New South Wales Supreme Court CITATION : Bradcorp Wilton Park v DLL Wilton [2010] NSWSC 1441 HEARING DATE(S) : 6/12/10, 7/12/10 and 8/12/10 JURISDICTION : Equity Division Commercial List JUDGMENT OF : McDougall J at 1 EX TEMPORE JUDGMENT DATE : 8 December 2010 (1) Declarations in terms of prayers 4, 5 and 7 of the amended summons filed on 7 December 2010. (2) Reserve liberty to apply in respect of prayers 1 to 3. DECISION : (3) Order that the amended cross-claim cross-summons filed in Court on 7 December 2010 be dismissed. (4) Order the defendants to pay the plaintiff's costs in the proceedings, including the cross-claim. (5) Order the exhibits to be dealt with in accordance with the Rules. CATCHWORDS : CONTRACT - construction - project delivery agreement - where defendant undertook to develop land - where clause 9.2 of agreement allowed defendant to sell "Englobo Lots" if sale price is no less than their "Retail Value" as defined - where defendant sought to utilise cl 9.2 to sell all unsold lots to parent company - whether subject matter of proposed sale is an "Englobo Lot". LEGISLATION CITED : Conveyancing Act 1919 (NSW) Environmental Planning and Assessment Act 1979 (NSW) CATEGORY : Separate question CASES CITED : Bass v Permanent Trustee Company Limited (1999) 198 CLR 334 Bradcorp Wilton Park Pty Ltd (Plaintiff) PARTIES : DLL Wilton Pty Ltd (First Defendant) Delfin Lend Lease Limited (Second Defendant) FILE NUMBER(S) : SC 2009/298666 COUNSEL : S D Robb QC / N J Kidd (Plaintiff) G C Lindsay SC / A P P Lo Surdo (Defendant) SOLICITORS : Swaab Attorneys (Plaintiff) Freehills (First and Second Defendants) - 25 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST McDougall J 8 December 2010 (ex tempore – revised 9 December 2010) 2009/298666 BRADCORP WILTON PARK PTY LIMITED v DLL WILTON PTY LIMITED JUDGMENT 1 HIS HONOUR: The plaintiff (Bradcorp) is the owner of two parcels of land at Wilton, south west of Sydney. On 15 August 2005, Bradcorp made a "Project Delivery Agreement" (the PDA) with the defendants (respectively, DLL and Delfin). Under the PDA, DLL undertook to develop one of those parcels of land, known as East Wilton (the land), for residential and associated purposes (the project). 2 Clause 9.2 of the PDA has the effect that DLL (which held PDA's power of attorney) may sell what are called "Englobo Lots" if the sale price is no less than their "Retail Value" as defined. DLL has sought to utilise cl 9.2 to sell all unsold lots in the project to its parent Delfin. The essential questions for decision are whether cl 9.2 has been engaged, and whether Bradcorp is required to give its consent to the proposed sale. The issues 3 The issues for decision may be stated as follows: (1) whether the subject matter of the proposed sale is an Englobo Lot for the purposes of the PDA? (2) Whether the attempt to implement cl 9.2 was undertaken in the course of and in performance of DLL's obligations under the PDA? (3) Whether, on the proper construction of the PDA, the value assessed for the land the subject of the proposed contract for sale was its Retail Value? (4) Whether the procedures set out in the PDA for the determination of retail value were implemented in such a manner as to bind Bradcorp to the result? (5) Whether DLL owes and breached an implied duty to exercise its contractual powers and power of attorney in good faith? 4 In addition, there is an issue arising out of cl 15.1 of the PDA. That issue is whether, and if so in what circumstances, advances made by DLL to Bradcorp as its "minimum return" from time to time are payable otherwise than by way of offset against future returns. Factual background 5 In August 2005, the land comprised an area of about 450 hectares. The PDA requires DLL to obtain all necessary approvals and finance to develop and to carry out the development of the land into residential lots (no more than 1165, with areas ranging from 250 square metres to 4,000 square metres) and for other purposes and uses including: (1) an area set aside for uses that would afford future employment; (2) a retail centre and village square; (3) a school; (4) a golf course, driving range and country club; (5) parklands; and (6) roads and other services. 6 The basic form of the project was described in a "Masterplan" (I use the language of the PDA) to be found in Sch 3 to the PDA. 7 Some of the services were to enure for the benefit not just of the land but also of the adjoining, or West Wilton land. Bradcorp, the owner of the adjoining land, gave DLL an option to undertake its development in the future. 8 The project has gone ahead. Necessary consents have been given. Plans of subdivision have been prepared and registered. In substance, those Deposited Plans lay out an estate that reflects the Masterplan and that is able to accommodate the uses and purposes that I have described. 9 A number of fully developed residential lots (which it is convenient to call "retail lots") have been sold, and others are fully developed and ready for sale, but unsold. There are, in addition, some 17 lots that are capable of further subdivision into smaller lots. Those 17 lots are Englobo Lots for the purposes of the PDA. There are lots for the creation of a golf course and related purposes, and for retail and other uses. The notice of 17 June 2009 10 By its letter of 17 June 2009, DLL notified Bradcorp of its intention to sell to Delfin the property described in that letter. The notification purported to be given in relation to one "Englobo Lot"; and in accordance with cl 9.2 of the PDA. The letter specified the price, showed how that price was derived, gave reasons for the proposed sale, and set out the financial results. 11 Since counsel focused attention on the detail of the letter, I set out as much of it as is relevant: Following our discussions, I am writing to you on behalf of DLL Wilton Pty Limited (DLL Wilton) and Delfin Lend Lease Limited (Delfin) and refer to the Project Delivery Agreement – Wilton Park (East) between DLL Wilton, Delfin and Bradcorp Wilton Park Pty Limited (Bradcorp), dated 15 August 2005 (PDA). 1. Consent to sale of an Englobo Lot This letter is a notice to Bradcorp pursuant to which DLL Wilton seeks the consent of Bradcorp for DLL Wilton to sell an "Englobo Lot" (as defined under clause 1.1) in accordance with clause 9.2(a) of the PDA. 2. Sale contract A copy of the proposed sale contract (excluding the vendor disclosure documents as attachments but including the title searches) is enclosed. The basic terms of the sale are as follows: Purchaser Delfin Lend Lease Limited ACN 000 966 085 Property* One Englobo Lot comprising the balance of the unsold land at the Bingara Gorge Development being the land listed in the schedule attached to this letter marked "A". Contract Price* $46,101,500 (inclusive of GST). Settlement On exchange of contracts * (The Property and Contract Price will be adjusted to take account of lots sold, or cancelled sales, between 15 June 2009 and the date of the contract, by excluding sold lots from the Property and by deducting their sale price from the Contract Price, and by including cancelled sale lots from the Property and by adding the sale price of the cancelled sales to the Contract Price) 3. Valuation of "Retail Value" We enclose a copy of a valuation prepared by Colliers International Consultancy and Valuations Pty Ltd dated 3 April 2009 that gives the Englobo Lot at that date a "Retail Value" (as defined in clause 1.1 of the PDA) of $49,000,000 (inclusive of GST). The Retail Value at 15 June 2009 has been adjusted to take account of sales and cancelled sales between 3 April 2009 and 15 June 2009 as set out in the schedule attached to this letter marked "B", resulting in an adjusted "Retail Value" of $46,101,500 (inclusive of GST). Under clause 9.2(a) of the PDA, Bradcorp must not withhold its consent to the sale of an Englobo Lot if under the sale Bradcorp will receive a distribution from the sale Gross Proceeds equal to or greater than it would have received had the sale price of the Englobo Lot been equal to or greater than Retail Value and consequently we do not believe that consent to the sale of the proposed contract price of $46,101,500 (inclusive of GST) may be withheld. The valuation 12 There was enclosed with the letter a valuation prepared by Colliers International Consultancy & Valuations Pty Limited (Colliers) dated 3 April 2009, bearing the reference VW 3846. DLL relied on that valuation to fix the gross selling price of the "Englobo Lot" that was the subject of its letter. 13 It is apparent, from the instructions that were given to Colliers and from the terms of the valuation given in response to those instructions, that Colliers was instructed to proceed, and did proceed, on the basis that, among other things: (1) it should undertake the assessment of "Retail Value" on an "in one line" basis: that is to say, on the basis that the whole of the land the subject of the letter of 17 June 2009 would be sold in one transaction to one purchaser; and (2) there would be no golf course or country club to be taken into account as part of the assessment of value, so that there would be no "golf front" or "golf view" lots. 14 The valuation proceeded on the basis of a hypothetical development approach, in which the valuer attempted to assess the present value of the cash flows that would result from and would be incurred in the realisation of the lots over time (excluding the actual costs of the physical development work). That was referred to as "the residual method of valuation". On that basis, the valuer ascertained that there would be gross realisations of $313,270,000; a net realisation after profit and risk of (in round figures) $148 million; and costs including holding costs, interest charges and acquisition costs, which would lead to a residual value of $49 million. Relevant provisions of the PDA 15 The parties to the PDA were Bradcorp (referred to in the document as "Bradcorp"), Delfin (referred to in the document as "Guarantor") and DLL (referred to in the document as "Developer"). The basis of the project was set out in the recitals: A Bradcorp is or will become the owner of the Land. B Bradcorp wishes to undertake the Project. C The Developer has agreed to fund, execute and Complete the Project. D The Guarantor will guarantee the obligations of the Developer to fund, execute and Complete the Project. 16 I pass over for the moment the definitions set out in cl 1.1 but, to the extent necessary, I will incorporate definitions that are relevant to the terms of the PDA on which parties relied and that I set out below. 17 Clause 6 of the PDA dealt with "the Project", and cl 6.1 set out DLL's obligations. Clause 6.4 dealt with commencement and termination. Clause 6.5 dealt with changes to the Masterplan. I set them out: 6.4 Commencement and termination of Project The Project commences on the date of this agreement and continues until the earlier of: (a) Completion; and (b) the date this agreement is terminated in accordance with its terms. 6.5 Material changes to the Masterplan require Bradcorp consent The Developer must obtain the prior written consent of Bradcorp before seeking any material change to the Masterplan. Bradcorp must not unreasonably withhold its consent. 18 I set out the definition of "Project": Project means the development and disposal (or dedication) of the Land (including, if applicable, lease of the Land) with or without improvements or buildings on the terms and conditions of this agreement. 19 By cl 7, Bradcorp appointed DLL as its attorney for the purposes of executing documents necessary or expedient to carry out the project. Bradcorp agreed, further, to give a separate and registrable power of attorney; that was done. 20 Clause 8 dealt with the Land, and covered, among other things, the absence of any interest in the Land given to DLL: 8.8 Developer - No Estate in Land The Developer acknowledges and agrees that despite any payment made by the Developer directly to Bradcorp: (a) nothing contained or implied in this agreement operates to transfer to or vest in the Developer any estate or interest in the Land; and (b) the legal and beneficial ownership of the Land remains vested in Bradcorp until any component parts are sold to third parties or purchased by the Developer in the course of the Project. 21 I set out the definition of "Land": Land means Lot 101 in Deposited Plan 1045369 and Lot 6 in Deposited plan 836296 22 Clause 9 dealt with the marketing of the lots. Clauses 9.1 and 9.2 are of central importance: 9.1 Sale of Lots It is the intention of the Parties that Lots shall be sold as they become available for sale and as market conditions may dictate. 9.2 Englobo Lots (a) The Developer must not arrange for the sale of Englobo Lots without the prior written consent of Bradcorp which must not be withheld if under the sale of such Englobo Lot Bradcorp will receive a distribution from the Gross Proceeds of sale which is equal to or greater than the distribution Bradcorp would have received if the sale price of the Englobo Lot was equal to or greater than its Retail Value. (b) In seeking Bradcorp's consent, the Developer must set out reasons for the proposed sale of the Englobo Lot. (c) Where Bradcorp consents to the sale of a Lot at less than its Retail Value, the amount of the Retail Value must be used for the purposes of determining: (i) when the $695,000,000 threshold point has been reached for the purposes of the definition of Second Lot Sale Retention; and (ii) Bradcorp's entitlement to a share of Gross Proceeds under clause 14.2. 23 I set out the definitions of "Englobo Lots", "Gross Proceeds", "Retail Value" and "Second Lot Sale Retention": Englobo Lot means a Lot which is capable of further subdivision into smaller lots under the relevant planning controls applicable to it. Gross Proceeds means the GST inclusive proceeds (whether in money or in kind) in relation to the disposal of an interest in part or all of the Land (other than granting a mortgage or a charge) and golf club memberships (in the case of the memberships, net of the Developer's reasonable selling costs). In particular, where the disposal comprises: (a) the sale of a Lot which is not an Englobo Lot and is disposed of under an Arms Length Transaction, the Gross Proceeds will be the GST inclusive sale price payable on settlement under the respective Sale Contract (exclusive of adjustments); (b) the sale of a Lot which is not an Englobo Lot, and is not disposed of under an Arms Length Transaction, the Gross Proceeds will be the GST inclusive amount agreed by the Parties, or, failing agreement, determined as the Retail Value of the freehold of that Lot; (c) the sale or lease of improved land (such as a 'house and land package') the Gross Sales Proceeds will be the GST inclusive amount attributable to the land component of the proceeds agreed by the Parties, or, failing agreement, determined as the Retail Value of the freehold for the land component; (d) the sale or lease of an Englobo Lot, the Gross Sales Proceeds will be the GST inclusive amount agreed by the Parties, or failing agreement, determined as the Retail Value of the freehold of the Englobo Lot; or (e) some other form of disposal (not including land which is transferred or dedicated to an Authority under the State Development Deed or as part of a contribution under section 94 of the Environmental Planning and Assessment Act 1979), the Gross Proceeds will be the GST inclusive amount agreed by the Parties or, failing agreement, determined as the Retail Value of the freehold of that part of the Land the subject of the disposal. Retail Value means the market value of the Land or the relevant part of the Land determined in accordance with clause 17 assuming a willing but not anxious buyer and seller and further assuming that: (a) it has been fully developed into the maximum number of Lots permitted under the relevant rezoning (or into such other configuration as the Developer demonstrates to the reasonable satisfaction of Bradcorp will deliver the same or better financial return to Bradcorp); and (b) each of those Lots is fully serviced, kerbed and otherwise finished ready for retail sale; and (c) Lot designs and yields are to be determined by a surveyor or town planner approved by Bradcorp acting reasonably where there is no development consent yet in place for the relevant Lots. Any predictions made about non residential use must be agreed by the Parties or otherwise determined by the Valuer. Second Lot Sale Retention means: (a) 26.5% of the Net Proceeds until Gross Proceeds from the Project reach $695,000,000; and (b) 31.5% of Net Proceeds when Gross Proceeds exceed $695,000,000. 24 Clause 13 provided for three loans known as the DLL Loan 1, the DLL Loan 2 and DLL Loan 3, to be made by DLL to Bradcorp in stipulated sums on specified dates or on the occurrence of specified events. The conditions upon which these loans were made were set out in cl 13.6: 13.6 Conditions of Loans Each of DLL Loan 1, DLL Loan 2 and DLL Loan 3: (a) are limited in recourse and are only repayable solely from amounts received by Bradcorp from the First Lot Sale Retention or in circumstances where this agreement specifically requires repayment of the DLL Loans; (b) are only repayable in the amounts and at the times specified in this agreement; (c) are interest free; and (d) are not guaranteed by Bradcorp Holdings Pty Limited ACN 073 497 024. 25 I set out the definition of "First Lot Sale Retention": First Lot Sale Retention means the sum of $50,000 per Lot from the sale of the first 1,100 Lots sold as part of the Project and where the relevant sale is the sale of an Englobo Lot, means $50,000 for each Lot into which the relevant Englobo Lot could be subdivided under the relevant zoning. 26 Clause 14 dealt with the distribution of "Gross Proceeds", and showed how the gross proceeds of sale were to be divided between DLL and Bradcorp: 14.1 Payments to the Developer The amounts paid to the Developer from Gross Proceeds under this clause 14, subject to any adjustments referred to in this agreement, are the only amounts payable to the Developer for the funding, execution and Completion of the Project and the carrying out of the Developer's Management Services. 14.2 Distribution of Gross Proceeds The Developer will, as agent for Bradcorp, receive the Gross Proceeds and must deposit them in the nominated bank account for the Project established and administered by the Developer solely for that purpose. The Developer must distribute the Gross Proceeds once a month by the 14th day of the month in the following manner and in priority order: (a) first, to Bradcorp to allow Bradcorp to pay all GST and any vendor duty or similar tax payable in relation to the relevant disposal together with any charge, tax (other than income or similar tax), levy or similar impost which is imposed on Bradcorp in relation to the Project which has not already been paid by the Developer. If any of these payments are required to be made by Bradcorp before the relevant payment or reimbursement under this clause, then the Developer must fund the relevant liability until funds are available; (b) second, to Bradcorp the First Lot Sale Retention. Bradcorp irrevocably directs the Developer that these monies be paid to the Developer to reduce DLL Loan 1, DLL Loan 2 and DLL Loan 3; (c) third to Bradcorp, the Second Lot Sale Retention; and (d) fourth, the balance of Gross Proceeds to the Developer (plus GST in accordance with clause 16) from which payment of 1% of Net Proceeds must be paid to the Environmental Trust referred to in clause 6.7. If the actual Gross Proceeds available for distribution under this clause 14.2 are insufficient for Bradcorp to receive its full entitlement under this clause because the Gross Proceeds used for the purposes of calculating such distribution was a deemed amount determined by a valuation, or for some other reason, then Bradcorp may issue a tax invoice to the Developer for any Shortfall and the Developer must pay the amount of the Shortfall to Bradcorp within 5 Business Days after receipt of the tax invoice. 27 Clause 15 dealt with the topic of "Minimum Annual Retention". It provided for minimum annual payments by DLL to Bradcorp, and for the recoupment of those payments in certain circumstances: 15.1 Payment to Bradcorp If, on 30 June of each Year following the DLL Loan Date: (a) the Bradcorp Return for that Year is less than the Minimum Return; and (b) a Difference exists for that Year, then the Developer must either: (c) advance to Bradcorp the Return Shortfall by 14 July following that Year by way of an interest free loan; or (d) buy the required number of Lots from the Project at Retail Value so that the Return Shortfall will be received by Bradcorp. In relation to the first potential application of this clause on the 30 June first following the DLL Loan Date, the relevant period is less than 12 months, the Minimum Return will be reduced on a pro-rata basis to reflect a proportion derived by dividing the number of days between the DLL Loan Date to (and including) 30 June by 365. 15.2 Offset of Bradcorp Distributions (a) If: (i) the Developer has made an advance under clause 15.1; and (ii) in any subsequent Year, Bradcorp has received the Minimum Return in that Year, then, once Bradcorp has received the Minimum Return for that Year, the Developer will not be liable to pay any further Second Lot Sale Retention during that Year until the aggregate of the Second Lot Sale Retentions due to Bradcorp under clause 14.2(c) exceeds the payments made to date under clauses 15.1 and 14.2(c). (b) The price payable under clause 21 must be reduced by the amount by which the aggregate of all amounts advanced under clause 15.1 and 14.2(c) exceeds the aggregate of the Second Lot Sale Retention due to Bradcorp under clause 14.2(c). 28 I set out the definitions of "Bradcorp Return" and "Minimum Return": Bradcorp Return means the aggregate of the Second Lot Sale Retentions received by Bradcorp during the relevant Year. Minimum Return means $5,000,000 per Year. 29 Clause 17 dealt with the way in which the Land would be valued, if there were an issue that requires "the determination of" that value: 17.1 Retail Value Valuation If there is an issue that requires the determination of a valuation of the Land, or a part of it, the Parties must seek to agree the Retail Value. 17.2 Valuation Dispute (a) If the Parties cannot agree on the Retail Value within 20 Business Days from the date the Retail Value is to be agreed, then the Retail Value shall be determined by Valuers appointed as below. (b) Within 10 Business Days after the requirement for valuation arises under clause 17.2(a), the Parties must jointly instruct two Valuers to determine the Retail Value. (c) If any or both of the Valuers do not accept (or cannot accept) the appointment as a Valuer under this clause 17, the Parties must seek to agree a replacement Valuer(s). (d) If the Parties are unable to agree a replacement Valuer(s) within 10 Business Days after notification by the Valuer(s) that it does not accept the appointment, either party may request the President of the Australian Property Institute (NSW Division) to nominate a Valuer(s). (e) If the Parties cannot agree on the instructions required under clause 17.2(a), this must be determined under clause 19. (f) If the Valuers do not agree on the Retail Value within 20 Business Days after the appointment of the Valuers: (i) if the higher valuation is equal to or less than 105% of the lower valuation, the Retail Value will be taken to be the average of the valuations; or (ii) if the higher valuation is greater than 105% of the lower valuation, then: (A) the Parties must instruct the Valuers to meet to seek to agree the Retail Value or a range of valuations that are within the ranges above; and (B) if the Valuers then advise the Parties they are unable to agree the Retail Value or a range of valuations that are within the range above, then either party may request the President of the Australian Property Institute (NSW Division) to nominate a Valuer to determine the Retail Value within the range of values determined by the Valuers. (g) If a Valuer is nominated by the President of the Australian Property Institute (NSW Division) , then the Parties must cause the Valuers to provide to such Valuer nominated by the Australian Property Institute (NSW Division) all supporting documentation supporting their valuations. (h) The Valuers are regarded as experts and not arbitrators and their decision will be final and binding on the Parties. (i) The calculation of the Retail Value is binding on the Parties. (j) The Parties must equally share the cost of the valuations. 30 Clause 18 dealt with the activities of the Consultative Committee. Among other things, the powers or duties of the Committee included "decision making in respect of ... material variations to the Masterplan (cl 18.2(a)). By the combined effect of cls 18.6, 18.7, 18.12, and 18.13, decisions in respect of changes to the Masterplan could not be taken by the use of the Chairman's casting vote, but instead were required to be decided under the dispute resolution process of cl 19. In short, the effect of those clauses is that even though DLL has control of the outcome of the deliberations of the Consultative Committee generally, it could not control the outcome of deliberations in respect of the matters listed in cl 18.2, which include, as I have said, material variations to the Master Plan. 31 Clause 19 set out the way in which disputes were to be resolved. It provided for a tiered dispute resolution process. It is necessary to set out only cl 19.9, which deals with the way in which the expert was required to make a determination: 19.9 Directions to expert In reaching a determination in respect of a dispute under clause 19.4 ("Disputes for expert determination"), the expert must give effect to the intent of the Parties entering into this agreement and the purposes of this agreement. First issue: Englobo Lots The parties' submissions 32 Mr S D Robb of Queens Counsel, who appeared with Mr N J Kidd for Bradcorp submitted that when one read together the relevant definitions, an Englobo Lot at any given time was a Lot shown on a plan of subdivision registered at that time that was capable of subdivision into smaller lots. On that basis, Mr Robb submitted, what he called "the supposed Englobo Lot" the subject of the letter of 17 June 2009 was neither an Englobo Lot nor a Lot. It was, on the contrary, an aggregation of land comprised of some 80 retail lots, 17 individual Englobo Lots (including areas designated for employment, retail and educational uses) and the six lots set aside for the golf course. 33 Further, Mr Robb submitted, the 80 retail lots could not be Englobo Lots because they were not capable of further subdivision. Thus, he submitted, cl 9.2 had no applications to them. By contrast, the 17 Englobo Lots could be sold pursuant to cl 9.2, but not (at least without consolidation) as part of some larger aggregation of land. 34 Mr G C Lindsay of Senior Counsel, who appeared with Mr A P Lo Surdo of counsel for DLL and Delfin, took a more subtle approach. He noted that the PDA did not define "subdivision" nor the cognate verb form "subdivide". He submitted that the meaning to be given to those words should be ascertained with regard to the relevant statutory context. That context included s 4B of the Environmental Planning and Assessment Act 1979 (NSW) (the EPA Act) and s 195 of the Conveyancing Act 1919 (NSW), as well as a Local Environmental Plan and Development Control Plan made under authority of the EPA Act and applicable to the land. 35 Thus, Mr Lindsay submitted: (1) the Land or such part of it as from time to time is in Bradcorp's ownership, is always capable of subdivision into smaller lots under applicable planning controls; and (2) nothing in the statutory concept of subdivision limits the concept of subdivision to division into ever smaller lots, or the number of times land could be subdivided. 36 From that point, Mr Lindsay advanced the following propositions: 42. The language of the PDA reflects the legislative regime governing development of the Land, manifesting an intention that references in the PDA to the word "subdivision" and its derivatives are to be construed in a manner consistent with that regime. 43. Nothing in the definition of "Englobo Lot" requires or justifies, a different approach. In particular: (a) Read in conjunction, the definitions of "Englobo Lot", "Lot" and "Land" contemplate that there might be one or more processes of subdivision of the real property defined by reference to "Lot" and "Deposited Plan" numbers in the definition of "Land". (b) The expression "subdivision of the land" incorporated in the definition of "Englobo Lot" via the definition of "Lot" is used, without reference to any particular time or parcel of land, as a noun. (c) The word "capable" refers to the potentiality of land (in a subdivision of the Land) to be the subject of "further subdivision into smaller lots". (d) The reference to "smaller lots" is a reference to the "process of subdivision" of land in a particular form, not to a process of successive subdivisions of land into ever diminishing parcels of land. 44. To limit the concept of "Englobo Lots" to ever diminishing parcels of land in successive subdivisions would be inconsistent with the commercial nature and object of the PDA. 45. Upon the proper construction of clause 9.2(a), the subject matter of a "sale" to which the subclause applies is any parcel of land which, at the time of the sale and irrespective of its earlier history, is capable of being subdivided into smaller parcels (to use a neutral expression). Decision 37 It may be accepted, as Mr Robb did accept, that subdivision includes consolidation or, more generally, realignment of boundaries (including by consolidation) by re-subdivision. But in my view, that does not assist in the process of construction. 38 Clause 9.2 will operate at particular moments in time, whenever DLL seeks Bradcorp's consent to a sale of an Englobo Lot. It is then that the question - is the subject of the request an Englobo Lot ? - must be answered. Thus the inquiry focuses, first, on whatever plans of subdivision are then registered, and on what lots are thereby created. 39 Once the parcel of land in respect of which consent is sought is identified as a "Lot" - that is, as a lot, or community lot, in a subdivision of the Land - the first part of the definition of Englobo Lot is satisfied. The inquiry shifts to the capability, for further subdivision of the Lot thus identified. But that inquiry relates to the identified Lot, not to some larger parcel of land with which it can be aggregated or with which it can, perhaps, be consolidated into a larger lot. 40 I accept that cl 9.2(a) deals with the sale of "Englobo Lots" in the plural. That usage indicates no more than that an Englobo Lot is, or several Englobo Lots are, proposed to be sold. The question of consent relates to each such Lot. It does not indicate that some process of aggregation is permissible, or that consent can be required for the sale of one "super lot" that could be created by a subsequent process of consolidation. 41 In essence, Mr Lindsay's submissions equate "Lot" with "Land", for the purposes of cl 9.2. That approach overlooks the drafting of the definitions on which, in my view, the resolution of this issue turns. 42 If one puts together the definition of Englobo Lot, Lot and Land, the subject matter of a request for consent under cl 9.2(a) is (omitting irrelevant material) a: lot or community lot ([including] a strata lot) in a subdivision of lot 101 in Deposited Plan 1045369 and lot 6 in Deposited Plan 8362969, that is capable of further subdivision into smaller lots under the relevant planning controls that are applicable to it. 43 That expanded definition of Englobo Lot emphasises the central concept: an existing Lot (as defined). It shows, in my view, that the definition, and therefore the clause, focuses on the Lot, not on some "parcel of land" into which it may in some way have been, or could be, aggregated. 44 I accept that a re-subdivision and consolidation of the Land (or so much of it as described in the letter of 17 June 2009) could produce a Lot that would be an "Englobo Lot". But unless and until that happens, the Land is an aggregation or accumulation of Lots, some of which are Englobo Lots and some of which are not. It is not, without some re-subdivision, a Lot in its own right. 45 The approach for which DLL and Delfin contend does some violence to the language of cl 9.2 and the associated definitions. There is no compelling reason - for example, avoidance of otherwise absurd outcomes - to justify that violence. It follows, in my view, that the language of cl 9.2, read with its associated definitions, should be given effect according to its terms. It follows from that that the letter of 17 June 2009 did not engage cl 9.2, because it did not seek Bradcorp's consent of a sale of an Englobo Lot. 46 Before leaving the first issue, I note that Bradcorp put before the Court a volume of material that it said was relevant as indicating the genesis of the PDA and the project, and the factual matrix in which the PDA was made, as known to all parties. I have not found it necessary to refer to that material (neither, I note, did counsel). I express no view as to its relevance or utility. Second to fifth issues 47 It is not necessary to deal with these issues, because my conclusion on the first issue is sufficient to entitle Bradcorp to the substance of the relief that it seeks. The parties suggested that it could be beneficial if I were to consider all the issues. I do not propose to do so. 48 As to the second and fifth issues: if the second were answered in Bradcorp's favour, the fifth would not arise. Equally, if the second were answered adversely to Bradcorp, it is difficult to see how the fifth could arise. But in any event, consideration of the content and operation of any implied obligation of good faith requires an understanding of the relevant terms of the contract, identification of the precise terms of the implied obligation, and precise identification of what are said to be acts inconsistent with that implied obligation. Any essays on these topics, in the context of my findings on the first issue, would be hypothetical at best. 49 As to the third and fourth issues: the PDA specifies clearly how "an issue that requires the determination of a valuation of the Land or of a part of it" is to be decided. That is the role of cl 17. Clause 17 was not engaged in this case. 50 I will, however, go so far as to say, in an attempt to give some guidance to the parties, that in my view: (1) any attempt to circumscribe or define the manner in which a valuation under cl 17 is to be performed requires either the consent of the parties or expert determination; (2) specifically, the definition of Retail Value, by para (b), necessarily assumes that the subdivision certificate has issued, and in turn (by reason of the relevant terms of the development consent), this assumes that the golf course has been completed and is ready for use; and (3) self-evidently, the Colliers valuation VW 3486 is not the outcome of the operation of the process laid out by cl 17 of the PDA, and thus is not determinative of the Retail Value of that part of the Land to which it relates. 51 More generally, in relation to issues 2 to 5, there is no factual dispute underlying any of them that I should resolve, to facilitate any consideration of this matter on appeal. An appellate court would be in as good a position as I am to look at the relevant documentation and to consider and deal with submissions that might be put in respect of it. 52 In short, the issue that I have dealt with is decisive, and I think it is pointless to do more than I have in relation to subsequent issues that, on my conclusion, do not require consideration. The cross-claim 53 What I have said disposes of the cross-claim to the extent that it seeks specific performance of the obligations said to have been engendered by the letter of 17 June 2009. It does not, however, deal with the issue as to cl 15.1(c). As I have indicated, that issue is whether advances made under that provision are repayable only in the manner set out in cl 15.2, or whether, because they are expressed to be advances by way of loan, there is some additional implied obligation to repay. If there is some such additional obligation, when and in what circumstances does it fall to be performed? 54 Those questions do not arise because of a factual situation that requires their decision. They are, in that sense, hypothetical. There is a real question as to whether they should be decided. See the joint judgment (Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ) in Bass v Permanent Trustee Company Limited (1999) 198 CLR 334 at [45] - [49]. It is sufficient to set out the last of those paragraphs: 49. As the answers given by the Full Court and the declaration it made were not based on facts, found or agreed, they were purely hypothetical. At best, the answers do no more than declare that the law dictates a particular result when certain facts in the material or pleadings are established. What those facts are is not stated, nor can they be identified with any precision. They may be all or some only of the facts. What facts are determinative of the legal issue involved in the question asked is left open. Such a result cannot assist the efficient administration of justice. It does not finally resolve the dispute or quell the controversy. Nor does it constitute a step that will in the course of the proceedings necessarily dictate the result of those proceedings. Since the relevant facts are not identified and the existence of some of them is apparently in dispute, the answers given by the Full Court may be of no use at all to the parties and may even mislead them as to their rights. Courts have traditionally declined to state — let alone answer — preliminary questions when the answers will neither determine the rights of the parties nor necessarily lead to the final determination of their rights. The efficient administration of the business of courts is incompatible with answering hypothetical questions which frequently require considerable time and cause considerable expense to the parties, expense which may eventually be seen to be unnecessarily incurred. 55 There is, no doubt, a controversy between the parties, based on the amended cross-claim cross-summons and its list statement and the response thereto, as to the construction and operation of cl 15.1(c); but it is a controversy that does not arise out of an existing state of facts. It is, at most, a controversy as to what would happen in some circumstances that may arise in the future. 56 Thus, I would not be disposed to deal with the arguments as to cl 15.1(c). To do so would declare no present right, nor declare or fix any present (or certain future) liability. 57 There is another reason for leaving this issue undecided. On reflection, I think that the parties did not in their submissions address a matter of significance. 58 To backtrack a little: Mr Robb submitted, dealing with the issues arising on his client's claim, that the effect of a sale of the kind proposed by the letter of 17 June 2009 would be to bring the project to an end. Mr Lindsay submitted to the contrary; obligations in relation to development, for example, and in relation to the deliberations of the Consultative Committee, would remain to be performed. I have not found it necessary to deal with those submissions. 59 However, counsel did not return to those arguments when dealing with cl 15.1(c). If the letter had been effective to trigger a sale of the Land to which it relates, it would not follow that Bradcorp's rights to advances under cl 15 would come to an end either when that land was sold or when the sale was completed. Indeed, it is at least arguable, on Mr Lindsay approach, that the rights would continue until the PDA terminated according to its terms. The parties appear to have assumed that cl 15.1(c), arises because of a termination of the project. But they did not address how this might arise. Specifically, they did not address the consequences, for cl 15.1(c), of a conclusion that, as Mr Lindsay had submitted, a sale of the Land would not terminate the project nor bring to an end the parties' obligations under the PDA. 60 If I were to deal with the issue in the absence of detailed consideration of those and perhaps other relevant matters, the utility of my advisory opinion would be, at best, limited. 61 For those reasons, I do not propose to decide the issues posed as to cl 15.1(c). Conclusion and orders 62 Bradcorp has succeeded in making good the bulk of its case for relief (save for the declaration sought as to the Colliers valuation VW 3846). In substance, the cross-claim fails. 63 The parties did not address in detail on the relief that should be granted if I came to the conclusions that I have just summarised. Specifically, they did not address on whether the injunctive relief sought (to restrain any sale on the terms proposed by the letter of 17 June 2009 and any related or ancillary use of the powers of attorney) was necessary. I would hope that it was not. 64 I make the following declarations and orders: (1) declarations in terms of prayers 4, 5 and 7 of the amended summons filed on 7 December 2010. (2) Reserve liberty to apply in respect of prayers 1 to 3. (3) Order that the amended cross-claim cross-summons filed in Court on 7 December 2010 be dismissed. (4) Order the defendants to pay the plaintiff's costs in the proceedings, including the cross-claim. (5) Order the exhibits to be dealt with in accordance with the Rules. *********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.