New South Wales Supreme Court CITATION : Luxury Homes Pty Limited v Margaret Patricia Lanham [2009] NSWSC 873 HEARING DATE(S) : 10, 11, 12 and 13 August 2009 JUDGMENT DATE : 14 September 2009 JURISDICTION : Equity Division JUDGMENT OF : Bergin CJ in Eq DECISION : Plaintiff's claim is dismissed. Defendant's Cross-Claim is dismissed. CATCHWORDS : CONTRACTS - whether contract void for uncertainty - whether implied term - whether breaches entitling defendant to terminate contract - claim for damages Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 Brogden v Metropolitan Railway Co (1877) 2 App Cas 666 G Scammell & Nephew Ltd v HC & JG Ouston [1941] AC 251 CASES CITED : Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 Luxury Homes Pty Ltd v Danieli & Anor [2005] NSWSC 379 McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579 Meehan v Jones (1982) 149 CLR 571 Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 Thorby v Goldberg (1964) 112 CLR 597 PARTIES : Luxury Homes Pty Limited (Plaintiff) Margaret Patricia Lanham (Defendant) FILE NUMBER(S) : SC 55022 of 2008 COUNSEL : VRW Gray (Plaintiff) VF Kerr (Defendant) SOLICITORS : McCoy, Grove & Atkinson (Plaintiff) Phillip A Biber (Defendant) - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION TECHNOLOGY & CONSTRUCTION LIST BERGIN CJ in EQ 14 SEPTEMBER 2009 55022 of 2008 LUXURY HOMES PTY LIMITED v MARGARET PATRICIA LANHAM JUDGMENT 1 The plaintiff, Luxury Homes Pty Ltd, and the defendant, Margaret Patricia Lanham, entered into a Joint Venture Agreement (the Agreement) in March 2004 to develop land in Frenchs Forest, a northern suburb of Sydney, New South Wales (the Project). The plaintiff claims that the defendant wrongfully repudiated the Agreement for which it is entitled to $1,418,821 in damages. 2 The defendant alleges that the Agreement is void for uncertainty, but if it is not, claims that the plaintiff was in breach of its obligations under the Agreement entitling her to terminate it. The defendant, by Cross-Claim, claims damages for the loss of profit she would have derived from the Project if it had been completed. There is an alternative claim for the costs incurred by the defendant during the Project. Background 3 The managing director of the plaintiff is Barry George Alcock (Mr Alcock) whose son, Jay Justin Alcock (J Alcock), was at all relevant times employed with the plaintiff. Mr Alcock has been involved in property development projects for approximately 34 years and the plaintiff has been similarly involved for the last 6 or 7 years. The plaintiff's involvement has been more in the nature of project management and development than development of land. However the plaintiff developed and completed three sites in the Frenchs Forest and nearby Killarney Heights area in 2004. 4 The defendant owned three properties in the Frenchs Forest area being, 19 Sturt Street and 75 Forest Way outright and 17 Sturt Street as a joint tenant with her husband. In about 2001 the defendant had a conversation with the owners of 77 Forest Way, Barry and Jenny Nolan (the Nolans), in which she asked them if they would be interested in joining with her to develop the four blocks, being her three properties and the Nolans' property. The Nolans said they were interested but would prefer to give the defendant an option over their property rather than being a "partner" with the defendant. In about 2001 the defendant had a conversation with J Alcock (whom she had met socially in 1997) in which he informed her that Mr Alcock was doing some property development in the Frenchs Forest area and would be interested in doing a development with the defendant. At about this time the defendant spoke briefly with Mr Alcock but decided she would try to do the development herself. Her plan was to develop her properties and the Nolans' property by demolishing all existing buildings and constructing 19 home units for "over 55" purchasers. After 18 months and $60,000 in costs, the defendant decided it was "not worth" pursuing the development any further. 5 Mr Alcock became aware of the defendant's abandonment of her development plans and met with her in January 2004. The following conversation took place: Mr Alcock: We should do this development. It's a great opportunity to make money. The defendant: I've just wasted $60,000 on this development. I don't have any more money to put into it. Mr Alcock: I will cover the costs. I will prepare a proposal and send it to you. The Nolans will be part of the development but I will deal with them. We could look at doing it on the three blocks if we can't get a buyer for the Nolans. Your blocks would be valued at $2.2 million - $800,000 for 17 Sturt Street and $700,000 each for the other 2 properties. If the Nolans aren't interested, we'll do it on just your 3 blocks. After all expenses of the development have been paid, my company Luxury Homes will get 50% of the remaining profit; you will get three quarters of 50% and the Nolans will get one quarter of 50%. Defendant: That seems fair to me, especially as you're going to look after everything and I don't need to get involved. 6 The defendant advised the Nolans that she had met with Mr Alcock and that he may approach them in due course in relation to a proposed development. The proposal – 27 January 2004 7 On 27 January 2004 the plaintiff wrote to the defendant in the following terms: Following our discussions concerning the development of your land at Sturt Street and Forest Way I have considered the various ways of proceeding and think the most suitable way is as follows. 1) We will enter into a joint venture with you to produce the optimum development and profit. 2) We will purchase number 77 Forest Way to add to the three blocks owned by you 3) All four blocks will – if a DA is obtained – be used as security for the development finance. 4) We will attend to the design and planning to get the DA, Construction, finance and marketing. 5) The net proceeds of the sales shall be distributed in the following order: a) To pay the mortgages over the properties. b) (1) Return of your original equity in your land, i.e.: agreed present value less present mortgages, and (2) return of our purchase price of number 77 less any mortgage taken to purchase it. c) Payment of any remaining development and selling costs d) Payment to the owners of 50% of development profit e) Payment of the other 50% to Luxury Homes. The apportionment of the owners profit would be 75% to you in respect of 3 blocks and 25% to us in respect of 1 block. Should we agree at some stage prior to obtaining development consent, to discontinue the application and abandon the project all costs incurred in relation to the proposal up to that stage are to be borne in the same proportion as the profits would have been. Should we not acquire 77 Forest Way the development will consist of only three blocks and the distributions of profit and sharing of costs incurred will be adjusted accordingly. The agreed value for your 3 blocks is $2.2 million. If you agree to the above proposal please sign the attached copy and return to us. The defendant's concern 8 After receiving the letter of 27 January 2004 the defendant spoke to Mr Alcock and asked him "what risk am I at? I don't want the home that I live in to be in jeopardy in any way. Should I go and see a solicitor?" Mr Alcock informed the defendant that he did not like to have solicitors involved and that he had "done a lot of these types of developments" and that he knew "how it all works". The plaintiff's response – 12 February 2004 9 On 12 February 2004 the plaintiff wrote to the defendant in the following terms: As we discussed I am providing some details/explanations on how we will minimise the risks when we do the development. The property stays in your name so that no stamp duty is incurred and so that you feel comfortable. We will not deal with the property without your permission. When we get development approval we will have the property valued and the project valued by the banks valuer for the purpose of refinancing and borrowing for construction. We will negotiate a "fixed price" contract with a builder for a price consistent with the feasibility done by the valuer. We will determine the market value for the units and may sell one or more off the plan. Thus we will know that the project is profitable before we start the building. During the building the bank's quantity surveyor will make payments to the builder based on the amount of money left to complete the project. That means that if he ( sic ) builder goes broke during that period we have the following protection: a) We have the money to finish retained by the bank. b) The builder must have Home Warranty Insurance to cover such a contingency. In summary – we do not start the project without a fixed price contract and approved finance which will be controlled by the banks quantity surveyors. We and our consultants will be working hand in hand with the builder to ensure the best quality and finish knowing that we can sell the units at a profit. Defendant decides to proceed 10 On 20 February 2004 the defendant's then solicitor, Paul Tocchini, wrote to Mr Alcock confirming that he acted for the defendant and advising that the defendant "would like to move forward with the proposals set out in your recent letters including the latest letter of 12 February". Mr Tocchini requested the plaintiff to submit a "formal agreement" and advised that if that agreement was "appropriate it will be signed off". Heads of Agreement 11 Mr Alcock drafted a document entitled "Heads of Agreement" and gave it to the defendant. It was in the following terms: Heads of Agreement between Margaret Lanham (the owner) of 17, 19 Sturt Street Frenchs Forest and 75 Forest Way Frenchs Forest and Luxury Homes (the Company). 1) The owner and the company agree to enter a joint venture to develop and sell townhouses on the land 2) For that purpose the development will also include the land at 77 Forest Way Frenchs Forest 3) All 4 blocks will be used as security for the development finance 4) The Company will attend to the design and planning to obtain development consent, construction, finance and marketing 5) The net proceeds of the sale shall be distributed in the following order. a) To discharge the mortgages over the 4 properties b) Return to the owner the original equity in the land i.e $2.2 million less the present mortgages c) Payment of any remaining development or selling costs d) Payment to the owner of 37.5% of the development profit e) Payment of the balance to the company 6) Should the parties agree prior to obtaining development consent to discontinue the application and abandon the project all costs incurred in relation to the proposal up to that stage are to be borne in the same proportion as the profits would have been. Defendant's letter – 22 March 2004 12 On 22 March 2004 the defendant wrote to the plaintiff in the following terms: Please find attached signed Heads of Agreement for the Sturt Street/Forestway Development. I am happy to leave all proceedings from now on to Luxury Homes, however please call on me if there is any way that I can assist. What I would ask of you is that I receive an update report on the last Friday of each month, as to what progress has happened during the previous month. That way I won't bother you with phone calls as I will want to know what is happening. This can either be faxed to me on [number provided] or email: [provided] Let me know if you have any concerns re this. Can you please sign and return this letter, plus return the Heads of Agreement also signed by you. I am really excited about the development and thank you for your understanding of my concerns. The Nolan's Agreement 13 Mr Alcock met with the Nolans in February 2004 and on 11 March 2004 the plaintiff wrote to the Nolans with a proposal in respect of their property. That letter included: As you know we are entering into an agreement with Maggie Lanham to develop 3 blocks of land owned by her which connects with your block. We propose that we enter into an agreement with you to purchase your property at a time to coincide the completion of the development. The development would incorporate your block and you would be paid a premium for allowing development and a delayed settlement. Although the profit made by Maggie will be fully taxable your situation differs in that you are not taking any of the development risk but are simply selling your house on a delayed settlement. A draft agreement is attached for your consideration. 14 The enclosed "draft agreement" attached to the letter was in the following terms: Heads of Agreement dated 26 th February 2004 between Jenny and Barry Nolan (the owners) of 77 Forest Way Frenchs Forest (the land) and Luxury Homes Pty Ltd of 285 George Street Sydney (the Company). 1) The company will apply for development consent for townhouses to be constructed on "the land" and an additional 3 blocks at 17 & 19 Sturt Street and 75 Forest Way 2) If consent is not granted within 12 months of the date of lodgement of the development application this agreement will lapse. 3) If consent is granted "the company" and "the owners" will enter into a contract for sale in respect of "the land". 4) The settlement date on the contract will be 14 days after the date on which construction of the townhouses is completed. 5) In consideration of "the owners" allowing this delayed settlement and allowing "the land" to be used as security for the development and in recognition of the probable increase in property values over the intervening period the sale prices will be determined as follows: S = A + B Where A = $700,000 B = 12.5% of the profit on the development and sale of the townhouses. 6) Payment of the sale price will be by way of a) discharge of the present mortgage when refinancing for construction and the subsequent discharge of that mortgage. b) payment of the balance in accordance with clause 4 above. 7) On completion of the project the owner will execute transfers of the strata units to the people nominated by the company. 8) The profit shall be calculated by including a) Land cost at $2.9 Million (4 blocks) b) All construction, development, finance and professional costs c) Sales receipts after advertising, commission etc. d) All figures excluding G.S.T. 15 The plaintiff advised the defendant that he had "signed up" the Nolans and that under their agreement they were to get one quarter of 50% of the profits and the defendant would get three quarters. It was not until February 2007 that the defendant received a copy of the Heads of Agreement between the plaintiff and the Nolans. Development Application: March 2004 – mid 2005 16 Between April and December 2004 the plaintiff worked with its architects, other consultants and the local Council to prepare plans for a development application. On 24 December 2004 the defendant signed the application for development approval and the plaintiff lodged it with the Council. 17 Between March 2004 and mid-2005 the defendant rang Mr Alcock occasionally to obtain an update on progress of the Development Application (the DA). She claimed that during these conversations she asked him when he was going to provide her with the "monthly progress report" and Mr Alcock responded that everything was "on track" and that he would provide her with the reports as promised. The defendant did not receive any written reports on the progress of the DA or the development itself from the plaintiff. Mr Alcock did not accept that he had an obligation to provide the defendant with monthly update reports, however he did accept that the defendant was entitled to know what was happening (tr 126). He said that between March 2004 and December 2005 "there was nothing to communicate" and that "nothing was happening" (tr 127). This was during the period that documents were being drafted and lodged with the Council for development approval. 18 Shortly after 3 February 2005 the defendant received a letter of that date from the plaintiff which was in the following terms: Development 17-19 Sturt Street & 75-77 Forest Way Rd Frenchs Forest I know you said you did not have any money to put in for the development (which is not our normal arrangement) but I wonder if you could perhaps reimburse some of the extensive costs we have had on our project. So far we have spent nearly $100,000 on Architects, Planners, Surveyors, Landscape Architects, Engineers, Council fees etc and the artist who produced those great perspectives. Could you possibly contribute say $30,000 towards those costs? I am sure you will appreciate that we still have more to spend – when we get development consent and I would really appreciate your help. 19 At a chance meeting at the local shopping centre with Mr Alcock, the defendant advised him that she was happy to contribute the expenses of $30,000. She then received an invoice for that amount dated 10 March 2005 that she paid over the period March 2005 to January 2006. The Nolans advised the defendant that they had also been asked to contribute to the development costs but had decided not to do so because it was not part of the "deal". 20 The defendant attended a Warringah Council meeting in late 2005 with J Alcock at which the development application for the Project was being considered and discussed by the Council members. The defendant's evidence was that during June 2005 she spoke to Mr Alcock who explained that the proposed development was for over 55's comprising "13 upmarket units with fittings of the highest quality". The defendant informed Mr Alcock that she was happy for him to proceed and to do whatever he thought worked best. Development Approval 21 In November 2005 J Alcock telephoned the defendant and advised her that development approval had been granted although it was not yet in writing. 22 On 24 November 2005 the plaintiff wrote to the defendant in the following terms: Our Development Project As we now have development approval, the next step is to have detailed building plans prepared and engage a certifier who will issue us with a construction certificate. Up until now we have paid the majority of costs that have been incurred, which as I said was not our normal practice. We will need to obtain mortgage finance to fund the construction. Also we need to be reimbursed for our outlays. Would you please indicate the extent of any mortgages currently existing on the properties and authorize us to begin negotiations for finance on your behalf. Looking forward to a very successful result. 23 On 29 November 2005 the plaintiff wrote to the Nolans in identical terms to the letter to the defendant of 24 November 2005. 24 On 13 December 2005 Warringah Council wrote to the plaintiff advising that, with certain amendments, the following development consent was granted: Development Application No. 2004/1647/0 for the construction of housing for older people and people with a disability, demolition of existing dwelling houses and consolidation of four lots into one lot, as Lots 39 & 40, DP 203647, Nos. 17 & 19 Sturt Street, and Lot 36, DP 410864 & Lot 27, DP 203647, Nos. 75 & 77 Forest Way, Frenchs Forest. The Nolans change position 25 In late November or early December 2005 the defendant met with Mr Alcock, J Alcock and the Nolans at the Nolans' house to celebrate obtaining the development approval and to discuss proceeding with the Project. The following conversation took place: Mr Alcock: Now we have the DA we need to organise finance for construction as soon as possible. We'll use the equity in your house (indicating the Nolans' house) plus the equity that Maggie has in her houses to organise the finance. Mr Nolan: You can't do that because we use the equity in our house to draw down funds from the Bank for our importing business as and when we need money. We are unfortunately presently in financial difficulty because of the closure of the Spastic Centre up at Allambie Heights where our goods have been impounded. There is some asbestos problem with the building which has put us in a really dire financial situation. Mr Alcock: What do you want to do? Do you want to continue on or sell at this stage? Mr Nolan: What would we get for it if we sold out at this stage? Mr Alcock: I don't really know. I've got people I can approach, but I'm pretty sure we'd get $825,000. Mr Nolan: That seems to be the way for us to go. We'll accept $825,000, but it has to be done quickly. Mr Alcock: We should have a construction certificate by June next year. Then we'll get quotes from Masterton Homes to build the development. The defendant: What do you think the development is now worth with the DA? Mr Alcock: The value of the 4 blocks with the DA is $4 million. December 2005 – March 2006 26 On 15 December 2005 the plaintiff wrote to the defendant as follows: I enclose a copy of our heads of agreement. I also enclose a copy of our letter to you dated 12 th February 2004 which sets out the mechanics of the deal. We are now at the stage where 1) We have to mortgage the properties to the bank which will be providing the project funding. Presumably St George. 2) We have to spend money to obtain our construction certificate. 3) We need to recover the costs we have paid to date. 4) We have to get the properties valued. 5) We have to get building quotes. 6) We have to arrange all of the funding. 7) We can borrow 80% of the development costs and the value of the land with DA. That means we have to provide equity of 20%. On the assumption that your 3 blocks value at $3 million and your mortgages are currently $1.5million ( sic ) with development costs of say $300,000 per unit we should have enough equity 27 In January 2006 the defendant had a telephone conversation with Mr Alcock in which she asked him how the finance was to be arranged. Mr Alcock advised the defendant that he had not formulated the proposal for finance with any precision at that stage. It was then that the defendant decided to obtain legal advice concerning the Project and on 24 January 2006 she wrote to Mr Alcock in the following terms: Further to our telephone conversation, could you please reply in writing to the following queries from my solicitor – following receipt of this, we can then hopefully proceed. 1. Who is to borrow the funds from the bank? 2. Who is to enter into the Contract with the builder? 3. What will be the terms of the Contract with the builder? 4. Reference is made to the manner in which the proceeds of sale are to be distribution ( sic) – please advise who bears a loss, if any. 5. What additional costs have been, and are to be, incurred in addition to the building costs. Please call if any queries. Cheque for $3000 towards development costs included. 28 On 1 February 2006 the plaintiff responded to the defendant's letter in the following terms: 1) Probably you with Luxury Homes and myself as guarantors. 2) Luxury Homes. 3) Standard AS 4000 contract. 4) I can not see how a loss can be incurred. a) There is already substantial profit by virtue of the DA b) We will only enter a fixed price contract – presumably with Masterton Homes. c) We will have established expected sales prices – realistically. These are anticipated to bring further substantial profits. 5) To date we have incurred the following: Council Fees $10,137 Planning Cons $10,560 Landscape Arch $20,724 Arborist $2,485 Hydraulics Eng $30,618 Nathers $1,485 Traffic Cons $3,025 Architect $72,215 Handicap Access $1,320 Printing $815 $153,384 We will incur further professional fees to obtain the construction certificate and contract administration and project management estimated at $150,000. The estimated construction costs for the 13 units is $3.9 million and the sales are estimated at 9.75 million. If there is anything further you need please let me know 29 On 10 February 2006 the defendant gave the plaintiff a copy of a letter from her solicitor, IE Duffield, to her of the same date. This letter dealt with a number of matters. The plaintiff responded to the matters raised in that letter by letter dated 13 February 2006, which included the following: I have digested the letter from your solicitor and recognise that he is looking after your best interests. In my view our arrangement is simple and does not need lengthy and complicated legal documentation. However if you want him to prepare a longer agreement – I have no objection as long as the terms properly express what we have agreed. I get the impression from his letter that an element of doubt or distrust exists. That is not the atmosphere we should be working in. You will recall that we had many discussions prior to our written agreement whereby our methodology and principles were put to you. Our most important principle being that the "net profit" on the joint venture was to be shared equally. That is to say all the costs associated with the project would be shared equally as would the sale proceeds. When you returned the heads of agreement and in our earlier conversations you expressed the desire to leave all proceedings to us. This is part of the deals we do. It is done that way to save you the hassles we have to go through along the way. In my letter to you dated 15 th December 2005 I set out the steps needed to be taken since the D.A. had been granted and that is still the position. 30 In respect of the borrowings from the bank, the plaintiff advised that it had no objection to it being the borrower, but advised that the bank and the home warranty insurance provider would want the owner to be the borrower and to have the contract with the builder. The plaintiff advised that it and Mr Alcock would be the guarantors and that the defendant's liability would be for the full borrowings but that "our agreement sees us as partners sharing income expenses and liabilities". In dealing with the question in relation to interest, Mr Alcock advised that it was a cost of the project and as such should be borne equally, but that in negotiations interest would be capitalised and would not need to be paid monthly. 31 As to the identity of the contractor with the builder, the plaintiff advised that the insurance company would insist on the owner entering into that contract, and although the plaintiff would be happy to enter into the contract, it may not be practical. However the plaintiff advised: I am happy to liaise and let you get involved to whatever extent you want to but the very essence of our deal was that I would take that work load and responsibility off your shoulders. 32 There were also questions raised in the solicitor's letter in relation to development approval costs and the costs for construction certificates. Mr Alcock advised that the architect's fees would be as follows: a) to c/c $3,000 per unit $39,000 b) Contract Docs $19,500 c) Contract Admin $19,500 d) Project Management 1% $39,000 e) Interior Design $19,500 33 Mr Alcock also advised that he estimated the certifier's fees at $5,000 and the basic feasibility, before the actual quotes were obtained, at: land value for the four blocks - $2.9 million; construction - $3.9 million; and sale proceeds - $9.75 million. At the conclusion of his letter of 13 February 2006 Mr Alcock said: As I understand it we need to pay out $1,500,000 on your present loans, $150,000 in costs to date and $825,000 for Jen and Barry less their share of costs to date say $37,500. We then borrow for construction. All together we would be borrowing $2,400,000 with interest say 8% (i.e:- $192,000 p.a) we could hold the units for a long gradual sale period. 34 By email dated 13 February 2006 the defendant thanked Mr Alcock for his prompt response and agreed that her solicitor did have an element of doubt and distrust but that she thought it went with his profession. That email included the following: Please be assured that I do not have these thoughts. Ian is, however looking after my interests, in a better way than I can. What I don't want to happen is the misunderstanding that Jenny and Barry had about their arrangement (which I was not privy to) and which was only clarified with them at the last meeting – whereupon they decided to sell out of the arrangement. I will forward your letter to Ian immediately and if he is happy we will proceed. 35 On 20 February 2006 the defendant forwarded a further letter from her solicitor to the plaintiff with a covering letter which included the following: A main concern I have is re the finance. I am to be the borrower with Luxury Homes and you as guarantors. Ian notes that if there were default under the mortgage and the properties sold, the bank could look to you for any shortfall. However the bank is not obliged to chase you, the guarantors, and may look to me as the borrower. I know this is the worst case scenario, however I am not prepared to risk 'everything' for this project; I am prepared to risk the four properties – but not the rest of my assets – i.e. I don't want to lose the place I am living in. Can you advise what can be put in place as an ironclad safeguard against this. Building contract – as you are to arrange the contract with the Builder and monitor it, I think it is best you enter the contract with the builder – as stated in your letter of February 1, 2006. I have just received a land tax bill on the properties for 2006 which I will pay – can you confirm that future land tax bills will be paid by the project. Thank you for your patience with me for what is the 'biggest project of my life' and I would be grateful if you could clarify these remaining issues so we can proceed. 36 The letter from the solicitor dealt with many of the matters that were in the first letter. On 21 February 2006 Mr Alcock responded in terms that included the following: Our problem is not so much the profitability and risk of the project but our capacity to fund it. Normally we have a situation where the land value at the start of our joint ventures is increased considerably when development consent is granted. Usually the increased value – plus the existing equity in the land provides enough equity in the project to enable the full construction costs to be borrowed. If the 4 blocks were valued today they would probably be worth $2.5m. Unfortunately, after buying the fourth block the debt will be $2.325m. Under our original agreement including Jen and Barry the debt would only have been $1.8m. The valuer would probably value the site with the DA at about $3.25m. To fund the project we would need to borrow the $2.325m plus $3.9m for the construction. Whereas before we would only need $1.8m plus $3.9m. The bank would only advance 80% of the improved land value plus construction costs. That means we would need an equity of 20% = $1.43m – but we only have $0.9m ($3.25 - $2.325). Before we would have had $1.45m. Thus – as you can see all the concern about the future and the potential risk is perhaps premature. I think the right thing to do now would be to sit tight and wait for the perception of a drop in values to disappear. The DA is good for 5 years and in that time the market will increase (according to RESIDEX) at the rate of 8-12% p.a. As I do not know anything about your financial position I can not offer you any advice in that regard but if you rent out the four properties rather than the 3 now I presume that the shortfall against interest is manageable. The other two options are to sell the consolidated site with a DA or to seek another equity participant. Should we perhaps meet with you and your accountant to discuss the next move? 37 On 21 February 2006 the defendant responded to Mr Alcock by email advising that she would contact her accountant and organise a time to suit all parties. She expressed disagreement with the estimated value of $2.5 million and also referred to the plaintiff's recent statement that with the DA the four blocks would be worth $4 million, which he had revised to $3.25 million. She suggested that perhaps the properties should be valued so that they had a clear idea of their worth. That communication included the following: I should also be very clear that I am not prepared to wait 5 years for the development and I am not prepared to take on another property for another 4-5 years. - you say that the shortfall against interest is manageable – I find it hard enough to manage the properties I have as it is now, let alone taking on another property for an indeterminate ( sic ) time. Perhaps if you find the interest is manageable, it might be best if you purchased the 4 th property or found another equity partner. The main query I had, and this will not change, is that I will not be put at risk for anything more than the value of the properties in the development – can you advise re this in relation to the figures…in your letter today. I also await your response to the other queries from my solicitor. 38 On 23 February 2006 Mr Alcock wrote to the defendant agreeing with her in relation to valuations but noting that one of his regular frustrations was trying to convince valuers they were wrong. That email also dealt with the solicitor's further questions. It reiterated that the arrangement between the plaintiff and the defendant saw the defendant getting first distribution at the rate of $2.2 million for three blocks and $2.9 million for four blocks. It also included reference to the agreement that the plaintiff was the last one to be paid after all expenses and after the distribution to the defendant. The Valuation – March 2006 39 The plaintiff obtained a valuation report dated 21 March 2006 from Carritt Taylor Valuations Pty Ltd. That report was to assess the then current market value of the four properties reflecting the existing development consent for a medium density development under SEPP (Seniors Living) 2004. It included the following: Currently, the residential real estate market is demonstrating a more positive mood. It is generally perceived that prices have bottomed out and there has been a noticeable increase in enquiry in recent months. Whilst values are not expected to increase for some time, the prevailing activity is encouraging. … VALUATION RATIONALE In the absence of comparable sales of medium density redevelopment sites with SEPP (Seniors Living) 2004 approval, we have had regard to hypothetical development or residual value calculations. Assumptions made in this exercise are:- Gross realisation of $9,750,000 which is based on an average price of $750,000; Construction cost of $3,575,000 including GST; Professional fees at $250,000; Statutory contributions of $30,000; Construction period of twelve months; Marketing commencing at three units per month for the first two months, then two units per month for the next two months, with one unit in each month for the following three months, resulting in a total selling period of seven months from completion; Profit and risk of realisation of at least 15%; and Interest assessed at 9.5% on 100% borrowings. Details of our calculations are included hereunder:- Gross Realisation $9,750,000 Less: GST on End Sales (Margin Method) $ 581,818 $ 9,168,182 Less: Marketing Expenses $ 268,125 Plus: Input Credits on Marketing $ 24,375 $ 243,750 $ 8,924,432 Less: Profit & Risk @ 15.42% $ 1,192,097 $ 7,732,335 Less: Development Expenses incl GST $3,855,000 Rates & Taxes $ 15,445 Project Interest $ 651,844 Acquisition Expenses $ 208,535 $4,730,824 Plus: Input Credits on Development Exp. $ 348,489 $ 4,382,335 DEDUCED LAND VALUE $ 3,350,000 The above calculations support a market value of the site reflecting the existing Development Consent, of $3,350,000 (Three Million Three Hundred & Fifty Thousand Dollars ). This figure which equates to $257,692 per site is considered to be indicative of market. We refer to your request to provide an approximate value range for the individual homes, on a single residential basis, ignoring any approval. It is highlighted that this opinion, is given in accordance with your instructions from external inspection only, and is to be used as a guide only and should not be construed as a formal valuation, which requires full detailed inspection, research and analysis. On this basis, we believe that the values of the properties could lie in the range as follows:- Property Value 17 Sturt Street $650,000 to $700,000 19 Sturt Street $600,000 to $650,000 75 Forest Way $550,000 to $600,000 77 Forest Way $550,000 to $600,000 Alternatives for the Nolan's property 40 On 12 April 2006 the defendant advised Mr Alcock that she had received a telephone call from the Nolans on 10 April 2006 asking to know what was happening. She advised Mr Alcock that she was surprised by this as he had informed her that he was to call them the previous week in relation to what options were available for them. The defendant advised Mr Alcock that she informed the Nolans that he had the valuations and that she had asked for a meeting. The defendant advised Mr Alcock that she had been thinking about the situation and wondered whether "the following would work"; that she would buy the Nolans' property then for $600,000 and that they would receive the remainder of the agreed value less the DA costs on completion/sale of the development. The defendant asked whether the other three properties would give "us" enough equity to satisfy the banks. 41 On 18 April 2006 the defendant wrote again to Mr Alcock advising him that she had spoken with two friends the previous weekend, both of whom were interested in the development and both of whom had money to invest. The defendant advised: I explained the arrangement I had with you – but they had lots of questions that I could not answer. Could you please send me details of how the arrangement would work with them (how the financing would work); what the 'figures' are – i.e. what they would make out of it; one also wanted to know how long he would have to finance the mortgage of the one property before the development finance took over. If you could get these details to me asap – I think they will make a decision quickly – and hopefully one of them will take up the opportunity. Also, can you advise how you got on re speaking with [the Nolans] about putting their property on the market. Look forward to hearing from you at your earliest opportunity. 42 On 27 April 2006 Mr Alcock forwarded a letter to the defendant in the following terms: Perhaps you could put a proposition to your potential purchasers along the following lines: 1) They acquire Jen and Barry's block for $750,000. 2) They could probably borrow $480,000 against the property. 3) They would rent the property for say 6-12 months and pay the interest on the borrowings. 4) We would then obtain finance for the development and begin work. The rent and interest would cease. 5) 12-18 months later the units would be sold. 6) They could make as much as $250,000 profit, i.e. 93% on the equity they put in. 7) As a protection for them we would (as a bottom line) buy back the property for what it cost them. 43 On the same day the defendant requested that Mr Alcock also provide the details of the arrangement between Luxury Homes and the person buying the property. There was no response to that request and on 2 May 2006 the defendant asked for a reply and wrote: It is now two weeks since I asked for 'something' to put to my friends – and as they would be looking at putting in at least $250,000, they need something a little more substantial than what Barry sent – I am sure neither of you would invest based on the document Barry sent. 44 The defendant advised that she would be away between 10 and 29 May 2006 and wanted to finalise the information prior to her departure. That did not happen and on the defendant's return from overseas on 29 May 2006 Mr Alcock wrote to her in the following terms: I have been continually thinking about our situation. I feel strongly that it is in your best interests to refinance the 4 blocks and generate almost enough money to buy Jenny and Barry's property. The 4 blocks have been valued at $3,350,000 with the DA. As I understand it you have loans of $1.5m against your 3 blocks. We could borrow 65% against the DA value – that is $2,177,500. You could borrow say $100,000 against your home and purchase their block. To ease your concerns we would make the same offer to you that we suggested to your "new purchaser". That is buy the block for $750,000 and we would guarantee to pay you as a "bottom line" scenario that $750,000. This really is the best way to go and does not introduce potential problems with new partners. By borrowing only 65% at this stage that should enable us to take that up to 80% and also fund 80% of the construction costs. Please think about it and let me know. 45 On the same day the defendant wrote to Mr Alcock in the following terms: I agree that this would be the best way if it could be done. Are you saying that Jenny and Barry will accept $750,000 for their property – can you confirm this definitely before I speak to my financial people. Also, I just arrived back today, and there was another call from Jenny on my answering phone asking what the situation was with the two people who you said were friends of mine and interested in buying their property. As I have still not received the information requested from you for my friends to assess the situation we both know that this is misleading for Jenny and Barry and makes me feel uncomfortable now that she has asked me to ring and let her know what the situation is. Please don't put me in this type of situation again. 46 Between June and November 2006 there were a number of email communications between the defendant and Mr Alcock in which the defendant sought information about what was happening with the Nolans. Mr Alcock advised that the Nolans were still making up their minds as to what they wished to do with their property. 47 On 6 December 2006 the defendant wrote to Mr Alcock in the following terms: Approval was given for the development 1 year ago today. Unfortunately it seems we have taken steps backwards rather than forwards since December 6, 2005; and I have been trying for three weeks now to get an update on what is happening, if anything, or what you intend to happen. Can you please do me the courtesy of replying to my emails. 48 On 6 December 2006 J Alcock wrote to the defendant in the following terms: The current status is that after 3 conversations over many weeks with Barry Nolan he still has not made up his mind what he wants to do. We need, as before, to buy him out and I have been strongly putting to him that all someone would pay is $700,000. However we need him to make up his mind to sell. We have a valuation which I think is high enough for us to refinance your three blocks and pay Barry $700,000. That would see you owning all four blocks and things would run more smoothly. Even if you were to purchase from him in the next month or two in our view we should not commence building for 12 months or more, because in this market we would not want to be sitting on 13 completed units and carrying the interest whilst we wait to sell. When the market picks up and the buyers can more accurately predict the timing and the sales price of their own property we could start selling of ( sic ) the plan. 49 On 6 December 2006 the defendant responded in the following terms: Thank you for finally letting me know what is going on; so in fact Barry and Jenny have control over the situation, which they have had for the past year; I am not prepared for this to continue indefinitely – and I am finding it increasingly difficult to pay the three mortgages with so many interest rises. Please advise what we can do to resolve the situation. Nolans decide not to sell –December 2006 50 A couple of days after these communications the defendant had a telephone conversation with Mr Alcock in which he advised her that the Nolans had decided not to sell their property but to renovate it. The defendant claims that Mr Alcock agreed that he could force the Nolans to continue in the agreement but that he would check to see whether it was possible to do the development with only the three blocks owned by the defendant. The defendant questioned Mr Alcock about this saying that he had already advised her that it was possible. Mr Alcock then informed the defendant that he had to obtain some more information and he would let her know when he obtained it. Mr Alcock denied that this conversation took place and that the only time he discussed the possibility of using only three blocks for the development was prior to entering into the agreements with the defendant and the Nolans in 2004. 51 On 11 December 2006 the defendant wrote to Mr Alcock in the following terms: Hi – further to your call Barry last week, advising that Barry Nolan has said he has decided to stay in his place and renovate. It has taken a year to get to this stage and we have been through many different scenarios, many things said that have been misunderstood and it is now time for us to work out a way forward. Firstly everything that is decided must now be put in writing – so that there are no future misunderstandings. I have some ideas of what we can do and I am sure you do as well. As discussed last week you will now check the feasibility of doing the development on my three blocks only; you had always said this was possible and then last week you said it may not be – so this needs to be sorted out absolutely. Can you advise when this information has been ascertained – and then I propose we meet to discuss our options. I am prepared to be patient re market prices of properties for as long as I can – even though this is financially difficult for me; however I am not prepared to be patient and hope that the Nolans will somehow 'come on board'.. The Nolans must also realise the consequences for them if they decide not to go ahead with their share of the development. I had hoped that you and the Nolans would work this out, but after a year of 'waiting' for the Nolans to make up their minds about what they are going to do, this is obviously not going to happen and so now I am going to become more involved (which was not my original intention or wish) so that the development can move forward. Please reply to this email as soon as you have the information requested. 52 The defendant did not receive a prompt response to this email and on 8 January 2007 she wrote again to Mr Alcock asking him to reply to her email of 11 December 2006. On the same day J Alcock advised the defendant by email that Mr Alcock was still on holidays but that he would speak to him and respond to the defendant shortly. On 19 January 2007 the defendant wrote again advising that she was still awaiting a response to her email of 11 December 2006. Approximately a week later the defendant spoke with Mr Alcock on the telephone asking him what was happening with the Nolans and whether it was feasible to proceed with the development with her three properties. Mr Alcock advised that he was visiting the Nolans on 25 January 2007 and he would let the defendant know the outcome of that meeting, and said he would prefer to proceed with the 4 properties as the DA was already in place. On 31 January 2007 the defendant, having not heard from Mr Alcock, wrote asking what had happened at the meeting with the Nolans. 53 On 1 February 2007 Mr Alcock wrote to the defendant in the following terms: We have spoken to Barry & had a look through the property. We can not use the D.A. for only three blocks. I told Jen that we would arrange a meeting with the four of us to discuss where we go from here. I have re read my agreement with them under which they have to enter a contract with me which has to settle on completion of the project. If they will not come to some agreement satisfactory to us we can insist that they stay with our agreement. When should we meet? Of course you and I should meet earlier so that we have a firm policy. 54 On 2 February 2007 the defendant requested a copy of the contract between the plaintiff and the Nolans and a breakdown of what the Nolans could expect to make out of the development if they stayed in it. The defendant also agreed to meet the following week and asked Mr Alcock to clarify what he meant in relation to the DA for the three blocks. She asked whether they could modify the current DA or was it the case that a development with only the three blocks was not possible. 55 On the same day Mr Alcock advised that his conversations with the Nolans were along the lines of trying to organise the Nolans pay out. He provided the defendant with a copy of the agreement with the Nolans and said that the basic premise on the deal was that the Nolans would get about $1 million. Meeting with the Nolans – 8 February 2007 56 A meeting was arranged between the plaintiff, the defendant and the Nolans for 8 February 2007. Prior to the meeting the defendant had a brief conversation with Mr Alcock in which he advised her that he was going to offer the Nolans $700,000 immediately and $125,000 on completion. The defendant agreed that she would leave the negotiations to Mr Alcock. At the meeting Mr Nolan advised that they wanted $825,000 paid as soon as possible and not by instalments. He requested that any proposals be put in writing and that he and Mrs Nolan would consider them. After the meeting Mr Alcock advised the defendant that he would formulate a proposal to put to the Nolans. Mr Alcock said he thought there were two options; first, to offer to pay $700,000 immediately and $125,000 as soon as finance allowed; secondly, to offer $700,000 immediately and $300,000 when the development was sold. The defendant observed that the Nolans had said they wanted to be paid in full upfront and wondered why Mr Alcock was continuing to offer the split payments. The defendant claimed that after the meeting she received a telephone call from Mr Nolan confirming that they would only accept a full upfront payment and no split payments. 57 On 13 February 2007 the defendant asked Mr Alcock to provide any proposal to her prior to it being put to the Nolans. On 7 March 2007 Mr Alcock advised the defendant that he had been working with "our broker on the refinance to buy out" the Nolans and that the broker believed that "we can do it but he needs to know whether if you buy it would we need what is called a low doc loan or would you provide details of your income and see if it stacks up". March/April 2007 58 On 20 March 2007 the defendant wrote to Mr Alcock emphasising that it had been two months since the meeting with the Nolans which seemed an inordinate length of time to put together the two suggestions they were interested in; to pay them $700,000 immediately and $125,000 as soon as finance allowed; or pay them $700,000 now and $300,000 when the development was sold. The defendant requested that Mr Alcock advise her when he could show her what he thought would work. There was further discussion between the defendant and Mr Alcock in relation to the defendant's assets and capacity to pay any loans. 59 On 21 March 2007 the defendant advised Mr Alcock that as she understood the development, the loan repayments would come out of the refinancing and she would not be expected to pay any additional loan repayments and requested confirmation of her understanding. On the same day Mr Alcock advised by email that there were "several steps"; firstly to get an investment loan to buy the Nolans' block; then to generate enough funds to pay for the costs related to the construction; and when they were ready to undertake construction, to borrow for that purpose with interest capitalised thereafter. The defendant wrote back immediately after this communication as follows: You didn't answer my question – am I expected to pay the difference between the rent received and the investment loan to buy the Nolans' block? As I understand it, you were going to refinance the whole development and this is where the money would come from to buy the Nolan's block, plus costs related to construction costs. I have told you many times Barry that I am already funding the 3 mortgages on the Sturt Street Development, plus my own mortgage, so I am not in a position to fund anything more. I just don't want you to waste time pursuing a loan that I cannot fund. 60 On 22 March 2007 J Alcock advised the defendant that a meeting had taken place with the broker and that he and Mr Alcock were putting some details together to send to her so "we can look at moving forward". That information was provided in the following form by email dated 28 March 2007: I have just completed my meeting with the broker. There are two ways that we might be able to refinance to buy the Nolans property. They are both going to be a tight squeeze. 1) We could borrow up to 65% against the value with the DA that would provide only $2,177,500 which is not quite enough. This would be expensive at 2% higher interest than the alternative with an establishment fee of 2%. 2) We could borrow against each block separately to a total of 80% of the value of each. We would need to have each property properly valued. Jay and I believe the four may total $2,800,000 and provide $2,240,000 which would just do. We would need to buy the property in your name because it would be preferable to have only one owner when the time comes to borrow for the development. We need part of the equity in your blocks as part of the equity for the 100% funding of $700,000 for the Nolan's block. Our broker is trying to give us favourable valuations and his current estimates are: a. 17 Sturt Street - $780,000 b. 19 Sturt Street - $720,000 c. 75 Forestway - $650,000 d. 77 Forestway - $650,000 $2,800,000 80% = $2,240,000 The funds would be used to pay out your mortgages, $1,400,000 and purchase Nolan's block for $700,000 and reimburse part of the costs paid by us to date. 3) We will need a statement of your assets and liabilities and a copy of your tax return or other income details. We will need to demonstrate the capacity to pay the amount by which the interest exceeds the rentals. 4) We are prepared to meet half of the difference between interest in respect of the Nolan's block and the rent paid by the tenant. 61 On 29 March 2007 the defendant asked a number of questions about this information including: the interest rate in relation to option 2; the amount of repayments per week; what would happen when the properties were no longer rented when construction began; and what Mr Alcock was proposing to offer the Nolans in addition to the $700,000. On 3 April 2007 the defendant requested a response to those questions. On 13 April 2007 the defendant wrote to Mr Alcock as follows: I am at a loss to understand why you have not replied to my email of last week or my email of two weeks ago – as below. These were just simple questions. I can only assume that something is very wrong with your business. Can you please advise me what the problem is. 62 On 16 April 2007 Mr Alcock responded to the defendant's questions advising that: the interest rate was 7.37%; the weekly payments would be $3,175; additional interest would not need to be paid if it were capitalised by the lender; and that he was proposing to offer a figure of $100,000 to $125,000 to the Nolans but they would have to agree on that number. 63 On 17 April 2007 the defendant had a telephone conversation with J Alcock in the following terms: Defendant: This is just ridiculous. You're not answering my emails or telephone calls – it has been over 15 months since we got the DA and we are not one step forward. Why don't you let me know what's going on? J Alcock: I'll send you fortnightly updates on the progress of the development. I will send the first update on Friday, 27 April. Defendant: Can you show me details of the costs incurred so far? J Alcock: We have all the invoices to get the development approval at our office. You can come in on Friday to look at them. Defendant: I will also want to see proof of payment of the invoices by Luxury Homes. J Alcock: That may take some time to put together. Defendant: Its no use me coming to look at invoices until you have collated proof of payment. J Alcock: Ok I'll make sure I have proof of payment for you. 64 On 18 April 2007 the defendant sent the following email to Mr Alcock and J Alcock: …further to our discussions on Tuesday night, following is the action that was decided. 1. you will send me fortnightly updates on progress of the development – the first one to be on April 27. 2. you invited me to your offices on Friday to look over the invoices re the development approval. I also asked to see proof of payment by Luxury Homes of these invoices; you said this may take some time to put together; can you advise by COB on Thursday, April 19 if you have all the required information – otherwise we can reschedule it for next week. 3. The valuer, Andrew Woodjer (sic) called; it has been arranged to do the valuations on my 3 properties from 10-12.30 next Monday, April 24; he said he will liaise with Barry Alcock re doing a valuation on the Nolans at 9.30am. 4. You also mentioned that Barry Alcock had spoken to Barry Nolan last week, but I couldn't remember what you said it was about – can you advise. Meeting – 17 May 2007 65 J Alcock delayed the meeting for a further week and then the defendant had to reschedule the meeting to suit her convenience. For various other reasons the meeting did not take place until 17 May 2007. That meeting was between the defendant and J Alcock as Mr Alcock was not well. The defendant wrote by email on 18 May 2007 to Mr Alcock and J Alcock in the following terms: Action following May 17 meeting – Jay Alcock and Maggie Lanham; Barry Alcock sick. Jay advised we may need presales before getting construction finance. Jay sending bank statements verifying payment of invoices re development approval stage. Jay check re refinancing the four properties or just the Nolan's property – and to advise. Jay to find out the construction costs to get to tender stage. Jay said the Nolans have accepted $700,000 – it is now to be decided additional amount; I think we should offer them a further $100,000 plus their portion of development approval costs. Jay advised the following valuations - 17 Sturt Street $860,000 19 Sturt Street $650,000 77 Forestway $630,000 75 Forestway $610,000 Jay advised the following timetable should be in the vicinity of action - Mid June – refinance organised Sep 1 – construction certification ready to go to tender Oct 1 – prices from builders Dec 1 – Construction finance organized (see above re presales) Jan 08 – building begins Jay to send fortnightly updates re development – next one due June 1, 2007 Please advise any additions/deletions. 66 J Alcock gave evidence that at the meeting on 17 May 2007 he advised the defendant that people did not issue receipts and that the bank statements did not show to whom the payments were made. He invited the defendant to contact the consultants to verify payments if she so wished. He also gave evidence that when the defendant asked what the process was from thereon he said: We should be able to organize the refinance by mid June and be able to go to tender in September with a construction certificate. Prices from builders should be available 4-6 weeks later. Hopefully, when we accept a fixed price tender, we can finalise the construction finance which may require some presales. If this occurs, we should be able to start building in January. June 2007 67 On 4 June 2007 the defendant wrote to Mr Alcock and J Alcock advising that she was to receive an update report on the development on Friday 1 June 2007 and requesting advice as to when she would receive such a report. On 5 June 2007 J Alcock wrote to the defendant advising that Andrew Woodger was going to call her to discuss the finance arrangements. J Alcock also advised: It is best that we do all 4 blocks together as the valuations have been through his provider and this will allow us to borrow the additional amount to fund the project up to Construction finance. I am awaiting word back from the Certifier to ascertain the amount of work to be done prior to construction. The consultants are currently reviewing the DA conditions and preparing the fee proposals to complete the necessary work. I will be in touch shortly with confirmed scope of works from the remainder of the teams. 68 On 7 June 2007 the defendant wrote to Mr Alcock and J Alcock advising that Mr Woodger had just called her about financing the development and that he was coming back to her with some suggestions the following week. The defendant requested advice as soon as possible as to the costs for the period from the construction certificate to tender. The defendant also wrote: Also, something that needs to be finalised before we go ahead with this refinancing is the complete deal with the Nolans – i.e. how much in addition to the $700,000 are we offering to pay them and for them to agree to; this needs to be signed and sealed before the refinancing – can you please get on to this asap and advise. 69 The defendant gave evidence that some time between 7 and 12 June 2007 she had a conversation with Mr Alcock in which he advised her that the Nolans had said they would settle for $700,000 plus a further amount on completion. He also advised that they would accept a split payment and that they had to work out and agree what that second instalment would be. The defendant informed Mr Alcock that she found that extraordinary because the Nolans had said to her time and time again that they were not interested in split payments. Mr Alcock denied that this conversation occurred. Offer to purchase Nolans' property – 12 June 2007 70 On 12 June 2007 Mr Alcock wrote to the Nolans confirming that the defendant intended to purchase their property and stated: As per our discussion the purchase price will be $700,000 and she will undertake to pay you a further $100,000 on completion of the project. Would you please acknowledge this by signing the enclosed copy of this letter and returning it to me. Would you please have your solicitor prepare the sale contract. 71 On 14 June 2007 the defendant wrote to Mr Alcock and J Alcock advising that Mr Woodger wished to meet with her and put the financial loan in place to secure the Nolans' property. The defendant advised that she had informed Mr Woodger that the meeting should not take place until she had the details of how much the period from the construction certificate to tender would cost and that the Nolans had accepted "legally" the $700,000 plus an additional sum to be determined and advised. 72 On 20 June 2007 J Alcock advised the defendant that the letter of 12 June 2007 had been sent to the Nolans and that he would be in touch as soon as any news came through. He also advised that he was still awaiting a fee proposal from the surveyors in respect of her questions relating to the construction certificate to tender costs, and he would get back to her when he had those available. 73 On 22 June 2007 the defendant requested a further report said to be "due today". She also asked for a copy of the letter that was sent to the Nolans and that if no word had been heard from them, they should be followed up. Nolans reject offer – 26 June 2007 74 On 26 June 2007 the Nolans wrote to Mr Alcock in the following terms: We refer to your letter of 12 June 2007 where the terms of the agreement to purchase of our property at 77 Forestway, French ( sic ) Forest were further varied. Delay in reply is regretted, I have been interstate. In this letter you stated that Maggie Lanham was prepared to purchase our property for $800,000.00, $700,000.00 to be paid at the time of purchase and the remainder to be paid upon completion of the proposed development. This arrangement for purchase is unacceptable to us chiefly because it does not bring the requisite certainty and finality to an agreement for the sale of land in the context of the development already fraught with delay. It is also unacceptable in light of your representation to us in a letter dated 15 December 2005 that $825,000.00 was a reasonable sum for the purchase. We are happy to have our solicitor draw up a contract for sale for $825,000.00 without delay with an extended settlement period if that would allow Maggie to make appropriate financial arrangements. Alternatively, we would be prepared to consider an arrangement whereby the purchase price would be $850,000, $700,000.00 to be paid on exchange with the balance of $150,000 to be paid on final settlement, which would be defined as being when the Construction Certificate is issued. Should your response to these terms of acceptance not be received within 28 days from the date of this letter we will proceed on the basis that the agreement for the purchase of our property as varied has been withdrawn. 75 On 29 June 2007 Mr Alcock sent an email to Mr Nolan advising him that he had tried to telephone him to discuss his letter and that no one was answering. That email included the following: You agreed some time ago to accept 700 now and 100 on completion of the project. We/Maggie can not raise the finance to do any more than what she has offered. Where do we go from here? If we can't agree now ,I ( sic ) suppose we will have to go to court to have the original agreement which you signed enforced. July 2007 76 On 4 July 2007 the Nolans responded to Mr Alcock's email of 29 June 2007 in the following terms: It seems that there is another misunderstanding of the matters discussed at meetings between us. On 4 February 2007 at a meeting at our home, 77 Forest Way, Frenchs Forest, attended by you, Maggie Lanham, my wife, Jenny and I it was decided you and Maggie would determine if finance could be arranged to buy our property. At this meeting you undertook to give us an offer in two weeks. I note that your offer comes some four months later. We did not agree to a price of $700,000.00 and $100,000.00 on completion. We indicated to you that we would need at least $700,000.00 to be paid on exchange and we would agree to the balance, which was at that time unarticulated, to be paid on settlement at a time which we would agree to at a later date. Furthermore, we agreed to a further term of settlement as suggested by you that we would during the period prior to settlement, either remain in the premises, or rent them and retain the rental income. As a result of these discussions, we have responded to Maggie's offer as conveyed by you, with a purchase price acceptable to us, which we believe to be quite reasonable in light of your letter of 15 December 2005. We had understood that you sought to negotiate the purchase of our home in good faith, yet in your last email you have indicated that you think the matter will have to be taken to court. It seems somewhat illogical that you would contemplate spending money on legal fees, which, in our view, could be better spent moving closer to an acceptable offer on the purchase of our property. We look forward to your favourable response. 77 On 6 July 2007 Mr Alcock forwarded a copy of the Nolans' letter to the defendant and advised: I believe there is a choice for you in that his letter dated 26 June 2007, offers a purchase price of $850,000 with $700,000 to be paid on exchange and $150,000 later which I am sure could be made to be on the completion of the project. Alternatively, we could seek to have our original agreement enforced. Given that the real difference between what we were prepared to offer and what he is prepared to take in his letter dated 4 July 2007, you should consider which option you want to take. The real value to us and to you of making them stay in the deal is that the equity in their property is much less than the purchase price you would have to pay and therefore it aids in the financing of the project. 78 On 6 July 2007 the defendant responded to Mr Alcock's email in terms that included the following: I find it interesting in your email below that you now say I have choice of what I can do – where in fact you have been negotiating alone with the Nolans without consultation with me and now you are again in another predicament and so it is back with me. So what would be acceptable to me is to pay $700,000 now and $100,000 on completion – anything above this $800,000 I believe should be borne out of your profits at the end of the project as your negotiations are what has placed us in this position. It is also your responsibility to reclaim from them their share of the development application approval. If this is not acceptable to you, then take them to court – costs of which will be borne solely by you. Or we can opt out of the project altogether – that is how far I have been pushed. Can you please let me know what you intend to do by July 13, 2007. Also when I met with Jay on May 17, he gave me an undertaking that he would give me an update re the development in writing every two weeks – since then I have received 2 emails from him. An update was due today that is why I rang and it is only because I rang that you have advised what is going on. Jay also said he would send verification of the payments re the DA approval – I have not received these. A month ago he said he would send me details of the cost to get the Construction Certificate. I have still not received this – 2-3 weeks ago he advised he was waiting on the surveyors quote; I sent him an email Thursday week ago – asking for these details – and have not heard from him. 79 On 9 July 2007 Mr Alcock wrote again to the defendant in terms that included the following: You said I was to deal with the Nolans. I did. The timing is not right to do the development yet. We will need some presales before we move to c/c and incur those costs. In my judgment we should be waiting and leaving the pressure on the Nolans. The D.A. is Good for five years or even longer with a mere "commencement"being ( sic ) undertaken. This is not something to rush into we don't want to risk being left with 13 apartments in a market which is not strong enough. It must be remembered that by getting the D.A. through we have increased the value of the properties by $750,000. That valuation was in march ( sic ) 2006 and valuations have started to recover since then. While we wait the end sales value of the 13 units is now increasing by 10%. Or even more as the market catches up. That equates to nearly $100,000 a year. It does no good to get frustrated and kick me around when the right course is to wait out the Nolans and wait for the right time to start. the ( sic ) reason I said it was your choice was because It ( sic ) was necessary to borrow against all of the properties and you would become the owner of all four blocks. Maggie when you first asked me to take on the project it was because your other attempts had been unsuccessful. You accepted my expertise .Now ( sic ) you obviously don't want to take my advice. We will make a lot of money but please don't regard me as the bad guy. If you choose to purchase their block now for 700 + 100 at the end then I will pay them the 50 at the end. Unless we wait them out I will not be able to get a share of costs from them. Really the share of costs they were up for was insignificant in the overall scheme of things. I say again you may see my methods as not working fast enough but there is really no need to rush. There will be no need to go to court if we proceed on that basis. 80 On 9 July 2007 the defendant responded to Mr Alcock's email in terms that included the following: I am sorry, but I am not prepared to wait five years for this development to go through – or another 3 – ½ years as we have already wasted 18 months. Because in another 3 – ½ years I am quite sure the Nolans will still be saying the same thing I have three mortgages to pay and this is very expensive for me; and let us be very clear Barry – you came to me about doing the development – Jay approached me and I said I would speak with you – that is how it started. Either we get this sorted out now or we walk away. So perhaps you could go back to the Nolans – say I will pay $700,000 to exchange contracts plus $100,000 when a construction certificate has been issued (if my refinance will allow this – can you check this and advise) and you will pay $50,000 on completion of the project; could you draw up a letter along these lines and send it to me before you send it to the Nolans – or advise how you think this will work. I am still waiting on the information Jay has promised me for two months – can you do something about this. You are the developer Barry – you will get half the profits – so you need to put some real effort into this and not keep delaying and delaying – that may be your agenda, but it is not mine and I am tired of your runaround ( sic ): when I spoke with Jenny when we met up – I said you told me in the last half of last year that you were waiting for them to make a decision – I have emails from Jay verifying this; She ( sic ) said this was not true – that they were waiting for you to come back to them with an offer – and it was only when I insisted in November that something happen that you decided to do something. I don't do business like this Barry – I let my clients know what is going on and I expect the same from you. everytime ( sic ) I speak to you or get an email you have a different story – the market is moving – have you even tried to get some presales? please ( sic ) advise. 81 A few hours later on the same day, 9 July 2007 the defendant wrote again to Mr Alcock in the following terms: On reading your email below again, it is apparent that you have no intention of proceeding in the near future. You say you have no intention of proceeding to the Construction Certificate until you have presale–something you have made no effort to do at this stage as I understand it. Can you advise why Jay organised for the broker to contact me re finance to get to the Construction Certificate – surely this was a waste of the broker's time and mine. You say that waiting will put pressure on the Nolans – have you thought that as house prices go up – they will want more – they have already gone up from what you were saying was their price of $800,000 to $825,000 to $850,000. I can assure you they have no intention of accepting a lower price. I think we should secure them at $850,000 at the Construction Certificate stage being $800,000 from me and $50,000 from you – if the finances will allow. If the finances will not allow this, they never will and there is no sense in prolonging the agony for everyone. You say that the time is not right – I agree the market has not been good but it is now moving and in two years when the development would be finished, it will be right – I don't want to wait two years and then start the development; your comment that the DA is for five years and can be extended is horrifying to me and something I will not agree to. This whole exercise has become a nightmare because frankly I don't know who to believe anymore. I have told you several times it is difficult for me to continue to pay the three mortgages, but this does not seem to matter to you. I now really have very little hope that the development will ever go ahead which I think is very sad and this is directly as a result of the mess that has been created between you and the Nolans – something I had no involvement in and have no control over. Unless this can be resolved in the very near future – I want out – completely. It is taking too much out of me and having too much of an effect on me – how much is peace of mind worth. I await your reply – please reply before July 13. 82 On 12 July 2007 Mr Alcock responded as follows: I appreciate the urgency you feel but it was not me that slowed the market down over the last 4 years. You will recall that I originally came to you and suggested a joint venture with you and it was thought that you would exercise your option to buy the 4 th block. You subsequently lodged a D.A prepared by your consultants which was not approved. You later asked me could I help you get a D.A and we agreed to do a joint venture with you and the Nolan's rather than have you exercise your option to purchase. You said you had no money to fund the D.A and asked me to pay the costs. My normal procedure was for the client to pay the costs. I was able to get a D.A and I paid the costs. The Nolan's decided to upset the apple cart. You seem prepared to believe them rather than me and I do not think that's fair. I am always truthful and continue to have our mutual best interests at heart. It was necessary to wait for the Nolan's to reduce their demands for $835,000 with no delays and my approach to them (in your interest and mine) was to wait. Now they have changed. As you know I wrote to you on 21/2/06 and explained where we were and where we might go. (Copy enclosed) Walking away is not an option – we can get Nolan's block and then the $750,000 increase in value will be crystallised. The steps we need to take from here are: Get the contract from Nolan's solicitor Arrange the finance on the 4 blocks so that we can pay the $700,000. Get structural drawings prepared which can be used to get a fixed price building quote. Approve the quote – presumably after reducing the price by what we can negotiate. Subsequently, when we are ready to start, get the c/c. At that time we would pay the bonds requested by the Council. Advertise by signage and agencies to get some presales. As to your comments on Jay: Jay says he has maintained contact with you regularly either in writing or on the phone. The surveyors quote has only just arrived because he was sick for 2 weeks. Jay gave you a copy of all the invoices when you were in our office. Jay says you don't believe us and you want to see our bank statements. That would prove nothing because the statements do not show whom the money was paid to. If you don't trust us (which I am not at all happy about) then you can phone the consultants and ask them to confirm the invoices and the payments thereof. I enclose a letter to the Nolan's for your approval. Please advise. 83 The enclosed letter to the Nolans was dated 11 July 2007 and was in the following terms: I have spoken with Maggie and we have agreed to offer you the $850,000 you suggested in your letter dated 26 June 207 ( sic ). The $700,000 would be paid at the time of purchase and the additional $150,000 will be paid on completion of the project. We simply can not fund it any other way as the equity in this deal, as far as the financer is concerned, would not be enough. Since your property has been valued at only $600,000 I think you will agree you are getting a good deal, and it is tax free. 84 Mr Alcock's evidence was that he did not hear back from the defendant in respect of that proposed letter to the Nolans and that it was never sent. The defendant gave affidavit evidence that on 12 July 2007 Barry Nolan telephoned her and said that he had received a letter with another split payment offer from Mr Alcock and that Mr Alcock knew that he would not accept a split payment on completion of the project. The defendant said that she did not know that the letter had been sent to the Nolans and asked Mr Nolan for a copy of the letter. The defendant claimed that Mr Nolan agreed to fax it to her and gave evidence that she received a copy of it from Mr Nolan. Mr Kerr suggested in submissions that the defendant was confused about receiving that letter. He suggested in submissions, although there is no evidence of this at all, that the defendant's memory is inaccurate and it was the letter of 12 June 2007 that she received from Mr Nolan. Defendant instructs solicitor – July 2007 85 The defendant did not respond to Mr Alcock's email of 12 July 2007. At this time she consulted her solicitor Mr Phillip Biber. Mr Biber wrote to Mr Alcock on 27 July 2007 and Mr Alcock responded by letter dated 1 August 2007. Those letters are set out hereunder with Mr Alcock's responses in italics. Notwithstanding development consent was obtained from the Warringah Council at the Council's meeting on 6 December 2005 and confirmed in writing to you on 13 December 2005, there has been, as far as my client is aware, very little progress in bringing the Development to a satisfactory conclusion. Without being exhaustive my client's real concerns regarding the Development are these: 1. notwithstanding the expertise as represented by you on behalf of your company the Development has suffered what can only be described as extraordinary delays both prior to and subsequent to the development consent; The delays occasioned were firstly those within Council which were contributed to by the shortage of staff, the problems they had with our application which was varied several times to make them happy. Also the government changed the law in March 2004 which saw the Council not acting on applications for over 55 developments for 12 months while they clarified the effect of the new laws on the planning controls. You can see from the correspondence that the need to acquire the 4 th block and the need to refinance plus the flat real estate market has also had impact. 2. Maggie has been at pains to bring to your attention on a number of occasions that in the event of construction finance being arranged, thus necessitating a refinancing of existing mortgages over the three properties, no assurance has been given to my client that her home at [address provided] would not be placed in jeopardy through the giving of a personal guarantee and perhaps offering that property as additional security for the finance; I see no problem in keeping her home out of any guarantee she may give. Should she choose to borrow separately over her home to inject some funds if needed in to the project then any loan secured by her home would insulate her against any call on her guarantee. 3. the "joint venture" has never been properly documented notwithstanding the significant nature of the Development and its commercial ramifications. One would have thought that utilising your expertise, as represented, that proper documentation would have been prepared thus affording my client the opportunity to obtain both legal and financial advice prior to embarking on the Development; Maggie consulted her accountant and her lawyer before entering into our agreement. 4. you have suggested on a number of occasions words to the effect "the timing is not right" for the Development to proceed. This opinion has never been supported by any feasibility or marketing material prepared by you or indeed by an independent third party expert; The timing has to take into account the state of the market as to valuation of the land at present and the prospective sales figures. Because of the need to pay $700,000 up front for the Nolan's block, the anticipated equity in the land is reduced. In the flat market the blocks current values will make borrowing difficult. It will not be long before we can get an increased value based on the recent moves in the market and the increased activity. The feasibility depends on the current values and the expected sale prices. The valuers hold the key and they will need to feel comfortable. 5. Maggie has suffered significant loss and damage due to the delays particularly as she has been required to service the mortgages on the three properties without any contribution or acknowledgement of this by you; Although I do not know the cost versus income situation on her properties I supposed it is no more now than it was before she asked us to join her in a joint venture. I estimate a difference of $20,000 to $30,000 a year which is of course tax deductible to reduce her real costs. The increased values of her properties far outweigh the holding costs. On the basis of the valuation we had done in March 2006, her properties now (on which 10 units can be built) are worth $2,600,000 where as the new value of her 3 houses is in the order of $1,850,000. She stands to make a substantial profit in the project. I enclose extracts from the valuation. 6. you have failed to secure the involvement of Mr and Mrs Nolan, the owners of an adjoining property at 77 Forest Way, Frenchs Forest and indeed you have threatened legal action against them; Maggie said long before I made that comment that she would sue them if necessary. I never felt that we would have to do that. I said wait them out, and we have and they have now come to the party. The ball is in Maggie's court to see if she will buy their property. I have offered to pay $50,000 towards it. 7. following meetings that occurred on 17 April and 17 May 2007 your company had undertaken to provide fortnightly updates concerning the Development. This undertaking has not been met; We have continually advised Maggie of any changes as they occur. 8. also as a consequence of the meeting of 17 May 2007 you were to provide copies of bank statements verifying payments of invoices alleged to have been paid by your company in relation to Development costs. These have not been provided; We provided Maggie with the details of cheque numbers of our payment. We pointed out that seeing the bank statements would not help as they do not show details of the payee. We invited her to call our consultants to verify what we paid. 9. further, and as a consequence of the meeting of 17 May 2007 you were to arrange for refinancing of the mortgages presently registered over Maggie's three properties by mid June 2007. To my client's knowledge no such refinancing has been arranged to date. I understand that a broker did contact my client for this purpose and he sought details of the cost associated with the construction certificate. This request was conveyed to Mr Jay Alcock. Your company has also failed to provide this information without any explanation. The refinance is dependent on acquisition of the Nolan's property. I emailed Maggie on the 12 July asking if she approved the letter that I proposed to send to Barry Nolan. I have had no reply. 86 Mr Biber's letter went on to claim that the timeframe agreed to at the meeting on 17 May 2007 had not been adhered to and that the defendant had "understandably" lost all confidence that the development could proceed to a satisfactory conclusion. Mr Biber requested comments from Mr Alcock as to why the joint venture arrangement should not now be brought to a close. Mr Alcock's response was that he was ready to proceed along the lines of his email of 12 July 2007. Termination 87 On 8 August 2007 Mr Biber wrote to Mr Alcock and the plaintiff in the following terms: I have received your letter of 1 August 2007 which was referred to Maggie for consideration and further instructions. Regrettably nothing contained in your letter serves to satisfy my client's concerns as expressed to you in my letter of 27 July 2007. Further your comments do not convey to my client any realistic expectation that your company will be able to perform and progress the venture in any constructive way. As a consequence I am instructed to advise that Maggie hereby terminates her involvement in the venture with your company and she no longer regards herself as obligated in any way to involve Luxury Homes in any development of the properties in question. 88 There was further debate between Mr Alcock and Mr Biber and in November and December 2007 the defendant had some discussions with the Nolans regarding the possible sale of the four properties with the DA. That was discussed with Mr Alcock who, the defendant claimed, said that it would at least progress the matter and that he was content for the sale to proceed on that basis. In any event the sale did not proceed on that basis because the Nolans decided that they wished to remain in their property. The defendant then elected to put her three properties on the market and has since sold 17 and 19 Sturt Street on 22 May 2008 and 12 May 2008 respectively. The defendant also gave oral evidence that as at 12 August 2009 she had sold 75 Forest Way for $710,000. The total selling prices for the three properties was $2.232 million. Proceedings commenced 89 The plaintiff commenced these proceedings by Summons and Technology and Construction List Statement filed on 29 February 2008. The defendant filed an Amended Technology & Construction List Response on 27 March 2009 and the plaintiff filed its Amended Reply on 22 May 2009. In the Technology and Construction List Statement the plaintiff contended that on 22 March 2004 the plaintiff and the defendant agreed, inter alia, that the plaintiff would acquire the Nolan's Land (par 2.1). The defendant admitted paragraph 2.1 of the List Statement in her Amended List Response (par 2(d)). The plaintiff also contended (and admitted by the defendant) that the cash required to acquire the Nolan's Land, to discharge the mortgages on the defendant's properties and to meet all "cash costs" of the Project, would be raised by way of loan from a financier (par 2.3). 90 In her Amended List Response the defendant contended that, "from December 2005 to 8 August 2007 the Plaintiff took the view that it should wait for the market for the proposed townhouses to improve before taking any substantive steps to advance the project, including potentially waiting for up to 5 years from the date the development consent was granted" (par 20). In answer to this contention, the plaintiff contended in its Amended Reply that inherent in the plaintiff's obligations in respect of the Project was the responsibility of both the plaintiff and the defendant "to decide when and, where applicable, with whom, and on what terms to proceed with obtaining development consent, construction, finance and marketing" (par 13.2). It contended that as at December 2005, it was necessary to finalise the purchase of the Nolans' property before substantive progress could be made toward "achieving the project objective" (par 13.3); and as at the same date it would not be in the best interests of the plaintiff and the defendant to undertake the construction phase of the project (involving the raising of loan capital to cover construction costs) unless market conditions for the sale of the townhouses to be built at prices which would yield a profit for the venture prevailed (par 13.4). 91 The defendant filed a First Cross-Claim Cross-Summons and a Technology and Construction List Cross-Claim Statement on 28 April 2008. The plaintiff filed a Response to Cross Claim on 12 May 2008. The defendant claims that by reason of her lawful termination she suffered a loss of the bargain, being 37.5% of the profit of the completed Project. The defendant makes an alternative claim for wasted costs plus the difference between the rental receipts from those properties and the costs of servicing the mortgages on the properties during the period 1 January 2006 to the date of sale of those properties. 92 The proceedings were heard on 10, 11, 12 and 13 August 2009 when Mr VRW Gray, of counsel, appeared for the plaintiff and Mr VF Kerr, of counsel, appeared for the defendant. Issues for Determination 93 The issues for determination on the plaintiff's claim are: what constitutes the agreement between the parties (the Agreement); was the Agreement void for uncertainty (Uncertainty); did the Agreement include an implied term that the plaintiff would report to the defendant all material information concerning the progress of the Project (Implied Term); what were the plaintiff's obligations in respect of the Nolans' Property (Nolans' Property); did the plaintiff breach the terms of the Agreement and if so, was the defendant entitled to terminate the Agreement as at 8 August 2007 (Breach/Termination). The issues for determination on the Cross-Claim are whether the plaintiff suffered loss by reason of the termination of the Agreement and the measure of any damages. The Agreement 94 The plaintiff contends that the Agreement is constituted by one document, the Heads of Agreement signed by both parties. The defendant contends that the plaintiff's letters of 27 January 2004 and 12 February 2004 and the defendant's letter of 22 March 2004 also form part of the Agreement. 95 The defendant contends that the letter of 22 March 2004 was her offer to enter into the Heads of Agreement. The defendant requested that the plaintiff sign the letter and return it to her with the signed Heads of Agreement. It is common ground that the plaintiff signed the Heads of Agreement but did not sign the copy of the letter of 22 March 2004. It is also common ground that the Heads of Agreement signed by the plaintiff was not returned to the defendant until December 2005. 96 The defendant submitted that after receiving the defendant's letter of 22 March 2004, the plaintiff commenced work on obtaining the development approval and that this conduct evidences acceptance of the defendant's offer. In support of this submission the defendant relied on Brogden v Metropolitan Railway Co (1877) 2 App Cas 666. In that case the directors of the Railway Company (the company) sued the owners of a colliery (the owners), who supplied the company with coal and coke for use in its locomotives, for damages for breach of contract. The company forwarded a draft written agreement to the owners who made only one amendment by the insertion of a name of an arbitrator to deal with any disputes between the parties under the contract. The draft agreement was not signed by the owners but was sent back to the company with that one amendment. It appears that the amended document was simply placed in the drawer at the company's premises and never executed by either party. However, the parties acted in accordance with the terms of the draft agreement as to quantity and price from the specified date in the agreement. 97 In the company's action against the owners for breach of contract the owners claimed that there was no contract. The company succeeded at first instance and on appeal. The appeal to the House of Lords was dismissed. The Lord Chancellor, Lord Cairns, said at 680: My Lords, those are the grounds which lead me to think that, there having been clearly a consensus between these parties, arrived at and expressed by the document signed by Mr. Brogden, subject only to approbation, on the part of the company, of the additional term which he had introduced with regard to an arbitrator, that approbation was clearly given when the company commenced a course of dealing which is referable in my mind only to the contract, and when that course of dealing was accepted and acted upon by Messrs. Brogden & Co . in the supply of coals. 98 Lord Blackburn said at 693: If the parties have by their conduct said, that they act upon the draft which has been approved of by Mr. Brogden , and which if not quite approved of by the railway company, has been exceedingly near it, if they indicate by their conduct that they accept it, the contract is binding. 99 In the present case the plaintiff made no reference to the letter of 22 March 2004 either by way of agreement or complaint. It did not sign a copy of the letter nor did it (or the defendant) mention its terms when it provided a copy of the signed Heads of Agreement to the defendant in December 2005. The defendant claims that the plaintiff's silence, coupled with its conduct in preparing for and obtaining development approval, should be characterised as conduct accepting the terms of the letter of 22 March 2004 as a binding contract between the parties. 100 The present case is distinguishable from Brogden v Metropolitan Railway Co in which the parties conduct was totally consistent with the terms of the draft agreement. In the present case the parties' conduct was inconsistent with the terms of the letter. The relevant provision in the letter was as follows: What I would ask of you is that I receive an update report on the last Friday of each month, as to what progress has happened during the previous month. That way I won't bother you with phone calls as I will want to know what is happening. 101 The letter made no provision as to the form in which any "update report" was to be provided. Certainly there were many communications between the plaintiff and the defendant during the period March 2004 and August 2007 but they could not fairly be characterised as monthly update reports. This part of the letter includes a fall back position that, if the update reports were not provided, the defendant would then have to "bother" the plaintiff with phone calls because she would, as the letter stated, want to know what was happening. There was no suggestion in the letter that the defendant's signature on the Heads of Agreement was conditional upon the plaintiff's signature on the letter. Although the defendant requested that the plaintiff let her know if there were any "concerns" in relation to her request, she did not make the plaintiff's agreement to her request conditional to her agreement to the terms of the Heads of Agreement. 102 I am not satisfied that the defendant's letter of 22 March 2004 formed part of the Agreement between the parties. 103 The plaintiff's letter of 27 January 2004 was a proposal for "the most suitable way" of proceeding with the development of the defendant's land and of purchasing the Nolans' property. The plaintiff invited the defendant to sign a copy of that letter if she agreed with the proposal within it. She did not do so. There was no reference to this letter in the Heads of Agreement. The plaintiff's letter of 12 February 2004 was an explanation to the defendant of how the risks of the joint venture could be minimised. That letter was referred to in the plaintiff's letter of 15 December 2005 to the defendant as "the mechanics of the deal". When the defendant's then solicitor wrote to the plaintiff on 20 February 2004, he requested a "formal agreement". The Heads of Agreement document was provided in response to that request and was signed. 104 I am satisfied that the plaintiff's submission in respect of the Heads of Agreement should be accepted. The contract between the plaintiff and the defendant is constituted by the Heads of Agreement signed by both parties (the Agreement). Uncertainty 105 The defendant claims that the Agreement fails the test for contractual certainty because the language used is insufficiently precise to determine the parties' contractual intentions and/or because essential terms were left to be settled by future agreement. In G Scammell and Nephew Limited v HC and JG Ouston [1941] AC 251 (Scammell v Ouston) Lord Wright concluded, at 268, that there was no contract in that case because the language used "was so obscure and so incapable of any definite or precise meaning that the court is unable to attribute to the parties any particular contractual intention". His Lordship also said at 268: The object of the court is to do justice between the parties, and the court will do its best, if satisfied that there was an ascertainable and determinate intention to contract, to give effect to that intention, looking at substance and not mere form. It will not be deterred by mere difficulties of interpretation. Difficulty is not synonymous with ambiguity so long as any definite meaning can be extracted. But the test of intention is to be found in the words used. If these words, considered however broadly and untechnically and with due regard to all the just implications, fail to evince any definite meaning on which the court can safely act, the court has no choice but to say there is no contract. 106 The construction of the Agreement requires consideration, not only of the text, but also the surrounding circumstances known to both parties and the purpose and object of the transaction: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 462 [22]. In Thorby v Goldberg (1964) 112 CLR 597 the High Court considered whether a particular document constituted a binding contract. The arrangement between the plaintiffs and the defendants related to the rights to occupy certain parts of premises that were to be constructed. Kitto J expressed the view that the distribution of the space in the new building as between the plaintiffs and the defendants was made with "precision and finality" and that there was nothing left for future agreement between those groups (603). His Honour said (at 603): It is only where future agreement is required in order that the agreed provisions and those to be agreed shall operate together as one contract that the agreed provisions cannot be treated as themselves constituting a contract. 107 In Scammell v Ouston Viscount Maugham referred to the court's willingness in interpreting commercial documents connected with dealings in a trade "with which the parties are perfectly familiar" to imply terms as to the method of carrying out the contract "if satisfied that the parties thought that they made a binding contract": at 255. It is true that this was a commercial arrangement and generally speaking it is inappropriate to apply a pedantic approach to its interpretation. However it is also true that only one of the parties was "perfectly familiar" with the particular trade. The defendant's previous foray into the field of property development demonstrated a rather costly lack of familiarity with the trade. Notwithstanding that lack of familiarity, it is important to give this commercial document a businesslike interpretation: McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579 per Gleeson CJ at [22]. 108 A finding that a contract is void for uncertainty is a draconian solution and it is important to remember the traditional doctrine that courts should be astute to adopt a construction which will preserve the validity of the contract: Meehan v Jones (1982) 149 CLR 571 per Mason J, as his Honour then was, at 589. 109 In the present case the defendant submitted that there are numerous matters that a joint venture agreement for a substantial property development needs to address with care and precision. In this regard the defendant relied upon Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited (2007) 233 CLR 115 in which the subject joint venture agreement was a most detailed document. That joint venture agreement was in relation to a very large area of land in respect of a project to be undertaken by the Local Aboriginal Land Council that included necessary rezoning of land and sensitive environmental issues. Although the development in the present case may be a smaller project, it was still necessary for the agreement between the parties to address the essential elements of their bargain. In the present case the Agreement was to "develop and sell townhouses" in a residential area without the need for rezoning and, it would appear, without the need to address any sensitive environmental issues. The defendant submitted that the Agreement is "embarrassingly brief". Brevity, of itself, does not mean that an agreement fails for uncertainty. It will depend upon the aim and objective of the parties and whether they have agreed on the essential terms of their bargain. 110 The defendant was not a party to the Heads of Agreement between the plaintiff and the Nolans (the Nolans' Agreement), nor was that agreement referred to in the Agreement. The defendant was not consulted in relation to the terms of the Nolans' Agreement nor was she made aware of its terms until February 2007. The plaintiff's letter of 12 February 2004 (the "mechanics of the deal") made no mention of the Nolans' property. The original proposal in the plaintiff's letter of 27 January 2004, although not free from ambiguity of what was to happen in relation to the Nolans' property, was understood by both the plaintiff and the defendant to mean the plaintiff would purchase that property. Indeed on the "pleadings", the parties are ad idem as to that matter. 111 There was no provision in the Agreement as to the price that was to be paid for the Nolans' property, nor was there any provision in relation to: the date upon which such property would be included in the development; the method of how to "include" the property in the joint venture; or the nature and/or extent of the available equity in each property for the purpose of its use as security pursuant to clause 3 of the Agreement. 112 The Agreement makes no provision for the period within which the development of the site was to be completed nor does it identify the role each of the co-venturers was to have in determining the acceptability of the fundamental aspects of the Project which would determine its financial viability. Although the Agreement provided that the development would "include" the Nolans' property, it was silent as to how, if at all, the share of the profits would be affected by any liability to the Nolans for the inclusion of their property. Although the Agreement referred to the plaintiff and the defendant agreeing to "enter a joint venture", the venture necessarily involved the Nolans because the plaintiff's agreement with them factored in a percentage of the profits from the development as part of the so-called "sale price" to be paid to the Nolans at the conclusion of the development. The Agreement provides a regime for distribution of the profit at the conclusion of the development with no mention of any amount being paid to the Nolans. It is not possible to ascertain from the terms of the Agreement the parties intention as to whether any amount to be paid to the Nolans was to be a "cost" to the joint-venture and thus an amount to be taken into account prior to the ascertainment of the "net proceeds"; or whether it was to be categorised as a "remaining" cost; or whether it was to be the plaintiff's liability to pay the Nolans out of the 62.5% of the development profit to be paid to the plaintiff. 113 The defendant submitted that whilst clause 4 of the Agreement explicitly allocates to the plaintiff the responsibility for the design, construction, finance and marketing, it does not address how any disputes between the parties concerning those matters were to be resolved. The defendant relied upon Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 in support of its submission that where there is no mechanism to resolve such disputes the Court would not enforce such an agreement. 114 Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd was a case in which the respondent (Wilson) leased a carpark from the appellant (Booker) for a three year period, with an option for a further three years. The option clause referred to rental being agreed or, failing agreement, fixed by an arbitrator appointed in accordance with other provisions of the lease. Wilson exercised the option but Booker refused to recognise the exercise as valid and required Wilson to vacate the premises. Wilson remained in possession and brought proceedings seeking specific performance. Booker sued for possession. Both cases were heard together, Wilson was successful at first instance and Booker's action was dismissed. On appeal to the Full Court of the Supreme Court of Queensland the validity of Wilson's exercise of the option was confirmed but the Court was of the view that the relief granted was too wide. Specific performance was refused because no rental had then been fixed. Booker's appeal was dismissed. On appeal to the High Court, Wilson was successful. The Court held that Wilson was entitled to a decree of specific performance and the order of the judge at first instance was adjusted to enable fixation of the rental. 115 In the joint judgment (Gibbs CJ, Murphy & Wilson JJ) their Honours said at 604-605: It is established by authority, both ancient and modern, that the courts will not lend their aid to the enforcement of an incomplete agreement, being no more than an agreement of the parties to agree at some time in the future. Consequently, if the lease provided for a renewal "at a rental to be agreed" there would clearly be no enforceable agreement. On the other hand, it is also well established that the parties to a contract may leave terms – even essential terms – to be determined by a third person: see the cases cited in Godecke v Kirwan [(1973) 129 CLR 629 at p.645]. In the present case, the lease itself provides the entire mechanism for determining the rental for the renewed term. There is no further agreement required of the parties. 116 The defendant submitted that in the present case an essential aspect of the bargain between the plaintiff and the defendant is absent from the Agreement. The plaintiff's Amended Reply made a general denial that the Agreement is void for uncertainty (par 2). It contended that both the plaintiff and the defendant had to decide when and, where applicable, with whom, and on what terms to proceed with obtaining development consent, construction, finance and marketing (par 13.2). The defendant submitted that where there is such a requirement, particularly in a venture such as the present for the development of property, it is imperative to have a mechanism agreed between the parties as to how any disagreement on such matters can be resolved. It was submitted that the absence of such a mechanism means that the agreement is "incomplete" and consistently with Booker Industries v Wilson Parking the Court would not lend its aid to the enforcement of such an agreement. 117 Clause 3 of the Agreement relating to the use of the four properties as security for development finance is vague and obscure. There is no certainty as to how the four blocks were to be used as security, nor was there any provision dealing with the extent to which each of the blocks would be mortgaged or encumbered for the purposes of obtaining development finance for the joint venture. The plaintiff's letter of 12 February 2004 advised the defendant that the plaintiff would not "deal with the property" (whatever was meant by that expression) without the defendant's permission. It also advised the defendant that after development approval was obtained the "property" and "the project" would be valued for the purpose of "refinancing and borrowing for construction". Even when the 12 February 2004 letter is taken into account, there is no prospect of ascertaining the parties' intentions in relation to the way in which the defendant's properties were to be used as security in accordance with clause 3 of the Agreement. It was left to further agreement by the plaintiff obtaining the defendant's "permission" to use her properties as security, with no mechanism for resolving any dispute in relation to the lack of permission, either generally or in respect of any aspect of the requirements of any prospective mortgagor. There was no capacity to ascertain the parties' intention as to what should occur if, for instance, the Nolans did not wish their property to be mortgaged for more than a particular amount, having regard to the fact that their property was apparently only 25% of the development site. 118 The defendant submitted that Clause 4 of the Agreement does not identify the most basic information to define the development. The defendant's submission in this regard should not be understood as requiring precise detail as to drawings, fittings and the like, but rather a requirement that the intentions of the parties as to how they were to develop not only the defendant's land but the land belonging to someone who was not a party to the joint-venture, the Nolans. As I have said above, there was no recognition of how the Nolans' property was to be brought into this development or how the defendant was to deal with the Nolans or their property in the joint venture. 119 There was certainly no indication of the number, size, configuration and design of the townhouses, the materials to be used in their construction or the program for completion of the development. Mr Gray submitted that this is not surprising because the development consent had not been granted at the time of the Agreement. There is some force in that submission. Mr Gray also submitted by way of example, that a partnership agreement between two people to practise as solicitors does not require them to include within it, their hourly charge out rates; the identity of their clients; the number of employees; or the detail of the premises from which they intend to practise. It was submitted that the absence of these matters from a partnership agreement does not make it void for uncertainty and that the same is true of the Agreement in this case. This analogy is not really helpful in the analysis of the circumstances of this case. Each case must be assessed on its own facts. In any event it may well be that in the example given by Mr Gray, such a loose agreement between two parties who want to practise together as solicitors might, without more, be unenforceable. 120 Consistently with what was said by the High Court in Booker, parties can agree in general terms to develop land and sell the constructed buildings on that land in a joint venture, leaving the mechanics of that development to be determined by some mechanism, but this was not such an agreement. This Agreement purports to be the "formal" agreement between the parties and does not contain any such mechanism. The so-called "mechanics of the deal", the letter of 12 February 2004, does not provide the mechanism for resolving any disputes between the parties nor does it remove the obscurities so that the contractual intentions of the parties in this regard can be ascertained. 121 Clause 5 of the Agreement is also obscure. The expression "net proceeds of sale" in the regime for distribution suggests that the distribution will be after all costs are paid. However clause 5(c) refers to the payment of "any remaining development or selling costs". It is not possible to ascertain with any certainty what is meant by the expression "remaining" costs that were to be paid in priority to the defendant being paid her percentage of the "development profit". These so called "remaining" costs were of significance to both parties. It was important that the plaintiff be reimbursed for its costs but it was also important that the defendant knew what costs were to be deducted prior to the distribution to her of the 37.5% of the development profit. There is nothing to explain the apparent contradiction in the expressions "net proceeds" and "remaining" costs. It is simply not possible to ascertain the intention of the parties in this regard. 122 It was also submitted that this clause does not identify who is to pay for the costs prior to finance being obtained or in the event finance or sales proceeds are insufficient to pay them. These were essential matters for agreement, not merely mechanical matters to be put in place at a later time. Indeed even when the letter of 12 February 2004 is taken into account, it is simply not possible to know what the parties intended should happen in relation to those costs. Clause 6 of the Agreement deals with the liability for costs only if there is agreement to discontinue the development application and the Project. Otherwise the Agreement is silent on this topic. Clause 6 also has the problem of the absence of any mechanism to resolve a dispute about whether to discontinue the application and/or the Project. 123 Clause 5(b) is also obscure. This was the second priority in the distribution regime said to be the "original equity" in the defendant's properties "less the present mortgages". It requires an assessment of the "present mortgages" without identifying the date on which the value of each of the mortgages was to be assessed as "present". The Agreement is undated and it is not clear whether the date for making that assessment was the date of the signing of the Agreement by either party or whether the parties intended that the values of the mortgages were to be assessed at the time of refinancing, after the Nolans' property was included in the proposed development. 124 I am of the view that essential aspects of the bargain are missing from the Agreement including: the obligations of both parties in respect of the Nolans' property; the Nolans' obligations in respect of the use of their property in the joint venture; the obligations in relation to the costs of the development, other than if the parties abandoned the Project prior to development approval; the intentions of the parties in respect of the costs of the development up to the stage of construction finance, except in the circumstance that the parties decided to abandon the project; the intentions if one party decided to abandon the Project prior to development consent but the other did not wish to do so; the intentions of the parties if one party wished to abandon the Project after development consent was obtained; the costs that were to be taken into account to ascertain the "net proceeds" of the development; the costs that were to be categorised as "remaining costs; and the mechanism for resolving disputes between the parties. It is not possible to identify any definite or precise meaning whereby any particular contractual intention can be attributed to the parties in respect of these essential matters. 125 It is true that the parties continued on in their unsatisfactory relationship for three and a half years. That fact, of itself, does not mean that the Agreement is certain and enforceable. Rather the frustration of the defendant in trying to ascertain what was happening with the development and attempting to bring some definition to the relationship is indicative of the uncertainty of the Agreement. 126 The plaintiff's submissions were that the contract was not uncertain and no submissions were made in relation to the possible severance of any clauses of the contract should any parts of it be found to be void for uncertainty. The parties approached this aspect of the matter on the basis of the whole, or no part, of the contract being void for uncertainty. This Agreement was uncertain in respect of many essential matters left either for future agreement or simply left unsaid that I am satisfied it is void for uncertainty. The plaintiff's claim to enforce it must fail. However I will consider the other claims as if the Agreement were enforceable. Implied Term 127 The defendant claims that in all the circumstances a term requiring the plaintiff to report to the defendant all material information concerning the progress of the Project should be implied into the Agreement. The defendant also submitted that the relevant facts against which this claim should be assessed include that: the plaintiff was to have the exclusive role of carrying out all work associated with the Project; the defendant had no experience in property development and to the plaintiff's knowledge, was reliant on the plaintiff's expertise and skill; and the brevity of the contract document, in particular the failure of the Agreement to address communication requirements between the co-venturers. It was submitted that such a term is reasonable and equitable; is essential to give business efficacy to the Agreement; is obvious; is capable of clear expression; and does not contradict any express term of the Agreement: BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283. 128 The defendant submitted that this was a substantial investment in a Project in which she had no experience and over which her co-venturer would exercise significant day-to-day control. The defendant needed to have timely information concerning the Project to enable her to protect her interest in the development and otherwise. Mr Alcock conceded in cross-examination that the defendant was entitled to be kept informed of what was happening with the progress of the development (tr 126). The plaintiff claimed expertise in property development and although the defendant had no such expertise, she was a co-venturer and was entitled to be kept informed of material information that affected her financial position. "Material" information in this context was information of importance or significance that was relevant to the progress of the development. That included the progress with the steps to "include" the Nolans' property in the Project and the steps in the process for obtaining finance for the development. 129 The defendant was servicing three mortgages and the longer the Project took the greater the burden on the defendant. The correspondence between the plaintiff and the defendant evidences the defendant's concern to have the development move forward in a fashion that would enable her to have some certainty in respect of both her financial position and the outcome of the development. In all those circumstances I am of the view that: such a term was just and equitable; the efficacy of the business arrangement between the parties required the co-venturer, the defendant, to be kept informed of material matters relating to the progress of the Project; such a term goes without saying and is obvious; and it is not inconsistent with any of the express terms of the contract. 130 I am satisfied that if the Agreement were otherwise enforceable, it included the implied term that the plaintiff would keep the defendant informed of material information concerning the progress of the Project. The Nolans' Property 131 It is common ground that it was the plaintiff's obligation to acquire the Nolans' property (par 9(a) of the List Response; par 3 of the Amended Reply). It is also common ground that the plaintiff would perform the obligation of acquiring the Nolans' property "within a reasonable time" (par 9 of the List Response; par 3 of the Amended Reply). The evidence establishes that unless the four blocks, including the Nolans' property, was held in one name or alternatively, unless the registered proprietors of the four blocks were active participants in the joint venture, finance would probably not have been available because the financiers and builder's insurer would insist on contracting only with the owner(s) of the land. 132 The plaintiff submitted that a "reasonable time" for the acquisition of the Nolans' property should be determined by reference to the timeframe within which the Project could be completed and the stage at which availability of the Nolans' property became essential for the orderly achievement of the joint venture objective. The plaintiff submitted that at the earliest, this was when construction finance was arranged and at the latest, it would occur fourteen days after completion of the Project, if the Nolans' property at that time had still not been purchased. The plaintiff knew that the development consent was for a project that included the Nolans' property and Mr Alcock advised the defendant that the project could not proceed without the Nolans' property. However the plaintiff pressed on with the submission that there was no need to acquire title in the Nolans' property until the completion of the Project. That defies the reality of the situation in which the Nolans changed their position in December 2005 and advised that they would not allow their property to be used as security to obtain finance for the development. 133 The plaintiff submitted that there was a fundamental change in circumstances once the Nolans expressed a desire that their property be purchased outright before the Project was completed. The plaintiff does not contend that the Nolans were entitled to insist that their property be purchased before completion of the Project, or correlatively, that the plaintiff was legally obliged to purchase the Nolans' property before completion of the Project. Rather it was submitted that it so happened that the real estate market in the area between December 2005 and mid 2007 was not buoyant and accordingly it was not opportune for the Project to be advanced. It was submitted that this circumstance enabled the plaintiff to undertake negotiations to see whether it would be possible for the Nolans' property to be purchased on terms which the joint venture could finance. It was also submitted that the fact that no agreement was reached with the Nolans prior to August 2007 was not the fault of the plaintiff. 134 The defendant submitted that irrespective of the Nolans' legal obligations under their Heads of Agreement with the plaintiff, in December 2005 they indicated that they would only participate by selling their property. It was submitted that for the next twenty months the plaintiff's efforts were directed to finding a means by which the Nolans' property could be used in the Project without it being acquired by the plaintiff. The defendant contended that by the end of June 2007 the defendant's efforts had come to nought, so that it was driven to threatening the Nolans with legal action to enforce the Heads of Agreement. It was also submitted that three and a half years had passed since the Agreement with the plaintiff was struck and some nineteen months had passed since development approval had been granted. It was submitted that by 8 August 2007 a more than reasonable time had passed for the plaintiff to have acquired the Nolans' property and the plaintiff's failure to do so by that time entitled the defendant to terminate the Agreement. 135 The defendant submitted that at all times after December 2005 the plaintiff lacked the means to acquire the Nolans' property. The defendant had no obligation to purchase the Nolans' property, however all the proposals that were put forward by the plaintiff after December 2005 involved the defendant doing so. By July 2007 the plaintiff proposed that an offer be made to the Nolans for the defendant to purchase the Nolans' property for $850,000, with $150,000 to be paid on Project completion. The Nolans rejected that proposal because it lacked certainty and finality. 136 The Nolans' Agreement with the plaintiff provided that the plaintiff would apply for development consent for townhouses to be constructed on their property and those of the defendant (cl 1). It also provided that if development consent was granted the plaintiff and the Nolans "will enter into a contract for sale in respect of" the Nolans' property. It was not a contract for the sale of that property, but rather a contract for sale "in respect of" the property. Settlement of such sale was not until 14 days after the date on which construction of the townhouses on the property, and the defendant's land, was completed (cl 4). The Agreement also provided for a sale price to be fixed by reference to the profit on the development and sale of the townhouses. 137 There was reference in the communications between the plaintiff and the defendant to the enforcement of the Nolans' agreement. Whether it was enforceable or not, it was not an agreement by which the plaintiff acquired the Nolans' property. It contemplated the construction of townhouses on the Nolans' property and the subsequent sale to people nominated by the plaintiff: (cl 1, 4 and 7). It was an agreement pursuant to which the Nolans remained involved in the development until the construction of the townhouses was completed and were obliged "on completion of the project" to execute transfers to those persons nominated by the plaintiff. The Nolans' Agreement is in parts vague and obscure. There is no identification of any rights or obligations in respect of the particular use to which the Nolans' property would be put in the development, including how title in one or more townhouses would pass to the Nolans so they could then transfer them to prospective purchasers. Although clause 3 of the Nolans' Agreement referred to entry into "a contract for sale in respect of" their property, this was not an agreement for the sale of the Nolans' property to the plaintiff but for the construction and sale of townhouses to persons nominated by the plaintiff: see also Luxury Homes Pty Ltd v Danieli & Anor [2005] NSWSC 379 per White J at [22]. 138 The Agreement provides that the development was to "include" the Nolans' property, however the pleadings establish that it is common ground that the plaintiff would "acquire" the Nolans' property. The plaintiff did not enter into an agreement with the Nolan's to acquire their property. Rather, as stated above, it was an agreement to construct and sell townhouses that would be the subject of some arrangement and/or agreement by which the Nolans would, on payment of the sale price (calculated on the basis of $700,000 plus 12.5% of the profit on the development), became owners of one or more townhouses and transfer them to the persons identified by the plaintiff. 139 The plaintiff submitted that whether the market conditions were so poor as to make proceeding with the Project financially unwise depended upon a careful assessment of a number of matters including: the likely cost and timeframe for construction of the townhouses; other costs such as consultants and regulatory costs likely to be incurred in carrying out the Project; the likely sale prices of the completed townhouses; and the availability and cost of finance. Indeed these were the very matters referred to in the plaintiff's letter to the defendant of 15 December 2005. The defendant submitted that during the entire period from February 2006 to August 2007 the only independent, objective material obtained by the plaintiff was from Carritt Taylor Valuations in its report of 21 March 2006. That valuation was not provided to the defendant until after August 2007. Although the valuation does not assess the value of the Project, it gave a positive market commentary stating that: the residential real estate market was demonstrating a more positive mood; that prices had bottomed out with a noticeable increase in enquiries in recent months; with an ever increasing demand for modern low maintenance accommodation suitable for seniors living. The defendant submitted that this positive market view expressed by Carritt Taylor was not consistent with the view repeatedly expressed by Mr Alcock to the defendant. 140 The suggestion made by the plaintiff in its communications with the defendant that it may have to enforce the agreement with the Nolans could not fairly be understood to be a reference to enforcing the acquisition of the property prior to the completion of the development, but rather an attempt to have the Nolans make their property available to the plaintiff and the defendant for the purpose of using it as security for the development pursuant to clause 5 of the Nolans' Agreement. The success of such an action in the circumstances as presently known particularly with such vague and obscure language in the Nolans' Agreement, would in my view be far from probable. That view is based on the facts in the present case uninformed by any evidence in respect of the plaintiff's negotiations and discussions with the Nolans, of which the defendant was not made aware. 141 The defendant claimed that as at 8 August 2007 the plaintiff had evinced an intention not to perform its obligations under the Agreement to "include" the Nolans' property in the Project. The defendant submitted that the evidence establishes that at all times she was ready, willing and able to comply with her obligations under the Agreement by the provision of her properties for the Project. The defendant certainly made every effort to assist in the purchase of the Nolans' property. When some of her friends expressed an interest in becoming involved, the defendant's efforts in this regard were thwarted by the plaintiff's failure to provide the defendant with relevant information so that she could provide it to those prospective interested parties. The defendant also agreed to make an offer to purchase the Nolans' property herself, but the plaintiff was not willing to assist by being party to a payment, other than a part payment at the conclusion of the construction or at the time a construction certificate was obtained. It was very clear that the Nolans did not wish to accept a split payment, yet the offers were made on that basis. 142 Mr Alcock's evidence that he was concerned that the plaintiff and the defendant did not have the burden of mortgaged townhouses on their hands in a market that was flat must be considered in the light of the far more positive views expressed by the valuers in March 2006. The longer the plaintiff waited to purchase the Nolans' property, the more likely it was that there would be an increase in its value and price. Even if the correct assessment is that the market was flat during the period 2006 to 2007, it is also necessary to factor in the timeframe within which the development could be concluded. It would not seem sensible to wait until the market rose to commence construction. The ideal situation would be to purchase the Nolans' property when the market was flat; construct the development as the market rose; and sell when the market was recovering or had recovered. The plaintiff's failure to advance the matter between December 2005 and August 2007 meant that the Nolans' property was not acquired before the market was rising. 143 The plaintiff submitted that had the defendant not terminated the Agreement, the plaintiff could have enforced the Nolans' Agreement. It was submitted that acquisition of the Nolans' property was not necessary until the Project was completed. That may be an accurate submission based on the premise that the Nolans' Agreement was enforceable. However the plaintiff knew very well from December 2005 that the Nolans had decided not to allow their property to be used as security for the development. It was at this time that steps needed to be taken to identify some form of finance or security that would be available to purchase the Nolans' property. The plaintiff did very little in this regard and the efforts it did make were based on the flawed premise of making an offer that involved a split payment. This so called "negotiation" went on for the whole of 2006 and was still not anywhere near conclusion by the time the defendant terminated the Agreement. 144 The meeting between J Alcock and the defendant on 17 May 2007 resulted from the defendant's frustration at the lack of progress of the development. At that meeting a timetable was agreed which included the "refinance" by mid June 2007. It was on 7 June 2007 that Mr Alcock advised the defendant that before refinancing could be finalised a decision had to be made as to how much "in addition to the $700,000" would be offered to the Nolans. Mr Alcock persisted, against the objection of the defendant, with making an offer to the Nolans that involved the split payment. Not surprisingly that offer was rejected on 26 June 2007. 145 The defendant rightly questioned Mr Alcock when on 6 July 2007 he suggested that the defendant had a choice to put an offer to the Nolans. She rightly pointed out that it was Mr Alcock who had been negotiating alone with the Nolans without consultation with her and, as she put it "now you are again in another predicament and so it is back with me". 146 I should say something about the expert evidence called by the parties. The plaintiff relied upon the evidence of Robert Campbell a licensed real estate agent in support of its claim for damages. It also relied upon Mr Campbell's evidence in response to the evidence of the defendant's expert Glenn Lewis Peisah a registered real estate valuer. Mr Peisah expressed opinions in relation to a reasonable timeline within which steps would be taken in a property development generally and with some regard to the facts in this case. However the evidence of these experts is not of assistance in determining whether in the particular circumstances of this case the defendant was entitled to terminate the Agreement by reason of the plaintiff's failure to "include" the Nolans' property in the development. 147 The plaintiff contends that a "reasonable time" within which to include the Nolans' property for the development had not been reached by August 2007. I disagree. The tardiness with which the plaintiff approached the task to "include" the Nolans' land in the development was exacerbated by a failure to consult with the defendant appropriately and a failure to recognise that the only way forward to acquire the Nolans' land was without a split payment. To persist with making such offers was merely to delay the matter even further. Breach/Termination 148 The defendant alleged that the first breach upon which she is entitled to rely to terminate the Agreement was the failure by the plaintiff to provide her with regular "update reports". I have found that the letter of 22 March 2004 was not part of the Agreement and accordingly that claim must fail. However the next claim made by the defendant is the alleged breach of the implied term to provide the defendant with material information in relation to the progress of the Project. There were clearly instances where the plaintiff did not provide prompt answers to the defendant's questions. It is obvious that the plaintiff could not provide answers to the defendant's questions until the Nolans' property was brought into the development and was able to be used, consistently with the Nolans' Agreement as security, for the Project. The plaintiff's failure to progress that aspect of the matter meant that nothing material was really happening in relation to the Project. Between February 2006 and 17 May 2007 when the defendant met with J Alcock, nothing of significance happened in the Project. The Project was simply not progressing. 149 I am satisfied that the plaintiff was not in breach of the implied term. 150 I am satisfied however that the plaintiff was in breach of its obligation to acquire the Nolans' property. As I have said earlier, that obligation is common ground by reason of the plaintiff itself pleading that it was its obligation and the defendant admitting it. Even putting the acquisition to one side, I am satisfied that the plaintiff was in breach of its obligation to "include" the Nolans' property in the Project. Whether it did this by negotiation with the Nolans so that the defendant was not disadvantaged or whether it sought to enforce the Heads of Agreement (such as they were) with the Nolans; or whether it simply purchased the Nolans' property pursuant to the suggested $825,000 price, I am satisfied that the plaintiff failed to proceed within a reasonable time to do so. I am satisfied that the defendant was entitled to terminate the Agreement by reason of the plaintiff's failure in this regard. 151 The plaintiff's claim against the defendant will be dismissed. Defendant's Claim for Damages 152 The defendant successfully claimed that the Agreement was unenforceable by reason of its uncertainty. In those circumstances the defendant's claim for damages for breach does not need to be considered. However because I have approached the matter on the basis that I would decide the issues on the presumption of enforceability, it is appropriate to deal with this aspect of the matter. 153 The defendant claimed that the lawful termination of the Agreement on 8 August 2007 entitles her to damages for the loss of bargain arising from that termination. The defendant called no evidence to establish the loss of bargain case and the only claim that was pursued was the difference between the rental receipts of the properties and the mortgage payments for the period January 2006 to the date of sale of the properties. 154 The defendant claims damages for the costs she incurred in continuing to hold her three properties after January 2006. The evidence establishes a holding cost for that period of $192,554.43. It was submitted that had the plaintiff performed its obligation to acquire the Nolans' land and attend to the construction, financing and marketing of the Project within a reasonable time then by January 2006 the defendant would no longer have been bearing those costs. 155 The development approval obtained by the plaintiff was at its cost, albeit that the defendant paid $30,000 towards those costs. The costs of obtaining the development approval were quantified in the plaintiff's letter of 1 February 2006 at $153,384. The plaintiff advised the defendant it would incur further professional fees to obtain the construction certificate and for contract administration and project management estimated at $150,000. The plaintiff did not call any evidence to establish the amount of any further costs incurred by it during the Project. The defendant requested verification of the costs referred to in the letter of 1 February 2006. Although there was some conflict between the evidence of the defendant and J Alcock in relation to these requests, the defendant did not call any evidence to suggest that the costs referred to in the plaintiff's letter of 1 February 2006 were not properly incurred. In correspondence post purported termination between the defendant's solicitor and Mr Alcock, the plaintiff claimed that the costs incurred were $182,643. The defendant's solicitor claimed that the tax invoices suggested that the correct figure was $171,686.95. In all the circumstances I intend to take this latter figure as the costs incurred by the plaintiff. 156 I think it is reasonable to bring these costs to account in determining the defendant's claim for damages. Although the plaintiff agreed to pay these costs and to recoup them out of the profit of the development, it would not be fair to burden the plaintiff with the whole of these costs in such an assessment. I think it is appropriate that the burden of these costs be borne equally between the plaintiff and the defendant. Accordingly each party would be responsible for payment of $85,843.48. The defendant has already paid $30,000 and her remaining liability for these costs would be $55,843.48 157 The defendant claimed an entitlement to the holding costs for the period January 2006 until the sale of each of the properties. After the Nolans advised the plaintiff and the defendant in December 2005 that their property could not be used as security for construction finance, the defendant continued to negotiate with the plaintiff in relation to the process to be adopted to secure or to attempt to secure the Nolans' property. The unavailability of the Nolans' property as security for the development was the real impediment to progressing the refinance of the properties. It is true that the defendant relied upon the plaintiff to progress the Project and the first step to be taken in that regard was as outlined in the plaintiff's letter to the defendant on 15 December 2005, to mortgage the properties to the bank that would be providing the Project funding. Neither party had the funding absent the Nolans' property, however the defendant continued to discuss with the plaintiff the alternative ways in which the Nolans' property could be brought into the development. It is true that those discussions were less than satisfactory because Mr Alcock did not respond to the defendant's requests promptly. It is obvious that an element of distrust entered the relationship and once Mr Alcock's son met with the defendant in May 2007 a timetable was put in place that required refinancing of the Project by mid June 2007. 158 It became clear in late June 2007/early July 2007 that the plaintiff was not going to acquire the Nolans' property nor were the Nolans going to agree to the alternative methods of acquisition which involved a part payment. I am satisfied that the defendant would be entitled to the holding costs, less the rental receipts for the period July 2007 to the date of sale of those properties. The holding costs for 17 Sturt Street were $33,746.35 or $1,088.60 per month. The holding costs for 19 Sturt Street were $70,001.76 or $2,333.39 per month. The holding costs for 75 Forest Way were $88,806.32 or $2,466.84 per month. Accordingly the defendant would be entitled to 13 and 12 months holding costs for 17 and 19 Sturt Street respectively, totalling $14,151.80 and $28,000.68. The defendant would also be entitled to 18 months holdings costs for 75 Forest Way totalling $44,403.12. 159 The defendant would be entitled to $86,555.60 in holding costs less her liability for the costs of obtaining the development approval of $55,843.48. If the Agreement were enforceable, the defendant would be entitled to entry of judgment in the amount of $30,712.12. Conclusion 160 The plaintiff's claim is dismissed. The defendant's Cross-Claim is dismissed. If the parties are unable to agree on a costs order I will hear argument when the matter is fixed for the filing of Short Minutes of Order at 9:30 a.m. on 25 September 2009. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. 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