Micro Developments Pty Limited v Rockdale City Council [2006] NSWSC 1400

New South Wales Supreme Court

CITATION : Micro Developments Pty Limited v Rockdale City Council [2006] NSWSC 1400

HEARING DATE(S) : 10 and 11 April 2006, 6, 7, 8 and 9 November 2006

JUDGMENT DATE : 22 December 2006

JUDGMENT OF : Bergin J

DECISION : Plaintiff entitled to $1,461,280 plus adjustment for interest and tax

CATCHWORDS : [DAMAGES] - Quantification of plaintiff's damages resulting from defendant's negligent misrepresentation in relation to zoning of land.

City of Botany Bay v Jazabas Pty Ltd [2001] NSWCA 94 CASES CITED : Gates v The City Mutual Life Assurance Society Limited (1986) 160 CLR 1 Jazabas Pty Ltd v City of Botany Bay Council [2000] NSWSC 58

PARTIES : Micro Developments Pty Limited - Plaintiff Rockdale City Council - Defendant

FILE NUMBER(S) : SC 50164/02

BW Rayment QC/ GJ Grogin - Plaintiff COUNSEL : MR McCulloch SC/ GJ Gemmell - Defendant on 10, 11 April 2006 PR Garling SC/ GJ Gemmell - Defendant on 6, 7, 8, 9 November 2006

SOLICITORS : John Orford & Associates - Plaintiff McCabe Terrill Lawyers - Defendant

- 53 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

BERGIN J

22 DECEMBER 2006

50164/02 MICRO DEVELOPMENTS PTY LIMITED v ROCKDALE CITY COUNCIL Introduction 1 The plaintiff, Micro Developments Pty Limited, a property developer, commenced these proceedings on 25 September 2002 when it filed a Summons seeking damages from the defendant, Rockdale City Council, for negligent misrepresentation in relation to the zoning of a property at 147 Russell Avenue, Dolls Point (the Property). At the time of the purchase of the Property, the defendant issued a certificate under s 149 of the Environmental Planning and Assessment Act 1979 in which it certified that the Property was zoned Residential 2(c2), a zoning that permitted the construction of residential home units. The plaintiff purchased the Property in 1997 for $640,000 in reliance upon the zoning in the s 149 Certificate with the intention of developing the Property into residential home units. The Property was in fact zoned 2(b1), a zoning that did not permit the development of residential home units. In its Defence filed on 18 October 2002 the defendant admitted that it was negligent in representing that the Property was zoned Residential 2(c2). 2 Although liability is not in issue, the parties are diametrically opposed as to the way in which the plaintiff's damages should be quantified. This meant that the expert accountants were not able to reach any agreement, not because of their unwillingness to assist the Court but rather because they were constrained by their respective instructions. The plaintiff claims that but for the defendant's negligent conduct it would not have purchased the Property. It claims that its damages should be quantified on the basis that but for that conduct it would have been able to develop more properties than it was able to develop between 1997 and the date of trial. The plaintiff, with the assistance of its expert, has constructed what has been referred to as a "parallel universe" in which "Hypothetical" properties are purchased and developed. The plaintiff claims that this parallel universe of four, or even five Hypothetical developments, is what would have been achieved but for the defendant's negligent conduct. These Hypothetical developments are constructed on the basis of assumptions the plaintiff's expert was instructed to adopt. Those assumptions are said to be reasonably available from the way in which the plaintiff operated its property development business. 3 The defendant claims that the plaintiff acted unreasonably in: (a) holding onto the Property after it was informed of its correct zoning; and (b) failing to develop the Property within the confines of its correct zoning. The defendant claims that even if the plaintiff's conduct in holding on to the Property in the hope that the defendant would rezone it was reasonable, the plaintiff's loss should be measured on the basis of only one Hypothetical development. In these circumstances it is necessary to analyse the way in which the plaintiff conducted its business and developed its properties over the years to the time it purchased the Property. It is also necessary to review the conduct of both parties after the plaintiff purchased the Property. History of proceedings 4 This matter has had a somewhat chequered history. On 28 November 2003 it was fixed for hearing for 3 days commencing on 8 March 2004. On 27 February 2004 that hearing was vacated because the defendant had recently passed a resolution that the parties thought may affect the assessment of damages. It is apparent that the parties anticipated that the defendant might rezone the Property and the matter was adjourned on a number of occasions in 2004 and 2005 to accommodate the Council meetings. On 15 July 2005 the matter was listed for hearing on 14 November 2005 for 5 days. On 11 November 2005, after further problems were discovered in relation to the development of the Property, the November hearing dates were vacated and the matter was fixed for hearing on 10 April 2006. 5 I commenced the hearing of this matter on 10 April 2006 when Mr BW Rayment QC and Mr GJ Grogin, of counsel, appeared for the plaintiff and Mr MT McCulloch SC and Mr GJ Gemmell, of counsel, appeared for the defendant. On the second day of the trial, the parties sought an adjournment of the proceedings because the defendant was meeting on 19 April 2006 and it was anticipated that an application by the plaintiff for development approval of the Property was to be considered at that meeting. The parties were concerned that the defendant's decision might affect the assessment of the plaintiff's damages. On 28 April 2006 the matter was listed part-heard, on 6 November 2006 for four days. The hearing continued on 6, 7, 8 and 9 November 2006. On those days, Mr PR Garling SC appeared in place of Mr McCulloch, otherwise the appearances remained the same. The Facts 6 The plaintiff has been developing property, mainly residential home unit developments in the St George area, since 1981. The three active directors of the plaintiff are George Daniel, Harry Kastrounis and George Staikos. The other three directors are the wives of the three active directors. Mr Daniel identifies possible sites for development, determines suitability of the site for development and negotiates the purchase including supervising the contract negotiations. He liaises with councils, lodges relevant applications and arranges for the marketing and sale of the developed property. Mr Kastrounis organises and supervises the various trades and workers on the construction sites. Mr Staikos deals with contractual matters with sub-contractors and the purchasing of building materials. Developments History 1982-1998 7 During the period 1982 to 1998, the plaintiff developed 16 properties. Those developments were as follows: