New South Wales Supreme Court CITATION : Lakatoi Universal Pty Ltd v L.A. Walker; Ensile Pty Ltd v Walker Consolidated Investments [2000] NSWSC 113 FILE NUMBER(S) : SC 50035/98; 50109/98; 50110/98; 1798/98 HEARING DATE(S) : 21, 22, 23, 27, 28, 29, 30.9.99; 11, 12, 13, 14, 15, 18, 19, 20, 21, 22, 25, 26, 27, 28, 29.10.99; 1, 2, 3, 4, 5, 8, 9, 10, 11, 12, 15, 16, 17, 18, 19, 22, 29, 30.11.99; 1, 2, 3, 6, 7, 8, 9.12.99 JUDGMENT DATE : 10 March 2000 50035/98 Lakatoi Universal Pty Ltd v Langley Alexander Walker & Ors PARTIES : 50109/98 Ensile Pty Ltd v Walker Consolidated Investments Pty Ltd 50110/98 Ensile Pty Ltd v Walker Consolidated Investments Pty Ltd and Ors 1798/98 Ensile Pty Ltd v Walker Consolidated Investments Pty Ltd (D. Court) JUDGMENT OF : Einstein J R.J. Ellicott QC, V.R.W. Gray, A.E. Galasso, COUNSEL : S.D. O'Campo (Plaintiffs) A.B. Shand QC, D.P.F. Officer QC, R.J. Powell, C.J. Leggat (Defendants) SOLICITORS : Gye & Associates (Plaintiffs) Perkes & Stone (Defendants) CATCHWORDS : Environmental Law - Environmental Planning and Assessment Act 1979 - Process necessary to obtain a rezoning of land - Commission of Inquiry - Failure to properly prepare for or present submissions to Commission of Inquiry - Contract - Joint venture contract related to lands proposed to be initially rezoned to permit redevelopment as residential subdivision - Oral representations inducing entry into Heads of Agreement subsequently followed by formal agreement - Construction of Contract - Commercial and business transaction - Whether defendants warranted that rezoning would be achieved - Whether defendants strictly liable for failure to obtain rezoning - Defendants' covenant to provide their expertise at cost to promptly secure rezoning of land - Obligation construed as obligation to use best endeavours [this is the promise] to secure the rezoning of the land promptly [this is the intended result of the promise] by the use of their expertise [this is the tool by the medium of which the best endeavours are to be applied] - Alternatively term to be implied into subject agreements to the same effect - Parole Evidence Rule - General rule that contract be interpreted objectively - Relevant intention is intention manifested in the words of contract or conduct of the parties as reasonably understood by the other party - Evidence of negotiations prior to execution of Heads of Agreement and formal agreement not admissible to establish subjective intention and expectations of parties, but admissible to establish objective background facts known to both parties and the subject matter of the contract - Rectification - Implied Terms - Oral evidence of parties' actual intention not admissible to establish implied term - Oral evidence admissible to negative implication of a term - Causation - Breach of contract need only be a cause of damage - Need not be sole or predominant cause - Causal relationship between individual breaches and ultimate loss - Breaches of Heads of Agreement and formal agreement both causes of the loss - Presumption against wrongdoers - Applicable where action of parties have made an accurate determination problematic - Loss of Chance - Principles applicable - Implied obligation to use best endeavours to promptly secure rezoning of land - Breach enables innocent party to bring action for loss of commercial opportunity - Opportunity need not be equal to or greater than a 50 per cent likelihood - Damages for breach of contract - Damages for loss of a chance - Plaintiff must show commercial opportunity was of some value, though not negligible value - Damages awarded by reference to the possibilities and probabilities of what would have happened - Difficulties and uncertainty of assessment of damages for loss of chance does not relieve from the court the responsibility of assessment as best it can - Equity - Fiduciary relationship - Joint venture - Contractual relationship may give rise to fiduciary obligations - Fiduciary obligations may exist between parties who embark upon conduct of the venture before the precise terms of the joint venture arrangements have been settled - Joint venturers may occupy relationship demanding trust, confidence and the exercise of good faith - Joint venturers undertaking to act for and on behalf of the joint interest in the venture and not as to prejudice joint interest - One joint venturer's interest vulnerable to another - Incidents of joint venture relationship gleaned from negotiations prior to execution of joint venture documents - Trade Practices - Misleading and deceptive conduct - Necessity for applicants seeking relief to establish what applicant would have done had applicant not relied on the representation - Necessity for comparison between hypothetical and actual state of affairs - Evidence - Failure of one party to call evidence - Application of principle in Jones v Dunkell - Administrative Law - Statutory decisionmaker may not fetter statutory discretion - Estoppel does not lie to fetter future exercise of statutory discretion Clean Waters Act 1970 Corporations Law LEGISLATION CITED : Environmental Planning and Assessment Act 1979 (NSW) Fair Trading Act 1987 (NSW) Protection of Environmental Administration Act 1991 (NSW) Trade Practices Act 1974 (Cth) Abbott v Hessen (1913) 15 WALR 80 Alexander v Cambridge Credit Corporation (1987) 9 NSWLR 310 Ashington Piggeries v Christopher Hill [1972] AC 441 Australasian Performing Rights Association Ltd Austrama Television Pty Ltd [1972] 2 NSWLR 467 Australia Hotel Co Ltd v Moore (1899) 20 LR(NSW) Eq 155 Australian Broadcasting Corporation v XIVth Commonwealth Games (1988) 18 NSWLR 540 Bennett v Minister for Community Welfare (1992) 176 CLR 408 Bishops Gate Insurance Australia Ltd v Commonwealth Engineering (NSW) Pty Ltd (1981) 1 NSWLR 429 Boska v Sterling Drug Co (1969) 416 F (2d) 417 Breen v Williams (1995) 186 CLR 71 British Homes Assurance Corporation Ltd v Paterson [1902] 2 Ch 405 Chamberlain v Thornton (1892) 18 VLR 192 Chaplin v Hicks [1911] 2 KB 786 Chatsworth Investments Ltd v Cussins (Contractors) Ltd [1969] 1 WLR 1 Codelfa Construction Pty Ltd v State Rail Authority (1982) 149 CLR 337 Collette v Morrison (1851) 9 Hare 162; 69 ER 458 Commercial Union Assurance Co of Australia v Ferrcom (1991) 32 NSWLR 389 Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 Coulls v Bagot's Executor and Trustee Co Ltd (1967) 119 CLR 460 Ex parte Wright (1812) 19 Ves Jun 255; 34 ER 513 Export Corporation v Asia Australian Express Ltd (1990) 19 NSWLR 285 Eyre v Measday (unreported, 16 October 1985. Court of Appeal, England) Fink v Fink (1946) 74 CLR 127 Gissing v Gissing [1971] AC 886 Greaves & Co (Contractors Ltd) v Baynham Meikle & Partners [1975] 1 WLR 1095 Hodgkinson v Simms (1994) 117 DLR (4d) 161 Houghton v Immer (No 155) (1997) 44 NSWLR 46 In re European Assurance Society Arbitration Acts and Wellington Reversionary Annuity and Life Insurance Society (1875) 1 Ch D 335 In re Head; Head v Head [1894] 2 Ch 236 Kenny v Scholl (1905) 7 ALR 197 Kitchen v Royal Air Force Association [1958] 1 WLR 563 Kurtovic v Minister for Immigration, Local Government and Ethnic Affairs (1990) 92 ALR 93 CASES CITED : LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (1990) 24 NSWLR 499 Malec v JC Hutton Proprietary Ltd (1990) 169 CLR 638 Mallett v McMonagle [1970] AC 166 Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 Milliman v Rochester Ry Co 3 App Div 109; 39 NYS 274 (1896) Minister for Urban Affairs and Planning v Rosemount Estates PtyLtd (1996) 91 LGERA 31 Mortimer v Cradock (1843) 12 LJCP 166 Multi-Malls Inc v Tex Mall Properties (1980) 108 DLR (3d) 399 Navigazine Libera v Newtown Creek (1938) 98 F (2d) 694 Nesterczuck v Mortimore (1965) 115 CLR 140 NSW Medical Defence Union Ltd v Transport Industries Insurance Co Ltd (1986) 6 NSWLR 740 Olsson v Dyson (1969) 120 CLR 365 Pacific Coal Pty Ltd v Indemitsu (Qld) Pty Ltd (unreported, Supreme Court of Queensland, 21 February 1992, Ryan J.) Pedler v Richardson (Unreported, New South Wales Supreme Court, October 16, 1997, per Young J) Penvidic Contracting Ltd v International Nickel Co of Canada Ltd [1976] 1 SCR 267 Performance Cars v Abraham [1962] 1 QB 33 Prior v McNab (1976) 78 DLR (3d) 319 (Ontario High Court) Pukallus v Cameron (1982) 180 CLR 447 Reardon Smith Line Ltd v Yngvar Hansen- Tangen (trading as HE Hansen Tangen) [1976] 1 WLR 989 Sapwell v Bass [1910] 2 KB 486 Scarf v Jardine (1882) 7 App Cas 345 Schipp v Cameron (unreported, 9 July 1998, Supreme Court of NSW, Equity Division, Einstein J.) Scruples Imports Pty Ltd v Crabtree & Evelyn Pty Ltd (1983) 1 IPR 315 Secured Income Real Estate (Australia) Limited v St Martins Investment Pty Ltd (1979) 144 CLR 596 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 Shirlaw v Southern Foundaries [1939] 2 KB 206 Thake v Maurice [1986] QB 644 The City Bank of Sydney v McLaughlin (1904) 9 CLR 615 Thomas v Nottingham Incorporated Football Club Ltd [1972] 1 Ch 596 Toikan International v Plasteel Windows (1989) 15 NSWLR 641 United Dominion Corporation v Brian (1985) 157 CLR 1 Utica City National Bank v Gunn (1918) 118 NE 607 Wood v Grand Valley Railway Co (1915) 51 SCR 283 DECISION : Short Minutes of Order to be brought in. THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION - COMMERCIAL LIST EINSTEIN J Friday, 10 March 2000 50035/98 - LAKATOI UNIVERSAL PTY LTD & ors v LANGLEY ALEXANDER WALKER & ORS 50110/98 - ENSILE PTY LIMITED v WALKER CONSOLIDATED INVESTMENTS PTY LIMITED and Ors 50109/98 - ENSILE PTY LIMITED v WALKER CONSOLIDATED INVESTMENTS PTY LIMITED 1798/98 - ENSILE PTY LIMITED v WALKER CONSOLIDATED INVESTMENTS PTY LIMITED JUDGMENT This judgment is divided into the following parts: PART 1 Overview identifying the proceedings, the parties and their relationships [Volume 1] [pages 1-45] Outline of the plaintiffs' cases Detail of the Lady Carrington Estate The planning background of the land the subject of the Commission of Inquiry The process of achieving a rezoning PART 2 The facts [Volume 2] [pages 46-346] PART 3 The witnesses called [Volume 3] [pages 347-426] Assessment of the reliability of the evidence given by Mr Hogarth and Mr Kidd Evidence given by Mr Lester Findings as to the essential backdrop to the negotiations Dealing with the representational cases Dealing with the fiduciary obligation case Dealing with the misleading and deceptive conduct case Dealing with the terms of the agreement and rectification cases Dealing with the implied term case Dealing with the proper construction of clause 7.3 of the HUTA PART 4 Dealing with the best endeavours case [Volume 4] [pages 427-629] Damages relating to the plaintiffs' rezoning cases Loss of chance in relation to the $1.75 million "further contribution" PART 5 Dealing with the sundry breach of covenant cases and the ancillary breaches of obligation cases relating to the HUTA [Volume 5] [pages 630-706] Short minutes of order and further submissions PART 1 Overview identifying the proceedings, the parties and their relationships 1 Presently before the court are several sets of related proceedings being heard together concerning dealings between the parties relating to extensive land holdings at Helensburgh in New South Wales. Those dealings led to the creation of a joint venture relationship under a written "Heads of Agreement" document executed between 11 November and 1 December 1993 ["the Heads of Agreement"] pursuant to which an agreement called the "Helensburgh Unit Trust Unit Holders Agreement" ["the HUTA"] dated 6 April 1994 was entered into. 2 Central to the disputes between the parties at a factual level are the circumstances in which attempts were made to secure the rezoning of the Helensburgh lands so as to allow a substantial portion thereof to be developed as a residential subdivision. It is common ground that those attempts were and remain unsuccessful and that a principal claim to relief pursued by the plaintiffs arises by reason of the failure to secure the rezoning of the subject land. Other claims to relief generally dealing with the terms of the HUTA and alleged breaches thereof are also pressed. These include the plaintiffs' claims that the defendants misused the Joint Venture vehicle and otherwise acquired private advantages at the expense of the Joint Venture. 3 It is convenient to commence a recitation of the issues by reference to what I shall call "the principal proceedings", namely proceedings No 50035 of 1998. 4 The first plaintiff ["Lakatoi"] is the trustee of the Genepa Investment Trust ["GIT"] created by trust deed of settlement dated 10 May 1982 between Mr A J Williams and Genepa Pty Ltd ["Genepa"]. 5 The second plaintiff ["Mr Hogarth"] has at all material times been a director of four of the relevant companies namely: (a) Lakatoi; (b) the third plaintiff, Highfield Grove Pty Ltd ["Highfield Grove"]; (c) the fourth plaintiff, Ensile Pty Ltd ["Ensile"]; and (d) the seventh defendant, which became the joint venture vehicle, namely Rosamond Pty Ltd [formerly known as Ibenmore Pty Ltd] ["Rosamond" or "Ibenmore"]. 6 It is common ground that each of Lakatoi, Highfield Grove, and Ensile has at material times been a wholly owned subsidiary of R & B Hogarth Investments Pty Ltd ["R & B Hogarth Investments"]. The directors of R & B Hogarth Investments are Mr Robert Martin Hogarth, his wife Mrs Barbara Florence Hogarth, their daughter Mrs Janene Anne Kidd and their son Mr Curtis Hogarth. The principal shareholders are Mrs Kidd and Mr Curtis Hogarth. 7 It is also common ground that a non land holding company, Lady Carrington Estates Pty Ltd ['Lady Carrington Estates' or 'LCE'] was used as a management vehicle representing the Hogarth interests in dealing with regulatory authorities. The directors and shareholders of Lady Carrington Estates were Mr Hogarth, Mr and Mrs Kidd and Mr Curtis Hogarth. 8 The first defendant is Mr Langley Alexander Walker ["Mr Walker"] who has at all material times been: (a) the managing director of: (i) the fifth defendant, Walker Corporation Ltd ["Walker Corporation"]; and (ii) the fourth defendant, namely Mitsui Mining Resources Pty Ltd ["Mitsui"]; (b) a director of Rosamond and a member of its policy committee; (c) a director of: (i) the third defendant, Walker Consolidated Investments Pty Ltd ["Walker Consolidated"]; (ii) the sixth defendant, Vamden Pty Ltd ['Vamden"]. 9 Walker Consolidated has at all material times been a wholly owned subsidiary of Walker Corporation. 10 Mitsui has at all material times been a wholly owned subsidiary of McRoss Developments Pty Ltd ["McRoss Developments"], the majority shareholding of which has been at all material times held by Mr Walker with the balance of the shareholding being held by his wife, Mrs Suzanne Merle Walker. McRoss Developments has at material times been the holder of approximately 46 per cent of the issued capital of Walker Corporation. 11 Rosamond is the trustee of the Helensburgh Unit Trust created by deed dated 29 March 1994, the settlor being Mr David Thackeray ["the HUT Deed"]. All transactions entered into by Ibenmore/Rosamond were entered into by Ibenmore/Rosamond in its capacity as trustee of the Helensburgh Unit Trust. 12 At all material times the second defendant, Mr Peter James Dransfield, has been a director of: (a) Walker Corporation; (b) Walker Consolidated; (c) Vamden; (d) Rosamond. 13 Each of Messrs Walker and Dransfield has at material times been a holder of shares and or other securities in Walker Corporation or holds and or held shares and or other securities in an entity which itself held shares in Walker Corporation. Background 14 Companies owned or controlled by Mr Hogarth had since the early 1980's owned land at Helensburgh which had a non urban zoning. Mr Hogarth had since at least 1985 been attempting to have the land zoned to residential for the purpose of being developed. 15 In the early 1990s Mr Hogarth and companies associated with him were in dispute with Westpac Banking Corporation ["Westpac"] and AGC (Advances) Ltd ["AGC"] which dispute arose from a foreign currency loan made by Westpac/AGC to the Genepa Investment Trust. 16 The plaintiff's case is that commencing in or about 1990 Mr Hogarth commenced discussions with Mr Walker with a view to a joint participation in the development of the subject land. The plaintiff's case is that from about this time Mr Hogarth authorised and requested Mr Walker to negotiate with Westpac/AGC on behalf of Mr Hogarth and interests with which Mr Hogarth was associated. The plaintiff's case is that in connection with and solely for the purposes of those negotiations, Mr Hogarth gave to Mr Walker considerable confidential information concerning Mr Hogarth and companies controlled by him. Particulars of that information is set out in para 19 of the fourth amended summons and includes details of previous negotiations with LandCom regarding the residential development of certain of the land to be later referred to as "the Ensile land". Other of the confidential information then furnished by Mr Hogarth to Mr Walker, on Mr Hogarth's case, included details of an area of land south of Otford Road, Helensburgh and west of Walker Street, Helensburgh, being an area known as 'the Land Pooling Area'. Alleged formation of joint venture and creation of fiduciary relationship 17 On the plaintiff's case Mr Hogarth sought and obtained the advice of Mr Walker as to the best way of dealing with Westpac/AGC and as to the terms on which Mr Hogarth should or might be able to settle his differences with Westpac/AGC. 18 Since 1980 (see para 21 of the fourth amended summons) Ensile was at all material times the principal owner of the subject land comprising approximately 1110 acres. Within the Ensile land is an area which is said by the plaintiffs to be suitable for residential re-development adjoining the town of Helensburgh and presently known as "Lady Carrington Estate". [See paragraph 64 below]. The parties tended to use the terms "Lady Carrington Estate" and "Ensile land" interchangeably, even though, to be precise, the Lady Carrington Estate in fact forms only part of the Ensile land. In the same way, the Judgment uses the terms interchangeably. 19 It is common ground that at all material times up to the execution of the Heads of Agreement, no part of the Ensile land, including the Lady Carrington Estate, could be subdivided for residential development because of its zoning. The first representations 20 The plaintiff's case is that prior to 23 November 1993 Mr Walker represented and warranted to Mr Hogarth that Mr Walker was in a position to provide political contacts, resources and expertise to secure the rezoning of the Ensile land to permit its use for residential development within twelve months of an agreement being reached for Mr Walker to provide such political contacts, resources and expertise. [Contentions paragraph 24A] 21 The particulars furnished are: 'The representation and warranty was oral and was given to Mr Hogarth and Mr Kidd by Mr Walker. The representation and warranty was to the effect pleaded and was amplified by an assurance that Mr Walker had the political contacts, resources and expertise to ensure that any Commission of Inquiry under the Environmental Planning and Assessment Act would report favourably to the rezoning of the Ensile Land within a few months of the Commission being established, that such rezoning was a foregone conclusion and that Mr Hogarth and Mr Walker should proceed on the basis that the requisite rezoning of the Ensile Land was a formality.' The alleged agreement 22 The plaintiff's case is that subsequent to the making of the first representations but before 23 November 1993, Mr Hogarth and Mr Walker agreed as follows: (a) Mr Hogarth and Mr Walker would as joint venturers undertake the development of the Ensile land; (b) Mr Hogarth would procure Ensile to make available the Ensile land for the joint venture; (c) the value of the Ensile land in its existing condition and zoning was $9 million; (d) Mr Walker and his interests would pay to Mr Hogarth and his interests, $4.5 million to acquire a 50 per cent interest in the Ensile land in its then existing condition and zoning, and that Mr Walker and his interests would pay this amount to Mr Hogarth and his interests whether or not the Ensile land was rezoned; (e) Mr Walker would provide political contacts, resources and expertise to ensure the securing of the rezoning of the Ensile land. [Contentions paragraph 24B] Further terms of agreement and alleged reliance conduct 23 The plaintiffs claim that in reliance upon and in consideration of the representation and warranty said to have been given by Mr Walker, and to give effect to the above described agreement, Mr Hogarth agreed with Mr Walker as follows: (a) Mr Walker or interests associated with him would pay to Mr Hogarth or interests associated with him $4.5 million to acquire a 50 per cent interest in the Ensile land in its existing condition and zoning whether or not the Ensile land was rezoned and that such payment would be made in two instalments, namely: (i) $2.75 million forthwith upon the arrangements of the joint venture being documented; (ii) $1.75 million forthwith upon the Ensile land being rezoned to enable the proposed joint venture development to proceed; or at the expiration of 12 months from the completion date, whichever first occurred; (b) these terms would be recorded in an informal "Heads of Agreement" document to be prepared overnight by Mr Kidd and which Mr Hogarth and Mr Walker would then sign the following day. [Contentions paragraph 24C] Heads of Agreement 24 The plaintiff's case is that overnight on 10/11 November 1993 and pursuant to the above described agreement between Mr Hogarth and Mr Walker, Mr Kidd produced the Heads of Agreement which was thereafter duly executed by Mr Hogarth and Mr Walker. Rectification counts 25 The plaintiffs claim that it was the mutual intention of Mr Hogarth and Mr Walker that the Heads of Agreement would reflect and give effect to their common intention and agreement referred to above. The claim is that pursuant to this agreement, Mr Hogarth and Mr Walker each instructed their respective legal representatives to more fully and formally document their agreement and that pursuant to those instructions, their respective legal representatives drafted and re-drafted the document which became the HUTA which was thereafter duly executed by the respective parties to it. 26 The plaintiffs claim that it was the mutual intention of Mr Hogarth and Mr Walker and their respective associated interests who or which executed the HUTA, that the HUTA would reflect and give effect to their common intention and agreement earlier referred to. 27 The claim is then that contrary to the mutual intention of Mr Hogarth and Mr Walker referred to above: (a) the Heads of Agreement does not give effect to their common intention and agreement insofar as the Heads of Agreement do not expressly provide that Mr Walker and interests associated with him will pay to Mr Hogarth and interests associated with him $4.5 million to acquire a 50 per cent interest in the Ensile land in its existing condition and zoning whether or not the Ensile land was re-zoned; (b) the HUTA did not give effect to Mr Hogarth's and Mr Walker's common intention and agreement earlier referred to insofar as the HUTA does not expressly provide that Mr Walker and interests associated with him will pay to Mr Hogarth and interests associated with him $4.5 million to acquire a 50 per cent interest in the Ensile land in its existing condition and zoning whether or not the Ensile land was rezoned. 28 In those circumstances Mr Hogarth claims against Mr Walker an order rectifying the Heads of Agreement and rectifying the HUTA [see the detailed claim set out in Contentions paras 24J and 24K]. The implied term case 29 Mr Hogarth further and in the alternative asserts that it is an implied term of the Heads of Agreement that in the event of the Ensile land not being re-zoned to permit residential development within a reasonable time of the Completion Date, Mr Walker and/or interests associated with him would forthwith at the expiration of such period pay to Mr Hogarth or to interests associated with him the balance of the sum of $4.5 million then remaining unpaid. 30 Again in the alternative Lakatoi, Ensile and Mr Hogarth assert that it is an implied term of the HUTA that in the event of the Ensile land not being re-zoned to permit residential development within a reasonable time of the Completion Date, Walker Consolidated would forthwith at the expiration of such period pay to Highfield Grove the sum of $1.75 million constituting what was referred to in the HUTA as "the Further Contribution". The further representations 31 The plaintiff's further assert that during October and November 1993 and prior to 22 November 1993 Mr Walker on behalf of himself and Walker Consolidated and/or Walker Corporation made the following further representations to Mr Hogarth: (a) that in the opinion of Mr Walker and Walker Consolidated the Lady Carrington Estate was immediately suitable for rezoning for residential purposes; (b) that Walker Consolidated and/or Walker Corporation was a company experienced in developing broad acre land into residential subdivisions and obtaining all the necessary approvals and in developing residential town land into residential strata unit development; (c) that the securing of the rezoning of the lands would be jeopardised if Mr Hogarth continued to have any involvement in the process and that Mr Hogarth must take a back seat in relation to the rezoning process; (d) that if Mr Hogarth entered into a joint venture in relation to the Ensile land neither Mr Walker nor Walker Corporation nor any of its subsidiaries or associated companies would during the term of the joint venture undertake any land development activities in and around Helensburgh except on the basis that such lands would form part of the lands to be subject to the joint venture. [Contentions paragraph 25] Reliance and further terms of agreement 32 The plaintiffs then allege that on the face of and in reliance on the further representations it was agreed between Mr Hogarth and Mr Walker shortly prior to 22 November 1993 that: (a) Mr Hogarth would procure those interests with which he was associated to provide the Ensile land and any other lands obtained by him or interests with which he was associated during the term of the joint venture to a joint venture between them for their development; (b) he, Mr Hogarth, would not be involved in the processes necessary for obtaining the rezoning and subdivision of the land and that in consideration thereof; (c) Mr Walker and/or Walker Consolidated and/or Walker Corporation would, or alternatively would use their best endeavours to, procure the rezoning of the land promptly; and (d) neither Mr Walker nor Walker Corporation nor any of its subsidiaries or associated companies would during the term of the joint venture undertake any land development activities in or around Helensburgh except on the basis that such land development activities would be undertaken under and in pursuance of the joint venture. [Contentions - Paragraph 26] 33 The plaintiffs then assert that on or about 22 November 1993 on the face of and in reliance upon the above representations and pursuant to their oral agreement, Mr Hogarth and Mr Walker entered into the Heads of Agreement which established the framework of the joint venture between them in relation to the Ensile land. A copy of the Heads of Agreement document is appended to this judgment. [Appendix '1'] Joint venture and fiduciary obligation under the Heads of Agreement 34 The plaintiff's claim is that the relationship between Mr Hogarth and Mr Walker under the Heads of Agreement was that of joint venturers. The claim is that the relationship was based in part on trust and confidence and that by virtue thereof that Mr Hogarth and Mr Walker each owed to the other and continued to owe to the other duties and obligations of a fiduciary nature including: (a) to act at all times honestly and in good faith and with loyalty to each other to achieve the objectives of the joint venture; [Admitted on the pleadings.] (b) to make full and proper disclosure to the other of all matters of significance to the objectives; [Admitted on the pleadings.] (c) not to place himself in a position where his duties to achieve the objectives conflicted with his private interests; [Admitted on the pleadings.] (d) not to acquire a private advantage at the expense of the joint venture; and [Admitted on the pleadings.] (e) to make available or cause to be made available to the joint venture any interest in land acquired by either of them or Walker Corporation Ltd or their associated companies in or about Helensburgh for the fulfilment of the objectives. [Denied on the pleadings.] Trust and confidence 35 The plaintiffs claim that by virtue of their relationship evidenced in part by their oral agreement, the terms of the Heads of Agreement and the steps needed to carry into effect the objectives thereof and by virtue of the circumstances and conversations between them from 1990 onwards and leading to the execution of the Heads of Agreement, Mr Walker stood in a position of control over the property and affairs of Mr Hogarth and his associated companies so far as they related to the fulfilment of those objectives and that Mr Hogarth relied upon and imposed trust and confidence in Mr Walker in relation to such fulfilment. [Denied on the pleadings.] Terms of Heads of Agreement 36 The plaintiffs then plead that it was a term and condition of the Heads of Agreement that Mr Walker would promptly procure or, alternatively, would use his best endeavours promptly to procure, rezoning of the Ensile Land so as to enable the residential subdivision and development of the Lady Carrington Estate. [Contentions paragraph 31A] 37 The plaintiffs claim that it was a term and condition of the Heads of Agreement that a company and joint venture structure would be developed by Mr Walker to be mutually acceptable to Mr Walker and Mr Hogarth and that pursuant thereto Mr Walker caused 'Ibenmore' [now called 'Rosamond'] to be incorporated. It is common ground that the shareholders of Rosamond were as at 6 April 1994 and remain Walker Consolidated and Lakatoi, each of which holds one share therein out of the total issued shares of two. It is common ground that the directors of Rosamond have at all material been and remain Messrs Walker, Dransfield, Hogarth and Kidd. Reliance 38 The plaintiffs assert that in pursuance of the Heads of Agreement Mr Hogarth caused Ensile and Lakatoi and Mr Walker caused Walker Consolidated to enter into the HUTA on 6 April 1994. A copy of the HUTA is appended to this judgment. [Appendix 2] 39 The plaintiffs claim that on the same date, namely 6 April 1994, Mr Hogarth caused Ensile to grant to Rosamond an option to purchase the Ensile land and that Mr Hogarth thereby fulfilled his obligations under the Heads of Agreement to provide the Ensile land to the joint venture. 40 It is common ground that the unit holders of the Helensburgh Unit Trust under the HUT deed were as at 6 April 1994 and remain Walker Consolidated as to 50 units and Lakatoi as to the remaining 50 units. 41 The plaintiffs claim that the relationship between Lakatoi and Walker Consolidated under the HUTA was and is that of joint venturers. Fiduciary obligations under the HUTA 42 The plaintiffs assert that like the relationship between Messrs Hogarth and Kidd under the Heads of Agreement, the relationship between Lakatoi and Walker Consolidated under the HUTA was and is in part based on trust and confidence and that by virtue thereof Lakatoi and Walker Consolidated each owed to the other and continue to owe to the same fiduciary duties and obligations. These are set out at paragraph 26 of this judgment. Again (a) to (d) are admitted on the pleadings, (e) is denied. HUTA covenants 43 The plaintiffs assert that under the HUTA, Walker Consolidated and Lakatoi covenanted and agreed that the purpose of Rosamond was to carry out the project and that each of them covenanted and agreed to do all things necessary, desirable or ancillary to the carrying out and fulfilment of the project in accordance with feasibility studies which included those reports and studies previously prepared for and on behalf of Lady Carrington Estates Pty Ltd and any further feasibility studies carried out by Walker Consolidated and/or Rosamond. 44 A critical threshold issue in terms of the way in which the plaintiffs put their case concerns the proper construction of clause 7.3(a) of the HUTA which provides: 'Walker will provide its expertise at cost to promptly: (a) secure rezoning of the land . . .' 45 The plaintiffs submit that the proper construction of this clause imposed an absolute obligation upon Walker Consolidated to promptly secure rezoning of the land. If this construction be correct, then difficulties which the plaintiffs face in terms of their alternative 'best endeavours' case [to the effect that if properly construed, the HUTA provided for Walker to carry out its best endeavours to use its expertise at cost to promptly secure rezoning of the land], fall away. These difficulties principally arise in terms of the necessity to reach a conclusion in terms of the Amann decision. [Commonwealth of Australia v Amann Aviation Pty Ltd [1991] 174 CLR 64]. If the best endeavours case requires to be addressed in order to furnish the plaintiffs with relief, the plaintiffs in pursuing this loss of chance case must deal with several complexities including the need for the court to assess what were the chances, had best endeavours been used: (a) that a form of alternate set of recommendations are likely to have been brought down by the Commissioner of Inquiry; (b) that such recommendations would, regardless of the political situation [the likely attitude of the Council and of the Minister to such recommendations] have been implemented by the rezoning. Sundry breaches of covenant, statutory duty and fiduciary duty 46 Paragraphs 38-50 and 58-85 of the fourth amended summons comprise the alleged breaches of covenant, breaches of statutory duty and breaches of fiduciary obligation claimed by the plaintiffs. The statutory duties pleaded arise under Corporations Law sections 232(3) and 232(4), namely: (a) duties as directors of Rosamond to act honestly in the exercise of their powers or the discharge of their duties as a director; (b) duties in like capacity to exercise the degree of care and diligence that a reasonable person in a like position in a corporation would exercise in the corporations circumstances. In each case the term of the relevant agreement or covenant, and the alleged breaches are set out in detail. 47 Paragraphs 38 to 50 and 58 to 85 are in the following terms: ' 38 . Under the HUTA Walker Consolidated covenanted to pay to Highfield Grove an Initial Contribution of $2.75 million on 8 April 1994. Particulars Clause 7.1(a) of the HUTA. 39 . Walker Consolidated did not pay and has not paid to Highfield Grove the said sum of $2.75 million or any part thereof. In fact Mr Walker and Mr Dransfield on or about 2 June 1994 caused Walker Corporation with the knowledge and consent of Walker Consolidated: (a) to pay $2,000,000 to AGC (Advances) Limited in discharge of certain indebtedness to that company by Mr Hogarth and his associated companies; (b) to pay $700,000 to Lakatoi; (c) to treat the total sum of $2.7 million as a loan to Highfield Grove secured by a first mortgage from Ensile to Walker Corporation over the Ensile Land; and (d) to show the said sum of $2.7 million in the accounts of Walker Corporation as an advance by Walker Corporation to Highfield Grove and to show interest thereon accruing in the books of Walker Corporation since the said sums were paid. The entries in the said accounts have allowed Walker Corporation to claim that it has a substantial asset of $2.7 million in respect of which it is receiving substantial income. Breaches of Covenant, Statutory Duty and Fiduciary Duty (i) Wrongful Charging of Expenditure to Rosamond 40 . Pursuant to the HUTA Walker Consolidated agreed to provide accounting expertise to the Helensburgh Unit Trust and to prepare monthly budgets and cash flow projections for Rosamond. It was an implied term of the Agreement that Walker Consolidated would be responsible for keeping the books of account of Rosamond and to ensure that those books and records accurately recorded the financial transactions in which Rosamond was engaged pursuant to and in accordance with the HUTA. Particulars (i) Clause 7.1(c) of the HUTA; (ii) Item 3(c) to the Schedule of the HUTA; (iii) Clause 12.1 of the HUTA. 41 . As directors of Rosamond Mr Walker and Mr Dransfield caused Rosamond to accept a liability to Walker Corporation purportedly for management fees and other items including interest in relation to the achievement of the objectives of the joint venture when in truth and in fact, as Mr Walker and Mr Dransfield well knew, Walker Corporation had not provided those services to Rosamond. Particulars ( i ) Fees charged to Rosamond Amount during the period 06.04.94 - 30.06.94 project management fees $ 500,000 work in progress to June 1994 $ 593,049 01.07.94 - 31.03.95 project management fee to December 1994 $ 565,000 security warehouse $ 17,868 direct alarm supplies $ 5,170 work in progress to March 1995 $1,116,241 $2,797,328 ( ii ) Interest and other charges to 30.06.96 $ 643,545 ( iii ) Further amounts in relation to work in progress or for other matters including costs incurred may have been charged to Rosamond since 31 March 1995 but this information is not presently known as work in progress reports have not been provided. ( iv ) In a letter dated 13 September 1996 from Walker Corporation to Mr Hogarth confirmation was sought for the purposes of audit of Walker Corporation by KPMG that an amount of $2,126,804 was due in respect of costs incurred for and on behalf of the Helensburgh Unit Trust. ( v ) Rosamond was shown and is still shown as a debtor to Walker Corporation in the books of Walker Corporation in respect of the whole or a substantial portion of the said amounts and Walker Corporation treated those amounts as income in respect of the years above mentioned. More precise particulars of the amount or amounts will be provided following discovery. 42 . (a) Mr Walker and Mr Dransfield's actions as alleged in paragraph 41 were contrary to the interests of the joint venture and were undertaken with the knowledge and consent of Walker Consolidated either for the benefit of themselves, Walker Consolidated and Walker Corporation or falsely in order to inflate the assets and income of Walker Corporation. (b) Mr Walker and Mr Dransfield acted as alleged in paragraph 41 not in the interests of the joint venture but with the knowledge and consent of Walker Consolidated in order to enable Walker Corporation falsely to include in its published accounts as revenue earned by Walker Corporation for the years in respect of which the alleged management fees together with interest were charged to Rosamond, the amounts of those alleged management fees and interest thereby falsely inflating the amount of such revenue and the resulting profit earned by Walker Corporation during those years. 43 . By reason of the matters alleged in paragraphs 41 and 42: (i) each of Mr Walker and Mr Dransfield has acted in breach of his duties as a director of Rosamond under sections 232(2) and 232(4) of the Corporations Law that is to say: (a) each of them failed to act honestly in the exercise of his powers or the discharge of his duties as a director; (b) in the exercise of his powers and the discharge of his duties each of them failed to exercise the degree of care and diligence that a reasonable person in a like position in a corporation would exercise in the corporation's circumstances. (ii) each of Mr Walker, Mr Dransfield and Walker Consolidated acted in breach of their respective fiduciary duties alleged in paragraphs 29 and 36 above that is to say each of them: (a) failed to act honestly and in good faith and with loyalty to achieve the objectives of the joint venture ; (b) placed himself or itself in a position where his or its duties to achieve the said objectives conflicted with his or its private interests; and (c) acquired a private advantage at the expense of the joint venture. (iii) Walker Consolidated was with the knowledge of Mr Walker and Mr Dransfield in breach of the covenant alleged in paragraph 37 above. 43A None of the alleged liabilities referred to in paragraph 41 constitute "Walker Expenses" for the purpose of the HUTA. Particulars Walker Corporation did not itself make any such payments. (If any payments were made or liabilities incurred, they were made by Walker Group Pty Limited). If any such payments were made they were not made or incurred with the approval or agreement or authority of the Policy Committee as required by paragraph (e) of Item 3 of the Schedule to the HUTA. Insofar as the payments or liabilities made were made or incurred in relation to services provided by Walker Corporation (or another Walker company) personnel, those services and the cost thereof were not the subject of any estimated cost agreed prior to commencement as required by and were not calculated in accordance with sub-paragraph (iv) of paragraph (e) of Item 3 of the Schedule to the HUTA. Insofar as the payments made or liabilities incurred were in relation to services or consultants provided or engaged in connection with the Commission of Inquiry: then those payments were made or liabilities were incurred in breach of the covenant and agreement referred to in paragraphs 48 and 49 below and represented costs thrown away which are not chargeable by Walker Consolidated and/or Walker Corporation to Rosamond; and/or (ii) if and insofar as the provision or engagement of those services and consultants did not accord with good practice (ie was negligent, eg because the services were engaged too late to be effectual) then such payments are not "Walker Expenses" for the purposes of the HUTA. Insofar as the payments made alleged to constitute "Walker Expenses" are: the management fees referred to in paragraph C41 of the Amended Summons; the political donations referred to in paragraph C44 of the Amended Summons; for matters unrelated to the joint venture, eg installation of a security system at Hunter's Hill referred to in paragraph C41 of the Amended Summons; they were not expenses actually, honestly and/or reasonably incurred for the purposes of the joint venture and therefore are not "Walker Expenses". (ii) Wrongful Use of Rosamond to Make Political Donations 44 . Purporting to act as directors of Rosamond Mr Walker and Mr Dransfield with the knowledge and consent of Walker Consolidated in or about the months of February and March 1995: (a) caused Rosamond to accept from Walker Consolidated an advance of monies totaling $220,000; and (b) caused Rosamond to donate $220,000 to political parties. Particulars Donee Amount of Donation Date Paid Australian Labor Party $100,000 13/02/95 Liberal Party $100,000 10/03/95 National Party $ 20,000 20/03/95 The said donations were not made for the benefit of Rosamond but for the benefit of Walker Corporation and its subsidiaries and themselves. 45 . The actions of each of Mr Walker and Mr Dransfield referred to in paragraph 44 was in breach of his respective duties as a director of Rosamond pursuant to sections 232(2) and 232(4) of the Corporations Law more particularly set out in paragraph 43(i) above. The said actions of Mr Walker and the consent of Walker Consolidated to those actions were in breach of their respective fiduciary duties alleged in paragraphs 29 and 36 above and more particularly described in paragraph 43(ii) above. Particulars (i) Each of the said donations was not made for the benefit of Rosamond but for the benefit of Walker Corporation Limited, its subsidiaries and the said directors. Rosamond or Ibenmore as it was then known was used by Mr Walker and Mr Dransfield as a front for Walker Corporation in order to make substantial donations perceived to be for the benefit of Walker Corporation, its subsidiaries and themselves as directors and shareholders of Walker Corporation. (ii) Rosamond derived no benefits from the making of each of the said donations and at the time each of them was made each of the said directors should have been aware that the amount of each donation was and the total donations were far in excess of any benefit which Rosamond could have expected to obtain from the making thereof. (iii) At the time the political donations were made Walker Corporation was seeking and was hoping to obtain substantial benefit from political consent to proposals for rezoning and development of lands in New South Wales, including lands in Balmain. (iv) On 20 March 1995 the Minister for Planning and Minister for Housing Mr Robert Webster granted to Walker Corporation Development Consent to permit the construction of low and medium density housing at the Walker Corporation Balmain site (the "Walker Balmain Site"); (v) On 24 March 1995 the day prior to the date of General election for the State of New South Wales the Minister for Planning and Minister for Housing gazetted a rezoning under the City of Wollongong Local Environmental Plan 1990 ("City of Wollongong LEP") of the Lady Carrington Estates from Zone No 1 Non-Urban to mostly Zone No 7(d) Hacking River Environmental Protection (effectively precluding its development as contemplated by the HUTA) and the balance of Ensile's land remained Zone No 7(d) Hacking River Environmental Protection. 46 . By reason of the grant of Development Consent for the Walker Balmain Site Walker Corporation and indirectly Mr Walker and Mr Dransfield obtained a significant financial benefit. 47 . The rezoning of the Ensile Land whilst it remains in force effectively prevents the fulfilment of the objectives of the joint venture as evidenced by the Heads of Agreement and the HUTA hereinbefore referred to. Breach of agreement and covenant to provide expertise in obtaining and to secure prompt residential re-zoning of the Ensile Land 48 . In addition to and/or in furtherance of the agreement between Mr Hogarth and Mr Walker shortly prior to 22 November 1993 referred to in paragraph 26 above, Walker Consolidated covenanted with Lakatoi in clause 7.3 of the HUTA to provide its expertise at cost to promptly secure or to use its best endeavours to promptly secure rezoning of the Ensile Land and to pursue and develop the Project therein referred. 49 . (a) Mr Walker and Walker Consolidated respectively have acted in breach of each of the agreement and covenant referred to in paragraphs 26, 31A and 48 above in that each of them failed to procure the rezoning of the land promptly and/or failed to use their best endeavours to procure promptly or at all the rezoning of the Ensile Land and in particular the Lady Carrington Estate so as to enable the residential subdivision thereof as promised; and (b) Walker Consolidated has acted in breach of the covenant referred to in paragraph 37 above and has failed to do all things necessary or desirable or ancillary to the carrying out and fulfilment of the Project as therein provided. Particulars (i) At a Commission of Inquiry over which Dr Mark Carleton presided which conducted hearings between 5 July 1994 to 15 November 1994, Walker Corporation or Walker Consolidated conducted the representation of Rosamond and relied almost exclusively on material originally prepared for Lady Carrington Estates Pty Limited and provided by Lakatoi to Walker Consolidated under the HUTA. (ii) The Commission of Inquiry Report dated December 1994 recommended no change in existing City of Wollongong LEP zonings until further studies were undertaken as to the effectiveness of the water settling ponds proposed by Lady Carrington Estates Pty Limited to maintain water quality. (iii) Since that date Walker Corporation and Walker Consolidated have done nothing to establish further studies to establish the effectiveness of water settling ponds to maintain water quality or to procure the rezoning of the Ensile Land. 50 . The breach by each of Mr Walker and Walker Consolidated has caused serious loss and damage to Mr Hogarth and Lakatoi and Ensile. Particulars (i) Mr Hogarth by providing the said Ensile Land to the joint venture on the faith of Mr Walker's promise has as a result lost the opportunity to develop the said lands and committed a half interest therein to Walker Consolidated and thereby to Walker Corporation. (ii) By reason of the said agreement and breach thereof Mr Hogarth has lost or Ensile and his other associated companies have lost the benefit of opportunities to develop the said land in other respects. (iii) Lakatoi and indirectly Mr Hogarth has failed to gain the benefits that it or he would otherwise have obtained from the prompt securing of the rezoning of the said land and thereby the benefits of the joint venture. (iv) Alternatively to (ii) Ensile has lost the opportunity to have the Ensile option exercised in accordance with its terms and the benefits including the sum of $20 million it would have received thereunder. Breach of duty in failing to secure Thompson Option for Rosamond ' 58 . On 6 April 1994 Francis Joseph Thompson ("Mr Thompson") was the owner of the land known as Lot 23 Deposited Plan 752033 (the "Thompson Land") which was located in the centre of and was entirely surrounded by the Ensile Land and which is etched in green on the plan which is annexure "A" hereto and which was an indispensable constituent part of any rezoning and development of the Ensile Land. 59 . On 6 April 1994 Lady Carrington Estates Pty Limited (a company associated with Mr Hogarth) held an option granted to it by Mr Thompson to purchase the Thompson Land (the "Original Thompson Option") which was to expire on or about 6 May 1994. The Original Thompson Option was a right which was made available by Mr Hogarth to the joint venture pursuant to the Heads of Agreement and the HUTA. 60 . Between 6 April 1994 and 6 May 1994 Mr Hogarth repeatedly asserted to Walker Consolidated the necessity of Rosamond before the expiry of the Original Thompson Option either: (a) securing from Mr Thompson a renewal of the Original Thompson Option; or (b) exercising the Original Thompson Option. 61 . Between 6 April 1994 and 6 May 1994 Walker Consolidated did not either secure a renewal of the Original Thompson Option in the name of Rosamond or for the benefit of the joint venture. 62 . On or about 20 June 1994 Mr Walker and/or Mr Dransfield and/or Walker Consolidated procured Mr Thompson for a consideration to grant to Walker Consolidated for its own benefit an option to purchase the Thompson Land (the "Current Thompson Option"). The actions of Mr Walker and Mr Dransfield were in breach of their respective duties as directors of Rosamond under Section 232(2) and 232(4) of the Corporations Law. The failure of Walker Consolidated to secure the Thompson Option for Rosamond was in breach of the covenant referred to in paragraph 37 and in breach of the fiduciary obligations owed to Lakatoi referred to in paragraphs 36(a) to (e) (inclusive). 63 . Walker Consolidated holds the benefit of the Current Thompson Option upon trust for Rosamond by reason of: (i) The Original Thompson Option was an asset to be applied and utilised for the benefit of the joint venture and Walker Consolidated was able to procure the grant to it of the Current Thompson Option in its capacity as a joint venturer with Lakatoi under the HUTA. (ii) Mr Walker and Mr Dransfield caused the amount of the option fee payable to Mr Thompson for the Current Thompson Option to be debited as an expense incurred by Rosamond. Breach of duty in relation to Development Consent over Thompson Land 64 . On or about 10 December 1995 Mr Walker and Mr Dransfield caused Vamden to submit to the Wollongong City Council ("WCC") a development application in respect of the Thompson Land (the "Vamden Development Application"). Particulars Development Application D 95/856. 65 . The Vamden Development Application comprised the following materials: (i) Document entitled "Application for Rezoning, Lady Carrington Estate, Helensburgh" prepared by Gutteridge Haskins & Davey Pty Limited for Lady Carrington Estates Pty Limited dated March 1992. (ii) Report prepared by Walker Corporation entitled "Statement of Environmental Effects for the Erection of a Dwelling House and Ancillary Structures on Lot 23 DP 752033 at Helensburgh" dated May 1996. (iii) Report prepared by Treescan Urban Forest Management entitled "Effect of Effluent Disposal on Existing Vegetation" dated 10 December 1996. 66 . On 23 June 1997 the WCC granted to Vamden development consent for the construction on the Thompson Land of the structures and improvements proposed in the Vamden Development Application ("Vamden Development Consent"). 67 . It was the duty of Mr Walker and Mr Dransfield as directors of Rosamond to cause: (a) any development application for the Thompson Land which could be beneficial to the achievement of the joint venture objectives to be lodged and pursued and, if development consent thereto be obtained, then to obtain such development consent in the name of Rosamond. (b) any material in which property rights did or may exist which could be beneficial to the achievement of the joint venture objectives to be obtained for and be owned by Rosamond. Particulars The duty arose under sections 232(2) and 232(4) of the Corporations Law. 68 . In lodging the Vamden Development Application and accepting the Vamden Development Consent in the name of Vamden and for the benefit of Vamden: (a) Mr Walker and Mr Dransfield acted in breach of the duties owed by them as directors as alleged in the preceding paragraph; and (b) Mr Walker acted in breach of the fiduciary duty he owed to Mr Hogarth referred to in paragraph 29(a) to (e) (inclusive). 69 . The Vamden Development Consent is held by Vamden for the benefit of Rosamond and the rights in and over the materials referred to in paragraph 65 above are held by Vamden on trust for Rosamond. Breach of duty and breach of agreement in not providing Chapman Land to the Joint Venture 70 . In or about November 1993 and on or about 6 April 1994, Mr Walker orally represented to Mr Hogarth that neither Mr Walker personally nor Walker Corporation nor any of its subsidiaries or associated companies would undertake any land development activities in and around Helensburgh except on the basis that such land would form part of the land subject to the joint venture between them. 71 . In reliance upon the representation referred to in paragraph 70 Mr Hogarth: (a) entered into the Heads of Agreement; (b) caused Lakatoi and Ensile to execute and become parties to the HUTA; (c) agreed to Walker Consolidated and/or other entities associated with Mr Walker (to the exclusion of Mr Hogarth and interests associated with him) pursuing on behalf of Lakatoi and Walker Consolidated as the relevant parties to the HUTA, the achievement of the objectives of the parties to the HUTA; and (d) did not himself or through Ensile or through other interests associated with him pursue further land acquisitions in the Helensburgh area. 72 . (a) In further reliance upon the representation made and referred to in paragraph 70 and at the insistence of Mr Walker and prior to the execution of the HUTA, Mr Hogarth and his wife Barbara Florence Hogarth ("Mrs Hogarth") executed on 6 April 1994 a Deed of Disclosure (the "Deed of Disclosure"). (b) The Plaintiffs will refer to the Deed of Disclosure as if the same were fully set forth herein. (c) Annexed to the Deed of Disclosure was a copy of the Original Thompson Option. 73 . Contrary to the representations referred to in paragraph 70 Mr Walker, through a company associated with him, acquired land in Helensburgh for land development activities independently of and without the knowledge or consent of Mr Hogarth or Lakatoi and/or without treating or offering to treat the said land as land which was to be the subject of the HUTA or the joint venture formed between them. Particulars (i) On or about 25 February 1994 Mr Walker caused Mitsui to be incorporated and/or acquired and become a subsidiary of McRoss Developments. (ii) Mr Walker is the dominant or sole beneficial owner of all shares in McRoss Developments and is a director of McRoss Developments. (iii) On or about 20 October 1994 Mr Walker caused Mitsui to purchase from John Chapman and Diana Joan Chapman all the land etched in pink on the plan which is annexure "A" hereto ("the Chapman Land"). (iv) The Chapman Land comprises 42 allotments and the titles to those allotments are set forth in the Schedule to the Summons hereto. (v) The Chapman Land is located within an area known as the Land Pooling Area and is bounded by the roads owned by Ensile and which form part of the Ensile Land. (vi) Mitsui acquired the Chapman Land for the purpose of land development. 74 . The actions of Mr Walker alleged in paragraph 73 above were done with the knowledge and consent of Walker Consolidated. 75 . The conduct of Mr Walker alleged in paragraph 73 was in breach of the agreement referred to in paragraph 26 and in breach of the fiduciary obligation owed by him to Mr Hogarth as alleged in paragraph 29(e) above and was in breach of Mr Walker's duties as a director of Rosamond under Sections 232(2) and (4) of the Corporations Law. 76 . The conduct of Walker Consolidated alleged in paragraph 74 above and its failure to take steps to prevent the actions of Mr Walker referred to therein was in breach of: (a) the covenant alleged in paragraph 37 hereof; and (b) the fiduciary obligation it owed to Lakatoi referred to in paragraph 36(e). Other breaches of the HUTA 77 . By the HUTA Walker Consolidated covenanted not to mortgage, charge or encumber its interest in the Helensburgh Unit Trust or any part thereof without the prior written consent of Lakatoi. Particulars Clause 8.3 of the HUTA. 78 . In breach of the covenant referred to in paragraph 77, Walker Consolidated mortgaged, charged or encumbered its interest in the Helensburgh Unit Trust or part thereof without the prior written consent of Lakatoi. 79 . By the HUTA Walker Consolidated covenanted not to mortgage, charge or encumber its shareholding in Rosamond or any part thereof without the prior written consent of Lakatoi Particulars Clause 9.1 of the HUTA. 80 . In breach of the covenant referred to in paragraph 79, Walker Consolidated mortgaged, charged or encumbered its shareholding in Rosamond or part thereof without the prior written consent of Lakatoi Universal. 81 . By the HUTA Walker Consolidated covenanted not to mortgage, charge or encumber its shareholding in Rosamond or any part thereof without procuring from the person taking the benefit of the mortgage, charge or encumbrance an agreement in writing to be bound by the provisions of the HUTA as if that person were a party to the HUTA. Particulars Clause 9.1 of the HUTA. 82 . In breach of the covenant referred to in paragraph 81, Walker Consolidated mortgaged, charged or encumbered its shareholding in Rosamond or part thereof without procuring from the person taking the benefit of the mortgage, charge or encumbrance an agreement in writing to be bound by the provisions of the HUTA as if that person were a party to the HUTA. Particulars to Paragraphs 78, 80 and 82 ASC Charge No Date Created Chargee Fixed/ Floating 473490 05/01/95 Esanda Finance Corporation Ltd Fixed 538661 11/04/96 Westpac Banking Corporation Both 537369 18/04/96 TMDA No. 5 Pty Ltd Fixed 537372 18/04/96 TMDA No. 5 Pty Ltd Fixed 586638 01/04/97 Australia and New Zealand Banking Group Ltd Fixed 611866 01/10/97 Commonwealth Custodial Services Ltd Both (collectively referred to as the "Walker Consolidated Charges"). 83 . By the HUTA Walker Consolidated covenanted to: (a) prepare monthly budgets and cash flow projections for Rosamond. (b) circulate such monthly budgets and cash flow projections to each member of the Rosamond Policy Committee with notice of the next Committee meeting. (c) provide to the Helensburgh Unit Trust accounting expertise and to pay for such accounting expertise. Particulars Clauses 12.1 and 17.1(c) and Item 3(c) of the Schedule to the HUTA 84 . On or about 21 March 1994 Lakatoi and Walker Consolidated agreed that Walker Consolidated would: (a) be solely responsible for the preparation of the Helensburgh Unit Trust annual accounts. (b) have those accounts audited by KPMG Peat Marwick. Particulars The agreement was oral and was made by Mr Hogarth on behalf of Lakatoi and Mr Brian Weinert on behalf of Walker Consolidated. 85 . In breach of the covenant referred to in paragraph 83 and in breach of the agreement referred to in paragraph 84 Walker Consolidated failed: (a) to prepare monthly budgets and cash flow projections for Rosamond. (b) to circulate such monthly budgets and cash flow projections to each member of the Rosamond Policy Committee with notice of the next Committee meeting. (c) to provide accounting expertise to the Helensburgh Unit Trust. (d) to prepare the Helensburgh Unit Trust annual accounts. (e) to have the Helensburgh Unit Trust annual accounts audited by KPMG Peat Marwick. Particulars (i) Walker Consolidated has never prepared monthly budgets and cash flow projections for Rosamond. (ii) Walker Consolidated has never circulated such monthly budgets and cash flow projections to each member of the Rosamond Policy Committee with notice of the next Committee meeting. (iii) Walker Consolidated has provided to Lakatoi accounts for the Helensburgh Unit Trust up to 31 March 1995 and for no subsequent period. (iv) Walker Consolidated has not procured KPMG to audit the Helensburgh Unit Trust accounts.' Representations as to expertise, resources and political contacts to secure prompt rezoning of Ensile land and representations as to experience 48 Paragraphs 51 to 57 of the amended summons deal with representations as to expertise, resources and political contacts to secure prompt rezoning of Ensile land and also deal with representations as to experience. The count sounds in misleading and deceptive conduct. 49 The allegation is that Mr Walker represented to Mr Hogarth: (a) that he and his companies had the necessary expertise, resources and political contacts to secure promptly the rezoning of the Ensile land to permit its use for residential development; and (b) that Walker Consolidated and/or Walker Corporation was a company experienced in developing broad acre land into residential subdivisions and obtaining all the necessary approvals and in developing residential town land into residential strata unit development. [Contentions paragraph 51] 50 Particulars furnished are by reference to paragraphs 24A and 25(b). 51 Each of the representations is said to have been a material representation and made in trade or commerce. 52 The plaintiffs then assert that Mr Hogarth acted on the faith of each of the representations and took steps which enabled the Ensile land to be provided to the joint venture constituted by the Heads of Agreement and pursuant to those Heads of Agreement the Joint Venture constituted by the HUTA and took no active part in relation to the rezoning process. [Contentions paragraph 53(a)] 53 The plaintiffs further assert that but for those representations, Mr Hogarth would not have so acted and would not have taken those steps and thereby lost the benefit of up to one-half of his interests in relation to the Ensile land and lost the opportunities to procure the development otherwise of the land and the benefits which would have flowed to him therefrom. [Contentions paragraph 53(b)] 54 The plaintiffs then allege that in reliance upon each of the representations, Mr Hogarth entered into the Heads of Agreement of 23 November 1993 and caused Lakatoi and Ensile to enter into the HUTA. 55 The plaintiffs then allege that contrary to the representations, neither Mr Walker nor his companies had the experience and expertise which Mr Walker on behalf of himself and Walker Consolidated represented that they had. 56 The allegation is that the conduct of Mr Walker and of Walker Consolidated in making the representations was misleading and deceptive, contrary to s 42 of the Fair Trading Act and that by reason of such conduct, Mr Hogarth, Ensile and Lakatoi have suffered loss and damage. 57 Paragraph 86 of the amended summons asserts that a number of facts and matters pleaded in para 41, 44, 49, 32, 64-66, 85 and 56 of the defendant's defence whereby the defendant's deny that the plaintiffs have standing to bring proceedings to recover damages compensation or other appropriate relief for Rosamond in respect of the facts and matters pleaded in the summons, constitute acts or omissions by or on behalf of Rosamond which were and remain oppressive and/or unfairly prejudicial to and/or unfairly discriminatory against Lakatoi as a member of Rosamond and/or contrary to the interests of the members of Rosamond as a whole within s 260 of the Corporations Law. 58 The claims to relief seek the following: " Declarations that: (a) Mr Walker and Mr Dransfield by reason of their conduct alleged in paragraphs 41 and 42 [see Judgment paragraph 39] have acted in breach of their duties as directors; (b) Mr Walker, Mr Dransfield and Walker Consolidated by reason of their conduct alleged in paragraphs 41 and 42 have acted in breach of their fiduciary duties; (c) Mr Walker and Mr Dransfield by reason of their conduct alleged in paragraph 43 [see Judgment paragraph 39] have acted in breach of their duties as directors; (d) Mr Walker, Mr Dransfield and Walker Consolidated by reason of their conduct alleged in paragraph 43 have acted in breach of their fiduciary duties. Mr Hogarth claims against Mr Walker: (1) an order rectifying the Heads of Agreement by deleting Clauses 1 and 4 thereof and substituting the following clauses in lieu: (1) LW to contribute $4.5 M to RMH to take up a 50% position in the Helensburgh Lands as further defined herein; (4) The basis of a joint venture will be that RMH will provide lands as further defined herein and LW will pay $4.5 M to two instalments namely: (a) $2.75 M forthwith; (b) $1.75 M either on achieving rezoning or at the expiration of a reasonable time from the Completion Date whichever first occurs whether or not the Ensile Land is rezoned; whereupon RMH and LW will each hold a 50/50 share in the joint venture. (2) A declaration that for the purposes of the Heads of Agreement a reasonable time from the Completion Date for payment of $1.75 M by Mr Walker to Mr Hogarth has expired. (3) A declaration that it is an implied term of the Heads of Agreement that in the event of the Ensile Land not being rezoned to permit residential development within a reasonable time of the Completion Date then Mr Walker and/or interests associated with him would forthwith at the expiration of such period pay to Mr Hogarth or interests associated with him the balance of the said sum of $4.5 M then remaining unpaid. (4) A declaration that for the purposes of such implied term a reasonable time of the Completion Date has expired. Lakatoi, Mr Hogarth and Ensile claim against Walker Consolidated, Mr Walker and Rosamond: (1) an order rectifying the HUTA by: (a) deleting from Recital H the expression 'Walker Contribution' and substituting the expression 'Walker Expenses'. (b) deleting from the definition of 'Further Contribution' in Clause 1.4 the words 'within 30 days of a gazettal of a rezoning of the Land' and substituting the expression 'within 30 days of a gazettal of a rezoning of the Land or at the expiration of a reasonable time from the Completion Date whichever first occurs whether or not the Ensile Land was rezoned'. (2) A declaration that for the purposes of Clause 1.4 of the HUTA a reasonable time from the Completion Date has expired. (3) A declaration that it is an implied term of the HUTA that in the event of the Ensile Land not being rezoned to permit residential development within a reasonable time of the Completion Date then Walker Consolidated would forthwith at the expiration of such period pay to Highfield Grove the said sum of $1.7850,000 constituting the Further Contribution. (4) A declaration that for the purposes of such implied term a reasonable time of the Completion Date has expired. Lakatoi, Mr Hogarth and Ensile claim against Mr Walker, Mr Dransfield and Walker Consolidated: (2) An order that Mr Walker and Mr Dransfield pay to Rosamond within 14 days of the date of the order: (a) the total of the management fees and other moneys referred to in paragraph 41 [of the Summons]. (b) $220,000 together with interest thereon or on the respective components thereof from the date of payment to the various political parties referred to in paragraph 44 [of the Summons] until judgment at the rates from time to time payable under section 94 of the Supreme Court Act. (c) equitable compensation for all losses sustained by Rosamond by reason of the breaches of duty by Mr Walker and Mr Dransfield hereinbefore referred to. Lakatoi, Mr Hogarth and Ensile claim against Walker Corporation: (3) An order that Walker Corporation indemnify Rosamond in respect of the losses suffered by Rosamond in consequence of the conduct of Walker Consolidated and/or Mr Walker and/or Mr Dransfield in respect of all losses sustained by Rosamond by reason of the breaches of duty by Mr Walker and Mr Dransfield hereinbefore referred to. Lakatoi, Mr Hogarth and Ensile claim against Mr Walker, Mr Dransfield and Walker Consolidated: (4) Alternatively to (2)(a), an order that the management fees and other moneys referred to in paragraph 41 [of the Summons] are not due and owing by Rosamond. Lakatoi and Mr Hogarth claim: (5) An order that Mr Walker pay to Mr Hogarth and Lakatoi damages. Ensile claims: (6) An order that Walker Corporation and/or Walker Consolidated pay to Ensile damages. Lakatoi, Mr Hogarth and Ensile claim against Mr Walker, Mr Dransfield and Walker Consolidated: (7) An order that Walker Consolidated pay to the third Plaintiff ("Highfield Grove") $2.75 million within 14 days of the date of the order together with interest thereon under section 94 of the Supreme Court Act from 6 April 1994 to the date of payment. (8) An order that Walker Consolidated transfer to the Seventh Defendant ("Rosamond") the benefit of the Current Thomson Option. (9) An order that Walker Consolidated (at its expense but on account of Rosamond) establish and undertake a study of the effectiveness of the water settling ponds proposed by Lady Carrington Estates to maintain water quality in the catchment of the Ensile Land. (10) An order that Vamden transfer to Rosamond the benefit of the Vanden Development Consent and the property rights in and to the documents comprising the Vanden Development Application subject to Vamden being indemnified for any expenses incurred by Vamden in obtaining such Development Consent and acquiring such documents. Lakatoi, Mr Hogarth and Ensile claim against the Fourth Defendant ('Mitsui'): (11) An order that Mitsui (at its expense but on account of Rosamond) transfer to Rosamond the benefit of the Chapman Land. All the Plaintiffs claim: (12) All such equitable relief (including but not limited to equitable compensation) as may be just. (13) Costs." The Defendants' Case 59 At the commencement of the hearing it was anticipated (in terms of case management) that Mr Walker, Mr Dransfield and Mr Weinert would be giving evidence for the defendants. Mr Shand QC boldly opened the defendants' case making plain that these witnesses would be called and their statements read. In cross examination, a number of sections of the statements of these witnesses were put to Mr Hogarth and Mr Kidd or otherwise referred to. 60 Indeed, the judgment of 30 September 1999 dealing with motions to set aside subpoenas sought to be used by the plaintiffs to investigate issues of credit of Messrs Walker and Dransfield, was predicated on the anticipated cross examination. 61 Well into the hearing, in fact on the 32nd day, it was announced by Mr Officer QC for the defendants, that neither Mr Walker, Mr Dransfield nor Mr Weinert would give evidence. Accordingly, their statements were ultimately not before the Court. Plainly they could not be cross examined. Certain file notes and other contemporaneous documents said to have been written or received by Mr Walker, Mr Dransfield or Mr Weinert were, however, tendered during the course of the proceedings. These will be dealt with in due course in this Judgment. 62 As the result of Mr Officer's announcement, the proceedings were considerably shortened. The only witnesses for the defendants were thus Messrs Lester, Joliffe, Cichacz and Dempsey. 63 Before turning to the detailed facts it is convenient to outline (a) detail of the Lady Carrington Estate, (b) the planning background of the land subject to the Commission of Inquiry, (c) in general terms, the process of achieving a rezoning. The Lady Carrington Estate 64 The land subject to these proceedings is conveniently referred to hereafter as the 'Lady Carrington Estate' (LCE). The total area of the LCE is approximately 450 hectares and is comprised of three separate areas of land as shown on the plans appended to this judgment as Appendices 3 and 4. Appendix '3' is Annexure A to the Fourth Amended Summons and shows the extent of the Ensile land. Appendix '4' is Figure 1 from the Commissioner's Report which shows the area the subject of the Commission of Inquiry making clear the three parcels of land which comprise the Lady Carrington Estate. The major part of the holding, referred to as Site 1 in keeping with the terminology of the 1992 GHD application, lies to the east of the Helensburgh township near Lilydale Road and is bordered to its east by the South Coast Railway. This site occupies an area of 417 hectares. The two smaller parcels of land, one of which is the 1895 subdivision, are collectively referred to as Site 2, and are located to the north of Site 1 in the vicinity of the Helensburgh tip. 65 The LCE land is located within the catchment of the upper reaches of the Hacking River and a number of its southern tributaries. The land lies to the south-west of the Royal National Park. 66 The landform of Site 1 is composed of both plateau and valley. The proposed urban development on this site was confined to the plateau area such that it would be an extension of the existing township along a north spur and the eastern plateau area. Beyond the plateau, the valley drops steeply, with vertical escarpments in some places. In the valley, Camp Creek flows in a north-easterly direction to join the waters of the Hacking River flowing to Port Hacking in the north-east. Other tributaries to the Hacking River in the vicinity of Site 1 include Gardiners Creek and an unnamed creek. 67 Site 2 is located on the north-east part of the Helensburgh plateau at an elevation of 200m. The eastern edge of the site falls away steeply into the Hacking River valley. 68 The location and topography of the Hacking River catchment area are such that it receives the highest average rainfall of all the catchments in the Sydney region. The upper reaches of the river (above Audley weir) are classified Class P (Protected Waters) under Part 3 of the Clean Waters Act due to its sensitive relationship with the Royal National Park. The Class P status applies also to urban runoff from the proposed development. 69 LCE was the largest single landholding on the edge of Helensburgh township considered by the Helensburgh Commission of Inquiry, appointed to resolve the future zoning of the LCE and other lands. 70 At the time of the Inquiry, Site 1 was zoned predominantly Non Urban 1 with certain land in the east zoned Environmental Protection Hacking River 7(d). The 1895 subdivision lands comprising Site 2 were similarly zoned Non Urban 1 with the remaining land zoned Environmental Protection Hacking River 7(d). It was proposed both in the 1992 GHD rezoning application and in the 1994 case put by the joint venture before the Commission of Inquiry to rezone much of this land to Residential 2(a), with the 1895 subdivision land being rezoned Environmental Protection (Residential) 7(c). Integral to this proposal was the dedication of approximately 320 hectares of bushland in the eastern area of Site 1 to the State Recreation Area. This dedication of land was intended to serve as a buffer between urban development of Site 1 and the Royal National Park. 71 The development, as it was originally proposed in the 1992 GHD application and again in the June 1994 submission, was to create some 805 allotments capable of supporting 1,010 dwellings on Site 1 and some 204 allotments capable of supporting 268 dwellings on Site 2. This proposal for LCE represented approximately one third of the total allotments proposed for the medium density development of the land subject to the Inquiry. Regulatory regime of the land subject to the Commission of Inquiry 72 There are essentially three points in time at which it is necessary to look at the existing regulatory regime current at that time. These are, March 1992, the time the GHD application for rezoning was submitted; February 1994, the time the Commission of Inquiry was announced; and March 1995, the time at which Wollongong LEP 1994, Amendment No. 63 was gazetted as an Interim measure while studies were to be done with 40 hectares minimum per allotment subdivision area. 73 In the course of detailing the regulatory regimes that pertained at these relevant times, it will also be necessary to look to certain initiatives/proposals that were put forward from time to time. (1) Regulatory Regime at the time of the 1992 GHD application 74 The 1992 GHD rezoning application was intended to serve a dual purpose. Not only was it seeking amendment of the City of Wollongong LEP 1990 extant at that time, but it was also lodged as an objection to Council's Draft LEP 1992 which proposed to rezone lands, including the LCE lands, to a zoning further inconsistent with urban development than already pertained. City of Wollongong LEP 1990 75 Pursuant to the City of Wollongong LEP 1990, at the time of the 1992 GHD application the land constituting Site 1 of LCE was primarily zoned 1: Non-Urban with the eastern extremities being zoned 7(d): Hacking River (Environmental Protection). The land constituting Site 2 was similarly zoned 1 and 7(d). 76 The objectives of zone 1 were to provide a rural atmosphere on the outskirts of the local government area and to act as a reservoir from which land suitable for either urban development catering for planned urban growth or environmental protection could be drawn. Only agricultural and peri-urban activities, which will not prejudice the environmental quality or development potential of the land, or lead to demand for further public services, would be allowed in the zone. 77 The objectives of zone 7(d) were to identify and protect the relatively pristine tributaries of the Hacking River catchment and to safeguard the natural qualities of these areas as a complement to the Royal National Park. Activities allowed in this zone required consent and include dwelling houses (if a dwelling right exists), leisure areas, and activities which would not prejudice the objective of protecting the Hacking River Catchment. 78 Under the Draft LEP 1992 (Certificate Plan Number 91/16), submitted by Wollongong Council under s 65 of the EPA Act 1979, the Council proposed to rezone certain land, including LCE land, from zone 1 to either zone 7(d) Hacking River Environmental Protection or zone 7(c) Environmental Protection Residential Zone. Under this proposal all the LCE lands were to be rezoned 7(d). [See the more detailed examination below]. [The objectives of zone 7(c) were to cater for limited residential and village development in areas possessing special environmental qualities or which may be affected by environmental hazards and as such, to allow some diversity of activities which will not detrimentally affect environmental quality, character or amenity of the area. All permissible activities required development consent in this zone.] 79 In order to appreciate the context in which Council submitted its Draft LEP 1992, it is necessary to look to the Draft Helensburgh Plan 1990 which was the precursor to that Council initiative. The Draft Helensburgh Plan 1990 80 Although titled a Draft Plan, the Draft Helensburgh Plan 1990 was a local environmental study prepared by Wollongong City Council's Strategic Planning Section with assistance from the now Department of Planning, the Department of Housing, the then SPCC (now the EPA), the NPWS, the Water Board, the Soil Conservation Service, landowners and a number of consultants. 81 The Plan investigated the urban expansion potential of Helensburgh and surrounding areas and presents a detailed and comprehensive long-term plan for the future development, management and conservation of the area. The Plan was prepared to form the basis of a Draft LEP and a Draft Development Control Plan. 82 The land identified as being capable of urban development under the Plan was consistent with that recommended by an earlier SPCC study. 83 The 1986 SPCC study recommended that urban development could occur only in the most disturbed catchments of the Hacking River. It found that, subject to the installation of appropriate water quality controls, development in the Gills and Camp Creek catchments would not significantly reduce the quality of the waters flowing into the Hacking River. The water quality controls recommended for the catchment were based on the Best Practical Means approach, and were required to be a permanent body of water equal to one percent of the catchment. 84 A subsequent series of water quality studies undertaken by consultants investigated the location and design options for the water quality treatment ponds in the Gills and Camp Creek catchments. The suggested pond location for the Gills Creek catchment was over a significant Aboriginal site. The suggested pond location for the Camp Creek catchment was partly within the Garrawarra State Recreation Area and would have potentially destabilised the Illawarra Line embankment. The 1990 Plan recommended that: (a) further development in the Camp Creek catchment be deferred pending discussion between landowners and the NPWS; (b) development of the Gills Creek catchment be allowed as it posed no significant problems other than the location of the water quality pond; and (c) the development of the area of small rural lots of the southern end of Walker Street could proceed if a more suitable subdivision design was found and a diversion channel could be constructed to drain the area to the Gills Creek water quality control pond. 85 Following the study, Council prepared Draft Local Environmental and Development Control Plans which were placed on exhibition from July to October 1990. Approximately 5000 submissions were received, 4850 objecting to, and 236 in support of, urban development proposed in the Plan. The issues raised in these submissions were: · the impact on the Royal National Park; · water quality of the Hacking River system; · the design and location of the water quality ponds; · flooding concerns at Otford; · destruction of significant bushland; · questions about the need of urban growth in Helensburgh; and · the lack of services in Helensburgh and the need for further growth to support more services. 86 Despite the positive recommendations made by Council's officers with respect to the Draft Helensburgh Plan 1990, the Council resolved not to proceed with the plan at its Special Meeting of 29 April 1991. Instead, it resolved to encourage Helensburgh to grow by up to forty percent through urban consolidation and to rezone all the land zoned non-urban around Helensburgh to an environmental protection zone. This draft plan is referred to as the "Draft LEP 1992". Draft LEP 1992 (draft amendment no. 63) 87 On 20 May 1992 a Section 65 Certificate to enable exhibition of the 1992 Draft Local Environmental Plan was issued and the plan was placed on public exhibition from 22 July to 18 December 1992. The objectives of the Plan were: (a) to permit development for residential purposes subject to environmental controls; and (b) to rezone certain land to Hacking River Environmental Protection in order to restrict development and safeguard the Hacking River catchment. 88 Approximately 7000 submissions were received. The issues raised in the submissions were similar to those raised in the submissions to the 1990 Plan. The major difference was that a number of the submissions were detailed development proposals generally supported by studies in water quality, bushfire risk analysis, servicing requirements and subdivision layouts. 89 One such submission was the 1992 GHD application for rezoning prepared on behalf of Lady Carrington Estate Pty Ltd. 90 On 13 April 1993 Council resolved, in part, to rezone the land as exhibited in the 1992 Draft LEP except for the Gills Creek catchment and to defer consideration of the Gills Creek catchment pending the outcome of mediation between interested groups - the mediation being subsequently abandoned. 91 Prior to this resolution being effected, and after considering the City of Wollongong LEP (draft amendment no. 63), the Minister for Planning convened a Commission of Inquiry under section 68 of the EP&A Act 1979. In establishing the Inquiry, the Minister is recorded as having taken into account the Director of Planning's concerns expressed to Wollongong Council at the time the draft plan was placed on exhibition. The Director had noted that a number of development proposals existed and requested Council to give consideration to these proposals as part of the rezoning process [19/144]. (2) Regulatory Regime at the time of the Inquiry 92 Despite the various Council initiatives which had been presented in the period leading to the Commission of Inquiry, the regulatory regime pertaining to the subject land at this time continued to be provided by the City of Wollongong LEP 1990. 93 Also relevant to the subject land was the Illawarra REP Plan No.1 gazetted in 1986. This plan identifies and aims to protect areas of rainforest, allowing such land to be cleared only with consent, following the advice of the NPWS. The plan also prevents land being rezoned from rural to urban without a local environmental study. If the lands subject to the Inquiry were to be rezoned for residential development, the provisions under the REP require that: · urban expansion is orderly and efficient having regard to the constraints of the natural environment, and that sufficient land is available to prevent price rises resulting from shortages of land, · development consent should not be granted on land supporting rainforest vegetation species unless after consultation with the Director of NPWS, the consent authority is satisfied that either the development will not have a detrimental effect on the rainforest…, or any detrimental effect…can be justified by other factors, · new residential land, or land for higher density development is only developed where there are adequate utility and community services available or where the relevant authorities or the developer is committed to provision of such services, · residential development does not occur on hazard prone lands, · bushfire risks to urban development are minimised, and · where a draft local plan provides for substantial increase in the area of residentially zoned land, the consent authority must have made an assessment of land availability and take-up rates and must be satisfied that there is insufficient land in that area to cater for projected household growth for a period of 10 years. 94 Further, the REP identifies an area of land as containing escarpment lands. These lands were identified in the Department's "Illawarra's Coast, A Discussion Paper" as suggested extensions to the Habitat Corridor System which links the Royal National Park to the Illawarra Escarpment. The plan protects the movement of fauna along the corridor and ensures the visual qualities of the lands are protected. The suggested expansion area encroaches to a limited extent upon Site 1 of the LCE land. 95 Additionally, the subject land was also affected by the State Government's Metropolitan Strategy for Sydney and 'Sydney's Future'. While Helensburgh was identified on the 1989 Metropolitan Strategy as suitable for urban expansion, it was not considered for urban expansion under the 'Sydney's Future' Plan and as such was not listed on the Urban Development Program. 'Sydney's Future' recommended a more compact form of growth for the Greater Metropolitan Region of Sydney, which includes Wollongong and Newcastle. It argued for a reduction in the amount of land taken up at the fringe for urban development and for the more efficient use of existing services and infrastructure. (3) Regulatory Regime as at March 1995 96 In March 1995 following the December 1994 recommendations of the Commissioner of Inquiry, Wollongong LEP 1994 Amendment No. 63 was gazetted. 97 Under this plan the LCE "Non-Urban" lands were zoned "Environmental Protection" 7(d) as an interim measure pending results of studies conducted with 40 hectares minimum per allotment subdivision area. Process of achieving a rezoning 98 At all relevant times, the zoning of the LCE lands did not enable, without more, the redevelopment of the land for residential subdivision. 99 Accordingly, what was required was for the existing Wollongong LEP 1990 to be replaced or amended in relation the LCE land. A zoning of Residential 2(a) was required. 100 Replacement of or amendments to an LEP are achieved via the process of making an LEP set out in Part 3 of the EPA Act 1979. 101 Although strictly an LEP is made by the Minister (section 70), with the exception of matters "formal" to the process of the making of the LEP, that process is in the main as determined, and as conducted, by the Council: see sections 54, 57, 62, 66 and 68. There is no avenue of appeal (as of right) against a Council's position with respect to the drafting of an LEP. Similarly, there is no avenue of appeal (as of right) against the Minister's decision either to make or refuse to make the LEP. The only avenues for appeal are in terms of judicial review of the exercise of powers and procedures in the making of the LEP, and even then such review can be limited as to time following the giving of public notice of the making of the LEP (section 35). 102 Since the submission of its Draft LEP 1992, Wollongong Council had made it clear that it was opposed to the rezoning contemplated by Lady Carrington Estate, and in fact had proposed a rezoning further inconsistent with the residential subdivision. 103 It is pertinent to note in contradistinction, the process of achieving development consent once rezoning is implemented. Development Consent issues 104 It is clear that had rezoning of the LCE lands been achieved, the joint venture would have been required to obtain development consent before effecting subdivision and development of the LCE lands. 105 The process for obtaining that consent is as prescribed in Part 4 of the EPA Act. 106 Part 4 provides for assessment of an application for development consent by reference to certain criteria including criteria and elements specified by the Act. These criteria include, for example, the requirements of the Council's own LEP and any Development Control Plan made by the Council (and endorsed by the Minister) with respect to the carrying out of development. 107 The plaintiffs point out that unlike the process of the making of an LEP to effect a change in the zoning of land, with respect to an application for development consent the EPA Act affords a mechanism for a merits appeal (as of right) under section 97. This right of appeal exists both: (1) as to, for example, an application for subdivision consequent upon a rezoning of the land; and (2) as to an application for the construction of trial ponds pursuant to the existing LEP (in the event that it is said that the Council would have been unlikely to have approved of such trials (see Smyth Transcript 1246). 50035/98 - LAKATOI UNIVERSAL PTY LTD & ors v LANGLEY ALEXANDER WALKER & ORS 50110/98 - ENSILE PTY LIMITED v WALKER CONSOLIDATED INVESTMENTS PTY LIMITED and Ors 50109/98 - ENSILE PTY LIMITED v WALKER CONSOLIDATED INVESTMENTS PTY LIMITED 1798/98 - ENSILE PTY LIMITED v WALKER CONSOLIDATED INVESTMENTS PTY LIMITED JUDGMENT - 10 March 2000 PART 2 The Facts 108 References to the many volumes of Exhibit PX will be shortened. Hence '1/181' is a reference to Exhibit PX, volume 1 page 181. 109 By reason of the number of meetings and conversations in issue and in respect of which most participants gave detailed evidence, a folder 'MFI 14' was created by the defendants. The folder seeks to identify many of the contemporaneous notes and memoranda created by witnesses who attended the meetings in issue. Those notes and memoranda are already in evidence. The folder has 22 dividers. Divider 6 includes a page identifying the subject matter as 'Meeting 6 - 10 November 1983 Meeting Hogarth, Kidd, Dransfield and Walker'. It then conveniently lists the sections of those witnesses' statements said to deal with this meeting. Although this may not have been the sixth relevant meeting, the parties agreed as a matter of convenience only, to adopt as a common dictionary, the reference to this meeting as 'Meeting 6'. This approach seen in the transcript, is followed in the Judgment. Hence it matters not that so-called 'Meeting 6' may have in fact been the fifth or eighth relevant meeting. 110 In endeavouring to outline the facts, it is not practicable to refer to every letter or document contained in the voluminous material tendered. Detail is included as necessary: (a) to sketch in the protracted attempts to interest local Councils, regulatory authorities and State Government representatives in LCE's pursuit of rezoning to permit redevelopment of the subject lands; (b) to identify the contested versions of the principal meetings which, together with all the evidence, are duly weighed in reaching the court's findings of fact; (c) to identify the exposed financial position of the Hogarth interests forming the backdrop to the negotiations and agreements between the Hogarth and Walker interests. 111 Finally, I note that a number of obvious typographic errors appear in the transcript and were never corrected. Notwithstanding this, in citing transcript I do not correct for errors. Hence what may at first be perceived as typographic errors in the Judgment transcript excerpts are carried over from the formal record. Planning History Summary 112 Before turning to the detailed examination of the facts, it seems useful in terms of the structural chronology to shortly set out the summary of the planning history of the Helensburgh lands. This history, which was prepared by the plaintiffs in a schedule for the purpose of final address and subsequently amended by the defendants, is not in issue and is as follows: 1895 Subdivision of some of LCE South lands to promote growth of Helensburgh. 1896 "Council advises that the area subject to the rezoning application by the Helensburgh Land Pooling Group was subdivided in approximately 1896 by Metropolitan Collieries." [COI Report PX Volume 19.092 at 0.1] 1947 "The land remained undertermined by the first planning scheme introduced in 1947, the County of Cumberland Planning Scheme." {COI Report PX Volume 19.092 at 0.2] 1948 Cumberland County Plan. LCE lands designated as "Rural". 1950 Wollongong Draft Planning Scheme exhibited. Development controlled by the Town and Country Planning (General Interim Development) ordinance that allowed development that was consistent with the Draft Planning Scheme. (LCE land designated Non Urban). 1960/61 Revised Wollongong Draft Planning Scheme and development administered in the same way as with 1950 Draft (LCE land is Non Urban "A", with 5 acre minimum per allotment subdivision area). 1968 Wollongong Planning Scheme Gazetted. Development now controlled by the Planning Scheme (Map and Ordinance). (LCE land is Non Urban "A" with a 25 acre minimum per allotment subdivision area). 1968 "These sites have, however, been zoned the equivalent of a Non Urban zone since 1968. In 1968 the Illawarra Planning Scheme Ordinance was adopted…" [COI Report PX Volume 19.092 at 0.2]. "In 1968 the minimum lot size was set at 5 acres (2 hectares) by the Illawarra Planning Scheme …" [COI Report PX Volume 19.092 at 0.3] 1971 "… in 1971, the Minister changed the minimum requirement to 50 acres (20 hectares). [POI Report PX Volume 19.092 at 0.4] 1980 Council resolved to prepare Draft Local Environmental Plan and Study to allow for urban expansion of Helensburgh but this did not proceed because the Urban Development Committee gave the area a low priority in terms of Sydney's expansion. 1984 Wollongong Local Environmental Plan No 38 (1984) supersedes the Planning Scheme (LCE zoned Rural "A" with 40 hectare (100 acre) minimum per allotment subdivision area). March 1994 "In 1968 the Illawarra Planning Scheme Ordinance was adopted and was in force until 1984 when the Wollongong Local Environmental Plan No. 38 was gazetted." [COI Report PX Volume 19.092 at 0.3] "This plan renamed the Non Urban zone to Rural …" [COI Report PX Volume 19.092 at 0.5] 1985 Urban Development Committee included Helensburgh on the Illawarra Urban Development Program and asked Council to undertake the necessary studies. (See Exhibit #PX21 being 22 February 1985 Minutes of the 38th Meeting of Urban Development Committee). 1986 Interim Conservation Order under the Heritage Act to prevent premature clearing of land east of Helensburgh while studies progressed. 1986 "The Illawarra Regional Environmental Plan No. 1 was gazetted in 1986 … the plan prevents lands from being rezoned from Rural to Urban without a local environmental study. If lands subject to the enquiry were to be rezoned for esidential development, the provisons under the plan require…" [COI Report PX Volume 19.68 at 0.9] 1987 Local Environmental Plan gazetted to create a 7(h) Hacking River Environmental Protection Zone over part LCE lands. 1990 Wollongong Local Environmental Plan 1990 supersedes the 1984 LEP. (LCE Lands part zoned Non Urban "1" and part zoned 7(d) with 40 hectare minimum per allotment subdivision area). 21 December 1990 "The subject lands [LCE] is covered by the planning provisions contained in the City of Wollongong Local Environmental Plan, 1990, made by the Minister for Planning, 21 December 1990." [GHD PX Volume 4.178 at 0.9] 1991 Council resolved to prepare a Draft Local Environmental Plan [(that ultimately became Amendment No 63-see below) to rezone all Non Urban land identified in the Helensburgh Study to 7(d) Environment Protection – Hacking River.] This included LCE land and resulted in the GHD objection/submission. 29 April 1992 "…Council resolved at a special meeting of 29 April 1991 to: · rezone the land identified in the Helensburgh plan as follows: - in the ridge to 8(b) - area off Sutherland Street to 2(a) · prepare a draft local environmental plan and draft development control plan for the Department of Housing land east of Lukan Street to rezone that land to 7(c). · rezone all other Non-Urban land identified in the Helensburgh study to 7(d) Environmental Protection - Hacking River …" [COI Report PX Volume 19.065 at 0.8 to PX Volume 19.066 at 0.1] 1992 GHD Objection /rezoning submission for LCE lands lodged with Council (PX4.0166; PX4.0167; PX4.0168). 20 May 1992 "The draft 1992 Local Environmental Plan was placed on public exhibition on 20 May 1992." [Department of Planning PX Volume 10.241] "…The LEP was placed on exhibition from 22 July to 18 December 1992." [COI Report PX Volume 19.066 at 0.5] 1990 Council resolved to proceed to complete the Draft LEP (Amendment No. 63) that rezoned the Non Urban land including LCE lands to Zone 7(d). June 1993 "The Council referred the 1992 plan to the Deparmtnt of Planning in June 1993 under section 68 of the Environmental Planning and Assessment Act, 1979." [Department of Planning PX Volume 10.242] Feb 1994 Minister Webster appoints Commission of Inquiry to resolve Helensburgh land use issues. Dec 1994 Commission Reports. March 1995 Wollongong LEP 1994, Amendment No 63 gazetted (LCE "Non Urban" lands zoned Environmental Protection 7(d) as an Interim measure while studies are done with 40 hectares minimum per allotment subdivision area. Early Nineteen Eighties 113 As already pointed out, the substantial Helensburgh holdings had been acquired in the early nineteen eighties. 1985 114 The Water Board constructed a sewer main through Camp Creek within the Ensile land and connected it to individual allotments within the Lady Carrington Estates. 1985-1991 115 During the period 1985 through to 1991 various consultants were engaged and plans and applications prepared and lodged with the Wollongong City Council in an endeavour to have the Lady Carrington Estates zoned to allow residential development. 25 June 1985 116 On 25 June 1985 Mitchell McCotter & Associates Pty Ltd, Planning Environmental and Engineering Consultants, wrote to the National Parks and Wildlife Service enclosing a recently completed report on lands owned by the Hogarth interests at Helensburgh. The report had been carried out in association with Mr Kevin Laws of Wollongong University and attempted to identify all areas subject to environmental constraints that would preclude residential development. The letter proposed that as a possible means of expediting a rezoning, the landowners had decided that they were willing to grant certain of their lands to the National Parks and Wildlife Service. [1/181] 14 March 1986 117 By letter dated 14 March 1986 Mr Hogarth wrote to the Premier (the Hon. Mr N K Wran) enclosing a submission together with two studies undertaken of the area. Mr Hogarth, inter alia, set out his concern that it would only be with the Premier's support that a reasonable response in connection with water supply would be forthcoming from the Metropolitan Water Sewerage and Drainage Board ['MWS & DB']. [1/223] 26 May 1986 118 By letter dated 26 May 1986 Mitchell McCotter & Associates wrote to the Wollongong City Council enclosing a submission on the Helensburgh Local Environmental Study. It made plain that the submission focussed on, inter alia, water quality and was to be read in conjunction with two earlier reports which considered environmental constraints and servicing options for the company's land. [1/224] July 1986 119 Pacific East Coast Limited was registered in July 1986 and it was a company of which Mr Severino was a director through the relevant period of time from about 1986 onwards. Mr Walker was a director from 8 October 1986 to 9 May 1995. Mr Weinert was the secretary from 9 May 1995. 22 October 1986 120 By letter dated 22 October 1986 Mr Kidd writing on behalf, inter alia of Ensile, wrote to the Minister for Environment and Planning (the Hon. R J Carr MP) confirming his interest to meet with Mr Carr at his earliest convenience to discuss a number of problems relating to the properties. Mr Kidd had met with Mr Carr in the Royal National Park some days earlier and invited Mr Carr to inspect the land in question. [1/228] September 1988 121 In September 1988 Lady Carrington Estates made an application to the Wollongong City Council to have its Helensburgh land holdings rezoned to residential 2A. 6 March 1989 122 A note entitled 'Briefing Data for Ministerial Visit to Helensburgh' dated 6 March 1989, includes the following: 'LCE has been instrumental in identifying a means to improve the overall pollution control in the Helensburgh area via a settling ponds scheme in Camp Creek. LCE has offered to fund 50 per cent of an expert study - and to contribute an equitable percentage of the construction of such a scheme. This offers a cure for existing runoff problems from most of the Helensburgh area via Camp Creek.' [2/18] 12 April 1989 123 A document entitled 'Briefing Data for State and Local Government Representatives' of 12 April 1989 sets out the zoning history as at that point in time of the subject land holding. The document includes similar material to that referred to in the 6 March 1989 briefing data for ministerial visit. The document states: 'In early 1988 the major portion of Ensile's land was rezoned from "Rural A" to "74 Environmental Protection" and most of the area now subject to the rezoning application to "2A Residential" remained as a rural zoning with an implication by WCC that the area was considered suitable for residential development.' [2/34] 24 April 1989 124 By letter dated 24 April 1989 Mr Dransfield wrote to Mr Arkell then Lord Mayor of the City of Wollongong advising, inter alia: "Re Helensburgh - Future Residential Development It is our understanding that a unique opportunity exists in the Helensburgh area to achieve a release of residential land into the Sydney and Wollongong markets, while at the same time achieving major contributions to a Sedimentation Containment Scheme to greatly improve the quality of the present and future discharge of water from Camp Creek into the Hacking River. We believe that ready co-operation has been forthcoming from a potential developer - Lady Carrington Estates Pty Ltd, The Colliery - Metropolitan Collieries Pty Ltd and the Department of Housing to fund an independent study of containment/sedimentation Pond in Camp Creek under the control of the Wollongong City Council and we commend this action and the co-operation which has been demonstrated thus far. It should however be borne in mind that the cost of proceeding further with the system to contain the existing and future discharges from Camp Creek must be borne by the local community unless commercial interests can see their way clear to contribute funds and in this case it will be greatly influenced by the extent of such development … We are informed that meetings have recently been held with the Council's Town Planning Department and Lady Carrington Estate's Consultants and that further data [as requested by the Town Planning Department] will be submitted to that Department in a Report in the first week of May 1989. The Areas identified by Lady Carrington Estate Consultants are identical to that which LandCom selected in 1984 and that was supported by the previous Government. Due to the critical level of availability of suitable residential land, we ask that WCC use their best endeavours to expedite this matter as we see an opportunity to meet the needs of the New South Wales people for new land availability, the cleaning of Protected waters in Royal National Park and the well planned use of land in the Helensburgh area." [2/39A] 29 May 1989 125 On 29 May 1989 Mr Kidd, writing on behalf of Lady Carrington Estates, wrote to the Hon. J P Hannaford MLC seeking his involvement in terms of a co-ordination effort suggested as needed between a number of government bodies to ensure that all merits relating to the application for re-zoning at Helensburgh were appreciated. Reference was made in this letter to the numerous separate New South Wales and Local Government departments involved including the State Pollution Control Commission, the Soil Conservation Service, the National Parks and Wildlife Service, State Recreation, State Rail Authority and various departments at Wollongong City Council. [2/46] 126 To provide some guidance as to the arguments involved Mr Kidd stated: '(a) That the State Rail Authority has concerns about embankments in the Helensburgh area and the effect that siltation containment ponds may have on these - and indicated that LCE had offered to undertake complete geotechnical investigations and to design these ponds in a way which would provide indemnification for the State Rail Authority. (b) That it was believed that the State Pollution Control Commission was requiring containment pond volumes to be designed in Camp Creek on the basis that the Camp Creek catchment was 100 per cent urbanised - and stating that this was not and never would be the case. (c) That LCE had been advised that the National Parks and Wildlife Service intended to resist the construction of any dam and water containment pondage in the Camp Creek catchment due to destruction of tree cover. [2/46] 5 June 1989 127 On 5 June 1989, Mr Kidd wrote to the Wollongong City Council outlining suggested 'community offsets' offered by Lady Carrington Estates and Ensile and, as part of the re-zoning, the construction of a siltation and pollution containment pondage on Camp Creek. [2/53] 128 Mr Hogarth gave the following evidence in relation to the date early June 1989: 'Q. By this time the Lady Carrington Estates and Ensile were making all sorts of efforts about lands and that kind of thing? A. Yes. Q. You had reached the stage where things were pretty desperate in relation to persuading the necessary bodies involved, council, New South Wales Government and so forth, is that so? A. Yes, it had been going on for four years. [T 44/45] 13 June 1989 129 On 13 June 1989, Lady Carrington Estates wrote to the National Parks and Wildlife Service enclosing a draft of heads of agreement proposed to be entered into between the National Parks and Wildlife Service and Lady Carrington Estates to establish the basis on which ownership of certain lands and associated leaseback arrangements could be made and to establish the basis on which Lady Carrington Estates as part of the re-zoning proposal, would construct certain siltation and water storage pondage and dams in the Camp Creek area. The proposal was for Ensile to receive a 99 year lease back and for 10 per cent of the proceeds of sale of the rezoned land to be used for a National Parks and Wildlife Service community fund. [2/55] 28 August 1989 130 By letter dated 28 August 1989, Mr Kidd wrote to the National Parks and Wildlife Service, following a meeting with that service and advising that he believed that some problems had been experienced in the recent past with contamination of the Camp Creek and Hacking River areas by industrial waste from the Helensburgh area and drawing to the attention of the service the fact that the Lady Carrington Estates proposal would provide 'large capacity containment pondage in accordance with SPCC design guidelines at nil cost to your service so that this problem would be circumvented in the future'. [2/66] 31 October 1989 131 By letter dated 31 October 1989, Mr Hogarth wrote to the National Parks and Wildlife Service enclosing a report giving details of the subject lands and various aspects of the proposal to transfer certain of those lands to the Service associated with the proposed support of the National Parks and Wildlife Service to the rezoning proposal. [2/70] 132 By letter dated 8 November 1989, the then Chairman of the Standing Committee on State Development (the Hon. J P Hannaford MLC), wrote to the Minister for Environment drawing to his attention to the proposal submitted to the National Parks and Wildlife Service in late October by Lady Carrington Estates and commending for serious consideration the proposals outlined in the Mitchell McCotter report of 1989. The letter advised, inter alia: 'We are all well aware of the pollution problems caused to the Port Hacking catchment by the existing development in Helensburgh. The proposal outlined in the Mitchell McCotter report appears to provide a satisfactory solution to these pollution problems without the capital cost being incurred by the public sector . . . The report also appears to outline a proposal whereby a very significant area of land at Helensburgh could be added to the National Parks and State Recreation area . . .'. [2/77] 10 November 1989 133 By letter dated 10 November 1989, Mr Hannaford also wrote to the Premier (the Hon. N Greiner MP) enclosing a copy of the Mitchell McCotter report and of the correspondence from the Lady Carrington Estates 'because of the significant public gains which are outlined in the Mitchell McCotter report for the Helensburgh area'. Mr Hannaford stated that he believed that the proposals as outlined in his letter also had the support of the member for Helensburgh, Mr Alan Andrews MP. In view of the significance of the report, the matter was brought to the Premier's attention. [2/79] 15 December 1989 134 By letter dated 15 December 1989, the Cabinet Office responded to Mr Hannaford's letter advising, 'your comments have been carefully noted and Mr Greiner has asked me to let you know that the matters raised are receiving close consideration'. [2/81] At some time during 1989 135 At some time during 1989, a draft Joint Venture Agreement document was apparently proposed between Taylor Woodrow (WA) Pty Limited and Ensile [2/3]. 2 February 1990 136 By letter dated 2 February 1990, Mr Hogarth wrote to the Minister for Housing, updating him as to the recent activities with regard to the land and in relation to the proposal 'to immediately progress the development of approximately 800 building blocks if all State and Local Government initiatives could be met', stating as follows: 'We have developed a plan to design, install and partly fund a containment pond system which would not only control any resultant runoff from our new development but which would also control runoff from the existing Helensburgh township, the Helensburgh tip and future developments by the Department of Housing and thereby decrease the effect of this runoff into the Hacking River and the areas of Royal National Park downstream. ' [2/139] 137 By letter dated 2 February 1990, Mr Hogarth wrote to the Minister for Local Government enclosing a copy of his recent correspondence to the Minister for Housing. [2/142] 6 March 1990 138 It appears that on 6 March 1990, a letter was written by Mr Dransfield as Director of Housing, on Department of Housing letterhead, to Mrs Kibble of the Department of Planning [PX 2/230]. The letter advises that the Department of Housing had recently received representations from companies seeking assistance in having three areas of land included in the Urban Development Programme for early development. The land in question is said to include land at Helensburgh. Mr Dransfield proposes in the letter that all three areas be considered by the Urban Development Finance Committee at its next meeting and by the Cabinet Committee on Urban Development on 21 March 1990. 139 The letter includes the following: 'In relation to Helensburgh, I have recently received a copy of a submission to the National Parks and Wildlife Service, prepared for Lady Carrington Estates, proposing rezoning of land at East Helensburgh and transfer of land to the Service. As you are aware, development in the Helensburgh area has been considered by the Cabinet Committee on a number of occasions and was the subject of a site visit by Committee Ministers. In the absence of direct correspondence from Lady Carrington Estates, I enclose a copy of the summary pages of the submission for your information.' 140 Mr Dransfield then sets out his view that proposals of the nature referred to in the letter which have a potential to bring substantial areas of land into development, should be afforded early and urgent consideration 'by our Departments', and the Urban Development Committee, to determine whether and when release of the land should be effected. Mr Dransfield further proposes that there be discussed the planning and servicing implications of the development in the three areas at the next meeting of the Urban Development Committee. 141 The letter proves that Mr Dransfield was well aware by early 1990 of the Helensburgh lands. It is common ground that Mr Dransfield was in fact Director of the Department of Housing for four years and that he visited the land in March 1990. 12 March 1990 142 By letter dated 12 March 1990, Mr Hogarth wrote to the Minister for the Environment referring to his submission of October 1989 to the National Parks and Wildlife Service and to the proposals which had been put up by lady Carrington Estates, stating that he had not yet received a formal response to the proposal and seeking such a response. [2/148] 143 Also by letter dated 12 March 1990, Mr Hogarth wrote to the Minister for Local Government seeking his advice regarding the processing of a local environmental plan for the rezoning of part of the lands at East Helensburgh. [2/146] 16 March 1990 144 By letter dated 16 March 1990 the Department of Planning wrote to Mr Hogarth, advising that the Wollongong City Council had completed a local environmental study and draft local environmental plan for urban expansion at Helensburgh and advising that the Director of Planning had issued a certificate under s 65 of the Environmental Planning and Assessment Act 1979 to enable the public exhibition of the study and draft plan. The letter advised: 'I have noted your concerns and suggested solution for controlling runoff in the Camp Creek catchment. The Department informs me that the exhibition of the study will facilitate discussion of the issues you have raised with a view to finding a suitable solution for drainage to Camp Creek. You may care to make your concerns and suggested runoff design known to the Wollongong Council which is the authority responsible for preparing and exhibiting the study and draft plan.' [2/153] 24 April 1990 145 By letter dated 24 April 1990, the State Pollution Control Commission wrote to the Wollongong City Council and stated, inter alia: 'The Commission has stated consistently that the guidelines in the Hacking River TCM and the SPCC Urban Stormwater Manual should be adhered to. Where these requirements cannot be complied with, the Commission's view has been, and still is, that development should not proceed. While the Commission has no objection to the development in principle the above matters should be fully addressed and implemented.' 8 May 1990 146 By letter dated 8 May 1990 Mr Hogarth wrote to the Minister for the Environment, advising that Lady Carrington Estates now sought to submit a modified proposal to incorporate a number of changes. The letter advised, inter alia: '. . . we request your written confirmation of the support of the Minister, his officers and the National Parks and Wildlife Service to enable us to both progress this matter further in full co-operate [sic] so that confusion will be eliminated in the minds of Wollongong City Council officers and other relevant departments concerned with the successful consideration and implementation of the Helensburgh plan.' [2/191] 147 The 30 page enclosed submission is to be located at PX 2/156. Paragraph 4.2 stated, inter alia: '4.2 WATER POLLUTION CONTROL 4.2.1 Proposed Controls The need to institute water quality controls on runoff into the Hacking River has been expressed in a number of reports, particularly those the NPWS (1985), the State Pollution Control Commission (1986) and Sinclair Knight (1989a) the most recent study of Sinclair Knight (ibid) established the desirability of constructing a detention basin in the area's most heavily urbanised catchment, Camp Creek and identified an appropriate location for such a structure just above the confluence with the Hacking River in Garrawarra SRA. A wet detention basin of the type proposed would significantly improve downstream water quality by trapping sediment and associated nutrient rich detritus. Taking into account future residential development it has been estimated that a detention basin on Camp Creek would decrease pollutants by between 50% and 90% as shown in Table 1. An alternative exists to locate some smaller containment ponds on various tributaries on the Hacking River. Independent consultants have identified the lower section of Camp Creek as the optimum location to maximise cleanup of runoff from the area. . . . The proposed detention basin on Camp Creek would cover an area of approx 0.85 hectares within Garrawarra SRA. Growth of appropriate Macrophyte endemic to the area, would be encouraged. A tentative location for the proposed basin is shown in Figure 3. It can be seen that there would be some adverse impacts associated with this development, including loss of existing vegetation and visual intrusion. A preliminary field survey has shown that the site in question contains some rainforest species but that these are well represented in the surrounding area. Furthermore, the basin would develop its own ecology, attracting birds and other wildlife. It would have significant water quality benefits and could be used as a source of water for fire fighting. As a part of its proposal, the Company is prepared to finance the design and construction of the basin(s). The aspect of the proposal does, however, raise three issues which are discussed subsequently. 4.2.2 Appropriateness of Basins The basin would be located within Garrawarra SRA and may not be considered appropriate within this context. Nevertheless, the more restrictive provisions applicable to national parks, historic sites and nature reserves, regarding leases and licences contained in Section 151 of the National Parks and Wildlife Act, 1974 would not be applicable. In the case of an SRA the relevant provisions are Section 153 and Schedule 90A Clause 19 where there are no restrictions as to the purpose for leases or licences. Nonetheless, the proposed detention basin on Camp Creek in Garrawarra SRA has, in addition to reducing the impacts of moderate urban expansion at Helensburgh, a real nexus with the existing SRA in that they would significantly reduce existing levels of pollution in the Hacking River which in turn adversely affects Garrawarra SRA and Royal National Park. Thus the detention basis would be directly relevant to the management of the existing SRA and National Park. The need to improve water quality in the Hacking River is reinforced by the importance of water based recreation in Royal National Park at Audley. 4.2.3 Environmental Assessment As has been discussed previously the proposed detention basin would be likely to have overall positive impacts. Despite this there would still be some possibility of some adverse environmental effects and an assessment would be necessary. Following agreement in principle to the proposal by the NPWS the Company would review environmental factors in accordance with the NPWS's requirements. 4.2.4 Construction and Management The Company would construct, at its own cost, the detention basin in accordance with any conditions applied by NPWS following the environmental assessment . . . Although the proposal to construct a detention basin with existing SRA is not a normally preferred activity, it is considered that the proposal should be favourably considered by NPWS based upon the following: * the proposed site of the basin within the SRA is the optimum location for improving water quality; * the basin would significantly improve existing water quality in the Hacking River and thereby contribute to better natural resource management in Garrawarra SRA and Royal National Park; and * there is a strong nexus between the basin and the management of the SRA by virtue of its potential construction to improving existing water quality. 148 By letter dated 8 May 1990, Mr Hogarth wrote to Mr Hannaford in his capacity as Chairman of the Standing Committee on State Development referring to the recently expanded and modified proposal of Lady Carrington Estates and announcing that it was hoped that the omission of a previous need for a 'leaseback' provision should make the matter more acceptable to the national Parks and Wildlife Service'. [2/155] 149 On the same day, letters in similar terms were written by Mr Hogarth to Minister Hay and to Minister Schipp. [2/189; 2/194] 16 May 1990 150 By letter dated 16 May 1990, the Minister for Environment, Mr Moore, wrote to Mr Hogarth asking for clarification of a number of aspects of the 8 May proposal. [2/195] 21 May 1990 151 By letter dated 21 May 1990, Mr Hogarth wrote to the Minister for the Environment, the Hon. T Moore MP, providing further data in answer to questions raised with Mr Hogarth and stating inter alia, 'we envisage that the transfer will proceed along appropriate lines, largely governed by the rezoning and legal requirements for our proposal to be implemented'. [2/196] 29 May 1990 152 By letter dated 29 May 1990, Mr Hogarth wrote to the Minister for the Environment effectively making plain that the National Parks and Wildlife Service would only receive a transfer of the land once the rezoning would have occurred. [2/203] 31 May 1990 153 On 31 May 1990, a valuation was carried out by Jones Lang Wootten under instructions from AGC of the then landholdings of 286.95 hectares. The valuation notes that the main detrimental factor for the proposed subdivisions was the high development costs, particularly in reference to the construction of necessary wet detention basins for water pollution control. The report identified the anticipated costs for development at $54,100 per lot. The valuation assumed that the land would be rezoned residential 2(a) but utilised a discount rate of 15 per cent as suitable bearing in mind the doubts that the land would be rezoned. Assuming that 600 lots could be developed at a development cost of $55,000 per lot, the valuation gave a figure of approximately $13,300,000. Three scenarios were in fact furnished by the valuation setting a range between $13,300,000 and $16,000,000. [2/209] Late 1989 into 1990 154 Mr Hogarth's evidence was that in about late 1989 and 1990 Mr Walker, Mr Severino and himself met on a number of occasions to discuss the possibility of a joint venture between Mr Hogarth and his companies on the one hand and Mr Walker and his companies on the other for the purpose of residential development of that part of the Ensile land then known as the 'Boral land'. May 1990 155 In his statement, Mr Hogarth's evidence was that in about May 1990 he was approached by Mr Walker who said that he was looking at the possibility of being involved in the Hogarth land at Helensburgh and asked how Mr Hogarth was progressing with that. Mr Hogarth said that he had been working away at the matter but the real problem was that he had a problem with the motel at Cronulla with AGC. On Mr Hogarth's evidence Mr Walker said that he might be able to help Mr Hogarth with that as he knew a lot of people in Westpac and had a good relationship with Westpac and as the Walker Group generally banked with Westpac. Mr Hogarth stated, on his evidence, that the problem stemmed from an overseas loan which Westpac had organised through their Singapore branch in Swiss currency and that in addition to the mortgage over the motel, AGC had insisted on taking a mortgage over the land purchased from Boral. On Mr Hogarth's evidence, he also informed Mr Walker of the history of his dealings and joint ventures with AGC. Mr Walker said that this would mean that Westpac would be running the account. [Hogarth para 14] Between May 1990 and August 1990 156 On Mr Hogarth's evidence, between May 1990 and August 1990, he and Mr Walker had a discussion in the presence of Mr Severino to the following effect: 'Mr Walker: It looks as if you are going to get rezoning Bob. All the indications seem to be there, particularly from our contacts, including the pollies. Mr Hogarth: Yes, Lang. If it wasn't for the Rex Jackson problem we would be building houses by now.' [Hogarth's statement, para 15] 21 June 1990 157 By letter dated 21 June 1990, the Minister for Local Government replied to Mr Hogarth's recent correspondence concerning urban development proposals at Helensburgh. The letter advised that as Mr Hogarth was aware, urban development proposals in Helensburgh within the Camp Creek catchment were constrained by the inability to locate a suitable site for a stormwater pollution control pond outside the Garawarra State Recreation Area. The Minister assured Mr Hogarth that his proposal was being given close consideration. [2/232] 6 July 1990 158 By letter dated 6 July 1990 Mr Hogarth wrote to the Minister for Local Government, pointing out that the current Helensburgh plan had been developed over the past five to six years and that he was concerned hint in the Minister's letter that an additional local environmental plan may be initiated after a further lengthy period of discussion on the matter. He suggested a meeting with the Minister if possible. [2/235] 2 August 1990 159 By letter dated 2 August 1990, the Minister for Local Government and Planning wrote to Mr Hogarth repeating that as Mr Hogarth was aware, development in the Camp Creek catchment area was dependent upon a suitable site being found for a stormwater pollution control pond. He noted Mr Hogarth's initiative to commission Unisearch to prepare a detailed study to potential sites for a stormwater pollution control pond outside the Garawarra State Recreation Area on Hogarth land and suggested that such study be submitted to the Council in the first instance. [2/248] 20 August 1990 160 By letter dated 20 August 1990, Mr Kidd sent to Mr Alan Andrews MP a draft of a letter which might be sent by Mr Andrews to Mr Hannaford [2/249]. That proposed letter [2/250] set out key points of Lady Carrington Estates' then proposal. One suggested key point read: 'If the offer from Lady Carrington Estates is not accepted it is likely that the local community will ultimately be required to fund a containment pond and water clean up mechanism in Camp Creek from its own funds.' 30 August 1990 161 By letter dated 30 August 1990 Mr Severino wrote to Mr Hogarth stating inter alia: "After you have read through my notes, please contact me and we can meet with Lang and start putting some detail together. If there is anything in the notes that you think is drastically wrong, let me know and I will make the necessary changes before next we get together. I have also sent a copy of this to Lang." [3/8] 162 The notes which were attached to this letter referred to the "Lang subdivision" and stated, inter alia: "(1) Walker and Hogarth form a joint venture entity with Walker holding 52 per cent and Hogarth 48 per cent - A Limited. Walker holds effective control. (2) A limited takes an option to purchase all land held by Ensile Pty Ltd at a price to be determined by the following formula [a formula is then set out]. (3) The effect of the 100 per cent is to put a "bonus" capital profit into Ensile Pty Ltd and thus would be tax free … (5) Walker would contract with A Limited to provide all civil engineering earth works, design and project management at cost plus an agreed margin. (6) The above option would be triggered by: (a) approval for lots being granted to a total in excess of 700 from the main area, Walker Street and north area . . . . (7) Hogarth's equity in A Limited would be assured by the contribution of land at the value as calculated above." [3/10] 163 On the plaintiff's case towards the end of July 1990 or early August 1990 an early note in Mr Walker's handwriting [2/247] uses the letters "JV". It reads, inter alia: "AGC/Walker joint venture or … . It uses the words "re-zone" and "scale in relation to number of blocks". October 1990 164 In October 1990, Kevin Mills & Associates, Ecological and Environmental Consultants, prepared an environmental impact report assessing the environmental impact of the proposed urban development at Lady Carrington Estates. The report includes a detailed examination of aspects of the problem of water quality and the ways in which these problems might be able to be overcome. It discusses a 'multiple ponds strategy'. It discusses the intention to construct a series of detention ponds to control the quality of the runoff from the development area. It discusses the impact of constructing retention basins. [3/14] 23 October 1990 165 By letter dated 23 October 1990, AGC wrote to Genepa Pty Ltd, Attention Mr Hogarth, referring to AGC's approval for an increase in loan for $8,186,000 and stating, inter alia: 'We wish to specifically clarify paragraph 5 in relation to the review on 31 December 1990 for the development approval on the Alison and Clyde Road, Cronulla project and Helensburgh rezoning. Our review will require that we have in place all security noted in the development approval and more particularly the land described in the area known as "the road closure" and that a current development approval as contemplated by the valuation be in place and that the Helensburgh rezoning is granted .' [3/38] [emphasis added] 7 November 1990 166 On 7 November 1990, the National Parks and Wildlife Service wrote to the Wollongong City Council in relation to the draft Helensburgh Plan no. 89/13. The letter dealt in detail with the Services' review of the draft plan. The Service expressed the view that if the proposed and possible developments outlined in the draft plan were approved, considerable impacts would occur to the natural cultural and recreational heritage values of the area. The letter included: 'This trade-off is based on the assumption that further development can occur with a minimum of impact on the area's natural value. Any development should be restricted as much as possible to the existing township of Helensburgh.' 167 The trade-off referred to was set out in the following paragraph: 'The dilemma facing the Service and the wider community is therefore, whether to object to any further development in the Helensburgh area because of its environmental impact and thereby retaining the present situation with its problems of poor water quality and uncontrolled degradation of the area's natural values or, to permit new areas to be developed in an environmentally acceptable manner in less sensitive areas whilst retaining permanently the land of high conservation value as a trade-off.' 168 The letter generally supported the draft Helensburgh Plan in principle, provided a number of the National Parks and Wildlife Service's recommendations were adopted. It was considered that some limited development could occur in new areas around Helensburgh, subject to a number of water quality caveats which would require further investigation. [3/52] 169 On the same date, the National Parks and Wildlife Service wrote to Lady Carrington Estates [Mr Hogarth] enclosing the submission. The National Parks and Wildlife Service were ready to discuss the land swap more fully but considered any further discussions should be held jointly with Wollongong City Council as those issues were so closely tied to the draft plan. [3/51] Late in 1990 170 On the plaintiff's case at a meeting towards the end of 1990 Mr Walker suggested to Mr Hogarth that he would approach AGC with a view to seeing if he could strike a deal with AGC and Westpac. It was plainly important if it was to become part of any arrangement for a joint venture, that Mr Hogarth be freed from any liability to Westpac or AGC. As part of this Mr Walker asked for a letter of authority from Mr Hogarth which he could use with Westpac/AGC. Such letter of authority dated 6 December 1990 [3/70] was in due course provided. [See also 3/71 letter in Mr Hogarth's handwriting] 20 November 1990 171 On 20 November 1990 the State Manager of New South Wales for AGC, wrote an internal memorandum [3/66] stating: "This morning I met with Messrs Lang Walker and John Hughes of the Walker Group to discuss the affairs of Genepa at the specific request of Bob Hogarth. Walker is looking to acquire the Helensburgh land for $5M as is today, with settlement on rezoning and development approval. In Walker's view (and so he says Hogarth's) the earliest this would be expected would be November 1992. Walker is prepared to pay for all of the professional and statutory costs which he believes would amount to about $.700M. AGC would defer all interest pending settlement. They are prepared, however, to negotiate a profit sharing facility in the event approval is forthcoming … Walker is meeting with Hogarth some time this week and if all parties are interested in progressing, a further meeting would be held week commencing 3/12/90". [3/66] 172 A note of Mr Walker's appears at 6/165 and is in handwriting. The date '28 October 1993' is not in Mr Walker's handwriting but was written by Mr Hogarth on a later occasion on to Mr Walker's note. This matter is dealt with below. Mr Walker's own note reads as follows: ''1. Walker purchase RMH companies which hold the Allison Road and Helensburgh properties 100 per cent. 2. Purchase price $2million cash. 3. Walker and RMH enter 50/50 JV to develop Allison Road and rezone Helensburgh. Allison Road Deed to be used for finance. 4. Walker to hold management control. 5. Rezone to take place within 2 years on Helensburgh. 6. If rezoned Walker will provide all development finance to develop land. Deed required.' [6/165] 173 It seems likely, although the matter is not clear, that this note related to discussions held at about late 1990. 6 December 1990 174 On 6 December 1990, Genepa (Mr Hogarth) sent a facsimile to Mr Walker advising: 'As discussed per phone this date we confirm our understanding of your preliminary discussions with AGC concerning their funding of the Cronulla Beach Resort and the lands at Helensburgh. This communication will confirm our permission for AGC and yourself to discuss these referred to matters and that you will keep this information confidential.' [3/70] 1991 175 In 1991 Mr Dransfield resigned his position with the New South Wales Government and returned to Walkers. 5 April 1991 176 Lady Carrington Estates [Mr Kidd], in letters to the Wollongong City Council and to the Minister for Environment, stated that Wollongong City Council was holding a special meeting on 18 April to determine the draft Helensburgh plan. Mr Kidd stated, inter alia, a concern that a number of issues still required investigation. Mr Kidd stated a concern that the Council appears to be moving at a rapid pace to finalise the Helensburgh Plan and that Lady Carrington Estates was 'genuinely concerned that if this plan as it affects our land is determined at this stage it could severely jeopardise our negotiations with the Service'. In these letters, Mr Kidd advised that Gutteridge Haskins and Davey [GHD] had made an initial assessment and identified a number of areas, including water quality for further consideration work that would be undertaken over the next three to four months. A request was made that Council defer consideration of the land controlled by Lady Carrington Estates as part of the Helensburgh draft plan, pending GHD work and completion of the negotiations with the National Parks and Wildlife Service. [3/125] 8 April 1991 177 On 8 April 1991, Deloitte Ross Tohmatsu, acting on behalf of Genepa and the Hogarth interests, made formal application to AGC for additional funding to enable the Group to proceed with the rezoning of the Helensburgh land. The application was for the facility to extend to 31 October 1992 and identified what was referred to as a critical timetable to be adhered to, namely: · Rezoning application to be completed and lodged by 31 October 1991. · Rezoning to be approved and gazetted by 30 April 1992. 178 The penultimate paragraph of Deloitte's letter was in the following terms: 'We recognise that to achieve finality within the desired time frame it will be necessary to ensure that all reports are promptly produced and discussions and negotiations with appropriate authorities undertaken without delay. To this end we are pleased to report that GHD have already met with officers of the Department of Housing and Wollongong Council.' [3/127] 10 April 1991 179 By letter dated 10 April 1991, Lady Carrington Estates [Mr Kidd], wrote to Mr Hay, the Minister for Local Government and Planning, attaching copies of the correspondence of 5 April to the Wollongong Council and to the Hon T J Moore. [DX 4/258] 16 April 1991 180 On 16 April 1991, a meeting took place between Mr Hogarth, representatives of the National Parks and Wildlife Service, a representative of Wollongong Council and Mr Dwyer of GHD. [3/130] 22 April 1991 181 By letter dated 22 April 1991, AGC wrote to Deloittes, responding to Deloittes' letter of 8 April 1991 and confirming that AGC's requirement included the following: Lady Carrington Estates to pledge the residual 320 hectares to support the rezoning and to allow AGC to take a registered first mortgage over same should at October 31 1991 in AGC's opinion the rezoning not occur by April 30 1992.' 182 The letter also advised that AGC's requirements were not negotiable. [3/151] 24 April 1991 183 On 24 April 1991, Mr Kidd sent a facsimile to Mr Hogarth generally discussing the proposed strategy for the forthcoming meeting which had been fixed with Wollongong City Council, following discussions between Mr Kidd and GHD. [3/159] 29 April 1991 - The Minister for Local Government and Planning notifies Lady Carrington Estates that the Wollongong City Council has resolved not to proceed with the Helensburgh Urban Expansion Proposals' 184 By letter dated 29 April 1991 or approximately 29 April 1991, the Minister for Local Government and Planning wrote to Lady Carrington Estates, attention Mr Kidd, in the following terms: 'I refer to your recent letter keeping me informed of progress concerning your company's urban development proposals at Helensburgh. After assessing the large number of submissions received as a result of the public exhibition of the local environmental study and draft local environmental plan, the Wollongong City Council resolved on 29 April 1991 not to proceed with the Helensburgh Urban Expansion proposals. I trust that this information clarifies the current situation for you.' [DX 4/259] 27 June 1991 185 By letter dated 27 June 1991, AGC wrote to Mr Hogarth referring to his attendance at AGC's office of 28 June 1991 and stating, inter alia: 'We consider that the meeting was successful and we are encouraged by your acceptance of our appointment of Cooper & Lybrand to independently review your financial position and that of your associated companies. . . . We also wish to confirm our mutual agreement to retain [GHD] . . . as consultants to further investigate the feasibility and viability of the Helensburgh project. Upon receipt of the review by Coopers & Lybrand and feasibility by [GHD] we will be able to propose a course of action which should be mutually satisfactory.' [3/164] 10 July 1991 186 On 10 July 1991 Mr Kidd wrote to Genepa, referring to discussions with AGC and AGC's nomination of GHD as consultants for the rezoning work and Lady Carrington Estates' acceptance of GHD. The letter advised inter alia: 'It is our understanding that payment for this work should be routed through [Lady Carrington Estates] and we must therefore request that this cost be guaranteed to [Lady Carrington Estates] by Genepa . . . We also understand that AGC has agreed to guarantee final payment to GHD in the event that Genepa should be unable to pay this cost.' [3/169] 25 July 1991 187 By letter dated 25 July 1991, the Minister for the Environment (Mr Moore), wrote to Mr Kidd of Lady Carrington Estates thanking him for his letter of 5 April regarding his company's proposal for transfer of land as an addition to the Garawarra State Recreation area. 188 The letter further referred to a meeting between National Parks and Wildlife and Mr Hogarth of 16 April 1991 and to Council having been told that the National Parks and Wildlife Service was willing to accept land for addition to the state recreation area, provided that acceptable environmental controls were put in place and an appropriate management strategy for the developed areas was prepared. 189 The letter advised, inter alia: 'In the event, of course, Council resolved not to proceed with the draft Helensburgh Local Environmental Plan in its present form. Given that your company now intends to revise its development proposals, the Service will await the outcome of the further studies that you have commissioned, and I have agreed that it should assist in providing resource information where available. Any future participation by the Service in negotiations with Lady Carrington Estates will naturally depend on resolution of the general planning issues for Helensburgh. I anticipate a further report from the Service when the proposed studies are complete.' [3/170] 13 August 1991 190 On 13 August 1991, a meeting took place between Mr Hogarth and Mr Kidd, AGC, Coopers & Lybrand and Deloittes. Mr Guy was also present. 191 Mr Hedge of Coopers & Lybrand indicated that AGC had three areas of concern, these being the need for AGC to fix its security position up, for AGC to ascertain the amount owed to it and for AGC to ascertain where the future funding was to come from. Such future funding being referred to as the moneys required to get the DA through at Helensburgh and ongoing funding to keep the Hogarth Group operating and particularly Ensile. 192 Mr Guy's file note of the meeting includes, inter alia, as follows: '4. A discussion then ensued about the question about what was the debt owing. AGC believes that it is approximately $10 million. Further discussion then ensued as to how could this be calculated and AG went through the history of the transaction and asked how could a loss of approximately $3 million in 1982 be $18 million in 1991. Hedge indicated that according to the accounts of Genepa for the 30th June 1990, the onshore component of $3.3 million was listed at $9.5 million. The offshore component of $2.7 million was brought back onshore by AGC on 19 September 1990 and is now $5.3 million . . . 6. AG indicated that in his opinion there was a question mark on the justification for all or any of the valuations that had been carried out over the years as they had all been done on a hypothetical basis . . . 11. In conclusion the parameters for the immediate future are: A. That a full accounting is to be supplied by AGC to Genepa. B. That there must be agreement reached between AGC and the Hogarth Camp. The Westpac Board are becoming very anxious because nothing has happened in this matter for in excess of 12 months and HG referred to the exchange of correspondence commencing in July 1990. C. Once agreement had been reached, then he would make a recommendation to the Westpac Board and felt confident that provided that recommendation was reasonable and supported by him then it would be supported by the Board.' [3/171] 15 August 1991 193 By facsimile dated 15 August 1991, Mr Kidd forwarded to Mr Hogarth five pages of Mr Kidd's notes of the AGC/Coopers & Lybrand meeting of 13 August 1991. Those notes include the words: 'AG - 460 notices - why not withdraw. Only when borrower commercially sensible.' 194 The notes also include the words: 'All good words spoken - loan in non-performing category. Bank provision of loss of [$10million].' [3/176 and following] 20 August 1991 195 On 20 August 1991, Mr Guy forwarded a memorandum to Mr Hogarth, setting out a proposal which he saw as possibly acceptable to all parties in an endeavour to resolve the many outstanding issues. The proposal included, inter alia, the following: 'A. Issues 1. Doubts about the consent of the Genepa Trust to the 1984 borrowings. 2. Faults in AGC documentation. 3. Possible problems for AGC in not securing best sale price on the realisation of both the motel and the Helensburgh land. 4. AGC's negligence in respect of the mismanagement of the offshore loan coupled with the unilateral bringing back of the offshore loan moneys by a Westpac onshore . . . 10. The lack of security over the [balance of Ensile] land. [Words in parentheses in handwriting.] B. AGC's Strengths 1. Monetary defaults. 2. Mortgages over units in motel and Helensburgh land.' 196 A handwritten note in relation to the above described sentence dealing with the mortgages uses the words 'guarantees of RM and BF Hogarth'. 197 The reference in handwriting to guarantees were as securing the borrowings for the building of the motel. 198 Mr Guy's note also included as part of the suggested solution by Hogarth's family/AGC, a proposal that: 'AGC should: A. Fund the acquisition by Genepa of Highfield Groves land. B. Permit Ensile to give Lady Carrington Estates control of the Helensburgh and Otford land. The intervention of Lady Carrington Estates would ensure that capital gains tax considerations are not a responsibility in the future of either Ensile or Lady Carrington Estates. . . .' 199 Mr Guy's notes as to Hogarth's family's proposal were in the following terms: '1. To dispose of all property in a reasonable manner and specifically - (a) To get the motel ready for sale with the appropriate Westpac guarantee arrangements to be concluded in conjunction with AGC and the selling agents. (b) Obtain a DA on the Allison Road sites . . . (c) Look at various alternatives to realise 7 and 9 Gerrale Street, Cronulla. (d) Obtain a development approval on the Helensburgh land. (e) Assist in the development of the Walker Street, Helensburgh properties. 2. The net return both income and capital on disposal of all property to be divided on a 50/50 basis.' 200 The document also provided an examination of the perceived advantages to AGC, including that AGC would not be involved in any litigation with the Hogarth family. [3/182 and following] 29 August 1991 201 On 29 August 1991, the National Parks and Wildlife Service wrote to Mr Hogarth to clarify the Service's position with respect to future proposals for urban development at Helensburgh made by Lady Carrington Estates. The letter advised, inter alia: 'As indicated in the Service's submission on the draft Helensburgh plan to Wollongong City Council the Service considers that the construction of a basin within Garawarra State Recreation Area may improve existing water quality in the Hacking River but no firm evidence has been provided to substantiate this claim. In the absence of scientific data and different standards for the control of pollutants in urban run-off, it is difficult to support the construction of such a structure in the State Recreation Area, particularly where there is potential for further pollution of the river. In consideration of this and the fact that Garawarra State Recreation Area was gazetted primarily to protect its natural values, I am not in a position to agree to structures for treating run-off from existing or proposed residential developments being placed in the State Recreational Area. I am happy for Service officers to continue to negotiate with your company over other matters such as the addition of lands to the State Recreation Area. I understand that one of the difficulties facing your company in its proposal to offer land to the Service for addition to the State Recreation Area is a block of about 40 hectares owned by Mr Thompson in the middle of your company's holdings. In the event that Council approves your development and some of your company's land is added to the State Recreation Area, this block would present unacceptable problems to the Service for adequately managing the bushland in the upper catchment of the State Recreation Area. Consequently I will be in a much better position to consider your company's development and the proposed additions to Garawarra State Recreation Area if Lady Carrington Estates is able to successfully negotiate acquisition of this land with the owner . . .' [3/185] 29 August 1991 202 By letter dated 29 August 1991, GHD wrote to Mr Hogarth seeking to place on record GHD's advice to Mr Hogarth 'about the sensitive state of the negotiations with the relevant authorities with whom we are dealing in our effort to obtain the desired rezoning of the Lady Carrington Estate'. 203 The letter advised, inter alia: 'In our discussions with the many officers of these authorities, we have gained the impression that there is a strong degree of support for the expansion of the town of Helensburgh, provided that environmental, national parks and infrastructure issues can be resolved. Studies relating to all of these matters are well advanced, and we will shortly be in a position to confer with the appropriate people in the Government and Local Government Authorities. Recently, I had the opportunity of talking with Mr Joe Schipp, Minister for Housing and the Water Board specifically about your project. He was most interested to hear that you had received the letter from Mr Tim Moore and stated that he was very pleased to know that Mr Moore was taking a positive attitude towards the expansion of the National Park, together with the urban expansion of Helensburgh. He made reference to the fact that an attitude had prevailed for a time in some areas where it was considered that if no Government action were taken, the land would become rezoned as an environmental protection area. This would result in the land being sterilised and virtually becoming a 'pseudo' national park. Mr Schipp stated that he was opposed to this view and supported a negotiated arrangement. It is apparent, however, that this could be the attitude that would apply if we cannot demonstrate that we are seriously endeavouring to solve the various issues that have been identified. It is therefore essential that the highest level of professional skill be applied to the job, and every effort made to display our dedication to, and confidence in, the project. Because of the need to make the above commitment, it is essential that no hint of any commercial problem be raised at this stage, for it is likely that if it were perceived that the project could not proceed for financial reasons, we would lose the support currently being displayed. There is also the very real risk that DOP would allow the section 65 Certificate to issue, thus permitting Wollongong City Council to almost immediately seek the environmental rezoning for your lands . . .' [3/188] 29 August 1991 204 By letter dated 29 August 1991, Deloittes wrote to AGC setting out a summary of the manner in which Mr Hogarth believed an amicable settlement to the benefit of both parties could be reached. This included the disposal of all property in a reasonable manner and specifically the obtaining of a development approval on the Helensburgh land. It also included the net return, both income and capital, on disposal of all property to be divided on a 50/50 basis. [3/190] 13 September 1991 205 A detailed memorandum from Mr Hogarth of 13 September 1991 addressed to AGC, set out the Hogarth Group's draft proposal. 18 September 1991 206 What appears to have been a final form of the Hogarth Group's proposal to AGC was dated 18 September 1991. This is to be found at 3/197. Under the subheading 'Releases' the memorandum, proposed that the Hogarth interests would jointly and severally release AGC and Westpac in respect of : (i) Any claim under the profit share arrangement of 1982. (ii) Damages in respect of the off-shore loan transaction of 1984. (iii) Damages in respect of AGC's unilateral rescission of the agreement to finance and purchases from LCE of the Helensburgh blocks in October 1985. (iv) Damages in respect of Westpac unilaterally bringing the offshore loan onshore on 19 September 1990. (v) Any claim which Genepa has in respect of the guarantee fees paid to AGC at the insistence of Westpac in respect of the offshore loan. 207 Under cross-examination, Mr Hogarth accepted that this proposal included a thinly veiled threat. 10 October 1991 208 By letter dated 10 October 1991, AGC wrote to Mr Hogarth advising that his proposal whilst recognised as a most genuine offer to assist the situation, was not considered totally acceptable. This AGC letter suggested a somewhat alternative proposal in detail and advised that this alternative was put forward following preliminary and cursory comment from AGC's administration which had indicated an unwillingness to commit the company to a five year association and that of a joint venture flavour. [3/205] 15 October 1991 209 On 15 October 1991 Mr Hogarth forwarded a memorandum to AGC, again setting out a detail of the proposed agreement, moving towards documenting the concept developed between AGC and Mr Hogarth's interests in previous discussions. In so far as the proposed arrangement was to deal with consultants, the following appears in this document: '21. The arrangement continue to employ the consultants [GHD] in respect of the Helensburgh land. I understand their fees to be approximately $850,000 and this has to be paid as to an initial amount of $70,000 immediately and thereafter progressively over the next four to six months to $350,000 with the balance over 18 months after rezoning. 22. GHD should be retained at a cost of approximately $95,000 to obtain a development approval in respect of the Alison Road site from SSC . . .' [3/207] 9 December 1991 210 An internal Wollongong Council Manager of Operations Report of 4 [or 9] December 1991 dealt with the Helensburgh Waste Disposal Depot. It treated with a question without notice which had sought information with respect to that depot as to what type of rubbish was deposited and how much coal waste, as to the likely life of the depot, as to leachate problems and as to a likely site for a new tip when the present one was completed. It stated, inter alia: 'It is acknowledged that leachate has escaped from the depot on occasions after heavy rain over the past two or three years as the existing leachate control system was overloaded. However, additional works to install new leachate collection lines, pumps in stormwater sedimentation ponds are now complete and these should overcome these past problems. However it must be recognised that additional leachate collection works will be required before filling can commence on the site of the old Sanitary Depot. . .' [3/214] 30 January 1992 211 By letter dated 30 January 1992, Messrs Gye Perkes & Stone wrote to AGC, advising that they had been contacted by Mr Hogarth and on behalf of Genepa, Ensile, Lady Carrington Estates and Mr and Mrs Hogarth had been asked to express their collective concern at the extraordinary delay that appeared to be occurring in AGC's reaching a final decision and future arrangement in relation to conduct of the accounts. 212 The letter complained of the delays in reaching a satisfactory resolution with AGC. The letter included: 'The delays which are now continuing in the failure to resolve this matter consequent upon the failure to satisfactorily resolve this matter . . . has caused and is now causing considerable difficulty and embarrassment to the client and more particularly the consultants which were engaged on this project at your suggestion, Messrs [GHD]. Indeed it is relevant to remind you that you directly approached GHD to assist in determining the status of the Helensburgh property. Some six months work has been carried out in preparing for presentation to Wollongong City Council a rezoning application in respect of Ensile's land at Helensburgh. GHD made representations to the Director of Planning in October 1991 on behalf of the client and yourselves and indicated that it would expect to be in a position to lodge a complete rezoning proposal by the end of January 1992. To this end and we might add, with your concurrence, many consultants have been engaged by GHD to carry out exhaustive planning investigations and reports and associated documentation for the presentation. These reports have substantially been completed but the various consultants, we are now informed by GHD, have indicated that they do not propose to release these final reports to GHD unless some satisfactory arrangements have been made regarding payment of their respective fees. GHD, we are now informed, are acutely embarrassed by this situation and have very recently been again contacted by the Director of Planning who is asking that these documents be filed with Council immediately as both the Director of Planning and the Minister are anxiously awaiting the lodgment so that the appropriate section of the Planning Act can be invoked to permit the planning process to continue . . . The writer had a meeting with Mr Dwyer and two of his assistants from GHD yesterday and it is very clear that GHD is becoming acutely embarrassed by the many difficulties that the lack of resolution of this matter is causing . It has been suggested to us by both the client and GHD that if there are other parties within Westpac and/or AGC that need to view the presentation, then such a presentation should be arranged (and in this respect GHD would make all efforts to be available on very short notice) forthwith. GHD had very clearly indicated to the writer that time is of the essence in lodgment of the rezoning application . . . The client and GHD wish to make it clear that this is not a situation where you have the opportunity of delaying the making of any decisions until rezoning of the Helensburgh land has occurred and a decision in support of the arrangement is required immediately . . .' [4/158] 213 Also on 30 January 1992 GHD wrote to AGC, pointing out that all the appropriate planning work and environmental studies had been completed and that GHD was ready to implement the next stage of the project which was to make the formal submission to Wollongong City Council and to those Government Departments and instrumentalities which would be involved in the total scheme. 214 GHD pointed out that the proposal which had been prepared involved the future development for the whole of Helensburgh and that for this reason it was of significant interest to the Minister of Planning and his department. They pointed out that the proposal would also impact upon other areas of Government and that the Ministers for Environment, National Parks and Wildlife, Local Government and the Water Board, would all have an involvement with the project. They continued: 'To date, we have had support from all of these areas of Government which, to a large degree, has been based upon GHD's credibility. Because of the size of the proposal, the approval process through Local and State Government will involve many groups all of whom will wish to know that the project is capable of implementation before they expend time on its examination. For this reason, it would not be prudent to make the formal submission to the authorities until the funding of the project is arranged. In fact, GHD would not be prepared to actively promote the project until we could state with some authority that the development was capable of implementation by the applicant, and that all costs associated with the development could [indecipherable] . . . Your recent advice that the funding arrangements may now be controlled by Westpac Group Loans Management instead of AGC Loans Management could result in further delays while the Westpac officers gain some understanding of the scale of the project. As the timing for proceeding with the project is becoming critical , could I suggest that arrangements be made immediately to enable the GHD group to brief the people charged with the responsibility of considering the funding arrangements so that they will be acquainted with the significance of the project . . .' [4/162] 14 February 1992 215 By letter dated 14 February 1992, AGC wrote to Westpac confirming that arrangements had been made with Mr Ross of Westpac for AGC to hand deliver all correspondence files for the subject accounts. By this time it appears that Westpac had taken over conduct of the accounts. [4/164] 17 March 1992 - The GHD 1992 application for rezoning [4/168] 216 In April 1991 Lady Carrington Estate Pty Ltd had commissioned Gutteridge Haskins & Davey Pty Ltd (GHD) to conduct comprehensive engineering, environmental and planning studies in respect of the Lady Carrington Estate holdings. 217 Subsequent to the preparation of these studies, GHD lodged a formal application dated 17 March 1992 with Wollongong City Council, seeking rezoning of part of the Lady Carrington Estate land to permit urban development in the form of some 1200 dwelling units. The lodgement of the application also served as an objection to Council's Draft LEP 1992 which had proposed to rezone those lands to a zoning further inconsistent with the joint venture's objective of subdivision. 218 The application is divided into two volumes. The first volume is entitled 'Summary Document' and is organised into the following sections: 1. Introduction 2. General Site Information 3. Zoning History 4. Helensburgh Strategic Plan - Opportunities/Constraints 5. Land Use Principles/Concepts Urban Design Criteria 6. Stormwater Strategy and Water Quality 7. Vegetation Assessment 8. Fauna Assessment 9. Visual Analysis 10. Landscape 11. Heritage/Archaeology 12. Services 13. Bushfire Assessment/Strategy 14. Land Management 15. Social and Community Needs Study 16. Traffic/Transportation 17. Consultation - Statutory Authorities 18. Conclusions/Recommendations 219 The strategy adopted by GHD in making the application on behalf of Lady Carrington Estate is well shown by the following [4/185]: 'Studies undertaken as part of this application, together with information already collected for the Helensburgh area, demonstrate that urban development of some lands can take place subject to appropriate design measures , without compromising the environmental integrity of adjoining lands which have significant conservation value. In fact, the largely uncontrolled nature of existing development, both urban and rural, is already responsible for adverse environmental impacts on surrounding and downstream lands. The development of Lady Carrington Estate, and possibly other suitable lands, will enable a number of these existing adverse impacts (such as water quality) to be rectified at no cost to the community, thereby providing a net benefit to the environment .' [emphasis added] 220 The second volume is entitled 'Working Papers' and includes a number of specific studies including flora, fauna and archaeological surveys, visual analysis, fire management guidelines and socio-economic analysis. Of particular relevance to the issues now in dispute is the Helensburgh Stormwater Management Strategy undertaken by GHD and dated 12 March 1992. 221 By way of background information, the application at 4/175 summarises the zoning history of the land up to that point in time. In particular, the application had reference to Council's early strategic plan for the future of the Helensburgh area, as outlined in the Draft Helensburgh Plan 1990. It was stated in the application as follows: 'CAMP CREEK CATCHMENT: while the Helensburgh Plan went into considerable detail about the development potential of land within the Camp Creek Catchment, a number of issues remained unresolved at the time the plan was placed on exhibition. These unresolved issues related primarily to the treatment of stormwater with water quality control ponds….concerns about the location of ponds… The Draft Helensburgh Plan therefore did not recommend any rezoning within Camp Creek catchment other than a small area of Department of Housing land where onsite controls could be used and servicing capacity already exists for land previously having development entitlement being given over to State Recreation Area. Rather, the plan identified possible rezoning of the areas of land should water quality measures be resolved.' [4/176-177] 222 The application then has reference to the conclusion of the Council officers' report to Wollongong City Council of 18 April 1991 which had made the point that the southern Sydney/northern Wollongong area was facing a shortage of residential land to cope with the demands of growing population and that Helensburgh had the potential to accommodate a limited amount of urban development which would alleviate some of this demand. The conclusion had, however, recognised that Helensburgh was located in a very environmentally sensitive area and that development should only be permitted if it could be undertaken in an environmentally acceptable manner [4/177]. 223 In the introduction to the Helensburgh Stormwater Management Strategy the stormwater issue is clearly flagged: 'As the site is situated within the catchment of the Hacking River (Class P, Protected Water under the Clean Waters Act, 1970), and upstream of the Royal National Park, the issue of stormwater quality from any such development is critical. ' [4/167.9 - emphasis added] 224 It claimed that the strategy had 'two separate components that address quantity and quality issues'. The strategy goals are stated as being 'to ensure that the urban development of the Lady Carrington Estate: · does not increase flood flows in the Hacking River above those currently existing; · does not cause further degradation of the integrity of the Hacking River's aquatic ecosystem and strives to achieve a net improvement in water quality wherever practical' 225 It was noted that urbanisation of a rural catchment would, without further intervention, significantly increase the volume of stormwater runoff (approximately 35%) and reduce catchment storage. This is due principally to the introduction of large areas of impervious surface such as bitumen sealed roads, concrete pathways, driveways and house roofing. 226 The strategy noted that of the potential impacts of stormwater pollution, sediment and nutrients are the most pertinent in respect of the LCE proposal [4/203]: 'Sediment contained in a water body can increase turbidity, consequently decreasing light penetration. This can impact on the number and variability of fish, micro-organisms and benthic organisms. It also has the potential for the silting up of a water body when sediment settles out of the water column. Excessive levels of nutrients, primarily nitrogen and phosphorous can result in the eutrophication of a water body..' [4/167.13]. The low absorption capacity of the Helensburgh soils is noted as being 'likely to increase the proportion of dissolved nutrients', most notably phosphorous, entering the Hacking River system [4/167.34]. 227 Section 6.3 of Volume 1 of the application noted that 'a large number of studies had been produced on the issue of stormwater management in the Helensburgh area.' It continued as follows: 'Much of this work has relied upon the "best practical means" approach which depends upon the use of water quality controls elsewhere, most significantly in Canberra. While such an approach is fully supported, GHD considered that an assessment of local conditions was essential to determine whether adjustments needed to be made to the treatment measures in order to ensure they functioned, as designed, under local conditions…. A water quality monitoring programme was undertaken which tested a range of items at twelve different monitoring sites in the locality to provide an indication of the water quality characteristics at various points in the catchment…. In addition to the monitoring programme, site testing showed that the local soil characteristics created an appreciable difference in water chemistry between Helensburgh and the Canberra region.' [4/204] 228 Chapter 4 of the Stormwater Management Strategy briefly detailed the aforementioned studies, previously undertaken to address the issue of stormwater management in the Helensburgh area. These studies included: · Investigation into the Impact of Urban Development at Helensburgh on Water Quality of the Hacking River (SPCC 1986); · Hacking River - Total Catchment Management (SPCC 1989); · Helensburgh Water Quality Management Study Stages 2 and 3 (SKP 1990a) · Helensburgh: Camp Creek Water Quality Management Study (SKP 1990b) · Helensburgh Water Quality Management Strategies: Camp Creek and Associated Catchments (Chowdhury 1990); · Function and Mechanism of Water Pollution Control Ponds in Urban Release at Helensburgh (Ellis 1990); · Critique of Urban Stormwater Runoff Control Measures Proposed in the Draft Helensburgh Plan (Short, Nichols and Flentje 1990). 229 While the first 6 studies listed generally bode well in terms of potential for urban development in the Camp Creek catchment, the latter was more critical and emphasised the need for local data, especially during storm events. 230 To achieve the application's previously stated goals, the management strategy to be implemented was as follows: · Construct wet/dry retention basin(s) as close to the potential pollutant source as practical. These basins (individual or cascading multiple basins depending upon topographic constraints), would serve the dual purposes of flood retardation and sedimentation. The [stormwater treatment measures (STM)] would reduce coarse sediment, metal, hydrocarbon and pesticide loads. The location close to the pollution source minimises the length of aquatic environment affected by urban runoff and maximises STM efficiency. · Construct artificial wetlands… The function of these wetlands is of high importance given the low expectation of nutrient absorption to settleable particulates and hence a higher dissolved nutrient fraction. The upstream basin will slightly reduce the pulse load to the wetland during storm events and reduce coarse sediment input. Fine sediment and nutrients would be trapped by this STM. · Ensure appropriate erosion and sediment control techniques are undertaken during the construction phase of the Lady Carrington Estate development. · Introduce management an maintenance controls as outlined in Section 14 [Land Management] when the estate is established. · Design stormwater and interallotment drainage lines to ensure runoff passes through the STMs before leaving the urban development area of Lady Carrington Estate. 231 In the strategy it was stated that the two major stormwater treatment measures utilised to ameliorate pollution of receiving water were sedimentation (settling) basins and wetlands. Their detail and uses were described as follows: · Sedimentation basins are designed on the basis that by reducing the velocity of stormwater entering the basin, particulate matter and importantly, phosphorous and other pollutants which may be attached, is given the opportunity to settle out of the water column. The efficiency of such basins depends on the average time water spends in the basin. Placement of crushed limestone and bauxite residue in the base of a basin in sandy soils may increase efficiency in phosphorous absorption. · Wetlands utilised can either be naturally occurring or artificially created. A constructed wetland typically consists of a trench or basin with an impermeable substrate to prevent seepage. The substrate must also contain a medium that can support the growth of macrophytes (reeds). The macrophyte system in the wetlands acts to remove pollutants from the incoming run-off using a complex combination of biological, physical and chemical processes. 232 In the GHD application, the strategy adopted in relation to placement of stormwater treatment measures was an "on-line" approach [4/167.27]. 233 On the evidence given by Mr Lester, "on-line" refers to the placement of stormwater treatment measures 'in the creek bed' as opposed to "off-line" where placement is 'in plateau' [view T8]. During cross examination Mr Rowbottom gave the following explanations of the concepts: 'HIS HONOUR: Q. … Are they the concepts, on-line and off-line? A. Off-line, being something where the water is actually collected from almost a natural drainage path and moved somewhere else so that the major flows do not pass directly through the particular pond. So all water that fell on the Chippendale site would essentially end up in that pond and, therefore, is on-line. If it was off-line, only a part of the water would go to the pond and the rest would bypass the pond. [T928] [While I do not intend to detail Mr Rowbottom's critique of the strategy at this point, it is relevant to an understanding of the proposed strategy to note Mr Rowbottom's point that the 1992 GHD proposal required that the wetlands and sediment basins be constructed on existing watercourses within the proposed development. He criticises this approach, his evidence being that 'if you move to an off-line situation, you have more control over where you could locate the wetlands and sediment basins': T942-3] 234 In the summary and conclusions of the stormwater management strategy, it was stated that: '. . . the implementation of this Stormwater Management Strategy can permit development of the [LCE], without degrading (and likely to actually improve) the integrity of the Hacking River's aquatic ecosystem.' [4/167.34] Response to the 1992 GHD application 235 The evidence is that as at 1992, the GHD application for rezoning utilised the best stormwater management technology available at that time (1992). This point was made by Mr Lester in his submissions to the Commission of Inquiry in 1994 [13/168] and is not controverted by Mr Rowbottom, whose evidence was that while it is difficult to evaluate a particular strategy without computer models or data, 'if I look at the state of the art in …1991/92, the strategy that GHD developed is probably at that time best management, in 1991/92. So I would conclude it was probably a reasonable strategy…' [T895]. SCE 1992 Review The stormwater treatment model proposed by GHD was assessed in detail by Sivakumar, Chowdhury & Ellis of the University of Wollongong in their review: 'Stormwater Management for Helensburgh with particular reference to Feasibility of Multiple Retention Basin Strategy' (SCE, 1992). In the review, it was found that the 'GHD study goes somewhat further than the best practical method' in considering predictive measures and in the provision of multiple retention ponds [5/006]. The review considered all practical issues dealing with stormwater management including the first flush phenomenon (during storm events), sediment and nutrient removal, and the impact of major storm events. It concluded that while the stormwater problems at Helensburgh were significant at that time, the existing pollution sources could be managed through the stormwater treatment methods proposed in the 1992 GHD application [5/006-7; 5/017]. It is pertinent to note the following statements which were made in summary in the SCE 1992 review - the particular relevance of the underlined statements will be dealt with below: ' The management of stormwater and enhancement of water quality are key issues for urban consolidation and further urban development consistent with the high standards of stormwater quality management required. The present stormwater problems at Helensburgh are significant and there is now a mechanism treating some diffuse pollution sources as well as some notable point sources of nutrients identified in the GHD survey…. With the feasibility of a reliable multiple retention basin strategy now established, it is necessary to emphasise the needs for continued development of the environmental data base. Moreover, monitoring must be planned and carried out and an observational approach to design development and review carried out .' [5/007 - emphasis added] 236 When questioned on the SCE 1992 review during cross examination, Mr Rowbottom commented that he found it 'very difficult to understand how the three gentlemen from the Wollongong university can say that the [1992 GHD] model is sound when there was no data provided in the particular reports…' [T894]. 19 May 1992 237 By letter dated 19 May 1992, Genepa [signed by Mr Hogarth] wrote to Westpac pointing out that Genepa believed that the rezoning of the Helensburgh land by Lady Carrington Estates could be achieved without the need for additional advances from AGC. The letter continued: 'Nonetheless, we acknowledge that the previous extension of our facility has expired and that our former proposal for an alternative basis of settlement has been rejected, even though after protracted negotiations we had been verbally advised that it was acceptable by senior AGC management. Accordingly, we now make formal application to AGC for a further extension of our facility to 31 June 1993. We believe that such an extension will provide sufficient time to obtain rezoning of the Helensburgh land and this view is supported by the consultants [GHD] . . . If however rezoning is granted earlier than present expectations, we suggest that the facility should expire three months after formal rezoning is achieved rather than 30 June 1993 . . . With regard to possible funding arrangements we confirm that we have initiated contacts with possible lender/joint venture partners. However, whilst we have indications of interest there have not yet been any formal exchanges of documents discussed nor placed before third parties. As we progress in formulating such proposals we would naturally wish to keep AGC informed. We trust the foregoing enables you to consider and approve a further extension of our facility as we firmly believe that the progress made over the last twelve months towards rezoning has been significant and on the advice of GHD we are extremely confident that our objectives will be met in the near future . . .' [5/24] 238 Mr Hogarth's cross-examination on this letter at pages 202 and following of the transcript, suggests to me that the letter does not reflect well upon his credit. He agreed that certain sections of the letter were deceptive. The only persons whom Mr Hogarth had been talking to at this time was Walkers and yet in this letter he used the plural 'contacts with possible lender/joint venture partners'. He agreed in evidence that he had been 'trying to play AGC along a bit'. [T 204] 239 Mr Hogarth was closely cross-examined upon the statement made in this letter 'as we firmly believe that the progress made over the last 12 months towards rezoning has been significant'. [T 209] To my mind, that statement is shown to have been a gross over exaggeration to say the least. On the evidence, no such progress and certainly no such significant progress had been made. 29 June 1992 240 By letter dated 29 June 1992, GHD wrote to Westpac summarising earlier meetings and setting out approximately 13 occasions between November 1990 and November 1991 when GHD had met with AGC/Westpac and with the Hogarth interests in relation to the rezoning of the land. GHD stated, inter alia: 'This company is firmly of the opinion that these studies and reports were initially commissioned by AGC and reconfirmed at a later date by Loan Management NSW . . .' [5/28] 3 September 1992 241 Part of Exhibit 'PX' comprises a facsimile cover sheet dated 3 September 1992 from Mr Severino to Mr Hogarth to which, as part of the exhibit, there are stapled two pages. The cover sheet, however, states that there are two pages including the cover sheet. The two pages which follow the cover sheet as part of Exhibit 'PX' and are to be found at 5/44 and 5/45, are respectively appended to this Judgment as 'Appendix 5'. An issue arose as to when the two documents now stapled to the cover sheet, had come into existence and first been received by Mr Hogarth. 7 October 1992 - Meeting 1 242 In Mr Hogarth's first statement, he gave evidence that on 7 October 1992, he met with Mr Severino and Mr Walker and at that time handed to Mr Walker a folder of documents entitled 'Table of Contents' which he had prepared. His evidence was that he had a conversation with Mr Walker to the following effect: 'Mr Hogarth: Westpac have provided finance for Lady Carrington to finalise its briefing of GHD to provide reports related to town planning matters. The people at Westpac understand that rezoning at Helensburgh will increase their return upon the sale of our lands and thus the amount left over for my company. Lang, what do you think of this deal? Do you think this is the best way to solve my problems with Westpac? Mr Walker: I'm not convinced that it would work and as you know Bob, I've had a lot of experience in these sort of developments. From my enquiries with my contacts, it seems that if you continue on with your current approach to obtain rezoning, you will not achieve that for at least three years if at all. You'll really need to change your current tack before you'll be in with a chance. You probably need some assistance from someone who knows about rezoning matters and has the right political contacts to protect your position rather than just relying upon Westpac to do the right thing by you. Mr Hogarth: AGC are confident that briefing technical people like GHD will assist in our getting the land rezoned. Mr Walker: It's no use just going down the traditional path of the rezoning application process like you are with GHD because you need to make sure that the pollies are willing to support the development proposal every step of the way and for that to happen you need political clout behind you. I know because I have developed contacts with people who count and, as you know, that includes Greiner, Max Willis and Webster and from the other side Della Bosca and others that I won't name. That can mean my proposals are looked at more favourably by the authorities. That having been said I'd be interested in being kept informed on how this project progresses .' [Hogarth's statement paragraph 22] 243 Mr Hogarth's case is that in about October 1992 he furnished to Mr Walker a set of documents to be found at [4/3 and following]. The documents were highly confidential and include a detailed examination of the possible revenue which the subject lands might provide by way of residential development. 8 October 1992 244 By letter dated 8 October 1992 Mr Hogarth wrote to Mr Walker thanking him for his interest in Mr Hogarth's affairs and problems and for Mr Walker's offer of a solution. The letter stated inter alia: "I am somewhat disturbed by the information your inquiries into our rezoning proposals reveal that it will be three years if at all for our rezoning to be successful." [5/48-49] 13 November 1992 245 On 13 November 1992, Westpac wrote to GHD confirming earlier advices that documentation of the arrangements between Hogarth Group and Lady Carrington Estates had taken longer than anticipated earlier - not because of any procrastination or unwillingness by the parties to bring the matter to conclusion but because of legal issues said to have arisen during preparation of documentation which had to be resolved. 246 Westpac stated that as Mr Ross had undertaken previously, Westpac would advise GHD when documentation was completed and payment of GHD's agreed past fees could occur. 247 In the same letter, Westpac advised: 'Meantime to allow you to proceed with the requirements of the proposed seminar at Helensburgh we confirm that AGC . . . will hold GHD covered for the fees referred to in your letter dated 12 November . Payment is to be sought in the normal way - i.e. account to Lady Carrington Estates who will request AGC to pay.' [5/63] 27 November 1992 248 A seminar was convened by the Helensburgh Citizens Committee entitled 'Seminar on Helensburgh'. That committee had been formed in September 1992. The objective of the seminar was to provide a neutral forum to discuss the proposed development. The keynote address was given by Mr Dwyer of GHD. Mr Kidd was on a commentary panel. Representatives of the Environment Protection Authority and of the Department of Conservation and land Management were to speak on management and control of stormwater pollution and total catchment management. Dr Ellis of Wollongong University was to speak on stormwater management at Helensburgh and circumstances in which the University of Wollongong had examined various proposals for stormwater management at Helensburgh over a number of years and had recently completed a detailed review of the latest strategies for stormwater treatment at Helensburgh. Dr Ellis was to address the seminar on the conclusions reached from this previous work. [See the agenda at 5/67] 30 November 1992 249 By memorandum dated 30 November 1992, Mr Gye set out for Mr Hogarth's purposes, a summary of the history, objectives', present position and new proposal with respect to dealings with AGC. Under the heading 'Present Position', Mr Gye referred, inter alia, to the following: 'GHD have not been paid. Westpac has given a commitment for current work (only)'. [5/73] 7 December 1992 250 By letter dated 7 December 1992, the National Parks and Wildlife Service wrote to Wollongong City Council in relation to the draft Local Environmental Plan (Certificate Plan No. 91/16) at Helensburgh. The letter pointed out that all the lands in question in the draft plan fell within the upper catchment of the Hacking River and contained valuable plant and animal communities which were not adequately conserved in the Royal National Park or in the Garawarra State Recreation Area. 251 The letter advised, inter alia: 'The Service has always held the view that any development of the Helensburgh area should be restricted as much as possible to the existing township, including infill of existing areas and urban consolidation. Development in new areas should be minimised and strictly controlled to minimise any environmental impact on the natural values and water quality of the Upper Hacking Catchment.' 252 The letter continued, inter alia: 'The Service . . . strongly supports the current draft LEP 91/16 as the land identified for rezoning to 7(c) Environmental Protection - Residential is considered to be a consolidation of the existing urban area of Helensburgh and is not on lands identified as having significant conversation attributes on figure 12 of the Service Report. Lands identified to be rezoned 7(d) Environmental Protection - Hacking River have been identified in figure 12 as having significant conservation attributes. The conservation of these lands is vital. The Service has been seeking to add these lands (and others as identified in the report) to the Service's reserve system. However, acquisition of all of the lands identified is not possible in the foreseeable future due to the Service's budget constraints and priority for land acquisitions across the State. The next best option for the protection of these lands is adopting a strict control on allowable development. It is considered that the 7(d) zoning sets adequate guidelines aimed at the long term protection of the heritage values of the Upper Hacking Catchment for the land in question.' [6/71] 253 Mr Hogarth's evidence in relation to this letter included the following: 'Q. Have you read that second paragraph? A. Yes. Q. That was a view, if taken seriously, which endangered the prospects of rezoning from your point of view, didn't it? A. Yes.' [T 217] 26 January 1993 254 On this date, the Helensburgh Citizens Committee sent an open letter to ratepayers and residents in Helensburgh. The letter summarised what was said to have occurred at the seminar at Wollongong City Council's chambers on 27 November 1992. It stated that all evidence indicated that the proposed residential development of Helensburgh would protect the valuable Port Hacking water catchment through the provision of stormwater treatment ponds and at no cost to the existing community or Council. [6/76] 2 March 1993 Dr Yassini's Review 255 On the 2 March 1993, Dr Iradj Yassini, Environmental Scientist and Council officer of Wollongong City Council, wrote to Ms Cheryl Lappin of Wollongong Council in relation to water quality and the Helensburgh LEP. In the letter, Dr Yassini reviewed the 1992 GHD application after making the following points in introduction: Australian experience in stormwater treatment, design and use of artificial wetland is limited. Except for the Australian Capital Territory, where the stormwater practice is a decade old. In most other cities the urban stormwater treatment is still at a juvenile stage. In the absence of solid local evidence on efficiency of artificial wetland and related management issues, the decision making criteria in stormwater quality planning is mostly limited to literature data and environmental consultant designs. The designs proposed by the consultants are often an extrapolation of the models developed in USA or Canberra without reliable local data. Even the limited amount of local data used in the design are not reflecting the fluctuation which may occur over a lengthier period. [6/080] 256 Specifically in relation to the 1992 GHD application [and the Land Pooling and Department of Housing Estate applications], Dr Yassini made the following criticisms: The basic water quality parameters used for the design of the retention basins and wetland filters in all the proposed rezoning estates were collected over a three month period at eleven locations from different subcatchments of the city. Some of the water quality values reported in these applications seem to be incorrect…. Some statements in GHD's applications regarding the use of coarse substrate in the wetland filter to prevent development of the root systems [of aquatic plant species] are contrary to the mechanism of wetland process. 257 Dr Yassini also noted that the subdivision of the LCE lands proposed to construct 45 retention basins and 76 wetland cells. However, he points out that no details on the size of each subcatchment, assumed flow rate and residence time were produced in the application. Accordingly, he stated at that 'no rational evaluation about the pollutant removal capability of the proposed systems could be done' [6/080]. Further, Dr Yassini stated at page 3 that efficiency and capability of both wet retention basins and wetland filters will diminish with time. He suggests that the servicing and maintenance costs of the basins and wetland cells, including the cost of regular sediment dredging and plant removal, will be a huge financial burden to Wollongong City Council. He also draws attention to the safety issues associated with the proposed basins having a depth of 5 metres and the potential for offensive odour and mosquito problems arising if the water bodies become stagnant. 258 While the particular implications of Dr Yassini's report to the plaintiffs' best endeavours case will be dealt with below, it is relevant to note at this point that Mr Lester, in the period in which he was preparing for the Commission of Inquiry, was unaware of Dr Yassini's report on the 1992 GHD application and that he thought he would have seen it as part of the data lodged with the Commission of Inquiry although he was not certain [T1454; 1481]. 259 The 1992 GHD application was never publicly exhibited or formally considered by Council. 260 On the evidence of Mr Lester, it was Walkers' view that as at December 1993 neither Wollongong Council or the Department of Planning had seriously considered the 1992 GHD application [T1453]. This view is evidenced in his file note of the 3 December 1993 meeting with Mr Woodward of DOP Wollongong as follows: 'A Section 65 Certificate was sought from the DOP by Council and a number of submissions, in some cases quite detailed (eg. Hogarth), were received. Despite the detail that had been prepared by Hogarth's consultants and by the Land pool Group, neither of these two were assessed in any detail. RW believes that the Council officers had tested the political position and did not appear to want to put considerable planning effort into a review that would not, under any circumstances, be approved or supported by Council.' [7/61] 261 The evidence is that at this time Council was opposed to urban development on the LCE lands [Draft LEP 1992 which proposed rezoning of the LCE land to 7(d) Hacking River Environmental Protection]. It was for this reason that obtaining a Commission of Inquiry to make recommendations as to the zoning issue was seen as important. 8 April 1993 262 The Illawarra Mercury in an article headed 'Minister Stays out of Burgh Dispute' of this date stated, inter alia: 'State Planning Minister Robert Webster confirmed yesterday he would not intervene if Wollongong City Council voted for an anti-development rezoning plan for Helensburgh next week. The Minister said he had discussed the matter with his department but believed the issues was a "local planning matter to be decided by Wollongong City Council".' [6/96] 263 The same article included the following: 'Mr Hogarth said yesterday it was "unjust" that after more than 8 years, his and other proposals still had not been publicly exhibited even though agreements had been reached with the National Parks and Wildlife Service, Environmental Protection Authority and other bodies. "This decision is very selective. It is unfair to us and to the other landowners, including the land pooling group which was even helped by Council officers" he said.' 264 The article concluded by asserting that Mr Hogarth had said that he was seeking legal advice on what steps could be taken next and that all he wanted was a fair go. The final two paragraphs read: '[Mr Hogarth] said aldermen, when considering the Helensburgh draft plan during the past few years, had ignored informed recommendations of Council officers and experts. The debate had become blatantly political because the ALP wanted to take the seat of Sutherland from the Liberals, Mr Hogarth claimed.' [6/96] 4 May 1993 265 By letter dated 4 May 1993, Mr Hogarth drafted a letter addressed to Premier Fahey and to Minister Webster, defending himself against what he suggested had been recent attacks under cover of State Parliament. The letter denied accusations made recently against Mr Hogarth in State Parliament to the effect that he had manipulated a file of the National Parks and Wildlife Service and called on Premier John Fahey and Minister Webster to institute a public inquiry into all aspects of what was said to be 'the injustices, politicisation and lack of professional appraisal' of the Hogarth interest plans for Helensburgh. [6/103] 266 The above draft letter was forwarded to the Premier by Mr Hogarth under cover of his letter of 7 May 1993 which stated: 'As a matter of courtesy we attach the original text of a letter which will be inserted tomorrow in a privately funded half page advertisement in the Sydney Morning Herald. This text is subject to review by the paper's legal advisers.' 267 In this letter, Mr Hogarth asked for the matter to be allowed 'to be debated away from the heat of the Labor Party Local Government Politics'. 268 Mr Hogarth's letter to the Premier was a strongly worded letter seeking a public inquiry into the matter and stating that the Labor Party had attempted to hijack the debate in State Parliament and that Mr Hogarth had been advised that Mr Carr had interfered in the Local Government process on the matter. [6/105] 12 May 1993 269 By letter dated 12 May 1993, the Minister for Planning and Minister for Housing wrote to Gutteridge Haskins and Davey noting that company's request for a Commission of Inquiry under the Environmental Planning and Assessment Act to be held in relation to the development proposals. The letter advised that the Department of Planning had advised that the Director of Planning issued a certificate under section 65 of the Environmental Planning and Assessment Act to enable the draft plan to be exhibited and urged the Council to give full and proper consideration to development proposals in the Helensburgh area. The letter pointed out that the Director had suggested that it may be appropriate following exhibition of the draft plan to consider the merits of holding a Commission of Inquiry to assist in resolving environmental and planning issues arising during the exhibition. 270 The Minister noted the concerns expressed by Gutteridge Haskins and Davey in their recent letter and added 'I . . . can assure you that all the relevant planning and environmental issues will be carefully considered before any decisions are made on the draft plan. The Act enables me to direct a Commission of Inquiry into any matter relating to the administration or implementation of the Act. Any decision to hold such an inquiry will await my consideration of the Department's assessment of the Council's submission on the draft plan.' [6/109] June 1993 271 In June 1993 AGC commenced proceedings against the Genepa Trust claiming $22M. Ultimately Ensile and Mr and Mrs Hogarth became parties. During the same month AGC exercised its power of sale over property owned by Genepa. The proceedings were settled on 3 June 1994. 272 By letter dated 15 June 1993, Mr Webster, the Minister for Planning and Housing, wrote to Mr Hogarth referring to Mr Hogarth's recent letters to the Premier and to the former Minister for Local Government and Minister for Cooperatives concerning the Helensburgh Urban Development proposals. The letter advised, inter alia: 'The Department of Planning has advised that the submission by the Wollongong City Council under Section 68 of the Environmental Planning and Assessment Act 1979 has recently been received with a request that I make the plan under Section 70 of the Act. The Department is currently examining the draft plan and is preparing a report for my consideration. . . . You may be assured that all relevant planning and environmental issues will be carefully considered before any decisions are made on the draft plan.' [6/111] July 1993 273 In July 1993 Lakatoi was appointed trustee of the Genepa Trust. Hence during discussions in an around mid-1993 Genepa Trust had as its trustee Lakatoi which ultimately became one of the joint venturers under the HUTA and it did so as the trustee of the Genepa Trust. At about this time the Genepa Trust had tax losses of some $10M-$12M available to it. One of the proposals which was ultimately adopted was to make the Walker interests beneficiaries of the Genepa Trust and a trust called Fanso and one of the Walker companies, namely the fifth defendant, was the other nominated beneficiary. 5 August 1993 274 By letter dated 5 August 1993, Mr Hogarth wrote to Mr Webster stating inter alia, that given the controversy 'we commend our studies and engineering solutions to you as a potential "model development" which can cure the problems in Helensburgh and in other future housing areas elsewhere in the State'. [6/120] October 1993 275 By this time the Hogarth interests were seriously under attack by AGC as Mr Walker well knew. As already indicated, since the early 1990's discussions and inter changes of documents had taken place between Messrs Hogarth, Walker and Severino about the potential for developing the Helensburgh land in joint venture and about Mr Hogarth's financial position. October/November 1993 276 On Mr Hogarth's evidence [paragraph 24 of his first statement - corrected in his 3 October 1999 statement as to date], he had a discussion in October/November 1993 with Mr Walker to the following effect: 'Mr Hogarth: The information I'm giving you is sensitive to us and must be kept confidential. I'm giving it to you to further any negotiations we may have that may result in resolution of the AGC matter and possibly a joint venture arrangement between us. Lang, as you know, I value your opinion and I hope this information I'm giving you will allow you to tell me how best to resolve this issue. Mr Walker: Yes I understand that Bob. I understand the sensitivity of the information and I've no problem with keeping it confidential.' 28 October 1993 - Meeting 2 277 A meeting took place on 28 October 1993 attended by Mr Severino, Mr Hogarth and Mr Walker. Mr Hogarth's Evidence 278 Mr Hogarth's version of the conversation runs for 17 pages in his first statement. All of these pages are in the first person. This version of that conversation is in the following terms: '27. . . . Mr Severino: "Lang, I've brought Bob along because I've been telling you about where things are at with AGC and with the land at Helensburgh and I think that there's an opportunity for you two to get together to do some joint development of that land". Mr Walker: "I've had previous discussions with Bob on an informal basis but we've never really been able to sit down and talk about the terms of any joint venture although we were talking several years ago but he seemed to have thought to have had his problems with AGC covered at that time". Mr Hogarth: "As you know, I've had ongoing discussions with AGC but the present position is that they've now been taken over by Westpac who seem to be running the deal and they've now brought in the toe cutters. I'm now in a position where I have to look for an alternative to do any further arrangements in respect of the land at Helensburgh and also in respect of the properties at Cronulla. Lang, just to bring you up to date, we've had GHD involved since about 1991 and they prepared and lodged a rezoning application with Wollongong Council and all the other authorities in March or April 1992. We've had them monitoring the matter since then and they've been responsible for lobbying the various politicians and government departments and they have been reporting both to me and also to AGC as to the progress of the matter. The Council would not consider the rezoning application and have tended to want to put the local plan on exhibition. The present position is that AGC now don't want to spend any more money with GHD but we've come to an arrangement with them where we're continuing to pay them and they're still running on the project". Mr Walker: "And where do you think you're up to with this?" Mr Hogarth: "I think that we're pushing along but we still don't seem to be able to get the right support that seems to be needed to get the rezoning in place. They've had meetings with various people including Webster (Mr Robert Webster, Minister for Planning) and he has indicated to them that at some stage he's going to think about requisitioning a Commission of Inquiry which would be his way of taking this matter outside the hands of the Council so that he could make the final determination. GHD tell me that if there was an appropriate Commission of Inquiry then its recommendations would enable Webster to be justified in signing a rezoning gazettal for the land". Mr Walker: "And where do you think that's up to?" Mr Hogarth: "Well the land was picked out in the strategy plan some years ago by the Department of Planning and it should be pushed along but I just don't feel that it's moving at the pace that I was expecting it to move at". Mr Walker: "My understanding is that you've been too aggressive and trodden on a lot of toes with the people that matter at Council (Wollongong City Council). From my recollection of looking at the property and from what I've heard around, that land should have been rezoned some time ago. The land up the top is certainly suitable for a large residential development and you've told me previously about the sewer and the water position. I know that there's some suggestion that you'd have to contribute to the augmenting of the water supply to Helensburgh but that all could be factored in. I believe the land is prime for redevelopment and it is just the political motives that are going to delay this. My understand is that Carr (now Premier Carr) is very much against this rezoning and has spoken directly to the Labor Councillors in Wollongong Council and wants to ensure that they don't allow this to be rezoned because he thinks there are some environmental issues but more relevantly, large scale housing development on this land would swing this electorate from what has currently been a Labor electorate". Mr Hogarth: "Well you seem to have an insight into the political side of things. Is there anything else you need to know about the land?" Mr Walker: "Where does your land extend to, Bob?" Mr Hogarth: "We've got approximately 1,100 acres which extends up behind the Helensburgh tip to the north and down to Otford Road in the south. It follows the South Coast Railway line on the east and pretty well extends to all of the land abutting the township of Helensburgh. We also have some blocks to the south of Otford Road in the land pooling area and we have the roads in the land pooling area which surrounds nearly all that land. We obtained a Supreme Court Order granting us title to the residue of the old Metropolitan 1895 titles to a number of roads throughout the township which includes the roads behind the shopping centre and in the area where they're proposing to put a shopping centre." Mr Walker: "We'd certainly be interested in doing something with you in Helensburgh." Mr Hogarth: "Well I think that that makes sense because we've now been there since 1979 and have got to know a lot about the area. As you know, we've spent a lot of money on consultants and we believe that we have a fair grip on all of the developments that are happening at Helensburgh. As Peter (Dransfield) will tell you LandCom have been active in the area and I would like to think that if we're going to enter into an arrangement together, that we do everything in Helensburgh together ." Mr Walker: "I agree, we have no experience in that area and it does not make sense for us to be involved separately given your history in the region." Mr Hogarth: " So in the proposal that we're talking about, I'd put up all my land and thereafter everything we do in Helensburgh we'll do together ." Mr Walker: " Yes I agree with that Bob ." Mr Walker: "Bob, as you know, Peter Dransfield has been very actively involved in investigating the land at Helensburgh over a number of years and you know his history with the Housing Department and the knowledge that he's derived from that period. Peter will be responsible for assisting me with the rezoning of the Ensile Land". Mr Hogarth: "That's fine with me. I realise that he's got considerable knowledge in this matter". Mr Severino: "Well how do you propose to deal with it, Lang?" Mr Walker: "If we could reach the basis of an agreement then I would propose that we would take over the day to day running. Once we'd reached that position I would use my political connections of which I'm quite confident and I'm sure that the way to get the land rezoned quickly would be for you not to take any further active part in the process and indeed if we're going to become involved, we would insist that you take a back seat in the whole thing ". Mr Hogarth: "Well I suppose I can accept that if you think that you've got the expertise and the connections to do it". Mr Walker: "I think you've seen what we've done at Menai and we've got plenty of projects on the go at the moment, so I think you know that we have the ability to manage a development like this. We also have the civil engineering section and that's been doing a lot of the work in the city and elsewhere and if need be we have the support of that expertise to either do the work or certainly direct the various contractors who would do the work. I think with our political connections which we have on both sides of Parliament we'd be able to ensure that we can either get a Commission of Inquiry or we can put some more pressure on the government to see if they can get this land rezoned because there's clearly a case to be made for further housing blocks to be released as there now seems to be a desperate need for relatively cheap housing blocks within the outer Sydney region and your land is suitable because from what I've been told you've got the sewer and the water either in the property or close by and the government spent all that money on the electrification of the railway to Wollongong". Mr Hogarth: "I understand that you are interested in developing our Cronulla and Helensburgh properties, what are you proposing?" Mr Walker: " I propose that we enter into a 50/50 joint venture on all of your properties where we would maintain management control over each project ". Mr Hogarth: "Why is that?" Mr Walker: " Well we're confident we can get rezoning within two years at Helensburgh but only if we are the managers of the project and that includes the rezoning process which you would have to keep out of ". Mr Hogarth: "Lang, I would be prepared to hand over the running of the rezoning to you if you have the people and capabilities to achieve rezoning". Mr Walker: "Well I've done this sort of thing before at Menai so I know what's involved in these broadacre developments". Mr Hogarth: "Well what about the pollies. As you know we've been having difficulties with Wollongong Council". Mr Walker: " Don't worry about the political side, I've got both sides covered ". Mr Hogarth: "And what about Cronulla?" Mr Walker: " We would get DA's and BA's for the properties. We have plenty of experience in the Sutherland Shire ". Mr Hogarth: "Well I guess that I can see that we could reach an agreement about that but we need to sit down and work out what the terms of the agreement would be". 28. A conversation to the following effect then ensued about the valuation of the land. Mr Walker: "What do you say is the value of the land, Bob?" Mr Hogarth: "Lang, AGC had the land they have a mortgage over – which we call the Boral Land – valued in 1990. This is the most current valuation that I've had on the property and in the current zoning of Rural A, it was valued at $7 million". Mr Walker: "Why should I place reliance on that?" Mr Hogarth: "Because they were valuing the property for mortgagee purposes and you know that they tend to put a low valuation for those purposes but nevertheless that's the valuation that they obtained". Mr Walker: "Well, what are you saying the place is worth?" Mr Hogarth: "If we are talking about all of the land I would say $11 million and if the tax losses can be used I think this would be a bonus for you. You recall that I've given you copies of the valuations that have been conducted on the property by AGC. We've had a lot of valuations on the property and I still think that it can value up as high as $16 million. I agree that there's probably some component in there for rezoning potential but in its natural state it's probably worth about $11 million". Mr Walker: "I think that that's all a bit much, Bob. I think that the property's probably worth less than that in its present condition which is what we're talking about. I don't really want to get into a long argument about it because if we're going to be in joint venture together then it probably doesn't matter much because the profit's going to be in the development and you and I will be sharing those profits". Mr Hogarth: "Well then what do you think is a reasonable figure for the purpose of resolving this?" Mr Walker: " I think we settle at $9 million as the value for the land ". Mr Hogarth: "Yes I think that's probably okay by me but I wouldn't accept anything less than $9 million, that would be it". Mr Walker: "That's all right, Bob. We don't need to get into an argument about that. What else would you bring with the joint venture?" Mr Severino: "Lang, I think you're aware that we've been talking about the tax losses and Bob's position with Capital Gains Tax". Mr Walker: "Yes, I've been speaking to Alan about that. I don't fully understand it but I understand that you've got these losses in your Trust which has been operating the motel". Mr Hogarth: "Yes I think that we've got losses of between $10-12 million in the Trust. I don't know if those losses would be available to the joint venture. Alan has spoken to me briefly about it but as a sweetener to the deal I'm prepared to put in those tax losses to the joint venture if my accountants tell me that they're available to you". Mr Walker: "Alan thinks that he can use that position for our benefit". Mr Severino: "The capital gains tax is a major issue". Mr Hogarth: "We've owned the land since 1979 and we bought some more land in 1980 and 1982 and it's all free of capital gains tax. I'm happy to go along with whatever he thinks is okay provided that what you may propose does not cancel our current position with regard to capital gains tax". Mr Walker: "I need to talk to Brian (Weinert) about some of these things and he and Alan can sit down and see where they get to on the matter". Mr Hogarth: "That's fine". Mr Walker: "And what else do you think is going to be involved in this?" Mr Hogarth: "Well, we've spent between $500,000 and $1 million over the last ten years or so trying to get the property rezoned and obviously we've got intellectual property in the rezoning application and all of the reports and work that's been done by all the experts and the consultants that we've engaged. Obviously we'd be putting the benefit of all of that into the joint venture". Mr Walker: " That seems fair enough. What do you want out of it? " Mr Hogarth: "I'd expect you to get the land rezoned quite quickly and in the meantime, receive $4.5 million ". Mr Walker: "What will you do with the $4.5 million ?" Mr Hogarth: "I have to sit down and work out what our present commitments are and obviously a lot of this depends on the position with AGC, but if we're able to resolve that satisfactorily then I don't need much money upfront from you apart from the AGC money and some small spending money. I think that we can settle the AGC matter with Westpac for $2.5 million. We haven't got down to final figures but I've got Jim Grant (Mr Grant of Deloitte Touche Tohmatsu) seeing what he can do with AGC and he's had a few meetings with them but I'm not really up to date with where that currently is. The other problem is that Barbara (Mrs Hogarth) and myself are guarantors and we need to ensure that we get released from those personal guarantees". Mr Walker: "Why don't you have a think about that and we'll talk about it later". Mr Hogarth: "I'll look at it and talk to the family". Mr Walker: "Bob, we would expect that you would have the land unencumbered before we go into the joint venture. How do you see all that working out?" Mr Hogarth: "Well I don't think that that can actually be achieved. My thoughts are that we can transfer the AGC mortgage to Highfield Grove. I've had a talk to Geoff Coleman (Mr Coleman, Accountant for Lakatoi) who thinks that I'm silly trying to achieve that but I've spoken to Mr Grant and he thinks that we may be able to achieve that transfer. He agrees with me that to ensure protection of the losses we should keep that mortgage current and Highfield Grove is a company that I was proposing to wind up and he thinks that that's the company that should acquire the mortgage". Mr Walker: "It is important that you keep those losses because we would consider them to be a bonus to the joint venture and if we can get access to those we don't want to lose that opportunity. And how do you see the joint venture working?" Mr Hogarth: "I would think that there would be a joint venture company and it would take 100% interest in the land that's needed to be subdivided". Mr Walker: "And how do you see that working out?" Mr Hogarth: "Well based on the rezoning application that we've lodged with Council there's an area of about 300 acres that's to be rezoned and subdivided and they think that they can get about 1,200 lots. In addition there's the land pooling area which I'm sure Alan has brought you up to date with and if we're successful there then we would expect to get another 80 to 100 allotments". Mr Walker: "And what do you expect to do with the rest of the land?" Mr Hogarth: "Obviously we'd prefer to stay on the homestead block and we would retain any of the land that's not needed for rezoning. As you know from the documents which I've given to you previously, and I don't know whether you've had a chance to fully digest all that, but it is proposed that the land below Lady Carrington Estate in some part would be given to the National Park as an extension of the Royal National Park. They want the land but don't want the responsibility of looking after it so I don't know where that's going to end up but I think that we're at a point where it's going to be necessary to give that land to them. We've pledged that to the National Parks and we've told the government that we'll do that and we also in that arrangement have to acquire Thompson's land which is known as the hole in the doughnut to our land". Mr Walker: "Tell me more about Thompson's land". Mr Hogarth: "He's a chap who works for South Coast Equipment. There's an area of 100 acres in the middle of my land and it's down in the valley but it's the most environmentally sensitive of all the area. You probably recall he got this land from his mother's estate and I think he came to some arrangement with the family to get ownership of the land. You and Brian Weinert came down some time ago and looked at an alternative access to the property and you gave us some advice at that stage". Mr Walker: "Yes I remember all that. Does that mean you've got to acquire that?" Mr Hogarth: "Yes I finally was able to negotiate an option with him a few years ago and I've extended that option each year and have to keep paying option fees and he keeps putting the price up. He becomes more and more confident about his position so keeps putting the price up and I really think that we're going to have to budget to acquire that during the currency of the option that we have". Mr Walker: "Okay I understand all that. So you're saying that you think that the National Park may want an area and you'd be left with some area". Mr Hogarth: "Yes, we'd be left with any of the area that National Parks didn't want and that would include the homestead block and the equestrian centre. I'm not sure whether or not we would have to close the equestrian centre but that may be an issue that gets fought out with the National Park after they indicate their preference on that matter. In any event we'd be prepared to give it all up if that is a condition of rezoning". Mr Walker: "And what happens if there was any problem with the rezoning, Bob?" Mr Hogarth: "Then we'd have to consider what, if anything, we want to do at the end of the five years but I think that we'd have to agree on that. Do you think five years is a reasonable time, Lang?" Mr Walker: " Yes, that's more than reasonable, Bob. I'm sure that we can get this rezoned quite quickly ". Mr Hogarth: "If we decided that we had to do something at the end of five years, then how would you see it going?" Mr Walker: "Well I think there would just be a 50/50 split. At that stage we've bought half the land under the joint venture so we just split the proceeds 50/50". Mr Hogarth: "I think if that were an eventuality I think I would still want to retain the homestead block". Mr Walker: "How do you expect to achieve that?" Mr Hogarth: "I think that I'd have to be charged $1 million say for the block and that would be offset against the loan accounts and that way I could retain that block and the present accesses that we use and the rest of the land can be sold if that's what we finally decide". Mr Walker: "I'm sure there's no problem with any of that and anyway I don't think that we're going to get to that position. What can we do about the properties at Cronulla?" Mr Hogarth: "Well I've got the two properties in Gerrale Street and I think that they're worth $2 million but I would be prepared to put it in the joint venture for $1.5 million ". Mr Walker: "What do you propose with that?" Mr Hogarth: "Are you going to be in a position to buy those outright or what would you want to do?" Mr Walker: "No, what I propose is that the joint venture gets an option over that property and also the Allison Road property and that during the time of that option the joint venture spends the money on getting development approvals from Sutherland Council". Mr Hogarth: "We've done some work on Gerrale Street with the prospect of getting a DA and obviously I'll put that work and all the consultants' reports into the joint venture as a further part of our contribution". Mr Walker: "Yes that's fine. What do you think Allison Road is worth?" Mr Hogarth: "Well there's a lot of property at Allison Road and I've been doing a lot of work on Allison Road. We've got 1-7 Allison Road and we've got the property which runs along the back of those properties (16 Clyde Avenue) so it's quite a big block in itself and separately I bought the property across Clyde Avenue (9 Allison Road). I've been having discussions with Sutherland Council and I've done some work on the history of the area and have found that Sutherland Council resumed an area which previously was allotments and made them into Clyde Avenue and it's suggested to me by Sutherland Council that if we make an application to close Clyde Avenue and turn it into a cul-de-sac that they'd be sympathetic to that type of approach". Mr Walker: "Well I'll have to get our people to look into it, but what do you think it's worth, Bob?" Mr Hogarth: "I think it's worth $3.5 million and that's what I'm prepared to give the option to the joint venture for". Mr Walker: "I think that's fine. I've obviously got to go and talk to the others about the prices of all these properties because they've done a lot more work on the them than I have but let's proceed along that basis". Mr Hogarth: "How long do you want these options for?" Mr Walker: "I think we'd need them for three years". Mr Hogarth: "No I think that's too long. We can't have the properties tied up for that long. I'm not prepared to keep the properties for that long without any income". Mr Walker: "Well how long do you suggest, Bob?" Mr Hogarth: "I think about 18 months would be sufficient". Mr Walker: "Yes all right, I guess if we can't do something in 18 months then there's no point persevering with it". Mr Hogarth: "Lang, if we go into a joint venture together then I would expect the joint venture to pick up all of the running expenses at the farm from now on". Mr Walker: "Yes that's fine. What do you think is involved in that, Bob?" Mr Hogarth: "Well there's obviously whatever's required to fund the rezoning of the land and then you've got to get a development approval of the land at Helensburgh. You've also got to get development approvals and I suppose building approvals for the properties at Cronulla and then there's the ongoing running expenses down at Helensburgh". Mr Walker: "I agree with the rezoning and development application expenses. What do you think is involved with the running of the farm?" Mr Hogarth: "Well, there's a fair bit of maintenance that goes on around the property. As you know, it's constantly being monitored by all the various government departments and green groups. We have to keep the property in relatively pristine condition. There is the riding school aspect and it pretty well runs itself but Ensile draws on a number of those staff from time to time to do general maintenance work and in addition, there's a number of other contractors that come onto the property. We also get heavy rain down there which can cause a lot of storm damage and that has to be fixed up from time to time and all of the services have to be maintained. We bring water from Otford over the hill and down through the property and similarly we bring power up from the railway line and we need backup services for telephone and for power and all those things need to be maintained. The fences have to be maintained. We've got about 35 km of roads and trails and they have to be preserved. We've got about 6 km of post and rail fencing. There's all the perimeter fencing, all that's got to be maintained, and we've got to ensure that all this looks like it's being kept up to a proper level because this in turn has an effect on would-be trespassers that come in and dump cars and disfigure the place and cause fires. That all in turn has an impact on the value of the property". Mr Walker: "And when do you expect us to pay that, Bob?" Mr Hogarth: " Well if we get the $4.5 million I guess that we'll be right for a while . I'd be happy for an amount to be credited to the loan accounts and those accounts can be balanced off each quarter and then on the end inequalities interest would be charged. I would think that that's the best way of doing it. I've done this a few times before. It saves anyone paying tax on any income which they don't get and that's the problem with putting interest on both sides of the loan accounts and I'd propose that we just do that at the National Bank's business base rate". Mr Walker: "Yes, I'm happy about all of that. All right, well all that sounds pretty good. What do you have to do, Bob?" Mr Hogarth: "Well obviously I've got to sit down and work out for you what land we've got and how we describe it". Mr Walker: "And how are you going to put all the land together, Bob?" Mr Hogarth: "The land's quite complex and I think we need to simplify it. We own approximately 1,100 acres, as you know, but we did run a court action and we have the residual right to the roads in the town". Mr Walker: "Yes I think I've heard something about that. That's how you get to a lot of the land in the land pooling area". Mr Hogarth: "Yes that's right. But it's also important because some of these roads stretch right up into the centre of town and could be integral in any further development there. I think you know that they're already talking about putting a shopping centre beside Short Lane and I think that we would be ideally positioned to be involved in that development". Mr Walker: " Well if these are the terms of what we're working on and you're going to put all those extra things in then I guess we should be involved in all of these things together ". Mr Hogarth: " I would expect that if I'm going to put everything up in Helensburgh and into this joint venture, then it makes sense that anything that's done in Helensburgh, we should both be involved in ". Mr Walker: "Yes I'm happy to do that. I wouldn't be doing anything in Helensburgh without you being involved in it. You obviously have so much local knowledge of the area and it seems to follow logically and equitably that that's how we'd do it". Mr Hogarth: "The other area that we haven't really talked about is the land pooling area". Mr Walker: "On the same basis as we've just talked about, I would think that that would have to be put in as part of the joint venture". Mr Hogarth: "Yes I think that's probably right. I suppose in the land pooling area I've got an interest in Helensburgh Land Pooling Incorporated (HLPI) . I've put in about $80,000 into that and I've given them a lot of other help and I've also got our consultants to give them some help". Mr Walker: "Where precisely does that land begin and end?" Mr Hogarth: "I own the road that's adjacent to Walker Street and it goes from the Housing Commission area in Walker Street down to about where the bus depot is. It's actually bounded by Blackwell's property so there's about 4 or 5 sections of land that go down there that make it up, then it forms a triangle bounded by Otford Road. It's all the rest of the land in that old subdivision and I've separately got about 30 blocks in that area". Mr Walker: "Do you propose that we do anything further in that area?" Mr Hogarth: "No, most of the land is owned by a whole heap of locals and they've been attending the meetings and I'm sure Alan has brought you up to date with what a farce they've been. The only problem is that there are blokes called Fellows, Chapman and Cullen that own a big swag of land and probably the most valuable land because it's next to the Housing Commission development, and they just don't seem to want to cooperate". Mr Walker: "What's their problem?" Mr Hogarth: "Well they own the key land which means that we need their land to successfully develop this area. We've done a lot of work on this and Alan's been involved in it but they refuse to contribute any money and have given us trouble in securing title to the roads. We had to take them along to the Land Titles Office with us a couple years ago and we agreed with the Land Titles Office to secure for them the add medium filum provision". Mr Walker: "I don't know what any of that's about". Mr Hogarth: "That gives them the right to access because one of the issues is that all these blocks are landlocked and that's the reason why Alan's been involved in trying to re-subdivide the whole area as part of the application to Council". Mr Walker: "But all that's being done by Helensburgh Land Pooling Incorporated (HLPI) through GHD". Mr Hogarth: "Yes that's right. They've virtually used all of our research and background. They're using all of our consultants and I think that I'm being charged for most of their work but I think in the long run it probably helps our development though I would propose that we put that in to be run separately in the agreement just so that we don't get caught up in some massive property dispute between the 150 land owners and the arrangements that Alan's trying to achieve. This might trip us up in our big application but I'm happy to involve everything that we've done in it. I see it actually as a benefit to the development but your people may want to run independently of it".' [emphasis added] 279 Mr Hogarth's evidence was that at the conclusion of the meeting he returned home and reduced the contents of the meeting to writing as best he could. His handwritten notes of the meeting overwritten in sections by Mr Kidd are to be found at 6/166-6/170. The note is referred to below. 280 Mr Hogarth's evidence was that his handwritten notes represent notes which were added to through several meetings, the same pages being taken along and added to - transcript 303. In short, the notes were built up over quite a period of time and in the form which they now bear, probably took six months to be built up. This evidence, given in cross-examination, to my mind departs from the evidence given in paragraph 29 of Mr Hogarth's first statement where he had simply said: "At the conclusion of that meeting I returned home and reduced the contents of that meeting as best I could recall to writing [6/166] . . . ". 281 Mr Hogarth accepted under cross-examination that the way in which paragraph 29 of his statement had been written meant to him 'that the whole of [6/166] was written out by [him] when [he] returned home after the conclusion of the meeting of 28 October 1993'. [T 304]. Mr Hogarth then gave evidence at transcript 304 as I understand that evidence, that part of his said notes had been prepared before the meeting in the sense that they had been composed before the meeting. His then evidence at transcript 305 was that he used the notes as a guide to what his interests would be prepared to accept as a basis for the joint venture. Hence, his evidence becomes one in which at transcript 305 he appears to be saying that parts of his notes existed before 28 October but the notes were put together as a complete document after he returned home 'as applied to the meeting' which he had with Mr Walker and Mr Severino and as representing what had been said at that meeting. All of this, even though on his evidence parts of the document had been put together with other parts of the document relating to incidents that had occurred prior to 28 October [T 305]. 282 In the result, it becomes very difficult to rely upon Mr Hogarth's handwritten document at 6/166 [excluding for the moment the extra comments inserted by Mr Kidd] as the precise genealogy of Mr Hogarth's handwritten notes is difficult to follow in the extreme. The evidence is perhaps summarised at transcript 308, line 10, as follows: 'Q. And are you telling us, therefore, that in the case of those documents upon which the notes had been made before 28 October, they were transmitted to this document so as to provide a sort of combined account of what had been said in the course of a number of meetings, including 28 October? A. Yes, what we were prepared to accept.' 283 Then after further cross-examination on Mr Hogarth's handwritten note 6/166 in terms of the detail upon them, he gave the following evidence: 'Q. Wouldn't this indicate to you that almost every part of this document . . . certainly on the first two pages, was a record of what you claim was actually said at the meeting of 28 October? A. Yes. Q. Not something that came into the document, not things that came into the document from pieces of paper that were written out on previous dates before 28 October; not that at all. Is that what you now say? A. No. Q. You don't say it? A. No. Q. You still say that quite a few of these items came from pieces of paper written out on previous days, do you . . .? A. Some of them, yes. Q. Which ones? A. I can't identify them but it forms a basis for a joint venture that we had discussed with other people previously. Q. You can't tell us now any of them which came from pieces of paper written out on previous days. Is that so? A. Yes.' [T 316-317] 284 Mr Hogarth's statement in reply, paragraphs 28 to 46 then gave further detail of his recollections. 285 In the result the document at 6/166 is very carefully scrutinised against all of the evidence including contemporaneous documents. It is clearly self serving in many respects. Mr Hogarth's evidence is assessed in this light - but even if, as appears to be the case, the document represents a compilation of recollections as to a number of conversations, the Court is able to hold by reason of probabilities gleaned from the whole of the voluminous evidence in the case, that certain conversations took place in the course of which particular representations were made. Here again, the failure of the defendants to enter the witness box to contradict or challenge the evidence, is a factor to be weighed in balance. 286 As earlier stated, the handwritten document at 6/166 and following is in Mr Hogarth's handwriting in the main but is overwritten in certain sections and there are further notes on the document made by Mr Kidd. The document is an important document and was closely cross-examined on. Mr Kidd's evidence was that he first saw it in late October 1993 and before the 1st of November 1993 on which occasion, as I understood his evidence, only Mr Hogarth's handwriting was on the document. 287 In terms of the chronology, Mr Kidd's evidence was that this was the document which he used in his endeavours to assist Mr Hogarth by in turn producing the first version of the document which became entitled 'Basis for Agreement between LW and RMH Companies'. That first version of the basis of agreement document is to be found at 6/197. In its form as appearing at that place in the evidence, the document has a number of handwritten changes to the typed script. In some sections, one is unable to read below the handwriting to discern what the original typewriting had recorded. The document in its original typed form was the first form of document prepared by Mr Kidd, whose evidence was that he used the handwritten document at 6/166 to assist in preparing this first form of the Basis for Agreement. Mr Kidd was closely cross-examined on the document at 6/197 as to its original form and as to the later handwritten amendments to it. A re-engrossed version of the document now incorporating the handwritten amendments appears at 6/201. That version appears again at 6/205 but now with Mr Walker's handwritten comments. 28 October 1993 - Department of Planning Minute Paper advising that the decision to hold a Commission of Inquiry was to be put into effect 288 A Minute Paper from Mr Peter Olive, the Divisional Manager, State and Regional Planning of the Department of Planning to Mr Ken Sullivan of the Wollongong Office of the Department of Planning was in the following terms: 'Neville Apitz and I have discussed this matter with the Director. While the issue of the EPA requirements was noted, as was the constraints on the Minister under the EPA Act to change the plan as submitted by the Council, the decision to hold a Commission of Inquiry is to be put into effect . What will be required is a formal recommendation to the Minister to do this, plus the terms of reference for such an inquiry. One such result from an Inquiry could be that the land in totality should be protected from development and that an environmental protection zone is appropriate. This would provide a basis for the Minister's decision on the draft plan submitted by the Council. Another outcome might be that not all of the land affected by the proposed LEP warrants environmental protection. This eventuality from a Commission of Inquiry could form the basis of a Minister's decision to return the plan to the Council for further consideration. Since the Minister has apparently decided that a Commission of Inquiry is the most appropriate way to deal with the present uncertainty surrounding the Council's draft LEP, action to set up an inquiry should be taken promptly. Please discuss with me or Neville Apitz as necessary.' [6/171] 289 The Minute Paper is an important document, bearing in mind its date. A strong inference is available on the evidence that this reference to a Commission of Inquiry is likely to have followed some communication between the Walker Interests and the Minister in relation to the subject. The Minute Paper strongly suggests that Mr Walker, by the time of the 28 October 1993 meeting with the Hogarth Interests, already had reason to believe that there was an excellent prospect that a Commission would be appointed. Whether the Walker Interests received such information informally and following the many earlier approaches by the Hogarth Interests to Mr Webster and others, or alternatively, as appears far more likely, from the Walker Group's interest in the subject, is not to the point. The crucial question is whether the Court may infer that as at the 28th October 1993 meeting, Mr Walker is likely to have had reason to believe that a Commission of Inquiry would be appointed. The Department of Planning Minute Paper of that precise date supports the inference which I draw that Mr Walker would have so believed. This inference is critical as it generally supports the evidence given by Mr Hogarth as to what was said at the meeting and in particular the references to Mr Walker's statements that he thought that, with the Walker Group's political connections on both sides of Parliament, they would be able to ensure that they could either get a Commission of Inquiry or put some pressure on the Government to get the land rezoned. It tends also to suggest that a Commission of Inquiry was mentioned at the later meeting attended by Mr Lester of 18 November 1993, which as will be seen from what follows below, was the evidence given by Mr Hogarth and Mr Kidd as to that meeting. 3 November 1993 290 Mr Hogarth's diary note for 3 November 1993, includes the following reference: 'David Winterbottom rang re fence if we would pull down he will get Commission of Inquiry.' 291 In the course of the view on 14 October 1999, Mr Hogarth at transcript 21, gave evidence that having had some difficulties with fires being lit in a particular area, he had caused the area to be fenced and that the owners of the subject land complained to the Council. The evidence was that the Wollongong Council's Town Planner, Mr David Winterbottom, rang Mr Hogarth and said "Bob, if you shift the fence we will get you a Commission of Inquiry" and that Mr Hogarth said "okay David it will be pulled down tomorrow", which they then did. Early November 1993 or thereabouts - Meeting 3 Mr Hogarth's Evidence 292 In Mr Hogarth's statement, he gave evidence in paragraph 30 of a meeting which he had with Mr Weinert a few days after the 28 October 1993 meeting to the following effect: 30. . . . Mr Weinert: "Lang tells me that we've got to give you $4,500,000 under the proposed deal that you spoke to Lang about. Why do you need all that money?" Mr Hogarth: "Well we've got to have at least $2,750,000, $2,000,000 to pay out AGC that Lang knows about, and the other $750,000 will pay off the mortgages for the Cronulla properties that we've agreed we're going to develop together". Mr Weinert: "We have to deal with the position with your titles, Bob. It is not possible for Walkers to become involved with you at Helensburgh or Cronulla unless your company's titles to those properties are clear and unencumbered." Mr Hogarth: "The only way to do that is to complete the settlement arrangements with AGC." Mr Weinert: "How about we pay you $2,750,000 upfront and as Lang tells me that we'll get the Helensburgh land rezoned pretty quickly we'll pay you the balance of the money then. The reason for this is that Lang would like to reserve our cash funds for other projects we have in the pipeline. We still agree that we have to pay you the balance of $1,750,000 and as rezoning is close we can use that as the trigger for that payment. We are confident that Walkers have spoken to enough people and have enough expertise to get this area rezoned, so the timing of the second payment shouldn't be a problem for you". Mr Hogarth: "This is different to the deal agreed to with Lang and Alan but I will go along with the $1.75 million being paid within a reasonable time and if the rezoning is close then we use that as the trigger for that payment. But I do stress, Brian, I only agree to this arrangement because of the pressure that I'm under with AGC and I don't want to do anything that could threaten my settlement of that matter. I also want to stress, Brian, that this should in no way change your obligation to pay the entire sum of $4.5 million". Mr Weinert: "No Bob. This deferred payment won't change any of that. We'll pay $2 million to AGC now and then the balance in the near future when we achieve rezoning. You should then arrange for Paul Stone . . . to have AGC transfer its mortgage to Highfield Grove". Mr Hogarth: "Yes I think that's fine. The reason why I was going to transfer the Cronulla properties to Lakatoi Universal was to help with preservation of the tax losses". Mr Weinert: "Okay, then you should put all this in your agreement with Lang". Early November 1993 - Meeting 4 293 In early November 1993, a meeting took place attended by Mr Hogarth, Mr Walker, Mr Dransfield and Mr Kidd. Mr Hogarth's Evidence 294 Mr Hogarth's evidence in relation to this meeting is set out in paragraphs 31 to 36 inclusive of his statement, in the following terms: '31. In early November 1993 I attended a meeting at Walker Corporation's Caringbah office at which Mr Walker, Mr Dransfield and Mr Kidd were present. I introduced Mr Kidd to Mr Walker and Mr Dransfield and Mr Walker handed to Mr Kidd a brochure and then set about explaining to him some of the history of Walker Corporation and their expertise. 32. Considerable discussion took place between Mr Walker, Mr Dransfield, Mr Kidd and myself. All parties were in possession of a copy of the Basis for Agreement (Exhibit "6/0205"). 33. With respect to the Basis for Agreement, I would comment as follows: (a) At the time of preparation of the first draft the amount required to settle the Westpac/AGC Proceedings was believed to be $2.5 million. This figure was negotiated down to $2 million prior to the Heads of Agreement being finalised by Mr Kidd. (b) The responsibility for dealing with AGC was to be my responsibility. Mr Walker said words to the following effect: Mr Walker: "Bob, I know you're worried about the AGC proceedings and we realise that this money is required to settle those proceedings. Mr Hogarth: "Since I've spoken to Brian (Weinert) and following further negotiations with Westpac I believe that they will settle the matter if I can pay them $2 million outright". (c) The amendment to clause 3 occurred in consequence of a discussion to the following effect: Mr Walker: " [ Bob, I've looked at clause 3 of the draft. I agree that we've settled the discussion about the value of the land being worth $9 million and that we have to pay you $4.5 million as our right to play. You've spoken to Brian and you have jointly come up with the figure of $2.75 million as the amount that we have to pay now. We agree that we will pay the remaining $1.75 million when we achieve rezoning and we believe that this can be achieved in the near future. However, we have to have a 50/50 position in the say of what happens from day one" . Mr Hogarth: " Yes I understand that, as long as you're clear that you have to pay the $1.75 million ". ( ) Mr Kidd: " So, let me make this clear: the $2.75 million is merely the initial ( contribution of ) the $4.5 million which we have agreed is necessary to be paid for you to take up a 50% interest in the land. As Bob has said to you earlier in this meeting today, you will have to pay the full $4.5 million to get that 50% interest based on our jointly agreed valuation of the land being $9 million ." Mr Walker: " Yes, that's right Geoff. We have already agreed earlier in this meeting that we would pay you $4.5 million in consideration of us obtaining a 50% interest in Helensburgh Land. That will be set out in the Heads of Agreement between us ". ] [I interpolate to note the sections marked in the bold square bracketed parenthesis are virtually word perfect in both Mr Hogarth's and Mr Kidd's statements. Where a few words are changed this is reflected by the use of round brackets. As the close to word perfect duplication is also to be found in other sections of Mr Hogarth's and Mr Kidd's statements, the same procedure is used later in the Judgment to identify these sections.] Mr Kidd: " Yes, that is how I have drafted it ". Mr Dransfield: " Yes, Lang and I have already said that rezoning of the Helensburgh land is imminent. We don't see that as a problem. So none of what we've said here about our paying this as an initial and a further contribution changes our agreement that we will be entitled to hold a 50% share in the land by paying $4.5 million. " 34. The conversation then turned to the value of the land at Helensburgh. A conversation ensued to the following effect: Mr Walker: "Bob, I know we've discussed this previously but tell me again what you think the land is worth". Mr Hogarth: "As I've told you before, we've had a lot of valuations on the property and I think that it can value up as high as $16 million. I agree that there's probably some component in there for rezoning potential but in its natural state it's probably worth about $11 million". Mr Walker: "What do you think it's worth, Peter (Dransfield)?" Mr Dransfield: "I think it's worth about $7.5 million ". Mr Walker: " And Peter how confident are you of that figure? " Mr Dransfield: "I know the land and I've looked at it again when I knew that we were going to have this meeting. I don't have a firm valuation but I feel that around $7.5 million would pull it up and that on any basis, you'd get that for the land today" . Mr Hogarth: " Well then the bottom line as far as we are concerned is that the land has a value of $9 million and that for you to take up a 50% shareholding you will need to pay us $4.5 million. " Thereafter Mr Dransfield and Mr Walker left the room to discuss our proposal and upon their return Mr Walker said words to the following effect: Mr Walker: " Bob, we agree to those terms and price but stress again Bob that you must stay out of the process completely as we know that with our political connections we will get the land rezoned quickly with the use of the GHD Reports and your keeping a low profile. " Mr Hogarth: " So you agree that the land's value is at least $9 million ". Mr Walker: " Well, you know we just want to do the deal. I don't think there's much point in us arguing much about the value because we're going to share everything 50/50. Why don't we just agree that the value of the land is $9 million and we have to pay $4.5 million and you'll get free carried for $4.5 million and that gives us a half interest in the land ". Mr Hogarth: "That seems all right to me. I agree there's not much point in arguing about the value of the land but as long as we agree that it's worth $9 million and you have to pay $4.5 million". Mr Walker: "Yes, there's no doubt about that". Mr Hogarth: "We agree and are prepared to enter into contracts on that basis." 35. The conversation with Messrs Walker and Dransfield then turned to tax losses and was to the following effect: Mr Hogarth: "The Genepa Investment Trust runs the motel and it has accrued significant losses because of the interest payments to AGC." Mr Walker: "Do you propose to make these available to the joint venture?" Mr Hogarth: "I'm prepared to share them with the joint venture, yes." Mr Walker: "How are we going to use them?" Mr Hogarth: "I don't know but your people can work it out. I'm just saying that they're available provided any action you propose does not adversely affect the losses and that our consultant accountants, Pannell Kerr Foster, agree with whatever scheme might be worked out." 36. The conversation then turned to the subject of the Thompson Land. The conversation was to the following effect: Mr Hogarth: "Lang, for the past several years I have secured an option over 100 acres of land in the middle of our property which is owned by a chap named Frank Thompson. I have had a lot of difficulty with Frank Thompson in the past because he attempted to apply, through the Land Board, for an access road other than the one available to him, and he put a road across my existing exit from my home. I opposed this as it cut into our privacy and affected the free range of our stock and I fought his action through the Land Board. You and Brian are aware of this because you came down a couple of years ago to give me some advice about alternative access. The National Parks and Wildlife Service has supported us in our action and Thompson has been denied alternative access at this time, but he could continue the action as the matter was not finally resolved. I secured an option to purchase the Thompson Land and I have renewed and paid option fees for those options for a number of years. The option expires next year and I think the Joint Venture should buy the Thompson Land. The consultants have advised us that it is imperative that this land be secured to negotiate its purchase by National Parks and Wildlife Service for inclusion in the Royal National Park and if we're not to purchase the land then we must renew the option current for the Joint Venture until we get rezoning." Mr Walker: "How does this affect the development?" Mr Dransfield: "Bob why is the land so important?" Mr Hogarth: "The option over the Thompson Land can only be exercised in favour of the State Government and as can be seen from our rezoning proposal prepared by GHD this is the "hole in the doughnut" as the National Parks and Wildlife Service termed the Thompson Land, and is additional to the 600 acres that we agreed to transfer to the National Park in exchange for rezoning of the land at the top of the escarpment. It is probably the most environmentally sensitive part of the whole place. You have been given copies of GHD's document entitled 'Application for Rezoning' that has been lodged with Wollongong City Council and in this document are maps and text setting out the importance of the Thompson Land. I will send you a copy of the letter from the National Parks and Wildlife Service that confirms their attitude as to the importance of the Thompson Land."' [emphasis added] Mr Kidd's Evidence 295 Mr Kidd's evidence in relation to meeting 4 is set out in paragraphs 12 to 20 of his statement and is in the following terms: '12. I attended my first meeting at Walker Corporation's Caringbah office Board Room during the negotiations for the proposed joint venture. This was the first occasion when I met Mr Walker and Mr Dransfield. On this occasion Mr Walker introduced himself to me and handed to me a brochure entitled "Men at Work" ("the Walker Brochure") and said words to the following effect: Mr Walker: "Geoff, this is a brochure we recently prepared about how we operate. It also sets out the way we go about our business and what our clients and joint venture partners can expect. It sets out some of the things that we've been involved with in recent times. I think you'll find after you've read it that it sets out what we're about, why we have been so successful and gives you an indication as to why we will be able to perform at Helensburgh". Exhibited and marked "PAB48" is a copy of the Walker Brochure. [I interpolate to note that in the subject brochure which became Exhibit PX2 and is also to be found within PX6 at 214 and following, a number of representations of a general nature were made. These included: "Naturally like most companies, profitability is directly linked to performance and our history of stable and positive growth underlines our performance record … The ability to perform is directly linked to the calibre of Walker's management team and staff and its success is built upon the experience and dedication of the team". [PX 6/216] "Our bellief in long-term associations rather than just short-term profits …" [PX 6/217] "Detail at Walkers means every element from the literal details in the initial document to the finishing touches on every project. We feel planning is the first home for quality and ensure equality is present in every detail. From initial concept through to completion, during critical path and peripheral stages, we're constantly reviewing and improving our approach - reviews that can save days and dollars especially after a project begins". [PX 6/218] "Walkers brings a wealth of experience in property development, engineering, building, financial structuring - and more - to joint ventures. Combined with an extraordinary understanding of its markets and the initiative to try for outstanding results it has helped bring capital, jobs and above-average returns for its business partners … It's an attitude that partnerships and friendships are built on, and built to last". [PX 6/224] "Successful syndication demands planning and timing. Walkers makes the time and has the expertise to succeed … For many of Australia's professional groups, Walkers provides the skills and the vision to put investment on an understandable, profitable footing without inflating costs. We don't see property syndication as dividing an asset, but rather as providing the most appropriate ownership for a certain property". [PX 6/231] ] 13. The conversation continued to the following effect: Mr Walker: "Bob, AGC have taken the Motel and I understand that Westpac are running AGC's activities to move further against your Group. It is our information that they want this matter wrapped up and they intend to move further against you. How is that going?" Mr Hogarth: "That's right but we have commenced an action against them in the Supreme Court and I believe that we could settle the matter with AGC for a cash payment of about $2-3 million, if we had that sort of money available". Mr Walker: "Well if we are to become involved in the area we certainly want them out of it. Do you have any way of raising that money?" Mr Hogarth: "I know that because we have discussed it a number of times between Peter, you and me in the recent past. After we last met I have made some enquiries within AGC/Westpac and it is my belief that the matter could be settled for $2-3 million. If we had that money readily available at the moment we wouldn't be here talking to you". 14. A conversation occurred to the following effect: Mr Kidd: "Lang, do you believe you've got the expertise in your organisation to develop the land at Helensburgh? I'm aware that you've got a civil engineering department but do you have the expertise to do all of the other things that are necessary for this type of development?" Mr Walker: "Yes, we've had many years of experience in taking broad acres and developing them to a point where they have been successfully developed. Menai is a prime example of a similar successful and profitable development which also proves the success of the joint venture mechanism that we are proposing. Our joint venture partner there is a major Japanese concern and they are very happy with how the Menai joint venture is being administered. We operate a separate company with them and we hold monthly meetings to update them on the progress of development and give them cash flows, budgets, accounts and the like. You can see other examples of what we have done in the brochure that I handed you (the Walker Brochure)". Mr Dransfield: "We've got the people here that can do all of the development and that's one of our real strengths". Mr Kidd: "How do you think you're going to control the political situation?" Mr Walker: "You don't need to worry about that. We have that all wrapped up. We can organise rezoning of this promptly. I've made enquiries and the information I'm getting is that there's a distinct dislike of Bob in Wollongong Council by the Labor contingent and they have their mind set on doing everything to frustrate him. We're liked by the Labor Party and we can overcome all of that. We are connected at the highest levels". Mr Kidd: "How in fact do you propose to go about handling the politics?" Mr Dransfield: "As soon as we finalise our deal with you we will manage and coordinate overtures to the various authorities, to the relevant Ministers and at the same time at all other political levels to ensure that we have the support of both the Ministerial Departments and also Wollongong Council. We can get this through and overcome the position that Bob has got himself in - but you will both need to stay right out of it". Mr Kidd: "That sounds okay. What do you think Bob?" Mr Hogarth: "Well Lang's been telling me for a while that he's got this expertise and all of these political contacts, so I suppose we should give it a go if we can agree on everything else". Mr Dransfield: "Geoff, that brochure outlines many of our successful projects and briefs you on our people, our management skills, our professional approach to the jobs that we do, the work that we have done and the satisfied clients that we have. It describes the type of relationship and the way we will work with you and manage the joint venture. You can rely on us". Mr Kidd: "Okay Peter, I'll have a look at it and get back to you if necessary. It certainly looks impressive from a first flick through it". 15. Mr Hogarth then had a discussion with Mr Walker and Mr Dransfield in my presence to the following effect: Mr Hogarth: "Lang, part of our holdings in Helensburgh is that for the past several years I have secured an option over 100 acres of land in the middle of our property which is owned by Frank Thompson. I have had a lot of difficulty with him in the past because he attempted to apply through the Land Board for an access road and put a road across our existing exit. I opposed this through the Land Board. The National Parks and Wildlife Service has supported us on this and Thompson has been denied alternative access but he could continue the action as the matter was not finally resolved. I secured an option to purchase the Thompson Land and I have renewed and paid option fees for those options for a number of years. The option expires next year and I think any Joint Venture between us should buy the Thompson Land. The consultants have advised us that it is imperative that this land be secured to negotiate the rezoning of Lady Carrington Estates with the agreement of National Parks and Wildlife Service for inclusion in the Royal National Park and if we're not to purchase the land then we must keep the option current for the Joint Venture until we get rezoning." Mr Walker: "Are you sure that this area has an effect on the potential development?" Mr Dransfield: "Bob, please explain why you think that this land is so important?" Mr Hogarth: "As can be seen from our rezoning proposal prepared by GHD (Gutteridge, Haskins & Davey) the Thompson Land is the "hole in the doughnut" as the National Parks and Wildlife Service termed it. The Thompson Land is part of the 600 acres that we agreed to transfer to the National Park in exchange for rezoning of the land near the town. It is probably the most environmentally sensitive part of the entire place. You have been given copies of GHD's document entitled 'Application for Rezoning' that has been lodged with Wollongong City Council and in this document are maps and text setting out the importance of the Thompson Land. I will send you a copy of the letter from the National Parks and Wildlife Service that confirms their attitude as to the importance of the Thompson Land. The option we have over the Thompson Land can only be exercised in favour of the State Government". Mr Walker: "I agree that we need to keep control of that land." 16. I then turned to Mr Hogarth and said words to the following effect: Mr Kidd: "Bob, you told me that you had a conversation with Brian Weinert about funding". Mr Hogarth: "Yes, Brian said to me the other day "what money do you need out of this arrangement to cover your existing commitments" and I said to him that I clearly am going into this arrangement because of the pressure that I'm under with AGC. Brian had asked me what other commitments I had and when I sat down and worked them out with him it transpired that to clear the titles on the properties at Allison Road, Clyde Avenue and Gerrale Street, Cronulla it would need approximately $750,000 and I believed as does Geoff (Kidd)that we can settle the matter with AGC if we could promise that we could pay them $2 million as a lump sum payment immediately". Mr Walker: "Yes I've spoken to Brian and he's explained to me how that conversation went. We obviously have cash flow considerations. We're in the throes of trying to float Walker Corporation and after the float we will have significant moneys available to us but until we get the float up we really want to hang on to as much of the cash flow as we've got for other purposes". Mr Hogarth: "Well I don't mind that if we're in partnership together down at Helensburgh provided I get the moneys that I absolutely need in the short term". Mr Walker: "So if we paid you $2.75 million, that would cover everything in the short term. You won't have any expenses apart from your living expenses because we'll be paying all of your major expenses". Mr Hogarth: "Yes I think that's all right". Mr Walker: "It would help us Bob, if you can allow us a little leeway on the balance of the 50% payment for a short time and what I would propose is that we pay the balance of the money when we get the rezoning and we'll get that rezoning promptly. With us on the job we would get that achieved in the very near future. I've checked it all out and I'm very confident of that, and it will help us a lot if we pay that money then because at that stage the project will be totally financeable and we won't have to go into our cash flow requirements for those moneys nor for the development moneys". Mr Hogarth: "That sounds okay to me. As you know, my immediate requirement is to pay out Westpac. How soon do you think you'll get this done?" Mr Walker: "Bob, I think from my initial inquiries that we could get this rezoned in the next few months". Mr Hogarth: "So that's when you envisage paying the rest of the money". Mr Walker: "Yes of course, there'll be no problems paying the money then and in any event, once we get the float up we'll have plenty of money to pay that". Mr Walker: "Bob, I know you're worried about the AGC actions and we realise that this money is required to settle those proceedings but we cannot get involved in that matter. You will have to be sure that you can secure a proper settlement that gives you the releases of your personal guarantees and your land". Mr Hogarth: "I agree that we've got to accept that responsibility. Since I've spoken to Brian and following further negotiations with Westpac (who were handling the negotiations for AGC) I believe that they will settle the matter if I can pay them $2 million outright". [ Mr Walker: "Bob, I've looked at clause 3 of the draft [6.0205]. I agree that we've settled the discussion about the value of the land being worth $9 million and that we have to pay you $4.5 million as our right to play. You've spoken to Brian and you have jointly come up with the figure of $2.75 million as the amount that we have to pay now. We agree that we will pay the remaining $1.75 million when we achieve rezoning and we believe that this can be achieved in the near future. However, we have to have a 50/50 position in the say of what happens from day one". Mr Hogarth: "Yes I understand that, as long as you're clear that you have to pay the extra $1.75 million to earn a 50% position". Mr Kidd: "So, let me make this clear: the $2.75 million is merely the initial payment towards the $4.5 million which we have agreed is necessary to be paid for you to take up a 50% interest in the land. As Bob has said to you earlier in this meeting today, you will have to pay the full $4.5 million to get that 50% interest based on our jointly agreed valuation of our land being $9 million." Mr Walker: "Yes, that's right Geoff. We have already agreed earlier in this meeting that we would pay you $4.5 million in consideration of us obtaining a 50% interest in the Helensburgh Land. That will be set out in the Heads of Agreement between us". ] Mr Dransfield: "Yes, Lang and I have already said that with us involved, the rezoning of the Helensburgh land is imminent. We don't see that as a problem. So none of what we've said here about our paying this as an initial and a further contribution changes our agreement that we will be entitled to hold a 50% share in the land by paying $4.5 million." A further conversation ensued between Mr Dransfield and Mr Hogarth to the following effect: Mr Dransfield: "Now let me turn to the Allison Road site. We've had a good look at it and we do not accept that it has a value of $3.5 million as you have proposed. I know the area well and the most I could agree to is $3 million". Mr Hogarth: I don't agree, Peter. As you know, I spent a lot of effort in putting this site together and I believe that if we had time we could sell it for $3.5 million". Mr Dransfield: "You may think that Bob but time is not available if we are to get this deal done". Mr Walker: "I agree with Peter's assessment of the value and I propose that we include an option on Allison Road at $3 million. In that way you can get on with settling things with AGC and progress things at Helensburgh and Cronulla. In the long run this offers major advantages to you". Mr Hogarth: "Okay, let's move forward on that basis". 17. A further conversation to the following effect took place: Mr Kidd: "Peter, you have been involved in looking at this Helensburgh land for the past half dozen years with the Department of Housing. What are your thoughts about what is appropriate, given that you have now had the opportunity of reviewing the rezoning application which Lady Carrington lodged with Wollongong Council and the various other authorities?" Mr Dransfield: "You are right, Geoff, I have been conversant with this land for a long time. I have had meetings with Bob previously when I was at the Department and I have been looking at this for Lang since I rejoined Walkers. I believe that it is suitable. It's previously been earmarked as land to be released and I think that GHD have identified the area at the top (the area shaded pink in the zoning principles plan) as suitable. We think that we can get somewhere between 1,000 and 1,300 residences on the property. There will be some avenue for villa type closed community units in some of the property and this will mean both a greater number of residences in the area and separately a lot more open space area can be freed up within the development. I have looked at GHD's plan which sets out the concept of what they propose. That has some medium density housing allowed for and it may be that the mix of that housing can be increased at a later date. I also note that they separately deal with the area behind the tip and I have not taken that into account in our current estimate of figures". 18. Mr Walker then commenced to give a verbal presentation to Mr Hogarth and myself on the activities of Walker Corporation. Mr Walker went on to discuss the position at Helensburgh and Walkers' potential involvement in words to the following effect: Mr Walker: "As you know, Geoff, we have been in discussions with Bob on a number of occasions and we have had a good look at all of the issues which have an influence on the Project at present and how they can all be addressed and solved. Peter has had a long association with this land from back through the Department of Housing and all of that data is available to us. One of the reasons for Walker Corporation's success has come from my personal political connections and these extend to both sides of politics. We have been getting our projects through with this Coalition Government but we also have people in the highest level of the Labor Party and I have researched the matter fully at State and Local Government level in preparation for these discussions". Mr Kidd: "And what have you found out?" Mr Walker: "We are fully aware of most of your activities and all of your problems so far which have culminated in your lack of success with the latest application for a rezoning. We also know that we have all of the right connections that can solve all of these issues". Mr Hogarth: "Are you sure about that because it has been pretty difficult so far and you don't know all of the difficulties because you don't live among the residents of the area. I can assure you Lang that this isn't a simple matter. It will be bloody hard to get a rezoning through now that the Council has committed themselves not to go ahead with our application". Mr Walker: "I agree that you will have a problem in taking this any further on your own. Your only hope is to come in with us and we can bring all of our influence, pressure and contacts to the party". Mr Kidd: "How can you be so sure?" I vividly remember what happened next because Mr Walker rose to his feet, leaned partly over the table and he looked myself, then Mr Hogarth, directly in the eye to say words to the following effect in a tone which was changed from the previously relaxed meeting : Mr Walker: "Look, let me make it quite clear that from all of our research, you blokes have both [stuffed] up the politics and the details of your recent rezoning application. You have got the Council offside and the State Government will not support what you are trying to do. Bob has created such a high profile that he is now disliked by the Regulatory Authorities, the Councillors, the relevant Ministers and the Greenies. You have a group in Wollongong Council which is voting against you as a block as you saw with your rezoning application and there is no way that you blokes, alone, can redress that position. The only chance that you have to get this land rezoned is to get involved with us. We can solve all of this. I agree with you that it won't be easy. We have looked at it and we know all of the facts. I tell you that we have all of the contacts and experience to get the land rezoned. We wouldn't want to get involved with you unless we were assured of success . We think you have put together an interesting parcel of land at Helensburgh and we are the only hope that you have to break the impasse that you have created for yourselves ". Mr Kidd: "We know things are a bit difficult with the Council but there is a possibility of a Public Inquiry that can solve this for us". Mr Walker: "That's right but the difference with us involved is that we can control the Public Inquiry. I have influence with the Minister and we can control when it is called and who is appointed as the Commissioner. With us in the project, the result of the Commission of Inquiry will be assured ". [I interpolate to note that in Mr Kidd's statement in reply of 27 October 1999, he altered this important paragraph to read: 'That's right. The difference is that with us involved we can bring all our influence to bear '. [emphasis added] Mr Kidd: "Are you certain of that?" Mr Walker: "Yes, we are. We wouldn't want to get involved if we can't get it solved and moreover , we propose that none of this will be painful for you in any way. You will bring the land to the joint venture and we will bring our financial strength plus the ability to get that land rezoned promptly . We propose to set up a 50/50 joint venture with you where we will pay you 50% of the value of the land which you bring to the joint venture and you don't have to do any more until we get it rezoned". 19. Following the above discussion, words were said to the following effect: Mr Kidd: "I am concerned at our giving up control of the Helensburgh land. As you know, we have control and most of it is unencumbered with Bob living down there. I'm not sure that a joint venture will be the best way to go. Can you point to anywhere where such a structure has worked well?" Mr Walker: "Well, first let me say that I'm not sure that you have too much choice. From our discussions with Westpac and AGC it is clear that they may soon move against you. You will certainly find our proposal a better alternative than the position that they will take. Now, we are about to complete a joint venture with a Japanese Group where we have undertaken the development of residential land at Menai. That land is very similar to Helensburgh and all runoff goes into the Georges River. At Menai we have successfully addressed all of the issues that will come up at Helensburgh and both joint venturers have made a lot of money. We can get Helensburgh rezoned promptly and we will pay you 50% of the base present land value which we both agree on. Now isn't that a much better position that the alternative of trying to deal with Westpac?" Mr Hogarth: "Westpac aren't the only alternative, Lang. We have other companies interested in doing a deal with us". Mr Walker: "Well none of them will have done the research that we have and I will guarantee that none of them will have the contacts to solve the political issues which we know are the barriers here. With us you get the 50% value of the land and no more worries because we will pick up all of the activities. You can sit back and wait for the Residential Zoning. In fact, we will require that you take a back seat on all issues unless we specifically require that you do a defined task. Wouldn't that be better than what you have been going through? Bob knows both Peter and I and he knows that you can trust us. Read the brochure again that we have given you and you will see the advantages of going into a joint venture with us". 20. During and after that meeting I read part and later re-read the whole of the Walker Brochure. I finished reading the Walker Brochure that evening. I was significantly influenced by contents in the Walker Brochure.' [emphasis added] 296 Mr Kidd's evidence was that the Basis for Agreement document was on the table at the meeting and that it would have been unusual for him not to have made notes on his copy. No such notes can now be located. [T730] Mr Kidd's Evidence in Reply 297 Mr Kidd gave evidence in reply to the statement of Mr Dransfield dated 29 July 1999. As mentioned previously, Mr Dransfield's statement was not ultimately read in court. Mr Kidd's statement in reply dated 8 October 1999 was, however, admissible. 298 Mr Kidd also in his statement in reply in paragraphs 14-20 gave further evidence in relation to the detail of the subject meeting. 299 Mr Kidd also in paragraph 20 of his statement of reply, gave evidence that Mr Walker and Mr Dransfield throughout the meeting appeared to him to be very specific as if they felt a need to convince Mr Kidd as the independent party, to recommend to the Hogarth family, the desirability of entering into a joint venture with Walker Corporation. His evidence was that this was particularly so when issues such as their experience, expertise and political connections were raised. 300 Mr Dransfield's handwritten notes made of this meeting are to be found at 6/246. Mr Kidd's evidence was that he had these notes to assist him when preparing his statement but then believed the notes to be in Mr Walker's handwriting. [T 793-794] 301 Importantly Mr Dransfield's notes include the following: ' - Walker manage the rezoning - Walker pay a further $1.75m upon rezoning - Hogarth has an option to purchase the house block for $1m in the event that the rezoning fails' . [6/246] [emphasis added] 4 November 1993 302 By letter dated 4 November 1993, Mr Hogarth wrote to Mr Walker referring to the recent meeting and enclosing what he said he believed to be 'the key points relevant to this land and to the establishment of a successful association between us'. [7/63] 10 November 1993 - Meeting 5 Mr Hogarth's Evidence 303 Mr Hogarth's evidence in his first statement was as follows: '37. Prior to 10 November 1993 I had a discussion with Mr Weinert to the following effect: Mr Weinert: "I've been thinking about how we can make this tax effective and my initial thoughts are that Walkers would put $3.75 million and that may come down to $2.75 million to Lakatoi Universal and all this will depend on finalising the arrangement with AGC and then we'll have a new company that's owned 50/50 with Lakatoi Universal. That means that Walkers will own 50% of Lakatoi Universal. How I'd envisage it is when Walkers have paid the rest of the moneys up to the $4.5 million then they will own 50% of Lakatoi Universal. We need to avoid stamp duty with all of these transactions and what I think is that if Lakatoi Universal gets control of the land and Walker has half of Lakatoi Universal before it gets that control then Walkers will not need to sell the land and we'll just have an operating company that would run the arrangement under Lakatoi Universal. You can give an option to Lady Carrington Estate and then it can assign its option rights to Lakatoi Universal". Mr Hogarth: "Yes, that sounds fine". Mr Weinert: "One other issue is that we need some security for the moneys that we have to pay and clearly we need to have some security for the initial payment which is the $2.75 million. What I propose is that you'll clear the title to all of the land under the settlement with AGC and then you should sign a mortgage which we'll keep in the bottom drawer in respect of the $2.75 million". Mr Hogarth: "So how do you think that's going to work?" Mr Weinert: "Well I don't propose that we'd register it. I just have to have a document so I can say if anyone asks me yes we've got some security for the $2.75 million and then we'll have to vary that when we pay the other $1.75 million". Mr Hogarth: "Okay". 38. An issue then arose regarding tax losses and other matters associated with the proposed transaction and I had a further conversation with Mr Weinert to the following effect: Mr Weinert: "Bob, we need to preserve the tax losses in the Genepa Trust. You've told me some things about it and I need to look at it much more closely and I plan to work on it with Alan Severino and we'll also talk to Geoff Coleman and Pannell Kerr Foster who I understand are your tax consultants". Mr Hogarth: "Yes we have tax losses of $9 million, maybe $10-12 million in the Genepa Investment Trust and I've previously indicated to Lang (Walker) and also to Alan (Severino) that I thought those could be available for the benefit of the joint venture provided Michael Grant (Pannell Kerr Foster) agrees that your action does not adversely affect the losses". Mr Weinert: "I don't know what to do about them at this time but certainly we will arrange something for them. We'll need to look at that and your idea about the mortgage being transferred and we'll need to look at the stamp duty situation as well". Mr Hogarth: "What do you think about that?" Mr Weinert: "I'm not sure at this stage but we need to look at the possibility of whether or not Ensile would be able to sell the blocks off and at the same time maintain its capital gains tax status". 10 November 1993 - Meeting 6 304 On 10 November 1993, Mr Kidd and Mr Hogarth had a further meeting with Mr Walker and Mr Dransfield. Mr Hogarth's Evidence 305 Mr Hogarth's version of this meeting is in the following terms: '39. . . . During this meeting I had a conversation with Mr Walker and Mr Dransfield to the following effect in the presence of Mr Kidd: Mr Walker: "Bob, we have all the political connections and access to the right people to have your land at Helensburgh rezoned to residential promptly. As you know, we have the experience in broadacre development as we have shown at Menai, for instance. As you would also know from the various meetings that you have attended together with me, we have the contacts and influence with certain pollies, such as Max Willis, Nick Greiner, John Hannaford and many others and other people with political influence. A condition of our involvement would be that you agree for us to have full control of the rezoning process with our consultant Alf Lester & Associates utilising, if necessary, any of the consultant documents you have commissioned and used in the past. I want you to keep away from any further public involvement in any of the rezoning process because our sources tell us that it is a personality problem that is stopping that land being rezoned and that is why the Labor Party through Wollongong City Council haven't rezoned your land. We would be the ones dealing with all public authorities and obtaining approvals from them such as the D.A. and the B.A. for the land". [ Mr Hogarth: "Do you think that you can get the rezoning through quickly?" Mr Walker: "We are very confident we can get it through in the next couple of months. We only enter into arrangements such as this after we have done our homework and there is a very high level of confidence that a re-zoning will [ ] be granted". Mr Dransfield: "We have spoken to our contacts in the Government and in the Labor Party and we are sure that, once we get the listing out of the way (stock exchange listing of Walker Corporation), that we will be able to ensure the rezoning takes place immediately. Mr Hogarth: "Are you confident Lang that you can get the land at Helensburgh re-zoned?" Mr Walker: "I can fix it. ( Just ) leave it to me. All I ask is that you take a back seat and say or do nothing unless we give you a specific task". Mr Hogarth: "That sounds pretty good to me. As you know, I've been working hard on this and worrying about it a lot!" Mr Walker: "You know that we want all the land at Helensburgh that you own". Mr Hogarth: "Yes, that's agreed. You know that we've got the roads and other parcels of land in and around Helensburgh". Mr Walker: "Yes I've heard that, that's why I'm concerned because I don't know that we know the limits or extent of the land that you've got". Mr Hogarth: "I want to be sure that everything that we do in Helensburgh we do together". Mr Walker: "Certainly Bob, that's the intention. That's why I want to be sure that I've got all your land". Mr Hogarth: "It would be pretty silly to be trying to do anything without us because of the various interests that we've got in the area". Mr Walker: "I ( ) want you to clearly set that out for us at some stage". Mr Hogarth: "That's fine, as long as we understand each other". [Although Mr Kidd's statement is close to identical to Mr Hogarth's statement up to this point, Mr Kidd's statement then includes a further section [paragraph 43] but then picks up, again verbatim or close to such, in terms of repeating Mr Hogarth's statement paragraph 40]. 40. Discussion continued regarding other aspects of the joint venture. Further discussion took place regarding the AGC position as follows: Mr Walker: "As you know Bob, we want the land unencumbered. How do you think you stand with AGC and what's the latest on that?" Mr Hogarth: "We've had a number of discussions. The situation is pretty delicate but we feel confident that if we had $2 million to pay to them immediately that we could do a deal with AGC. They are seeking a lot of money and they have been more conciliatory in recent times because they were talking about doing a joint venture with us on Cronulla. However, subsequently when Westpac moved in we get mixed messages because as you know they took the Cronulla Beach Resort and we feel that Westpac are driving this and are just looking for dollars to wrap up the whole transaction". Mr Walker: " ( If we gave you ) $2 million ( ) would you be able to get it settled because that's obviously going to be pivotal to the whole transaction". Mr Hogarth: "Yes, I think that that's the case". Mr Kidd: "So that means that we get the payment that's needed to clear these transactions now and we'll get the balance of the money later". Mr Walker: "Yes that's how we would envisage it happening and we've already explained how we would expect to be funding that". 41. A discussion then ensued regarding the tax effectiveness and other aspects of the transaction as follows: Mr Walker: "I've spoken to Brian (Weinert) who tells me that he thinks you've got a good chance of Ensile having the profits free of capital gains tax". Mr Hogarth: "Yes I had a long conversation with Brian about this and he thinks that on balance that should be the position. Ensile's been the land owner of some of the land since 1979 and of the balance of the land since 1982 and we think that that's a reasonable position. The property has been used for primary production purposes and in addition the principal activity was and still is the riding school". Mr Walker: "Brian thinks that he can do something with the profits via Ensile". ( ) Mr Hogarth: "Yes he has spoken to me about that. I think that all we can do at this stage is say that ( ) we'll jointly share the benefit of any capital gains tax entitlement that may be due to Ensile. Brian says he's very busy and preoccupied with trying to arrange the float and doesn't expect to be able to look at this matter for some time". Mr Walker: "Yes, that's right. Bob, the other matter that he's talked about is the tax losses which Genepa has". Mr Hogarth: "Yes the Genepa Investment Trust has run the motel and it has accumulated losses of $10-12 million mainly (because of the Swiss franc loan business"). Mr Walker: "Well obviously we're very interested in those. How do you think we can deal with that?" Mr Hogarth: "Well Brian wants to explore that further with Alan Severino and says that they will come up with some formula of how the whole deal should be structured but again, he doesn't have the time to look at that at this time. We spoke to Alan recently and he says that he will be working with Brian on this". Mr Kidd: "So I'll just put general clauses in the agreement that both of these items, that is, capital gains tax and the tax losses, will be for the benefit of the joint venture, if possible". Mr Walker: "Yes, that will be fine, Geoff. That also will apply to the structure of the joint venture and I think we've explained to you previously how we want to do that".] 42. The conversation then moved to the topic of rezoning to the following effect: Mr Walker: "Bob, we've had contact with Robert Webster's office. He's the Planning Minister and I think that you'll find that a Commission of Inquiry will be authorised by him in the very near future". Mr Hogarth: "That's good news". Mr Kidd: "What do you think will be achieved by a Commission of Inquiry?" Mr Dransfield: "We think we can get a Commissioner who'll be sympathetic to our cause and a positive finding will sort out the impasse with the politicians. We've appointed Alf Lester (of Lester Firth & Associates Pty Limited) to handle the town planning issues that may arise for us during the Inquiry. He's a town planner but he's also a whiz at all of this and he's done a lot of work for us in the past and if we get a Commission of Inquiry he's the one that I believe has the ability to run the Commission of Inquiry for us. As we have said to you both previously, we want you both to take a back seat and only provide information when Alf asks for it. We will organise a meeting for you to meet Alf". Mr Hogarth: "Well that's up to you and Lang as to how you want to manage these issues. We need professional representation at the Commission of Inquiry. If you think that Lester Firth should handle this then go ahead. I've never heard of the firm or him". Mr Kidd: "Who are you going to use for technical support in this matter?" Mr Dransfield: "Our feeling at the moment is that we will continue to use GHD. We've had the opportunity of having a look at the documents that they've prepared. We think they've been properly prepared and with Alf's coordination and assistance and input we think that we can get up an appropriate presentation which we will take to the Commission of Inquiry when it's announced". Mr Kidd: "And how is this to be progressed?" Mr Dransfield: "Alf will have a look at it and if he thinks he needs any further technical input then he will make the necessary arrangements. Alf and I will be in regular contact and you can leave this all to us. I'm going to try and organise a meeting for 16 November so that you can meet Alf". Mr Kidd: "Where does that leave us with GHD?" Mr Dransfield: "Bob's told me about the position with the accounts. You'll have to go and deal with them about the unpaid accounts to date but you can assure them that for present purposes we'll be continuing to keep them involved and you can tell them that we anticipate a Commission of Inquiry being announced in the near future. Walkers will retain GHD for any additional work and will be responsible for their expenses from now on". 43. Mr Dransfield then said to Mr Kidd and me in the presence of Mr Walker words to the effect: "We'll leave it to Brian as the financial person to arrange how Walker will pay you the $4,500,000." 44. At the conclusion of the meeting a conversation to the following effect ensued: Mr Walker: "Geoff, could you promptly prepare those amendments as I am anxious to sign the amended document".' [emphasis added] Mr Kidd's Evidence 306 Mr Kidd's version of Meeting 6 is set out from paragraphs 22 through to 29 of his statement. I have already indicated that paragraph 22 of his statement is almost word for word identical to paragraph 39 of Mr Hogarth's statement. Paragraph 24 of Mr Kidd's statement is then also almost identical to paragraph 40 of Mr Hogarth's statement. In between the two paragraphs in Mr Kidd's statement, he includes evidence that the following discussion regarding the acquisition of land at Helensburgh took place: '23. On 10 November 1993 a discussion took place regarding the acquisition of the land at Helensburgh to the following effect: Mr Walker: "You've indicated that you think the land is worth $9 million and that we should pay half of that now". Mr Hogarth: "Actually I think it's worth more than that but I think that we've now reached a point where we agreed that sum as the value to be placed on the land if you're going to come in and provide the expertise that you have indicated. We are talking about a 50/50 joint venture and you therefore need to contribute half of the present value for the right to play". Mr Walker: "Well you've had a discussion with Brian (Weinert) about what money you need and I understand that you've now reached a point where you need $2 million for AGC and about $700,000 to clear all your debts off the Cronulla properties. Is that right?" Mr Hogarth: "Yes, that's right in the case of AGC and I sat down and worked it out with Brian (Weinert) that with the mortgages and the stamp duty, etc which is needed to transfer the properties to Lakatoi, I think that's about what's required". Mr Walker: "We think that it is important that the properties be unencumbered when we enter into the joint venture so if we give you approximately $2.7 million, that will be enough for you at the time being and we can give you the rest when we get the land rezoned. That won't take long and it solves your problem – plus it helps our cash flow. We will all win by this and we ask that you allow us this favour". Mr Hogarth: "Yes, I guess that's probably okay". Mr Kidd: "So that's what you want me to include in Heads of Agreement?" Mr Walker: "Yes" (and turning to Mr Hogarth). Mr Hogarth: "Yes".' 307 Paragraph 25 of Mr Kidd's statement is then, as already indicated, close to word perfect to paragraph 40 of Mr Hogarth's first statement. 308 Mr Kidd in paragraphs 26 and 27 of his statement then gives the following evidence: '26. I was concerned how this arrangement was going to operate and a conversation to the following effect took place: Mr Kidd: "Lang, if this is how the arrangement's going to be, how and who's going to run all this?" Mr Walker: "You don't have to worry about that Geoff. I've previously indicated to Bob that we're set up to do everything. We have the expertise and we'll be attending to the administration of the joint venture". Mr Kidd: "So that means you'll take care of everything". Mr Walker: "Yes, because we'll be providing all the money. We'll run the bank account and we'll control the accounts and all of the things that normally occur in a venture of this nature". Mr Kidd: "And will that extend to Cronulla?" Mr Walker: "Yes, we would expect to build the developments at Cronulla and when we get down the track we'll sit down and work out exactly how that's going to happen". 27. At the meeting a conversation took place to the following effect: Mr Walker: " Geoff, I'd like you to prepare the amendments to these points of agreement quickly as we need to sign something to understand what we are agreeing about". Mr Kidd: "Okay Lang I'll get onto it tonight and write it out".' [emphasis added] 309 Paragraphs 28 and 29 of Mr Kidd's statement are in the following terms: '28. At this meeting I made some notes ("PAB50"). The other members at this meeting allocated me the responsibility of taking notes and preparing a document (expanding on the Basis of Agreement) which would later be known as the Heads of Agreement. Those present at the meeting were in possession of the document which I had prepared and headed "Basis for Agreement between LW and RMH Companies". I refer to my notes of that meeting and comment as follows: (a) The initial item relates to the number of allotments that were in the Land Pooling Area. (b) The second paragraph refers to the number of allotments in the Lady Carrington Estate and the Ensile controlled allotments in a revamped subdivision of the Land Pooling Area. (c) The reference "LW can fix it" records an assurance by Mr Walker to Mr Hogarth and myself to the effect of: "I can solve the re-zoning problem". I will separately refer to that conversation and to the reference to "Bob to say nothing". (d) The $4.5 million is the consideration to be paid by Walker Corporation. (e) The $2.75 million relates to the first instalment of the consideration to be paid by Walker for an involvement in the Helensburgh land. (f) The subsequent references relate to Allison Road, Cronulla which at that time was anticipated to be a three-storey walk-up with a building cost anticipated to be $3 million. (g) The reference to "all land that we own" is a reference to a discussion between Mr Walker and Mr Hogarth that everything at Helensburgh is to be included in the joint venture. (h) The comment "Bob to say nothing" is confirmation that Mr Walker had decided that he was going to take over the running of the joint venture thereafter. (i) The final reference to GHD is in respect of LCE reaching an agreement about the outstanding accounts for consulting work due to GHD and these being a responsibility for LCE. 29. Messrs Walker or Dransfield never mentioned their intention to include this potential arrangement in the prospectus for their public float.' 310 Mr Kidd's handwritten notes of the meeting dated 10 November 1993 include the words: 'LW can fix it $4.5 x [$10million] . . . [arrow to the next line] $2.75 x [$10million] to Westpac or others $1.75 on a rezoning and credited to a loan account. . . . All land that we own Bob to say nothing Sign off from GHD needed as part of agreement with AGC and ourselves.' [21/189] [6/248] 11 November 1993 311 By letter dated 11 November 1993 Mr Dransfield, writing on letterhead of Walker Corporation, wrote to Mr Hogarth and copied the letter to Mr Kidd. The letter was in the following terms: 'Re Joint Venture - Total Land Holdings Hogarth Group - Helensburgh This note is a confirmation of our understanding as to the agreements reached at our meeting on 10 November 1993. · Walker and Hogarth form a joint venture to rezone and develop the Helensburgh land owned in various entities by Hogarth associated companies and trusts (the venture to share profits and losses 50/50). · Walker to pay Hogarth $2.75million initially with such sum to be secured against the total land holding at Helensburgh. (Security in favour of Walker or nominated bank/lender). · No other liabilities or encumbrances to exist against the land at Helensburgh. · Walker to pay Hogarth (by way of loan account credit) a further $1.75 million when a residential rezoning has been gazetted. · Walker to perform all tasks in relation to the rezoning, however, regular joint venture meetings will be held to agree major direction and policy between the parties. · All interest costs and rezoning costs will be funded by Walker and form project costs for the purpose of calculating profit/loss. · Walker agree to a supplementary deed granting Hogarth the right to buy back the house property, including the 150 acre site upon which the house and stables are built, for the sum of $1million only if the venture fails to achieve a rezoning. Such option will not be exercisable if rezoning is achieved . · Walker agree to assist Hogarth in the development or disposal of properties at Gerrale Street, Cronulla and Allison Street, South Cronulla. Such assistance will initially involve concept drawings, development applications and feasibility studies. Bob If you agree with the above we can leave it to our respective solicitors to document. Please let me know' [6/256] 312 Also on 11 November 1993, Mr Kidd wrote to Mr Dransfield in the following terms: 'Re Our discussion and agreement yesterday Further to our meeting yesterday, we have drafted a Heads of Agreement [6.251] based on our understanding of the key points of the deal that was done. I hope that you find this to be a true reflection of the discussion and that this is of use to you in progressing this matter. We look forward to examining your base document in the next short period.' [6/254] 313 The Heads of Agreement document which was compiled by Mr Kidd and Mr Hogarth runs for three pages and is to be found at 6/251-253. 18 November 1993 - Meeting 7 - First Meeting Attended by Mr Lester 314 A meeting took place on 18 November 1993, attended by Mr Hogarth, Mr Walker, Mr Dransfield, Mr Kidd and Mr Lester. Mr Hogarth's Evidence 315 Mr Hogarth's evidence as to the events at this meeting is set out in paragraphs 45 and 46 of his statement and is to the following effect: '45. . . . I had not been informed that Mr Lester would be attending this meeting. At this meeting I was introduced to Mr Lester by Mr Dransfield who said words to the following effect: Mr Dransfield: "Geoff and Bob, I'd like you to meet Alf Lester. He's the person that we have retained as the most experienced expert to lead and coordinate all of the activities on Helensburgh. Alf has done a number of jobs for us similar to this and they have all been successful. Alf has had considerable experience with what we're going to go through in respect of the Helensburgh land and I've invited him to this meeting so you can get an understanding of how we propose to go about achieving rezoning. Alf's role in this will be to kick off all of the activity and you can see that we're honouring our side of the bargain because we're moving on this quite quickly. We think that with Alf's assistance we'll be able to secure rezoning promptly and can move forward after that". Mr Lester: "We're happy to act on this project. Peter, you would be familiar with our work on the other projects we're doing together with you." Mr Dransfield: "Yes, I am Alf. You can manage the technical input but I'll be responsible for overall co-ordination of our submissions to the Commission. Alf, you'll report back to me." Mr Hogarth: "That's fine with me Peter. I'm keeping a back seat. Are you familiar with the land at Helensburgh, Alf?" Mr Lester: "I'm generally aware of the area and I know that it's at the bottom of the National Park. Peter (Dransfield) has given me an outline of the property and what's involved". Mr Hogarth: "I'd be happy to give you a briefing on the background however this is all about water quality and maintaining the integrity of the Hacking River. That's where you need to concentrate. All of the greenies that have been involved in objecting to the rezoning are in some way related to interests seeking to protect the Hacking River and that extends right up to Sutherland and the Sutherland Council. It is ironic because Sutherland Council drain their surface water directly into the Hacking River but they seem to want to apply a different standard to us further upstream at the headwaters". Mr Lester: "Yes I'm aware that water quality is going to be an issue". Mr Dransfield: "I have appraised Alf of the water quality issues and how important that's going to be". Mr Kidd: "Well I'm glad that you have the ability to put all this together Alf because I've been attending the meetings of the Hacking Catchment Management Committee for some months now and when anything around this area comes up in the discussion, all they're on about is water quality". Mr Lester: "Yes I'm aware of that and I will deal with that with the consultants that we retain as we look like being successful in getting a Commission of Inquiry organised". 46. At that meeting a further conversation took place to the following effect: Mr Kidd: "Lang, how do you think that you're going to have this land rezoned?" Mr Walker: "I've told Bob previously about our political connections and how that assists us in getting the authorities to look favourably at our projects. I've had my people look at it and we believe that we can get final agreement for a Commission of Inquiry to be convened. I've already made some enquiries and I think that we'll be successful in that respect" . Mr Kidd: " Do you think that's the way to go ?" Mr Walker: " I think that's the only way to go. With our expertise and with the work that's already been done, the outcome will be a foregone conclusion ". Mr Hogarth: "What do you propose to do in the short term?" Mr Walker: "We'll have Alf Lester review all of the work that's been done and make a list and address any outstanding items and he'll not only do that for what's outstanding but he will also get ready for the Commission of Inquiry to make sure we've got everything together". Mr Hogarth: "Okay, you've told us that you're going to run it and that seems to be making good progress. We'll leave it to you". The conversation continued to the following effect: Mr Hogarth: "Lang, as I have told you I agree to bow out of the rezoning proceedings but I want to be kept informed of what is taking place. I agree that you have the final say on how the rezoning and Commission of Inquiry is run. Are you completely satisfied that Lester Firth is capable in this field and does he have the staff capable of running the Commission of Inquiry and providing the studies that will be required? " Mr Walker: " Lester Firth is doing most of our work in this type of project and with all of the data GHD and your other consultants have produced he will be able to win our case at the Commission of Inquiry. I will talk with Peter Dransfield and he and I will suggest that GHD should have a role in the process because of their knowledge and involvement in the rezoning application process ". Mr Hogarth: "To sum up, you and Peter Dransfield intend to appoint GHD as a sub-consultant to Lester Firth". Mr Walker: " Yes, I think that with that team we will get a positive result from the Commission of Inquiry ". [emphasis added] ' Mr Kidd's Evidence 316 Mr Kidd's evidence as to this meeting is to be found in paragraphs 31 to 34 inclusive of his statement, which are in the following terms: '31. I accompanied Mr Hogarth to a meeting at the Paddington office of Walker Corporation on 18 November 1993 with Mr Walker and Mr Dransfield. At this meeting I was introduced to Alf Lester ("Mr Lester") by Mr Dransfield who said words to the following effect: Mr Dransfield: "Geoff and Bob, I'd like you to meet Alf Lester. He's the person that we have retained as the most experienced expert to lead and coordinate all of the activities on Helensburgh. Alf has done a number of jobs for us similar to this and they have all been successful. I've invited him to this meeting so you can get an understanding of how we propose to go about achieving the rezoning. We think that with Alf's assistance and our contacts we'll be able to secure rezoning promptly". Mr Walker: "We've had contact with Robert Webster's office. I think that you'll find that a Commission of Inquiry will be authorised in the very near future". Mr Kidd: "What do you think will be achieved by a Commission of Inquiry?" Mr Dransfield: "We think we can get a Commissioner who'll be sympathetic to our cause and a positive finding will sort out the impasse with the politicians. We've appointed Alf Lester to handle the Commission of Inquiry. He's the one with the ability to run the day to day aspect of the Commission of Inquiry for us. We want you both to take a back seat. Alf will report to me and I will be responsible to the joint venture". Mr Hogarth: "We need professional representation at the Commission of Inquiry. If you think that Lester Firth should handle this then that is your decision and your responsibility. I've never heard of the firm or him". Mr Kidd: "Who are you going to use for technical support?" Mr Dransfield: "Our feeling at the moment is that we will continue to use GHD. We've had the opportunity of having a critical look at the documents that they've prepared and we are sure that they will carry the day. We think they've been properly prepared". Mr Kidd: "And how is this to be progressed?" Mr Dransfield: "If Alf thinks he needs any further technical input then he will discuss it with me. Alf and I will be in regular contact and you can leave this all to us. Mr Kidd: "Where does that leave us with GHD?" Mr Dransfield: "You'll have to deal with them about the unpaid accounts but you can tell them we'll be continuing to keep them involved and we anticipate a Commission of Inquiry being announced in the near future. Walkers will be responsible for their expenses from now on". Mr Hogarth: "Do you know this land Alf?" Mr Lester: "I know that it's at the bottom of the National Park. Peter (Dransfield) has told me what's involved". Mr Hogarth: "This is all about water quality and maintaining the integrity of the Hacking River. That's where you need to concentrate. Sutherland Council drain their surface water directly into the Hacking River but they seem to want to apply a different standard to us further upstream". Mr Lester: "Yes I'm aware that water quality is going to be an issue". Mr Kidd: "I'm glad you can put all this together. I've been attending the meetings of the Hacking Catchment Management Committee and when anything comes up about this area, all they're on about is water quality". Mr Lester: "I will deal with that with the consultants that we retain". 32. After Mr Lester left the meeting there was a conversation to the following effect: Mr Dransfield: "Geoff, I sent you a letter about my thoughts on some things that should go into the Heads of Agreement". Mr Kidd: "Yes but I had already prepared it and you would have received my draft on the same day". Mr Dransfield: "Yes, but there are a couple of issues which I wanted to deal with. One is in respect of the further $1.75 million". Mr Kidd: "I saw that comment in your letter but that's not what we agreed upon. What I put in the Heads of Agreement I believed exactly set out what was intended, namely that you would be paying the further contribution of $1.75 million to earn your 50% interest in the land". Mr Dransfield: "Yes, I accepted that because you'll see that I signed your Heads on 12 November 1993 subject to some other comments". Mr Kidd: "Well that's fine, I want to be precise as to when that $1.75 million is to be paid". Mr Dransfield: "Lang's enquiry says that the rezoning is a formality and the further contribution will be paid as soon as that comes through which will be in the near future". Mr Kidd: "What do you mean by that?" Mr Dransfield: "It's difficult for us to say at the moment because we're so occupied about the float but we would certainly think in the next six months or so". Mr Kidd: "Yes I think that's all right with us, we'll accept that. I don't think we need to put anything further in the documents". Mr Dransfield: "That's what I thought and that's why I've signed it". 33. Exhibit "PAB53" is a copy of my notes of the meeting of 18 November 1993. The references to "AS", "BW" and "Geoff Col" relating to tax positions are references to Alan Severino, Brian Weinert and Geoff Coleman. 34. Mr Hogarth briefed the meeting on the background of the history of the Helensburgh area and the LCE Re-zoning Application and work carried out to date. A site visit was arranged. A conversation then took place to the following effect: Mr Walker: "I'm going to meet with the politicians and make sure that this re-zoning goes ahead. I'm also arranging for Peter and myself to talk to the senior people in the Department of Planning". Mr Walker then said: Mr Walker: "Who are you using as your accountant on this matter?" Mr Kidd: "Geoff Coleman". Mr Walker: "I'm going to get Alan Severino and Brian Weinert to meet with Geoff Coleman and to go through the companies and the tax positions so we can work out the best way of operating the joint venture". Further discussions continued in respect of the Cronulla properties being the Allison Road Property and the Gerrale Street Property.' [emphasis added] 317 Mr Kidd's handwritten notes of the 18 November 1993 meeting are to be found at 7/19. Mr Lester's Evidence 318 In answer to paragraph 45 of Mr Hogarth's statement and paragraph 31 of Mr Kidd's statement, Mr Lester's evidence in his first statement dated 23 July 1999 was as follows: (a) He did not recall that Mr Dransfield had said: 'You can manage the technical input but I'll be responsible for overall coordination of our submissions to the Commission.' His evidence was that a Commission of Inquiry was only a vague option at that stage. (b) Mr Lester denied having said : '. . . I will deal with the consultants that we retain as we look like being successful in getting a Commission of Inquiry organised.' (c) Mr Lester's evidence was that water quality was only one of the many issues discussed at that meeting and in that respect it was noted that there was a need to demonstrate that the proposed development could lead to an enhancement of the Hacking River in environmental terms. (d) Mr Lester denied in his statement that a conversation to the effect of that deposed in paragraph 31 of Mr Kidd's statement had taken place. [I interpolate that at transcript 1435 under cross examination, Mr Lester clarified this section of his statement by saying that he had not intended to deny the whole of paragraph 31 of Mr Kidd's statement but was 'denying the essence of the focus on a Commission of Inquiry'. His evidence was that some of the words set out in paragraph 31 of Mr Kidd's statement could have been said. Whilst he denied that Mr Walker had said that he thought that they would find that a Commission of Inquiry would be authorised in the very near future, he did accept that a Commission of Inquiry was talked about as a possibility. Mr Lester could not recollect, but would not deny that the possibility of getting a Commissioner who was sympathetic to the joint venture was discussed at that time. (e) Mr Lester did not recall that Mr Walker would have said: 'We've had contact with Robert Webster's office. I think that you'll find that a Commission of Inquiry will be authorised in the very near future.' [I interpolate that at transcript 1430 Mr Lester, although stating that he could not recall Mr Walker having said these words, agreed with the proposition that Mr Walker could have said it.] 319 In answer to paragraph 46 of Mr Hogarth's statement, Mr Lester could not recall that Mr Walker said: (a) 'With our expertise and with the work that's already done, the outcome will be a foregone conclusion.' (b) 'Lester Firth is doing most of our work in this type of project and with all of the data GHD and your other consultants have produced, he will be able to win our case at the Commission of Inquiry.' [Under cross examination, Mr Lester denied that the engagement of GHD was committed at the time. He could not recall GHD's name being raised at the time other than in connection with GHD's 1992 application, which was background as part of the briefing - T 1440.] Of course GHD is referred to in Mr Lester's file note of 18 November - 7/15.] (c) 'Yes I think that with that team we will get a positive result from the Commission of Inquiry.' 320 Mr Lester had no recollection of the conversation referred to in paragraph 34 of Mr Kidd's statement. [Lester's statement paragraph 6] [See Mr Lester's statement at paragraphs 5 and 6] 321 To the best of Mr Lester's recollection, Mr Walker, Mr Dransfield, Mr Hogarth and Mr Kidd remained together after he, Mr Lester, left the meeting. He accepted that naturally further discussions could have taken place at the meeting after he left. [T 1402 - 1403] 322 Mr Lester could not recall Mr Walker saying at this meeting, "We can get the rezoning done properly". This was not, on Mr Lester's evidence, said. His reason for asserting that Mr Walker had not said this was expressed as follows: 'Because the whole structure of this meeting was to provide a background to what might happen, to provide an understanding, as far as I was concerned, an understanding to me; and what might happen had not been resolved, that was something that would flow from a further exploration of data, of information, an understanding of the site.' [T 1402] 323 Mr Lester's evidence was as follows: 'Q. Did Mr Dransfield ever say anything to you about whether or not he thought they could get this land rezoned; . . . A. Only in the context of the process that we might go through to seek rezoning . . . A. We, at various meetings subsequent to this, talked about the preferred way to achieve it, and the conclusion that was arrived at following various investigations, discussion or in the discussion, site inspection, a review of the available material, was that the preferred way would be to seek a Commission of Inquiry. Q. Did he ever say to you that he was optimistic about getting the land rezoned? A. I don't recall whether he said he was optimistic . We did talk about rezoning and seeking rezoning. Q. Did he ever say anything to you which gave you an impression about whether or not he thought there was some chance and, if so, what chance of getting rezoning; did he every say anything to you like that? A. I think only in the context that Walkers were prepared to work toward rezoning. In that sense there was a positive attitude, that it was possible and could potentially be achieved. Q. What did he say, to the best of your recollection? A. We had a number of discussions and it was that we, in - the general principle was that we sought an opportunity of putting material before an impartial body, such as a Commission of Inquiry that was removed from politics, and that in so doing there was a good chance that it would happen. Q. When was it that he first said anything like that to you? A. I can't recall precisely when that happened. Q. Was it in December, for instance, that - this meeting took place in November - and is it in December 1993? A. I would need to think about the time frames, but I know when I say - I don't know - I seem to recall around December or January there was, I understand Walkers had a meeting with the Minister, I had prepared a briefing in that, and that was directed towards seeking a Commission of Inquiry. Q. Now, you recollect him saying to you that if you had a Commission of Inquiry there is a good chance you would get rezoning; is that what you say? A. I don't think I would like to say that he said that, but the general feeling was that there was, the general attitude was to commit resource to achieving it, and that was the preferred way of achieving rezoning.' [T 1403 and 1404] 324 Mr Lester's evidence was that at the time he left the meeting, he left with the sense that there was another potential job from Walkers. His evidence was that he was still a bit uncertain about the scope and scale of the project because he had had one session and would not get a good understanding of the project until he started to look at the data and at the site and began to understand what it was all about [T 1414]. 325 Mr Lester's evidence was that the Commission of Inquiry may have been mentioned at this first meeting which he attended but that it was not in his mind as a conclusion. There had been no decision to hold a Commission of Inquiry by that time. 326 It was put to Mr Lester that at the meeting, a Commission of Inquiry was put forward by those present as a priority, that is to say as something that they wanted to achieve as soon as practicable but he could not agree with this [T 1415]. 327 It was put to Mr Lester that his task identified at the meeting was to go away and see whether or not the grounds for holding such an Inquiry could be put together but he did not accept that this had been the case [T 1415]. 328 Mr Lester's evidence was that at the meeting he had been briefed and numerous options had been presented and that he felt that it was necessary to review that material to make an informed assessment as to the best approach to achieving rezoning. By the end of the meeting, to the best of his recollection, the meeting had not formed any view about what the choices were. He was asked: 'Q. Can you think of another means that was practicable of achieving the rezoning of that land, other than holding of a Commission of Inquiry? A. Only with the benefit of looking back, no. But I did not hold that view at that time. Q. And what I want to suggest to you was that whether you held that view at that time, those who were present indicated in your presence that they thought that a Commission of Inquiry was the way to go? A. No. . . . Q. What was said about a Commission of Inquiry at the meeting? A. I believe that there was a reference to that was a possible choice . . .' [T 1416] 329 Mr Lester was asked as follows in relation to this meeting: 'Q. The subject of water quality was mentioned at the meeting, was it not? A. Yes. Q. And as it turned out later, you realised that that was a most important issue? A. I realised it was one of a number of issues. Q. Later on, wouldn't you agree that it was clear it was the major issue that was concerning the Wollongong Council? A. It was one of the issues, probably the primary issue with respect to Wollongong Council, yes . Q. And it became a prime issue with the Commission of Inquiry? A. It became a major issue with the Commission of Inquiry, yes . Q. And Mr Hogarth from time to time, I suggest to you, indicated to you that it was the prime issue? A. I don't recall the word such as "prime". It was certainly mentioned as one of the key issues. Q. He said to you, from time to time, it is one of the key issues ? A. Yes . . . . Q. . . . What I want to put to you is that he told you that that was the key issue . . . A. No, that was one of the necessary - - Q. He never said that to you? A. I don't recall him ever saying that to me. Q. He could have said it? A. He could have said it.' [T 1419] 330 Mr Lester's notes of this meeting are to be found at 7/15. Mr Lester's evidence was that he effectively went to the meeting 'cold', namely having virtually no information about what the meeting was to cover before he arrived at the meeting. It had often happened that he would be invited to a meeting with only the information that he may be able to help Walkers with a particular project. I accept this evidence of Mr Lester as reliable. 331 Mr Lester was asked under cross examination: 'Q. Now, at that meeting on 18 November . . . did Mr Hogarth say something like this "that he would be happy to give you a briefing but the problem was all about water quality and maintaining the integrity of the Hacking River . . . " A. He mentioned that one of the issues was water quality. Q. So he didn't say "it is all about water quality", is that what you are saying? A. Yes. Q. Did he say to you "You need to concentrate on that issue"? A. Not to the exclusion of others, no.' [T 1455] 22 November 1993 332 By letter dated 22 November 1993 Mr Kidd wrote to Mr Dransfield, referring to his letter of November 11, 1993 which had been signed and faxed back to Mr Kidd on November 12 and advising that the Hogarth Group had edited the Heads of Agreement to include the comment marked up on page 3. This had been included in agreement item 7 to reflect that funding would be undertaken by a third party, to be arranged by Mr Walker. 333 The letter confirmed that this edit was the only change, stated that Mr Dransfield had signed and had arranged for Mr Hogarth to sign, enclosed a suggested final version of the document and sought to have the same executed by Mr Dransfield and Mr Walker [7/27]. 24 November 1993 - Meeting 8 Mr Hogarth's Evidence 334 On Mr Hogarth's evidence, a further meeting took place on 24 November 1993 when Mr Lester visited the farm at Helensburgh. In paragraph 48 of his statement of 24 December 1998, the conversation which took place at this meeting was to the following effect: 'Mr Hogarth: "Alf, I've got something like eight filing cabinets full of documents, mainly on that part of the property here that we intend to rezone including consultants' reports. You have complete access to whatever you want. I've got a photocopier here for you to take copies away". Mr Lester: "Okay, that's good Bob but I think that what we'll be doing Bob is taking a fresh look at the whole process. What I may need is, if I send anyone down here, I ask that you take anyone we send down on a "Cook's Tour" of the place". Mr Lester took some but not all of the information which I offered him which included that which I had on water quality such as the Hans Westerman Report (which he left behind). We then had a further discussion to the following effect: Mr Hogarth: "Is there anything else I can do?" Mr Lester: " Bob, your role is to provide information about the property such as maps and so forth and taking people on tours around the place. Walkers' have briefed me and I am now in charge of this rezoning issue . Any queries that I have about how to conduct this I'll refer back to Peter Dransfield and Lang Walker". Mr Hogarth: "Okay Alf but what about our dealings with the authorities to resolve this water quality issue?" Mr Lester: " You've agreed to take a back seat in all of this. I'll be taking care of all the submissions to public authorities such as the Department of Planning and Wollongong City Council to allow our development plans at Lady Carrington Estate to go ahead ". Mr Hogarth: "Yes, sure Alf. I'm happy to show people about the place but Alf, I again stress as I have with Lang Walker and Peter Dransfield that water quality is the most important part of the rezoning process. I had Ian McManus (the State Member for Bulli) where you are standing and his words were 'Bob, get the water quality right and you will get rezoning'. The other important thing is the Thompson Land to satisfy the National Parks and Wildlife Service by our "gifting" half of all of the land to them".' [emphasis added] Mr Lester's Evidence 335 In Mr Lester's statement of 23 June 1999 he denies that a conversation to the effect of that deposed to in paragraph 48 of Mr Hogarth's statement took place. More specifically, he denies those sections of paragraph 48 of Mr Hogarth's statement as are underlined above. To the best of Mr Lester's recollection, his file note [7/31] accurately records what was discussed at the meeting and issues relating to water quality and the National Parks and Wildlife Service were only two of many raised at that meeting. 336 In his statement, paragraph 13(b), Mr Lester in denying section of what he is alleged by Mr Hogarth to have said [in paragraph 48 of Mr Hogarth's statement], stopped the denial with the word 'rezoning issue'. Although Mr Lester did include paragraph 13(a) of his statement, denying that a conversation to the effect deposed to took place, he took the trouble to specifically deny the saying of certain words but failed to add the words 'any queries that I have about how to conduct this I refer back to Peter Dransfield and Lang Walker'. On being tested on this matter in cross examination, Mr Lester's evidence as to the additional sentence was 'I don't recall that sentence. I can't tell you why I can't specifically excluded it, but it would have been certainly - it's possible that I would have said "I refer back to Peter Dransfield", and for "Peter Dransfield", but I don't recall saying that'. [T 1468] 337 At the same time, Mr Lester under cross examination, accepted that it had been his task to talk to the Department of Planning and to the Wollongong Council and that this was part of the investigations flowing from the collecting start. 338 Mr Lester was asked to give, to the best of his recollection, what Mr Hogarth had said about water quality at this conversation and his answer was: 'My recollection is that water quality was one of the issues that was mentioned during our tour of the site. It was mentioned in the context of effluent from the stables for example. It was mentioned during the briefing that I had in Mr Hogarth's study. But along with a range of other issues. Q. Well just tell us, to the best of your recollection, what words he used in relation to water quality . . . A. Water quality is one of the issues that needs to be addressed. . . . Q. So, what I suggest to you again, if I may, but I won't repeat it again, is that he did say to you in words to the effect "look this water question is a key issue"? A. I would deny the "key issue". [T 1470] 25 November 1993 339 By letter dated 25 November 1993, Mr Woodward wrote to Mr Kidd advising that 'the mediation between conservation and development interests which Wollongong City Council appointed me to undertake in relation to land use and controls for part of the lands . . . has not been able to proceed . . . due to the refusal of groups/persons expressing conservation interests in the area to participate in discussions . . .'. [7/38] December 1993 340 Under cross examination, Mr Lester was asked and answered as follows: 'Q. And when do you think it was that you first were acquainted with the problem being perceived of Mr Hogarth having to settle fees with GHD, when do you think that that subject matter came up? A. I believe it came up sometime during December, and for memory, and I have to check my notes if you wish, but I believe it was raised by one of a number of the people that I was invited to contact. I think for example Mr Smith, Dennis Smith who had left GHD, I contacted him, and I believe that he raised that matter.' [T 1442] 1 December 1993 - Final Form of Heads of Agreement signed 341 Under cover of facsimile dated 1 December 1993, Walker Corporation [Mr Walker] sent to Mr Hogarth a copy of the final version of the Heads of Agreement with the handwritten alteration on page 1. This version now recorded the execution by all parties of the document, the last party to have signed apparently being Mr Dransfield whose signature is appended as dated 1 December 1993. [7/53, 7/56] A copy of the document is appended to the Judgment as Appendix '5'. The document was signed by Messrs Hogarth, Walker, Kidd and Dransfield and is entitled 'Heads of Agreement between LW and RMH'. It is to be recalled that the later HUTA was an agreement between Ibenmore, Lakatoi Universal, Walker Consolidated and Ensile. Bearing in mind the fact that the earlier document was a Heads of Agreement document, I infer that the personal signatories to the Heads of Agreement signed in a representative capacity intending to generally represent their respective relevant corporate interests. The only significance of the matter is probably where it may be suggested that the later HUTA did not cover certain areas provided for in the earlier Heads of Agreement. 3 December 1993 342 At about this date, Mr Lester met with Mr Woodward of the Department of Planning at Wollongong to discuss the background to the Helensburgh project. Mr Lester's file note of this meeting is to be found at PX 7/60. 343 To my mind, this file note is a reasonably balanced note, summarising the position to this point in time. The note includes the following: 'According to RW, Bob Carr put forward a political position which was on the public record indicating that Helensburgh expansion would not proceed. It is RW's clear view that this is closely related to the marginal position of the local seat sought which was only won by some 300-400 votes. Accordingly any movement or action that might jeopardise the marginal votes would be opposed by both political parties. It also helps to explain why the green vote and the objections that were lodged to the previous scheme have been treated so seriously . . . A section 65 certificate was sought from the DOP by Council and a number of submissions, in some cases quite detailed (eg Hogarth), were received. Despite the detail that had been prepared by Hogarth's Consultants and by the Land Pool Group, neither of these two were assessed in any detail. RW believes that the Council officers had tested the political position and did not appear to want to put considerable planning effort into a review that would not, under any circumstances, be approved or supported by Council. He believes that one of the key concerns that applies to the Hogarth land in particular is that the level of run off of water and quality must be equal to or less than the present level under any new development proposal . RW was aware of some of the more recent detailed proposals to clean up the existing stormwater flows from Helensburgh as part of the Hogarth development. The major issue now appears to be the "protected waters nature of Hacking River " and the concern on the part of the Water Board they cannot guarantee that there would not be any discharge at any time from the proposed sewer system . . . RW indicated it is likely that a public inquiry will be called (possibly about March 1994) given that politically, it may be the easiest outcome and provide a solution to Wollongong Council and to the Minister. Alternatively, to avoid any political backlash it may be attractive for the Minister to accept the recommendations of Wollongong Council . . . RW also pointed out that if a Commission of Inquiry is called it will almost certainly be necessary for a detailed assessment (more than the very preliminary and cursory works so far) to be carried out by Wollongong Council Planning Officers so that a reasoned judgment can be made. . . .' [7/60] [emphasis added] 344 On the same date, Mr Lester met with Mr Cummins, a senior officer with the Council Planning Department. [7/58] 345 This file note reads, inter alia: 'A final plan was displayed in 1988 and there were 6,000 objections which primarily related to the impact on the National Park and to water quality in the Hacking River . . .'. 346 Mr Lester was asked why he had not spoken to Mr Winterbottom who was the Chief Town Planner at the Council at this time: 'Q. But wouldn't it have been more sensible to try and get to the Chief Town Planner on this particular issue, as you had undertaken the task of finding out what were the technical and political problems in relation to the Wollongong City Council? A. Yes.' [T 1474 - 1475] 347 Mr Lester's file note of his discussion with Mr Cummin included: 'According to PC some of the Councillors would secretly be comfortable if the matter was referred to a Commission of Inquiry given that it would remove their need to make a decision on the rezoning and hence avoid any political repercussion. He believes that Councillors have lobbied the Minister for some three years for such action . . . PC attempted to gain a resolution of this project when he first started but noted that the positions of the various participants have hardened over the last ten years and hence the Commission of Inquiry is the only circuit breaker that is possible .' [7/59] [emphasis added] 348 Mr Lester was asked in relation to the advice he had received of the hardening of the positions of the participants as follows 'Q. . . . Now when he told you that, that surely indicated to you that there was a struggle ahead, so far as the Council was concerned ? A. Yes . Q. And therefore, . . . that there was a need to develop some definite solutions in order to deal with the problem of the Council? A. Yes. Q. And one of the definite solutions that needed to be developed was certainly a solution in relation to stormwater and water quality? A. Yes. . . .' [T 1478-1479] 349 Mr Lester also gave evidence at transcript 1480 that he had not taken any step to ask the Council's engineer about the problems in relation to stormwater, that he had not asked to look at the Council's file in relation to the matter, and that he had not used the freedom of information legislation. 350 At transcript 1481, he gave the following evidence: 'Q. Can you tell his Honour why in relation to this matter, say prior to May 1994, let alone afterwards, but prior to May 1994 no steps had been taken, either to ask for access to the Council file, or either directly by request, or through the freedom of information legislation? A. I think the best way I can explain that is that our view was that the section 92 report and application had not been carefully assessed, and that it had been put aside for political reasons. There was not going to be a great amount of information or view in pursuing Council's files. Q. But you did not know what was in the Council's files in relation to the GHD report, did you? A. No. Q. And, therefore, until you found out, you wouldn't know whether or not something that was consistent with what Mr Woodward was telling you, or what Mr Cummins was telling you? A. No. Q. And the position is this, isn't it, that it just didn't occur to you, I said prior to May 1994, to request access to the Council's file, either directly to the Council or through the process of the freedom of information legislation? A. No.' [T 1481] 9 December 1993 351 By letter dated 9 December 1993, Mr Kidd wrote to Mr Dransfield and to Mr Hughes advising, inter alia: 'Re Joint Venture Agreement As arranged, please find attached our first draft [the draft became exhibit D12 (previously MFI 12)] the Joint Venture Agreement (dated 8 December 1993) for your review and comment. This has been prepared as a priority activity at the request of Walker Corporation on the basis of protecting the interest of both parties and reflecting the signed Heads of Agreement . . .' [7/67] 352 It appears from the hand writing at the top of the letter that Mr Kidd forwarded a copy of it to Messrs Hogarth and Gye. 353 Also on 9 December 1993, Mr Lester prepared a file note of a meeting which he had had with Mr Walker and Mr Dransfield to review the Helensburgh position. The file note includes the following: 'LW provided AL with a copy of Shell Harbour development paragraph for the brochure that is being prepared for the public listing of the Walker Corporation and requested a similar description of the Helensburgh project. Action: AL to prepare a paragraph suitable for inclusion in the public listing brochure . . .' [7/68] 354 Under cross examination, Mr Lester accepted that it was Mr Walker who asked him, and not Mr Dransfield, to provide a similar description of the Helensburgh project [T 1484]. 355 On 9 December 1993, Mr Kidd forwarded to Mr Dransfield a copy of the letter which Mr Woodward had sent dated 25 November 1993, received by Mr Kidd on December 7 [7/66]. 356 Mr Lester's evidence was that he believed that at this stage Walkers had been selected as the preferred development group to work with Shell Harbour Council, and that the project was aimed at proceeding. The land for Shell Harbour had already been zoned residential, and the marina so that there was no issue about zoning. He recalls having been aware at that stage that it would be necessary to go through an EIS process because of the proposed scale of the marina and that that would mean working with a number of government departments. He expected the relevant approvals to be forthcoming for Shell Harbour. 10 December 1993 357 On 10 December 1993, Mr Lester forwarded to Mr Dransfield a number of press cuttings to assist in Mr Dransfield's discussions with the Minister for Planning, Mr Webster [7/69]. 358 The same facsimile stated as follows: 'Following discussions with Ross Woodward, I would like to confirm his advice that Helensburgh was scheduled as a potential development area within the Illawarra Urban Development Programme estimate. The indicative lot potential was in the order of 1500-2000 lots but following Wollongong Council's decision to rezone the bulk of the Helensburgh area as 7(d) Environmental Protection, the DOP elected to remove the Helensburgh investigation area from the 'schedule'. 359 It appears to be the case from Mr Lester's evidence that it was at about this time, namely 10 December, that Mr Lester received his first advice from Mr Walker in relation to Mr Walker's preliminary meeting with Minister Webster. 13 December 1993 360 Under cover of facsimile dated 13 December 1993, Mr Lester forwarded to Mr Dransfield 'suggested Helensburgh para for inclusion in the public float documents'. He pointed out that there was a need to fill in the profit share basis and to cross check whether a project management fee would be applicable. 361 The enclosed draft paragraph prepared by Mr Lester for inclusion in the public float document was in the following terms: ' Helensburgh The Walker Group is working in conjunction with the landowner to plan and develop lands located to the east and to the north of the existing Helensburgh township some 50 kilometres south of Sydney. It is proposed that a substantial environmentally sensitive portion of the 450ha site be dedicated to the National Parks and Wildlife as part of the rezoning process. The rezoning of the balance lands should result in a residential capacity of approximately 1200 lots which, together with the existing residential capacity, should assist in developing a viable and more vibrant community. There is the potential to develop a series of environmentally sensitive residential precincts set within eucalypt woodlands with elevated and extensive views to the Pacific Ocean. The proposed design of the residential estates also provides for a significant upgrading of the existing stormwater run off characteristics, as well as environmental controls on the proposed expansion areas, which will lead to an enhancement of the water quality of the Hacking River. Profits will be shared with the landowner on an x:x basis and, in addition, the Walker Group will receive a project management fee.' [7/71] 362 Mr Lester's evidence was that at this time he expected the approval of the Helensburgh land to be forthcoming. When asked what was the source of that expectation and what gave him that expectation, his evidence was: 'In broad terms it was the various discussions that I had with a number of - with Wollongong City Council, with the Department of Planning, and I think at around that time also with Mr Dennis Smith. They all indicated that there was support at departmental level. There was support at Wollongong Council Office Planning level, and the project had been politically set aside so that if this was taken to an arena where politics could be removed, there seemed to be a very strong probability that rezoning would occur.' [T 1407] 363 Whilst it was possible that Mr Lester relied in forming this expectation on matters which Mr Walker or Mr Dransfield may have said to him, he did not recall that this had been the case [T 1407]. 364 In being able to identify the proposed '1200 lots', referred to in his draft prepared for inclusion in the public float document, Mr Lester had broadly drawn on the GHD documentation which he had received from Mr Hogarth, namely the 1992 submission [T 1408]. 365 Mr Lester, when cross-examined on what it was that Mr Walker in particular had said to him during discussions he had had with Messrs Walker and Dransfield about rezoning, answered as follows: 'Only that he was - things that I can remember, I prepared a briefing paper for him at his request. He, I understand, had a meeting with the Minister. He indicated that he thought that the Minister was supportive of some form of Commission of Inquiry. He indicated that he thought that there was a - that the matter would be reviewed dispassionately. There was a probability that rezoning would occur. Q. When did he say that to you? A. I believe that was said after he had the meeting with the Minister . . '. [T 1408] 366 The context put by Mr Ellicott to Mr Lester in cross examination was essentially that Mr Lester had attended the meeting on 18 November at which the question of strategy was decided and that Mr Lester was then, as he understood, to have a meeting with Mr Hogarth soon after that meeting. This was accepted by Mr Lester. The cross examination continued: 'Q. And right after the meeting, as far as one can tell from your note, the first thing that Mr Dransfield is raising is the question relating to the float, that is lot capacity, and I'm suggesting to you that there was a sense of urgency? A. I don't recall any sense of urgency. Q. Certainly it was not long after that that you were requested to prepare the document? A. Yes. Q. And the document referred to lot capacity? A. Yes.' [T 1461] 367 To the best of Mr Lester's recollection, he first learned or heard reference to a float to include reference to Helensburgh at about the same time as he first was told that the float would include reference to Shell Harbour - this was a matter of his best assumption [T 1464]. 14 December 1993 368 Mr Lester prepared a file note on 14 December 1993 dealing with a number of matters. He first dealt with Mr Lester's discussion with Mr Dransfield following the meeting between the Walker Group and Minister Webster to discuss the Helensburgh project. 369 This file note includes, inter alia, the following: 'The Minister had a response/advice from the DOP which is slightly contrary to some of the information that AL has gathered. The advice appears to suggest that the Minister should support Council's current recommendation rather than a proposal. The advice had been prepared by Ken Sullivan who heads up the regional office of the DOP and according to PD highlights two issues: · The difficulties associated with potential discharge of polluted stormwater into the hacking River which is protected under the Clean Waters Act. · The potential discharge of sewerage from the Board's sewerage linkage to Helensburgh to Cronulla. It appears that the uncertainties associated with both items are tending to influence the Department's view and in a sense the preference to take the easy option. The Minister indicated that if Walkers could demonstrate that there was an alternative course of action and/or the problems that have been identified were not as serious as initially suggested by the Department, then it would be possible to consider a Commission of Inquiry. PD requested that AL contact KS to further explore the issue. KS was somewhat guarded initially, given that the advice had been tendered to the Minister and was confidential in nature. However, he did acknowledge that the sewer/stormwater were two major problem areas and also noted that some of the options put forward by Lady Carrington Estates had not been properly assessed by Wollongong Council. He was not able to clarify how the Department had made decisions and recommendations in the absence of careful consideration of alternatives. However, it appears that given that the problems exist and there is no clear resolution to date, then the Department would recommend to the Minister that Council's decision be adopted in the short term. It would appear from the discussions that it will be necessary to demonstrate clearly to the Department that there are solutions to the Helensburgh problems.' [7/79-80 - emphasis added] 370 Under cross examination in relation to the above section of the note dealing with 'two major problem areas', Mr Lester was asked as follows: 'Q. And again it is highlighting the water problem, is it not? A. That sentence? Yes. Q. Sewer and stormwater were two major problem areas? A. Yes. Q. It is really emerging as the major issue, isn't it, wouldn't you agree with that, by this stage? A. They are important issues, yes. Q. But the question of water quality, now, Mr Lester, surely by December 14, or whenever it was shortly after that you spoke to Mr Sullivan, was emerging as the major problem? A. Yes, I think in fairness, if the rest of the particular . . . Q. No, would you agree with me by that stage it was emerging as the major problem. If you don't agree you can say so, obviously? A. It was an important problem. Q. It was? A. An important problem. Q. Yes. It was an important problem, obviously, but I am suggesting to you it was a very important problem, and the key problem that you had to address - by this stage I will start again, so that I don't ask too many questions at once. By this stage, in your mind, I suggest, the question of stormwater had become, in your mind, the key issue which you had to address generally in relation to Helensburgh? A. No. Q. Where would you rate it amongst all the problems that you had to address, number 5? A. No. Q. Where would you put it? A. I would rank it with - I would rank it highly. Q. Whereabouts . . . ? His Honour: . . . How would you describe its ranking at this time, to your mind. You don't have to say number 2 out of 10 or 7, but you can use your words to describe it for us? A. I have difficulty, your Honour, in the sense that it was important, but it was also clear from the various discussions, that it had not been carefully considered. So my view was that while - a lot of the responses that I was hearing were not qualified by a careful assessment of the GH & D data . . . Q. Did that remain your view during 1994? A. No. I think it became clear at the Commission of Inquiry during 1994 that water quality, and issues relating to water quality, became important. Q. Became the major issue I suggest? A. Within the Commission of Inquiry, yes. Q. And the fact that you didn't see it beforehand as a major issue was a great misjudgment on your part, was it not? A. No. Q. See, all the material, I suggest to you, for you to form a conclusion as to whether or not it was the major issue was before you, before you put in your submission that I've just taken you to, in June 1994, all the material that you could have regard to which would emphasise the significance of the problem? A. Yes. Q. And I suggest to you that your failure to recognise from that material that this was a major issue was a major misjudgment on your part? A. No.' [T 1487 - 1488] 371 The same file note states that following further discussions with Mr Dransfield, it was agreed that Mr Lester would contact Mr Tim Smyth of GHD who had had a number of dealings with Mr Dransfield in the past and in debating issues with the Water Board, particularly with Rouse Hill. 372 The file note includes reference to Mr Tim Smyth having been helpful and having noted that with Helensburgh, the problems could be slightly different in that he assumed that the existing township waste was transported westward rather than directly to Cronulla. 373 The file note includes: '[Mr Smyth] was not sure about capacity amplifications etc., and suggested that AL talk further with Tom Pinzone [of GHD]. AL left a message for Mr Pinzone. It will be desirable to discuss both sewerage and stormwater issues with Mr Pinzone prior to contacting PD and arranging for a follow-up meeting with KS.' 374 The file note concludes with action required: 'LFA to prepare an overview of the stormwater/sewerage issues following further discussion with GHD. Follow up meeting with KS to resolve the Department's approach and understanding of the technical issues involved with stormwater/sewerage . . .' [7/81] 375 In Mr Lester's statement, he also gave evidence of some of these matters. The evidence is consistent with the file notes. 376 Mr Lester's evidence dealt with events following his 14 December 1993 meeting with Mr Dransfield and then with Mr Tim Smyth of GHD. It was as follows: 'I subsequently telephoned Ken Sullivan of the DOP who said: "The sewerage and stormwater pollution issues are the two major problem areas. The proposals put forth by Lady Carrington Estates were not properly assessed by Wollongong Council but given the problems associated with the proposals it is probable that the Department would recommend to the Minister to support the Council's decision in the short term." After these discussions, I considered that it would have to be clearly demonstrated to the DOP that there were definite solutions to the Helensburgh problems. Further discussions with Mr Dransfield who said: "I suggest you contact Tim Smyth of GHD again. He is accustomed to debating issues with the Water Board." I spoke to Mr Smyth who said: "There was a similar problem in Camden involving discharge from a waste treatment plant." He described techniques that could be used including holding tanks to handle overflow or provide storage capacity in the event that the pumps fail to work. Mr Smyth also said: "The Helensburgh situation could be different given that the existing township waste is shipped westward rather than directly to Cronulla." [Statement of Mr Lester paragraphs 27 through to 31] 377 Mr Lester accepted under cross examination that he understood from his experience with Mr Walker that Mr Walker obviously had political influence and that lobbyists could have an effect which would be beneficial from the point of view of a project in lobbying persons in political positions. He accepted that this was the same with respect to local councils. He accepted that he had known that the Wollongong City Council was a council that was balanced on a knife edge of eight votes to seven through this period. [T 1411] 378 Mr Lester gave evidence that he knew the Councillors may have been aligned politically and that this may have had an effect on the carriage of the Helensburgh rezoning proposal. His evidence was as follows: 'Q. And you knew, did you not, that they were in political positions, those people, is that right . . . Q. The people on the Council who were voting eight to seven, they were in political positions? A. You mean they were aligned politically. Q. They may have been aligned, they had political views which had an effect? A. Yes. Q. And which had a serious effect on this particular project, is that right? A. Yes. Q. And was continuing to have an effect as at December 1993? A. Yes. Q. And so far as you can recall, [the Councillors who were voting 8 to 7] did not change their mind throughout the whole of 1994. Is that right? A. Yes. . . . Q. They seemed to be implacably opposed? A. Yes. Q. Didn't it occur to you that in your organisation of this strategy for the Commission of Inquiry, once it was established, that you should endeavour by some means, not improper but proper, to try and understand and if possible change the minds of some of the Council in a similar way perhaps as Mr Walker may have been able to do with the Minister as a result of your paper. Did that not occur to you? A. Yes. Q. Well whenever did you do such a thing during 1994? A. At the meetings that - I think you will find notes that Mr Walker was going to approach the Mayor in much the same way as he approached the Minister. Q. But that wasn't successful, was it? A. Whether it was successful, if action was taken to try and address that political position. Q. Did you ever have in mind getting a political lobbyist on your side as part of a team? A. No, that role was very much assigned to Mr Walker. Q. Did you every think of it yourself? A. It was an integral part of the process that Mr Walker was involved in that political sensitivity, political touchstone with all of the various parties, including the Minister. . . .' [T 1412] 379 Mr Lester's evidence was that he regarded Mr Walker's skills in that area to be considerable and that it was agreed at various meetings that Mr Walker would undertake that role. 380 Mr Lester never suggested to Mr Walker that there might be chosen a political lobbyist who would be made part of the team. [T 1413] 381 Mr Lester's evidence under cross examination was that it looked by the middle of December that the outcome was going to be a Commission of Inquiry [T 1421]. His further evidence was: 'Q. And the outcome was one which involved, in part, finding some real solutions to the problem? A. Yes. Q. And you understood that from the very beginning that you needed to find a strategy which would give it answers to the problem? A. Yes. Q. And they would have to be definite answers, wouldn't they? A. We would have to put forward a competent argument and competent case, yes.' [T 1421] 382 At transcript 1422, Mr Lester's cross examination includes the following: 'Q. . . . You saw your task as developing a strategy in conjunction with Walkers? A. Yes. Q. And that was a necessary task? A. Yes. Q. And it is one which, I suggest to you, required you to demonstrate clearly that there were solutions to the problems at Helensburgh? A. Yes. Q. And you understood that right from the beginning? A. No. I can't say that I understood that from the beginning. I began to understand the complexity as I began to appreciate, through the reading of the data, the site inspection, and my discussions with the various offices and various departments and Council .' [T 1423] 15 December 1993 383 Exhibit D4 is a copy of Mr Hogarth's diary note for 15 December 1993. It includes the following: 'Spoke to Peter Dransfield 9am re JV. He told me that Lang had spoken to Max Willis and that Max told him that Helensburgh was very sensitive and that they may not action for rezoning until after the next election 1995. I asked Peter if this affected Walkers attitude to the JV. He said that they were committed to the JV and Helensburgh as strong as before and that they had expected the road to rezoning to be difficult.' 22 December 1993 384 Mr Lester's file note of 22 December 1993 summarises a conversation which he had with Mr Hogarth and discussions which he had with Mr Smith formerly of GHD. The file note summarises the conversation as dealing, inter alia, with fees owed to GHD. According to the file note: 'DS also noted that there has been some differences of opinion with BH and that GHD are owed substantial fees which, as yet, remain unpaid. AL touched on the three major issues that appeared to be of concern in the briefing note prepared by Ken Sullivan of Wollongong DOP for the Minister, Robert Webster. The three issues were : · water quality and the impact of development following any Helensburgh expansion on the protected waters of the Hacking River; · the cost of providing services; · the potential impact of sewer overload on the Hacking River . . .' '[DS] was also of the view that a number of the Wollongong Councillors would privately support a Commission of Enquiry [sic]. Up until now however, the Wollongong Council has been 8/7 against the potential development of Helensburgh and the vote has been along party lines. . . . Action: LFA to cross-check the hydrology issues/stormwater, sewer, water. [7/82-86].' 385 Mr Lester's cross examination includes the following, after having taken Mr Lester to the above paragraph about the 8/7 Council vote. 'Q. . . . Now that told you, did it not, that you had a political problem as part of the resolving of the issue as to whether or not rezoning could take place, that's a political problem at the council level? A. It indicated that if a rezoning application was put to council in the conventional way then, as happened, it was unlikely to be voted for. Q. And it meant, did it not, in a volatile atmosphere, such as a Commission of Inquiry where everybody in the area is of interest, is involved, and the council is involved, it meant, did it not, that just one vote could change the situation? A. In the context of a Commission of Inquiry? Q. Yes? A. It is an impartial technical review of all of the data. As I understand it it is a political. Q. But you had formed a view, had you not, at some stage, if not by this, certainly before the Commission's hearings commenced, you had formed a view that the council were prepared, next, to express a view which was opposed, whether or not there was a real issue in relation to water quality? A. Based on the information that was available to me it was likely that council would oppose it, yes. . . . Q. . . . That you formed the view, prior to the Commission of Inquiry that the council would vote against the approval of the 1992 GHD application, whether or not there was a real issue as to water quality? A. Yes. Q. In other words, they were, you came to the view, using water quality you thought as an excuse for not granting the application? A. I am not sure that they were using water quality; I think they had decided not to approve it. His Honour: Q. I may be misunderstanding what Mr Lester is saying, but the way I understood it, subject to particular views which some of the council officers who Mr Lester spoke to had expressed at this time, it seemed to me I may have understood what he said, to be a closed book here, or close to such i.e. council had not considered for years applications and materials and, as I have heard understood what he has been saying, that continued to be by and large the case. I may misunderstand the evidence. Witness: Yes. Mr Ellicott Q. Is that right, Mr Lester? A. Yes. Q. And as far as you were concerned, did that not cause you to think that if the vote on the council was 8 to 7, that you should either, yourself, have some political lobbyist appointed or, alternatively, make some representation to Mr Walker or Mr Drabsfield [sic] that he should engage in more intense lobbying of the councillors as, say, distinct from the mayor? A. It was my understanding that Mr Walker made some such approaches.' [T 1492-1493] 386 Mr Lester gave the following further evidence under cross examination: 'Q. Mr Lester, by this stage Mr Walker had been to see the Minister? A. Yes. Q. And the Minister had indicated that if he could give some good reasons in effect? A. Yes. Q. Which were an answer to his Department? A. Yes. Q. Then there was a real chance of getting a Commission of Inquiry? A. Yes. Q. And by this stage you yourself had prepared a document for the purposes of the prospectus. That is right? A. Yes. Q. And you have given certain answers as to your state of mind at the time you prepared that document? A. Yes. Q. We won't go back over those, but it was at least clear to you at that time, that is I'm talking about the end of December 1992, 1993, and if you like early 1994, that water quality and stormwater management were going to be significant issues? A. I prefer the term, important issues. Q. Is there any difference between "significant" and "important" to you? A. I believe there is. Q. What is the difference? A. I think there are a number of important issues. "Significant" to me would imply that it has got some pre-eminence. Q. By the end of 1993, or early 1994, you surely must have realised, did you not, that in obtaining rezoning, whatever other issues there might be, you would have to leave no stone unturned to establish that Walkers, or LCE, however you put it, had the solution to the problem relating to the water quality and stormwater management. Would you agree with that? A. I find the term "no stone unturned" a little difficult but I would agree that work needed to be - stormwater issues needed to be looked at , but I was also conscious from various discussions that the various agencies had not thoroughly looked at the proposals that had been put forward. Q. But however you did it, it was essential, wasn't it, in your mind by the end of 1993 or early 1994, that you had to succeed in convincing the Council, or the Department, or if there was a Commission of Inquiry, the Commission of Inquiry, that there was a solution to the water quality and stormwater management problem? A. Yes. Q. Now it was obvious that that was a problem, that is stormwater management and water quality, that was a problem with the Department and the Wollongong Council? A. Yes.' [T 1495-1496] 387 Mr Lester further gave the following evidence: 'Q. And by this time, that is late 1993 and early 1994, Mr Walker had seen the Minister? A. Yes. Q. And you had been told that you were to prepare a paper to put to the Minister, and were in the course of preparing it? A. Yes. Q. And the purpose of that was to persuade the Minister that there should be a Commission of Inquiry? A. Yes. Q. And you were learning fairly quickly, I suggest, what the problems were that had to be addressed, including the water quality and stormwater management problem? A. Yes. Q. Now I want to suggest to you that you really didn't, so far as stormwater and water management was concerned, to do anything of any significance in terms of effectiveness until late July 1994 to put before the Commission of Inquiry, which had then been established, anything which might attempt to be an effective solution to the problems relating to water quality and stormwater management? A. I don't agree. Q. I suggest to you that by the end of July 1994, that as a result of the delay that had taken place, you had lost the initiative in the Inquiry. What do you say to that? A. Don't agree. Q. The fact is that you had to in effect tell the Inquiry that the 1992 GHD report needed to be upgraded, or updated I think was the word? A. No. Q. Did you not tell them? A. We did not tell - Q. That it needed to be updated? A. No. . . . Q. In the report that you put in, be it your report or Dr Joliffe's report, or GHD's report, whatever the report, the report that was part of your submission did not address best management practice in relation to water quality or stormwater management, did it? A. It's my understanding that it did just that. [T 1497] 388 At transcript 1498 when asked whether the report submitted to the commission satisfied best management practice, Mr Lester said "I would defer to experts on that matter" [T 1498]. 4 January 1994 389 By file note dated 4 January 1994, Mr Lester dealt with his discussions with Mr Dransfield in relation to Shellharbour, Helensburgh and Greenacre. As to Helensburgh, the file note reads: 'It was agreed that LFA would prepare an overview which PD and Lang Walker will relay to the Minister. The overview will be based on data received in late December and, in particularly, advice received from Denis Smith.' [8/26] 7 January 1994 390 A further file note of Mr Lester of 7 January 1994 reads, inter alia: 'AL handed over the briefing paper on Helensburgh and noted that it contained some potentially sensitive material, particularly where references were made to political affiliations of planning officers within the DOP. . . . PD was of the view that most of the material needed to surface in one form or another, although he acknowledged the sensitivity of the data. Action : Walkers to review and advise on any further actions and/or preparation of briefing paper.' [8/27] 391 The briefing note is to be found at 8/28 and following in its then draft form. 13 January 1994 - Mr Walker's letter to the Minister for Planning and Housing 392 On 13 January 1994, Mr Walker wrote to Mr Webster the Minister for Planning and Housing, in the following terms: 'Re Helensburgh - Urban Release Issue You may recall our recent discussion on this matter and your suggestion that certain issues be addressed. Attached hereto is a briefing note which attempts to provide some history, addresses in a positive manner the issues raised and provides a view concerning the politics. The politics do go beyond Council and have been the very great impediment to progressing this matter. It is our view that the Helensburgh land is required for the urban expansion of the Southern Suburbs and to assist in addressing the needs of the Northern Suburbs of Wollongong. We respectfully ask you not to make the plans submitted by Wollongong Council. In lieu we submit that an independent Commission of Inquiry could properly consider the potential of the land having full regard to the technical issues free from political influence reaching a conclusion by mid 1995. Thank you for the opportunity to put this submission forward.' 8/35] 393 The briefing note [in the same form as the draft] enclosed under cover of Mr Walker's letter is to be found at 8/36 and following. 20 January 1994 394 On 20 January 1994, Mr Lester accompanied Mr Walker during a meeting with the Minister. 395 Mr Lester did not have a strong recollection of the meeting. His evidence was that its objective was to inform the Minister about the issues that were in the briefing paper and to seek his support for a Commission of Inquiry [T 1681]. He was unable to recall what the Minister or Mr Walker had said in any detail. Whilst it was not usual for him to attend at meetings with ministers and whilst he usually kept notes, he was unable to find any note of this meeting. He suspected that he had kept a note but had not been able to locate it. The meeting took only something in the order of 20 minutes. 31 January 1994 396 Lester Firth Associates invoice to Walker Corporation of 31 January 1994 charges for: · 'meeting with client January 7, 1994 · discussions with Bob Hogarth · review of summary overview for Ministerial briefing · attend meeting Parliament House, January 20, 1994.' [8/42] 397 By letter dated 31 January 1994, GHD on a 'without prejudice' basis, wrote to LCE [attention Mr Kidd] in relation to settlement of outstanding matters. The letter advised, inter alia: 'Your offer of settlement in the amount of $100,000 dated 7 January 1994 has been discussed by GHD directors, and in principle, we are in agreement. I suggest you have your solicitors draw up appropriate documentation and forward it to ourselves . . .' [8/47] 8 February 1994 398 By letter dated 8 February 1994, Mr Kidd wrote to GHD. The letter was marked 'without prejudice'. It dealt with the subject 'settlement of outstanding matters'. 399 A number of matters were confirmed as agreed, including that what was intended on the Hogarth side was that the exchange of letters be a settlement of all matters between LCE and all other Hogarth companies with GHD and GHD related companies. Mr Kidd proposed that the settlement should put to bed all matters between them and rule off the slate at 31 January 1994. He added: 'I have conducted lengthy discussions with our solicitors and with LCE directors and we can draw up an appropriate documentation for the settlement of the above matters . . .'. [8/51] 9 February 1994 - The Minister for Planning and Housing determines to appoint a Commission of Inquiry 400 On 9 February 1994 the Minister for Planning and Housing wrote to the General Manager of the Wollongong City Council advising as follows: 'I refer to your letter requesting that I make the Council's draft local environmental plan, for environmental protection zones at Helensburgh. As you are aware, the numerous planning proposals for Helensburgh in recent years, involving both development and conservation have generated considerable controversy. When the Director of Planning issued the Certificate under Section 65 of the Environmental Planning and Assessment Act 1979 on 20 May 1992, to enable the draft plan to be publicly exhibited she noted that there were a number of development proposals under consideration. She then urged your Council to give full and proper consideration to these proposals. The Director also noted that, after the public exhibition of the draft plan, it might be appropriate to consider holding a Commission of Inquiry to assist in resolving the planning issues. After considering a report by the Department of Planning, I am of the view that full and proper consideration has not been given to the range of planning proposals at Helensburgh and that a Commission of Inquiry is warranted to assist me in my decision on the draft plan. I have therefore directed under section 119(1)(a) of the Act that a Commission of Inquiry be held into appropriate land-uses and zonings in the vicinity of Helensburgh. In view of the long history of planning proposals in Helensburgh and extensive controversy that debate has generated I am sure that you will agree that an inquiry is the most appropriate way of ensuring that all points of view are heard and considered in an independent and impartial way. When I receive the report of the Commission of Inquiry I shall refer it to the Council to consider. I have given an undertaking to the Lord Mayor that I shall not use my powers to rezone the lands in Helensburgh against Council's decision after it considers the report of the Commission of Inquiry. I look forward to the Council's support and cooperation in the process.' [8/58] 10 February 1994 The Commission of Inquiry 401 On 10 February 1994 the then Minister of Planning, the Hon Mr Robert Webster, announced that a Commission of Inquiry was to be held to examine the appropriate landuse and zonings of the land in the vicinity of Helensburgh [8/60] (refer to Appendix 4 for identification of the subject land). The terms of reference of the Commission of Inquiry were announced on 27 August 1994 as follows: 'To assess the capability of land in the general vicinity of Helensburgh, as identified on the attached map, to sustain various landuse options without causing significant environmental degradation. To make recommendations on appropriate landuses and zonings based on the assessment and taking into account: 1. water quality impacts on the Hacking River and whether or not urban or other development provides opportunities to improve water quality; 2. potential environmental impacts from alternative landuses on the Royal National Park; 3. the conservation value of the land, including flora, fauna and places of Aboriginal and early European heritage; 4. economic costs and benefits of alternative landuses, including the financial costs to Wollongong City Council and the State Government with respect to the provisions and maintenance of public utilities and community services relating to: (a) the lands specified on the attached map; and (b) Helensburgh urban area; 5. the role of Helensburgh in providing housing and employment opportunities for Southern Sydney and the Illawarra; 6. the implications for the character of Helensburgh; and 7. bushfire risks. 402 Hearings were conducted in the period 5 July 1994 to 15 November 1994. 403 The Primary Session hearing occurred over 11 days from 5 to 20 July, and included two full day site inspections of Helensburgh and surrounding areas. Round table sessions on water quality impacts were held on 22 August, 13 and 21 October. A further site inspection was conducted on 12 October. The Session in Reply was held over 9 days from 1 to 15 November. 404 Overall there were 24 hearing days including the three days of site inspections. 405 The Commissioner, Dr Mark Carleton, delivered his report in December 1994. 11 February 1994 406 On 11 February 1994 Mr Dransfield sent a memorandum to Mr Watson, a solicitor at Mallesons, giving certain details of the projects at Helensburgh, Shell Harbour and Luddenham. The memorandum is annexed to this Judgment as Appendix '6' and to be found at 8/67. In relation to the proposed Helensburgh project, it identifies the number of lots as 1300, the sales revenue estimate as $130 million and the time frame as 7 years from 1996. 407 Dealing specifically with Helensburgh the memorandum [8/68] advises, inter alia: 'The development approximates 1300 residential lots. Before development can occur it is necessary to secure a rezoning of the land from Rural to Residential uses. The NSW Government have announced a Commission of Inquiry to review the zoning question. This is a positive move for the land in question. The development is estimated to take 7 years and the Sale Revenue to the joint venture is estimated at $130million. There is a growing shortage of Residential land in the adjoining Sutherland Shire and Northern Suburbs of Wollongong.' 408 A facsimile transmission admitted into evidence as 8/79.6 has a note in Mr Dransfield's handwriting upon it. The facsimile which is addressed to Mr Hogarth, encloses a copy of a radio interview in the course of which the newsreader refers to the Minister's statement that he would not use his powers to rezone the lands in Helensburgh against the Council's wishes. The whole of the evidence suggests that it is highly likely that Mr Dransfield became aware that the Minister had given the undertaking to Council earlier referred to. I infer that Mr Dransfield became so aware. It is improbable in the extreme, given the significance of the undertaking, given the extensive publicity given to the undertaking, given Mr Dransfield's involvement in the project to achieve a rezoning and taking into account the handwritten note upon PX 8/79.6, that this matter would not have come to Mr Dransfield's attention at this time. Mid February 1994 409 Following the announcement of the establishment of the Commission of Inquiry, the Minister was interviewed on several talk shows in relation to the reasons for his decision. In his interview on a morning talk show of 11 February 1994, the Minister said inter alia: 'I decided that the best thing was to have an independent inquiry and the independent inquiry will look at all of the aspects of the lands in Helensburgh including bush fire risks, including the impact of siltation of the Hacking River whether development occurs or not and it will also look at the Gills Creek Catchment Area, which is an area that the Council itself is prepared to consider for housing development. So, all of those issues will be taken into account but the one thing I do want to emphasise . . . and I did make this very plain to the Mayor when he was here the other day, that whatever the outcome of the Commission of Inquiry into Helensburgh, I will be referring the final decision to the Council. The State Government will not be intervening in the rezoning process. It will be a matter for the Wollongong Council .' [8/71] [emphasis added] 410 A further interview on Radio Illawarra of 11 February 1994 includes the following: 'Newsreader: State Planning Minister, Robert Webster, has lashed out at Wollongong City Council over a decision to hold a Commission of Inquiry into the future development of lands at Helensburgh. Mr Webster says the Inquiry will be far reaching and take submissions from all interested parties as well as examine the impact of siltation on the Hacking River and the Gills Creek catchment area. The Minister insists he'll not use his powers to rezone lands in Helensburgh against the Council's wishes. He blames Wollongong City Council for the need for the Inquiry. Robert Webster: The Council hasn't considered all of the options. They've ignored a request from the Director of Planning which she's entitled to make under her statutory powers so, you know, they haven't been quite honest in what they've said. The fact is that there is very much divided opinion on the Council and there's also divided opinion in the Helensburgh community. . . . David Campbell: When I met him the other day I said: Look Minister, they the facts, it's been debated out. There have been many, many hours of discussion, public meeting, submissions put, exhibitions, media discussions, debate in the community and so it goes on. Minister, our option, our preferred option, our position, our stated resolve position is to rezone for Environmental Protection. He said: Oh, but my Department tells me I should have a Commission of Inquiry.' [8/64-65] 411 There was also extensive publicity given at about this time into the Inquiry which had been appointed. An article in The Mercury of 12 February 1994 was entitled "Burgh land inquiry 'a waste of time, money'"- 8/82. Alleged Conversation in relation to the representation at the Commission of Inquiry 412 In paragraph 54 of his statement, Mr Hogarth gave evidence that after the Commission of Inquiry was announced, he spoke with Mr Walker and Mr Dransfield to the following effect: 'Mr Hogarth: "What's going to be the position about representation at the Commission of Inquiry?" Mr Dransfield: "Walker Corporation will engage consultants to represent them at the Commission of Inquiry. We would expect those costs to be costs borne by the joint venture. We don't propose that there will be any other charges put through although clearly we'll have to do some work. We're of the view that we will sit down and discuss those costs with you after the land gets rezoned. We don't anticipate that there will be any internal fees generated at this stage". Mr Hogarth: "Well that's fine with me because I would not be seeking to charge for my time nor for Geoff's time and it's in this spirit that I have not sought reimbursement of any of the money spent on any of the consultants". 22 February 1994 - Walker Corporation Prospectus 413 A prospectus dated 22 February 1994 was issued for the offer for sale of 88,982,580 shares and the issue of 38,709,677 shares at a price of $1.55 per share, a total of $197,922,998 in relation to Walker Corporation. The prospectus is to be found at 8/95 and following. 414 Pages 22, 31 and 32 of the prospectus [PX 8/118,127 and 128] gave details with respect to 'Residential Subdivision Development'. The relevant passages are as follows: ' Conditional Land Acquisition The Walker Group rarely commits to the acquisition of a site until all necessary approvals have been granted or there is a very high level of certainty that they will be granted . Land is usually secured by option or conditional contract until approvals are received.' [Prospectus at page 22] [emphasis added] ' Helensburgh Development The Walker Group is in the final stages of negotiating an agreement with the owner for the development of a site located to the north east of Helensburgh which is 50 kilometres south of Sydney. The development is subject to rezoning. A residential capacity of approximately 1,300 lots is expected. It is proposed that profits will be shared on a 50:50 basis with the landowners and that the Walker Group will be paid a development management fee. The financing aspects of this project are yet to be finalised.' [Prospectus at page 32] 415 At prospectus page 31, detail of the residential subdivision projects outlined in the prospectus are set out. The Helensburgh project is relevantly noted as following: · Size - 500 hectares; 1300 lots · Status - 'Subject to documentation. Awaiting approvals'. · Actual or estimated commencement date - 1994/95. · Estimated completion date - 1998/99 · Estimated development revenues ($million) - 130. 416 The plaintiffs seek to rely upon these passages in the prospectus in support of their proposition that the representations made in the prospectus fit hand in glove with the representations which the plaintiffs assert had been made to them during the negotiations. The Walker Group, the plaintiffs submit, had in fact committed to the acquisition of the land in their dealings with the Hogarth interests and, if the statement in the prospectus is to be accepted, would not have so committed unless all necessary approvals had been granted or unless there was a very high level of certainty that they would have been granted. The submission is that coming so soon after the subject negotiations and after the entry into of the Heads of Agreement, the statements in the prospectus serve to point up how likely it is that the representations which Mr Hogarth and Mr Kidd contend had been made, had in fact been made. The submission is that there was every reason, bearing in mind the context involved, essentially the rapid progress towards production of a prospectus, why Messrs Walker and Dransfield would have been content to make such representations and to make them in the precise terms stated in the evidence given by Messrs Hogarth and Kidd. 417 At page 48 of the prospectus, [8/144], a table of directors' earnings forecasts was set out for a number of years. At 8/145, the following note appears: 'The Directors earnings forecasts have been prepared after consideration of the various factors that are likely to affect the group's financial performance including the risk factors referred to in section 4.3 of this prospectus. Although the Directors have given due care and attention to the preparation of these forecasts before adopting them, no guarantee of assurance can be given that the forecasts will be achieved. There will usually be differences between forecasts and actual results because events and circumstances frequently do not occur as expected and these differences may be material.' 25 February 1994 418 A file note by Mr Lester of 25 February 1994 summarises certain of the conversations between Mr Lester and Mr Dransfield of 25 February 1994 'to discuss the next set of actions which would need to take place on Helensburgh'. The note records, inter alia: '2. PD indicated that he would like to meet with LFA to define the scope and scale of the submission that will need to be in an EIS form that addresses all of the various political concerns and issues that have been raised by the opponent. It will also need to encompass the positive material that has been prepared by GHD.' '3. There will be a need to resolve the outstanding matters between GHD/Hogarth so that the appropriate data can be tabled within any LFA report. Alternatively, it will be necessary to commission others to prepare an equivalent submission which would address issues relating to : . . . Water quality . . .' [8/199] [emphasis added] 419 At transcript 1633 and following, Mr Lester's cross examination includes the following: 'Q. And you knew from then it was important for you to get to work to prepare submissions in relation to those matters? A. With the proviso that the sentence that you are referring to starts with "alternatively". Q. Of course it does? A. And the "alternatively" refers to if GH&D are not accessible, then there would be a need to commission others. Q. But you were saying that apparently with some sense of urgency, were you not, to Mr Dransfield? A. I was saying that those are the things that needed to be resolved. Q. That needed to be done with some sense of urgency wouldn't you agree? A. Not urgency, no.' [T 1633] 420 Mr Ellicott further cross examined at transcript 1635 as follows: 'Q. See, I want to suggest to you that that was saying "well, look, we better sit down soon and discuss these matters", wasn't it? A. Not in my view. Q. So he was just making a comment, as it were, off the cuff of no particular urgency in the light of there being a Commission of Inquiry that Mr Walker had asked for and used his political connections to get; is that right? A. No. It was saying that there was a need to think carefully about the submissions; there was a need to encompass the GHD material; and there would need to address the issues that are identified in paragraph 3. Q. And that meant that you would start doing it and get on with it, didn't it? A. Well, it meant in my view that you would access a large part of the data; most of those items, if not all of those items are encompassed within the GH&D document. Q. And that meant, I will ask you again, that had you got on with it straight away? A. Subject to having access to GH&D, yes . Q. It didn't say that. It said "alternatively if you can't do that it will be necessary", not "it will be a good idea", but that "it will be necessary to commission others"? A. Yes. Q. You didn't commission anybody else, did you? A. I wasn't in a position to commission others. Q. You didn't commission anybody else before 15 June 1994 did you? A. We commissioned people on 6 May, as we have noted earlier today. Q. You did not commission anybody else - by commission, I mean get them to sit down and write a report on anything between then and 15 June, which I understand is the date you put your submission in? A. In the sense that - I mean it is a very hard to answer "yes" or "no". There were discussions with a number of parties. There were discussions with GH&D that took place on 12 May. There was reassurance that they would work with Walkers and ourselves to facilitate and present to the Commission. There was an engagement of GH&D, which I believe is dated 6 July , and that reflected discussions that had taken place.' March 1994 421 Mr Hogarth's evidence was that in March 1994 he read the references in the Prospectus to the Ensile Land [Statement 23 December 1998, paragraph 55.] 9 March 1994 - Deed of Settlement with GHD 422 By Deed of Settlement dated 9 March 1994, GHD and associated companies ['the GHD entities'] settled their antecedent disputes with Genepa, Ensile, LCE and Mr Hogarth ['the Hogarth Entities']. The Deed recited aspects of the dispute including the registration of Mortgage I570164 dated 23 June 1993 by Ensile over certain lands and the fact that the GHD entities claimed $383,644 for work carried out to date for the Hogarth entities. The parties agreed to resolve the dispute upon the payment by the Hogarth Entities to GHD of $100,000.00. Upon execution of the Deed the Hogarth Entities agreed to release the GHD Entities from antecedent claims. Upon receipt of the consideration moneys GHD gave similar releases and agreed to discharge the Mortgage. GHD upon receipt of these moneys agreed to licence to the Hogarth Entities, the right to use all works, reports, designs, dealings, studies and the like prepared on behalf of the Hogarth Entities in respect of the LCE rezoning application prepared by GHD in support of the submission to Wollongong City Council. [8/218] 423 During March 1994, a series of meetings and conversations took place between Messrs Hogarth, Kidd, Dransfield, Walker and Weinert in different combinations. The meetings are referred to in MFI 14 as 'Meetings 9'. Meetings 9 Mr Hogarth's evidence 424 Mr Hogarth gave detailed evidence in respect to those events in his statement of 23 December 1998, paragraphs 60-69. 425 The gist of his evidence was that numerous discussions took place as to the arrangement of the Hogarth, Walker interests, in particular, the Walker share of the Genepa Trust tax losses, cash flow between the joint venturers and the grant of an option to Walkers over the Ensile land so as to minimise stamp duty liability. 426 In the result, Mr Hogarth attests that he had a conversation with Mr Weinert as set out in paragraph 69 of his statement extracted below. 427 Mr Hogarth's version of these events, set out in paragraphs 60-69 of his 23 December 1998 statement, is in the following terms: '60. In March 1994 I had a meeting with Mr Walker who said words to the following effect: Mr Walker: "Bob, I've been able to secure a Commission of Inquiry. I told you I had the right political contacts. We need to get this agreement finalised". Mr Hogarth: "Yes, I'm impressed that you got the Commission of Inquiry organised. I know that Don Dwyer (of GHD) has been working at it but there's no doubt that it's been called and if you think that it's your input then that's great. I obviously want the joint venture done. I've been yelling at everybody to get it finished but they all say that you're the one holding it up because you're too busy with your prospectus roadshow". Mr Walker: "No Bob, we're very keen to get it done". 61. In furtherance of the trust that I placed in Mr Walker I entered into the arrangements in April through to July 1995 with Mr Dransfield and Mr Walker in respect of the Allison Road site . . .. 62. In or about March 1994 I had a discussion with Mr Weinert to the following effect: Mr Weinert: "Bob, part of our arrangement is for us to share the tax losses in your Trust." Mr Hogarth: "Yes, I think Lakatoi has about $9,000,000." Mr Weinert: "Then I would like to restructure the deal so that Lakatoi becomes the party to the joint venture and I will arrange for a couple of Walker's interests to be made parties to the Genepa Investment Trust". Mr Hogarth: "Yeah that's probably fine if our accountants agree that it will not affect the losses. I'm more concerned about Ensile's position because it is not a developer and it purchased the land as a family pursuit and it will not be involved in these land dealings. I would propose that Lady Carrington would be the party as it has held an option from Ensile for a number of years in respect of the land and has spent all of the money on the consultants." Mr Weinert: "I think that's fine but I think that Lakatoi will have to be the party to the joint venture so that the profits from the joint venture can flow to it." 63. Shortly afterwards I had a discussion with Mr Weinert to the following effect: Mr Weinert: "I've worked out how to do the transaction. Lakatoi will be your party and we will convert the transaction into a profit sharing arrangement. Walker Consolidated will be Walker's party. We will need to incorporate a company to represent both parties' interests. You and Geoff Kidd will be directors and Lang Walker and Peter Dransfield will be the other directors and that company will acquire the assets and run the joint venture. The company will be solely set up for that purpose and there will be a procedure for meetings and the future conduct of the joint venture and the rezoning procedure. It will be a unit trust with Lakatoi holding half of the units and Walker Consolidated holding the other half." Mr Hogarth: "Well as long as that doesn't adversely impact on our companies' position, I'd be happy with that arrangement". 64. Shortly after this meeting I had a conversation with Mr Walker and Mr Weinert to the following effect: Mr Walker: "Bob, we don't want to pay stamp duty on $4,500,000 or $9,000,000 and that is what is involved if we transfer the land to this trust deed company." Mr Weinert: "It may be possible Bob that Ensile could continue just to sell the blocks off in sections as and when required or it may even be possible subject to the funding that it could be the ultimate vendor to the various allotments." Mr Walker: "Bob, for that sort of arrangement to work, Walkers will need some type of security over your land. What I propose is to get John Hughes to work out a mortgage arrangement so that we can have some security over the land pending the transfer of the land to the Trust Deed that we are setting up. Mr Hogarth: "What sort of security do you want?" Mr Walker: "Well I think we should take a first mortgage so that you can't sell or deal with the land and then we can work it out later once we work out how we are going to develop the land." Mr Hogarth: "You know that I have a capital gains tax exemption in respect of the land." Mr Weinert: "We were going to factor into the transaction part of your profit in the land sale by Ensile." Mr Hogarth: "How do you propose to do that?" Mr Weinert: "We have done some numbers and based on those numbers your share of the profit could be approximately $44 million. We would propose that half of that profit be taken out by Ensile in the land sale." Mr Walker: "What about the monies that we've got to pay now?" Mr Weinert: "They will come off the $20 million that have to be paid on the first tranche. The deal is that everything will be fifty fifty." Mr Hogarth: "How do you propose to achieve all of this?" Mr Weinert: "Ensile will give an option to the trustee for $20 million to buy the land and that can be paid in stages but we will have to sign something that says that any money that you get now comes off the $20 million." Mr Hogarth: "That sounds okay to me. What is going to happen to the stamp duty on that?" Mr Walker: "That will just have to be an expense that we will have to meet from the joint venture." 65. In March 1994 I had a conversation with Mr Walker and Mr Weinert to the following effect: Mr Walker: "Because we're going into the joint venture equally and after we've paid $4.5 million, we own one half of the land. Therefore we need to share the income stream equally". Mr Hogarth: "Yes, I have no difficulty with that". Mr Weinert: "We want to maximise the benefit of the capital gains tax exemption and we're proposing that Ensile sells the property for $20 million". Mr Hogarth: "And why do you want to do that?" Mr Weinert: "Two reasons. Firstly because we don't have any interest in the land unless we obtain some type of option from Ensile over the land. Secondly, we need to offset any imbalance in cash flow so that the benefits are equal by creating an arrangement to obtain some management fees". Mr Hogarth: "Well how do you propose to do that?" Mr Weinert: "Well, the land's currently worth $9 million and Ensile's going to be paid $20 million under the option. Therefore when the option's exercised we will put through a charge for management fees to one of the companies in the Walker Group of $11 million and we would be proposing that that would go through the Genepa Investment Trust and that's how we would propose to get the benefit of the Trust's tax losses". Mr Hogarth: "Well that's fine if it's okay with my accountants. You know that we've agreed that the tax losses are to be shared". Mr Weinert: "Yes we know that but included in the package that's in the joint venture is your capital gains tax provision and I'm suggesting that you'll get your money tax free via the capital gains tax exemption and therefore you won't be needing the losses in the Genepa Trust". Mr Hogarth: "What about Allison Road and Gerrale Street?" Mr Weinert: "Well I think we agreed that you would be retaining half of the losses which I think will be $4.5 million and they can be offset against the profit from those two developments". Mr Hogarth: "So that's how you think the tax arrangements will work". Mr Walker: "That's right, that's how I would see it happening. We would get those benefits because they would flow directly to us while at the same time you're getting the benefit of your tax free position". Mr Weinert: "Well I presume that will be okay. I'd like to think about it a bit more but in principle I suppose that's correct. It's just that it's never been put to me that way before". Mr Walker: "I think that that's a fair way of settling this from all parties' points of view". 66. In or about March 1994 I had a conversation with Mr Weinert to the following effect: Mr Weinert: "Bob, I have had a look at your AGC mortgage documents and I have spoken to a couple of groups of accountants and I have come to the conclusion that we have to preserve the losses in the Genepa Trust." Mr Hogarth: "Yeah, that's fine. I spoke to Lang about the losses before we did the Heads of Agreement and I told him what we had and he said that he would like to share in the losses if possible and I think I spoke to you about it, Brian, at the time." Mr Weinert: "Yes, we did briefly in November." Mr Hogarth: "Well, what do you propose to do?" Mr Weinert: "I have spoken to Coleman and I think that to preserve the losses we are going to have to keep the mortgage current by transferring it to Highfield Grove otherwise the accruals of the interest that are in the accounts of the Trust will have to be crystallised if you discharge the mortgage. I'm going to get you to fix it but what will happen is that they will have to transfer the mortgage from AGC to Highfield and then it will have to postpone its priority in favour of the mortgages to Walker." Mr Hogarth: "Well I will see what I can do." 67. At a meeting held in March 1994, I had a conversation with Mr Weinert to the following effect: Mr Hogarth: "We've agreed that Walkers are buying a one half interest in Ensile's Land for $4.5 million. How are you going to structure this?" Mr Weinert: "I will structure the deal in such a way as to take into consideration Ensile's capital gains tax position when the land is ultimately sold. The purchase price for the land needs to be as high as possible for Ensile to get the maximum return on having owned and sold this pre-capital gains tax asset and Walker could benefit from that". Mr Hogarth: "Brian, any financial arrangement that you propose that involves Ensile's capital gains tax position and the losses in the Genepa Investment Trust will have to get the green light from our accountant Geoff Coleman and Michael Grant of Pannell Kerr Foster, that the arrangement will not adversely affect the current status. As I have said before, if an arrangement was put in place that adversely affected the status of the capital gains and losses then Walkers would not benefit and we would possibly lose the benefit that we are looking forward to using in the future." Mr Weinert: "Well Bob, can you talk to your accountants about this and get back to me?" Mr Hogarth: "Yes, I'll let you know how things go". Mr Weinert: "Bob, Walker's have a tax and a stamp duty problem with this transaction. The tax problem is that we've agreed that the property is presently worth $9 million. If we transfer the property now, we will have to pay stamp duty on $9 million and Lakatoi will owe Ensile $4.5 million and we will have to pay Ensile $4.5 million". Mr Hogarth: "What's the problem with that, Brian?" Mr Weinert: "We have already discussed with you that we don't want to pay $4.5 million now and therefore I presume you won't be happy to transfer the property until we pay you the balance of the $4.5 million". Mr Hogarth: "Yes, that sounds reasonable". Mr Weinert: "If we transfer the land for $9 million then stamp duty of approximately $400,000 - $450,000 will be payable and it seems to be a waste at this stage". Mr Hogarth: "Well how do you see the capital gains tax being a problem? We've been told at this stage that any money derived by Ensile will be capital gains tax free and we would be seeking to maximise the money received by Ensile in this transaction". Mr Weinert: "That is the dilemma that I have. I've thought about that and I think that we should fix a figure of $20 million as the price for the land and that would be paid to Ensile. The problem is that if we were to transfer the property either now or after rezoning, then we're going to have a stamp duty problem either now of $450,000 or then of approximately $1 million". Mr Hogarth: "Well how do you suggest we get around that?" Mr Weinert: "I have to work on something to sort that out but I currently think that we'll have to have an option that will secure our position but I really think that in the long run it may be that Ensile will remain the vendor of the blocks and a development fee will be payable to Lakatoi and Walkers out of the profit. This is the way that we'll even up the money flow. We need a joint venture in the short term and I will organise that". Mr Hogarth: "Well then what documents do you think will be needed because we need to get this wrapped up?" Mr Weinert: "I think we're going to need an option. I'll work on it but I want you to know that ultimately we may do this in a different way. As long as we've got some form of security over the property, that's all I care, and if you don't transfer the property then I suppose you won't care". 68. I subsequently had a meeting with Mr Weinert towards the end of March 1994 and a conversation to the following effect ensued: Mr Hogarth: "Brian, have you been able to work out how this transaction is going to take place with regard to the land?" Mr Weinert: "Yes I've had a bit of a think about it and I've had a document drafted up which will be an option with some special conditions containing the details setting out the program for the payment of moneys. The important thing is that we get $20 million to Ensile and you and I will have to work out the other details as we go along". Mr Hogarth: "So our arrangement means that Ensile may ultimately be the company signing over the sub-divided land to the various purchasers". Mr Weinert: "Yes I think that's how it will probably work". Mr Hogarth: "Yes we've discussed that before and that arrangement seems okay to me". 69. I then had a further conversation to the following effect: Mr Weinert: "Bob, as Lang and I have discussed with you before, we don't propose to take a transfer of any of the titles at the farm at this stage. What I think we should do is take a mortgage over that land and I'll keep it in the bottom drawer so that we can demonstrate as a public company that we have security over the property down there". Mr Hogarth: "Will that arrangement attract interest?" Mr Weinert: "No Bob, this mortgage is just a formality for Walkers' purposes. No interest would be payable on that". Mr Hogarth: "Well I'll do what you think you need seeing as it doesn't change anything. As far as I'm concerned you are to pay $4.5 million for your right to play and whatever security documents you think you need for that, I'm happy to sign". Mr Weinert: "I think what we'll do is get a mortgage and I'll get that drawn up and you can just sign it and I'll keep it". Mr Hogarth: "What do you want to do with the title deeds?" Mr Weinert: "We'll keep those and I'll hang onto the mortgage as the security if I need it".' 16 March 1994 428 A further file note by Mr Lester of 16 March 1994 deals with Mr Lester's attempts to determine who was the most appropriate contact within the Department of Planning to discuss the Commission of Inquiry and the various guidelines which would be required and against which information would be reviewed and processed. [8/227] Meeting of 21 March 1995 Mr Hogarth's Evidence 429 Mr Hogarth's evidence was as follows: '70. At a meeting held at Walker's (Botany Street, Mascot) office, on or about 21 March 1994, I had a conversation with Mr Weinert to the following effect: Mr Hogarth: "Brian, what do you think will be done about the setting up of the trust and the running of those arrangements." Mr Weinert: "Leave all that to me. I'll organise for the trust to be set up." Mr Hogarth: "What's going to happen with the accounting?" Mr Weinert: "We will be doing the accounting and we will be attending to all of the financial details. If we are going to put the money in then we want to look after the accounts." Mr Hogarth: "And how do you think you'll run the day to day administration?" Mr Weinert: "We'll prepare monthly budgets and cash flow projections and they'll be circulated to members of the Policy Committee. We have all the expertise for this". Mr Hogarth: "What check can I make in respect of the accounts?" Mr Weinert: "Clearly you will be able to get a copy of them from time to time and we are going to contract to supply them monthly to you. In any event, the accounts will be audited and we will get KPMG to do that as they are the auditors for Walker Corporation."' 23 March 1994 430 A further file note of Mr Lester of 23 March 1994 records that a Department of Planning Officer (Mr Olive) had telephoned Mr Lester to advise that the terms of reference had not been signed and that the Commissioner of Inquiry had not yet been appointed. Mr Olive would be in touch with LFA again in one month. [8/230] 24 March 1994 Meeting 431 A meeting took place on 24 March 1994, attended by Mr Walker, Mr Dransfield, Mr Weinert, Mr Grant, Mr Kidd and Mr Hogarth. Mr Hogarth's Evidence 432 Mr Hogarth's version of the meeting is set out in paragraphs 71 and 72 of his statement, in the following terms: '71. At a meeting on 24 March 1994 attended by Mr Walker, Mr Dransfield, Mr Weinert, Mr Grant, Mr Kidd and me a number of discussions took place at which there was a discussion between Mr Walker and me to the following effect: [ Mr Hogarth: "Do you think that you can get the rezoning through quickly?" Mr Walker: "We are very confident we can get it through in the next couple of months." Mr Dransfield: "We have spoken to our contacts and we can ensure that the rezoning takes place quickly. We already have the Commission of Inquiry ordered by (Minister) Webster and are very confident of the outcome of the Inquiry". ] [Note - The section within the square brackets is almost identical to Mr Kidd's evidence given in paragraph 41 of his statement extracted below.] Mr Hogarth: "Okay, that's fine by me". In consequence of that discussion, clause 7.1 was inserted in the HUTA. 72. At that meeting a further conversation took place to the following effect: Mr Weinert: "The AGC mortgage appears to be over 600 acres and is a non-recourse loan. There is a tax deduction of approximately $13 million if the Commissioner still rules in favour of the preservation of the tax losses. I note from perusal of the documents that Ensile is the guarantor to Genepa of the moneys due to AGC. I believe that Genepa has the trading losses and therefore it is Genepa that has the tax losses". Mr Walker: "The deal is, Brian, that Bob has agreed that we can share in those losses provided naturally that our participation does not affect them".' Mr Kidd's Evidence 433 Mr Kidd's version of the meeting is set out in paragraphs 41 and 42 of his statement in which he states: '41. At a meeting on 24 March 1994 at the offices of Walker Corporation between Mr Walker, Mr Dransfield, Mr Weinert, Mr Grant, Mr Hogarth and me a number of discussions took place. The more significant discussions for present purposes were as follows: A. Rezoning There was a discussion between Mr Walker and Mr Hogarth to the following effect: [ Mr Hogarth: "Do you still think that you can get the rezoning through quickly?" Mr Walker: "We are very confident we can get it through in the next couple of months." Mr Dransfield: "We have spoken to our contacts and we can ensure that the rezoning takes place quickly. We already have the Commission of Inquiry ordered by Webster and are very confident of the outcome of the Inquiry". ] B. Management Committee Mr Walker: "We propose to run this Joint Venture the way we have run Menai." Mr Kidd: "How is that operated?" Mr Walker: "We will have a management committee which will comprise two from each side. They will be fully informed through our reporting system and they will meet regularly to make all the decisions." Mr Hogarth: "Lang, we go back a long way and I don't want to be working with some minor person here that has got no real interest in this development. I want you and Peter to be on that management committee." Mr Walker: "Yes I agree with that, you don't have any objection with that do you Peter?" Mr Dransfield: "No, I agree with that. Who will your representatives be Bob?" Mr Hogarth: "It will be Geoff and myself". Mr Walker: "That's fine." 42. When the drafts of the HUTA were being prepared this matter again came up for discussion. At a meeting held at Walker Corporation's offices at Botany on 24 March 1994, a conversation took place to the following effect: Mr Kidd: "Lang, I see in the draft of the HUTA that you're proposing to have both a management committee and a policy committee". Mr Walker: "Well I'm not sure what's in the agreement but what I said we wanted was exactly what we had with Menai and I asked that those provisions be incorporated into the Agreement". Mr Kidd: "So therefore all of the decisions for future works and expenditure of moneys and the like have to be determined by the management committee". Mr Walker: "Yes, that's how we talked about it before and that's what we propose". Mr Kidd: "And you propose still to do all the budgets and prepare monthly reports and cash flow projections and the like?" Mr Walker: "Yes and I think that's included in the Agreement". Mr Kidd: "And you're still proposing that the management committee have meetings regularly and probably every four to six weeks?" Mr Walker: "Bob's already said that he wants me to be at those meetings so yes, subject to my availability, because I've just been running around the world trying to organise funds for the float . But if that quietens down then yes I should be around". Mr Kidd: "That's fine by me and I want it to be clear that the main reporting functions and responsibility will rest with Walkers and we will be relying on you to keep us accurately informed". Mr Walker: "Yes - that will be in the Agreement". Exhibit "PAB58 " [8/231] is a copy of my notes of that meeting. Mr Kidd's Further Evidence 434 Mr Kidd's evidence was that in the same meeting he spoke with Mr Dransfield, when a conversation to the following effect took place: '43. In a meeting I had with Mr Dransfield in March 1994 a conversation took place to the following effect: Mr Kidd: "Peter, as you are aware I am a member of the HCMC and it is clear to me that water quality will be one or the key issue that will need to be addressed and solved at the Commission of Inquiry. I am now aware that this is a much more severe application for stormwater quality control than was your job at Menai. The Hacking River is a Class P Waterway and requires more rigorous cleanup measures". Mr Dransfield: "Yes, we are aware of that. I think you know that I am heavily involved in the Rouse Hill Project and that project is very relevant. It includes many water treatment pondage systems which eventually discharge to the Nepean/Hawkesbury River System. As you know, that river system is under heavy scrutiny because of the algae problem in the river. Through my involvement at Rouse Hill we have access to all of that technology and we will be able to show the Commissioner, first hand, a working successful water treatment system. Don't you worry any more about this issue. I have looked into it and the reference plant at Rouse Hill will carry the day at the Commission of Inquiry". Mr Kidd: "Okay, I accept what you say. I will have a look at it and will get back to you to discuss it again if needed". Further March Meetings 435 Mr Kidd's evidence was that in March 1994, he had a conversation with Mr Walker and Mr Weinert in the presence of Mr Hogarth to the following effect: 'Mr Weinert: "We want to take advantage of the capital gains tax exemption that Ensile would enjoy. I have looked at it with Alan Severino and with Geoff Coleman and also with some other accountants and we think that that exemption will be available and Bob's already agreed that it can be used for the benefit of the joint venture". Mr Hogarth: "How do you propose to use it?" Mr Weinert: "Bob, I propose that we have an option granted by Ensile to the joint venture company and the figure that I've come up with is a figure of $20 million". Mr Hogarth: "Well I guess you'll have no difficulty in confirming that figure after the land's been rezoned". Mr Weinert: "No, I'm pretty comfortable about that". Mr Walker: "I would have thought that would be conservative". Mr Kidd: "Well what then do you propose?" Mr Weinert: "I think that the present position is that we agree that the land's worth $9 million and so we pay you $4.5 million which is what I would call our "right to play". That means that there is then an $11 million benefit that would pass to you if the option is exercised and to offset that benefit I propose that we will take $11 million as a management fee". Mr Kidd: "So how do you propose to do that?" Mr Weinert: "I haven't actually formulated the idea in my mind yet as to how but all I wanted to say at this point was that as long as you understand the reasoning behind it, I'll make sure that the documentation to implement that is put into position at some stage". 436 Mr Hogarth also gave evidence that in about March 1994 he had a discussion with Mr Walker to the following effect: 'Mr Walker: "Bob, I need you to sign a statement setting out all of the lands that you have an interest in through your various companies and entities. You know that everything in Helensburgh is to be included in the Joint Venture and I am concerned that we have all of the land. You seem to have bits of land everywhere and we want it all included." Mr Hogarth: "I am happy to do that. You must remember that you made a notation to this effect on the Heads of Agreement that we formalised last November. You know from our previous discussions that everything in Helensburgh is to be included in the Joint Venture. Is that correct?" Mr Walker: "Yes, I agree with that. Is there anything of significance that we should know about?" Mr Hogarth: "The only thing that is crucially important is the Thompson option about which we have spoken previously. I previously had that option in favour of the National Parks but AGC then decided that they wanted to control it because it gave them some control over the proposed development and its strategic importance and it has to be renewed in a couple of months." Mr Walker: "We will arrange for the Joint Venture to renew that before it falls due. You should supply details of who we have to contact and deliver copies of the options to John Hughes".' [Hogarth statement paragraph 73] Late March/Early April 1994 437 Mr Hogarth's evidence in paragraph 75 of his statement was that in late March and early April 1994, he attended several meetings at the offices of Walker Corporation at which Mr Hughes, who was a director of Walker Consolidated, was present. Mr Hogarth's evidence was that at one of those meetings at which Mr Walker was present, words to the following effect were said: 'Mr Hughes: Bob, Lang wants a document that says that all of the land that you own at Helensburgh is included in this joint venture. Mr Hogarth: Yes I've got no trouble with that. What do you want in it? Mr Hughes: I've had my people try to identify all of the land that you own at Helensburgh and we have some difficulty because of the complexity of it. We think that the best way is that you sign a document to that effect. Mr Hogarth: If it's to ensure that all the land is in the joint venture then I have no difficulty with that. You are aware that Lang has said to me that everything we do at Helensburgh we'll be doing together. If you have some difficulty as to whether or not I'm putting up what I'm saying I'm putting up then I can dispel that doubt by signing whatever document you want. Mr Hughes: I think there should be a document prepared by Barbara (Hogarth) and yourself that says that this is everything that you have an interest in. Mr Hogarth: I have no problem with that. I've got the land which you've seen on a plan which I've given to you and also to Lang on a couple of occasions that have been numbered up to 18 areas. In addition we have the roads in the town and I think that you're aware of those. Mr Hughes: Well that's one of the areas that we seem to be having some difficulty with. Mr Hogarth: As you may be aware, we got a Court order that gave us the residue of Metropolitan Coals' title and that in turn has given us a number of blocks of land and a number of roads through the township. In fact we own a lot of the land that runs parallel to Walker Street and it means that it landlocks parcels of land that abut some of the houses that currently are built there. In addition, I've got a couple of interests in a couple of blocks of land with Tony Williams, my farm manager, and we've got interests in a couple of other blocks of land within the Land Pooling Area. Mr Hughes: Well that's the sort of thing that I'm trying to cover. I appreciate that the Land Pooling Area is quite integral to the overall development. Mr Hogarth: Yes the other area that we've got, and I know Lang and Peter are fully aware of it, is Thompson's land. We've got an option over that land and subsequently AGC also took their own option over it. I think that expires in about May or June of this year but I certainly intend that that land be part of the joint venture. Mr Hughes: So Bob you'll put all of that into a document and have Barbara and you sign it? Mr Hogarth: Yes I have no difficulty with that.' 5 April 1994 438 Mr Allen Severino who is the husband of Mrs Hogarth's niece, was a co-director with Mr Walker in Pacific East Coast Developments and a business associate to Mr Walker. By letter dated 5 April 1994 Mr Severino wrote to Mr Lang Walker, Walker Corporation "Re: Helensburgh - Alison Road" in the following terms: 'This note is to confirm our agreement in regard to the negotiation over some four years of the arrangement between Walker Corporation Ltd and R M Hogarth (and associated entities). Fee as agreed $200,000 Payment to be $10000 (sic) upon the exchange of documents between the parties, evidencing the Walker equity involvement. A further $100,000 to be paid upon rezoning of the Helensburgh site to a status suitable for development of the project into residential allotments in excess of 500 in total. Lang please fax your agreement by return and arrange for the first payment to be made upon execution of the documents (immediately after Easter, I presume).' [emphasis added] 439 This letter appearing at 9/11 bears a handwritten note upon it of Mr Walker dated 6 May 1994 reading 'No. Agreed. 200k on rezoning.' 440 A further version of the letter then appears at 9/111 which includes the same first two paragraphs. It excludes the third paragraph. In the place of the fourth paragraph, the following appears: 'Payment to be made immediately upon rezoning of the Helensburgh site to a status suitable for development of the project into residential allotments in excess of 500 in total.' 441 The fourth paragraph of this version of the letter as typed is shown as deleted and Mr Walker has initialled across the deleted sentence. The sentence which has been deleted had read: 'If a deal is finalised whereby the Alison Road site is separately developed prior to rezoning of Helensburgh, a pro rata payment should be made.' 442 This version of the letter is signed by Mr Walker and dated 12 April 1994. 443 A final version of the letter is again dated 7 April 1994. It is in the same terms as the second form of the letter but the final paragraph has written at the end of the typed section in Mr Walker's handwriting the words 'and that amount agreed at the time'. This letter is also signed by Mr Walker. [See generally the subject letters which are additionally set out in PX 36 Volume 45 from pages 450265 through to 450268]. 444 Certainly this letter of 7 April 1994 suggests that for approximately 4 years negotiations had taken place in relation to the subject lands. 6 April 1994 - HUTA signed 445 On 6 April 1994, the HUTA was entered into [9/36] [Appendix '2']. As earlier noted, the HUTA was entered into by the companies Ibenmore, Lakatoi Universal, Walker Consolidated and Ensile. 15 April 1994 446 By memorandum dated 15 April 1994, Mr Kidd wrote to Mr Walker and to Mr Dransfield and copied the memorandum to Mr Hogarth. The memorandum sought agreement on an agenda in anticipation of 'our first committee meeting'. A number of items were set out on the proposed agenda. The document referred, inter alia, to suggested terms of reference and proposed that an attempt be made to agree on action to be taken with regard to the public inquiry and the formulation of 'our representation to the terms of reference'. [9/121] 447 One matter referred to in the memorandum was: 'Discuss and agree on areas of responsibility for various individuals with regard to the following: · Relationship with GHD.' 16 April 1994 448 By 16 April 1994 Mr Severino's family company was known as Berrinba Pty Ltd. Mr and Mrs Severino held shares in this company and were the directors at all material times of the company. 21 April 1994 449 A file note by Mr Lester of 21 April 1994 states, inter alia: 'The current advice states that the Commission of Inquiry (COI) will be advertised on calling for material to be submitted mid June. AL had already expressed concern about the time scale given that there is a need to make sure that material can be prepared in a form that would best address the various issues associated with the potential residential development of Hogarth land at Helensburgh . PD has suggested that a written application to the Commissioners may be made seeking a referral. At this stage however, there is no firm timetable given that it will be dependent on the COI's office. . . . Action: · LFA to monitor and note need for possible major push to prepare a suitable document for submission to the COI.' [9/126] [emphasis added] 450 In being tested on this file note, the following evidence was given by Mr Lester: 'Q. There was never any major push between 25 February and the end of April, was there? A. There was preparation in part, but we were waiting for the terms of reference, which I believe came out on 27 April and a resolution of access to GHD. Q. There was not one ounce of preparation on technical matters, was there? A. We had decided that we would wait for the terms of reference. Q. . . . There was not one ounce of preparation on technical matters between 25 February 1994 and the end of April ? A. I would need to go through all of my file notes to answer that properly. Q. And shortly after that you said, there was a major push you, yourself, went on holidays, did you not? A. I think that's what my diary shows.' [T 1631] 451 Also at transcript 1632, the following evidence was given by Mr Lester: 'Q. (His Honour) Doesn't the first sentence of paragraph 3 contain what Mr Ellicott was suggesting to you, as a need for a major push, I think he said? A. The concern was that the terms of reference were to be made available in the very near future and it was indicated that that would leave little time, effective time, to prepare a report. That is the concern that is being expressed there. Ellicott: Q. And that is, because you had done nothing since 25 February at the latest, I would suggest? A. As I said, we were awaiting the specific terms of reference. Q. You had done nothing to prepare a technical document between 25 February and the end of April, I would suggest to you? A. There had been some work, but not a lot of work, yes.' [T 1632] 21 April 1994 452 Mr Dransfield sent a facsimile to Mr Hogarth on 21 April 1994, stating: '1. Suggest meeting with Alf Lester next Friday . . . 2. The Commissioner appointed is Dr Mark Carlton. Timing is : Background documents . . . 27 April 1994 Submissions . . . 2 June 1994 Initial hearing . . . 15 June 1994 3. I am attempting to find out what the exact processes are. 4. Terms of reference will be spelt out in an advert next week - I am trying to get them earlier. 5. We need access to GHD urgently .' [9/128] [emphasis added] 27 April 1994 453 The formal announcement of the appointment of the Commission of Inquiry is dated 27 April 1994. The announcement identified that the first session of the Inquiry would commence on 15 June 1994 and that the date for the second session would be determined at the close of the first session. The announcement notified the fact that any person seeking to make submissions to the Commission of Inquiry would be required to register by 2 June 1994 and otherwise dealt with formal aspects of preparation of submissions and annexed the terms of reference for the Inquiry. A copy of this document is appended to this Judgment as Appendix '7'. [9/132-137] 29 April 1994 - Meeting 10 454 On 29 April 1994, Mr Hogarth and Mr Kidd attended a meeting with Mr Walker, Mr Dransfield and Mr Lester. The accounts of what was said at the meeting are disputed. Mr Lester and Mr Kidd made notes of the meeting. Mr Hogarth's Evidence 455 Mr Hogarth in his first statement, gave the following evidence in relation to this meeting: '79. A conversation took place to the following effect: [ Mr Walker: "We expect formal advice from the Commissioner in the very near future. We've been working on it and I think you'll find that the Commissioner will be someone sympathetic to our position". Mr Lester: "The Commissioner that is proposed by Webster is a chap who should know what he's dealing with on this". Mr Dransfield: "A briefing note should be prepared by Alf Lester for Lang so that he can know what he's got to say to the Mayor of Wollongong Council, David Campbell". Mr Walker: "I'll also need to check this with the Liberal Party before I go and see the Mayor". Mr Kidd: "The priority is to determine what is really going on". Mr Lester: "I think it will all be determined within the next two to three weeks". Mr Kidd: "What period of time will you need to have our case prepared to present to the Commission of Inquiry?" Mr Lester: "We may need to obtain an extension of time as there is a lot of work to be done and a lot of correspondence to be collated and papers organised to form part of our presentation". ] Mr Hogarth: "Haven't you already done some work on this?" Mr Lester: "Yes, we've made our own enquiries about what's involved and we'll take it from there". [ Mr Dransfield: "Bob, I think you should talk to the land pooling people to make sure that they are also pushing along and doing a proper presentation to the Commissioner. Apart from that we want you to lie low and leave this all to us". Mr Hogarth: "I'll speak to them and make sure that they are progressing okay. That is what they raised the money for". ] Mr Dransfield: "Good". [ Mr Hogarth: "Well what about our representation at the Inquiry. Shouldn't we have legal representation?" Mr Dransfield: "No, we don't need lawyers, we've got Alf Lester". Mr Hogarth: "Don't you think we need somebody to coordinate the presentation to the Commission?" Mr Dransfield: "Lawyers aren't going to help you. All they'll do is stuff it up". ] Mr Hogarth: "So you're sure that we won't need legal representation". Mr Dransfield: "Yes I've spoken to Alf and he's quite confident he can do it himself". Mr Walker: "Yes you're right Bob, we should look into that and then let you know what we think". 80. At our meeting of 29 April 1994 and in the presence of Mr Walker, Mr Dransfield and Mr Kidd I had a further conversation with Mr Walker to the following effect: Mr Walker: "About this Commission of Inquiry, as we've said from the outset Bob, you're to keep out of it. I have arranged for Alf Lester & Associates to act on our behalf at the Inquiry to present our case for rezoning at Helensburgh." Mr Hogarth: "What do you think our chances are at the Commission of Inquiry?" Mr Walker: "Bob, as you are well aware, this Commission of Inquiry is the opportunity we want. I've got no doubt that now that the Inquiry has been called and with our contacts and knowledge, rezoning at Helensburgh is a foregone conclusion. Through his contacts, Greiner has got the right Commissioner for us and he'll see that our water proposals are right for the area". 81. During the course of our meeting on 29 April 1994 a discussion regarding the terms of the Commission of Inquiry and the issue of water quality and water storage took place to the following effect: Mr Kidd: "What happens at these Commissions of Inquiry and how will we conduct our case?" Mr Dransfield: "It will be up to myself and Alf to run the program. I'll attend these sessions on our behalf". Mr Hogarth: "But I want to go along to all of the sessions". Mr Dransfield: "That's okay but we don't want you to say anything. Alf and I will be making decisions progressively in reaction to how the thing's going and we will formulate the method of how we tactically approach the Commission once we get further guidance as to the terms of reference and the way the Commissioner intends to run it. We will need to be flexible to address the issues that are likely to be raised by our opposition. We have no objection to you being there Bob but you need to take a secondary role as we've already discussed. Alf and I will be running the show. We're the ones experienced in this area. You know that we have looked at all of the documents and we told you in November what we were going to do about it all. You need to leave it to us". Mr Kidd: "You've all seen the terms of reference by now. I have sent to each of you a memorandum about a number of matters which I think should be addressed. One of the most important matters is the issue of water quality. As you know, the Hacking River is rated Class P Hacking Protection by the Department of Water Conservation and I have been a member of the Hacking River Management Committee for some time and I know from those meetings that they believe that the issue of water quality and damage from stormwater run-off into the Hacking River will be the major issue at the Commission of Inquiry. What have you chaps done about that?" Mr Lester: "I think that we have got the experience to handle all of that. Peter and I have done a number of jobs together and we believe that we have the issue of water quality under control". Mr Kidd: "What do you think about all of this, Peter. Do we have the expertise or not?" Mr Dransfield: "Yes we do, Geoff. I was involved with the Department of Housing in the Rouse Hill project. I was instrumental in arranging for that to be set up back in 1990 and I was the person responsible for coordinating the development of that area. The Rouse Hill Development Area is a large area comprising approximately 3,500 acres in the first stage with quite a number of creeks and with native vegetation alongside and had significant water run-off problems. These include the high phosphorous load in stormwater from existing development which feeds into Cattai Creek. Rouse Hill ultimately drains into the Hawkesbury River and we designed and developed storage ponds for that area and those work satisfactorily and we have satisfied all of the environmental requirements in respect of that development". Mr Kidd: "So you believe that my concerns about water quality are not a major issue?" Mr Dransfield: "No, we think that they will be major issues but we know from our experience in the matter that we can deal with those quite adequately. We're well aware of the recent terms of reference and we've been dealing with similar issues elsewhere, haven't we Alf?" Mr Lester: "Yes, Peter. For Helensburgh we already have the 1992 reports by GHD. We'll use GHD again ourselves for the water quality aspect. GHD will be subcontracted to my firm". Mr Hogarth: "I'm happy for you to use our experts. Will you be briefing GHD to update things?" Mr Lester: "We'll be using the GHD Report as the basis of our submission updated by other consultants if need be". Mr Hogarth: "I just want to make sure we're prepared because those greenies, Tapsell and Donohoe, are likely to put up a fuss and Wollongong Council have been in a political stalemate situation for years about Helensburgh". Mr Dransfield: "Bob, as we've said to you, we think we have this Commission of Inquiry wrapped up because of our political contacts and we're very confident that we'll get the rezoning on the basis of the GHD Report we've already got. We've used GHD before so we know how to deal with them now that we'll have access to them". Mr Hogarth: "Well I'm not getting any younger and I've fought a good fight and I'm pleased to be handing this over to you since you are confident of success".' [The bracketed sections are again close to identical with and in one case closely similar to, the bracketed sections set out below in Mr Kidd's statement.] Mr Kidd's Evidence 456 Mr Kidd's version of this meeting is set out in paragraphs 47 and 48 of his statement, to the following effect: '47. On 29 April 1994 I attended a meeting at Walker's Mascot office with Mr Walker, Mr Dransfield and Mr Lester. Mr Hogarth accompanied me. The meeting of 29 April 1994 was the first meeting that I had with Mr Lester since 18 November 1993. A conversation took place to the following effect: [ Mr Walker: "We expect formal advice from the Commissioner in the very near future. We've been working on it and I think you'll find that the Commissioner will be someone sympathetic to our position ". Mr Lester: "The Commissioner that is proposed by Webster is a chap who should know what he's dealing with on this". Mr Dransfield: "A briefing note should be prepared by Mr Lester for Mr Walker so that he can know what he's got to say to the Mayor of Wollongong Council". Mr Walker: "I'll also need to check this with the Liberal Party before I go and see the Mayor". Mr Kidd: "The priority of all of these meetings should be to determine precisely what is really going on at all levels of Government". Mr Lester: "I think it will all be determined within the next two to three weeks". Mr Kidd: "What period of time will you need to have our case prepared to present to the Commission of Inquiry?" Mr Lester: "We may need to obtain an extension of time as there is a lot of work to be done and a lot of correspondence to be collated and papers organised to form part of our presentation". ] [ Mr Dransfield: "Bob, I think you should talk to the land pooling people to make sure that they are doing a proper presentation to the Commissioner. Apart from that we want you to lie low and leave this all to us". Mr Hogarth: "I'll speak to them. That is what they raised the money for". ] 48. During the course of the meeting a discussion regarding the terms of the Commission of Inquiry and the issue of water quality and water storage took place to the following effect: [ Mr Kidd: "What happens at these Commissions of Inquiry?" Mr Dransfield: "It will be up to myself and Alf to run our case". Mr Hogarth: "I want to go along to all of the sessions". Mr Dransfield: "That's okay but we don't want you to say anything. Alf and I will be running the show. You need to leave it to us". Mr Hogarth: "Peter, we need to get some lawyers involved". Mr Dransfield: "No, we don't need lawyers, we've got Alf Lester. Lawyers will stuff it up". Mr Hogarth: "So you're sure that we won't need legal representation". Mr Dransfield: "Yes I've spoken to Alf Lester and I'm confident he can do it". ] Mr Kidd: "I sent to each of you a memorandum. One of the most important matters is the issue of water quality. As you know, the Hacking River is rated Class P Hacking Protected Waters by the EPA. I have been a member of the Hacking River Management Committee for some time. I know that they believe water quality and damage from stormwater run-off to the Hacking River will be the major issue at the Commission of Inquiry. What have you chaps done about that?" Mr Lester: "Peter and I believe that we have the issue of water quality under control". Mr Kidd: "What do you think about all of this, Peter. Do we have the expertise or not?" Mr Dransfield: "Yes we do. I was involved in the Rouse Hill project. Rouse Hill comprises approximately 3,500 acres in the first stage and has significant water run-off problems. Rouse Hill drains into the Hawkesbury River. We designed and developed storage ponds for that area and those work satisfactorily. We have satisfied all of the environmental requirements in respect of that development". Exhibit ['9/140'] is a copy of my notes of that meeting. [emphasis added] 457 Mr Kidd's note at 9/140 includes the following words: 'Send PD a copy of the GHD settlement document.' Mr Lester's Evidence 458 Mr Lester's evidence was that his file note [9/141] dealt with the meeting. 459 This file note states, inter alia: 'The political background was debated to some length and there is a need to check the proposed time scale which appears to have been accelerated against the previous proposals put forward and discussed at Parliament House. It was agreed that contacts would be made with both Labor and Liberal Parties to identify any reasons for the apparent acceleration. The previous preferred programme would have enabled the COI to have conducted its various hearings but to be considering the matter during run-up to the March 1995 elections . The main action will be taken by LW. LW requested a briefing paper to assist in this regard . . . The issue of accessing GHD data was discussed and there is still some sensitivity . An agreement was reached that PD would contact Ken Conway to resolve the matter. It was also agreed that contact would be made with Don Dwyer to seek his advice. The person within GHD who has access to most of the information is Mike Ingland . . .' [emphasis added] 460 Mr Lester's evidence in answer to paragraph 79 of Mr Hogarth's statement and as to the issue of legal representation at the Commission of Inquiry was that he could not recall Mr Dransfield saying "No we don't need lawyers we have Alf Lester" or "Yes I've spoken to Alf and he's quite confident he can do it himself". 461 Mr Lester, in answer to paragraph 47 of Mr Kidd's statement, gave evidence that he had not said, "The Commissioner that is proposed by Webster is a chap who should know what he's dealing with on this" or "I think it will all be determined within the next two to three weeks." 462 In answer to paragraph 81 of Mr Hogarth's statement, Mr Lester's evidence was as follows: (a) He denied that the conversation went along the lines as deposed. His evidence was that water quality was discussed but not in the manner stated by Mr Hogarth. (b) He did not recall that Mr Dransfield would have said "It will be up to myself and Alf to run the programme. I'll attend these sessions on our behalf." (c) His evidence was that at the meeting, Mr Hogarth said, "Should we attempt to retain legal representation for the Commission of Inquiry" and that someone, possibly Mr Dransfield, said "We will investigate whether or not there will be a need for legal representation at the Inquiry". (d) His evidence was that it was agreed at the meeting that water quality was a matter which would need to be addressed together with a range of other issues. [Although initially rejected, this portion of Mr Lester's statement was read back into the transcript by Mr Ellicott (transcript 1734)]. (e) His evidence was that he had not said "I think we have got the experience to handle all of that. Peter and I have done a number of jobs together and we believe that we have the issue of water quality under control". (f) He could not recall Mr Dransfield saying "We're very confident that we'll get the rezoning on the basis of the GHD report we have already got". (g) He denied saying "GHD will be subcontracted by my firm". It was always his understanding that GHD were engaged directly by Walker Corporation. 463 In answer to paragraph 48 of Mr Kidd's statement, Mr Lester's evidence was that he did not recall that Mr Dransfield had said "No, we don't need lawyers, we've got Alf Lester. Lawyers will stuff it up". 464 Mr Lester did not recall Mr Kidd having said "One of the most important matters is the issue of water quality. As you know, the Hacking River is rated Class P Protected Waters by the EPA. I have been a member of the Hacking River Management Committee for some time. I know that they believe water quality and damage from stormwater run-off to the Hacking River will be the major issue at the Commission of Inquiry. What have you chaps done about that?" 465 Mr Lester denied saying "Peter and I believe that we have the issue of water quality under control". 466 A further note by Mr Lester of 29 April 1994 summarises Mr Lester's discussions with Ms St John who had confirmed a number of matters in relation to the Inquiry. Mr Lester's note appears at 9/144 and includes the following: 'AL spoke with Helen St John . . . who confirmed the following: · That the form of enquiry is more open-ended than normal given that most COIs relate to a specific proposal and its impacts (eg marinas). · It is unlikely that an expansion will be granted although she did note that for other reasons, there may be a change of venue and a deferment of approximately 2-3 weeks in the date set out in the notice of COI . . .' Early May 1994 - Revised Schedule of Dates for the COI 467 In early May 1994, the Commission of Inquiry announced a revised schedule of dates. The schedule identified the date for inspection of background documents as 27 April 1994; the date for lodging submissions as 16 June 1994; the date for inspecting submissions as 22 June 1994; the date for the commencement of the first session of Inquiry as 5 July 1994; the date for lodging questions/requests as 5 July 1994 and the date for responses to questions/requests as 5 August 1994. The dates for the second session of the Inquiry and for the site and surrounding area inspection were yet to be determined [9/183]. 10 May 1994 468 Mr Murton's file note of 10 May 1994 is entitled 'Overview'. It summarises various aspects of the forthcoming Commission of Inquiry, including the fact that it had received 7,000 submissions. It includes, inter alia, the following: 'GHD have submitted a report severely criticising the DLEP largely on the basis that a Zoning Plan does not provide effective management of land uses and in particular the natural environment. They rightly argue that land management rather than simplistic zoning is a far better management tool. This was the original basis to the GHD proposal for limited subdivision with the bulk of the bushland transferred to the NPWS for effective protection . . . In reviewing most of this material it appears that there are common objectives amongst most submissions. These can be summarised as: 1. The protection of the bushland adjacent to the Royal National Park as an extension of the natural habitat of the area. 2. The retention of the bushland coupled with the Royal National Park as an effective buffer between the Sydney and Wollongong Urban Areas. 3. The control and improvement of the water quality of the Hacking River System. . . . most of the environmentally concerned submissions support controls and management procedures which cannot be implemented under the DLEP . . . Our approach should be based on the achievement of the common objectives by effective management techniques . . . The argument should be based on an integrated approach to land management with suitable areas selected for sensitive urban development designed in such a way to provide a cohesive and effective buffer to the more sensitive bushland and river system. These natural areas can then be handed on to the NPWS for effective environmental management that would meet the aspirations and objectives of the community.' [9/179 & 180] 469 On 10 May 1994 Mr Dransfield sent to Messrs Hogarth and Lester, a copy of a notice which had been received from the office of the Commissioners of Inquiry, identifying changes of venue and date. The notice was dated 4 May 1994. It identified the first session as to commence on Tuesday 5 July 1994 and '[to] continue until all submissions are heard'. 470 It stated that submissions were to reach the office of the Commissioners of Inquiry by 1pm on Thursday 16 June 1994 and that four copies of each submission was required. [9/181 & 182] 471 Also on 10 May 1994, the office of Lester Firth Associates sent a facsimile to Mr Lester who was then on holiday in Fiji, which stated that Mr Dransfield was anxious to set up two appointments on the Thursday regarding Helensburgh, namely at 9am with Bob Hogarth and Don Dwyer at Helensburgh and at 1pm with Mike Ingland at GHD offices. The telex completes with the words 'he has asked me to confirm these today!! Please advise.' [9/184] 472 On 10 May 1994, Mr Murton prepared a file note on decisions by the Commissioner, Dr Carleton. The file note dealt with three recent cases chaired by Commissioner Carleton where he had recommended against the decisions of councils in relation to the Port Kembla Coal Terminal, in relation to mineral beach sand mining and the decision of the City of Taree and in relation to DLEP of the Balmain Peninsula. [9/173] 11 May 1994 473 A further memorandum to file by Mr Murton of 11 May 1994 deals with some of the background history and in particular the special Council meeting held on 18 April 1991 where the Council had considered the draft Helensburgh plan. 474 In this memorandum, Mr Murton refers to the main issues supporting the draft plan as Council saw them and as summarised in the Council minutes of the Development and Planning Committee Meeting of 5 April 1993. 475 Mr Murton includes the following comments: 'At the Council Meeting of 5 April there appears to be a cynical comment regarding the improvement of water quality with limited and well planned development. To quote: "To paraphrase these conclusions: If you want better water quality in the Gills Creek Catchment - urbanise it." If the last comment was changed to carefully plan it then the statement would be sound.' [9/191] 476 Mr Lester's diary note of 11 May 1994, which was the first day after his return from Fiji, shows 'briefing Shell Cove, Helensburgh, Greenacre, others' [T 1755]. 12 May 1994 477 On 12 May 1994 Mr Gye sent a fax to Mr Weinert, referring to their discussions of 11 May and confirming a number of matters as 'the suggested arrangement for the various transactions'. 478 The facsimile dealt with the 'previous proposal', the 'loan moneys', and the 'documentation' as follows: ' A. Previous Proposal 1. Highfield Grove was to assume the liabilities of Lakatoi Universal to AGC and in turn indemnify Ensile in respect of its liability under its third party mortgage to AGC. 2. In return, Lakatoi Universal and Ensile were to release Highfield Grove from their loan accounts. 3. Agreement has now been reached with Westpac for the AGC securities to be transferred to Highfield Grove on payment of $2million. 4. The effect of the above is that whereas previously there was an arrangement between mortgagor and mortgagor (Lakatoi Universal and Ensile and Highfield Grove) it is now proposed there be an arrangement between mortgagee and mortgagee (AGC and Highfield Grove). 5. The unit holders' agreement of 6 April 1994 provides that the initial contribution and a further contribution are to be paid by Walker to Highfield Grove. It is now agreed that these are to be converted into loans. B. Loan Moneys 1. Walker Consolidated lends Highfield Grove $4.5million at some agreed rate of interest. 2. Of the loan moneys Walker actually advances $2.55million made up as follows: Amount to be Advanced $4.5million Less Amount payable under options $200,000 Amount retained pending rezoning $1.75million $1.95million $2.55million 3. Highfield Grove advances $2million to Lakatoi Universal in return for 5-year mortgage from Lakatoi Universal over the Ensile land as presently secured to AGC. 4. Highfield Grove and Walker Consolidated enter into a loan agreement. 5. Lakatoi Universal discharges its obligation to AGC. AGC transfers its security at the direction of Lakatoi Universal to Highfield Grove in consideration of the moneys advanced by Highfield Grove. 6. Highfield Grove consents to postponement of its mortgage in favour of the two Walker mortgages. C. Documentation 1. Loan agreement between Walker Consolidated and Highfield Grove in respect of $4.5million (and referable to the two payments). 2. Loan agreement between Highfield Grove to Lakatoi Universal in respect of the $2million. 3. Mortgage from Ensile at the request of Walker Consolidated as borrower to Walker Corporation in respect of the $4.5million. 4. [Indecipherable] of mortgage from AGC to Highfield Grove. 5. Postponement of AGC mortgage to rank after the two Walker mortgages.' [9/197-198] 479 Mr Hogarth gave evidence in paragraph 84 in his statement which I accept to the following effect: 'At a point in time between the execution of the HUTA and settlement on 3 June 1994, I had a conversation with Mr Walker to the following effect: Mr Walker: "Bob, we need to justify our position in the books of the public company's accounts as to why we're entering into this transaction and what we would propose is that we treat the payment of $2.75 million as a loan to Highfield Grove. When we get the development up and running we can reverse all these entries but for the present purposes that's how we'd like to treat the documents". Mr Hogarth: "What do you want me to do?" Mr Walker: "I'll get someone to prepare a loan agreement and I think that you should say that it is an interest-free loan for five years and that's what I propose that the agreement would reflect". Mr Hogarth: "But as far as you and I are concerned you'll be paying the First Contribution under the HUTA as part of the $4.5 million". Mr Walker: "Yes that's fine, of course we'd be doing that. It's just that I've got to make the accounts look good and I've got to make it look like we've got some security".' 12 May 1994 Meetings 480 Mr Lester's diary note for 12 May showed a 9am meeting with Mr Hogarth, Mr Dwyer and Mr Dransfield, which is the meeting which occurred at Helensburgh. It also records an inspection of the Helensburgh property between noon and 1pm. For 2pm it records 'GHD: Mike England, Ken Conway and PD' and at 4pm it records 'Return to LFA office. Review Helensburgh'. It also refers to 'Greenacre'. 481 There are two file notes by Mr Murton, each dated 12 May 1994 and each addressed to Mr Lester and to the file. 482 The file note at 9/193 deals with the meeting at Helensburgh at which Mr Hogarth, Mr Dransfield, Mr Dwyer, Mr Lester and Mr Murton were present. 483 The file note covers the land pooling areas and covers a number of other topics including an outline of past planning history provided by Mr Dwyer. The file note includes the following: 'Bob Dwyer indicated that there was significant pollution entering the Hacking River at present from various sources including the rubbish tip and the run down pig farm as well as ad hoc run off. He made the statement that the water quality would in fact improve if the proposed development and associated water quality controls were implemented . . . [I interpolate to note that in the Commissioner's final report at page 104 claims to this general effect were regarded as 'extraordinary assertion[s].' BH would forward a brief history of the project land and also was asked to forward a copy of Hans Westerman's report to LFA. BH raised a number of issues: 1. Sutherland Council attitude to water quality - criticising the proposal when they have done little in the area. This issue may be raised at the COI . . . 5. Dr Short's report in water quality should he be given a consultancy to further examine water quality? (To be discussed with GHD). [9/193] 484 The second file note deals with the meeting at GHD's office with Mr Conway and, Mr England of GHD, Mr Dransfield, Mr Lester and Mr Murton. The file note states that Mr Dransfield opened the conversation basically acknowledging past events and efforts and seeking GHD support for Walker Corporation in the current matter and on a commercial basis. 485 Mr Conway, according to the file note, related some of the past experiences 'and a reluctance to continued involvement with past client groups. However, he expressed support for Walkers and discussion then focussed on technical matters'. 486 The file note includes, inter alia, the following: 'PD asked GHD as the major planner if there were any issues that were outstanding or unsound. · Water quality and pollution control had been adequately and successfully resolved. Some critical comments were received from Dr Short (a local and respected scientist). However, his comments were in the main supportive. The steepness of the control systems allowed water to become more aerated and thereby encouraged bacterial and nutrient breakdown.' [9/195-196] 487 Mr Lester's further evidence was that a discussion about the demand for land in the Sydney region ensued and that it was decided that more information needed to be obtained to support a claim that land availability in the southern region was scarce. 13 May 1994 488 Mr Lester's diary note for 13 May refers to an 8am Shell Cove meeting, a 10am-12 noon Helensburgh reference and in the afternoon Greenacre and Strathfield. 489 A file note by Mr Murton of 13 May 1994 headed 'Helensburgh - Submission approach', points out that after the discussions of 12 May it is suggested that the submission should provide a succinct and strong overview of planning issues that directly address the terms of reference of the Commission of Inquiry. The file note suggests that the main aim of the Inquiry is to assess the capability of the subject land to accommodate urban development and that the issues relate to land suitability, ability to service the land and the demand for housing. The file note suggests that environmental issues should be addressed and resolved and that in addition a series of carefully worded questions should be prepared ready for submission and aimed at undermining the emotive arguments of environmentalists. 490 The file note suggests that the submissions should be an overview with reference back to various working papers and reports and that there was a need to obtain, inter alia, the following: · 'Information or summary from GHD or from relevant Authorities. · GHD should prepare to address the Inquiry regarding the objection they submitted to Wollongong Council and be prepared to discuss water quality in detail.' [9/199] 491 A 13 May 1994 file note of Mr Heinjus of Lester Firth Associates, outlines the response from Government agencies concerning the draft Local Environment Plan for Helensburgh May 21, 1991. [9/200] Meeting of Mr Lester, Mr Hogarth, Mr Walker and Mr Dransfield of 13 May 1994 492 A further file note of Mr Lester of 16 May 1994 summarises what is said to have occurred at a meeting of 13 May 1994, attended by Mr Walker, Mr Dransfield, Mr Hogarth and Mr Lester to further review the position to be adopted with respect to Helensburgh. The file note includes the following: '3. BH was concerned that Sutherland Council would oppose development of Helensburgh on the grounds that water quality in the Hacking River Catchment would be impaired. He suggested that contact be made with Keith Lund and Sutherland Scientific Advisers to clarify their stance on the matter. He suggested it may be possible to influence their representation to the Commission. This area will need to be further explored. 4. It was agreed that PD would contact the Department of Housing and attempt to resolve their attitude. . . . 5. BH was concerned about the paper by Short, Nichols and Francy (SNF) who had been critical of the Sinclair Knight Water Quality report [see 10/31]. It had also been critical of a review conducted by Wollongong University. According to discussions with ME and subsequent cross-check by LFA, it appears that the comments by SNF . . . have been incorporated in the review which now forms part of the submissions that have been lodged with the Commission. The revised submissions incorporate amendments to the Canberra model with particular reference to the sell quality and run-off characteristics in the Helensburgh area and also provides for a multiple ponds detention/treatment system. It was suggested that LFA contact Short at Ansto and see whether it is possible to commission SNF to prepare a review of the revised water quality report . . .' 493 Under the action heading of this note there was included the following : 'LFA to contact Dr Short of SNF at Ansto and seek further advice of SNF carrying out a review of revised water quality proposals prepared by GHD . . .' [9/216] 494 Mr Lester's evidence was that at the 13 May meeting, those present further discussed the position which they should take with respect to Helensburgh. His evidence was that Mr Hogarth had several concerns at that stage, including opposition to the development by the Sutherland Shire Council and the Department of Housing. Another concern he recalls was the Short Nichols and Francy paper which criticised the Sinclair Knight Water Quality report and the Wollongong University Review. 495 Mr Lester's evidence was that it was agreed that the Hans Westerman Report should be forwarded to him to be included in the documents for submission to the Commission of Inquiry [Lester paragraph 62]. Between 6 April 1994 and 19 May 1994 496 Mr Hogarth gave evidence in para 86 of his statement which I accept as reliable that between 6 April and 19 May 1994 he had a conversation with Mr Weinert regarding the structuring of the initial payment to Highfield Grove as a loan arrangement for tax purposes: '86. Some time after the execution of HUTA (6 April 1994 but before 19 May 1994), I had a conversation with Mr Brian Weinert to the following effect: Mr Weinert: "Bob, as you know we want to make this deal as tax effective as possible for Walkers. We want to structure the initial payment to Highfield Grove as a loan arrangement so that we can show this as a receivable in our accounts. This is just for our own internal purposes at Walkers and will not change our deal with you under HUTA." Mr Hogarth: "Brian, we don't care how you structure this, provided it is not detrimental to the interests of any of my companies. If this arrangement is just to help you with your internal problems and doesn't affect my companies' position, we will help you in any way we possibly can. At the end of the day, we will always look to the HUTA agreement as the document to be relied upon anyway." Mr Weinert: "Don't worry, this is not intended to be a loan and won't carry interest. The initial contribution will still be part payment for Walker's right to play in the joint venture". 16 May 1994 497 On 16 May 1994, the Development and Planning Committee presented a report considering what Wollongong Council's stance at the proposed Commission of Inquiry should be. The report is found at 9/208 and following. 498 The report begins by pointing out that Wollongong Council had formally rejected development on the eastern side of Helensburgh on two occasions and that Council had not rejected the possibility of some form of development to the south west of Helensburgh in the area known as Gills Creek Catchment. It was suggested that Council's stance at the Inquiry should reflect those two positions. 499 The initial recommendation was that Council's submission to the Helensburgh Commission of Inquiry would be as follows: '1. Reiterate Council's opposition to development to the east and south east of Helensburgh and support for the rezoning of these areas to 7d Environmental Protection - Hacking River. 2. Reflect an "open mind" on the development or non development of the area to the south and south west of Helensburgh known as the "Gills Creek Catchment", pending Council's review of submissions to the Inquiry and the Commissioner's report. 3. Advise the Commissioner of Inquiry of the Minister's written undertaking that he will not use his powers to rezone land in Helensburgh against Council's wishes after Council considers the report of the Commission of Inquiry.' [9/208] 500 Mr Lester's evidence was that to the best of his recollection, he had not seen this document in May 1994, notwithstanding the LFA file note of 20 May 1994 (which he had seen at that time) which refers to and is in fact entitled 'Council Report 16th May 1994'. Mr Lester could not recall when he saw the document. [T 1641] 501 After setting out the background history, one finds in the report at 9/213 the following: 'This undertaking [referring to the Minister's undertaking to the Council of 9 February 1994] should be reiterated to the Commissioner in the first hearing session. It implies that Council will : 1. be the decision making authority in this instance and 2. that Council will be able to review the Commissioner's report and evidence brought before the Inquiry and make a decision on the best available evidence . Council's Stance before the Inquiry Council officers have argued that Council should consider the development/conservation of lands around Helensburgh with an open mind, given that recent development submissions have focussed on the central issue - limiting the impacts of stormwater from existing and proposed development on the Hacking River and its tributaries. Council has rejected these arguments on the basis that water quality treatment technology, practice and maintenance is largely unproven and that for at least the area to the east and south-east of Helensburgh, topography, disparite tributary catchments, a lack of soils and the slope of the land, allows for little margin of error between theory and practice. I have no new information to add at this time to convince Council otherwise. Council has retained an open mind on development or non-development in the Gills Creek catchment and the Commission of Inquiry should provide a body of evidence to enable Council to make an informed decision on this. Council's stance at the Inquiry should reflect Council's two different positions for the eastern and south-western catchments of Helensburgh.' [emphasis added] 502 The document concludes, inter alia, as follows: ' Options 1. Adopt the Recommendations. 2. Adopt an 'open mind' on the development/non development of land to the east and south-east of Helensburgh as well as land within the Gills Creek Catchment. 3. Oppose any development outside the existing urban boundary . . . Conclusion Whilst the Commissioner's report and submissions to the Inquiry will provide Council with the ability to review its previous decisions relating to Helensburgh, Council's stance at the Inquiry should reflect its current opposition to development in the eastern and south-eastern catchments and Council's more open minded approach to the development or non development of the Gills Creek catchment.' [9/215] 20 May 1994 503 Mr Murton prepared a file note (earlier referred to) dated 20 May 1994 which reads (extracted in full): 'Council Report 16 May 1994 Wollongong Council met on 16 May to discuss the Commission of Inquiry. Council is required to prepare a submission for the Inquiry. The recommended approach will be to reiterate Council's past position in opposing further development at Helensburgh. The Council report shows a clear attitude towards the Inquiry. They intend to oppose development of the Lady Carrington Estate but have an open mind to the Gills Creek area. Council intend to advise the Commissioner that the Minister will not use his power to rezone the land. In so doing, they are implying that the Commission's findings will not be binding on the Council. Council also note that the Commissioner Dr Mark Carlton also chaired the Coal Loader Inquiry (which went against Council). The Council Report also notes that Council officers have argued that development should be considered with an open mind, however the Councillors have rejected these arguments on the basis, they say, of unproven water quality control. This is not the real reason since there is now a wealth of information relating to water quality controls at Helensburgh. This should be emphasised at the Inquiry. The Council report concludes by re-stating that they are not bound by the Commission's findings and make their attitude clear by indicating that they will still oppose development of the LCE land.' [9/235] 504 At transcript 1642 Mr Lester accepted that he had read this file note, giving evidence as follows: 'Q. You knew you had a fight on your hands didn't you? A. Yes. Q. And you knew that one of the major issues that the Council was concerned about was water quality did you not? A. From the Councillors' point of view, yes. Q. The Council's report shows a clear attitude towards the Inquiry. You see that? A. Yes. Q. You didn't bother to look at the report, is that what you're telling his Honour, or you don't recall looking at the report? A. I'm saying that I have seen the report. I cannot tell you the date on which I sighted the development and planning committee paper . . . Q. Are you telling his Honour that you did see it and that it was sometime before the submission went in? A. I can't recall. . . . Q. I am suggesting to you that if you were professional about what you were doing, you would have looked at it in May? A. It is possible that I did. . . .' [T 1642-1643] 505 Mr Lester was asked in relation to the development and planning committee report of 16 May 1994 as follows: 'Q. You would have expected Mr Murton to read it and tell you about it if you didn't read it yourself? A. Alternatively he may have discussed the matter with various officers of council. Question repeated A. I find it difficult to answer on behalf of Mr Murton. Q. I am asking you your expectation. You see, I am asking you really about how you expect your officers to act, and whether how carefully you expect them to act in relation to documents on your file. Would you have expected Mr Murton, if he read that, to bring it to your attention? A. If he had read that, yes. [T 1644] 506 At transcript 1645, Mr Lester accepted that he would infer from Mr Murton's file note that he, Mr Murton, had sighted the development and planning committee report. 507 At transcript 1645-1646, Mr Lester gave the following evidence: 'Q. Now look at the second last paragraph "The Council report also notes that Council officers have argued that development shouldn't be considered with an open mind. However the Councillors have rejected these arguments on the basis they say of unproven water quality controls". Now he adds "This isn't the real reason. There is now a wealth of information relating to water quality controls at Helensburgh. This should be emphasised at the Inquiry". But it was abundantly clear, that the Council had rejected the arguments on the basis of unproven water quality controls. That was the information you got wasn't it . . .? A. No, the information I got was that Council had decided against this politically and that they had not carefully considered the GH&D quality material at all.' [T 1645-1646] 27 May 1994 508 Mr Murton prepared a further file note on 27 May 1994 stating, inter alia: 'Recent meetings have identified a number of actions in regard to the Commission of Inquiry. In addition several external actions have occurred which need comment.' Actions from meetings : . . . Dr Short involvement. Attempts have been made to contact Dr Short. After some enquiries it has been ascertained that Dr Short has moved to New Zealand. Dr Short was involved in the Gills Creek proposal which proposed similar stormwater treatment methods to the LCE. In speaking with ME of GHD he indicated that Dr Short was not opposed to the Multiple Ponding System proposed by GHD nor was he opposed to some development in the area. Dr Short's active involvement in the Inquiry is unlikely, given his remoteness. Further to the discussions with ME of GHD, he indicated that the only difference in stormwater treatment between Gills Creek and LCE was that Gills Creek treatment was off the main stream whereas LCE was based on the stream. In practice there would be little difference between the two schemes. However, ME stated that the major concern with Gills Creek is the multiple ownership of the land. If the scheme was approved some owners would benefit while others would lose development benefits where land is allocated to open space or stormwater treatment. There needs to be some method of land pooling or transferred benefits/development rights. These issues have not been addressed . . .' [9/248] 509 At transcript 1639, the following evidence was given by Mr Lester: 'A. I think that the file note dated 27 May makes it clear that recent meetings have identified a number of actions and these were a whole series of issues that we were looking at. Q. Why were you looking at the need for current expert evidence on water quality being required on 30 May? A. Issues had been raised in various discussions. Q. And those issues were that you needed to get proper expert evidence on water quality, is that right? A. Yes. Q. And you mentioned Nichols Short or Chowdury, and you commissioned none of them, did you? A. I didn't commission them, no. Q. And nor did Walkers? A. Not at that time. Q. And nobody was commissioned before you put your submission in, is that right, on water quality? A. Other than GHD, yes. Q. They were not commissioned before you put your submission in, were they? A. They indicated support and involvement on 12 May. . . . Q. And I've asked you to read it in relation to commissioning GHD, and I suggest to you that they were not commissioned in that meeting of 12 May . . . A. They were not formally commissioned. I'm not aware of a letter of commissioning, but it is my understanding that they were part of the team from that point onwards. Q. Were they commissioned in that meeting of 12 May 1994, or were they not commissioned in that meeting of 12 May, or are you unsure about that topic? A. I'm not aware of the formal commission letter, but it is my understanding that they were willing to participate and form part of the submission team as it were that would address the Commission of Inquiry, and the submission. Q. On 12 May, were they commissioned or were they not commissioned, or do you have no recollection about that matter? A. I don't - it's difficult I find to answer that with some precision. I'm not aware of a commissioning letter at that time. Q. The only letter that you were able to produce is the one that's in volume 11 at page 46.1 that was handed up to his Honour this morning dated 6 July. That was your best effort then was it not? A. That's a commissioning letter, yes. . . .' [T 1639-1640] Meeting of 30 May 1994 - Meeting 13 510 A meeting was held between Mr Hogarth, Mr Kidd, Mr Dransfield, Mr Lester and Mr Murton. Accounts given by Messrs Hogarth and Kidd are disputed by Mr Lester who took file notes. Mr Hogarth's Evidence 511 Mr Hogarth's version of the conversation is as follows: '88. On 30 May 1994 I attended a meeting at the offices of Walker Corporation with Mr Dransfield, Mr Kidd, Mr Lester and Mr Howard Murton (an associate of Mr Lester). The purpose of this meeting was to appraise Mr Kidd and me of Walker Corporation's endeavours with respect to the Commission of Inquiry that was proposed. The following are the effect of parts of the conversations which took place during that meeting: Mr Lester: "There is one key aspect which is the visual impact that houses on this land will have from the town. Apparently inspections are to be undertaken looking back towards the land from the hotel and from one other site". Mr Hogarth: "Well houses are houses and there will be something seen but it is our intention to leave trees and the key trees will be marked and will not be cut down and the houses will be included around them. We need to prepare a response dealing specifically with visual impact". Mr Dransfield: "One other key point is that we need to give a briefing to the Liberal politicians in the region who would hopefully support an increased residential standard in Helensburgh as that would potentially change the voting pattern in the region and it would go from a Labor to a Liberal seat. I propose that we draw up some briefing notes for Malcolm Kerr from Cronulla, Ron Phillips from Miranda and Chris Downey from Sutherland". Mr Kidd: "That's okay. As you know, I was Malcolm Kerr's Campaign Manager and we might be able to get a meeting with him". Mr Dransfield: "Okay, I'll draw up the minutes". Mr Lester: "We need a letter of support from Ensile advising that there will be no impediment from the actual owner of the land to a residential zoning". Mr Hogarth: "That's okay, I'll organise something". Mr Dransfield: "We also need to get the Housing Industry Association or an equivalent body to establish that residential development is necessary in Helensburgh to offset the shortage in housing blocks in Sydney". Mr Hogarth: "I know Herb Shields who used to be the president of one of those organisations and we can talk to him". Mr Dransfield: "I also know some people and I'll make some enquiries. The main thing is that we can convince the Commission of Inquiry that housing is necessary". Mr Kidd: "What's the position with water quality because as you know, we've told you for a long time that that's going to be one of the key issues". Mr Dransfield: "We've got it in place. We're talking with GHD and we're handling it, don't worry about it. I would just like to reinforce that you fellas have to leave it to us. We don't want you talking to the consultants or taking a high profile role unless we ask you to. We are briefing you on what's happened now but we don't want you to do anything". Mr Hogarth: "That's okay, we're happy to help. Just let us know if you need anything". Mr Kidd's Evidence 512 Mr Kidd's version of the conversation is as follows: '49. On 30 May 1994 I attended a meeting at the offices of Walker Corporation with Mr Dransfield, Mr Hogarth, Mr Lester and Howard Murton (an associate of Mr Lester). The purpose of this meeting was to appraise us of Walker Corporation's endeavours with respect to the Commission of Inquiry that was proposed. Exhibit "PAB60" is a copy of my notes of that meeting. 50. During the meeting words to the following effect were spoken: Mr Lester: "One key aspect is the visual impact that houses on this land that will have from the town". Mr Hogarth: "It is our intention to leave trees and the key trees will be marked and will not be cut down. The houses will be fitted in around them". Mr Dransfield: "We need to give a briefing to the Liberal politicians who would hopefully support an increased residential standard in Helensburgh as that would potentially change the voting pattern in the region and it would go from a Labor to a Liberal seat. I propose that we draw up some briefing notes for Malcolm Kerr from Cronulla, Ron Phillips from Miranda and Chris Downey from Sutherland". Mr Kidd: "I was Malcolm Kerr's Campaign Manager and we might be able to get a meeting with him". Mr Dransfield: "Okay, I'll draw up the minutes". Mr Lester: "We need a letter from Ensile saying that there will be no objection from the actual owner of the land to a residential zoning". Mr Hogarth: "Okay". Mr Dransfield: "We also need to get the Housing Industry Association to prove that residential development is necessary in Helensburgh to offset the shortage in housing blocks in Sydney". Mr Hogarth: "I know Herb Shields who used to be the president of one of those organisations and we can talk to him". Mr Kidd: "What's the position with water quality?" Mr Dransfield: "We're handling it, don't worry about it. You fellas have to leave it to us. We don't want you talking to the consultants or taking a high profile role unless we ask you to. We are briefing you on what's happened now but we don't want you to do anything". 51. A discussion took place at Walkers on 30 May 1994 at which words were said to the following effect: Mr Hogarth: "The Thompson Option was due to expire earlier this month. What have you done about renewing it?" Mr Dransfield: "I'm not sure what we've done yet but I've asked Ian Grist (a solicitor in the employ of Mr Hughes) to look into the matter." Mr Hogarth: "Can you make sure that that is done immediately because that is very important to the whole deal." Mr Kidd: "You know from the contents of the work done by GHD and from our previous meetings with NPWS that they say that this is the "hole in the doughnut" and is pivotal to the whole arrangement. They regard it as extremely environmentally significant, they want it and control of that land will be vital to a deal with the Government". Mr Dransfield: "Yes I'll make sure that happens".' Mr Lester's Evidence 513 Mr Lester's evidence was that the file notes prepared by Mr Murton at the meeting [9/252 and 9/254] accurately represent what occurred at the meeting which was substantially different to the meeting said to have taken place in Mr Hogarth and Mr Kidd's statements. Mr Lester's evidence was that, contrary to what was suggested in paragraph 88 of Mr Hogarth's statement and paragraph 50 of Mr Kidd's statement, it was Mr Kidd who expressed concern relating to the visual impacts of the development and suggested the briefing to the local politicians. 514 In Mr Murton's file note of 30 May 1994, dealing with the meeting of Mr Dransfield, Mr Hogarth, Mr Kidd, Mr Lester and Mr Murton, the following appears : 'Discussion then turned to water quality issues. Some concern was expressed for the need to engage an expert such as Dr Short. In addition, to look at locations where this water quality system has been implemented. It was pointed out that this would not necessarily advance the debate since each location has its own physical conditions and constraints, i.e. the Canberra model. Despite this, it was considered that some current expert evidence on water quality was required. Names suggested were Nicols, Short or Chowdury . . . BH suggested that the report should deal with the implications of no rezoning of the Lady Carrington land. There are some 270 lots which are capable of being sold and the likely implications of numerous land holders on the overall management of the land. There would also be a discontinuity of the wildlife corridor. Actions : . . . · Expert water quality advice LFA · Department of Housing - water quality system HM' [9/252] 515 Mr Lester's evidence was that at this meeting, the new Housing Department development was noted and specifically the storm water management method undertaken. His evidence was that it was decided to make further enquiries as to which method of water quality control system would be used. His evidence was that the need for expert water quality advice was also noted and the engagement of experts such as Dr Short was considered. His evidence was that it was at this meeting that Mr Dransfield suggested engaging a public relations consultant to counter lobby groups and that Ms Twyford was nominated as a potential consultant due to local knowledge of the Illawarra area. 516 Mr Lester's evidence was that it was at this meeting that it was agreed that current expert evidence on stormwater quality was required. 517 Mr Lester's further evidence was that the Helensburgh tip was discussed at the 30 May 1994 meeting and on several other occasions in May 1994. He could not recall a discussion on this subject with Mr Kidd to the effect of that set out in Mr Kidd's statement at paragraph 57. He did not have a file note of a conversation with Mr Kidd in June 1994 relating to the Helensburgh tip. The issue, he said, had been discussed on a number of occasions at various meetings. 518 Mr Lester pointed out that the tip had been previously discussed in the briefing paper prepared on 2 May 1994 where it was noted that leachate from the Council controlled tip had been monitored and that it appeared to have led to the loss of vegetation immediately downstream. 519 Mr Lester's evidence was that the tip was discussed at the meeting of 12 May when GHD had noted that monitoring and sampling had been undertaken. His evidence was that it was also noted that the tip was on Crown land and operated under a lease agreement to WCC. 520 Mr Lester's further evidence was that the process of closing the tip and upgrading the area in environmental terms was discussed at the meeting of 13 May 1994. [Lester statement paragraphs 68-71] 2 June 1994 521 A number of directions were given with respect to settlement on 2 and 3 June 1994. The subject authorities and directions and cheques are to be found at 10/114, 10/115, 10/116, 10/117, 10/118, 10/185 and 10/186 and are appended to this Judgment [Appendix 8]. A chart [MFI 5 as altered by Mr Gray of counsel] summarising the effect of the transactions in general terms is set out as Appendix 9. 522 The short position is that Mr Gye, solicitor for the Hogarth companies, sent a fax to Mr Hughes, who was acting for Walkers, with a direction from Highfield Grove Pty Ltd to Walker Consolidated Investments Pty Ltd to pay the sum of $2.75 million as follows: (a) Bank cheque in favour of AGC (Advances) Ltd $2,000,000 (b) Bank cheque in favour of Lakatoi Universal Pty Ltd $700,000 (c) Ibenmore Pty Limited $50,000 $2,750,000 The fax also enclosed a request to Highfield Grove from Ibenmore to advance to it $50,000 by way of loan and to pay the $50,000 as follows: (a) Ensile Pty Limited $45,000 (b) Lakatoi Universal Pty Ltd $2,500 (c) Lakatoi Universal Pty Ltd & Pinemore Pty Ltd $2,500 $50,000 3 June 1994 523 On 3 June 1994 Ensile as mortgagor, mortgaged the subject lands to Walker Corporation - see mortgage U376672 to be found at 10/120. At the same time, Ensile as mortgagor, entered into mortgage U376673 with Walker Consolidated Investments as mortgagee to be found at 10/184. The terms of the mortgages are examined below under the headings 'The Walker Corporation Mortgage' and 'The Walker Consolidated Mortgage'. 12 June 1994 - Meeting 14 524 On 12 June 1994, Mr Hogarth sent to Mr Dransfield and to Mr Lester a copy of a letter from the Save the Hacking Coalition which had been sent to Mr Fahey, then Premier and Minister for Economic Development. This letter asked the Premier to cancel the Commission of Inquiry into land use at Helensburgh. [10/111] Shortly after this, Mr Hogarth's evidence was that a meeting [Meeting 14] took place, attended by Mr Dransfield, Mr Lester, Mr Kidd and himself, at which the following conversation took place: 'Mr Kidd: "You've all seen a copy of the document that Bob received in respect of the request to Premier John Fahey to scrap the Commission of Inquiry. Alf, what are we doing about water quality. It seems they're on about the Hacking River again as I have indicated to you". Mr Dransfield: "We have all that under control. We've engaged further consultants and they'll be doing a report for us". Mr Lester: "We have confidence that water quality won't be an issue in this matter". Mr Kidd: "Wouldn't all this be in position now?" Mr Lester: "No, this all takes a bit of time but we are working on it at the moment".' [Hogarth's statement paragraph 101] 525 Mr Kidd had no recollection of what, if anything, was said at this meeting. [T 852] 526 It is perhaps convenient to also here set out Mr Kidd's evidence in paragraph 57 which was as follows: '57. In or about June 1994 because of matters that were being told to me by members of HRCMC and information that I was hearing regarding the role of SSC in the upcoming Commission of Inquiry, I had a discussion with Mr Lester to the following effect: Mr Kidd: "Alf, what's your view about the Helensburgh tip and what do you think should be done about it?" Mr Lester: "That's a tip run by Wollongong Council. I think it's a very major matter. I've read the stuff that Bob has given to me and it seems clear that the tip is leaching into the Hacking River and I suspect that you're being blamed for a lot of the damage being caused by the tip". Mr Kidd: "And is that going to be relevant for the Commission of Inquiry?" Mr Lester: "Very much so". Mr Kidd: "Well I'll speak to Walkers but I would have thought that some more positive work would need to be done on that. Clearly we can't rely on the Hacking River Catchment Management Committee to do all of this because we're not sure as to what their motives are. They see both Councils as their ally so it's not really in their interest to be bringing up matters that are unfavourable to Council and when you talk about the tip then it becomes very sensitive with Council". Mr Lester: "I'll certainly be speaking to Walkers about it but it wouldn't hurt if you followed it up".' 527 Paragraphs 58 and 59 of Mr Kidd's statement are in the following terms: '58. I subsequently had a discussion with Mr Dransfield to the following effect: Mr Kidd: "Peter, I've been talking to Alf Lester and he suggests that we really need to address the issue of the Helensburgh Tip and water quality in the Hacking River as this will be a major issue for the Commission of Inquiry". Mr Dransfield: "Well I suggest that you speak to Paul McKenna as he's the person in charge of the research being put together to assist Alf Lester". 59. I subsequently had a discussion with Mr McKenna to the following effect: Mr Kidd: "Paul, I've spoken to Alf Lester and Peter Dransfield regarding the Helensburgh Tip and Peter suggested that I speak to you to see what you think you can find out about the Tip". Mr McKenna: "Yes, we've already been doing some work on the Tip". Mr Kidd: "Well, as you know I've been a member of the Hacking River Catchment Management Committee for the past 12 months and I've been telling everybody who'll listen that the water quality is the major issue and will be the major issue at the Commission of Inquiry. I've had discussions with some of the members of the Committee and I was at a meeting recently and know that there's an opportunity to get the Committee to support us because of their annoyance at the continued operation of the Helensburgh Tip by Wollongong Council". Mr McKenna: "We have some data about that but we really should get some more information". Mr Kidd: "I think you should be getting somebody to do some monitoring of water quality in that area. I'm surprised that somebody hasn't already been doing that so that we can talk with authority about what is the true position of the Tip and its effect on the Hacking River. We have to convince the Council and the Commission that what we're about is to improve the Hacking River by whatever means is appropriate and surely the current state of the Hacking River being damaged by this very Council through the Tip must be relevant". Mr McKenna: "Yes I agree with you. I think it's of great relevance and I'll get whatever information I can and supply it to Alf Lester".' 528 Mr Lester denied that he had said at the meeting, "We have confidence that water quality won't be an issue in this matter". His evidence in his first statement was that it was quite obvious to all involved, which was evidenced by his file notes of the various meetings, 'that water quality was one of a series of contentious and serious issues that would have to be addressed in detail if we were to succeed in the Commission of Inquiry''. 529 A close reading of the transcript of Mr Lester's cross-examination makes plain that he was tested very strongly on whether or not and if so when, he formed the view that water quality was the critical issue before the Commission of Inquiry. 530 Clearly, Mr Lester's state of mind leading up to and during the Commission of Inquiry is an important consideration as he sought to justify his and the defendants' approach to the Commission upon the basis that he had no particular reason to be anxious or troubled about the currency of the 1992 GHD application. It is in relation to this topic that his credit is most obviously in issue. 531 Mr Lester steadfastly and repeatedly denied that he was told or that he formed the view that water quality was the critical issue in the lead-up to the Commission of Inquiry [T1419; 1470; 1495; 1777-1779]. His evidence was that it was an issue but it was one of a number of issues and that it did not play a predominant part in his thinking. 532 For instance, at T1495 Mr Lester answered as follows: 'Q. …. it was at least clear to you at that time, that is I'm talking about the end of December 1992, 93, and if you like early 1994, that water quality and stormwater management were going to be significant issues? A. [I] prefer the term, important issues. Q. Is there any difference between "significant" and "important" to you? A. I believe there is. Q. What is the difference? A. I think there are a number of important issues. "Significant" to me would imply that it has got some preeminence.' 533 In the light of Mr Lester's refusal to characterise water quality as 'the key issue', but rather, as only 'an important issue', Mr Lester was asked during cross-examination at T1487 to rank water quality in relation to the other problems requiring to be addressed by the joint venture: 'Q. But the question of water quality, now, Mr Lester, surely by December 14, or whenever it was shortly after that you spoke to Mr Sullivan, was emerging as the major problem? ……A. It was an important problem. ….Q. Yes. It was an important problem, obviously, but I am suggesting to you it was a very important problem, and the key problem that you had to address - by this stage I will start again, so that I don't ask too many questions at once. By this stage, in your mind, I suggest, the question of storm water had become, in your mind, the key issue which you had to address in relation to Helensburgh? A. No. Q. Where would you rate it amongst all the problems that you had to address, number 5? A. No. Q. Where would you put it? A. I would rank it with - would I rank it highly. Q. Whereabouts? HIS HONOUR: I don't know that you can ask for on a scale of 1-10, Mr Ellicott, but the witness can tell you how highly: What do you mean? How would you describe its ranking at this time, to your mind? You don't have to say number 2 out of 10 or 7, but you can use your words to describe it for us? A. I have difficulty, your Honour, in the sense that it was important, but it was also clear from the various discussions, that it had not been carefully considered. So my view was that while - a lot of the responses that I was hearing were not qualified by a careful assessment of the GH & D data.' 534 Mr Lester, however, gave the following evidence in relation to his view of the importance others' placed on the issue of water quality during this time: 'Q. Later on, wouldn't you agree that it was clear [water quality] was the major issue that was concerning the Wollongong Council? A. It was one of the issues, probably the primary issue with respect to Wollongong Council, yes. Q. And it became a prime issue with the Commission of Inquiry? A. It became a major issue with the Commission of Inquiry, yes. Q. And Mr Hogarth from time to time, I suggest to you, indicated to you that it was the prime issue? A. I don't recall the words such as "prime". It was certainly mentioned as one of the key issues….. Q. Is that right. See, what I want to put to you is that he told you that that was the key issue? ….Not one of the key issues, but the key issue…. WITNESS: No, that was one of the necessary-- ELLICOTT: Q. He never said that to you? A. I don't recall him ever saying that to me. Q. He could have said it? A. He could have said it.' [T1418-9] 535 Further, Mr Lester, having reference to his file note of 3 December 1993 [7/60] which recorded his meeting with Mr Woodward of the DOP Wollongong, agreed at T1451-1452 that the reference: "At this stage the major problem was likely to be related to the pollution of the Hacking River, the main pollution was deemed to be storm water pollution", obviously indicated that the Department of Planning identified pollution of the Hacking River as the major problem. Mr Lester's file note records Mr Woodward's belief that "one of the key concerns that applies to the Hogarth land, in particular is that the level of run-off of water and quality must be equal to or less than the present level under any new development proposal". The file note continues: "The major issue now appears to be the protected waters nature of the Hacking River". 536 Mr Lester gave evidence at T1453 in relation to that file note as follows: 'Q. Now it is clear, I would suggest to you, by [3 December 1993], that the problem of water quality and storm water quality was seen to be a major problem both with the Department of Planning, and that is seen by you, to be a major problem both with the Department of Planning and the Wollongong Council-- …….WITNESS: I think it is fair to say that there was, there was perceived to be a problem, but I think that my notes that relate to the meeting with Mr Cummings indicated that the council had not investigated or studied the water quality proposals that were part of the GH & D submission, so water quality was a problem but appropriate investigations, and review of those proposals, had not been carried out. ……ELLICOTT: Q. What do you say about the council, about the Department of Planning? A. That flagged that water quality was an issue that needed to be addressed, but they equally had not studied, as I understood it, the GH & D proposals.' 537 Further, at T1496, Mr Lester gave the following evidence as to his understanding of the DOP and Council's attitude to the water quality issue: 'Q. By the end of 1993, or early 1994, you surely must have realised, did you not, that in obtaining rezoning, whatever other issues there might be, you would have to leave no stone unturned to establish that Walkers, or LCE, however you put it, had the solution to the problem relating to water quality and stormwater management. Would you agree with that? A. I find the term "no stone unturned" a little difficult, but I would agree that work needed to be - stormwater issues needed to be looked at, but I was also conscious from various discussions that the various agencies had not thoroughly looked at the proposals that had been put forward. Q. But however you did it, it was essential, wasn't it, in your mind by the end of 1993 or early 1994, that you had to succeed in convincing the council, or the Department, or if there was a commission of inquiry, the commission of inquiry, that there was a solution to the water quality and stormwater management problem? A. Yes. Q. Now it was obvious that that was a problem, that is stormwater management and water quality, that was a problem with the Department and the Wollongong Council? A. Yes. Q. And I wonder if you just turn to paragraph 28 of your statement: "After these discussions I considered that it would have to be clearly demonstrated to the DOP that there were definite solutions to the Helensburgh problem". You say that there? A. Yes. Q. And that you have sworn to that, and I take it you adhere to that? A. Yes.' 538 Mr Lester conceded at T1608-1609 that it was on the issue of water quality that most opposition to the proposed rezoning focused during the Commission of Inquiry: 'Q. You see, these other people, and particularly the council, had made it quite apparent, hadn't it, that they were opposing the accuracy and the validity of the water quality and stormwater management solutions that had been put in by you in your June 1994 submission? A. No. Q. Is that absolutely clear, that Mr Robertson for instance was attacking your submission in relation to water quality? A. Yes. Q. And had been doing that over those days at the Commission between the time that the Sutherland Council put its submission in and the time that it concluded its submission he was vigorously attacking the position that you had taken up in your submission of June 1994. You agree with that? A. Yes.' 539 As to the relevance of the issue of water quality to the Commission of Inquiry, Mr Lester maintained his stance that water quality was not 'the critical issue' but one of a number of issues before the Commissioner. It is evident from his cross-examination that this stance created difficulty for Mr Lester, particularly in view of his brief to GHD once the Commission had commenced: 'Ellicott: Q. When you engaged [GHD] under that letter of late July, early August… And that said that "This report would reflect state of the art knowledge in 1994 and update the philosophy developed in 1991/92….. didn't you engage them under that letter because you realised that the question of water quality and stormwater management had not been adequately addressed in the submission that you put in June 1994? A. No. I think that - no. Q. So you still thought that the submission of June [1992] provided an answer to the problem of water quality and storm water management; is that right? A. Yes. Q. And not only provided an answer, but provided the answer; is that correct? A. Provided an answer. Q. Did it provide the up-to-date answer, in your view, as at the end of July 1994? A. That was my understanding from GH & D. Q. And didn't that mean that because of the failure of the June 1994 submission, to address the state of the art in 1994 that there was a problem at that stage in relation to water quality for Walkers case and the joint venture's case before the Commission of Inquiry? A. No, I don't believe so. Q. And isn't that the reason why you went to GHD at that time? A. No. Q. And wasn't that part of the reason why you went and engaged Mr Lloyd of Queens Counsel? A. No. ……. ELLICOTT: Q. Did you believe at this time that the issue of water quality had become a critical component of the Commission's investigations? A. It was one of the components that the Commission addressed questions on. Q. I am asking you a question which is: Did you have the view at the time that the issue of water quality had become a critical component of the Commission of Inquiry's investigations? A. I was of the view that there were a range of issues that the Commissioner had raised. This was one set of issues relating to water quality. Q. I will ask you again, and I do think his Honour of course will overrule me if I am being unfair, but I do think you can answer this "yes" or "no": Did you think at that time that the issue of water quality was a critical component of the Commission of Inquiry's investigations? A. It was an important part. Q. Was it a critical part? A. …. I still say that I would treat it as an important issue. Q. Not a critical issue? A. Well, an important issue. Q. Would you go to page 155. Water quality. This is the outlined brief for Gutteridge Haskins Davey which I understand you had some part in preparing: "The issue of water quality has become a critical component of the COI's investigations"; do you see that sentence? A. Yes, I do. Q. Is that true? A. Well, I wrote it so yes. Q. So you will agree with me now that you did have the view that the issue of water quality had become a critical component of the Commission of Inquiry's investigations ; is that right, you will agree with that? A. Yes.' [T1774-1777 - emphasis added] 540 Previously, at T1499-1500, when Mr Lester was cross-examined on the brief he had prepared for GHD in late July 1994, he gave the following evidence: 'ELLICOTT: Q. And will you go back to page 155, and I suggest to you that this was written after you'd realised that you had lost the initiative at the Commission of Inquiry, because there had been great criticism of the GHD based submission made, or put in by you in the middle of June 1994? A. …. I would not agree that we'd lost the initiative. I would agree it was in response to issues raised, and submissions made, and questions raised by the Commissioner. Q. Under water quality at page 155, the issue of water quality has become a critical component of the COI investigations, you see? A. Yes. Q. Absolutely clear that by then it was a critical component, right? A. Yes.' 541 Mr Lester had given a similar answer at T1487 when pressed as to whether he continued to hold the view during the Commission of Inquiry that water quality was simply one of a number of important issues: 'ELLICOTT: Q. Did that remain your view during 1994? ……A. No. I think it became clear at the Commission of Inquiry during 1994 that water quality, and issues relating to water quality, became important. Q. Became the major issue, I suggest? A. Within the Commission of Inquiry, yes . Q. And the fact that you didn't see it beforehand as a major issue was a great misjudgment on your part, was it not? A. No. Q. See, all the material, I suggest to you, for you to form a conclusion as to whether or not it was the major issue was before you, before you put in your submission that I have just taken you to, in June 1994, all the material that you could have regard to which would emphasise the significance of the problem? A. Yes. Q. And I suggest to you that your failure to recognise from that material that this was a major issue was a major misjudgment on your part? A. No.' [emphasis added] 542 To my mind it is curious in the extreme that Mr Lester apparently failed to grasp the significance of the water quality issue at a very early stage - indeed, that it would be the key issue before the Commission of Inquiry. It appears that all the signs that this would be the case were before Mr Lester in the lead up to Commission, including references in his own file notes. (See section of judgment dealing with indicia…). The plaintiffs assert that Mr Lester, at the latest by the end of December 1993, ought to have known that water quality was the key issue. They say that if not 'he was incompetent or his denials were untruthful.' [Plaintiffs Submissions: Walkers failure to secure the rezoning promptly, paragraph 17]. 543 Mr Lester's evidence as to his state of mind and whether, and if so when, he formed the view that water quality was the key issue before the Commission of Inquiry, was inconsistent. During his cross-examination I formed the clear impression that Mr Lester was 'digging in his heels' in his insistence that water quality was to his mind at the time, but one of a number of important issues to be addressed before the Commission of Inquiry. However, when pressed on this point he did at times concede that it became clear to him during the Commission of Inquiry that this was the case. The probabilities are in favour of a finding of fact that at the time Mr Lester believed that water quality was likely to be the key issue before the Commission. That finding is made. 15 June 1994 - Initial Submissions to COI 544 On 15 June 1994, an announcement was made that Wollongong City Council and Sutherland City Council had established a joint committee to face the Inquiry and that both Councils had resolved their position to be 'that there should be environmental protection'. [10/214] 545 Under cover of letter dated 15 June 1994, Lester Firth Associates forwarded to the Commission of Inquiry the initial submission prepared on behalf of LCE referred to as the 'Primary Submission'. The covering letter stated: 'The submission encompasses the findings of a number of previous studies and plans that have been prepared for Lady Carrington Estates. The submission also addresses the issues raised in the Commission's terms of reference and includes additional studies that have been undertaken.' 546 The submission and the covering letter are to be found at 10/7, running through to 10/95. 547 The structure of the submission conveniently corresponds to the structure of the terms of reference of the Commission of Inquiry. 548 The submission is organised into two parts. The first part deals with land capability and the suitability of both parcels of land contained within the Lady Carrington Estate for residential development. Land suitability is assessed in relation to landform, drainage, vegetation and land tenure. This is then compared with the land suitability assessment contained in the Draft Helensburgh Plan 1990. 549 The second part of the submission addresses the seven specific terms of reference as follows: water quality impacts on the Hacking River; potential environmental impacts on the Royal National Park; conservation value of the land; economic costs and benefits; housing and employment opportunities; urban character of Helensburgh; and bushfire risks. The submission then includes a summary of conclusions, the tenet of which is to indicate that it is possible to undertake sensitive residential development of the LCE lands coincidently with ensuring the protection of environmentally significant land and provision of effective measures for pollution control and environmental management. 550 In the introduction to the submission, it was stated that the current proposal on the part of Lady Carrington Estate Pty Ltd is to develop portions of the land adjoining Helensburgh and to dedicate the environmentally significant land to the National Parks and Wildlife Service. 551 It was said that in undertaking a feasibility study and developing a planning proposal, LCE commissioned professional planning and engineering advice. Further, it was said that the consultants liaised closely with the Wollongong City Council and relevant government authorities, this process being supported by Wollongong Council staff in an attempt to rationalise land holdings and to address land use issues. 552 The section of the submission dealing with water quality impacts totals 4.5 pages. The proposed stormwater management approach is covered in half a page and relies exclusively on the Stormwater Management Strategy included in the 1992 GHD rezoning application. Given the surprising brevity of this sub-section, it is convenient to extract it in full: 'The GHD proposal for Lady Carrington Estate proposed a comprehensive approach to stormwater management which introduced a combination of seasonal sedimentation basins together with artificial wetlands aimed at controlling run-off and pollution in each of the residential catchments. More specifically, the strategy was based on a first intercept utilising seasonally wet and dry retention basins close to the pollution source. These basins provide the dual role of flood retardation and sediment capture. The basins would collect coarse sediments, metals, hydrocarbons and pesticide loads as close to the source as practical. The second intercept was a series of artificial wetlands capable of trapping fine sediments and absorbing nutrients through biological uptake. The upstream retention basins will reduce the pulse load during storms and allow the wetlands to uptake non filterable material. The stormwater management approach is part of a wider strategy of water conservation and retardation within the residential precinct and involves actions such as slowing run-off and roof water tank collection for garden irrigation all aimed at minimising peak stormwater run-off.' [10/029] [It is convenient to interrupt the examination of the June 1994 submission proper to note the following points which go to the relevance of Dr Yassini's review of the 1992 GHD application earlier flagged in the judgement.] 553 In concluding the water quality section of the 1994 June submission, LFA expressly noted that Dr Short's 1990 criticism of the Sinclair Knight proposal (which was one of the earlier studies upon which the 1992 GHD report drew), had been specifically addressed in the GHD application - the GHD proposal being modified accordingly. Indeed, Dr Short is stated as having advised GHD for that purpose [10/30-1]. 554 To my mind, implicit in the above statements is an acknowledgment, presumably by Mr Lester being co-ordinator of the submission, that it is important to address criticism of an early approach to an issue when subsequently dealing with that issue. By way of 'address', I have in mind either distinguishing the earlier approach or substantiating it (and thus disproving the criticism) if it is to be followed. 555 As can be readily identified from the sub-section extracted above, LFA relied exclusively on the 1992 GHD application in making its primary submissions in relation to stormwater management to the Commission of Inquiry. It was, therefore, important that before making such submissions, Mr Lester gather and address all information available which treated with the 1992 GHD application. It is not enough that it was noted in the June 1994 submission that the GHD proposal was assessed in detail and approved by Sivakumar, Chowdhury and Ellis of the University of Wollongong in 1992 when Dr Yassini's criticisms loomed large. 556 During the proceedings Mr Lester gave evidence that while Dr Yassini's report may have been included as part of the data lodged with the Commission of Inquiry, it was on the council file on the LCE lands as at December 1993 [T1454]. 557 Mr Lester conceded in cross-examination that Dr Yassini's report expressed some major concerns about the 1992 GHD application [T1454] and as the 1992 application formed the basis of the June 1994 submission to the Commission of Inquiry, it would have been helpful to have had access to Dr Yassini's report in December 1993 at the time when he was developing with Walkers an overall strategy for the preparation and presentation of the joint venture case to the Commission of Inquiry [1481-3]. 558 Mr Lester gave evidence as follows at T1483: ELLICOTT: Q. (Volume 10 page 29 handed to witness) That I think is part of your submission of June 1994 in relation to proposed stormwater management. You see that? A. Yes. Q. Now there is nothing in there, that is 3.2, about which suggests any criticism of the [1992] GHD proposal? A. No. Q. And I would suggest to you that there is nothing in that submission which suggests criticism. Indeed it was extolling its virtue, isn't that right? A. Yes. Q. And it would have been very useful, wouldn't it, to have had to have known that Mr Yassini's report would, would it not, so you could have anticipated it and answered it if you could? A. Yes. 559 In relation to this topic, Mr Rowbottom deposed in paragraph 244 of his report of 17 September 1999 as follows: 'Mr Lester states that the "preliminary investigations had indicated that the [1992 GHD application] had not been considered in detail by WCC and accordingly, the detailed GHD documentation had not been assessed in a competent manner. In my opinion, if these 'investigations' had been more thorough, the team preparing for the Inquiry would have identified the report prepared by Mr Yassini in response to the 1992 GHD Submission. Mr Yassini's report was critical of the stormwater treatment measures presented in the 1992 GHD Submission… and if discovered it would have notified the joint venture team that their approach required revisions.' 560 During the course of Mr Rowbottom's cross examination, it was pointed out to Mr Rowbottom that Dr Yassini had three grounds for criticising the stormwater component of the 1992 GHD application. These were summarised as: too many basins and wetlands; difficulty of maintenance; and inefficient approach in relation to reduction of phosphorous. It was put to Mr Rowbottom that as nowhere in his statement of 17 September 1999 did he say "I agree with Mr Yassini's concerns", his references to Dr Yassini were for some purpose other than for the purpose of agreeing with them. In answer, Mr Rowbottom noted that his statement of that date was a statement in reply and that while he could not recall the exact context or whether he agreed with all of Dr Yassini's comments, Dr Yassini did criticise the fact that the proposed wetlands were located on-line rather than off-line and that in that respect he (Mr Rowbottom) would agree with Dr Yassini [T1067]. 561 Mr Smyth noted at paragraph 3.2 of his report dated 11 February 1999, that Dr Yassini's report to WCC raised some important concerns as to the proposed methodology put forward in the 1992 GHD application. Notwithstanding this, Mr Smyth deposed that he did not find any reference to the Yassini report in Mr Lester's notes of his meeting with WCC officers on 3 December 1993. Nor did Mr Smyth find any reference in Mr Lester's notes to suggest that he sought any feedback from WCC about WCC's reaction to the water quality or other parts of the 1992 GHD application. 562 Mr Smyth gave evidence at T1243 that the concerns expressed in Dr Yassini's report as to the 1992 GHD water quality controls should have alerted Walkers to the need to carry out testing so as to substantiate the controls. In any event, Mr Smyth gave evidence that Mr Lester's file note of 16 May 1994 repeated the concerns raised by Dr Yassini. 563 Returning to the June 1994 submission. 564 Clearly, the sections in the June 1994 submission dealing with 'environmental impacts on the National Park'; 'conservation value of the land'; 'urban character of Helensburgh' and 'bushfire risks' also rely primarily on the 1992 GHD application and the various studies included as Working Papers to that application. 565 The sections on 'economic costs and benefits'; 'housing' and 'employment opportunities' also draw to a large extent on the Draft Helensburgh Plan 1990. 566 Also on 15 June 1994, GHD forwarded to the Commission of Inquiry a submission on behalf of the Helensburgh Land Pooling Group to be found at 10/96 through to 10/109. 16 June 1994 567 June 1994 was the closing date for initial submissions to the Commission of Inquiry. 568 Also on 16 June 1994 the Opposition Leader, Mr Carr, was reported as saying that a State Labor Government would block any urban expansion at Helensburgh. One report stated as follows: 'Speaking after a meeting with the Save the Hacking Coalition, Mr Carr said an incoming Labor Government would completely ignore the recommendations of a Commission of Inquiry, which had been set up by the Fahey Government. He said that, as Premier, he would reverse any development approval granted by current Planning Minister, Robert Webster .' [10/220] [emphasis added] 569 A further article which by handwritten notation upon the copy in evidence, appears to have been sent to Messrs Dransfield, Walker and Hogarth, appeared in 'The Mercury' on 16 June 1994 generally to the same effect. According to the article, Mr Carr's announcement was welcomed by the Wollongong City Council Lord Mayor, David Campbell, who stated that Mr Carr was endorsing the position which he had argued for and advocated at Council for four years. According to the article: 'Mr Carr said the government, which called for the Inquiry, was "rushing headlong into urban sprawl on this sensitive land on the edge of The Royal National Park.' 570 The article in strong terms quotes Mr Carr as saying that a Labor Government would completely ignore the recommendations of a Commission of Inquiry. [10/219] 24 June 1994 - Meeting 15 571 A further meeting was held on this date between Messrs Hogarth, Kidd, Walker, Dransfield and Lester. Accounts of the meeting are in dispute. Mr Hogarth's Evidence 572 Mr Hogarth's version of the meeting is set out at paragraph 102 of his statement in the following terms: '102. On 24 June 1994 I attended a meeting at the offices of Walker Corporation with Messrs Walker, Dransfield and Kidd. During that meeting a conversation took place to the following effect: [ Mr Kidd: "Gentlemen, we have a serious issue on water quality. I attended the Helensburgh Catchment Management Committee's meeting on Wednesday (22 June 1994) and the members of that Committee were very forthright as to how they were going to deal with this Commission of Inquiry". Mr Kidd then described some of the members' theories on the issue of water quality. Mr Kidd: "We really need to be up to the mark on this issue". Mr Dransfield: "Geoff, I can assure you that we are. We have all of the experts engaged that are necessary. We've got GHD and they are in charge of the Rouse Hill development and Alf Lester has a full understanding of what's involved and required to satisfy the Commission regarding water quality and water settling ponds". Mr Kidd: "Are you still satisfied that the work that's happening at Rouse Hill and the testing that's being carried out is adequate to satisfy the Commission?" Mr Dransfield: "I am more than confident that that case study will be sufficient to satisfy the Commission. That is why we have used the consultants for this Commission that have been involved at Rouse Hill. As you know, I'm the Chairman of the Rouse Hill Infrastructure Consortium".' ] Mr Kidd's Evidence 573 Mr Kidd's version of this meeting in paragraph 61 of his statement was in the following terms: '61. On 24 June 1994 I attended a meeting at the offices of Walker Corporation with Messrs Walker, Dransfield and Hogarth and Lester. During that meeting a conversation took place to the following effect: [ Mr Kidd: "Gentlemen, we have a serious issue on water quality. I attended the Hacking River Catchment Management meeting on Wednesday (22 June 1994) and the members of that Committee were very forthright in their opposition to our proposal in this Commission of Inquiry. We really need to be up to the mark on this issue". Mr Dransfield: "Geoff, I can assure you that we are. We have all of the experts engaged that are necessary. I am the chairman of the Rouse Hill Infrastructure Committee. We've got GHD and they are in charge of the Rouse Hill design and Alf Lester has a full understanding of what's involved and required to satisfy the Commission regarding water quality and water settling ponds". Mr Kidd: "Are you still satisfied that the work that's happening at Rouse Hill and the testing that's being carried out is adequate to satisfy the Commission?" Mr Dransfield: "I am more than confident that that case study will be sufficient to satisfy the Commission. That is one of the reasons why we have used the consultants for this Commission that have been involved at Rouse Hill". ] Mr Kidd: "You've all seen a copy of the document that Bob received in respect of the request to Premier John Fahey to scrap the Commission of Inquiry. Alf, what are we doing about water quality. It seems they're on about the Hacking River again as I have indicated to you". Mr Dransfield: "We have all that under control. We've engaged further consultants and they'll be doing a report for us". Mr Lester: "We have confidence that we can overcome objections based on water quality and defuse this issue". Mr Kidd: "Shouldn't all this be in position now?" Mr Lester: "No, this all takes a bit of time but we are working on it at the moment".' [Again the section in square brackets is close to identical with the section identified above in Mr Hogarth's statement.] Mr Lester's Evidence 574 Mr Murton took a file note dated 27 June 1994 of the meeting. The file note is to be found at 10/271. It includes the following: 'GK commented that with Sutherland Council there are some 126 stormwater discharges, only one of which is treated. This information should be verified and then form the basis of a question to SSC . . . GK indicated that he would propose a resolution as a member of the Hacking River Catchment Management Committee to request that WCC close the rubbish tip and install a transfer station to accept rubbish . . .' [10/271] 575 In answer to paragraph 61 of Mr Kidd's statement, Mr Lester's evidence was as follows: (a) He denied that he had said "We have confidence that we can overcome objections based on water quality and defuse this issue". (b) Mr Lester recalled indicating that consultants were preparing reports that would address the water quality issues that were being raised. To his recollection, it was agreed that this information should be verified and form the basis of a question to the Sutherland Shire Council. [Under cross-examination, Mr Ellicott put to Mr Lester that there were no consultants engaged at this stage to prepare reports. Mr Lester was not certain and agreed that it was possible that this statement could be quite wrong. [T 1789] (c) Mr Lester's evidence was that Mr Kidd had noted that there were some 126 stormwater discharges under the SSC control, only one of which was treated. His evidence was that it was agreed that this information should be verified and form the basis of a question to the SSC. (e) His evidence was that Mr Kidd indicated that he would propose a resolution as a member of the Hacking River Catchment Management Committee, requesting that the WCC close the rubbish tip and install a transfer station. [Lester statement paragraph 77] 30 June 1994 576 On about 30 June 1994, there was announced the fact that Sutherland Council would spend $15,000 on a publicity campaign against the Helensburgh Commission of Inquiry and had that week called on the Minister for Planning, Mr Webster, to cancel the Inquiry and would seek the support of local State MPs in their fight. [10/282] 5 July 1994 577 The Commission of Inquiry hearings began on 5 July 1994. The list of submissions to the Inquiry are conveniently to be found at Appendix '3' to the Commissioner's December 1994 Report - see 19/284. 578 The list of appearances by the end of the Commission is set out as an appendix [Appendix 2] to the Commissioner's Report which is at 19/280. That list of appearances by the end of the Commission includes as appearing on behalf of LFA (or Walker Corporation - LCE), Mr M. Sharpin, Gutteridge Haskins and Davey. 579 At transcript 1606, Mr Ellicott put to Mr Lester that GHD at the commencement of the hearing, were appearing for the Helensburgh Land Pooling Group (with which Mr Lester agreed), and were not appearing for LCE at that stage and had not been engaged - which Mr Lester disagreed with. 580 Mr Lester's evidence was that GHD had been engaged and did attend at the beginning of the Commission on behalf of Lady Carrington Estates. 581 Mr Lester's diary note assisted him to recall that he attended the Commission of Inquiry on 5 July as his diary note said 'drive to Helensburgh. COI Wollongong. Attend COI Wollongong'. 582 According to Mr Lester's diary, the second day that he attended at the Commission was on 6 July, his diary note showing that at 7.30am he was preparing for it and at 8.30am he met with Mr Sharpin and that he reviewed strategy with Mr Paul McKenna and then drove to Helensburgh the Commission of Inquiry. It was a site visit at 12.30 . . . Mr Lester's recollection being that the Commissioner had arranged for a site inspection on that date. [T 1607] 583 Mr Lester's recollection was that his next appearance at the Commission was on 7 July when the LCE presentation took place which was followed by the Land Pool Group presentation. His evidence was as follows: 'Q. So you presented the Lady Carrington Estate? A. Yes. Q. And I suggest to you that GHD presented the Land Pool submissions? A. As far as I recall the land Pool presentation was put forward by GH&D.' [T 1608] 584 Mr Lester's evidence was that he next attended on 12 July, he believed with Mr Heinjus and was there until approximately 1 o'clock. His diary notes were not clear as to 14 July but he also appeared on about the 19 July [T 1608]. 6 July 1994 585 By letter dated 6 July 1994, Mr Sharpin of GHD wrote to Lester Firth Associates in the following terms: 'Re Assistance to Helensburgh Commission of Inquiry Reference is made to recent discussions (LFA/Walkers/GHD) regarding assistance to LFA and Walker Corporation in their submissions to the Commission of Inquiry for Helensburgh. We wish to confirm that this assistance would be provided by GHD on a time plus disbursements basis. As previously advised to Walkers for the Shell Cove project, Mike Sharpin's charge rate will be $95 per hour. We look forward to working with you on this project.' [11/.0046.1] 586 Mr Hogarth's evidence which was not in issue, was that he attended at every session of the Inquiry. His evidence was that at the start of the Commission, Mr Lester was not present. To his recollection, Mr Lester was present on about half the number of sitting days [T9]. 587 Mr Lester's evidence was that he attended at the Inquiry on 5, 6 and 7 July 1994. Also on 12 July until approximately 1.00pm. He had not attended on 13 July. He was unsure of whether he attended on 14 July but did attend on 19 July. 588 To Mr Hogarth's recollection, Mr Murton was present approximately half of the sitting days. His evidence was that Mr Dransfield had not appeared during the first few days of the Commission and thereafter appeared infrequently and stayed for short periods of time and either left early or arrived late. 589 His evidence was that in the early days of the Commission of Inquiry he telephoned Mr Dransfield and had a conversation with him to the following effect: '103. During the early days of the Commission of Inquiry which commenced on 5 July 1995, there was hardly any attendance by the Walker Corporation people which prompted me to telephone Mr Dransfield when we had a conversation to the following effect: Mr Hogarth: "Peter, we're getting walked all over down here. Wollongong and Sutherland Councils have joined forces and briefed Tim Robertson, a Queens Counsel, and they are killing us. As you know, Wollongong Council are not supportive of our development and they're now doing everything they can to stop it. You said you had this all wrapped up but we're having real problems here. You lot told me to take a back seat and then don't even bother to turn up. I don't think Walkers are taking this Inquiry seriously enough". Mr Dransfield: "Bob, we've sent Alf Lester down to make Walkers' submissions". Mr Hogarth: "Alf Lester has turned up and occasionally makes passive observations but nobody from Walkers is coming down and making verbal submissions. Peter, you told us that you yourself were going to run the show and you haven't even fronted. The issue of water quality came up at the Inquiry and you're not there to answer it and Alf Lester says that I'm not allowed to address the Inquiry". Mr Dransfield: "Bob, I'm very confident that Alf Lester has all the expertise to professionally deal with all of this and I assumed that he had this totally under control. I'll come down and see for myself". Mr Hogarth: "Well it's my observation that at the present our crew haven't got a clue about what they're doing down there. Apart from Lester turning up, all they're doing is relying on the stuff that we had (the GHD Reports and supporting information)". Mr Dransfield: "Bob, Walkers have retained Alf Lester to deal with all of this on our behalf and our people think he's doing enough at the Commission of Inquiry".' 590 Mr Hogarth's further evidence in paragraph 104 of his statement and 105 of his statement were in the following terms: '104. Subsequently I had a further discussion with Mr Dransfield along similar lines: Mr Hogarth: "You said you would be coordinating our submissions to the Inquiry and yet you've rarely shown up". Mr Dransfield: "Bob, I've briefed Alf to work on this and I've also sent Paul McKenna down there". Mr Hogarth: "McKenna is not a lawyer and anyway, he hardly says anything. Peter we have got to get someone else down here. The greenies are trying to white-ant the Commission of Inquiry and as you know I had to give the Commissioner an undertaking that I will defer the action we have got against the local greenies, Donohoe and his mate Tapsell, until after the Commission of Inquiry is concluded." Mr Dransfield: "Well we are pretty sure that the Commission of Inquiry is going to be favourable to us and we don't want to spend too much money on it but if you think we have got to have better representation then we will have to think about it." 105. Subsequent to that, a number of Walker Corporation people were present at the Commission of Inquiry including Mr David Lloyd (Queens Counsel) retained by them on or about 28 July 1994. I personally had to prompt him to reply to some of the arguments put forward by Mr Tim Robertson, the barrister retained by Wollongong and Sutherland Shire Councils.' 591 Two file notes compiled by Mr Heinjus, an employee of Lester Firth & Associates, as to the proceedings on the first day of the Commission on 12 July 1994 were tendered and taken into evidence as PX 11/52 and PX 11/112. 592 Mr Hogarth had in paragraph 109 of his statement, given the following evidence: '109. In or about July/August 1994 I had a discussion with Mr Lester to the following effect: Mr Hogarth: "Alf, I'm worried about the damage that Robertson QC is causing to our case, particularly in his raising doubts about the water quality aspect of our proposal. He seems to have captured the Commissioner's attention". Mr Lester: "We've got the facts and we'll win in the long run and outdo such showmanship".' 593 In answer to paragraph 109 of Mr Hogarth's statement, Mr Lester's evidence was as follows: (a) He recalled a conversation with Mr Hogarth in or about July/August 1994 where Mr Hogarth had expressed concern about the issues that Mr Tim Robertson was raising about water quality. (b) Mr Lester denied that he had said "We've got the facts and we'll win in the long run and outdo such showmanship". (c) Mr Lester's evidence was that he recalled that Mr Robertson was presenting the material very dramatically and that he indicated to Mr Hogarth that the material and issues being raised were being reviewed by a number of specialists and that on advice from Mr Lloyd QC that was being prepared for presentation in a consistent and thorough manner. [Lester paragraph 80] 594 Mr Lester's evidence in his statement at paragraph 89, dealt with Mr Lloyd's retainer [referred to below], to provide legal representation for the Commission of Inquiry. Mr Lester described his own role as follows: 'My role was to ensure that the various skills and disciplines that were required to make both written and oral presentations to the Commission of Inquiry were coordinated. My task was also to ensure that where questions were raised by the Commissioner that a specialist was briefed to prepare specific responses . . . It was made very clear to Mr Hogarth from the outset that I had qualifications in architecture and town planning. At no stage was it suggested that I had any legal training.' [Paragraph 89 of Mr Lester's statement] 17 July 1994 595 On 17 July 1994, Mr Kidd sent a facsimile to Mr Hogarth and copied it to Mr Dransfield and Mr Lester. Mr Kidd apologised for not having been able to attend earlier but suggested a number of matters to be worked through when the recipients of his facsimile met as part of their deliberations. These considerations included the following: 'Do we need to retain additional experts to counter those of SSC? I think we do as Tim Robertson QC will run this like a trial with our experts versus his experts. Do we need to change our future presentation approach to have a Silk represent some part of our case as a specific response and counter to Robertson? I think we do to ensure that we match SSC blow for blow . . . Who will attend the "round table" discussions on our behalf? When will we establish the main points to be covered in our session in reply? Note that we know all of the experts retained by SSC and I believe that we need to now move to retain all of the same class of expert plus two or three more and prepare favourable reports in parallel with SSC so that we can counter each of their experts with a favourable one of our own. This needs to be actioned immediately or we will need to request 8-10 weeks' extension and have it granted once SSC's reports are received. . . . Someone (a Silk ???) to match Robertson's polish and to specifically attack Robertson's theatre and bullshit. We perhaps could open with this and then hand over to the technical people. Someone from Walkers (PD or LW) to present the good corporate citizen line and to replace Hogarth and Kidd as the "big fat developers". Any other experts or references that we need. Here it would be great if we could fly in the Westerman, the Mike Ingland and the Ros Mustern of the USA to say how successful is our concept and point to some reference examples overseas which are an outstanding success. How was this handled when Rouse Hill was being considered. We are going to need a couple of trump cards to play in the reply session and an expert(s) from overseas would confuse things a little - particularly if they have time here to get familiar with the counter arguments, the local area and the details of the land. In my opinion we should definitely finish off with Hans Westerman and have him do an hour. He will have the Commissioner eating out of his hands. To do this properly we therefore need to be on last or late in the reply session. I am worried about being tied to Rouse Hill and getting down to detail design of basins too early as this gives our opponent something firm to attack. I think that I favour presenting any detail late in an effort to convince the Commissioner. If we do it earlier, Robertson will tear it to pieces. If Rouse Hill can be proven not to be a failure, we should accuse the National Parks Association of deliberately misleading the Commissioner and of treating the Commission of Inquiry with contempt.' [11/88-11/90] [emphasis added] 596 Under cross examination, Mr Lester was referred to this facsimile and in particular the words 'do we need to change our future presentation'. He gave the following evidence: 'Q. Now it was that paragraph in that note to you and to Mr Hogarth and Mr Dransfield that provoked the appointment with the engagement of Mr Lloyd of Queens Counsel. Is that right? A. I think it was one of the elements. Q. If you went back to the origin of the idea, it came from Mr Kidd did it not? A. I think it was discussed by a number of parties, and this was just one of the reinforcements of that.' [T 1604] 19 July 1994 597 Mr Lester prepared a detailed note dated 24 July 1994 of the Commission of Inquiry hearing of 19 July. The note begins: 'The first part of the session was directed toward the presentation and site visits that were scheduled on the following day, Wednesday 20 July. In this context AL noted that there would be some three weeks of effort required before Lady Carrington Estates would be able to identify the potential storm water detention site. The Commissioner accepted this advice and for this reason Lady Carrington Estate South was deleted from the proposed inspection schedule . . .' 598 The note includes the following: 'Council then submitted the test results on water quality which were based on a QEM (Quality Environmental Management) Report prepared by Ros Muston. He suggested that there were no plans for the tip at the moment, that the Crown Lands had leased a part of the tip to Council and that part of the area was owned by Council. He suggested that based on the QEM Reports, the quality of run-off was equal to or better than the existing creek systems in the Helensburgh area. He further suggested that QEM data which was based on a number of samples over a 12 month period was superior to the GHD monitoring which occurred over a fairly short time frame. It was not clear from the data what had been tested during the QEM investigations and how this compared with GHD review . . . Council was asked questions about the water standards, urban catchments, the capping of the tip and the future management plans. The next presentation was by Dr Smith from Sutherland Council. He indicated that the consultancies now committed by Wollongong/Sutherland Council were anticipated to prepare responses by the 22nd of August. He indicated that they would be in a position to attend a round table on water quality on the 8th of August . . .' [11/119] 20 July 1994 599 Mr Lester's file notes of the site inspections of Wednesday 20 July 1994 are dated 25 July 1994. The file note includes the following: 'An inspection of the Lady Carrington Estate took place and focussed on the areas on the plateaus to the north and to the south. Wollongong Council attempted to draw attention to the comparatively steep nature of the creek tip zone and against sought details on the water quality control structures that would be utilised . . . Again Wollongong Council attempted to identify where the detention basins/wet land zones would go and the impacts that might be associated with such detention basins in steeply sloping gullies . . . The primary reason for the protected land status was to ensure that on relatively steep land (reference was made to slopes of 18 degrees) that tree cover was to be retained and hence the soil stability maintained. Clearly if works associated with water quality/retention were to be implemented then an application to CALM would be necessary . . . Before closing the day's session Dr Smith again sought advice from LFA about the nature of the brief that would be issued to the consultants who are to review the stormwater quality control procedures and the information about the brief that would be given with respect to the design of stormwater control measures. AL responded by noting that the consultants were responding to questions raised by the Commissioner and that it was extending the work from what might have been normally acceptable as defined by Dr Brett Phillips at yesterday's session of the Commission, to extend and develop the modelling parameters based on current best practice and also to review with additional data the design of a number of prototype wet basins.' [11/128-132] 600 The whole of Mr Lester's file note and in particular that dealing with the inspection of the Royal National Park sites and the Lady Carrington Estate record the breadth of interest of the Commissioner and of those attending in relation to parameters of significance including, for example, sedimentation components, crofton weed, natural transport of sediment in the Hawkesbury sandstone area, soil stability. 21 July 1994 601 On 21 July 1994, Mr Lester spoke with Mr David Lloyd QC. They discussed the nature of the Inquiry and Mr Lloyd's fees if retained. Apparently Mr Lloyd is regarded as from this date having been first informally and then formally retained. [11/111] 602 A draft dated 21 July 1994 of the letter of 28 July 1994 from GHD to Lester Firth and Associates appears at PX 11/107. 22 July 1994 603 By facsimile dated 22 July 1994, Mr Lester wrote to Mr Dransfield advising, inter alia: 'We have been in contact with David Lloyd QC and an appointment has been confirmed to _ _ pm on Monday 25 July in his chambers . . . Attached please find a faxed copy of the fee disclosure . . . which Mr Lloyd has indicated must be acknowledged in writing before meeting with him . . .' [11/118] 25 July 1994 604 A conference took place, attended by Messrs Lester, Dransfield and Kidd with Mr Lloyd QC on 25 July 1994 for 1¼ hours. Mr Lloyd's memorandum of fees dated 14 November 1994, set out at 18/144 and following, summarises the work carried out by Mr Lloyd between 25 July 1994 and 14 November 1994 with some precision. His first attendance appears to have taken place on 5 October 1994 at the Inquiry, he having before this point in time examined and settled a draft report of Professor Westerman and having prepared submissions in reply. 605 Walker Corporation returned to Mr Lloyd QC his fee disclosure agreement with their signed acceptance under cover of facsimile dated 25 July 1994 - [11/125]. Whilst it is difficult to decipher, Mr Lloyd's fee disclosure and offer letter appears to have been sent by Mr Lloyd by facsimile on 22 July 1994 - 11/126. 25 July 1994 - Meeting 18 Mr Hogarth's Evidence 606 Mr Hogarth gave evidence that during a visit by Mr Weinert to the Helensburgh property on 25 July 1994, a conversation to the following effect took place: 'Mr Weinert: "Lang has asked me to see if we can do something about the profit figures in Walker's accounts and the only thing that I can think of is that we can accrue as income an amount on account of management fees. Bob, we are going to be a couple of million short of our projected profit for our first year as a public company. You'll recall Bob that when we have paid the $20 million to Ensile we were then going to take a component being the difference between the $9 million value of the land and the $20 million as management fees". Mr Hogarth: "Yes, I recall that". Mr Weinert: "Lang thinks that we can accrue those at the moment and put those through as income for Walkers. Lang has suggested that I ask you to help us with this as we have helped you. After all, we are now your joint venture partner." Mr Hogarth: "I don't care as long as it doesn't affect me and doesn't affect the joint venture. Brian, I will need something in writing to the effect that the amounts you are talking about will never require payment". Mr Weinert: "It won't affect you and I've prepared a couple of invoices which I'll give you. These invoices are to Ibenmore for certain amounts of work and those invoices would never need to be paid by Ibenmore. You should keep these in your bottom drawer in case things get complicated and I'll sign them on the bottom so that they're not to have any effect on the joint venture". Mr Hogarth: "Yes, whatever you think, Brian. I am prepared to help and trust you to protect us".' [Hogarth Statement paragraph 106] 26 July 1994 607 On or about 26 July 1994, Lester Firth & Associates prepared an outline brief for GHD. The brief is to be found at 11/155 and following. 608 The brief includes the following: 'Water Quality The issue of water quality has become a critical component of the COI's investigations. A wide range of departments and agencies have been asked to clarify the standards that should be set and the processes involved in the monitoring of such standards. The Lady Carrington Estate presentation incorporated in the GHD studies carried out 1991/92. It has been noted, as part of the presentation to the COI, that a number of parameters adopted in 1991/92 would now need to be modified in the light of subsequent experience and available data. It has been suggested that the extent and nature of wet basins associated with enhancement of water quality may be significantly reduced if current day standards are adopted . Accordingly, there is a need to ensure that GHD prepare supplementary submissions to the COI which will address the following issues: · A review of the parameters used in the 1991/92 modelling. · A review of the standards that should reasonably be applied . . . · The work prepared by GHD should be reviewed by the Wollongong University Group which carried out the initial peer review it would also be appropriate to engage a nominated specialist to undertake a review given the commissions that have recently been issued to specialists by Wollongong/Sutherland Council . . . · Supplementary material indicated the standards that have been adopted by other authorities including those in New Zealand and in various parts of the USA could well be appropriate provided the issue of inappropriate technical/model transfer can be satisfactorily addressed . . .' [11/155 and following] [emphasis added] 609 Under cross examination, Mr Lester did not accept that the outline brief was written after he had realised that he had lost the initiative at the Commission of Inquiry. He did accept that the brief was in response to issues raised and submissions made and questions raised by the Commissioner [T 1500]. 610 Mr Lester did accept that by this time the issue of water quality had become a critical component at the Commission of Inquiry investigations and that this was absolutely clear by this point in time [T 1500]. 611 It was put to Mr Lester under cross examination that it was quite clear from the terms of this brief that the submission that was put in in the middle of June 1994 was not adequate to address the water quality, stormwater management issues. He did not agree. It was also put to Mr Lester that the 1994 submission had been inadequate because it was not brought up to date. He did not agree [T 1501]. 612 The cross examination continued as follows: 'So you say do you, that the 1992 GHD document was state of the art! Is that what you're saying? A. What I'm saying is that based on advice that I had received from GH&D, the various issues and problems that had been raised by various parties in their opinion had been successfully resolved. And that's covered in the file note I believe on 12 May.' 613 Mr Lester was asked in relation to the sentence in the brief 'It has been suggested that the extent and nature of wet basins associated with enhancement of water quality may be significantly reduced if current day standards are adopted'. His evidence was that it was Mr Sharpin's suggestion that is here recorded. His evidence was that in Mr Sharpin's presentation to the Commission 'he indicated that it would be possible to reduce the quantum of area given across to basins, because there was some data that suggested that the ponds system were more efficient than had previously been thought, and hence the area of ponds would be reduced . . .. His presentation was that - and I think it runs through in the supplementary reports - the general thrust and nature of the recommendations that GH&D made would be sustained, and that if some of the data that was available were to be applied, there could well be a reduction in the area of wet basins' [T 1501]. 28 July 1994 614 On 28 July 1994, GHD wrote to Lester Firth & Associates, inter alia, stating as follows: 'Reference is made to recent discussions (Lester/Sharpin) regarding stormwater issues raised in submissions to the . . . Commission of Inquiry and by the Commissioner himself, relating to stormwater matters. Numerous issues have been raised by submitters to the Commission, with these concerns being of various degrees of validity. In summary, the concerns relate to the potential negative impact of developments on water quality and flows downstream of the development site and on the Royal National Park and Hacking River. These issues can be summarised as follows: · . . . · The need to meet an appropriate criteria for water quality control. Questions have been raised regarding whether concentration or long-term load criteria are more appropriate. · Determination of the growth limiting nutrients for the Hacking River System (nitrogen or phosphorus . . .) To address these issues it is proposed that a supplementary submission be made to the Commission of Inquiry. This submission would include a revised stormwater management strategy report for Lady Carrington Estates. This report would reflect state of the art knowledge in 1994 and update the philosophy developed in 1991/92. It is considered that a thorough and competitive report is required, within the constraints of available time in order to address this contentious issue . . . It is understood that submissions to a Commission of Inquiry must be lodged by 18 August 1994. We would therefore propose to prepare a draft report by 12 August to enable finalisation by the due date. . . .' [11/162] [emphasis added] 615 A draft of this letter of 28 July had been prepared dated 21 July and Mr Lester accepted that he had assisted in the preparation of the draft in the context that it refers to 'recent discussions [Lester/Sharpin]' [T 1603]. 616 Under cross examination and being shown the above extracted sentence, referring to the need for the report to reflect 'state of the art knowledge in 1994', Mr Lester was asked and answered as follows: 'In the 1991/92 application of [GHD], upon which you based your submission in June of 1994, obviously did not reflect state of the art knowledge in 1994, did it? A. No. Q. And the philosophy developed in the 1991/92 application had to be updated by them, is that right? A. I think the word "updating" needs to be slightly qualified in the context of what happened at the Commission. Q. Update the philosophy developed in 1991/92. That is what you recommended to Walker they be engaged to do was it not? A. Yes. [T 1603] End of July 1994 617 It was put to Mr Lester that by the end of July 1994, he had really lost the initiative in the Inquiry. He was asked and answered as follows: 'Q. You see, these other people, and particularly the council, had made it quite apparent, hadn't it, that they were opposing the accuracy and the validity of the water quality and stormwater management solutions that had been put in by you in your June 1994 submission? A. No. Q. Is that absolutely clear, that Mr Robertson for instance was attacking your submission in relation to water quality? A. Yes. Q. And had been doing that over those days at the Commission between the time that the Sutherland Council put its submission in and the time that it concluded its submission he was vigorously attacking the position that you had taken up in your submission of June 1994. You agree with that? A. Yes. Q. And it was absolutely clear wasn't it that you needed legal advice and legal representation at that stage? A. It seemed appropriate. Q. That was largely due to appreciate from Mr Kidd and Mr Hogarth, and their reaction to the impression that Mr Robertson appeared to be making on the Commission? A. In part, yes. Q. And by the end of July you had to concede yourself that the 1992 GHD application needed to be updated? A. Yes. . . . Q. It's obvious, is it not, from the Commissioner's report that you had not demonstrated to him that sense of conviction he needed in order to find that the water quality stormwater management problems had been solved. It was apparent wasn't it, in reading his report ? A. Yes .' [T 1609] 4 August 1994 618 By letter dated 4 August 1994, Mr Lester wrote to Walker Corporation in the following terms: 'Re Helensburgh Commission of Inquiry Please find enclosed letter and term of engagement dated 28 July 1994 from GHD outlining work to address stormwater issues raised at the Commission of Inquiry for Lady Carrington Estate supplementary submission. We confirm your earlier instruction to request GHD to proceed with their proposals. GHD in turn have requested a written confirmation from the Walker Corporation. I would appreciate if you could prepare such confirmation and forward to GHD.' [12/245] 619 Under cross examination, Mr Lester gave the following evidence: 'Q. . . . Now the written confirmation that was requested, was it not, was in relation to the work that they [GHD] were about to do pursuant to their letter which I've shown you . . . [which] has the date 28 July on it. Is that right? A. Yes. Q. And the engagement under which they did work, actual work at the Inquiry, which went into supplementary submissions, was done pursuant to the letter of 28 July and the acceptance of it by Walker Corporation? A. Yes, in terms of the supplementary submission. Q. And there was no letter of engagement in May, was there? A. No. Q. And there was no letter of engagement in June? A. No. Q. And you prepared the submission in June of 1994 on your own, and there was no input into that submission at that time by GHD, that is correct isn't it? A. No. Q. What are you relying on when you say "no" Mr Lester? A. I'm relying on the discussions that took place with GH&D on or about 12 May. Q. You were relying on a meeting you're talking about, and they were not engaged at that time by you or by Walker Corporation, were they . . .? A. It was my understanding that as from the date of the 12th May, GHD had agreed to work with Walker Corporation toward the preparation of a submission. Q. Is this the position, that you are relying on that meeting of 12 May to say that they put some input into the submission that went in, I think it was on 15 June 1994, is that it? A. Yes. Q. And what the submission of 15 June did was to refer back to the GHD application of 1992. That's correct is it not? A. Yes. Q. There was no updating of the GHD document of 1992, was there? A. No. Q. It would be fair to say they didn't contribute any passages, any parts of the submission, that is the submission of June 1994, except indirectly by the use of their application of 1992. That is right isn't it ? A. Yes. Subject to the reassurance that was given on 12 May . Q. You did not show them the submission in draft, did you ? A. I can't recall . Q. And as at 12 May there was no submission in existence, was there ? A. No. ' [T 1601-1602] 8 August 1994 620 On 8 August 1994 Woodward Clyde wrote to Walker Civil Engineering, advising that they had now completed their 'water sampling program' [relating to Helensburgh] and provided the results of the water samples collected on 20 July 1994. 621 The 'introduction' paragraph of this letter includes the following: 'At the request of Messrs Paul McKenna and Greg Ovens of Walker Civil Engineering, AGC Woodward - Clyde has conducted a surface water sampling program to investigate the quality of the water in Tip Creek in the vicinity of Helensburgh land fill site.' 622 The conclusions are set out in the following terms: 'Based on the water sampling investigation detailed in the above report, the following conclusion is appropriate. · In general, the quality of the water samples taken from the three locations on Tip Creek at Helensburgh was good and was consistent with other similar rural water courses. There was no evidence of the land fill affecting water quality in Tip Creek at the time of sampling. · Levels of phosphate and nitrate are indicative of nutrient rich waters. These may be due to land fill leachate but may also be due to the current agricultural activities in the area. The highest levels of phosphate and nitrate were recorded at the railway line sampling point downstream of the land fill which suggests that water from another catchment may be entering Tip Creek between the land fill and the railway line . . . · The results obtained are, therefore, not conclusive with regard to the possible impact of the land fill on the quality of the water in Tip Creek due to the current dry weather pattern.' [13/8] 623 The copy of this letter in evidence has a handwritten note at the top of the right hand section of page 1 of the letter. Mr Lester was unable to decipher the handwriting. However, it appears to say: 'Paul McKenna/Civil. These results are not helpful - we will have to bury them .' 624 That handwritten note appears to be dated on the 16th of the month, although which month is not clear. At the foot of the page it appears that the letter has been copied ('c.c') to PD and to 'Alf Lester' although the handwriting is difficult to decipher. 625 Mr Lester gave evidence that he suspected that this letter may have been passed on to him by Mr McKenna. I infer from the materials and from this evidence of Mr Lester that he saw the document at or about the time it was sent [T 1676]. 18 August 1994 626 On 18 August 1994, Mr Lloyd had a view and conference at Helensburgh [18/144]. 627 An extensive meeting took place at the Hogarth residence on 18 August 1994, followed by a site inspection. The meeting was attended by representatives of Lester Firth & Associates, Walker Corporation, GHD and various scientists and other experts, as well as Mr Lloyd QC. [13/158] 22 August 1994 628 On 22 August 1994, the Commission of Inquiry held a water quality round table session [13/161]. 26 August 1994 629 By letter dated 26 August 1994, Lester Firth & Associates wrote to the Commissioner in response to his request for further explanation on a series of matters. This letter included the following: 'Change in Design It is LFA/GHD's view that there has been no fundamental change in the design philosophy that has been adopted in the treatment of stormwater stemming from any urban development within the Helensburgh area. It is clear that there are a series of options and choices which need to be explored, given that there appears to be no agreed standard that the design philosophy and detail needs to achieve. The 1992 GHD submission was based on current best practice procedures at that time and appears to be compatible, for example, with the standards adopted by WCC in committing the West Dapto area for urban development. In undertaking the detailed review, the objective has been to identify the range of choices that are available, to respond to a number of questions raised by the Commissioner and to explore the way in which a series of incremental changes to the performance criteria (or standards) will impact on the design solution. At the Commissioner's request there has also been a commitment to extend the initial design philosophy to a level of detail normally associated with the development application phase. While the design philosophy remains constant, the review has led to changes in the detailed design of specific components. These changes were foreshadowed in the primary submission presentation to the Commission which noted the potential for a substantial reduction in the scale of wet basins. The review has also allowed LFA/GHD to take into account some of the concerns that have been expressed by opponents to urban expansion as well as incorporating the latest standards that have been adopted in Australia, New Zealand and the United States of America . . . As agreed at the round table session for water quality, LFA/GHD will provide to the Commission and to their identified major parties, a draft of the supplementary submission on stormwater issues by Tuesday 30 August 1994. . . .' [13/166] 30 August 1994 630 On 30 August 1994, a draft supplementary submission of GHD was prepared for Peer Review. This is to be found at 12/1 to 12/141. 631 The report commences under the heading 'Introduction' as follows: 'A Commission of Inquiry is currently investigating appropriate land uses and zoning in the vicinity of the Helensburgh urban area. Walker Corporation, through their planning consultants Lester Firth Associates, engaged Gutteridge Haskins and Davey to prepare a supplementary submission to the Commission of Inquiry addressing stormwater issues for the Lady Carrington Estate. The supplementary submission was prompted by changes in engineering practices and knowledge that have occurred since preparation of a rezoning application by GHD (1992) and to respond to issues raised during the Inquiry.' [12/5] 632 It was put to Mr Lester under cross examination, that LFA did not engage GHD until July 1994. His answer was 'That's wrong. I think you'll find they were engaged on - 6 May. Sorry, not 6 May, they were engaged on - there is a letter from GHD, they were engaged to participate in the Commission of Inquiry. I think it might be 6 July . . . I am not in doubt, the doubt is about the date . . . GHD were engaged. There is the letter on file. The only thing I'm uncertain about is the date, but it preceded the Commission of Inquiry'. [T 1502] 633 In being shown the draft supplementary submission and in particular the above referred to paragraph, the following evidence was given by Mr Lester: 'Q. Now do you still say that the GHD 1992 document was state of the art? A. I didn't say it was state of the art. Q. Do you still say that it contained an effective solution to the stormwater problems and the water quality problems? A. Based on the advice that I had received, yes. Q. Do you still say that as at the end of July 1994 you believed that it provided an answer, a satisfactory answer, to the stormwater management problem and the water quality problem? A. Yes.' [T 1502-1503] 634 In his evidence of 12 November, Mr Lester clearly stated that the engagement of GHD 'preceded the Commission of Inquiry' [T 1502 line 35]. However, on 16 November, Mr Lester was asked and answered as follows: 'Q. So that you are saying that when you put the submission in, that is the first submission, you had engaged [GHD] at that time? A. Yes. Q. That would be therefore that if there was a letter it should be in May or June, is that right, of 1994? A. I think it was, if my memory serves me correctly, I believe it was in July. Q. Now let us be clear about it. You have just sworn that it was before the Commission of Inquiry? A. Yes. Q. You said on Friday it preceded the Commission of Inquiry? A. Yes. Q. Page 1502 line 35. Now, is that true or not? A. Yes. Q. Now, if it preceded the Commission of Inquiry it must have happened before it started? A. Yes. Q. And it could therefore not have been July? A. I understand the question, but my recollection of events is that on 12, on or about 12 May, there was a discussion with GH&D, and there was a letter from GH&D confirming their involvement in the presentation of material to the Commission of Inquiry.' [T 1599] 635 It was then put to Mr Lester that the 28 July 1994 letter from GHD to Lester Firth Associates was the letter where they had offered their services following upon discussions which LFA had had with GHD in July 1994. Mr Lester's response was that this followed discussions with GHD, that being correct, but that there was also a letter which preceded the 28 July 1994 letter, which Mr Lester believed was dated 6 July. Mr Lester's evidence was that he had seen the earlier letter recently as part of the data provided to the court. He was then shown the document which is PX 11/46.1, being a GHD letter to LFA of 6 July 1994. His cross examination continued: 'Q. Now that preceded the problems that arose later in July did it not? A. The letter - . . . Q. That letter that you've just looked at, dated 6 July, preceded the problems which arose, in which you discussed with [GHD] later in July? A. The letter preceded the discussions in July. Q. Which arose because of problems at the Inquiry? A. They arose because of issues raised at the Inquiry. Q. And as a result of those discussions later in July between you and [GHD], that letter that I've shown you at volume 11 page 162 was written by [GHD], isn't that right? A. Yes.' [T 1601] 636 The comments of the Peer Reviewers are undated, but are tendered at 11/204-208. 31 August 1994 637 On 31 August 1994, Lester Firth & Associates prepared a file note setting out the actions that needed to take place over the next four weeks up until 27 September, at which time it would be necessary to submit the Helensburgh submission in reply as part of the session in reply. This note included detail of the tasks which included finalisation of the water quality report, action being required in relation to: · the water quality report issued to the Commission; · the report issued to other groups nominated by the Commission; · circulate to peer group review; · coordinate receipt of written critical comment; · organise peer group review meeting; · preparation of written supporting commentary by peer review groups for inclusion as appendix in final report; · assessment of capacity implications; · detailed site investigations to agree and peg basins and perimeter roads; · identify storage basin volume/location for potable water. 638 The same file note dealt with coordination of the submission by Mr Westerman, coordination of responses to questions raised by the councils and by the Commissioner, coordination of the overall presentation programme with Mr Lloyd QC and with a number of other matters by way of finalisation of necessary reviews [13/187]. August/September 1994 Mr Hogarth's Evidence 639 Mr Hogarth's evidence in paragraph 114 was in the following terms: '114. In or about August/September 1994, I had a conversation with Mr Dransfield to the following effect: Mr Dransfield: "Bob, I know you're pretty disappointed about the way the Commission is going but I am satisfied that they are not presenting the situation as it truly is. We've done all this work at Rouse Hill and it's been accepted by all the various departments as being the leading edge technology and I think that we can convince the Commissioner that that's what he should be relying on". Mr Hogarth: "So you're saying it's up and running and tested and everything". Mr Dransfield: "Yes, it's been fully done to the satisfaction of all the various departments. I've been involved in the Rouse Hill Consortium from its inception and I can tell you that that's the way that runoff water should be treated and that's the basis upon which we believe we should be presenting our case to the Commission". Mr Hogarth: "Well I'm obviously leaving it up to you. You told me you were running the show but I'm quite apprehensive that we look like we're being done cold by these consultants of the two Councils and their barrister". Mr Dransfield: "As you know, we've got an adjournment and we're going to just re-design some drainage basin options". Mr Hogarth: "But is that going to give you the test results?" Mr Dransfield: "I'll get GHD to put all that information together based on what's happening at Rouse Hill and elsewhere but I can tell you that it's now accepted all over the State that this works and I don't agree with how this Commission's dealing with this". Mr Hogarth: "Peter, I say again and as I've stressed from time to time, you're running the show but I've got to insist that the water quality is 90% of our case. As you know even from previous trips when you were a member of a Government Department that water quality is the key issue. As you know, I was told by persons such as McManus, if we can get our water quality thing right we'd have no problem in getting this land rezoned. This design was originally carried out as it is with the GHD document. The design was virtually done by the Housing Department's engineers and has changed very little since then and we're going back there to 1985 in consultation with the likes of the Department of Planning, the National Parks and Wildlife Service, Wollongong Council and other government instrumentalities such as the EPA and our plan designed over this period, probably of the last 12 or 13 years, is to not only service the residential proposal that we've put up but also to clean up the Helensburgh runoff generally. The plan also of course took in the other water quality problems such as the augmentation of sewer and water services so I must stress that we've got that right but we've also got to get the water quality thing right. If our opponents have been saying that the cascading basins in the bottom of the creek are unacceptable because of various reasons such as disturbance of the streams themselves, then we should have altered the scheme to the plateau type devices that they're now talking about". Mr Dransfield: "Okay, I hear what you're saying. What we propose to do now is get our people to go out and re-survey and design the water quality drainage ponds in accordance with these plateau type devices in accordance with what these other experts are talking about". Mr Hogarth: "As I said before, Peter, this is most important. This is our one shot at it. We've been waiting for 13 years to get our day in court and here we are muffing it. We're now looking as if we're chopping and changing these things and it must come across to the Commissioner that we don't know what we're doing . So whatever we do now has got to be absolutely provable and we've got to be sure of our water quality treatment of the area. We are being beaten to the punch by these people. They've got their experts and I told you before we've got to have effective representation. As far as I'm concerned Alf Lester is too wishy-washy and seems to be confused. I've had to prod him to respond to the likes of Robertson. We must have representatives prepared to take these people on. It seems as if what has happened is that we've got all of the Government Departments that we virtually had on side previously now siding with what you might call our opposition. We've got to do something about it and we've got to be positive in whatever approach we now take". Mr Dransfield: "Yes I've heard all that from you before, Bob, but we are working on it and we do propose to have a new presentation to put before the Commissioner". Mr Hogarth: "Well that's well and good but he's seen pieces of paper, lots of them. He wants to know that it works. How are you going to prove that it works?" Mr Dransfield: "I'm leaving all that up to Alf. He's the expert and he's handling it. He knows what's required. We'll then confer with our other consultants on the matter".' [emphasis added] 640 On various dates in September, Mr Lloyd QC engaged in work on behalf of Walker Corporation and Lady Carrington Estates, including settlement of Professor Westerman's draft report and preparation of submissions in reply. All such work is detailed in his memorandum of fees included at 18/144: 641 On 16 September 1994, Mr Lloyd QC examined and settled the draft report of Professor Westerman [18/144]. 642 Between 19 and 21 September, Mr Lloyd QC examined the submissions in reply of other parties and prepared an overview of submissions in reply [18/144]. 643 On 22 September, Mr Lloyd QC conferred with Mr Lester for 2½ hours and examined further submissions in reply and comments thereon by Walker Corporation and prepared an overview of submissions in reply - this work generally taking one day [18/144]. 26 September 1994 644 On 26 September 1994 the Environmental Strategy Coordinator of Water Resources, forwarded a report to the office of the Commissioners of Inquiry, being a submission which followed on from a previous submission of 31 August 1994, sent after the water quality round table. After review of the draft report by GHD of August 1994 and of the final report by GHD of September 1994, water resources provided detailed comment covering some four pages. The report stated, inter alia: ' Section 3 Water Quality - Sampling The report has considered a good number of sites for sampling and this large number may actually be required for the modelling exercise. However in interpreting the data there are too many sites and a degree of confusion results. There is a wide range of water quality (WQ) parameters covering the issues at hand. The major problem is that there are no flow results and therefore the loads cannot be calculated from the samples taken. The report refers to loads but not to their own sampling results. This appears to be an area of concern. The number of samples taken and the period of sampling are insufficient to obtain a clear picture of the current situation. As was stated at the WQ round table, to obtain a representative sampling there needs to be a period of at least 18 months and Water Resources contends that the minimum should preferably be 36 months with up to monthly sampling to gain an accurate picture for this site. This includes the range of flows and the seasons sampled . . .' [16/96] 29 September 1994 - 30 September 1994 645 On these dates Mr Lloyd QC examined final reports of GHD (on hydrology and water quality modelling, stormwater issues) and examined peer review reports, Walker's civil engineering quality plan for construction and preliminary environmental management plan and examined submissions in reply of Helensburgh Land Pooling Inc and settled submissions in reply of Ensile Pty Limited. [18/145] September 1994 GHD Final Report 646 The Final Report is entitled 'Lady Carrington Estate, Helensburgh: Supplementary Submission on Stormwater Issues to Helensburgh Commission of Inquiry'. Together with tables, the report runs for over 240 pages and is found at PX15. 647 The Executive Summary of the report notes that a Commission of Inquiry is currently investigating landuses and zoning for land in the vicinity of the Helensburgh urban area, including the LCE land, a portion of which LCE proposes to develop for standard residential purposes. The report is stated as addressing 'a range of stormwater and aquatic ecology issues' for the proposed development. 648 In the introduction to the Final Report, it is acknowledged that changes in engineering practices, knowledge and community expectations regarding stormwater quality have occurred since the preparation of the 1992 GHD application for rezoning. Indeed, it was said that preparation of the September 1994 Final Report was prompted by such changes and for the purpose of responding to a number of issues raised during the Inquiry. 649 The structure of the report is said to be as follows: · A summary of past studies addressing stormwater issues in the Helensburgh area. · A description of the topography, geology, soils, landuse and climate of the Helensburgh area, to provide a framework for the assessment of stormwater issues. · A description of the characteristics of the Hacking River and its catchment. This includes a description of the topography, geology, soils, water quality, fluvial geomorphology, aquatic and riparian zone ecology. · An assessment of the potential impacts of urbanisation on stormwater characteristics. This includes a review of the runoff characteristics from rural and urban catchments, the potential impacts on pollutant loadings and fluvial geomorphology and the potential aquatic and riparian zone ecosystem effects. · Establishment of appropriate stormwater management criteria. The flooding and water quality criteria were prepared in order to minimise or eliminate the impacts of urbanisation on downstream water courses and improve conditions where possible. · Hydrological modelling of the Hacking River catchment, including the Lady Carrington Estate area, to determine flows for a range of average recurrence intervals (ARI). This modelling was prepared for existing and post development conditions (without mitigation measures in place). · Water quality modelling of the Hacking River catchments under existing and post Lady Carrington Estate development conditions. This was undertaken for the pollutants suspended solids (SS), total phosphorus (TP) and total nitrogen (TN), to indicate potential pollutant loadings if stormwater treatment was not undertaken. · A review of post development potential stormwater management techniques for both flow mitigation and stormwater treatment. · The development of options for appropriate post development stormwater management for the LCE. This includes systems incorporating retarding basins and stormwater treatment measures (STMs) to ensure that there is no predicted impact of the Lady Carrington Estate on downstream flows, channel stability and water quality, and existing conditions are improved where practical. · Discussion of potential erosion and sediment control techniques for the construction phase of the project. · Identification of further investigations and monitoring which could be undertaken as part of preparing any subsequent development application. 650 In the section dealing with 'The Helensburgh Environment - Water Quality', GHD note that further to the sampling undertaken in 1991 by GHD, additional sampling was conducted in August 1994: 'Sites were chosen along the Hacking and its tributaries to given an indication of the health of the system…. While the relatively short monitoring program has not enabled long term trends or patterns to be monitored, it has enabled the identification of pertinent issues and enabled direct comparison with other studies.' It continues stating that despite variations in the results of these studies, overall, the conclusion that the upper reaches of the Hacking is under stress, is consistently reflected in the results. 651 GHD note that the water is generally of poor quality with elevated nutrients, suspended solids and faecal coliforms. They state that the degree of impact varies throughout its length, reflecting the variety of inputs. In summary, it is said that the upper reaches of the Hacking River provide considerable point and non-point source pollutants to the aquatic system. It is observed, however, that the Hacking River is able to 'assimilate and provide in-stream treatment of pollutants' as the results indicate that pollutant loads at Audley (downstream of Helensburgh) return to or below levels at Otford (upstream of Helensburgh) [15/021]. 652 In examining the potential impacts of urbanisation, GHD note that stormwater pollution concentrations during wet weather events are highly variable and can appreciably exceed dry weather concentration criteria that could be applied to the Hacking River. It is noted that these pollutant concentration criteria could be derived from sources such as the Clean Waters Act (Classification P), SPCC (1989) and ANZECC (1992). The qualitative criteria specified in each of these sources is recorded in Appendix D to the report [15/195]. 653 On the topic of stormwater management criteria (section 5), GHD note that as the impacts of pollutants from the proposed development will be long term, instantaneous concentration criteria are not considered appropriate. They suggest that a long term load criteria be applied to reduce the average annual load of SS (suspended solids) and TP (total phosphorous) under post development conditions to or below that occurring under existing conditions. The criteria would apply at the downstream boundary of the proposed development. They say that the criteria would apply particularly to water quality for low flows and frequent floods, as the residence time of large floods within the Hacking River will be relatively short [15/029]. 654 GHD state that the proposed stormwater management controls implemented to reduce SS and TP would also apply to a range of other potential pollutants, including total nitrogen, heavy metals, bedload material, weed propagules and bacteria. 655 The report then details the various hydrological modelling techniques and the estimates produced of both flows in the Hacking River catchment and flows following unmitigated development of the LCE land. 656 In section 8, dealing with potential stormwater management techniques, GHD assert that 'a wide range of stormwater management techniques are available to mitigate the impacts of urbanisation on watercourses'. A brief summary of Flow Attenuation techniques on the one hand, and Stormwater Treatment Measures (STMs) on the other then ensues. The former are said to include such techniques as: retarding basins, infiltration basins, onsite detention and rainwater tanks. With regard to STMs, also known as Best Management Practices (BMPs), it is stated that they may be constructed either on-line or off-line as follows: 'An on-line STM receives all flows along the drainage system. Off-line STMs only receive base flows and frequent flood flows (eg. Up to the one year ARI event). Flows in excess of the capacity of the diversion structure bypass the STM. Off-line STMs are generally preferred, when site conditions permit, as less disruption to the STM occurs (eg. Sediment resuspension). 657 The report continues that potential STMs include: · Dry retarding basins: This is essentially the retarding basin [most commonly used for flow attenuation which operates by temporarily storing a proportion of the inflow runoff volume. It] achieves relatively poor pollutant reduction. · Extended detention basins: These are essentially dry basins that store a proportion of the inflow volume for an extended period, commonly 6 to 24 hours. · Wet (retention) basins: These are essentially a small dam which contains a permanent pool of water. Pollutant removal is achieved in this pool by a variety of mechanisms, the predominant one of which is sedimentation. · Artificial wetlands: This system is essentially a shallow body of water, a large proportion of which is covered by wetland plants including macrophytes. · Multiple or combined basins: The efficiency of a number of these basins can be enhanced by combining different techniques. This may include a wet extended detention basin or an extended detention wetland. · Sediment traps: These are generally concrete structures that trap coarse sediment and may be provided with a trash rack on the downstream end (commonly referred to as gross pollutant traps or GPTs). · Litter traps: In addition to GPTs, litter can be collected by constructing litter traps within large manhole structures on stormwater drainage systems. · Grass filters: This technique is primarily used to treat overland flow from agricultural and other sources. · Infiltration trench: A shallow infiltration trench filled with gravel. Stormwater percolates through the gravel and pollutants are trapped on the gravel or the base of the trench. · Infiltration basin: Infiltration basin described above can trap pollutants within the upper layers of the soil at the base of the basin. · Porous pavements: A deep pavement incorporating a porous wearing course above a gravel layer. Pollutants from stormwater runoff are trapped in a similar manner to an infiltration trench, by passing through the gravel and sand layers. · Sand filters or peat sand filters: This involves a layer of sand overlying a subsoil drainage system, with stormwater spread over the sand bed percolating through the media. A peat layer can also be provided above the sand media. · Water treatment: Secondary and tertiary water treatment processes such as Memtec can be used to produce a high quality effluent. 658 Under section 9: Proposed Mitigation Strategies, GHD point out that a wide range of potential stormwater management strategies could be applied to LCE. They state that these could draw upon the range of stormwater quality and quantity management techniques noted above. GHD continue that the 'ultimate strategy to be applied to the development will be determined during any subsequent development application and detailed design stage and would be based on additional local data.' 659 [The report then refers to section 11: Development Application Stage Investigations, which states as follows: 'The investigations undertaken to date for the Lady Carrington Estate are of a preliminary nature only. A series of further investigations is recommended during the development application stage in order to refine the preliminary analysis and confirm the sizing of system components. This investigation could include the following items: · Investigation of runoff and pollutant export characteristics from an existing urban catchment at Helensburgh. It is considered that approximately six storm events should be continuously monitored for both flow and water quality. Sediment gradings of particulates contained within the stormwater should also be undertaken. · Monitoring of flows and water quality from the development area. Again, six storm events should be monitored to obtain an appropriate level of confidence in the model predictions. Stormwater sediment gradings could also be undertaken. · Dry and wet weather monitoring of the Hacking River and its tributaries, in order to assess the nature existing conditions within the catchment and the likely impacts and benefits of the LCE development. This should be undertaken over an approximately 12 month period during a range of climatic conditions. · A detailed assessment of the aquatic ecosystem characteristics of the upper reaches of the Hacking River and its tributaries. This will provide a good indication of the condition of the creeks and Hacking River, as the aquatic ecosystem condition is related to the nature of the prevailing flow and water quality regime (effectively biological monitoring). This will enable a more accurate assessment of potential impacts and needs for mitigation schemes to be undertaken. · An assessment of the fluvial geomorphology characteristics of the upper reaches of the Hacking River and its tributaries. This will assist in determining the extent of flow attenuation required for frequent storm events. 660 Four primary options are then detailed (combinations from which could be developed), which can be summarised as follows: 661 Option 1, which is said to be similar to that originally proposed in the 1992 GHD application (and, I infer, in the June 1994 primary submission to the Commission of Inquiry), is comprised essentially of a series of wet and dry retention basins located on the plateau of the southern development area to treat run-off from the LCE; in Camp Creek, primarily to treat run-off from the existing urban areas of Helensburgh; and in Tip Creek to treat run-off from the tip and the proposed LCE northern development area. GHD note that the actual number and extent of the wet basins for this option can be reduced appreciably over that contained in the 1992 GHD application (and again, I infer, the June 1994 submission), from 2000m3/ha to 250m3/ha. GHD state that this option has the advantage of treating the run-off from a large portion of the existing Helensburgh township. They note, however, that there will be some environmental impacts associated with the construction of these basins in Camp and Tip Creek, which will need to be evaluated against the resulting improvement in water quality. 662 Option 2, the essential elements of which are a retarding basin with a 1 year ARI low flow pipe, a gross pollutant trap, and a wet extended detention basin from which settled water would be discharged, is said to be the simplest of the proposed management systems and is said to be similar to systems used elsewhere in Australia and overseas to control the impact of urban run-off on receiving waters. 663 Option 2A is a variation on option 2, providing for the installation of a pumping system from the wet extended detention system to a temporary storage reservoir. From that temporary storage pond, water would be pumped through a continuous microfiltration Memtec water treatment facility to a storage reservoir. The Memetc facility is described as a filtration system which will reduce all particulate matter, weed propagules and bacteria to below detection levels.' It is said that a flash mixer can be installed upstream of the Memtec system to remove dissolved pollutants by creating a floc, which is retained on the Memtec filters. The treated stormwater would then be distributed back to the creek and groundwater systems by discharge and irrigation respectvely from the storage reservoir. 664 Option 2B involves the reuse of the stormwater within the storage reservoir for non-potable uses within the LCE residential area. 665 GHD assert that option 2A provides a very high level of treatment, with option 2B providing the additional advantage of stormwater reuse and consequential reduction in potable water consumption. 666 Option 3, is a variation on option 2, with flows less than the 2 year ARI event being discharged into the gross pollutant trap, as opposed to the 1 year pipe system of option 2. Option 3 also incorporates a storage reservoir to which settled water would be pumped to enable controlled discharge and irrigation. GHD state that this is a more sophisticated system that provides a slightly greater degree of stormwater control (than option 2) and further reduces any potential receiving water impacts. 667 Options 3A and 3B involve the installation of a Memtec system and operate in a similar manner to options 2A and 2B respectively. 668 Option 4 is again a variation on options 2 and 3, the essential elements of which are a retarding basin with a 2 year ARI low flow pipe; a gross pollutant trap; an equalisation basin to average inflow rates and concentrations; a Memtec treatment system to receive water pumped from the equalisation basin; and a storage reservoir from which treated water will be distributed. 669 Option 4A involves the reuse of the stormwater within the storage reservoir for non-potable uses within the LCE residential area. GHD state that option 4 is also considered to provide a very high level of protection to the downstream receiving waters. 670 GHD then evaluates the ability of the various options to mitigate impacts of the proposed development on the aquatic ecology and the fluvial geomorphology of the Hacking River and its tributaries. While GHD refrain from advocating the benefits of any particular option presented, they do state that 'due to the lack of site-specific data on water quality and the need to adopt the precautionary principle, it is recommended that the first stage of the development (within the relatively disturbed Camp Creek catchment) be undertaken using a system incorporating a Memtec plant' [15/087-8] while data is collected for future stages [15/096]. They state that the use of Memtec will provide a high degree of reliability regarding the effluent from the treatment facility, ensuring that 'all pollutants from urban areas would be reduced from the majority of storm events from the Lady Carrington Estate' [15/096]. In conclusion, GHD assert that the above approach 'will result in maintenance of or improvement to the existing water quality within the upper reaches of the Hacking River and its tributaries' [15/096]. 671 Appendix I to the Final Report provides details of the proposed Memtec microfiltration facility. It includes a bulletin on the application of microfiltration in water and wastewater treatment, noting that there are now over 350 continuous microfiltration plants installed on applications ranging from high purity water to primary treated sewage in 14 countries worldwide [15/225]. The bulletin outlines the use of Memtec in drinking water plants and wastewater treatments. In the table listing recent sales and installations of microfiltration technology it is apparent that it is most commonly used to obtain potable water from a river source or surface supply, to process water for industry, or as a pre-treatment for reverse osmosis of industrial or municipal waste. There is no explicit reference in the table to the application of the technology to the treatment of stormwater. 672 In relation to the LCE proposal to utilise a Memtec facility in conjunction with the pond and wetland processes, the Commissioner reported that the LCE consultant claimed that this 'would provide the highest level of stormwater treatment in Australia and would be the model for other developments'. The Commissioner noted the Council's statement that while Memtec is particularly efficient at removal of sediment, Phosphorus and bacteria, it is not so effective in relation to removal of Nitrogen. As such, he records that Council considers further study is required to determine whether the nutrient related stream problems in the area are Phosphorous or Nitrogen limited. 673 It is also necessary to look at parts of the Commissioner's report to ascertain that GHD undertook a demonstration of the Memtec facility and that the results of that demonstration were submitted to the Commission of Inquiry in support of the joint venture's development proposal. 674 The Commissioner reported that the LCE demonstration of the Memtec system on a 50L sample from the existing Landcom Heathcote Street pond claimed the following results: · meet ANZECC Water Quality Guidelines, · suspended solids are very low, · the majority of Phosphorous is in particulate form is largely removed · [the Nitrogen is unchanged] [19/139] 675 Further, it is apparent from the Commissioner's report that submissions further to the September 1994 Final Report were put to the Commission of Inquiry. The following appears in the Commissioner's report at 19/140: 'Concerns are raised that there is no similar example of Memtec treatment of stormwater in Australia, and that for sewage treatment there are cost concerns. Memtec advise that this is an area that they are looking to enter (being a relatively new and innovative Australian company) and that overseas examples exist for treating combined stormwater/sewage. Additionally, similar quality water is treated by Memtec units at numerous locations around Australia, and the distinction with stormwater is a moot point .' [emphasis added] 676 As to trialing, the Commissioner noted the LCE offer to install the Memtec unit at the existing Landcom pond/wetland, or elsewhere as Council may suggest, for a period of some weeks (at LCE's cost of around $18,000) in order to satisfy concerns. While Council and Government Departments saw this as a benefit, they noted the longer term viability, maintenance, performance concerns that would still remain and suggested that a longer trial and wider catchment based approach would be necessary. The Commissioner reports that the Government Departments 'favour such potentially beneficial high level treatment if it can be proven to be efficient and reliable' [19/140]. 677 The structure of the submission conveniently corresponds to the structure of the terms of reference of the Commission of Inquiry. 678 The submission is organised into two parts. The first part deals with land capability and the suitability of both parcels of land contained within the Lady Carrington Estate for residential development. Land suitability is assessed in relation to landform, drainage, vegetation and land tenure. This is then compared with the land suitability assessment contained in the Draft Helensburgh Plan 1990. 679 The second part of the submission addresses the seven specific terms of reference as follows: water quality impacts on the Hacking River; potential environmental impacts on the Royal National Park; conservation value of the land; economic costs and benefits; housing and employment opportunities; urban character of Helensburgh; and bushfire risks. The submission then includes a summary of conclusions, the tenet of which is to indicate that it is possible to undertake sensitive residential development of the LCE lands coincidently with ensuring the protection of environmentally significant land and provision of effective measures for pollution control and environmental management. 680 In the introduction to the submission, it was stated that the current proposal on the part of Lady Carrington Estate Pty Ltd is to develop portions of the land adjoining Helensburgh and to dedicate the environmentally significant land to the National Parks and Wildlife Service. 681 It was said that in undertaking a feasibility study and developing a planning proposal, LCE commissioned professional planning and engineering advice. Further, it was said that the consultants liaised closely with the Wollongong City Council and relevant government authorities, this process being supported by Wollongong Council staff in an attempt to rationalise land holdings and to address land use issues. 682 The section of the submission dealing with water quality impacts totals 4.5 pages. The proposed stormwater management approach is covered in half a page and relies exclusively on the Stormwater Management Strategy included in the 1992 GHD rezoning application. Given the surprising brevity of this sub-section, it is convenient to extract it in full: 'The GHD proposal for Lady Carrington Estate proposed a comprehensive approach to stormwater management which introduced a combination of seasonal sedimentation basins together with artificial wetlands aimed at controlling run-off and pollution in each of the residential catchments. More specifically, the strategy was based on a first intercept utilising seasonally wet and dry retention basins close to the pollution source. These basins provide the dual role of flood retardation and sediment capture. The basins would collect coarse sediments, metals, hydrocarbons and pesticide loads as close to the source as practical. The second intercept was a series of artificial wetlands capable of trapping fine sediments and absorbing nutrients through biological uptake. The upstream retention basins will reduce the pulse load during storms and allow the wetlands to uptake non filterable material. The stormwater management approach is part of a wider strategy of water conservation and retardation within the residential precinct and involves actions such as slowing run-off and roof water tank collection for garden irrigation all aimed at minimising peak stormwater run-off.' [10/029] [It is convenient to interrupt the examination of the June 1994 submission proper to note the following points which go to the relevance of Dr Yassini's review of the 1992 GHD application earlier flagged in the judgement.] 683 In concluding the water quality section of the 1994 June submission, LFA expressly noted that Dr Short's 1990 criticism of the Sinclair Knight proposal (which was one of the earlier studies upon which the 1992 GHD report drew), had been specifically addressed in the GHD application - the GHD proposal being modified accordingly. Indeed, Dr Short is stated as having advised GHD for that purpose [10/30-1]. 684 To my mind, implicit in the above statements is an acknowledgment, presumably by Mr Lester being co-ordinator of the submission, that it is important to address criticism of an early approach to an issue when subsequently dealing with that issue. By way of 'address', I have in mind either distinguishing the earlier approach or substantiating it (and thus disproving the criticism) if it is to be followed. 685 As can be readily identified from the sub-section extracted above, LFA relied exclusively on the 1992 GHD application in making its primary submissions in relation to stormwater management to the Commission of Inquiry. It was, therefore, important that before making such submissions, Mr Lester gather and address all information available which treated with the 1992 GHD application. It is not enough that it was noted in the June 1994 submission that the GHD proposal was assessed in detail and approved by Sivakumar, Chowdhury and Ellis of the University of Wollongong in 1992 when Dr Yassini's criticisms loomed large. 686 During the proceedings Mr Lester gave evidence that while Dr Yassini's report may have been included as part of the data lodged with the Commission of Inquiry, it was on the council file on the LCE lands as at December 1993 [T1454]. 687 Mr Lester conceded in cross-examination that Dr Yassini's report expressed some major concerns about the 1992 GHD application [T1454] and as the 1992 application formed the basis of the June 1994 submission to the Commission of Inquiry, it would have been helpful to have had access to Dr Yassini's report in December 1993 at the time when he was developing with Walkers an overall strategy for the preparation and presentation of the joint venture case to the Commission of Inquiry [1481-3]. 688 Mr Lester gave evidence as follows at T1483: ELLICOTT: Q. (Volume 10 page 29 handed to witness) That I think is part of your submission of June 1994 in relation to proposed stormwater management. You see that? A. Yes. Q. Now there is nothing in there, that is 3.2, about which suggests any criticism of the [1992] GHD proposal? A. No. Q. And I would suggest to you that there is nothing in that submission which suggests criticism. Indeed it was extolling its virtue, isn't that right? A. Yes. Q. And it would have been very useful, wouldn't it, to have had to have known that Mr Yassini's report would, would it not, so you could have anticipated it and answered it if you could? A. Yes. 689 In relation to this topic, Mr Rowbottom deposed in paragraph 244 of his report of 17 September 1999 as follows: 'Mr Lester states that the "preliminary investigations had indicated that the [1992 GHD application] had not been considered in detail by WCC and accordingly, the detailed GHD documentation had not been assessed in a competent manner. In my opinion, if these 'investigations' had been more thorough, the team preparing for the Inquiry would have identified the report prepared by Mr Yassini in response to the 1992 GHD Submission. Mr Yassini's report was critical of the stormwater treatment measures presented in the 1992 GHD Submission… and if discovered it would have notified the joint venture team that their approach required revisions.' 690 During the course of Mr Rowbottom's cross examination, it was pointed out to Mr Rowbottom that Dr Yassini had three grounds for criticising the stormwater component of the 1992 GHD application. These were summarised as: too many basins and wetlands; difficulty of maintenance; and inefficient approach in relation to reduction of phosphorous. It was put to Mr Rowbottom that as nowhere in his statement of 17 September 1999 did he say "I agree with Mr Yassini's concerns", his references to Dr Yassini were for some purpose other than for the purpose of agreeing with them. In answer, Mr Rowbottom noted that his statement of that date was a statement in reply and that while he could not recall the exact context or whether he agreed with all of Dr Yassini's comments, Dr Yassini did criticise the fact that the proposed wetlands were located on-line rather than off-line and that in that respect he (Mr Rowbottom) would agree with Dr Yassini [T1067]. 691 Mr Smyth noted at paragraph 3.2 of his report dated 11 February 1999, that Dr Yassini's report to WCC raised some important concerns as to the proposed methodology put forward in the 1992 GHD application. Notwithstanding this, Mr Smyth deposed that he did not find any reference to the Yassini report in Mr Lester's notes of his meeting with WCC officers on 3 December 1993. Nor did Mr Smyth find any reference in Mr Lester's notes to suggest that he sought any feedback from WCC about WCC's reaction to the water quality or other parts of the 1992 GHD application. 692 Mr Smyth gave evidence at T1243 that the concerns expressed in Dr Yassini's report as to the 1992 GHD water quality controls should have alerted Walkers to the need to carry out testing so as to substantiate the controls. In any event, Mr Smyth gave evidence that Mr Lester's file note of 16 May 1994 repeated the concerns raised by Dr Yassini. 693 Returning to the June 1994 submission. 694 Clearly, the sections in the June 1994 submission dealing with 'environmental impacts on the National Park'; 'conservation value of the land'; 'urban character of Helensburgh' and 'bushfire risks' also rely primarily on the 1992 GHD application and the various studies included as Working Papers to that application. 695 The sections on 'economic costs and benefits'; 'housing' and 'employment opportunities' also draw to a large extent on the Draft Helensburgh Plan 1990. 27 September 1994 696 On 27 September 1994, Lester Firth & Associates forwarded a submission in reply on behalf of LCE [14/154]. 697 An undated submission in reply, essentially drafted by Mr Kidd but to which Mr Hogarth contributed, was submitted to the Inquiry by Ensile. In the index for the plaintiff's general bundle, the date assigned to this document is 1/9/94. The submission covers 16 pages and represents an extremely subjective, impassioned submission. It alleges certain deliberate attempts to mislead the Commission of Inquiry. It includes for example the following paragraph: 'Sutherland Shire Council provided a primary submission in the form of a rambling dissertation on the evil of mankind (most of which are regularly approved or encouraged in their Council area) and they hired a professional presenter [intended to refer to the Council] and a large group of consultants which have presented to you a contrary opinion or to sow doubt in an atmosphere of court room theatre.' 698 The submission includes the following: 'Mr Commissioner, we have been subjected, at every turn, to a succession of "spoiling" arguments orchestrated and arranged by Mr Robinson in this C of I. An example is, if we said "white" they would immediately counter with "black". We would confer with our consultants to see if we could live with "black" and if so accept the change. Our opponents would then provide a series of distortions of why "black" would not work. We are not experts and have never claimed to be so. We retained the best possible advice and professional assistance the we could. Their brief has been to research and design the area around the natural features. It was our consultants who found or identified many of the prominent features being discussed here, and never have we attempted to compromise their findings. Instead we have attempted to design our plans around their findings. We ask you to compare this with the "spoiling" arguments of our opponents led by Mr Robinson where we believe an attitude has been established to oppose our case, no matter what the merits may be of our arguments . . . Mr Robinson has recently threatened to influence the full force of the law on our existing operations and he decries the evils of horse riding operations, yet WCC has recently approved a pony club development in Helensburgh to be relocated onto an area almost adjoining the National Park with all runoff discharging untreated into the Park. This is a clear example of where WCC uses double standards in opposing us while approving other developments of a similar nature. We give more examples of these double standards below. . . . One would have thought that SCC would have attended the round tables armed with data, or at least a description, from their own detention basin plans but I am sure that this C of I was given the impression that SCC and WCC are not in favour of detention basins. We ask whether the non-provision of relevant information of this nature on one of the key arguments before you is in fact a deliberate attempt by SCC to mislead you. Sir, SCC have, in their area, a number of water courses which flow into the Royal National Park and then into the Hacking River, some after flowing through industrial areas. SCC has discovered an excellent method to treat these waters and have publicised this widely in the local press as the saviour of the park and the river, surprise surprise - they intend to install detention basins - the very measure which they have argued will not work successfully in our case - even after we include a MEMTECH filtration system to produce drinking quality water into the river. We believe that it is scandalous that SCC did not fully cover their plans as part of the round table and we question their integrity on this matter. We believe that this is another example of where Mr Robinson and his clients have not merely argued their case, but have attempted to paint a false picture in an attempt to influence the findings of this C of I. WCC is now attempting to have a second bight [sic] of the cherry with regard to the zoning of our land. . . . WCC have bumbled and bungled this area for at least the past 15 years . . . For WCC to say to this Commission (in the form of Mr Doughton) that MEMTECH will not work is obviously ridiculous . . .' 699 At page 14 of the document, the following inter alia appears: 'This movement is led by Sutherland Shire Council's National Park Protection Committee (a laudable name for a political pressure group) which is co-chaired by Councillor Paul Smith who, by design or coincidence is also the prescribed candidate for the State Seat of Miranda. This culminated in the issuing of a pamphlet in Sutherland Shire and elsewhere which contained distortions, misrepresentations and lies about our submissions, and again requested submissions from the public based on these lies.' 700 The submission concluded with the following: 'We have borrowings and commitments which may dictate our actions and we urge you to appreciate the gains which can be had by all reasonable parties if you recommend for the type of land use proposed by us. We thank you for the opportunity to make this presentation in reply.' 701 The third paragraph of the submission in reply reads: 'If, Mr Commissioner, you detect a degree of frustration on our part in the following submission then you are spot on. We are absolutely flabbergasted that WCC and Mr Doughton can argue on the one hand that our producing drinking quality water from our development for discharge to the Hacking River will not be sufficient, and then argue on the other hand that the measures taken at the Helensburgh tip are satisfactory. We believe this is but one example of the biased, unreasonable and "spoiling" approach that WCC, SCC and Mr Robinson are taking to this Inquiry.' [14/38] September/October 1994 702 In Mr Hogarth's statement, he gave the following evidence: '118. In September or October 1994 Mr Dransfield and I had a discussion to the following effect: Mr Hogarth: "That barrister, Lloyd, is bloody useless. He came in late to this Inquiry and has never caught up. He hardly responds to Tim Robertson's submissions and defers to him all the time. Robertson is giving our witnesses a hard time. Tim Robertson has it all over him and our submissions are being put into doubt. Robertson is creaming us". Mr Dransfield: "Well maybe David Lloyd was not the right choice. Although I'm not sure we can fix this all up at this late stage, I say we sack him". Mr Hogarth: "Well you never had a barrister to begin with and now that you've employed one he's bloody hopeless. These inquiries are really not his cup of tea and Robertson is always one step ahead. I agree that you should sack Lloyd and get someone else. We've got the Session in Reply coming up shortly and you've got to get someone in, a barrister who can think on his feet and match Robertson in these verbal submissions. Peter, you know I'm very concerned about how the Inquiry is going and we need to get someone competent in if we are going to win back any ground. I feel this Inquiry is slipping away from us". Mr Dransfield: "Leave it with me Bob and I'll attend to it".' 703 Mr Hogarth's evidence in paragraph 119 of his statement was that he did not recall Mr Lloyd appearing on Walker Corporation's behalf at the Session in Reply and that no other barrister was hired as a replacement in time to advocate and defend Ibenmore's position at that session. 704 Mr Lester's statement, replying to paragraph 119 of Mr Hogarth's statement was that Mr Lester recalled that Mr Hogarth was dissatisfied with Mr Lloyd's representation and that Mr Hogarth had indicated an unwillingness for Mr Lloyd to participate in the Session in Reply. Mr Lester's evidence was that Mr Hogarth had said "I am comfortable with only the consultant team to make the representations". 705 Mr Hogarth's evidence was that Walker Corporation had no legal counsel present during the concluding sessions of the Commission of Inquiry [Hogarth paragraph 120]. 706 Mr Lester responded to paragraph 120 of Mr Hogarth's statement by giving evidence that cross-examination of expert witnesses was not provided for under normal Commission of Inquiry guidelines. His evidence was "the normal Commission of Inquiry practice is for written submissions to be lodged, issues may then be raised by the opponents in the form of written questions, to which replies may be prepared. The Commissioner then may direct parties to provide further written material and responses to the issues" [Lester statement paragraph 87]. 707 Mr Hogarth's evidence was that during the Commission of Inquiry, Walker Corporation representatives, including Mr McKenna, gave evidence to the effect that they were experts in broadacre development which involved the installation of pollution control ponds [Paragraph 121 Hogarth's statement]. 708 In answer to paragraph 121 of Mr Hogarth' statement, Mr Lester gave evidence that he recalled that Mr McKenna from Walkers indicated that his professional training and skills included responsibility for urban development, which in turn included the construction of pollution control ponds. 709 Mr Hogarth's evidence was that Mr Lester very occasionally made oral submissions to the Commission [Hogarth's statement paragraph 122]. 710 Mr Lester's response to paragraph 122 of Mr Hogarth's statement was as follows: (a) That Mr Lloyd QC was retained with the consent of both Mr Kidd and Mr Hogarth to provide legal representation for the Commission of Inquiry. (b) That Mr Lester's role was to ensure that the various skills and disciplines that were required to make both written and oral presentations to the Commission of Inquiry were coordinated and that his task was also to ensure that where questions were raised by the Commissioner that a specialist was briefed to prepare specific responses. (c) That it was made very clear to Mr Hogarth from the outset that Mr Lester had qualifications in architecture and town planning and that at no stage was it suggested that he had any legal training. [Lester statement paragraph 89] 711 Mr Hogarth's statement included the following: "Mr Dransfield very rarely turned up to the Commission of Inquiry and even then spending only a few hours out of a whole day hearing by turning up late and leaving early." [Hogarth's statement paragraph 124] 712 In response to paragraph 124 of Mr Hogarth's statement, Mr Lester's evidence was as follows: (a) That Mr Lester did not keep a record of Mr Dransfield's attendance at the Commission of Inquiry. (b) That Lester Firth & Associates were responsible for coordinating and managing a substantial volume of material such as the specialist consultant reports which covered a broad range of disciplines and which were prepared in response to questions lodged by the Commissioner. Mr Lester's evidence was that these reports were of great importance to the Commission and had to be lodged within specific timeframes [Lester's statement paragraph 90]. October 1994 713 On various dates in October and November 1994, Mr Lloyd QC engaged in further work on behalf of Walker Corporation and LCEs. The work is detailed in his memorandum of fees included at 18/144. A further hearing and conference in Wollongong took place on 5 October 1994, attended by Mr Lloyd QC. 11 October 1994 714 On 11 October 1994, Mr Lloyd QC went on a view of retention basins and the surrounding area at Helensburgh. [18/145] 12 October 1994 715 Again on 12 October 1994, Mr Lloyd viewed retention basins and surrounding area with the Commissioner and parties. [18/145] 13 October 1994 716 On 13 October 1994, Mr Lloyd attended a round table conference on water quality in Wollongong. [18/145] 717 Mr Hogarth's evidence included the following: '123. I attended at the Water Quality Session on or about 13 October 1994. A short time after that Session, Mr Dransfield, Mr Kidd and I had a meeting at which Messrs Dransfield and Kidd had a discussion to the following effect: Mr Kidd: "Peter, you told me on a number of occasions that you had this under control and that we could rely on all of the work that had been done at Rouse Hill". Mr Dransfield: "Yes, I believe that's right". Mr Kidd: "Then why is it that the Commissioner doesn't seem to be accepting this? The National Parks Association is giving evidence which treats our submissions with contempt. You don't seem to have done anything about this". Mr Dransfield: "I think it's all under control and I believe that the Commissioner will accept our view in the long run".' 718 Mr Hogarth's further evidence was that he attended the Commission of Inquiry with his wife and sat in the audience away from Mr Lester who sat together with the Walker Corporation representatives. His evidence was that in the final sessions Mr Kidd made a speech on behalf of Ensile. [Statement paragraph 125] 20 October 1994 719 On 20 October 1994, Mr Lloyd conferred with Mr Lester, McKenna and Mr Joliffe. 720 I note that the list of submissions made to the Inquiry as at 20 October 1994 is set out at 17/104. 21 October 1994 721 A further round table conference on water quality in Wollongong was attended by Mr Lloyd QC on this date. 26 October 1994 722 On 26 October 1994, Mr Lloyd examined further submissions in reply and drafted an outline of topics to be covered in supplementary submissions in reply. [18/145] 27 October 1994 723 On this day, Mr Lloyd QC conferred with Mr Lester and Mr McKenna for two hours. [18/145] 7 November 1994 724 On 7 November 1994 Mr Lloyd drafted the supplementary submission in reply. [18/145] 13-14 November 1994 725 On these dates, Mr Lloyd examined the submissions in reply of Wollongong City Council and Sutherland Shire Council. [18/146] 15 November 1994 726 Towards the end of the Commission, Mr Hogarth accused a Dr John McGarity of having intentionally exhibited bias in his reports. Mr Hogarth's evidence under cross-examination included the following: 'Q. But what had happened was this was it not: A Dr . . . McGarity had been very severely accused of something by you? A. Yes. Q. Something that went to his integrity? A. Yes. Q. And how did you come to do that Mr Hogarth? A. We had friends in where he lived near Byron Bay. . . . and apparently Mr McGarity had been at a dinner,. . . and in conversation he was asked what he was doing, and he said he was - according to the people that told us, that rang us, said that he had been employed to go to a Commission of Inquiry in Wollongong and destroy an argument put up by the developers. Q. And that came to your notice, did it? A. Yes, the person that heard that first hand rang me. Q. And how did you come to convey that or something like it to the Commission? A. It was on the last day of the Commission. Q. But how did you do it, did you speak to it? A. Yes. Q. You got up, did you, and levelled this accusation at Mr McGarity, did you? A. He wasn't there. Q. No, about him, then if not to him? A. About him, yeah. Q. You decided you would play it rough, did you? A. Play it as it was. Q. You wanted to destroy him as a witness by that means? A. I wanted to bring it to the Commissioner's attention. Q. Do you think that sort of technique might not have been very counter productive; that is the technique that you used? A. I was frustrated to the point where I thought the Commission of Inquiry was going against us. Q. You were prepared to play hard - hard ball perhaps is the expression - for that reason, were you? A. As Mr Robertson was.' [T 284] 727 By letter dated 15 November 1994, Dr John McGarity complained to the Commissioner, inter alia, as follows: 'I understand that in the Inquiry meetings on Friday last . . . that allegations were made by Mr Hogarth that I had intentionally exhibited bias in my report made on behalf of the Sutherland and Wollongong Councils. This allegation appears to have arisen as a result of a statement made by an unidentified friend of the Hogarth's in Armidale. Before discussing this accusation, I wish to make it clear that in some forty years of activity in Universities, learned societies and other public bodies, and in my professional consultancy activities, I have never been subject to an allegation of this kind which if it was true would bring disrepute not only to me but to the agricultural profession. I have, over the years, gained a reputation for scientific integrity which has led to my appointment on many occasions as a referee for higher degrees in Australian and overseas universities, as an elective representative on the University PHD Committee for many years and for the last nine years as a referee on the International Scientific Journal "Geoderma". Other positions I have had as chairman of various organisations, scientific, sporting, etc would not have been made if I had not had a reputation for fairness and objectivity.' [18/158] 728 On 15 November 1994 the Commission of Inquiry hearings concluded. 17 November 1994 729 Mr Lester's evidence was that on 17 November 1994, Mr Hogarth had hosted both Mr Lester and Mr McKenna at a luncheon at Maestros Restaurant in Paddington at which luncheon Mr Hogarth had said "I want to express my admiration and appreciation for the way in which the Commission of Inquiry process has been handled. I look forward to a successful outcome" [Lester paragraph 92]. 730 Under cross-examination in relation to this luncheon, Mr Hogarth could not recall the event of the luncheon. [T 337 of 19 October] He accepted that the luncheon could have taken place. He was not prepared to accept that he hosted the luncheon in order to celebrate the way in which the joint venture case had been conducted in the Commission of Inquiry. He said that "it would have been an act of goodwill". He denied saying "I want to express my admiration and appreciation for the way in which the Commission of Inquiry process has been handled, and I look forward to a successful outcome", saying it was unlikely he would have congratulated Messrs Lester and McKenna as he was not satisfied. 731 He could not remember the occasion at transcript 338. He most certainly did not recall congratulating Mr Lester and Mr McKenna and doubted very much that he would have said the above described words because he was not satisfied. He was not sure on 19 October that he had taken those gentlemen to luncheon. 732 On Wednesday 20 October 1999, Mr Hogarth having over night looked at an account, was able to give evidence that he now recalled having the luncheon with Mr McKenna and Mr Lester. He still, however, denied or had doubt about whether he had paid the compliment to the efforts made during the Commission of Inquiry earlier referred to. When asked what caused him to host the lunch, his answer was: "I think it was to - I couldn't be sure but I think it would have been to ascertain what the thoughts were - what their thoughts might have been after the completion of the Commission of Inquiry". Q. But the report wasn't out by them, of course, was it? A. No. Q. And you had been sitting throughout the Inquiry yourself? A. Yes. Q. So you knew precisely what had gone on from start to finish? A. Yes I did. Q. What more could you expect to learn from them? A. Well just to get their ideas to talk about what transpired. Q. Talk about what transpired. What do you mean by that? You were there. A. Yes I was there. Q. What did you need to know? A. What their ideas were. Q. What did you need to know? Their ideas? A. Yes. Q. What did you ask them? A. How they thought and what might possibly happen after this . . . Q. It's more than likely, is it not, that you took these two gentlemen to lunch because you wanted to express your gratitude for the efforts they had made during the course of this Inquiry? A. Well, as far as Mr Lester was concerned, I wasn't particularly happy with his performance . . . Q. Do you deny that you took them to lunch [in order to compliment them and thank them for the part they played in a successful Inquiry as you thought it was]? A. Yes, I do. [T 353-354] 733 Finally, the following questions were put at transcript 354: 'Q. That's why I'm putting it to you. You still can't remember anything about what happened at such a lunch, can you? A. Yes, and I can't remember congratulating them on their performance by the same token. Q. You don't know whether you did or did not now, do you? A. It seems out of character for me to have congratulated them for their performance. Q. But you don't remember whether you did or not now, do you? A. No, I don't.' 22 December 1994 - Commissioner delivers his report 734 On 22 December 1994, the Commissioner delivered his report. [19/8] The Report 735 The Commissioner did not recommend that the land be rezoned from Environment Protection Hacking River 7(d) to Residential Low Density 2(a) to allow for residential development, as sought by the joint venture. 736 Instead the Commissioner recommended that 'there be no change in the current LEP or current zonings until further studies are undertaken primarily aimed at identifying existing and potential impacts from various landuses, then setting of appropriate environmental objectives/standards, followed by identification of cost-effective, strategic catchment management plan to control existing catchment pollution sources and determine appropriate landuse controls capable of meeting these objectives' [19/010: Letter to the Minister December 1994]. 737 It is clearly not appropriate to set out in full the Commissioner's report, being near 300 pages in length including appendices. 738 However, it is convenient to set out the Executive Summary, which serves as a useful synopsis of the conduct of the Commission of Inquiry and the findings and recommendations of the Commissioner. [I note that the section appearing at the end of the 'Executive Summary' and entitled 'Recommendations', appears at first sight to be , but is not, identical to the section entitled 'Recommendations' to be found at the end of the report.] EXECUTIVE SUMMARY The Hon Robert Webster MP, Minister for Planning and Minister for Housing, established this Commission of Inquiry into appropriate landuse and zonings in the vicinity of Helensburgh, in accordance with terms of reference. The relevant issues are addressed below including a summary of findings and recommendations. Helensburgh is located at the headwaters of the Hacking River which drains through, and largely serves the Royal National Park. The Royal National Park comprises a large proportion of the Hacking River catchment, while Helensburgh occupies a relatively small area. Helensburgh owes its origin to the nearby coal mine (still operating) and it is interesting to note that both the Royal National Park and Helensburgh (and coal mining) occurred at around the same time (mining slightly earlier in fact, and one can speculate that if vice versa, then coal mining and Helensburgh development may not have occurred). A number of issues raised are outside the terms of reference. These issues include Council's previous actions, landowner's expectations, community surveys/circulars, etc. Other actions, including Court actions, requests for investigation by ICAC and the Ombudsman, and an abandoned attempt at mediation are also noted as being outside the terms of reference. However, these and other issues illustrate the long and complex range of concerns related to Helensburgh, which in part have resulted in this Inquiry and also caused the Inquiry to be relatively long and complex. In particular, certain actions of parties are criticised by others, and both development proponents and opponents agree that certain actions or steps may have assisted or avoided delays either leading up to the Inquiry or at the Inquiry's hearings. Substantial delays to the Inquiry's public hearing sessions arose through Wollongong Council's refusal to exhibit Inquiry submissions, Council's late venue re-arrangements, subsequent venue availability problems and delays (two venues were required), deferment requests by Sutherland Council, late landowner changes to important proposals and requests for time needed to supply requested information by parties including Government Departments, landowners and Council. Action was taken to enable parties to participate at the Inquiry without fear of Court action (by the seeking and obtaining of undertakings). All of these and other matters made for a difficult, sometimes emotional and complex Inquiry, and thankfully most parties exhibited helpful assistance. Approximately 700 submissions were made to the Inquiry by 244 parties and around 7,000 submissions (mainly proforma letters made in response to the exhibited draft Local Environmental Plan) were also considered. In total over 25,000 pages of documents, (including background material), and over 50 consultant reports have been considered during this Inquiry. Nearly five weeks of public hearings, including three days of site inspections and three Round Table Sessions were undertaken between 5th July and 15th November 1994. A number of studies specifically relating to the subject lands or issues have been conducted for or by Wollongong Council. Reference is made to these in the report, but specific reference is made to the 1990 Draft Helensburgh Plan, which is an Environmental Study and Strategy undertaken in preparation of a Local Environment Plan. This Draft Plan undertaken by Council, with input from a number of Government Departments, consultants, committees and other involved parties, includes detailed and thorough assessment of many of the previous studies and issues also raised at the Inquiry. The issues assessment, and the findings and recommendations of Council's Draft Helensburgh Plan are largely consistent with the issues assessment and findings and recommendations of this Inquiry. It is noted that important information (eg Catchment Management Strategies and other information) were submitted late in the Inquiry public hearings, and that a number of other requests for information were not fully complied with or were partly satisfied. A number of initiatives are current or about to proceed. However, Council and a number of Government Departments considered that the Inquiry had been supplied with all relevant information. In respect of the Terms of Reference for this Inquiry, the following brief outline of findings and recommendations is given. More complete information, findings and recommendations are to be found in relevant sections of this report. The overriding Term of Reference is: "To assess the capability of land in the general vicinity of Helensburgh, as identified on the attached map, to sustain various landuse options without causing significant environmental degradation." Previous and detailed studies indicate that there are extensive areas with environmental protection attributes, and smaller areas with identified urban and industrial development potential. However, the land capability is affected by highly erosive soils, moderate to steep slopes and very intensive rainfalls (amongst the highest in the state), leading to, a high erosion hazard for much of the soils of the region . Care is required in the management of not only the areas with urban or industrial development potential, but to the upper Hacking catchment and Royal National Park and areas identified as requiring conservation and protection. A range of controls and safeguards are essential if the quality of the environment is not to be despoiled by urban development . There is some agreement with previous studies conducted by or for Council as to areas with urban development potential, but there is also some disagreement (numerous parties request Environmental Protection for all subject land). The greatest risk of erosion and sediment loss is during the construction stage when extreme caution is required and a staged rate or release is needed to minimise the area of land disturbed at any one time. Given the potential for impacts on the downstream sensitive and significant areas, a conservative approach is suggested by many consultants, specialists and responsible authorities. Hence, land of less than 12% slope constitutes land favoured should any land be considered for urban rezoning, subject to the soil type. Land with a slope above 20% should not be developed. In regard to soil type and site characteristics or limitations, it appears that "Csd" soil class is the limiting soil class, but due to the potential for impacts and the value and significance of downstream areas, the precautionary approach would mitigate against development on this soil type, at least until there is sufficient evidence that sediment and erosion can be controlled. Given the concerns and the poor urban development industry performance surveyed by the EPA, then current practice does not satisfy the high standards required. Extensive vegetated areas have environmental protection attributes and should be conserved. These are the eastern, northern and southern peripheral areas which are generally not suitable for urban landuse due to steeper slopes, related moderate to high erosion hazard, and/or the need to conserve or protect the natural vegetation and soils of these areas. These areas should be considered for Environmental Protection zoning. Generally the flatter, cleared and previously disturbed or developed western most and south-western areas (being limited Gills Creek and Lady Carrington (south) lands), are assessed to have potential urban capability (subject to further studies, including existing catchment impacts, identification of necessary standards and determination of appropriate landuse controls). Performance of water quality controls is required to be proven and trialing would be necessary. Such trials are integral to previously mentioned studies. Should these studies and assessment not find that sensitive areas would be protected or water quality or impacts would not be improved for the catchment, then Environmental Protection zoning is recommended. Basically previously disturbed and cleared areas of Gills Creek areas and a smaller cleared and filled area of Lady Carrington Estate have potential for urban capability, but further studies are required to more accurately define such areas as well as to define the necessary controls, limits (to development), or other requirements. As to other subject lands, the concurrent studies as to catchment management standards, fauna habitat studies and potential impacts, success or otherwise of water quality control pond trial/s, then possible rezoning and development of selected area/s of Gills Creek and cleared areas of Lady Carrington Estate (south) lands, all precede consideration of Land Pooling land, Landcom land (the tip site) or Lady Carrington Estate land (also near the tip - the northern site). These latter subject lands have limited potential urban capability, but equally there is concern and uncertainty as to water quality, downstream impacts, flora, and fauna potential impacts and other matters. In total, there are greater potential impacts from urban development proposals or rezoning these other subject lands than for the Gills Creek and Lady Carrington Estate (south) cleared and disturbed areas identified as having potential urban capability. As to the other terms of reference: To make recommendations on appropriate landuses and zonings based on the assessment of capability taking into account: 1. water quality impacts on the Hacking River and whether or not urban development provides opportunities to improve water quality; Existing urban and rural landuse and zonings are impacting the Hacking River to an unacceptable degree, based on the limited studies undertaken. The extent of impact and necessary controls requires further assessment on a catchment wide basis. Standards, objectives and other matters would then follow from such assessment (including landuse controls). There is the potential for improvement in water quality with existing landuse or urban development, although the degree of improvement is uncertain. Predictions are limited by insufficient monitoring, inaccuracies or uncertainties (noting that Gills Creek predictions are based on some site monitored data). Experience with urban runoff controls elsewhere is doubtful or of limited use given site specific constraints. Urban runoff controls proposed with development are potentially the highest level of stormwater treatment in Australia but uncertainty remains as to location, long term viability, performance, maintenance and funding. As well as further studies involving a catchment management approach, trialing of water quality ponds is required (subject to success or failure of such trial not being critical or affecting the area's values). Wollongong Council is currently undertaking detailed water quality pond studies and assessment in the sensitive West Dapto area, involving joint Federal, State, Council and land developers co-operation and funding. There is uncertainty whether other landuses for disturbed and cleared land are more appropriate in respect of water quality in the short and long term. Environmental Protection zoning is claimed to be similar to existing landuses and hence may simply continue the existing unacceptable downstream impacts and degradation for disturbed and cleared land. There is limited opportunity for other landuses to improve current unacceptable impacts (without considerable funding and actions, which have not been detailed or proven to the Inquiry). Environmental Protection zoning is proposed for extensive vegetated, steeper or sensitive land and is the most appropriate zoning as to controlling water impacts. Fringe areas or partially cleared or disturbed land require further detailed study. Council, the NPWS, the EPA and a number of other parties agree that protection of the sensitive National Park and Hacking River is of paramount importance; that experimentation or risks should not be allowed for such an important and sensitive area. A catchment based approach is suggested by the EPA in that a recommended strategy is required (including urban development) in view of setting appropriate environmental objectives (including water quality). This is supported by involved Government Departments, and the Hacking River Catchment Management Committee. This includes further study and assessment of existing pollution sources and impacts, development of a strategy and standards and then consideration of landuse and controls to meet these aims. 2. potential environmental impacts from alternative landuses on the Royal National Park; Existing developments have reduced the Royal National Park's conservation and recreation values and placed a financial burden on the NPWS, who do not support additional development which further diminishes these values. There are potential environmental impacts from alternative landuses (mainly being urban or rural landuse) on the Royal National Park which include, loss of fauna habitat, a reduced wildlife corridor (and arguably reduced wildlife use or increased predation), increased domestic animal predation into the National Park, increased weed invasion, and increased nutrient/algal problems in National Park waters. With urban development there is the potential for loss of habitat which supports wildlife in the nearby National Park or Recreation reserve areas especially during certain seasons or circumstances (including bushfires). The preservation of as many trees as possible is a recognised goal to preserve habitat with landowners arguing that there will be little or no impact to the habitat of significant species. However the surrounding areas, including the National Park, have high value habitat areas, which are potentially susceptible to impacts of upstream areas. There is potential with urban zoning to secure and allow management of a substantial area of Lady Carrington Estate (LCE), which includes high value habitat land and wildlife corridor vital to the National Park's fauna. The existing landuse and zoning does not ensure appropriate protection and management of this land. Other landuses have had limited assessment, but Environmental Protection zoning is claimed to be similar to the existing landuse in terms of National Park impacts and degree of controls. Preservtion and conservation of as much natural vegetation and habitat areas as possible, as well as certainty with water quality controls proposed with developments including urban landuse, and thorough understanding of other existing and potential impacts is required to ensure the National Park's conservation and recreational values are protected both in the short and long term. Decisions should not be made which may have long term consequences or impacts, which may then be difficult or impossible to reverse. Further studies are required before an assessment of potential impacts can be made. Such further studies include the: · wildlife corridor potential impacts as to habitat loss, · existing ridge fauna habitat and potential impact of its loss or partial clearing, · impacts to rare and endangered species, particularly the Sooty Owl, · sources and control of other impacts. 3. "the conservation value of the land including flora, fauna and places of Aboriginal and early European heritage;" A significant number of rare and endangered flora or flora communities of conservation significance are located on subject land, but are generally not in areas proposed for urban development (further study is required for Lady Carrington Estate (south) as to two significant species which may regenerate following recent fires). Certain areas have high conservation significance and are identified or capable of being protected with urban landuse proposals. Other naturally vegetated areas have limited conservation value, in that no rare or uncommon flora of habitat are likely to be substantially impacted, but involved flora/fauna parties and I accept the NPWS position for retention of as much natural vegetated areas as possible. Loss or modification of these vegetated areas raise the risk or threat of impacts to nearby significant flora, habitat for fauna and wildlife corridor viability. Each of these are highly important issues and further study is required as to potential impacts or threats. Certain areas are cleared and disturbed (73ha in Gills Creek area and 13 ha for Lady Carrington Estate) and have little or no conservation value in their present state. Revegetation of cleared areas may be possible but unlikely under any of the potential landuse or zonings considered without significant funding (which has not been identified) or without discontinuation of any landuse (which may not be appropriate management of this land). An area on Lady Carrington Estate is filled with railway ballast and other material and it is unlikely to be revegetated or rehabilitated without significant funding or management. The eastern valley and slopes of the Lady Carrington Estate (south) subject lands have high conservation, habitat and wildlife corridor value and parties generally agree that these areas should be under the control of the NPWS and/or under their management (rather than the current unmanaged and unprotected situation). Two rare species may regenerate after recent fires and further study is required as they are in the area proposed or affected by urban development (location is uncertain). The Lady Carrington Estate (northern site), Land Pooling and Landcom sites are all generally naturally vegetated. The Land Pooling site has disturbed areas around tracks, and no species of conservation significance are identified, except communities along the central stream, which are proposed for conservation with any urban development. Closed forest communities on the Lady Carrington Estate (north) site have national significance , and are intended for conservation with any urban rezoning (being downstream of proposed development areas). Similarly closed forest communities on the Landcom site have regional and state significance, and are intended for conservation with any urban rezoning. One uncommon species (Eucalyptus scias, subs callistmastha) is located in the area proposed for urban development but loss of several specimens would not threaten the species according to the flora consultant. There is uncertainty as to flora community's fauna habitat and wildlife corridor values of areas on or near the Lady Carrington Estate (north and south sites), and further studies are required. Rare or endangered fauna or their habitat have not been identified as being on the subject lands, however further study is required as to general loss of habitat near high value conservation areas and potential impacts. Eastern areas particularly of the Lady Carrington Estate subject lands have high conservation value and are to be conserved. Adjacent areas have potential significance in being part of or buffering an important wildlife corridor to the Royal National Park. There is a difference of professional opinion as to conservation value of ridge vegetation on the Lady Carrington Estate (south) land, and the likely impacts or potential changes that could result to its conservation value with development, (even with tree retention strategies) and to what cumulative or long term effects may result to fauna, fauna habitat and fauna of conservation significance. The risk or threat to a number of rare and endangered fauna, such as the Sooty Owl (which is claimed to be one of the rarest birds in Australia), indicates that considerable care is required. Accordingly, there is insufficient information to make conclusive recommendations on the value of the ridgetop fauna habitat and fauna value, and further detailed studies are required to assess this. Given the sensitivity of the area and the above claimed threats to rare fauna, a Fauna Impact Statement, including consideration of selected rare and endangered species recovery plan/s may be appropriate, noting that this would normally be required at Development Application stage. While a number of archaeological and heritage items occur in the Helensburgh area, none are located on the lands under investigation for urban expansion. The only currently identified archaeological constraint to development within the study area is site 9, which is located within an area which would be inundated if a major stormwater control structure for Gills Creek Catchment was constructed. The subject proposed water control structure can be relocated to avoid such impact and further study is considered appropriate with any development application. 4. economic costs and benefits of alternative landuses, including the financial costs to Wollongong City Council and the State Government with respect to the provisions and maintenance of public utilities and community services relating to: (a) the lands specified on the attached map; and (b) Helensburgh urban area; (a) the lands specified on the attached map: In summary, on the basis of user pays which is now widespread in both State and Local Government, there are limited costs to State and Local Government. However with urban development proposal, there are a number of likely additional costs to State Government and possibly to Local Government where infrastructure (such as electricity or community services) do not recover full costs. These costs are relatively small based on the evidence to the Inquiry. There are equally a number of benefits with urban development, mostly to the local Helensburgh community, as well as to Council in that certain infrastructure, community facilities and, not the least, the potential to clean up and control certain urban runoff. Council's Draft Plan (Environmental Study-Strategy) came to this conclusion after detailed assessment and liaison with Government agencies (including 30 service providers), consultants and the community (involving at least one survey). There are similar (or possibly lesser) costs to Council and State Government with existing zoning or Environmental Protection zoning as there are with urban development proposals based on identified service needs, and potential water and sewerage amplification for infill type development of existing Helensburgh. Most service providers supply infrastructure on a needs basis (subject to adequate lead times and planning/funding programmes of up to five years). Water and sewerage may require significant additional infrastructure (at developer cost), but this would be required in any case due to urban consolidation aims for Helensburgh (up to 40% population increase). Water and sewerage and other infrastructure requirements or funding would not detract from other areas, as provision has been made to accommodate such potential development. Community facilities could be improved if additional development around Helensburgh proceeds, again through developer contributions. In particular some parties consider that an increased population is desirable to justify such community facilities, including a potential high school and major retail store. The school or shop provision would normally be determined after a threshold population is reached and there is no certainty or assurance that development will enable such facilities to be provided. Relevant sections of Council's Draft Helensburgh Plan should be updated, to assist in determination of Section 94 developer contributions, for both any development of the subject areas as well as development of urban infill areas with existing Helensburgh (after other studies and assessment). (b) Helensburgh urban area: There is limited information submitted on cost and benefits for existing Helensburgh. The Draft Helensburgh Plan is again referred to as it notes that studies have revealed the need for certain services and community facilities. Wollongong Council have not indicated how such facilities and services are to be provided, and presumably without certain initiatives, these would be implemented in competition with other of Council's identified needs for this community at Council (and certain Government) cost. The Water Board states that the existing water supply cannot support a 40% increase in the existing population of Helensburgh (by urban infill - dual occupancies, etc). The system is operating near capacity and any significant development in Helensburgh will require augmentation of the system. Any significant development in Helensburgh requires additional infrastructure. This includes re-zoning of subject areas to urban or Council's proposed 40% increase in existing Helensburgh by urban consolidation. In particular, water and sewerage infrastructure will require upgrading unless minimal (100 lots or so) development is intended for existing Helensburgh. This can be accommodated, at developer cost and without detriment or reallocation of funds or priorities to other development areas in Sydney, according to the Water Board. The major trade-offs proposed by Lady Carrington Estate include, dedication of substantial lands to the National Parks and Wildlife Service at no cost (thus conserving significant habitat and important wildlife corridor), options involving land and/or construction of stormwater controls serving existing Helensburgh and offers to cease polluting activities on lands outside the terms of reference (eg Otford Valley Farm). The evidence to the Inquiry, whilst limited with respect to trade-offs indicates that there are benefits or potential benefits (unquantified) with a number of trade-offs. However the overriding consideration is the protection of the National Park and Hacking River from unacceptable impacts. Nevertheless Council's Draft Helensburgh Plan notes that the involvement of the State Government or its Departments is required for such trade-off negotiations. Subject to the further studies and assessments required, and subject to urban capability being found for Lady Carrington Estate land, it would appear that negotiations could be explored similar to and concurrent with other arrangements or negotiations for infrastructure provision, staging, etc. The benefit of land transfer to the NPWS is not disputed however and irrespective of monetary valuations (the landowner claims a $3-10 million valuation for the transfer land), the NPWS considers the benefits in obtaining such land as invaluable. 5. the role of Helensburgh in providing housing and employment opportunities for Southern Sydney and the Illawarra; The town's geographical location makes it a convenient location to take extra housing. It is well situated between the centres of Wollongong and Sydney, with good rail and road links. It has a desirable location near coastal recreational areas and the National Park, yet it retains a rural town character with regard to the isolation of the township, and pursuits such as horseriding and bushwalking. Helensburgh's role in the provision of housing is not significant in terms of Sydney's growth or Wollongong's growth, however, further residential development in the town would have some benefit in relieving pressure on housing in these areas. There are also additional local or locational benefits. Environmental protection, efficient use of infrastructure/services and other matters are interrelated to housing provision. Overall it appears that Helensburgh's role in providing employment is currently fairly small, and would increase to some extent if some development was permitted. However, with the current high use of the car, Helensburgh would be likely to remain more of a dormitory town, that is, the situation where most residents commute to either Wollongong or Sydney for employment and some business or shopping trips, would be expected to continue. Industrial zonings within the Gills Creek subject lands has the greatest potential for longer term local employment. However the Gills Creek landowners proposal is unclear as to industrial landuse and appears to favour greater residential landuse. 6. the implications for the character of Helensburgh; and Submissions to the Inquiry span the range of community feeling, from "increasing development enables better shops, facilities and infrastructure", to increasing development means greater traffic, bushland loss or pollution". Similar development has occurred and is proposed with infill development of existing Helensburgh (40% increase in population) and arguably the resulting impact is not and has not been substantial. However, the diverse, yet village character of Helensburgh has been changing in recent times and with urban development of subject lands there would be an impact on the character of Helensburgh according to certain submissions. Certain submissions disagree. Other terms of reference especially water quality and impacts on the National Park are related and if it is found that there will be impacts on the National Park, then this would affect the character of Helensburgh including its bushland setting. Village atmosphere would be lost to some degree. It would also be lost with 40% population increase (with infill development but possibly to a lesser degree). 7. bushfire risks. The subject areas of land have (or are located in areas of) moderate to high bushfire hazard. The exceptions are cleared areas especially in the Gills Creek area and a smaller cleared area in Lady Carrington Estate which have low to moderate fire hazard status. Concerns exist that the slope, vegetation and aspect of subject areas (virtually on the edges of the plateau except Gills Creek land) lead to a high bushfire hazard for most subject lands (except the above cleared Gills Creek and Lady Carrington Estate lands. Bushfire hazard reduction has potential impacts such as fauna habitat and flora loss as well as erosion, sedimentation, and funding-practicality concerns. Consultants for landowners argue that urban development would reduce the high hazard ranking (due to loss of vegetation). After assessing bushfire hazard potential, Council's Draft Helensburgh Plan also considers that there are no major bushfire constraints except for the ridge areas of Lady Carrington Estate which would need to comply with bush fire standards. The proposal presented is designed to comply. In this and other areas, bushfire hazard reduction zones, minimum lot depths for various slopes and aspects of certain urban development would require certain measures. I refer to fuel reduction and impacts on flora or habitat under the flora and fauna sections of this report. However there is some question as to fuel reduction practicability and funding especially in the long term. Both these aspects require more detailed examination, and the Department of Bushfire Services would appear to prefer Menai type development with peripheral roads, setbacks and acceptable building design. The incorporation of fuel reduction zones in private lands as proposed by Council's Draft Helensburgh Plan, may be more cost effective, but has long term policing and effectiveness problems, highlighted by the Como example raised by the Department of Bushfire Services. Council's submission to the Inquiry suggests that proposed residential development along ridgelines causes particular risks in the area along Undola and Lilyvale Road ridges, and that if adequate bushfire protection is to be achieved in the Lady Carrington Estates proposal, it may be at the expense of downslope vegetation which Council suggests includes the good quality forests in the gullies. Council also comments that the retention of tree canopies throughout the development conflicts with bushfire hazard reduction requirements although it is noted that the Draft Helensburgh Plan suggests a balance between satisfying bushfire hazard reduction and maximising quality tree cover should be an objective to be achieved in the event that state government decision allows development there to proceed. Reference is made to the section of this report on conservation significance, which concludes that further study and assessment is required on loss or disturbance of LCE habitat (with development of bushfire hazard reduction) and the impacts or potential impacts. Reference is also made to the potential visual impact of bushfire hazard reduction measures which may require increased bushfire fuel reduction zone width to allow for the potential reduced screening effect when viewed from nearby vantage points. Rezoning of all subject lands to Environmental Protection would not allow urban development to further approach bushland areas (noting that considerable areas of Gills Creek and a lesser area of Lady Carrington Estate are already cleared). Conservation groups argue that revegetation of these areas is possible. In this respect, certain controlled development would reduce fire hazard or exposure of some older areas of Helensburgh which have little or no buffers to bushland, have no peripheral fire tracks or escape routes and have other risk problems such as slope, vegetation or construction material problems according to the Department of Bushfire Services. RECOMMENDATIONS It is recommended that there be no change in the current Local Environment Plan or current zonings until further studies are undertaken primarily aimed at identifying existing and potential impacts from various landuses, then setting of appropriate environmental objectives, followed by identification of a cost-effective strategic catchment management plan to control existing catchment pollution sources and identify landuse controls capable of meeting these objectives. It is recommended that studies be conducted in an independent fashion involving: · set-up, overview, supervision and final assessment plus funding allocation of further studies by the Hacking River Catchment Management Committee (and particularly a nominated sub-committee), · final considerations (re catchment management approach, strategies, standards, controls, and success of failure of water quality control trials or other studies) are to be by the future Catchment Assessment Commission (or the above-mentioned Hacking River Catchment Management Committee Sub Committee in the interim), with recommendations to Council for action. Given the regional, state and national issues or potential impacts then dependent on the outcomes of further studies and subject to any Catchment Management Strategies or Catchment Assessment Commission recommendations (regarding landuse controls) then Council and the State Government will need to liaise (and perhaps negotiate with certain landowners) to achieve the environmental protection and landuse or control appropriate to this area's current and future values or objectives. Arrangements for setting up and funding such studies should be similar to as occurred at West Dapto with joint Council, Government and developer co-operation. Some studies are specific to certain land and these studies will involve funding by that landowner. Other studies are catchment based and therefore involve joint Council, Government and landowner joint funding. Studies include: · immediate or short term studies as well as long term studies, · existing water quality, water quality impacts and environmental impacts, · cumulative impacts, · flora and fauna habitat loss impacts, · testing and proving water quality pond/wetland proposals. · rare and endangered fauna impacts (or a Fauna Impact Statement) particularly assessing potential impacts on the Sooty Owl, [by LCE and Landcom], · wildlife corridor impacts from various landuses and buffer areas (especially urban development and bushfire hazard reduction areas), [by LCE], It is noted that Council's Draft Helensburgh Plan concluded that the Gills Creek area has urban landuse capability subject to appropriate environmental controls (including water quality control ponds), but that urban development in Camp Creek could not proceed until there is an identified and acceptable pond location serving existing developed areas in Helensburgh. The evidence to this Inquiry leads to the same conclusion, based on the objective of treating runoff from existing and new development. The above listed studies relate generally to all lands but in respect of water quality control, trials are warranted in the Gills Creek area, and concurrently or following such trials, then in Camp Creek depending on other factors such as locational constraints and the objective of treating existing uncontrolled runoff from upstream developed areas and improvement in overall water quality and impacts. In total however, given the current concerns and numbers of overlapping constraints which may or may not be satisfied with substantial and detailed further studies, and given the limited urban capability, lot yields and consequent viability uncertainty, it would appear that Gills Creek has reasonable capability (re urban development and controls and resulting environmental improvement), LCE (cleared and filled area) a lower capability (subject to further detailed studies and rigorous assessment), that vegetated areas of Gills Creek have the next lowest capability, that Land Pooling has a lower capability again (catchment improvements are unlikely) and that catchment improvements are also unlikely with the Landcom (northern site) or with the LCE (northern site) (ranked last) unless one or both sites can be linked with landfill rehabilitation works which can demonstrate overall improvement for the catchment or sensitive downstream waters (again requiring detailed studies, and perhaps delay until the landfill closure is imminent). The vegetated ridge areas of LCE (south) would sit around second last in overall urban capability based on the large numbers of concerns and studies required. It is regrettable, but appropriate that other actions and lands have higher priority or earlier trialing or staging. This is the nature of planning and especially where irreversible environmental impacts are possible, the precautionary principle dictates such an approach. Other smaller and separate Landcom subject land (two sites) and Lady Carrington Estate land (near the landfill but south of Landcom's major land proposal) have identified environmental attributes and should be considered for Environmental Protection zoning, based on the limited information provided to the Inquiry on these areas. It is noted that Council previously proposed that the larger of the two Landcom sites be rezoned to 7(c) Environmental Protection (Residential). Landcom have not indicated whether this is acceptable or not. Accordingly zoning should not change at this time, but remain unchanged which requires appropriate landuse controls to be fully assessed prior to final landuse extent, density or options being determined, to provide protection of sensitive areas, as is the intent of much of the current zoning. Subject to these further trials, studies, Catchment Management Committee considerations and conclusions (re landuse controls, study findings and assessment), then I recommend that Council amend and determine the Draft Local Environmental Plan for submissions to the Minister pursuant to Section 68 of the Environmental Planning and Assessment Act in accordance with the comments, findings and recommendations outlined in this report.' [19/270-275] 739 The report is organised into two primary sections. 740 The first section provides relevant background to and detail of the Inquiry. Here, the Commissioner sets out the terms of reference and the time frame for the Inquiry; the history of Helensburgh, the Royal National Park and the Hacking River; a summary of events leading to the Inquiry; previous reports undertaken in the area; the planning background of the lands subject to the Inquiry and a summary of submissions received both by the Inquiry and in response the earlier exhibition of the 1992 Draft LEP (which were treated as background documents to the Inquiry). 741 The second section is entitled the 'Commissioner's Comments and Findings'. The Commissioner first sets out the relevant provisions of planning instruments, policies and other matters. He then examines the following in detail: land capability; water quality; potential environmental impacts from alternative landuses on the Royal National Park; the conservation value of the land; economic costs and benefits of alternative landuses; the socio-economic role of Helensburgh; impact of development on the character of Helensburgh; and bushfire risk of the lands subject to the Inquiry. 742 At page 41 of the report, the Commissioner noted that 243 parties were involved in the Inquiry, including: · Wollongong and Sutherland Councils; · Government Departments and Agencies -Department of Planning (DOP), -Environment Protection Authority (EPA), -Hacking River Catchment Management Committee, -Department of Water Resources, -National Parks and Wildlife Service (NPWS), -Soil Conservation Service of the Department of Conservation and Land Management (CALM), -Roads and Traffic Authority (RTA), -State Rail Authority (SRA), · Major Landowner Groups - Gills Creek Landowners, -Lady Carrington Estate (LCE), -Land Pooling Group, -Landcom/Department of Housing. · Community Groups and Individuals LCE submission generally 743 While this matter will be examined in detail below, it is convenient at this point to briefly outline the case presented to the Commission of Inquiry on behalf of the joint venture (LCE submission) seeking rezoning for the purposes of urban development. 744 It is accepted that the initial submission to the Commission of Inquiry submitted in June 1994 was based on the 1992 GHD rezoning application (outlined above). 745 It is also plain that following the Primary Submissions, Walkers retained GHD to prepare an updated stormwater report: 'The [supplementary] report was prompted by changes in engineering practices, knowledge and community expectation regarding stormwater quality that have occurred since a rezoning application was originally prepared for the Lady Carrington Estate in 1992' 746 That supplementary report, or Final Report as it was called, was submitted in September 1994 and in the Executive Summary of that report it was stated that it addressed 'a range of stormwater and aquatic ecology issues' relating to the proposed development. The Commissioner reported that it was submitted that the degree of detail thus provided was 'well beyond that normally provided at rezoning stage and is at the level normally associated with development application stage' [19/123]. 747 In relation to the joint venture's submission dealing with the water quality issue, the Commissioner reported as follows: 'LCE claims that their proposed water quality ponds/wetlands and microfiltration (tertiary treatment) would be the highest level of treatment for urban runoff in Australia. LCE claims that urban development will lessen erosion/sedimentation problems (but accepts that construction impacts will have the highest potential erosion risk). The submission claims that no runoff controls or improvement in current impacts will result without urban development controls which pick up both existing and proposed urban areas. Considerable consultant reports are submitted as to water quality predictions of proposed ponds and wetlands.' [19/078-79] 748 The Commissioner reported that the consultant for LCE pointed out that 'similar ponds have been used in Canberra for nearly twenty years and that the technology is neither experimental nor new. The consultant claims that even after 15 years operation the pollutant removing efficiency of Canberra ponds is around 75% or greater' [19/129]. 749 In relation to other landuses of the subject land, the Commissioner reported as follows: 'Consultants for LCE note that computer modelling indicates that alternative landuse, including Environmental Protection zoning, will produce higher pollution loads for sediment than their controlled urban development proposal. Council argues that this prediction is falsely based on data from other catchments not Helensburgh.' [19/131] 750 The Commissioner reported that while the Otford Valley Farm was outside the subject lands, at the time of the Inquiry the land was owned by Ensile - LCE and that LCE offered to cease polluting activities such as horse riding and agistment uses as a 'trade-off' for rezoning certain of the subject lands [19/130]. Other LCE 'trade-offs' previously mentioned included the dedication of approximately 320ha of LCE land having a high conservation value, to the NPWS. It was submitted that this land, which contained significant flora and fauna would serve as a habitat corridor to link the Royal National Park with the escarpment land to the south [19/078]. Conduct of the Commission of Inquiry 751 The Commissioner reported at page 84 that the issue of water quality was considered by 'a number, if not most involved parties', to be the 'most important issue before this Inquiry' [19/117; see also 19/136]. 752 The Commissioner listed the water quality issues or concerns raised during the Inquiry as: · relevant aims, standards or limits, · existing Helensburgh stormwater impacts on the Hacking River, · the sensitive nature of the catchment, · the need for high (highest) standards for such a sensitive area, · the lack of definite standards, · the lack of appropriate data, monitoring or assessment, · the use of computer modelling predictions and accuracy, · limited site specific data or impact assessment, · water quantity and quality control devices involving ponds and wetlands and the evolving nature of such controls, · significant changes to pond/wetland proposals during the public hearing sessions, · use and experience with similar basins elsewhere, including Helensburgh, Sydney, Wollongong and Canberra, · relative contribution of other pollutant sources including, the waste landfill, existing Helensburgh, existing rural uses (horseriding), etc, · lack of assessment of other landuses or potential zonings, particularly Environmental Protection zoning, · trade-offs offered by one landowner and relative cost-benefits to water quality, · earlier reports, studies and approaches, particularly the concept of (or preference for) disturbed/degraded catchments for investigation and/or disturbed/cleared lands over undisturbed/undegraded lands or uncleared land, · the position or approaches of various involved Government Departments, agencies or committees (including the Hacking Catchment Committee), · changes about to be introduced with a Catchment Assessment Commission, an Office of Water, an Urban Stormwater Task Force, a Draft Catchment management Plan, a Draft Royal National Park Plan of Management and other initiatives. [19/116-117] 753 The Commissioner noted that water quality concerns also relate to other terms of reference, such as the impacts on the Royal National Park [19/117]. 754 The Commissioner recalled that in respect to water quality, Council's Draft Helensburgh Plan noted: · the Hacking River is classified as a protected river under the Clean Waters Act (with one of the highest levels of protection), · the Hacking River is already degraded by development, · local characteristics aggravate the situation in that the area has -high intensity rainfall, -an erodible sandstone base, and -low base flow in water courses, · urban expansion without appropriate controls could result in further pollution [19/117] 755 It was because of the water quality concerns and issues presented in Primary Submissions that the Round Table sessions on Water Quality were held in the period between the Primary Hearing and the Session in Reply. In relation to this topic the Commissioner noted as follows: '..due to a number of factors including late water quality submissions by many involved parties, substantial and late changes to proposed water controls, on-going concerns, then not one but three separate days of water quality round table sessions were held, at the request of the involved parties. Whilst the concerns as to the adversarial approaches and lack of co-operation were raised by some parties, the outcomes …. were generally considered worthwhile. However, the three separate round table sessions (over a period of 7 weeks) resulted in considerable delay to the Inquiry whilst further information was prepared .' [19/118 - emphasis added] 756 During the course of the Commission of Inquiry particular emphasis was placed on the standards applicable to the Hacking River catchment waters and to the stormwater entering the catchment. Such standards were seen as a necessary starting point from which to discuss water quality issues. 757 The Commissioner reported that there were no definitive standards applicable for instream water quality and that urban runoff standards were similarly uncertain given the diffuse nature of stormwater. Further, the Commissioner noted that the EPA had pointed out that, in relation to the subject land, until more detailed studies of the existing natural range of variables in time and space and the way ecosystems responded to changes were conducted, appropriate objectives and limits could not be determined [19/119]. 758 The Hacking River and its tributaries above the weir at Audley are Class 'P' Protected Waters, and as stormwater from the proposed development would enter the Hacking River in that portion classified 'P', it too would be required to comply with that classification. In general terms, Protected Waters are waters into which discharges are permitted provided they do not affect consumption by humans, industry, plants or animals or aquatic life. There were, however, no specific policies in relation to such waters administered by the EPA 759 The Commissioner reported that the EPA, in reluctantly providing a list of water quality parameters or ranges based on the ANZECC Australian Water Quality guidelines to the round table on water quality, indicated that until specific guidelines or standards were set for the Hacking River, then the ANZECC based values may be useful, and that the lower values, for example for Phosphorus, may be likely. However, the Commissioner noted that the EPA had pointed out that the ANZECC guidelines were limited in that they apply to ambient receiving water quality, not discharges into them [19/119]. The Commissioner reported that consultants for landowners noted that the ANZECC guidelines apply to the 'whole range of rivers over the continent of Australia, and that there are limitations based on site specific characteristics when examining selected parameters or limits' [19/119]. Submissions before the Commission of Inquiry opposing rezoning for urban development Wollongong and Sutherland Councils The Commissioner noted in his report that in its primary submission, Wollongong Council had stated that it was totally opposed to any development in eastern Helensburgh given that two different elected Councils in Wollongong had decided, after extensive consultation, that the subject land should be rezoned Environmental Protection. The supporting reasons for that stance were stated as including the undulating to steep topography and heavy vegetation in the area and the view that the critical issue of water quality could not be satisfactorily addressed [19/74]. The Commissioner pointed out that jointly, Wollongong and Sutherland Council's views were that insufficient grounds existed to warrant urban development on the subject lands where such development would have detrimental impact on a very sensitive environment and there was uncertainty regarding the adequacy of the proposed environmental safeguards given the 'P' Class Classification of the Hacking River. With regard to further urban expansion of Helensburgh, the Councils, informed by the precautionary principle, had posed the following question: Can any further development occur around Helensburgh without detrimental impact on the local environment generally and the water quality of the Hacking River specifically? Specifically in relation to water quality and predictions, the Commissioner noted that Council's water quality consultants were 'critical of sensitivity assessments particularly for LCE, arguing that pollutant characteristics can differ from storm to storm and for different locations' [19/123]. Further, the Councils had noted that 'there is limited data available on the longterm performance of artificial wetlands, and leading edge technology is not appropriate for stormwater management in the headwaters of the Hacking River' [19/75]. In response to suggestions that trials should be conducted to test the efficiency of or to determine the most appropriate type of stormwater treatment measures, the Commissioner recorded that 'Council considers that extensive monitoring would be required and if trials are to be conducted, they should be located within the existing urban area of Helensburgh or the disturbed Gills Creek catchment'. Further, the Commissioner lists the following points raised by the joint Councils: · storm ponds - wetlands are new technology, there is limited data, on short or long term efficiency. · experimental technology is inappropriate at the headwaters of the Hacking River particularly given the significance of the National Park and its ecosystem, · the continuing degradation of Hacking River, the poor management at present, and that nitrogen and phosphorus levels currently exceed ANZECC guidelines and EPA criteria, · siltation from urban areas greatly exceeds natural areas and Port Hacking is heavily silted, · potential for algal blooms in Hacking River, · proposed control ponds are less efficient over time, · little water quality and quantity data in this area…. · lack of site data does not allow confident predictions, · there is little or no assessment of construction impacts, · detention basins cannot limit pollution loads to current levels and Memtec technology use in this area requires further investigation. It is clear from the Commissioner's recapitulation of Councils' submissions that from the very outset, indeed, from the Primary Submission which was lodged with the Commission before the commencement of the Primary Hearing Session, water quality was raised as 'the' specific concern of Council. Further, the Councils' emphasis on 'experimental' in relation to the water quality control measures proposed by the developers, indicates the significant role that testing may have played in the Inquiry, had it been commenced at the earliest possible time and perhaps had preliminary results been obtained. Government Departments and Agencies The Commissioner reports that the EPA submission centred on water quality and water quality standards. The submission pointed out the lack of such standards or objectives appropriate to the sensitive areas of the Hacking River and the Royal National Park and stated that 'before appropriate determination can be made, a process involving community consultation, consideration of options and development of catchment management plans is required' [19/082]. Further, the Commissioner related the EPA position as follows: 'The EPA closely examined various water quality predictions, pond/wetland controls proposed by landowner consultants and other landuse options, but states that site specific monitoring and other studies are required to satisfy its concerns. The modelling lacks sufficient accuracy, lacks site specific calibration and is only suitable for broad scale catchment management. The EPA may review its position as to prevention of development in disturbed catchments, should trialing and monitoring in a disturbed catchment be found to not increase pollutant loads.' [19/082] In relation to the topic of water quality criteria, the Commissioner reported as follows: 'The EPA agrees that the selection of water quality limits may not fully address potential impacts in such a sensitive area. The EPA concludes that a strategic approach to urban development is required through a catchment management process, with a view to setting objectives including water quality. The EPA considers that this might involve a strategic assessment of catchment pollutant sources, and development of a cost effective strategic catchment management plan . The NPWS considers the 1986 SPCC study is restricted to sampling on 7 occasions over a three month period in 1985 and they suggest additional monitoring is warranted. As with the EPA the NPWS considers that water quality management would best be served if monitoring and assessment occurred in a co-ordinated and standardised manner across the entire upper Hacking catchment as was undertaken for the 1986 SPCC study. A repeat of the 1986 Weed Study is also suggested if only to obtain data on predevelopment conditions.' [19/119 - Commissioner's emphasis] The Commissioner noted that similarly, the Hacking River Catchment Management Committee and the Department of Water Resources referred to the need for longer term water quality studies and demonstration of the viability of water controls proposed. Both agencies also submitted that a catchment based approach is required to address potential impacts including cumulative impacts from other pollution sources. These submissions were consistent with those from the NPWS. The Commissioner reported that in the EPA's view, the best practical means approach, which was the approach to the water quality strategy adopted in Council's Draft Helensburgh Plan requiring consideration of the following issues: 'the measurement of degradation against what standard; the reliability of pollutant export; best practice stormwater control performance' was not appropriate for any development of the subject land. According to the EPA and as noted by the Commissioner, a catchment based approach is required and would involve the following: · assessing the existing water quality of the Hacking River and tributaries, - the EPA states that further monitoring is required for at least one year with average conditions and perhaps establish a pollutant budget. · establishing appropriate water quality controls, -The EPA states that whilst a framework is now in place with the National Water Quality Strategy and the Government White Paper on management and regulation of water in NSW, the process has not been finalised sufficiently to be implemented for the Hacking River · developing a Strategic Catchment Plan In relation to the Stormwater Task Force set up by the state government, the Commissioner reported that parties including the EPA considered that 'rather than the Task Force and Catchment Management Commission being of assistance, [the] Helensburgh Inquiry and its recommendations may be more detailed and hence awaiting either of the above initiatives is not warranted' [19/120]. Community Groups and Individuals The points of opposition to urban development from community groups and individuals were varied and are best gleaned from the Commissioner's report itself. In particular, the Commissioner noted that Sutherland Shire Environment Centre claimed that stormwater control would be speculative, costly and would force overdevelopment to recover costs [19/087]. Precautionary Principle 760 The Commissioner reported that many parties had suggested that the precautionary principle should apply to any rezoning or consideration of urban development in the subject lands. This principle had been given statutory and judicial recognition and is stated as follows in section 6(2) of the Protection of the Environmental Administration Act 1991 (NSW): 'if there are threats of serious or irreversible environmental damage, lack of full scientific certainty should not be used as a reason for postponing measures to prevent environmental degradation.' 761 The Commissioner noted that the 1992 Intergovernmental Agreement on the Environment which was formally signed by the Commonwealth and all State and Territory Governments, utilises the above definition but incorporates the following extension: 'In the application of the precautionary principle public and private decisions should be guided by: (i) careful evaluation to avoid, wherever practicable, serious or irreversible damage to the environment; and (ii) an assessment of the risk weighted consequences of various options.' [19/089] 762 The Commissioner, in assessing the 'land capability' of the subject land noted that 'the precautionary approach warrants trial soil loss, sediment and water quality controls and assessment on Gills Creek lands (and possibly LCE) in conjunction with other studies or trials' [19/114]. Commissioner's comments and findings 763 The Commissioner commented specifically in relation to the land capability of the LCE land as follows: · there is a small cleared or disturbed area, · present rural landuse is limited to the small cleared area, · erosion and soil losses are limited to around this cleared area and along tracks, · existing soil losses are not high overall, (except with the cleared area and near tracks) but have the potential for high losses, particularly on slopes greater than 10%, · moderate soil losses are predicted with urban landuse for the flatter cleared lands and high to extreme losses for development of other steeper or erosive soil areas, · slopes are variable, with substantial steep eastern areas greater than 20%, but less steep western areas between 5 and 20% (which includes tha flatter cleared area of 5-10% slope, and ridge areas of 10-20% slope), · ridge areas are reasonably narrow and have moderate to high soil loss potential with urban development, · a considerable amount of cleared area is fill (railway ballast and other material), · the filled area may be rehabilitated, but this is likely to be costly as would be revegatation, · flatter cleared areas have urban capability, subject to further study of fill material, · according to Council's Draft Helensburgh Plan a substantially lesser area has urban capability potential (with controls) than is proposed by LCE, and a lower density is suggested for ridge areas, [I interpolate to note that such considerations while they would be dealt with at the development application stage, clearly impact on the assessment of damage, if any, in the present proceedings.] · sensitive waters downstream require high(est) level of controls. [19/112-113 - emphasis added] 764 The Commissioner reported that it was 'perhaps unfortunate that a number of initiatives relating to either water, catchment assessment or the National Park are either in train or have recently been released only in draft form. He further reported that many parties, including involved Government agencies considered that such initiatives have limited bearing on the Inquiry and that the Inquiry should not await any of these' [19/134]. 765 As to further testing of existing conditions, the Commissioner reported that all parties, including landowners' consultants generally agreed that further studies are required and that they would be at the cost of the landowners/developers [19/126]. 766 While the Commissioner found that 'the urban runoff controls proposed with urban development are potentially the highest level of treatment in Australia', he highlighted the uncertainty which remained as to 'location, long term viability, performance, maintenance and funding' [19/262]. 767 In relation to the suggested trial pond/wetland, the Commissioner first noted the parties' difficulties in agreeing on a suitable location and then reported as follows: 'Gills Creek may be a potential location for a trial basin… However this necessitates rezoning and development to enable such trial pond construction, monitoring and assessment. The Lady Carrington Estate has similar benefits, but Council considers that these lands have not the same capability as Gills Creek, being steeper, largely uncleared and not already degraded or used for housing or industrial uses. In any case, the dilemma is that of allowing trials with rezoning of land for urban development. While this would enable testing of the important construction period, the precautionary principle suggests a more conservative approach . The EPA and Department of Water Resources agree that a trial for existing Helensburgh is preferred, but recognise that funding may be a problem..' [19/144 - emphasis added] 768 The Commissioner commented that there were major trade-offs proposed by LCE, including the dedication of substantial lands to the NPWS (thereby conserving significant habitat and an important wildlife corridor); options involving land and/or construction of stormwater controls serving existing Helensburgh; offers to cease polluting activities on lands outside the terms of reference (eg Otford Valley Farm); and the rehabilitation of the landfill site to control leachate runoff and provide recreation facilities [19/219]. 769 However, he noted that while these trade-offs represented potential benefits (largely unquantified), the 'overriding consideration is protection of the National Park and Hacking River from unacceptable impacts' [19/219]. 770 The Commissioner, in assessing the land capability of the LCE land noted that contrary to LCE claims, 'it is likely that urban development would not improve current stormwater or stream water quality, nor would impacts on the Hacking River or National Park be improved or removed. In fact unacceptable impacts are likely' [19/257]. As such, he required that further studies be conducted including flora, fauna habitat, potential impacts on rare, endangered or uncommon species or communities, as well as trialing water quality ponds, monitoring existing water quality impacts in disturbed and undisturbed catchments and assessing overall catchment based strategies for landuse controls and catchment improvements [19/257]. He stated that 'should these studies and assessment not find that sensitive areas would be protected or water quality or impacts be improved for the catchment, the Environmental Protection zoning is recommended' [19/261]. Commissioner's Recommendations 771 As noted above, the Commissioner did not recommend that the Lady Carrington Estate lands be rezoned so as to permit urban development. Instead, the Commissioner made the following recommendations: It is recommended that there be no change in the current Local Environment Plan or current zonings until further studies are undertaken primarily aimed at identifying existing and potential impacts from various landuses, then setting appropriate environmental objectives, followed by identification of a cost-effective strategic catchment management plan to control existing catchment pollution sources and identify landuse controls capable of meeting these objectives. It is recommended that studies be conducted in an independent fashion involving: set-up, overview, supervision and final assessment plus funding allocation of further studies by the hacking River Catchment Management Committee (and particularly a nominated sub-committee), as follows: the Sub-Committee to comprise one representative from respectively, the EPA (Chair), Wollongong Council, a Landowner representative (of subject lands), a conservation representative (or a NPWS representative), and a DOP representative, final considerations (regarding catchment management approach, strategies, standards, controls, and success of failure of water quality control trials or other studies) are to be by the future Catchment Assessment Commission (or the abovementioned Hacking River Catchment Management Committee Sub-Committee in the interim), with recommendations to Council. Any rezoning should not occur until all such recommendations are with Council. Given the regional, state and national issues or potential impacts then dependent on the outcomes of further studies and subject to any Catchment Management Strategies or Catchment Assessment Commission recommendations (regarding landuse controls) then Council and the State Government will need to liaise (and perhaps negotiate with certain landowners) to achieve the environmental protection and landuse or control appropriate to this area's current and future values or objectives. The acknowledged sensitivity the Royal National Park and unusual nature of the Hacking River Catchment (being largely occupied by the National Park but also by a coal mine, freeway, railway and urban development) warrants such particular measures and precautions. Arrangements for setting up and funding such studies should be similar to what has occurred at West Dapto with joint Council, Government and developer co-operation. Some studies are specific to certain land and these studies will involve funding by that landowner. Other studies are catchment based and therefore involve joint Council, Government and landowner joint funding. Any arrangements or disputes as to funding, proportional funding, etc are to be decided by the Catchment Management Sub Committee. The timing is uncertain subject to further more detailed assessment but indicative times based on the studies of major or critical importance given in submissions are: immediate studies (commencing now for up to 12-18 months): assessment and location of trial basin (especially use or part assessment/monitoring of construction pollution etc, that is currently under way, this requires urgent consideration or action as another basin and construction activities on this scale may not arise again in the short term (reference is made to the Heathcote Street current development and future Landcom likely development)), pre-construction situation and impacts with the above trials, a construction-erosion-sedimentation study involving detailed assessment of various soil losses for soils, slopes and vegetation cover on the subject lands. longer term studies (12 months minimum but may require up to 3 years awaiting representative condition requirements, as follows - [details in square brackets [ ] indicate if particular subject land is involved and if so, that landowner should fund such study through the Sub Committee arrangement]: existing water quality, water quality impacts and environmental impacts on the Royal National Park involving a catchment based examination and assessment of other impacts and sources of pollution and controls, covering various seasons, various developed and undeveloped catchments and utilising various appropriate chemical and biological (in stream) indicators, [all landowners], cumulative impacts of other landuses and pollution sources on the Hacking River and National Park, and the identification of mutually beneficial opportunities or controls to attain the identified objectives or standards, [all landowners], flora and fauna habitat loss or reduction/alteration involved with urban or other landuses on subject lands (including specific location/density/type constraints, the potential for large lots, selective tree removal, loss of lower flora species, bushfire hazard reduction measures, etc), [all landowners], testing and proving water quality pond/wetland proposals associated with various landuse options, particularly related to aspects such as reliability with time, seasonal effects, rainfall or storm characteristics, maintenance, performance and funding. Such trial being undertaken for existing developed Helensburgh area/s where success or failure does not have detrimental impact on downstream areas, [all landowners unless specific to certain subject land]. additional longer term (1-3 year) specific studies funded by individual landowners (but which are subject to the control, conduct, and assessment of the Catchment Management Sub Committee) include: rare and endangered fauna impacts (or a Fauna Impact Statement) particularly assessing potential impacts on the Sooty Owl, [by LCE and Landcom], rare and endangered flora studies of certain species of conservation significance on LCE (including species burnt in recent fires on LCE but which are capable of regeneration after fire), [by LCE], wildlife corridor impacts from various landuses and buffer areas (especially urban development and bushfire hazard reduction areas), [by LCE], the sizing of storm ponds requires examination as to related discharges in major storms, potential impacts of partial or untreated stormflows, and improvements/costs/other benefits related to larger storage, (flooding, erosion and sedimentation effects should be addressed on sensitive downstream areas), [all landowners], the presence, locations and extent of potentially problematic soils (eg colloidal soils, or filled areas) as well as their management, treatment or problems with water quality control basins and particularly construction controls, [all landowners for colloidal soils, and LCE for their filled-cleared area soil/s], While funding is to be by certain or all landowners (with certain Council or Government assistance), the management and assessment of the studies is to be by the Sub-Committee. It is noted that Council's Draft Helensburgh Plan concluded that the Gills Creek area has urban landuse capability subject to appropriate environmental controls (including water quality control ponds), but that urban development in Camp Creek could not proceed until there is an identified pond location serving existing developed areas in Helensburgh. The evidence to this Inquiry leads to the same conclusion, based on the objective of treating runoff from existing and new development. (Council's Draft Helensburgh Plan noted a potential location on land under the control of the NPWS however (now excluded) and the Helensburgh Draft Plan - Strategy identified further consideration of these matters by Government, Council and the community.) The above listed studies relate generally to all lands but in respect of water quality control, trials are warranted in the Gills Creek area, and concurrently or following such trials, then in Camp Creek depending on other factors such as locational constraints and the objective of treating existing uncontrolled runoff from upstream developed areas and improvement in overall water quality and impacts. The Lady Carrington Estate land (southern site ridge area) requires particular studies related to fauna, flora, fauna habitat and wildlife corridor potential impacts in greater detail than presently supplied. Virtually a Fauna Impact Statement is required given the importance of this area and the potential for impacts on identified rare and endangered species, and the consideration or assistance of the NPWS should be sought. As to other subject lands, the concurrent studies as to catchment management standards, fauna habitat studies and potential impacts, success or otherwise of water quality control pond trial/s, then possible rezoning and development of selected area/s of Gills Creek and cleared areas of Lady Carrington Estate (south) lands, all precede consideration of Land Pooling land, Landcom land (the tip site) or Lady Carrington Estate land (also near the tip - the northern site). These latter subject lands have limited potential urban capability, but equally there is concern and uncertainty as to water quality, downstream impacts, flora, and fauna potential impacts and other matters. In total there is greater potential impacts from urban development proposals or rezoning these other subject lands than for the Gills Creek and LCE (south) cleared and disturbed areas identified as having potential urban capability. In general, priority ranking (and in any staged or progressive rezoning approach) would be as follows: 1. Gills Creek cleared and disturbed lands have moderate to good land capability, based on large flatter areas, existing uncontrolled stormwater quality and current landuse problems where there is opportunity for catchment improvements with stormwater controls. 2. LCE (south) (filled, cleared and disturbed area) which is relatively flat, of likely low erosion hazard (being railway ballast and other fill but requiring further study), is unlikely to be rehabilitated or revegetated to its original condition or conservation value. Current stormwater and landuse problems are likely to be significantly improved (subject to confirmation with trials and other studies). Improvement and treatment of existing Helensburgh urban runoff water quality (Camp Creek) requires further study as does that portion of the cleared/disturbed land that drains to Gardners Creek (undisturbed catchment). A water quality pond location in Camp Creek serving both existing Helensburgh and proposed cleared area development may be difficult but parties consider further studies are required. Overall improvement to water quality in Camp Creek (and/or Gardners Creek) and improvements in individual or overall catchment impacts, by collecting and treating existing Helensburgh flows and existing site polluted runoff, must be demonstrated by water quality trials and further studies. An acceptable location and proving overall water quality and catchment improvements by trials is critical to any urban rezoning. Unless improvements in stormwater quality and catchment impacts can be appropriately demonstrated to the hacking River Catchment Management Committee (sub-committee's) satisfaction, then this land should be zoned Environmental Protection. 3. Existing flatter, naturally vegetated central to northern areas of Gills Creek land, subject to further studies and assessment of flora, fauna and fauna habitat conservation values and potential impacts on these values or the nearby National Park or wildlife corridor values. 4. Land Pooling, there is limited cleared or disturbed area, noting a small existing urban development adjacent to the northern boundary. In this respect (and subject to other studies) a limited area near the northern boundary - small existing urban area may warrant examination in terms of controlling existing (uncontrolled) urban stormwater runoff. Consideration of a fringe of urban or low density urban-rural type development might be possible and appropriate subject to success with water quality trial ponds with 1 or 2 above, and subject to negotiations in a similar fashion to Council's Illawarra Escarpment "Fair Trading Policy"; namely trading limited land development rights for this northern fringe area land (around 10-25 lot capability) for a larger substantially bushland area to be conserved (noting that this area has limited identified conservation study subject to further study). Diversion of stormflows of existing and proposed urban areas to Gills Creek catchment (and/or any proposed Gills Creek water quality ponds) but at a lesser scale than previously considered by Council (namely by pipeline perhaps down Walker Street) might warrant further consideration with any later limited "fringe" development rights area - Fair Trading considerations. This suggestion is made on the basis of limited urban capability, stormwater and catchment improvements being proven, and having regard to the objectives of the Environmental Planning and Assessment Act, as to whether this land might otherwise be sterilised or left without appropriate management. 5. Landcom (northern area) there is limited existing cleared area and there would be limited urban potential area (a smaller area than proposed), subject to other related studies and preferably in conjunction with the future closure of the adjoining landfill and rehabilitation/construction of playing fields. 6. LCE (south) ridge areas, a smaller area than proposed having regard to further studies and assessment of flora, fauna, fauna habitat, wildlife corridor and National Park values (particularly rare and endangered species) and potential impacts, as well as having regard to bushfire hazard reduction conflicts with habitat conservation, and visual aspects. 7. Lady Carrington Estate (north) a substantially reduced area (than proposed by the landowner) on the smaller cleared and disturbed western boundary area (alongside the landfill boundary), subject to other related studies (fauna habitat, rare and endangered fauna potential impacts (the Sooty Owl), and also preferably in conjunction with the future closure of the adjoining landfill and rehabilitation/construction of playing fields. Unless appropriate improvements in stormwater quality and catchment (or sub-catchment)impacts can be appropriately demonstrated to the Hacking River Catchment Management Committee (sub-committee's) satisfaction, then any or all of these subject lands should be recommended for Environmental Protection zoning. In total however, given the current concerns and numbers of overlapping constraints which may or may not be satisfied with substantial and detailed further studies, and given the limited urban capability, lot yields and consequent viability uncertainty, it would appear that Gills Creek has reasonable capability (re urban development and controls and resulting environmental improvement), LCE (cleared and filled area) a lower capability (subject to further detailed studies and rigorous assessment), that vegetated areas of Gills Creek have the next lowest capability, that Land Pooling has a lower capability again (catchment improvements are unlikely) and that catchment improvements are also unlikely with the Landcom (northern site) or with the LCE (northern site) (ranked last) unless one or both sites can be linked with landfill rehabilitation works which can demonstrate overall improvement for the catchment or sensitive downstream waters (again requiring detailed studies, and perhaps delay until the landfill closure is imminent). The vegetated ridge areas of LCE (south) would sit around second last in overall urban capability based on the large numbers of concerns and studies required. It is regrettable, but appropriate that other actions and lands have higher priority or earlier trialing or staging. This is the nature of planning and especially where irreversible environmental impacts are possible and the precautionary principle dictates such an approach. Other smaller and separate Landcom subject land (two sites) and Lady Carrington Estate land (near the landfill but south of Landcom's major land proposal) have identified environmental attributes and should be considered for Environmental Protection zoning, based on the limited information provided to the Inquiry on these areas. It is noted that Council previously proposed that the larger of the two landcom sites be rezoned to 7(c) Environmental Protection (Residential). Landcom have not indicated whether this is acceptable or not. Accordingly zoning should not change at this time, but remain unchanged, which requires appropriate landuse controls to be fully assessed prior to final landuse extent, density or options being determined, in order to provide protection of sensitive areas, as is the intent of much of the current zoning. Subject to these further trials, studies, Catchment Management Committee considerations and conclusions (re landuse controls, study findings and assessment), then I recommend that Council amend and determine the Draft Local Environmental Plan for submissions to the Minister pursuant to Section 68 of the Act in accordance with the comments, findings and recommendations outlined in this report.' [19/270-275] 9 January 1995 772 On this date, Walker Corporation and Lady Carrington Estates issued a press release pointing out that the Commissioner's report had not recommended specific environmental zoning on land submitted as having development potential for LCE, that the report recommended further studies be carried out and suggested a process by which those studies could be managed and stating that the report encourages Wollongong Council to participate in the committee to further study the urban potential of substantial areas of land at Helensburgh. [20/69] 31 January 1995 773 On 31 January 1995, Walkers Civil Engineering briefed Dunhill Madden Butler [Mr John Whitehouse] to advise on Helensburgh planning issues. [20/117] 774 According to Mr Smyth, Mr Whitehouse had been an adviser to Mr Paul Landa. He became a Deputy Director in the NSW Department of Environment and Planning whilst Mr Smyth was Director. He went on to become Director General of the National Parks and Wildlife Service. He was one of the authors of the Environmental Planning Heritage Act - The Environmental Planning Assessment Act. 10 February 1995 775 On 10 February 1995, Dunhill Madden Butler furnished written advice to Mr McKenna of Walker (Civil Engineering) and a copy of this document was forwarded to Mr Hogarth. The document appears at 20/177 and gives a number of options. These are : (a) Implementation of the Commission of Inquiry recommendations. (b) Rezoning of the land to achieve greater development opportunities. (c) Undertake development of the land in accordance with the current Local Environmental Plan provision. (d) Sell the majority of the holding to the Government. [20/177] 13 February 1995 776 By memorandum of this date, Mr Dransfield wrote to Mr Walker and copied the memorandum to Mr Weinert. The memorandum stated that the Carleton Report would mean extensive delays, further very high costs in studies, trial tests and approvals and a cut-back in the developable area. The letter listed, following discussions with Messrs McKenna, Hogarth, Kidd and Lester four options which Mr Dransfield said they believed to be achievable over time as follows: 1. Sell of existing land holdings (with house plans approved) - possible recovery $7 to $10million. 2. Engineer Government acquisition of the property either in whole or a substantial part. 3. Part Government acquisition and part development. 4. Land swap with other Government lands. [20/192] 777 Mr Dransfield gives support for options 2 or 3 saying that they are likely to give best realisations and produce the quicker result. 22 February 1995 778 By letter dated 22 February 1995, the Wollongong City Council wrote to the Minister for Planning and the Minister for Housing, Mr Webster advising, inter alia: 'Thank you for referring a copy of Commissioner Dr Mark Carlton's [sic] Report to Council . . . The Commissioner has emphasised that a great deal of additional work is required (studies, trials, monitoring, adoption of standards and controls) before anyone can say with certainty that any particular land is suitable for urban development. Council agrees that an independent body such as the hacking River Catchment Management Committee undertake such studies etc and reviews all findings with consultation with Council. However, Council believes that the Committee as presently constituted is inadequate in terms of representation, skills, funding and administrative support to carry out the required work. . . . With regard to funding Council has resolved that it will not contribute to any additional studies required to verify suitability of the land . These should all be undertaken at the cost of the landowners. (With regard to zonings, Council requests that all the land with the exception of land in the Gills Creek Catchment be rezoned 7(d) Hacking River Environmental Protection in City of Wollongong Local Environmental Plan 1990. There is little point in retaining the land in the current non-urban zone as the findings of the Inquiry clearly reveal that unacceptable environmental impacts would result from any urban development. Council agrees with the Commissioner that unless appropriate improvements in stormwater quality and catchments impacts can be appropriately demonstrated, then all of the lands be zoned environmental protection including Gills Creek catchment land . . . In relation to the Helensburgh urban area, Council will request the Hacking River Catchment Management Committee to prepare an environmental management plan for the area. This will detail all sources of pollution and identify options for their mitigation.' [20/203] 13 March 1995 779 On 13 March 1995, a meeting took place attended by Mr Dransfield and Messrs Crouch and Stellane of the NPWS. Notes of the meeting were distributed to Mr Hogarth, Mr Walker and Mr McKenna. The notes record that the findings of the Carlton Report were discussed and that the NPWS 'hold the firm view that the land identified in NPWS Figure 1 is the area which they will insist not be developed . . . Furthermore they would consider acquisition if it was clear that the land is on offer by the current owner.' [20/216] 780 Appended to Mr Dransfield's note at 20/217 is page 2 of the June 1994 NPWS submission to the COI found at 10/86 reading inter alia: 'Wollongong City Council and the NPWS have previously considered a proposal by Lady Carrington Estate . . . for a trade off in which privately owned land of high conservation value is transferred to the NPWS in return for some limited urban development. This was on the proviso that this development can be undertaken in an environmentally acceptable manner. The NPWS considers that such a proposal has merits in principle for conservation and for the long term viability of Royal National Park'. 24 March 1995 781 By letter dated 24 March 1995 the Minister for Planning and Minister for Housing, Mr Webster, wrote to the Wollongong City Council advising, inter alia: 'I am pleased to advise you that following my consideration of Commissioner Carleton's Report and the Council's request, I have made the plan . . . In making the plan I was mindful of the Commissioner's finding that the existing urban and rural land use and zonings are currently impacting the Hacking River to an unacceptable extent. I also noted the Commissioner's finding that there were parcels of land that were suitable for urban development subject to further studies. I believe that the rezoning of the land to environmental protection should serve an interim measure while the studies recommended by the Commissioner are undertaken for the catchment and the areas that may be suitable for urban development . The Council should therefore be prepared to review the planning controls for Helensburgh following the completion of the studies. I have asked the Department of Planning to initiate discussions with other Government agencies and the Council regarding the implementation of the Commissioner's recommendation. This will include the review of the Constitution and funding of the Hacking River Catchment Management Committee you requested in your letter . . .' [20/233] 25 March 1995 782 On 25 March 1995 the State election took place. Ultimately the Australian Labor Party was called upon to form a Government. In opening, Mr Shand submitted as follows: 'The reality of it was that the successful election of the Australian Labor Party to govern in New South Wales, bearing in mind Mr Carr's very well known attitude to the Helensburgh development, spelt the doom of this project. Mr Carr left no doubt about it.' [T 308] 783 An article appearing in the Mercury of 29 March 1995 appeared under the headline 'Victory in Bid to Protect Helensburgh'. The article included, inter alia, the following: 'Conservationists and Wollongong City Council have declared a major victory in their campaign to protect Helensburgh from overdevelopment. Wollongong Lord Mayor David Campbell yesterday welcomed an official announcement from State Planning Minister Robert Webster backing Wollongong City Council's rezoning plan for environmentally sensitive land at Helensburgh. Mr Webster signed the council's Local Environment Plan 1990 on March 17, backing the findings of the Helensburgh Commission of Inquiry, which recommended in favour of a council Local Environment Plan for limited development. The announcement marks the end of a 10-year tussle between the developers and the council culminating in the six month Inquiry.' [20/236] 784 Mr Hogarth's cross-examination included the following in relation to this article: 'Q. A large number of institutions, bodies, and people appeared to regard the signing by the Minister of the Council's local environmental plan as a fatal blow to your development. To put it in round terms? A. Yes. Q. Did they not? A. Yes. Q. And so did you did you not . . .? A. Not to the extent that is portrayed there. Q. Pretty close to it? A. I think the Commissioner's statements had given us heart.' [T 366] 785 Mr Hogarth's evidence here does not ring true. Whilst the signing of the Local Environment Plan on March 17 backing the findings of the Commission of Inquiry did not necessarily represent the end of the road for Mr Hogarth's interests, it was obviously a very significant blow to the Hogarth interests' prospects and one which on my findings, was so perceived by Mr Hogarth. If Mr Hogarth's evidence in relation to having been given 'heart' is merely intended to refer to the fact that there was still some, albeit slender, prospect of future testing and investigation leading to a further session of the Commission and ultimately leading to a rezoning, then to that extent only can Mr Hogarth's statement be accepted. April 1995 786 Whilst Mr Hogarth was away on holidays, a meeting took place between Mr Dransfield and Mr Whitehouse of Dunhills. 787 A detailed note of the meeting was prepared by Mr Dransfield and appears at 21/1. The document summarising the meeting says nothing whatever about rezoning of the whole of the land and the references in paragraph 4 to 'DA for a large development . . .' as Mr Hogarth accepted at transcript 368, had nothing to do with the subdivision that might have resulted from a rezoning which had been generally hoped for through the Commission of Inquiry. 6 April 1995 788 On 6 April 1995, Mr Kidd sent to Mr Dransfield a memorandum headed 'Response to matters raised at Ibenmore Board Meeting 4 April 1995'. [21/12.1] 789 That memorandum included the following: '4. Other business - JV accounts We thank you for the copy of the General Ledger Detail Report and your document A/C 1001 for the Helensburgh Unit Trust, on both of which we offer the following comments. Both RMH and I feel that it is now appropriate to document the mechanism and amounts shown for "Project Management" as an internal Walker requirement and that the sum shown of $1,065,000 will not apply to the JV in fact. Please advise how you wish to handle this. The General Ledger shows political donations of $220,000. We were only informed of your actions with the Labor Party and no approval was sought from us for other parties. We feel that this sum should reasonably be spread over all Walker Projects and Prospects on a prorata basis. We do not accept that Helensburgh should carry the full sum . . .' 790 Mr Hogarth was present at the Ibenmore Board Meeting of 4 April 1995 and was aware of the wording of Mr Kidd's said facsimile. 791 In relation to the first two sentences of the above paragraph beginning 'The General Ledger shows', Mr Hogarth gave evidence under cross-examination that he agreed with that statement. His further evidence was as follows: 'Q. But you had been informed of the Walker interests' actions with the Labor Party in regard to political donations? A. I had a conversation with Mr Walker. Q. About the Labor Party and political donations to it? A. To it. I approved only $5,000. . . . His Honour: Q. Are you saying that Mr Walker told you that $5,000 was to be a political donation to the Labor Party? A. Yes. . . . Mr Shand Q. You say that Mr Walker nominated the figure of $5,000? A. No. I did.' [T 372-373] 792 Mr Kidd's evidence was that he had on about 4 April 1995, received some accounts for the joint venture comprising a number of pages of a spreadsheet and an A4 document. The spreadsheet is to be found at 21/5. The A4 sheet is to be found at 10/275. His evidence was that he went through these documents fairly quickly but sufficiently to note the political donations and the management fees. He noted a list of payments to various persons. 793 Mr Kidd's evidence was that after he had looked at the accounts, that is to say at or near the end of the meeting of 4 April, he had a discussion to the following effect: 'Mr Walker: "These spreadsheets are for the period June 1994 to March 1995 and I've had them generated this morning [21/5] . I have to leave the building in a short while for an important meeting so that only a short time can be given to a review and discussion of the figures. I suggest that you review all of these figures and we can reconvene if you have any issues that you need to discuss". Mr Kidd: (After having had a brief glance at the Spreadsheet) "Lang, I've had a quick scan of these accounts and I've looked at the sheet which was attached to the agenda. We have never agreed to these fees and they should not be shown in the books of the joint venture". Mr Walker: "Yes I'm aware of all that". Mr Kidd: "Lang, what the hell are these political donations?" Mr Walker: "I decided to use Ibenmore as the vehicle to make these donations". Mr Kidd: "Well why weren't we informed about this?" Mr Walker: "I rang Bob one day and said that I was thinking of using Ibenmore. He said that he thought it was a waste of time". Mr Kidd: "Well I'm certain that he would never have imagined that you were going to be using Ibenmore to pay $220,000 to political parties. I do not, and I will not approve of such sums and I would be amazed if Bob would either. All of the benefit for such a sum would come back to Walker and we will only wear the amount approved by Bob". Mr Hogarth: "Yes, and that was only $5,000". Mr Walker: "Well we're going to have to see how we work this out. It probably should be apportioned amongst all of our projects. Please bear with us while I sort this out". Mr Kidd: "Okay but I want you to know that I am disappointed that you think you can use a Joint Venture in this way and I disapprove". Mr Walker: "I hear you and I'll fix it - now I've got to go". Mr Kidd: "How do you propose to sort it out given that they're in the accounts of the Trust and presumably it's suggested that they are partly Lakatoi's responsibility". Mr Walker: "I don't know how to sort it out but clearly we'll have to. It's not the intention that you are to pay these. [Turning to Mr Dransfield] Peter, can you find out how we're going to sort this out?" Mr Dransfield: "Yes, I will and we will meet again".' [Mr Kidd's statement paragraph 80] 794 Mr Kidd's evidence was that he then wrote the letter of 6 April to Mr Dransfield. His cross-examination then included the following in relation to the second page of that memorandum: 'Q. And after referring to the political donations of $220,000, you say, do you not, in that memorandum "we were only informed of your actions with the Labor Party". You see that do you not? A. Yes. Q. And you knew, did you not, when you wrote that memorandum, that the Labor Party appeared in the accounts as the beneficiary of a donation of $100,000? A. Yes. Q. And you then go on to say in your memorandum "And no approval was sought from us for other parties". You see that? A. Yes. Q. And that is a reference, is it not, to the Liberal Party and the National Party which appeared in the accounts? A. Yes. Q. And would you not agree that the clear inference from your words is firstly, that we were informed of Mr Walker's actions with the Labor Party? A. Well I knew that we weren't informed, but those words don't specifically take issue with the $100,000 donation. Q. Mr Kidd, I take it that this memorandum was putting forward, was it, your honest assessment of what you understood the position to be? A. Yes. Q. And the clear inference is, is it not, that you were informed of the donation to the Labor Party? A. That may be the reading of that document in hindsight, Mr Officer, yes. Q. A fair reading of it is it not? A. Of those years that are there, yes. Q. And a fair reading that approval was given in respect of the donation to the Labor Party? A. Those words were written after a very robust discussion with Mr Walker and Mr Dransfield about our surprise, and our disapproval of the level of those donations. Q. I have read the statement. My question was, a fair inference, from what you have there written, is that approval was given by the Hogarth interests for the donation to the Labor Party, correct? A. That may be the hindsight of reading of those words. It was not the intention when I wrote it . . .' [T 868-869] 795 At transcript 870, it was put to Mr Kidd that there was no suggestion in the document that approval was only given to the extent of $5,000 and he agreed. The following question and answer was then given: 'Q. And what I suggest to you is that the conversation that you depose to in paragraph 80 concerning the $5,000, and political donations, just never took place? A. That's not correct.' 17 May 1995 796 On this date a meeting took place attended by Messrs Kidd, Dransfield, McKenna and Whitehouse. The minutes of the meeting are to be found at 21/51. The minutes suggest that generally the parties were working towards acquisition of the subject land through a series of tactics. 22 May 1995 797 By letter dated 22 May 1995, Mr McKenna wrote to Dunhills confirming their request for Dunhills to draft a letter to the Government suggesting options for the Helensburgh land as: (i) Acquisition by Government (ii) Development under current zoning (iii) Sale of individual lots [21/78] 5-6 June 1995 798 Dunhills drafted letters to be sent to the Minister for the Environment and to the Minister for Urban Affairs and Planning, copies of which were sent to Mr Hogarth [21/83-84]. 14 June 1995 799 On 14 June 1995, Walker Corporation wrote to the Minister for Urban Affairs and Planning, forwarding the same letter to the Minister for the Environment. 800 The letter stated inter alia: 'In essence the Commission of Inquiry recommended that there be no change to the current local environmental plan or current zonings until further studies are undertaken primarily aimed at identifying the existing and potential impacts of various land uses and then setting appropriate environmental objective followed by identification of a cost effective strategic catchment management plan to control existing catchment pollution sources and identify land use controls capable of meeting those objectives . . . The findings and recommendations of the Commission of Inquiry rely upon a series of future studies. To date there appears to be no commitment by the relevant Government agencies to funding the series recommended by the Commission of Inquiry. In the absence of a clear commitment for funding of such studies it appears that nothing will happen to resolve this matter and hence the entire Commission of Inquiry process would largely have been a waste of time and money. Indeed we would suggest that the Commission of Inquiry findings and recommendations avoided making a fundamental decision about the future land use of the areas. If there is to be future development within the area and if such a clear commitment was made the Walker Group of Companies could then proceed to assist Government in implementing the studies and designs necessary to minimise environmental impact. However you will appreciate that no responsible corporation could commit funding to studies in the absence of a reasonable prospect that some development would proceed . . . We suggest that given the fact that no substantive action has occurred nor is likely to occur in terms of implementing the Commission of Inquiry's recommendations the appropriate course of action would be for the Government to proceed to negotiate with the Walker Group of Companies for the inclusion of its land within the Royal National Park . . . We are most anxious to resolve the future of our holdings at Helensburgh in a clear and definitive manner and we would appreciate your advice regarding our offer that the land be acquired by the Government for the purposes of addition to the Royal National Park.' [21/91] 23 June 1995 801 On 23 June 1995, Mr Hogarth forwarded to Mr Dransfield a copy of the 7 November 1990 National Parks and Wildlife Service letter to the Council which he suggested may be of help in 'our new approach'. This was a reference to the acquisition or resumption of the land [21/113]. 22 July 1995 802 By letter dated 22 July 1995, the Total Environment Centre Inc wrote to Mr Dransfield noting that legal proceedings between LCE and Mr Tapsell, Mr Donohoe and Mrs Donohoe made it difficult for the Centre to consult with Mr Dransfield [21/137]. 803 The letter noted that Premier Carr, in the 'Sydney Morning Herald' of 18 July, excluded Helensburgh from further urban growth. 14 September 1995 804 On this date the Minister for Urban Affairs and Planning and Minister for Housing, Mr Knowles MP wrote to Mr Walker advising, inter alia: 'I refer to your letter regarding the issue of future land use in the Helensburgh area following the findings and the recommendations of the Commission of Inquiry in December 1994. The Department of Urban Affairs and Planning has informed me of the history and the need for a long term solution to the planning and development of the area. I am also aware of the environmental significance of parts of the land your corporation jointly owns and the effect development would have on them. The Wollongong Local Environmental Plan 1995 which was made following the Commission of Inquiry rezoned the Corporation's and other lands to environment protection. This was seen as an " interim" arrangement while the studies recommended by the Commissioner were carried out. I have requested that the Department of Urban Affairs and Planning to promptly begin a process with relevant agencies and the Council for commencement of the studies. The recommendations state that the studies be undertaken or managed by the Hacking River Catchment Management Committee. As the Committee is the responsibility of my colleague, the . . . Minister for the Environment, it will be necessary for discussions to be held with Ms Allan on the role and funding of the Committee. I have noted the Corporation's request that certain lands be acquired by the State Government for inclusion in the Royal National Park. However, a decision on acquisition of any such lands should appropriately await the outcome of the studies recommended by the Commissioner. The Corporation may be aware that following the release of the Metropolitan Air Quality Study the Premier indicated that the Government will not support further urban expansion at Helensburgh at least until the studies are finalised .' [21/166] 805 Mr Ellicott QC submitted that the last paragraph of the above extract from this letter, written by the Labor Minister some months after the election, supports an inference that notwithstanding Mr Carr's strong earlier statements to the effect that if Labor was appointed, the Government would not implement the recommendations of the Commissioner and would turn its back on further urban expansion at Helensburgh, there had been a marked change in the attitude of the new Government. The matter seems quite unclear, particularly bearing in mind the statement in the 22 July 1995 letter from the Total Environment Centre Inc, noting that the Premier had, as appeared from the Sydney Morning Herald of 18 July, excluded Helensburgh from further urban growth. 31 October 1995 806 During this week, Mr Hogarth accompanied Mr Smart, a valuer of Smart Property Group, on an inspection of Helensburgh. 11 December 1995 807 By letter dated 11 December 1995, Mr Severino wrote to Mr Dransfield in relation to Allison Road, advising inter alia: 'Further to our telephone discussion, there exists an agreement with Walker Corporation for a fee of $200,000 in regard to RM Hogarth and Helensburgh and associated developments. With the commencement of the Allison Road project, I would submit that a portion of the fee is now payable . . .' [PX 36 - Vol 45 at page 450269] 808 Payment of the sum of $15,000 was made to Mr Severino by payment to Berrinba Pty Limited on 27 March 1996 - PX 36 at Vol 5 page 450270. 7 March 1996 809 By letter dated 7 March 1996, Mr Knowles MP wrote to the Hacking River Catchment Management Committee in response to its enquiries regarding the implementation of the recommendations by the Commissioner of Inquiry into land use, planning and development proposals at Helensburgh. The Minister advised, inter alia: 'I have considered the Commission of Inquiries findings and recommendations and I have decided, on the basis of the Government's policy towards Helensburgh, not to adopt the recommendations for the carriage of studies.' [22/101] 50035/98 - LAKATOI UNIVERSAL PTY LTD & ors v LANGLEY ALEXANDER WALKER & ORS 50110/98 - ENSILE PTY LIMITED v WALKER CONSOLIDATED INVESTMENTS PTY LIMITED and Ors 50109/98 - ENSILE PTY LIMITED v WALKER CONSOLIDATED INVESTMENTS PTY LIMITED 1798/98 - ENSILE PTY LIMITED v WALKER CONSOLIDATED INVESTMENTS PTY LIMITED JUDGMENT - 10 March 2000 PART 3 The Witnesses called 810 Reference has already been made to certain of the evidence called - in particular to that of Messrs Hogarth, Kidd and Lester. The Judgment deals below at greater length with these witnesses. 811 It is convenient at this stage, to briefly outline the areas covered by evidence given by expert witnesses. 812 The plaintiffs' case relies heavily but by no means exclusively, on evidence adduced by expert witnesses. In relation to their best endeavours case, the plaintiffs called Mr Smyth and Mr Rowbottom. As to quantification of damages, Mr Weatherby and Mr Egan gave evidence in relation to estimated costs of developing the LCE land and valuation of the likely development had rezoning been achieved. The plaintiffs also called expert accounting evidence from Mr Humphreys. 813 The defendants met this case with their expert witnesses, Mr Lester and Dr Joliffe in relation to the plaintiffs' best endeavours case and Mr Cichacz and Mr Dempsey in relation to the development costs and valuation evidence. 814 The following is a brief outline of the expertise of each of the expert witnesses called by the respective parties: (a) Mr Smyth Mr Smyth is an environmental planner and engineer, having senior/chief executive level private and public sector experience. In particular he has extensive experience with Commissions of Inquiry. Mr Smyth was called by the plaintiffs to give evidence in relation to best practice in the advancement of a "case" before a Commission of Inquiry and as such, to assess Walkers' preparation and presentation of the joint venture case before the Helensburgh Commission of Inquiry. He also gave evidence in relation to steps a reasonably competent and adequately resourced property developer would take in order to advance their case within the wider sphere. Further, Mr Smyth gave evidence in relation to the likely implementation of a Commissioner's favourable recommendation for rezoning. (b) Mr Rowbottom Mr Rowbottom was called by the plaintiffs to give evidence primarily in relation to the stormwater management plan proposed by Walkers on behalf of the joint venture interests before the Commission of Inquiry. Mr Rowbottom is Manager of the Kinhill Pty Limited, NSW Environment, Planning and Economic Studies group. He is a civil engineer and project manager with specialist expertise in the environmental and engineering aspects of civil design, urban stormwater management, water quality assessment, catchment and floodplain management and hydrology. (c) Mr Weatherby Mr Weatherby is a registered surveyor, town planner and a director of Wallis & Moore Pty Ltd. He was called by the plaintiffs to give evidence in relation to the assessment of current costs involved in the development of the proposed LCE subdivision. His estimation was calculated in accordance with the subdivision proposed in the 1992 GHD application for rezoning. (d) Mr Egan Mr Egan is a Registered Real Estate Valuer. He gave evidence for the plaintiffs in relation to the indicative profit potential (as at specified dates) if the LCE lands were sold in residential lots as if subdivided in accordance with the 1992 GHD application. In calculating his valuations, Mr Egan applied a reduction according to the number of lots excised on the basis of one or a combination of contingencies referred to in Mr Weatherby's report of 30 June 1999 as the "Wetlands Contingency" the "Post COI Contingency" and "DUAP Contingency". (e) Mr Lester As noted previously, Mr Lester gave evidence for the defendants on a range of topics. Mr Lester is an architect and town planner and managing director of Lester Firth Associates (Pacific) Pty Limited (LFA). Mr Lester was engaged by Walkers to coordinate the preparation and presentation of the joint venture's case before the Helensburgh Commission of Inquiry. In relation to the plaintiffs' best endeavours case, Mr Lester and Dr Joliffe were the primary expert witnesses upon which the defendants relied. (f) Dr Joliffe Dr Joliffe is Principal Water Resource Engineer with Gutteridge Haskins & Davey Pty Ltd (GHD). He was called by the defendants to give evidence in relation to certain of the material put before the Commission of Inquiry on behalf of the joint venture. In particular, Dr Joliffe gave evidence in response to the evidence of Mr Rowbottom and to a more limited extent, Mr Smyth. (g) Mr Cichacz Mr Cichacz is Principal Civil Engineer at Gutteridge Haskins & Davey Pty Ltd (GHD). He was called by the defendants to give evidence in relation to the assumptions and methodology relied upon in the reports of Mr Weatherby and to comment on their appropriateness. (h) Mr Dempsey Mr Dempsey, Registered Valuer, is a director of Arthur Anderson. He was called by the defendants to comment on and to test the valuation evidence given by the plaintiffs' expert witness, Mr Egan. In so doing, Mr Dempsey gave evidence in relation to accepted industry standards. As appropriate, the evidence of each of the above expert witnesses is treated with below. Plainly it is inappropriate to set out the whole of the extensive and sometimes voluminous statements of the expert witnesses - in some cases several statements of particular witnesses were read. Assessment of the Reliability of the evidence given by Mr Hogarth and Mr Kidd 815 It is convenient to begin by dealing with Mr Kidd's reliability as a witness. Mr Kidd 816 Like Mr Hogarth, Mr Kidd was taken through almost every one of the conversations he had had and meetings he had attended referred to in his statement. Again, it is not appropriate to set out all of this evidence. 817 It seems to me important in assessing Mr Kidd's reliability as a witness to note that at all material times he had his own business to run and did not have a detailed working relationship with Mr Hogarth. He was not always in the country and did a considerable amount of work interstate. It was his evidence which I accept, that generally he and his wife did not regularly visit Mr and Mrs Hogarth's home save for example for approximately on average six times a year. Outside of his own quite separate and time consuming business activities, Mr Kidd and his wife were involved in a number of sporting activities which kept them busy virtually every weekend. Mr Kidd's evidence, which I accept, was that they did not visit the Hogarth's house weekly or monthly. They ran their own lives separate of Mr Hogarth. It was only very seldom when they would visit or see the Hogarths on weekends. They spoke occasionally by telephone but by and large Mr Kidd stepped in on occasion and on the request of Mr Hogarth for his assistance by way of helping the family. [Hogarth evidence T76.45; Kidd evidence T828.] 818 In assessing Mr Kidd's evidence then, I approach the matter upon the basis that his participation from time to time in relevant events was for the purpose of assisting his father-in-law on request. In this respect the correspondence and materials in Exhibit PX, unaided by this evidence of Mr Kidd and Mr Hogarth, would suggest to an observer that Mr Kidd had a close integral, sustained and ongoing involvement with Mr Hogarth in virtually every aspect of Mr Hogarth's negotiations with the Walker interests. On my findings this was not the case. This does help to explain in certain areas why it is that Mr Kidd's familiarity with continuity of detail may be absent. It also assists, it seems to me, to confirm my view that Mr Kidd is a witness of real credibility who is inherently reliable. To my observation, Mr Kidd presented as a careful businessman with detailed notes of contemporaneous events who endeavoured to help Mr Hogarth on occasions and sometimes for longer periods. Where Mr Kidd is unable to now decipher certain words in his own handwritten notes of meetings, this is often explicable because it was necessary for him to pick up, during meetings, the thread of what had gone before, where although he had attended some earlier meetings from time to time, because of his interim absence, he was learning as he went along during the meetings which he did attend. I do not see the evidence as suggesting that Mr Kidd, notwithstanding his obvious relationship with Mr Hogarth and interest in the outcome of the case, was otherwise than doing his level best, in giving evidence, to be totally objective. This is in contradistinction to my assessment of Mr Hogarth as a witness who very often exaggerated events of the past, in a fashion which suggested that the exaggeration would assist his case. This is not to say that Mr Hogarth failed to give evidence which he believed to be correct. Over the years he has obviously spent so much time and energy on his case that he has simply come to persuade himself of certain things which he believes occurred but which, in fact, on my findings, did not occur or did not occur in the way Mr Hogarth gave evidence that they had occurred. Regrettably this situation does arise not uncommonly in litigation which has extended over a considerable period of time when witnesses subconsciously persuade themselves of events which they believe had in fact occurred, which had not in fact occurred or had not occurred in the way that the witnesses, when giving evidence during the court case, have come to believe to be the case. This is why, to my mind, Mr Hogarth's evidence must be confirmed or corroborated in order to be accepted. To the contrary, however, it does not seem to me, that Mr Kidd's reliability suffers from this difficulty. 819 One of the very real difficulties in assessing the credit of both Mr Hogarth and Mr Kidd arises from the fact that in certain respects their statements included summaries of meetings and conversations which were literally word for word or as close to such, as to make it absolutely plain that this could not have been a coincidence. 820 Neither Mr Hogarth nor Mr Kidd was able to assist in how this had occurred. 821 Mr Hogarth's evidence was that he had not shown Mr Kidd his version of what had occurred before he signed his statement and that he had not seen Mr Kidd's version of what had occurred before he, Mr Hogarth, had signed his statement. He was aware though in giving his evidence, that there were parts of the two statements which were identical. His evidence was that he had only noticed that sections of the statements were identical after he had read Mr Kidd's statement. 822 Mr Hogarth was simply unable to explain how it came about that sections of the two statements were word for word. This was a total mystery to him [T 610]. 823 All that Mr Hogarth was able to say was that there had been a mistake made somewhere [T 611]. When tested by the question "What sort of mistake do you mean by that", the answer was "I can't explain it. I really can't. All I can say is that in the typing up of our statements there's been - which I didn't do. It was done in our solicitor's office. It happened there." 'Q. So you are saying that if there is any identity between your statement and Mr Kidd's, then you don't know anything about how it occurred? A. No.' [T 611] 824 Mr Hogarth at transcript 668 when again tested on whether he had discussed his recollection of what had been said at a particular meeting with Mr Kidd before he filed his statement, said that he had not shown his version of the relevant conversation to Mr Kidd at any time prior to his statement being signed. His answer was : 'No I was warned not to. Q. You were what? A. I was warned not to. Q. Who warned you not to? A. Solicitors. Said we had to make our own statements in our own way . . .' [T 668] 825 Mr Kidd's evidence was that he had worked on his statement for six to eight months and had sent in to his solicitors drafts and worked on it and built it up as he recalled matters and that the solicitors had sent back those drafts. Sometimes he had not looked at those drafts for two weeks because he was off doing his normal work. He was, I accept, genuinely unnerved when shown in cross-examination that sections of his statement were word perfect to that of Mr Hogarth. 826 In being shown one section in which the two statements were literally identical to another, Mr Kidd was in effect asked how he knew the statement which he was signing included his own recollections. His answer was "Well, I have to say this is a bit of a shock to me. I don't recall drafting those words but it was 18 months ago when it was done, or more, so I can't explain it. I don't recall writing those words, but it's so long ago" [T 767]. 827 Mr Kidd's first statement was signed on 24 December 1998 and his evidence was he would have been getting ready to go on holidays on that day, at transcript 771. He recalled signing the statement at Mr Gye's office and that there was a rush to get it done prior to Christmas and get it lodged with the Court. He was going on holiday on the following day and it was his family's practice to have Christmas dinner on the 24th and then to leave for holidays on the 25th. Hence he could only assume that he signed the statement in the morning of the 24th and that it was then filed on that day by the solicitors [T 773]. 828 Mr Kidd's recollection about the circumstances in which he signed his 24 December 1998 document was not clear. [T 773] 829 On the evidence, it therefore appears that Mr Kidd had worked on his statement over a considerable period of time and had sent in many sections of the statement to the solicitors for retyping and had then received these sections of the statement from those solicitors. Mr Kidd had always believed that what he was receiving from the solicitors was the typed version of his handwritten notes. Ultimately, he signed his statement believing that it represented the typed version as slowly built up by him over a period of time of his handwritten notes. He was plainly nonplussed by the revelation that Mr Hogarth's statement in certain sections was word perfect the same as his. He had no explanation otherwise than to suggest that it may have somehow happened in the word processing department of the solicitors. 830 These are matters of special concern in relation to assessing Mr Hogarth's and Mr Kidd's credit. That neither was aware in any fashion that his statement in certain sections was word perfect to that of the other is an oddity which to my view requires to be explained. No evidence was adduced to explain this somewhat extraordinary state of affairs. I have given the matter the closest of attention and read and re-read the sections of the statements which were identical and have endeavoured to assess these sections against such contemporaneous records as were admitted into evidence. At the end of the day and particularly because I was so impressed with Mr Kidd's demeanour, acceptance of obvious mistakes in his statements as put to him in cross-examination, business like attitude to his notes and candour, I am not persuaded that the identity in statement sections requires that his evidence be rejected as unreliable. Certainly it warrants and is given careful scrutiny by the Court using the whole of the evidence as a control to assist in assessing the probabilities. 831 Had the defendants elected to call evidence [Messrs Walker, Dransfield and Weinert], these matters may have had greater weight in throwing doubt on the reliability of both statements and on the credibility of both witnesses. As the principal lay witnesses in the defendants' camp elected not to give any evidence at all, the court is more comfortable, subject to carefully examining Mr Kidd's evidence and very particularly subject to ensuring that Mr Hogarth's evidence is consistent with contemporaneous records, in accepting the evidence of Messrs Hogarth and Kidd. Naturally, Mr Kidd's evidence is also checked for consistency with contemporaneous records. Mr Hogarth 832 Mr Hogarth gave evidence over all or part of ten days. The transcript of his evidence exceeds 550 pages. Plainly it is not necessary nor possible to detail all of this evidence. I note, however, that the cross-examination principally conducted by Mr Shand QC virtually took Mr Hogarth through most of the material documents appearing in the many volumes of Exhibit PX. 833 One of the many examples of the difficulties with accepting Mr Hogarth's evidence as reliable, relates to one of the documents which was admitted into evidence as 6/165. This is an office memorandum of Mr Walker in Mr Walker's handwriting. Mr Hogarth placed the date 28 October 1993 at the top right hand corner of the document. His various attempts to explain how he had done this and why and then to endeavour to give evidence as to when he had first sighted Mr Walker's memorandum plainly indicated that he had no real recollection at all of the circumstances in which he first received and read Mr Walker's memorandum and gave reasons for doubting his version of why he placed the date 28 October 1993 at the top right hand section of the document. 834 The sequence of events was that following service of Mr Walker's statement of 22 July 1999, Mr Hogarth signed a statement in reply in October 1999. In that statement in reply, Mr Hogarth referred to paragraph 34 of Mr Walker's statement in which Mr Walker had referred to the document as a copy of Mr Walker's notes of a meeting of 28 October 1993. Mr Hogarth then said "I wrote the date 28 October 1993 on this document when I was requested by my solicitors to place undated documents in chronological sequence for the purpose of inclusion in the plaintiffs' list of documents . . . I now say that the date 28 October 1993 is not the correct date for this document. I say that this document is an attachment to [2/47] which was handed to me by Mr Walker on or about August 1990 as set out in paragraphs 16 and 17 of my statement dated 23 December 1998". 835 In paragraphs 16 and 17 of Mr Hogarth's statement of 23 December 1998, he had given evidence that 'Mr Walker produced [2/247 - another of Mr Walker's handwritten notes] during the course of one of our meetings prior to Mr Severino's issuance of his letter dated 30 August 1990'. 836 Hence Mr Hogarth's statement in reply of October 1999 in fact stated that the document 6/165 was an attachment to Mr Walker's other note 2/247, which Mr Hogarth had been handed by Mr Walker in or about August 1990. 837 These sections of Mr Hogarth's evidence were departed from in cross-examination where it became absolutely plain that he had no memory at all of Mr Walker handing to him Mr Walker's notes 2/247 and never had had a memory of Mr Walker giving that note to him [T 121]. 838 Likewise, Mr Hogarth at transcript 122 accepted that he had no recollection of receiving the document 6/165 at the same time as he received the document 2/247. Mr Hogarth was unable to give any explanation as to how, as recently as his 3-page statement of 11 October 1999, he was still claiming to have a recollection which he did not have [T 123]. Ultimately, he was forced to accept that he was really unable to inform the Court as to when he received 2/247 at all - [T 124] and at transcript 126 he gave the following evidence: 'Q. At the time he wrote 28 October 1993 on [6/165], you certainly have no recollection then that that document, when first seen by you, had been attached to any other document, had you? A. No. Q. And you still have no recollection that that document, the time you first saw it, was attached to any other document, have you? A. No.' 839 These difficulties in relation to such recent evidence of Mr Hogarth comprising his October 1999 statement in reply, although it may be suggested that they represent as of course they do, only one problem in relation to only one or two aspects of enumerable documents, give an indication of why it seems to me necessary that Mr Hogarth's evidence be carefully corroborated and checked at all material times and suggest that he was prepared, perhaps simply because of the volume of the materials requiring to be referred to and understood at the commencement of the hearing, to sign what was placed in front of him by his legal advisers. 840 One of the particular difficulties with accepting the detail of Mr Hogarth's recollection in his statements of meetings and conversations which occurred, relates to the manner in which he prepared his statements. His evidence generally was that he used notes and notes from notes and in many cases destroyed the notes. An example of his approach is to be found at transcript 291 and following. In short, his general evidence was that over a considerable period of time he prepared his statement and in so doing commenced with preliminary or rough notes which were then transposed into further notes and which ultimately found their way into his version of events as set out in his statement. Some of the segments in the statement were made without reference to notes at all. As to the notes themselves, his evidence was that his solicitors observed the fact that he had his notes and was using them to assist him in making his statement and were actually present so as to be able to see him doing that and yet as far as he could recall, said nothing to him about the preservation of those notes to him. His solicitor at the time was Ms Tamira Stienissen. Whilst he was able to find only some of the notes he had used, it seemed clear that by and large and outside of course of the specific notes which have been referred to in the exhibits and/or in the Judgment, Mr Hogarth's earlier notes, and notes from notes, were unable to be produced during the hearing in order that his version in his statement be tested. These are all matters which again involve a degree of considerable caution in accepting Mr Hogarth's version of what occurred at particular meetings and in particular conversations. [See generally cross-examination on notes at transcript 287 through to 296.] 841 Mr Hogarth's evidence was that he did not keep good notes himself, that is to say he was not a particularly good note taker [transcript 297] and so he accepted under cross-examination that this meant as a general rule, that he had not made notes for that reason. This is again another reason why a focus on Mr Kidd's notes is of special significance. 842 It is quite plain from Mr Hogarth's evidence that at the time he commenced his negotiations with the Walker interests, the financial position of Mr Hogarth and his associated companies was precarious to say the least. AGC had been and were pressing for satisfaction in relation to the foreign currency loan indebtedness earlier referred to. Whilst Mr Hogarth had apparently been in a position to, so he believed, obtain some generally favourable comments to the way forward from AGC, once Westpac came onto the scene and took over conduct of the loan, a hard line was clearly being taken. At the same time it is clear from the evidence that by the time Mr Hogarth commenced his negotiations with the Walker interests, his efforts which had continued over very many years to obtain a favourable rezoning of the Helensburgh lands to permit residential development had failed and that without some significant new initiative, such a rezoning was out of the question. I reject as unreliable Mr Hogarth's evidence that he regarded AGC as having simply given up its entitlement to claim $10 million of the indebtedness when it indicated that it had written that off [T 152]. The June 1993 AGC proceedings against Genepa of course claimed the sum of $22 million. Ultimately, Ensile and Mr and Mrs Hogarth had become parties to those proceedings. On my findings the threat of the AGC proceedings explains that Mr Hogarth and his companies had no alternative but to treat with the Walker interests at the time when their negotiations commenced to take shape. On my findings, the threat of AGC and the exposed position which Mr Hogarth and his companies had achieved through the inability to rezone, provides the essential backdrop to the whole of the negotiations and transactions between the two sets of interests, namely the Hogarth and the Walker interests. 843 A number of indications appear in the evidence recording the difficulties which the Hogarth interests had in cash flow terms. One such indication is to be found in Mr Hogarth's evidence at transcript 214 and 215 in relation to the amounts which had not been paid to GHD. That evidence included the following: 'Our capacity to pay was affected by the fact that Westpac had moved into the motel and were taking all the net receipts from the motel.' - This of course deals with the period when Westpac took possession of the motel. 844 The immediate body blow to Mr Hogarth's plans appears to have been delivered by the 29 April 1991 letter earlier referred to from the Minister for Local Government and Planning which notified Lady Carrington Estates [attention Mr Kidd] that after assessing the large number of submissions received as a result of the public exhibition of the Local Environmental Study and Draft Local Environmental Plan, the Wollongong City Council had resolved on 29 April 1991 not to proceed with the Helensburgh Urban Expansion Proposals. 845 Mr Hogarth appears, even after the 29 April 1991 decision, to have continued to have the view that a rezoning remained possible. He appears to have taken heart from discussions which he had with Mr David Winterbottom, the Chief Town Planner of the Council, to the effect that it was still possible that if a new plan altogether was prepared which adopted modern town planning principles, rezoning would be given good consideration by relevant officers within the Council [T 142]. 846 There does not seem to have been any real issue in Mr Hogarth's evidence but that he was at all material times aware that the particular difficulty with achieving a rezoning reposed in what he referred to as 'the political arm of the Council'. By this, Mr Hogarth was referring to the elected councillors who, by apparently a majority of one, had voted against the rezoning [T 142]. At transcript page 35, Mr Hogarth accepted that he had the problem 'that the elected members of the Council itself were consistently against the idea . . .'. 847 To my mind on the evidence, Mr Hogarth's optimism in relation to a rezoning, notwithstanding the majority in Council against the rezoning, appears to have been misplaced. Not unnaturally, Mr Hogarth and his interests having such a very large landholding, would tend over the years to grasp at any suggestion, even if fanciful, that would suggest that a rezoning was possible. However, on the evidence, I am satisfied that up until the involvement of the Walker Group with the Hogarth interests, the position which had been achieved was that attempts to obtain a rezoning had failed dismally and that Mr Hogarth and his interests had succeeded in generally antagonising those with whom they had been dealing in the Wollongong Council and also many of the environmental groups interested in the proposals. There was a need for a paradigm shift in strategy if ever a redevelopment was to have any chance of success. This was the stage at which, on my findings, Mr Hogarth and his interests commenced to deal with the Walker interests. In my view on the evidence, Mr Hogarth and his interests had almost no negotiating ability in their dealings with the Walker Corporation interests. Hence the whole of the arrangements, agreements and joint venture discussions and documents represented, as a matter of fact, dealings in which the Hogarth interests had very little alternative but to accept whatever it was that was put to them. In my view, on the evidence that is precisely what the Hogarth interests did. And whilst the close negotiations, agreements, conversations and meetings do of course reflect a considerable degree of care by the Hogarth interests in working through the particular points to be agreed upon and in working through into the signed Heads of Agreement and other agreements already referred to, the fact was that all of this occurred against a backdrop in which the Hogarth interests had their back to the wall and faced if not inevitable financial ruin, at the least a disasterous financial debacle relating to the subject investment in the LCE lands, absent the involvement, support and assistance of the Walker Group in the joint venture attempts to obtain the necessary rezoning to permit a redevelopment. 848 At transcript 154 and 155, Mr Hogarth recalled the service on Genepa of notices under section 460 of the Corporations Law and accepted that the possibility of Genepa being wound up and of the consequential calling up of guarantees had been material at the time. Exhibit PX 14 comprises a Notice of Demand given under section 460 dated 18 June 1991 to Genepa whereunder AGC (Advances) Limited required the payment of $2,694,125.57 said to be the amount due and outstanding as at 31 May 1991 under the Deed of Loan and Guarantee of 12 July 1982 made between, inter alia, AGC (Advances) Limited as lender and Genepa Pty Limited as borrower. 849 It is also relevant to recall that Mr Hogarth was well aware in late August 1991 and I infer at material times, of the need to ensure that no hint of any commercial problems be raised in relation to the then still hoped for achieving of a rezoning to permit residential development. [See the letter 29 August 1991 GHD to Mr Hogarth earlier referred to at 3/188]. 850 In relation to Mr Hogarth's credit, Mr Hogarth accepted that a large number (apparently in the order of 60) subpoenas had been sought going to credit and in particular to the credit of Mr Walker [T 175]. Mr Hogarth denied that many of those subpoenas were designed or were in terms which called for production to the Court of documents and records which might publicly defame Mr Walker [T 175]. 851 Mr Hogarth was asked: 'Q. Did you intend that Mr Walker should suffer damage to his character and reputation by the production to the Court of the majority of the documents sought to be produced under these subpoenas . . . A. No.' 852 Mr Hogarth did accept that he had given general instructions for the issue of the vast majority of subpoenas [T 176]. 853 Mr Hogarth was asked at transcript 177: 'Q. You would agree, would you not, that it would be a despicable thing for you to give instructions for the issue of such subpoenas, for the purpose of attempting to force Mr Walker and his interests into a settlement of this case rather than face damage to the character and reputation of himself and his companies? A. Yes.' 854 The following matters were then put to Mr Hogarth: 'Q. That is exactly what you intended to happen here in the issue of the subpoenas isn't it? A. No. Q. In respect of the issue of those subpoenas, do you say that there wasn't present, to your mind, the possibility that such subpoenas would bring about a settlement of this case? A. The thought did cross my mind, yes.' 855 At the end of the hearing, I was satisfied that the vast majority of the subpoenas had been issued for bona fide for purposes of impugning the credit of Mr Walker. And importantly the defendants in final address advanced no contention to the effect of the matter as put to Mr Hogarth in cross-examination. [T325.33] 856 A particular indication of the difficulties faced by Mr Hogarth's group by 30 January 1992 is to be seen in the letter from GHD to AGC of that date earlier set out, which referred to 'the timing for proceeding with the project [as] becoming critical'. 857 One matter which was suggested as reflecting adversely on Mr Hogarth's credit relates to a mid-1997 meeting which I find he had with Mr Dransfield. Mr Dransfield's version of this conversation had been set out in paragraph 74 of his statement which although cross examined on, was never read. It is repeated merely to enable an understanding of the cross examination of Mr Hogarth and is not in evidence save in that respect. It was in the following terms: 'In mid 1997 I met with Mr Hogarth and told him that the Helensburgh land would have to be sold as then zoned. In October 1997 I met with Mr Hogarth at Cronulla and had the following conversation: Mr Hogarth: "You have underestimated the cost of selling the land at Helensburgh". Me: "The realisable value of the land is between 8 to 10 million dollars which is not a bad outcome". Mr Hogarth: "Walkers were hopeless at Allison Road. Walkers should walk away from Helensburgh". Me: "Walkers have put in more than $4 million and won't be walking away". Mr Hogarth: "I know a lot about Walkers. If you don't walk away I will get Mark Westfield to write a Financial Review article exposing Walkers".' 858 Under cross-examination, Mr Hogarth conceded that he did have a meeting with Mr Dransfield on a Saturday at the offices of the agency in which Mr Dransfield had an interest in Cronulla. He believed it would have been approximately October. He then gave a number of inconsistent answers first saying that he had a recollection of what was said and then saying that he was not sure [T 521]. 859 Mr Hogarth conceded that he had said to Mr Dransfield that Mr Dransfield had underestimated the cost of selling the land at Helensburgh. He believed that Mr Dransfield may well have replied to the effect 'The realisable value of the land is between $8 to $10million which is not a bad outcome'. 860 Mr Hogarth believed that he had said 'Walkers were hopeless at Alison Road' and that he had said 'Walkers should walk away from Helensburgh'. 861 Mr Hogarth was then asked: 'Q. Did Mr Dransfield reply "Walkers have put in more than $4million and won't be walking away?" A. I don't remember the figure, but I would have said that they hadn't put in $4million. Q. Did he say "Walkers won't be walking away"? A. Yes. . . . Q. Do you happen to remember anything else that was said during that conversation we have been just dealing with that may have followed Mr Dransfield's remarks that you have been considering? A. No. Q. You can't remember anything else being said? A. I did show Mr Dransfield newspaper cuttings that I had been sent anonymously by a Mark Westfield with respect to the cote d'azur and their business operations. Q. Walkers? A. Walkers, yes. . . . Q. No reference to Mark Westfield by you? A. At that stage we were sympathetic with Walkers and we tried to assist in every possible way as a joint venture partner. Q. There was no reference by you to Mark Westfield in this conversation? A. I have just said that I told - showed Mr Walker articles that had been sent to me anonymously. His Honour Q. You mean you showed Mr Dransfield? A. Yes. Q. But you have not told us that you said anything about them. In fact you said you didn't, haven't you? A. Yes. Q. All you did was show them to him? A. Yes. Q. Well . . . A. I could have said "This is the sort of thing. Have you had anything like this? This is something that I received in the mail". Q. Is that what you think you said? A. Yes. Q. That is the best you can do? A. Yes. Q. You didn't say anything like this did you "What I received in the mail is cuttings about purchasers of units and the performance of Walkers after going public" did you? A. No. Q. You didn't say in addition to what I have just put to you . . . Q. You didn't say "What I received in the mail is cuttings about purchasers of the units and the performance of Walkers after going public, which were written by a chap called Mark Westfield" did you? A. No. Q. Did Mr Dransfield say anything about blackmailing? A. No. Q. Let me read you what paragraph 92 of your statement in reply dated 3 October 1999 says. It was this: that you said "After Mr Dransfield had said to me he would not be walking away from Alison Road, Cronulla, the conversation continued along the following lines: Mr Hogarth "What I received in the mail is cuttings about purchasers of units and the performance of Walkers after going public, which were written by a chap called Mark Westfield." Now that is what you have denied saying isn't it? A. I said that I had received cuttings. Q. That is what you have denied saying to Mr Dransfield on that occasion, isn't it. A. I said I had received cuttings. Q. You have denied saying that to Mr Dransfield on that occasion in answer to my questions in the last three or four minutes, haven't you? A. I don't think I did. Q. You denied specifically having said that to him, didn't you? A. I told him that I had received cuttings in the mail. Q. You have denied specifically in the last three or four minutes saying that to Mr Dransfield haven't you . . .? Q. You have claimed on your oath in this statement in reply paragraph 92 that you said to Mr Dransfield during this conversation just what you have denied saying. That is what you have said in your statement, isn't it? A. Can I read my statement? Q. Please do. His Honour Q. That is your 3 October statement . . . A. I have said "What I received in the mail is cuttings about purchasers of units and the performance of Walkers after going public, which were written by a chap called Mark Westfield" . . . Q. That is what you have denied in the last few minutes having said? A. In the statement I made previously I understood that I said that I had mentioned the fact that I had received cuttings anonymously about Walkers by a Mark Westfield . . . Q. You have had read back to you from the Court transcript my question to you about whether you said what is contained in those three lines haven't you? A. This is what happened at that meeting . . . Q. You denied that you had said to Mr Dransfield on that occasion what is contained in those three lines, didn't you? A. Well, I didn't mean to say that I hadn't said that I spoke to him about the cuttings that I had received anonymously. Q. You heard being read back your answer "No" to the question whether or not you had said to Mr Dransfield what is contained in those three lines, haven't you? A. I did not mean to say that I had not said to Mr Dransfield at that meeting that I had been given anonymously cuttings by Mark Westfield . . . Q. Do you recall saying that Mr Dransfield did not refer to blackmailing in the conversation on that occasion. Do you remember giving that answer? A. Yes, I did say that. Q. You denied that you had used the word 'blackmailing' didn't you? A. Yes. Q. But in your statement you have sworn he did, haven't you? A. Yes. Q. Did you say to Mr Dransfield on the occasion we are talking about "I know a lot about Walkers"? A. I could have done. Q. Did you say "If you don't walk away I will get Mark Westfield to write a Financial Review article exposing Walkers?" A. I don't know Mark Westfield and I didn't know. Q. Well, then, is it correct to say that you said to Mr Dransfield "If you don't walk away, I'll get Mark Westfield to write an article exposing Walkers?" . . . A. No.' [T 523 and following] 862 Mr Hogarth on my findings on this occasion, made a threat to Mr Dransfield to the effect that if Walkers did not walk away he would get Mark Westfield to write a Financial Review article exposing Walkers. Whilst this finding to an extent reflects adversely on Mr Hogarth's credit, I am not persuaded that it goes beyond suggesting a reaction with Mr Hogarth's back to the wall in a situation which, to Mr Hogarth's perception, was caused by the Walker Group's failure to discharge its legal obligations. 863 Clearly, Mr Hogarth came to believe during the sessions of the Commission of Inquiry that the joint venture had been ill prepared at the commencement of the Inquiry and had failed then to present a forceful and united face, supported by what Mr Hogarth had expected would be solid evidence in support of the joint venture case. A difficulty at the time was that Mr Hogarth had not been kept informed in detail of precisely what results Lester Firth & Associates had achieved in obtaining consultants' reports to be furnished to the Inquiry. Hence, Mr Hogarth's initial impressions of the Inquiry involved, I accept, literally no representation at all at the commencement of the Inquiry on behalf of the joint venture interests and a situation in which, in a short time, to Mr Hogarth's perception, Mr Robertson of counsel who appeared on behalf of the Wollongong City Council and Sutherland Shire Council, appeared to have an immediate and in due course an excessive influence over the Commissioner. Mr Hogarth's evidence was: 'They had a Queens Counsel representing them, Mr Robertson, and he was, he was very forthright and we just didn't match his forthrightness.' [T 229] - Mr Robertson was not in fact a Queens Counsel as Mr Hogarth ultimately accepted. 864 Mr Hogarth was impressed, he said, by the grasp which Mr Robertson had of the complex matters concerning water quality, the ecology and environmental aspects. He was impressed by the way Mr Robertson conducted himself and at the way in which consultants, called on behalf of the joint venture, were in the main significantly affected by Mr Robertson's interjections and his critiques of their evidence. [T 229 - 230] Evidence given by Mr Lester 865 A deal of Mr Lester's evidence has already been set out in the section of this judgment dealing with the facts. Mr Lester was cross examined over a five day period and closely taken to most of the relevant documents. 866 Mr Lester is a founding partner and managing director of Lester Firth Associates (Pacific) Pty Limited (LFA) - architects, urban planners, landscape architects and interior designers. LFA were engaged by Walkers to coordinate the preparation and presentation of the joint venture's case before the Commission of Inquiry. Mr Lester had carriage of the project and himself gave expert evidence at the Commission of Inquiry. In the proceedings presently before me, Mr Lester gave evidence for the defendants. 867 In addition to oral evidence, Mr Lester's statements dated 23 June 1999 and 9 September 1999 were read in court. 868 Mr Lester, architect and town planner, has had more than forty years professional experience which is detailed in his curriculum vitae. He completed a Bachelor of Architecture (Hons) at the University of New South Wales in 1964 and a Diploma of Civic Design (Distinction) at Edinburgh University in 1967. Since forming LFA in 1977, Mr Lester has been responsible for the direction, co-ordination and execution of major urban design, planning, architectural and landscape projects carried out by the firm. 869 Mr Lester's curriculum vitae is to be found at 24/121 and following. 870 Mr Lester gave evidence that he was not an expert in stormwater quality. 871 Mr Lester accepted at transcript 1389 that when he first became involved in this matter in December or late November 1993, he had no previous experience at all in relation to Commissions of Inquiry. He had not had any previous experience in organising or overseeing presentation of submissions to Commissions of Inquiry. 872 Mr Lester accepted that his role was to organise submissions for the purpose of presenting them to the Commission of Inquiry and to develop a strategy in conjunction with the client. Lester Firth & Associates were paid by Walker Corporation and rendered their accounts to Walker Corporation. Mr Lester accepted that he held many meetings with Mr Dransfield during 1993 and 1994 in relation to the Commission of Inquiry at which neither Mr Hogarth nor Mr Kidd nor other representatives of LCE were present. He accepted that these were meetings at which significant matters were discussed and decisions made [T 1390]. 873 Prior to becoming involved in the Helensburgh matter, Mr Lester accepted that Lester Firth & Associates had carried out a number of tasks for the Walker Group including work relating to the Kernel Golf Courses Estate, the Menai Project, a project relating to the Cronulla Workers Club site, a Greenacre project and a project at Shell Harbour, and work at Kangaroo Point. 874 Mr Lester's evidence was that the proportion of Walker's fees to the total LFA fees for the 1993/1994 financial year was some 19 percent [T 1432]. 875 It is clear from Mr Lester's evidence that as far as he could recall it, at the very first meeting he attended of 18 November 1993 although a Commission of Inquiry was mentioned, it was only mentioned as a possibility [T 1443]. 876 It is also clear from Mr Lester's general evidence that at meetings subsequent to his first meeting, but not at the first meeting, there was a measure of optimism about the potential to rezone and to gain rezoning of the lands [T 1448]. 877 Mr Lester was cross examined at transcript 1612 and following on his contemporaneous knowledge of certain literature in relation to drainage guidelines for multiple use of drainage systems and the like. He was taken to an article entitled 'Better Drainage' - guidelines for multiple use of drainage systems - which appeared in the Australian Planner 32(1) of 1994. That article recommended an approach advocated in a publication by the New South Wales Department of Planning (1993) 'Better drainage guidelines for the multiple use of drainage systems'. The 1993 publication is said to have been the result of collaboration between the Department of Planning, the Department of Housing and the Sydney Water Board, all of which contributed to its funding. 878 The 1994 article pointed out that the 'better drainage' guidelines were devised to focus on 'best practice' in the provision of drainage systems which not only perform their essential function: drainage, but also: · are attractive elements in the new urban landscape; · are useable in a variety of ways, including a range of outdoor recreational uses, but also other uses such as kiosks, restaurants, car parks and commercial uses; where appropriate flood protection is provided; · enhance the value of adjoining properties; · contribute to reducing the volume of run off and improving its quality.' [PX 27] 879 Mr Lester's evidence was that in general terms he had been familiar with this material at some point in time but could not recall precisely when he read the material. In detailed cross examination on why aspects of this material were not referred to in the submissions put to the Commission of Inquiry, Mr Lester said "I would have relied on GHD to be fully aware of this document" [T 1616]. 880 At transcript 1617, Mr Lester accepted that there was no reference in the submission to the article Exhibit PX 27. But his evidence was that specific references went well beyond the document. 881 His general evidence was that without going back and cross checking, he believed that in some fashion a number of the points or certain of them raised in the material, had been contained within the GHD proposal. He was then asked: 'Q. Did you ever give any thought to them Mr Lester, that is why I am asking you, did you give any thought to them? A. I would rely on the specifics of the detail work by GH&D.' [T 1619] 882 It is clear that Mr Lester did not hold himself out as a water quality expert and relied, on my findings, exclusively on GHD's input. This meant that the constraints on Mr Lester being able to speak with GHD before the first submission went in, materially hampered his being able to be satisfied in any detail by GHD that the water quality aspects of that submission, being reliant upon the 1992 GHD application, was current and correct as at June 1994. And later when the supplementary submission was put forward in September 1994, again on my findings, Mr Lester relied reasonably exclusively on GHD for its input on water quality issues. 883 At transcript 1621, Mr Lester was asked and answered as follows: 'Q. What is clear, you had no discussions with [GHD] between the time that the Commission of Inquiry was set up and 12 May 1994? A. No, my recollection is that there was an agreement that the - for better words, an embargo that existed about accessing GHD was to be resolved . Q. There was no embargo at all, was there? A. Yes. Q. Mr Lester? A. Yes there was. Q. Where would we find any reference to an embargo? A. You will find in my file notes a number of references to the need for Mr Hogarth and interests associated with Mr Hogarth to resolve the impasse with GHD . . . Q. Did you ever ask Mr Kidd or Mr Hogarth whether they had resolved it? A. Yes in the context of discussions that took place that are recorded in my file notes that I highlighted the importance of gaining access to GH&D . . . Q. We know that the matter was settled on 9 March 1994? A. I was not so advised. Q. Well just assume it was. I take it that the question of access to GHD was a matter of great importance to you was it not? A. Yes. Q. You knew that Mr Hogarth and Mr Kidd were in the course of settling the matter with GHD did you not? A. No. Q. You didn't know that? A. No. Q. You're sure of that? A. I know that I had suggested that it was important to gain access. I was not aware nor party to their discussions with GHD. Q. It didn't occur to you to ask them from time to time between November 1993 and May 1994 whether they had settled the matter with GHD? A. I think you'll find that my file notes - I don't know whether it goes beyond May, but I certainly raised the issue a number of times with Mr Hogarth, with Mr Kidd and with Walkers at various meetings.' [T 1622] 884 At transcript 1623, Mr Lester gave the following evidence: 'I'm saying that in the time between November '93 and the preparation of the material which goes to the Commission, the matter was raised on a number of occasions, and it was agreed that between Mr Hogarth and Walkers action would be taken to resolve it. Because I believe you'll find on one file note I point out that in the alternative it would be necessary to commission others to undertake a series of studies' [T 1623]. 885 At transcript 1624, Mr Lester was asked to assume that there had been a deed of settlement with GHD of 9 March 1994. He was asked whether it was the case that no one told him of the existence of that deed of settlement as between GHD and the Hogarth interests which had sorted out the previous problems. His answer was: 'A. I understand, it was my understanding, and it preceded the meeting that took place between 12 May which I accompanied - I was accompanied by Mr Peter Dransfield, and that was the first formal meeting with GHD to resolve their involvement in this project directly. Q. Well do I gather that, as you said in your note you had left in the air what you saw as a live and continuing need to resolve the outstanding matters between GHD and Hogarth and the Hogarth interests, waiting for advice as to whether, and if so how, and on what terms, that dispute had been resolved. Is that the case? A. That's correct . . . Q. Didn't it occur to you to get in touch with them after you had - I think I said earlier 27 February, it's 25 February. It didn't occur to you after that meeting to get in touch with Mr Kidd, or get Mr Dransfield to get in touch with Mr Kidd or Mr Hogarth? A. As I said, my file notes will show that that was a continuing issue that needed to be resolved between Walkers on the one hand and with Hogarth and GH&D on the other . . . Q. So can we take it that the question of whether or not Mr Kidd and Mr Hogarth had settled the matter with GHD, so far as you were concerned, was a matter between Walkers and Mr Kidd and Mr Hogarth, is that right? A. Yes . . . It was a matter that rested with those people. Q. And you didn't see it either as part of your task or as part of something that you ought to do to get in touch with either of them, that is Mr Hogarth and Mr Kidd, in relation to the matter? A. I saw it as an important issue . And it was my understanding that those parties were to resolve that matter. Q. Well after that meeting, Mr Lester, why did you not just ring up Mr Hogarth or Mr Kidd? A. I think you'll find that the issue was discussed in the subsequent meetings.' [T 1624-1625] 886 At transcript 1629, the following evidence was given: 'Q. Can his Honour take it, and I must ask you, that so far as enquiries of either Mr Kidd or Mr Hogarth as to whether the question of GHD's fees had been resolved, you regarded that as a matter which lay in Mr Dransfield's court? A. No. I regarded the matter of settling the fee issue with GH&D in Mr Hogarth's court, and that I would be advised Q. By whom? A. By either Mr Hogarth, Mr Kidd or via the management group, which involved Walker.' [T 1629] 887 At transcript 1630, Mr Lester gave the following evidence: 'Q. Mr Lester, what you are telling his Honour is that you were just waiting there for somebody to tell you whether or not this matter had been settled from 25 February onwards, and you were not prepared to take any initiative yourself to find out, that is what you are saying to his Honour, is it not? A. No. Q. What are you saying? A. I am saying that the responsibility for resolving that matter rested outside my sphere of responsibility, and I would be advised once the matter had been resolved. Q. You knew that it was an important matter to resolve wasn't it? A. Yes. Q. And you've got it in your file note to that effect? A. Yes. Q. Alternatively other things had to be done? A. Yes. Q. And you knew it was a matter of urgency? A. I knew it was important, yes . Q. And I put it to you that no sense of urgency gripped you between 25 February and 12 May 1994? A. No. [T 1630] 888 At transcript 1638, Mr Lester's evidence was that he had attempted to get hold of Dr Short and was reassured by GHD on a number of occasions that the issues that had been raised had been resolved. He was then asked as follows: 'Q. So now you are assured by GHD on a number of occasions are you; is that what you're saying Mr Lester? A. Yes. Q. Mr Lester, I put it to you that you are now exaggerating your evidence? A. No.' [T 1638] 889 Mr Lester gave the following evidence under cross examination: 'Q. You see, what you were doing really was you were taking a punt weren't you, you were taking a punt, you thought that you could rely on a 1992 report in order to answer a 1994 Commission of Inquiry were you not. That is what you were doing? A. No I don't agree. Q. And you knew at the time that you're greatest opponent, the Wollongong City Council, was rejecting it on the basis that water quality controls were unproven. You understood that? A. I understood that Wollongong City Council had not carefully considered the GH&D submission. Q. You knew that so far as the Council resolution was concerned, they were rejecting it on the basis that water quality controls were unproven. You knew that? A. That's what they said, yes. Q. But that is what you accepted, did you not, as being their official attitude as of May 1994? A. I accepted that they were rejecting the proposal, yes. Q. On those grounds? A. My understanding was on the grounds that they had not carefully considered the GH&D water quality proposals. Q. Now that can't make sense, can it, that a Council would say words to the effect and rely on it as a sensible resolution. That just can't be right can it? A. I believe it to be so. Q. The fact is, I put to you, that your understanding was that Councillors have rejected the arguments of the Council's officers on the basis of unproven water quality control. That is what you were told in that note? A. Yes, and what that implied to me was that political decision had been made to oppose it by people who didn't have water quality qualifications. Q. So here they are, you know that they are going off to the Commission of Inquiry to oppose you, is that right? A. Yes. Q. You knew that. And you knew that their case was going to be that the water quality controls that had been put forward were unproven? A. In their mind, yes. Q. Not only in their mind, but as a stated attitude of a responsible council, whatever you thought of the Council? A. All the advice that I had gathered indicated that the detailed proposals put forward by GHD in the '92 document had not been carefully considered by council. Q. So you decided to present the matter to the Inquiry on the basis of a 1992 document, that's clear isn't it? A. No. . . . Q. That is the basis upon which you did put it to the Commission of Inquiry, that is to say a 1992 document prepared by GHD? A. I put that material to the Commission of Inquiry on the basis of the advice of GHD. Q. You put it to them on your own decision did you not Mr Lester? A. No. Q. You made the decision yourself to put it in didn't you? A. No. Q. You put to the effort your own professional capacity did you not? A. No. Q. And I suggest to you that you fell far short of what was professional in relation to it? A. No.' [T 1647-1648] 890 At transcript 1649, Mr Lester repeated that he would not like it to be said that he relied on the 1992 report without GHD's professional support. Mr Lester's further evidence is referred to, as appropriate, below. Dealing with the plaintiffs' cases 891 A convenient course is to approach the balance of the plaintiffs' cases as follows: (i) To first set out my findings as to the essential backdrop to the negotiations. (ii) To then deal with the representational cases. (iii) To then deal with the fiduciary obligation case. (iv) To then deal with the misleading and deceptive conduct case. (v) To then deal with the terms of the agreement and rectification cases. (vi) To then deal with the implied term case. (vii) To then deal with the proper construction of clause 7.3 of the HUTA. (viii) To then deal with the plaintiffs' best endeavours case in detail. (ix) To then deal with damages relating to the plaintiffs' rezoning cases. (x) To then deal with the plaintiffs' loss of chance in relation to the $1.75 million 'further contribution' (xi) To then deal with the sundry breach of covenant cases and the ancillary breaches of obligation cases relating to the HUTA. (xii) To then deal with the amended cross claim in the principal proceedings. The Essential Backdrop to the Negotiations 892 The evidence satisfies me that the crucial backdrop to the negotiations between the parties which ultimately resulted in the HUTA included the following parameters: (a) the exposed financial position of the Hogarth interests as at mid to late 1993 leaving the Hogarth interests vulnerable, with precious little in terms of options still available to them to achieve a redevelopment of the subject lands; (b) the crucial significance to the Walker group of the impending float of Walker Corporation and the importance in relation to preparation for that float, of putting forward the most attractive picture in terms of proposed future profit prospects by way of proposed residential developments. 893 It is important to focus upon the material in evidence in relation to the decision to float Walker Corporation. In that regard, it is necessary to appreciate the precise steps which were taking place during the lead up to the float which serve to explain the pace with which the negotiations held by the Walker interests with the Hogarth interests moved. There was on my findings an agenda in place by the Walker group for the entry into of appropriate agreements with the Hogarth interests so as would permit the proposed redevelopment of the subject lands at Helensburgh to be included in the prospectus being prepared. 894 Part of exhibit PX 32 is a document entitled 'Walker float timetable', appended to this judgment as Appendix 10. It is divided into three columns namely 'Latest Date', 'Activity' and 'Responsibility'. 895 The first item gives 1 October 1993 as the latest date for the activity 'commence project'. Under the 'responsibility', column that item is noted as having been 'done'. All items up to and including one of the items noted for 6 December 1993 in the 'Latest Date' column, are shown as having been 'done'. 896 The timetable records commencement of 'data collection for new diligence' by 9 November 1993. This also is noted as having been 'done'. The timetable includes comments on the first draft of the prospectus due by 23 November, - also noted as having been 'done'. 897 The timetable includes the circulation of a draft Underwriting Agreement by 24 November - also noted as 'done'. It includes circulation of a second draft of the prospectus by 25 November - also noted as 'done'. 898 By 6 December a draft Underwriting Agreement is recorded as having been settled. 899 It is quite plain that the movement towards the floating of Walker Corporation was in progress prior to 28 October 1993, the date the Walker and Hogarth interests begin negotiations. The timetable extended across the period when the Heads of Agreement were negotiated. I accept as correct the plaintiffs' submission that the probabilities are that a flotation of Walker Corporation was discussed and in the pipeline well before 1 October 1993. The plaintiffs suggest that the Men at Work brochure extolling the virtues of Walker Corporation [6/213] was distributed late in 1993. This was plainly intended for investors. Its preparation and circulation I accept, suggests an agenda which led in due course to the formal prospectus. 900 On 28 October 1993 a meeting of the Board of Directors of Walker Corporation was held. The minutes [exhibit PX 32 - 41/4] under "general business" record that Mr Weinert updated the board on the status of the proposed listing of Walker Corporation. 901 It was anticipated on 20 November 1993 that Walker Corporation would value at between 230 and $300 million dollars. [Newspaper article exhibit PX 32 - 41/8]. 902 The evidence reveals that during the period of the discussions between the Hogarth and Walker interests in October and November 1993 there was a tight timetable for the float. The draft of the prospectus was to be circulated and the due diligence committee was to meet first on 10 November. I accept as correct the plaintiffs' submission that it is reasonable to infer that there was considerable pressure on Walker Corporation and on its directors Messrs. Walker and Dransfield, to prepare the prospectus and to launch the float. I draw that inference. The evidence establishes,I further accept, that in the course of the discussions Mr Dransfield exhibited an interest in lot numbers. [PX 6/247] 903 In the light of subsequent events, namely the reliance on Helensburgh as part of the glossy picture for future residential developments and the figures inserted in the prospectus in relation to it, it is also reasonable to infer, as I do, that during the discussions which took place with Messrs Hogarth and Kidd, both Messrs Walker and Dransfield were anxious to procure a deal with Mr Hogarth as soon as they could. 904 I accept also that Mr Lester's introduction into the matter on 18 November 1993 is shown to have been partly for the purpose of his undertaking some investigation to determine lot capacity. On 24 November 1993 he was requested by Mr Dransfield to review the technical documents and to examine and crosscheck 'the lot capacity' [PX 7/34]. It does appear that Mr Dransfield was waiting for Mr Lester to obtain the GHD documents from Mr Hogarth so that an assessment could be made. On the evidence this is the first task which Messrs Dransfield and Walker asked Mr Lester to carry out after 18 November 1993. 905 By 1 December 1993 Messrs Walker and Dransfield had succeeded in obtaining a signed Heads of Agreement document to the satisfaction of the Walker group which enabled the drafting of documents needed to implement it. 906 Reference has already been made to the 9 December 1993 meeting between Mr Lester and Messrs Walker and Dransfield, when Mr Lester was asked to prepare a paragraph for inclusion in the prospectus. 907 At T 1700 and following Mr Lester described how he calculated the figures. The GHD lot numbers were 1007 but he was able to get them up to 1200 [PX 7/7 1 and 7/7 5]. Plainly, the Walker Corporation would have been interested in any possible increase in lot numbers. On 10 December 1993 Mr Lester replied that the original potential of Helensburgh was 1500 - 2000 lots. [PX 7/69] 908 Although the float documents record a slight movement in the proposed timetable for the float as against that which was achieved, essentially the prospectus was issued reasonably close to the time originally proposed [the issue took place 13 days after 11 February]. On 14 December 1993 Mr Weinert was urgently seeking confirmation of the particulars of each director and of senior management required to be inserted into the prospectus. [PX 41/45 - 61] 909 At the same time, namely on or around 14 December 1993, Mr Walker was moving quickly to use his political connections to see the Minister in order to pursue his quest to have a Commission of Inquiry appointed for Helensburgh [see PX 7/79 - 81]. I accept as correct, the plaintiffs' submission that on the evidence this also must have been done quickly with an eye on the float. As soon as Mr Walker obtained an indication that a Commission of Inquiry might be established, on my findings he moved quickly over the Christmas break to have a document prepared by Mr Lester for the Minister. Mr Lester handed it over on 7 January 1994 [PX 8/27 -- 3 2] and it was sent to the Minister on 13 January 1994. [PX 8/55]. Mr Walker saw the Minister on 20 January 1994 with Mr Lester and on 10 February 1994 the Minister appointed the Commission, the announcement being made on the same day. I accept as correct, the plaintiffs' submission that having regard to the time of year, all this occurred with considerable speed. I accept the plaintiffs' submission that it demonstrated the strength of Mr Walker's political influence. I further accept as correct, the plaintiffs' submission that it also added support to the reference in the prospectus to the Helensburgh lands. 910 On the same day it was announced through the media that the Minister had informed Wollongong Council that he would not use his powers to rezone the lands against the Council's wishes. On the probabilities this must have come to Mr Dransfield's attention. [See PX 8/79.6-79.8; the note on exhibit PX 8/79.6 appearing to be in Mr Dransfield handwriting; see also PX 8/78]. 911 On 11 February 1994 both Mr Walker and Mr Dransfield signed letters to the Due Diligence Committee confirming statements of opinion and intention contained in the then first draft of the prospectus. [PX 8/61 - 2] 912 Also on the same day Mr Dransfield sent to the chairman of the Due Diligence Committee [Mr Watson] answers to questions regarding, inter alia, Helensburgh. [PX 8/67]. I accept as correct, the plaintiffs' submission that in the context of the case, this is an important document as the note regarding Helensburgh does stand in some respects in marked contrast to the note finally inserted in the prospectus and is clearly different to the note which Mr Lester had prepared [PX 7/75]. The number of lots had become 1300 instead of 1200. The court has no explanation as to this. In Mr Dransfield's note the timeframe is seven years from 1996. In the prospectus its estimated completion date is 1998/99 with an estimated commencement date in 1994/95. In the prospectus the text regarding Helensburgh differs significantly from that in Mr Lester's document and in Mr Dransfield's document. 913 In the absence of evidence adduced by the principal lay witnesses for the defendants, the court is limited in that it cannot know what actually happened. Westpac had an obligation to keep records for seven years [see Corporations Law sections to 86 and 1270]. The plaintiffs submit that Walker Corporation failed to produce documents which would reveal how the final text and figures inserted were arrived at. No detailed material which would reveal this was admitted into evidence. 914 The plaintiffs submit that one can only assume that the figures in the prospectus as to timescale, as to lots and as to revenue, reflected what Messrs Walker and Dransfield desired the investing public to believe. This is of course a reasonable assumption in the circumstances. 915 The plaintiffs then suggest, and I accept, that it is significant that by 8 February 1994, the anticipated capitalisation of Walker Corporation as proposed to institutional investors had risen from $230 million to $300 million in November up to $360 million. The plaintiffs submit that it is reasonable to infer that this, in the absence of any explanation, was in no small way due to the execution of the Heads of Agreement and 'to the ability to insert $130 million as "blue sky" in the prospectus'. To my mind this submission is one of substance and I so infer. 916 I accept the plaintiffs' submission that the prospectus is a very important document and one which strongly supports the plaintiffs' case that both Messrs Walker and Dransfield represented that they had the political connections and the expertise to quickly achieve a rezoning. 917 The plaintiffs rely upon sections of the prospectus which includes the following statement under the headings 'Development and Risk Management Strategy' and 'Conditional Land Acquisition': 'The Walker group rarely commits to the acquisition of a site until all necessary approvals have been granted or there is a very high level of certainty that they will be granted. Land is usually secured by option or conditional contract until approvals are received.' 918 In relation to Helensburgh, apart from the table, the following statement is made: 'The Walker group is in the process of obtaining approvals which are expected to be forthcoming for .... Helensburgh'. 919 The prospectus also notes that it is 'in the final stages of documenting an agreement for a fifth development at Helensburgh'. [PX 8/127] 920 The prospectus includes a similar statement at PX 8/128 and states 'the development is subject to rezoning'. 921 The stated policy of the Walker group was not to come to an acquisition without approvals having been obtained except in a case of a very high level of certainty that they would be granted. I accept the plaintiffs' submission that having already committed to Helensburgh it was to be expected that not having qualified the above statement, the Walker group regarded Helensburgh as a case where there was a very high level of certainty. I accept the plaintiffs' submission that a fair reading of the prospectus would have given potential investors that impression. The First Representations [Contentions Paragraph 24A; 51(a), (b); cf paragraphs 52-57 for ancillary allegations] 922 The terms of the representation as pleaded in paragraph 24A are: 'Prior to 23 November 1993 Mr Walker represented . . . that [he] was in a position to provide political contacts, resources and expertise to secure the rezoning of the Ensile Land to permit its use for residential development [within 12 months of an agreement being reached for Mr Walker] to provide such political contacts, resources and expertise.' 923 Paragraph 51(a) of the contentions is in virtually the same terms but: (a) adds that the representation covered Mr Walker and his companies; (b) substitutes the word 'promptly' for the words in square brackets. 924 Paragraph 51(b) of the contentions in terms alleges that Mr Walker represented 'that Walker Consolidated and/or Walker Corporation was a company experienced in developing broadacre land into residential subdivisions and obtaining all the necessary approvals and in developing residential town land into residential strata unit development'. 925 In my view, Mr Kidd's evidence on this subject may be accepted as reliable. That evidence was as follows: (a) Mr Kidd's evidence earlier set out in relation to Meeting 4 (b) Mr Kidd's evidence earlier set out in relation to Meeting 6. This evidence is importantly corroborated by Mr Kidd's contemporaneous handwritten notes [6/248] which include the words 'L.W. Can fix it'. (c) Mr Kidd's evidence earlier set out in relation to Meeting 7. 926 At transcript 799, Mr Kidd was taken to so much of paragraph 31 of his first statement as in relation to meeting 7 included Mr Walker saying words to the effect "We've had contact with Robert Webster's office. I think that you will find that a Commission of Inquiry will be authorised in the very near future". 927 Mr Kidd was asked and answered as follows: 'Q. I mean, he certainly wasn't telling you, was he, that it was a certainty that it was going to happen? A. Mr Officer, Mr Walker in that two lines, left me in no doubt whatsoever that he was claiming to have organised this Commission of Inquiry, and the way that was said, and the tone in his voice, it was virtually a boast. Q. Did you understand it to be a boast at the time? A. Yes. Q. Something that really was, as you understood it, an exaggeration of what you believed he could achieve? A. No. He had a smile on his face when he said it, which made me feel that it was virtually achieved. Q. I suggest to you that believing in the process that had to be followed, your construction of what was being said to you is just an exaggeration, isn't it? A. Well, all I can tell you is the impression I got. I came out of this meeting feeling that the Commission of Inquiry was on the way and that they could get a Commissioner who was sympathetic to the case. That's what they told us. Q. You understood them to be saying, did you not, that "that's what we hope to be able to achieve"? A. Well, when someone of Lang Walker's standing and track record says "I've been in touch with Robert Webster's office and I think you'll find a Commission of Inquiry will be called in the near future" and he gives you the impression by his body language, by his tone and by the smile on his face that it's a done deal, that's the impression I got and I must say I was very happy with that. Q. There's no way in the world, I suggest to you, at the meeting of 18 November 1993, if anyone had said to you "It's a done deal that this land would be rezoned", that you would have believed a word they were saying, would you? A. That's not what I said. I said it was a done deal to get the Commission of Inquiry . Q. No one at that meeting gave you any impression at all that it was a done deal that the land was going to be rezoned, did they ? A. Not a done deal for the land to be rezoned, no . Q. A done deal perhaps that a Commission of Inquiry is going to be called. Is that what you were telling us? A. Yes. A done deal that they had been in touch with the Minister's office and the Commission of Inquiry would be authorised in the very near future, yes. Q. By 'sympathetic to our cause" did you understand that what Mr Dransfield was saying to you was someone who didn't have a conservative leaning? A. Yes. We wouldn't get a hanging judge, no . . . Q. You wouldn't get a hanging commissioner. Correct? A. Correct. Q. In the sense of a commissioner who was biased in favour of a no rezoning argument. Correct? A. Yes. . . .' [T 799-800] 928 These answers ring true bearing in mind the whole of the context in which the meeting took place and the manner in which Mr Kidd gave his evidence. His evidence was given in a credible fashion. The evidence fits well the background matrix of fact in which the words are said to have been spoken and fits also with the Walker Corporation's entry into of the subject joint venture agreement. 929 It is important in assessing the evidence given by Mr Hogarth and Mr Kidd to appreciate that the subject matter in discussion at the relevant time is readily capable of confusion. When an exceptionally optimistic picture is painted, as I find it was, by the Walker group, in support of their belief as to the almost sure prospects of achieving a rezoning, it is a short step for Mr Hogarth to take, to suggest that the representation was made in absolute terms and was to the effect that a rezoning would be procured. The evidence and the contemporaneous file notes and correspondence require to be very closely examined indeed in order to assess whether or not a representation in the absolute terms is to be held as having been made. When both Mr Hogarth and Mr Kidd from time to time shied away from suggesting that the words "a guarantee" had been used, it became quite apparent to the court that no absolute assurance had been given but that something very close to an absolute assurance had been given. But for a representation to be close to an absolute assurance does not mean that on the evidence, an absolute assurance was given. And there is of course all the difference in the world as between on the one hand, an absolute assurance to secure a rezoning, and on the other hand an absolute assurance that one believes that a rezoning is virtually assured and can almost certainly be achieved. This latter form was the representation which on my findings was made. Mr Kidd in particular conceded this during his cross-examination on a number of occasions, including at transcript page 744 when he accepted that "there was certainly no suggestion... that anyone could guarantee that the rezoning would happen". And when Mr Kidd very importantly produced a statement in reply dealing with words attributed to Mr Walker in Meeting 4, he altered, the words initially suggested to have been used from:- "That's right but the difference with us involved is that we can control the Public Inquiry. I have influence with the Minister and we can control when it is called and who is appointed as the Commissioner. With us in the project, the result of the Commission of Inquiry will be assured". 930 The most important alteration attributed to Mr Walker in place of the above words, the following:- "That's right. The difference is that with us involved we can bring all our influence to bear . " 931 Also relevant amongst the many pieces of evidence to be taken into account covering the several meetings dealing with the topic is Mr Kidd's evidence at T 800 - 801 dealing with the 18 November meeting [meeting 7], to the effect that no one at that meeting had said anything to the effect that the rezoning was a foregone conclusion and that no one at the meeting had said anything into which the listener could have read that rezoning was but a formality. 932 I note also that in the plaintiffs' written submissions in relation to the suggested "defendants dilemma" [extracted below], Mr Ellicott paraphrased the evidence of Mr Hogarth and Mr Kidd as that "Walker was saying that it was a near certainty that rezoning would take place". 933 In assessing Mr Hogarth's evidence in relation to this general area it is relevant to recall his cross-examination in relation to the 24 March 1994 meeting [one of the meetings 9]. Both Mr Kidd and Mr Hogarth had given evidence in relation to this meeting that Mr Walker had said that he was very confident and that the rezoning "could be got through within the next couple of months" and that Mr Dransfield had said that they had spoken to their contacts and could ensure that the rezoning took place quickly. But under cross examination at T 654 Mr Hogarth said that the word "ensure" did not have the same meaning as "guarantee" and he then went on to give evidence that he could not be absolutely positive that the word "ensure" was used and in response to it being put to him that he knew on 24 March 1994 that Walker's could not guarantee that rezoning would take place, he said:- "I recognise there was an element of risk". 934 By 24 March 1994 the Commission of Inquiry had already been announced. Mr Hogarth's readiness to accept that at that time he recognised that there was an element of risk may be said to be inconsistent with his strong statements that the late 1993 meetings had included representations in absolute terms, that the subject rezoning could and would be procured and/or, regardless of the exact words which were used, that he had believed:- - this to be the content of what had been represented to him: - that the subject rezoning was in fact assured; a certainty; a sure thing; something which had been somehow procured by the Walker interests in advance of any Commission of Inquiry being held. 935 The events in question occurred some six years before the evidence was given during the hearing proper. One can very easily in that time persuade oneself of the almost imperceptible shift as between a representation given in absolute terms and a representation given in close to absolute terms. This may well be what has occurred as far as Mr Hogarth is concerned. Mr Kidd by and large, appeared more ready to accept a characterisation of the all-important representation on this matter as less than the absolute, as having been his contemporaneous understanding. Seen in context and although delicate in the extreme in terms of the narrow line separating the two types of representation, my finding is that this characterisation correctly reflects the terms of the representation as in fact made and as reasonably understood from the words then used. 936 Returning to the content of the first representations as pleaded, it does not appear at the end of the day that the precise words which were used must be determinative of the plaintiffs representational case. In this regard Mr Kidd's evidence is generally accepted as to the words which were used. But I accept so much of the defendant's submission as asserted that "even if the representation's claimed by Messrs. Kidd and Hogarth were made then it is clear from their own evidence that they understood from them nothing more than that Walker's would use their best endeavours to obtain rezoning. Mr Kidd and Mr Hogarth knew that rezoning would be difficult, they knew that it would depend upon the outcome of the Commission of Inquiry and they knew that there was a .... possibility that rezoning would not be achieved." 937 My finding is that whilst most of the words used [see subparagraph (d) below] as pleaded in paragraph 24A of the contentions or closely similar words were used by Mr Walker:- (a) they were reasonably understood by Messrs Hogarth and Kidd as being very strong statements of Mr Walker's then belief as to the almost sure prospect of securing the rezoning; (b) they were not at that time understood by Messrs Hogarth and Kidd as being an assurance is an absolute sense that the rezoning would be secured; (c) had Mr Hogarth and Mr Kidd at that time understood the representations as constituting an assurance in an absolute sense that the rezoning would be secured, that understanding could not have been reasonably reached based upon the words used in context and against the background in which the words were used; (d) the representation was not in terms of the suggested twelve month period, but was in terms of acting promptly to secure the result. 938 The same finding extends to embrace the extension pleaded in paragraph 51(a) of the contentions. 939 My finding is that the representation pleaded in paragraph 51(b) of the contentions is made out on the evidence. The Further Representations [Contentions Paragraph 25] 940 It will be recalled that the further representations alleged to have been made in October and November 1993 (but prior to 22 November) are said to have been: (a) that in the opinion of Mr Walker and Walker Consolidated the Lady Carrington Estate was immediately suitable for rezoning for residential purposes; (b) that Walker Consolidated and/or Walker Corporation was a company experienced in developing broad acre land into residential subdivisions and obtaining all the necessary approvals and in developing residential town land into residential strata unit development; (c) that the securing of the rezoning of the lands would be jeopardised if Mr Hogarth continued to have any involvement in the process and that Mr Hogarth must take a back seat in relation to the rezoning process; (d) that if Mr Hogarth entered into a joint venture in relation to the Ensile land neither Mr Walker nor Walker Corporation nor any of its subsidiaries or associated companies would during the term of the joint venture undertake any land development activities in and around Helensburgh except on the basis that such lands would form part of the lands to be subject to the joint venture. 941 The representation pleaded in subparagraph (c) is admitted on the pleadings. 942 In my view, Mr Kidd's evidence on these subjects may be accepted as reliable. Hence representations (a) and (b) were clearly made. 943 As to representation (d), I accept as reliable Mr Hogarth's evidence of his March 1994 discussion with Mr Walker earlier set out and dealing with the need for a statement to be signed as to detail of Hogarth Interest lands in Helensburgh. I accept as reliable the evidence, uncontradicted by Mr Walker, that Mr Walker agreed with Mr Hogarth's statement "You know from our previous discussions that everything in Helensburgh is to be included in the joint venture". 944 This is corroborated by : (a) Mr Hogarth's discussion with Mr Hughes at which Mr Walker was present, of late March and early April 1994. [Hogarth Statement para 75] (b) By Mr and Mrs Hogarth executing the 6 April 1994 Deed of Disclosure. [9/0013-0018] My finding is that representation (d) was made. Contentions paragraphs 26 and 27 945 The evidence establishes to my satisfaction that on the face of and in reliance both on such of the first representations as have been held by the court to have been made and on such of the further representations as have been held by the court to have been made, it was agreed between Mr Hogarth and Mr Walker shortly prior to 22 November 1993 that: (a) Mr Hogarth would procure those interests with which he was associated to provide the Ensile land and any other lands obtained by him or interests with which he was associated during the term of the joint venture to a joint venture between them for their development; (b) Mr Hogarth would not be involved in the processes necessary for obtaining the rezoning and subdivision of the land; 946 The matters pleaded in subparagraphs(c) and(d) of the Contentions paragraph 26 are dealt worth elsewhere in this judgment [the best endeavours term is dealt with in the "Best Endeavours" section of the judgment; the term dealing with all relevant Helensburgh land development activities is dealt with in the "Chapman Land" section]. The evidence further establishes to my satisfaction that on the face of and in reliance upon such of the first representations as have been held by the court to have been made and on such of the further representations as have been held by the court to have been made, and pursuant to their oral agreement , Mr Hogarth and Mr Walker entered into the Heads of Agreement which established the framework of the joint venture between them in relation to the Ensile land. The fiduciary obligation case 947 The defendants did not put in issue the plaintiffs' claim that a fiduciary relationship existed between Mr Hogarth and Mr Walker springing out of the Heads of Agreement in respect of the relationship of joint venturers created under those Heads of Agreement. Nor did the defendants put in issue the plaintiffs' further claim that a fiduciary relationship existed between Lakatoi and Walker Consolidated springing out of the HUTA in respect of the relationship of joint venturers created by reason of the HUTA. 948 The defendants did, however, place in issue the plaintiffs' allegation that the fiduciary obligations extended to include the obligation that each party make available or cause to be made available to the joint venture, any interest in land acquired by either of them or Walker Corporation Ltd or their associated companies in or about Helensburgh . That matter has already been dealt with in terms of a finding in the plaintiffs' favour. 949 I am clearly satisfied that the subject fiduciary relationship was created not only because of the joint venture nature of the subject transactions, but also because Mr Hogarth was in a vulnerable position and was induced by Mr Walker's representations and promises about rezoning : (a) to make available to Mr Walker and his Group, details of Mr Hogarth's own financial affairs and those of his group; (b) to make available to Mr Walker and his Group all the information, studies and applications Mr Hogarth had over the years gathered, made or had made on his behalf in respect of the subject lands; (c) to commit himself and his companies to a joint venture under which Mr Walker and his companies were enabled to exercise considerable control over Ensile's land at Helensburgh; (d) in particular, to essentially stand back from the sundry steps necessary to be taken in the attempt to procure a rezoning and to permit Mr Walker and his companies to take those important steps. 950 In a real sense the Walker Group was placed in the position to exercise considerable control over Ensile's land and was empowered in a general way to vitally affect the interests of Mr Hogarth and his group. 951 Mr Walker and the Walker Group were to have the essential right to control, albeit with claimed expertise and political influence, the approaches to the whole rezoning process and the accounts and administrative supervision of the joint venture vehicle. 952 The nature of the relationship clearly required, as the evidence establishes, that Mr Walker and his companies not use the joint venture, its potential assets, its accounts, its administrative structure and its corporate vehicle for their own benefit, as distinct from the benefit of both joint venturers. 953 The relationship demanded trust, confidence and the exercise of good faith in relevant respects. 954 I am satisfied that the evidence discloses that the conduct of Mr Walker and of the Walker companies in several respects, breached those duties of trust, confidence and good faith reposed in them and constituted an abuse of the control which the joint venture arrangements permitted them to exercise over the property interests of the Hogarth group and over Mr Hogarth himself. 955 The most obvious of the breaches of fiduciary obligation involved matters the subject of findings which follow later in the Judgment such as: (a) use of the joint venture vehicle for the purpose of debiting to its account private expenditure for Mr Walker on security alarms for his home at Hunters Hill; (b) the failure of Walkers to procure a renewal of the option over the Thomson land in the name of the joint venture vehicle, Walker Consolidated having procured the Walker Thompson option of 20 June 1994 for itself; (c) the lodging by Walkers for its own benefit, of a development application in respect of the Thompson land in the name of Vamden, a wholly owned subsidiary of Walker Corporation, and the accepting of the Vamden Development Consent in the name of and for the benefit of Vamden; (d) the use of the joint venture vehicle, Ibenmore ( now known as Rosamond) as a front for making very large political donations on behalf of Walker Corporation and its subsidiaries (e) the acquiring of land in the Helensburgh Land Pooling Area (the Chapman land) in the name of Mitsui Pty Ltd which was at the time a subsidiary of McRoss Developments Pty Ltd (a Walker family company) without informing Mr Hogarth or his companies. [Note - Mitsui subsequently became a subsidiary of Ruly Holdings Pty Ltd, a Walker family company]. 956 The principles of law which underpin fiduciary duties and relationships, and in particular the extent to which and reasons for those duties to be found in Joint Venture relationships, were referred to in some detail in Schipp v Cameron (Supreme Court of New South Wales, unreported, Einstein J., 9 July 1998 at 231 and following). To my mind those principles do not required to be restated. Essentially the parties to the subject joint venture have been shown either explicitly or implicitly to have undertaken to act so as to further their joint interest in the venture and not to act so as to prejudice that joint interest. The parties have been shown on the evidence, to have placed mutual confidence in one another, and as such, each, [but here in particular, the Hogarth group], was vulnerable to abuses of power by the other. [Cf Pacific Coal Pty Ltd v. Indemitsu (Qld) Pty Ltd (Supreme Court of Queensland, unreported, 21 February 1992, Ryan J. at 17, cited in Schipp at 240] 957 I accept as correct the plaintiffs submission that: "the existence of a contract does not necessarily preclude the existence of fiduciary obligations between the parties. To the contrary, the legal incidents of many contractual agreements are such as to give rise to fiduciary duties." [Hodgkinson v Simms (1994) 117 D.L.R. (4th)161 at 173 per La Forest J] 958 As La Forest J goes on to point out, the paradigm example of this class of contract is the agency agreement, in which the allocation of rights and responsibilities in the contract itself gives rise to fiduciary expectations [Cf P.D.Finn, "Contract and the Fiduciary Principle" (1989), 12 U.N.S.W.L.J. 7 6]. La Forest J and also cites Finn to the effect that the "end point" in each situation is to ascertain whether "the one has the right to expect that the other will act in the former's interests (or, in some instances, in their joint interest) to the exclusion of his own several interests": [see Finn at 88]. 959 Here what has been clearly established is evidence of a mutual understanding gleaned from the negotiations and representations leading up to the Heads of Agreement, from the Heads of Agreement and ultimately from the HUTA, to the effect that the Walker group had relevantly relinquished its own self-interest and agreed to act, not only on behalf of the joint venture, but also in the place of and as the mouthpiece of Mr Hogarth and his interests as proprietors of the subject lands. The undertaking of the Hogarth group to stand back and permit the Walker group to carry out the necessary steps to achieve a rezoning, becomes important as a centrepiece of the relationship created by the agreements and also as springing up from the antecedent negotiations leading to the agreements. 960 In a real sense relevant fiduciary obligations spring up prior to the Heads of Agreement being signed and certainly upon their signing, being months prior to execution of the HUTA. Although it may be fairly said that the very detailed ultimate written statement of the parties' obligations is to be found in the HUTA, the evidence clearly establishes that the parties had embarked upon the joint venture from late 1993 - the Hogarth interests were standing back, Mr Lester was at work and Mr Walker in fact went about and achieved the important goal of using his political influence and lobbying expertise to procure the appointment of the Commission of Enquiry. The following extract of the relevant principle is taken from the judgment of Mason, Brennan and Deane JJ in United Dominions Corporation v Brian (1985) 157 CLR 1 at 12 [the fuller extract is set out in Schipp at 233 under the heading 'Negotiations to Enter a Partnership on Joint Venture]: "… a fiduciary relationship with attendant fiduciary obligations may, and ordinarily will, exist between prospective partners who have embarked upon the conduct of the partnership business or venture before the precise terms of any partnership [or I interpolate, joint venture] arrangement have been settled." 961 During argument I put to Mr Ellicott that I had some difficulty in following precisely what relief the plaintiffs claimed based purely upon the alleged breaches of fiduciary obligation. In particular, a question arose, if the plaintiffs did succeed in their best endeavours case, as to relief for breaches of fiduciary obligation comprising double counting. Mr Ellicott QC frankly accepted that the breach of fiduciary obligation case was "a cause of action which we only rely on at the end of the day if all else is lost. It is not our primary argument..." [transcript of 29 November 1999 at page 14]. Mr Ellicott also conceded that if the plaintiffs succeeded on their best endeavours case "it would be difficult to argue, because there might be double counting, in relation to a fiduciary claim ... that we are entitled to that fiduciary relief that I have just been outlining " [see transcript at the same page]. 962 I note that the plaintiffs having initially alleged that the Walker Group had repudiated their obligations as fiduciaries under the Joint Venture Agreement and having initially claimed relief by way of an order rescinding the Joint Venture arrangement and avoiding such rights as the Walker Group might have under those arrangements in respect of or in relation to Mr Hogarth and the subject lands, ultimately withdrew any claims to such relief. [Transcript page 322- 2/12/99]. 963 As the plaintiffs have succeeded at least in part in their best endeavours case, I remain unclear as to their entitlement, if any, to further relief based upon breaches of fiduciary obligation. I propose to reserve leave to both parties to address further submissions on this issue following the reading of this judgment The plaintiffs' claims relying upon alleged misleading and deceptive conduct contrary to section 42 of the Fair Trading Act. [See Contentions paragraphs 51 -- 57] 964 The plaintiffs' case in this regard suffers a threshold but fatal hurdle. It is clearly established that it is for a plaintiff seeking relief relying upon the Trade Practices Act or the Fair Trading Act [sections 52 /s42] to establish what the plaintiff would have done had he or she not relied upon the relevant representation. [See Amann Aviation at 94 per Mason CJ, Dawson J.; at 116 per Deane J., and Sellars at 349,350, 352 and 355 per Mason CJ, Dawson J., Toohey and Gaudron JJ for references to the requirements for a comparison between a hypothetical and an actual state of affairs, germane not only where the court assesses damages for breach of contract or damages in tort, but also where the court assesses claims for relief under for example, section 82 Trade Practices Act for a contravention of section 52]. 965 Mr Hogarth's relevant evidence in this regard is to be found in paragraph 18 of his statement of 5 October 1999 and signed on 3 October 1999. In that paragraph Mr Hogarth alleges that he relied upon certain representations: "when I forewent seeking any alternative coventurer with whom to collaborate to secure rezoning of the land; decided to enter into the Heads of Agreement with Mr Walker....; agreed to the $1.75 million balance of $4.5 million payment for a 50 percent interest in the land being made payable when the rezoning of the land for residential development was gazetted; and agreed to Lakatoi and Ensile entering into the HUTA; and agreed to Walker having control of the conduct of the joint venture case before the Commissioner of Inquiry ." 966 I am not satisfied on the evidence that Mr Hogarth has shown that had he or his companies not entered into the subject arrangements, Heads of Agreement and HUTA with the Walker interests, Mr Hogarth or his companies would have entered into any other form or relevant transaction with any other group or person. No evidence was adduced as to any other person or group having the same political connections or expertise in relation to redevelopment as at the Walker group. No evidence was adduced as to any interest in or contact with or possibility of dealing with another Group. 967 In the result the plaintiffs have not established what they would or feasibly could have done had they not relied upon the subject representations. The plaintiffs misleading and deceptive conduct case fails. Terms of Agreement and Rectification The allegations as to detail of how and when and on which conditions, if any, the Walker interests were to acquire an interest in the Ensile land [Contentions paragraphs 24B and C; See also paragraphs 24D-K] 968 Findings are set out below as to the proper construction of Clause 7.3 of the HUTA. 969 It is necessary to treat with the specific contentions dealt with in terms in relation to the following material allegations: '24B. Subsequent to the making of the representations referred to in paragraph 24A but prior to 23 November 1993, Mr Hogarth and Mr Walker agreed as follows: (a) Mr Hogarth and Mr Walker would as joint venturers undertake the development of the Ensile Land; (b) Mr Hogarth would procure Ensile to make available the Ensile Land for the joint venture; (c) The value of the Ensile Land in its existing condition and zoning was $9 million; (d) Mr Walker and his interests would pay to Mr Hogarth and his interests $4.5 million to acquire 50% interest in the Ensile Land in its then existing condition and zoning, and that Mr Walker and his interests would pay this amount to Mr Hogarth and his interests whether or not the Ensile Land was rezoned; and (e) Mr Walker would provide political contacts, resources and expertise to ensure the securing of the rezoning of the Ensile Land.' '24C. In reliance upon and in consideration of the representation and warranty given by Mr Walker referred to in paragraph 24A, and to give effect to the agreement referred to in paragraph 24B, Mr Hogarth agreed with Mr Walker as follows: (a) Mr Walker or interests associated with him would pay to Mr Hogarth or interests associated with him $4.5 million to acquire a 50% interest in the Ensile Land in its existing condition and zoning whether or not the Ensile Land was rezoned and that such payment would be made in two instalments, namely: (i) $2.75 million forthwith upon the arrangements of the joint venture being documented; (ii) $1.75 million forthwith upon the Ensile land being rezoned to enable the proposed joint venture development to proceed; or at the expiration of twelve (12) months from the Completion Date, whichever first occurred; (b) these terms would be recorded in an informal "Heads of Agreement" document to be prepared over night by Mr Kidd and which Mr Hogarth and Mr Walker would then sign the following day. Particulars Conversations between Mr Hogarth and Mr Kidd on the one hand and Mr Walker and Mr Dransfield and Mr Weinert on the other hand. There was no express reference to payment of $1.75 M at the expiration of twelve (12) months from the Completion Date but payment of the $1.75 M whether or not the Ensile Land was rezoned was expressly agreed and, if the Ensile Land were not rezoned such payment would be due within a reasonable time and the expiration of twelve (12) months from the Completion Date is a reasonable time.' 970 Particular focus is placed upon the plaintiff's assertion that 'as part of his inducement to Hogarth to enter into the Heads of Agreement and the HUTA, Walker warranted and represented to Hogarth and thereby induced Hogarth to believe: (a) that Walker would secure the prompt rezoning of the Helensburgh lands for development; (b) that Walker (or interests associated with him) would pay Hogarth (or interests associated with him) $4.5 million to acquire a 50% interest in the land.' [Plaintiff's opening written submissions 17 September 1999, paragraph 10] 971 The specific orders sought in relation to rectification would require the following: (a) An amendment to the Heads of Agreement by the deletion of clauses 1 and 4 and the substitution of a clause that Walkers will pay $4.5million in two instalments, namely (a) $2.75million forthwith and (b) $1.75million either on achieving rezoning or at the expiration of a reasonable time which ever first occurs whether or not the Ensile land is rezoned. [30 November 1999 Final submissions - T 122] (b) An amendment to the definition of 'further contribution' in clause 1.4 of the HUTA so as to include the following words which are set out in parenthesis: '"Further contribution" - means the payment by Walker to Highfield Grove within thirty days of gazettal of a rezoning of the Land (or at the expiration of a reasonable time from the completion date which ever first occurs whether or not the Ensile land was rezoned), the further consideration of $1,750,000'. 972 The plaintiffs' written submissions on the claim for rectification were in the following terms: '1. During the negotiations which led to the Heads of Agreement and the HUTA, Walker and Dransfield assured, promised and represented to Hogarth and Kidd and they would be able to achieve re-zoning of the Land "promptly", "quickly" and "within about six months". Kidd T 813/30 – 814/5. 2. The Plaintiffs say that the material terms of the agreement as discussed between Hogarth and Walker at Meeting 1 on 28 October were: (a) Hogarth and Walker would treat the Land in its existing condition and zoning as worth $9 million; (b) Walker would pay Hogarth $4.5 million and acquire a 50% interest in the Land; (c) Walker would pay the $4.5 million to Hogarth when the joint venture documentation was signed. Provision (c) was implied for the fact that no other express provision as to time for payment was discussed and the law will imply that the obligation to make the payment is concurrent with the acquisition of the 50% interest in relation to which the payment is to be made. 3. Subsequently, at Walker's request, after Hogarth had discussions with Weinert [give references to Hogarth and Kidd] Hogarth agreed to accept the $4.5 million in two instalments: (i) $2.75 million when the joint venture documentation was signed; (ii) $1.75 million when the Land was re-zoned. It was clear to both parties and accepted by them that by agreeing to payment and rezoning Hogarth was not releasing Walker from the obligation to pay in any event. 4. It was therefore the common intention of the parties at the time they entered into the Heads of Agreement that the Further Contribution of $1.75 million would be paid and that payment was not in itself contingent upon the Land being re-zoned. 5. It was the common understanding and intention of the parties that, by providing for payment of the Further Contribution to be due when the Land was re-zoned they were not making the obligation to pay the $1.75 million dependant on the land being rezoned. As a result of Walker's representations both parties believed that the land would be rezoned. The absolute obligation to pay was accepted but because of this confidence in rezoning and Walker's request for time to pay they agreed that the time for payment be postponed till rezoning. This means that they intended that if rezoning did not occur within a reasonable time the amount would then be payable. 6. It was also the common understanding and intention of the parties that the Defendants would perform their assurances, promises and representations to secure the re-zoning of the Land "promptly" or "quickly" or "within about six months". It was therefore the common understanding and intention of the parties that the Further Contribution would be paid within a reasonable time of the HUTA being signed. 7. It was also the mutual intention of the parties that the HUTA give effect to the obligations set fourth in the Heads of Agreement. 8. The Heads of Agreement and the HUTA failed to give effect to the parties' mutual intention that the $1.75 million Further Contribution would be paid within a reasonable time of the HUTA being signed whether or not the Land was re-zoned. 9. Consequently the Heads of Agreement and the HUTA should be rectified to provide for the Further Contribution of $1.75 million to be paid at the expiration of a reasonable time from the Completion Date whether or not the Ensile Land is then rezoned". 10. It was in reliance on the assurances, promises and representations of the ability of Walker and Dransfield to secure re-zoning of the Land "promptly", "quickly" or within about 6 months", Hogarth and Kidd did not require any amendment to the Heads of Agreement when the basis of the deal changed to provide for payment of Walker's contribution of $4.5 million to take up a 50% interest in the Land to be made in two instalments. Kidd T 813/30 – 814/5 11. It is self-evident that the obligation of Walker to pay $1.75 million under the Heads of Agreement and the obligation of Walker Consolidated to pay $1.75 million under the HUTA are not concurrent: it was never contemplated that Walker would pay Hogarth $2.75 million under clause 1 of the Heads of Agreement and Walker Consolidated would pay Highfield Grove $2.75 million under the HUTA (which would have the consequence that the parties entered into their joint venture on the basis that the value of the Land in its then current state and zoning was a total of $5.5 million). The parties clearly intended that the obligation of Walker to pay $1.75 million under the Heads of Agreement was replaced by but be in substance identical to the obligation of Walker Consolidated to pay the Further Contribution under the HUTA. Therefore, the significance of rectification of the Heads of Agreement is merely to ensure that the HUTA, when rectified, is consistent with and in furtherance of the Heads of Agreement. 12. It is also equally apparent that if and when re-zoned for residential development, the Land would immediately become worth far more than it had been before the re-zoning. To suggest that, only after re-zoning, when the joint venture would commence residential subdivision of the Land to produce blocks estimated to yield $130 million (gross) would Walker become liable to pay a mere $1.75 million more is, it is submitted, absurd. Why would the parties have agreed on this? Walker was to acquire a 50% interest in the Land from commencement and only for Walker's own convenience was the original obligation to pay 50% of the current value immediately varied to provide for payment in two instalments, the second instalment of $1.75 million to be payable on re-zoning which was to be achieved (which Walker was to procure would be achieved) "promptly", "quickly" and "within about six months". There is no plausible explanation for the parties' intending to defer Walkers' obligation to pay the $1.75 million Further Contribution until an event which, if Walker failed to perform the critical obligation (promptly procure re-zoning of the Land – which was the rasion d'etre of the joint venture) might never occur.' 973 It is important to bear in mind in relation to the rectification claim that these were seasoned businessmen who were dealing with one another, that there were many drafts of the Heads of Agreement and of the Joint Venture Agreement and that the HUTA was ultimately drafted by legal advisers to the parties. 974 Notwithstanding the earlier discussions which took place between the parties wherein, on my findings: (a) Mr Walker did say that he would 'settle at $9million as the value of the land', (b) Mr Walker asked what Mr Hogarth would do with the $4.5million, (c) there was discussion as to each of the parties receiving $4.5million (d) there was discussion about a payment of $2.75million up front and of the balance of the funds being obtained when the Helensburgh lands were rezoned which was expected fairly soon, (e) there was discussion wherein Mr Walker agreed to pay $4.5million 'as our right to play' (f) there was discussion that $4.5million would be paid in consideration of the Walker Group obtaining a 50% interest in the Helensburgh land which was to be set out in the Heads of Agreement; what eventuated was that the Heads of Agreement as signed, clearly used the words 'payable on achievement of a rezoning' in referring to the future $1.75million and the HUTA clearly defined 'the further contribution' in terms of payment within 30 days of a gazettal of a rezoning of the land. 975 The further claim to rectification is in terms of the suggested representation that the rezoning would take place within twelve months so that the further $1.75million was to be paid whether or not the land was rezoned. 976 The first time that the claims to rectification were raised were on 28 August 1998 when the amended summons was filed. Nothing had been suggested in relation to the now claimed rectification in the four years between the Heads of Agreement and the HUTA on the one hand and the commencement of the proceedings and nothing was said about them when the proceedings were commenced. The amended summons to which I have referred was filed after the defence and cross claim, after the defence to the cross claim and after the reply to the defence, and after the time the plaintiffs had been directed to file and serve their statements (24 July 1999). 977 Mr Kidd's relevant evidence appears at pages 809 to 811 and 813 to 814. I simply do not accept that seasoned businessmen whom after much negotiating determined to sign Heads of Agreement and the HUTA in particular terms, did not read or understand what those terms meant. From the time they were signed, those businessmen parties became bound accordingly. A real explanation for how this came about in my view, is that the Hogarth Interests had their back to the wall and had no negotiating or bargaining power. But I do not accept that they were misled in the exercise. On my findings, they knew what the document said and they went along with the altered wording because they were so certain that rezoning was reasonably soon and because they had no alternative. 978 A major problem for the plaintiffs is that the agreement that they propound is inconsistent not only with the agreements they seek to rectify but with the contemporaneous documents. Following the meeting of 10 November 1993 (Meeting 6) Mr Dransfield faxed Mr Hogarth and Mr Kidd a letter confirming what was agreed at the meeting including that Walker would pay Hogarth a further $1.75 million "when a residential rezoning has been gazetted" and Mr Kidd's fax of 11 November 1993 of the draft Heads of Agreement (which fax and draft he says crossed with Mr Dransfield's fax of 11 November) contains a clause making it clear that the further $1.75 million was payable on achievement of rezoning. The Heads of Agreement also makes it clear that there was a possibility that rezoning would not be achieved. 979 Mr Kidd in his account of the meeting of 18 November 1993 (Meeting 7) has himself saying to Mr Dransfield re Mr Dransfield's letter of 11 November 1993: " I saw that comment in your letter but that's not what we agreed upon. What I put in the Heads of Agreement I believed exactly set out what was intended, namely that you would be paying the further contribution of $1.75 million to earn your 50% interest in the land." [emphasis added] 980 There is nothing in writing taking issue with the letter of 11/11/93 and Mr Kidd did not change the Heads of Agreement and nothing in the notes of the meeting of 18 November 1993 makes any reference to $1.75 million being discussed. 981 I accept as correct the defendants' submission that: 'the payment of the $1.75 million absent rezoning is contrary to the Heads of Agreement that Mr Kidd and Mr Hogarth drafted and contrary to the HUTA that Mr Hogarth and Mr Kidd's solicitors drafted and which drafts Mr Hogarth saw (T507ff).' 982 I accept as correct the following statements of principle taken from the defendants' written submissions: '8.1 There must be clear and strong evidence to support a claim for rectification [Australia Hotel Co. Limited v Moore (1899) 20 LR(NSW) Eq. 155] at 161 Clear and strong evidence is required to show that a mistake has been made in recording the final intentions of the parties [Bishops Gate Insurance Australia Ltd v Commonwealth Engineering (NSW) Pty Ltd (1981) 1 NSWLR 429 at 431. An identical contractual intention must be proven [A/Asian Performing Right Association Ltd v Austarama Television Pty Ltd (1972) 2 NSWLR 467 at 473]. See NSW Medical Defence Union Limited v Transport Industries Insurance Co. Limited (1986) 6 NSWLR 740 at 746, Chamberlain v Thornton (1892) 18 VLR 192, Kenny v Sholl (1905) 7 ALR 197. 8.2 It has been said that a court is less willing to rectify a document where the plaintiff seeking rectification is the person who has prepared the document but it is clear that in an appropriate case the court can do so, though the identity of the person preparing the document is a factor to be taken into account as to whether relief ought to be granted: see Exparte Wright (1812) 19 Ves Jun 255; 34 ER 513: Collett v Morrison (1851) 9 Hare 162; 69 ER 458. 8.3 One can only rectify a contract so that it accords with, relevantly, the actual common intention of the parties. As pointed out (inter alia) by Mason J. in Codelfa Construction Pty Limited v State Rail Authority (1982) 149 CLR 337 at 346 "rectification ensures that the contract gives effect to the parties' actual intention: the implication of a term is designed to give effect to the parties' presumed intention".' 983 I accept as correct the defendants' further submissions in the following terms: 'Accordingly it is necessary for the plaintiff to establish the parties actual common intention. The plaintiff cannot rectify according to what may be implied as an intention of a party had they turned their mind the problem. In the present case there is no evidence to support the proposition that the parties turned their minds to the question relevantly of whether the $1.75 million would be payable in the event that the property was not rezoned, let alone turned their mind to the question that it would be paid within a reasonable time of any event and let alone again "at the expiration of a reasonable time from the completion date" as sought by way of rectification in the summons. The evidence just does not establish that the parties turned their minds to that situation at all let alone that they had some common intention as to what would occur. What the plaintiffs are really seeking to achieve is to rectify according to what one may or may not have implied as would have been the intention of the parties had they in fact turned their mind to the problem. Such an exercise is impermissible. 8.4 The plaintiffs' difficulty is compounded by the relief sought in the summons paragraph AA1 when it is seeking an order rectifying the Heads of Agreement. It is totally inappropriate to delete the whole of paragraph 4 but in any event the form of rectification sought by inserting a reference to "completion date" in the Heads of Agreement makes no sense because such a phrase is not referred to expressly or impliedly in that Heads of Agreement. . . . 8.5 . . . Significantly there is no evidence that at the time they signed the agreement the plaintiffs did not appreciate what was written and no evidence that at the time it was executed the defendants were under any mistaken belief as to what was provided for. See Maralinga Pty Limited v Major Enterprises Pty Limited (1973) 128 CLR 336 at 349: Pukallus v Cameron (1982) 180 CLR 447 at 457. 8.6 In the present case the claim for rectification does not comply with or satisfy the above requirements. The relevant factual conclusions . . . are inherently improbable, inconsistent with a range of contemporaneous documents, inconsistent with the Heads of Agreement and the HUTA and are a late invention.' 984 The rectification case is rejected. The Implied Term Case 985 The term said to be implied into the Heads of Agreement is: '. . . that in the event of the Ensile land not being rezoned to permit residential development within a reasonable time of the Completion Date then Mr Walker and/or interests associated with him would forthwith at the expiration of such period pay to Mr Hogarth or interests associated with him the balance of the . . . sum of $4.5M then remaining unpaid.' [Contentions paragraph 24L] 986 The term said to be implied in the HUTA [further or in the alternative to the above suggested implied term] is: '. . . that in the event of the Ensile land not being rezoned to permit residential development within a reasonable time of the Completion Date then Walker Consolidated would forthwith at the expiration of such period pay to Highfield Grove the . . . sum of $1.75M constituting the Further Contribution'. [Contentions paragraph 24M] 987 It is of course the case that oral evidence as to the parties' actual intention, although admissible on a rectification case, is not admissible in aid of a claim for an implied term. In relation to such a claim, it is only admissible to negative an implication. In short, if it is sought to establish an implied term 'A', evidence is permitted to show that such a term was considered and rejected but only for the purpose of negativing the implication. As was said in Codelfa by Mason J at 353, 'The existence of the remedy of rectification and the purpose which it serves makes it obvious that the actual intention of the parties cannot constitute the basis of an implied term'. And at page 354, the distinction is drawn between pre-contractual negotiations on the one hand (which are not admissible for the purposes of establishing an implied term) and other matter in the common contemplation of the parties, yet not of a contractual nature. The latter is admissible in that it establishes one of the circumstances in which the question as to implication can be determined. See also Justice Brennan at page 401. I accept the defendants' submission that the whole basis of the principle is that the implication of terms is to correspond with the presumed intention of the parties and not their actual intention. [See Codelfa at page 346.5] 988 Accordingly, much of the evidence of the pre-contractual negotiations which is admissible for the purposes of the rectification claim, is not admissible for the purposes of the question of whether or not the terms now sought to be implied ought be implied. 989 The accepted five point test [BP Refinery (Westernport) Pty Ltd v Hastings Shire Council 180 CLR 266] is: (i) The implication of the term must be reasonable and equitable; (ii) It must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it. (iii) It must be so obvious that it 'goes without saying'. (iv) It must be capable of clear expression. (v) It must not contradict any express term of the contract: [Cf also Codelfa at page 347; Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 605; Breen v Williams (1995) 186 CLR 71 at 80.] 990 In the present case, it cannot be said that the implication of the suggested terms is reasonable or equitable. The Heads of Agreement expressly provided for the additional $1.75m to be payable upon the achievement of a rezoning. They also expressly envisage (clause 4(c)) that after a period of time a rezoning may no longer be an option. Likewise the HUTA expressly provides for the further contribution to be payable within 30 days of gazettal of a rezoning. That agreement also expressly envisages that rezoning may not be achieved. I accept the defendants' submission that it cannot be said to be reasonable or equitable to impose a substantial additional obligation on a party above that imposed by the contract when dealing with the very subject matter of when, if at all, the $1.75m was to be paid. 991 I further accept the defendants' submission that it cannot be said on the evidence, that the implication of the term is necessary to give business efficacy to the contract. The contract is effective without it and in those circumstances I accept that no term would be implied. The plaintiffs have not, I accept, been able to demonstrate to the contrary. I accept the defendants' submission that it is not to the point that the plaintiffs may wish some additional protection or some additional benefit. The fact is that the contract makes no provision for the payment of $1.75m in the event of the land not being rezoned. The fact that 'such a provision would provide a greater protection for the [plaintiff's] is not a sufficient reason for implying it' - Cf Secured Income at 605. 992 I further accept the defendants' submission that it cannot be said that the term is so obvious that it 'goes without saying'. The officious bystander, had he suggested the proposed term, would not have been met by the contractual parties in common saying 'yes of course'; see Shirlaw v Southern Foundries [1939] 2KB 206 at 227 and BP Refinery (Westernport) at 383. 993 Finally, the proposed implied term, I accept, does contradict an express term of the contract in that the $1.75m under the express terms is payable, and only payable, on rezoning. Hence, to imply a term which makes it payable in some other circumstances amounts to a breach of a fundamental parameter of the principles in which such a term is able to be implied. 994 Mr Ellicott strongly contended that business efficacy and a general understanding of the respective contributions of each party to the joint venture, made it clearly obvious that the nature of the bargain obliged the Walker group to pay $4.5 million to acquire its 50 percent interest in the joint venture. In this regard the plaintiffs prepared a table said to point up the huge imbalance, were the Walker Group to be permitted to gain entry to the joint venture as a 50 percent partner, upon payment, should rezoning not eventuate, of $2.75 million only. The table is as follows: WALKER HOGARTH The Helensburgh Land including: · Boral Land Payment of the Initial contribution of $2.7M in April 1994 and payment of $1.75M further contribution on rezoning (or within a reasonable time) · House Block · Sharps, ASL, Purdy, Roads, Residue Boral · All other Helensburgh Land and Helensburgh Land Pooling interest · Thompson Option Promise to have land rezoned promptly and to pursue and develop the Helensburgh Project Intellectual Property (15 years) relating to attempts to have the land rezoned - GHD etc Funding of costs relating to COI and payment of Ensile Expenses Mortgage as security for expenses to be funded by Walkers The Cronulla land including: Promise to pursue the Cronulla Development, including preparing feasibility studies · Allison Road properties · Gerrale Street properties Tax Benefits including: · Capital Gains tax exemption · Tax losses ($9M) 995 I reject the submission. The Hogarth group believed that the prospects of obtaining a rezoning once the Walker group was involved in the joint venture, were very high indeed. Upon a rezoning being secured very large profits would be made with the development proposed. To permit the Walker group very attractive terms was not as astonishing as Mr Ellicott now suggests when one takes into account that this was quite probably seen at the time, as the Hogarth group's one and only and last chance to achieve a rezoning. In any event, the fact is that the written document clearly spells out the terms and bases upon and on which the Walker Group would gain entry into the joint venture for a 50 percent interest therein. That the agreement leaves unstated, precise detail as to how the joint venture was to treat with the unexpected eventuality that the hoped for rezoning would not take place, is by itself an insufficient basis for the implication of the term for which the plaintiffs contend. 996 The implied term case fails. The Proper construction of clause 7.3 of the HUTA The Clause 997 Clause 7.3 of the HUTA relevantly provides as follows: "Walker will provide its expertise at cost to promptly: (a) secure rezoning of the land..." The Plaintiffs' Submissions Strict Liability for Non performance of Contractual Obligations 998 The plaintiffs submit that upon its proper construction, this clause imposed an absolute obligation upon Walker Consolidated to achieve a specified result, namely, to promptly secure rezoning of the land. As such, failure to achieve that result, no matter what that failure is attributable to, is said to constitute a breach of the obligation. On the plaintiffs' submissions, 'contractual obligations, unlike tortious duties, are freely assumed: if the promisor wants in some way to limit his obligation then he is free to do so; if he chooses not to he bears the risk of non performance'. The plaintiff in this regard cite the a passage from E. McKendrick (ed), Force Majeure and Frustration of Contract (1991) Lloyds of London Press Limited at 4. 999 The following passages are also to be found in McKendrick at 1-5: 'The common law of contract proceeds from the basis that liability for non performance of contractual obligations is strict. Apart from those cases where the promise is to provide personal services, in which case the presumption is that the promisor undertakes only to exercise reasonable care in performing his or her duties under the contract, failure to bring about the state of affairs promised in the contract will, without more, amount to a breach of contract and give rise to a claim for damages . The rationale for such a rule was given by the Court of Kings Bench as long ago as 1647 in Paradine v Jane 1647 Aleyn 26: "When the party by his own contract creates a duty or charge upon himself, he is bound to make it good, if he may, notwithstanding any accident by inevitable necessity, because he might have provided against it by his contract". Proof of breach is not dependent on the promisee showing that the promisor was in some way at fault in failing to perform as promised . As Lord Edmund-Davies said in Raineri v Miles, [1981] AC 1050 at 1086 "it is axiomatic that, in relation to claims for damages for breach of contract, it is, in general, immaterial why the defendant failed to fulfill his obligation, and certainly no defence to plead that he had done his best". By contrast, the law of tort generally finds a defendant liable to compensate another for harm that he has caused only where the victim shows that the defendant was in some way at fault in causing that harm. Where the defendant's conduct is not shown to have fallen below a certain standard, generally that of the reasonable man, he will not be called upon to compensate the plaintiff for the harm which he has inflicted. The rationale for this distinction rests in the source of the contractual obligation. [The passage extracted above is then set out.] Such a proposition, which would seem to penalize a promisor for failing to perform the impossible, is easier to accept if we view a contractual promise not as a promise to perform but as a promise to bear the risk of the promised event not coming to pass . The point is well put by Holmes when he says: "An assurance that it will rain tomorrow, or that a third person shall paint a picture, may as well be promised as one that the promisee shall receive from some source one hundred bales of cotton, or that the promisor shall pay the promisee one hundred dollars. . . . The law does not inquire . . . how far the accomplishment of an assurance touching the future is within the power of the promisor . . . In the case of a binding promise that it shall rain tomorrow, the immediate legal effect of what the promisor does, is that he takes the risk of the event . . . as between himself and the promisee. He does no more when he promises to deliver a bale of cotton." It is this ability to allocate risks which provides a major function of the law of contract; it enables individuals and corporations to plan for the future with a moderate degree of certainty and hence to maximize their freedom of action. Secure in the knowledge that contractual obligations will be performed or compensation given if they are not, a promisee is free to turn his or her attention to some other transaction . . . It may be, however, that a promisor does not wish to assume such an absolute risk and he is free to delimit the extent of the obligation in any way he chooses , subject, of course, to the agreement of the promisee. As we have already seen, the justification given in Paradine v Jane for the imposition of strict liability was that the promisor could have limited his obligation by the contract if he so wished . . .' [emphasis added] 1000 In relation to the reference made in McKendrick to those cases where the promise is to provide personal services, in which case the presumption is that the promisor undertakes only to exercise reasonable care in performing his or her duties under the contract, reference may be made to Thake v Maurice [1986] QB 644. Those proceedings concerned the plaintiffs, husband and wife, who contracted with the defendant, a surgeon, that he would perform a vasectomy operation on the first plaintiff. Prior to the making of the contract, the defendant explained to the plaintiffs the nature of the operation and that subject to surgical reversal, the operation which involved the cutting of the vas was irreversible. The defendant failed to warn the plaintiffs that there was a small risk that after the operation there could be a recanalisation of the vas so that the first plaintiff would become fertile again. This in fact occurred. The proceedings included a count against the defendant for breach of contract. 1001 The trial judge found that the defendant was in breach of the contract which he had made with the plaintiffs that he would make the first plaintiff irreversibly sterile. The Court of Appeal by majority, Neill and Nourse LJJ (Kerr LJ dissenting) held that determined objectively, the statements made by the defendant to the plaintiffs did not amount to a binding promise that the vasectomy operation would achieve its purpose of making the first plaintiff permanently sterile and that, accordingly, the plaintiffs claim that the revival of fertility gave rise to a breach of contract by the defendant failed. 1002 Neill LJ pointed out that on behalf of the plaintiffs it was conceded that the defendant never used the word 'guarantee' in relation to the outcome of the operation. His Lordship also made the point that it was not in dispute that the task of the court in that case was to seek to determine objectively what conclusion a reasonable person would have reached having regard to the words used by the defendant, the demonstration which he gave and the form which the plaintiffs were asked to sign. 1003 Neill LJ saw it as essential to view the words which the defendant used against the background of a surgeon's consulting room. His Lordship said: 'It is the common experience of mankind that the results of medical treatment are to some extent unpredictable and that any treatment may be affected by the special characteristics of the particular patient. . . . Both the plaintiffs and the defendants expected that sterility would be the result of the operation and the defendant appreciated that that was the plaintiffs' expectation. This does not mean, however, that a reasonable person would have understood the defendant to be giving a binding promise that the operation would achieve its purpose or that the defendant was going further than to give an assurance that he expected and believed that it would have the desired result.' 1004 Nourse LJ said inter alia: 'The question then is whether the defendant contracted to carry out a vasectomy or to render Mr Thake permanently sterile. The latter alternative necessarily involved a guarantee; in other words a warranty that there was not the remotest chance, not one in 10,000, that the operation would not succeed. . . . The object of the operation, as stated in the form, was to render Mr Thake sterile and incapable of parenthood. The contract contained an implied warranty that, in carrying out the operation, the defendant would exercise the ordinary skill and care of a competent surgeon. It did not contain an implied warranty that, come what may, the objective would be achieved . . . The only question is whether it contained an express warranty to that effect. Would the words and visual demonstrations of the defendant have led a reasonable person standing in the position of the plaintiffs to understand that, come what may, Mr Thake would be rendered sterile and incapable of parenthood? The function of the Court in ascertaining, objectively, the meaning of words used by contracting parties is one of every day occurrence. But it is often exceedingly difficult to discharge it where the subjective understandings and intentions of the parties are clear and opposed. Here the plaintiffs understood that Mr Thake would be permanently sterile. The defendant himself recognised that they would have been left with that impression. On the other hand, he did not intend, and on the state of his knowledge he could not have intended, to guarantee that that would be the case. Both the understanding and the intention appear, as individuals, to have been entirely reasonable, but an objective interpretation must choose between them. In the end the question seems to be reduced to one of determining the extent of the knowledge which is to be attributed to the reasonable person standing in the position of the plaintiffs. Would he have known that the success of the operation, either because it depended on the healing of human tissue, or because in medical science all things or nearly all things, are uncertain, could not be guaranteed? If he would, the defendant's words could only have been reasonably understood as forecasts of an almost certain, but nevertheless uncertain, outcome and his visual demonstrations as no more than explanations of how the operation would be done. He could not be taken to have given a guarantee of its success . . . . . . But where an operation is of the modern origin, its effects untried over several generations, would a reasonable person, confronted even with the words and demonstrations of the defendant in this case, believe that there was not one chance in 10,000 that the object would not be achieved? I do not think that he would.' 1005 Nourse LJ cited a decision of the Court of Appeal in Eyre v Measday (unreported, UKCA, 16 October 1985). Two passages from the judgment of Slade LJ in that case were as follows: 'But, in my opinion, in the absence of an express warranty, the Court should be slow to imply against a medical man an unqualified warranty as to the results of an intended operation, for the very simple reason that, objectively speaking, it is most unlikely that a responsible medical man would intend to give a warranty of this nature. Of course, objectively speaking, it is likely that he would give a guarantee that he would do what he had undertaken to do with reasonable care and skill; but it is quite another matter to say that he has committed himself to the extent suggested in the present case.' 1006 The second passage was : 'I am afraid that in my view, if they had wanted a guarantee of the nature which they now assert, they should have specifically asked for it.' 1007 Also of relevance are the observations of Lord Denning MR in Greaves & Co (Contractors Limited) v Baynham Meikle & Partners [1975] 1 WLR 1095, 1100, cited by Nourse LJ in the following terms: 'Apply this to the employment of a professional man. The law does not usually imply a warranty that he will achieve the desired result, but only a term that he will use reasonable care and skill. The surgeon does not warrant that he will cure the patient. Nor does the solicitor warrant that he will win the case.' 1008 The present case is of course, well removed from the circumstances under consideration in a surgeon/patient case. But the courts function is identical- it is concerned with ascertaining objectively the meaning of words used by contracting parties in a written document. And within and subject to the constraints outlined by Mason J in Codelfa at 347-353, the court in relation to a commercial contract may have regard to "the surrounding circumstances", the principle having been expressed by Lord Wilberforce in Reardon Smith as follows: "In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating" [1976 1 WLR at 995-996] 1009 Hence it is plain that the parties must be taken to have known how a rezoning may be achieved- that is to say-pursuant to Part 3 of the Environment Planning and Assessment Act, 1979. This was, after all, what the clause was directed to. And again subject to the constraints laid down by Mason J in Codelfa, the court is entitled to look beyond the language and to see what were the circumstances by reference to which the words were used [Cf Lord Wilberforce, Prenn v Simmonds [1971] 1 WLR at 1383-1384-passage extracted in Judgment of Mason J in Codelfa at 348-349] 1010 As Mason J said in Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 352: 'The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous of susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning . Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious, knowledge of them will be presumed. It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself . The object of the parole evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.' [emphasis added] 1011 At the end of the day, the matter is one of construction of the HUTA. It is the words which were used in that contract which are of fundamental importance. 1012 The plaintiffs' final written submissions [Part 5] were inter alia in the following terms: The Construction Of The Obligation: Absolute - Not "Best Endeavours " 2. The express promises made by Walker Consolidated in the HUTA, are not promises to use its best endeavours, they are promises to achieve a result. 3. There is no justification for "reading down" the express words of the promise which was made. 4. The evidence is that the HUTA went through numerous drafts between 3 December 1993 and 4 April 1994 where the parties were each legally represented (the Plaintiffs by Gye Perkes & Stone, and the Defendants by Hughes, Walker Corporation's in-house counsel). 5. Never, at any stage of those long and torturous negotiations and drafting, and re-drafting, was there ever any suggestion that the absolute and unconditional promise expressed in clause 7.3 (a) of the HUTA (as it ultimately became) did not accurately reflect [the] true intention of Walker and Dransfield as expressed in the Heads of Agreement and in their oral dealings with Hogarth and Kidd. 6. This is important because clause 7.3 of the HUTA was obviously carefully drafted in relation to the obligations Walker Consolidated was assuming, and there is a self-evident striking contrast between the obligations to "secure" rezoning of the Land in sub-clause (a) on the one-hand, and the obligation to "pursue" other matters in the other sub-clauses. If sub-clause (a) had used the expression "pursue" re-zoning, then the nature of Walker Consolidated's obligations under clause 7.3 (a) would be quite different. The parties intended that Walker Consolidated's obligation to achieve rezoning of the Land were to be of a different nature [to] its obligations in relation to the other matters and was to be absolute. 7. If despite its absolute terms the Court is in doubt about the meaning of clause 7.3 (a) it is at least ambiguous and in accordance with the principles discussed in Codelfa Construction Pty Limited v State Rail Authority (1981-82) 149 CLR 337) it is permissible to consider the factual matrix. The matrix here would include the absolute terms in which Walker made representations as to rezoning. For example he said he could fix it. There is a consistency between what was said and clause 7.3 (a) then to read the absolute terms as it is clearly capable of being read. The Significance Of The "Sunset Clause" 8. The express provision in the HUTA for the Ensile Residual Right if re-zoning were not achieved with 5 years and the parties resolved not to proceed, is no more significant in construing clause 7.3 (a) than is for example a liquidated damages clause in a building contract. 9. The existence of a contractual clause providing what is to happen in the event of breach is no basis for not giving [full] legal effect to the contractual obligations the breach of which has triggered the operation of the provision which was inserted against that contingency and provides no basis for depriving the innocent party of the full redress to which he is entitled by reason of the breach. 10. It is therefore apparent that the existence and terms of the Sunset Clause are not inconsistent with the literal constructions of clause 7.3 (a) of the HUTA for which the Plaintiffs contend.' 1013 The plaintiffs further submit that it is not correct to approach the construction of a promise in a written contract by enquiring whether the promisor had apparent capacity to perform the promise and then, if the answer be 'no', to assume that the promise is to be read down to a promise to attempt by use of best endeavours, to perform the promise. 1014 The submission is that a promise to pay any sum of money is not read down to a promise to pay whatever the promisor can afford. The true position is said to be as Holmes expressed it in The Common Law (1888) Little Brown & Co quoted in McKendrick (extracted above). 1015 The plaintiffs' submission is that the only question is whether, as a matter of construction of the HUTA, in the context of the document as a whole, the words the parties chose to express the obligation in clause 7.3(a) signify an absolute obligation or something less, i.e. a promise to use best endeavours to perform the obligation. 1016 The submission is that clause 7.3(a) is a promise to 'use its expertise . . . to secure [a result]'. 1017 The submission is that the result which clause 7.3(a) required Walkers to secure in fact required the cooperation of a third party or third parties, namely the Wollongong Council and/or the Minister (over whom Walkers had no power of control) to rezone the land. 1018 The plaintiffs point out that at the time the HUTA was executed: (a) All parties knew the current zoning of the land and the procedures necessary to have the zoning changed to enable residential subdivision. (b) The plaintiffs had for years attempted to have the zoning of the Lady Carrington Estate changed to permit residential subdivision without success. (c) The defendants had orally asserted that with their influence and contacts on both sides of politics, they could succeed where the plaintiffs had failed. (d) The Prospectus had issued and insofar as the references to the Ensile Land were concerned, had been read by Mr Hogarth [Statement 24 December 1998 paragraph 55] 1019 Focusing upon the HUTA, the plaintiffs draw attention to : (a) Recital F which records the experience of Walkers in 'obtaining' necessary planning approvals. (b) Clause 2.3 which provides that all parties have an obligation equivalent to a 'best endeavours' clause to achieve the objectives of the joint venture. (c) Clause 7.3(b) and (c) which expressly provide for Walkers to 'pursue' certain objectives. (d) Clause 7.4 which refers to a third party 'pursuing' a certain objective. (e) Clause 7.3(a) which requires Walkers to 'secure' a different objective. 1020 The submission is that it is impossible, as a matter of construction, to construe clause 7.3(a) as if it meant no more, in different words, than the obligation Walkers already had under clause 2.3. 1021 The plaintiffs submit that the difference between these clauses is that: (a) Walkers' obligation under clauses 2.3 and 7.3(b) and (c) was, in each case, that those clauses did not impose upon Walkers any obligation to achieve a result; merely an obligation to seek to achieve a result. (b) Walkers' obligation under clause 7.3(a) was to achieve ('secure') a result. 1022 The plaintiffs submit that the consequence of a breach of clause 7.3(a) is that the promise becomes one to indemnify the promisee against the consequences of the covenanted result not being achieved. 1023 The plaintiffs submit that the use of the phrase 'provide its expertise' does not affect this construction. The submission is that the phrase requires Walkers to act itself (as distinct from sub-contract out the entire obligation;) it does not, the plaintiffs submit, qualify what Walkers is to achieve as a result of using its expertise. 1024 The plaintiffs posit Walkers having covenanted to 'provide its expertise' to : (a) Build a building according to certain plans, etc. (b) Secure rezoning of the land. 1025 On that basis, the plaintiffs submit that it would be impossible to suggest that the obligation to build the building was merely to use its best endeavours to build the building. 1026 Further, the plaintiffs emphasize the definition in the HUTA of the word 'Project' as meaning: 'The purchase of the Land by Ibenmore, the rezoning of part of the Land for suburban style residential use, the development of the land by subdivision; the construction of roads and services and the subsequent sale of the residential and medium density lots as contemplated in the Feasibility Studies consistent with the Future Objects.' 1027 The plaintiffs emphasize that the relevant phrase within this definition did not include the words 'endeavouring to obtain the rezoning', but simply referred to 'the rezoning'. 1028 The plaintiffs then rely upon clause 2.3 which is in the following terms: 'Each of the Unit holders agree that the purpose of Ibenmore is to carry out the Project and accordingly each of them agrees to do all things necessary, desirable or ancillary to the carrying out and fulfillment of the Project in accordance with the Feasibility Studies.' 1029 The plaintiffs point to the use by the draftsman in clause 2.4 of the words 'agrees to seek to have . . .'. Clause 2.4 reads: 'Each of the Unit holders further agrees to seek to have the Cronulla Properties endowed with DA's and agrees to do all things necessary, desirable and ancillary to the seeking of such approvals and thereafter to carry out the Cronulla development.' 1030 The plaintiffs seek to contrapose use of the words in clause 2.4 'agrees to seek to have', with use of the words 'the rezoning' within the definition of 'Project'. The submission is that the parties could easily have used, had they so intended, within the definition of the word 'Project' words such as 'seeking to have [or procure] the rezoning'. 1031 The plaintiffs then draw attention to recital F in the HUTA which is in the following terms: 'Walker is a company experienced in developing broad acre land into residential subdivisions and obtaining all the necessary approvals and also developing residential town land into residential strata unit developments.' 1032 The plaintiffs also refer to page 40 of the HUTA wherein one finds in a group of clauses defining 'Walker Expenses', sub-clause (a) providing that 'the expertise of Walker to provide in-house architectural design, civil engineering and rezoning advice and expertise in respect of the land to the Helensburgh unit trust at cost'. 1033 The plaintiffs then in addressing clause 7.3, point to the differences between use in sub-clause (a) of the word 'secure' and in sub-clauses (b) through (e) of the word 'pursue'. Clause 7.3 in full reads: 'Walker will provide its expertise at Cost to promptly: (a) Secure rezoning of the Land; (b) Pursue and develop the Project; (c) Pursue DA of the Alison Road site; and (d) Pursue DA of the Gerrale Street site; (e) Pursue the Cronulla Development subject to clauses (c) and/or (d).' 1034 The submission is that the obligation upon Walker was to 'secure', as it was to carry out the Project which it is submitted, harking back to the definition of 'Project' includes 'the rezoning . . .'. 1035 Mr Ellicott put the submission in two separate ways, which on his submission would lead to the same construction. The first reading was: 'Walker will provide its expertise at cost in order to promptly secure rezoning.' 1036 This was submitted as a promise to secure a result using its expertise and to secure that result promptly. 1037 The second reading was as if it included two promises, namely: (1) a promise by Walker to provide its expertise at cost; (2) a promise by Walker using that expertise, to promptly secure the rezoning of the land. Decision on the Proper Construction of HUTA clause 7.3 1038 In my view the clause does not, upon its proper construction, contain an absolute obligation to promptly secure rezoning of the land. Of obvious significance in relation to the proper construction of the clause is the simple fact that it was plainly never open to the Walker Group to secure a rezoning. As already pointed out, to effect a rezoning there had to be an amendment or replacement of the existing Wollongong LEP, amendments to an LEP being effected by means of the process set out in Part 3 of the Environmental Planning and Assessment Act, 1979. As section 70 makes plain, an LEP is made by the Minister. Hence the proper construction of the clause requires that it be read against a factual matrix in which: (a) it was not the Walker Group or Mr Walker who could secure a rezoning (b) the avenues open to the Walker Group in relation to the ultimate securing of a rezoning required approaches to the political arena, as through lobbying. 1039 There is of course no doubt but that the court is entitled to inquire beyond the language and to "see what the circumstances were with reference to which the words were used, and the object appearing from those circumstances, which the person using them had in view". [ Prenn v Simmonds [1971] WLR 1381 at 1384 per Lord Wilberforce] 1040 Hence it is that "the commercial, or business object, of the transaction, objectively ascertained, may be a surrounding fact" [Prenn at 1385]. As Lord Wilberforce points out, Cardozo J thought so in Utico City National Bank v Gunn (1918) 118 NE 607. "And if it can be shown that one interpretation completely frustrates that object, to the extent of rendering the contract futile, that may be a strong argument for an alternative interpretation, if that can reasonably be found. But beyond that it may be difficult to go: it may be a matter of degree, or of judgment, how far one interpretation, or another, gives effect to a common intention: the parties, indeed, may be pursuing that intention with differing emphasis, and hoping to achieve it to an extent which may differ, and in different ways. The words used may, and often do, represent a formula which means different things to each side, yet may be accepted because that is the only way to get 'agreement' and in the hope that disputes will not arise. The only course then can be to try to ascertain the 'natural' meaning. Far more, and indeed, totally dangerous is it to admit evidence of one party's objective - even if this is known to the other party. However strongly pursued this may be, the other party may only be willing to give it partial recognition and in a world of give and take, men often have to be satisfied with less than they want. So, again, it would be a matter of speculation how far the common intention was that the particular objective should be realised." [Prenn at 1385 ] 1041 In Prenn, Lord Wilberforce upon a close examination of the agreement and of the surrounding circumsances was able to hold that "the appellant's construction does not fit in any way the aim of the agreement, or correspond with commercial good sense, nor is it, even linguistically, acceptable". His Lordship was however able to hold that the converse of each of those propositions applied to the respondent's interpretation. [Prenn at 1389] 1042 Lord Reid, Lord Donovan and Lord Pearson expressed agreement with Lord Wilberforce's speech. Lord Diplock however, whilst agreeing with the statement by Lord Wilberforce "as to the principles to be applied in the interpretation of a written agreement, and as to the reasons which underlie the rule that evidence is not admissible of the negotiations between the parties or any purpose which either of them hoped to achieve by it does not appear from the words used in the agreement and the surrounding circumstances", was less confident that the application of those princples to the written agreement contended for on behalf of the respondent was to be preferred to the alternative meaning which had commended itself to the Vice-Chancellor. His Lordship then added "but such doubts as I have are not strong enough to justify my differing from the remainder of your Lordships". [Prenn at 1390] 1043 Hence, even accepting as clear, the statement of principle laid down by Lord Wilberforce, one can see how difficult at times, can be an attempt to apply those principles to specific facts. Lord Diplock's comment makes plain that different minds may see an application of the principles in different ways. 1044 The general test of objectivity is pervasive in the law of contract. Two passages from speeches of Lord Diplock illustrate the point (as Gleeson CJ said in Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 549). 1045 In Gissing v Gissing [1971] AC 886, his Lordship said: 'As in so many branches of English Law in which legal rights and obligations depend upon the intentions of the parties to a transaction, the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party's words or conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party.' 1046 In Ashington Piggeries v Christopher Hill [1972] AC 441 at 502, his Lordship said: 'In each of the instant appeals the dispute is as to what seller promised to the buyer by the words which he used in the contract itself and by his conduct in the course of the negotiations which led up to the contract. What he promised is determined by ascertaining what his words and his conduct would have led the buyer reasonably to believe that he was promising. That is what is meant in the English Law of contract by the common intention of the parties. The test is impersonal. It does not depend upon what the seller himself thought he was promising, if the words and conduct by which he communicated his intention to the seller would have led a reasonable man in the position of the buyer to a different belief as to the promise; nor does it depend upon the actual belief of the buyer himself as to what the seller's promise was, unless that belief would have been shared by a reasonable man in the position of the buyer. The result of the application of this test to the words themselves used in the contract is still "the construction of the contract".' 1047 To the extent that the plaintiffs' submissions seek to outflank the parole evidence rule by suggesting that the Court may be assisted in construing Clause 7.3(a) by resort to the parties prior negotiations, the plaintiffs' submissions are rejected. Those negotiations, save to the extent that they tend to establish objective background facts which were known to both parties and the subject matter of the contract, are not admissible on the construction issue. They are not receivable insofar as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations. As Mason J points out in Codelfa, such statements and actions may reveal the terms of the contract which the parties intended or hoped to make - but are superceded by and merged in the contract itself. 1048 I interpolate to note that certainly, the present case is a case in which clear representations were made prior to entry into the Heads of Agreement and the HUTA to the effect that the Walker Group had looked at the issue, knew the facts, had the contacts and experience to get the land promptly rezoned and would not become involved with the Hogarth interests unless the Walker Group was assured of success. These were very strong statements. A summary of the relevant evidence in relation to these statements was conveniently set out by the plaintiffs in paragraph 21 of their final submissions [Part 4] which included the following: Evidence of Mr Hogarth · Walker said that they had influence on both sides of politics and that they could arrange that the Commissioner be a person who would be sympathetic to our application and that rezoning would follow. [Transcript pages 586, 590, 591] · Walker said that they had connections on both sides of the political spectrum - that rezoning would take place within a short time or promptly and that he could 'fix it'. [Transcript pages 593, 594] · Walker said he would get the land promptly rezoned - it was a foregone conclusion. [Transcript page 596] Evidence of Mr Kidd · You don't need to worry about the politics. I've got it all wrapped up. We can get this rezoning through. [Transcript page 745] · I understood him to be saying that he could not only bring it (a Commission of Inquiry) about but that he could have some influence over where it [went]. [Transcript page 751] · There were a series of assurances . . . that he had made the enquiries . . . that he had found out . . . That he can solve it. That they are liked by the Labor Party. That they are connected at the highest levels. There was a series of assurances that they could solve the rezoning. [Transcript page 765] · Walker was able to make sure the rezoning went ahead. 1049 The fact is however that to a very real extent, these statements were qualified in further cross-examination when both Mr Hogarth as well as Mr Kidd accepted that no guarantees had been given. And in any event the evidence is not in my view admissible on the construction issue. 1050 I would accept that relevant surrounding circumstances tending to establish what were the objective background facts which were known to both parties and which are admissible in construing the agreement , include: (a) the fact that the prospectus was issued in late in late February 1994; (b) the fact that the floating of Walker Corporation formed a relevant parameter against which the HUTA was entered into; (c) the fact that prior to the execution of the HUTA, Mr Hogarth had in March 1994 read the references in the prospectus to the Ensile land 1051 The strength of the references in the prospectus to the Walker group's perceived "very high level of certainty that [all necessary approvals...would] be granted" does not alter my view as to the proper construction, of the contract. The terms of the prospectus do not alter my view as to the parties presumed intention. 1052 To my mind the present is a very good example of why the court is so constrained in its ability to look at prior negotiations for the purpose of construing a written document. That the prior negotiations are admissible as tending to establish objective background facts which were known to the parties and the subject matter of the contract is unexceptional. But here what is sought by the plaintiffs, under the guise of the search for surrounding circumstances as admissible to assist in the interpretation of the contract (there being, on the plaintiffs submissions, language which is ambiguous or susceptible of more than one meaning), necessarily erodes the rule that statements of the parties during negotiations which are reflective of their actual intentions and expectations are not receivable. As Mason J. makes plain in Codelfa, such statements and actions do reveal the terms of the contract which the parties intended or hoped to make but are superseded by, and merged in, the contract itself. The parole evidence rule excludes such statements. The court searches for the objective framework of facts within which the contract came into existence, and for the parties presumed intention in this setting. 1053 In entering into the HUTA the Walker group may not have been prepared to warrant or guarantee that the rezoning would take place, in the sense of giving an absolute undertaking or covenant to this effect. And this notwithstanding that those who were negotiating with the Walker group may then, at a time prior to signing the written document, have believed that the Walker group would be prepared in signing such a document, to undertake an absolute obligation to promptly secure the rezoning of the land. There is a world of difference between what is said at the negotiating table and what a party is prepared to sign. This case is a very good example as it seems to me of Lord Wilberforce's words: "It may be a matter of degree, or of judgment, how far one interpretation, or another, gives effect to a common intention: the parties, indeed, may be pursuing that intention with differing emphasis, and hoping to achieve it to an extent which may differ, and in different ways. The words used may, and often do, represent a formula which means different things to each side, yet may be accepted because that is the only way to get "agreement" and in the hope that disputes will not arise. The only course then can be to try to ascertain the "natural "meaning. Far more, and indeed totally dangerous is it to admit evidence of one parties objective -- even if this is known to the other party. However strongly pursued this may be, the other party may only be willing to give it partial recognition and in a world of give and take, men often have to be satisfied with less than they want. So, again, it would be a matter of speculation how far the common intention was that the particular objective should be realised ." [Prenn at 1385 ] [emphasis added] 1054 Ultimately the words used in the HUTA are of fundamental importance. The relevant intention of each party is that which was reasonably understood by the other parties to be manifested by that parties words or conduct. The words used in the HUTA could not have led the plaintiffs to reasonably believe that Walker was subjecting itself to an absolute obligation to promptly secure rezoning. 1055 To my mind the submissions of the plaintiffs to the contrary are not of substance. 1056 I do not see that the plaintiffs are able to draw the suggested absolute obligation out from the difference in use of the word 'secure' as opposed to the word 'pursue' in clause 7.3, nor out of the context or use in clause 7.4 of the word "pursuit". 1057 Nor do I accept that within the principles laid down in Codelfa, the plaintiffs are able to identify an ambiguity of meaning or language susceptible of more than one meaning in order to move outside the written terms of the contract as an aid to construction. Here the submission was that one could go to the factual matrix: (a) to identify that use of the word 'expertise' included technical expertise as well as political connections and as a means by which the rezoning could be achieved; (b) to establish that it was stated that the result of using the expertise would be that the rezoning would be secured. 1058 These submissions are not of substance. The question is not one of difficulty in following what the word 'expertise' meant in the circumstances. That word is probably sufficiently explained in recital A and is also dealt with in some detail in sub-paragraphs (a) and (b) of Item 3 on page 44. The question is squarely one of construction. But even if it were appropriate to go outside the terms of the written document in order to identify that the subject expertise was intended to be both technical expertise and political expertise, being expertise in relation to obtaining necessary approvals by using, inter alia, political connections and the like, this would not, it seems to me, advance the plaintiffs' case to achieve the desired construction of the clause. 1059 Had clause 7.3(a) simply read "Walker will promptly secure rezoning of the land", then upon its proper construction the absolute obligation to secure rezoning of the land would, it seems to me, have been clear. Upon my reading of the clause the obligation here, however, is to provide expertise [this is the tool by the medium of which the best endeavours are to be applied], "to" (that is, "for the purpose of") securing a particular result [see also paragraph 1075 below]. The obligation is not an absolute obligation to secure the result. 1060 The plaintiffs' case that clause 7.3(a) upon its proper construction constituted a covenant to promptly secure the rezoning of the land as opposed to a covenant to use its best endeavours to secure that rezoning is rejected. 1061 I note that finally, Mr Ellicott sought to put a submission in support of the proposition that what had been said in October or November 1993 constituted a collateral contract or warranty or promise. The submission was that the Walker Group had in effect said: 'If the Hogarth interests entered into a joint venture on the terms which had been discussed, the Walker interests would use their expertise to secure a rezoning.' 1062 This submission is not of substance. The court is dealing with a written contract. If the construction of clause 7.3(a) as not giving rise to an absolute obligation be correct, a collateral contract of the type suggested in argument by Mr Ellicott would simply be inconsistent with the proper construction of the executed contract. No such collateral contract could stand with the written contract. 50035/98 - LAKATOI UNIVERSAL PTY LTD & ors v LANGLEY ALEXANDER WALKER & ORS 50110/98 - ENSILE PTY LIMITED v WALKER CONSOLIDATED INVESTMENTS PTY LIMITED and Ors 50109/98 - ENSILE PTY LIMITED v WALKER CONSOLIDATED INVESTMENTS PTY LIMITED 1798/98 - ENSILE PTY LIMITED v WALKER CONSOLIDATED INVESTMENTS PTY LIMITED JUDGMENT - 10 March 2000 PART 4 The Best Endeavours Case 1063 The plaintiffs' best endeavours case asserts that agreement was reached by one or more of Mr Walker, Walker Consolidated and/or Walker Corporation ["Walkers"] obliging Walkers to use their best endeavours to procure the rezoning of the subject lands promptly so as to enable the residential subdivision thereof. 1064 There are three separate points in time at which agreement to this effect is said to have been reached. 1065 The first is on a date or on dates shortly prior to 22 November 1993 [Contentions paragraph 26(c); the particulars rely upon "conversation between Mr Walker and Mr Hogarth in or about October/ November 1993 in the presence of Mr Dransfield and Mr Kidd] 1066 The second is when the Heads of Agreement were entered into [early December 1993] [Contentions paragraph 31 A; the particulars assert the term as having been either oral or implied]. 1067 The third is when the HUTA was entered into [6 April 1994] [Contentions paragraph 48]. 1068 The proceedings were relisted for mention following the completion of submissions when the court raised two questions of pleadings with the parties. The first was that although paragraph 49(a) of the Contentions only alleged breaches of the covenants pleaded in paragraphs 26 and 48, it seemed plain from the oral argument that the plaintiffs also relied upon breaches of the covenants pleaded in paragraph 31A of the Contentions. The second matter was that the second further amended defence as filed on 17 November 1999 had not pleaded at all to paragraph 31A of the Contentions. To my observations the parties had addressed and the matter had been fully litigated upon the assumption that the plaintiffs had meant to include within paragraph 49(a) an allegation of breach of the agreement and covenant referred to in paragraph 31A. 1069 Having drawn the parties' attention to these issues, the plaintiffs made plain that this had indeed been an inadvertent omission in their propounding on 10 December 1999 of the fourth amended summons. The defendants did not consent but did not wish to be heard on the plaintiffs' application to amend accordingly. The court granted leave to the plaintiffs to so amend paragrpah 49(a) of the Contentions. 1070 At the same time and without objection the defendants were granted leave to further amend the second further amended defence so as to formally deny the allegations made in paragraph 31A. 1071 The court's findings in relation to the First Representations have already been set out. This has involved accepting Mr Kidd's evidence in relation to meetings 4, 6 and 7. It will be recalled for example that in relation to meeting 4, Mr Kidd's evidence includes Mr Walker having said words to the effect "You will bring the land to the joint venture and we will bring our financial strength plus the ability to get that land rezoned promptly" 1072 Mr Kidd's evidence in relation to meeting 6 was that words to the following effect had been said: Mr Kidd : "Lang, if this is how the arrangement's going to be, how and who's going to run all of this? Mr Walker : "You don't have to worry about that Geoff. I have previously indicated to Bob that are we are set up to do everything. We have the expertise and we'll be attending to the administration of the joint venture." Mr Kidd : "So that means you'll take care of everything" Mr Walker : "Yes... We'll... control... all of the things that normally occur in a venture of this nature" 1073 On my findings there was then oral agreement generally to the effect of that pleaded in the Contentions paragraph 26(c). Mr Powell who argued this aspect of the case for the defendants accepted at transcript page 404 [3 December 1999], that the same implied term formed part of the Heads of Agreement. Clause 6 of the Heads of Agreement provided inter alia: "L. W. shall be responsible to fund all costs associated with the establishment of the Joint Venture, the rezoning and DA's of the above properties" 1074 My finding in any event is that the five point test [B.P. Refinery (Westernport) Pty Ltd v Hastings Shire Council] is satisfied in relation to the implication of this term. 1075 My further finding is that upon the proper construction of the HUTA, a term to like effect is to be found. In this instance again, as I understood the defendants oral argument and written submissions, there was no issue or argument to the contrary. [See paragraphs 17.3 -- 17.5 of section D of the defendants written submissions] [see also the defendants final written submissions which, although including sections such as "No breach of best endeavours covenant during the inquiry" [section E], included no section asserting that there was no such covenant in the HUTA.] But if I be wrong and if the defendants do place this in issue, then a term to this effect is found as a matter of the proper construction of clause 7.3(a) of the HUTA. The HUTA permits one to focus on the very precise ultimate formulation of the covenant. To be more precise, my finding is that the relevant term was as follows: "An obligation to use best endeavours [this is the promise] to secure the rezoning of the land promptly [this is the intended result of the promise] by the use of their expertise [this is the tool by the medium of which the best endeavours are to be applied]". Alternatively, and if it were necessary to find the term as an implied term, the above described five point B. P. Refinery (Westernport) test is also clearly satisfied. 1076 In the result the critical issues litigated and requiring determination become breach, causation and loss. Overview of approach to be taken to the Amann/ Poseidon issue 1077 The plaintiffs submit that had the Walker group exercised its best endeavours to properly prepare for a Commission of Inquiry at the earliest possible time and had the Walker group carried out all the steps reasonably open to be carried out by it in advance of the commencement of the Commission of Inquiry, the Commissioner would have included a different set of recommendations in his final report. The plaintiffs further submit that a more favourable set of recommendations would have been implemented and rezoning to allow for residential subdivision would have thus been achieved. 1078 The detailed principles of law to be applied are referred to below. At this stage it is sufficient to note that plainly, the plaintiffs' case in this regard calls for an assessment of the hypothetical. Any such assessment must rely upon all of the evidence and requires the court, doing its best to avoid the obvious dangers of hindsight, to fairly assess on the evidence, what if any, was the realistic prospect that in the posited hypothetical circumstances, an alternate set of recommendations are likely have been brought down by the Commissioner and that such recommendations would in due course, have led to the hoped for rezoning. 1079 On any view the Court's task requires the Court to examine with scrupulous care all aspects of the Commission of Inquiry including the submissions put to the Commissioner and the Commissioner's report. In the nature of things this examination must descend to considerable detail. This is how the best endeavours case was litigated. As the relevant principles set out below make plain: (a) the Court looks first to whether the plaintiffs have proved that some loss or damage was sustained by proving that the alleged contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by relevance to the degree of probabilities or possibilities. This exercise in a case such as the present requires the Court to examine the facts proven in considerable detail; (b) provided that there has been an actual loss suffered, the mere fact that damages cannot be assessed without difficulty and uncertainty, does not relieve the Court from its undoubted responsibility of attempting to assess those damages as best it can. Hence no applogy requires to be given in relation to the detail set out hereunder going to the best endeavours case. 1080 It seems convenient: - to commence by setting out the expert critiques on the conduct of the joint venture case before the Commission of Inquiry and the likely outcome had Walkers conducted the case differently; - to then set out in detail the gist of the respective submissions made in relation to the plaintiffs' best endeavours case; - to then focus upon the importance of the Commission of Inquiry to the joint venture goal of achieving rezoning; - to then deal with a number of disparate considerations to be taken into account (incorporating certain findings which are set out); - to then set out the relevant principles; - to then set out the ultimate holding on the best endeavours case. The Expert Critiques 1081 The plaintiffs' best endeavours case relies heavily but by no means exclusively, on evidence adduced by experts, namely, Mr Smyth and Mr Rowbottom. 1082 The defendants met this case with their own experts, namely, Mr Lester and Mr Joliffe. 1083 The convenient way forward is to outline without being exhaustive, the evidence given by each expert except for Mr Lester, whose evidence has in fact been dealt with above and is referred to as appropriate throughout the judgment. Mr Richard Smyth 1084 Mr Smyth is a qualified environmental planner and engineer, having considerable senior/chief executive level private and public sector experience. 1085 His professional experience has involved urban, regional and state environmental planning; natural resource management and environmental protection; environmental impact assessment; project development and management of approval processes. He has had management experience as senior/chief executive in organisation establishment and development; corporate management; education and training; public, media and political relations; ministerial, government and developer advice; the development and implementation of government policies including extensive national and state government committee work. 1086 Mr Smyth works as a planning consultant, being principal of Smyth Planning, established in February 1998. Previously, from 1989, he had been a planning consultant with Beca Simons & Smyth and Richard Smyth Planning Consultants Pty Ltd and during 1988 he was Manager of Research and Development for The Mirvac Group. In that role one of his responsibilities was to advise on residential, industrial and commercial opportunities and obtain development approvals. 1087 From 1980 to 1987, Mr Smyth was Director of the NSW Department of Environment and Planning. The following information as to Mr Smyth's professional experience gained at that time is extracted from his CV [PX 20]: 'Responsible for Ministerial and Governmental Advice and Policy Development on Environmental Planning and Protection; the Implementation of new Environmental Planning and Heritage Legislation; the Supervision of the Administration of the Environmental Planning and Heritage Legislation in NSW, Chairman of the Advisory Co-ordinating Committee of Government Agencies. In those roles I advised the Minister, The Cabinet Co-ordinating Committee, and other Committees, The Deputy Premier and the Premier on issues relating to both public and private sector development and environmental planning in NSW. These included matters such as Airports, Highways, Forestry, Rainforests, Flooding, Public Works, Smelters Coal Mines, National Parks, Wetlands, Heritage, Urban Development….. The Department was involved in all major development matters in NSW as well as other development matters and supporting the Minister who had a key role in the co-ordination of development in the State. Ministers I was responsible to and worked directly with over the period 1980 to 1987 were: Eric Bedford Part 1980, 1981-3 Terry Sheehan 1984 Bob Carr 1985-1987 incl In addition, my experience involved the Specification of Requirements for Environmental Impact Statements for all major projects in NSW and the Environmental Assessment of these projects. The assessment was usually by a Director's Examination and then Clause 113(5), which included the co-ordination of the inputs of other specialist Departments, and if the projects went to a Commission of Inquiry, the Department's Submission to that Inquiry.' 1088 Annexure 'A' to Mr Smyth's CV which is entitled 'Commissions of Inquiry', outlines Mr Smyth's involvement with the same. In 1979 Mr Smyth assisted in the preparation of the particular sections of legislation that established the Commission of Inquiry process. Whilst Director of the Department, Mr Smyth was responsible for the recommendations to the Minister to establish Commissions of Inquiry. To his recollection, Mr Smyth cleared or supervised the production of the evidence of the Department of Environment and Planning for some 35 major Inquiries. At the Aluminium Smelter Inquiries, Mr Smyth gave the Department's evidence himself. 1089 Mr Smyth gave evidence that as a result of his involvement with Commissions of Inquiry, he observed how many different parties presented their respective cases to the relevant Commission of Inquiry and how major parties or parties having major interests at stake had utilised resources such as political contacts and the media to advance their case. His evidence was that in a few cases where the proposal was a potential major employment generator that met the government's "high priority" classification, he was required to advise the proponent on the strategy that should be followed to "win" at the Commission of Inquiry and to monitor progress at the Commission of Inquiry. 1090 Mr Smyth's evidence is that in view of the above, he observed how good some parties were at preparing and presenting their cases and at utilising every possible or available resource to win their case. Further, he observed how ineffectual some parties could be through inadequate preparation and under resourcing. His evidence is that with his experience he was able to assess what best practice in the advancement of a "case" before a Commission would require for best results, both in terms of formal presentation to the Commission and in terms of utilising other resources or avenues to advance the case within the wider sphere. 1091 Since entering private practice in 1989 Mr Smyth has been involved in two Commissions of Inquiry, including the Helensburgh Commission of Inquiry in which he gave evidence on behalf of a small landowner, and provided advice on another. 1092 Previous to becoming Director of the Department, Mr Smyth was Director of Special Projects and then Chairman of the NSW Planning and Environment Commission (1977-1980). During this time, Mr Smyth was directly responsible to two Ministers, namely, Paul Landa 1977-1980 and Eric Bedford 1980. Mr Smyth has also worked as Assistant Secretary to the Commonwealth's Departments of Urban and Regional Development and Environment Housing and Community Development, providing advice primarily on planning/transport interface issues to Mr Tom Uren (1974-5) and to Mr Kevin Newman (1976-7). 1093 Mr Smyth's other relevant professional experience included his role as Principal Planner at the Department of Planning and Transportation, Greater London Council from 1971-1974. 1094 Mr Smyth was called by the plaintiffs to give evidence in relation to the preparation and presentation by Walkers and its consultants of the joint venture's case for rezoning before the Helensburgh Commission of Inquiry. 1095 Mr Smyth gave oral evidence and his reports dated 11 February 1999, 22 April 1999, 30 June 1999, 9 September 1999, 11 October 1999, 15 October 1999 and 22 November 1999 were read in court. An interlocutory judgment dealt with an attack on Mr Smyth's expertise. His statements were admitted subject to the rulings so given. It is convenient to set out below a section of that judgment: It is first necessary it seems to me to address the extent to which Mr Smyth has been shown to have specialised knowledge based on his training and experience…. Mr Smyth has been shown in [his] CV to have specialised knowledge based on his training and experience: (a) In relation to the Commission of Inquiry process, including; · the manner in which recommendations may be made to the Minister to establish Commissions of Inquiry; · the presentation of evidence and to the Commission of Inquiry; · the provision of resources, including political contacts and the media, to advance their cases before Commissions of Inquiry; · what best practice in the advancement of a "case" before a Commission of Inquiry would require for optimal results, both in terms of formal presentation to the Commission and in terms of utilizing other resources or avenues to advance the case within the wider sphere. [The word 'case' is used advisedly. Naturally a Commission of Inquiry differs markedly from a court case heard in an adversary system]. (b) In relation to environmental planning, natural resource management, environmental protection, environmental impact assessment, project development and management of approval processors. (c) In relation to public, media and political relations. (d) In relation to advice given to Ministers and to Government pertaining to environmental issues. (e) In relation to the development and implementation of Government policies going to environmental related issues. (f) In relation to the processes and procedures available to applicants seeking a re-zoning of land. Mr Smyth is plainly qualified to express opinions on a wide spectrum of areas falling within his above described specialised knowledge. This extends to giving evidence as to: (a) the operation in practice of Commissions of Inquiry into environmental issues; (b) the forensic tools available to parties interested in such inquiries; (c) The wider field of the political and media resources available to parties interested in achieving a particular result from a Commission of Inquiry, or through the further processes and procedures of Local Government and State Government, of which processes and procedures, the inquiry forms only one stage. In addressing the subject objections and the wider question of the admissibility of the opinions sought to be expressed by Mr Smyth (see section 79 of the Evidence Act) it is necessary also to bear in mind the clearly established principle that expert witnesses are not permitted to express opinions on the basis of unstated assumptions of fact which are disputed and are to be determined by the tribunal. In short, particular precision requires to be addressed to making explicit those assumptions upon which expert witnesses rely for the purpose of expressing their opinions. It is of course plain that a basic objection to any evidence which an expert seeks to give, is that such evidence must be able to be understood in terms. If the evidence is, as a matter of form, simply not able to be understood, then the evidence, for that reason, requires to be rejected. To my mind Mr Smyth has been shown to have specialised knowledge based on his training and experience and to be qualified to express an opinion as to the prospects of persuading the Commission of Inquiry to hand down recommendations different in kind or result or emphasis to those in fact handed down. Naturally, in order to express any such opinion, Mr Smyth would require to identify with precision, the assumptions upon which the giving of such opinion rests. In short Mr Smyth, in order to justify his opinion, would require to set out in detail precisely what further or different or other assumed submissions and/or materials he takes into account as submissions or material which could and should in his view have been put before the Commission of Inquiry. It would also be necessary for Mr Smyth with precision to identify precisely what are the further and additional or other recommendations to which he is referring as recommendations in respect of which he seeks to opine as having had any, and if so what, chance of coming forward. I come then to whether Mr Smyth is qualified to deal with: (a) The question of whether and if so to what extent the Minister's undertaking given to the council would have reduced the prospects of achieving a re-zoning within a reasonable timeframe. (b) The question of the impact of the Minister's undertaking in terms of the suggested requirement that Wollongong City Council would have had to be lobbied to try and open the way for re-zoning, and could have been lobbied to achieve that result. The difficulties which I have are with Mr Smyth's endeavour to give opinions which are underpinned by his references to Minister Webster's undertaking. That undertaking may be regarded as curious in the circumstances. This is of course a matter for final submissions and possibly for evidence. It is important to recall that at the time this interlocutory judgment is being handed down, the plaintiff's evidence has not been completed and the defendants' case has not commenced. The plaintiffs, I note, submit that the undertaking was effectively "writ in water", as it was not possible for the Minister to fetter his discretion in this way. The difficulty is that Mr Smyth's endeavour to express opinions as to the effect of the undertaking, in terms of the suggested reduced chances of achieving a re-zoning within a reasonable timeframe, fail a simple basic test of the requirement that the expert make plain what he or she is in fact wishing to say. If Mr Smyth's evidence is that taking into account the existence of that undertaking, then regardless of what different form of recommendations may have been forthcoming from the Commissioner, it would have taken some, and if so what, effort and some, and if so what, time to persuade any, and if so which relevant officers within the Wollongong City Council, to accept the recommendations, then Mr Smyth it seems to me could give such evidence. But when Mr Smyth says that in his opinion "the Minister's undertaking reduced the chances of achieving a re-zoning within a reasonable timeframe to the order of 50 percent", I fail to understand in what sense he is referring to or seeking to take into account, the Minister's said undertaking. To my mind Mr Smyth has not been shown as qualified within the parameters laid down by section 79 of the Act to give evidence as to the circumstances in which ministers' undertakings given to local councils are withdrawn or breached or successfully challenged in Court proceedings. His specialised knowledge based on his training, study and experience, even including his experiences in the inquiries referred to in Annexure A to his CV, do not extend to embrace these further parameters on which he seeks to express opinions. The opinions which he seeks to express on those matters to my mind cannot be said to be wholly or substantially based on his specialised knowledge. In the event that I be wrong in this holding and assuming that Mr Smyth would be entitled to give admissible evidence under section 79 in relation to these questions going to the Minister's undertaking, in my view opinions of that nature ought to be rejected pursuant to section 135 of the Evidence Act, for the reason that the probative value of that evidence is substantially outweighed by the danger that the evidence might be unfairly prejudicial to the defendants, misleading or confusing or cause or result in undue waste of time. The probative value of evidence is defined in the dictionary of the Evidence Act as "the extent to which the evidence could rationally affect the assessment of the probability of the existence of a fact in issue". Given the definition of "relevant evidence" in section 55 (1) of the Act, "probative value", in substance, means degree of relevance. But there is I accept a potentially significant difference between the definition of relevance and the definition of probative value. In terms of section 135 (a) of the Act, to my mind the concept of "unfair prejudice" to the defendant which here arises is because the defendants, against whom the evidence is sought to be tendered, would be based forensically in an awkward or impossible situation in terms of the evidence in the form in which it now appears. The difficulty is essentially that the Court is simply unable to cope with evidence of this nature. To my mind the reasons earlier given appropriately address the somewhat difficult parameters where an expert is brought forward to deal with areas involving political processes, lobbying, and matters which would not generally be accepted as appropriately the subject of expert evidence…" [Ex tempore Judgment delivered 5 November 1999] 1096 I have previously referred to Mr Smyth's evidence as to the significance of the 1994 Commission of Inquiry to the joint venture goal of having the LCE land rezoned for residential use and the importance of obtaining a positive recommendation. To this end, Mr Smyth emphasised the need to have 'the right strategy and the right team of experts to respond to the Terms of Reference'. He noted that 'Good practice requires that both strategy and team should be established as soon as the Commission is announced having regard to the known issues, the Terms of Reference and the likely opposition. The strategy and team should be refined and developed as the process proceeds to and through the Inquiry.' [11 February 1999 statement, paragraph 4.3]. 1097 Mr Smyth also noted that the political history of Helensburgh revealed that 'in 1993 WCC was not in favour of development in any area but was willing to negotiate over the Gills Creek catchment'. He surmised that this meant that LCE would need a 'very special effort to persuade the Commission that the LCE should be in the rezoning category'. 1098 Mr Smyth gave evidence at T1121-3 that a professional and competent developer would approach a Commission of Inquiry in two stages. The first stage is the primary submission stage that would perhaps involve workshops on detailed matters. The second stage would usually run a month or two apart and deals with submissions in reply. He gave further evidence as follows: 'for the first stage a professional and competent developer would be well prepared. They would have expert reports addressed to each of the Terms of Reference. There would be a clear statement of what the applicant was trying to achieve, and they would be submitted in accordance with the Commission's timetable. So that all of the issues are on the table and the applicant's answers and positions on each of the issues is available to the Commissioner and to the objectors and to the supporters and to any other applicants involved. There would be a Case Manager, usually often a solicitor but not necessarily always, who was present for the entirety of the inquiry who covered all matters such as tactics, legal issues, strategy, making sure all the papers were there, all the witnesses were on time and available and generally in a position to revise the strategy and tactics as the inquiry progressed as necessary. For the .. submission in reply, it would need to be comprehensive, answer the issues and give a reason[ed] and responsible conclusion to the Commissioner. So that if you, during the inquiry, looked as though you were not going to get your first point, you have a fall back position that was available to the Commissioner. So that the Commissioner, in framing his decision, is able to have regard both to the objectors or the opponents and the applicant's aspirations and so forth, so you have got an even chance at least of doing that. In your general conduct, the Commissioner should be reasonable, rational, knowledgeable, and you should convey the sense of expertise. In a way, preparing anything for an inquiry can be a bit like preparing for a court case. You must have matters in on time, you must deal with it professionally and competently. That would be my definition of a professionally, competently run matter before the inquiry. 1099 Mr Smyth sets out in paragraphs 14.1 to 14.16 of his statement of 11 February 1999 the 'respects in which Walkers' conduct of the joint venture case before the Commission of Inquiry failed to meet good practice as at 1994'. 1100 They were as follows: 14.1 Walkers appear to have seriously underestimated the difficulties of achieving a rezoning of the LCE lands to residential and the importance of the Commission of Inquiry. They appeared to have little idea of what was required to win at the Commission of Inquiry. Nor did they seek a sufficiently wide range of advice to find out what was needed to win at the Commission of Inquiry. 14.2 Walkers failed to seek legal advice and appoint a Solicitor/Advocate when Minister Webster announced the Inquiry. (The belated appointment of a Queens Counsel when the Inquiry was well under way was too late to recover an initiative they never had. Not even the best Queens Counsel could have saved them at that stage). 14.3 Walkers failed to appreciate the need to make representations to the Minister to have the Terms of Reference amended to make a specific reference to the Council Tip even though they produced a supplement to the AL Submission to address the problem of the Tip. 14.4 Walkers failed to appreciate the political scene and appeared to make no attempt to do so. They failed to appoint a PR Consultant/Lobbyist when the Inquiry was first announced. When the appointment of a PR Consultant was discussed it was as a reaction to the publicity accorded to the objectors rather than as a pro-active move to take the initiative. WCC's resolution to rezone the LCE and other areas to Environment Protection was a warning that there was a need to do considerable work on the political as well as the technical front if Council was to be persuaded to rezone the LCE or parts of it for urban development (See also below). 14.5 Walkers failed to appreciate the urgency of the situation and the need to update previous technical work. The Inquiry was announced in February and Walkers and AL discussed the need and the contents for the Inquiry submission at a meeting on 25 February 1994. Annexed hereto and marked "K" is AL's file note of that date. It is apparent from this file note that at this stage Walkers would rely at least in part on the 1992 GHD Report and its specialist papers to support a general submission from AL that addressed the Terms of Reference as well as all the various political concerns. At that meeting the parties also identified most of the likely key issues and noted "it will be necessary to commission others to prepare an equivalent submission which would address issues relating to: · bushfire protection · water quality · stormwater retention · infrastructure services and related costs · sewerage · access · local facilities within existing community". Although these matters were identified in February 1994, Walkers failed to follow up and commission the work. Indeed nothing appears to have been done to prepare for the Inquiry in the months of February, March and April 1994. 14.6 …discussions took place between Walker Corporation and LFA about history and strategy was 12 May 1994. There was a short meeting on 19 April 1994 at which politics were discussed and tasks allocated [Added in chief]. Walkers meeting with GHD on that date appears to have been held without any review of the events of the previous two years and as a result advice was accepted that the "water quality and pollution control had been adequately and successfully resolved". (Walkers failed to inquire at WCC about Officer reaction to the water quality aspects of the 1992 GHD Report: see paragraph 3.2 above). It was not until after the Inquiry started that Walkers/GHD realised that this was not the case. 14.7 Walkers received a copy of the WCC Officers' Report dated 16 May 1994 (see paragraph 12.3 above) and sent a copy to AL on 17 May 1994. A file note to AL dated 20 May 1994 reported on the results of the WCC meeting that considered the Report. In that document it is noted that the WCC showed a clear attitude to the Inquiry. I note that the WCC was merely re-iterating a view that it had held since 1991: (a) WCC intends to oppose development of the LCE but have an open mind to the Gills Creek catchment. (b) WCC intends to advise the Commissioner that the Minister will not use his power to rezone the land. (In doing so they are implying that the Commission's findings will not be binding on the WCC). (c) WCC Officers have argued that the development should be considered with an open mind, however, Councillors have rejected these arguments on the basis, they say, of unproven water quality controls. (The writer of the file note, Howard Murton of LFA, then goes on to opine that "this is not the real reason since there is now a wealth of information relating to water quality controls at Helensburgh. This should be emphasised at the Inquiry"). (d) The WCC concluded by restating that they are not bound by the Commissions' findings and made their attitude clear by indicating they will still oppose development of the LCE land. 14.8 Walkers failed to act on two critical matters raised in this file note. The first action should have been to seek urgent clarification from Minister Webster on his undertaking to WCC. If the Minister had given such an undertaking and was prepared to stand by it then it should have been discussed with Walker Corporation's Board of Directors and an appropriate strategy put in place. In my opinion the Board should have been advised of Minister Webster's commitment and its very serious and negative impact on the chances of achieving a rezoning, especially if the Commission did not recommend such a rezoning. In the event that a well informed Board had decided to continue at the Inquiry, then the strategy should have included provision for an even greater effort in preparing for and participating in the Inquiry and should have included a strong political campaign at the appropriate time. 14.9 The second action should have been to consider whether or not the water quality controls were unproven as was suggested by WCC. There was only one answer and that is that WCC was right; the parties had no evidence that such controls would work in Helensburgh. 14.10 Walkers should have immediately realised at the time of the WCC Officers' Report that in practice the water quality controls were unproven and required a practical experiment to prove that the water quality controls would work in the Helensburgh situation and in particular by the method proposed for LCE. Failure to do this at this late stage meant that the Inquiry was lost, at least as far any recommendation for the rezoning of LCE for urban uses in the immediate future was concerned. 14.11 In preparing their initial submission to the Inquiry (in June 1994), Walkers relied on a rezoning application prepared by GHD that was submitted in 1992 as well as a summary report prepared by AL. (This summary paper may have been suitable for a smaller parcel of land but not for a major holding that was already not supported by WCC). What was required was a summary report based on at least one specialist report addressing each item of the Terms of Reference. The expert reports in Volume 2 of the 1992 GHD Report should have been updated and expanded as necessary for submission to the Commission to address most of the Terms of Reference. 14.12 Walkers failed to properly investigate and have regard to the history of the water quality issue and failed to appreciate the need to take previous investigations one step further, that is, apply the results of the previous investigations into a practical test situation. They did not provide or attempt to provide a demonstration project to show that improvements could be achieved in water quality when the proposed schemes were implemented. 14.13 Walkers failed to properly organise for the Commission and failed to appoint the necessary advocate and experts and failed to develop the necessary strategy to achieve a required positive result from the Commission. (This failure is illustrated by the fact that GHD had to be engaged after the start of the Commission and asked to update their 1992 Report on water quality). 14.14 The Commission of Inquiry reported in December 1994 ("Commissioner's Report"). The Commissioner's Report notes the difficulties caused by the actions of some of the parties and the extension and delay of the Commission's program caused by late reports. In so far as Walkers was concerned, the late reports were a direct result of their failure to prepare properly for the Inquiry and to give the Inquiry sufficient priority. This in turn resulted in them always being in a catch-up position and never having the initiative. That they (and perhaps more so other parties) managed to persuade the Commissioner to recommend that the status quo in the zoning be maintained until tests were done further illustrates their failure at the Commission. The situation is worse when the fact is noted that the Commission gave a low level of priority (for rezoning) to parts of the LCE lands when an appropriate start and initiative may have prevented this action. 14.15 The WCC resolved to zone all of the major areas the subject of the Commission to Environment Protection and Minister Webster gazetted their draft Local Environmental Plan on 22 March 1995, three days before the State General election. Even when this occurred it was still open to Walkers to pursue the opportunity to test the water quality control proposals and prove the methods and then to seek WCC and State Government approval for a rezoning. There was no reason why Walkers could not have lodged a rezoning application as soon as the Commissioner's Report had been considered as a basis for progressing the water quality trials and tests. This could have been done by the start of 1995 and before the decision was taken by the WCC about their response to the Commissioner's Report. A copy to the Minister would probably have ensured that the matter was again put in abeyance or at least appropriate action was put in hand to continue investigations. 14.16 Walkers' failure to lodge a rezoning request and promptly follow up on the Commissioner's Report was a major failure on their part. Lakatoi has lost and hence been deprived of a valuable and perhaps once only opportunity to secure rezoning of the LCE for urban uses. 14.17 Without a landowner initiative that is, a landowner being willing to pay for the tests and a Council being willing to approve of same, it would seem that the LCE will stay in an Environmental Protection Zone unless the political situation changes and the technical tests are done. 1101 As the defendants' point out, many of Mr Smyth's points of criticism overlap. 1102 Mr Smyth concluded at paragraph 14.18 of that statement that had the procedure outlined above been followed, there was in his view a 60% chance that the Commissioner would have recommended in favour of the rezoning sought by the joint venture. 1103 Mr Smyth's cross-examination was undertaken over a number of days and covered numerous topics, complete detail of which is not intended to be set out in the Judgment. 1104 During cross-examination Mr Smyth conceded that what was of fundamental importance at the Commission of Inquiry was not an advocate's rhetoric but rather the quality of the expert evidence directed towards the 7 matters specified in the terms of reference and directed towards the stated objects in s.5 of the EPA Act. Mr Smyth's evidence in this regard was as follows: Q. The approach to be adopted by the Commission of Inquiry relied upon, I suggest to you, an impartial non political technical assessment of such matters; you agree? A. By the Commissioner? Q. Yes? A. Yes. Q. And in order to most assist the Commissioner, it was necessary and appropriate for parties to conduct themselves in a similar fashion. You would agree? A. Yes. [T1173] 1105 In relation to the engagement of Mr Lloyd QC, Mr Smyth gave evidence that he was not really a match for Mr Robertson, who appeared for the Council [T1158]. Mr Smyth conceded, however, that at the date Mr Lloyd QC was briefed to appear at the Commission of Inquiry, "He was a very, very senior member of the Bar of New South Wales, comprising members of the Bar who appear regularly in the Land & Environment Court of New South Wales." [T1159]. Further, Mr Smyth gave evidence that he had: "a high regard for Mr Lloyd but in terms of this Inquiry, I think he is probably too senior for it and he does not have, or did not have the personality that would combat Mr Robertson, who I accept was a junior. I wouldn't have chosen him, if that helps answer the question." [T1159] 1106 Mr Smyth agreed that in expressing his view that Mr Lloyd was too senior, he had not taken into account the amount of money that was at stake [T1161]. His evidence was as follows: Q. I suggest to you, with the greatest respect, that is completely illogical, and I put it on this basis, that where a sum of money like, in excess of $100 million was involved as a potential profit on the joint venture, that there was no choice but to use senior counsel of Mr Lloyd's eminence at some stage in the Commission of Inquiry? A. I base my opinion on my experience with Mr Lloyd, in that I was in a major case as a witness, very minor witness, that he was involved in and I found him very heavily reliant on a junior counsel and a solicitor in preparing his case, and also in support of witnesses. My experience was, although limited perhaps, but some experience with senior barristers is that it is usual for them to have a junior and experts to support them, and certainly in my experience with Mr Lloyd he needed that, and just expecting him to do the nitty gritty himself was I think not appropriate, and that was the reason why I said I thought he was too senior, not nothing (sic) to do with his fees or the profits from the joint venture. [T1161] 1107 When Mr Smyth was asked whether he had any criticism of the way Mr Lloyd actually dealt with the issues at the Commission of Inquiry, he gave evidence that while he wasn't at the Commission of Inquiry, he had seen what he understood to be the final submission and he felt it lacked a conclusion or any pointers for the Commission of Inquiry as towards a decision. Mr Smyth gave evidence that as compared to Mr Robertson's submissions on behalf of the Council which had a good conclusion and were very extensive and thorough, the submission 'left something to be desired' [T1162]. 1108 Mr Smyth then gave the following evidence: Q. Let's look at a criticism that you make of Mr Lester, and it's found at paragraph 114 of your statement of 9 September 1999. You say this at paragraph 114: "I note Mr Lester's insistence on the team's sole focus as presenting a professional and competent submission. In my experience such a focused approach often leads to a failure to see the big picture". You see that? A. Yes yes. *Q. You would agree with me that some reasonable minds may consider that your observations about Mr Lester amount to very complementary observations. Would you accept that? A. If that's his sole focus. One could say that's - I don't comment there on professionalism, or the competence of the submission, I just simply said his sole focus was that, and that is commendable in some cases, yes. *Q. And in your view Mr Lester adopted a focused approach towards the issues at the Commission of Inquiry; would you agree with that? …. WITNESS: Yes. LEGGAT: Q. So what we had as part of a joint venture team was the focused Mr Lester, and what you've described as Mr Lloyd being the big picture man. That is a very complementary team, isn't it? A. Only if Mr Lloyd actually has the big picture in mind, yes. He's - I was describing him in the context of his approach to a court case, and his general work style, and comparing that with Mr Robertson. I wasn't saying that it was necessarily going to be complementary to Mr Lester's approach. I mean one needs both, but Mr Lloyd needed - would in my view have needed the backup that he would normally get in a full legal team. Q. Well he had the backup by Mr Lester, with Mr Lester's focused approach, didn't he? A. Well you could say that, yes. But I qualify it by what I said in response to the previous question. Q. You see, what Walkers chose for the advancement of the joint venture interests was almost a dream team wasn't it, with the overly focused, you suggest, Mr Lester and Mr Lloyd QC, subsequently to be appointed as a judge of the Land and Environment Court, with a reputation in your mind for having a capacity to deal with the big picture? A. Well I would like to go back a little on that, because I didn't say that Mr Lester had a sole focus. I note in my statement that Mr Lester's insistence on the team's sole focus as presenting a professional and competent submission, I didn't say that he had a sole focus. I mean that's his insistence, not necessarily mine. HIS HONOUR: Q. I think you are now being asked something slightly different about a dream team, or dream A. I wouldn't have called it that, no. LEGGAT: Q. But you would concede that someone in the position of the joint venture could reasonably have identified those two men, that is Lester and Lloyd, as being a very appropriate working combination in 1994? A. With appropriate support, yes. HIS HONOUR: Q. Why wouldn't such appropriate support have been furnished by GHD, as I understand it, who have a reputation of some suggested excellence in the field? A. Appropriate support would have been afforded by GHD, Mr Lester and others. But in terms of Mr Lloyd, he needed support at the solicitor, junior barrister in my opinion. And I haven't changed that to actually get the material together. He needed the equivalent, or perhaps of Mr Robertson in the team to give him that essential material in a - or that might be my opinion anyway. Q. Well presumably you appreciate the way in which the bar has moved, that there was a time when it was close to necessary to have two counsel when you had a QC or an SC, but in more recent years a senior council (sic) is able to appear without a junior, and indeed without a solicitor, by direct contract with the client. That is your understanding is it? A. Yes your Honour. I've had experience - I've worked directly with barristers in the Land and Environment Court…. [T1173-1175] 1109 Mr Smyth was then cross-examined in relation to his assertion that the belated appointment of Mr Lloyd QC when the Inquiry was well under way was too late to recover an initiative they never had. His evidence was as follows: LEGGAT: Q. Now your proposition in the final sentence "not even the best Queens Counsel could have saved them at this stage", is it your proposition that by the time Mr Lloyd was appointed the Commissioner had made up his mind adversely to the Walkers interests? A. No. I can't say what the Commissioner had made up his mind about at that stage. Q. How could Walkers have been not saved at that stage unless that is what you meant? A. Well, what I mean there is that the necessary submissions had not been done; the primary submission was inadequate; and whereas the other party's primary submissions had addressed the issues, he had - put it this way - the council's submissions had been in on time, and I am aware that the Commissioners are antagonised if the parties don't perform in accordance with the way they expect them to - and on top of that the other objectors had made their submissions on time and completed submissions on time, the other people making submissions, whether they were objectors or supporters, who have made their submissions on time, and complete, also upset or antagonised by that, by the late material, by the fact that the research hasn't been done; and it was my view that the Commissioner is influenced by the material that comes before him, its comprehensiveness, and its timeliness, and tends to have perhaps what one might call or get, what one might call, a mind set, that you might recover from, so you are actually, what one might say, behind the eight ball at the start of the Commission, and for the first few times in the Commission, and you are continually trying to catch up and recover lost ground, and it is on that basis that I say that an inquiry was well underway and too late to recover an initiative. Q. You say more than that, don't you. You say that by the time of the appointment of Mr Lloyd there was no saving of the joint venture proposal. That's what you say in the last sentence, isn't it? A. Well, that is how it turned out. Q. Would you be courteous enough to deal with my question please? A. No, that is what I am saying, what I am saying in the last part is "Not even the best Queens Counsel could have saved them at that stage"; that is my opinion. ….. Q. Let us move on. 14.2 assumes, does it not - and by the reference to 14.2 I mean your paragraph 14.2 in your statement of 11 February 1989 - inherent in your opinion expressed in paragraph 14.2 is the proposition that the Commissioner will somehow pay less regard to matters that are put to him towards the end of the inquiry than he had to matters put to him early in the inquiry; do you agree that that is pregnant in your proposition in 14.2? A. No, I don't, and the reason for that is that I believe that the ground is set in the initial submission, and the matter is then explored then in the final submissions, and if your initial submission does not establish your case in a clear concise way and deal with all the technical issues then you are behind the eight ball from the start. I think I refer to that earlier in my submission where I suggest it is necessary to hit the deck running and be ahead of the game, and that is something that I have always had the opinion that it is necessary to be in that situation. HIS HONOUR: Q. You have never sat as a Commissioner of Inquiry, have you? A. No, I haven't. Q. Or as a judge? A. No; I have not done that either. [T1179-1181] 1110 Mr Smyth agreed the round table sessions on water quality were an initiative of the Commissioner. He further agreed that irrespective of the strength of a party's initial submission, a process like a round table, where competing views are thrashed out, inevitably occurs at a Commission of Inquiry in relation to technical issues [T1184]. 1111 In relation to Mr Smyth's criticism of Walkers for raising matters concerning the tip, Mr Smyth gave the following evidence: Q. Yes, the last part of the second last sentence [19/274] makes it clear beyond doubt that Walkers did not waste large sums of money investigating a matter which was of no importance to the Commission of Inquiry? A. Well the Commissioner recognises the existence of the land fill, and perhaps the need for land fill rehabilitation works, but he does not actually go into - well the difference - what I'm saying is that it's an identified factor, but it didn't require the extensive investigation that took part in… Q. You're saying that your point really is that the extent of investigation carried out by Walkers and Lester Firth & Associates was too great, not the fact that they spent time on investigating matters such as the one we see at page 274; is that your point? A. I think it's both of those points. That a planner would recognise the problem with the tip, and I think could come to the conclusion it's come to there without the need to do the extensive investigations and spend the time on it that Walkers spent. [1189-1190] 1112 Mr Smyth gave evidence for the plaintiffs that Walkers failed to appreciate the political scene and failed to appoint a public relations/political consultant until it was too late in paragraphs 5.2, 5.3 and 14.4 of his statement dated 11 February 1999. 1113 In those paragraphs, Mr Smyth asserted that the desirable team required by a reasonably competent and adequately funded developer seeking rezoning of the Lady Carrington Estate in 1994 would have included a Public Relations Consultant/Lobbyist with experience in Commission of Inquiries at the outset. He asserted that such a person would be required to 'sort out the politics of the situation and make an input to the determination of the strategy' that was to be adopted in putting the joint venture case before the Commission. 1114 During cross-examination, Mr Smyth noted that "lobbyist" is the word he should have given the emphasis to and that the person employed for this role ought to have been 'skilled in both PR and lobbying politicians with the sensitivity and the inside running of the political parties'. In his view, such a person could have 'been advising, or and lobbying the councillors, the state politicians, watching the media, guiding the professionals and taking an overall view of the approach and making sure that they - documents that were submitted were readable by the Commissioner and the public' [T1190]. 1115 When it was pointed out to Mr Smyth that it was not the public who were deciding the Inquiry but the Commissioner, he answered as follows: 'Yes, but at the end of the day the public agitation was going to affect council and the state politicians, and while Mr Walker was able to lobby the politicians and so on, there needed to be somebody in the group that actually could do the same job, particularly amongst the councillors who were pretty critical, and also the council's solicitors were, in the majority, opposed for what was being proposed for the LCE lands.' [T1192] 1116 Mr Smyth gave further evidence as follows: LEGGAT: Q. You are not suggesting, are you, that a public relations consultant could have positively influenced the recommendations to be made by the Commissioner? A. Only indirectly in the approach taken by the people making the submissions. …..if a lobbyist PR consultant had done their homework, in terms of what the council was looking for and what the councillors, the individual councillors were wanting and found particular things, such as their concerns about the unproven water quality issue, then that could have influenced the approach taken by the team, and in approaching the inquiry and, subsequently, how the submissions were written.… Q. What earthly difference would that make to the Commissioner what the Wollongong councillors thought about the technical merits of the matter that he was required to assess? A. Well, I think in terms of, to answer that, I probably best use an example. If, in talking to the councillors, the lobbyist found that their particular concern related, to go away from the water quality, but that could be used as well, but related to the retention of the bushland on the ridge and larger allotments, and he found that if the consultants had proposed larger allotments and a design of the allotments to actually retain vegetation so that allotment size not only varied across the ridge but also had regard to the significant trees or clumps of vegetation, then the joint venture consultants could have actually designed such a layout that could have influenced the Commissioner to, or addressed at least some of his concerns that he expressed about the ridges. In terms of water quality, if the lobbyist had found out the detail that was apparent in the council report, but it emphasised that to the team, then perhaps the trial would have been pushed along and the Commission could have adjourned until the results of the trial were available, but that is the sort of thing that I would expect a lobbyist to pick up, and in my experience on other matters that's what we have tended to do: We have tended to re-shape submissions to [councils], or reports to address extra issues or particular issues in a particular way. Q. …… Have you seen anything which supports your proposition that councillors views may, during the course of the inquiry, have influenced the manner in which the technical merits were dealt with at the Commission of Inquiry by council? A. No. [T1193-4] 1117 Mr Smyth gave further evidence as follows: Q. So if this note is correct, the difficulties in a marginal seat of needing to keep the green vote on side would have been known to presumably councillors as well as members of parliament? A. To both political parties, yes; and the councillors in the northern end of Wollongong I think have been green councillors for some time, the two water councillors. Q. How would you suggest a lobbyist could get across that problem by lobbying? A. I would have suggested a lobbyist could have got behind Bob Carr's reasons for his attitude to Helensburgh expansion, and found out whether it was a view in regard to the election, whether a positive result from a Commission of Inquiry would change that view, whether the potential of 300 odd hectares of highly valued conservation land going to National Parks for nothing would have changed that view, and in my opinion it probably would have, because I know Mr Carr reasonably well, but it would have been, from my perspective the lobbyists would have actually done the background to those sorts of statements, not taken them at face value from a middle level departmental officer; and I know Mr Woodward quite well, and I have got a lot of respect for him, but at the same time if a council officer said that to me I would be finding out the background or getting somebody to find out the background as to why, and likewise with the council, going into and talking to the councillors and finding out what chance one had and what one had to do to get them to change their minds, that is the sort of thing that a lobbyist or somebody who knows the council can actually do. Q. Presumably the words 300 to 400 votes would be easy to understand by any politician? A. If that was the case, the nature of the Helensburgh electorate has changed, and the boundaries adjusted from time to time so that they actually change it. At that stage it was, it may well have been marginal in the previous election, but it might not because of the swing in public opinion be marginal in the next one, so I would have had a lot more or done a lot more investigations as to that rather than taken the matter at face value as well. *LEGGAT: Q. In the course of that answer you said words to the effect, because you know Mr Carr fairly well it is your view that Mr Carr's political opinion could have been changed. That was the gist of what you said, wasn't it? A. ... Yes. LEGGAT: Q. Can I suggest to you with the greatest respect that that is gross speculation that is devoid of any intellectual integrity? A. I don't agree. I think I've got a pretty reasonable basis of experience to be able to say that with reasonable certainty. HIS HONOUR: Q. You didn't say it in your statements, or did you, your three or four statements; did you say that then? A. …. I don't think so your Honour. I don't recall. [T1198-1200] 1118 Mr Smyth conceded that he had not investigated what the various councillors had had to say in the media in relation to the matter over the years or whether the councillors' positions were based upon questions of a political nature, in terms of election prospects and the like [T1192]. 1119 Further, Mr Smyth acknowledged that Mr Hogarth had probably been endeavouring to lobby council officers or state politicians since he had owned the land. As to Mr Hogarth in relation to the topic of lobbying, Mr Smyth gave evidence as follows: Q (HIS HONOUR). Did you, in the course of preparing your report, reach a view and, if so, what view, as to whether or not it would be advisable for Mr Hogarth to do such lobbying himself? A. From the papers I saw it wasn't, it wouldn't be. My recollection of those papers is that it was suggested by Walkers that they would be the good guys and Mr Hogarth should stay out of it. That is my recollection. Q. Do you have any criticism of any such suggestion? A. No. At any time - no, I would agree with that, from what I read, that would have been a wise suggestion. Q. From what you read did that suggest that Mr Hogarth should or should not actually send in submissions to the Commissioner himself? A. I doubt if there would be a problem with that; it depended on the nature of the submission. [T1193] 1120 When questioned closely on paragraph 14.4 of his statement, Mr Smyth explained that in his view, Walkers' failure to attempt to appreciate the political scene 'before, during and after the Commission' was evidenced by their failure to involve a lobbyist to investigate 'council attitudes, the State Government attitude, the party head office attitudes, and actually do an internal memo on those particular matters' [T1195]. 1121 Mr Smyth gave evidence as follows: Q. Let me suggest to you that far from Walkers failing to appreciate the political scene, it is evident, from a fair reading of the file notes of Mr Lester, that Walkers very carefully assessed and monitored the political scene; what do you say as to that? A. I would accept that there was some of that between Mr Walker and Mr Webster, the minister, but I found nothing that I can recall in there about the Labor Party being approached or the matter being discussed with the shadow minister, or the premier, and I found nothing in there about any discussions with individual councillors, except I think from Councillor Proudfoot, and there was possibly one other councillor mentioned, but I saw no reference to appointments or anything like that. 1122 Mr Smyth agreed that his criticism of Walkers in this regard is a research criticism. 1123 Mr Smyth was taken to a number documents, namely LFA file notes, during the course of his cross-examination. It was put to Mr Smyth that certain references in those documents tended to prove the falsity of his claim that Walkers failed to appreciate the political scene in the lead up to the Commission of Inquiry and had made no attempt to do so. 1124 In relation to these references, Mr Smyth initially responded that such references evidenced only either 'a series of assumptions from an outsider point of view' or attempts by Mr Lester and/or Walkers to understand the political situation from a bureaucratic perspective. He maintained that a 'lobbyist should go inside the system and find out what really is the basis for the opposition or the reported opposition in these cases.' However, as the cross-examination progressed, he conceded that his paragraph 14.4, while correct in context during the Inquiry, was incorrect in the context of the whole picture. He noted that 'in the context of a lead up to the Inquiry, there were certainly investigations done as to background.' 1125 As to the choice of PR consultant lobbyist, Mr Smyth gave evidence that in his view, Walkers ought to have appointed either one person who could work with both parties, or ought to have found two people, one for each side. This is notwithstanding Mr Smyth's assertion that as it was the Labor Party that was at the council, and that it was predominantly the Labor Party that was the most important in terms of lobbying [T1203]. 1126 He suggested that someone like Mr Brian Dale or Mr Allan Walsh would have been competent to act as PR consultant/lobbyist on behalf of the joint venture interests. 1127 On Mr Smyth's evidence, Mr Dale was capable of lobbying both political parties and had in fact worked for both sides and at Federal level. He had advised Mr Phillips in the Health Department and had also been Mr Wran's advisor cum press person for a number of years, subsequently becoming an advisor to Mr Frank Walker, former Attorney General and Minister for Housing and Landcom. Mr Smyth described Mr Walsh as being a former Labor Member of Parliament for Maitland, who has been an active lobbyist in the town [T1203]. 1128 As to the engagement of Ms Vivian Twyford as a PR consultant lobbyist, Mr Smyth agreed that it is clear from page 20 of his own statement, dated 11 February 1999, that Twyford Communications were working with the joint venture team from 8 July 1994, within 3 days of the commencement of the Commission of Inquiry. While he agreed that Twyford Communications certainly provided PR consultancy, he was unsure of the Twyford lobbyist role. In any event, he proposed that 'that particular role should have started with the initial preparation for the Commission of Inquiry' [T1205]. 1129 Mr Smyth agreed that there were a number of communications made by Vivien Twyford Communications Pty Limited during the course of the Commission of Inquiry and that at paragraph 63 of his statement dated 9 September 1999, he referred to these communications as having achieved " some positive results". He gave further evidence as follows: Q. You would agree with me that in the course of a very extensive analysis of inadequacies, as you perceive them in the joint venture strategy, you have not once suggested that Vivien Twyford Communications Pty Limited were other than an appropriate choice for the joint venture to retain. That is so isn't it? A. I haven't made a suggestion either way. I didn't attempt to pass a judgment on that. [T1205] 1130 In relation to political donations, Mr Smyth gave the following evidence: HIS HONOUR: Q. Which donation do you mean? A. If any party has made a donation, or if any developer or person has made a sizable donation to one political party, they normally make the same to the other. In my experience when developments they were initiating came in, and came through the place, the Minister's office was usually aware through the party head office that those contributions had been made. And that was a factor - that is no doubt pressure on the Minister, but that was a factor that entered into the matter. Certainly in my experience. Q. You're talking about money donations to political parties? A. That's right your Honour. I'm afraid it's a fact of life, they helped decisions to be made. I am afraid that is a fact of life. [T1346] 1131 Mr Smyth gave the following evidence in relation to the appropriateness of Walkers' use of Professor Westerman in making submissions to the Commission of Inquiry: Q….Now yesterday you were trying to deal with the proposition that Professor Westerman, being the Chief Planner of the National Capital Development Commission, would have been a very useful person to have as part of the Walker team. That was the proposition that you were seeing to deal with yesterday was it not? A. I would like to see the transcript to see the proposition. (By leave copy of yesterday's transcript handed to witness.) ……WITNESS: The proposition I was seeking to deal with yesterday is in the question that precedes the answer you quoted. That question says: "So Professor Westerman was clearly a very useful person to use in terms of any public relations political strategy use that might be made of the views of a former chief planner of the Capital Development Commission; agree?". And I stay with my former answer. I would limit the usefulness. Professor Westerman left the NCDC in probably about 1978, and became a professor at the university. I could be wrong in a year. I'm not totally sure. I know he was there in 1977. But became a professor in the University of New South Wales. In terms of the councillors at Wollongong, in terms of their political people and public relations, I'm not sure that too many people would have known of him. The fact that he was a professor would have given him some status, but I don't - I would stay with "limited usefulness" in that regard. Q. It's apparent from the transcript at page 1206 at about line 50, that you were not aware that Professor Westerman was in fact the Chief Town Planner. That is demonstrated by that part of the transcript is it not? A. Yes. I only new him as an Assistant Commissioner, which is more senior an [sic] the Chief Town Planner. Q. The position is, I suggest to you, when you made your observation, the second sentence of paragraph 10.1, about the excellent precedent exist from the National Capital Development Commission, you were not aware that Professor Westerman had been the Chief Planner of the National Capital Development Commission. That is so isn't it? A. I had been aware that he was Assistant Commissioner there, but not the Chief Planner necessarily. [T1213] 1132 Mr Smyth gave the following evidence during cross-examination in relation to his evidence in chief to the effect that Walkers seriously underestimated the difficulties facing them, failed to develop an appropriate strategy, were in a catch up position and failed to update technical work: LEGGAT: Q. Mr Smyth, I want to take you to the first amendment that you sought to make to your statement this morning. Can I do that by taking you to paragraph 14.5 of your statement of 11 February 1999. Now, Mr Smyth, in the first sentence you make the point that "Walkers failed to appreciate the urgency of the situation and the need to update previous technical work"; do you see that? A. Yes. Q. Concentrating on the second limb to that first sentence. You say there was a failure by Walkers to appreciate the need to update previous technical work; that is your point in part, isn't it? A. Yes. I have described that in paragraphs section 7 onwards. Q. Now, what you then seek to do in that sentence is gain support for that criticism by going to a Walker Lester Firth file note of 25 February 1994 and seeking to characterise that file note as being consistent with your criticism that there was a need to update previous technical work; that is what you are seeking to do in paragraph 14.5, isn't 2? A. In part I would say yes. Q. The change that you sought to make today included the insertion of the word "alternatively" to the quote that you extracted from the Walker's Lester Firth minute of meeting which you sought to rely upon to establish, that there was an acknowledged need to update the previous technical work; that's right, isn't it? A. Yes, it can be interpreted that way. Q. See, I put it to you that it was intellectually dishonest in the extreme for you to have left out the word "alternatively" from the Walker Lester Firth memorandum, because by leaving out the word "alternatively" it gives a totally different and wrong complexion to what was actually resolved at the meeting on 25 February 1994; now that's right, isn't it? A. No, I don't agree totally. I would put it down to carelessness on my part, because in my September statement I was much closer to being right. In this one I put it down to carelessness, but there was nothing actually resolved at that discussion; it merely noted that there were matters that needed to be done, and outstanding matters between GHD and Hogarth that had to be resolved. It wasn't - I was, I think my point principally was that although it had been discussed at that stage nothing had been done. Q. Your point included the proposition that Walkers and Lester Firth acknowledged in writing the need to commission others to prepare submissions. That was your point in part was it not? A. In part that was the point. Q. But you agree with me now, don't you, that the use of the word "alternatively" contained in the memorandum makes it clear beyond doubt that those at the meeting did not feel there was a need to commission others if the GHD report was in fact available. That is right is it not? A. Well in part it's right, because if you look at paragraph 2 of that note at annexure K, it makes it quite clear that they were to meet to define the scope and scale of the commission, and need to be in an EIS form. It addresses all of the political concerns and issues that have been raised by their opponents. Also need to encompass the positive material that has been prepared by GH & D. If I look at the whole of that document, I'm happier about my interpretation, although I admit that I was careless in leaving out the word "alternatively". Q. Let's look at annexure L, your entry for 25 February 1994. The carelessness that you have spoken of pervades your observation there in the same manner doesn't it? A. Yes. Q. You see, I suggest to you with the greatest respect that it wasn't carelessness, it was intellectual dishonesty? A. I don't agree. Q. Do you agree with the proposition that had you not been taken to the omission of the word "alternatively" in cross -examination, the impression you would have conveyed to his Honour by the paragraph 14.5, and by the entry on annexure L, would have been a misrepresentation in relation to a critical aspect of the plaintiffs' case? A. In part I would have to agree with you. [T1146-1148] 1133 Mr Smyth then gave the following evidence in relation to his paragraph 14.6 of his statement of 11 February 1999: HIS HONOUR: Q. Why did you not refer to the meeting of 29 April 1994 before this morning? A. At this point I was referring to the history and strategy. If you look at the documents your Honour you will see that that was the - they weren't able to discuss history and strategy until they'd done the basic homework that was set in the meeting of 29 April. I readily concede there was a meeting then, it's actually in my list, but the agenda for that meeting, or the matters discussed at that meeting related to people gathering information and the political situation, it wasn't about background, and it wasn't about the road (sic) the Inquiry will be approached. Q. Isn't the last sentence of paragraph 14.5 incorrect when you bear in mind that at the 29 April meeting, tasks were allocated? A. Sorry? Q. The last sentence of paragraph 14.5, at the top of page 9, do you see it says: "Indeed nothing appears to have been done to prepare for the inquiry in the months of February March and April 1994"? A. That would be, apart from 29 April that would be incorrect, yes. Q. It's incorrect because it doesn't refer to 29 April 1994? A. Yes your Honour. Q. Why didn't you refer to 29 April 1994 when drawing that sentence? A. I based it merely on the - that sentence on the accounts that LFA sent to Walkers. And there was very little money spent or charged in those months towards the Inquiry. And there were discussions, I accept that, but in terms of what I'd call solid preparation, basically there was nothing done on those months. Q. Mr Ellicott asked you on Friday I think whether it was correct to say - I'll read his question: "Subject to corrections that have been made, and you know some omissions or some paragraphs have been deleted, but subject to that, do you swear that the contents of those statements are true and correct, either as to facts where they are facts, or as to opinions where you are expressing an opinion as they represent your opinion?" You said "Yes". And he pointed out that when he used the word "swear", he should have said "do you affirm" and you said "Yes". How did you come to be able to do that when there were these corrections which you today have identified are required to be made? A. I think at the time that he asked me the question I thought I was right. I had been asked to do a corrigenda to the statement prior to the case, but I was diverted by a subpoena that was issued by the other side to produce all my draft reports and everything, so I didn't get a chance to do it but at the time I believe I was right - I thought I was right. [T1150-1152] 1134 Mr Smyth gave evidence that he was not an expert on water quality issues [T1168] and in relation to the appropriateness or otherwise of the stormwater management strategies included in the 1992 GHD application, he would have to defer to Mr Rowbottom [T1168]. Further, Mr Smyth gave evidence that he had no expertise of detail in the area of flora and fauna on LCE [T1231]; that he had no expertise in matters archaeological [T1231]; and that while he had some experience in dealing with bush fire planning, he did not have any qualifications in relation to bush fire strategies and fire management guidelines [T1235]. 1135 Mr Smyth gave evidence at T1247 that in comparing the LCE proposal with the Shell Cove development, "the proposition that I have was that the preparation for Helensburgh is inadequate and the preparation for Shell Cove is adequate." 1136 Mr Smyth then gave evidence as follows: Q. Now the defendants' position in relation to that is that it borders on the absurd with the greatest respect, to compare the Shellcove project with the Helensburgh project for an enormous number of reasons, and let me take you to those reasons. The first is that the land at Shellcove was already zoned residential. That is so isn't it? A. To my knowledge, yes. Q. Whereas the whole question at Helensburgh was whether there should be a change of zoning to residential, wasn't it? A. That's correct. Q. The second point of distinction is that at Shellcove the development that was proposed was for some three thousand two hundred residential lots. Is that as you understand it? A. Yes, that's in paragraph 3 of my statement. Q. And it was for the establishment, this is Shellcove, of a three hundred and fifty wetberth commercial marina; agree? A. I know it was for the establishment of a marina. That was designated development. I wasn't aware of the number of berths, but I have noted that in paragraph 3 of my statement. Q. And Shellcove required the construction of a 22 hectare boat harbour, including the creation of breakwaters and groins. That is as you understood it? A. No, but I'm not going to dispute it with you. Q. Another feature of Shellcove was that commercial and recreational facilities were going to be constructed within an existing wetland area. Did you understand that to be the case? A. I understood that, yes. Q. Did you understand that in addition there was going to be an 18 hole golf course built at Shellcove? A. I won't dispute that. I don't have any reason to disagree. I'm not sure myself. Q. Now the development of the boat harbour marina constituted what is known as designated development for the purposes of the Environmental Planning and Assessment Act. That is right isn't it? A. Yes that's correct. Q. Because it was designated development, a process known as an environmental impact statement needed to be prepared by Lester Firth Associates as part of the planning approval process; correct? A. That's correct, yes. Q. Fundamentally different from what was required for the Commission of Inquiry in relation to Helensburgh. You agree? A. A different project altogether, that's correct. [T1247-8] 1137 Mr Smyth agreed that an environmental impact statement when triggered by designated development brings into place an entirely different legal regime to that triggered by the Helensburgh Commission of Inquiry process, and that in the environmental impact statement process the Director of the Department of Planning sets out specific requirements that need to be addressed by the nominated developer. When it was put to Mr Smyth that in the Shellcove environmental impact statement the Director required studies to be prepared in relation to topics that required some twenty consultants to address topics, Mr Smyth gave evidence that the Director specified matters to be addressed, however, he noted that how those matters are addressed and to what extent they are addressed, is left to the applicant [T1249]. 1138 Mr Smyth then gave evidence as follows: Q. You have not paid sufficient regard, I suggest to you, to the difference in scale of the various projects; do you agree with that? A. If I excluded the residential development from Shell Cove then I believe that the projects are approximately the same, it would be approximately the same scale, but one is comparing chalk and cheese: but in my judgment I would say they are approximately the same scale but totally different types of projects. [T1252] Q. Would you agree with me that the Helensburgh terms of reference were formally advertised one month prior to the commencement date of the Helensburgh Commission of Inquiry, where as the Department of Planning director's requirements were formulated some eighteen months prior to the commencement of the Shell Cove Commission of Inquiry? A. I think, as it turned out, the terms of reference of the Inquiry were advertised approximately six weeks before the Inquiry started; I previously interpreted it as a month, but it was six weeks, I think, and the timing of the director's requirements, I have got no argument about that, approximately eighteen months is correct. [T1253] 1139 In relation to his allegation that Walkers failed to carry out testing to prove water quality prior to the Commission of Inquiry, Mr Smyth gave the following evidence: Q. You say that Walkers failed to carry out a practical experiment to prove the water quality controls, and you say that Walkers should have known that a practical experiment was necessary because of concerns expressed by a Mr Yassini which concerns were repeated in the memo of 16 May 1994; is that an adequate summary at this point? A. That is a reasonable summary. Q. Now, what I suggest to you, Mr Smyth, is that it was simply not possible for Walkers to carry out and have before the Commission of Inquiry a practical experiment that proved the water quality controls would work in the Lady Carrington Estate in the particular method proposed by GH & D; do you understand the proposition I am putting to you? A. Yes. I don't - I have indicated that - my criticism is that [they] didn't attempt to do anything; [they] didn't attempt to design a trial, get an approval or anything like that. It wasn't that they did not have the results. I mean to have the results the Commission would have needed to have adjourned, but to convince the Commission to adjourn you needed to have a trial session in place or, alternatively, be attempting to get one, without doing the necessary preliminary, the design and so forth. I think that is my point. I saw it - I think I have said in my statement - as a special initiative to assist the case that would have been probably a more profitable one than attempting to do something with the trial….. His Honour: Q. Well while I understand there are very different ramifications for what didn't occur, namely an adjournment while water testing trials proceeded on the one hand, and what did occur, namely recommendations and then a suggestion of the future depending as further tests might take place, the reality, is it the case that in your opinion there is really a fairly narrow difference between the two ways of approaching the whole thing by the Commissioner? A. (No answer) Q. The end result would be the same if there were testing one day? A. Probably if - if there was testing one day, or if there was testing, it would or could then be shown to work. I mean, and everybody could see it. The results would be there. It wouldn't be just technical argument, it may have been possible to run technical arguments, but my preferred approach would have been a trial. Q. Well with an election coming up, a decision to simply adjourn for who knows how long, would have what sort of possibilities before such a Commissioner in your opinion? A. Neutral. I don't think the Commissioners have much regard to elections or politics from that point of view. Q. But in your view, would such an adjournment have been required for months or years in order to get water testing? A. Couple of years probably. Depending on when it started. Q. How many inquiries have you known which have adjourned for two years to permit further evidence? A. There's only one that I know of that's been adjourned for a couple of years waiting for some test results to be done on some wetlands. Or some test results to come from back from work along the wetland on the North Coast. Q. Well then, presumably that is a fairly rare thing for a thing to occur where inquiries in evidence is produced, and a Commissioner is expected to hand down some form of recommendations rather than simply adjourning? A. Well I think the Commissioner actually adjourned this inquiry quite often. Q. Yes, but not for two years? A. No, that would be right… [T1243-4] 1140 Mr Smyth then gave evidence as follows: "Q. You're aware that Dr Joliffe has said that once the water quality ponds are constructed, then there is a period of three to five years that he would recommend as being necessary to monitor and assess the outcome; are you aware of that? A. It could well be his opinion, yes. Q. You see, I suggest to you that it is quite absurd, with the greatest respect, to suggest that such a study could have been carried out prior to the Commission of Inquiry, or that the Commissioner would have adjourned for a period of not less than three years pending the result of testing studies; what do you say as to that? A. For a start I have suggested that the trial should have been established. I have suggested it should have been in the Camp Creek catchment where council I'm aware has or had at that stage pollution records - monitoring records of 1990 and other monitoring records. So there was some basis upon which a trial could have been established further to this. That if the monitoring had been commenced at the time, I'm suggesting the trial planning should have started, it would have probably had six months at least as well as the other readings available before the ponds were built. And you could still maintain the monitoring above the ponds right through the period when you're also testing what was coming from the ponds. So you could actually progress if the test came from the ponds. It was my understanding that in other material that I've looked at that the testing period needed to be two to three years. Q. Finally, in order for a water quality testing pond of the type that you're referring to, in order for that to be built, that required the development consent of the Wollongong City Council did it not? A. Yes, I've said that in my statement. Q. And the likelihood of the Wollongong City Council granting development consent in 1993 or 1994 for the construction of a pond in the Camp Creek area was as close to zero as not to be worth cavilling about; don't you agree? A. No I don't agree, and I will tell you why I don't agree, and that's in the 16 May 1994 report that you referred me to, and I refer to page 7 of that report in the top three paragraphs. In my view council - the officers would have recommended to council that the test should go ahead. [T1246-7] 1141 Mr Smyth was cross-examined in relation to various sections of the Commissioner's report and whether the report actually represented a 'win' for the joint venture case. 1142 He gave evidence that the Commissioner's report represented a draw between the joint venture and Council's interests as it maintained the status quo rather than sanction Council's proposal to rezone substantial LCE lands to Environmental Protection[T1257]. 1143 Further, Mr Smyth gave the following evidence in relation to the effect of the Commissioner's approval of the LCE trade-off offer to transfer certain land to the NPWS: Q. More than that, it's just not a matter of publicising it, the Commission, I suggest to you, gave credibility and validity to the Lady Carrington Estate proposal in relation to land trade-off with the National Parks and Wildlife Service? A. I'm sorry, that had been given by the Service to council in probably 1990/91 perhaps. Probably even before then. When it was being initially discussed there was an official Service acceptance. I think I quoted Mr Garooly, his letter to, as I recall, the council, and the Department setting out the Service's view. And the Service's view essentially was that it's better to trade-off now, if we're looking towards a longer term development. And that was made officialese. So I don't see any great benefit that the Commissioner thought it was a good idea, it was already on the table. [T1259] 1144 As to the Commissioner's Finding in Relation to Community Facilities, Mr Smyth gave evidence as follows: Q. Now page 9, the top point, I would like you to assume that the Commissioner recommended that community facilities could be improved as a result of additional development around Helensburgh. Now you would agree that if that was the Commissioner's opinion, that represented an advancement of the joint venture position? A. I think it was probably a finding of the Commissioner rather than necessary recommendation as you suggest, and certainly I think that that would have been a recognised factor fact to anyone. Everybody would have gone into the Commission with that realisation. Q. Whether or not everyone would have done that, it was a favorable finding that was obtained from the Commission was it not? A. Yes, I don't have any argument about finding that. [T1262] 1145 Mr Smyth gave the following evidence in relation to the Commissioner's assessment of land capability: Q. Let's look at the next point: "The Commissioner assess land within the Lady Carrington Estate to have potential urban capability subject to further studies". You see that? A. Yes. Q. I would like you to assume that that is an accurate summary of one of the findings of the Commissioner. Now on that assumption, you would accept that was an extraordinarily favorable finding and assessment reached by the Commissioner, wouldn't you? A. I couldn't have described it as extraordinarily, anything like that. It's been my view for many years that the land had urban capability, and I would have been surprised and disappointed if the Commissioner hadn't included that in his findings. [T1262] 1146 Further, Mr Smyth gave evidence as follows in relation to the Commissioner's findings with respect to the proposed GHD stormwater management plan: Q. The final point, you will see the fourth dot point on page 9, the Commissioner noted that the urban stormwater runoff controls that had been proposed by Lady Carrington Estates were potentially amongst the highest level of treatment in Australia. I would like you to assume that that is an accurate summary of one of the findings of the Commissioner. Now that advanced the position of the joint venturers, did it not, insofar as it was a recognition by the Commissioner of a strategy that it was putting forward to deal with urban stormwater runoff? A. I would accept that that could well have been the finding of the Commissioner, I wouldn't argue with that, but what I would say is that the Commissioner went on to recommend that they should be trialed and proven. [T1263] 1147 As to his evidence in chief that Walkers failed to test water quality after the Commission of Inquiry and failed to lodge a rezoning request, Mr Smyth conceded in cross-examination that he would have to defer to Mr Rowbottom in relation to the time required to assemble appropriate water quality tests following the Commission of Inquiry [T1263]. Further, Mr Smyth conceded that there is no legal capacity pursuant to the EPA Act, or any other legislation, for a land owner to require a consent authority such as Council to assess and determine a rezoning application [T1263]. 1148 Mr Smyth then gave the following evidence in relation to Mr Whitehouse then of Dunhill Madden Butler, from whom Walkers and LCE sought advice as to the next step: "I first met [Mr Whitehouse] when he was adviser to Mr Paul Landa. He became a division head and a deputy-director in my department. He went on to become director general of National Parks & Wildlife Service. From there he went on to be a partner at Dunhills and then moved to Minter Ellison. He was one of the authors of the Environmental Planning Heritage Act – Environmental Planning Assessment Act. Q. He is now with Minter Ellison, as far as you know? A. He is a senior partner there. [T1265] 1149 Mr Smyth was then asked the following questions: Q. But you certainly wouldn't cavil with the proposition that the joint venturers were entitled, in January, February - February, March of 1995 to expect that Mr Whitehouse would give to them appropriate legal advice to resolve the position in which they found themselves? A. I think his advice could be described as both legal and strategic advice, tactical advice perhaps. Q. But you would agree with me that the joint venturers could not be criticised for seeking the advice of Mr Whitehouse in January, February, March of 1995 because Mr Whitehouse was a person with the appropriate experience and legal training to be able to provide advice to the joint venturers in relation to the position which they found themselves at that time? A. Very much so. [T1268] HIS HONOUR: Q. Presumably if you put yourself into the joint venture and Mr Hogarth's company's interests, once the Commission of Inquiry recommendations had come down, if you approach a person such as Mr Whitehouse seeking to find out, upon the assumption that you are not going to have a rezoning shortly at all, and that you have to maximise your - you have to alter your position radically by endeavouring to obtain as much money as you can for most of the land, there are a limited number of tactics and options which such an advisor could put forward; would you agree with that? A. Once you made the decision that you were going to maximise the money side of it, I would agree with it then your Honour; but in terms of the doors it opens on the basis of the Commissioner's recommendations, I wouldn't, but if it is going down the track of maximising the money, then I have no difficulty with this if that is what Mr Whitehouse's brief will be. Q. That opens two separate windows. One is the Commissioner's recommendations. What if one was to ask an expert, such as Mr Whitehouse or yourself, what are the possible options open to further the joint venture's interests, bearing in mind the recommendations, are you able to identify what they are, are they three, five or ten and do they involve, for example, finding funding for water studies? A. One of them certainly would. That would be normal with a development, that studies that were needed were funded by the developer. Q. Mr Leggat put to you yesterday that you would not get consent from a council being able to install these water ponds and/or testing devices, that first port of call against a council that is adamantly opposed to what you are after appeared, as I understood his question, to require council consent? A. Yes, your Honour, but I really, I am not being disrespectful, but I started to answer the question and we adjourned for lunch. You might recall that I referred to a paragraph in the report of May on page 7, as I recall. There were three paragraphs there. I said that those were critical to understanding the issue that council was concerned about, and council was concerned that the particular topographic ground, other conditions of Helensburgh, were unique and therefore I think the words "the difference between theory and practice is pretty narrow", and they really wanted to - one could produce all the theory one wanted, but the council wanted a practical example to be satisfied with; and that was subsequently confirmed, by my recollection, in Mr Robertson's final submission where he indicated that council would support. It is my belief that if the applicants had come up with a proposal to, in future, site testing ponds in the Campbells Valley, where they had been looking at upon for a number of years before the inquiry, anyway and they come up with that as a proving mechanism, I believe that the council DPA and everybody would have supported it, provided it was done properly. Q. That assumes, does it not, that A) funding is obtained and B) the tests take place and C) there is some form of adjunct to the Commission of Inquiry where the Commissioner is later satisfied with those tests, and D) the council, in receipt of that material, takes a positive attitude and/or E) the then Labor government - and this may be years later by the time that this all occurs - alters its prestated view, that is Mr Carr's prestated view, all those types of hurdles seem to be implicit in this approach which I gather, from what you are saying, is the 180 degree opposite approach to immediately trying to realise the best value potential of the land? A. Yes, your Honour. It is normal for a developer to do the necessary studies, trials and whatever and fund them. Then with a potential, I was told the other day, of something in the order of $100 million profit from this, the million dollars to, or whatever it cost, quarter of a million dollars or whatever it was, to do some water testing at the end of the day, I mean everybody was very confident it was going to work, all the consultants were going to say "yes, this will work", all they had to do was prove it, and that is one of my concerns, that the enquiries that council, and particularly as published in the report, if I recollect it may have been in a report in April '93 as well, was that council were not satisfied about, or council were concerned that the water quality testing or water quality argument had not been proven. Q. If you have a joint venture group with unlimited funds, unlimited time, no anxiety about haste, and quite content to have no development while every possible effort is taken to further in whatever ways possible the possibility of achieving a rezoning after the Commission of Inquiry then you have one type of set of parameters to look at; but, if, on the other hand, you have a joint venture group or vehicle who are determined, because they are constrained by time and by financial considerations, and perhaps even by disagreement within their ranks, to realise as quickly as possible the properties obtaining as much as possible in terms of acquisition resumption resale, then Mr Whitehouse appears to have given certain types of advice; would you agree? A. Yes. I don't agree with advice, but I agree with that….. HIS HONOUR: Q. This is the land on the north you are referring to? A. The land to the north of the property I am referring to, and in the end we arranged for them to resume it so that it was a nominal dollar transfer fee, and it got around the treasury problems of wanting full recompense, and that's how that was transferred to National Parks, probably about 1987. Q. In any event, you accepted yesterday that Mr Whitehouse had qualifications of the type Mr Leggat put to you in that there was no problem, you saw, with those who would wish to optimise the possibility of best realisation of the property in the environment which operated? A. Yes. [T1299-1302] 1150 Whilst not all of Mr Smyth's views are to be accepted as soundly based, his experience, it seems to me, suggests that his evidence as to what could be expected to have been achieved by a professional and competent developer generally rang true. I do not accept the submission that Mr Smyth has been shown to be so partisan to the plaintiffs' side of the record as to require that little or no weight be given to his opinions. His opinions are however assessed against all of the evidence in the findings which follow later in the Judgment. As noted below I find it unnecessary to place and do not place any probative value on Mr Smyth's evidence as to the size of political donations being taken into account or influencing ministers in exercising their relevant statutory discretions. Mr Ian Rowbottom 1151 Evidence was given by Mr Rowbottom for the plaintiffs. In addition to oral evidence, his reports dated 27 May 1999, 25 June 1999, 17 September 1999 and 8 October 1999 were read in court. 1152 Mr Rowbottom is and has been since 1998, Manager of the Kinhill Pty Limited NSW Environment, Planning and Economic Studies group. The group is responsible for various aspects associated with environmental projects including studies in environmental economics, planning, site contamination, environmental impact statements and reviews of environmental effects. 1153 His extensive curriculum vitae details fifteen years experience as a civil engineer and project manager with specialist expertise in the environmental and engineering aspects of civil design, urban stormwater management, water quality assessment, catchment and floodplain management and hydrology. 1154 Mr Rowbottom completed a Bachelor of Engineering (Civil) at the University of New South Wales in 1982 and a Master of Engineering Science (Hydrology) at the University of New South Wales in 1988. 1155 Mr Rowbottom has worked for the Department of Water Resources, River Murray Commission and the University of New South Wales (Project Engineer on the 1987 revision of Australian Rainfall and Runoff). 1156 From 1995 to February 1998 Mr Rowbottom was in the employ of Patterson Britton and Partners Pty Ltd during which time he was Senior Associate responsible for hydrology, urban stormwater management, catchment management and water quality assessment projects. Projects have included the detailed design and documentation of a 1.5 hectare constructed wetland for the Highland County residential development at Newcastle; development of a strategic water quality management plan for Drummoyne Council; and water cycle management, land capability and infrastructure study at Jervis Bay for Shoalhaven City Council. 1157 Previously, from 1991 to 1994, Mr Rowbottom was Manager, Civil and Water Engineering at Kinhill Engineers Pty Ltd. In that position he was responsible for business development and technical supervision for projects in the areas of urban drainage, rural flooding and floodplain management. 1158 Mr Rowbottom deposed that his report dated 27 May 1999 is intended to address the following specific questions: 2. As at 10 February 1994 (the date the Helensburgh Commission of Inquiry ("Inquiry") was announced) would adequately funded developers competently advised have recognised that the issue of stormwater quality control, and potential impacts on receiving waters, was a consideration that would need to be addressed for the proposed rezoning of the Lady Carrington Estate? 3. If so, as at 10 February 1994, what steps was it reasonable for adequately funded developers seeking re-zoning of that land to take in preparation for the hearings to be conducted by the Inquiry in June 1994? 4. Having regard to the Commissioner's Report published on 18 December 1994 ("Commissioner's Report"), what would have been entailed (both in terms of physical operating structures and systems and in terms of expenditure) for adequately funded developers seeking re-zoning of the Lady Carrington Estate in 1995 to undertake (if necessary, entirely at their own expense) with respect to trials of the settling pond technology (referred to in the Commissioner's Report) to establish the probable efficacy of that technology in maintaining receiving water quality if the Lady Carrington Estate was to be developed for low or medium density residential use? 5. What were the probable results of any such trials? 6. Whether as at: (a) October 1994 (b) June 1995 it is more probable than not that Mr Lang Walker and/or Walker Corporation Limited and/or Walker Consolidated Investments Pty Limited and/or Walker Civil Engineering Pty Ltd (collectively "Walkers") (had it acted with proper skill and care in the interests of the joint venture since either November 1993 and/or 6 April 1994) could have satisfied the Inquiry and the Wollongong City Council ("WCC") respectively that such technology (when properly designed, constructed and maintained), would have been effective to maintain receiving water quality if the Lady Carrington Estate were to be developed for low to medium density residential use? 1159 Mr Rowbottom gave his opinion in that report as follows: 7. In my opinion, as at 10 February 1994, adequately funded developers competently advised would have recognised that the issue of stormwater quality control and potential impacts on receiving waters was a consideration that would need to be addressed for the proposed re-zoning of Lady Carrington Estate for low and medium density residential developments (Appendix A). 1160 I note that in Appendix A, Mr Rowbottom outlines the 'Relevant Regulatory Regime' of the land subject to the Inquiry. Therein, he emphasises that the Class P classification of the Hacking River and the provisions of Wollongong Local Environment Plan 1990 pertaining to stormwater discharge [clauses 16(1) and 30] draw attention to the issue of water quality as a relevant concern. 1161 In opening the plaintiffs' case, Mr Ellicott QC outlined the evidence to be given by Mr Rowbottom. He stated that 'the thrust of the [evidence] is that there was available material and expertise which could have put an effective case to the Commission which laid the basis of satisfying the Commission that this issue could be satisfactorily dealt with'. He conceded that it was a difficult issue, however, he noted for example, Mr Rowbottom's criticisms of Walkers for 'not having at least conceived and started tests in relation to settling ponds'. Mr Ellicott stated that while Mr Rowbottom agreed that test results may not have been finalised for up to three years, what was needed, in effect, was to 'have the Commission going with you, not as it turned out ending up with not knowing what the answer was necessarily going to be, but saying in effect if that could be overcome then this land could be suitable.' [T191-2]. 1162 During cross-examination Mr Rowbottom agreed that he was engaged as an expert witness not to design an alternative stormwater management strategy, but to comment on the adequacy of the strategy proposed to the Commission of Inquiry on behalf of the joint venture [T903; 955]. Mr Rowbottom gave evidence, however, that had he been engaged to do so, he could have developed an alternative strategy and lot layout for the LCE [T904]. 1163 In paragraph 8 of his 27 May 1999 statement, Mr Rowbottom deposed that in his opinion, as at 10 February 1994, adequately funded developers seeking rezoning of land before a Commission of Inquiry convened to inquire into that zoning, should have immediately retained a recognised firm of engineers or other suitable experts to prepare a comprehensive report, which reflected most recent knowledge in the field, to be submitted as evidence to the Commission of Inquiry. Such knowledge would include both academic writing and practical application of wetland technology. Such a report, properly researched, would take some time to prepare - it could not be thoroughly researched and prepared within a few weeks. On the evidence of Mr Rowbottom, the material originally relied upon by Walkers at the Commission of Inquiry (June 1994 submission) did not satisfy this requirement. 1164 Mr Rowbottom, in Appendix D to his statement, outlined those elements that ought to have been included as at June 1994 for a water sensitive design based on best management practice. They were as follows: D1. Based on information in the documents in Appendix B Best Management Practice (BMP) for water sensitive design (as at July 1994) would include: · Integrated Stormwater Management System · emphasis on detention, vegetated overflow lines, sensitive location of discharge points and quality of receiving waters. · Water Sensitive Residential Development Precinct · excludes land needed for natural or modified drainage, floodplains, remnant vegetation, environmental values. · Public Open Space (POS) Network Responsive to Drainage Function · provides for inclusion and linking of stormwater management system and integration of Best Management Practices into landscaped POS. · Water Sensitive Road Layout · emphasises use of road system for stormwater management. Longer roads to be on lower gradients with verges available for swales. · Water Sensitive Cluster Development · reduced private open space to be re-allocated to greater public open space abutting clusters of housing. Increased open space allows for the accommodation of local detention basins, swales, etc. · Water Sensitive Streetscape · incorporates reduced frontages, reduced front verges, zero lot lines, local detention of stormwater in road reserve and managed landscaping. · Water Conservation · use of native vegetation to reduce need for irrigation, use of rainwater tanks. D2. These objectives would be achieved with community cooperation, including awareness of appropriate catchment management practices with regard to disposal of paints and oils, car washing, lawn and garden management, use of herbicides, pesticides and fertilisers and reporting of illegal disposal of trade wastes such as motor vehicle oil. D3. An assessment of stormwater BMPs and their technology (Urbonas, 1994), presented at the 6th International Conference on Urban Storm Drainage, held in Niagara Falls, September 1993, acknowledges the importance of community participation in achieving Best Management Practice. Urbonas presents a structural/non-structural urban stormwater management dichotomy, where non-structural BMPs 'include a variety of institutional and educational practices'. Structural BMPs are described in this paper as a backup to the 'good housekeeping measures practised within any community'. D4. As stated by Urbonas 'stormwater runoff quality enhancement begins with the avoidance and prevention of pollutant deposition into the urban landscape'. This paper includes an assessment of BMP effectiveness and concludes that although all BMPs, when properly designed for local soil, groundwater, climate and site geology, will remove pollutants from stormwater, 'all could benefit from well conceived prolonged (at least 5 years) field studies'. D5. Wheelans June 1994 report (Appendix B) recognises a progressive shift in stormwater management towards water quality and the protection of receiving environments. 'This shift in focus has meant that traditional stormwater conveyance and end of pipe water quality solutions have been questioned. In their place has been the development of the concept of storage oriented systems and Best Management Practices, which can be determined on the basis of catchment and site specific requirements.' D6. These guidelines provide detailed schedules of best planning practices and best management trees, an index to assist the designers in the selection of particular BMPs to meet water sensitive objectives. D7. Wheelans observes that combining BMPs to form a 'treatment train' will 'improve and better guarantee performance or overcome site factors that limit the effectiveness of a single measure.' 1165 In Appendix E to his statement, Mr Rowbottom examined in detail the adequacy of the material presented to the Commission of Inquiry. To this end, he first detailed the 1992 GHD rezoning application. He noted that the strategy goal of the application was of "no net increase" in pollutant export above that which existed at the time. The assumption in this, he states, is that if the proposed development did not increase the existing pollutant export, then development ought not be opposed on water pollution grounds. 1166 Mr Rowbottom then lists the potential stormwater treatment measures reviewed in the 1992 GHD application. These included: · land use controls; · erosion and sedimentation controls both during construction and for continued site maintenance; · management controls such as street cleaning, litter control and resident education; · soft engineering/urban design controls including vegetated buffer strips, drainage control and porous pavement; and · engineering or structural controls including trash racks, sedimentation basins and wetlands; · stormwater tanks to reduce volume of runoff. 1167 He notes that the report then goes on to state: "While each of these measures make a positive contribution to the control of the quality of urban runoff, it is the sedimentation basins and wetlands which will provide the greatest amelioration of water quality impacts for the Lady Carrington Estate, given the site specific characteristics which exist. The sedimentation basins are designed to reduce the velocity of inflowing stormwater, providing the opportunity for particulates and suspended matter to settle to the bottom. Since many of the pollutants are attached to particulate matter, they, too will settle to the bottom and are removed from the water column." 1168 Mr Rowbottom concludes that although the GHD report made reference to the use of source control and water sensitive design, the adopted management strategy was clearly reliant on "end of pipe" solutions (constructed wetlands), which on their own would be unlikely to achieve the adopted water quality objective, unless it can be argued that the site already had a relatively high pollutant export as a result of the rural activities on site, such as the equestrian centre. 1169 In relation to the initial presentation to the Commission of Inquiry, Mr Rowbottom made the following comment and criticism: E7. Good practice in planning and development matters required a proponent seeking rezoning of land and relying upon technical evidence to deal with a technical issue relevant to the proposal, to present to the Inquiry established to consider the rezoning proposal a technical report on that issue which reflected current good practice or current learning on the subject to which the report relates. E8. The strategy [of the initial submission made to the Inquiry on behalf of the Joint Venture] was not based on the current Best Management Practice at the time (1994). E9. The following extract is taken from the Executive Summary of the Supplementary Stormwater Report prepared by GHD. "The report was prompted by changes in engineering practices, knowledge and community expectations regarding stormwater quality that have occurred since a rezoning application was originally prepared for the Lady Carrington Estate in 1992" (Walker, 1994a). E.10 Many of these changes occurred before the initial submission to the Inquiry and should therefore have been addressed prior to the Inquiry. The initial rezoning application was prepared in 1992 and it appears that very little, if any, subsequent work was done to update the proposed strategy in line with current practice prior to the Inquiry. This appears to have occurred only after the 1992 strategy was criticised by other parties at the Inquiry. [Statement 27 May 1999 - emphasis added] 1170 Mr Rowbottom then examined the requirements of a 'good stormwater management strategy for LCE in 1994'. 1171 He noted that the 'use of constructed wetlands for the treatment of urban stormwater has become increasingly acceptable since the early 1970s. This acceptance is reflected in the increased volume of literature in this field and the growing number of wetlands constructed for the treatment of stormwater throughout the Sydney region'. He says that 'it is important to note, however, that the move towards constructed wetlands does not suggest or endorse the sole use of wetlands as the only acceptable method for the treatment of urban runoff. Nor does it ignore the variability of wetland performance as a function of design, maintenance and site specific constraints and objectives.' 1172 Mr Rowbottom pointed out that in 1993, the Department of Urban Affairs and Planning released a document entitled "Better Drainage - Guidelines for the Multiple use of Drainage Systems" (DUAP, 1993). He states that the publication notes a shift towards water sensitive design and promotes multiple use drainage systems. Constructed wetlands are identified as having a drainage function. Further, he says that it is noted that there is a need to incorporate gross pollutant traps or wetland filters upstream of the water body to ensure water quality is maintained and that the report emphasises the importance of implementing integrated landscape planning strategies within the development. 1173 Mr Rowbottom says that the focus of stormwater management by 1994 (when the Inquiry was established) was exemplified by the 'Planning and Management Guidelines for Water Sensitive Urban (residential) Design Manual' prepared for the Department of Planning and Urban Development, the Water Authority of Western Australia and the Environmental Protection Authority of Western Australia. He notes that the Final Report was released in June 1994 and that it referenced the AMCORD URBAN (1989) Guidelines for Urban Housing, which contained guidelines for urban stormwater management. 1174 Mr Rowbottom then continues to examine stormwater management in 1997, having reference to various publications/reports released at that time. He notes that while certain stormwater management initiatives had not been developed at the time of the Inquiry,' in practice in 1994 the general requirements earlier outlined in his report should have been complied with in any proposal by Walkers/Lester Firth on behalf of the Joint Venture to satisfy the Commissioner's concerns about water quality and obtain from him a favourable recommendation.' 1175 Mr Rowbottom then turns to examine 'comprehensive management systems'. He notes that 'in many urban development situations it is difficult to stipulate categorically the level of detail required for the stormwater management strategy'. He says that this is particularly true with regard to appropriate water quality standards or objectives. 1176 However, he says that because of the scale of the proposed LCE development, it would have been obvious to a competent developer in 1994 that a comprehensive stormwater management strategy would be required in order to minimise downstream impacts, in terms of both the quantity and quality of stormwater runoff. He asserts that the overall objectives of such a strategy would generally be governed by consideration of: · the sensitivity of adjacent or receiving waters; · potential impacts of the proposed development; · the state of knowledge at the time (Best Management Practice). 1177 Mr Rowbottom asserts that 'although no definitive water quality objectives/standards were available in 1994 it would have been prudent for a development that discharges into a Class P waterway, upstream of a National Park, at least to adopt an objective such as "no net increase in annual pollutant export from the site". He states that achievement of this would require the implementation of a range of controls or management measures such as: · application of water sensitive urban design principles within the development · source control to reduce the volume of runoff and potential for pollutant export · use of grass swales and buffer strips adjacent to streams and waterways · trash racks and gross pollutant traps to remove litter and coarse sediment · constructed wetlands to remove sediment and nutrients · stormwater collection and reuse, and · removal/control of other potential pollutant sources associated with current use of the area. 1178 Mr Rowbottom also points to an appropriate education and/or community awareness programme to achieve the required objectives. He states that while "end of pipe" solutions such as constructed wetlands, are an important component in the overall stormwater management strategy, they ought not be relied upon. He emphasises that the cost of a comprehensive stormwater management strategy, which includes source control and water sensitive design elements, could be implemented at a similar cost to "end of pipe" solutions, which were sized to achieve the same water quality objectives. He states that in general it is more cost effective to reduce pollutants at the source than it is to remove pollutants once they enter the water cycle. 1179 Mr Rowbottom concluded Appendix E to his 27 May 1999 statement by noting that while the final stormwater management strategy is significantly better than that initially presented to the Inquiry, in its focus on "end of pipe" rather than holistic solutions, it still fell short of the "state of the art" strategies for stormwater pollution control, which would be required for a development of this scale in such a sensitive environment. 1180 During cross-examination, Mr Rowbottom agreed that in a nutshell, his evidence is that the June 1994 submission made by Lester Firth to the Commission of Inquiry gave inadequate weight to issues of water quality [T890]. [Notwithstanding this agreement, it can clearly be seen, indeed, from the very conclusions outlined in the paragraph above, that Mr Rowbottom was also critical of the 1994 GHD Supplementary Stormwater Strategy.] Further, Mr Rowbottom gave evidence at paragraph 61 of his statement of 17 September 1999 that the only real difference between the GHD 1992 and GHD 1994 strategies was the introduction of Memtec microfiltration. 1181 The evidence given by Mr Rowbottom was that the June 1994 Lester Firth submission put forward the GHD proposal for the Lady Carrington Estate, which was the original rezoning application made in 1992. Mr Rowbottom gave evidence that in his view, the GHD strategy should have taken a more holistic catchment based approach rather than focussing on end of pipe controls [T562]. According to Mr Rowbottom, while the 1992 GHD strategy was essentially the correct strategy, it required three enhancements as at June 1994. Those enhancements were said to be a more water sensitive design and lot layout; greater emphasis on pollution source control; and an element or a greater element of community education awareness [T891]. He gave evidence that had the GHD strategy had those three enhancements, then it would have been a strategy that Mr Rowbottom himself would have been comfortable in putting forward to the Commission of Inquiry [T891]. 1182 Mr Rowbottom conceded that GHD's reputation in 1992-1994 was that of a very well regarded professional body in its area of expertise [T908]. 1183 Mr Rowbottom suggested as an example of water sensitive design, grass swales should have been utilised to reduce the quantity and improve the quality of the runoff [T562; 997]. Mr Rowbottom gave evidence that this is achieved by evapotranspiration of the water by the plants growing in the grass swale together with infiltration absorption through the soil profile [T997-8]. 1184 However, at T991, Mr Rowbottom gave the following evidence: "I would agree that the current soils on that site, because of their nature, would become saturated relatively quickly, in other words, water would infiltrate, as it says here [15/129], very quickly into the top few, half a metre may be, of the soil profile. As soon as it was supersaturated a lot of the water that fell onto the surface would run off the site in the existing condition of the site." 1185 Further, at T998 Mr Rowbottom gave evidence as follows in relation to the ability of the soil to support the grass he envisaged would be necessary to for swales: Q. The absorption and the growing of grass both require soil, other than the soil that's presently found on-site. That is so, isn't it? A. I think the soil that's presently found on site could be improved by the addition of I don't know all of the things that you would add but gypsum would be one of the components that you add to improve the characteristics of the soil as a growing medium but they are certainly not ideal soils for the growing of grass." Q. You say that the soil could be improved, but the reality is I suggest to you, that in order for your planned grass swales to operate the soil must be improved? A. Yes, definitely the soil must be improved, yes." Q. Because if left as is your grass swales won't work, will they? A. As I have said before the type of soil that is out there on the site at the moment, it would be a very poor medium for growing grass…" 1186 Mr Rowbottom agreed that an integral part of his enhanced strategy was that less surfaces be covered by impervious material as pervious surfaces provide a greater degree of absorption and thus filter contaminants [T1028]. Mr Rowbottom then gave evidence as follows: Q. "There is a fundamental problem with that, isn't there, that council's requirements in relation to open space are that open space be usable in wet weather as well dry weather, or is that something you would defer to the town planner on? A. There certainly would be open space on parts of this space that were not dedicated to a drainage function, and they would be the areas that are used for almost all-weather sporting activities…" Q. "And of course another problem with your open space is the soil profile problem that we have been dealing with, isn't it? A. Yes." [T1029] 1187 Mr Rowbottom conceded during cross-examination that there are numerous problems associated with the use of grass swales, including erosional problems where topography is steep [T1008]; safety issues [T1009]; weed propagation problems [T1010]; bushfire risk [T950] and requirements of ongoing maintenance [T947]. 1188 Mr Rowbottom gave evidence that weed invasion was a legitimate concern of the Commissioner [T1017] and that one benefit of the strategy suggested by GHD was that: "the end-of-pipe controls the GHD are proposing would eliminate seeds and weeds from the stormwater drainage system." [T1011] 1189 Mr Rowbottom gave the following evidence: Q. In the course of that answer you indicated that it was necessary to have an integrated strategy in order to determine whether or not something like a grass swale should be used. That is what you said, wasn't it? A. I agree, yes." Q. Now as you sit in the witness box today it is clear beyond doubt isn't it that you have not attempted to develop an integrated strategy; that's what you said isn't it? A. That's correct." [T950] 1190 At the outset of his cross-examination, Mr Rowbottom acknowledged that the design for the Lady Carrington Estate conceptual lot layout and stormwater drainage system is not an exact science. He agreed that if one hundred hydrologists were asked to describe a conceptual lot layout and stormwater system design for Lady Carrington Estate, it is likely that there could be one hundred variations on a theme, however, he did not agree that there could be one hundred different approaches if all descriptions were developed at the same time and with the same constraints imposed [T553]. 1191 Mr Rowbottom agreed at T918 that his 'cluster' solution is 'one solution taken from a continuum of legitimate possible solutions' and that it is a solution upon which reasonable professional minds may agree to reasonably differ. 1192 Further, Mr Rowbottom conceded that his expertise does not permit him to suggest to the court what the Commissioner of Inquiry would or wouldn't have done differently in his report had the Commissioner had before him the three Rowbottom enhancements suggested to that part of the 1994 GHD strategy dealing with stormwater. 1193 However, Mr Rowbottom made the following assertion: 'I believe at one stage in my statement I do say that if GHD had done a number of things, one being rethought the strategy in light of those three different methods, the water sensitive, the source control, the education, and also argued it in another way, in other words, provided the justification for those controls, computer model results, which they did do in their final report but not in their initial report, the evidence or the material, supporting material, that you may get out of a scientific publication to show where controls have been used, how they have been used and how effective they have been, monitoring information, if it was available, whether that be directly relevant to the Lady Carrington Estates or somewhere else, they you may try and infer those results. So, if I say in my statement that if GHD had presented a strategy and argued that strategy, or presented that strategy adequately, I say in my statement I believe it is more probable than not that the Commissioner would have had a more favourable response to that strategy. [T563-4 emphasis added] 1194 As to the constraints referred to above, the evidence of Mr Rowbottom is that there are at least two types of development constraints that might be imposed in relation to the LCE. The first type of constraint relates to the physical characteristics of the LCE land, namely: soil characteristics; the existence and location of surrounding creeks; the location and quality of the Hacking River; the proximity of the Royal National Park; the presence of particular flora and fauna on site and in adjacent lands; and bushfire risks. The second type of development constraint relate to the regulatory regime pertaining to the land. At T554 Mr Rowbottom identified the relevant regulatory instruments as including the EPA Act 1979, the Illawarra REP, and any planning controls that apply to the land. 1195 In relation to the first type of constraint, and specifically in relation to flora and fauna, Mr Rowbottom conceded that he could not predict the ramifications of his suggested changes to the 1994 GHD strategy which go toward water quality, to other aspects of the 1994 GHD strategy. For example, at T559-561, Mr Rowbottom gave evidence as follows: Q. Let us cut straight to the point. You have suggested changes to the GHD strategy have you not? A. Yes Q. You do not know the ramifications of your suggested changes upon the flora and fauna constraints associate with LCE. That is correct is it not? A. I don't agree. Q. Do you say that you have assessed the ramifications from a flora and fauna perspective of your suggested changes to the GHD 1994 strategy? A. I haven't assessed them, no. … Q. Are you aware, and perhaps you're not, because it may be considered to be a flora and fauna issue, whether or not as the part of the GHD strategy put to the Commission of Inquiry it was suggested there would be corridors of natural vegetation left on the Lady Carrington Estate? ….. What I am suggesting to you is that a constraint upon where a hydrologist might want to lay out lots, or to lay out a stormwater drainage, is the need to take into account the topic of whether or not to and where to locate wildlife corridors linking nearby habitats? A. That would be a constraint you would consider, yes. Q. Now it is a constraint that you have not considered when suggesting the changes that you recommend GHD should have made to their 1994 strategy, correct? A. It's a constraint that I haven't explicitly addressed. But if I had developed a strategy, it would have been a constraint that I would have addressed. Q. Putting it another way, you don't know whether your recommended changes to the 1994 GHD strategy provide acceptable or unacceptable ramifications in respect of the issue of flora and fauna. That is true is it not? A. I haven't assessed that. I am not saying it would be one way or the other…… In terms of stormwater management - I can comment on the adequacy or otherwise of the suggested controls - but in terms of the flora and fauna impact, other than aquatic ecology, I cannot comment on it. Q. So, the answer to my question, I respectfully suggest to you, is: Yes, you don't know whether the Commissioner of Inquiry would find your stormwater changes acceptable to him dealing with the issues he has to deal with. Agreed? A. I would agree in terms of flora and fauna, yes. Q. We know, don't we, that the terms of the reference to which the Commissioner had to direct his mind included, specifically, the conservation value of the land, including flora, fauna and other matters. We know that, don't we? A. Yes, we know that. 1196 Mr Rowbottom gave similar evidence at T564 : A. ..I'm still talking specifically about stormwater. I don't know whether the Commissioner would accept the stormwater and then reject it totally on flora and fauna grounds. Q. Indeed? A. I am not trying to do that. I am specifically talking in my area of expertise about stormwater management and water quality, which was seen to be a very significant component or party of the Inquiry. Q. So, when you proffer the opinion that the Commissioner is likely to have found the GHD strategy more acceptable if it had the three components, you are referring to the stormwater component of the strategy, aren't you? A. I'm referring to the stormwater component of the strategy, which is integrally related to the development layout, so far as they are part of the one thing, but I'm still just talking about stormwater and water quality. 1197 Mr Rowbottom made similar concessions, namely, that he could not say whether his suggested enhancements to the water quality strategy would be rejected on other grounds, in relation to the other terms of reference. 1198 As to his suggestion that stormwater control devices be located within the development rather than on the perimeter, Mr Rowbottom gave evidence that he had not considered the feasibility of this suggestion in terms of geotechnical characteristics of the site [T1032]. Further, Mr Rowbottom agreed that in suggesting his elements for water sensitive design, he did not turn his mind to the issue of refuge and alternative egress arising from the location of an internal road system in light of the high fire hazard rating of the LCE land [T953]. 1199 At T919 Mr Rowbottom agreed that there is an incompatibility inherent between stormwater design objectives on the one hand and planning issues for instance, amenity and bushfire safety objectives, on the other. He agreed that for the latter requirements, he would defer to a town planner. In this regard, Mr Rowbottom gave evidence as follows: A. In relation to this dot point, and other points, I wouldn't propose to develop a stormwater management strategy solely on my own, there would be other professionals, for example, in this case a planner, who would assist me with the development of an integrated strategy that integrated both the stormwater drainage system and the development layout." Q. What other experts, if any, would you need in order to develop an appropriate strategy? A. In my experience in the past I would be working in conjunction with a planning firm who would be responsible for the actual layout of the development. They would have carriage of issues such as traffic, safety, aesthetics, and I would have carriage of the stormwater drainage issues, which would need to be compatible with both – with the other issues that the planners would be specifically addressing. Q. Why in your opinion would there need to be a compatibility between your area of expertise and your (sic) expertise possessed by others? A. Because, as I have mentioned a couple of times, water sensitive design and residential layout on the surface may appear at times to be counter opposed. A development that – an ideal development in terms of stormwater management may not work in terms of traffic flow. So it's very important that that is those other issues, such as traffic, visuals, are considered at the time when the development is being planned." [T969] 1200 Mr Rowbottom gave evidence as follows: Q. I suggest to you that part of the problem inherent in the approach that you have taken - and by that I mean simply that you have commented upon an existing approach rather than try to develop your own approach - part of the problem inherent in your approach is that you don't know all of the detail that was before the entity that produced the original proposal you, as a professional, cannot understand the types of constraints and relevant factors that they were seeking to address in their strategy. How do you respond to that? A. I don't agree with that. I believe that I can, by looking at the 1992 report that was prepared by GHD, I can comment on the adequacy of that particular strategy at either the time it was prepared, which was 1991/92, and more importantly, at the time it was presented to the Commission of Inquiry in 1994. I, in response to a question yesterday, agreed that in 1992 the strategy was, I believe, probably okay, but in 1994, because of changes in technology, expectations, and our understanding of the impact of urban development, that the strategy was no longer curren t. So I don't believe I needed to review all of the background documents in 1992, because I believe in 1992 the strategy was current, or I would have expected to have been current, but by 1994 I believe it was not current , so the more important documents to review are documents or available literature between 1992 and 1994 and not pre-1992. [T904] [emphasis added] 1201 Mr Rowbottom gave evidence that in saying that the strategy was 'not current' in 1994, he means a number of things. One is that the technology, and the solutions that were available at the time were not current. Just as important, however, is that the way the solutions were presented was not current. He used as an example the computer model, saying that the level of detail required of the computer model was considerably higher in 1994 than in 1992. Indeed, Mr Rowbottom pointed out that when GHD prepared their final submissions to the Inquiry in September 1994, a more advanced computer program was used. Also, at that time, ten years of rainfall data, as opposed to the one year used in 1992, was used to model water quality. Mr Rowbottom also pointed to changes in community expectations and/or concerns of government bodies which meant that the 1992 strategy was no longer current in 1994. 1202 It was put to Mr Rowbottom in cross-examination at T905 that the problems that were sought to have been addressed by GHD in 1992, such problems being evident from an appraisal of the background studies, were the same in 1994. At T906 Mr Rowbottom gave evidence that the problems were exactly the same in 1992, 1994 and now. However, he gave the following evidence at T905 in relation to the emphasis on certain of those problems: A. The importance of one of those [problems] was certainly changing. Faced with developing a stormwater development strategy in 1992, and prior to 1992, most engineers would have done very little in terms of water quality . The emphasis was very much on the quantity of water and flooding issues, and not the quality of water. So what was changing, and had changed over that two year period, and is continuing to change now, are our expectations about the level of detail required to address stormwater quality. So while there may have been a number of, let's say twelve, issues to be addressed in 1992, water quality may not have been seen as the most significant . Flooding was probably the most significant in terms of stormwater. But by 1994 the importance of water quality was certainly much more recognised in the engineering profession, and in the community's expectations . [emphasis added] 1203 Mr Rowbottom gave evidence that in 1994 there was a move away from end-of-pipe solutions to controls within the development aimed at minimising runoff and pollutant generation at the source. Mr Rowbottom gave evidence as follows: HIS HONOUR: Q. Do you say that there was a paradigm shift as between 1992 and 1994, in terms of a focus moving away from end-of-pipe to earlier control in your area of stormwater control expertise? A. There was some talk of it, even in 1992, but very little, but certainly between 1992 and 1994 there was a paradigm shift in the focus of the controls, where the focus moved away from end-of-pipe solutions to solutions within the development . LEGGAT:Q. Let's just deal with that on the way through since it's arisen. There has never been any suggestion that an end-of-pipe approach is not satisfactory when used as part of a treatment train type approach, has there? A. On the contrary, even with this move to source control there is still a reliance on end-of-pipe controls as part of an overall strategy. Q. Indeed, that is what I am suggesting? A. So we are not moving away from end-of-pipe and dismissing that totally and moving to source control, only adopting source control, the move has been to integrate source control into a strategy that incorporates the end-of-pipe solutions that are part of this strategy." [T981] 1204 Mr Rowbottom then gave the following evidence: HIS HONOUR: Q. And when do you say that the shift or change was crystalized, ie, do you suggest that it was something which took place over a particular period of up to twenty four months starting in 92 and finishing in 94 and if so on which dates, when exactly in your opinion did the paradigm shift start to be thought about and then ultimately be achieved prior to 1994? That's a very difficult question to answer, because it depends on how far a field you look for literature on the subject…I don't believe that by 1994 it had necessarily crystalized into a design guideline, but it was certainly being advocated within the engineering profession, and there are a lot of papers and references to use of source control, water sensitive design and a move away from traditional end-of-pipe solutions to integrated solutions….. HIS HONOUR: Q. Isn't it extremely difficult to pinpoint in terms of a temporal or time line scale exactly when what you I think said was a paradigm shift can be said to have become the norm or the accepted situation? A. It is extremely difficult to say that. I mean if we keep posing dates, and at which time something stopped being appropriate and when something else was required, there is no – there is no clear date that something came out and said that you are now required to do something different. It's not like a piece of legislation was introduced that made something not compliant that was previously compliant, it is a gradual shift…" [T982-3] I interpolate to note Dr Joliffe's evidence in relation to Mr Rowbottom's alleged change between 1992 and 1994 in the nature of a paradigm shift: Q. You agreed with me, I think, that one of the matters that you had undertaken in your statement of evidence of 23 June was to identify literature that had been published after 1994? A. I did, yes. Q. Was one of the reasons that you identified that literature an attempt to establish that some of the notions of stormwater control that Mr Rowbottom was advocating had come into the market place, so to speak, after 1994? A. Water quality was changing in the period of 1992/1994 and it is still changing, and I was seeking to identify, simply identify the literature that became available after the Commission of Inquiry." [T1907] 1205 Mr Rowbottom gave evidence that he agreed with Dr Joliffe that community environmental education and awareness cannot be relied upon to guarantee a successful outcome, but it should be a component of a stormwater management strategy. He gave evidence, however, that he hadn't put his mind to exactly who would be responsible for the education campaign, be it the body corporate or Council [T1054]. Mr Rowbottom then gave evidence as follows: Q. It (Community Education and Awareness) would need to be a component of your type of strategy wouldn't it, it would not need to be a component of GHD strategy, would it; that is so isn't it? A. I don't believe it would need to be a component of GHD strategy… [T1055] 1206 In relation to Memtec, Mr Rowbottom gave evidence that he had three criticisms in relation to the suggested use of the Memtec technology. The first was that it is an end-of-pipe control and as such, according to Mr Rowbottom, was 'just one more component of what is essentially an end-of-pipe strategy'. His second criticism was that it was unproven technology for stormwater treatment. Mr Rowbottom gave evidence that the reason such a criticism was important was that 'one of the criticisms being levelled at the 1991/1992 strategy was that the technologies that were being proposed were unproven' and in his view, adding another unproven piece of technology was thus not appropriate. Mr Rowbottom's third criticism was that it was a 'very, very sophisticated piece of technology' to be added to a stormwater system, and by analogy, it was 'like trying to crack a walnut with a sledgehammer'. Mr Rowbottom gave evidence that there are much more effective ways of cracking that walnut [T1056]. 1207 Mr Rowbottom agreed that Memtec has been applied successfully around the world, however, he noted that not one of the examples cited was for the treatment of stormwater [T1061]. 1208 Mr Rowbottom gave the following evidence in relation to weed control: Q. "Of course you would agree that if the end-of-pipe control also incorporates a MEMTEC mechanism that would be an almost perfect way of avoiding the problem of weed invasion into the National Park; that's right, isn't it? A. I would agree, because of the screening process of the MEMTEC microfiltration that would be a very effective way of taking seeds out of storm water but an equally effective way would be to remove the plant species from the development that will cause a problem…" [T1011] 1209 Mr Rowbottom gave evidence that the cost of implementing Memtec on the LCE would be approximately $6,000 per lot [T1013; 1057] and that in his view, implementing Memtec simply for the possibility of weed control was not appropriate [T1013]. [I interpolate to note that on the basis of a subdivision in the order of 803 lots, this equates to a cost of $5,618,000. I further note that subsequent evidence adduced by the plaintiffs was that the cost of implementing the Memtec facility would be $6.7 million.] 1210 Mr Rowbottom gave the following evidence in relation to the GHD conceptual lot plan [which I interpolate to note, is used by the plaintiffs to quantify damages]: "So your evidence as the plaintiffs' expert on water is that the GHD conceptual lot plan is fundamentally flawed and cannot form the basis of a reasonable development of the Lady Carrington Estate in the future; isn't it, that is your proposition in a nutshell? Yes." [T1051] 1211 At T1026 Mr Rowbottom gave the following evidence in relation to the number of lots required to be reduced so as to incorporate his water sensitive design features: HIS HONOUR: Q. Just how many lots are you able to take into account, in your view, in terms of size? Are you able to indicate that or? A. I couldn't indicate that at this stage. I don't believe it would be a significant reduction in lot numbers…. Q. What is the quantification for his Honour of the number of lots yielded by the Lady Carrington Estate, by virtue of your cluster development suggestion? A. I don't think the cluster development proposition would necessarily reduce the lots at all. Q. But you have not considered it until you have sat in the witness box here now; that is the case isn't it? A. I haven't tried to quantify that number, no. *Q. So you don't know whether it could be a reduction by 50 percent of the number of lots in the conceptual lot layout; you just don't know one way or the other? A. I haven't quantified each of the individual items, but reference material about water sensitive design indicates that developments that are water sensitive do not have to be result in a reduced lot yield,… HIS HONOUR: Q. Is there an answer to that question; you agree or disagree? A. I have not quantified the number….. I don't believe there would be a significant reduction in block size - in block numbers. Q. Do you know or don't now? A. I don't categorically know." [T1026-7] 1212 Mr Rowbottom gave the following evidence in relation to his role as an expert witness: Q. "It is accurate to say, isn't it, as you do, that what you were asked to do, and what you have done, is think of possible reasons why the submissions in relation to storm water failed to convince the Commissioner to immediately rezone the Lady Carrington Estate land in accordance with Walker's submissions? A. That's correct, yes. Q. It was a task of, I suggest to you, thinking really quite laterally as to why the known outcome, that is the Commissioner's report, why it was in that form, and then thinking laterally and then trying to work out what possible reasons might have caused him to do that? A. That was certainly what I was charged with doing." [T1062] 1213 Mr Rowbottom was then cross-examined in relation to his criticism of Walkers for failing to undertake water quality trials of the existing Chippendale estate as a means of establishing the efficacy of wetland performance in the Helensburgh area. Mr Rowbottom suggested that such monitoring would establish wetland performance in lieu of constructing trial ponds. He gave evidence as follows: Q. "It is apparent, from reading G3, that the monitoring results for that development (Chippendale Estate) only became available in September 1998, that is some four years after the Commission of Inquiry was concluded? A. That's certainly when the monitoring results were compiled and had become available, yes." [T1063] [I interpolate to note that Mr Rowbottom's G3, 'Probable Wetland Performance' records that the Chippendale Estate development commenced around June 1994 and the monitored period was from 11/8/97 to 10/12/97.] Q. So it would have been impossible to provide such results to the Commission of Inquiry in 1994 wouldn't it? Absolutely."… Q. And you are saying that therefore in your opinion it would have been impractical to conduct a trial water quality scheme prior to the enquiry. That's your opinion isn't it? A. It is certainly my opinion. It would have been impractical to conduct it prior to the inquiry once the dates of the inquiry have been set, yes." 1214 Mr Rowbottom gave evidence that he believed a trial water quality scheme would require around three years to achieve meaningful results [T1063]. He explained that those three years would include the construction and establishment period so, for example, if a trial was to be conducted from 1 January 1995, three years later the wetland would be functioning and meaningful results would have been collected [T1064]. While Mr Rowbottom agreed that there are those in the industry who are of the opinion that a five year field study is not inappropriate; he did not agree that given the proximity of the National Park, testing for any period less that five years is inconceivable [T1065]. 1215 In relation to the Commission of Inquiry outcome, Mr Rowbottom gave the following evidence at T1062: Q. "…The outcome of the Commission of inquiry. You would agree that the Commission's findings resulted in an advancement of the position of the Lady Carrington Estate's interests, insofar as there was a movement from the existing "no development permitted" status of the land, to a position where development was a distinct possibility? A. That was the conclusion, yes." 1216 As to the recommendations made by the Commissioner, Mr Rowbottom gave evidence that pursuant to these, an adequately funded developer seeking re-zoning of the LCE lands in 1994 would: (a) have monitored the existing pond and wetland constructed as part of the Landcom development in Helensburgh known as "The Chippendale Estate" to establish the efficacy of the wetland performance in the area; or (b) had it preferred to act on the Commissioner's recommendations, constructed a wetland downstream of the existing urban area at Helensburgh and monitored it for three years. A 0.5 ha wetland would cost approximately $250,000 to construct, while the monitoring program would cost about $50,000 per annum. 1217 In Mr Rowbottom's view, alternative 9(a) is both the better and cheaper alternative and would have been accepted by the Hacking River Catchment Management Committee as reliably indicative of the efficacy of a wetland system for the LCE land. Had the developer acted on alternative 9(b), however, Mr Rowbottom asserted that the preferable course would have been to construct the wetland not at the site suggested by the Commissioner in his report, but on Camp Creek, downstream of the existing Helensburgh township. He notes that in order to achieve meaningful results, a wetland would need to be constructed downstream of an existing (or developing) residential area. Mr Rowbottom's preferred site would receive runoff from part of the existing Helensburgh township, therefore 'providing a more representative result from monitoring stormwater' quality [Appendix F]. 1218 Mr Rowbottom gave evidence that the monitored results taken over a 4 month period in 1997 of the wetland constructed to control run-off from the Landcom development at Helensburgh disclose an acceptable level of pollution containment (suspended solids 72% retention of total load; total phosphorous 56% retention; total nitrogen 63%). Indeed, a recent study into the performance of the stormwater treatment measures concluded that 'the pond is an extremely effective system for the interception of stormwater pollutants, and that there are no indications of leakage of sedimented material' (Willing and Partners 1998). Mr Rowbottom expressed the view that it is to be expected that a wetland constructed for the LCE development would achieve retention rates at least as good that recorded at the Landcom site [Appendix G]. 1219 Mr Rowbottom's evidence suggested that he had taken special care to carefully examine the facts prior to expressing considered views. The findings below take his considered views into account, usually as opinions of substance. Dr Ian Joliffe 1220 Dr Joliffe's report dated 23 June 1999 reviews the report of Mr Rowbottom dated 27 May 1999. His further report of 16 September 1999 reviews the reports of Mr Rowbottom dated 25 June 1999 and Mr Smyth dated 30 June 1999. 1221 Dr Joliffe completed a Bachelor of Civil Engineering (Hons) at the University of Newcastle in 1976, later completing his PhD at the University of Newcastle in 1981. 1222 Dr Joliffe has been in the employ of Gutteridge Haskins & Davey Pty Ltd ("GHD") for over seven years. He is currently employed as Principal Water Resource Engineer. Previously (1994-98), he was Manager of the Water Resources Division and in that role he was responsible for all technical reports issued by the Water Resources group. As such, he was involved in preparing the GHD submissions to the 1994 Commission of Inquiry into the rezoning of land at Helensburgh. Before that (1992-1994) Dr Joliffe was Principal Engineer Hydraulics and Quality Modelling in the Sydney office of GHD. 1223 It is apparent from Dr Joliffe's extensive curriculum vitae that he has had abundant experience in the preparation of stormwater management plans for numerous projects in New South Wales and has also been published in relation to this topic. 1224 In cross-examination, Dr Joliffe made clear that while the GHD final report to the Commission of Inquiry submitted in September 1994 received his sanction, he was not the primary author of that report. Rather, Mr Sharpin was the primary author and Dr Joliffe reviewed the report before it was issued [T1897]. Dr Joliffe gave evidence as follows at T1898: Q. I just want to appreciate how the process between you and Mr Sharpin operated. Whether you and he discussed what the report or the content of the report might be, and he went off and wrote the report ultimately to be sanctioned by you, or whether he wrote the report in a vacuum so to speak from your input, and presented it to you as his thoughts for which he asked your sanction? A. During that project, or the investigation leading to that report, we had many conversations about the matter in the report. I think from recollection I would have seen a table of contents for it and various parts as it was developed, and then read it in its entirety at the end of the day. So there was input from me through the process, but I don't believe I ever said you shall put a particular structure to that report. 1225 Likewise, the two further reports that were prepared for the Commission of Inquiry by GHD, namely, the September 1994 "Final Report (Revised)" and the November 1994 final report, were not authored by Dr Joliffe, but were reviewed by him as they were being developed and were ultimately sanctioned by him before being issued. 1226 Dr Joliffe was not in the employ of GHD at the time the 1992 application for rezoning was prepared on behalf of Lady Carrington Estate. He joined GHD in approximately April 1992 [T1899]. 1227 In relation to the letter of engagement sent from LFA to GHD on the 28 July 1994 and signed by Mr Sharpin, Mr Joliffe was unable to categorically state whether he had had involvement in the drafting of the letter or whether he had sanctioned it before it was sent. His evidence at T1900 was that he 'would expect that [he] discussed it' with Mr Sharpin, however, he 'can't be categoric whether [he] had [seen it] or not'. 1228 Dr Joliffe gave evidence, however, that as at about the end of July 1994, he was well aware of the proposal for GHD to assist in the preparation of a submission to the Commission of Inquiry that had already commenced [T1900]. 1229 In the letter of engagement it was proposed that a supplementary submission be made to the Commission of Inquiry. The letter stated: 'This submission would include a revised stormwater management strategy report for Lady Carrington Estates. This report would reflect state-of-the-art knowledge in 1994 and update the philosophy developed in 1991/92. It is considered that a thorough and competitive report is required, within the constraints of available time, in order to address this contentious issue.' 1230 Dr Joliffe gave evidence that with the exception of replacing the word "competitive" with "comprehensive", which he believed to be the intended word, the notions that are spoken of in the sentence underlined above, are notions that he held at about the end of July 1994 with respect to the Commission of Inquiry. 1231 His evidence was as follows at T1902: Q. And may we take it that if more time was available, a more thorough report and a more comprehensive report could have been prepared? A. I don't necessarily agree with that. We prepared what I would have considered a comprehensive report, but we did it in quite a short time frame. Q. Was it a comprehensive report on your conclusion on the basis of the available time, or was it a comprehensive report regardless of any notion of time? A. Obviously if you have twelve months to prepare a report it can be more comprehensive. A. Yes? A. We didn't have that long and, therefore, there was a limit on how much you can consider in a time frame. [emphasis added] 1232 In his report of 23 June 1999, Dr Joliffe had reference to Appendix E to Mr Rowbottom's 27 May 1999 Report which detailed Mr Rowbottom's findings as to Walkers' initial stormwater strategy, and the requirements of a good stormwater strategy for the LCE lands as at 1994. 1233 Dr Joliffe noted that it appears that Mr Rowbottom, in describing the strategy of the 1992 GHD application as being one of "no net increase" in pollutant exports, adopted that as being the criteria for his comments on the water management strategy presented to the Commission of Inquiry on behalf of the joint venture. 1234 Dr Joliffe, in responding to Mr Rowbottom's criticism of the 1992 GHD strategy for relying upon "end-of-pipe" solutions, gave evidence that 'the reason that form of treatment was relied upon was because one could not guarantee that a new residential community at Helensburgh would implement all the targeted measures that one would expect from a good education program'. He notes that while acknowledging that benefits can be gained from education programs, these were taken as being 'a bonus over and above that which was predicted to occur through the proposed wetland systems'. 1235 Dr Joliffe asserts that Mr Rowbottom's criticisms of the LCE submission for failing to prepare a 'comprehensive stormwater management strategy', indicate that Mr Rowbottom has either 'ignored' or 'misunderstood' the benefits of the scheme outlined by GHD in the 1994 Supplementary Stormwater Report. Dr Joliffe expressed the view that this supplementary report provided a comprehensive stormwater management strategy. 1236 Dr Joliffe noted that the GHD Supplementary Stormwater Report consisted of the 'collection of stormwater, discharge of low flows through gross pollutant trap into wetland systems while higher flow went directly to the wetlands, the treatment of that stormwater in the wetland, discharge through microfiltration and then non potable reuse of the treated stormwater on site'. He states that that scheme was designed to minimise the amount of stormwater that could discharge off the site and also to minimise the potential for pollution off the site. 1237 His evidence was that while 'no stormwater quality criteria were available and could be determined during the Commission of Inquiry, the opponents to the development clearly wanted the highest standard of treatment suggested in the ANZECC guidelines. To that end, the GHD Supplementary Stormwater Report referred to a non-conventional stormwater scheme aimed at minimising the amount of runoff from the site'. Further, Dr Joliffe pointed out that an analysis in the GHD Supplementary Stormwater Report indicated that something like 98% of the annual average total runoff from the site would have been retained in the wetland systems, treated and reused on site. He gave evidence that in a similar manner, the pollutant export was being handled by means of the wetlands within the system, the microfiltration and the reuse of water to minimise discharge. 1238 Accordingly, Dr Joliffe concludes that the proposed scheme as detailed in the GHD Supplementary Stormwater Report went far beyond the "no net increase" criteria advocated by Mr Rowbottom. He continues that 'while it was not possible to guarantee that under no conditions would there be a discharge (either quantity and/or quality) offsite, the proposed scheme provided a scheme which was intended to provide as close as practical to nil export (water quantity or quantity loads) to the Hacking River'. He expresses the view that Mr Rowbottom seems to have ignored that in his overall premise which appears to be based on the presumption of stormwater passing through wetlands. 1239 Dr Jollife referred to the elements proposed by Mr Rowbottom as being appropriate for a stormwater system. He expresses the view that the GHD Supplementary Stormwater Report proposed scheme had 'all those elements and additional elements'. 1240 Dr Jollife noted that a number of the publications/reports to which Mr Rowbottom refers in the course of criticising the final stormwater management strategy, were not available in 1994 and therefore, specific findings could not have been incorporated into the design as detailed in 1994. 1241 Dr Joliffe referred to Mr Rowbottom's conclusion that the GHD supplementary report is an end-of-pipe solution rather than a holistic solution and that the system as proposed in 1994 did not represent state of the art strategies for stormwater pollution control at that time. Dr Joliffe asserts that the only issue that was raised by Mr Rowbottom that was not specifically incorporated within that document, was the need for community education and that as mentioned above, a decision was made not to rely upon an educational program because its benefit could not be relied upon to guarantee a successful solution. 1242 Dr Joliffe asserts that the design that was put forward in the supplementary report to provide a stormwater management system is, to his knowledge, better than any other stormwater system in Australia. 1243 Dr Joliffe gave evidence that in preparing the GHD reports to the Commission of Inquiry from September 1994 onwards, GHD did not revisit, nor was it retained to revisit, such issues as are dealt with in the 1992 application for rezoning other than water quantum and water quality [T1902-3]. 1244 Dr Joliffe gave evidence that while no objective standards for stormwater control exist, the absence of such standards does not disable formulation of effective stormwater controls. He agreed that it is not surprising that the ANZEC guidelines were relied upon as the appropriate criteria, they being more stringent than no net increase and that the position of no net increase is to be viewed in light of the existing offload. His evidence in this regard was as follows at T1910-1912: Q. One of the concerns, as you understand it, that was raised at the Commission of Inquiry was precisely what was to be the criteria against which stormwater controls were to be measured? A. Certainly that was a major issue, yes. Q. Would you agree with the proposition that no matter what the development that question poses itself at the commencement of all developments, does it not? A. It certainly would be one of the issues for consideration in any development assessment, yes. Q. In the state of New South Wales there are no, what may be described , as objective standards that are set in stone by the legislature or otherwise against which you, as a professional, are able to gauge the performance of your storm water measures on any given development, are there? A. I think that is a correct statement. I am not absolutely sure about determinations from Hacking River and what the legislative requirement is, but outside those there are guidelines but no descriptive legislative requirements, that I am aware of. Q Certainly the absence of any such objectives does not disable you from performing the tasks of appropriate storm water design and implementation of controls, does it? A. It doesn't prevent it but it makes it difficult in that you don't know what you have to achieve. ……. Q. Would you agree that generally speaking the approach that was adopted by the Lady Carrington Estate's camp was one in which the criteria or the yardstick ought to be one of no net increase in pollutants discharge from the estate? A. We considered a range of options, some of which were close to no net impact; others went beyond that. Q. When you say close to no net impact, may we take it from that that some of the measures that you considered also involved some degree of net increase? A. Yes, there was an option that did consider an increase, yes. Q. And at the other extreme of criteria there was the position that had been embraced by others who had made submissions to the Commission of Inquiry being adherence to the ANZEEC guidelines? A. There was definitely reference to meeting criteria in the ANZEEC guidelines, yes. Q. The ANZEEC guidelines are a more stringent control, insofar as their role, if they had been adopted in relation to this estate, [than] a no net increase position? A. To assess a no net increase we would have had to assess what was coming off, in terms of pollutants loads, as of 1994. Based on what we assessed from that, the ANZEEC guidelines would have been more stringent. Q. In that last answer you said "we would have had to have assessed the pollutants loads from the site". May we take it from that answer that you had not undertaken any assessment of pollutants loads from the site? A. We undertook an assessment, based on pollutants export information that we could find, and mathematical modelling of pollutant loads off the site. If one went and measured the pollutant loads and tried to measure you may not have found the same as we had predicted, but we had predicted loads to form a base on. 1245 During cross-examination Dr Joliffe gave evidence that to his knowledge, no monitoring was undertaken by Walkers before or during the Commission of Inquiry other than the test of water quality of the Hacking River in August 1994 which took between one and three days [T1924-5]. 1246 Dr Joliffe gave evidence that he understood at a point in time before the September 1994 GHD report, that the cornerstone of criticism levelled at the 1992 GHD application was that the proposed technology, namely, on-line detention basins, was untested [T1917-8]. 1247 Dr Joliffe agreed that as at the date of the Commission of Inquiry, the application of Memtec technology to stormwater treatment was untested and that such application, subject to one possible user, as to which he was quite unsure, is still not used today [T1917]. He noted that he was unsure as to how effective Memtec was in relation to Nitrogen and Phosphorous removal [T1916]. Dr Joliffe gave evidence that rezoning applications have been put forward for land generally similar to Helensburgh, however, he is not aware of Memtec being proposed for any other sites [T1918]. 1248 Dr Joliffe gave evidence that any testing is beneficial in a design [T1923] and that the measures recommended by GHD in the September 1994 submission to the Commission of Inquiry would themselves have benefited in design and in establishing standards from testing undertaken over six storm events estimated to take between 6 to 12 months [T1924]. 1249 Dr Joliffe gave evidence that in general the stormwater management controls referred to by Mr Rowbottom were known in the profession before 1994 [T1907]. He agreed that grass swales can be of benefit in improving the quality and quantity of stormwater runoff, however, they were not utilised as part of the 1992 or 1994 GHD stormwater strategy. Dr Joliffe gave evidence that provided swales are constructed in an appropriate manner, topography is not prohibitive [T1929]. Dr Joliffe conceded that the use of grass swales would have been of benefit on plateau areas [T1929]. 1250 Mr Joliffe's evidence seemed also to be soundly based. It may be thought curious, however, that Mr Joliffe was the only GHD representative called bearing in mind: (a) that he had a very limited involvement in relation to preparation of the 1994 GHD report; (b) that there was no explanation given as to why no other employee of GHD having direct hands on involvement with the 1994 report and/or who was involved in discussions at or about the time when GHD were retained, was called by the defendants. The Plaintiffs' Submissions 1251 The plaintiffs submit that had Walkers fulfilled their best endeavours obligation and thus necessarily conducted the Commission of Inquiry differently, the Commissioner's recommendations would have been different (in favour of development) and it is likely that they would have been implemented and the sought after rezoning achieved. As it were, the plaintiffs submit that 'Walker's conduct of the joint venture case was totally inadequate in every respect' [Plaintiffs' Overview Submissions paragraph 37]. 1252 The following points represent the major heads relied upon by the plaintiffs to attack Walkers' conduct in preparing and presenting the joint venture case before the Commission of Inquiry, many of which clearly overlap: 1. Preparation/Overall Approach · inappropriate 'team' · failure to appreciate the political scene and to appoint a PR/lobbyist until too late · failure to approach Council and/or use FOI to obtain relevant information · re-submission of the 1992 GHD application without updating the material as at 1994, or addressing the particular terms of reference · failure to appreciate water quality as key issue · failure to commence testing to substantiate proposed water quality controls 2. Presentation · inappropriate 'team' · unprofessional presentation · failure to appoint an advocate until it was too late; appointment of the wrong advocate · changing pond/wetland proposals · delay 1253 The plaintiffs further submit that the failure of Walkers to institute testing as recommended by the Commissioner in his December 1994 report, is in breach of their best endeavours obligation. 1254 In closing submissions addressing the overall approach to the Commission of Inquiry, the plaintiffs assert that in no way, or in no significant way, did the submission to the Commission of Inquiry purport to address, thoroughly or comprehensively, matters within the terms of the reference for the Commission of Inquiry [Submissions, paragraph 22]. 1255 The plaintiffs assert that the Walkers' effort to obtain rezoning was attended by: 1. a failure to appreciate at an early stage the critical importance of the water quality problem; 2. inordinate delay in preparing for a Commission of Inquiry leaving Walkers in a position where it was forced to rely on an outdated report that was not state-of-the-art; 3. failure to approach the preparation with the necessary sense of urgency, application of resources, commissioning of reports and a concentration on the serious and critical issues. 1256 The plaintiffs assert that what was required in order to present a thorough and comprehensive submission was a top-quality, experienced and professional team. To this end, the plaintiffs suggest that Walkers should have, from the date the Inquiry was anticipated, or at the very least announced, engaged a team of experienced experts comprising a solicitor, a planner and a public relations consultant to devise and carry into effect a multi-front strategy to achieve the re-zoning objective. 1257 The plaintiffs assert that Walkers failed with respect to each of the elements of such a team, pointing out that the initial team comprised essentially only Mr Lester. They submit that while the team was added to by the retaining of Mr Lloyd QC and Ms Twyford, this did not occur until well after the appropriate time, being after the commencement of the Commission of Inquiry. Likewise, the plaintiffs submit that experts were not engaged until well after the commencement of the Commission of Inquiry. [In any event, the plaintiffs say that despite the retaining of Mr Lloyd QC, the final submissions of Walkers to the Commission of Inquiry lacked a conclusion and gave no pointers to the Commission of Inquiry as to the appropriate manner to deal with the question of land capability.] 1258 The plaintiffs assert inter alia that Mr Lester, who was retained by Walkers to co-ordinate the preparation and presentation of the joint venture's case before the Commission of Inquiry was inexperienced, having never conducted a case before a Commission of Inquiry and having reference only to an environmental law text for guidance. 1259 The plaintiffs assert that the essence of the primary submission made to the Commission of Inquiry in June 1994 was a re-submission of the 1992 GHD application for rezoning. They submit that not only was this material not updated as at 1994, but that in no, or in no significant way, did that submission purport to address, thoroughly or comprehensively, matters within the terms of reference for the Commission of Inquiry. The plaintiffs point to Mr Lester's failure to obtain reports/information from Council in relation to the 1992 GHD application and hence to his failure to address criticism that was on the record, as indicative of this inexperience. In this regard, the plaintiffs also point to Mr Lester's failure to talk to anyone at the EPA in relation to appropriate controls/standards and his failure to commence trials/testing to indicate viability of the proposed controls. Further, the plaintiffs assert that it ought to have been clear to adequately funded developers competently advised, that water quality, particularly stormwater run-off from any development of LCE entering the Hacking River, was at all times, including in particular even before the commencement of the Commission of Inquiry, at the cornerstone of matters to be addressed by, and hence for which satisfaction was to be demonstrated to, the Commission of Inquiry. [The plaintiffs submit that Mr Lester's denials as to having knowledge that water quality was to be the key issue before the Commission of Inquiry indicate that he was either incompetent or that his denials are untruthful.] As such, it is asserted that this was a topic on which expert consultants were required. 1260 Accordingly, the plaintiffs say that Mr Lester's initial approach to the Commission of Inquiry was significantly short of what was appropriately required for any presentation to a Commission of Inquiry, let alone a presentation by adequately funded, experienced and competent developers seeking rezoning. The plaintiffs submit that in the circumstances of the Commission of Inquiry, the failure in this regard was at the extreme. They say that this initial approach set the tone for the remainder of the Commission of Inquiry and set the tone for response to all subsequent submissions to the Commission of Inquiry by Walkers, enabling those opposed to rezoning to leverage resistance to all and any attempt to alter the status quo. The plaintiffs submit that accordingly, the joint venture was forced into a reactive (or defensive) mode as opposed to a pro-active and confident mode. 1261 The plaintiffs submit that on the issue of water quality, Walkers did not engage any consultants between the date the Commission was anticipated (December 1993) and the date it was publicly announced (February 1994), or between that date and the day it commenced hearing submissions (5 July 1994). In fact, the plaintiffs point out, Walkers did not engage GHD to prepare a comprehensive and up to date report dealing with the water quality issue until 5 August 1994 - exactly one month after the Commission had commenced hearing submissions, many of which had strongly opposed the proposed rezoning primarily on the ground of detrimental effects on water quality in the Hacking River catchment. 1262 The plaintiffs submit that this belated engagement was far too little, far too late and gave the consultants no sufficient time to prepare a comprehensive submission based upon the state of the art knowledge and theory which was required to carry the day on this issue before the Commission. The plaintiffs say that the need to have up-to-date solutions and clear and definite solutions should and indeed would, have been apparent to Walkers as experienced developers in December 1993 when they set out on the task of obtaining rezoning. They point out that as Mr Lester states in paragraph 28 of his statement, following discussions on 14 December 1993, "after these discussions I considered that it would have to be clearly demonstrated to the DOP" (and presumably to any rezoning body) "that there were definite solutions to the Helensburgh problem". They say the true explanation of the failure to bring the GHD 1992 application up-to-date so as to represent state-of-the-art was clearly the inordinate delay in preparation. In any event, they submit that Walkers' delay and their failure to bring the 1992 GHD application up to date so as to represent state-of-the-art technology and their failure to develop a comprehensive strategy was inexcusable in circumstances where they held themselves out to be competent and experienced residential subdividers who had undertaken to use their expertise to secure promptly the rezoning of the land. 1263 The plaintiffs then submit that had Walkers engaged these consultants at an early date, they would have had sufficient time to thoroughly research the relevant issues and to prepare a submission based upon the state of the art professional knowledge which would have had every prospect of being accepted by the Commission and of resulting in a favourable recommendation for re-zoning of the land. The plaintiffs assert that had this been done, there would have even been time for relevant tests to be undertaken at other sites and for some steps to have been taken to commence testing at the proposed development sites so as to establish empirically the validity of the joint venture submission. 1264 The plaintiffs point out that commencing such testing was particularly important in light of the "untested" criticisms which the on-line stormwater management controls proposed in the 1992 GHD application had attracted. The plaintiffs say that the basis of such criticism was known, or ought to have been known to Walkers, well before the commencement of the Commission of Inquiry. 1265 The plaintiffs assert that there is no excuse for not having provided a detailed assessment of issues contained within the terms of reference, the Commission of Inquiry having noted that such detail was not unusual in Commissions of Inquiry considering zoning potential, notwithstanding that such detail is ordinarily dealt with at the development application stage. 1266 The plaintiffs submit that the September 1994 submission to the Commission of Inquiry, notwithstanding that it was a revised approach, could not be said to be a comprehensive, thorough approach to the issue of water quality - rather, it is said to have been a function of the 'constraints of time'. They say that while it purported to introduce a process for the treatment of stormwater quality and quantity different to that proposed in the 1992 submission, it was essentially a revision of the 1992 proposal, and remained an end-of-pipe solution. They say the only real difference between the two strategies was the introduction of microfiltration (Memtec). The plaintiffs suggest that as at 1994 what was required in accordance with best management practice, was an integrated approach as this lends greater certainty to stormwater controls. Such an approach (Comprehensive Stormwater Management System) required the utilisation of a range of measures (which were not included in the proposals put forth to the Commission of Inquiry), including a water sensitive design, source control and education. The plaintiffs say that the elements proposed by their expert, Mr Rowbottom, would have been suitable for the LCE land, and that had sufficient time been available (not a mere matter of weeks), a comprehensive report could have been prepared for the Commission of Inquiry. The plaintiffs point out that Dr Joliffe did not dispute certain assertions going to the inadequacy of the approach to stormwater issues in the September 1994 GHD submission. 1267 The plaintiffs then point out that notwithstanding what they submit were the clear shortcomings of the LCE submissions (which, it is submitted were further manifested by a change in the September 1994 submission to yet further untested technology), Walkers maintained the bold, untenable assertion (noted to have been a 'somewhat extraordinary assertion' by the Commissioner at 19/137 given that studies generally link urban development with more pollution) that by allowing development, there would be no net decrease in water quality. The plaintiffs further submit that Walkers asserted during the Inquiry that development should be permitted in order to fund testing. The plaintiffs say that such an absurd suggestion, and approach to water quality (and to the Commission of Inquiry) served only to enliven and entrench all concerned in the strict application of the precautionary principle. 1268 The plaintiffs note that when the Commissioner did report in December 1994, he recommended that rezoning of the land be reconsidered when testing had been done to establish the validity of the joint venture proposals to control water quality. The plaintiffs then assert that notwithstanding the continuing obligations under the heads of agreement and the HUTA, no such testing was undertaken by Walkers. The Defendants' Submissions 1269 The defendants submit that the retention of LFA, GHD and Mr Lloyd QC fulfilled the best endeavours covenant. 1270 They say that that is so because: 1. the documents numbered 3.1 to 3.86 formed part of the submissions received by the Commission of Inquiry and assessed by the Commission. [See PX 19/284-5; 288] 2. LFA, GHD and Mr Lloyd QC were involved in the preparation of the 86 documents. The extent of their preparation varied according to the nature of the document. 3. LFA, GHD and Mr Lloyd QC had expertise in their fields. 4. Walkers were entitled to assume that LFA, GHD and Mr Lloyd QC would act professionally and competently in preparing and dealing with the documents numbered 3.1 to 3.86. 1271 The defendants point out that a Commission of Inquiry convened to examine and make recommendations in respect of appropriate landuse and zonings, must necessarily make choices between options presented. 1272 Further, they submit that it was recognised by Handley JA in Minister for Urban Affairs and Planning v Rosemount Estates Pty Ltd (1996) 91 LGERA 31 at 34 that there can be no one planning regime for particular land that is consistent with all objects of the EP&A Act 1979: 'There is no basis on which this Court could conclude that only one planning regime for a particular land or for a particular purpose could be consistent with the objects of the Act. Planning involves the making of choices between alternatives suggested by the conflicting objects in s5(a). These include the proper development and conservation of natural resources, the promotion of the economic use and development of the land, and the protection of the environment. The working out of these conflicting objects in a given policy, plan or decision will inevitably present to the legislative, planner or decision-maker a range of choices within the scope of any power' 1273 The defendants submit that the terms of reference of the Commission of Inquiry not only contain language suggestive of a range of subjective choice ("assess the capability", "to sustain options", "without causing significant environmental degradation") or are themselves matters purely subjective, but that the seven matters identified conflict with each other in some fundamental respects. For instance: (1) water quality in the Hacking River improved or degraded by urban development v. (3) the conservation value of flora and fauna; and (5) the provision of employment opportunities v. (3) conservation value of the land. 1274 The defendants assert that such terms of reference inevitably present to a decision maker in the position of a Commissioner of Inquiry a range of potential recommendations. 1275 In addressing each of the plaintiffs' heads of attack, the defendants give detailed references to evidence which they say, justify entirely their conduct in preparing for and presenting to the Commission of Inquiry and thereafter. 1276 As to the alleged failure of Walkers to appoint an appropriate advocate and to make that appointment within time, the defendants point out that the role of an advocate is to present evidence, cross-examine and to put submissions, whereas at the Commission of Inquiry, the submissions were in writing and there was no cross-examination. Further, they note that while some 244 parties were involved in the Commission of Inquiry, Mr Lloyd Q.C. and Mr Robertson were the only barristers who appeared before it. Indeed, Mr Smyth appeared at the Commission of Inquiry without a solicitor or QC. The defendants submit that what was of fundamental importance at the Commission was not an advocate's rhetoric but rather the quality of the expert evidence directed towards the seven matters specified in the terms of reference and directed towards the stated objects in s.5 of the EP&A Act. In any event, the defendants submit that the role played by Mr Robertson at the Commission of Inquiry was more that of a town planner, expert witness and environmental crusader rather than an advocate. 1277 As to the notion of the belated appointment and an inability to thereby recover, the defendants point out that there was a meeting with Mr Lloyd QC and Mr Lester on 25 July 1994 [confirmed in fee note at 18/144] and that Mr Lloyd QC concluded settling the submissions in reply for LCE on 30 Sept 1994 by which date he had been in the matter for more than 2 months [see fee note 18/145]. Further, Mr Lloyd QC concluded the settling of a supplementary submission in reply on 7 November 1994 for LCE. He had by then been in the matter for more than 3 months. [See 18/145]. Such a period of time, it is submitted, was more than sufficient time for Mr Lloyd QC to understand and deal with all relevant issues. 1278 In addition, the defendants submit that the notion that the input from Mr Lloyd QC was too late assumes that the Commissioner would pay less regard to matters put to him at the end of the inquiry than to matters put to him early in the Inquiry. They say that this is an absurd proposition. The defendants point out that the Commissioner is bound to duly consider all material supplied in accordance with the timetable. Further, they say that it is far more logical that a final submission at the end of a long inquiry will subsume what has preceded it and would therefore be given greater consideration by the Commissioner to that given to initial submissions. 1279 In addressing the plaintiffs' complaints in relation to the tip, that is, that Walkers' ineptness is demonstrated by the raising of matters concerning the tip and that Walkers failed to seek to have the terms of reference amended to include the tip and thereby "wasted large sums of money on investigations to remedy the purported problems arising from the tip", the defendants submit that it is apparent from the nature of the Commission of Inquiry report references that consideration of the tip was of relevance to a proper understanding of factual and technical matters before the Commission of Inquiry. 1280 As to the allegations that Walkers failed to appreciate or attempt to appreciate the political scene and failed to appoint a PR/political consultant until it was too late, the defendants point to numerous documents to evidence Walkers' appreciation of the political scene. Further, they assert that the use made by LFA at the Commission of Inquiry of Professor Westerman's views represented good political strategy. In any event, they say that it cannot be seriously contended that Dr Carleton's findings and recommendations would have been positively influenced by the actions of a Public Relations consultant. The defendants also note that Walkers in fact appointed a PR consultant/lobbyist company within days of the commencement of the Commission of Inquiry and Mr Smyth does not criticise the performance of that company. 1281 In relation to the plaintiffs' assertion that Walkers seriously underestimated the difficulties facing them, failed to develop an appropriate strategy, were in a catch up position and failed to update previous technical work, the defendants say that Mr Lester acquainted himself diligently with the relevant issues and the appropriateness of the technical data contained in the 1992 GHD study via conferences with various officers of Council and Government bodies. They submit that this is evidenced by documents. The defendants suggest that these documents contain the following indications: · Meeting at Walkers on 18.11.93 [PX Volume 7.015] first meeting: Paras 6 & 7 is said to indicate that DOP and WCC planners considered the technical studies were not in need of updating and were satisfactory in their present form; Para 15 - 'general strategy' said to suggest that difficulties were recognised and the dot items said to suggest by their nature that there was no underestimation of the difficulties facing a rezoning application; Para 17 final sentence - said to suggest a considered and proactive attitude towards the issue of how to achieve a rezoning. · Mr Lester visits Mr Hogarth on 24.11.93, 6 days after the 18.11.93 meeting - see PX Volume 7/03: Para 1 - 1968 development proposal covered much the same area as the current development proposal. This fact plus the fact that there had been no result since 1968 is said to suggest that Mr Lester would be under no illusion as to the difficulties facing a rezoning application; Para 10 - refers to "stormwater impacts" and the "relatively minimal" soil cover producing a "comparatively non-absorbent surface". That is said to be recognition of difficulties due to those site constraints; Para 15 – (a) said to suggest that Mr Lester was on notice as to the existence of technical problems and political problems. (b) "the objective of these meetings..." this is said to suggest that Mr Lester is assessing whether there is a need to update the technical reports; Paras 7-14 of Mr Lester's statement of 23.6.99 deal with the same meeting. Mr Lester says in para 11 that water quality and the effect on the Hacking river were discussed. It is submitted that in such circumstances it is highly likely that Mr Lester is correct when he says at para 128 that the difficulties in seeking a rezoning were recognised by him. · PX Volume 7.046 is said to indicate that by 30.11.93 Mr Lester had access to the GHD 1992 study, the conceptual lot layout and other relevant documents. Accordingly Mr Lester is said to have been armed with sufficient material to put him on notice as to the difficulties associated with a rezoning application. GHD 1992, [PX Volume 4.0169] the contents page is said to indicate the nature of the matters addressed by GHD. It is submitted that armed with such information Mr Lester would be under no misapprehension as to the magnitude of the task in relation to rezoning. · PX vol. 7/058 , 3.12.1993: It is said to be apparent that Peter Cummings of WCC does not raise any criticism of the GHD study in relation to its age or otherwise; Para 2 is said to indicate that Mr Lester was informed of 6,000 objections. That is said to suggest Mr Lester was aware of the magnitude of the difficulties facing the rezoning; Para 7 is said to indicate that Mr Lester was aware of Council's refusal to co-operate with the LCE rezoning application - that is another matter which is said to suggest Mr Lester was aware of the nature and extent of the difficulties facing the rezoning; Para 13 is said to indicate that Mr Lester was aware that the opposition had "hardened" over the last 10 years. That is another matter which is said to suggest Mr Lester was aware of the nature and extent of the difficulties facing the rezoning. · PX Volume 7/060 is said to indicate that on 3.12.1993 AL met with Ross Woodward of the DOP: Para 2 is said to indicate that Mr Lester was informed about two "major problems". The language is said to suggest Mr Lester was aware of the magnitude of the difficulties facing the rezoning; Para 5 is said to indicate that Mr Lester was aware of the nature and magnitude of the political problems facing the rezoning; Para 7 - is said to identify a "key concern" - runoff water and quality; Para 9 - "major issue" is the Hacking River; Para 11- (a) "be necessary for a detailed assessment". The language is said to suggest that Mr Lester was in no doubt about the difficulties, (b) is said to suggest that Mr Woodward had no concerns about the 1992 GHD study or he would have such concerns. · PX Volume 7.078 is said to indicate that Mr Lester reviewed submitted material. The material described at 7.046 included the GDH 1992 data. · PX Volume 7.079 - memo of 14 Dec 93. See "action" at 7/81 "overview stormwater ... further discussions with GHD". It is submitted that this refers to an analysis of the prior data. · PX Volume 7/079 - memo of 14 Dec 93: Para 2 - is said to indicate that the difficulties were perceived to be increasing in that the Minister appeared to be shifting to an anti development position; Para 5 - " serious ... problems" – the language is said to suggest Mr Lester was in no doubt as to the seriousness of the difficulties; Para 7 - "two major problem areas" - sewer and stormwater and para 8 - "... it will be necessary to demonstrate clearly..." The language is said to indicate an awareness of the problem. · PX Volume 7.082 memo of 22 Dec 93: Para 14 - "major stumbling block". The language is said to indicate an awareness of the problem. · PX Volume 7.082 memo of 22 Dec 93: Para 9 - is said to indicate a process of assessing the GHD data; Para 10 & 11 – similarly; Para 24 - said to suggest that the GHD approach is valid; "action"- "LFA to cross-check..." said to indicate yet more assessment of GHD reports. · PX Volume 7.90 is said to indicate that Mr Lester spent 37.5 hours in December 1993. It is submitted that it is apparent from the LFA file notes that a significant amount of that time was spent investigating the appropriateness of the GHD 1992 study. · PX Volume 8.025 memo of 4.1.94 at 8.026 - is said to indicate that the political aspect was being given careful attention by Mr Lester. · PX Volume 8.027 memo of 7.1.94: said to indicate Mr Lester was aware of sensitive nature of the political issues involved; Briefing note at 8/028 states that environmentalists refused to meet with the mediator. That is said to indicate an awareness of the difficulties associated with the rezoning. · PX Volume 8.55 and 8.56: On 10.2.94 the COI was announced along with draft terms of reference. It is submitted that, prior to the announcement of the COI, it is clear from the above material that Mr Lester had access to material that would have put any reasonable town planner on notice of the difficulties in relation to rezoning. · PX Volume 8.199 memo of 25.2.94: Para 2 - said to indicate that consideration was given to the scope and scale of the submissions to the COI and that the submission was to address the political issues and the issues raised by opponents; Para 3 - said to indicate that the 1992 GHD data would be used or alternatively an "equivalent submission" would be obtained and the equivalent submission would deal with the 7 matters referred to in para 3. This is said to be a very important memorandum because of the use Mr Smyth sought to make of it. · PX Volume 8.227 memo of 16.3.94 said to indicate that Mr Lester was actively exploring matters behind the scenes, said to indicate no underestimation of the difficulties lying ahead. · PX Volume 8.230 memo of 23.3.94 said to indicate the state the COI process had reached. · PX 9.126 memo of 21.4.94: Para 3 - said to indicate that Mr Lester was aware of the need for the initial written submission to be of a calibre that was appropriate for the size of the proposed LCE development. It is also said to indicate that Mr Lester was assessing carefully the time available for the production of an appropriate submission. · PX Volume 9.141 meeting on 29.4.94. This was dealt with at paras 51-55 of Mr Lester's statement of 23.6.1999. Messrs Lester, Walker, Dransfield , Hogarth and Kidd attended: Para 2 is said to indicate political matters were considered; Para 5 is said to indicate that access to the GHD material had not been resolved; Para 9 is said to indicate that there were no concerns expressed about the appropriateness of the 1992 GHD study. · PX Volume 9.173 memo of 10.5.94: Said to indicate that Mr Lester is assembling information about the Commissioner's planning proclivities. This is said to suggest no underestimation of the difficulties. Also memo of same day at PX Volume 9.186 notes 3 common objectives in most submissions. That is said to indicate LFA has read and considered most of the submissions. The final 3 paragraphs are said to indicate that Mr Lester had already formulated a logical , attractive and co-ordinated approach to the manner in which the LCE interests could be promoted at the COI. The memo is said to indicate no underestimation of the difficulties. · PX Volume 9.188 memo of 11.5.94: Said to indicate that Mr Lester was assessing and analysing the difficulties in a very detailed, ordered and professional manner. · PX Volume 9.190 memo of 11.5.94 is said to be in the nature of a soliloquy, it is said to indicate that Mr Lester was assessing and analysing the difficulties in a detailed, ordered and professional manner. · PX Volume 9.195 memo of 12.5.94: This is said to be a very important meeting. It is at GHD. Kenneth Conway and Michael England from GHD are present. PX Volume 4.263 is said to indicate that Mr England was part of the GHD team that prepared the 1992 report; 4th para - GHD is asked by Peter Dransfield if there were any issues that were outstanding or unsound. It is submitted that GHD is being put on the spot , being asked does this 1992 report of yours leave anything outstanding or does it contain anything that is unsound. Answer - "Water quality and pollution control had been adequately and successfully resolved." "Clean Waters Act" Answer - "The comment to this was that the proposed development was a wonderful opportunity to improve current water quality." The contents of the memo provide, it is submitted, a reasonable basis for Walkers use of the GHD 1992 report at the COI as part of the initial written submissions. · 12.5.94 DX Volume 9.195 - this is said to be able to be seen now in context. The appropriateness of the GHD 1992 study had been explored by Mr Lester since November 1993 and this was an imprimatur from GHD Michael England [PX vol.4/263 is said to show he was project planner for GHD '92] , also see PX vol. 9/193 - Don Dwyer was project director of GHD '92 and at 9/193 he raises no concerns about the appropriateness of the GHD '92 study for use at the COI. · PX Volume 9.199 memo of 13.5.94 is said to indicate a considered professional approach. · PX Volume 9.200 file note of 13.5.94, is said to show preparation and analysis of the likely opposing perspectives. · PX Volume 9.216 file note of 16.5.94: Para 1 is said to indicate a logical and appropriate approach to the Commission of Inquiry; Para 5 is said to show that the water quality strategy was the subject of ongoing review and appraisal by Mr Lester and others. · PX Volume 9.223 file note: Said to indicate that LFA was monitoring and appraising articles in the SMH. This is said to be indicative of a concerned and professional approach. · PX Volume 9.235 file note: Said to indicate that Mr Lester was in doubt as to the attitude of Council and in no doubt as to the difficulty facing LCE. · PX Volume 9.248 file note by Howard Murton of LFA 27.5.94: Para 1- said to indicate tactics in relation to the Sutherland Council approach; Para 2 - Said to indicates that Walkers were monitoring and analysing political aspects of the matter; Paras 3 & 4 - Said to indicate that tactical consideration was being given by LFA to promotion of the GHD storm water strategy by recourse to the Gills Creek proposal. · PX Volume 9.257 file note by Mr Murton of LFA of 30.5.94: Said to indicate that LFA was active behind the scenes, seeking to form liasons and do deals with likely opponents. It is submitted this indicates an appreciation of the difficulties facing LCE. · PX Volume 9.255: 16 June 1994 was the deadline for the initial written submissions. · PX Volume 10.008 said to indicate that the LFA submission was lodged on 15 June 1994. [Note: The italicised material is generally taken from the defendants' submissions and in some cases paraphrased. The material does not include any findings by the court.] 1282 As to the allegation that the June 1994 submission failed to deal with each of the terms of reference, the defendants say that Mr Smyth has not identified any specific inadequacies in the remainder of the 1992 GHD material and submit that Mr Smyth had only limited expertise. Also said to be relevant in this context is that Mr Smyth refers at para 10.1 of his statement of 11 February 1999 to the NCDC "excellent precedent" and the involvement of Professor Westerman in both the NCDC and the LCE strategy. 1283 In addressing the allegation that Walkers failed to act on 2 critical matters arising from WCC officer's report of 16.5.94, that is, (i) the practical experiment needed to prove the water quality controls because of the concerns of Mr Yassini and (ii) that Walkers should have made "an even greater effort" as WCC's position as at 16.5.94 was a re-iteration of a view it had held since 1991 namely to oppose development on LCE land and not to be bound by the Commission of Inquiry's findings, the defendants assert that on any view of the appropriate period of time for testing, there was insufficient time within which to set up the necessary trials, monitor and then produce the results to the Commission of Inquiry. As to Council's position, they submit that in the Manager of Planning's report to Council [9/208], a clear distinction is drawn between Council's stance during the Commission of Inquiry and Council's intended stance once armed with the Commission of Inquiry report. In this regard, the defendants assert that Mr Smyth misrepresented the contents and effect of the document in a manner favourable to the plaintiffs. 1284 With regard to the plaintiffs' assertion that the governing approach is to apply the precautionary principle, the defendants submit that on the written evidence, the only occasion on which Mr Smyth mentions the principle is in his statement of 9 September 1999. Likewise, Mr Rowbottom is said to have given little play to the application of the principle in his written evidence. Further, the defendants submit that while the Commissioner observed that "many parties suggest that the precautionary principle should apply to any rezoning", the Commission does not expressly adopt such a proposition. The defendants state that judicial precedent on the application of the precautionary principle indicates that, at its highest, the Commission should adopt "a cautious approach…in evaluating the various relevant factors…" They note that the relevant factors are set out in the terms of reference and that water quality impacts on the Hacking River was one of seven relevant matters to be taken into account. 1285 As to the plaintiffs' assertion that the outcome of the Commission of Inquiry was a failure for LCE, the defendants submit that the Commissioner did not preclude the rezoning of the LCE for residential purposes and in fact advanced the position of LCE's interests given that the WCC position as at 16 May 1994 was to oppose the development and to seek to implement a zoning further inconsistent with development. 1286 In dealing with Walkers' alleged failures to test water quality after the Commission of Inquiry and to lodge a rezoning request, the defendants point out that Walkers and LCE sought advice from Mr Whitehouse of Dunhill Madden Butler, an L&E expert as to the next step. In essence, that advice recommended a change of tack, namely, to seek resumption and to fight about the quantum of the valuation. In following this advice, the evidence indicates that at 13 March 1995 steps were being taken by Walkers to advance the LCE interests by promoting an acquisition of LCE lands by NPWS. It is submitted that Walkers took legal advice and were in the process of advancing a logical strategy based on that advice when the status quo was changed by the Government. As to the latter criticism, the defendants submit that there is no process pursuant to the EP&A Act or any other legislation, for a landowner to have a rezoning request assessed and determined. 1287 The defendants then submit that the evidence indicates that following the change of the status quo, Walkers continued to consider planning and political solutions to the now changed Helensburgh issues and that Mr Kidd was in apparent agreement with the continued retention of Mr Whitehouse and with the strategy to endeavour to have the land resumed by the Government. 1288 Turning now to the defendants' specific submissions in relation to Mr Smyth's evidence that had Walkers conducted the Commission of Inquiry differently then the outcome would have been different and the sought after rezoning would likely have been achieved. 1289 The defendants submit that there are three insurmountable problems with respect to Mr Smyth's evidence in this regard. (1) The defendants assert that first, Mr Smyth's opinions are based on an assessment of only a small part of the material which was before the Commissioner. Accordingly, they state that Mr Smyth may be correct when he says that, based on what he has considered and assessed, his opinion is "X". The defendants submit that such a conclusion, however, says nothing as to what his opinion would have been had he considered and assessed the material which was actually before the Commissioner. (2) Secondly, the defendants assert that Mr Smyth's opinions did not take into account whether or not the seventeen matters of concern identified by the Commissioner in the report were likely to be resolved favourably for the joint venturers. The defendants submit that there are at least two reasons why Mr Smyth did not take the seventeen matters into account: (a) The data had not been compiled; and (b) The assessment of the data was outside the expertise of Mr Smyth. (3) Thirdly, the defendants assert that Mr Smyth's opinions are based on assumptions that are without a factual basis or are inconsistent with known facts or experience. (1) The plaintiffs' first problem as identified by the defendants 1290 With regard to what the defendants submit is the first problem for the plaintiffs, the defendants point to the following evidence given by Mr Smyth to support their position: Q. The effect of the presentation of the written material in the oral presentation to the Commissioner is something which you are not able to evaluate, because of the absence of the transcript; that has got to be right, doesn't it? A. Yes. [T1164] LEGGAT: Q. Let us take that a step further. There were a number of round table conferences regarding water quality, weren't there? A. Yes. Q. You did not attend all of those conferences, did you? A. I didn't attend any of them. Q. The Commissioner attended those conferences though, didn't he? A. Yes. Q. No record of what was discussed at those conferences was made, as you understand it? A. In terms of a record I would suggest that the Commissioner would have kept his own notes, and I imagine the parties would have kept their own notes as well, because there were follow on actions that the Commissioner asked for and so forth, so in terms of a record, that's my interpretation. Q. Would you not have recourse to the Commissioner notes, certainly? A. No, only his report. Q. The consequence of that is that you don't know what the Commissioner had before him arising at the round table conferences on water quality; that is so, isn't it? A. That's correct. [T1166] Q. You don't know, I suggest to you, whether if Walkers had met good practice in 1994, in the manner in which you suggest, you don't know whether that good practice would have answered concerns raised at the water quality round table; correct? A. Yeah, that precise nature of the question, that would be correct. Mr Smyth was asked the following questions commencing at page 1270 line 6: Q. Now you say in paragraph 1.2 [of the statement of 11 February 1999] that in preparing your report, in preparing this report, you have read the material in the bibliography marked A 2; do you see that? A. Yes. Q. That is, the material in the bibliography marked A 2 is the material you relied upon to prepare your report; agreed? A. I went through it before - correct, the preparation of the report, that's correct. Q. And you have listed all that material in A 2, haven't you, which is found at page 18 and following; that's right, isn't it? A. Yes, that is my understanding. Q. Now, based on that material, and certain assumptions which you have set out in A3 and A4, you express certain views, don't you? A. Yes. [T1169] 1291 The defendants submit that it is apparent from a comparison of the material set out in Annexure A2 of Mr Smyth's statement of 11 February 1999 and paragraph 25 of his statement of 11 February 1999 with the material set out in Appendix 3 to the Commissioner's report [19/284-305], that Mr Smyth's opinions are based on an assessment of only a small part of the written material which was before the Commissioner. (2) The plaintiffs' "second problem" as identified by the defendants 1292 With regard to what the defendants submit is the second problem for the plaintiffs, the defendants submit that the Commissioner, in the findings and recommendations section of his report, had reference to some seventeen matters of concern which he recommended required further study. 1293 The defendants submit that by and large, Mr Smyth conceded at T1308-1325 that these studies were separate studies envisaged by the Commissioner and that such studies would have to be undertaken prior to the consideration of zoning being able to be addressed. 1294 The defendants point out that such studies are distinct from the development application process. In this regard, Mr Smyth gave the following evidence: His Honour. So as I understand your evidence, correct me if I am wrong, in the attempt to get the Commissioner to come forward with positive findings apropos rezoning, that is really a dimensionally separate step to the actual application for development approval which would follow, notwithstanding that this conceptual lot layout and detailed approach had been put forward by the joint venture group. That is just an idea, but it may have altogether different consequences when a DA is put forward. They may have to redesign it completely. Is that what you're saying? A. Yes. The developer puts in an application, and as a result of an assessment there have to be changes to it, and then so it's redesigned to various criteria. [T1320] 1295 After being taken to each of the sixteen studies recommended by the Commissioner during cross-examination, Mr Smyth gave evidence as follows: Q. Now as at 11 February 1999 you had not assessed the likelihood of those studies being able to be resolved satisfactorily; that is so, isn't it? A. Not 16, no. [T1325] LEGGAT: Q. The question had within it an element as at 11 February. It is clear, up until yesterday afternoon, I suggest to you, you had not considered the likelihood of the studies numbered 1-16 that I identified as being capable of being addressed satisfactorily, had you? A. I believe I wouldn't have come to the conclusion - sorry, if it is the 1 to 16 I hadn't considered them at all. Q. And the reason why you hadn't considered a number of them, I suggest to you, is because they would require an expertise and an experience beyond that expertise and experience which you have; now that's right, isn't it? A. I certainly wouldn't undertake them. I would engage appropriate experts to undertake them. But I have, when you say I lack the experience, I have worked with people doing most of this, those sort of studies that you have identified, if not all of them, on various protects as a former project manager, alternatively as a senior advisor to the client on all aspects of the development. Q. The reason why you would need to retain experts is because you would defer to their opinion in relation to their area of expertise, wouldn't you? A. I would have them do the work; in terms of opinion, I would discuss it with them. [T1326] 1296 The defendants point out that further, in relation to some of the studies, Mr Smyth conceded that he would have no idea what the outcome of the studies would be: Q. The likely outcome of the sooty owl fauna impact study, you have no idea what the outcome of such a study would be, do you? A. No. I would say that is a reasonable proposition. I'm not ensure (sic) what the specification that the Commissioner had for a study was. [T1328] Q. You don't know what flora was burnt in the recent fires, do you, you are just guessing? A. No I'm sorry, I'm talking about groundcover, and I'm talking about the likes of orchids, and perhaps other plants, that would grow over that particular area that was burnt. Whether exactly what the species were I couldn't tell you, but I do know that is the outcome of bushfire, and it takes a little while for things to grow back. [T1328] 1297 The defendants submit that the evidence extracted above (and further evidence that they relied on in submissions), demonstrates that the opinions expressed by Mr Smyth did not take into account whether or not the 17 studies or 17 matters of concern, identified by the Commission in the report were likely to be resolved favourably for the joint venturers. The defendants submit that the reason why Mr Smyth did not take those 17 matters into account included (a) that the data had not been compiled and therefore could not be taken into account and (b) the assessment of the data was outside the expertise of the Mr Smyth. (3) The plaintiffs' third problem as identified by the defendants 1298 With regard to what the defendants assert is the third problem for the plaintiffs, the defendants submit that Mr Smyth's evidence in relation to likely outcomes has no probative value because the matter is incapable of rational analysis. The defendants point out that on the one hand, Mr Ellicott QC submitted to the effect that Mr Smyth may be the only person in the world able to give such evidence, while on the other, Mr Shand QC submitted to the effect that Mr Smyth was seeking to perform a miraculous feat akin to that of a mind-reading guru. 1299 Further, the defendants note that Mr Smyth concedes that his opinions are based on certain assumptions. The defendants submit that an analysis of those assumptions demonstrates that they are without a factual basis and are inconsistent with known facts or experience. 1300 The defendants submit that the following are assumptions made by Mr Smyth and that these are apparent from the following extracts of the transcript: · At T1125-1126 Mr Smyth identified the studies he assumed the Commission of Inquiry would have recommended had the Commission of Inquiry been conducted competently: "The studies relating to the appropriate allotment sizes and the extent of development in the critical areas such as the ridges and the areas of critical vegetation. Studies looking at the infrastructure needs of the residential area, in terms of open space, play areas and so forth. The traffic will be a study that would lead towards a development control plan that led to a rezone (sic). The storm water management plan as well as the appropriate storm water management plan for the release area." 1301 The defendants assert that the studies nominated by Mr Smyth did not include most of the studies nominated by the Commissioner in his report which identified 17 matters to be resolved. 1302 Further, the defendants submit that Mr Smyth conceded that he took no issue with virtually all of the material that the GHD 1992 application addressed in relation to the terms of reference numbered 2 to 7, and that in such circumstances, there is no logical basis for Mr Smyth to assume that the 17 matters nominated by the Commissioner in the his report would have been reduced to those Mr Smyth identified at T1125-1126 had the Commission of Inquiry been conducted competently. · At T1127 Mr Smyth gave evidence as to the assumptions he made about Wollongong Council: Q. In coming to that answer , did you make an assumption about the Wollongong Council , and if so , what assumption ? A. The assumption I made would have been that the council would have cooperated with the - cooperated with the department in implementing the Commission's recommendations, and the timing, would be the type of timing that you would normally expect in the release area and the planning process. 1303 The defendants submit that Mr Smyth's predictions as to the manner in which Wollongong Council may or may not have acted should be given no probative value for the following reasons: First, the Council forms a collegiate decision by voting. Each councillor has one vote and the decision of Council must be "supported by a majority of the votes at a meeting of the council at which a quorum is present". See s.371 of the Local Government Act 1993. There is no evidence that Mr Smyth was acquainted with the councillors of the WCC and had studied their voting habits. Secondly, the LCE rezoning question raised complicated environmental, political and social issues. It is submitted that in such circumstances even if Mr Smyth was well acquainted with all of the councillors it is unrealistic to assume he could predict their attitude at the date of voting. Thirdly, the COI report identified some 17 matters to be the subject of further inquiry. No one, including Mr Smyth, knows what those studies would reveal. Accordingly, the effect of the outcome of such studies on the minds of individual councillors cannot be determined. · At T1127 Mr Smyth gave the following evidence in relation to his assumptions about the Minister: Q. And did you have in mind any assumption about a minister, and for instance who the minister might be ? A. No, because the question related to the process, and that process is essentially bureaucratic in council... 1304 The defendants submit that Mr Smyth's assumption that all ministers, of all particular parties, would treat the complex LCE rezoning issue in the same manner, is contrary to common sense and life experience. They note that the political questions involved in the LCE rezoning involved competing political values, most notably, the environment as against development. The defendants submit that Mr Carr had made his view well known as is evidenced by the following: "According to RW [Mr Woodward of the Department of Planning], Bob Carr put forward a political position which was on the public record indicating that Helensburgh expansion would not proceed." [7/060] "According to DS [Denis Smith] the major stumbling block lay in the political arena with Carr's public announcement that the development would not proceed." [7/083] · Further to Mr Smyth's assumptions about what the Minister would or would not do, the defendants point to the following evidence: Q. What is your assumption about what the minister would do in the face of such a report ? A. He would consider the report. He would probably check with the local member and any - consider the interests of other departments or agencies involved... Q. What would you assume about what the minister would do in terms of accepting or rejecting ? A. I would assume that he would normally accept the recommendation of his department head in these matters. [T1127] WITNESS. ... I have omitted to previously mention that in the Director's report the matter of the trade-off of National Parks would have been dealt with. And, in the Minister's office, I dare say the applicant in this case, or any other case would be making sure , through the particular party head office, the Minister's aware of the size of the donation to the party. That's a factor that is taken into account. And I apologise to the Court that I omitted to mention it previously in the evidence, but it is a factor that is considered - political factor that was taken into account… HIS HONOUR. Could I understand one thing Mr Smyth. Did I understand you to be giving evidence a moment ago that in your experience ministers charged with a discretion of approving or rejecting a recommendation by a head of department as to how the Minister should deal with a commission of inquiry's recommendations, are influenced by a consideration altogether outside of the merits of the subject question of rezoning or no, namely the question of what if any political donations have been made to the party then in government. Is that what you were telling me ? I will just have this read back to you if you wish. [T1345-7 - defendants' emphasis] A. No no, I was telling you that, but I included in my previous comments about the views of the local member and other political factors perhaps that are - there are two things. There is one, the minister can consider something in accordance with the legislation. And the other matter, a political - personal other factors that influence the Minister. And I'm saying that the size of a political donation is a factor that the Minister is aware of when he is exercising. Whether he allows it to influence him or not is a matter for the individual minister…. [A section of the transcript has been intentionally excised for the reasons set out in paragraph 1433] I have overheard things in ministers' offices whether the Minister gets the advice or not. But it certainly is a factor that is discussed in our office." [Transcript 1347] 1305 The defendants submit that Mr Smyth's assumption as to the effect of the political donations is quite scandalous and should taint the probative value of his opinion (as to what the minister would or would not do), to such extent that the opinion should be given no probative value. 1306 The defendants submit that Mr Smyth's evidence earlier set out and appearing at Transcript 1198-1200 demonstrates the unsatisfactory nature of Mr Smyth's evidence concerning what members of the New South Wales Parliament might do or might not do in certain circumstances. · At T1333 Mr Smyth gave the following evidence in relation to his assumptions about the outcome of the flora and flora studies: Q. ... Now what was the assumption you made as to the likely outcome of that study ? [development of critical areas] A. Likely outcome, I would expect to be to show the extent of development on the ridges. Let's just assume that the ridges are the critical areas... 1307 The defendants submit that Mr Smyth had no reasonable basis for that assumption as at T1231he conceded that he has no expertise in relation to flora and fauna on the LCE. · At T1334 Mr Smyth gave evidence that he had assumed that the outcome of the stormwater quality tests would prove satisfactory. 1308 Again, the defendants point out that Mr Smyth had conceded that he had no expertise in relation to stormwater quality [T1168]. The defendants submit that it is not known whether stormwater quality tests can in fact result satisfactorily for the LCE. · At T1340 Mr Smyth gave the following evidence in relation to the outcome of studies on the Commissioner's 16 matters of concern: Q. If one accepts that it is a matter of degree, you are not in a position to indicate to his Honour the likelihood of the matter of degree being such in respect of one or all of those 16 matters so as to make it more likely than not that the development application would get approval; that must be right , mustn't it ? A. Without knowing the issue and the degree of difficulty or the extent of the problem, I would not be able to make that prediction, no . [emphasis added] 1309 The defendants thus submit that Mr Smyth's assumption that the outcome of studies on these matters will result favourably to the LCE rezoning proposal is unwarranted. · The defendants assert that another assumption made by Mr Smyth is that Dr Carleton would have acted in a particular way had the LCE submissions been put in the manner Mr Smyth suggested. However, the defendants submit that that assumption should be given no probative value in view of the following evidence given by Mr Smyth at T1341: Q. ...You have no experience as to how Dr Carlton thinks or assesses Commissions of Inquiry matters, do you ? A. Only from what I have read in this particular thing.... His Honour : Has he studied Dr Carlton; is that the question ? Leggat : Yes. His Honour : What would be the answer to that question ? A. I have read a couple of his writings, in terms of storm water treatment and storm water control, and I know of his interest in that. 1310 The defendants point out that Mr Smyth has never sat as a Commissioner of Inquiry [T1181]. The defendants further point out that Mr Smyth contended that "not even the best Queens Counsel could have saved them at this stage" because, according to Mr Smyth , "the Commissioners are antagonised if the parties don't perform in accordance with the way they expect them to..." [T1179] and that a party such as Walker causes the Commissioner to "get , what one might call , a mind set..." . 1311 The defendants submit that Mr Smyth's assumption, as to the irreversible prejudice that a Commissioner will display, reflects no credit upon Mr Smyth and that the probative value of Mr Smyth's opinion, as to how the Commissioner would likely have reacted if things had been put to him in the manner Mr Smyth suggests, should be given no probative value. The Importance of the Commission of Inquiry to the joint venture goal of achieving rezoning 1312 As noted in the 'Process of achieving a rezoning' section above: · Wollongong Council had made it clear that it was opposed to the rezoning proposed by LCE and had in fact proposed a rezoning for the subject land further inconsistent with urban development of that land; · There is no avenue for appeal (as of right) against a Council's position with respect to the drafting of an LEP; 1313 A Commission of Inquiry ordinarily plays no explicit part with respect to the process of the making of a LEP for the rezoning of land: see generally Part 3 of the EP&A Act for an absence of reference to a Commission of Inquiry. 1314 Notwithstanding this, and by dint of the climate encapsulating the proposal to rezone the Lady Carrington Estate lands, the appointment of the Commission of Inquiry was seen as being a mechanism to: "… allow for a comprehensive and objective review of the detailed environmental capacity and costing studies …coupled with an assessment of the potential advantages that might flow to the existing community of Helensburgh. The Inquiry would have the ability to fully review the detailed submissions … to carefully assess environmental concerns…" [ 8/032] 1315 Accordingly, the Commission of Inquiry provided a meaningful avenue, both as a forum and with respect to the subject matter of that forum (determined by its terms of reference) for the determination and resolution of objections and issues relating to the proposed residential land release of the LCE lands. 1316 In this regard, the terms of reference of the Commission of Inquiry required it: 'To assess the capability of land in the general vicinity of Helensburgh, as identified on the attached map, to sustain various landuse options without causing significant environmental degradation.' 1317 By this manifestation of its role, the Commission of Inquiry was given a mandate to determine land uses rather than simply to assess a particular nominated land use. The plaintiffs submit that thus, what was created was a "level playing field" as to land uses for the LCE lands, with the key (in terms of the recommendation from the Commission of Inquiry) being the ability to persuade the Commission of Inquiry towards adopting the sought after rezoning [Plaintiffs' Submissions - Planning Issues, paragraph 23]. 1318 It is apparent from the circumstances of the initiation of the Commission of Inquiry that the findings of the Commission were to be, and were, crucial to attempts to rezone the LCE lands for urban purposes. This importance was even further amplified by the undertaking afforded by the Minister to the Council as to the rezoning of the land, as consideration of the Commission of Inquiry findings and recommendation operated as a precondition to dealings (in terms of rezoning) with the LCE lands: '…I shall not use my powers to rezone the lands in Helensburgh against council's decision after it considers the report of the Commission of Inquiry..' [8/58-59] 1319 The Undertaking had the effect of elevating the importance of the findings of the Commission of Inquiry and hence elevated the need for LCE to obtain a favourable recommendation. 1320 Mr Smyth deposed at paragraph 4.1 of his statement of 11 February 1999 that the Commission of Inquiry presented the best opportunity to the pro development parties to have the matter resolved in their favour. His evidence was that it could also be seen to be the final opportunity to obtain a rezoning of land adjacent to Helensburgh in the near future or perhaps even at all. In his opinion, it was critically important for the landowners to "win" at the Commission of Inquiry to have any chance of keeping alive the prospect of having the land considered by the Commission of Inquiry as appropriate to be rezoned for residential use. I accept as both reliable and pervasive, these views of Mr Smyth. 1321 In examination in chief, Mr Smyth explained that by the word "win" he meant to "obtain a recommendation from the Commission of Inquiry that the land should be rezoned" [T1119]. Mr Ellicott QC submitted that this does not necessarily require the Commissioner 'coming down with a finding that this land be gazetted for residential subdivision full stop' [T1019]. Further, Mr Smyth's evidence was that such a recommendation may have required further studies or finalisation of results addressing matters that were of concern to him and that those studies 'would have led to the council's development control plan that would define the subdivision and layout of the roads and space and the allotment sizes' [T1119]. He gave evidence which I accept that the process of implementing a positive recommendation from the Commission of Inquiry would take approximately two to three years so that a development application or subdivision application could then be made [T1120-1]. 1322 On the evidence, I accept that it was fundamental to the joint venture to be able to demonstrate to the Commission of Inquiry by means of a thorough, comprehensive and competent presentation, that a residential subdivision of the LCE lands was appropriate. Questions and Issues thrown up by the Plaintiffs' case 1323 Immediate questions thrown up by the plaintiffs' case include the following: (a) what, on the evidence, is the date by which the Walker group had sufficient expectation that a Commission of Inquiry would eventually be appointed, as to justify the immediate commencement of preparation for such a Commission of Inquiry; (b) what, on the evidence, were the steps which the Walker group could then be reasonably expected to have taken, to properly prepare for a Commission of Inquiry (c) how did Walkers' actual preparation and presentation of the joint venture case before the COI compare to that which could reasonably have been expected? [I interpolate to note that the expression "the Walker Group" is presently used loosely to include both Mr Walker as well as Walker Consolidated. The judgment deals below with some questions which may arguably arise in terms of differentiating between Mr Walker's obligations and those of Walker Consolidated.] 1324 Close consideration then requires to be addressed on further issues as to the chances, had best endeavours been used, of a number of events occurring. Hence consideration requires to be given to the following matters : (i) had such steps been taken, as to the likely course [in terms of the submissions to be put by the several parties to the commission, and in terms of the approach to be taken by the Commissioner in dealing with those submissions and in terms of his final recommendations], which the commission is likely to have taken; (ii) as to what those alternate final recommendations are likely to have meant [that is to say, in terms of where they are likely to have led], in terms of the somewhat complex situation [bearing the political situation in mind] which would have obtained at the time those recommendations would have been brought down; (iii) if those alternate final recommendations are likely to have led to a rezoning of all or some of the subject land, then : -- -- what that rezoning is likely to have been -- precisely which sections of the subject land are likely to have achieved precisely what form of rezoning -- when would that rezoning have likely been achieved -- what form of development application is likely to have been successful and with what likely results as to profits to the joint venture. As to (a) above 1325 On my findings, the candidates for the date by which the Walker group had sufficient expectation that a Commission of Inquiry would eventually be appointed, as to justify the immediate commencement of preparation for such a commission , are as follows: (a) by mid December 1993 [Mr Lester conceded in cross-examination -- "it looked like the middle of December that the outcome was going to be a Commission of Inquiry" -- transcript page 1421] (b) by late December 1993 [Mr Lester was cross-examined in relation to his file note of 22 December 1993 and accepted that by the time Mr Walker had first seen the minister, the minister had indicated that if Mr Walker could give some good reasons which were an answer to his department, then there was a real chance of getting a Commission of Inquiry -- transcript page 1495] (c) by 20 January 1994 [Mr Lester in the company of Mr Walker, attended on the minister on this day -- 8/42] (d) by early February 1994 [the formal announcement of the appointment of the commission took place on 9 February]. 1326 I see no reason why, in the absence of other or different evidence called on behalf of the defendants, Mr Lester's admission referred to in (a) should not be taken at face value. One has to recall that Mr Lester had been asked by 10 December 1993 to prepare a draft paragraph for inclusion in the public float documents and had done so. Also that on Mr Lester's evidence, at this time he expected the approval to be forthcoming. Also the terms of the prospectus which, although only issued on 22nd February 1994, would have required considerable preparatory work to have been carried out well before the prospectus was issued. On my findings on the evidence, it was quite clear at a very early stage, that the only way in which a rezoning could be achieved would be following a Commission of Inquiry which so recommended. On my findings, the probabilities are that by mid to late December 1993, the Walker group had sufficient expectation that a Commission of Inquiry would eventually be appointed, as to justify the immediate commencement of preparation for such a Commission of Inquiry. 1327 It is necessary to deal with a threshold matter concerning the justifiable expectations of the parties at that time as to when the Commission of Inquiry was likely to be held. This is an area in relation to which the failure of the defendants to call Mr Walker or Mr Dransfield to give evidence assists the plaintiffs in relation to the appropriate inferences to be drawn from the evidence. 1328 The defendants suggest that Mr Lester's file note of the meeting of 29 April 1994 should give rise to a finding that up until the announcement of the appointment of the Commission and the simultaneous announcement of the dates when the first session of the Commission would be held, the programme reasonably anticipated by the defendants' involved a Commission being appointed which, having conducted its various hearings, would be considering the matter during the run-up to the March 1995 elections. The defendants' submission is that this finding should flow from terms of Mr Lester's file note [9/141]. It will be recalled that this file note includes the words "the previous preferred programme would have enabled the COI to have conducted its various hearings but to be considering the matter during run-up to the March 1995 the elections". 1329 The factual matrix in the evidence on this point is reasonably sparse. Mr Kidd's evidence of the 18 November 1993 meeting [meeting 7] includes a statement by Mr Walker to the effect that the Walker group had had contact with the Minister's office and that Mr Walker thought that the Hogarth group would find that a Commission of Inquiry would be authorised in the very near future. Mr Lester had left the meeting early and of course could not say what might have been discussed after he had left. Messrs Walker and Dransfield gave no evidence at all. 1330 Mr Lester's file note of his meeting with Mr Woodward of 3 December 1993 makes clear that Mr Woodward had indicated that it was likely that a public inquiry would be called possibly in about March 1994. [7/58] 1331 Mr Lester's evidence as his state of mind on 10 December 1993 at about which time he had prepared a draft paragraph for inclusion in the public float documents, was that he expected the approval of the Helensburgh land to be forthcoming. To my mind an inference should be drawn, bearing in mind Mr Lester's close lines of communication to Mr Dransfield and Mr Walker, that Mr Lester's state of mind at this time is likely to have been strongly influenced by what he was told by Mr Dransfield and/or Mr Walker. 1332 One then has Mr Walker's initial attendance upon the Minister. Mr Walker does not give any evidence as to what occurred or was said during this attendance. One does have Mr Lester's evidence that by the stage when Mr Walker had been to see the Minister, the Minister had indicated that their was a real chance of getting a Commission of Inquiry if Mr Walker could give some good reasons which were an answer to the department. [T 1421] 1333 One also has the attendance by Mr Walker, together with Mr Lester, upon the Minister on 20 January 1994. No evidence as to what occurred at this meeting is given by Mr Walker. Mr Lester has only the faintest recollection of what occurred at the meeting. 1334 Next one has the very strong statements made in the Prospectus on 22 February 1994 to the effect that the Walker group rarely committed to the acquisition of a site until all necessary approvals had been granted or there was a very high level of certainty that they would be granted. And importantly one has the actual or estimated commencement date given on page 31 of the prospectus as 1994/1995. 1335 As already earlier noted, it was on 27 April 1994 that the formal announcement of the appointment of the Commission of Inquiry was made. 1336 In my view, the appropriate finding from the evidence is that by mid to late December 1993 the expectation of the Walker Interests was not that a Commission of Inquiry would commence to conduct its hearings only very late during 1994, but was that the Commission was likely to be appointed fairly early and when appointed, could be expected to get on with the job reasonably swiftly. 1337 To the extent that the finding may be said to be confirmed by the drawing of inferences, the court is entitled to rely on Jones v Dunkel. There being no explanation which, in the circumstances, I regard as sufficient, for the failure by Mr Walker or Mr Dransfield to give evidence, I infer that their evidence on this issue would not have helped the defendants' case. Evidence which might have been contradicted by Messrs. Walker and Dransfield may be accepted the more readily, where they have not given evidence. And where as here, an inference is open from facts proven by direct evidence , the question being whether it should be drawn, the circumstance that the defendants disputing it, might have proved the contrary had they chosen to give evidence, is properly to be taken into account as a circumstance in favour of drawing the inference. As to (b) above 1338 On my findings, the evidence establishes the following as the steps which the Walker group could then be reasonably expected to have taken, to properly prepare for a Commission of Inquiry: (a) immediate inquiries from GHD as to whether and if so on what terms, it was content to accept a retainer to assist and advise the joint venture team in its preparation for a Commission of Inquiry; (b) the retention of GHD or if this proved impossible, of some other reputable and experienced water resource engineers or environmental scientist and project managers, to assist and advise the joint venture team in its preparation for a Commission of Inquiry (c) in relation to such a retainer, to require that the 1992 GHD application/report be reassessed and updated in terms of significant changes since the date of the earlier report, if any, in engineering practices, knowledge and community expectations regarding any structural parameter dealt with in the application, including stormwater quality and to so update or alternatively, reconstitute, the 1992 GHD material; (d) if such a reassessment and updating would result in advice that a particular approach, for example to water quality control [whether or not being the approach advocated in the 1992 application/report] , be adopted, to take immediate steps: (i) to identify the best way of substantiating the substance and viability of such approach; (ii) to then go about such substantiation [and dealing for example with water quality control, if the particular approach to such control being advocated was novel in terms of not having been tested before, then to ensure that immediate tests be commenced with a view to producing such results, even preliminary, as may be likely to have had the best prospects of producing a comfortable satisfaction to interested parties, including any Commissioner of Inquiry, as to the substance and viability of the approach being advocated.] Before returning to this area, it is convenient to address (c) above. As to (c) above 1339 On my findings, the June 1994 submission to the Commission of Inquiry was, in effect, merely a re-submission of the 1992 GHD rezoning application submitted to Wollongong Council in response to its Draft LEP 1992. This is evidenced by the submission itself [10/029], by Mr Lester's cross examination and by the following comment made by the Commissioner: 'It is also noted that the landowners in general commenced with the 1992 draft development proposals used to support urban rezoning applications in response to the exhibition of the 1992 Draft Local Environmental Plan.' [19/136] 1340 To my mind, implicit in the Commissioner's further comments at 19/136 in relation to the level of detail required by him of the water quality controls proposed, is the view that LCE ought to have known that the requirements of a Commission of Inquiry convened to consider capability of land and appropriate zonings of that land, differ from those of Council considering a rezoning application: '…whilst detailed assessment of development proposals and water controls may be unusual for Councils at the rezoning stage, this is not unusual for Commissions of Inquiry , particularly where sensitive catchments or potential for serious impacts are involved.' 1341 It follows that merely resubmitting to the Commission of Inquiry a two year old rezoning application prepared for the consideration of Council, was careless in the extreme. 1342 As the plaintiffs point out, it is clear by the middle of July, after some 11 days of hearing at the Commission of Inquiry, that the June 1994 submission put in on behalf of LCE had npt been well received. This is indeed evidenced by the briefing note prepared by LFA [11/0155] which makes clear that the LCE presentation had come under attack because a number of the parameters adopted in 1991/92 needed to be modified in the light of subsequent experience and available data. This briefing note is clear support for the view that the submission of June was quite inadequate. GHD's letter to LFA of 28 July [11/162] likewise acknowledges the need for a report to be prepared reflecting state -of-art knowledge in 1994 and updating the philosophy developed in 1991/92. The list of dot point matters contained in that letter, particularly at pages 2-4 indicate the areas which required attention. 1343 Further, the LFA letter to the Commissioner sent on 26 August 1994 as a precursor to the September 1994 submission, acknowledges that the June 1994 submission, by relying on the 1992 GHD report, was outdated in relation to its stormwater management approach: 'The general approach adopted by LFA in co-ordinating the various responses [to questions raised during the Inquiry] together with the detailed review of the assumptions, data and solutions has been to develop an integrated response designed to assist the Commission rather than to respond to the issues on an individual basis. In part this approach has been influenced by changes in approach to stormwater treatment since late 1991 when the initial GHD report for …LCE was completed . As noted in the primary submission, as part of the material presented by Mr Sharpin, there has been a significant reduction in the volume of wet basins now required compared to with the volumes that were adopted in the 1991 report …' [13/167 - emphasis added] 1344 To my mind, both the brief and the letters underline how inadequate Mr Lester's assessment of the critical nature of the water quality issue was. If, as asserted, he did truly believe that it was only one of a number of issues, his competence must be questioned as is submitted by the plaintiffs. I find that Mr Lester seriously misjudged the issue and its potential signifiance for the Commission of Inquiiry. 1345 The plaintiffs submit, and I agree, that on such a highly contentious and important matter, the actions of Walkers in putting in the outdated June 1994 submission had serious effects on its case before the Commission of Inquiry. It is submitted by the plaintiffs that as a result, the initiative at the Commission of Inquiry was lost and LCE's case was left in potential tatters where it was reacting to events and attacks from others rather than speaking from the strength of a comprehensive report on the water control problem. The plaintiffs say that this is combined with the failure of Walkers to initiate tests in relation to water quality from the existing Helensburgh township which would have given the Commissioner a basis upon which to feel a sense of confidence that the water control problem was capable of solution. In my view, these are submissions of substance. 1346 The Commissioner, in listing the water quality issues or concerns raised during the Inquiry, specifically noted the 'significant changes to pond/wetland propsals during the public hearing sessions' [19/116]. Throughout the report he also made numerous references to the 'substantial and late changes to proposed water controls' and the considerable delay that ensued [19/118; 19/038-39]. 1347 To my mind, it is likely that had Walkers prepared and presented at the outset of the Commission of Inquiry, the material it put before the Commission in September in its Final Report, with the addition of preliminary test results going to the efficacy of the proposed stormwater management controls, the conduct of the Commission of Inquiry may have been different. 1348 An early basic question which is raised for consideration concerns the precise role given to Mr Lester by the Walker group from the commencement of Mr Lester's involvement in the venture. I accept as reliable Mr Hogarth's evidence that Mr Lester said to him on their first occasion together when Mr Lester had visited the property, that Mr Lester was in charge of "the rezoning issue." I accept as reliable Mr Hogarth's evidence that Mr Lester said to Mr Hogarth that Mr Lester would refer back to Mr Dransfield and to Mr Walker any queries which Mr Lester might have about how to conduct the rezoning issue. Early in the piece the Commission of Inquiry came up as the vehicle through which it was hoped that the rezoning could be achieved. 1349 On my findings, the role given to Mr Lester was to organise submissions for the purpose of presenting them to the Commission of Inquiry and to act by way of coordinating all relevant aspects of the approaches to be taken in relation to that commission . But Mr Lester, as the evidence makes quite plain, took his marching instructions from generally Mr Dransfield , and ultimately from Mr Walker. Hence when one is focusing upon shortcomings in the approaches to the whole rezoning issue and in particular to the Commission of Inquiry, a question arises as to whether it is legitimate to criticize Mr Lester or whether the ultimate guiding hand as to what Mr Lester and hence the joint venture was doing in preparing for the Commission of Inquiry, was in effect Mr Dransfield and/or Mr Walker, in effect the Walker group. Whilst many of the findings set out below in addressing critical comments in relation to the failings in preparation for the Commission of Inquiry focus upon Mr Lester, by the same token the very same comments may be seen as addressed to the Walker group. Even if it be the case that Mr Lester's relevant conduct occurred by reason of the marching orders of the Walker group, then still this fact remains potent in support of the plaintiffs case as against the Walker group. At the end of the day the Walker group had accepted the responsibility of carrying out its best endeavours to procure the rezoning and the fact that it failed to discharge that responsibility remains the case regardless of whether or not that failure stemmed from the Walker groups instructions to Mr Lester or from Mr Lester's shortcomings [in terms of his background or in terms of his performance in approaching the Commission of Inquiry], or from a combination of these causes. 1350 It is clear from Mr Lester's evidence that effectively the sole involvement of GHD in the one or two months prior to the commencement of the Commission of Inquiry was by way of a "reassurance" given to Mr Lester on 12 May ["what I'm saying is that based on advice that I received from GHD the various issues and problems that had been raised by various parties in their opinion had been successfully resolved. And that's covered in the file note I believe on 12 May"-transcript page 1501/"Q. It would be fair to say [GHD] didn't contribute any passages, any parts of the submission, that is the submission of June 1994, except indirectly by the use of their application of 1992. That is right isn't it? A. Yes. Subject to the reassurance that was given on 12 May."-- transcript page 1602.35/ "GHD had been questioned about the status issues that had been raised in discussions with GH D, and reassurances had been received that they had addressed all of the water quality issues" -- transcript page 1483/ cf transcript page 1635.45/transcript 1639.26 ] 1351 The brief to GHD was sent on 28 July 1994. By the end of August 1994 GHD in its draft supplementary submission was already able to say that the supplementary submission was "prompted by changes in engineering practices and knowledge that have occurred since preparation of [the 1992 rezoning application] and to respond to issues raised during the inquiry" [12/5]. 1352 On my findings it would not have taken more than one month, or at the most, say two to three months, for GHD, had it been retained to carry out this task months earlier, to discern that since preparation of the 1992 rezoning application there had been significant changes in engineering practices and knowledge which made it imperative, if a state-of-the-art presentation was intended to be put before any Commissioner of Inquiry in 1994, to review and as necessary update, the earlier application. On my findings there was ample time, had GHD been retained to carry out this task in December 1993 or in January or February of 1994 or even at or about early April when the HUTA was signed, for the task to have been carried out. 1353 A question may be suggested to arise, had there been insuperable difficulties with retaining GHD, as to what period of time it may have taken to retain an alternative group of reputable and experienced water resource engineers or environmental scientists and project managers to review the 1992 application and to come to the same conclusion. Clearly enough such an alternative group of experts would have required to take proper time to become seized of the detail of the 1992 application in order to then be in a position to comment on its possible updating. No evidence was led as to what period of time such an alternative group of experts would be likely to have taken in this regard. Bearing in mind the date by which the first set of submissions were ultimately required to be put into the Commission of Inquiry [16 June 1994], even if one allowed a reasonably leisurely period of three months from say 16 February to 16 May in which to permit such a new group to assess, comment upon and commence to update the 1992 application and allowed the joint venturers, with the assistance of such new group of experts, one further month in which to prepare and submit a preliminary form of updated formal submission, it seems to me open to infer that this could have been achieved. The inference is particularly able to be drawn when one takes into account as the assumption, the fact that the alternative group would be reputable and experienced water resource engineers or environmental scientists and project managers. The underlying point is that the first submission to the Commission of Inquiry is likely to have been a 1994 submission importing the then best practices. Even if such a submission had required to be supplemented later, it would not have been able to be so effectively undermined as outdated, as of course in fact occurred with the initial submission presented on behalf of the joint venturers. 1354 Bearing in mind the history of the land and the history of the dealings between the parties [up to say late January 1994], it is curious to say the least, that no steps were taken to retain a firm of solicitors as well as Counsel to prepare for the Commission of Inquiry and to present the joint ventures case at the inquiry. The selection of Lester Firth and Associates and in particular of Mr Lester to effectively coordinate and present the joint venture's case to my mind, without any disrespect to Mr Lester's obvious competence in his field, suggests that an altogether casual approach was taken to what must very obviously at the time have been justifiably expected to be, a difficult and complex and especially volatile inquiry [bearing in mind the many directly interested parties who had for so many years stringently opposed any notion of the rezoning]. 1355 Then there is the curious failure to have taken steps to closely examine what if any materials were to be found in the council's files relating to GHD's 1992 application. 1356 Particularly difficult to follow in the context of the events which happened is the apparent lack of communication to Mr Lester of the precise results of the negotiations which took place in early 1994 with GHD. with respect to its unpaid fees and with respect to whether and if so on what grounds and when, it might be prepared to accept a retainer to assist the joint venture in preparation for the Commission of Inquiry. On Mr Lester's evidence he had no doubt but that it was very important indeed that the question of GHD's availability be sorted out shortly. He had apparently, notwithstanding the pendency of the Commission of Inquiry, taken no particular active steps to approach the Mr Dransfield or Mr Hogarth seeking to find out what if anything had occurred in terms of resolving the difficulties with GHD. And apparently, as I understand the evidence, Mr Lester took no steps to directly approach GHD. in relation to that particular topic. As Mr Lester's essential instructions were coming from Mr Dransfield and sometimes from Mr Walker, and as Mr Hogarth was apparently to remain in the background, it is curious to say the least, that Mr Lester did not press Mr Dransfield or Mr Walker [or indeed Mr Hogarth or Mr Kidd I] to ascertain what result, if any, had been achieved on the disputes with GHD. 1357 There appear to be two strands, each of relevance or arguable relevance, in relation to the GHD position. The first is that until the Commission of Inquiry was appointed and the terms of reference signed off and possibly the Commission indicated the date by which it would require to receive submissions and the date when it would commence hearings, it is possible that Mr Walker, Mr Dransfield and Mr Lester thought it appropriate to hold back in endeavouring to follow up GHD. This was inadvisable to say the least, bearing in mind the crucial significance of updating GHD's 1992 report and even if the report had not required to be updated, of: (a) coming to appreciate that testing to confirm that the recommendations in the 1992 report were viable, should be started; (b) commencing such testing. 1358 The second strand is to focus upon who in fact approached GHD and when and what was the result and when was the result communicated and to whom. This strand throws up that Mr Kidd, by negotiating with GHD, had procured the Deed of Settlement of 9 March 1994. There is no evidence as to specific communication of the fact of or terms of that Deed from Mr Kidd or from the Hogarth Group's solicitors to the Walker Group or to the Walker Group's solicitors. The next relevant event appears to be Mr Kidd's memorandum of 15 April 1994, seeking to set out the agenda in anticipation of the first committee meeting and including one matter for consideration, being 'discuss and agree on areas of responsibility for various individuals with regard to the following . . . Relationship with GHD'. 1359 The next relevant event appears to be Mr Dransfield's facsimile to Mr Hogarth of 21 April 1994, sent following the then announced detail of when submissions would be due to the Commission of Inquiry. Mr Dransfield's note said 'we need access to GHD urgently.' Obviously by this point in time, Mr Dransfield was cognizant of the need to access GHD urgently. He appears to have appreciated that issue, possibly only by reference to the announcement of the Commission having been set up. He is not called to give any evidence as to why he took no action to check what the position with GHD before then was. 1360 The next relevant event appears to be the 29 April 1994 Meeting 10 position, where Mr Kidd's notes confirm that he is to send to Mr Dransfield a copy of the GHD settlement document. 1361 Presumably the correct inference to draw from these facts is that, notwithstanding the Deed of Settlement with GHD of March, this did not end the sensitivity which still existed between GHD and the Hogarth Interests. That sensitivity is referred to in Mr Lester's file note of 29 April 1994. It required to be overcome but had plainly not been attended to at all prior to 12 May when Mr Lester returned from Fiji and when there is discussion of GHD's support for Walker Corporation 'on a commercial basis'. Further discussion takes place with respect to GHD's reluctance to continued involvement with the past client groups and past experiences of GHD in that regard are apparently related at the meeting. Mr Conway, however, is said to have expressed support for Walkers - 9/195. 1362 The appropriate inference which I draw from the evidence is that the Walker Group simply never approached GHD seeking its support and offering to fund its involvement until very late in the peace and indeed until after the commencement of the Commission of Inquiry. As it was the Walker Group's obligation to handle the running of the approach to the Commission of Inquiry and generally in relation to seeking to procure the rezoning, on my findings it failed dismally in this regard. It is no excuse, to my mind, for the Walker Group to suggest that the Hogarth Interests needed to inform the Walker Group, and did not, that its past monetary disputes with GHD had been resolved by Deed. That is a matter which Mr Dransfield in particular, Mr Lester in particular and the Walker Group, ought to have been following up. Indeed the whole question of retaining experts as soon as it was appreciated that a Commission of Inquiry would be held, ie by mid December 1993, required the Walker Group to immediately set up a team to prepare for the Commission. Amongst its very first tasks would have been the obvious task of obtaining the 1992 GHD Report and then retaining GHD to update the Report and if this could not for any reason occur, to then retain other experts to do precisely that. And particularly in the absence of evidence having been adduced from Mr Walker or Mr Dransfield as to their then perceptions with respect to GHD it ill behoves the defendants to now suggest, when they give no evidence of this matter, that the court should infer that their responsibility in relation to retainer of appropriate experts to prepare for the Commission of Inquiry consensually hinged upon the Hogarth Interests reaching some form of settlement with GHD. The inference is that evidence on this issue from Messrs Walker or Dransfield would not have assisted the defendants' case. As Kitto J put it in Jones v Dunkel 101 CLR at 308: '. . . any inference favourable to the plaintiff for which there was ground in the evidence might be more confidently drawn when a person presumably able to put the true complexion on the facts relied on as the ground for the inference has not been called as a witness by the defendant and that the evidence provides no sufficient explanation of his absence . . .'. 1363 In all of those circumstances Mr Lester fell down in an important area which any responsible solicitor or barrister or expert familiar with Commissions of Inquiry [and familiar with the unusual background in which this Commission of Inquiry had sprung to life], would clearly have well understood as requiring critical attention. Mr Lester's evidence time and time again stressed that he had not seen water quality as the critical factor or as a dominant factor or as the only important factor during the run-up to the actual commission hearings. He did however, accept that at all material times he appreciated that it was an important factor but stressed that it was only one of a number of factors which to his mind would play an important role during the inquiry. 1364 It is then appropriate to focus on what steps would have been taken had the Walker group, rather than retaining Lester Firth and Associates, commenced in November of 1993 or even in January 1994, by retaining a team comprising a leading (or experienced) firm of solicitors, counsel including senior counsel and appropriate experts, for the purpose of preparing for the anticipated Commission of Inquiry. Any such team is certain to have begun by looking at the history and in particular at the documentary history, recording the many attempts by the Hogarth interests to interest the council and the relevant government departments in the proposed rezoning for the purpose of the proposed redevelopment of the subject lands. One of the particular purposes of setting out in this judgment in such detail the whole of the relevant history running back to the initial acquisition of the lands by the Hogarth interests, is to point up that a close reading of that history would have informed any competent team preparing for the anticipated Commission of Inquiry, of the significance attached to stormwater and water quality issues, of the many different types of proposal over the years in that regard, and most particularly, of the strength of opposition to a rezoning exhibited by the many interest groups in the years leading up to 1994. True it is that Mr Lester as he readily accepted, was aware by mid-May 1994 " that he had a fight on his hands" . Standing back from all of the evidence, to my mind Mr Lester ought to have realized that that was the case close to the commencement of his involvement with the enterprise. On my findings a competent team preparing for the anticipated Commission of Inquiry, would have come to realize that there was a fight on their hands literally within days of first obtaining access to Mr Hogarth's materials and certainly as soon as they would have commenced discussions with relevant council officers. Indicia in the evidence that stormwater issues were or should have been clearly in the forefront of Mr Lester's mind in preparing for the Commission of Inquiry 1365 The Commissioner reported that 'a number, if not most involved parties, consider water qualtiy (including impacts) is the most important issue' in relation to assessing the capability of the subject land to sustain urban development [19/117]. 1366 It follows that much of the plaintiffs' best endeavours case hinges on the alleged unreasonableness of Mr Lester in failing to grasp the special significance of the stormwater quality issue - indeed, that it would become the key issue before the Commission of Inquiry. 1367 A question therefore arises as to whether this focus was simply a personal focus of the Commissioner or whether it was such an obvious issue that a competent person preparing for a Commission of Inquiry would identify it as requiring special attention and thus ensure that submission material relating to stormwater quality would meet best practice as at 1994. [I interpolate to note what may be the inherent redundancy in this exercise given that a competent person seeking a positive recommendation as to rezoning before a Commission of Inquiry would ensure that all aspects of their submission accorded with best practice as at the time of submission, irrespective of whether a particular aspect was "important" or "the most important" at that time. Notwithstanding this, the point asserted by the plaintiffs is that the key importance of the water quality issue was so clear prior to the Commissoin of Inquiry that every effort ought to have been made to submit state of the art material in relation to the proposed water quality controls before the Commission of Inquiry.] 1368 To my mind, the key role that stormwater issues and water quality solutions were going to play before the Comission of Inquiry was, or ought to have been, clearly evident to Mr Lester in preparing for the Commission of Inquiry. The indicia which I find point to this conclusion, are, inter alia: · Classification of the Hacking River (into which stormwater from the LCE lands ultimately discharged) as a Protected ("P") River having the highest levels of protection under the Clean Waters Act 1970; · Location of the proposed development upstream of the Royal National Park; · The recommendation in the 1986 SPCC study that urban development in the Camp Creek catchment occur subject to the installation of appropriate water controls; · The focus in the Draft Helensburgh Plan 1990 on the feasibility of stormwater management controls in the Camp Creek catchment. The Commissioner, in reviewing the plan, reported at page 27 of his report that in relation to LCE, 'identification of a suitable site or sites for effective stormwater control measures was seen as a critical issue..' · Mr Hogarth's letter to the Minister for the Environment of late May 1990; · The Minister for Local Government and Planning 's letter to Mr Hogarth of 2 August 1990; · The October 1990 environmental impact report prepared by Kevin Mills and associates; · The 7 November 1990 letter from the National Parks and Wildlife Service to the council; · An overview of the 5000 submissions received following the public exhibition in the second half of 1990 of the draft Helensburgh plan; · The council officers report to the council of 18 April 1991 with respect to camps creek; · The terms of the GHD. 1992 application and in particular section 6 of that application; · The types of matter treated with at the late November 1992 seminar convened by the Helensburgh citizens committee; · The acknowledgment in the introduction of the Helensburgh Stormwater Management Strategy included with the 1992 GHD application that the stormwater issue is critical [4/167.9]; · The identification in the SCE 1992 report (which reviewed and commended the 1992 GHD application) of stormwater management and water quality as key issues; the emphasis in this report on the need for continuing development of the environmental data base and monitoring [5/007]; · Dr Yassini's report which was critical of the stormwater treatment measures presented in the 1992 GHD application; · The identified need to contact Dr Short for support in relation to the stormwater issue [8/199; 9/252-3; 9/254-5]; · Mr Lester's file note of conversation with Mr Woodward of the Department of Planning Wollongong on 3 December 1993 to the effect that the main issue was stormwater [7/60-62]; · The briefing note prepared by LFA for the Minister noting water quality as a major issue [8/28-32]; · The LFA file note of 10 May 1994 recording water quality as one of three particular concerns identified in many of the 5,100 submissions responding to **** opposing urban development [9/186-7]; · The knowledge, by 16 May 1994 that Council would oppose the rezoning on water quality grounds [9/235; Lester XX T1642]; · Mr Lester's file note of 16 May 1994 recording meeting with LW, PD and BH on 13 May 1994. Paragraph 3, 5, Action 4 re testing [9/216-8]; · Identification of 'water quality impacts' as the first issue in the terms of reference to be taken into account by the Commission in assessing the capability of the subject land. 1369 Standing back from the whole of the evidence I have formed a clear view that the approach by the Walker Group to the Commission of Inquiry, Mr Hogarth having expressly been relegated to a back seat in relation to the whole exercise, was an altogether lightweight and surprising one, in the circumstances where so much turned on the inquiry in terms of the vital interests of the joint venture. This was the joint venture's one chance to present and to present convincingly, a case for a rezoning . This was the joint venture's one chance to present such a case, presumably to a Commissioner with an open mind. To have blithely accepted the GHD 1992 application as still applicable some two years later · when GHD. had not itself had an opportunity to see whether it required to be updated, · when GHD's comments in relation to the earlier report of 12 May were plainly made in the absence of any fresh retainer or in-depth involvement in recent times, is to my mind, suggestive of a failure to appreciate the significance of the impending very close focus on the 1992 report, not only by the Commissioner, but of course by all the interested parties who would be opposing the suggested rezoning. Mr Lester's own file note earlier extracted at 7/60 of 3 December 1993 of his meeting with Mr Woodward of the Department of Planning at Wollongong, used the words 'the major issue now appears to be the "protected waters nature of Hacking River" . . .'. This was an express statement of the significance of that issue and ought to have alerted Mr Lester in no uncertain terms to the special significance of the issue. 1370 As neither Mr Dransfield nor Mr Walker who were principally involved in giving the direct instructions to Mr Lester, were called to give evidence, it is impossible for the court to know in any detail, their side of what in fact occurred. The court is left with the overwhelming impression that for whatever reason, the Walker group elected to use Lester Firth and Associates, and in particular Mr Lester, who had no relevant expertise in relation to commissions of inquiry, who failed to retain legal advisers until well after the commission had commenced, and who seemed content to move forward up to the filing of the first submission before the commission, by simply using the GHD. 1992 report as the operative vehicle to promote the joint venture's case. [Whilst Mr Lester at transcript p 1631 seemed to my mind to have difficulty in answering the question "Q. there was not one ounce of preparation on technical matters, was there? A. I would need to go through all of my file notes to and so that properly", on my findings the essential answer to that question on the evidence is in the affirmative.] 1371 Mr Ellicott did not shrink from strongly submitting that the court would make a finding that the real purpose of the Walker Group throughout was to achieve its float and to obtain the profits which came from the float. The following passages appear in the final address: 'HIS HONOUR: When you were opening the case I asked you about motive and you made some submissions in relation to what might or might not ultimately turn out to be the case and so in closing the case am I to take into account anything more than what you submit should be seen as ineptitude and professional ineptitude? Am I to go further than that and try to search through the evidence for any indication of why on earth that would be the case, where there is such an attractive prospectus and a large amount of money to be made through a development? It is something which logically a court would think about, presumably if both parties gave evidence. ELLICOTT: We ask your Honour to think about it and to make a finding about it, that the real purpose of the conduct of Walker in October/November through was to achieve what we have referred to as blue sky but to achieve a commitment in relation to the Helensburgh lands that they could use for the purposes of the prospectus , that that was their object in doing this, that it led to great profits to Mr Walker hugely substantial profits of $138.7million I think it is, and that the subdivision was not something which was other than a subsidiary part of their motives and intention at the time . Their capacity was such, that is to say their capacity and expertise was such that one does look about for some explanation as to why they didn't do it properly and we say they didn't do it properly because they didn't see it as their major commitment, their major commitment was to get the float and to get the profits which came from the float . There is a parity between the false and misleading conduct so far as Hogarth and Kidd were concerned and the false and misleading statements we say in the prospectus and the over-eagerness to obtain this led Walkers into grievous error . . .'. [Transcript 29 November 1999 page 16] [emphasis added] 1372 Whilst the evidence clearly leaves a hiatus as to how or why it came about that the Walker Group adopted such a light, insubstantial and ill thought through approach in relation to the Commission of Inquiry, the evidence does not permit of a finding as to whether or not the real purpose of the Walker Group was as suggested by Mr Ellicott QC. 1373 The characterisation of the conduct of the Walker Group suggested by Mr Ellicott in the passage extracted above would require detailed proof as it would suggest grave wrongdoing of the highest order in relation to a prospectus. [Pedler v Richardson (Unreported, Supreme Court of New South Wales , October 16, 1997, Young J)]. 1374 In the result, the allegation remains but an allegation. 1375 Mr Ellicott in written submissions referred to 'the defendants' dilemma', putting the case in the following terms: '1. It is apparent from the cross-examination that the Defendants approach is to show that it would have been unreasonable or foolish for Walker and Dransfield in the circumstances to make representations and promises along the lines alleged and equally unreasonable or gullible for Hogarth and Kidd to have believed them if they had been said. 2. Mr Shand's cross-examination accentuated the problems Hogarth had from time to time in seeking to obtain the re-zoning of the land. · his attempts to obtain Carr's support failed. Carr's opposition vivid 36-;41/5; · in 1989 things were going backwards 43/15; · rezoning a blow to Ensile's financial position 43/25; · got no good news from Ministerial visit 6/3/89, 44/25; · things regarded as desperate 45/10; · 1988 application to Council had floundered 46/2; · got no effective response from NPWS after Whitehouse left 79/35; · in 1990 the letter from Minister Schipp was a put off 91/40; · with Hay, Moore, Schipp getting no where 94/5, 94/45; · Hay's response unhelpful 95/25; · without agreement of the State Government doomed to failure 98/50; · NPWS letter no encouragement 127/6; · Hay's letter in 1991 not a good development 133/50; · No way of affecting Council's attitude in his favour 164/40; · NPWS refusal to allow treatment structure in 1991 a blow 166/1; · Westpac's attitude a frost for Hogarth 189/50; 3. Presumably Mr Shand was leading up to a proposition that the position was so hopeless no sensible person would make the promises and representations Hogarth and Kidd were alleging or if they did believe such promises or representations they would be foolish to do so. 4. See too Mr Officer's cross-examination. He took a similar approach. T589/602-50. 5. The aim was to suggest that these things could not have been said because they promise too much or if said could not be believed. 6. The Defendants face a dilemma because the Prospectus says in substance what Hogarth and Kidd say namely that Walker was saying that it was a near certainty that rezoning would take place . To succeed on this path the Defendants will prove the false and misleading nature of the Prospectus. The Plaintiffs submit that the Prospectus is not false insofar as it is asserting what Walker and Dransfield were saying around this time but could be false because they had no reasonable grounds for saying it. 7. The fact is that their covenant in clause 7.3(a) is reflecting precisely what Hogarth and Kidd said they said and what the Prospectus says. 8. Were they so sure of having a rezoning because they had a potential subdivision that was so good that they were prepared to make these statements or were they making the statements not believing them to be true in order to obtain an agreement which would enable them to add substantial "blue sky" to their Prospectus .' [emphasis added] 1376 I note that during the course of addresses some attention was given to the question of the defendants' submissions as to the period of time over which a practical experiment by way of relevant monitoring tests to establish water quality would have taken. Mr Leggatt of counsel for the defendants in being closely questioned in terms of just what could have been achieved by way of practical experiments of this nature, submitted that the evidence appeared to suggest that one approached the issue of the scientific question of examining what was the likely ramification of urbanisation on the particular parcel of land upon the protected waterway, by a series of steps including computer modelling. The steps, on Mr Leggatt's submissions, would take real time. And on Mr Leggatt's submissions there was simply nothing like sufficient time available for the steps to be taken so as to be able to be placed before the Commissioner during the course of the Inquiry. On Mr Leggatt's submissions "nothing could have been done … the period of time was just to small" [transcript 536]; "the reality was … that no practical experiment could have been carried out within the time" [transcript 537]. 1377 The transcript of argument includes the following: "HIS HONOUR: Well, it sounds as if one certainly couldn't have thought that construction could commence or a redevelopment commence in 94 or 95. LEGGATT: I think that's right, with respect, your Honour. HIS HONOUR: Well, on one view, or if the view is open that the prospectus said that, it was quite wrong. LEGGATT: Well, that may be a problem for other people on another occasion, but the evidence seems to support that as a proposition, that there needed to be a monitoring of the waters for at least a 12 month period. HIS HONOUR: If there was no proper basis on which, depending upon its construction, statements made in the prospectus were made, that would be a matter of serious concern. LEGGATT: Well, again, that is a matter for the defendants perhaps in another context, your Honour. HIS HONOUR: Yes. LEGGATT: And one needs to look closely at what basis the directors had for making the statements they made and look very closely at the temrs of those statement". [Transcript of 7.12.1999 at pages 537 and 538 - but see the address from pages 533 through to 539 for the full context which, at transcript page 537, also includes the following: HIS HONOUR: Well, on the basis that you've been putting to me, as I understand it, that this would be the net result of what had to have happened at that informal session, then there was no way in the world in which it would have been proper for any representations to have beeen made at all to the Hogarth interests that rezoning could be achieved within a reasonably short period because it would have been, to anyone who understood the real environment, a most unreasonable and unjustifiable thing to be able to say. It just couldn't have been appropriate because those in the know, with the expertise, would have known just what you have been putting to me. LEGGATT: That seems to be the reality and that is something the defendants will just have to live with".] [emphasis added] 1378 Mr Lester's leaving for a holiday in Fiji at a critical point in time in terms of preparation for the commission, itself speaks in terms of the lack of a relevant sense of urgency. At transcript p 1633.56 Mr Lester exposed his attitude that there was no particular urgency in needing to resolve the GHD position or to commission other experts to prepare an equivalent submission to address water quality [see also 8 / 199] By 11May 1994 Mr Lester was either concerned at the fact that GHD had not been retained and had obviously not yet carried out any further work in assisting for preparation for the rapidly approaching Commission of Inquiry, or not so concerned. On my findings he was very concerned and his evidence to the contrary is rejected. If Mr Lester was properly coordinating preparation for the commission he could not , without continued monitoring, have left it to Mr Dransfield to organise for GHD's retainer. 1379 Mr Lester of course stands on his many statements of the reassurances which he received from GHD on 12 May that matters concerning water quality and pollution control had been adequately and successfully resolved. 1380 The subject file note to be found at 9/195 repays close attention. It begins with Mr Dransfield opening the discussion 'basically acknowledging past the events and efforts at seeking GHD support for Walker Corporation in the current matter and on a commercial basis'. [I interpolate that there is no real evidence that GHD had given any support to Walker Corporation in the current matter and on a commercial basis at any time prior to this day]. 1381 Mr Conway of GHD, according to the file note, related some of the past experiences and 'a reluctance to continued involvement with the past client groups'. This does not suggest any involvement of GHD in recent times up to 12 May. The file note goes on 'however he expressed support for Walkers and discussion then focused on technical matters'. 1382 The relevant section of the file notes then reads: 'PD asked GH D. as the major planner if there were any issues that were outstanding or unsound · water quality and pollution control had been adequately and successfully resolved. Some critical comments were received from Dr Short (a local and respected scientist) however his comments were in the main supportive. The steepness of the control systems allowed water to become more aerated and thereby encouraged bacterial and nutrient breakdown.' 1383 The sentence underlined in the above passage appeared to be Mr Lester's sheet anchor whenever he was pressed as to why or how it had come about that GHD had not been involved in preparation in the run-up to the actual Commission of Inquiry, in settling or preparing for the joint venture's first submissions to the commission. 1384 Whilst Mr Lester's evidence clearly was that he relied upon GHD's statement that its 1992 application had adequately and successfully resolved water quality and pollution control issues, to my mind this evidence ought not to be accepted at face value. Whilst in the intervening period Mr Lester may have come to believe that this represented his then state of mind, in my view it is clear from the evidence that Mr Lester, having had no access to GHD over the previous months, and when gaining access to GHD on about 12 May, having done so in circumstances in which he had no reason for believing that GHD had done any recent work on its 1992 application, ought to have been vitally concerned at the state of affairs. If in fact Mr Lester did rely upon GHD's said statement, then he did so in circumstances in which such reliance was reckless. At the least it was incumbent upon Mr Lester to require GHD: · to reread its 1992 application and to make suggestions as to any possible improvements by way of any necessary updates warranted by changes in current water quality practices · to confirm that it had indeed spent time and care in critically analyzing its 1992 application in order to be in a position to make such suggestions. 1385 On my findings Mr Lester imposed no such requirements upon GHD. The Principles 1386 A series of decisions of the High Court of Australia have affirmed in recent years the principle that a contract to provide a commercial advantage or opportunity, if breached, enables the innocent party to bring an action for damages for the loss of that advantage or opportunity. [See in particular The Commonwealth v Amann Aviation Pty Ltd (1991) 194 CLR 64; Sellars v Adelaide Petroleum NL (1992) 179 CLR 332] 1387 The approach was explained as follows in Sellars: 'In the realm of contract law, the loss of a chance to win a prize in a competition resulting from breach of a contract to provide the chance is compensable, notwithstanding that, on the balance of probabilities, it is more likely than not that the plaintiff would not win the competition. (Chaplin v Hicks [1911] 2 KB 786; McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 at 411-412). As the contract contained a promise to provide the chance, the breach of the contract resulted in the loss of the chance and that loss was for relevant purposes, an actual loss, in the sense in which Dixon and McTiernan JJ used that expression in Fink v Fink [(1946) 74 CLR 127 at 143]. And where there has been an actual loss of some sort, the common law does not permit difficulties of estimating the loss in money to defeat an award of damages . . . The damages will then be ascertained by reference to the degree of probabilities, or possibilities, inherent in the plaintiffs succeeding had the plaintiff been given the chance which the contract promised. This approach is not confined to contracts relating to games of chance, sporting contests or other competitions . . . So in The Commonwealth v Amann Aviation Pty Ltd, Mason CJ and Dawson J, . . . Brennan J . . . and Deane J . . . concluded that a lost commercial advantage or opportunity was a compensable loss, even though there was a less than 50 per cent likelihood that the commercial advantage would be realised. Damages for breach of contract were assessed by reference to the probabilities or possibilities of what would have happened.' [ Sellars at 349 per Mason CJ, Dawson, Toohey and Gaudron JJ; and see in particular Deane J in Amann at 118-126]. 1388 The principle had been explained in 1970 by Lord Diplock as follows: 'The role of the court in making an assessment of damages which depends upon its view as to what will be and what would have been is to be contrasted with its ordinary function in civil actions in determining what was. In determining what did happen in the past a court decides on the balance of probabilities. Anything that is more probable than not it treats as certain. But in assessing damages which depend upon its view as to what will happen in the future or would have happened in the future if something had not happened in the past, the court must make an estimate of what the chances are that a particular thing will or would have happened and reflect those chances, whether they are more or less than even, in the amount of damages which it awards.' Mallett v McMonagle [1970] AC 166 at 176 [emphasis added] 1389 Dealing specifically with the plaintiffs' entitlement to recover the value of a lost opportunity, even if its chance of materialising was less than 50 per cent, Waddams 'Damages: Assessment of Uncertainties 11 (1988) 13 Journal of Contract Law, 55 at 60-61 explains the matter thus: 'In Chaplin v Hicks, [1911] 2KB 786, the plaintiff was one of 50 persons shortlisted for 12 positions. The defendant, in breach of contract, deprived her of the opportunity of being interviewed, and she was not appointed. The decision of the English Court of Appeal upholding a jury award for the value of the lost chance has been widely followed in Commonwealth jurisdictions. Again where the defendant negligently permits an action to become statute barred, (Kitchen v Royal Air Force Association [1958] 1 WLR 563 (CA); Prior v McNab (1976) 78 DLR (3d) 319 (Ont HC) or fails to take steps that would have given to the plaintiff's land a chance of profitable rezoning (Multi-Malls Inc v Tex-Mall Properties Ltd (1980) 108 DLR (3d) 399, affd 128 DLR (3d) 192n (Ont CA), the plaintiff recovers damages, even though the chance of success of the action, or of the rezoning application, may have been 50 per cent or less. It is reasonably clear in these cases that the plaintiff has lost something of real value: an action with a 40 per cent chance of success has a real 'settlement value'; land with a 40 per cent chance of profitable rezoning is more valuable than land without it. The principle here is not, strictly speaking, one of apportionment. The defendant is liable for the full loss caused, but valuation of that loss requires the consideration pf probabilities . In the land rezoning case it is very clear that this is the proper approach, because evidence could often be adduced to show that the land had a certain market value without the chance of rezoning, and a higher market value with it. The defendant's wrong deprives the plaintiff of the difference. It is not necessary, however, that there should be any sort of actual market: in Chaplin v Hicks, the plaintiff could not in fact have sold her opportunity, but it was sufficient that she had been deprived of 'a right of considerable value, one for which many people would give money'. [Fletcher Moulton LJ at 797]… The principle of measuring compensation according to the value of an opportunity, even if less than 50 per cent, was recognised in the Amman case . . . in the context of a claim for reliance expenses, where other uncertainties were the probability that the government would have cancelled the contract lawfully even if it had not repudiated it, and the possibility that the contract would have been renewed on favourable terms after its expiry. The plaintiff received compensation for these possibilities, even though in respect of each an outcome favourable to the plaintiff could not be shown to have been more probable than not. In Sellars v Adelaide Petroleum NL, the High Court of Australia adopted the same approach to valuation of a loss of commercial opportunity in a case arising under the Trade Practices Act.' 1390 The passage from the joint judgment in Sellars at 355 reads: '. . . the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities. It is no answer to that way of viewing an applicant'' case to say that the commercial opportunity was valueless on the balance of probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable.' 1391 As Waddams (supra) reminds us at 66: 'This two-step analysis ensures compensation according to probabilities, as in Chaplin v Hicks. The plaintiff established first that she had lost 'a right of considerable value'; it then followed inevitably that the court must give due compensation for the loss, and that the compensation would be measured according to the probability of success.' 1392 The resultant standard of proof analysis is explained by Waddams at 66 as follows: 'It should be noted also that the conclusion reached in Sellars does not necessarily imply that the burden of proof on the question of quantification is any less than the usual standard of proof on the balance of probabilities: the result may be explained by saying that the plaintiff did prove (on the balance of probabilities) the value of the chance he had lost, that value depending on probabilities.' 1393 In the result, the court's task in determining damages for what on the evidence was the plaintiffs' undoubted loss in this case of the optimal commercial opportunity of procuring a rezoning of the LCE lands must be ascertained by reference to the court's assessment of the prospects of success of that opportunity had it been pursued by the Walker Group using their best endeavours. Difficulties of Assessment 1394 It is also clear that the mere fact that damages cannot be assessed without difficulty and uncertainty does not relieve the court from its undoubted responsibility of attempting to assess those damages as best it can - per Deane J in Amann at 125 - who cites the following passage from the judgment of Dixon and McTiernan JJ in Fink v Fink: 'Where there has been an actual loss of some sort, the common law does not permit difficulties of estimating the loss in money to defeat the only remedy it provided for breach of contract, an award of damages.' [(1946) 74 CLR at 143] 1395 However, Deane J does in Amann lay down one caveat of importance: 'There are, however, extreme cases in which curial procedures are simply inadequate to determine whether there was any real or significant chance that an alleged benefit would actually have been obtained but for the repudiation or breach of contract or to assess the intrinsic worth of a particular suggested "benefit". The profit which one experienced commercial person may see as lying at the end of some commercial undertaking might be seen as an inevitable and disastrous loss by another. What seems to one person to be a benefit may be thought by other and wiser people to be valueless or even a detriment. The nature of what would have been obtained if the contract had been performed may be so completely speculative that "it is quite impossible to place any value" upon it . . . In such cases, recovery of other than nominal damages by the plaintiff will depend either upon the applicability of principles of restitution to enable the direct recovery of a benefit obtained by the defendant or upon the presumption of value referred to in the following paragraph to enable the recovery of wasted expenditure.' [174 CLR at 125-126] 1396 The same point was made by Latham CJ and Williams J in Fink v Fink (supra at 134): 'The damage arising from loss of opportunity to obtain a benefit may be so dependent upon a number of contingencies as to be negligible (Sapwell v Bass (1910) 2 KB 486).' 1397 To my mind, the present case falls outside the parameter raised by this caveat. The nature of what would have been obtained if the contract had been performed is not completely speculative so that it is not possible to place any value upon it. The damage arising from the lost opportunity is not so dependent upon the number of contingencies to be taken into account as to be negligible. Notwithstanding the several tiers of uncertainty raised by the difficulties posed by the whole of the process commencing with the Commission of Inquiry and following through into the examination of the several possible sets of recommendations which may have emanated from it and then through the political minefield including consideration of the Minister's discretion, I am clearly satisfied on the evidence that the plaintiffs lost a valuable commercial opportunity by reason of the conduct in breach of contract, of the Walker Group. I am satisfied on the evidence that once the Commission of Inquiry had been announced, the chance that a properly prepared and presented case would ultimately, following recommendations to this effect, have led to a rezoning although very far from certain, was by no means fanciful or negligible. 1398 The court must then do the best that it can to assess the value of the loss: 'If the plaintiff proves that the defendant has caused a loss, the impossibility of proving the precise value of the loss "cannot relieve the wrongdoer of the necessity of paying damages". The court, whether judge or jury, will do "the best it can". The plaintiff must prove what she can reasonably be expected to prove, and will suffer if she fails to adduce relevant evidence within her control, but where the uncertainty is not of the plaintiff's making, and she has suffered a real loss, the court will attempt to assess it, however difficult the task.' [Waddams supra at 60 citing Wood v Grand Valley Railway Co (1915) 51 SCR 283 at 289; Penvidic Contracting Ltd v International Nickel Co of Canada Ltd [1976] 1 SCR 267 at 280.] 1399 In Sellars, Brennan J points out at 365 that 'in the progress of events a point is reached at which it can be said that the plaintiffs had a substantial prospect of acquiring the benefits they were seeking. 1400 Brennan J then at 365-367 refers to the way in which a court views the material bearing on the relevant issues: 'As the existence and assessment of the value of a valuable opportunity usually depend on an evaluation of hypothetical situations or future possibilities, it is clear that the manner in which a plaintiff discharges the onus of proving his case is different from the manner in which he would discharge it if an issue depended upon the existence of historical facts. In Malec v. J. C. Hutton Pty. Ltd. …. Dawson J. and I observed: "Hypothetical situations of the past are analogous to future possibilities: in one case the court must form an estimate of the likelihood that the hypothetical situation would have occurred, in the other the court must form an estimate of the likelihood that the possibility will occur. Both are to be distinguished from events which are alleged to have actually occurred in the past." We cited what Lord Diplock said in Mallett v McMonagle: [the above cited extract is then set out] In Malec (95) Deane, Gaudron and McHugh JJ. Said: " When liability has been established and a common law court has to assess damages, its approach to events that allegedly would have occurred, but cannot now occur, or that allegedly might occur, is different from its approach to events which allegedly have occurred. A common law court determines on the balance of probabilities whether an event has occurred. If the probability of the event having occurred is greater than it not having occurred, the occurrence of the event is treated as certain; if the probability of it having occurred is less than it not having occurred, it is treated as not having occurred. Hence, in respect of events which have or have not occurred, damages are assessed on an all or nothing approach. But in the case of an event which it is alleged would or would not have occurred, or might or might not yet occur, the approach of the court is different. The future may be predicted and the hypothetical may be conjectured." These observations relate not so much to the standard of proof as to the way in which a court views the material bearing on the issues for determination. They can affect the determination not only of the issues of loss and its assessment but also the issue of causation .' [emphasis added] 1401 Dealing more particularly with causation, Brennan J observes at 367-368: 'But what is the standard of proof in cases where the issue of causation depends on competing hypotheses? There is no reason why the balance of probabilities should not be the standard of proof required to establish both causation and the existence of a loss, though that standard is inappropriate to the assessment of the amount of a loss where the assessment is merely an evaluation of future possibilities. In Bennett v. Minister of Community Welfare, Gaudron J. said: "It might be said that, where questions of causation depend on hypothetical considerations, allowance should be made, as in the assessment of damages, for the possibility that some event would not have occurred. Possibilities, if they are not fanciful, must be taken into account, at least in a general way, when ever causation or the related issue of prevention is in issue. But questions of that kind are not answered 'maybe' or, even, 'more probably than not'. They are answered 'yes' or 'no' depending on the probabilities for or against. In this respect, they are indistinguishable from the question whether an event happened where possibilities are taken into account but, once the question has been answered, those possibilities have no further bearing on the matter." I respectfully agree. Unless it can be predicated of an hypothesis in favour of causation of a loss that it is more probable than competing hypotheses denying causation, it cannot be said that the plaintiff has satisfied the court that the conduct of the defendant caused the loss. Where a loss is alleged to be a lost opportunity to acquire a benefit, a plaintiff who bears the onus of proving that a loss was caused by the conduct of the defendant discharges that onus by establishing a chain of causation that continues up to the point when there is a substantial prospect of acquiring the benefit sought by the plaintiff. Up to that point, the plaintiff must establish both the historical facts and any necessary hypothesis on the balance of probabilities. A constant standard of proof applies to the finding that a loss has been suffered and to the finding that that loss was caused by the defendant's conduct, whether those findings depend on evidence of historical facts or on evidence giving rise to competing hypotheses. In any event, the standard is proof on the balance of probabilities. Although the issue of a loss caused by the defendant's conduct must be established on the balance of probabilities, hypotheses and possibilities the fulfilment of which cannot be proved must be evaluated to determine the amount or value of the loss suffered. Proof on the balance of probabilities has no part to play in the evaluation of such hypotheses or possibilities: evaluation is a matter of informed estimation.' [emphasis added] 1402 The principles then appear to include at least the following : 1. The requirement that a plaintiff prove a breach of a relevant contract term. 2. The requirement that such breach be proven to have caused the loss of the chance of a commercial advantage or opportunity. 3. The usual onus of proof applies to the issues of : (a) causation (b) whether the plaintiff has suffered loss or damage. 4. In this class of case, the plaintiff will show that some loss or damage has been sustained by showing that the defendants' relevant breach caused the loss of a commercial advantage or opportunity which had some real value (not being a negligible value) - that value being measured or determined by reference to the degree of probabilities or possibilities. The defendant is in fact liable for the full loss caused, but valuation of that loss requires the consideration of probabilities or possibilities inherent in the plaintiff's succeeding had the plaintiff been given the chance which the contract promised. 5. The lost commercial advantage or opportunity is a compensable loss even though there may have been a less than 50% likelihood that the commercial advantage would be realised. And in contradistinction to the requirement to establish on the balance of probabilities the issue of a loss caused by the defendants' conduct, hypotheses and possibilities the fulfilment of which cannot be proved must be evaluated to determine the amount or value of the loss suffered. In this area evaluation becomes a matter of informed estimation, proof on the balance of probabilities having no part to play in the evaluation of such hypotheses or possibilities. 6. Extreme cases do arise in which curial procedures are inadequate to : (a) determine whether there was any real or significant chance that an alleged benefit would actually have been obtained but for the contractual breach; (b) assess the intrinsic worth of a particular suggested 'benefit'. In particular - the nature of what would have been obtained had the contract been performed, may be so completely speculative that it is quite impossible to place any value upon it. - the damage arising from the lost opportunity may be so dependent upon a number of contingencies as to be negligible. In such cases, nominal damages only will often be appropriate. Recovery beyond nominal damages will depend either upon the applicability of restitutionary principles to enable the direct recovery of a benefit obtained by the defendant or upon the presumptions of value (referred to by Deane J in Amann at 126-127) to enable the recovery of wasted expenditure. Applying the principles 1403 On my findings and for the reasons earlier set out, Mr Walker and Walker Consolidated, in conducting the joint venture case before the Commission of Inquiry [the word 'conducting' is used loosely as it was during the hearing, to include steps taken, or omitted to be taken, both before the Commission commenced to sit and during the Commission sessions], clearly acted in breach of their covenants to use their best endeavours: - to secure the rezoning of the Ensile land promptly so as to enable the residential subdivision and development of the Lady Carrington Estate by the use of their expertise. 1404 On my findings those breaches have clearly been proven to have caused the loss of the chance of a commercial advantage or opportunity which had a very real and certainly not a negligible value. This issue has been referred to earlier in the judgment. My finding is that the plaintiffs, by reason of the breach, suffered initially the loss of the chance of obtaining a more favourable recommendation from the Commissioner. 1405 Mr Walker's breach was a breach of the oral agreement pleaded in the Contentions paragraph 26(c), but more importantly was a breach of the implied term to be found in the Heads of Agreement. 1406 Walker Consolidated's breach was a breach of the HUTA. 1407 Earlier in the judgment I referred to certain questions which may arguably arise in terms of differentiating between Mr Walker's obligations and those of Walker Consolidated. No point was taken during the hearing in terms of the defendants [for whom only one set of counsel appeared] seeking to limit the liability of Walker Consolidated by suggesting that: (a) its contractual obligations sprang up only upon the execution of the HUTA; (b) that any loss suffered by the plaintiffs could and should be sheeted home to breaches by Mr Walker of the implied best endeavours covenant in their Heads of Agreement, he having been the party to the Heads of Agreement. 1408 Nor was any point taken during the hearing in terms of the defendants seeking to limit the liability of Mr Walker under the implied best endeavours covenant in the Heads of Agreement, by suggesting that: (a) his contractual obligations under the Heads of Agreement ended upon execution of the HUTA; (b) any loss suffered by the plaintiffs could and should be sheeted home to breaches by Walker Consolidated of the implied best endeavours covenant in the HUTA. 1409 However, the distinct but related obligations cast on Mr Walker and Walker Consolidated by (respectively), the Heads of Agreement and the HUTA and the distinct breach of each, create difficulties in assessing the casual relationship between the individual breaches and the ultimate loss. 1410 A party to a breach of a contract is, of course, only liable for damage caused by that breach. But the breach need only be a cause of the damage, it need not be the sole or predominant cause: Alexander v Cambridge Credit Corporation (1987) 9 NSWLR 310 at 314-315 per Glass JA, at 330 per Mahoney JA, at 349, 357 per McHugh JA. In determining what damage was caused by the distinct breaches of the Heads of Agreement and the HUTA there are, it seems to me, three approaches: (i) to regard the breach of the Heads of Agreement and the HUTA as sufficient causes of the total loss suffered by the plaintiffs; that is, both individually and in combination caused the loss suffered by the plaintiffs. As both the breaches would be regarded as a cause, any assessment of the relative causal weight is irrelevant: Alexander v Cambridge Credit Corporation (supra) at 315 per Glass JA; To adopt this approach would not be to regard the breach of the HUTA merely as a subsequent act with the potential to cause damage which was already caused by the breach of the Heads of Agreement (cf. Performance Cares v Abraham [1962] 1 QB 33); nor, to admit to any uncertainty as between which of the actions caused the damages (cf. Nesterczuk v Mortimore (1965) 115 CLR 140 at 158 per Owen J), but to view the breaches as two wrongful actions, independently causing the same loss. In such circumstances, authority indicates that liability is cast on all wrongdoers: HLA Hart and T Honore, Causation in the Law (1988) Oxford: Clarendon Press, pp 235-236, Boska v Sterling Drug Co (1969) 416 F (2d) 417. As was said by Learned Hand J in Navigazine Libera v Newtown Creek (1938) 98 F (2d) 694 at 697, the wrongdoer 'cannot be allowed to escape through the meshes of a logical net'. (2) to regard the assessment of the relative causal weight as a task so complex such as to attract the presumption against wrongdoers, resolving against the wrongdoer doubtful questions where their actions have made an accurate determination of damages problematic: see LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (1990) 24 NSWLR 499 at 508 per Hodgson J, Houghton v Immer (No. 155) (1997) 44 NSWLR 46 at 59 per Handley JA. So in Mortimer v Cradock (1843) 12 LJCP 166, the inability of a defendant to differentiate the various parts of a diamond necklace led to the defendant paying damages based on the whole; (3) to regard the respective breaches of the Heads of Agreement and the HUTA as individually causative of part only of the ultimate loss suffered by the plaintiff, and to award damages based on an assessment of how much of the loss of the plaintiff can be said to have been caused by the breaches of Mr Walker and how much can be said to have been caused by the breaches of Walker Consolidated. 1411 A fourth method of resolving the difficulty caused by the distinct obligations created by the Heads of Agreement and the HUTA would be to regard the latter as effecting some form of novation of the former. 1412 No submissions were addressed by either party suggesting that a novation had occurred. The analysis which follows suggests that the parties correctly determined that a novation would not be inferred. 1413 In terms quoted with approval by Windeyer J in Olsson v Dyson (1969) 120 CLR 365 at 368, Lord Selbourne defined a novation as follows: "there being a contract in existence, some new contract is substituted for it either between the same parties or between different parties; the consideration mutually being the discharge of the old contract" - Scarf v Jardine (1882) 7 App Cas 345 at 351. The novaton may be effected expressly or tacitly. A tacit novation may be inferred by the creation of a latter obligation inconsistent with a former obligation: Olsson v Dyson (supra, at 390 per Windeyer J), or may be inferred where one party to an existing contract knowingly continues to carry on business where the second party is succeeded by a third: see, for instance, In re Head; Head v Head [1894] 2 Ch 236, Abbott v Hessen (1913) 15 WALR 80, Chatsworth Investments Ltd v Cussins (Contractors) Ltd [1969] 1 WLR 1 at 4 per Lord Denning MR. 1414 The typical novation occurs in a tripartite debt situation, where one debtor or creditor is substituted for another: Toikan Internatonal v Plasteel Windows (1989) 15 NSWLR 641 at 645 per Samuels JA. In this instance a threshold difficulty is created because rather than there being three contracting parties there are in fact four: Mr Walker and Mr Hogarth as parties to the Heads of Agreement and Walker Consolidated and Lakatoi as parties to the HUTA. Although Lord Selbourne's definition in Scarf v Jardine (supra) would, in strict terms, allow for a novation in such a situation, his Lordship's concluding phrase may suggest that the current situation would not permit an inferred novation. 1415 As Lord Selbourne makes clear, the consideration for a contract created by novation is the discharge of the obligations under the old contract. But where, as here, there are four parties, the latter contract between two parties distinct from the parties to the first contract, the discharge of the first contract can provide no consideration for the entry into the second. It is elementary that the consideration for a contractual promise must move from the promisee: Coulls v Bagot's Executor and Trustee Co Ltd (1967) 119 CLR 460 at 495 per Windeyer J. Here the parties to the second contract had no rights under the first and, therefore, could not discharge those rights as to provide consideration for the second. No doubt this reasoning underlies those definitions of novations that in terms restrict it to the tripartite situation: see Scruples Imports Pty Ltd v Crabtree & Evelyn Pty Ltd (1983) 1 IPR 315 at 320 per Powell J (as he then was), quoted with approval by Carruthers J in Export Corporation v Asia Australian Express Ltd (1990) 19 NSWLR 285 at 295; DW Greig and JLR Davis, Law of Contract (1987, LBC, p 1023). 1416 Moreover, the evidence as presented to the Court does not reveal that a novation was ever expressly adverted to by the parties and there is insufficient in the facts to infer a novation of the best endeavours obligations from Mr Walker to Walker Consolidated. As Nathaniel Lindley in his text on partnership said (Lindley on Partnership, 6th Edition, p 246, quoted with approval by Farwell J in British Homes Assurance Corporation Ltd v Paterson [1902] 2 Ch 405 at 409) it is necessary to show that the party to whom the obligation is owed 'by some act of his own … accedes to the substitution' of obligors. In Re European Assurance Society Arbitration Acts and Wellington Reversionary Annuity and Life Insurance Society (1875) 1 Ch D 335 the assignment of liability from one insurer to another was held not to effect a novation for the assured was not fully aware of the transfer and the conditions of her insurance policy remained unchanged. Not dissimilarly, at the posited time Mr Hogarth had insufficient knowledge to allow an inference of novation. 1417 The division of causative elements issue is further dealt with below. 1418 Was there then a real (as opposed to a fanciful or negligible) chance that a more favourable recommendation by the Commissioner would have been implemented in the political climate of the day and that the sought after rezoning would thus have been achieved? Integral to a determination of this question is an assessment of such probability. 1419 The issue has already been referred to. The background context has been set out. A number of relevant factual findings have been given. My further findings are set out below. Implementing a more favourable recommendation by the Commissioner 1420 The plaintiffs submit that the length of time it might have taken to achieve rezoning after a more successful report would depend on what view the court adopted as to the likely nature of the successful report. They submit that if the view was that the Commissioner would have recommended subdivision and left the trials to the development application stage, the matter would have been concluded as far as the Commission was concerned in favour of LCE. Alternatively, they submit that if the view was that the Commissioner would have awaited the results of the trials, there was a very good chance that in those circumstances the trials could have been completed within a short period sufficient to satisfy the Commissioner on an adjourned date, that the residential subdivision could be recommended [Plaintiffs' submissions in reply - Sections E, F & H, para 13]. 1421 Mr Smyth gave the following evidence in relation to the process of implementing a positive recommendation from a Commissioner, that recommendation being subject to further testing: Q. Would you go to paragraph 4.1 of your statement of 11 February? You say there "in my opinion it was critically important for the land owners to win at the Commission of Inquiry". Would you explain to his Honour what you mean by the word "win" ? A. Obtain a recommendation from the Commission of Inquiry that the land should be re-zoned. Q. Would that be qualified or be subject to other recommendations? If so what? A. * We normally follow recommendations in regard to points that the Commissioner was concerned about and studies and so forth. The process from a recommendation from a Commission of Inquiry to re-zoning would involve subsequent studies and more detailed planning by the council in preparation of the development control plan to guide the subdivision. That would initially be based on any studies that the Commissioner recommended or that the council decided to undertake itself . ELLICOTT: Q. In relation to the re-zoning in terms of what you say is a win, would there in your view be recommendations and if so what recommendations? Could you specify those? A. The Commissioner would have recommended a study to address matters that were of concern to him , such as the finalisation of the storm water management plan, such as a more detailed examination of the ridge areas and the LC north in regard to preservation of vegetation and the design of any subdivision in those lands. Probably into staging of the release area and those studies would have led to council's development control plan that would define the subdivision and layout of the roads and space and the allotment sizes in relation to vegetation and soforth. Q. What in your opinion would be the period of time which it would take from the time of the report until when the actual development application could go in-- OBJECTION…… OFFICER: The question seems to have jumped from the report of the Commissioner to a stage post-zoning when there is re-zoning, if there be any, when you get a development application. ….. OFFICER: My friend's earlier question related to what "win" meant, what recommendations and the witness has explained that. We are now moving or seeking to move, my friend is, from the timing of the recommendations to when one lodges a development application, as I understand it, for the subdivision. HIS HONOUR: Unless I mistake the position, one is now in an unexceptional area in terms of the assumed position which evidence has been given, which goes to mainly an assumption of something different to what in fact occurred and an assumption that the Commissioner produced recommendations which would have, in the ordinary course of events, gone a number of stages. We are not dealing with any problems with councils or anything like that. It is just a direct assumed situation and the assumption is that the Commissioner had handed down an entirely different form of recommendations. Now I gather if I am correct, Mr Ellicott is asking within what period of time would this witness say those recommendations would have actually led to a re-zoning, is that correct? ELLICOTT: That is the substance….. ELLICOTT: Q. You have given an answer in relation to the form of recommendations and the studies that would be made. I want you to answer this question. What time in your opinion would it take from the time of the recommendations being handed down until, and I think you said the lands would go into the council's urban development program, is that right? A. No. In response to your question the process after the Commission of Inquiry would take approximately two years, two to three years, to have the land re-zoned with the development control plan that control the subdivision which would then allow a development application or a subdivision application to be made.' [T1119-1120 - emphasis added] 1422 It appears from this evidence that in Mr Smyth's view, even if the joint venture had prepared and presented the plaintiffs' hypothetical 'best case' to the Commission of Inquiry and the Commissioner was thus persuaded to hand down a recommendation favouring rezoning, it is inevitable that the Commissioner would have required further studies to 'address matters that were of concern to him'. 1423 My finding in the light of this evidence is that the first of the plaintiffs' proposed scenarios, that is, that the 'Commissioner would have recommended subdivision and left the trials to the development application stage' (see above), is unlikely. 1424 Mr Smyth's further evidence, that a development control plan would then be developed based on such studies or on studies initiated by Council and that that process would take two to three years, is clearly based on the assumption that the results of the further studies would necessarily allay such concerns that the Commissioner may have had and/or satisfied Council. 1425 While I accept Mr Smyth's evidence as to the process of implementing a positive recommendation given his uncontroverted experience with Commissions of Inquiry, in dealing with the plaintiffs' best endeavours case, it is necessary to keep in mind the importance of generally delineating the relevant tiers of the hypothetical that go to the Amann assessment of damage. 1426 Whilst it is difficult in the extreme in a case such as the present to reach any clear findings as to what is likely to have occurred with what degree of probability had Walkers conducted the joint venture case before the Commission of Inquiry in the manner put forward by the plaintiffs as being appropriate, my findings on the evidence is that there was clearly a chance that: (i) the Commissioner would have handed down a different set of recommendations; (ii) those recommendations would have favoured rezoning subject to further testing; (iii) the period of this testing would have been for 1 to 3 years; (iv) such testing would have proved the viability of the proposed environmental management plan (be it in relation to stormwater controls, to the preservation of vegetation on ridge areas or other specified area of concern) to the satisfaction of the relevant decision-maker (be that the Commissioner having adjourned the Inquiry to await the test results, or Council and/or some other decision-maker, having been entrusted by the Commissioner to make the necessary assessment); (v) any tests required to be undertaken by Council for preparation of the development control plan would have proved viability; (vi) the draft LEP proposed by Council and ultimately endorsed by the Minister would not have been so endorsed; (vii) the development control plan would have been duly made; (viii) the political climate would have been such that the rezoning would have been implemented. 1427 It is unnecessary to be precise as to exactly how the Council would have seen the satisfactory testing and/or the Minister of the day acted. The court is dealing with evaluation by way of informed estimation of hypotheses and possibilities. 1428 The Minister of course had a discretion and an obligation to give proper consideration to how that discretion should be exercised in all of the circumstances. As a matter of law he was not able to fetter that discretion [cf. Minister for Immigration v Kurtovic (1990) 92 ALR 93, and in particular the judgment of Gummow J at 108-109]. It is clearly arguable that the terms of the Minister's undertaking to the Council purported to fetter that discretion. Hence it is clearly possible ,had pressure been brought to bear upon the Minister following more favourable recommendations by the Commissioner, that the Minister would have been persuaded (or by curial proceedings been ordered), to give proper consideration to the manner of exercising his discretion. 1429 And as I have said, in considering generally the approach which may have been taken by the Labor government, the court's task is one of the evaluation, by way of informed estimation, of hypotheses and possibilities. A paradigm shift would have taken place in the environment had the Commissioner recommended in principle support for rezoning subject to final testing being consistent with preliminary testing to approve the validity of the proposed environmental management plan, particularly as it pertains to water quality control. One indication of the attitude of the Minister is that which appears from the last paragraph of his letter to Mr Walker of 14 September 1995 extracted earlier in this judgment. The Premiers indication is said to have been "that the government will not support further expansion at Helensburgh at least until the studies are finalised". The date is significant. This is close to six months following the election. But what is especially significant is the implicit suggestion that the government may well support such further expansion when the studies are finalised. Certainly the Minister could not be said to have indicated that the door was firmly closed on the government supporting further expansion at Helensburgh. 1430 The above consideration in itself is sufficient to permit the court to infer that the hoped for rezoning was achievable notwithstanding the earlier indications that, if elected, the Labour government would ignore the recommendations of the Commission. 1431 A further approach may permit the same inference. This approach looks to the position as it appeared as at the date of the prospectus. If it be correct that as at that date, a reasonable perception of the somewhat complex political situation, was that the hoped for rezoning was achievable , then one may be entitled to infer that this position would have continued. 1432 This approach raises a question as to what if any inferences may be drawn as to what may have passed between Mr Walker and the Minister in their discussions prior to issue of the prospectus on 22 February 1994. It was the defendants who strongly contended during the proceedings that the evidence clearly proved Mr Walker's appreciation of the political scene. The evidence clearly does prove that appreciation. Plainly Mr Walker had political influence of high order. Equally plainly the court may infer that in the discussions between the Minister and Mr Walker, the political dimensions of appointing a Commission of Inquiry and of a possible rezoning of Helensburgh are likely to have been discussed. 1433 In the light of the above considerations it is unnecessary for the court to place and I do not place any probative value on Mr Smyth's evidence as to the size of political donations being taken into account by or influencing ministers in exercising their relevant statutory discretions. My Smyth's personal experiences may or may not furnish a sound basis for his evidence in this regard but those experiences were not illustrated by any concrete instance of the influence having been brought to bear. The court would need very particular cogent evidence indeed in order to rely upon Mr Smyth's evidence in this regard as a factor underpinning a finding as to the approach which may have been taken by the Labor government in the circumstances. The manner in which the evidence was given, the relatively loose and expansive approach taken in giving this evidence, the lack of detail given in relation to the allegations, the manner in which Mr Smyth was content to refer to "the ministers I worked with" [in general without being precise by way of both naming any particular minister together with giving any concrete instance to justify an allegation that such minister was capable of being influenced, when this self-evidently would be contrary to their public duty], all combine to suggest that no reliance ought be placed on allegations of such a serious nature. 1434 Is it then permissible to infer that Mr Walker would have been informed by the Minister that the appointment of a Commission of Inquiry could only take place if the Minister undertook to the Council that whatever the outcome of the Inquiry, he would refer the final decision to the Council? 1435 It is here that an important area of uncertainty arises which presumably could clearly have been cleared up had Mr Walker elected to give evidence. Had Mr Walker been informed by the Minister that the only route by which the Minister could appoint a Commission of Inquiry would be in tandem with the subject undertaking having to be given to the Council and honoured , then the question which arises is whether in those circumstances, it was it proper for the Walker Group to put out a prospectus which clearly represented to readers that "there [was] a very high level of certainty that [necessary approvals] [would] be granted".? 1436 The court is entitled to infer that the Walker group had committed to the acquisition of the subject lands only after being given reason to believe that there was a very high level of certainty that all necessary approvals would be granted . In the absence of the statement constituting a misleading and deceptive representation, no such statement could have been made in the prospectus unless there was such belief. And as Mr Walker has been shown on the evidence to have clearly had a close appreciation of the political scene, a belief by him at the time when the prospectus was issued, to the effect that there was a very high level of certainty that the necessary approvals would be granted, then assists the Court in inferring that, as at the date of the prospectus, a reasonable perception of the somewhat complex political situation, was that the hoped for rezoning was achievable. 1437 I am satisfied on the evidence that the Commissioner is likely to have approached the whole of the Inquiry including the critical task of writing his final report in a very different way had the Walker Group [and here I intend to refer to both Mr Walker as well as Walker Consolidated] from the outset, caused the joint venture case to be prepared and presented in a carefully thought out and highly professional manner. 1438 Given the key importance of water quality control to any proposed development in the area, it was very important for the joint venture case to have been able to go an appreciable distance towards substantiating, by some cogent form of initial testing, the stormwater management plan to be advocated. 1439 It is highly likely that there would have been a dimensional difference between on the one hand, presentation of the initial submission as occurred, with its fundamentally misconceived reliance on an outdated report, criticism of which had been documented on the record, and which did not and could not withstand close examination, and on the other hand, presentation of a confident and clear state of the art submission such as that proposed by the plaintiffs. 1440 Standing back from the plethora of detail admitted into evidence, essentially, what appears to have occurred may be shortly summarised as follows: 1. The initial submission of June 1994 was in effect merely a re-submission of the 1992 GHD application which was prepared for Council in 1992, not for the Commission of Inquiry; 2. Virtually immediately during the Inquiry it became apparent that the issue of water quality was the primary consideration in the face of development; 3. The water quality controls initially proposed by Walkers were those detailed in the 1992 GHD application. The strategy essentially was to contain runoff from the proposed development in retention basins/wetlands. The first intercept utilised wet and dry retention basins close to the pollution source which were intended to provide the dual role of flood retardation and allow for the settling out of major pollutants. The second intercept proposed was a series of artificial wetlands intended to trap fine sediments and absorb nutrients through biological uptake. It was proposed that these stormwater treatment measures be constructed on-line within the area of the LCE to enable appropriate maintenance/ management controls to be effected. The conceptual layout was attached to the 1992 GHD application. It was also proposed to minimize peak stormwater runoff by roof water tank collection; 4. This strategy was vulnerable to attack on a number of bases, the most important of which appear to have been: (a) the untested nature of the on-line and cascading basins and the unpredictablity of computer modelling; (b) the multitude of basins and as such, the maintenance concerns; (c) problems of erosion and sedimentation, particularly during the construction phase of the proposed basins; (d) the failure of the proponents to take steps to update the now outdated 1992 GHD application and to take into account clear shifts in the accepted approaches to water quality control exemplified by formal regulatory authority publications. [An example of such a shift was from a focus on end-of-pipe controls to a more integrated approach including source and end-of-pipe controls]; 5. To the limited extent that Walkers' initial submission was capable of being defended, Walkers had not retained any competent and experienced barrister, or solicitor, or even spokesperson to stand up to a sustained attack on that report. On my findings, given that the joint venture was and was always to be a major actor (and one of the few main actors), in relation to the Inquiry, and given the clear advance notice of the sustained opposition to be anticipated from the Councils (always likely to be the other main actors) and from sundry interest groups, the need to have a competent team to present the joint venture case was (and ought always to have been anticipated to be), as clear as may be. 6. What then occurred was that after the primary hearing session and in entirely reactive mode and having lost the initiative, Walkers commissioned GHD to prepare a supplementary submission dealing with water quality. This submission was duly lodged in September 1994. 7. The new submission moved away from the earlier material before the Commission of Inquiry in that: -it incorporated water quality developments as at 1994 [and included up to date literature searches. -it introduced a microfiltration facility (Memtec) which was shown to be effective in other applications, particularly for the removal of sediment, phosphorous and bacteria from drinking and waste water. Whilst the Memtec facility had yet to be applied to treat stormwater runoff and its effectiveness in relation to nitrogen removal remained doubtful, the proposal to utilise the technology clearly introduced an integer of special interest and probable significance - the Commissioner's interest is clearly shown up in his report. -it reduced the number and the capacity of the ponds/wetlands as detailed in the 1992 GHD application. 8. The joint venture case had, however, completely lost the early chance of being able to show to the Commissioner in its primary submissions, even preliminary results from use of Memtec, which at that stage, had not been proposed at all. Ultimate Holding on the best endeavours case 1441 In my view, had the team earlier suggested been retained, had earlier tests utilising Memtec been commenced with early promising results, and had a properly prepared initial set of submissions on water quality control been submitted of the type lodged in September 1994 [see the note set out in square brackets at the end of this paragraph], there is a far from fanciful or negligible chance: (a) that the Commissioner would have been persuaded to go well beyond the recommendations which he in fact handed down and to recommend in principle support for rezoning subject to final testing being consistent with preliminary testing to prove validity of the proposed environmental management plan, particularly as it pertains to water quality control; (b) that such a set of recommendations would, following their publication, have led to appropriate zonings, development consents and regulatory approvals being in place by the end of March 1999. [I interpolate to note that on my findings and accepting that the execution of the HUTA was the first time when a best endeavours obligation arose in relation to Walker Consolidated, there was certainly still sufficient time to permit GHD to be retained to prepare and to have ready by 16 June 1994, a set of submissions of the type lodged in September, and there was at least sufficient time for some form of analysis and possibly limited testing using Memtec, to have been at least proposed and possibly even set in train or commenced, so that the Commissioner could have been made aware of such initiatives as having been taken. Whilst focus only upon what could have been achieved in this more limited time frame lessens the chance referred to in (a) and (b) from that which existed on a time frame commencing upon the execution of the Heads of Agreement, the finding is that the chance which existed even in the more limited time frame was far from fanciful or negligible.] 1442 My assessment of the latter chance commences with an estimate of the probability that such recommendations would have been handed down by the Commissioner and is then reduced to take into account the political situation including the Council's attitude, the likely course of conduct of the Minister and the likelihood that the Carr Government would ultimately have reversed its earlier stated position in relation to the Commission and to the rezoning issues. The resultant assessment is 20 per cent. Hence there was a 20 per cent chance that had Mr Walker and Walker Consolidated complied with their best endeavours covenants, the appropriate rezonings, development consents and regulatory approvals would have been in place by the end of March 1999. 1443 Returning to the questions earlier adverted to, namely the arguable need to differentiate between Mr Walker's obligations and relevant breach of those obligations and the obligations of Walker Consolidated and relevant breach of those obligations, on my findings the breaches by Mr Walker of the Heads of Agreement and the breaches by Walker Consolidated of the HUTA, were both sufficient causes of the loss. Both sets of breaches together caused the loss. The consequence must be as it seems to me, that both Mr Walker and Walker Consolidated are held jointly liable for the plaintiffs' proven loss of chance. If I be wrong in this, then to my mind the division of causative elements in the unusual circumstances of this case are relevantly so complex as to make appropriate and applicable reliance upon the presumption against wrongdoers, the onus of proof and resolving doubtful questions against the parties whose actions have made an accurate determination so problematic. For that reason again, the consequence is that both Mr Walker and Walker Consolidated are jointly liable for the plaintiffs' proven loss of chance. Damages Relating to the Plaintiffs' Rezoning Cases 1444 I propose to set out the evidence of each of the experts who dealt with some aspect of quantification of damages before setting out my findings in relation to each of the contentious issues. It may be, however, that it is convenient to indicate in square brackets where I find such evidence to be persuasive. Development Costs The Plaintiff's Evidence 1445 In addition to the evidence given by Mr Smyth in his statement in reply dated 22 November 1999 dealing with section 94 contributions, the plaintiffs called Mr Colin Weatherby to give evidence on development costs. Mr Weatherby 1446 Mr Weatherby, who is a registered surveyor, town planner and a director of Wallis & Moore Pty Ltd, has background and experience to eminently qualify him to give evidence relating to major land subdivisions and in particular to give evidence in relation to the assessment of development costs of the proposed subdivision. In addition to his oral evidence, Mr Weatherby prepared a number of reports dated 4 March 1999, 30 June 1999 and a report in reply to the report of Mr Chicacz who was called by the defendants, dated 12 October 1999. During the course of the proceedings it was Mr Weatherby's 30 June 1999 report that became the relevant report, the earlier report having been superseded. 1447 Mr Weatherby had been instructed to calculate the current costs involved in development of the Lady Carrington Estate lands in accordance with the subdivision proposed in the 1992 GHD Application (termed 'GHD Report' in Mr Weatherby's reports). 1448 Essentially Mr Weatherby estimated the cost of development and subdivision of the LCE lands as at March 1999 and January 1997 under several scenarios, scenarios E, F and J being later utilised by the plaintiffs' valuer, Mr Egan, in his valuation process. Mr Weatherby gave evidence that a 'full feasibility study' of the LCE development would include that report and Mr Egan's report [T1509]. 1449 Mr Weatherby's scenarios A to F estimated costs as at March 1999 ('the 1999 rezoned date' - contingency 'A'). Mr Weatherby's scenarios G to L estimated costs as at January 1997 ('the 1997 rezoned date' - contingency 'B'). 1450 The 'rezoned dates' are the dates identified by Mr Smyth as to when the LCE lands would be available for subdivision into serviced blocks under contingencies 'A' and 'B' referred to in the Glossary to Mr Weatherby's June 1999 report as follows: Contingency "A": Trialing and testing recommended by the Commissioner (a) That the recommendations made by Commissioner Mark Carleton are those actually contained in his report issued in December 1994. (b) That immediately after the handing down of such report the developer initiated the expert studies needed to resolve the future of flora and fauna sensitive areas (mainly ridges) and within 2 – 3 years these studies allowed the future use of these areas to be determined, that is, as environmental protection or as residential zoning, and if residential the extent and density of development; (c) That immediately after the handing down of such report the developer conducted the trials and tests recommended by the Commissioner to prove the efficacy of devices proposed by the developer for storm water treatment; Those tests proved satisfactory; and (d) That immediately thereafter the Minister announces his decision to implement such zoning and then issues such directions concerning the making of such Environmental Planning Instruments and consents as are necessary for the LCE lands to be released through the Urban Development Program. Contingency "B" Favourable Inquiry Result (a) That in December 1994 Commissioner Mark Carleton decided instead to recommend immediate rezoning of the Lady Carrington Estate (in whole or in part) to allow for residential development. Same as for sub-paragraph (d) …. 4 above. [Report 30 June 1999, Glossary items 4,5] 1451 Mr Weatherby was closely cross-examined in relation to : (1) the degree of confidence for costs the subject of his estimates; (2) EPA Act section 94 contribution costs; (3) his development scenarios E, F and J; and (4) external infrastructure costs. 1452 During cross examination Mr Weatherby gave evidence that his estimation of development costs was based on the GHD concept plans and that other than the subdivision shown on those plans, he had no other plans of subdivision available to him. Mr Weatherby conceded that at this stage the GHD plans are conceptual in nature and that they would be refined if the development went ahead. As such, Mr Weatherby agreed that his estimates of development costs would be refined when he had available to him a more accurate plan of subdivision and would be further refined as the subdivision concept was itself refined towards the point of implementation. He agreed that the cost estimate he carried out was a broad scale assessment [T1510]. 1453 In his report in reply to the evidence of Mr Cichacz (whose comments are detailed below), Mr Weatherby deposed that the conceptual lot layout plans prepared by GHD provide 'potential capacity for intending subdivisions which allow estimates of development costs to be undertaken at this stage of the process, on a broad scale, for feasibility purposes'. Further, Mr Weatherby noted that it is normal practice to undertake estimates of costs at this stage and to refine these costs as the project progresses. His evidence was that as Walkers do not appear to have prepared revised subdivision plans [as Mr Cichacz suggested would be required for cost estimation], he had assumed that the Walkers' feasibility studies in terms of lot numbers were based on the 1992 GHD report [12 October 1999 report, paras 3.2-3.3]. (1) Degree of confidence 1454 Mr Weatherby explained that he believed the term 'degree of confidence' is used to describe the degree within which he could guarantee a cost estimate based on a concept plan. He gave evidence that his degree of confidence in his estimate of development costs is within 10 percent [T1511]. 1455 When it was put to Mr Weatherby that the degree of confidence is more realistically in the order of 25 percent given that the plans from which the cost estimate is based are yet to be refined, Mr Weatherby disagreed. However, when it was suggested to Mr Weatherby that it was not until the subdivision plans are refined that the degree of confidence would come within the 10 percent ball park, Mr Weatherby gave the following evidence: 'A. … There would be some amendments no doubt, if there was any change in the plan to determine whether it's 25 percent, 10 percent, I believe it's very difficult for me to say "yes" or "no". Q. Are you saying it's difficult for you sitting there now to agree or disagree with the 25 percent that I was putting to you? A. It is. Q. And difficult as you are sitting there now to be able to say with confidence whether it's 10 percent or 20 percent… A. I'm saying I'm quite confident in saying that the reports I prepared would be within 10 percent of correct estimate. I am also saying that any change in the plan would vary the gross figure, but probably more than likely, the cost per lot would not change greatly, and not to the extent of 25 percent. Q. Just so that we understand each other, what I'm putting to you is that when one works off a concept plan, such as you have done, a degree of confidence, I suggest, you would have is in the order of 25 percent, and it would only get down to the 10 percent degree of confidence when you got a refined plan of subdivision. Do you disagree with that proposition? A. I just feel that the 25 percent that you're saying is too high.' [1511-1512] 1456 In re-examination Mr Weatherby explained that the basis upon which he gave his degree of confidence in his report as 10 percent was that he had 'gone to a lot of trouble to examine the plans, determine all the cost on an individual basis.' Further, he stated that he measured lengths of roads, sewers and water rather than just grabbing a figure 'off the top of the head' and that in that way, and based on his experience, he was able to assert a 10 percent degree of confidence. Mr Weatherby's evidence was that while there is latitude, in his opinion, his figures are within 10 percent [T1552]. 1457 Mr Weatherby agreed that he had excluded the costs of tip remediation from his assessment and that those costs would be in the order of $4.7 million as at March 1999. Mr Weatherby gave evidence that he had so excluded them on the advice of Mr Smyth, who had the argument that the remediation of the tip would be the responsibility of Council [T1512]. [I note Mr Dempsey's concessions in this regard - refer to 'findings'; point 6]. 1458 Further, Mr Weatherby agreed that on the basis of Mr Rowbottom's report, he had excluded the costs of the tertiary treatment facility (Memtec) from his assessment and that if such facility were included in the stormwater treatment plan, it would cost approximately $6.7 million. [I accept the defendants' submission that these costs ought be accounted for - refer to 'findings' point 7]. (2) Section 94 contribution 1459 In relation to the section 94 issue, Mr Weatherby agreed that section 94 of the Environmental Planning and Assessment Act 1979 provides, in general terms, for a developer to make contribution towards the cost of public facilities generated by the development. Such contribution would go towards matters such as upgrading existing roads and open space recreation [T1513]. 1460 Mr Weatherby, in agreeing that a section 94 plan is required in order to levy a section 94 contribution, gave the following evidence: Q. You don't make mention of any section 94 plan in your report. Did you take one into account? A. I did mention in the report the fact that I had utilised the current costs laid down by Wollongong Council, and they were the charges applied to the nearby Landcom development. I then qualified it by saying that if a development such as this was to proceed one would expect a section 94 contribution plan to be prepared, and in that way my figure may well vary. Q. Can we take it one step at a time. Did you, for the purposes of this report, read and take into account the existing section 94 plan that Wollongong Council has? A. I utilised the section 94 contribution, which is a figure so much per lot, as asked of the adjoining developer. Q. Please, Mr Weatherby? A. Which was not - I didn't read the plan as such, if that's what you - if that was the question. Q. You didn't read the plan for the purposes of calculating, in your work, the section 94 contribution; correct? A. Correct. Q. You envisage in your report, and indeed in the answer that you have just given us, that if this development went ahead there could well be a separate section 94 plan for this development? A. I implied that. I even stated in my final report when this was criticised by Mr Cichacz, and he referred to some cost outlined by council at the Commission of Inquiry, and I then utilised or looked at those costs and I made comment as to how that would vary my particular cost that I had estimated, which is exactly what I said in my original report, that if this development is to proceed there would be a section 94 claim prepared. Q. But it is fair to say, isn't it, that for the purposes of your report you have not attempted to work out what public facilities would be generated by this development if it went ahead? A. The only thing that I have referred to is in my last report where Wollongong Council did set out those particular facilities and I think I made mention, from my memory now, my total cost in my second report and first report totalled approximately $2 million; I believe in my final report that came up to about $3.5 million, and I have outlined that in detail. [T1513-1514] 1461 Mr Weatherby gave evidence that in his reports, he calculated the section 94 contribution at $1500 current as at March 1999 [T1514; 1526]. Mr Weatherby stated that this figure was taken not from the plan itself, but from the figure that was imposed upon Landcom in 1993, adjusted according to the CPI increase[T1514]. Mr Weatherby gave evidence that the Landcom development is comparable to the LCE proposal, however, he noted that as the LCE proposed development is larger, the section 94 contribution payable on the LCE development may vary [T1515]. 1462 It was put to Mr Weatherby that lifting the Landcom section 94 figure, which was applicable to a 77 lot subdivision [total lots approved 175], was inappropriate to apply to the LCE development having a subdivision in the order of 900 lots. Mr Weatherby replied that he did not deny that the figure would have to be adjusted, in fact, he had mentioned that that would be the case in his report [T1515]. 1463 Mr Weatherby agreed that under section 94 a certain area of land is required to be dedicated to public open space and that that may be paid for by either dollars or land [T1516]. Whilst some issue was taken with Mr Weatherby as to how, if at all, he had accounted for such land dedication in his cost assessment [T1517], I am satisfied from Mr Weatherby's re-examination and report in reply that he did account for land dedication pursuant to a section 94 contribution in accordance with the open space provided by the GHD plan [T1553; 12 October 1999 report, paragraph 6.5]. 1464 In this regard, I note the plaintiffs' submission that no evidence was adduced by the defendants as to the costs of land proposed to be dedicated and, in the absence of evidence to the contrary, their submission that the cost of "gifting" the land to the State would be nominal and subsumed by the 5% contingency factor allowed for by Mr Weatherby in his estimates in development costs (see paragraph (d) on page 14 of his Supplementary Report dated 30 June 1999). 1465 Following criticisms directed at Mr Weatherby's utilisation of the $1500 figure for section 94 contribution, Mr Weatherby deposed in his report in reply that the Commission of Inquiry report at page 176 refers to Council's Draft Helensburgh Plan which identified the following potential section 94 costs: · $1 million for road and traffic improvements; · $1.2 m for Walker Street; · Community facilities · Community centre improvements ($100,000); · Playgrounds $50,000; · Polyclinic - preschool extension $500,000; and · Neighbourhood centre ($650,000). 1466 While Mr Weatherby again stated that such matters are subject to the preparation of a section 94 contribution plan applicable to the development, a total of $3.5 million is identified in the above items [12 October 1999 report, paragraph 6.4]. 1467 Mr Weatherby then deposed as follows: In my reports I have provided for a Section 94 Contribution of $1,500/lot which assumes dedication of public reserve areas from the site. As stated within page 4 of my Report, dated 4 March 1999, this rate applied to the 1993 nearby Development by Landcom who dedicated land as public reserve from the subdivision. A similar situation is assumed to apply to the Lady Carrington Estate as Ensile Pty Ltd. owns residual land adjacent to the escarpment, which forms the eastern and southern borders to the Lady Carrington lands. This rate provides in my reports a maximum contribution of $1,513,000 for a yield of 1,009 lots (Scenario C) with a contingency factor of $2.34 million being allocated. As stated in my Supplementary Report page 19 item (1) "My estimate of Section 94 contributions must be read subject to variation if a new Section 94 Contribution Plan for Helensburgh is prepared following any rezoning of the Lady Carrington Estate." [12 October 1999 report, paragraph 6.5] 1468 During cross examination, Mr Weatherby stated that while he extracted the list of potential section 94 costs identified in the Draft Helensburgh Plan from the Commissioner's report, he did not refer back to the draft plan itself. Further, Mr Weatherby gave evidence that he did not read the Commissioner's report in full, rather, he read approximately 10 pages either side of page 176 of the report. Mr Weatherby was taken to page 178 of the report which stated that advice from the RTA is that the cost of road services could range from $0.5 - $15 million. Mr Weatherby conceded that he had not taken that into account in estimating the section 94 contribution [T1529]. 1469 Mr Weatherby gave evidence as follows: 'Q. You seek in some way Mr Weatherby, I'm not quite sure how, in paragraph 6.4, are you seeking in some way by setting out those costs to justify the $1500 figure for the s94? A. No I think what I'm doing there is identifying what I've added up the s94 cost to be. And I'm comparing that with my $1500 per lot amount, and I think I say that there is therefore a shortfall of $1.5 million. Yes, my report provides, when you add up all the precincts, $1,5 million, when you add up the Commission of Inquiry's it came to 3.5 million, and I pointed out the difference was approximately $1 million. But I did say that in - I had a contingency factor of 2.34 in that particular report. so I was really just explaining that how close it was to the 2. Q. Of course if you include anything like the 5 or $15 million for the freeway upgrade, you're way out are you not? A. The only thing with the freeway, and all these particular figures, you've got to remember, as I understand it, it's not simply for the Lady Carrington Estate 1470 In submissions in reply, the plaintiffs point out that at page 178 of his report [19/210] the Commissioner merely noted but did not ratify the Department of Planning submission that costs for upgrade of the freeway be attributed to Section 94 Contributions. Further, they submitt that while as the consent authority, Wollongong Council would be enabled by section 94 to impose as a condition of development consent under part 4 of the EPA Act, a requirement for the dedication of land (or the payment of money or both), section 94 makes no provision for the Council to require the developer to make payments to the Roads and Transport Authority for funding of main roads (as distinct from local roads for which a local council has responsibility under the Roads Act). 1471 The plaintiffs further submit that if, alternatively, the Commissioner had recommended such application of section 94 contributions to the RTA for upgrading of major roads, the Commission was dealing with a potential number of 3,000 or more residential allotments at Helensburgh. Thus the plaintiffs argue, of the range of $500,000 to $15 million estimated by the Department of Planning, the joint venture's contribution would have been about 1/3 of that. 1472 Mr Weatherby was taken during cross-examination to the part of exhibit D21 which is the Summary Assessment Sheet of Wollongong City Council Section 94 Contributions effective from 20 July 1993. Mr Weatherby agreed that the document purported to summarise the section 94 contribution payable on the Walker Street development by reference to various components including open space, community facilities, recreation, studies/administration, car parks, and traffic/roadworks. Mr Weatherby agreed that the document detailed section 94 contribution costs payable on the Landcom development in excess of $7,000 per lot and that his figure of $1,500 per lot was 'way short' of that amount. [T1535-6]. [I interpolate to note that as to the applicability of the figures detailed in Exhibit D21, I find Mr Smyth's evidence (detailed below) pervasive.] (3) Development scenarios 1473 Mr Weatherby was then taken in detail to his report of 30 June 1999. The evidence was that while he provided various scenarios in that report, only his scenarios E, F and J ought be focused on by the court as these were the only scenarios utilised by Mr Egan in his valuation exercise [T1519]. 1474 Mr Weatherby gave evidence that in calculating development costs under each scenario, he divided each site, north and south, into precincts to reflect what he believed would be the order of progression of development [T1518]. He agreed that this progression followed infrastructure planning, in particular, the extension of sewer [T1524; 1525]. Mr Weatherby explained that in dividing the development into precincts he did not consider the length of time over which the development would take place, only the order of progression [T1548]. 1475 Mr Weatherby gave evidence that the calculations for each precinct followed the same format, detailing: · Council costs (development application; Subdivision Certificate; Construction Certificate; Compliance Certificate; section 94 contribution) · [I interpolate to note that the figure Mr Weatherby utilised for the section 94 contribution was $1500/lot qualified in his report in reply as being 'subject to variation']; · roadworks and drainage; · drainage, environmental matters; · landscaping works; · Sydney Water; · water reticulation, sewer reticulation; · power and telecommunication; · consultants; · contingency factors. 1476 Mr Weatherby gave evidence that his calculations for "Drainage Environmental Matters" was based on constructing the stormwater management controls as proposed in the 1992 GHD application. His figure of $6,500 per lot thus allows for the construction of wet/dry retention basins, artificial wetlands, erosion control measures and management and maintenance control. While Mr Weatherby deposed that he was unable to estimate the cost of this work without further detail design, the figure of $6,500/lot corresponds to the rate used by Walker Corporation in their September 1994 feasibility study of the Helensburgh Project being $6,361 adjusted for CPI increase. 1477 Mr Weatherby conceded that absent some agreement with the Water Board, rather than spreading the external infrastructure amplification costs over the various precincts, it would have been more accurate to put those initial external amplification costs against precinct 1. Mr Weatherby noted, however, that this impacts on Mr Egan's report rather than his own, as he has not undertaken a cash flow [T1547]. [I accept that Mr Weatherby's concession in this regard is significant.] 1478 Mr Weatherby's scenario E estimates development costs as at March 1999. The scenario contemplates subdivision of the LCE (South) lands based on single lot numbers in only its GHD Southern Plan as reduced by (i) the Post-COI contingency and (ii) the Wetlands contingency respectively. In the result, the total lots yielded is 695 lots with development costs averaging at $70,415 per lot. [Refer to Appendix 11(a)]. 1479 Mr Weatherby's scenario F likewise estimates development costs as at March 1999. The scenario contemplates subdivision of the LCE (North) lands based on single lot numbers in the GHD Northern Plan as reduced by (i) the DUAP Contingency and (ii) the Wetlands Contingency respectively. The total lots yielded according to this scenario is 108 lots with development costs estimated at $78,938 per lot. [Refer to Appendix 11(b)]. 1480 Mr Weatherby's scenario J estimates development costs as at 1 January 1997 of subdivision of both the northern and southern areas reduced by the number of lots excised on the basis of the Wetlands Contingency. Under this scenario, the total lots yielded is 958 lots with development costs averaging at $65,540 per lot. [Refer to Appendix 11(c)].This scenario is equivalent to scenario D, the difference being that scenario D estimates development costs current as at March 1999. Under scenario D the development costs are estimated at $67,322 per lot. 1481 In Schedule 1 to his report Mr Weatherby included the following in his 'glossary of terms': Item 1: "Wetlands Contingency": (a) This refers to the amount of area required for installation of the updated stormwater treatment devices recommended by Mr Ian Rowbottom of Kinhill Pty Ltd in Appendix E to his report filed 27 May 1999 entitled "Amended Expert's Report on Stormwater Quality". (b) In part (c) of his report filed today entitled "Development Costs and LandCom Monitoring Results" Mr Rowbottom estimates the approximate area required for installation of such measures on the LCE lands is 5% (five percent) of the subdividable land in addition to the area already set aside by GHD in the 1992 Report. (c) Under Scenarios D/J the number of lots available in the GHD plans are reduced accordingly. (d) Under Scenarios E/K and Scenarios F/L the number of lots available are reduced by 5% after identifying the reduced subdivision area according to the Post COI Contingency and the DUAP Contingency respectively. [I interpolate to note that Mr Weatherby gave oral evidence that the Wetlands Contingency may apply to the north and south areas of LCE land - T1521]. Item 2: "Post COI Contingency": (a) This refers to the reduced area available for subdivision in the LCE (South) lands if further trialing and testing of stormwater treatment measures recommended by Commissioner Mark Carleton had been undertaken by the proponents for development of the LCE lands. (b) In Annexure "A" to his report entitled "Allotment Reductions - Lady Carrington Estate lands" filed today, Mr Smyth identifies the reduced developable area if such testing proved the efficacy of such devices. (c) I have prepared and annex to this (my) Supplementary Report as Annexure 11 my computer generated version of that plan. (d) The subdivision area available under Scenarios E and K of my report have been reduced according to the Post COI Contingency. [I interpolate to note that Mr Weatherby gave oral evidence that the Post-COI Contingency applies only to the south area of the LCE land. It follows the Commissioner's recommendation that development should not reach along the eastern extremity of the peninsula and involves reducing the proposed lot number in this subdivision by 73 lots - T1521-2]. Item 3: "DUAP Contingency": (a) This is the term allocated by Mr Smyth at paragraph 18 of his report filed today to the reduced area available for development in the LCE (North) lands if concerns raised by the Commissioner in his report about flora and fauna were resolved in accordance with the submission to the Inquiry by the Department of Planning (as it was then known). (b) Mr Smyth has estimated the reduced area in the plan forming Annexure "C" to his report. (c) I have prepared and annex to this (my) Supplementary (as Annexure 12) my computer generated version of that plan. (d) The subdivision area available under Scenarios F and L of my report have been reduced according to the DUAP Contingency. [I note that Mr Egan, in his valuation reports, based his Assessment 1 on Mr Weatherby's Scenario J; Assessment 2 on Scenario E and Assessment 3 on Scenarios E plus F. His evidence is detailed below.] 1482 It is appropriate to note the plaintiffs' submission that the lot numbers as calculated by Mr Weatherby and as relied upon by Mr Egan in his Assessment 1 (764 lots) and Assessment 3 (695 lots) are accordingly less than Walkers' estimates in the Prospectus (at page 31 thereof - 8/127). (4) External infrastructure costs 1483 Mr Weatherby was then questioned on the veracity of his figure of $10.8 million CPI indexed which he utilised for external infrastructure amplification. In the course of cross-examination on this point he was again taken to page 176 of the Commissioner's report which recorded that GHD had estimated to the Commission of Inquiry that the cost of amplifying water and sewer works in the Helensburgh area would be in the range of $21-24 million and that Sydney Water had estimated this cost between $32-35 million [T1544]. Mr Weatherby noted that those figures related to the total catchment, not just to the proposed LCE development. He then gave evidence as follows: Q. The figure, I suggest to you, that you have utilised of $10.8 million as at today's cost is just grossly inadequate, isn't it Mr Weatherby? A. I don't believe so, and I can explain my reasons…… I am able to give an opinion on the total cost of water and sewage infrastructure that would be charged to a developer in this case, and I accept that the $10.8 million that I estimated from the GHD report may have increased, and in fact it is recommended that it be increased later on. But what I point out, that nowhere in these reports, and they are reporting on the total cost of infrastructure to the development, do they mention the existing major works charges that apply, and if you look at my figures I have utilised approximately $12 million in the figures for GHD, and on top of that I have another $9 million in this contribution, that is the current rate for Helensburgh. What I am suggesting is that totals $21 million , and what I am suggesting to you is that if this development was to go ahead, that I believe that the total cost would be somewhere in the order of what I have estimated, because none of these reports have taken into account that major works contribution that I have included. If you bundle them all together, and I believe you should be bundling them altogether, our figures are not all that far off from what would be a realistic rate . Q. Do I understand you to be saying that where the Commissioner is talking about figures on 176 you are saying, well, he hasn't really dissected them between a comparable of the 10.8 and the major works charges? A. That's right, and I don't believe GHD did either. They didn't separate - they didn't have a separate major works charge plus - they just took the whole thing as a lump sum external works charges, and that's what I believe, if you add my figures up, the figure I have come up with is quite reasonable. [T1544-5] [emphasis added] 1484 Mr Weatherby dealt with this same topic in his report in reply when he specifically addressed the comment by Mr Cichacz that in Sydney Water's view, the GHD estimate to the Commission of Inquiry was substantially underestimated [12 October 1999 report, paragraphs 5.1-5.9]. He deposed at paragraph 5.4 that he had been unaware of this criticism. He further stated as follows: 5.5 If such comments of Sydney Water Corporation are accepted, this would mean that water and sewerage together would be greater than the $27 million figure in the 1990 Council Draft Helensburgh Plan, and could be of the order of $32-35 million (noting that Water Board infrastructure costs are dependent on lot number or yield)". 5.6 It should be noted that I believe that in my Reports I have estimated on the high side in my estimate of the cost of water and sewer major works. In all my scenarios I have: Provided for major works contribution water and sewerage at a rate of $76,039/ha for sewer and $60,892/ha for water major works. A dditional to these figures , I have applied further expenditure of $12.3 million for infrastructure identified in the 1992 GHD Report. 5.7 Overall this has totalled an expenditure for water and sewer major works described within my Supplementary Report as: Scenario A $19,434,520 Scenario B $21,325,446 Scenario C $21,325,446 Scenario D $20,888,586 Scenario E $18,584,085 ) Scenario F $2,566,785 ) $21,150,870 Scenario G $18,429,052 Scenario H $20,286,133 Scenario I $20,286,133 5.8 As mentioned in my Supplementary Report, the amount contributable to Sydney Water Major Works contribution will continue to be negotiable with Sydney Water until final actual costs are known. 5.9 I agree that it may be a requirement of Sydney Water to seek contribution for major work external to the site in advance of development. Nevertheless, this would be subject to negotiation and it would be reasonable that some of the payment for this work could be staged depending upon the circumstances of the impact of increased population. [12 October 1999 report - emphasis retained] 1485 In re-examination Mr Weatherby gave evidence that to his knowledge the highest contribution paid by a developer for water and sewage external to a residential site is $18,000 per lot [T1555]. In comparison, the contribution figure Mr Weatherby provided for external infrastructure in the development scenario whereby the LCE north and south lands are subdivided, is $21,150,870. Mr Smyth 1486 Mr Smyth, in his statement of 22 November 1999, examined Exhibit D21 which is Wollongong Council's section 94 Contribution Plan dated 14 July 1993 for various areas within Council's jurisdiction. Mr Smyth gave evidence that the plan does not apply to the LCE. His evidence was that the only part of Helensburgh to which it applies is a small area fronting Walker Street within the existing urban area of Helensburgh and that that area does not have any relevant comparability with a development of LCE. Further, Mr Smyth gave evidence that the car parking contributions covered by the plan applies to proposed Commercial/Industrial development and is therefore not relevant to the residential proposal for LCE. 1487 My Smyth noted, however, that a component for Studies and Administration would be applicable to any development on LCE at the rate of approximately $121 per allotment. 1488 My Smyth deposed that if the LCE had been rezoned for residential development, the Council would, at the same time, have prepared and published a specific section 94 Contribution Plan for the development. In the absence of such a plan, he gave evidence that the best indication of the section 94 contribution which the Council would have required for subdivision of the LCE is the contribution the Council in fact required for the 1993 Landcom subdivision which immediately adjoins part of the LCE. Mr Smyth noted however that the Landcom subdivision was a subdivision of undeveloped land into approximately 270 lots, which was a smaller subdivision than that proposed by the joint venture. 1489 Mr Smyth gave evidence that in preparing a site specific section 94 Plan, Council would assess the social and physical infrastructure that was needed to support the forecast population of the proposed development, develop a works program to supply that infrastructure and calculate the cost of doing so. He stated that infrastructure may be new or may involve additions to existing facilities and that how the facilities are provided is a matter for negotiation between the developer and Council. 1490 Mr Smyth deposed that for a proposed development on LCE, the developer is likely to have offered to provide and embellish all the required open space on site; to offer to provide the stormwater clean up facilities on site and possibly get a credit for including capacity to process part of the stormwater from the existing urban area of Helensburgh; and possibly to provide a small community hall and other recreational facilities along with the other facilities used to promote sales of lots in the subdivision. Mr Smyth stated that in his experience, most large single estate developers prefer to do works in kind rather than contribute to Council and then wait for the work to be done. 1491 My Smyth gave evidence that in his opinion, the factors which the Council would have taken into account in determining a section 94 contribution rate for LCE are essentially the same as those which it would have taken into account when determining the contribution rate for the immediately adjoining Landcom subdivision. Mr Smyth noted that this equates to approximately $1,500 per lot as at March 1999. 1492 Mr Smyth deposed that if one uses the contribution rates set in Exhibit D21, then one must take account of the principles upon which Exhibit D21 was based and then notionally apply it, so far as applicable, to the situation of the LCE. He stated that as part of a subdivision of the LCE, he assumed that the developer would provide in kind, all open space required to satisfy the requirements of the applicable section 94 contributions plan. Similarly, he assumed that the developer would provide "in kind", any other infrastructure that was needed. Therefore, in his opinion, even if Exhibit D21 can be used for comparative purposes, the result would be that the contribution per lot would be within the range set for one bedroom and three bedroom dwellings, namely: 1 Bedroom 3 Bedroom Community facilities 347 1,042 Recreation 232 695 Studies and administration 121 121 700 1,858 In these circumstances, Mr Smyth deposed that on the information available, he regarded the best estimate of the likely section 94 contribution for LCE would not exceed $1,858.00 per lot. [In the light of his extensive experience, I accept Mr Smyth's evidence as pervasive in this regard.] The Defendants' Evidence Mr Cichacz 1493 The defendants called Mr Cichacz, a Principal Civil Engineer at Gutteridge Haskins & Davey Pty Ltd (GHD), to give evidence in relation to the assumptions and methodology relied upon in the reports of Mr Weatherby dated 4 March 1999 and 30 June 1999 ('the Weatherby Reports') and to comment on their appropriateness. In addition to oral evidence, Mr Cichacz's report of 9 September 1999 was read in court. 1494 Mr Cichacz has some 30 years experience in Project Management, design and construction and urban infrastructure development including roadworks, railways, stormwater drainage, water supply and sewage works. He joined the employ of GHD in 1967 and was previously involved in the Lady Carrington Estate development proposal to the extent that he reviewed the services infrastructure, including cost estimates to upgrade services to cater for development of an additional area of approximately 300 hectares. 1495 Mr Cichacz deposed that his review of the Weatherby Reports identified a number of relatively minor arithmetical and typographical cross referencing errors which he detailed in his report. Further, Mr Cichacz deposed that a number of potentially significant additional costs identified during the Commission of Inquiry were not included in the Weatherby Reports. His evidence was that such costs primarily relate to the cost of water and sewer infrastructure and section 94 contributions for additional infrastructure items such as community facilities and road/traffic improvements for Council and RTA roads (paragraph 1.3). 1496 Mr Cichacz noted that the Weatherby Reports provided cost estimates based on historical costs for "similar" work performed elsewhere. His evidence was that in calculating "cash flow" and other financial analysis, a significant "up front" cost would be necessary to provide for the early provision of water/sewer infrastructure and that this cost would not be distributed on a precinct basis as assumed in the Weatherby Reports (paragraph 1.4). [I accept Mr Cichacz's evidence as pervasive in this regard.] 1497 Mr Cichacz also noted that tip remediation and tertiary treatment costs were excluded from the Weatherby Reports. He then gave evidence as follows: Tip remediation and tertiary treatment costs have been excluded from the Weatherby Reports. The cost of finance and fees for legal work, real estate/project manager commissions and promotion/advertising are included in the valuation report prepared by Frank Egan dated 7 July 1999 ("The Egan Report"). Whilst it is outside the scope of this report to provide a critique on The Egan Report it is noted that the "Development Costs" used in The Egan Report do not correspond to the figures stated in The Weatherby Reports. [paragraph 1.5] 1498 In conclusion Mr Cichacz deposed that because subdivision plans were not prepared and site investigations and detailed design were not carried out, the estimates provided in the Weatherby Reports were speculative and unreliable. 1499 In particular, Mr Cichacz noted that Mr Weatherby made the statement that it was necessary to "…examine closely the subdivision layout in the 1992 Conceptual Lot Layout…". Mr Cichacz deposed that this implies an accuracy and detail that is not warranted. He pointed out that in the first instance, the plans are not subdivision plans as stated, rather, the plans are conceptual lot layouts prepared primarily for the rezoning process and meant to indicate potential capacity (based on subdivision requirements at the time). Mr Cichacz deposed that detailed design work (including survey and geotechnical investigations), is required to prepare plans of subdivision. 1500 The plaintiffs refute Mr Cichacz's evidence that there is a relative lack of refinement of the development proposal at the stage that Mr Weatherby carried out his assessment. They submit that the 1992 GHD rezoning application provides a reliable basis for estimating the possible reduced developable area and therefore lot numbers without putting the plaintiffs to the expense of preparing a final subdivision plan (estimated at $150,000 minimum by Mr Rowbottom at paragraph 8 of his Report dated 25 June 1999). The plaintiffs support this submission by reference to the following: · Mr Weatherby's evidence that his estimates of development costs based on such proposed plans are accurate "within 10%" (XX 1510/L49-1511/L31; XX 1512/L2-L22; RX and XX 1551/L41-1552/L34); · Mr Weatherby's evidence at paragraphs 3.2 & 3.3 of his Report in Reply dated 12 October 1999 in which he states "it is normal practice to undertake estimate of costs at this stage and to refine these costs as the project progresses…"; · Mr Lester's admission that at the request of Mr Peter Dransfield he prepared an estimate of lot numbers available in the Lady Carrington Estate for inclusion in the Walker Prospectus based on the amount of developable area identified by GHD in the two Conceptual Lot Layouts (XX 1407/l54-1408/L3); · That as Mr Smyth points out (at paragraphs 14, 15 & 16 of his Report in Reply dated 11 October 1999), neither Mr Lester nor Walker Corporation prepared a final subdivision plan before preparing various feasibility studies including those submitted to the Inquiry after issuance of the Walker Corporation Prospectus. · That Walker Corporation's Prospectus figure must have been developed in this way. · After admitting that certainty depends on how much work is done, Mr Chichacz admitted that Weatherby in his Report in Reply has gone into it "with a reasonable degree of accuracy" (1861/L36-L49). · Under cross-examination Mr Chichacz stated that his comments about Mr Weatherby's estimates as being "speculative and unreliable", are limited to the head works charge and possibly some doubts about section 94 Contributions (1863/L11-L17). [I accept the plaintiffs' submissions in this regard as of substance.] 1501 Mr Cichacz gave evidence that there are two components to a project such as the LCE development proposal. The first component is the infrastructure which includes the water, the sewer and s94 contribution costs. Mr Cichacz expressed the view that while there is a section 94 plan in existence for the existing situation, the LCE development would require a new section 94 plan. The second component is the actual built form, the subdivision itself, including, the roads, the cutting up, and the allotments [T1842]. 1502 Mr Cichacz gave evidence that the appropriate degree of confidence for infrastructure costs is at least 25 percent - in this regard he noted that the estimates are based on very broad concepts and that Sydney Water itself admitted in their submission to the Commission of Inquiry that they are plus or minus 25 percent. He suggested that for the other costs, the development of the subdivision costs, a 10 to 15 percent degree of confidence would be reasonable [T1842]. [I accept Mr Cichacz's evidence that a 10 percent degree of confidence for infrastructure costs is not appropriate, however, I am not persuaded that confidence in Mr Weatherby's figures is as low as 25 percent. I find that a 20 percent degree of confidence in these costs is reasonable. With regard to all other costs I accept Mr Weatherby's evidence, which is not contradicted by Mr Cichacz, that a 10 percent degree of confidence is reasonable.] 1503 In relation to estimating the section 94 contribution, Mr Cichacz gave evidence that the existing section 94 plan for the Helensburgh region (Exhibit D21) would probably provide a fairly good indication of the likely cost payable under a section 94 plan applicable to the LCE development [T1842-3]. During cross-examination, however, Mr Cichacz agreed that the existing plan effectively related to the built up commercial part of Helensburgh, thought to have a potential development of a further 120 lots and that the subject land 'obviously has no relationship whatever to a brand new subdivision of residential land of 800 or 1,000 lots' [T1844]. [In my view, Mr Cichacz's concession in this regard is of particular importance in weighing his opinions on the issue.] 1504 Mr Cichacz gave evidence that he had only a vague, that is preliminary, familiarity with the Landcom development, which was a subdivision for residential purposes in close proximity to the LCE. However, he was not intimately involved with it. When questioned on whether, in terms of section 94 contributions, the Landcom subdivision would be essentially much the same as a subdivision at LCE, except somewhat smaller, Mr Cichacz answered that he could not fully answer that on the basis that he knew that the water and sewer infrastructure was very close to or at capacity [T1845]. 1505 When questioned on whether he himself could undertake a cost estimate of the section 94 component, Mr Cichacz gave evidence that he could not as there are specialist section 94 planners who prepare such plans [T1845]. Mr Cichacz then gave evidence as follows: "Q. If you are not able to answer this question because, again, it falls outside your expertise, please just say so. But in principle is it your experience that a local body, if you like specifically the Wollongong City Council, when levying section 94 contributions on developers of subdivisions, would do so in a way which was consistent, as between one subdivision and a comparable one? A. Not necessarily. I can be specific at, say an example at Stanhope. It is a new 1400 lot subdivision in the north-west sector of Sydney around the Rouse Hill area. There the section 94 contributions vary verily considerably because what they did there to be fair to the catchments, they sort of broke it up into various catchments. They allocated the drainage components, they allocated the major road components, parks and the like, and they actually levied people living in those catchments quite differently than the adjoining catchment; , so there has been distinctions, yes. Q, So is what you have just explained to us a discriminatory approach based upon what were perceived to be relevantly different circumstances for each particular part of a larger subdivision? A. I will answer it this way. I think it also can be perceived as being a more a user-pay principle, in other words, you want to live there you pay the premium because of certain terrain or geographic disadvantages which require further protection or thereabouts. Q. Specifically reverting to the Wollongong Council and subdivisions in and around Helensburgh, would it be consistent with what you have described for a section 94 contribution, assessed in respect of the Lady Carrington Estate, to be comparable to the section 94 contribution assessed in respect of the Landcom subdivision if the council perceived the two to be comparable for that purpose? A. If council perceive it comparable for that purpose, I would assume that they would use that same principle and adopt that same - yes … Q. And unless there was some positive evidence to show that the relevant infrastructure requirements of the two subdivisions, in this case one actual and one hypothetical, were in fact actually different, then the inference would appear to be that they would be seen as comparable by the council; is that right? A. With Helensburgh, with the proposed re-subdivision of Helensburgh, of the thousand lots approximately I keep thinking it is a fairly significant impact on the existing township, so it is not only the immediate environs and council that are concerned but you have got that sort of peripheral and more regional influence, traffic, roadways, particularly and schooling, it may generate baby care centres, because of the population, so councils sometimes could perceive it as an opportunity to provide these facilities and get the larger, because of the large development, it justified based on the large proposed development. Q. Are you saying that in your opinion those considerations would not have been taken into account in relation to the Landcom subdivision? A. Can I qualify this answer, because I am not an expert in section 94 contributions. However, I think from experience I would say section 94 would not be comparable to do your Landcom. Q. When you say in your answer a section 94 would not be comparable, you are meaning to say, are you, that as between Lady Carrington Estate on the one hand and Landcom on the other the two would not be comparable? A. Yes, in terms of cost allocations, I think it would be more expensive in terms of section 94 contributions to develop the Lady Carrington … Q. Now, for a subdivision the size of Lady Carrington it is invariable for the developer to provide [community recreation facilities] at least in practice, as part of the development? … A. That would depends on the section 94, the way that the section 94 is implemented, or the agreement between the council and the developer. Q. You would expect that, in the case of Lady Carrington, wouldn't you? A. I would expect that council would come to an agreement with the developer or vice versa; I would expect a developer would negotiate with council for the best terms, yes. [Transcript 1845-1848] 1506 Mr Cichacz gave evidence that while he had the expertise to make an estimate of infrastructure costs, he had not been asked to engage in that exercise. Rather, his main task was to examine Mr Weatherby's methodology and the consistency between various sections of his report and to provide broad comments on the main issues [T1850]. 1507 In relation to Mr Weatherby's infrastructure amplification figures, Mr Cichacz gave evidence that the extent of the work originally envisaged by the GHD report and estimated as costing $10.8 million, was in all probability inapplicable and that additional work would be required [T1854] and that an additional $5 - $6 million had been identified in the Commission of Inquiry as being necessary to be allowed for this work [T1861-2]. [In this regard I note Mr Weatherby's evidence that his estimates for infrastructure amplification include an additional amount under sewer and water 'major works' - refer to Appendices #1-3.] 1508 Further, Mr Cichacz gave evidence that it is most likely that the majority of this augmentation work would have to have be undertaken at an early stage of the development [Statement 9 September 1999, page 4] and that it was misleading for Mr Weatherby to distribute those costs over the entire subdivision. Mr Cichacz gave evidence that in his experience it is the developer that has to fund such infrastructure costs [T1851] and that Sydney Water does not negotiate on the funding of the infrastructure costs [T1852; T1854; T1857]. 1509 In relation to the section 94 contribution costs, the defendants submit that Mr Weatherby's figure of $1,500 per lot is a gross underestimate of the contribution that would be required, being lifted from a 1993 nearby development by Landcom of 77 lots. Further, they state that when he utilized that figure, Mr Weatherby did not calculate how much land would be required to be dedicated, nor did he work out the cost of such land which may be dedicated in lieu of a section 94 cash contribution to open space needs. The defendants point out that Mr Weatherby had not seen the section 94 contribution plan exhibit D21 and submit that he was seeking to put forward a figure on the basis that one assumed that LCE owned residual land adjacent to the escarpment that would be dedicated as open space. They submit that failure to allow in the development costs for dedicating open space land, underestimates the development costs. [Defendants' submissions - Section I, paragraph 20.4]. 1510 Further, the defendants submit that the Commission of Inquiry report page 178 [19/210] identified a potential section 94 cost ranging between $5 million and $15 million for upgrading the freeway between Helensburgh and Waterfall, but that Mr Weatherby did not take that figure into account in settling his section 94 figure. [I interpolate to note that the Commissioner reported that the RTA identified costs of works as $5 million or $15 million depending upon work undertaken and that the DOP claimed that advice from the RTA identified costs as ranging between $0.5 - $15 million]. 1511 The defendants state that 'even on his own figures Mr Weatherby admits a short fall of some $1.5 million in the section 94 contribution but he seeks to justify this by reference to a contingency factor which on his own schedules is not a contingency factor which has been applied to the section 94 cost'. [Defendants' submissions - Section I, paragraph 20.7]. 1512 The defendants then submit as follows: Mr Weatherby envisages that if the subject land were subdivided there would be a separate section 94 plan (TP1533 L45) (and see statement Smyth 22 November 1999 paragraph 7). Neither Mr Weatherby nor Mr Smyth (TP1933 L35) have sought to identify the public facilities needed for the hypothetical development of the Lady Carrington Estate nor cost them so as to work out a section 94 contribution figure that may be applicable if such a new S94 plan were bought into existence. In those circumstances and in light of the above mentioned identified facilities in the Helensburgh draft plan and the Commission of Inquiry's report it is submitted the court would accept the evidence of Mr Cichacz that the section 94 plan exhibit D21 gives a fairly good indication of what the costs would be (TP1843 L1). Certainly the figures put forward by Mr Smyth in his report of 22 November 1999 cannot be relied upon because they assume but do not bring to account the cost of open space dedication or the infrastructure costs which he has assumed that the developer would provide in kind (statement 22 November 1999 paragraph 12 and TP1934 L2). He also has not taken into account the Commission of Inquiry's suggested contribution arising from the freeway upgrade (TP1934 L55). [Defendants' submissions - Section I, paragraph 20.9] 1513 The defendants submit that Mr Weatherby ought to have utilized a figure in the order of $9,000 per lot as indicated by exhibit D2 in the absence of more refined work in working out what facilities may be generated by the LCE development and what their costs may be bearing in mind the indications of the sort of costs as referred to in the Commission of Inquiry's report. Valuation Evidence The Plaintiffs' Evidence Mr Egan 1514 Mr Frank Egan, who is a Registered Real Estate Valuer gave evidence for the plaintiffs on the valuation of the proposed LCE development. He was instructed to assess the indicative profit potential (as at specified dates) if the LCE lands were sold in residential lots as if subdivided in accordance with the 1992 GHD application reduced according to the number of lots excised on the basis of one or a combination of two of the contingencies referred to in Mr Weatherby's report of 30 June 1999 as the "Wetlands Contingency" the "Post COI Contingency" and "DUAP Contingency". 1515 In addition to oral evidence, his valuation reports dated 7 July 1999, 27 October 1999 (in reply to the report of Mr Dempsey dated 13 September 1999), 5 November 1999 and 22 November 1999 were read in court without objection. 1516 Mr Egan is a director of Egan National Valuers (NSW) Pty Ltd and his curriculum vitae details over forty years of experience in public and private practice. Mr Egan is the Past President of the New South Wales Division of the Australian Property Institute 1981/82 and has been appointed as a Referee by the Supreme Court and as an Arbitrator in land-related disputes. 1517 As noted above, in making his Assessments 1-3, Mr Egan adopted and applied the number of residential lots identified by Mr Weatherby under Scenarios J, E and F in his report. 1518 Mr Egan gave oral evidence that the exercise he was asked to perform was to assess the indicative profit potential of various scenarios under the HUTA agreement. To do this, he was required to first assess the total income and then deduct the total outgoings. He stated that while certain inputs were dictated by the agreement, such as $31 million for input of land value, the task was complicated by subdivisions of up to 1,000 lots to be developed over time. He stated that in order to assess the carrying charges, the sale rates, the estimates of when payments are made, it is more accurate to make calculations on a 'discounted cash flow' (DCF) which involves assessing the time the subdivision will take from commencement of construction to the time when the last lot is sold and the profit is made [T1816-7]. 1519 In his primary assessments, Mr Egan assumed a land value of $31 million. According to his oral evidence, he had been asked to assume this figure, he had not been shown a copy of the HUTA agreement and had not been asked to comment on whether or not $31 million was an appropriate figure [T1824]. His recalculated assessments of 22 November 1999 assume an alternative land value of $40 million. 1520 Mr Egan gave evidence that in making the calculations, he accepted the commencement dates nominated, namely, January 1997 and March 1999. Further, he stated as follows: A. And also I've accepted the experts' inputs which were given to me on the cost of subdivision and town planning. So the discounted cash flow assesses the commencement of the exercise when the land input is taken, we've - because of such large proportions they have been divided into precincts, because one precinct would be constructed and being sold, the other one would commence construction towards the end of that one, so there is a continuous flow of land available on the market as a marketing exercise. All the money isn't put out at once, it's put out at different stages and the money is recouped at different stages as the sale goes on. We have calculated the cost of money during this exercise. The most outlay is at the beginning of the exercise, as it generates profits the money comes back in, and that is of course the interest, or the cost of money is one of the main ingredients in the exercise. It will run from the first day of the exercise to the last. And the main theory of it is to assess what the cost of money is over the investment period. And say the first exercise is 92 months, so that money is going out for 92 months, or not completely 92 months, but money is coming back in over 92 months as it's sold. And that is basically how it works. At the end of it you have your construction costs over time plus the cost of money interest, and you have your revenue flow from the sale of the land. So basically at the end of the exercise it's the value of the revenue stream less value of the cost, and that is the indicative profit for each project. Q. Just another question: At the end of the exercise, do I assume that everything is sold to others that those who had original equity in the interests as developers and so forth, having developed, it's all gone into common property or not? A. It's gone into the subdivision, and roads are dedicated to council, and all the lots are in private ownership. Q. All they have in dollars, and it's a question of working out on various bases what amount of dollars, is that right? A. What dollars, yes, their profits, the land is in the ownership of the people who have created the revenue flow, and they walk away. ELLICOTT: Q. And did you have to make any assumptions about the residue of the land and the National Park area; did you make any assumptions about that? A. I didn't make any particular assumptions about that because Mr Weatherby who had worked out the cost continuation on the subdivision and various dedications that would have been to council. So I have assumed, in having spoken to him, there was some dedication of acreage that would support what they call s 94 or contribution to the community, would be dedicated to the council, which would suffice to satisfy any council demands for that allocation of community areas. I accepted Weatherby's reports. Q. In relation to your valuation assessments, they're not strict valuations of land at a particular date in the conventional sense are they? A. No. We had to assess what the selling prices of the land would be to construct an income flow, which we analysed sales in various subdivisions, and which are indicative, and I make a decision on what the blocks of land would sell for. And in doing that, because of the nature of the exercise, none of these lots are pegged out, we can't actually go and say lot 100, and have a look at it. So what the top and bottom range would possibly be, and took an average across the lot because it wasn't - just wasn't physically possible to walk onto each lot and grade it, so this one is better than that one, so we have said we had to adopt an average lot over the whole subdivision. Q. What you have been speaking of refers I think to the assessment 1; you have got four assessments? A. Yes. Q. In your report. What you have been referring to relates to the first three? A. Yes. Q. Now would you explain to his Honour the basis of the fourth assessment? A. Fourth assessment was - can be valued at the date we inspected the property. And to assess the reduction in the value of the holding by its downgrading and zoning. Originally it was part non-urban and part environmental protection, and after the COI inquiry the Wollongong Council amended the zoning to all environmental protection which has got less potential than non-urban, and we've endeavoured to measure the loss in value by the downgrading of that zoning which is physically what happened. Q. And for that purpose, would you call that a valuation in the stricter sense? A. We had to endeavour to make a valuation of the land part non-urban and part environmental protection, and then an assessment of the land being all environmental protection, and the difference in that would probably be the diminution in value caused by the adverse zoning. Q. And I think it was a figure of 2 million odd? A. About 2.6 million I think. Q. And how much? A. I think it's about 2.6 million. Q. Did that involve the taking into account some comparable sales? A. We endeavoured to get comparable sales, but it's very difficult. There is nothing exactly the same as that. We've had a look at sales of non-urban land with some potential. We have had look at some non-urban sales that had houses on them because they had a previous - but had more potential probably than this land. So it did involve an assessment of land of environmental protection zoning and non-urban zoning. It was - I must admit it was difficult because there isn't any direct evidence on that, but I've looked at the sales that were available and had to draw some conclusions. (Transcript 1817-1819] 1521 In relation to the subdivision, Mr Egan deposed that the location of the LCE lands is an extremely enhancing marketing factor as the development is convenient to the local shopping centre and railway stations at Helensburgh and Otford. Further, he noted the excellent road system to Sydney and Wollongong; the picturesque environment with walking trails and horseriding facilities; the ready access to the Royal National Park and South Coast beaches; and that the development offers a lifestyle having all the benefits of urban amenity in a rural setting. 1522 Further, he gave evidence that based on the growing scarcity of residential land in Helensburgh itself and the scarcity of good building lots in the southern suburbs of Sydney, it is likely that there would have been a ready market for the lots particularly when supported by a concerted advertising and promotion campaign. In this regard, Mr Egan had reference to certain NSW Department of Urban Affairs and Planning publications which he stated verified that the supply of vacant residential land in the Southern Suburbs of Sydney is diminishing to such an extent that land is scarce and will become increasingly so unless substantial new subdivisions are released in the next few years. Mr Egan also supported this conclusion by reference to market evidence. 1523 In relation to the valuations, Mr Egan explained that given the conceptual nature of the subdivision design, it was not possible to estimate a price for each and every lot (as there is no peg out), the only practical approach being to strike an average price estimate, above and below which, prices could be expected to range depending on individual lot areas, frontages and plottage, position in the subdivision, aspect, outlook and views and physical characteristics. 1524 Mr Egan gave evidence that he calculated agents' commissions at 2.5% of the average gross realisation potential of the lots and the medium density site in stage four. In relation to legal fees, he allowed a flat rate of $600 per lot as at 1997 and $650 per lot as at 1999 for preparation of contracts of sale and for conveyancing, treating the medium density site as the equivalent of seven lots. For promotion and advertising expenses, Mr Egan allowed $1,000 per lot for the purpose of signage, brochure and media advertising. Interest on borrowings he calculated at The National Australian Bank "National Bench Mark Rate". For Assessment 1, calculated as at 1997, he used a rate of 9.40% on quarterly rests as envisaged in the joint venture agreement [Valuation Report 7 July 1999, paragraphs 68-71]. For Assessments 2 and 3, calculated as at 1999, he utilized a rate of 8.35% [paragraph 103]. 1525 Mr Egan's Assessments 1-4 detailed in his report dated 7 July 1999 and amended in his report dated 5 November 1999 were as follows: Assessment No. 1: …As indicated on the plan prepared by Mr Weatherby (in relation to Scenario J in his report) the sub-division pattern for the purposes of my Assessment One is: (a) 764 lots in the LCE (South) lands and an additional medium density site in five stages; and (b) 194 lots in the LCE (North) lands representing a sixth stage. The lots average at 600 m2 in all stages.……. Estimated Gross Realisation Potential 958 Lots at $165,000/lot $158,070,000 36 M D Sites at $ 35,000/site $ 1,260,000 $159,330,000 Realisation Expenses Agents Commissions 2.5% $3,983,250 Legal Fees $ 600 / lot $ 579,000 $ 4,562,250 $154,767,750 Development Costs $63,697,396 Advertising & Promotion $1,000 /lot $ 965,000 Holding Charges $4,715,812 Interest on cash flow -$34,158,913 Total consideration for land in JV $31,000,000 Stamp Duty (staged basis) $1,600,410 Legal Fees on purchase (staged basis) $ 310,000 $ 68,129,705 Indicated Margin of Profit $ 86,638,045 On this basis, the indicative profit potential as at January 1997 for the project based upon a yield of 958 lots plus a medium density site and land cost of $31,000,000 is estimated at $87,000,000. Assessment No. 2: …As indicated on the plan prepared by Mr Weatherby (in relation to Scenario E in his report) the sub-division pattern for the purposes of my Assessment Two yields 695 lots in five stages in the LCE (South) lands. The North section is taken from the development entirely. The lots average at 600 m2 in all stages…. Estimated Gross Realisation Potential 695 Lots at $190,000/lot $132,050,000 36 M D Sites at $40,000/ site $ 1,440,000 $133,490,000 Realisation Expenses Agents Commissions 2.50% $3,337,250 Legal Fees $ 650 / lo $ 456,300 $ 3,793,550 $129,696,450 Development Costs $49,207,611 Advertising & Promotion $1,000 /lot $ 702,000 Holding Charges $ 3,173,949 Interest on cash flow -$18,948,399 Total consideration for land in JV $31,000,000 Stamp Duty (staged basis) $ 1,533,390 Legal Fees on purchase (staged basis) $ 310,000 $ 66,978,550 Indicated Margin of Profit $ 62,717,900 On this basis the indicative profit potential as at March 1999 from the project, based on a yield of 695 lots plus a medium density site and land cost of $31,000,000 is $63,000,000. Assessment No 3: …As indicated on the plan prepared by Mr Weatherby (in relation to Scenario E in his report) the sub-division pattern for the purposes of my Assessment 3 yields 108 lots in one stage in the LCE (North) lands. [I interpolate to note that in regard to the northern area, Mr Egan relied on Mr Weatherby's Scenario F.] The South section produces 695 lots as noted in Paragraph 74. The lots average at 600m2 in all stages. … Estimated Gross Realisation Potential 803 Lots at $190,000/lot $152,570,000 36 M D Sites at $40,000/ site $ 1,440,000 $154,010,000 Realisation Expenses Agents Commissions 2.50% $3,850,250 Legal Fees $ 650 / lot $ 526,500 $ 4,376,750 $149,633,250 Development Costs $57,732,957 Advertising & Promotion $1,000 /lot $ 810,000 Holding Charges $ 4,180,642 Interest on cash flow $55,078,121 Total consideration for land in JV $31,000,000 Stamp Duty (staged basis) $ 1,552,360 Legal Fees on purchase (staged basis) $ 310,000 $ 40,507,838 Indicated Margin of Profit $109,125,412 On this basis the indicative profit potential as at March 1999 from the project on a yield of 803 lots plus medium density site and land cost of $31,000,000 is $109,000,000. [I interpolate to note that Mr Ellicott QC explained in submissions that Mr Egan's Assessment 4 provided for in his reports is distinct from Assessments 1-3, because what it is positing is that as a result of the alleged breach by Walkers, namely, the failure to secure rezoning of the land, the value of the land as an entity dropped and that that becomes a consideration in relation to damages - T1819]. Assessment No. 4: I am requested to assess the approximate amount by which the LCE Lands have at current values been devalued as a consequence of the rezoning on 31 March 1995 of part of the land from "Non Urban zone 1" to "Zone 7(d) (Hacking River Environmental Protection zone)" under the Wollongong LEP…. I am of the opinion that the approximate amount by which the Lady Carrington Estate has at current values been devalued as a consequence of the rezoning on 31 March, 1995 of part of the land from "Non Urban 1" to "Zone 7 (d) (Hacking River Environmental Protection Zone)" under the City of Wollongong Local Environmental Plan 1990 is reasonably assessed at $2,680,000.00 (two million, six hundred and eighty thousand dollars). [paragraph 155] 1526 After giving oral evidence on Friday 19 November 1999, Mr Egan produced a statement dated 22 November 1999 (which was read in court without further cross-examination) in which he recalculated Assessment numbers 1, 2 and 3 on the following bases: Assessment No 1: (a) Reassess computer model with the Weatherby cost adjustments for increase in the water and sewerage amplification, adjust the Section 94 Contributions from $1,500 per allotment to $1,858 per allotment and adopt a land component of $40,000,000 in contrast to that dictated by the HUTA of $31,000,000. (b) To reassess Assessment No 1 with the Weatherby cost adjustments to water and sewerage amplification and the Section 94 Contribution adopting the land component of $31,000,000 as dictated by the HUTA, but paying the water and sewerage amplification costs "up front". (c) Calculate Assessment No 1 with the Weatherby cost adjustments to water and sewerage amplification, the Section 94 Contribution, the land component of $40,000,000 in contrast to the HUTA of $31,000,000 and paying the water and sewerage amplification costs "up front". The calculated figures are as follows: (a) $63,387,452 (b) $75,039,019 (c) $52,499,147 Assessment No 2: (a) Reassess Assessment No 2 increasing the Section 94 Contributions from $1,500 per allotment to $1,858 per allotment and calculating the land content at $40,000,000 in contrast to the HUTA of $31,000,000. (b) Reassess Assessment No 2 adjusting the Section 94 Contributions and adopting a land content of $31,000,000 but paying the water and sewerage amplification costs "up front". (c) Adjust Assessment No 2 by the Section 94 Contributions from $1,500 per allotment to $1,858 per allotment, adopting a land content of $40,000,000 in contrast to the HUTA of $31,000,000 and calculating the payment of the water and sewerage amplification costs "up front". The calculated figures are as follows: (a) $46,293,477 (b) $55,396,935 (c) $39,407,714 Assessment No 3: (a) Reassessment on the basis that the Section 94 Contributions are increased from $1,500 per allotment to $1,858 per allotment and adopting a land content at $40,000,000 in lieu of $31,000,000 dictated by the HUTA. (b) Reassessment on the basis of the adjusted Section 94 Contributions, adopting a land content of $31,000,000 but paying the water and sewerage amplification costs "up front". (c) Adjusting the assessment by the increase in Section 94 Contributions, adopting a land of $40,000,000 in lieu of the HUTA of $31,000,000 and paying the cost of the water and sewerage amplification "up front". The recalculated figures are: (a) $86,377,968 (b) $100,010,810 (c) $77,949,619 1527 During cross-examination Mr Egan gave evidence that the development period for Assessment I is 92 months; for Assessment II it is 66 months; and Assessment III is 78 months [T1820; 1821; 1822]. 1528 Mr Egan gave evidence that for the purposes of the valuation exercise he was instructed to spread the land value figure of $31 million over the different stages of the hypothetical development, rather than to bring the land value to account at the beginning of the exercise [T1826]. 1529 In relation to the infrastructure amplification costs, Mr Egan gave evidence that he relied on Mr Weatherby's report in which these costs were spread over each precinct of the development as it progressed, rather than brought to account at stage one [T1832]. He gave evidence that he thought that that was the correct approach on the basis that for other subdivisions with which he has had involvement, costs have never been paid up front but rather, a price has been struck by the Water Board and the developer negotiates a deal whereby the costs are paid progressively [T1833]. However, when pressed, Mr Egan conceded that his experience in that regard is limited to the Kordak development - Cecil Hills [T1834]. The Defendants' Evidence Mr Dempsey 1530 Mr Dempsey, a Registered Valuer, was called by the defendants to comment on and to test the valuation evidence given by the plaintiffs' expert witness, Mr Egan. Mr Dempsey, did not, however produce a valuation in reply [T1890]. In addition to oral evidence, Mr Demsey's two statements dated 13 September 1999 and 17 November 1999 were read and he gave oral evidence. 1531 Mr Dempsey is a director of Arthur Anderson Worldwide and has over 26 years experience in the Property Industry. Previous to his current position, Mr Dempsey acted as National Director of Investment Advisory with Knight Frank and earlier as NSW Director of Valuation for Hooker Corporate. 1532 According to Mr Dempsey's curriculum vitae, his primary focus has been property advisory and valuation across a broad range of property uses and locations. He has extensive experience in commercial CBD markets, particularly the Sydney CBD, given that his early career included a period with the NSW Valuer General attached to their city office, undertaking rating tenancy and capital value assessments in the Sydney CBD. In more recent times Mr Dempsey has provided advice to owners, developers and underwriters in relation to commercial property including feasibility analysis, due diligence and advice to Government tender assessment panels. Mr Dempsey has experience in other consultancy and general property advice related areas, including: litigation support in commercial, resumption and statutory rating matters; real estate market analysis and assessments for financial reporting purposes [Report 13 September 1999, Annexure C]. 1533 Mr Dempsey gave evidence that in his opinion, the calculation in Mr Egan's report assessing indicative profit potential dated 7 July 1999, is unsound both in methodology and result, and fails in the following areas: (a) it is simplistic and not consistent with normal acceptable investment analysis standards. (b) it is inconsistent with industry standards including the standards required by banks, the Australian Property Institute and colleges of higher education and related course material. 1534 Mr Dempsey deposed that he did not agree with Mr Egan's findings in relation to costings [he relies in this regard on other independent expert advice], and revenues. 1535 Mr Dempsey gave evidence that he arrived at his conclusions by: (a) testing Mr Egan's stated assumptions and applying his costs and revenues as set out in assessment one having a valuation date of January 1997; (b) undertaking a static residual land value analysis in order to as close as possible based on the limited disclosure in Mr Egan's statement, reflect the methodology attempted by Mr Egan; (c) assuming a ten year development period (although no development period is set out in Mr Egan's report) for the whole project which includes the whole of LCE lands both northern and southern sections; and (d) for the purposes of this exercise adopting all of Mr Egan's costings and revenues within [his] model. 1536 Notwithstanding the above, Mr Dempsey deposed that there was insufficient information disclosed in the Egan Report to allow a comprehensive test of its findings. 1537 Mr Dempsey gave evidence that using Mr Egan's costs and assuming a ten year project and a land value of $31 million Mr Egan's analysis implies a 133.8% profit. He stated that even if Mr Egan's inputs were correct, comprehensive and rational (and in his opinion they are not), such a result in his opinion does not take account of the probable long pre sales holding period resulting in greater interest charges and a deferment of the sales proceeds. [I interpolate to note that Mr Dempsey gave no evidence in relation to Mr Egan's recalculated figures of 22 November 1999. While obviously, the profit margin in relation to these recalculated figures is reduced, to my mind, the gist of Mr Dempsey's comments remain applicable to Mr Egan's reduced profit margin.] 1538 Further, he gave evidence that the profit of 133.8% is well in excess of a profit that a developer would normally expect for the risks associated with this type of development. He stated that part of this profit component may be attributed to the timing of the payments for the land which are undertaken on a staged basis consistent with the production of completed allotments as set out in the HUTA. 1539 Mr Dempsey deposed that Mr Egan's profit margin is significantly different to the feasibility undertaken by Walker Corporation and their calculations undertaken on 30 September 1994 where they noted the return based on total net surplus over total revenue expressed as a percentage being 18.1% in the worst case scenario and 25.9% in the likely case scenario based on a 1,000 lot sub-division. 1540 He gave evidence that an inaccurate assessment of both costs and revenues may also be a factor contributing to such a significant profit result, but in all events, he concluded that the results arrived at by Mr Egan are not consistent with what may be considered a reasonable outcome or basis of assessment. 1541 Mr Dempsey originally criticised Mr Egan on the basis that Mr Egan's inputs were not applied to a discounted cashflow model. He later however gave evidence that Mr Egan did utilize such a model. 1542 In relation to Accepted Industry Standards, Mr Dempsey gave evidence that in his view, the analysis undertaken by Mr Egan to derive the indicated marginal profit is a lesser standard than that which is required by major banking institutions. Mr Dempsey deposed that he had reference to a standard instruction from the ANZ Bank which sets a minimum commercial standard and requires extensive detail relating to costing and timing and that this was not found in Mr Egan's report. Mr Dempsey indicated that he also had reference to a Feasibility Studies (Buildings) guidance note from the Australian Property Institutes Professional Practice Standards (first addition, January 1999). He gave evidence that the principles expressed in the guidance note apply equally to owner occupied schemes, to residential developments and developments of other non-commercial uses. Mr Dempsey concluded that in his opinion, the Egan report does not meet minimum standard as set down in the guidance note. 1543 In conclusion, Mr Dempsey stated that in his opinion there was insufficient data available for Mr Egan or any other valuer to undertake the analysis in the Egan Report based on industry standards. He gave evidence that there is insufficient information available for any valuer to properly assess the profit potential of the subdivision of the LCE and that as such, the Egan Report valuations are highly unreliable. 1544 Mr Dempsey criticised Mr Egan's analysis of the market. In particular, his evidence was that Mr Egan's estimates provide no supporting market analysis which reflects local demand in terms of allotment size of land required nor any analysis which would support a sales period. Mr Dempsey gave evidence that the Shell Cove Estate Realty at Shellharbour to which Mr Egan had reference in relation to land demand, serves only to demonstrate demand for Shellharbour, not for Helensburgh. Further, Mr Dempsey gave evidence that Mr Egan did not consider the impact of other lands being available for sale prior to the LCE, the depth of market demand and the impact on the viability of LCE. 1545 Further, Mr Dempsey deposed that he disagreed with Mr Egan's assumption that many of the lots would be sold off the plan or within 42 days of each stage being completed. He gave evidence that there is no other indication within the Egan Report as to the length of the development period for the production and sale of the whole estate nor any indication of whether there may be delays in commencing the sub-division pursuant to the Commissioner's preferred sequence of development if the Commissioner had considered these lands were suitable for residential development. 1546 The Commissioner's preferred sequence of development was as follows: (a) Gills Creek (cleared and disturbed lands) (b) LCE South (cleared and disturbed lands) (c) Gills Creek (flatter vegetated areas) (d) Landpool areas (e) Landcom (north) (f) LCE south ridge areas (g) LCE north. 1547 Mr Dempsey gave evidence that this sequence of development would impact markedly on the timing and cost of infrastructure and would involve a significant time interval between the release of the first sectors of LCE south lands, through to the much later development of the balance of the LCE south lands, followed by the LCE north land. 1548 Mr Dempsey deposed that the Egan Report and the reports upon which it is based, namely the Weatherby, Smyth and Rowbottom Reports, have assumed that if the LCE lands were rezoned residential that subdivision work could have proceeded to detailed design and construction without the need for any further environmental, bushfire, water quality or other associated studies identified by the Commissioner. Further, Mr Dempsey noted that the Egan Reports imply (without so stating), that the various development approvals would have been readily given by the various authorities involved. He pointed out that no allowance for any delays or opposition on the part of Wollongong Council, NPWS nor representatives of the various State authorities was provided for. He gave evidence that this was optimistic at best. 1549 In closing submissions, the defendants assert that Mr Egan's assumptions with respect to demand are optimistic, particularly so when Mr Egan had not factored into account in his valuation exercise, the possibility of other lands being rezoned in the vicinity and being released in competition with the subject land. Further, the defendants point out that Mr Egan assumed that both the north lands and the south lands were to be rezoned at the same time, notwithstanding that the Commissioner of Inquiry's report expressly envisaged a priority of land for rezoning and expressly envisaged the possibility of staged rezonings. [I note that the defendants did not, however, provide the Court with valuations that did factor in these considerations.] 1550 Mr Dempsey pointed out that the Egan Reports assess the profit potential of the LCE lands if they were sold in residential lots "as if subdivided in accordance with GHD 1992 report". He gave evidence that in effect, this means that the whole of the Egan valuations are based on GHD's conceptual layout rather than a detailed plan of sub-division and without the studies clearly identified by Mr Rowbottom in paragraph 8 of his report dated 25 June 1999. His evidence was that this clearly places the results, the conclusions and the measure of reliance of Mr Egan's reports, in question. Mr Dempsey regarded the Egan exercise as being 'based on a series of speculative assessments and contingencies that assume outcomes from the COI but are not based on any detailed analytical assessment' [paragraph 56]. 1551 Further, Mr Dempsey's evidence was that it is difficult to understand why the indicative profit potential of LCE with the northern area reduced by both the DUAP Contingency and Wetlands Contingency is higher at Assessment 3, than the indicative profit in Assessment 1 with lots reduced only on the basis of the Wetlands Contingency. 1552 Mr Dempsey gave evidence that he did not agree with the manner in which Mr Egan dealt with his land value, that is, to have adopted a land value of $31 million and then distribute this land value on a pro-rata basis relative to the number of lots in each stage over the full development period. Mr Dempsey deposed that in his opinion, such an approach represents a hypothetical and convenient spread of land costs which serve to defer the charge against land and thus enhance profit. He gave evidence that in his view, the correct approach is to treat the land in the same manner it would be reported in the balance sheet and that is as a land value for the single entity being the lands proposed to be subdivided. Mr Dempsey stated as follows: The assumed land value of $31 million has an economic cost in the context of the subdivision in much the same way as a cash deposit of $31 million in a bank account would be expected to return an interest payment. The owners of the land are seeking the maximum return relative to risk incurred. If they were to put their money in a savings account, they would expect a return on the whole of that money from the date of investment. Similarly, having the same amount of money as equity in a subdivision should return a dividend relative to the risks associated with the project in the same manner as any other cost. The return on those funds can only be achieved through the sales of land. The longer the sales proceeds are deferred, the lower the profit. Likewise, if the sales process occurs much earlier, then the profit may increase. 1553 Mr Dempsey concluded that based on these views, Mr Egan has overstated his profits as he has compressed both his costs and his revenue over an unrealistically short period of time and has not brought to account his cost in a manner which would be considered reasonable in the practical undertaking of the subdivision. He deposed that in his view, Mr. Egan's 50% IRR outcome is likely to be beyond the expectations of an experienced developer. 1554 During cross-examination Mr Dempsey gave evidence that he had not been on the LCE land. He had only observed the land from various locations [T1881], namely, public roads in the area and from the vantage point of the Helensburgh Tip [Report, 13 September 1999, paragraph 8]. 1555 Mr Dempsey gave evidence that he relied on advice from Mr Cichacz in relation to headworks infrastructure costs. He gave evidence that it is not reasonable to spread the infrastructure works over the full term of the development period of the whole sub-division as these headworks are essential before the first stage can be released. A practical sequence of works or cashflow, according to Mr Dempsey would allow for these costs to be incurred in the sequence in which they would be brought to account. [As noted previously, I accept this evidence as pervasive.] 1556 Mr Dempsey deposed that Mr Egan made no allowance for tip remediation costs which are estimated at $4,769,000 as at March 1999. He noted that Mr Egan assumed that Wollongong Council would remediate this site and that even if this was to occur, Mr Egan made no allowance for deferring the subdivision of this land pending Council's timing of such remediation. Mr Dempsey stated that Mr Egan's assessment assumes that such works would be done by Council well in advance of the lands being subdivided. 1557 Further, Mr Dempsey deposed that Mr Egan made no allowance for any stigma associated with this location as a result of the use as a rubbish tip nor did he make any allowance for the odours emanating from the sewerage pumping station. 1558 During cross-examination, Mr Dempsey gave evidence that he had not been aware that the Council had an EPA licence in respect of the tip or that a condition of that licence was to remediate the site at the end of its life. He stated, however, that he would have thought that that would be the case [T1883]. Further, Mr Dempsey agreed that a considerable amount of remediation work has already been undertaken in the hill area adjacent to the playing field in the vicinity of the northern LCE land. He agreed that it could be the case that one would not see the activities in the tip from the LCE land, however, he had not had the opportunity to observe the situation as he had not walked over the LCE land [T1885]. 1559 Mr Dempsey gave evidence that he had not made inquiries to discover whether Council would cease using the tip in the short term. He believed that he may have read something that indicated that there was local pressure on the Council to this end [T1885-6]. [I deal later with Mr Dempsey's evidence in relation to costs of rehabilitating the tip and the stigma associated with land proximate to the tip - refer to findings, point 6.] 1560 Mr Dempsey deposed that with regard to lot demand, Mr Egan's discounted cashflow provided for six stages yielding 958 lots under his assessment one, being allocated in the following manner: Stage 1 228 lots Stage 2 131 lots Stage 3 122 lots Stage 4 171 lots Stage 5 112 lots Stage 6 194 lots 1561 Mr Dempsey gave evidence that in his experience, a subdivider would not release more than 30-50 lots in any one stage. He stated that the above scenario provides the most optimistic outcome in terms of demand and that it assumes a constant demand over the development period allowing the subdivider to commence subsequent stages without delay. Mr Dempsey stated that in his opinion, this assumption is unrealistic and has no regard to variations in demand due to a range of reasons including changing economic circumstances. 1562 During cross-examination Mr Dempsey was taken to references in the Walker prospectus to the Helensburgh development and agreed that the prospectus detailed the development as being 1,300 lots with an estimated commencement date in 1994/95, completion date in 1998/99 and having an estimated revenue of $130 million. He gave evidence that such a timetable works out at 325 lots per year. Mr Dempsey further accepted that Walkers are very experienced developers [T1888-1889]. 1563 Mr Dempsey was then questioned in relation to the references he had made to the feasibility undertaken by Walkers dated 30 September 1994. At paragraph 18 of his statement dated 13 September 1999 Mr Demsey had noted that Mr Egan's calculated profit margin (calculated at that time to be 133.8% but subsequently adjusted), was significantly higher than the likely case scenario calculated by Walkers (25.9%). Further, at paragraph 34 of that statement, Mr Dempsey deposed as follows: Although [Walkers'] feasibility analysis is of a preliminary nature, it demonstrates the basis upon which a normal developer would undertake an analysis of a project of this size wherein they have adopted a discounted cash flow approach. In my opinion Mr Egan has applied a lesser standard in his assessment inconsistent with commercial practice. 1564 Mr Dempsey's evidence during cross-examination was as follows: Q. And you say that demonstrates a basis upon which a normal developer would undertake an analysis of a project of this size. Now that provided for 200 lots per annum out of the 1,000 lots, did it not? A. Yes, I think that is what it appeared to demonstrate. Q. So you would agree with me that based on those figures, which emanate from Walker Corporation which is, you agree, a very experienced residential developer, that a figure of 130 lots per annum would look conservative, would it not? A. Well, firstly I am not aware of the basis upon which they make their estimates, and I have only got this table as an extract from the prospectus. Q. I have just asked you to make the assumption? A. Yes, I can make that assumption. Q. On the basis of those figures? A. Yes. Q. The a figure of 130 would appear to be conservative, wouldn't it? A. Based on that assumption it would. [T1889-1890] 1565 The plaintiffs submit that Mr Dempsey's criticisms of Mr Egan's assumptions in relation to demand are speculative, particularly as Mr Dempsey admitted that he was unaware of the location of the Land Pooling Land except that it was "there" in Helensburgh; that he was unaware that Mr Hogarth owned any of such lands; that he had not walked the Lady Carrington Estate Lands; and that he was in not position to provide an opinion or comparison with other lands for subdivision purposes nor to comment upon whether the south-west lands would be as competitive as the LCE lands [T1880-1882]. Further, the plaintiffs point out that no evidence was adduced by the defendants as to the likely timing of release of any other lands at Helensburgh; and if such lands would in fact be in the same market as the LCE subdivision (ie the same price range taking into account views and amenity) at the same time. They submit that therefore, no evidence exists that there would in fact be a direct competitor at the time of release of the LCE subdivision and that in fact, in his recommendations at page 242 of his Report, the Commissioner ranked the Land Pooling Lands fourth in the order of priority for urban development and therefore subsequent to residential rezoning of the LCE (South) lands [19/273]. [To my mind these plaintiffs' submissions are of submissions of real substance.] 1566 The plaintiffs submit that Mr Egan estimated rates of sale based on other actual comparable sites south and south west of Helensburgh, not on any "hypothetical" competitor which may or may not have emerged at the same time in the same market. In terms of rates of demand, the plaintiffs submit that the LCE lands may set its own market or be a market leader as according to Mr Egan "it would be a most attractive subdivision, better than Yarrawarra" [T1830]. 1567 The plaintiffs assert that if Mr Egan assumed that both the LCE North and South Lands would be rezoned at the same time this is not material, as Mr Weatherby set out the LCE lands in precincts for staged development, completing development of the LCE South Lands before moving to the first stage of development in the LCE North Lands. The plaintiffs submit that practically speaking, this would allow for progressive rezoning and that as Mr Weatherby estimated that development of this land was not likely to occur until at least the sixth year of the progress of the subdivision, the delay of rezoning of those lands until immediately prior to such proposed development would serve to minimise expenditure on statutory out-goings on the LCE North land as they would be valued by statutory authorities as Non-Urban land until rezoned. 1568 The plaintiffs point out that Mr Egan adopted a rate of 132 lots to be sold per annum and that such a rate of sale is conservative when considered in the context of: · the Walker Corporation Report entitled "Helensburgh Redevelopment: Lady Carrington Estate Feasibility" dated 21 September 1994 (Annexure I to Smyth's Report dated 8 October 1999) which indicated a sale of 1000 lots at the rate of 200 per annum; · Mr Dransfield's memorandum to Mr Bruce Watson dated 11 February 1994 (PX8.0067) which indicated a sale of 1300 lots (from 1996) at the rate of about 186 lots per annum; and · the Walker Prospectus issued by Walker Corporation in February 1994 which at page 31 (PX8.0127) predicted an annual sale rate (from 1994/1995) of over 300 lots per annum. [In my view the plaintiffs' submissions in this regard are persuasive.] 1569 A question also arose as to what figure is an appropriate input for land value in determining the profit margin. 1570 Under the terms of the First Supplementary Agreement entered into between Lakatoi, Walker Consolidated, Ensile, Ibenmore, Highfield Grove, and Walker Corporation: -- Walker Consolidated was to be paid a project management fee of $20 million by Ibenmore subject to and conditional upon: (i) the Helensburgh land being rezoned (ii) Ibenmore exercising the Ensile Option (iii) Ensile receiving $20 million pursuant to the Ensile Contract [defined as the contract for sale to be entered into upon exercise by Ibenmore of the Ensile option] [clause 3] -- the parties agree that the moneys payable under the Ensile Contract are payable pursuant to the Ensile Option; that the moneys payable under the Ensile Contract may be paid in stages pursuant to the proposed staged subdivision; and that Walker Consolidated was to be entitled to payment of its project management fee on a pari passu basis with the payment of moneys to Ensile under the Ensile Contract [clause 4] -- notwithstanding the provisions of clause 4, Ensile agreed that if Ibenmore did not pay to Walker Consolidated an amount equal to the Project Management fee, then any moneys paid by Ibenmore to Ensile under the Ensile Contract in excess of the moneys received by Walker Consolidated from Ibenmore as project management fees was to be paid to Walker Consolidated, as to one half thereof, in part satisfaction of its agreement to guarantee the performance of Ibenmore pursuant to clause 6. [Clause 5] -- Ensile guaranteed to Walker Consolidated, the performance of Ibenmore's obligation to pay the moneys to Walker Consolidated pursuant to clause 5 [clause 6] 1571 Under the terms of the Second Supplementary Agreement entered into between the same parties: -- Walker Consolidated agreed to the project management fee being reduced to $11 million subject to nominees of Walker Consolidated receiving $9 million via the Genepa Investment Trust ["GIT"] [clause 2] -- Lakatoi consented to the sum of $9 million being paid to GIT and then distributed to the nominees of Walker Consolidated, subject to a Highfield associated entity receiving, on a pari passu basis, the equivalent amount [clause 3] -- Ensile consented to the reduction in the project management fee on condition that the terms of the First Supplementary Agreement regarding payments being made pari passu to Ensile and Walker Consolidated be maintained. The parties further agreed that any such payments would include payments to Ensile under the Helensburgh option and payments via GIT to the nominees of Walker Consolidated [ clause 4] -Walker Consolidated nominated the following payments: (a) an initial payment of $4.5 million to it to be received in its capacity as trustee of the Thanzo No. 3 Trust; and (b) a further payment of $4.5 million to Walker Group Pty Ltd [clause 5] -- Lakatoi consented to these nominations and agreed to use its best endeavours to preserve the current tax losses to the extent of $9 million in GIT [clause 6] 1572 The parties were at issue as to the appropriate figure to be taken into account as notional land cost [not to be confused with land value - the words "land cost" or "land value" were used loosely in submissions and are used interchangeably below. The exercise is of course concerned with construing agreements as opposed to looking at actual land valuations] and/or as a development expense. Mr Egan's figures were calculated in the alternative, taking either $31 million or $40 million into account as attributed to the costs of acquisition of the land. 1573 It seems tolerably clear from the First Supplementary Agreement that Ensile and Walker Consolidated were each to receive $20 million. In the case of Ensile this was its just entitlement upon exercise by Ibenmore of the Ensile option. In the case of Walker Consolidated this was by way of a project management fee. 1574 The variation achieved by the Second Supplementary Agreement simply reduced the management fee of $20 million to $11 million, but only upon the basis that the further sum of $9 million would be paid to GIT as provided for in clause 3. 1575 The defendants assert that if payment of the $11 million by way of management fee is to be treated as part of the cost or value attributable to the land, then it is inconsistent for the additional $9 million payable to the nominees of Walker Consolidated not to be similarly treated. The submission is that one of two results must follow, namely, either: (a) the land value of the cost is to be taken in at $40 million or alternatively; (b) the difference between the $40 million and the $31 million payable by virtue of the supplementary agreements, ought to be brought to account as a development expense The defendants submission is that accordingly the additional $9 million ought to be accounted for either as land value or development costs payable by the joint venture The plaintiffs on the other hand, submit that the $9 million amount due to Walker Consolidated under the Second Supplementary Agreement "is by way of dedication of tax losses from the Genepa Trust and not cash payment up front... [and] would go to the Thanzo Trust of which Mr Walker was a beneficiary". In my view the agreements require that the $40 million figure be accounted for as land acquisition cost. I note that whether or not one takes in the $40 million as land value, or regards the same sum as to $31 million, as land value, and as to $9 million as a development expense, the appropriate figure to be brought to account by Mr Egan would remain $40 million. 1576 Mr Dempsey gave evidence as follows: Q. If the arrangement between the parties was to pay an amount equivalent to $31 million and to do so at a rate of over [sic], with the land being released over the period at a rate of $20,000 a lot, just assuming that? A. (Witness nodded). Q. If you were trying to get the profit as between the parties as distinct from what you might call an ordinary arms-length subdivision it would be proper to take those figures into account, would it not? A. It would be - if that is the basis of the arrangement between the parties, well most certainly. [T1890] 1577 As already pointed out, the plaintiffs had briefed Mr Egan to prepare his estimation of the indicative profit potential had the joint venture "Project" proceeded pursuant to the HUTA (with the developable area reduced according to various contingencies) on the basis of the "Underlying Assumptions" in Schedule 5 at page 65 of his Report dated 7 July 1999. This included the assumption that the cost to the joint venture of the Ensile Land would be $31 million when calculated in accordance with the HUTA and its two Supplementary Agreements. Mr Egan, it will be recalled, undertook no valuation exercise in respect of the land [T1824]. 1578 In conclusion, the defendants submit that even if Mr Weatherby's development costs and Mr Egan's valuation exercise is adjusted to take in to account Mr Cichacz's and Mr Dempsey's comments, it is impermissible speculation as to which scenario with which contingency ought be utilized. [I note that to my mind this submission is without substance.] 1579 The defendants further submit that if that speculation can be resolved and the figures, as corrected, rerun, it would still be necessary, if possible to provide for the 50/50 joint venture and any discernible and ascertainable lost opportunity. [I accept that qualification of lost profits necessarily entails splitting the final figure 50/50 and reduced according to the court's determination of the probability of the chance.] The Court's Findings 1580 To my mind, the defendants' claim that Messrs Weatherby's and Egan's Reports are "nothing more than a random selection of the contingencies in various random scenarios" is without substance. 1581 The defendants' case on damages quantification is essentially a destructive and not a constructive case. The defendants are entitled as a matter of forensic choice and bearing in mind the onus which lies upon the plaintiffs to prove their case, to so approach the issue. In the result the court pays close attention to assessing the plaintiffs' evidence taking into account each of the matters raised by the defendants' experts and by the defendants in submission. 1582 The defendants' omission to brief their own experts to provide an alternative costing and evaluation is of course worthy of note. On the evidence the defendants were in a position to offer specific expert evidence to assist the court on the question of actual quantification of damages including development costs and indicative costs. Mr Cichacz gave evidence that while he had the expertise to make an estimate of infrastructure costs, he was not been asked to engage in that exercise. Rather, his main task was to examine Mr Weatherby's methodology and the consistency between various sections of his report and to provide broad comments on the main issues [T1850]. Likewise, Mr Dempsey was not briefed to prepare an alternative valuation; his instructions were to examine and comment on Mr Egan's reports. 1583 In Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 32 NSWLR 389 at 418-419, Handley JA commented as follows: "Indeed I think the omission to interrogate a friendly witness in respect to facts presumably within his knowledge is more significant than the failure to call such a person as a witness, and that the presumption that the evidence would not have been favourable to the parties' case is stronger than the one which arises from the failure to produce such a person as a witness (Milliman v Rochester Ry Co 3 App Div 109; 39 NYS 274 (1896) … Again it appears to me that the principles earlier referred to derived from Jones v Dunkel and the decision of the Appellate Division of the Supreme Court of New York in Milliman … are applicable, and indeed the proper inference is to the opposite effect of that drawn by the judge". 1584 While I have accepted as valid certain of the defendants' experts' comments in relation to the estimates put forward on behalf of the plaintiffs, in the main, I accept the evidence of Mr Weatherby, Mr Smyth in relation to section 94, and the evidence of Mr Egan. 1585 My findings with respect to each of the contentious issues are as follows: (1) Reliance on the 1992 GHD concept plans : I am satisfied that the proposed subdivision plans provided a reliable basis for Mr Weatherby to estimate the possible reduced developable area and therefore various lot number scenarios. I reject the submissions that these scenarios are so speculative as to be of no assistance to the court in quantifying damages. In fact, in the absence of contrary evidence, Mr Egan's valuations based upon Mr Weatherby's scenarios provide the best estimate available. (2) Degree of confidence : I have carefully reviewed the evidence in relation to this topic. The Court's finding, particularly in view of Sydney Water's reservations, is that the appropriate degree of confidence in the infrastructure costs is 20 percent, with a 10 percent degree of confidence for all other costs. (3) Section 94 contribution : I accept as reliable and correct, Mr Smyth's evidence that on the evidence, the best estimate of the likely section 94 contribution for LCE is $1,858 per lot. (4) External infrastructure amplification : I accept as generally reliable and correct, Mr Weatherby's evidence in this regard, but as already noted, the Court's finding is that the degree of confidence in this cost estimate is reasonably within 20 percent. (5) Timing of amplification works : I accept as correct Mr Cichacz' evidence that the majority of the infrastructure amplification works are likely to have been undertaken at an early stage of the development and that it is misleading to distribute these costs over the entire subdivision. (6) Rehabilitation of the tip : On the evidence it is apparent that Wollongong City Council has a licence (number 005861) issued under the Waste Minimisation and Management Act 1995 in respect of the Helensburgh Tip, and that a condition of that license issued by the EPA, is to remediate the tip in full upon completion of its physical life. Further, according to the Report of Manager Operations (WCC) re: Helensburgh Waste Disposal Depot (PX3.0214), the maximum life of the Tip is until 2010. On the plaintiffs' submissions, this means that the tip would be filled and remediated prior to the seventh and eighth year of the subdivision when it is predicted that the northern land would be on the market. I am satisfied that in the absence of evidence adduced to the contrary, it would be incorrect to assume that the Council would not comply with and carry out its obligations under that statutory licence. As such, Mr Dempsey's criticisms of Mr Egan's estimates for failing to account for rehabilitation costs or stigma arising due to proximity of the LCE northern development to the tip are rejected as without substance. (7) Stormwater Management Controls : I am satisfied of the reliability of Mr Weatherby's evidence that the cost of the Memtec facility if it were included in the Stormwater Management Plan, would be $6.7 million. Mr Weatherby in his calculation for "Drainage and Environmental Matters" predicated the rate of $6,500/lot upon the proposition that what was proposed was to construct wet/dry retention basins, artificial wetlands, erosion control measures and introducing management and maintenance control. I am satisfied of the reliability of this figure, particularly as the rate of $6,500 per lot is the same figure as that used by the Walker Corporation's report entitled "Helensburgh Redevelopment: Lady Carrington Estates Feasibility" dated 21 September 1994. Given that Mr Weatherby's calculations are based upon Mr Rowbottom's evidence, I infer that the figure of $6,500/lot accommodates for any testing required to be undertaken before construction of the stormwater management controls. (8) Value/Cost of the land : The court's finding is set out above. Mr Egan's valuations as extracted, serve to recalculate the profit margin using the correct input land 'value'/cost of $40 million. (9) Market demand : I accept as reliable and soundly based, Mr Egan's evidence in relation to release of the lots. It is perhaps noteworthy, that on the evidence, Mr Egan's timetable is indeed conservative when compared to that detailed in Walkers' prospectus. (10) Choice of Scenario : In the absence of evidence to the contrary, I am of the view that Mr Egan's Assessment 3 as recalculated at (c) in his statement of 22 November 1999, provides the appropriate basis for quantification of damages. To my mind, there is a real chance that had the defendants not breached their best endeavours obligation, the rezoning may have been implemented and development of the LCE north and south land may have been achieved in accordance with the contingencies applied by Mr Weatherby. This equates to subdivision of 803 lots. 1586 The plaintiffs' damages entitlement is then to be calculated upon the basis of a profit of $77,949,619 less the $6,700,000 indicated by Mr Weatherby as representing the cost of including the Memtec microfiltration facility. I find that the use of Memtec was an integral component of the LCE final submissions to the COI and would have been required had the rezoning been achieved. This figure is subject to further reductions to account for the cost of testing and implementing any other stormwater management comtrols not accounted for. 1587 I accept the defendants' evidence that this figure ought be split 50/50 to reflect the parties' joint venture arrangement. 1588 The resultant figure of $35,624,809.50 must then be reduced according to the court's determination of the probability of the chance that the sought after rezoning would have been achieved but for the defendants' breach of their obligation to use their best endeavours to secure the rezoning. As previously stated, the court has found, that that chance ought properly be assessed at 20 percent. Accordingly, the plaintiffs' prima facie damages entitlement on their best endeavours case, is $7,124,962. Questions do however arise as to the extent, if at all, that this figure may need to be reduced to take into account the fact that the land has not yet been sold and has a value. 1589 It is appropriate at this point to also note that the Judgment below also gives Ensile damages in the sum of 20% x $19,955,000, namely $3,991,000, less such figure as may be found appropriate in the exercise of taking into account Ensile's rights in the land, or to acquire the house block upon exercising the Ensile residual right option. Loss of chance in relation to the $1.75 million 'further contribution' 1590 The findings set out above in relation to the plaintiffs' loss of chance case mean that Lakatoi also lost the chance of obtaining the further contribution. Hence, Lakatoi's damages entitle it to an order on this basis for 20 per cent of $1.75 million - being $350,000. 50035/98 - LAKATOI UNIVERSAL PTY LTD & ors v LANGLEY ALEXANDER WALKER & ORS 50110/98 - ENSILE PTY LIMITED v WALKER CONSOLIDATED INVESTMENTS PTY LIMITED and Ors 50109/98 - ENSILE PTY LIMITED v WALKER CONSOLIDATED INVESTMENTS PTY LIMITED 1798/98 - ENSILE PTY LIMITED v WALKER CONSOLIDATED INVESTMENTS PTY LIMITED JUDGMENT - 10 March 2000 PART 5 Alleged breach of Covenant by Wrongful Charging of Expenditure to Rosamond [Contentions paragraphs 40-43A] 1591 The allegations are that the following fees were wrongly charged to Rosamond when in fact services were not provided to Rosamond in respect of such fees, namely: (a) A project management fee of $500,000 (b) A project management fee of $565,000 (c) A security warehouse invoice of $17,868 (d) A direct alarm supplies invoice of $5,170 (e) Interest and other charges to 30 June 1996 $643,545 (f) Work in Progress to (i) June 1994 $593,049 (ii) March 95 $1,116,241 1592 The short position is that the defendants do not contend that amounts (a) - (e) are payable by Rosamond. The defendants' written submissions of 27 September 1999 include the following: 'In relation to the two project management fees the evidence of Mr Dransfield (paras 68 to 70 of his statement) these sums were never intended to be paid by Rosamond/Ibenmore, but represented profits in advance to be realised from Walker's share of the joint venture. The invoices of 20 June 1994 [PAB31] and 14 December 1994 [PAB35] have the words "I confirm that this amount will not require payment by Ibenmore P/L" In relation to the security warehouse invoice of $17,868 and $5,170 these (sic) inadvertently entered as Walker Expenses. In the particulars at paragraph 41 of the Amended Summons the plaintiffs refer to two work in progress amounts of $593,049 and $1,116,241. As set out in paragraph 10 of Mr Pengly's statement [ultimately not read] these amounts appear to have double counted the sums of $500,000 and $565,000 referred to above. In any event no claim for such sums has been made or is made against Rosamond. In the particulars to paragraph 41 of the Amended Summons the plaintiffs also refer to an amount of $643,545 said to be "interest and other charges to 30.6.96". As stated at paragraph 26 of these submissions, no claim is made against Rosamond for interest. The invoices for the Walker Expenses that are claimed against Rosamond, in addition to the Initial Contribution of $2.75 million, are contained in the folder. [PX 27/101] Outstanding claims of the plaintiffs to declaratory relief go beyond the Plaintiffs' concessions. It is necessary to deal with the facts in some detail. Security Warehouse Transaction 1593 I find the following facts: - Ensile Pty Limited had a Sales Tax Exemption Number effective from 4 June 1993 (PX40.0023). - On 23 September 1994, Mr Joe Gribble, an employee of Walker Corporation (see PX 6.0173.3) obtained a quotation from Security Warehouse for goods for the Company Ensile Pty Limited (PX40.0032). The cost of the goods was $17868. - These goods were ordered, and payment made by Walker Group on 5 October 1994 (see PX40.0035 and PX40.0038). - On 10 October 1994, the delivery docket shows that the goods were delivered to "Joe Gribble Hunters Hill" (PX40.0036). The delivery docket also shows the quotation of Ensile's Sales Tax number. - On 10 November 1994, "Vlado" from Security Warehouse faxes back to "Joe/Tony" the order, and requesting an authority relating to the Sales Tax Exemption. (PX40.0041). - In relation to PX40.0041: - This is not a genuine Ensile letterhead ( it can be compared with a genuine letterhead which is at PX40.0024); - Ensile has never had its address as "Lot 5 Lady Carrington Drive"; - Ensile has never quoted its sales tax number on its letterhead; - Ensile has never had its Accounts sent to Walker Corporation's address at Mascot; - Mr Hogarth supplied details of Ensile's Sales Tax Exemption Number during the October/November 1993 discussions leading up to the signing of the Heads of Agreement (see Mr Hogarth's statement filed 5/10/99 para 27). - At PX40.0042, Mr Joe Gribble signed as a person authorised to quote. He is not, nor has he ever been, authorised to quote Ensile's Sales Tax number. - At PX40.0044 is a plan by Security Warehouse of "CCTV System Wiring" for 12 Crescent Street. This is the Hunters Hill address referred to in the quotation, and was the private residence of Mr Lang Walker (see PX40.0027). - The Helensburgh Unit Trust Accounts (PX0021.0005) show an amount of $17868.00 has been charged to the Joint Venture on 31 March 1995. Rosamond received no benefit, nor could have expected at that time to receive any benefit, from the installation of a security system at Mr Walker's home or elsewhere. - The Helensburgh Unit Trust Accounts (PX0021.0005) show that the amount of the Security Warehouse invoice ($17868.00) was charged to the Joint Venture on 31 March 1995. This amount has remained in the Accounts until 17 September 1999 when the Defendants, via its Solicitors advised the Plaintiffs that the amounts were "mistakenly debited to the Rosamond account". Direct Alarms - The Helensburgh Unit Trust Accounts (PX0021.0005) show an amount of $5170.00 has been charged to the Joint Venture on 5 October 1994. No supporting documentation was discovered by the Defendants. Rosamond received no benefit nor could have excepted at that time to receive any benefit from any goods purchased from Direct Alarms. - On 27 May 1999, a subpoena was issued to DAS Security Wholesalers which is a company owned by Hills Industries. They were unable to locate any documentation prior to February 1996. Generally - By facsimile dated 17 September 1999, Perkes & Stone advised that the Defendants do not contend that those amounts are to be paid to Rosamond Pty Limited as "these amounts were mistakenly debited to the Rosamond Account."(PX40.0022). Management Fees 1594 These findings relate to project management fees of $500,000 and $565,000, which have been recorded in the accounts of the Helensburgh Unit Trust (HUT) as amounts owing to Walker Group Pty Limited, a wholly owned subsidiary of Walker Corporation Limited. 1595 I find the following facts: (a) Mr Hogarth's evidence (para 106 of his First Statement) which I accept as reliable on this issue, is that on 25 July 1994, Mr Weinert met him at his property and explained to him that Walker Corporation were going to be a couple of million dollars short of their projected profit for their first year as a public company. Mr Weinert, who, it seems, was acting on behalf of Mr Walker, asked Mr Hogarth if he could help them to increase their reported profits by accepting certain invoices made out to Ibenmore Pty Limited ("Ibenmore") for project management fees (para 106 of Mr Hogarth's First Statement). (b) Mr Weinert then handed Mr Hogarth an invoice dated 20 June 1994 from Walker Corporation Limited to Ibenmore for project management fees in the sum of $500,000 (PX10.0268). Mr Hogarth says and I accept, that he accepted that invoice on the basis that it was only to assist Walker Corporation, and that the amounts stated on the invoice would not be payable by Ibenmore (para 106 of Mr Hogarth's First Statement). Mr Hogarth, I accept, asked Mr Weinert to provide him something in writing to the effect that those amounts would never require payment by Ibenmore, and Mr Weinert complied by handwriting on the invoice " I confirm that this account will not require payment by Ibenmore P/L". (c) The Walker Corporation Prospectus, issued on 22 February 1994 (PX8.0095) contained the director's profit forecasts for the years ending 30 June 1994 and 30 June 1995 (PX8.0144). In view of the importance which subscribers to the prospectus would have attached to those profit forecasts, it is reasonable to infer that there was obviously pressure on Walker Corporation Limited to deliver results, which met or exceeded those forecasts. That pressure was I infer, compounded by the rapid decline in Walker Corporation's share price ($1.55) from the time of listing in March 1994. By the end of June 1994, Walker Corporation's share price had fallen to $1.11 (Walker Corporation Limited monthly share price data, being part of Exhibit PX4). (d) Schedule 2 to Mr Humphreys' Report dated 27 September 1999 contains a table showing a comparison between the director's profit forecasts for the 1994 and 1995 years, and the actual results achieved by the company in those years. (e) For the year ended 30 June 1994, taking the "normalised" forecasts (as Mr Humphreys as done in Schedule 2), Walker Corporation's profit fell more than $5 million short of the director's forecasts. Taking the forecasts in the prospectus which are not been normalised (ie third column of figures on page 48 of the Prospectus), Walker Corporation's reported profits for the year ended 30 June 1994, exceeded the director's forecasts ($40.8 million) by only $150,000. (f) The plaintiffs accept that they do not have enough evidence to say for sure that the $500,000 fees were ultimately included in Walker Corporation's reported profits for the year ended 30 June 1994 (para 50 of Mr Humphreys' Report). (g) Mr Humphreys has given evidence that it is possible that the fees of $500,000 were included in Walker Corporation's profits for the year ended 30 June 1994, given that that invoice (not bearing Mr Weinert's handwritten notation) was contained in Walker Corporation's auditor's files (para 51 of his Report). Mr Humphreys' has also given evidence that the project management fees of $565,000 (discussed below) were included in Walker Corporation's profits for the year ended 30 June 1995 (para 52 of his Report). The plaintiffs submit, therefore, that it is reasonable to infer that the amount of $500,000 was included in Walker Corporation's reported profits for the year ended 30 June 1994. It is no coincidence, the plaintiffs' submit, that the date of the invoice, 20 June 1994, is a date just 10 days prior to the end of the 1994 financial year. (h) Assuming that the $500,000 fees were included in Walker Corporation's reported profits for the year ended 30 June 1994, those fees were the difference between Walker Corporation meeting its prospectus forecasts, and failing to meet those forecasts (on the basis of the forecasts which are not normalised). (i) By December 1994, Walker Corporation's share price had plummeted to 69 cents (monthly share price data, being part of Exhibit PX4) and the plaintiffs submit that it is reasonable to infer that there was clearly real pressure on Walker Corporation to show that it was on track to meet its prospectus forecasts for full year ending 30 June 1995. (j) In November 1994, the Australian Stock Exchange wrote to Walker Corporation to query why the share price had fallen from 92 cents on 9 November 1994 to 81 cents on 11 November 1994 (Exhibit PX4). Walker Corporation's company secretary, replied by stating: "We are unable to explain this decline and can only reiterate statements made by the Chairman, Mr Bill Loewenthal, and Managing Director Mr Lang Walker, at the Company's Annual General Meeting on 31 October 1994 " The Board believes that the only way to improve the share price is to deliver results that are well above average "." [emphasis added] (k) Sometime in December 1994, Mr Weinert handed to Mr Hogarth another invoice issued by Walker Corporation to Ibenmore for project management fees. (para 127 of RMH's First Statement). That invoice is dated 14 December 1994, and is for fees of $565,000. Mr Hogarth accepted that invoice, and he even signed it (KPMG Document 11038, being part of Exhibit RGH3 to Mr Humphreys' Report). Mr Hogarth only accepted that invoice on the basis that it would not affect the joint venture, and Mr Weinert again wrote on the December 1994 invoice "I confirm that this account will not require payment by Ibenmore P/L" (PX19.0311). (l) The plaintiffs submit that it is probable, that in December 1994, Mr Walker and Mr Dransfield were aware of Walker Corporation's likely profit shortfall for the 1995 year. (m) Looking again at Mr Humphreys' table in Schedule 2 to his Report, it can be seen that for the year ended 30 June 1995, Walker Corporation's actual profits fell way short of the director's forecasts. Walker Corporation's profits for the 1995 year amounted to $40.48 million (before-tax), compared with the $56.7 million profit forecast contained in the prospectus. The $40.48 million reported profits included the $565,000 project management fees (see para 52 of Mr Humphreys' Report). It should be noted that the invoice for $565,000 in Walker Corporation's auditor's files does not bear Mr Weinert's handwritten notation (see KMPG11038 being part of Exhibit RGH3 to Mr Humphreys' Report). (n) The date of the invoice for $565,000 is said by the plaintiffs to be significant, being a date just prior to 31 December 1994, the cut-off date for revenues which would be included in the company's half yearly report. The half-yearly report would clearly be an indicator to shareholders as to whether the company was on track to meet the prospectus forecasts (or "results that are well above the average") for the year ending 30 June 1995. (o) At some stage, it seems in 1995, Mr Hogarth was also handed an invoice issued by Walker Corporation to Lakatoi Universal for $320,000 (21.0094). This fee was purportedly for architectural and development assistance in completing development approval on the site at Allison Road in Cronulla (it was originally intended that Ibenmore would develop that site, but Lakatoi and Walker Consolidated later agreed to develop that site by a separate joint venture, which became known as "The Carrington"). The invoice handed to Mr Hogarth also bears Mr Weinert's notation, "Bob, Confirming this invoice is never to be paid". As Mr Humphreys notes in paragraph 53 of his Report, it is possible that this invoice too was included in Walker Corporation's reported profits for the year ending 30 June 1995 or the year ending 30 June 1996. (p) On 4 April 1995 an Ibenmore Board meeting was held at Walker Corporation Limited's offices in Mascot. Mr Hogarth, Mr Kidd, Mr Dransfield and Mr Walker were all in attendance (para 134 of Mr Hogarth's First Statement and para 78 of Mr Kidd's First Statement – and see PX21.0004, PX21.0016). (q) During that meeting, Mr Walker handed to Mr Hogarth and Mr Kidd a General Ledger Detail Report for the Helensburgh Unit Trust for the period from June 1994 to March 1995, which had been generated that morning (para 136 of Mr Hogarth's First Statement, para 80 of Mr Kidd's First Statement, and document PX21.0005-21.0009). Notwithstanding Mr Weinert's verbal and written assurances to Mr Hogarth that the project management fees would not require payment by Ibenmore, those fees had been recorded in the accounts of the Helensburgh Unit Trust as amounts owing to Walker Group Pty Limited (PX21.0005 - 21.0007, and see paras 46-48 in Mr Humphreys' Report). (r) It is relevant to note here that on or about 21 March 1994, Mr Weinert on my findings, told Mr Hogarth that Walker Consolidated, or Walker Corporation would be "doing all the accounting" in relation to the joint venture (para 70 of Mr Hogarth's First Statement). From the commencement of the joint venture, it was understood as between the Lakatoi interests and the Walker Consolidated interests that Walker Consolidated would be responsible for maintaining the accounts for Ibenmore and the Helensburgh Unit Trust. The General Ledger Detail Report, generated on 4 April 1995, was, it seems, prepared by Walker Corporation within its accounting department. Therefore, both Mr Walker and Mr Dransfield had control over the preparation of the accounts for the Helensburgh Unit Trust. (s) Mr Hogarth and Mr Kidd did not have much of a chance to discuss the 4 April 1995 General Ledger Detail Report with Mr Walker or Mr Dransfield as Mr Walker announced that he had another meeting to attend, and he left shortly thereafter (para 136 of Mr Hogarth's First Statement, para 80 of Mr Kidd's First Statement). The Plaintiffs submit that it might be suggested that Mr Walker attempted to evade discussion of the General Ledger Detail Report because he knew that Mr Hogarth and Mr Kidd would dispute amounts in the accounts (including management fees). (t) Mr Kidd's evidence (para 80 of his First Statement) is that, after having a brief look at the General Ledger Detail Report, he said to Mr Walker "We have never agreed to these fees and they should not be shown in the books of the joint venture", and Mr Walker replied, "Yes I'm aware of all that". Mr Hogarth's evidence (para 135 of his First Statement) is that he expressed his concerns to Mr Dransfield about the management fees appearing in the accounts of the joint venture, and that Mr Dransfield told him, evasively, "Why don't you set out your concerns in writing and we'll sort it all out then". (u) On 6 April 1995, Mr Kidd (on behalf of Lakatoi Universal Pty Limited) sent a facsimile to Mr Dransfield, headed "Subject Response to Matters Raised at Ibenmore Board Meeting 04.04.95". At point 4 of that facsimile, Mr Kidd refers to the General Ledger Detail Report that he had received and states that: "Both RMH and I feel that it is now appropriate to document the mechanism and amounts shown for "Project Management" as an internal Walker requirement and that the sum shown of $1,065,000.00 will not apply to the JV in fact. Please advise how you wish to handle this." (v) Mr Kidd's letter of 6 April 1994 is, I accept, consistent with Mr Hogarth's evidence that Mr Weinert had told him that the invoices were only prepared for the purpose of Walker Corporation's accounts. Mr Kidd's letter is also consistent with Mr Hogarth's and Mr Kidd's evidence that they had never given their approval to Ibenmore being liable to pay the fees of $1,065,000 to Walker Corporation. The letter is also entirely consistent with Mr Hogarth's and Mr Kidd's evidence of what transpired during the meeting on 4 April 1995, when they were handed the General Ledger Detail Report (as summarised above). (w) Shortly after the meeting on 4 April 1995, Mr Hogarth had a conversation with Mr Walker about the management fees totalling $1,065,000, which had been included in Ibenmore's accounts (para 139 of Mr Hogarth's First Statement). Mr Hogarth again expressed his concerns that the management fees were included in Ibenmore's accounts and Mr Walker told him that Mr Weinert had already given him papers to the effect that those amounts never need to be paid (para 139 of Mr Hogarth's First Statement). (x) Mr Kidd has given evidence that on 24 April 1995, he attended the offices of Walker Corporation and spoke to Mr Dransfield (para 83 of Mr Kidd's First Statement). Mr Kidd raised the issue of the accounts, which he said needed to be addressed (para 83 of Mr Kidd's First Statement). Mr Dransfield replied "Yes, I got your letter, I'll get back to you about it, it's just a question of organising Lang." (y) On 2 May 1995, Mr Kidd sent a facsimile to Mr Dransfield (PX21.0029). In that facsimile Mr Kidd stated that the matters raised in his fax of 6 April 1994 regarding the accounts were not discussed at the meeting on 24 April 1995, and he requested a response to those matters, or "a meeting to examine them at earliest" (PX21.0030). On 5 May 1995, Mr Dransfield replied to Mr Kidd's facsimile, stating in respect of the accounts, that "We will arrange a meeting for a suitable time next week to progress these issues" (PX21.0033). (z) Mr Kidd's evidence is that in the period between 2 May 1995 and mid June 1995, he telephoned Mr Dransfield on approximately four or five occasions to discuss Ibenmore's accounts (para 87 of Mr Kidd's First Statement). Mr Dransfield told him "I need a little time to get the accounting data checked and once the information is clear we need to get a date that suits us all…We will definitely get a meeting arranged and I will give you a call with some suggested dates". (aa) On 20 June 1995, Mr Hogarth, Mr Kidd, Mr Dransfield and Mr Walker attended a meeting at the offices of Walker Corporation (para 98 of Mr Kidd's First Statement). Mr Kidd told Mr Walker that despite his attempts to contact Mr Dransfield and Mr Walker about items in the accounts, he still did not have answers from them. Mr Dransfield again told Mr Kidd that the accounting department was looking at the matters and Mr Dransfield expected to be able to fix it and get back to him. Mr Kidd said to Mr Walker: "Lang, I looked at the work in progress statement and your spreadsheet. You have accrued what appear to be unbelievable amounts of money and applied them to work in progress when hardly any work has been done. I refuse to accept that we have any liability on any of those matters" (para 99 of Mr Kidd's First Statement) Mr Walker, presumably referring to the management fees which had been charged to the accounts, replied to Mr Kidd by saying: "These matters are all history now and we advised you that these amounts won't be debited against your loan account in Ibenmore's books." (para 99 of Mr Kidd's First Statement) Mr Dransfield said, with respect to the disputed amounts in the accounts (including the management fees and political donations): "We agree these have to be fixed and when you get the next set of accounts, I believe they will show how we have dealt with the matters". (ab) Mr Kidd says and I accept, that during 1995, a number of meetings were held at Walker Corporation in respect of the Carrington matter, but "at no time were Walkers prepared to talk or explain to me how the accounts of the Helensburgh Unit Trust were to be resolved" (para 88 of Mr Kidd's First Statement). According to Mr Kidd, no further meeting was ever arranged at which these accounting issues were considered. Nor were any further accounts for the Helensburgh Unit Trust supplied to Mr Hogarth or Mr Kidd (para 88 of Mr Kidd's First Statement). (ac) It seems reasonable to infer from Mr Dransfield's and Mr Walker's responses to Mr Kidd and Mr Hogarth, at, and following, the meeting on 4 April 1995, that Mr Dransfield and Mr Walker knew that the project management fees should not have been charged to the accounts, but they sought to evade doing anything about it. (ad) The plaintiffs submit that perhaps, Mr Walker and Mr Dransfield thought that Mr Hogarth and Mr Kidd would not be as persistent as they were about those items in the accounts, and Walker Corporation or Walker Consolidated would therefore get away with receiving an additional $1,065,000 from the Hogarth interests when it came time to distribute profits from the joint venture. Alternatively, they might have thought that removing those amounts from the HUT accounts would alert the auditors of Walker Corporation to the fact that the management fees should not have been included in the accounts of Walker Corporation. (ae) Accounts of the Helensburgh Unit Trust for the periods from July 1994 to June 1997 were obtained through the discovery process (Exhibits RGH8A(ii), RGH8A(iii), RGH8A(iv), RGH8B(ii), RGH8B(iii) and RGH8B(iv) to Mr Humphreys' Report). The project management fees totalling $1,065,000 are recorded in those accounts as amounts owing to Walker Group Pty Limited. (af) Looking at those accounts, the amount of $1,065,000 is included in the total "Work in Progress" figure in the "Helensburgh" ledger, and in the closing balance of the "Walker Group Pty Ltd" ledger, of General Ledger Detail Report. The project management fees totalling $1,065,000 also make up the total in the "Work in Progress" and "Walker Group Pty Ltd" items in the Balance Sheets for the Helensburgh Unit Trust (Exhibits RGH8B to Mr Humphreys' Report). (ag) The Walker Group Pty Ltd General Ledger Detail Reports for the period from June 1997, also obtained through the discovery process, show the project management fees of $1,065,000 as receivable from the Helensburgh Unit Trust (see "Helensburgh Unit Trust" General Ledger Detail Reports, being Exhibits RGH16A(iv), RGH16A(v), RGHA(vi) to Mr Humphreys' Report). (ah) On 1 August 1997, Mr Dransfield wrote to Mr Hogarth, enclosing figures relating to the Helensburgh project (PX23.0138). The amount shown in that letter as "Work in Progress" for Helensburgh is $863,872. As Mr Humphreys notes in paras 71-72 of his Report, the total of the management fees exceeds the $863,872 figure, and therefore, Mr Dransfield's letter confirms that the management fees were never to be payable by Ibenmore to Walker Corporation. (ai) The defendants now concede that the amounts of $500,000 and $565,000 are not owing by Ibenmore to Walker Corporation (para 25 of Further Amended Defence). The plaintiffs seek a declaration from the Court to that effect. But that is not the end of the matter. (aj) The plaintiffs submit that Mr Walker and Mr Dransfield breached their duties as directors of Ibenmore, and that Mr Walker, Mr Dransfield and Walker Consolidated breached the fiduciary duties which they owed to Mr Hogarth and to Lakatoi Universal Pty Limited. (ak) Mr Walker and Mr Dransfield were at all material times, directors of Walker Corporation and Mr Walker was a substantial shareholder in Walker Corporation. (al) Throughout 1994 and in the first half of 1995, I accept that it is reasonable to infer that there was considerable pressure on the directors of Walker Corporation (including Mr Walker and Mr Dransfield) to deliver results that met the profit forecasts in the prospectus, which those same directors were responsible for making. Given the downward spiral of the company's share price, I accept that there was even greater pressure on the directors, not only to meet the prospectus forecasts, but to go further, and deliver results "well above the average". As a substantial shareholder, Mr Walker would, I accept, also have been interested in taking action to increase the company's share price. (am) The plaintiffs submit that when Mr Walker and Mr Dransfield realised in June 1994 and December 1994 that Walker Corporation's reported profits would not reach the projected figures, they sought to falsely inflate the company's accounts, and they used the joint venture as the vehicle to do that. (an) The plaintiffs submit that Mr Walker and Mr Dransfield knew that Walker Corporation had not provided any chargeable project management services to the joint venture but they nevertheless caused two invoices to be created for project management fees, one for $500,000 in June 1994 and one for $565,000 in December 1994. Mr Walker asked Mr Weinert to deliver the invoices to Mr Hogarth and Mr Hogarth accepted the invoices on the basis that they would not affect the joint venture in any way (and Mr Weinert confirmed this by his handwritten notation on the invoice). (ao) It is relevant to note here that, in their defence (para 41), the defendants claim that the services, in respect of which management fees were charged, were provided. However, I accept that the defendants have produced no evidence of any such services that were provided. In addition, the fact that the defendants now concede that the fees are not payable by Ibenmore, further suggests that the fees were not justified by any services provided by Walker Corporation. (ap) Mr Walker, Mr Dransfield, and/or Walker Consolidated had control over the preparation of the accounts of the Helensburgh Unit Trust. On my findings, unknown to Mr Hogarth and Mr Kidd (the other directors of Ibenmore), and without their approval, Mr Walker and Mr Dransfield caused the alleged project management fees to be entered into the accounts of the joint venture, as amounts owing to Walker Group Pty Ltd or Walker Corporation Limited. (aq) The plaintiffs submit and I accept that the Court is entitled to infer that Mr Walker and Mr Dransfield caused the invoices to be created, and caused the project management fees to be charged to the HUT accounts, to "confer some legitimacy to the transactions that…would otherwise have been the subject to question by the auditors" (meaning, the auditors of Walker Corporation) (para 70 of Mr Humphreys' Report). Clause 17.1 of the HUTA provides that KPMG (the auditors of Walker Corporation) were to be the auditors of Ibenmore but the accounts of the HUT have never been audited. (ar) As noted above, copies of the invoices for $500,000 and $565,000 in the files of the auditors of Walker Corporation (KPMG Peat Marwick) do not bear Mr Weinert's handwritten notation, "I confirm that this account will not require payment by Ibenmore" (see KPMG11037 and KPMG11038, being part of Exhibit RGH3 to Mr Humphreys' Report). The plaintiffs submit and I accept that it is highly probable that Mr Weinert's intention with respect to the invoices (ie that they would never be payable by Ibenmore) was never conveyed to the auditors of Walker Corporation. (as) The plaintiffs base their claim on Mr Walker and Mr Dransfield having caused Ibenmore to accept liability for the amounts of $500,000 and $565,000. That is what the accounts of the Helensburgh Unit Trust, and the General Ledger Detail Reports of Walker Group Pty Ltd disclose (ie that those amounts are owing by Ibenmore to a Walker Group Pty Ltd). (at) The plaintiffs submit that: "The defendants might now suggest that the project management fees represented profits in advance to be realised from Walker's share of the joint venture, and that the management fees were not ever amounts owing by Ibenmore". (paras 68-70 of Mr Dransfield's Statement, being Exhibit PX25). The plaintiffs then submit that: "The defendants might say therefore that Mr Walker and Mr Dransfield never caused Ibenmore to accept any such liability. Accordingly the defendants will contend that there has been no breach of duty on the part of Mr Walker or Mr Dransfield or Walker Consolidated." However, that, on the plaintiffs' submissions, only raises another dilemma for the defendants. Namely, that if Ibenmore never had an obligation to pay those fees to Walker Corporation, those fees should not have been included in Walker Corporation's reported profits in the years ending 30 June 1994 and 30 June 1995 (see paras 60-70 of Mr Humphreys' Report – which were not challenged in cross-examination; see TX1565-1576). If that is the case, the plaintiffs submit that Mr Walker and Mr Dransfield, and Walker Corporation's accountants have deceived the company's shareholders and creditors, and the public. It is then submitted that: "Walker Corporation would also have deceived the Australian Stock Exchange (paras 73-74 of Mr Humphreys' Report and Exhibits referred to in those paragraphs). One can only speculate that this might have been one of the reasons why Mr Walker, Mr Dransfield, Mr Weinert, and Mr Pengly did not appear as witnesses." (au) In any event, the plaintiffs submit that whether or not Mr Dransfield and Mr Walker caused Ibenmore to accept liability for the management fees, they caused the accounts of the HUT to give the appearance that the fees were a liability to Walker Group Pty Ltd. (av) Mr Humphreys has given evidence (which was not challenged in cross-examination; see TX1565-1576) that it was not proper to record in the accounts of the HUT sums representing profits in advance, and that the project management fees should therefore not have been recorded in the HUT's accounts (paras 54-58, 66-70 of his Report). (aw) The defendants say that Mr Hogarth approved payment of the management fees. The plaintiffs submit that whilst Mr Hogarth accepted the invoices, it is clear, from his evidence, that he did so on the basis that the invoices would not affect the joint venture. The defendants have, I accept, produced no evidence that Mr Hogarth, or, for that matter, Mr Kidd, approved of the management fees being charged to the accounts of the HUT. (ax) The plaintiffs say that there is sufficient evidence to draw the inference that Mr Walker and Mr Dransfield caused the accounts of the HUT to show the management fees as owing to Walker Group Pty Ltd, to falsely inflate the reported profits of Walker Corporation. By the defendants' own admission, (paras 68-70 of Mr Dransfield's Statement, being Exhibit PX25), the objective of raising the management fee invoices was to enable Walker Corporation to bring to account profits not yet earned. (ay) The plaintiffs submit that by their conduct Mr Walker and Mr Dransfield acted in breach of their duties as directors of Ibenmore under sections 232(2) and 232(4) of the Corporations Law. The plaintiffs also claim that Mr Walker, Mr Dransfield, and Walker Consolidated, breached fiduciary duties which they owed to Mr Hogarth and Lakatoi Universal (as alleged in paras 29 and 36 of the Third Amended Summons). The defendants admit that those fiduciary duties were owed (paras 15 and 21 of Second Further Amended Defence). (az) The plaintiffs seek a declaration from the Court that the relevant defendants breached their duties as directors and their fiduciary duties, in authorising the management fees to be charged to the accounts of the HUT. (aaa) The plaintiffs say and I accept this is an instance of the Walker interests using the joint venture as a vehicle for their own benefit. 1596 The question of precise relief is dealt with in paragraphs 1598-1600 below. Interest Charges to Highfield Grove Alleged breach of Covenant by Walker Consolidated to pay Initial Contribution of $2.75M to Highfield Grove [Contentions paragraphs 38, 39] 1597 I find as follows:- (a) In clause 7.1(a) Walker Consolidated Investments Pty Limited ("Walker Consolidated") covenanted to pay to Highfield Grove the Initial Contribution of $2.75 million by 8 April 1994, or as soon as practical thereafter (see clause 1.2). (b) It is not in dispute that on or about 3 June 1994, Walker Consolidated or Walker Corporation handed to representatives of Mr Hogarth's interests, cheques in favour of AGC (Advances) Limited ($700,000) and Lakatoi Universal ($2,000,000) (PX10.0116). Highfield Grove directed Walker Consolidated to draw cheques to those parties, for those amounts (10.0186). (c) In effect, therefore, on 3 June 1994, Walker Consolidated paid to Highfield Grove the sum of $2,700,000. There is dispute as to whether Walker Consolidated effectively also paid $50,000 to Highfield Grove in June 1994. (d) Walker Group Pty Ltd (a wholly owned subsidiary of Walker Corporation) and Walker Corporation Limited subsequently treated those payments totalling $2,700,000 in their respective accounts, as a loan to Highfield Grove. (e) PX27.0022 shows that the amount of $2,700,000 was treated as a loan to Highfield Grove in the accounts of Walker Group Pty Ltd for the period June 1994. Mr Humphreys has given evidence (paragraph 16 of his Report) already referred to, that the payments totalling $2,700,000 were treated as a loan in Walker Corporation's financial statements for the year ending 30 June 1994 (the amount was included in Walker Corporation's accounts as "Loans-Secured") (f) The plaintiffs tendered as Exhibit PX24 sections of the affidavit of Mr E.N. Pengly of 27 May 1999. Mr Pengly until 5 May 1998 and was company secretary and financial administration manager of Walker Corporation. On that day he resigned as company secretary but has continued in his role as financial administration manager until 3 July 1998 from which time he has made himself available to Walker Corporation to assist with issues relating to his duties with Walker Corporation. He has deposed, as is now common ground, that on 2 June 1994 Mr Anthony Gye sent a facsimile to Mr John Hughes by way of: (i) a direction from Highfield Grove to Walker Consolidated to pay the sum of $2,750,000 as follows: - to AGC (Advances) Ltd ($2, million); - to Lakatoi ($700,000); and - to Ibenmore ($50,000); (ii) a request from Ibenmore to Highfield Grove that Highfield Grove advance to Ibenmore the sum of $50,000; (iii) an acknowledgment from Ibenmore to Highfield Grove, that Ibenmore accepted the advance of $50,000 by way of a loan from Highfield Grove and a direction that Highfield Grove pay those moneys as follows: - to Ensile ($45,000); - to Lakatoi ($2,500); and - to Lakatoi and Pinemore ($2,500). (g) Mr Pengly also gives evidence that following the initial drawing of three specified cheques, the first of which was payable to Highfield Grove and Pinemore in the sum of $10, the second which was payable to Highfield Grove in the sum of $10, and the third of which was payable to Ensile in the sum of $100, the amount of these cheques were subsequently altered to $2,500, $2,500, and $45,000 respectively. His evidence is that he is not aware as to why the amounts and payees were changed. (h) His evidence is further that the amount of $5,000 relates to the options for Gerrale Street and Alison Road. (i) The $2,750,000 Initial Contribution was not to be an advance, it was a once and for all payment. Clause 7.1(a) of the HUTA states that Walker Consolidated will pay the Initial Contribution to Highfield Grove. Nowhere in the HUTA is there any mention of the Initial Contribution being a loan to Highfield Grove. It is quite clear that the Initial Contribution was to be a part payment by Walker Consolidated to acquire an interest in the land owned by Hogarth interests (see paragraph 35 of Mr Humphreys' Report). (j) Mr Weinert's subsequent explanation for treating the payments totalling $2,700,000 as a loan to Highfield Grove (paragraph 33 of Witness Statement of Brian Weinert, being part of Exhibit PX26), was that the monies were advanced pursuant to a mortgage. As Mr Humphreys explains in paragraphs 8-12 of his Report, Mr Weinert's explanation for treating the payments totalling $2,700,000 as a loan to Highfield Grove, is not a valid explanation. (k) Mr Hogarth's evidence (see paragraphs 84, 86 of his First Statement) which I accept on this issue as reliable, is that Mr Walker and Mr Weinert told him that they wanted to treat the $2.75 million payment as a loan to Highfield Grove so that they could show the payment as a receivable in Walker Corporation's accounts. (l) The plaintiffs submitted that: "The defendants might claim that if the amount of $2,700,000 was not treated as a loan in Walker Corporation's accounts it would have been treated as an investment, and so there would be no difference in asset side of Walker Corporation's balance sheet." However, the plaintiffs submit that the reason that Walker Corporation wanted to treat the payment as a loan was because they wanted to accrue interest on that amount. Accruing interest on the so called 'loan' would have the effect of both increasing Walker Corporation's reported profit and assets (as set out below). (m) Mr Stone's file note (PX9.0241A), which the plaintiffs say, was in response to Mr Gye's request for him to comment on the Deed of Contract for Loan to the Draft Deed of Loan (PX9.0241C) is, I accept, further evidence that any loan was not going to be a 'real' loan. Mr Stone states in that file note "Any loan must be repaid, but there won't be any repayment because it is effectively an acquisition of an interest…I don't know the intricate borrowing arrangements to attempt to disguise what is really happening". (n) On 20 June 1995, the Financial Controller of Walker Corporation wrote to Highfield Grove, asking it to confirm that as at 30 June 1995 Highfield Grove owed Walker Corporation $3,032,617 (PX21.0100). That figure comprised the payments totalling $2,700,000 and interest accrued on that amount. (o) Mr Hogarth signed that Walker Corporation letter on 21 September 1995 (PX21.0100) and sent it back to Walker Corporation with a letter stating "We sign the memo on the understanding that this does not alter the Joint Venture Agreement with which this amount is associated" [PX21.172]. (p) In late December 1996, Mr Hudson, the General Finance Manager at Walker Corporation handed to Mr Hogarth a letter dated 13 September 1996, asking Mr Hogarth for confirmation that $3,343,544 was owing by Highfield Grove to Walker Corporation (paragraph 151 of Mr Hogarth's First Statement and PX22.0208). (q) The next day, it seems, Mr Hogarth had a conversation with Mr Hudson (paragraph 151 of RMH's First Statement). Mr Hudson asked Mr Hogarth to sign the letter of confirmation and return it as soon as possible. Mr Hogarth told Mr Hudson that he would only sign it if he were given a similar written undertaking to that which Mr Weinert gave him with respect to the management fee invoices. It appears that Mr Hogarth did not sign the letter of confirmation. (r) Not only did Walker Corporation treat the payments totalling $2,700,000 as a loan to Highfield Grove, but, in the period from July 1994 to 31 January 1997, Walker Corporation also showed in its accounts, interest accruing on the loan. (i) For the year ending 30 June 1995, $332,617 interest was accrued on the payment of $2,700,000 to Highfield Grove, in Walker Corporation's accounts (paragraph 17 of Mr Humphreys' Report) (ii) For the year ending 30 June 1996, $310,927.66 interest was accrued on the payment of $2,700,000 to Highfield Grove, in Walker Corporation's accounts (paragraph 18 of Mr Humphreys' Report). (iii) For the year ending 30 June 1997, $182, 397.54 interest was accrued on the payment of $2,700,000 to Highfield Grove, in Walker Corporation's accounts (paragraph 19 of Mr Humphreys' Report). A lesser amount was accrued in the 1997 year, compared to 1995 and 1996 years, because Walker Corporation ceased to accrued interest on the amount of $2,700,000 after 31 January 1997. (iv) In the period from July 1994 to 1 January 1997, the total interest accrued on the amount of $2,700,000 was $825,942.20 (paragraph 29 of Mr Humphreys' Report). (s) All interest accrued on the $2,700,000 in those years was shown as profit in Walker Corporation's profit and loss accounts for the relevant year (see paragraphs 17,18, 19 and 29 of Mr Humphreys' Report). (t) In addition, interest that was accrued on the amount of $2,700,000 each year was added to the "Secured-Loans" item in Walker Corporation's balance sheet, so that a greater amount was shown as being receivable from Highfield Grove (see paragraphs 17, 18 and 19 in Mr Humphreys' Report). (u) Mr Humphreys' evidence (which was not challenged in cross-examination – see TX1565-1576) is that it was not in accordance with proper accounting practice to include interest in the consolidated Financial Statements of Walker Corporation for the 1995, 1996 and 1997 years (paragraphs 20-28 of Mr Humphreys' Report). (v) The cross-examination of Mr Humphreys elicited at Transcript p 1574 [as qualified in re-examination at Transcript 1576] that if the initial $2.7 million figure ought not to have been treated in the accounts as a loan, the amount could have been recorded under the heading "investments". Mr Humphreys also accepted at Transcript 1574 that whether or not the $2.7 million amount was a loan or the initial contribution, it [regarded as the purchase of an interest in the joint venture], constituted an asset "in the hands of Walkers". (w) As noted above, Walker Corporation ceased accruing interest on the amount of $2,700,000 after 31 January 1997. Mr Humphreys' evidence (in paragraphs 31-33 of his Report) is that the interest accrued to that date should have been written off in Walker Corporation's accounts in the year ending 30 June 1997. As, at December 1997, there had been no write-back of the accrued interest in Walker Corporation's accounts (paragraph 15 of Mr Humphreys' Report). (x) On 10 October 1995 the ASX wrote to Walker Corporation asking, at point 5, for details of the outstanding secured loans totalling $6,504,000 in Walker Corporation's balance sheet as at 30 June 1995 (Exhibit RGH6 to Mr Humphreys' Report). Walker Corporation sent a letter in reply dated 30 October 1995 (Exhibit RGH7 to Mr Humphreys' Report), indicating that the total of secured loans included a secured loan to Highfield Grove of $3,033,000. Mr Humphreys' has given evidence (at para 35 of his Report) that that response by Walker Corporation was misleading. (y) The plaintiffs submit, and I accept, that it should be inferred that all this appears to have been done with Mr Walker's and Mr Dransfield's knowledge and consent. It involved using the joint venture to falsify Walker Corporation's accounts. (z) In the result it seems clear that the Walker group caused the sum of $2.7 million to be shown in the accounts of Walker Corporation as an advance by Walker Corporation to Highfield Grove and to show interest thereon accruing in the books of Walker Corporation since the amount was paid. (za) It is equally clear that the Walker group now accept that there was no loan by Walker Corporation to Highfield Grove of the sum of $2.7 million. The Walker group accept, as I understood Mr Powell's submissions, that it is appropriate for a declaration to be made that there is no such indebtedness and never was any such indebtedness. [Transcript 481 and 482 of 6 December 1999]. (zb) At the end of the day the parties were not at issue, as I understood their submissions, on the propriety of a declaration of the type referred to above. An issue apparently is still pressed relating to the sum of $50,000. The issue here is as to whether the $50,000 paid by Walker Corporation to Ensile, Pinemore and Lakatoi Universal was paid on account of Highfield Grove or on account of Rosamond pursuant to Walker Consolidated's obligations under the HUTA. (zc) Pursuant to clause 3.2 of the HUTA, Rosamond (then named Ibenmore) was to enter into three option agreements: the Ensile option, the Gerrale Street option and the Allison Road option. Under all these options, Rosamond was obliged to pay option fees. Item 3(d) of the Schedule includes within "Walker Expenses" contributon of the moneys to enable Rosamond (Ibenmore) to exercise the options and complete the contracts. Furthermore, in clause 1.2 of the HUTA (page 4) "Development Expenses" is defined to mean "all moneys paid by (Rosamond) which are necessary to complete the Objectives …" (which are in turn defined (page 4) to mean the intentions of the Unitholders (i.e. Lakatoi Universal and Walker Consolidated) expressed in clauses 2.3 and 2.4 (page 13) which includes carrying out the Project (defined on page 8 to include achieving rezoning and development of the land). By clause 7.2 (page 16) WalkerConsolidated was topay the "Walker Expenses" which were defined in item 3 of the Schedule (page 40) to include the "Development Expenses". (zd) Therefore Walker Consolidated was, under the HUTA, obliged to fund the option fees payable by Rosamond under the Gerrale Street, Allison Road and Ensile options. (ze) The $2.75 million paid by Walker Consolidated included the following amounts paid as indicated: Lakatoi Universal 2,500 Pinemore Pty Limited 2,500 Ensile Pty Limited 45,000 $50,000 (zf) I accept as correct the plaintiffs' submissions that these have now been shown to have been paid to Highfield Grove to meet the option fees payable by Rosamond under the options, this being a Walker expense. (zg) It seems to me that the $50,000 was paid by Walker Consolidated on account of Rosamond pursuant to clause 7.2 of the HUTA, Highfield Grove is in consequence entitled to an order that Walker Consoldiated pay to Highfield Grove the unpaid balance of $50,000 in respect of the Initial Contribution. Specific relief by way of declaration or other order 1598 Both in relation to the management fees issues and in relation to the alleged loan and interest issues, the plaintiffs have submitted that declaratory relief should be given by way of specific and detailed findings of breaches by Messrs Walker and Dransfield, of fiduciary duties and of duties owed under the Corporations Law. 1599 I have the following concerns in relation to these matters: (a) It is not clear to me at this stage precisely whom are the beneficiaries of those duties and what specific relief might flow from findings of breach. (b) There is some evidence of lack of clean hands insofar as Mr Hogarth is concerned - see for example the part he played in accepting the sham invoices for project management fees. (c) Unless some specific relief is sought as ancillary to declarations of the type sought, it is not obvious to me that declaratory relief of this nature would be of real utility and therefore ought be granted. (d) The defendants have now conceded that the management fees are not payable by Rosamond. (e) The defendants have now conceded that it is appropriate for a declaration to be made that there is not and never was any loan by Walker Corporation to Highfield Grove of the sum of $2.7 million. 1600 It seems to be appropriate to reserve leave to the plaintiffs to further address this matter following their having had an opportunity to read the reasons for judgment. Both parties will be invited to address submissions as to whether any, and if so what, relief ought be granted in relation to these matters. Alleged breach of Covenant by Wrongful use of Rosamond to make Political Donations [Contentions paragraphs 44-47] Conversations 21 1601 Mr Hogarth's evidence is that he agreed to a payment of $5,000 from the Joint Venture to the Labor Party by way of a donation [Statement paragraph 130]. 1602 Of signal importance is the failure of Mr Walker to give evidence to contradict that given by Mr Hogarth and Mr Kidd. 1603 The evidence given by Mr Hogarth which I accept on this issue as reliable is as follows:- 1. In February 1995, Mr Walker informed Mr Hogarth that with the State Election coming up, he intended making a donation to the Labor party. Mr Hogarth said that he would not give them a cent, but if he (Mr Walker ) thought it advisable, he would OK $5000 from the Joint Venture to donate to the Labor Party (Statement 130) 2. At a meeting of the directors of Ibenmore on 4 April 1995 he and Mr Kidd were handed a General Ledger Detail Report and document AC1001 for the Helensburgh Trust, on reading which they discovered the Political Donations (PX 21.0005; Statement 136, 137) 3. Soon after MrKidd's facsimile of 6 April 1995, he had a conversation with Mr Walker confirming that they had not agreed to payment of those amounts, that he did not believe any benefit was to be achieved from the Donations, and that he agreed only to a $5000 donation to the Labor Party. Mr Walker stated that Walker are involved in projects in most states, and that the size of the donation was realistic (Statement 138) 4. As a result of adverse publicity concerning the donations, Walker wanted to change the name of Ibenmore, which was done and the company changed to Rosamond (Statement 144) 5. Shortly after the name change was agreed, Mr Hudson of Walker Corporation advised Mr Hogarth that Mr Walker and Mr Dransfield advised him that Ibenmore would not have to pay the donations. Mr Hudson asked Mr Hogarth to sign a declaration from the electoral office about the donations which he did on the understanding that the amounts would not be debited to the joint venture. (Statement 145-146) 6. Mr Hogarth's evidence was that he had not seen these documents prior to these proceedings and only learnt of the donations referred to in those documents when he and Mr Kidd were handed the accounts for HUT on 4 April 1995. His evidence was that he only ever agreed to Ibenmore making a political donation of up to $5000 to the Labor Party, and that no proposal had been made to him for donations to the Liberal or National Parties. (PX 20.0232 and 21.0036; Statement 55-57) Cross Examination 7. Mr Hogarth recalled under cross-examination seeing the General Ledger report in April 1995 where he discovered the political donations (T333/20) 8. Mr Hogarth under cross-examination confirmed that he had had a conversation with Mr Walker and had approved only a $5000 donation to the Labor Party. The cross examination on this point commences at 372/6 and continues to 373/33, with the critical points being found at 372/34, 372/55 and 373/10 (T 372/6 - 373/33, 437/25-437/50) 9. Mr Hogarth under cross-examination confirmed his conversation with Mr Hudson regarding the change of name of Ibenmore and the signing of the electoral office declaration (T516/50, 517/5) 1604 The evidence given by Mr Kidd which I accept as reliable is as follows:- 1. On 4 April 1995 he attended a meeting at the offices of Walker Corporation with Mr Hogarth, Mr Walker and Mr Dransfield (PX 21.0004; Statement 78-79) 2. At this meeting Mr Kidd queried the political donations and confirmed that he did not and would not approve such sums. Mr Hogarth confirmed that he only agreed to $5000 and Mr Walker stated that the amount should be apportioned amongst all their (Walker) projects, and asking Mr Kidd and Mr Hogarth to "bear with us while I sort this out. (PX 21.005; Statement 80) 3. At a meeting between Mr Hogarth, Mr Kidd, Mr Dransfield and Mr Walker on 20 June 1995, Mr Walker agreed that Ibenmore should not be responsible for the political donations though it should share some component. Mr Walker stated that he was still getting advice on how they were to rectify the fees and the political donations (Stmt 99, 104) 4. He was never consulted about any payments to politicians (Stmt 13(d)) 5. Under cross-examination he accepted that when he first saw the Accounts he picked up the political donations (PX 10.0275; T866/15) 6. In relation to his fax to Mr Dransfield, of 6 April 1995, his evidence, which I accept as reliable on this issue, was that it was not his intention to convey in the document the meaning alleged by Mr Officer that the Hogarth interests had agreed to the Donation to the Labor Party of $100,000. (PX 21.0018, 22.0117 and T868/20-87/7) 7. Mr Kidd gave evidence that he had not had any discussions with anyone about an agreement to make political donations (T 869/38) 1605 On my findings, the evidence establishes that Mr Hogarth agreed to a political donation to the Australian Labor Party for the 1995 Election of an amount up to $5000. 1606 In my view, on the balance of probabilities, it can be concluded that Mr Hogarth would not have agreed to anything more than that this is supported by the uncontested evidence of both Mr Hogarth and Mr Kidd. 1607 I accept that the mere size of the donations is apparent when compared to the next biggest donation to the Labor Party by Lend Lease Corporation of $60,000. Given the extent of the operations of that company, it is extremely unlikely that Ibenmore would give such donations on its own account. 1608 I accept as correct the plaintiffs' submission that the proper inference is that Ibenmore was used as a front for Mr Walker to hide his political donations. The evidence establishes: (a) that Mr Walker conceded that the Helensburgh Unit Trust would not be debited with the Political Donations; (b) that the Political Parties knew that Mr Walker was involved with Ibenmore, and therefore Walker's other companies could expect to receive any perceived benefit from the donations; and 1609 The appropriate inference is that the subsequent publicity surrounding the donations was the very reason why Walker's wanted the name of Ibenmore changed, and why the procured Mr Hogarth to sign the Electoral Office Declaration. 1610 In any event, the expenditure on the donations was ultimately thrown away, Ibenmore received no benefit whatsoever from these donations. In my view the amount is not recoverable due to Walker's default. Alleged breach of duty in failing to secure the Thompson Option for Rosamond. [Contentions paragraphs 58-63] 1611 In paragraph G(8) of the Summons the plaintiffs sought an order that Walker Consolidated Investments transfer to Rosamond benefit of the Thompson Option. 1612 In paragraph 2(d) (Nature of Dispute) of the Summons, the plaintiffs claim that Walker Consolidated is liable to account to Rosamond for the benefit of the Thompson option which option Walker Consolidated took in its own name. 1613 In fact the Thompson Option has now expired and was not renewed. There is therefore nothing now in existence for which Walker Consolidated can be required to account. But the Plaintiffs submit that the conduct of the Defendants in relation to the Thompson Option is eloquent evidence of their repudiation of their fiduciary obligations. 1614 The Thompson Land (Lot 23 in Deposited Plan 752033) (owned by Francis Joseph Thompson ("Thompson")) is located in the centre of and is entirely surrounded by the Ensile Land and was vital to any rezoning and/or development of the Ensile Land because of its significance to the National Parkes & Wildlife Service to whom it was essential if the proposed gifting of the Ensile land to augment the National Parks as part of the development of the Lady Carrington Estate was to be acceptable to the Service. 1615 Thompson had granted options over the years to Lady Carrington Estates Pty Limited ("LCE") (a company associated with Mr Hogarth) to purchase the Thompson Land:- § Option to LCE dated 3 July 1991 expiring 2 January 1992 [PX 3.0165] § Option to LCE dated 6 November 1992 expiring 6 May 1994 [PX 5.0055] 1616 The Option dated 6 November 1992 [PX 5.0055] was held by LCE as at 6 April 1994 (the date of execution of the HUTA) which was due to expire on 6 May 1994. 1617 The Thompson Option was a right which Mr Hogarth made available to the joint venture pursuant to the Heads of Agreement and the HUTA. 1618 The evidence establishes that both prior to and subsequent to the execution of the HUTA, Mr Hogarth repeatedly asserted to Walker Consolidated the necessity for Rosamond before the expiry of the Thompson Option to either secure a renewal of the option to exercise the option: (a) Prior to execution of HUTA :- § paragraph 28 on page 18 of the Statement of Mr Hogarth dated 23 December 1998 · paragraph 36 on pages 32 and 33 of Mr Hogarth's Statement · end of paragraph 48 on page 45 of Mr Hogarth's Statement · paragraph 73 on page 60 of Mr Hogarth's Statement (b) Subsequent to execution of HUTA :- · paragraph 140 on page 92 of Mr Hogarth's Statement · paragraph 149 on page 96 of Mr Hogarth's Statement · paragraph 152 on page 98 of Mr Hogarth's Statement · paragraphs 155-157 on page 99 of Mr Hogarth's Statement · paragraph 51 on page 38 of Statement of Mr Kidd dated 24 December 1998 · paragraph 100 on page 63 of Mr Kidd's Statement · Ibenmore Board Meeting of 4 April 1995 at which the matter was discussed [PX 21.0004] · Fax from Mr Kidd to Mr Dransfield "in response to matters raised at Ibenmore Board Meeting of 04.04.95". Refers to agreement at meeting on 4 April 1995 that "you will proceed to negotiate with Thompson to obtain a 12-18 month extension to the option which we presently hold" [PX 22.0117]. It was Mr Hogarth's and Mr Kidd's belief that the option was held in the name of the joint venture - not Walker Consolidated. 1619 A facsimile dated 10 June 1994 from Mr Grist to Brian Weinert, Emanuel Pengly and Kim Davison requested a cheque for $5,000 in payment of option fee. [States "Peter Dransfield deal" [10.0194; 10.0210]] 1620 The cheque for $5,000 was provided [10.0207_01] 1621 Instead of pursuing this task in the name of or for the benefit of the joint venture, Mr Dransfield and/or Walker Consolidated allowed the option to expire and instead procured an option in the name of Walker Consolidated dated 20 June 1994 ("the Walker Thompson Option") [referred to in PX 21.0106 although the option itself was never produced] and Mr Walker and Mr Dransfield caused the amount of the option fee payable to Mr Thompson for the Walker Thompson Option to be debited as an expense incurred by Rosamond [PX 21.0006]. 1622 Mr Walker and Mr Dransfield in the name of Walker Consolidated continued to obtain extensions in the name of Walker Consolidated. On 8 May 1995 Ian Grist of JHH wrote to Russell McClelland & Brown (solicitors for Thompson) requesting an extension of the option for 12 months due to the "Helensburgh Enquiry" [PX 21.0034]. 1623 At a meeting on 20 June 1995 the extension of the Thompson Option was again discussed [PX 21.0105]. On the same date a Deed was entered into between Thompson and Walker Consolidated (signed by Peter Dransfield and John Hudson) whereby the option to Walker Consolidated was extended to 20 June 1996 [PX 21.0106]. 1624 A Walker Group cheque was paid to Thompson on 21 June 1995 for $5,000 in payment of the option fee [PX 21.0108]. 1625 A memorandum dated 4 July 1995 from Mr Grist to Kim Davison, Brian Weinert, Peter Dransfield and John Hudson confirmed that the Thompson Option was extended to 20 June 1996 [PX 21.0131]. 1626 The Walker Group paid $62.50 stamp duty on 9 August 1995 [PX 21.0148-9]. 1627 The 20 June 1995 Thompson Option was to expire 19 June 1996. 1628 On 13 May 1996 Mr Dransfield instructed Mr Grist to negotiate a further extension of the Thompson Option and on 23 September 1996 a Deed was entered into between Thompson and Walker Consolidated (signed by Mr Dransfield and Mr Walker) whereby the Thompson Option was further extended to 19 June 1997 [PX 22.0213]. 1629 A memorandum dated 24 September 1996 from Mr Grist to Kim Davison, Walker Corporation advised "In accordance with Peter Dransfield's instructions we have negotiated an extension" of the Thompson Option for a further 12 months and requesting cheque for $5,000 [PX 22.0217] 1630 The Walker Group payment details of the $5,000 on 27 September 1996 are in evidence [PX 22.0220] 1631 Walker Group paid $62.50 stamp duty on 21 November 1996 [PX 22.0228]. 1632 A file note of Mr Ian Grist was tendered covering a conversation with Mr Hogarth on 25 March 1997 "Bob has requested that we forward to him the following ... Copies of correspondence with Frank Thomson to obtain an extension to the Option over the Thomson land at Helensburgh" [PX 23.0079]. 1633 On 26 March 1997 Mr Grist also wrote to Russell McClelland & Brown seeking an extension of the Thompson Option to 20 December 1998 [PX 23.0080]. The Thompson Option was extended to 20 December 1998. 1634 A with compliments slip from Mr John Phillpott, Walker Corporation to Mr Hogarth in March 1997 was tendered which enclosed a letter from JHH to Russell McClelland & Brown dated 26 March 1997. 1635 A memorandum from Mr Grist to Kim Davison, Walker Corporation urgently requested a cheque for stamp duty [PX 23.0146] 1636 On 13 November 1998 JHH wrote to Russell McClelland & Brown seeking an extension of the Thompson Option for a further 12 months [PX 24.0108]. 1637 A letter from Gye and Associates ["GAL"] to Perkes & Stone ["P&S"] dated 18 November 1998 was tendered [PX 24.0109]. 1638 A Rosamond Policy Committee Meeting was held on 18 November 1998 at which Messrs Walker, Dransfield, Hogarth and Kidd were present and discussed the issue of the Thompson Option [PX 24.0111]. 1639 On 25 November 1998 J.H. Hughes ["JHH"] wrote to Russell McClelland & Brown requesting that a new option be granted in the name of Rosamond [PX 24.0112]. A follow-up letter was sent on 30 November 1998 [PX 24.0113]. 1640 Shortly thereafter P&S confirmed to GAL that Thompson had agreed to extend the option [PX 24.0114] and a cheque was drawn by Walker Corporation in the sum of $5,000 in favour of F J Thompson on 8 December 1998 [PX 24.0115]. 1641 On 9 December 1998 JHH sent to Russell McClelland & Brown the counterpart Option Agreement executed by Rosamond [PX 24.0116]. 1642 On 28 January 1999 Russell McClelland & Brown wrote to JHH advising that the option fee is to be increased to $6,000 and the purchase price of the property to be increased to $580,000 if the option is to be granted [PX 24.0118]. 1643 On 2 February 1999 JHH wrote to Russell McClelland & Brown advising that legal proceedings would be commenced if the option was not extended in accordance with the prior terms [PX 24.0119]. 1644 On 5 March 1999 JHH wrote to Russell McClelland & Brown [PX 24.0120]. 1645 I accept as correct the plaintiffs' submission that the proper inference to draw from the absence of evidence from Messrs Walker and Dransfield is that the securing of the Thompson Option in the name of Walker Consolidated was deliberate and that it was done behind Mr Hogarth's back with a view to obtain for its own benefit the option over the Thompson Land. Any defence that it was done by mistake is not made out. It has not been renewed and the joint venture and Mr Hogarth have lost the benefit of it. The plaintiffs submit that this has reduced considerably the capacity of Mr Hogarth and the joint venture to deal with NPWS and the Government authorities in relation to the land, but in final submissions [transcript 151 on 30.11.99] the plaintiffs accept that there is no evidence as to the specific diminution in the value of the land by reason of the loss of the option. 1646 The actions of Mr Walker and Mr Dransfield in securing the Walker Thompson Option were in breach of their respective duties as directors of Rosamond under Section 232(2) and 232(4) of the Corporations Law. 1647 The failure of Walker Consolidated to secure the Thompson Option for Rosamond was, on my findings, in breach of the covenant referred to in paragraph 37 of the Summons and in breach of the fiduciary obligations owed to Lakatoi including: (a) to act at all times honestly and in good faith and with loyalty to each other to achieve the objectives of the joint venture; (b) to make full and proper disclosure to the other of all matters of significance to the said objectives; (c) not to place itself in a position where its duties to achieve the said objectives conflicted with its private interests; (d) not to acquire a private advantage at the expense of the joint venture; (e) to make available or cause to be made available to the joint venture any interest in land acquired by either of them or Walker Corporation or their associated companies in or about the town of Helensburgh for the fulfilment of the said objectives. 1648 Ultimately the plaintiffs accepted in submissions that no specific relief could be claimed in relation to the Thompson Option and submitted, as I accept, that this is simply yet another example of a failure to recognise fiduciary obligations [30.11.99 transcript page 152]. The Vamden Development Consent - Alleged breach of duty in relation to Development Consent over Thompson land. [Contentions paragraphs 64-69] 1649 This is yet another of the issues in respect of which the plaintiffs ultimately press no claim for relief save, no doubt, as to costs. The facts are relied upon as a further suggested example of breaches by Mr Walker of fiduciary duties owed to Mr Hogarth and of breaches by Messrs Walker and Dransfield of duties owed as directors of Rosamond (Corporations Law ss.232(2) and 232(1)). 1650 The short relevant chronology extracted from the plaintiffs' submissions is as follows:- Date Description PX Ref § Meeting between Geoff Kidd, Peter Dransfield, Paul McKenna and John Whitehouse 21.0038 - File note of Geoff Kidd (21.0038) 21.0040 17-May-95 - Memo from Geoff Kidd to Bob Hogarth "Submit a BA on a 100 acre lot for a garish white stucco monstrosity of a house but ensure that all details are adequately addressed ... to ensure that there are no grounds for rejection of the application ... It is however vital that this application not be rejected as such a rejection would diminish the value of the land" (21.0040) 21.0047.1 - File note of Peter Dransfield (21.0047.1) 21.0051 - Minutes of meeting "Preparation of DA for housing site (40 Ha) to be prepared but not submitted" (21.0051) 19-May-95 § Peter Dransfield instructs John Phillpott and Paul McKenna to have a House Development Application prepared for lodgment in late June 1995. Told them to ensure the application was 100% complete so as to not to fail on a technical ground. 21.0072 10-Oct-95 § Ensile consents to lodgement of DA. 21.0175 12-Oct-95 § Letter from Peter Dransfield (on Walker Corporation letterhead) to WCC authorising Vamden or its nominee to lodge DA - signed under seal of Vamden 21.0176 3-Nov-95 § Thompson consents to lodgement of DA via a letter from his solicitors Russell McLelland 7 Brown to WCC 21.0184 8-Nov-95 § DA lodged with WCC in the name of Vamden 21.0186 29-Jan-96 § Fax from Kerrie Christie of WCC to Alan Doughton referring to "lack of submissions". 2-Apr-96 § Walker Civil Engineering enters into a Consulting Services Agreement with AMBS to prepare report on Threatened Fauna Species Investigation - to be completed by 12 April 1996. 15-May-96 § Walker Corporation prepares report on assessment of stability of Thompson Land. May 96 § Statement of Environmental Effects prepared by Walker Corporation (Revision 1) May 96 § Vegetation Survey prepared by QEM May 96 § Report by Treescan - Effect of Effluent Disposal on Existing Vegetation. 19-Jun-96 § Walker Corporation sends revised application to WCC with amended Statement of Environmental Effects. 15-Jul-96 § WCC writes to Vamden informing them that some of the matters listed in WCC letter of 21 November 1995 had not been addressed and that the application had been deferred pending receipt of such information. 22.0199.1 22-Sep-96 § QEM prepares report - Bushfire Constraints, Assessment of Proposed Development on Lots 23, DP 752033 Helensburgh". 28-Apr-97 § WCC meeting re determination of Development Application. 23.0089 23-Jun-97 § Development Consent granted by WCC to Vamden - effective for two years 23.0104 1651 The facts proven are as follows:- (a) On or about 10 December 1995 Mr Walker and Mr Dransfield caused Vamden to submit to Wollongong City Council a development application in respect of the Thompson Land (the "Vamden Development Applicaton"). This DA is numbered D 95/856. (b) The Vamden Development Application comprised: (i) the March 1992 GHD Rezoning Application prepared by GHD for LCE; (ii) Statement of Environmental Effects prepared by Walker Corporation and dated May 1996; (iii) Report prepared by Treescan Urban Forest Management entitled "Effect of Effluent Disposal on Existing Vegetation" dated 10 December 1996 (c) On 23 June 1997 the Council granted to Vamden development consent for the construction on the Thompson Land of the structures and improvements proposed in the Vamden Development Application ("Vamden Development Consent"). 1652 I accept that it was the duty of Mr Walker and Mr Dransfield as directors of Rosamond (such duty arising under sections 232(2) and 232(4) of the Corporations Law) to cause: (a) any development application for the Thompson Land which could be beneficial to the achievement of the joint venture objectives to be lodged and pursued and, if development consent thereto be obtained, then to obtain such development consent in the name of Rosamond; (b) any material in which property rights did or may exist which could be beneficial to the achievement of the joint venture objectives to be obtained for and be owned by Rosamond. 1653 On my findings, in lodging the Vamden Development Application and accepting the Vamden Development Consent in the name of Vamden and for the benefit of Vamden: (a) Mr Walker and Mr Dransfield acted in breach of the duties owed by them as directors as alleged in the preceding paragraph; and (b) Mr Walker acted in breach of the fiduciary duty he owed to Mr Hogarth including: (i) to act at all times honestly and in good faith and with loyalty to each other to achieve the objectives of the joint venture; (ii) to make full and proper disclosure to the other of all matters of significance to the said objectives; (iii) not to place himself in a position where his duties to achieve the said objectives conflicted with his private interests; and (iv) not to acquire a private advantage at the expense of the joint venture; (v) to make available or cause to be made available to the joint venture any interest in land acquired by either of them or Walker Corporation Limited or their associated companies in or about the town of Helensburgh for the fulfilment of the said objectives. Chapman Land - Alleged breach of duty and agreement in, through an associated company, acquiring Chapman Land for the purpose of land development. [Contentions paragraphs 26(d), 70-76] 1654 It will be recalled from the earlier recitation of the pleadings that the defendants have admitted that the relationship between the parties was based on trust and confidence and that by virtue thereof Mr Hogarth and Mr Walker each owed to the other and continued to owed to the other duties and obligations of a fiduciary nature including : (a) an obligation to act at all times honestly and in good faith and with loyalty to each other to achieve the objectives of the joint venture; (b) an obligation to make full and proper disclosure to the other of all matters of significance to the objectives; (c) an obligation not to place himself in a position where his duties to achieve the objectives conflicted with his private interests; (d) an obligation not to acquire a private advantage at the expense of the joint venture; 1655 It is first necessary to focus upon the precise location of the Chapman land. This involves identifying the Land Pooling Area, the Stanwell Land, the Cullen Land and the Chapman land. The subject lands are: (a) Land Pooling Area - Appendix 12(a) (all the area within black outline) (b) Stanwell Land - Appendix 12(a) (the area highlighted blue) (c) Ensile Land - Appendix 12(a) (the area highlighted pink) (d) Cullen Land - Appendix 12(b ) (the area highlighted green) (e) Chapman Land - Appendix 12(c) (the area highlighted yellow) (i) Comprises 42 allotments (ii) Located within the Land Pooling Area and is bounded by the roads owned by Ensile and which form part of the Ensile Land 1656 The issues raised in respect of the Chapman land commence with an assessment of the evidence of Mr Hogarth. I accept as reliable so much of Mr Hogarth's evidence of meeting as involves: (a) Mr Hogarth saying "Well I think that makes sense because we've now been there since 1979 and have got to know a lot about the area. As you know, we've spent a lot of money on consultants and we believe that we have a fair grip on all the developments that are happening at Helensburgh. As Peter will tell you LandCom have been active in the area and I would like to think that if we're going to enter into an arrangement together, that we do everything in Helensburgh together"; (b) Mr Walker responding "I agree, we have no experience in an area and it does not make sense for us to be involved separately given your history in the region"; (c) Mr Hogarth responding "So in the proposal that we are talking about, I'd put up all my land and thereafter everything we do in Helensburgh we'll do together"; (d) Mr Walker saying "Yes I agree with that Bob". Later in the conversation: (e) Mr Hogarth saying "I would expect that if I'm going to put everything up in Helensburgh and into this joint venture, then it makes sense that anything that's done in Helensburgh, we should both be involved in"; (f) Mr Walker responding "Yes I am happy to do that. I wouldn't be doing anything in Helensburgh without you being involved in it. You obviously have so much a local knowledge of the area and it seems to follow logically and equitably that that's how we'd do it"; (d) Mr Hogarth saying "The other area that we haven't really talked about is the Land Pooling Area"; (e) Mr Walker responding "On the same basis as we've just talked about, I would think that that would have to be put in as part of the joint venture"; (f) Mr Hogarth responding "Yes I think that's probably right. I suppose in the Land Pooling Area I've got an interest in Helensburgh Land Pooling Incorporated …". 1657 I further accept as reliable Mr Hogarth's evidence that at meeting 6 conversation to the following effect took place: (a) Mr Walker "You know that we want all the land at Helensburgh that you own"; (b) Mr Hogarth "Yes, that's agreed. You know that we've got the roads and other parcels of land in and around Helensburgh"; (c) Mr Walker "Yes I've heard that, that's why I'm concerned because I don't know that we know the limits or extent of the land that you got"; (d) Mr Hogarth "I want to be sure that anything that we do in Helensburgh we do together"; (e) Mr Walker "Certainly Bob, that's the intention. That's why I want to be sure that I've got all your land; (f) Mr Hogarth "It would be pretty silly to be trying to do anything without us because of the various interests that we've got in the area"; (g) Mr Walker "I want you to clearly set that out for us at some stage"; (h) Mr Hogarth "That's fine, as long as we understand each other". 1658 I further accept as reliable Mr Hogarth's evidence that in about March 1994 he had the discussion earlier recited in this judgment in relation to Mr Walker needing him to sign a statement identifying all of the lands that he had an interest in through his various companies and entities. In particular I accept as reliable Mr Hogarth's evidence, uncontradicted by Mr Walker, that Mr Walker had said to him words to the effect "You know that everything in Helensburgh is to be included in the joint venture and I am concerned that we have all of the land. You seem to have bits of land everywhere and we want it all included". 1659 I further accept as reliable must Hogarth's evidence earlier set out and uncontradicted by evidence from Mr Walker, that Mr Hogarth had responded inter alia saying words to the effect "You know from our previous discussions that everything in Helensburgh is to be included in the joint venture. Is that correct", to which Mr Walker responded that he agreed with this proposition. 1660 In final written submissions in relation to the Chapman land issue the defendants devoted three paragraphs only to the matter. 1661 Essentially the defendants simply rely upon the identity between Mr Hogarth's evidence and Mr Kidd's evidence and then submit that the subject conversation or conversations were fictitious and that there is no provision in either the Heads of Agreement or the HUTA to the effect alleged. 1662 The facts proven are set out in the plaintiffs written submissions are as follows: (a) On or about 22 June 1994 Mr Walker via John Hughes caused a company called Mitsui Mining Resources to be incorporated and/or acquired and become a subsidiary of McRoss Developments (Mr Walker is the dominant or sole beneficial owner of all shares in McRoss Developments and is a director of McRoss Developments) [PX 9.0169; PX 10.0269]. Subsequently Mitsui Mining Resources became a subsidiary of Ruly Holdings Pty Limited [PX 25.0124]. Ruly Holdings Pty Limited is fully owned by Mr Walker [PX 26.0006]. Mr Hughes is a director of Mitsui Mining Resources [PX 25.0124]; (b) On or about 20 October 1994 Mr Walker caused Mitsui to purchase from John Chapman and Diana Joan Chapman the Chapman Land (see Appendix 11(c)) for development activities for a consideration of $95,000. [PX 17.0132; 17.0147]. This involved simultaneous exchange and settlement; and (c) This was done independently of and without the knowledge or consent of Mr Hogarth or Lakatoi and/or without treating or offering to treat the Chapman Land as land which was to be the subject of the HUTA or the joint venture. Mr Hogarth was not aware of Mr Walker's/Mitsui's transactions involving land within the Land Pooling Area until July 1997. [PX 23.0103.1 - this is when the Chapman Transfer was first discovered - see stamp by Land Titles Office dated 16 June 1997 at top of document]. Circumstances leading up to and surrounding the Chapman Transfer · 19-Dec-78Cullen and Chapman purchase the Stanwell Land (see Appendix 11(a) - area highlighted blue) as tenants in common [PX 1.0004] · 7-Mar-89Cullen sell portion of land to Fellows [PX 2.0019] · Nov-90Cullen sell portion of land to Chapman pursuant to Deed of Partition executed on 22 June 1989 [PX 3.0049] · Nov-90Cullen sell portion of land to Chapman pursuant to Deed of Partition executed on 22 June 1989 [PX 3.0064] · 1994Handwritten note of either Mr Hughes or Mr Grist outlining the two sales to occur ie from Cullen to Chapman for $45,000 and from Chapman for $95,000. States "but don't register" [PX 11.0197]. The instruction not to register the Transfer is curious and had the effect of concealing the transaction · Sale by Patrick Cullen and Maureen Anne Cullen ("Cullen") to John Chapman and Diana Joan Chapman ("Chapman") (See Appendix 12(b)) Sep-94 Mr Weinert instructs John Hamilton Hughes to prepare contracts for the sale of the land held by Cullen and Chapman to Chapman Sep-94 Ian Grist of JHH instructs Jan Hyde (employee of JHH) to prepare a contract for the sale of land by Cullen to Chapman. Mr Grist requests that the contract reflect a settlement date 4 weeks following exchange although exchange and settlement would in fact be effected simultaneously [PX 11.0198] Sep-94 Handwritten note of JHH to Jan Hyde [PX 11.0199] 27-Sep-94 Fax from JHH to Citylink requesting title searches and stating "this is to be charged to McRoss Developments account" [PX 16.0107] 29-Sep-94 Letter from JHH to Chapman enclosing contract prepared "in accordance with Brian Weinert's instructions" [PX 16.0111] 13-Oct-94 Mr Cullen advises his solicitors Brock Partners that they are not required to act in respect of the transaction - this is confirmed by letter from Brock Partners to Cullen [PX 17.0005] 17-Oct-94 Contracts are exchanged for the sale by Cullen to Chapman for $45,000.00 [PX 8.0015]. This is the contract under which Chapman bought out Cullen's share in the land which was jointly held by Cullen and Chapman. Notice of Sale [PX 18.0113] states the date of exchange to be 17 October 1994 18-Oct-94 Mr Grist acknowledges receipt of 17 Certificates of Title and requests stamp duty moneys and LTO registration fees [PX 17.0093] 21-Oct-94 Cheque provided by Walker Group of Companies in the sum of $681.50 in favour of Westpac for "Land & Building Helensburgh Stamp Duty" [PX 17.0174] 21-Oct-94 Bank cheque provided by Westpac Banking Corporation (Mascot Branch) for $681.50 payable to Office of State Revenue [PX 17.0161] 3-Nov-94 Smart Property Group valuation addressed to Office of State Revenue values the land at $95,000.00 [PX 18.0030] 3-Nov-94 Smart Property Group valuation addressed to Office of State Revenue values the same land at $45,000.00 [PX 18.0033] 11-Nov-94 Completion of sale by Chapman and Cullen to Chapman for $45,000 [PX 18.0112] 17-Nov-94 Letter from JHH to V.J. Ralph & Co sending Certificates of Title and Transfer and relevant accompanying documents for registration of the Transfer. Accompanying cheque payable to the Land Titles Office was provided by McRoss Development No. 2 Pty Limited [PX 18.0164] · Sale by Chapman to Mitsui Mining (see Appendix 11(c)) 22-Jun-94 JHH purchased a shelf company named "Mitsui Mining Resources" from Patricia Holdings Limited with a transfer date of 4 May 1994. The shares in the company were held by McRoss Development No. 2 Pty Limited. It appears that the company was purchased solely for the purpose of the Chapman transaction [PX 9.0169; PX 10.0269] Sep-94 Mr Weinert instructs JHH to prepare contract for the sale of land by Chapman and Cullen to Chapman and subsequently by Chapman to Mitsui 14-Oct-94 Letter from Mr Grist to Chapman enclosing contract "in accordance with Brian Weinert's instructions" and noting that completion of this sale can only take place following the transfer of the jointly owned land from Cullen [17.0025] 17-Oct-94 Fax from Ian Grist to Citylink confirming account payable by McRoss Developments [PX 17.0081] 20-Oct-94 Simultaneous exchange of contracts and settlement of the sale of land by Chapman to Mitsui for $95,000 [PX 17.0147; 23.0103.1]. Chapman described as "acting for self". JHH act for Mitsui 20-Oct-94 Memo from Mr Grist to Mr Weinert forwarding the 17 Certificates of Title to Mr Weinert for safe keeping pending registration of the Transfer "in due course". Memo also states "BW (Brian Weinert) paid Chapman on 20-10-94" [PX 17.0103] 24-Oct-94 Copy of memo of 20 October 1994 from Mr Grist to Mr Weinert with handwritten notation "Received B Weinert 24 October 1994" [PX 17.0141] 3-Nov-94 Smart Property Group valuation addressed to Office of State Revenue values the land at $95,000.00 [PX 18.0030] 3-Nov-94 Smart Property Group valuation addressed to Mr Chapman values the same land at $45,000.00 [PX 18.0034] 18-Dec-94 Letter from Mr Grist to Mr Chapman enclosing counterpart contract for sale dated 20 October 1994 "as instructed by Mr Brian Weinert" [PX 19.0310] 16-Feb-95 Mr Grist sends Certificates of Title to Mark Wilkinson for safe keeping [PX 22.0092] 7-Feb-96 Letter from Messrs John Hamilton Hughes to Citylink Legal Services sending Transfer and Certificates of Title for registration of the transfer of land by Chapman to Mitsui at the Land Titles Office. Accompanying cheque in favour of Land Titles Office was drawn on the account of J H Hughes [PX 22.0088; 22.0090] Transfer registered on 12 February 1996 1663 To my mind this is a very clear case of a breach by Mr Walker of the fiduciary obligations owed by him to Mr Hogarth. On my findings the actions of Mr Walker were carried out with the knowledge and consent of Walker Consolidated. The conduct of Walker Consolidated is in turn pleaded as a breach of the fiduciary obligations which it owed to Lakatoi. 1664 The above factual findings clearly establish that the agreement pleaded in the Contentions paragraph 26(d) was entered into. Other alleged breaches of the HUTA [Contentions paragraphs 77-85] 1665 The plaintiffs allege that Walker Consolidated is in breach of several other obligations arising under the HUTA. 1666 The breaches alleged are: (a) mortgaging or charging its interest in the Helensburgh unit trust without Lakatoi Universal's consent; (b) mortgaging or charging its shareholding in Rosamond without Lakatoi Universal's consent and without obtaining a written agreement from the mortgagee or chargee to be bound by the terms of the HUTA; (c) failure to prepare monthly cash flows and budgets, circulate copies to the Policy Committee, prepare annual accounts and have those accounts audited by KPMG Peat Marwick. 1667 I remain somewhat unclear as to whether any of these claims not yet dealt with are still pressed and see it as appropriate to allow the plaintiffs an oppportunity to consider this question in the light of these reasons. The parties have leave to address these claims when the matter is before the Court for further submissions. The Walker Corporation Mortgage -- proceedings 50110/98 [previously proceedings 4897/97] 1668 These proceedings concern mortgage U376672. This mortgage was given pursuant to clauses 4.1,4.2 and 6.1 of the HUTA. 1669 These clauses provided as follows: "4.1 Walker [meaning "Walker Consolidated"] shall be responsible for obtaining finance approval in consultation with Ibenmore for the Project and the Cronulla Development 4.2 The Initial Contribution and the Further Contribution may be borrowed by Walker by third party mortgage. Interest accrued and the obligation to repay shall remain the responsibility of Walker and not Ibenmore.... ......... 6.1 Ensile shall at the request of Walker execute a third party mortgage over the Land or part thereof subject to the prior consent of Ibenmore ("the third party mortgage") 1670 Under the subject mortgage Walker Corporation is the mortgagee, Walker Consolidated is the principal debtor, and Ensile is the mortgagor. 1671 Any moneys raised by the mortgagee would therefore flow from the mortgagee, Walker Corporation, to the principal debtor, Walker Consolidated, (in the mortgage document referred to as "the borrower"), who then use the moneys as its own moneys: (a) to pay the initial Contribution and the Further Contribution under clauses 4.1, 4.2 and 7.1; and (b) to pay the Walker Expenses under clause 7.1 1672 Clauses 3.1 and 3.2 of Memorandum 281787E [which is incorporated into the mortgage] provide that all moneys secured by the mortgage are payable upon demand unless expressly agreed otherwise. 1673 The plaintiffs caused a notice and subsequent correspondence to be served upon the defendants requiring production of any documents evidencing or pertaining to "moneys owing by [Walker Consolidated] to [Walker Corporation] and secured by Mortgage No. U376672" and relating to the terms on which Walker Corporation had advanced to Walker Consolidated, the moneys secured by this mortgage". No documents were produced in response to that notice [see exhibit PX 30]. 1674 The plaintiffs submit and I accept, that in those circumstances on the evidence, any moneys which may have been advanced, may be presumed to be payable immediately upon demand by Walker Consolidated to Walker Corporation. 1675 In those circumstances the plaintiffs have claimed the following orders: (a) an order that Walker Consolidated pay Walker Corporation all moneys secured by mortgage U 376672; or (b) an order that Walker Corporation execute a discharge of the mortgage [Final submissions paragraph 12] 1676 The plaintiffs further make the point that the consolidation of accounts oblige Walker Corporation to meet all of Walker Consolidated's liabilities. 1677 The defendants take the stance that Ensile is not entitled to be exonerated from the Walker Corporation mortgage until the HUTA is terminated "and the termination rights of the parties are agreed or resolved" 1678 Ensile's response to this contention has been that the contention can be sustained only if Walker Corporation be contractually precluded from demanding of Walker Consolidated, repayment of the moneys advanced by Walker Corporation to Walker Consolidated until the HUTA be terminated. 1679 Ensile submits that such a term is nowhere expressed and that no basis for implying such a term has been pleaded or could be sustained. 1680 As the court is presently in the position to determine on a final basis the respective contractual rights of the mortgagee, the principal debtor and the mortgagor, it seems to me that there is substance in the plaintiffs' claim to the relief sought. The court is in a position to infer on the evidence that any moneys which Walker Corporation advanced to Walker Consolidated and which are secured by the Mortgage, are repayable forthwith on demand. That being the case, forthwith upon compliance with an order that Walker Consolidated pay to Walker Corporation, all moneys secured by the subject mortgage, Ensile becomes entitled in equity to a discharge of the mortgage. Alternatively, upon Walker Corporation executing a discharge of the mortgage, Ensile equally is relieved from the mortgage. [Cf. Thomas v Nottingham Incorporated Football Club Ltd [1972] 1 Ch 596] The Walker Consolidated Mortgage -- proceedings 50109/98 [previously proceedings 1986/98] 1681 These proceedings concern the mortgage given by Ensile to Walker Consolidated Investments No. MU 376673 [PX 1 0 /.0184] 1682 The subject mortgage was given by Ensile pursuant to clause 6.4 of the HUTA and secures "Walker Expenses advanced by Walker to Ibenmore". 1683 The short issue relates to the expenses identified in exhibited D2. 1684 The defendants claim that these expenses comprise "Walker Expenses" as defined in the HUTA. 1685 The plaintiffs accept : (a) that the two amounts each of $17,500 paid to Ensile and shown on the first page of exhibited D. 2 comprise "Walker Expenses" as so defined. [Exhibit D2 is reproduced as appendix...] (b) that the amount of any judgment in respect of unpaid maintenance expenses which may be entered in favour of Ensile against Walker Consolidated in the Ensile Maintenance Expenses proceedings will comprise "Walker Expenses" as so defined. (c) that all moneys paid by Walker Consolidated by way of rates and taxes on the land since 6 April 1994 comprise "Walker Expenses" as so defined. 1686 The other issues raised involve the defendants claims that if, [see subparagraph (e)(iii) of the HUTA], it was necessary for the Board or Policy Committee to approve all such payments, which is not admitted, the payments were made with the knowledge and consent of the persons who constitute the Board or Policy Committee and if payments were not formally so approved, they were ratified by the members of such Board or Committee. 1687 The plaintiffs' final written submissions were in the following terms: "1. These proceedings concern the mortgage given by Ensile to Walker Consolidated Investments M U376673 (PX 0010.0184). 2. This mortgage is given by Ensile pursuant to clause 6.4 of the HUTA (PX 0009.0036) and secures 'Walker Expenses advanced by Walker to Ibenmore'. 3. 'Walker Expenses' are defined (by reference to Item 3 in the schedule) in clause 1.9, referred to in clause 7 and defined in Item 3 of the schedule to the HUTA. This definition in turn incorporates 'Development Expenses' and 'Ensile Expenses'. Those expressions are both defined in the HUTA. The definition of 'Development Expenses' in clause 1.2 incorporates the 'Objectives' and the 'Objectives' are, in turn, defined in clause 1.2 to mean the intentions of the Unit-holders specified in clauses 2.3 and 2.4 of the HUTA. Clause 2.3 provides that an intention of the Unit-holders is to 'carry out the Project' and 'Project' is defined in clause 1.4 to mean": the purchase of the Land by Ibenmore, the rezoning of part of the Land for suburban style residential use, the development of the Land by subdivision; the construction of roads and services and the subsequent sale of the residential and medium density lots as contemplated in the Feasibility Studies consistent with the Future Objects' 'Feasibility Studies' is defined in clause 1.4 to mean consultants reports and studies prepared for and on behalf of LCE (Lady Carrington Estate) and any further feasibility studies carried out by Walker and/or Ibenmore' and 'Future Objects' is defined in clause 1.4 to mean the Objectives set out in Item 7 of the Schedule which is 'to provide a high quality residential development. 4. By this tortuous route, in the events which have occurred, 'Walker Expenses' therefore includes (a) 'the rezoning of part of the Land for residential use …' and (b) 'The Ensile Expenses'. 5. The important point is that, under Item 3(e)(i) of the schedule, Development expenses shall be those items as may be approved from time to time by the Board or Policy Committee of Ibenmore. 6. There is no evidence that the Board or Policy Committee of Ibenmore ever approved any expenditure. Kidd para 75. 7. Clause 3(e)(iii) provides for the basis of engagement of consultants and contractors, and clause 3(e)(iv) provides for the basis of approval and agreement for work undertaken internally by either Unit-holder. 8. There is no evidence that either of these requirements was ever satisfied in respect of any expenditure. 9. Under clause 3(e)(x) of Item 3 of the schedule 'Walker Expenses' also includes 'The Ensile Expenses'. 'The Ensile Expenses' are defined in clause 1.6 of the HUTA and include: (a) 'outgoings' (c) the reasonable costs of any maintenance and repair work on the Land provided it has previously been approved by Ibenmore, and 'outgoings' is defined in clause 1.4 of the HUTA to mean all rates and taxes (including all land tax and pastures protection board rates) of the Land from the date of this agreement. 10. Ensile accepts that the 'Ensile Expenses' therefore include: (a) the $35,000 already paid by Walker Consolidated to Ensile; (b) the amount of any judgment in respect of unpaid maintenance expenses which may be entered in favour of Ensile against Walker Consolidated in the Ensile Maintenance Expenses proceedings; (c) all moneys paid by Walker Consolidated by way of rates and taxes on the land since 6 April 1994. 11. It is therefore submitted that the Court should declare that, as at the date of the trial, the money secured by the Walker Consolidated mortgage is the total of the moneys referred to in paragraph 10. 1688 The defendants' final written submissions were in the following terms: "29.1 Both the Heads of Agreement and the HUTA provide that the Walker Expenses (as defined in the HUTA) are to be repaid from the proceeds of the sale of the Land and that thereafter the proceeds are to be divided between the Walker and Hogarth parties. 29.2 The Walker Expenses are itemised in exhibit D2. Exhibit D2 does not include the items which the plaintiffs specifically contest in the Summons (the management fees, the interest and the Security Warehouse/Direct Alarm invoices). However by the Second Amended Summons served on 21 September 1999 the plaintiffs plead in paragraph 43A: 43A. None of the alleged liabilities referred to in paragraph 41 constitute "Walker Expenses" for the purpose of the HUTA. Particulars (a) Walker Corporation did not itself make any such payments. (If any payments were made or liabilities incurred, they were made by Walker Group Pty Limited). (b) If any such payments were made they were not made or incurred with the approval or agreement or authority of the Policy Committee as required by paragraph (e) of Item 3 of the Schedule of the HUTA. (c) Insofar as the payments or liabilities made were made or incurred in relation to services provided by Walker Corporation (or another Walker company) personnel, those services and the cost thereof were not the subject of any estimated cost agreed prior to commencement as required by and were not calculated in accordance with sub-paragraph (iv) of paragraph (e) of Item 3 of the Schedule of the HUTA. (d) Insofar as the payments made or liabilities incurred were in relation to services or consultants provided or engaged in connection with the Commission of Inquiry: (i) then those payments were made or liabilities were incurred in breach of the covenant and agreement referred to in paragraphs 48 and 49 below and represented costs thrown away which are not chargeable by Walker Consolidated and/or Walker Corporation to Rosamond; and/or (ii) if and insofar as the provision or engagement of those services and consultants did not accord with good practice (ie was negligent, eg because the services were engaged too late to be effectual) then such payments are not "Walker Expenses" for the purposes of the HUTA. (e) Insofar as the payments made alleged to constitute "Walker Expenses" are: (i) the management fees referred to in paragraph C41 of the Amended Summons; (ii) the political donations referred to in paragraph C44 of the Amended Summons; (iii) for matters unrelated to the joint venture, eg installation of a security system at Hunter's Hill referred to in paragraph C41 of the Amended Summons; they were not expenses actually, honestly and/or reasonably incurred for the purposes of the joint venture and therefore are not "Walker Expenses". 29.3 Paragraph 26A of the Second Further Amended Defence provides: 26A. The defendants deny paragraph 43A and in relation to the particulars of paragraph 43A say: a. If, which is not admitted, Walker Group Pty Limited made the payments, the payments still constitute Walker Expenses; b. &c. If, which is not admitted, it was necessary for the Policy Committee to approve all such payments, the payments were made with the knowledge that consent of the persons who constitute the Policy Committee and that if payments were not formally approved by the Policy Committee they were ratified by its members; d. "Walker Expenses" cannot be qualified in the way alleged in paragraph d. e. No claim is made against Rosamond Pty Limited for the management fees or the Security Warehouse Invoice or the Direct Alarm Invoice. The defendants say that the latter invoices were mistakenly debited to the Rosamond account. 29.4 The evidence in relation to this matter is contained in Topic 33. The majority of the payments were made during the course of the Commission of Inquiry to those who, to the knowledge of Mr Kidd and Mr Hogarth, were conducting the Inquiry and preparing reports for the benefit of the joint venture. In other cases the payments were made at the request of Mr Hogarth. 29.5 The suggestion of the plaintiffs that the defendants must prove that the persons constituting the Policy Committee knew the amounts of the respective payments is not the law. "Equity, as well as law, recognises that things are what they are. And if, in such a case, the person for whom another assumes to act receives and keeps and benefit which may have resulted from the act done, we think that it must be taken to have adopted and ratified it." "Express assent is not necessary. Conduct active or passive, may establish it. Silence, whether as a duty to speak, may be excellent evidence of assent" City Bank of Sydney v McLaughlan (1904) 9 CLR 615 at 625 and 633. 29.6 If the Policy Committee did not meet to ratify the expenditure then Mr Kidd and Mr Hogarth were aware of this, they being two of its full members. Being aware of that fact and that monies were being expended on behalf of the joint venture and remaining silent (not asserting that the monies would not be recoverable until the Second Amended Summons of 21 September 1999) amounts to ratification of the expenditure. 1689 The defendants have also conveniently summarised the relevant evidence as follows: "A – THE STATEMENTS 1. Mr Hogarth at paragraphs 135 to 139 gives evidence of the meeting of 4 April 1995 where he says that he complained about the political donations and the management fees. 2. Mr Kidd's evidence at paragraph 75 is that the only accounts that he was given were the two documents handed to him on 4 April 1995 and that he has still not received a reply to the matters raised in his memorandum of 6 April 1995. At paragraph 80 to 83 he deals with the meeting of 4 April 1994 where he says that he was given spread sheets for the period June 1994 to March 1995 (PAB36) and where he says that he disputed the political donations. 3. In paragraph 86 to paragraph 93 Mr Kidd says that Walkers never responded to his memo of 6 April 1994. He says that he sent letters to Walker Corporation and lists six of them in the period 19 February 1996 to 26 June 1997 (PAB67-72) and says (in paragraph 93) that he did not approve the management fee invoices (totalling $1,065,000), the invoice in respect of Carrington in the sum of $320,000 (PAB32) or the loan said to be owed by Highfield Grove to Walker Corporation. 4. In paragraph 99 Mr Kidd says that he complained to Mr Walker in June 1995 about the political donation and the work in progress (the management fees) and in paragraph 112 he says: "All expenditure on developing rezoning of the Ensile Land ceased, without our agreement or approval, and without a meeting of the Board and/or the Policy Committee of Rosamond ever occurring, after the Ensile Land was rezoned by Minister Webster on 22 March 1995." B – THE DOCUMENTS 1. Exhibit D2 are particulars of the Walker expenses claimed. 2. Mr Kidd's memorandum of 6 April 1995 (21/15, PAB64) records as follows: 4. OTHER BUSINESS – JV ACCOUNTS "We thank you for the copy of the General Ledger Detail Report and your document A/C 1001 for the Helensburgh Unit Trust, on both of which we offer the following comments. Both RMH and I feel that it is now appropriate to document the mechanism and amounts shown for "Project Management" as an internal Walker requirement and that the sum shown of $1 065 000.00 will not apply to the JV in fact. Please advise how you wish to handle this. The General Ledger shows political donations of $220 000.00. We were only informed of your action with the Labor Party and no approval was sought from us for other parties. We feel that this sum should reasonably be spread over all Walker Projects and Prospects on a prorata basis. We do not accept that Helensburgh should carry the full sum. Please confirm that should you proceed with us at Allison Rd and/or Gerrale St that separate accounts can be operated within Ibenmore to simplify consideration of costs for each. We would appreciate your further advice on the above and whether you wish to proceed further with us on Allison Rd. We hope that you do. Regards and thanks," 3. In a fax from Mr Kidd to Mr Dransfield of 2 May 1995 among other things it recorded as follows: "JV Accounts Our meeting on April 24 did not discuss section 4 of my fax of April 6 – in particular paragraphs 2 and 3. We request your response on those items or suggest that we arrange a separate meeting to examine them at earliest." 4. Mr Dransfield's fax reply on 5 May 1995 (21/33) said re the "accounts and Joint Venture Agreement we will arrange a meeting for a suitable time next week to progress these issues." 5. The General Ledger Detail Report and document AC1001 shown to Hogarth and Kidd on 4 April 1995 is PAB36 (21/005). C – THE ORAL EVIDENCE HOGARTH P332 Paragraph 104 last subpara conversation where he alleges Dransfield said "we don't want to spend too much money on the Commission of Inquiry." Q. Was that said by him? A. Yes. Words to that effect. Q. Can we rely upon them as being accurate? A. They're as accurate as I can make them. Q. Where are your notes of that conversation? A. Same place as where the other notes are. Q. Do they exist, or did they ever exist? A. They did exist, yes. Q. Of that conversation? A. Of all our - well, I'm not sure about that particular conversation. Q. Think you might have some notes of that one? A. I don't think so. Q. Think you might have destroyed them, or never had them? A. I think I might have destroyed them. Q. Were you aware during this Commission as to how much money was being spent financing it; that is by the Walker interests? A. No we weren't told. Q. Did you ask? A. No I didn't ask. Q. You and Mr - A. We had some idea, having employed GHD previously with the similar - whereby with almost the same number of consultants. Q. Did you ever indicate to Mr Dransfield or Mr Walker that they were stinting on the moneys that they were spending in connection with the Commission of Inquiry? A. Not during the Inquiry, no. Q. You had no reason to think they were, did you? A. No. Q. In fact every reason you had was indicated they were spending an enormous amount of money on it, didn't it? A. Wouldn't say an enormous amount of money. Q. Did you ever find out what they spent on it? A. I was told by Mr Dransfield that it was the joint venture in total that spent something like 800,000. P334 Shown Exhibit D2 (particulars ) Q. On the Commission of Inquiry. Does that satisfy you that a very great deal of money was spent by the Walker interest on the Commission of Inquiry? A. Well I queried one amount, $302,000, in that 800,000 to Walkers Civil. Q. Walker civil? A. I would like to have those figures broken down. P402 Shown 21/179 (letter Smart Preoperty 31/10/95) P403 Q. He had been engaged to value the Helensburgh land, had he? A. Yes. Q. Well, did he value the land? A. Yes. Q. What was the purpose of the valuation? A. Lots for the purpose of completing one of the options. Q. Which was acquisition? A. Either a land swap or acquisition by a Government agency. Q. So, there was being spent a large sum of money in order to promote one or other of those objectives? A. Yes, another valuation. This was taken on advice by Mr Whitehouse. Shown 21/18 (Fax Kidd to Dransfield 6/4/95 PAB64) "Both RMH and I feel that it is now appropriate to document the mechanism and amount shown for project management as an internal Walker requirement, and that the sum shown of $1,065,000 will not apply to the joint venture in fact" P427Q. It is correct, is it not, that that was the only item to which any sort of attention was drawn at that time in the joint venture accounts? A. No, there was the political donations, and also a further similar account for $320,000. Q. Yes, but the $325,000 received no mention in this document? A. No. "The general ledger shows political donations at $220,000. We were only informed of your actions with the Labor Party, and no approval was sought from us for other parties". Q. You said nothing, or Mr Kid said nothing as to the Labor Party donation being limited to a figure of $5,000, did he? A. Not there, no. RE-EXAMINATION P692 Q. And had you seen a list like that before containing those items prior to the commencement of these proceedings? A. No. Q. Now, so far as that item of Walker Civil $302,000 is concerned, was that ever brought to your attention prior to these proceedings being commenced? A. No. Q. Now that document on page 5 of volume 21 to page 9 of volume 21 constitutes PAB 36, which is referred to in your statement; remember? A. Yes. Q. And was that a document you were handed on 4 April 1995? A. A copy. Shown 10/275 Q. Have you seen that document before, or a copy of it? A. Yes, that was given to us at the same time as the other document. Q. The one that you have just given evidence about at 21? A. Yes, number 5 yes. Q. Page 5 to 9? A. Yes. Shown document prepared by "our accountants". [STRIKEOUT BEGINS]. Q. Does that document identify a list of what are called Ensile expenses? A. Yes. [STRIKEOUT ENDS] P701 HIS HONOUR: In terms of re-examination I allow the question that had been asked and I admit into evidence as exhibit PX16 a copy letter from Coleman Maher & Co to Gye Associate Lawyers of 5 August 1999 on the basis that, and I make a s136 order accordingly, the admission into evidence of this document is only taken as evidence that Mr Hogarth, as I understand his evidence, came to know of the content of this Exhibit PX. It is not evidence that any of the facts set out in PX16 are in fact facts in terms of the proper construction of the words, "Ensile maintenance expenses" or of the words, "Ensile expenses" within the agreement. If the plaintiffs seek to prove that the document does, as a matter of fact, set out a schedule of Ensile maintenance expenses, they will need to prove that in another fashion, presumably by calling admissible evidence of that type. EXHIBIT #PX16 COPY LETTER FROM COLEMAN MAHER & CO TO GYE ASSOCIATE LAWYERS DATED 5/8/99. KIDD P866 Shown 21/5 (PAB36) and 10/275 (the other document shown to Kidd on 4 April 95) Q. Well you went through them sufficiently to understand, did you not, what they show? A. I went through them sufficiently to pick up on a couple of points. Q. Well you have told us obviously that you picked up on the political donations point? A. Yes. Q. And you have told us that you also picked up on the management fees? A. Yes. Q. Did you, to use your phrase, pick up on the proposition that the accounts included amounts that had been paid apparently to Lester Firth? A. I noted a list of payments to various people. Q. Various people clearly associated with the joint venture; correct? A. Yes. Q. And they are the ones that appear, do they not, in the list of payments on pages 21/6 and 21/7; correct? A. Yes. P867 Q. And after you say that conversation took place, do I understand you were given the responsibility of sorting out the position of the accounts with Walkers? A. Based on what was said at that meeting, I took it on myself to write a letter to them on 6 April, yes. Q. I understand that. Do I take it from that paragraph (82) that you took it upon yourself the responsibility of sorting out the question of the accounts, the accuracy of the accounts that you had been handed on 4 April? A. Yes. Q. And that was something, was it, that you took on yourself rather than being directed by Mr Hogarth to do it? A. I don't recall being directed by Mr Hogarth. Q. Or requested by Mr Hogarth to do it? A. I don't recall a specific request, no. Q. Your recollection is that it was something that you took on yourself? A. Yes. Q. And it was after that meeting on the 4th obviously, and the discussion that you say took place, that you wrote your memorandum did you, of 6 April? A. Yes. Q. And I take it that before you wrote the memorandum of 6 April you again looked at the accounts; correct? A. Yes. Q. That you had looked at them, or at least cast your eye over those detailed items, and on the face of it anyway they seemed to be in order; correct? A. I thought - no I don't accept that they were in order, I didn't concentrate on them because I wanted to sort the management fees and the political donations. P871 Q. Now tell me, you also take issue I think, is this correct, in relation to the joint venture accounts with the project management fees? A. Yes. Q. So far as you are aware, you never took issue, did you, with any other amount which appears in the accounts that you were handed on 4 April? A. No. Q. When you say "no", do you agree with me? A. Yes. Q. And certainly, you have never suggested, have you, in any conversation with any representative of Walkers, that you really needed a project committee meeting to approve the other expenses; you have never suggested that, have you? A. No. Shown DX Vol 7, page 48 A. That is my wife's signature your Honour. 1690 In my view the evidence makes plain that during the relevant period Mr Hogarth was clearly aware that very substantial payments were being made by the Walker group in relation to the Commission of Inquiry. And as to Mr Kidd, although he did take issue with the management fee items and the political donations items in relation to the accounts which he was handed on 4 April 1995, he accepted under cross-examination that he had not taken issue with any other amount which appeared in those accounts. 1691 I am satisfied that the defendants submissions are of substance. Save for the payments made to political parties referred to on page 7 of exhibit D2 and separately dealt with in this Judgment, each of the other listed payments in the events which happened are "Walker Expenses" within the meaning of the HUTA. In my view the conduct of Mr Kidd and Mr Hogarth in the circumstances amounts to an adoption and ratification of the subject payments: "Equity, as well as law, recognises that things are what they are. And if, in such a case, the person for whom another assumes to act receives and keeps a benefit which may have resulted from the act done, we think that it must be taken to have adopted and ratified it." [ The City Bank of Sydney v McLaughlin (1904) 9 C.L.R. 615 at 625 per Griffith CJ) "Express assent is not necessary. Conduct, active or passive, may establish it. Silence, where there is a duty to speak, may be excellent evidence of assent" [ The City Bank of Sydney v McLaughlin (1904) 9 C.L.R. 615 at 633 per Isaacs J.) 1692 The above findings should serve to clarify the moneys secured by the Mortgage. Submissions may be addressed as to the appropriate relief to be granted. Ensile's claims 1693 Ensile asserts that if the LCE lands had been rezoned to permit residential subdivision as envisaged by the HUTA, Rosamond would have purchased Ensile's land for $20 million pursuant to the Ensile option. The failure of Walker Consolidated promptly to secure the rezoning of the Lady Carrington Estate as envisaged by the HUTA is then said to mean that Ensile lost the benefit of the contract. 1694 Ensile claims that: (a) if Walker Consolidated's obligation promptly to secure the rezoning of the Ensile land be an absolute obligation, then Ensile is absolutely entitled to recover the amount of its loss [said to be the sum for which Rosamond would have purchased the Ensile land, namely $20 million less the option fee of $45,000, i.e. $19,955,000]; (b) if Walker Consolidated's obligation promptly to secure the rezoning be merely a covenant to use its best endeavours to secure that result, Ensile's claim is that as a result of the breach by Walker Consolidated of that obligation, Ensile lost the corresponding chance of recovering $19,955,000. 1695 Subject to the issues referred to below, Ensile's approach seems correct. In this way Ensile's claim on the loss of chance case is a mirror image of Lakatoi's claim for damages based upon the same failure of Walker Consolidated. 1696 The issues which still require to be clarified include, as it seems to me, whether in fact it is Ensile or arguably Lakatoi which must, in so far as its claims to damages are computed, give account in some way for the value of the land. 1697 The further issues which require to be addressed concern: (a) the question of how the proven value of the land [see Mr Egan's report of 7 July 1999] at $7,848,000 is to be taken into account; (b) whether or not in that valuation Mr Egan made any, and if so, what valuation to the so-called 'house block'; (c) the question of how the diminution in value of the land caused by the rezoning to Hacking River Environment Protection, is to be taken into account; (d) the question of whether it is now necessary to have Mr Egan update his 7 July 1999 valuations of these items. 1698 Only on some of these matters did the parties address. In those circumstances it seems to me appropriate to reserve leave to the parties to further address the following reading these reasons for judgment. 1699 Mr Officer QC submitted that the plaintiffs' assessment of damages assumed that the whole of the land was subdivided and sold and that it was from this exercise that the plaintiff derived its profit. The submission was then: "The plaintiff, Ensile however still retains the subject land. It has a value according to Mr Egan of $7.8 million. Accordingly in order not to 'double count' the figure of $7.8 million [in address Mr Officer submitted that this figure should be halved] ought be deducted from …Ensile's entitlement to any damages". [emphasis added] 1700 Issue (a) has a number of tiers of complexity, as it seems to me: (i) If one approaches the matter upon the basis that the Heads of Agreement [clause 4(c)] is applicable, then the parties are seen to have set out a regime pursuant to which the subject lands would ultimately be sold if after five years the joint venture decided that rezoning was no longer an option, such sale to be one in respect of which all profits would ultimately be split between the two parties to the Heads of Agreement. (ii) If one approaches the matter, as seems to me to be correct, upon the basis that the HUTA prevails, being the later instrument and being arguably inconsistent with the Heads of Agreement in this respect, then clauses 3.8 - 3.11 of the HUTA set out the agreed regime. Here again a resolution is required by the joint venture vehicle to the effect that the project is not proceeding, following which [and after compliance with the clause 3.8 notice provisions]: (a) Ensile becomes entitled to exercise the Ensile residual right option; (b) if such option is exercised, Ensile must pay the $1 million 'release moneys' to Ibenmore; (c) Ensile is to transfer the land [less the house block] to Ibenmore; (d) Ibenmore acquires the land. 1701 It may be thought that the net result of the approach taken in (ii) above is that the joint venture vehicle holds the land [less the house block] and holds the $1 million posited to have been paid by Ensile as "the release moneys", and that there is no contractual provision dealing with how the joint venture is to proceed - for example, as by selling or, on the other hand, retaining the land. 1702 There are a number of ways of looking at the matter. It may be arguable that Ensile always had an 80 per cent chance that at the end of the day it would pay $1 million and receive back the house block. If this be correct and if this right of Ensile represents as positive value [say $X], then what Ensile must arguably account for is not that 80 per cent chance, but is in fact 20 per cent of $X. 1703 Likewise, it may be arguable that Lakatoi always had an 80 per cent chance that at the end of the day it would receive: (a) 50 per cent of the $1 million amount ("release moneys") to be paid by Ensile; (b) 50 per cent of the proceeds of sale of the land less the house block, ["Lakatoi's posited receipts"]. 1704 If this be correct, then it is Lakatoi and not Ensile which would have to account for Lakatoi's posited receipts. 1705 In short, arguably Lakatoi's entitlement would be: [20% x $35,624,809.50] = $7,124,962 from which must be subtracted the sum of the following: (a) 20% of $500,000; (b) 20% of 50% of the value of the land excluding the house block. 1706 Because these matters were not fully adverted to during argument, it seems to me appropriate to reserve leave to both parties to address further submissions on the above issues. 1707 Leave is also reserved to the parties to further address on Ensile's claims to damages as the amount by which its land has been diminished in value by the rezoning to Hacking River Environment Protection. The plaintiffs' claim is here put upon the proposition that, had Ensile's land been rezoned to permit residential subdivision, it would not have been zoned Hacking River Environment Protection. As is apparent from the evidence, Mr Egan's evidence as to the diminution in value of the subject lands as a consequence of the 31 March 1995 rezoning appears as "assessment four" - the amount being $2,682,000. Ensile also claims this amount. 1708 As I understand the defendants' submissions, the defendants contend that to also allow this amount would constitute double counting. 1709 Here again it seems appropriate to permit the parties to further address on this issue following their having had an opportunity to read the judgment. 1710 One possibility in respect of which argument is invited is as to whether the following process of reasoning is correct: (a) that the Court infer that the outcome of the Commission of Inquiry would necessarily have led either to an immediate increase in the value of the lands or to an immediate decrease in the value of the land; (b) that on the above reasoning, the plaintiff group on the above calculations will have been compensated for its 20 per cent loss of the chance of receiving the benefits which would have been attached generally to the land under a rezoning for residential purposes, but there was then a correlative 80 per cent chance of a depreciation in the value of the land following the outcome of the Commission of Inquiry. If the plaintiffs [considered as a group to include Ensile] were also able to claim 100 per cent of the diminished value of the land as well as the 20 per cent loss of chance of sharing in the benefits of the increased value of the land, then the plaintiff group would be receiving 120 per cent of a loss of chance. On this reasoning the plaintiff group would only be entitled to an additional 80 per cent of the ultimately diminished value of the land. On the above figures that would be 80 per cent of $2,682,000, being $2,145,600. 1711 As I have said, leave is reserved to the parties to further address on these issues. The plaintiffs' claim of a breach of covenant following the Commission of Inquiry 1712 Paragraph 49 of the contentions alleges that Mr Walker and Walker Consolidated acting in breach of covenant failed to procure the rezoning of the land promptly and/or failed to use their best endeavours to secure promptly, or at all, the rezoning so as to enable the residential subdivision as promised. 1713 On this leg of the plaintiffs' claims they assert that since the handing down of the Commissioner's report, Walker Corporation and Walker Consolidated "have done nothing to establish further studies to establish the effectiveness of water settling ponds to maintain water quality or to procure the rezoning of the Ensile land." [ particular (iii) to paragraph 49]. 1714 The matter is then taken up by the second further amended defence where the defendants plead: "(a) that following the report it was agreed between the plaintiffs and the defendants that the land was unlikely to be rezoned even if further studies were undertaken as to the effectiveness of water settling ponds and that the parties should pursue other options for the disposal of the land that did not involve the rezoning of the land as envisaged by the HUTA; (b) that at least by 25 March 1995, there was no reasonable possibility of obtaining rezoning of the land as envisaged by the HUTA and that in these circumstances, the failure to undertake further studies as to the effectiveness of water settling ponds was not a breach of the defendants' covenant to use their best endeavours to secure such a rezoning of the land; (c) that if, which is not admitted, the failure to undertake further studies as to the effectiveness of water settling ponds was a breach of the defendants' covenant to use their best endeavours to secure rezoning of the land, then this caused the plaintiffs no loss because the land would not have been rezoned even if the further studies had been undertaken". 1715 It seems to me that it is possible to deal fairly shortly with the plaintiffs' claim and with the defence. Had the finding of the Court rejected the plaintiffs' claims to breaches of the best endeavours covenant having occurred prior to the handing down by the Commissioner of his findings, a real question may have arisen as to whether, notwithstanding the defendants' posited compliance with the best endeavours covenant up to the time when the Commissioner handed down his findings, the defendants conduct constituted thereafter a breach of the covenant. 1716 The findings already handed down to the effect that the defendants in fact breached their best endeavours covenant prior to the handing down by the Commissioner of his findings, effectively means that the question of further breaches by the defendants of that covenant occurring after the handing down of the Commissioner's findings, simply fall to be assessed in terms of the plaintiffs' claims to damages and in terms of matters such as causation. 1717 In my view the evidence establishes that following the handing down of the Commissioner's report, the plaintiffs acted reasonably in all the circumstances in endeavouring, together with the Walker group, to work through what then appeared to be the only possibly viable course of alternative actions open to be taken. The important factor to bear in mind is that it was the defendants breaches of the best endeavours covenant which had led to the dramatic change in the joint venture's position. 1718 Mr Hogarth accepted that when he received and read Mr Kidd's memorandum to him of 17 May 1995, he understood that all that was left was for the land to be disposed or for the utilisation of the land to be maximised under the existing zoning. [Transcript page 382]. Mr Kidd's memorandum following his meeting with Mr Whitehouse, Mr Dransfield and Mr McKenna had stated inter alia: "Before any of the above, Whitehouse recommends that we write to the relevant Minister and the Premier advising them that we have reviewed Carlton's report, had reached a dead end, and have no option but to dispose of the land or maximise its utilisation under the provisions of the existing zoning." 1719 Mr Hogarth's evidence under cross-examination included the following: Q Now, when you received this document, you understood, did you not, that the message was, in that paragraph that I have read, that there was no further action that could be taken to utilise the Carlton report, didn't you. A Yes Q And you understood also, and I referred to what followed immediately after that, "and have no option but to dispose of the land or maximise its utilisation under the provisions of the existing zoning. A Yes Q Now, that is what you understood to be the position, did you not, with that? All that was left that you could do was to dispose of the land or maximised its utilisation under the existing zoning. A Yes. [transcript page 382] 1720 As I understood Mr Powell's submissions he accepted that the plaintiffs claim appeared grounded upon a holding rejecting the claim to a breach of the best endeavours covenant having taken place by the time the Commissioner's recommendations were handed down. The relevant transcript in argument includes the following: POWELL: The complaint is that we've done nothing to establish further studies into water settling ponds and, your Honour, the defence at page 41, the relevant parts are A, B and C … I heard what your Honour said about whether or not or how an agreement not to pursue the studies is relevant if you've got an obligation to do so short of waiver - I think that was the discussion - but we say it ties in with the other points. Whatever "best endeavours" means, it can't mean to pursue the either impossible or the futile in circumstances where the other party is not urging you to do so. HIS HONOUR: Well, there are two windows here, are there not? There is, first of all, the question of the content of the obligation in the first place to properly prepare and present a case, use one's best endeavours up to that point in time to try to achieve positive recommendations. If there is a breach in that exercise, then presumably that is something which, if Annan can be galvanised and Poseidon and so forth can be galvanised, and if the paragraph in those statements of principle that there are some cases where it is totally impossible to do this expectation exercise, if that is inapplicable, then the plaintiffs may be able presumably to recover in some way for breach of window 1. When you get to window 2, what about what happened after the report? If there is some way of the defendants establishing that, notwithstanding on this hypothesis a breach of the best endeavours obligation in relation to conducting the Commission, what happened thereafter was a new event and rubs out the breach in some way because of consensus or some legal doctrine, then no doubt I'll be shown, and maybe this is what you're going to now do. POWELL: Yes. HIS HONOUR: It is what the defendants say and how it works. POWELL: Well, firstly, your Honour should see in B we say that it is not a breach of the best endeavours covenant when there is no reasonable possibility of obtaining it following the report. HIS HONOUR: But you follow my problem is that it seems to assume all the time that there is no breach already. If there was a breach then, unless in some fashion the plaintiffs say to themselves or must be held in law by reason of their conduct to have said to everyone … … we excuse all the past, we give up all our legal rights, now let's go up another road. Unless one gets in it maybe that's a type of election notion, then the pervasive position is always going to be there was the primary breach. POWELL: Yes, your Honour, I understand that, but the way that I understand the case is being put is, well, you didn't use your best endeavours at the Commission of Inquiry and if you had then the Commissioner would have recommended rezoning. That is the first way they put their case. HIS HONOUR: Yes. POWELL: They also say, as I understand it, if they are wrong on that, let's say your Honour found that we did use best endeavours with the Commission of Inquiry, then they say: Well, that's one thing. However, you didn't use best endeavours following the report of the Commission in going on to obtain or commission the further studies. So yes, I understand what your Honour is saying, but, as I understand the way the plaintiffs put their case, they can be unsuccessful in their argument as to our endeavours at the Commission of Inquiry, but still get up by saying we breached our best endeavours following the Commission of Inquiry. HIS HONOUR: Then do you develop this in coming pages by suggesting that it was clearly perceived by all that it was then hopeless?" [Transcript at page 447] 1721 On my findings the evidence does not establish any agreement by Mr Hogarth or by the Hogarth interests to vary the terms of the joint venture agreement or to abandon such claims as the Hogarth interests may have had to sue the Walker interests for breach [by reason of acts or failure to act up to the point in time when the Commissioner's findings were handed down], of the covenant to use best endeavours to secure a rezoning. No waiver of the plaintiffs' rights in that regard took place. 1722 I do not see that there are any further findings required in relation to paragraph 49 of the third amended summons or paragraph 32 of the second further amended defence. The Ensile maintenance expenses proceedings 1723 This is at least in one respect, a somewhat unusual claim pressed by Ensile. This is because the claim depends upon an alleged oral agreement said on the pleading to have been reached in about late July 1994 between Mr Weinert on behalf of Walker Consolidated and Mr Hogarth on behalf of Ensile. Yet even at the time when the case was being opened by both leading counsel no evidence had been filed by Mr Hogarth setting out detail of the conversations said to constitute such an oral agreement. Notwithstanding that Mr Shand QC alluded to this matter in his opening, the only evidence now relied upon by the plaintiffs to prove the oral agreement came forward during the cross-examination of Mr Hogarth. 1724 Notwithstanding this circumstance, the plaintiffs seize upon the evidence given by Mr Hogarth during this cross-examination and rely upon that evidence on this aspect of their sundry cases. 1725 The HUTA in clause 1.9 defines the Walker Expenses as the moneys described in item 3 of the Schedule and clause 7. Paragraph (e) (x) in item 3 of the Schedule is "The Ensile Expenses". Clause 1.6 of the HUTA provides that: "Ensile expenses" -- means the aggregate of the following: (a) outgoings; (b) work required to comply with any notice issued by WCC or any other Statutory Authority to Ensile in respect of the Land; (c) the reasonable costs of any maintenance and repair work on the land provided it has previously been approved by Ibenmore (d) calls/expenses payable to Helensburgh Land Pooling Inc." 1726 In the District Court proceedings now transferred into the Commercial list, [District Court proceedings No 1798 of 1998] the claim is made to $210,000 as "being the moneys due and payable by the defendant to the plaintiff in respect of the "Ensile Maintenance Expenses" (as hereinafter defined) for the period 6 October 1994 to 5 October 1997. The plaintiff now claims the amount said to be owing from 6 April 1994 up to the date of judgment. 1727 The only relevant documents are an invoice of 2 August 1994 on Ensile letterhead addressed to Ibenmore to the attention of Mr Weinert, claiming the sum of $35,000 as "For general maintenance of the joint venture property... as agreed for the period 12 November 1993 to 12 May 1994". 1728 Detail of this invoice having been paid by two separate payments on 1 September 1994 and on 16 September 1994, each of $17,500 [Exhibits PX 14/61 and 16/85]. 1729 A further invoice again in the sum of $35,000 [in the form in which the invoice was originally typed] seeks an amount of $35,000, this time for the period 13 May 1994 to 11 November 1994 [again in the form in which the invoice was originally typed]. [PX 16/51]. This invoice has handwritten alterations suggesting the period was1 July 1994 to 31 December 1994. 1730 Under cross-examination of Mr Officer QC asked: " Q. And you would have, would you his Honour believe that there was some arrangement that it would be $17,500 a quarter, regardless of what in fact the expenses were? A. Yes. Q And that claim is just fault is it not Mr Hogarth? A No it's not" [transcript page 570] 1731 It was then put to Mr Hogarth that he knew by 23 December 1998 when he swore his first statement that the District Court proceedings had been transferred into the Supreme Court to be heard at the same time as the main proceedings. Mr Hogarth supposed that he knew this fact. He was unsure as to whether anywhere in that statement he had said anything about the Ensile Expenses claim. It is common ground that no reference was made to this claim in that statement. 1732 It was also put to Mr Hogarth that even after hearing Mr Shand QC opened upon the basis that no evidence had been filed by the plaintiffs in support of this claim, no further evidence was so filed and that this was because, so it was put to Mr Hogarth, he knew that the claim was false. Mr Hogarth denied this proposition. 1733 The cross-examination then included the following: "Q And the reason it was false was because it was claiming $17,500 a quarter rather than what the expenses in fact may have been? A Yes, well the expenses as it - as we've worked out, are much in excess of what we've claimed. Q You have not made a claim for those in any proceedings you commenced so far, have you? A Not at this point, but it can be either way one way or the other, the true expenses or an arranged figure.... A We're quite quite prepared to have the expenses - to prove the expenses to what they are and seek those moneys" [transcript at page 573] 1734 A section of Mr Weinert's statement was then put to Mr Hogarth. It was put to Mr Hogarth that Mr Weinert had said to him words to the effect "At the end of the first year, payments will be adjusted to accord with the actual maintenance expenses". Mr Hogarth did not accept that this conversation had taken place. It was further put to Mr Hogarth that in neither of his statements did he take issue with what Mr Weinert had stated had taken place. He accepted this. Mr Hogarth then gave evidence that: "The arrangement with Mr Weinert was to save a lot of book work. We would agree to an amount to be paid with respect to the Ensile expenses. I thought that they would be more and we settled on the figure of $70,000 per year for the Ensile expenses". 1735 At transcript page 577 the cross-examination includes the following: "Q ... if your version is correct, you weren't going to have to worry about what the expenses were; you were just going to substitute $17,500 for the bit in the clause [the HUTA] about reasonable expenses. A Well, this is what Mr Weinert agreed to and acted on." [transcript page 577] 1736 Finally at transcript page 579 Mr Hogarth was asked what was the reason for the two payments which were made and answered as follows: "At this point in time we had - because the amount of money that had been paid by Walkers was insufficient to leave us with any money to handle certain matters, I brought this up with Walker, what our idea was; that we would attempt to put any of the expenditure that we spent and credit it to our joint venture account, and we were short of money, and I asked Mr Weinert, on the basis of the expenditure, to give us sufficient funds to tide us over at that point in time. That's why those two payments were made... ... We agreed that it was $70,000 a year". 1737 Notwithstanding that neither Mr Walker nor Mr Weinert gave evidence to contradict Mr Hogarth's evidence on this matter, I reject his evidence as not reliable. Having listened to the cross-examination on the issue, bearing in mind the failure of the plaintiffs to produce any earlier evidence in relation to the suggested oral agreement, bearing in mind Mr Hogarth's repeated statements during the cross-examination of his even at this point in time preparedness to have his claims to the Ensile expenses judged according to the actual expenses incurred, and bearing in mind that aside from the above described invoices, no other invoices were sent by Ensile, I do not accept that the agreement which Mr Hogarth alleges, took place. Mr Hogarth's evidence on this issue is rejected as unreliable and as significantly against the probabilities. 1738 In the result, the short minutes of order to be brought in will have to make provision for reference out to a referee of the question of proof of the actual Ensile Expenses which once quantified, will then require to be included in an appropriate order. Leave is reserved to the plaintiffs to address upon whether any further evidence is sought to be adduced and if so how, and when, and is likewise reserved to the defendants to address upon the same issues. It may be that exhibit PX 10 is able to be utilised by parties in this exercise. The Amended Cross-Claim in the Principal Proceedings 1739 The further amended cross-claim in the main proceedings is pursued by Walker Consolidated and Walker Corporation against Lakatoi and Ensile. The claim is to an order that the assets of the Helensburgh Unit Trust including the Land be realised and after payment and discharge of debts and liabilities [said to include the defendants' claims as to what in fact are "the Walker expenses"], including those said to have been incurred by Walker Consolidated, any surplus is to be paid to Walker Consolidated and Lakatoi in equal shares. 1740 The cross-claimants plead the Heads of Agreement and in particular clause 4(c) whereunder the parties agreed that if, after five years, rezoning was no longer an option, the land would be sold and, subject to an option to Mr Hogarth to purchase the house block land for $1 million, net proceeds would be to the account of the joint venture and profits split between Mr Walker and Mr Hogarth or their companies on a 50/50 basis. 1741 The cross-claimants then plead that the HUTA was entered into. 1742 The cross-claimants plead that Lakatoi and Walker Consolidated were respectively, the company's nominated by Mr Hogarth and Mr Walker to receive their respective shares of the proceeds of the sale of the land in accordance with the Heads of Agreement and the HUTA. 1743 The cross-claimants then plead that it was a term of the HUTA that upon the termination of the Helensburgh Unit Trust for any cause whatsoever, the assets of the trust would be realised and the proceeds applied to the payment and discharge of any debts and liabilities incurred by the unit holders in relation to the trust and that any surplus would be paid and distributed to the unit holders in equal shares. [Clause 15.3 of the HUTA] 1744 The cross claimants then plead that the substratum of the joint venture relationship between the unit holders has been removed and that the purpose of the joint venture, namely the rezoning of the land for suburban style residential use cannot be attained. The cross claimants assert that there is no likelihood now of the land being zoned residential as it has been designed "Environmental Protection". 1745 The cross claimants claim that the joint venture relationship between the unit holders has broken down completely and that the purpose of the joint venture, namely the rezoning of the land for suburban style residential use, cannot be attained. 1746 For these reasons the cross-claim asserts that the Helensburgh Unit Trust ought to be dissolved. The claim is that the assets of the trust should be realised and the proceeds applied in accordance with the provisions of the HUTA. 1747 The cross defendants assert that it is the HUTA which, where inconsistent with the Heads of Agreement, clearly represents the ultimate agreement between the parties. The cross claimants assert that on this issue the HUTA is in fact inconsistent with the Heads of Agreement. 1748 The cross defendants refer to clause 3.8 of the HUTA which makes it quite clear, as I accept, that a resolution would be required to be agreed to unanimously by both parties if after five years, namely 31 March 1999, the residual option of Ensile was to be exercised and the balance of the land was to be taken by Ibenmore. The cross defendants assert that if this happens, Ibenmore would own the land other than the homestead area. The cross defendants assert that clause 3.11 is open to the construction that if the option was not exercised, Ensile would be entitled to be paid for the land. 1749 Ultimately the cross defendants' stance is that whatever be the true construction of clause 3.11, the fact is that clause 3.8 which only came into operation in March 1999, leaves it to the parties to make a decision on the question. The cross defendants assert that the parties did not commit to a court the power to decide the issue and that the situation which has arisen is not governed by section 66 G of the Conveyancing Act, 1919. 1750 The cross defendants submit that the notion of substratum failing has no relevance to the situation here, where the parties have agreed upon their own regime for bringing to an end the HUTA, remembering that it was only in March 1999 that the five-year period elapsed. 1751 On this issue it seems to be appropriate to invite the parties to address further submissions following their having had an opportunity to consider the above reasons for judgment. Whilst the court may have jurisdiction in the instant circumstances to make appropriate orders to terminate the joint venture agreement, questions also arise as to whether and if so by precisely what orders, such power ought be exercised. However, for example, is the homestead area to be dealt with? Ought, for example, Ensile to be placed into the same position as it would have been had it exercised the Ensile residual right option? It seems appropriate to first permit the parties to reconsider their positions on the matters raised in the cross-claim in the light of the above reasons. For those reasons it seems to me necessary defer final determination of the cross-claim until after the parties have had the benefit of reading these reasons and then indicating what their then attitude is to the matters raised by the cross-claim. Should both parties continue to take the stances which they have taken up to this point in time then subject to clarification of the matter raised above, I propose to invite the parties to address on the authorities and on the legislation which bear upon the court's jurisdiction to make the orders sought by the cross claimants. Further submissions and Short Minutes of Order 1752 As will have been noted, the judgment in several places grants leave to the parties to address further submissions on a number of particular issues. 1753 Bearing in mind the number of sets of proceedings, the complex and in a number of cases, interrelated claims, and the need for the parties to have an opportunity to read the reasons before final orders can be formulated and made, it is appropriate to grant leave to the parties: (a) to address submissions on any claims for relief which had been sought and which may not yet have been dealt with; (b) to press for any relief on such claims as may not yet have been dealt with; (c) to press for relief on matters reserved for further submissions. 1754 The proceedings will be stood over to a convenient date for the receipt of such further submissions and for such short minutes of order as the parties may be able to agree upon to be brought in. ***** Last Modified: 01/07/2002 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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