Supreme Court New South Wales Medium Neutral Citation: Lend Lease (Millers Point) Pty Limited v Barangaroo Delivery Authority [2013] NSWSC 1848 Hearing dates: 27, 28 March and 24 May 2013 Decision date: 12 December 2013 Jurisdiction: Equity Division Before: Lindsay J Decision: Subject to allowing the parties an opportunity to make submissions as to the form of the orders to be made in disposition of the proceedings, the Court proposes to declare that, upon the proper construction of the Project Development Agreement for the Barangaroo Project, an Approved Valuer making a determination of the Current Market Value for the grant of a Lease of the Premises on which the proposed buildings C4 and C5 are to be constructed (for the purpose of clause 1.2 of Schedule 3 to the PDA) is not entitled to input as cash inflows, in performing a discounted cash flow valuation for the purpose of paragraph (g) of the definition of Current Market Value in clause 1.1 of PDA Schedule 3, those cash contributions paid before Practical Completion to the Developer (by the Nominee nominated by the Developer to accept a Call Offer) respectively referred to in clause 18 of the C4 Agreement and clause 19 of the C5 Agreement. Catchwords: CONTRACT - Construction - Dispute resolution clauses - Expert Valuation - Dispute about terms of instructions to Valuers - Declarations sought as to proper construction of contract - Declaratory relief available REMEDIES - Declarations - Declarations without consequential relief - Construction of contract - Commercial contract - Dispute resolution clauses - Declarations granted in aid of contractual dispute resolution procedure Legislation Cited: Barangaroo Delivery Authority Act 2009 NSW Court Suppression and Non-Publication Orders Act 2010 NSW Government Information (Public Access) Act 2009 NSW Supreme Court Act 1970 NSW Valuers Act 2003 NSW Cases Cited: AG Robertson Limited v Valuer-General (1952) 8 LGR (NSW) 261 at 262 Albany v Commonwealth (1976) 60 LGRA 287 at 293-294 Australian Broadcasting Commission v Australasian Performing Right Association Limited (1973) 129 CLR 99 at 109 Australian Provincial Assurance Association Limited v Commissioner of Land Tax [1942] ALR 156 at 158 Blair v Curran (1939) 62 CLR 464 at 531-533, that render them binding on the parties Boland v Yates Property Corp Pty Limited (1999) 74 ALJR 209 at 268 Codelfa Constructions Pty Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 at 350, 352 Equuscorp Pty Limited v Glengallan Investments Pty Limited (2004) 218 CLR 471 at 483 [34] Fitzgerald v Masters (1956) 95 CLR 420 at 426-427; 436-438 Hogan v Hinch (2011) 243 CLR 506 at 531 [21]) John Fairfax & Sons Limited v Police Tribunal (NSW) (1986) 5 NSWLR 465 at 476-477 Legal & General Life of Australia Limited v A Hudson Pty Limited (1985) 1 NSWLR 314 at 335D-336B Pacific Carriers Limited v BNP Paribas (2004) 218 CLR 451 at 461-462 [22] Royal Botanic Gardens and Domain Trust v South Sydney City Council (2009) 240 CLR 45 at 62-63 [39] Spencer v The Commonwealth (1907) 5 CLR 418 at 432, 436-437 and 440-441 Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165 at 179 [40] Western Export Services Inc v Gireh International Pty Limited [2011] HCA 45; 86 ALJR 1 at [3]-[5] Texts Cited: K Lewison and D Hughes, The Interpretation of Contracts in Australia Law Book Co, Sydney, 2012) paragraph (7.02) JW Carter, The Construction of Commercial Contracts AA Hyam, The Law Affecting Valuation of Land in Australia (Federation Press, 3rd ed, 2004, Sydney), pp 124-126; 143-149 Category: Principal judgment Parties: First Plaintiff: Lend Lease (Millers Point) Pty Limited (ABN 15 127 727 502) Second Plaintiff: Lend Lease Corporation Limited (ABN 32 000 226 228) Defendant: Barangaroo Delivery Authority (ABN 94 567 807 277) Representation: IM Jackman SC with SA Lawrance (Plaintiffs) B Walker SC with G Rich and S Nixon (Defendant) Herbert Smith Freehills (Plaintiffs) Clayton Utz (Defendant) File Number(s): 2012/000379741 Judgment INTRODUCTION 1These proceedings concern the proper construction of a contract between the first plaintiff, Lend Lease (Millers Point) Pty Limited (as "Developer") and the second plaintiff, Lend Lease Corporation Limited (as "Guarantor" of the Developer) on the one hand, and, on the other hand, the defendant, the Barangaroo Delivery Authority. 2The Authority is a New South Wales Government agency constituted under the Barangaroo Delivery Authority Act 2009 NSW ("the BDA Act"). 3The contract (styled "Project Development Agreement" and commonly identified as "the PDA") concerns the terms upon which public land, known as "Barangaroo", on the foreshore of Sydney Harbour is presently being developed. 4The parties find themselves in dispute about the proper construction of particular provisions of their contract (centrally, paragraph (g) of the definition of "Current Market Value" in Schedule 3 to the PDA) that appear, to both sides of the record, to have significant financial implications for due performance of the PDA. 5The relief sought, on both sides, is confined to declaratory relief about the proper construction of the contract. 6By their summons and supporting pleadings the plaintiffs (respectively, a land developer and its guarantor) have applied for a declaration vindicating their contention as to the true construction of the contract. By its cross summons, the defendant (owner of the land the subject of development) has applied for a declaration to the opposite effect. From their opposite adversarial corners, having joined issue with one another, they make common cause in inviting the Court to adjudicate their contest. 7Neither side claims relief consequential upon a grant of declaratory relief. An order for a declaration of right carries with it liberty to apply for consequential relief (Royal Insurance Company Ltd v Mylius (1926) 38 CLR 477 at 497), but there appears to be no present need for consequential relief. 8The PDA is on foot. Nobody contends otherwise. All parties have held themselves out to the Court, without qualification, as ready, willing and able to perform their respective obligations under the contract, properly construed. 9There is presently no need for an order for specific performance to compel performance of the contract, or an injunction to restrain a breach of it, because the declared intention of each party is to perform its respective obligations. 10The question of construction that divides the parties is not a feigned, or hypothetical, issue. Evidence before the Court demonstrates, as a fact, that there is a genuine dispute that is presently impeding performance of the contract on both sides. 11What is sought from the Court is not abstract judicial advice. The parties want an authoritative determination of the meaning of the PDA so that they can move forward in performance of the contract. A grant of declaratory relief, without consequential relief, is not likely, on the parties' present understanding of their relationship, to lead to fragmentation of litigation. 12Two provisions of the Supreme Court Act 1970 NSW bear upon the current proceedings. 13Section 75 of the Act provides that "[no] proceedings shall be open to objection on the ground that a merely declaratory judgment or order is sought thereby and the Court may make binding declarations of right whether any consequential relief is or could be claimed or not". 14Section 63 directs the Court to "grant, either absolutely or on terms, all such remedies as any party may appear to be entitled to in respect of any legal or equitable claim brought forward in the proceedings so that, as far as possible, all matters in controversy between the parties may be completely and finally determined, and all multiplicity of legal proceedings concerning any of those matters avoided". 15In particular cases (illustrated by Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286 at 306-307), there may be a tension between ss 63 and 75 because a decision whether to grant, or withhold, declaratory relief is discretionary, and one of the factors to be taken into account upon an exercise of such a discretion is the desirability of avoiding a fragmentation of disputes likely to frustrate the policy objective expressed in s 63. 16That said, judicial resistance to widespread use of declaratory proceedings as a means of facilitating the conduct of commerce ceased long ago: Sankey v Whitlam (1978) 142 CLR 1 at 20-21 and 23, referring to Dyson v Attorney-General [1911] 1 KB 410 and Guaranty Trust Company of New York v Hannay & Company [1915] 2 KB 536 as foundational cases. The jurisprudence that presently guides an exercise of the Court's discretion accepts that the Court's jurisdiction is extensive, and that it should be freely exercised when there is utility in doing so: Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 581-582. The availability of declaratory relief, with or without consequential relief, is regarded as an important incident of the Court's commercial causes jurisdiction: Integrated Lighting & Ceilings Pty Ltd v Philips Electrical Pty Ltd (1969) 90 WN (Pt 1) (NSW) 693 at 701B-E and 702F-G. 17A core problem for the parties in the present proceedings is that a dispute resolution mechanism for which the PDA provides has been paralysed by the parties' inability to agree upon the terms in which expert valuers are to be briefed for the purpose of making an assessment of the "Current Market Value" of property within the meaning of PDA Schedule 3. 18Performance of the PDA has reached the stage where an assessment of "Current Market Value", as defined by the contract, is required in relation to two buildings (respectively described as "C4" and "C5") that form part of the parties' development project. 19Assessments of "Current Market Value" drive quantification of payments to be made by the first plaintiff, as Developer, to the defendant. 20By reference to several provisions of the PDA (principally, clauses 4.1, 4.2, 4.5, 27 and 29), and several definitions set out in clause 1.1 of the contract (including "Call Offer", "Call Offer Period", "Lease Commencement Date", "Nominee", "Premises", "Premises Land Value", "Pro-forma Lease" and "Works Portion") one comes eventually to Schedule 3. 21Clause 1.1 of Schedule 3 defines "Current Market Value" by reference, inter alia, to assumptions specified in paragraphs (a) to (h) of the definition. Clause 1.2 of the Schedule throws light on the meaning of "Current Market Value" by its description of the way in which a determination of "Current Market Value" is to be determined by expert valuers. 22The central focus of the parties' dispute is paragraph (g) of the definition of the definition of "Current Market Value". The assumption for which it provides is expressed in the following terms: "The Purchaser [an expression defined in early parts of the definition of 'Current Market Value' in terms reminiscent of a hypothetical purchaser of the type encountered in Spencer v The Commonwealth (1907) 5 CLR 418 at 432, 436-437 and 440-441] is entitled to derive a pre-financing (ungeared) project IRR [an expression defined in PDA Schedule 3 but which, here, can be taken to mean 'Internal Rate of Return'] of [x %] in respect of the costs referred to in paragraph (e) and the carrying out of the Approved Development Works [Emphasis added]." 23The reference, here, to "x % " rather than the numerical figure in the PDA pays due respect to an application made by the plaintiffs - not opposed by the defendant - for orders under the Court Suppression and Non-Publication Orders Act 2010 NSW for preservation of the confidentiality of commercially sensitive information in, or associated with, the PDA. 24The terms upon which such orders might be made is one of the topics that requires consideration in this judgment. At the commencement of the hearing, interim orders were made under s 10 of the Act to facilitate the conduct of the hearing. They were confirmed when, at my invitation, the evidence was re-opened to ensure that there was before the Court a sufficient evidentiary foundation for an orderly determination of the proceedings. 25A core dispute between the parties concerns the meaning of the expression "a pre-financing (ungeared) project IRR". 26That expression ties in with the definition of "IRR" in PDA Schedule 3 clause 1.1. 27"IRR" is defined to mean "the discount rate at which the net present value of the projected cash flows is equal to zero. It is to be determined by using monthly cash flows and applying [a specified computer programme]". 28This requires monthly cash "inflows" (on the "revenue" side of the ledger) and "outflows" (on the "expenses" side) relating to Approved Development Works (as defined by paragraph (d) of the definition of Current Market Value) to be taken into account in a discounted cash flow analysis. The parties' dispute relates to whether particular cash inflows should, or should not, be taken into account. 29Particular notice should, here, be taken of the expression "taken into account". It hides layers of complexity that need to be uncovered. 30First, the fact that the parties seek a declaration and a counter declaration in particular terms does not bind the Court to embrace one or the other. The Court can mould a grant of declaratory relief to reflect its determination of the true construction of the PDA, emerging from the dialectic of adversarial debate. 31Secondly, an exploration of the parties' competing contentions may lead to a conclusion that the question whether particular cash flows should, or should not, be "taken into account" may be interdependent with, and subordinate to, questions about how and for what purpose such inflows might be "taken into account". 32Thirdly, care needs to be taken to remember the context in which declaratory relief is sought, and the purpose for which such relief is sought. These proceedings have been instituted in aid of a decision-making process whereby, as the parties have agreed in PDA Schedule 3 clause 1.2, expert valuers are to determine the value of property. The proceedings cannot be permitted to subvert the valuers' exercise of their professional judgment by an erroneous conversion of "valuation" questions into "legal" ones. 33Fourthly, a principal purpose, if not the principal purpose, for the Court's involvement in the parties' contractual dealings, at this stage, is to reduce the risk that the decision-making processes for which the PDA provides may miscarry for want of clarity in the task to be performed by the professional valuers selected by the parties. Attention needs to be focussed on the question(s) asked of the valuers, and a pathway needs to be cleared for them to move towards their answer(s), so that they can be left to their professional judgment in answering calls made on them. 34Fifthly, the valuation exercise for which the PDA provides may have a bearing on the profitability of the contract from the joint and several perspectives of the parties to it, highlighting the importance of the PDA being construed as a whole. 35Sixthly, all questions that arise for consideration in these proceedings must be determined within the paradigm of the contractual arrangements that the parties, acting autonomously, have themselves adopted. 36If the parties' dispute is not authoritatively determined by the Court, any determination by expert valuers of the "Current Market Value" of property within the meaning of the PDA may fail to answer the description of "Current Market Value" for the purposes of the contract. Their determination would, in those circumstances, be contractually flawed according to principles enunciated by McHugh J in Legal & General Life of Australia Limited v A Hudson Pty Limited (1985) 1 NSWLR 314 at 335D-336B. 37The Court's support for alternative dispute resolution procedures generally may, in an appropriate case (of which this is an example), allow, and require, it to lend its aid to the due performance of a contractual ADR process. 38A practical condition for the effective exercise of this jurisdiction in these proceedings is the communication to the Court, by both sides of the record, that: first, they stand ready, willing and able to perform their respective obligations under the PDA, as properly construed; secondly, they are ready, willing and able to submit to the dispute resolution procedures for which the PDA provides once the present impasse is cleared away; and thirdly, they each accept that the declarations of intent made on these questions by the opposite side are bona fide and based on reasonable grounds. CONFIDENTIALITY ORDERS 39By a notice of motion filed, and amended, on 27 March 2013 (the first day of the hearing of the principal proceedings), the plaintiffs applied for suppression orders designed to protect the confidentiality of commercially sensitive information in documentation intended to be adduced as evidence in the principal proceedings. The motion had been earlier foreshadowed. 40The motion was supported by affidavits sworn by David Stewart Hutton on 25 and 26 March 2013. 41Subject to four qualifications, that evidence establishes a sufficient case for the making, and maintenance, of orders for the preservation of the confidentiality of commercially sensitive information adduced in evidence in the principal proceedings. 42The qualifications are these. First, in making an assessment of what, if any, orders are necessary or should be made to facilitate the proper administration of justice the Court must be mindful of the purpose, or purposes, served by invocation of the Court's jurisdiction in the principal proceedings. 43Those proceedings are directed towards the determination of a dispute between contracting parties, in aid of performance of contractual obligations on both sides of the record. The primacy given (by Parliament, in s 6 of the Court Suppression and Non-Publication Orders Act 2010 NSW, and by the Court itself under the general law) to the public interest in open justice must take into account the purpose, or purposes, served in the principal proceedings. Different proceedings, governed by a different purpose, may yield a different outcome in terms of public disclosure of information. 44Secondly, any decision made for the grant, or continuance, of a suppression order or a non-publication order must take colour from the constitution of the proceedings in which it is made and the presence or otherwise of an active contradictor to any application for such an order. 45In the present proceedings, as constituted, there is no active contradictor to test the evidence or submissions advanced in support of the plaintiffs' application for orders under the Court Suppression and Non-Publication Orders Act. Given the purpose for which the principal proceedings have been instituted, that is entirely understandable. However, it needs to be noted lest, in other contexts, that evidence, and those submissions, come under closer scrutiny than has been possible, or appropriate, in these proceedings. 46Thirdly, in making, or continuing, an order under the Court Suppression and Non-Publication Orders Act, the Court may be required to allow for the fact that information the subject of an order is, or may become, no longer confidential. 47That possibility is present in these proceedings if only because of the operation of the Government Information (Public Access) Act 2009 NSW and the ongoing public scrutiny to which the Barangaroo Project is subject. 48Fourthly, because all suppression orders and non-publication orders made under the Court Suppression and Non-publication Orders Act are subject to a review mechanism, for which ss 13-14 of the Act provides, all such orders are, to that extent, contingent on the absence of a statutory review. 49Parties entitled to apply for a review under s 13 include a news media organisation or any other person who, in the opinion of the Court, has a sufficient interest in the question whether a suppression order or non-publication order should have been made or should continue to operate. 50In the context of these proceedings, as presently constituted and in the absence of an active contradictor, I accept the substance of the evidence adduced by the plaintiffs through the affidavits of Mr Hutton. 51Mr Hutton is a senior officer (the Group Head of Development) of Lend Lease Corporation Limited and its subsidiaries, including the plaintiffs. He has occupied his current office since April 2010. He has worked at "Lend Lease" since 1988. 52As Group Head of Development, Mr Hutton is a member of Lend Lease's senior management team, reporting direct to the Group's Global Chief Operating Officer. 53The majority of Lend Lease's large development projects world-wide are secured through some sort of competitive tender or bid. Mr Hutton is responsible for overseeing major development projects and bids. He sits on Lend Lease's Global Investment Committee, along with other senior managers including the Group's Global Chief Executive Officer and its Global Chief Financial Officer. Where investments require approval of the Lend Lease Board of Directors, that Committee determines whether to make a recommendation to the Board. 54In his affidavits, Mr Hutton deposed, inter alia, to the nature of the business of Lend Lease; the identity of its competitors; the competitive tender process that led to entry into the PDA; the nature of the Barangaroo development; and processes associated with Lend Lease's making a bid for a development project, performing project work, raising finance through investors and seeking tenants to occupy premises in a completed development. 55Lend Lease (through the first plaintiff) participated in the New South Wales Government's international design competition for Barangaroo in 2006, and then again in the international development tender process for the project in 2008/2009. It was announced as the preferred proponent for the development on 20 December 2009 and, after additional work, the PDA was signed in March 2010. 56Initial construction for the project officially commenced on 25 October 2011. Substantial work, involving a commitment of millions of dollars, has been undertaken since that time. 57In order to fund the project, Lend Lease undertook what Mr Hutton understands to have been the largest equity-raising of its kind in Australia (totalling $AUD 2 billion), including $AUD 1 billion from a major off-shore institutional investor. The project is forecast to be valued at $AUD 6 billion on completion. 58Mr Hutton has been closely involved with the Lend Lease bid and management of the project from 2008 until the present time. As the Chief Operating Officer of Lend Lease Asia Pacific, he was the senior Lend Lease executive responsible for overseeing Lend Lease's bid for the project. He presented the proposed bid to the Lend Lease Board for approval. In his capacity as Group Head of Development, and as a member of Lend Lease's senior management team, he has continued to monitor and have input into the Project, including negotiations for the securing of $AUD 2 billion of equity for the Project raised for Project funding in July 2012. He is a member of the formal Joint Management Committee for the Project, which has representatives from both Lend Lease and the defendant. He is a director of the first plaintiff, and a designated senior Lend Lease spokesman for the Project. In the course of his duties he often meets with key external stakeholders including representatives of the New South Wales Government, tenants and investors. 59In support of the suppression orders sought by the plaintiffs, Mr Hutton's evidence traverses distinct categories of information that the plaintiffs, and Lend Lease more generally, consider to be commercially sensitive. Mr Hutton explains why each category of information is regarded to be commercially sensitive, and links those explanations with particular items of information in respect of which suppression orders are sought. 60The categories of information the subject of the application for suppression orders are directed, generally, to pricing, costs and similar information: payment processes, mechanisms or formulas that Lend Lease adopts in its tender processes, including the tender for the Barangaroo Project; the nature, extent, quantum or composition of Lend Lease's actual or anticipated payments or costs relating to the Project, including costs relating to financing arrangements; rates of return on investment as employed in the PDA and other project margins employed in respect of the Project; Lend Lease's financial modelling employed in respect of the tender for the Project; and its funding arrangements with investors in respect of the Project. 61In the context of these proceedings, as presently constituted and in the absence of an active contradictor, I accept Mr Hutton's evidence, and accordingly I find, that Lend Lease has a substantial investment, built up over many years, in commercial systems able to support competitive bids for large development projects and (by the performance of construction work, entry into financial arrangements and marketing of property the subject of development work) to carry those projects to completion over the long years from concept to realisation. 62In the context of these proceedings, as presently constituted and in the absence of an active contradictor, I also find, that, insofar as the Barangaroo Project is a current project (and is not anticipated to be completed for several years yet), disclosure of the information presently sought to be made the subject of suppression orders would very likely prejudice Lend Lease's ability to negotiate with sub-contractors, suppliers, prospective tenants, prospective investors and others involved in carrying through the Project to fruition. Exposure of the plaintiffs' cost sensitivities, risks, margins and profitability calculations could do substantial harm to the economic interests of the plaintiffs, and others, who, by committing themselves to the Project, have an economic interest in its due administration. 63The plaintiffs' motion is predicated upon an acceptance of three propositions. 64First, any suppression order made in favour of the plaintiffs should incorporate one or more "sunset clauses". This gives recognition to the fact that any perceived necessity to maintain such confidentiality as may attach to particular contractual provisions is likely to fade, over time, as the Barangaroo Project approaches completion or, at least, moves beyond earlier phases of performance. 65Secondly, because the PDA is a government contract, the defendant has been required to make disclosures about it to the public, in accordance with the Government Information (Public Access) Act 2009 NSW, unless a need for confidentiality is established. The extent of disclosures required to be made for the purpose of that Act has been the subject of a decision in the Administrative Decisions Tribunal in which (with the benefit of participation in the decision making process by a party not privy to the PDA) independent consideration has been given to the operation of the Government Information (Public Access) Act: Australians for Sustainable Development Inc v Barangaroo Delivery Authority [2013] NSW ADT 252 (7 November 2013). In the current proceedings, the Court's focus is upon the operation of the Court Suppression and Non-publication of Orders Act and the inherent jurisdiction of the Court. 66Thirdly, as is recognised by the Court Suppression and Non-publication of Orders Act (s 6) and upon an exercise of the Court's inherent jurisdiction the principle of open justice that is a touchstone of decision-making in the Court must be accommodated, as a primary consideration, in the conduct of the current proceedings. 67Consistently with their acceptance of a need to ensure that these proceedings are open to public scrutiny, each of the parties provided to the Court, for publication to news media organisations that might seek access to them, a redacted form of the written submissions relied upon in oral argument. 68Full allowance needs to be made for these considerations and, critically, the public interest in deciding where the interests of justice lie upon a determination of the plaintiffs' motion for suppression orders. 69That motion invokes both the jurisdiction for which the Court Suppression and Non-publication Orders Act 2010 NSW provides (Rinehart v Welker [2011] NSWCA 403) and the inherent jurisdiction of the Supreme Court as a superior court (John Fairfax & Sons Limited v Police Tribunal (NSW) (1986) 5 NSWLR 465 at 476-477; Hogan v Hinch (2011) 243 CLR 506 at 531 [21]). 70The application can, and should, be accommodated by an application of the Court Suppression and Non-publication Act, s 4 of which expressly provides that the Act does not limit or otherwise affect any inherent jurisdiction or any powers that the Court has to regulate its proceedings or to deal with a contempt of court. 71For present purposes, the material provisions of the Act are the definitions of "court", "information", "non-publication order", "party", "publish" and "suppression order" in s 3 and ss 6, 7(b), 8(1)(a), 8(1)(e), 8(2), 9(1), 9(3)-(5), 10, 11 and 12: "3. Definitions In this Act: 'court' means: (a) the Supreme Court, ... 'information' includes any document. ... 'non-publication order' means an order that prohibits or restricts the publication of information (but that does not otherwise prohibit or restrict the disclosure of information). 'party' to proceedings includes the complainant or victim (or alleged victim) in criminal proceedings and any person named in evidence given in proceedings and, in relation to proceedings that have concluded, means a person who was a party to the proceedings before the proceedings concluded. publication order, a court must take into account that a primary objective of the administration of justice is to safeguard the public interest in open justice. 'proceedings' means civil or criminal proceedings. 'publish' means disseminate or provide access to the public or a section of the public by any means, including by: (a) publication in a book, newspaper, magazine or other written publication, or (b) broadcast by radio or television, or (c) public exhibition, or (d) broadcast or publication by means of the Internet. 'suppression order' means an order that prohibits or restricts the disclosure of information (by publication or otherwise). 6. Safeguarding public interest in open justice In deciding whether to make a suppression order or non- 7. Power to make orders A court may, by making a suppression order or non-publication order on grounds permitted by this Act, prohibit or restrict the publication or other disclosure of: ... (b) information that comprises evidence, or information about evidence, given in proceedings before the court. 8. Grounds for making an order (1) A court may make a suppression order or non-publication order on one or more of the following grounds: (a) the order is necessary to prevent prejudice to the proper administration of justice, (b) the order is necessary to prevent prejudice to the interests of the Commonwealth or a State or Territory in relation to national or international security, (c) the order is necessary to protect the safety of any person, (d) the order is necessary to avoid causing undue distress or embarrassment to a party to or witness in criminal proceedings involving an offence of a sexual nature (including an act of indecency), (e) it is otherwise necessary in the public interest for the order to be made and that public interest significantly outweighs the public interest in open justice. (2) A suppression order or non-publication order must specify the ground or grounds on which the order is made. 9. Procedure for making an order (1) A court may make a suppression order or non-publication order on its own initiative or on the application of: (a) a party to the proceedings concerned, or (b) any other person considered by the court to have a sufficient interest in the making of the order. ... (3) A suppression order or non-publication order may be made at any time during proceedings or after proceedings have concluded. (4) A suppression order or non-publication order may be made subject to such exceptions and conditions as the court thinks fit and specifies in the order. (5) A suppression order or non-publication order must specify the information to which the order applies with sufficient particularity to ensure that the order is limited to achieving the purpose for which the order is made. 10. Interim orders (1) If an application is made to a court for a suppression order or non-publication order, the court may, without determining the merits of the application, make the order as an interim order to have effect, subject to revocation by the court, until the application is determined. (2) If an order is made as an interim order, the court must determine the application as a matter of urgency. 11. Where an order applies (1) A suppression order or non-publication order applies only to the disclosure or publication of information in a place where the order applies, as specified in the order. (2) A suppression order or non-publication order is not limited to applying in New South Wales and can be made to apply anywhere in the Commonwealth. (3) However, an order is not to be made to apply outside New South Wales unless the court is satisfied that having the order apply outside New South Wales is necessary for achieving the purpose for which the order is made. 12. Duration of orders (1) A suppression order or non-publication order operates for the period decided by the court and specified in the order. (2) In deciding the period for which an order is to operate, the court is to ensure that the order operates for no longer than is reasonably necessary to achieve the purpose for which it is made. (3) The period for which an order operates may be specified by reference to a fixed or ascertainable period or by reference to the occurrence of a specified future event. " 72A suppression order or non-publication order made pursuant to these provisions can be reviewed by the Court on its own initiative or on an application by a person, identified in s 13(2), who is entitled to apply for a review: s 13. By s 14 (read with s 101(1)(a) of the Supreme Court Act 1970 NSW), an appeal lies to the Court of Appeal, with that Court's leave, against a decision of a divisional judge of the Supreme Court to make, or not to make, a suppression order or non-publication order, or a decision of such a judge referable to a review of such orders. 73Having made interim orders under s 10 of the Act at the commencement of the hearing of the principal proceedings, and having confirmed those orders during the course of the hearing, I have satisfied myself that they should be continued, provided that their continuation does not interfere with the orderly decision making processes that culminated in the ADT's determination of 7 November 2013 or any appeal from that determination. 74The open availability of the parties' written submissions in redacted form, the conduct of the hearing of the proceedings in public, and the publication of Reasons for Judgment in which the parties' submissions are openly canvassed, combine to expose to public scrutiny the nature of the parties' dispute, their competing contentions and the Court's determination of the dispute. 75That done, there is a public interest, as well as a private one, in permitting contracting parties to maintain commercial confidentiality in the ongoing performance of complex contractual arrangements. In this case, that public interest includes facilitation of a dispute resolution procedure which, working as it should, contemplates a private decision-making process. The administration of justice, in a system that encourages parties to make, and to adhere to, "alternative dispute resolution" arrangements requires that due allowance be made for the importance attached to confidentiality by participants in many ADR processes. If parties such as those presently before the Court were to be denied all prospect of their commercial arrangements remaining confidential, it would undermine the utility of ADR procedures, upon which the current court system heavily depends for the orderly resolution of civil disputes. 76In publishing these Reasons for Judgment, I propose to allow the parties an opportunity to make submissions as to the precise form of the declaratory relief to be granted in the principal proceedings. In entertaining such, if any, submissions as they may make about the form of declarations, I will also allow the parties an opportunity to formulate the precise terms in which, having regard to the proceedings in the ADT, orders under the Court Suppression and Non-Publication of Orders Act should be expressed. THE QUESTION IN DISPUTE 77The beguiling simplicity of the central question stated by the parties for determination by the Court disappears, from time to time, as one enters the thickets of interlocking definitions, and countless qualifications, in complex commercial documents. However, it is important to negotiate a path through the thickets in order to verify the question, and to arrive at an answer, in a manner calculated to accommodate the PDA, as a whole and in its true commercial setting. 78The central question in dispute is WHETHER, on the proper construction of the PDA, the definition of "current market value" in PDA Schedule 3 requires or permits an Approved Valuer (that is, as defined by Schedule 3 clause 1.1, an expert valuer registered under the Valuers Act 2003 NSW and possessed of other qualifications, professional experience and reputation as described in the PDA), when assessing the current market value for the premises for the C4 building (and, mutatis mutandis, the C5 building), to include the cash contributions received by the first plaintiff as Developer under an agreement described as "the C4 Agreement" (and a corresponding agreement referred to as "the C5 Agreement") prior to practical completion (as defined in PDA clause 1.1) as cash in-flows in the discounted cashflow analysis undertaken for the purpose of paragraph (g) of the definition of "Current Market Value". 79The defendant asserts, and the plaintiffs deny, that an Approved Valuer calculating the Current Market Value of the Premises relating to the C4 Building (and the Premises relating to the C5 Building) must, when performing the discounted cashflow analysis required by paragraph (g), "input" the cash contributions to be received by the first plaintiff under the C4 Agreement (and the C5 Agreement) as cash in-flows of the hypothetical Purchaser. 80The word "input", here, is similar to with the expression "taken into account" earlier discussed. Larger issues are hidden from view. 81The high water mark of the plaintiffs' case is a contention that payments made to the first plaintiff under the C4 Agreement are to be ignored because they bear the character of "financing" or "funding" payments which paragraph (g) dictates be put aside. 82The high water mark of the defendant's case is that all payments under the C4 Agreement are to be included, at full value, on the "revenue" side of the discounted cash flow analysis contemplated by paragraph (g). That is said to be because they bear the character of progress payments for work done or property sold. One side's high water mark is the other's low tide. 83The PDA, as presented for review in these proceedings, was entered into on 5 March 2010 and subsequently varied by agreements dated 1 April 2010, 8 June 2010, 30 July 2010, 23 December 2010 and 14 June 2012. The version in evidence is a consolidated version annexed to the "Deed of Amendment" dated 14 June 2012. 84The "C4 Agreement" and the "C5 Agreement" are in substantially similar terms. The parties are agreed that, for the sake of convenience, the Court's determination of the question in dispute can be directed to the terms of the PDA Agreement on the one hand and, on the other hand, the terms of the C4 Agreement and a related Side Agreement. They are agreed that that determination will, incidentally, determine their dispute relating to characterisation of the C5 Agreement and its Side Agreement. 85The C4 Agreement is a written agreement dated 7 July 2012 made between Lend Lease IMT (LLWTST ST) Pty Limited as "Owner", the first plaintiff as "Developer", Lend Lease IMT (LLWTST) Limited as the "Owner's Guarantor" and Lend Lease (Barangaroo South Co Owner) Pty Limited as "Central Plant Co-owner". For present purposes, only the Owner and the Developer are material parties. 86The C5 Agreement is a separate written agreement between the same parties, also dated 7 July 2012. Again, the only material parties for present purposes are the Owner and the Developer. 87The complexity of the PDA, the C4 Agreement and the C5 Agreement can be approached, initially, by paraphrasing introductory paragraphs of the plaintiffs' Commercial List Statement (filed 6 December 2012): "3. In respect of each Works Portion under the PDA, the Authority [the defendant] grants the Developer [the first plaintiff] an option, allowing the Developer to nominate a Nominee to take a 99 year Lease from the Authority of the Premises applicable to that Works Portion. 4. Immediately prior to the commencement of a Lease of Premises, the Developer is obliged to make a payment to the Authority, calculated by reference to the Current Market Value of those Premises. The Current Market Value is to be determined under a process set out in Schedule 3 of the PDA. 5. For the purpose of financing its undertaking of the Works Portion known as Building C4, the Developer has entered into [the C4 Agreement] with a third party, under which the Developer agrees to nominate that third party to take a Lease of the premises for the C4 Building from the Authority, and agrees to carry out the Works relating to the C4 Building, in return for (amongst other things) a series of cash contributions paid by the third party to fund those Works. 6. The Developer has entered into a corresponding agreement in relation to the Works Portion known as Building C5 [the C5 Agreement]." 88Despite proliferation of the expression "Lend Lease" in the names of the parties to the C4 and C5 Agreements, the parties to these proceedings are agreed that those agreements are to be treated as arm's length transactions. Substantial investors, independent of Lend Lease, have an economic interest in the Project through the medium of trusts. 89The entity described in the C4 Agreement as "the Owner" is the trustee of a trust constituted by a deed dated 20 February 2012. It is, as "the Owner" described in the C5 Agreement, trustee of a separate trust constituted by a deed dated 8 June 2012. 90The "third party" referred to in the extracted fifth paragraph of the plaintiffs' Commercial List Statement is "the Owner" identified in the C4 and C5 Agreements. 91The introductory words of that paragraph ("For the purpose of financing its undertaking ...") and those at its end ("... a series of cash contributions paid by the third party to fund those Works") point to the nature of the controversy between the parties. Upon the proper construction of paragraph (g) of the definition of Current Market Value, are payments made to the first plaintiff by the third party to finance, or fund, the Works to be taken into account (and, if so, how are they to be taken into account) as revenue items, or "cash inputs", in the discounted cash flow analysis required in the calculation of Current Market Value? 92The effect of including those items as revenue items in a discounted cash flow analysis would be to increase the resultant valuation vis á vis a valuation calculation which did not include them. It is in the interests of the defendant to have a higher valuation, and in the interests of the plaintiffs to have a lower one. 93It is common ground that whether or not, for the purpose of paragraph (g), the Approved Valuers take into account amounts paid to the first plaintiff under the C4 Agreement (and the C5 Agreement) will have a material effect on the "Current Market Values" assessed by the Valuers and, therefore, on the "Premises Land Value" of Buildings C4 and C5. The evidence does not disclose how large a difference the different constructions of the PDA produce. The construction question has been argued before the Court without quantification of arithmetical consequences. 94The plaintiffs contend that inclusion in the Current Market Valuation of payments made to the first plaintiff for the purpose of funding work undertaken in advancement of the Barangaroo Project would distort calculation of Current Market Value by reference to the discounted cash flow methodology that the PDA requires to be used. The defendant contends that the receipts which the plaintiffs, for their own purposes, characterise as "funding receipts" are, in reality, indistinguishable from progress payments made by the "third party" through whose trust arrangements investors in the development are, ultimately, to obtain the benefit of leases. 95For convenience, the recitals to the C4 Agreement can be taken as summarising the effect of each of the Agreements for the purpose of elaborating the question in dispute in these proceedings. 96Those recitals are expressed in the following terms: "1. The Owner is the trustee of the Trust. 2. The Developer agrees to carry out on behalf of the Owner, and the Owner agrees to the carrying out of, the Development Works by the Developer on its behalf in accordance with this Agreement. The Development Works will be for the benefit of and for the use and enjoyment of the Owner. 3. The Developer agrees to: A. Nominate the Owner as being entitled to accept a Call Offer under the terms of the Project Development Agreement and the BDA Side Deed from the BDA [the defendant Authority]; B. Nominate the Owner and the Central Plant Co-Owner in the Central Plant Proportions, as being entitled to accept the Call Offers in respect of the three Leases of the respective Central Plant Lots under the terms of the Project Development Agreement and the BDA Side Deed from the BDA. The Owner agrees to accept the Call Offers as set out in this Agreement. 4. In consideration of the agreements by the Developer in this Agreement, the Owner must make the payments to the Developer contemplated in clause 18. 5. The Owner's Guarantor guarantees the performance of the obligations of the Owner under this Agreement. [Emphasis added]." 97The key recitals, for the purpose of these proceedings, are those numbered 2, 3A and, particularly, 4. 98The "payments to the developer contemplated in clause 18" of the C4 Agreement, referred to in recital 4, are those which lie at the heart of the competing claims in these proceedings. 99Payments under clause 18 include monthly "Construction Funding Amounts" described as "CFA" (clauses 18.1-18.4 and 18.6) and payments referable to a "Nomination Rights Fee" (clauses 18.1 and 18.7). 100The first of two paragraphs designated "(a)" in clause 18.1 provides that each CFA amount payable under clause 18.6 is paid to the first plaintiff "for it to fund the construction and other costs to be incurred by the Developer in connection with the Development Works [the design and construction of Building C4 and associated works] carried out on behalf of the Owner and for the benefit of the Owner". 101The second of two paragraphs designated "(b)" in clause 18.1 provides for the payment by the Owner to the first plaintiff of the Nomination Rights Fee (pursuant to clause 18.7) "in consideration of the Developer agreeing to nominate the Owner as the Nominee to accept the Call Offer" for which the PDA, ultimately, provides. 102The characterisation of these payments in the C4 Agreement cannot govern their proper construction under, or for the purposes of, the PDA. However an admission made by the defendant (in paragraph 20 of its Commercial List Response filed on 20 December 2012 in answer to the corresponding paragraph in the plaintiffs' Commercial List Statement filed on 6 December 2012) must be taken, for the purpose of these proceedings, as establishing as a fact that CFA amounts bear the character of amounts the Owner is required to pay to the first plaintiff to fund the construction and other costs to be incurred by the first plaintiff in connection with the Development Works. THE TERMS OF CONTRACTUAL ARRANGEMENTS The Project Development Agreement 103Ownership of the Land by the Defendant. The defendant owns the land or, at least, takes responsibility for title to the land the subject of development under its auspices: PDA Recital A; PDA clause 1.1 definition of "Barangaroo"; BDA Act, s 4(1). 104The First Plaintiff's Obligation to carry out Works. Under the terms of the PDA, the first plaintiff agrees to carry out the "Works": PDA Recital B (a); PDA clauses 15.1 and 30.1 (a). 105"Works" is defined to mean each of the "Works Portions" and all other work required to be performed or carried out to complete the "Project" in accordance with public authority "approvals", plans and specifications: PDA clause 1.1 definitions of "Works", "Works Documents" and "Approvals". 106"Works Portion" is defined to mean separately approved components of the Works: PDA clause 1.1. A full elaboration of the concept would require reference to PDA clause 11. I proceed instead on the basis of the parties' identification of each of the buildings "C4" and "C5" as a "Works Portion" 107Shorn of qualifications, the "Project" is defined to mean the undertaking by the first plaintiff of works that include "the design, funding, marketing and delivery of land and Buildings on the Site", as well as infrastructure and remediation works. "Land" is defined to mean the land in specified certificates of title folio identifiers. "Building" is defined to mean buildings to be erected on the Site. "Site" is defined, in extended terms not necessary to set out, to mean land comprising, or in the vicinity of, "Barangaroo" as defined by BDA Act, s 4(1): PDA clause 1.1 definitions of "Project", "Land", "Building", "Site" and "Barangaroo". 108The First Plaintiff's Obligation to pay a Development Rights Fee to the Defendant. As consideration for the right granted by the defendant to it to undertake the Project, the first plaintiff agreed to pay a "Development Rights Fee" to the defendant: PDA clause 4.1. 109The Development Rights Fee comprises two components: PDA clause 4.2. The first is a "Total Fixed Payment Amount" payable by instalments: PDA clause 4.2(a). The second is "an amount equal to the Value Sharing Payment for each Premises payable to [the defendant] pursuant to clause 4.5 [of the PDA] immediately prior to the Lease Commencement Date for the Lease of those Premises": PDA clause 4.2(b). 110PDA clause 4.3 provides for the first plaintiff to pay an "Accelerated Fixed Payment" to the defendant in certain circumstances. 111PDA clause 4.5 (entitled "Value Sharing Payment") is in the following terms, so far as presently material: "If immediately prior to a Lease Commencement Date... the final instalment of the Total Fixed Payment Amount has been paid or is due and payable, the Developer [the first plaintiff] must pay to the Authority [the defendant] immediately prior to that Lease Commencement Date [x%] of the Premises Land Value less the balance outstanding of the Total Fixed Payment Amount, if any." 112PDA clause 1.1 defines "Premises Land Value" as having the meaning given to it in PDA Schedule 3. 113Schedule 3 is entitled "Value Sharing Payments". 114Clause 1.1 of Schedule 3 defines "Premises Land Value" to mean "the unimproved value of the Premises, determined in accordance with [the valuation process, involving participation by the parties' respective valuers after the preparation of a Valuation Brief, set out in clause 1.2 of Schedule 3] based on the Current Market Values provided by the Approved Valuers" respectively nominated by the parties. 115That definition leads into the definition of "Current Market Value" in PDA Schedule 3 clause 1.1. 116Definition of "Premises". "Premises" is defined to mean, in respect of a Works Portion (such as Buildings C4 and C5), that part of the Site which will comprise the land and Improvements to be leased or licensed (where relevant) to the "Tenant" pursuant to clauses 27 or 28 [of the PDA], together with any Improvements on that land...": PDA clause 1.1. "Improvements" means all improvements erected at any time on the Site: PDA clause 1.1. 117PDA clauses 27-29: Nomination of a Tenant, and Grant of a Lease, of Premises. The expression "the Tenant pursuant to clauses 27 or 28" picks up not only those clauses but also clause 29: PDA clause 1.1 definitions of "Tenant", "Nominee" and "Acceptable Tenant". The definition of "Nominee", in particular, means "a person, not being the Developer [the first plaintiff], who [the defendant] has confirmed is an 'Acceptable Tenant' and is nominated by the Developer under clause 29.6 as being entitled to accept the relevant Call Offer": PDA clause 1.1. The plaintiffs' submissions highlight the italicized words, "not being the Developer". "Call Offer" is defined to mean the offer (or offers) made by the defendant to lease the Premises (or any part of the Premises) under PDA clause 27.1. 118Subject to various qualifications, PDA clause 27 provides that, in respect of each Works Portion (including Buildings C4 and C5), the defendant "makes" an offer to any relevant Nominee (that is, a person, not being the Developer, who the defendant has confirmed is an Acceptable Tenant and is nominated by the first plaintiff) to lease the Premises (that is, the land and improvements to be leased or licensed) applicable to that Works Portion to that nominee, which cannot be the Developer : PDA clause 27.1(b). 119Each Call Offer, thus made, is an irrevocable offer by the defendant to the Nominee to enter into a binding lease of the relevant Premises with that Nominee in the form of the Pro-forma Lease (defined in PDA clause 1.1 to mean the form of lease comprising PDA annexure B, a 99 year lease, at a nominal rental) and may only be accepted in accordance with the provisions of the PDA: PDA clause 27.1(c). 120PDA clause 27.2 limits the circumstances in which, and the means by which, a Call Offer can be accepted. Acceptance can occur only during the Call Offer Period applicable to the particular Call Offer and, then, provided that the first plaintiff is not in breach of obligations (including its obligation to pay the Development Rights Fee) and the PDA has not terminated with respect to the relevant Works Portion. "Call Offer Period" means, in respect of the Premises the subject of a Works Portion (or any part of it), the period commencing on the Date of Substantial Commencement of that Works Portion and ending on the date being 60 Business Days after the Date of Practical Completion of that Works Portion: PDA clause 1.1. 121Critically, by virtue of PDA clause 27.2(d), a Call Offer can be accepted only by delivery to the defendant of: a Notice of Acceptance of Call Offer signed by the Acceptable Tenant (PDA clause 27.2(d)(i)); copies of the relevant Lease executed by the Acceptable Tenant as lessee (PDA clause 27.2(d)(ii)); a certification by the solicitor for the first plaintiff that the Lease is in accordance with the terms of the PDA (PDA clause 27.2(d)(iii)); anything else the Lease requires the lessee to deliver to the lessor on or before the execution date of the Lease (PDA clause 27.2(d)(iv)); cheques for payment of all registration fees and any stamp duty payable in respect of the Lease (PDA clause 27.2(d)(vi)); and, most critically, "payment of the Value Sharing Payment and any Accelerated Fixed Payment payable in respect of the Premises the subject of the Lease relevant to that Call Offer", plus any amount payable on account of GST (PDA clause 27.2(d)(v)). 122If the Call Offer is accepted in accordance with PDA clause 27.2, then at the times the items set out in that clause are delivered to the defendant, Leases applicable to that Call Offer are deemed to have come into existence and are binding on the defendant (as lessor) and the Tenant (as lessee) from the relevant Lease Commencement Date, as if both the Defendant and the Tenant had executed the Leases at that time: PDA clause 27.3(a). 123PDA clause 28 provides for a put offer pursuant to which the first plaintiff "makes" an offer to the defendant to require the first plaintiff to lease the Premises applicable to particular Works Portions. In the nature of things, it includes no provision for the payment of a Value Sharing Payment or an Accelerated Fixed Payment. 124PDA clause 29 deals with matters consequential upon acceptance of a Call Offer or Put Offer and entry into leases by reason of such an acceptance, and miscellaneous matters. One of those miscellaneous matters, set out in PDA clause 29.6, relates to the mechanics whereby the first plaintiff is entitled to give written notice to the defendant nominating a Nominee as being entitled to accept a Call Offer. The activation of this right put in train the processes leading to the current proceedings. 125The Pro-Forma Lease. A pro-forma lease, set out in PDA Annexure B, is incorporated in the text of the PDA by PDA clause 27.1(c) and PDA clause 28.1(c), which respectively define the concepts of a "Call Offer" and a "Put Offer": PDA clause 1.1 definition "pro-forma Lease". 126Clause 10 of the pro-forma Lease (entitled "Alienation") is important to note because it explains the context in which the C4 Agreement and the C4 Investor's Side Deed were entered, and, in combination, the pro-forma Lease, the C4 Agreement and the Investor's Side Deed may impact directly on the operation of paragraph (f) of the definition of "Current Market Value" in PDA Schedule 3 clause 1.1. 127It is sufficient, for present purposes, to extract clauses 10.1, 10.2, 10.3 and 10.9: "10. Alienation 10.1 tenant not to alienate (a) The Tenant must not dispose of, deal with, assign its estate and interest in the Premises or its rights and powers as Tenant under this lease, including by way of sub-lease or concurrent lease, where the result of the sub sub-lease or concurrent lease is an effective disposal or assignment of the Tenant's rights under this lease. (b) For the purposes of clause 10.1(a), unless the Tenant or a Parent of the Tenant is a company or trust listed on the Australian stock exchange or the trustee of a Wholesale Fund or Superannuation Fund, a person becoming or ceasing to be a Parent of the Tenant will be deemed to be a disposal of the Tenant's estate and interest in the Premises. 10.2 Assignment Despite clause 10.1: (a) prior to Practical Completion (as defined in Attachment 1) the Tenant may dispose of, deal with, assign its estate and interest in the Premises or its rights and powers as tenant under this Lease to the Developer or a nominee of the Developer that satisfies the requirements of clause 10.2(b); and (b) after Practical Completion, the Tenant may assign its estate and interest in the Premises and its rights and powers as a Tenant under this lease with the consent of the Landlord, which must not be unreasonably withheld, provided that, before the proposed transaction takes effect: (i) the Tenant gives to the Landlord not less than 15 days notice of its intention to assign or transfer which sets out: A. the name and address of the proposed assignee or transferee; and B. if the proposed assignee or transferee is a company, the names and addresses of its directors; (ii) the Tenant proves to the reasonable satisfaction of the Landlord that the proposed new tenant is a respectable, responsible and solvent person capable of duly and punctually observing and performing the obligations of the Tenant under this lease; (iii) the Landlord, the Tenant and the proposed new tenant sign a deed relating to the transfer or assignment in a form reasonably required by the Landlord under which: A. the Tenant and the Landlord each release the other from their respective obligations under this lease arising after the transfer or assignment. B. the Tenant and the Landlord each release the other from all claims in respect of, or in any way arising from, this lease except in respect of any matter or thing which occurs before the date of transfer or assignment; and C. the proposed new tenant agrees to comply with this lease as if it were the Tenant in respect of All obligations imposed on the Tenant which arise on or after the transfer or assignment; and (iv) any Trigger Event or Event of Default by the Tenant, notice of which has been given by the Landlord to the Tenant prior to the Tenant's clause 10.2(b)(i) notice, has been remedied by the Tenant or waived by the Landlord; (v) the proposed new tenant satisfies the Landlord that it has effected the insurances required under clause 9; (vi) the Tenant and the proposed new tenant pay the Landlord's reasonable Costs, including legal Costs, of considering the proposed assignment; and (vii) any guarantee required under clause 10.10 is provided in accordance wit h that clause. 10.3 Assignee to comply with Tenant's obligations By taking an assignment or transfer, the assignee or transferee is taken to have agreed with the Landlord to comply with the obligations of the Tenant under this lease relating to the period after the assignment or transfer takes effect." 128The effect of the Investor's Side Deed was that the defendant agreed that the "Investor" (the "Owner" named in the C4 Agreement) was an Acceptable Tenant for the purpose of the PDA (Side Deed clause 2.1); the first plaintiff nominated the Investor as entitled to accept a Call Offer (Side Deed clause 2.2(a)); and the parties agreed that if the Call Offer were to be accepted pursuant to Side Deed clause 2.2 then the Lease or Leases applicable to that Call Offer were deemed to have come into existence (Side Deed clause 2.4(b). As the Tenant under such a Lease, the Investor would, presumably, be constrained by a clause equivalent to clause 10 of the pro-forma Lease. That means that, to realise its investment in the C4 Building, the Investor may seek to assign each lease (or sublet it) to a number of as yet unidentified, unrelated parties intended to be the ultimate occupiers of the C4 Building. 129Viewed in this light, the effect of the C4 Agreement and the Investor's Side Deed, may be characterised as the interposition of a wholesaler (the "Owner"/"Investor" as trustee for an external investor) in the process of the first plaintiff discharging its obligations under the PDA (clause 1.1 definition of "Project", paragraph (a); clause 15.11(e); clause 21.2(j); clause 25.2(b); and clause 41.3(a)) to market property, inter alia, to prospective tenants (in the "retail" market). 130The definition of Current Market Value. PDA Schedule 3 clause 1.1 defines "Current Market Value" in the following terms: "Current Market Value means the amount which a purchaser/assignee (Purchaser) would pay to a vendor/assignor (Vendor) for the grant of a Lease of the Premises on which the relevant Works Portion is to be constructed, assuming: (a) a willing buyer and a willing seller in an arm's length transaction, after proper marketing, where each party acts knowledgeably, prudently and without compulsion; (b) the terms of the lease of the Premises are the terms of the Pro-forma Lease, as completed in accordance with this deed; (c) the Lease is granted by the Authority [the defendant] at Practical Completion and the Value Sharing Payment relevant to the Premises the subject of that Lease will be paid by the Developer [sic] to the Authority at the time of the grant of that Lease and the Developer [sic] will incur no costs of funding that Value Sharing Payment until the time of the grant of that Lease; (d) the Purchaser must undertake or procure that works are undertaken on the Premises in accordance with the Developer's obligations under this deed (Approved Development Works). These obligations include, without limitation: (i) those relating to the approval of detailed design documents, including design excellence, relevant requirements of applicable Revised Statement of Commitments and any other applicable minimum standards; and (ii) the requirement to pay the Developer Contribution and the Public Art and Cultural Development Levy or any payment required under clause 4.11 of this deed; (e) that the Purchaser will have incurred the following costs on or before Practical Completion of the Approved Development Works: (i) GST, the actual GST that would be imposed (less any input tax credit entitlement); (ii) no stamp duty; (iii) design and construction costs, the amount determined to be reasonable by a Quantity Surveyor, as the cost of undertaking the Approved Development Works, including: A. the costs incurred by the Developer under clause 23.3(d) of this deed with respect to those Approved Development Works. B. a x% construction contingency. C. the likely costs incurred or to be incurred by the Developer as certified by the Independent Certifier as a result of the change in the location (and timing of construction) of the Metro Line 1 (Stage 1) station, station portals, corridors, tunnels and other infrastructure concerning Metro Line 1 (Stage 1) from the location contemplated as at 9 November 2009 (such costs are to be apportioned across GFA comprised in Buildings C5, C6, R1 and R7) (and if the GFA [Gross Floor Area] comprised in such Buildings is not determined at the time the first apportionment is to be made, then the Developer and the Authority must agreed [sic] such GFA (acting reasonably)); and D. in respect of any Approved Development Works which have been or which are anticipated to be Substantially Commenced prior to 30 June 2012, the costs incurred by the Developer in carrying out and completing the Crossing Works as certified by the Independent Certifier (such costs are to be apportioned on a pro-rata basis in respect of each of those Approved Development Works having regard to the GFA that a particular Approved Development Works bears to the total GFA of all Approved Development Works that have been or are anticipated to be Substantially Commenced prior to 30 June 2012 (and if the total GFA of all such Approved Development Works has not been determined at the time the first pro-rata apportionment is to be made, then the Developer and the Authority must agreed [sic] such total (acting reasonably)). but excluding always any costs otherwise taken into account under any other subparagraph of this paragraph (e). (iv) Recoverable Stage Costs, have been paid in equal proportions over the period of 3 months starting on the date on which the Approved Development Works physically commence on-site; (v) development management fee of x% of the design and construction costs referred to in paragraph (e)(iii) and project management fee of x% of the design and construction costs referred to in paragraph (e)(iii); and (vi) all other reasonable developer costs, as determined by the Approved Valuers using their professional judgement (and without limitation, taking into account the extent to which any Rates or land tax may or may not be payable during the period up to Practical Completion including any payments to the Authority under clause 4.7(c)), after taking into account any relevant reimbursement or payments made or to be made by the Authority to the Developer under this deed in relation to such costs; (f) that: (i) in the case of non-residential Development Works [such as Buildings C4 and C5], that not less than x% of the GFA [Gross Floor Area] of those non-residential Approved Development Works has been leased to tenants at market rent and with incentives that reflect current market incentives at the Lease Commencement Date for similar pre-lease arrangements; and (ii) in the case of residential Development Works, apartments representing not less than x% of the anticipated revenue from those residential Approved Development Works have been sold off the plan at a market price, provided that where the Developer has pre-sold or pre-leased premises included in the Works Portion for which the Current Market Value is being determined, the Developer must provide that information to the Approved Valuer, who must take account of that information; (g) the Purchaser is entitled to derive a pre-financing (ungeared) project IRR of x% in respect of the costs referred to in paragraph (e) and the carrying out of the Approved Development Works; and (h) the extent to which any GST (less any input tax credit entitlement) may be payable in respect of the initial transfer of any Lease. A worked example has been attached (for information purposes only) to this deed at Annexure W for information purposes only showing how the Current Market Value might be determined." 131The letter "x", in each place it appears in this extracted definition, represents a numeral in respect of which a suppression order has been made. 132No particular significance has been attributed, by either side of the record, to the particular types of costs enumerated in paragraph (e). 133Of the two types of "pre-commitment" revenues referred to in paragraph (f), the first is the one applicable to Buildings C4 and C5. 134The defendant relies on the terms of the proviso to paragraph (f) to make the point that the definition of Current Market Value is not entirely hypothetical, but directed to the market experience of the first plaintiff. 135The plaintiffs contend that the expression "the Developer" twice occurring in paragraph (c) is an erroneous reference to "the Purchaser", relying upon Fitzgerald v Masters (1956) 95 CLR 420 at 426-427 and 436-438. There the High Court confirmed that, in construing a contract as a whole, words may be supplied, omitted or corrected where clearly necessary in order to avoid absurdity or inconsistency. 136The plaintiffs' contention (which I accept as correct) has three foundations. First, the definition of Current Market Value is predicated upon adoption of the perspective of a hypothetical Purchaser rather than that of the first plaintiff in fact. Secondly, all reference to the Value Sharing Payment in paragraph (c) would be otiose if the Value Sharing Payment and funding costs referable to it were to be paid and borne by the first plaintiff, rather than borne by the hypothetical Purchaser, from whose perspective such expenses are to be taken into account. Thirdly, there is a clear inconsistency between paragraph (c) and an equally important provision that mirrors it. 137The valuation process for which PDA schedule 3 clause 1.2 provides contemplates that, as part of the process of instructing Approved Valuers to prepare valuations of Current Market Value, the first plaintiff is to give each of them "a Valuation Brief". Clause 1.1 of schedule 3 defines "Valuation Brief" to mean "the valuation brief comprising Annexure M" to the PDA. That annexure sets out, in clause 2.1, the text of the definition of "Current Market Value". In doing so, it sets out paragraph (c) of the definition in terms that substitute "the Purchaser" for "the Developer" in the two places the latter expression appears in paragraph (c) of the definition of "Current Market Value in schedule 3 clause 1.1. 138The parties have informed the Court that, in their performance of the PDA vis á vis the Buildings C4 and C5, they are at the point that a Valuation Brief has to be delivered to their respective valuers. It is at this point that their differences about the proper construction of paragraph (g) of the definition of Current Market Value have impeded progress. 139Some provisions from the template for a Valuation Brief set out in Annexure "M" to the PDA may throw light upon the proper construction of paragraph (g) of the definition of Current Market Value in PDA schedule 3 clause 1.1. Clause 1.1 of the annexure describes the purpose of a Valuation Brief. Clause 1.2 picks up documentation published by the Australian Property Institute, generically identified as "API Guidelines". Clause 5 (which the parties agree should be read as following on from the introductory words in clause 4) sets out "key assumptions" which are to form the basis of the valuation to be prepared by each valuer. The assumptions set out in clauses 5.6 and 5.7, in particular, are worthy of notice. 140With that explanation, the following clauses of Annexure M are here set out: "1. Introduction 1.1 Purpose (a) The Barangaroo Delivery Authority (Authority) and Lend Lease (Millers Point) Pty Limited (Developer) require a formal valuation to determine the Current Market Value [of Building C4 or Building C5, as the case may be] pursuant to the Project Development Agreement (PDA) between these parties. The land relates to a part of the Barangaroo site, as defined in section 2.1 of these instructions, which is to be leased to a tenant under a 99-year lease. (b) The Authority and the Developer are separately engaging valuers under these valuation instructions to provide an assessment of the Current Market Value in accordance with processes set out in the PDA. (c) A worked example is attached for information purposes only showing how the Current Market Value might be determined in accordance with this Valuation Brief. [Completion Note: Annexure W from the PDA to be attached] 1.2 Policy Codes, Standards and Ethics The Valuations must be performed in accordance with the prevailing Australian Property Institute (API) Code of Ethics, the API Rules of Conduct and the API Code of Professional Practice. In particular, the API Valuation and report Standards, pages 6.9.1 to 6.9.5 shall be used to guide the preparation of the assessment of value. However, the instructions outlined here will apply if there is a conflict with the API Guidelines. ... 4. Minimum Requirements of a Valuation Report The Valuation Report must contain all of the following information. However, the item headings are listed merely as a guide. ... 5. Key assumptions which form the basis of valuation ... 5.6 Market Commentary and Assumptions (a) Detailed demographic review of location. (b) Comment on underlying supply and demand profile of the market for the proposed development (including projective return in the intermediate and medium term; net absorption analysis; market demand for various products; incentive details). (c) Rationale for selection of market capitalisation rate(s). (d) Details of contracted leases, agreements for lease and heads of agreement and commentary on the relevance to the market and impact on value. 5.7 Valuation Model (a) The DCF valuation should include: (i) Full details of all revenue, cost and economic assumptions; (ii) The Current Market Value which must be calculated as an amount which enables the purchaser of the land to achieve exactly a pre-financing (ungeared) project IRR of (x%) on the development costs. (iii) A detailed statement of monthly cash flows and out flows. (iv) A separate statement of the justification for each assumption, including relevant benchmark comparisons, det ails of the sources of information used to justify each assumption. The Valuer should explain how any adjustment for comparability has been made to benchmark data. (v) The valuation should be conducted using Estate Master or an equivalent audited valuation tool as accepted by the API. Please note that an electronic copy of the cash flow analysis will be required. ..." 141It is common ground between the parties that the definition of Current Market Value employs a variant of the discounted cash flow method to arrive at the unimproved land value of the subject Premises, whereby (to paraphrase AG Robertson Limited v Valuer General [1952] 18 LGR 261 at 262) a valuer notionally erects a hypothetical building upon the subject land, capitalises the anticipated net return from the building, and subtracts the estimated building cost from the capitalisation, to arrive at an estimate of the unimproved value of the land. 142The final lines of the definition of Current Market Value in PDA schedule 3 clause 1.1 and clause 1.1(c) of PDA Annexure M both refer to a "worked example" attached "for information purposes only" to the PDA as Annexure W. 143The arithmetic set out in Annexure W is the subject of a suppression order and, accordingly, it is not here set out. Primary significance attaches to the methodology implicit in the worked example, and its use of the expression "ungeared" in connection with references to both "Net Project Cashflow" and "IRR". 144However, the entries in the "worked example" leading up to an entry entitled "Net Project Cash Flow (ungeared, before financing costs)" and an "Ungeared IRR" (at the rate specified in paragraph (g) of the definition of Current Market Value) provide context for paragraph (g). 145Those descriptors are as follows: "Barangaroo Example Current Market Valuation Start Date End Date Revenue Assumptions GFA [in square metres] Efficiency (a percentage) NLA [Net Lettable Area, in square metres] Car Park Bays [a number] Commercial [$ / square metres / per annum] Car Park - associated with buildings [$ / bay / per annum] Signage [a specified dollar figure] Initial Yield [a percentage capitalisation rate] Cashflow Revenue End Value Commercial Signage Car Park-associated with buildings Total Net Revenue [Less] Incentives [Equals] End Value Post Incentives Costs Construction Costs D&C [Design and Construction] Costs Total D&C Development Costs Project Management Fee Development Management Fee DA Application Fee Legals-Contract for Sale and Dev Agreement Legals-Major tenant leases Legals-Other Insurance Valuations Stamp Duty Rates Other (to be determined by a valuer) Total Development Costs Selling Costs Marketing Fees Commercial Leasing Agent Commission Total Selling Cost Levies Debt Contribution Art Levy Total Levies Costs Total Project Costs (excl land) Recoverable Stage Costs Current Market Value [of a 99 year lease] Total Project Costs Net Project Cashflow (ungeared, before financing costs)" 146It is common ground between the parties that the arithmetic set out in this "worked example" bears no relationship to the exercise that is required to arrive at valuations for the Buildings C4 and C5, save for reference to the internal rate of return (IRR) applied to the figures in the example. That IRR is represented by the symbol "x%" in paragraph (g) of the definition of Current Market Value as extracted in these Reasons. In Annexure W the same percentage rate is described as "Ungeared IRR". 147A point made by the plaintiffs by reference to the example is that it contains no reference to financing costs, whether those costs be in the form of debt or equity. On the other side, the defendant observes that the "worked example" does not display every item of costs referable to Premises - it excludes allowances for GST, for example . 148What Annexure W contains, in terms of methodology, is a discounted cash flow analysis in which: (a)the capitalised rental return of the (improved) Premises the subject of valuation appears as a cash inflow at the time of Practical Completion (less an allowance for incentives); (b)the hypothetical Purchaser's construction and development costs appear as monthly cash outflows; (c)a Current Market Value is calculated in order to yield the agreed "Ungeared IRR" on the cash flows; and (d)the Current Market Value represents the Approved Valuer's Estimate of the unimproved value of the Premises as at Practical Completion. 149The plaintiffs emphasise that the agreed percentage per annum internal rate of return, which the hypothetical Purchaser is assumed (in PDA schedule 3 clause 1.2(g) and PDA Annexure M clause 4.7(a)(ii)) to earn, is "a pre-financing or ungeared rate of return". By that expression, they contend that it is "a rate of return calculated without regard to cash flows associated with how the Purchaser finances or funds the works" or, more particularly, without regard to "the cash receipt of that finance and any interest or financing fees" associated with it. 150The Valuation Process. The definition of "Premises Land Value" (PDA clause 1.1 and PDA Schedule 3 clause 1.1), that lies at the heart of the concept of "Value Sharing Payment" (PDA clause 4.5) incorporates reference to both the concept of "Current Market Value" (defined by PDA Schedule 3 clause 1.1) and the means by which (pursuant to PDA Schedule 3 clause 1.2) Current Market Value is to be determined. It is in the following terms: "Premises Land Value means the unimproved value of the Premises, determined in accordance with paragraph 1.2(f) or paragraph 1.2(g) (as the case may be) based on the Current Market Values provided by the Approved Valuers." 151The reference to "paragraph 1.2(f) or paragraph 1.2(g)" is a reference to paragraphs (f) and (g) of clause 1.2 of Schedule 3. That clause is self described as "paragraph 1.2", but I prefer to reserve the word "paragraph" for passages delineated only by a lower case letter of the alphabet. 152PDA Schedule 3 clause 1.2 is in the following terms: "Valuation process (a) The Authority and the Developer must each act in good faith in doing the things contemplated by this paragraph 1.2. (b) At least 40 business Days before the Developer requires the Current Market Value to be determined (or at any other time the Authority requires the Developer to do so, provided that the Authority cannot require the Developer to do so prior to the date of the grant of the Construction Zone Licence for the Works Portion relevant to that part of the Site the subject of the Current Market Value determination and also provided that the Developer had not already issued to the Authority a CMV Notice in respect of the relevant determination required), the Developer must issue the Authority with a CMV Notice in which the Developer must nominate an Approved Valuer to provide its opinion as to the Current Market Value. (c) Within 10 Business Days of service of the CMV Notice, the Authority must nominate an Approved Valuer to provide its opinion as to the Current Market Value. (d) Within 15 Business Days of service of the CMV Notice, the Developer must give each of the selected Approved Valuers a Valuation Brief which has been approved by the Authority (acting reasonably), completed with: (i) the description of the Premises; (ii) the then Stage Costs Deficit Balance for the purposes of determining the Recoverable Stage Costs, and (iii) the Approved Development Works. (e) If requested by either Approved Valuer, the Developer must provide t he Approved Valuers within 5 Business Days with: (i) the information on which the Developer is t hen relying in order to determine the costs of the Approved Development Works that the Developer intends undertaking on the Premises; (ii) the terms on which it has negotiated to lease premises in the Approved Development Works to prospective tenants; (iii) the terms on which it has negotiated to sell all or part of the Premises and any improvements thereon; and (iv) any other information reasonably required by the Approved Valuer. (f) The Premises Land Value of the Premises will be: (i) the Current Market Value determined by each Approved Valuer where they have made the same determination; or (ii) where the gap between the Current Market Value of each Approved Valuer is no more than 5% of the lowest of the two Current Market Values determined by the Approved Valuers, the mid-point of the gap between those Current Market Valuations; or (iii) where the gap between the Current Market Value of each Approved Valuer is more than 5% of the lowest of the two Current Market Values determined by the Approved Valuers, the Premises Land Value must be determined in accordance with the provisions of paragraph 1.2(g). provided that the Developer serves notice under clause 13.4 of this deed ["masked for relevance" by the parties] within 60 Business Days of the Premises Land Value being determined (and Substantially Commences the Works Portion relevant to that Premises within 140 Business Days of the Premises Land Value being determined). For the avoidance of doubt, the Developer agrees that if it does not serve notice under clause 13.4 of this deed within the specified time period (or if Substantial Commencement if the Works Portion relevant to that Premises is not achieved within the specified time period), then: A. the amount determined will not be the Premises Land Value for the purposes of the Premises; and B. unless otherwise agreed, the Premises Land Value must be re-calculated in accordance with this paragraph 1.2. (g) If paragraph 1.2(f)(iii) applies: (i) then the Authority and the Developer will together select a third Approved Valuer (invoking the provisions of clause 45 of this deed if necessary); (ii) the third Approved Valuer will be provided with the Valuation Brief, any information provided to the Approved Valuers under paragraph 1.2(e) and a copy of each Approved Valuers determination of Current Market Value; and (iii) the Premises Land Value of Premises will be the Current Market Value determined by the third Approved Valuer but in any event not more than or less than the higher and lower of the Current Market Values determined by the other Approved Valuers. (h) Each of the Authority and the Developer will bear 50% of the costs of the third Approved Valuer and 100% of the costs of the Approved Valuer selected by it. (i) The Premises Land Value must be used for the purposes of calculating the Value Sharing Payment for the Works Portions." 153Reference has already been made to the draft "Valuation Brief" (PDA Annexure M), referred to in extracted clause 1.2(d). 154Four observations about clause 1.2 are presently apposite. First, the key players in the valuation process are "Approved Valuers", an expression defined in PDA Schedule 3 clause 1.1 as requiring registration as a valuer, accompanied by a high level of qualifications, experience and professional reputation. 155Secondly, whereas the definition of "Premises Land Value" refers to "the unimproved value of the Premises... based on the Current Market Values provided by the Approved Valuers", clauses 1.2(f)(i) and 1.2(g)(iii) confine the concept of "Premises Land Value" to "the Current Market Value" as determined in accordance with clause 1.2. Clause 1.2(i) then ties the concept of "Current Market Value", as determined by the valuers, into PDA clause 4.5, dealing with Value Sharing Payments. 156Thirdly, although the definition of "Current Market Value" must be assessed from the perspective of a "hypothetical" transaction, the valuation process is, or may be, informed by reference to actual business dealings. That can be seen in clause 1.2(d) and clause 1.2(e), particularly subparagraphs (ii) and (iii) of clause 1.2(e). 157Fourthly, the provision in clause 1.2(e)(iv) for an Approved Valuer to require the first plaintiff to provide information underscores the independence of professional judgment required of an expert of the character of a senior valuer. 158Context for the definition of "Current Market Value". Each side of the record maintains that the meaning of "Current Market Value" is able to be determined, in its favour, without travelling beyond the bounds of the definition itself, incorporating the "worked example" in PDA Annexure W. 159Nevertheless, the definition must be read in context. 160There are four layers of contextual material that require particular consideration. The first is relied upon by both sides of the record, with different emphases. The second and third are relied upon by the plaintiffs. The fourth is relied upon by the defendant. 161The first relates to the ancillary provisions of the PDA that feed directly, or indirectly, into the definition of Current Market Value. Reference has, generally, been made to them already. Any exposition of the definition requires resort to the various definitions set out in the text of the PDA (principally clause 1.1), clauses 1.1 and 1.2 of PDA Schedule 3, and the operative provisions of the PDA as a whole. 162A second layer of contextual material focuses on PDA clause 43, entitled "Developer - restrictions on alienation". That clause bears upon the ability of the Lend Lease Group to obtain financial accommodation to fund the Barangaroo Project. 163A third layer relates to a penumbra of documentation formally noticed by, if not incorporated by reference in, the PDA via an "entire agreement" clause (PDA clause 57.17), which defines the "entire agreement between the parties" by reference to a class of documents described as "Project Documents" the subject of a definition in PDA clause 1.1; a particular document in that class, "the Final Proposal", the subject of its own PDA clause 1.1 definition which, in turn, requires reference to another defined concept, "Detailed Response", and pre-contract documents incorporated by reference in paragraphs (g) and (p) of the latter definition. 164This chain of references begins, and ends, with a reference to PDA clause 1.6 (entitled "Ambiguity and Inconsistency") which, by attributing an order of priority to the documents listed in the definition of "Project Documents", colours the list as a statement of hierarchical importance in the process of addressing "any ambiguity or inconsistency" between the listed documents. 165A fourth layer of contextual material is a document (entitled "International Valuation Guidance Note No 9", expressed to have become effective on 31 July 2007, and set out on pages respectively numbered from 6.91 to 6.9.5) agreed to represent the Australian Property Institute Valuation and report Standards picked up by paragraph 1.2 of the draft "Valuation Brief" set out in PDA Annexure M, defined in clause 1.1 of Schedule 3 of the PDA. 166There is a fifth layer of documentation to which the plaintiffs invite the attention of the Court; namely, extrinsic evidence not able to be accorded the colour of right as a contractual document by virtue of clause 57.17 and the definitions that feed into that clause via the definition of "Project Documents". I apprehend no need to refer to that documentation. We have more than enough already. In formal terms, upon an application of the principles enunciated in Codelfa Construction Pty Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352 (to which both sides of the record appeal as expressing the extent to which, if at all, evidence extrinsic to the PDA can be consulted as an aid to construction), I formally reject their tender on the ground that they are irrelevant. 167PDA Clause 43 and the defendant's commitment to enter into "a Financier's Side Deed". PDA clause 43 contains express restrictions on any entitlement the first plaintiff might otherwise have to alienate or encumber its interest in the PDA, the Barangaroo Site or property brought onto the Site by it. 168Against that background, PDA clauses 43.5 and 43.6 are in the following terms: "43.5 Financing documents The Authority acknowledges that: (a) the Developer or its Related Entities may be obtaining financial accommodation to fund the Project; and (b) it may be a condition of that [sic] obtaining that financial accommodation that the Authority enters into a financier's side deed and other agreements with the Financier. 43.6 Negotiating terms of financing documents The Authority agrees to: (a) enter into a Financier's Side Deed; and (b) be reasonable in negotiating the terms of the Financier's Side Deed and other agreements referred to in clause 43.5(b) provided that: (i) there is no material derogation of the Authority's rights under this deed, the Leases (assuming that the relevant Put Offers or the Call Offers are accepted) or the Financier's Side Deed; (ii) the Developer pays all Costs reasonably incurred by the Authority arising out of or in connection with those agreements (including negotiating their terms); and (iii) the Authority is satisfied (acting reasonably) with the credit standing of the Financier (including, where the Financier is acting in a security trustee capacity), that the Authority is satisfied that the entity providing commitments to the Authority under the Financier's Side Deed is capable of financially performing those obligations after taking into account: A. the benefit of any indemnities it may have from the Developer and/or any financier; and B. the recourse of the entity to the assets of the security trust pursuant to the relevant security trust deed." 169The expression "Financier's Side Deed" is defined in PDA clause 1.1 to mean "a deed generally in the form of Annexure D and otherwise in a form acceptable to the Authority (acting reasonably)". 170Annexure D (entitled "Financier's Side Deed") is a pro-forma document expressed to be between the three parties to the PDA (styled, as they are in the PDA, as the "Authority", the "Developer" and the "Guarantor") and an unnamed, additional party styled the "Security Trustee". 171The pro-forma deed contemplates the existence of another, underlying agreement defined (in clause 1.1 of the pro-forma deed) as a "Facility Agreement". That expression, in turn, is defined as "the Facility Agreement dated on or about the date of this deed between each of the Financiers, the Security Trustee and the Developer". The expression "Financier" is defined to mean "each bank or financial institution which is a party to the Facility Agreement as a 'Financier'". An associated definition is that of "Facility", which is defined to mean "the facility or facilities provided, or to be provided, by the Financiers to the Developer under the Facility Agreement. 172The recitals to the pro-forma deed (set out under the heading "Background") are in the following terms: "A. The Authority, the Developer and the Guarantor have entered into the Development Agreement [defined, in clause 1.1, as the PDA]. B. The Financiers have agreed to provide the Facility to the Developer to fund the Works Portion. C. The Developer has granted or will grant the Financier's Securities to the Security Trustee. D. The parties have agreed to regulate the exercise of their various right [sic] and obligations in connection with the Development Agreement and the Financier's Securities on the terms of this deed." 173The recitals, by reference, incorporate two other definitions. Clause 1.1 of the pro-forma deed appears to define the expression "Development Agreement" to mean the PDA. It defines the expression "Financier's Securities", in less definitive terms, to mean a Fixed and Floating Charge and other documentation to be identified "once security structure finalised". 174The plaintiffs, correctly, contend, by reference to PDA clauses 43.5 and 43.6, coupled with PDA Annexure "D", that the parties had within their contemplation at the time the PDA was entered that the plaintiffs would be likely to finance their performance of the PDA by resort to third party borrowings, "debt" rather than "equity funding". 175As it happens, the defendant has joined in the signing of an "Investor's Side Deed" in connection with each of Building C4 and Building C5. The Side Deed relating to Building C4 is dated 7 July 2012, the same date as the C4 Agreement. It has an equivalent, in relation to Building C5, dated 9 November 2012, a date subsequent to that of the C5 Agreement. 176Having been entered into after the date of the PDA, these Side Deeds cannot govern the construction of terms in the PDA in the absence of some provision materially varying the PDA. 177Neither side of the record contends that the Side Deeds materially varied the PDA. However, the occasion for entry into the Side Deeds was used, to some extent, to renegotiate the terms upon which the parties were doing business; and the recitals to each Side Deed include a statement that "[the] parties have agreed to regulate the exercise of various of their rights and obligations in connection with the Project Development Agreement and the 'Works Portion Project Agreement' [an agreement evidently made contemporaneously with each Side Deed] on the terms in this Deed." 178PDA clauses 1.6 and 57.17, and "Project Documents". Via PDA clause 1.6 and clause 57.17, and ancillary definitions (of "Project Documents", "Final Proposal" and "Detailed Response") in PDA clause 1.1, the plaintiffs direct attention to the following "Project Documents" which, they submit, support their construction of the definition of Current Market Value: (a)First, a document entitled "Commercial Terms" described as schedule 10 to the "Detailed Response" as defined by PDA clause 1.1. It bears a date (namely, 24 March 2009) which I infer to be its date of preparation. (b)Secondly, Question 14 in a letter dated 18 May 2009 addressed by the defendant to Lend Lease Development Pty Limited, and Lend Lease Development Pty Limited's reply dated 25 May 2009, respectively documents (g) and (h) in the PDA clause 1.1 definition of "Detailed Response". (c)Thirdly, extracts from a document entitled "Commercial Proposal" (bearing the defendant's date stamp evidencing receipt of the document on 9 November 2009), comprising part of schedule 3 to the "further offer" referred to in paragraph (a) of the definition of "Final Proposal" in PDA clause 1.1. (d)Fourthly, the "Financial Model", defined by PDA clause 1.1 as "the financial model in Returnable Schedule 3 of the Final Proposal", presented in evidence in the form of a number of work sheets from which, it might be inferred, PDA Annexure W was derived. 179Placement of these documents in their contractual context requires the following provisions of the PDA to be extracted: "57.17 Entire Agreement The Project Documents represent the entire agreement between the parties. 1.6 Ambiguity and inconsistency (a) If there is any ambiguity or inconsistency between any of the documents comprising the Project Documents, that ambiguity or inconsistency will be resolved by interpreting the Project Documents in the same order of priority that they are referred to in the definition of the 'Project Documents' in clause 1.1. (b) If there is any ambiguity or inconsistency between the Agreed Design Documents and the Agreed Design Parameters, the Agreed Design Parameters prevail to the extent of that ambiguity or inconsistency. [1.1] Project Documents means: (a) this deed; (b) the Final Plans and Specifications; (c) the Detailed Plans and Specifications; (d) any Building Contract; (e) any Builder's Side Deed; (f) any Financier's Side Deed; (g) any Independent Certifier's Deed; (h) the Final Proposal; and (i) any document which the Authority and the Developer acknowledge in writing to be a Project Document, but for the removal of doubt excluding any Lease. 1.1 Final Proposal means the Detailed Response as varied, enhanced or improved by: (a) the further offer submitted by the Developer to the Authority in response to the document entitled 'Barangaroo Stage 1 Final Phase RFDP' issued to nominated proponents on or around 14 August 2009, as varied, enhanced or improved by the following clarifications: (i) Clarification Responses: 17-19 November 2009; (ii) Clarification Drawings and Documentation sent to the Authority under cover of letter dated 27 November 2009; and (iii) Clarification Responses (dated 7 December 2009) to letter from the Authority dated 24 November 2009, provided that any plans, designs and drawings comprising any part of clarifications referred to in paragraphs (i) to (iii) above are excluded from, and do not form part of, the Final Proposal for the purposes of this definition; and (b) Refined Proposal. 1.1 Detailed Response means the detailed proposal (including plans, specifications, models and financial feasibilities contained in that detailed proposal) submitted by Lend Lease Development Pty Limited to the Authority in response to the Barangaroo Stage 1 Request for Detailed Proposals issued to short-listed proponents on 25 September 2008, as varied, enhanced or improved by the following clarifications: (a) ... (b) ... (c) ... (d) ... (e) ... (f) ... (g) Proponent Presentation - Lend Lease Clarification Proponent Presentation, 18 May 2009. (h) ... (i) ... (j) ... (k) ... (l) ... (m) ... (n) ... (o) ...; and (p) Clarification Proponent Presentation Answers, 25 May 2009." 180The "Commercial Proposal" comprising schedule 10 to the Detailed Response. This document has several numbered paragraphs, of which reference needs to be made only to the first three. The first paragraph asks, and answers, the question: "What fixed payments will be made to the Authority [by the Developer]?" The second asks, and answers, the question: "What other payments will be made to the Authority [by the Developer]?" The third is entitled, "The Current Residual Land Value". 181The first of these questions, for present purposes, simply serves as an introduction to the second. So far as is material, the second question and answer are in the following terms: "2. What other payments will be made to the Authority? (a) When the Developer wishes to draw down for development (a Development Site), the Current Residual Land Value of the Development Site will be determined on the basis set out in paragraph 3 (CRLV). (b) After the CRLV has been determined (and any other conditions to drawing down the Development Site in the Project Delivery Agreement (PDA) are satisfied, the Developer will be required to pay the Authority on the grant of the Lease an amount equal to the Value Payment... 3. The Current Residual Land Value At the date on which the Current Residual Land Value is determined (the Calculation Date) the Developer will appoint a registered valuer with at least 5 years' experience from an agreed panel to make the determination applying a hypothetical development approach and in accordance with the following instructions: (1) The value 'as if complete' is the market value of the Development Site and proposed improvements on the assumption that all construction had been satisfactorily completed in all respects at the date of the report, calculated applying market rental or sales rates and a market capitalisation rate (the 'as if complete' value); (2) The profit and risk factor and the Site Development Costs must then be deducted from the 'as if complete' value; (3) The Profit and Risk Factor will be determined based on a reasonable developer's return for the proposed improvements but representing a minimum project IRR to the developer of x%*; (* the x% IRR approximates to a x% margin on costs). (4) The Site Development Costs of the proposed improvements, having regard, among other things, to the terms of the Development Management Agreement between the Developer and Lend Lease Developments Pty Limited, including: . Reasonable fees and charges incurred or to be incurred by the Developer associated with the 'acquisition' of the Development Site; . The amount paid for the acquisition of the Development Site; . Development Site holding costs, approvals costs and contributions; . Design and construction costs; . Reasonable development management fees associated with the relevant development; . Reasonable marketing fees, leasing fees, incentives and letting up allowances; and . Reasonable costs associated with selling the whole or parts of the Development Site and proposed improvements." 182The plaintiffs contend that: first, paragraph 2(b) of this extract is the genesis of the concept of "Value Sharing Payment" for which PDA clauses 4.2(b) and 4.5 presently provide; and, secondly, although the terminology and IRR percentage have changed, the principles underlying the concept of "Current Market Value" (as defined by the PDA schedule 3 clause 1.1) are evident in the extracted paragraph 3; thirdly, the IRR concept embodied in extracted paragraph 3(3) provides for a return for "profit and risk", not merely the time value of money; fourthly, extracted paragraph 3 demonstrates that the profit and risk factor and site development costs are to be deducted from the valuer's assessment of the market value of the premises at practical completion, as one would expect in a hypothetical development approach to valuation; and, fifthly, extracted paragraph 3 makes no reference to financing costs. 183The "Detailed Response" (PDA clause 1.1), Documents (g) and (p) - Defendant's Question 14 and Lend Lease's Answer. Under cover of a letter dated 18 May 2009 addressed to Lend Lease Development Pty Limited, the defendant asked as series of questions, of which question 14 is said by the plaintiffs to have significance. It was in the following terms: "14. In your proposal, value payments are dependent upon the return from the project - revenues, interest on fixed payments, the costs performance of the project and time. The incentive that you have is your fixed payment, but the value payment component to Government, are we totally are [sic] reliant on your performance?" 184The reply of Lend Lease Development Pty Limited, dated 25 May 2009, includes (subject to some "masking for relevance") the following response to question 14: "14. .Our Commercial Proposal has been structured to ensure that the Authority is not totally reliant on our performance or development risk and, to the extent that our performance can impact on value payments, that there is a strong alignment of interests between Lend Lease and the Authority. First, insofar as costs and interest has a bearing on Value Payments, the Commercial Proposal provides that: General Stage 1 Costs are to be pre-agreed with the Authority, as opposed to them being determined on an actual cost basis (which could be impacted on by our performance) Site Development Costs are subject to independent 3rd party scrutiny and determination before commencing a development and, again, are not subject to the risk of non-performance by us or any of our contractors. Interest on un-recouped Fixed Payments will be as BBSY plus 2.5% which is significantly less that [sic] our weighted average cost of capital. Second, insofar as the revenues are concerned, the 'as if complete' basis for determining the current residual land value may be informed by rental on pre-lets, revenues on pre-sales and market cap rates secured by us, but it is the independent valuer's determination of market rentals and sales rates and the market cap rate that prevails, not the revenues secured by Lend Lease. Third, insofar as the timing of development determines when Value Payments are due (and the extent of the interest on un-recouped Fixed Payments, if any,) our performance is driven by the following factors: The obligation to make Fixed Payment instalments on set dates regardless of the extent of development and the adverse impact from a risk perspective and the significant drag on Lend Lease's overall project return if Fixed Payments are made in advance of development occurring. As structured, Lend Lease does not begin to receive its 60% share of Value until the Authority has received 100% of the ... Fixed Payment and is highly incentivised to begin to share in Value at the earliest opportunity. If the development milestones are not achieved by the Milestone Dates referred to in our Commercial Proposal, in addition to still being required to make all Fixed Payments, an additional Licence Fee is payable to the Authority. In short, we do not believe that the Authority is dependent on our performance in relation to the costs of infrastructure, remediation and development returns, or in relation to revenue, and that while market conditions and Lend Lease performance will impact on the riming of development and hence the timing of Value Payments, Lend Lease is highly incentivised to optimise performance and there is a strong alignment of its interests with those of the Authority in this regard. ... [Emphasis added]" 185The plaintiffs rely, particularly, on the extracted passages that appear here in italics and, especially, on the underlined section of the second of the three numbered paragraphs extracted. 186The plaintiffs contend that this document supports their construction of paragraph (g) of the definition of "Current Market Value" in the PDA because: first, it demonstrates that actual receipts of the Developer were not to be treated as revenues of the hypothetical Purchaser for the definition of Current Market Value; and, secondly, that was so, even if, as set out in the extract, the Developer's pre-lettings and pre-sales might inform the end value of the building and thus be taken into account in assessing the Current Market Value. 187Schedule 3 to the "Further Offer" referred to in paragraph (a) of the definition of Final Proposal. Under the heading "Commercial Proposal", this document outlines Lend Lease's bid for the Barangaroo Project in terms that approximate those now found in PDA clause 4 and PDA schedule 3. The plaintiffs rely upon the following extract from it: "Value Payments (a) The first point that Lend Lease wishes to make is that the following value sharing regime only applies after the Authority has received 100% of the Total Fixed Payment Amount. Until that point the expected land value surpluses referred to will be applied towards accelerating Fixed Payments to the Authority. (b) Lend Lease has responded to the Authority's request for it to improve on the [x%] share of land value derived from the project over and above the Total Fixed Payment Amount and the recovery of Total General Stage 1 Costs by increasing the Authority's share to [x%]. (c) Lend Lease has given careful consideration to the alternative approaches that have been discussed with regard to determining additional value payments to the Authority, and believes the residual method provides the most accurate methodology. This approach has also assisted Lend Lease to maximise the Fixed Payment component of its offer, particularly having regard to potential land value that may be derived based on the forecasts and assumptions in its financial model. (d) Lend Lease has also sought to respond to issues of concern raised by the Authority. These are now documented in Schedule 3 of the PDA and are principally the following: Current Market Value must in all cases be determined on the assumption that the price is payable by the purchaser to the Authority, as vendor, on Practical Completion and that the Lease is granted by the Authority at Practical Completion. This assumption is to apply regardless of whether or not Lend Lease calls for a Lease to be granted at Substantial Commencement. That of the costs that the purchaser will be assumed to have incurred, and may involve related Lend Lease entities such as construction costs, development management fees and project management fees, the costs are verified by an independent quantity surveyor or are fixed percentages of construction costs. That the costs include recoverable Stage 1 Costs (as specified under the PDA) That the value determined is only effective for a specified time period. That at the time the value is determined all key information that Lend Lease has regarding secured pre-sales and pre-letting has been provided to the valuer, and on the assumption that in any event a minimum of [x%] of the GFA off commercial office space will have been leased to tenants at market rates, and on market terms and a minimum of [x%] of the anticipated revenue from residential premises will have been secured by pre-sales off the plan at market prices. 38230000775774That the purchaser is entitled to derive a pre-financing (ungeared) project IRR of [x%] in respect of development (excluding land and interest costs), for incurring the specified costs and generally in carrying out of the approved development works on the land. (e) Underlying the requirement that the current market value to be determined in all cases is on the basis that the Lease is granted at Practical Completion is Lend Lease's desire to ensure that: the assessment of its offer is not prejudiced by the right that it has sought to have Leases granted at Substantial Commencement. This was done t o address very real concerns over the availability and pricing of debt and equity to fund development in a post GFC environment and in the absence of an ability to give investors and financiers real security over the land at the commencement of development. Lend Lease recognises that this has not been the practice of the Sydney Harbour Foreshore Authority in the past, and Lend Lease has successfully developed SHFA land without title being granted before practical completion. However, Lend Lease did not want the status quo to act as a constraint to development in the changed environment. Lend Lease has taken steps in the PDA to address concerns that they Authority has over the transfer of title before practical completion. The value payments to the authority is NOT reduced if Lend Lease calls for the Lease to be granted at Substantial Commencement. Worked Examples Worked examples of the Fixed and Value payments to the Authority are attached (see Schedule 1). They are based 9on hypothetical amounts and stages for simplicity." 188The plaintiffs rely upon this extract in support of a submission that what is clearly intended by the PDA is: first, that there be a valuation using the residual value method; and, secondly, for the purpose of assessing the rental income that the completed premises would generate, a valuer is to be provided with information that Lend Lease had about how many tenants had been secured and what rent they were prepared to pay. 189The Financial Model. As admitted into evidence (as Exhibit P3, Tab 28, pp 8-40) documentation representing the Financial Model (as defined by PDA clause 1.1) comprises a number of hard copy pages of worksheets taken from a large Microsoft Excel file. 190In paragraph 1.3 of an introductory note, on page 9 of the exhibit, Lend Lease included a formal disclaimer which, the defendant submits, undermines any foundation the documentation might have (under Codelfa principles) to be used as casting light on the proper construction of the PDA. The disclaimer is in the following terms: "1.3 This Financial Model does not, and is not intended to, create any legally binding obligations on the part of Lend Lease. In particular this Financial Model: (a) does not and is not intended to constitute an offer to carry out the arrangements contemplated by it. (b) may not be taken as any form of commitment on the part of Lend Lease to proceed with any of the arrangements contemplated by it." 191This is but a debating point. The Financial Model is a pre-contract communication (dated 9 November 2009 or thereabouts) subsequently "incorporated" in the PDA by reference. If the Codelfa principles were otherwise engaged, a formal note of this character would not, of itself, preclude reference to the documentation to which it was appended. In any event, the plaintiffs claim for the documentation status as part of their contract with the defendant by virtue of PDA clause 57.17. 192PDA clause 57.17 does not, of itself, attribute persuasive value to documentation falling within the definition of "Project Documents". That is, or may be, a topic to which one must turn to PDA clause 1.6 and the order of priorities set out in the definition of "Project Documents" in PDA clause 1.1. Even then, as part of the "Final Proposal" (as defined by the definitions of "Final Proposal" and "Financial Model" in PDA clause 1.1) the Financial Model ranks well behind the PDA in terms of the evidentiary value it might have as a guide to the parties' contractual intention. 193However, it does fall within the concept of a "contractual document" identified in PDA clause 57.17, and its inclusion in that category lends weight to any attribution to it of the character of a "surrounding circumstance" to which (consistently with Codelfa) reference can be made in the process of construing the PDA. 194In the course of submissions counsel for the plaintiffs specifically referred to only two pages of the worksheets from the Financial Model. Both pages are the subject of an admission made by the defendant by a letter dated 12 March 2013 in response to a Notice to Admit Facts dated 4 March 2013 served on behalf of the plaintiffs. 195Those two pages are, respectively, numbered 10 and 14 in Exhibit P3. 196The point made by the plaintiffs by reference to page 10 can be gleaned from the admission made by the defendant: On the worksheet entitled "Model Outputs" (that is, page 10), the entry for "Project IRR (pre-tax)" (in line 77) is independent of the values on the lines subsequently appearing under the heading "Funding" (lines 153 to 216). This is but a paraphrase of the admission, but it is directed to proof of the plaintiffs' case that the agreed IRR rate shown in paragraph (g) of the definition of "Current Market Value" in PDA schedule 3 clause 1.1 is independent of funding arrangements. 197The plaintiffs find similar support for their case in the admission made by the defendant by reference to page 14 of Exhibit P3. That page, entitled "C1", relates to one of seven worksheets (numbered "C1" to "C7") reproduced from the Financial Model. The plaintiffs rely upon it for its demonstration of the methodology they submit underlies paragraph (g) of the definition of "Current Market Value". 198They rely on the fact that line 134 includes a reference to "IRR" (at point K134) which is the same percentage rate found in paragraph (g) of the definition of Current Market Value. The defendant's admission is that that figure (at K134) is independent of the values shown in the lines appearing, lower down the page, under the heading "Funding" (lines 153-216). 199The plaintiffs also rely upon an entry shown in the worksheet for "Project IRR (pre-tax)" on line 151 (at point M 151). It too is the same rate as shown in paragraph (g) of the definition of Current Market Value. The defendant's admission is that the figure for "Project IRR (pre-tax)" at point M151 is also independent of the values of the lines appearing under the heading "Funding" (lines 153-216). 200The defendant has also admitted: first, that figures appearing in the lines under the heading "Revenue Calculations" (lines 47-70) are independent of the values in the lines appearing under the heading "Funding" (lines 153-216); and, secondly, that figures appearing in the lines under the heading "Revenue" (lines 74-85) are independent of the values in the lines appearing under the heading "Funding" (lines 153-216). 201With the benefit of these admissions, the plaintiffs make the following submissions about Exhibit P3 page 14: first, by a comparison between that page (in particular, lines 1-151) and Annexure W to the PDA, an inference can be drawn that the worked example shown in Annexure W has been prepared by taking part of one of the commercial development worksheets from the Financial Model; secondly, significance attaches to the fact that the part of the worksheet that was not taken from the worksheet for Annexure W is that part dealing with "Funding"; and, thirdly, the selectivity demonstrated in drawing annexure W from the Financial Model suggests that the calculation of "Current Market Value" was intended to be undertaken without having regard to cash flows associated with funding the works. 202Australian Property Institute and Report Standards. The "API Standards" (admitted into evidence as Exhibit P2 Tab 21) are those identified in paragraph 1.2 of the draft "Valuation Brief" (PDA Annexure M) extracted above. It is an important component of the defendant's case, coupled with the definition of "IRR" in PDA Schedule 3 clause 1.1. That definition (extracted above) feeds into the expression "a pre-financing (ungeared) project IRR of x%" in paragraph (g) of the definition of Current Market Value. 203In the definition of "IRR" the defendant places particular emphasis on the reference to "net present value of the projected cash flows" and the direction that the IRR "is to be determined by using monthly cash flows". 204The defendant accepts that "debt finance" should be excluded from the cash flows used to calculate "Current Market Value", but it contends: firstly, that the CFA Amounts are not a form of debt finance, the essence of which is a loan incorporating an obligation to repay; secondly, under the C4 Agreement, there is no present, future or contingent obligation on the first plaintiff to repay any of the CFA Amounts to the Owner; thirdly, the CFA Amounts are instalments, pre-payments or progress payments on account of the "Adjusted Total Consideration" and "Nomination Rights Fee" for which clause 18 of the C4 Agreement provides (as elaborated below); fourthly, the CFA Amounts are instalments, pre-payments or progress payments, initially, for building works and related services and, consequentially, for nomination of the Owner as the person entitled to acquire a leasehold interest in Building C4; fifthly, an instalment, pre-payment or progress payment is not a loan, but a receipt in the nature of "income"; sixthly, the words "pre-financing (ungeared)" in paragraph (g) of the definition of "Current Market Value" do not permit such income to be excluded from the cash flows that are used for the IRR calculation; and seventhly, the definition of "IRR" in PDA Schedule 3 clause 1.1, read with the API Standards, compels a conclusion that the PDA requires that such cash flows, and the time at which they occur, be taken into account. 205The API standards comprise six paragraphs (divided into sub paragraphs) under the heading, "Discounted Cash Flow Analysis for Market Valuations and Investment Analyses". 206The nature, purpose and scope of the API Standards are set out in paragraphs 1-2: "1.0 Introduction 1.1 Discounted cash flow (DCF) analysis is a financial modelling technique based on explicit assumptions regarding the prospective income and expenses of a property or business. Such assumptions pertain to the quantity, quality, variability, timing and duration of inflows and outflows that are discounted to present value. DCF analysis with appropriate and supportable data and discount rates, is one of the accepted methodologies within the income capitalisation approach to valuation. ... 1.2 DCF valuations, as with other income-based valuations, are established on analysis of historical data and assumptions about future market conditions affecting supply, demand, income, expenses and the potential for risk. These assumptions determine the earning capacity of a property or business upon which the pattern of its income and expenditures/outgoings is projected. 1.3 The objective of this Guidance Note (GN) is to prescribe Generally Accepted Valuation Principles (GAVP), best practice and due diligence measures for Valuers to follow in performing DCF analysis for market and non-market based valuations and to distinguish between applications of DCF analysis in these two different types of valuation assignments. 2.0 Scope 2.1 This GN applies to market and non-market valuations developed by means of DCF analysis. It discusses the structure and components of DCF models and the reporting requirements for valuations based on DCF analysis. 2.2 The scope of this GN extends to the reasonableness and supportability of the assumptions upon which the DCF analysis are based. Assumptions made in any valuation directly affect the value conclusion. In accordance with the IVSC Code of Conduct, all assumptions underlying a valuation should be likely, reasonable and supportable." 207These paragraphs dovetail with the concluding words of paragraph 1.1 of PDA Annexure M. They provide that the API standards "shall be used to guide the preparation of the assessment of" Current Market Value; but that "the instructions outlined" in the Valuation Brief to be given to Approved Valuers (in the Valuation process governed by PDA Schedule 3 clause 1.2) "will apply if there is a conflict with the API Guidelines." 208The defendant contends, correctly, that the API Standards indicate that, in performing a discounted cash flow valuation of a property development, a valuer should have regard to anticipated cash inflows (as well as outflows), including the timing of anticipated sales income and other receipts. 209In support of that contention, the defendant relies upon the following points, drawn from the API Standards: "(a) Paragraph 1.1 [of the API Standards] confirms that a discounted cash flow analysis is 'based on explicit assumptions regarding the prospective income and expenses of a property or business. Such assumptions pertain to the quality, quantity, variability, timing and duration of inflows and outflows.' (b) Paragraph 3.2 states that, in the case of development properties, 'estimates of capital outlays, development costs, and anticipated sales income are estimated to arrive at a series of net cash flows that are then discounted over the projected development and marketing periods.' (c) Paragraph 3.4 defines the internal rate of return as 'the discount rate that equates the present value of the net cash flows of a project with the present value of the capital investment. It is the rate at which the Net Present Value (NPV) equals zero.' (d) Paragraph 3.6 describes 'Net Present Value' as the 'difference between the discounted revenues, or inflows, and the costs, or outflows, in a discounted cash flow analysis.' (e) Paragraph 5.2 says the Valuer must identify 'the components of DCF analysis' including 'the components of cash inflow and cash outflow' (at paragraph 5.2.2), and 'net cash flows per period (the sum of inflows less the sum of outflows)' (at paragraph 5.2.4). (f) Paragraph 5.2.2.1 identifies the components of 'cash inflow' as including, in the case of development properties, 'income from sales, adjusted for cost of sales.'" 210The defendant contends that, when paragraph (g) of the definition of Current Market Value is read with PDA Annexure M and the API Standards, it is evident that the Approved Valuers are required to take account of monthly cash inflows, as well as outflows, in respect of the Approved Development Works. Moreover, it contends, those provisions are not consistent with an argument (attributed to the plaintiffs) that the Approved Valuers must ignore the CFA Amounts as and when received, and instead "pretend" that a notional amount will be paid to the first plaintiff at a later date. 211The defendant also relies upon the API Standards in support of a submission that the words "pre-financing (ungeared)" IRR found in paragraph (g) of the definition of Current Market Value exclude debt finance, but do not exclude pre-payments or progress payments. In this connection, in addition to references to "sales income", "revenues", "inflows" and "net cash flow" earlier noted above, the defendant draws upon the API Standards as follows: "(a) Paragraph 5.1.3 [of the API Standards] observes that 'DCF model cash flow can be developed both gross or net of tax and gross or net of debt financing', and the 'discount rate will therefore be based on the assumptions of the cash flow, gross or net of tax and gross or net of debt financing'; (b) Paragraph 5.2 refers to the need for the valuer to identify the components of the DCF analysis including any 'debt finance or debt service (payment of interest and principal) per period; and (c) Paragraph 5.9.3.1 states that the valuer must 'indicate the annual effective rate at which periodic interest is calculated, where finance debt or debt service (payment of interest and principal) is a component of the projected period cash flows." 212The defendant submits that the API Standards thus indicate that debt financing and debt servicing are matters which may or may not be included in a discounted cash flow analysis, but that the projected cash flows should take account of all cash inflows in the nature of income, in order to arrive at a series of net cash flows. It contends that, accordingly, when the PDA refers to a "pre-financing (ungeared) project IRR" which is "to be determined using monthly cash flows", it requires the Approved Valuers to exclude from the projected cash flows any debt financing or debt servicing (as the API Standards contemplate may occur), but to include any cash flows in the nature of anticipated income. 213The defendant draws support for its construction of paragraph (g) of the definition of Current Market Value from paragraph (f) of the definition, the proviso to which requires that, where the first plaintiff has pre-sold or (as is relevant in the context of Building C4) pre-leased premises included in the Works Portion for which the Current Market Value is being determined, the Approved Valuers must take that information into account. It contends that, if the first plaintiff receives payments in respect of pre-sales or pre-leases in a given month, then the Approved Valuers could not, consistently with paragraph (f), ignore that information or assume (contrary to fact) that those amounts will not be received in that month or at all. There is, it contends, no basis in the contractual language for excluding such payments (cash inflows) from the "monthly cash flows" used to determine the IRR under paragraph (g). The C4 Agreement: a Funding/Investor's Agreement 214Overview. The C4 Agreement is one of at least two agreements entered into by the first plaintiff for the purpose of funding its performance of its obligations under the PDA, using funds provided by an investor or investors. A related agreement submitted to the Court for consideration, visa á vis Building C4, is the "Investor's Side Deed". 215Lend Lease INT (LLWTST ST) Pty Limited is named in the C4 Agreement as "the Owner" and in the Investor's Side Deed as the "Investor". As appears from the recitals to the C4 Agreement (reproduced above), the company is also the trustee of a trust constituted by a trust deed dated 20 February 2012. That trust is described in the Side Deed as the "Investor Trust". It is through that trust that investors, unrelated to Lend Lease, participate in the Barangaroo Project. Lend Lease INT (LLWTST ST) Pty Limited entered into the Side Deed in its capacity as trustee of the Investor Trust: clause 13.1(a). 216Obligations of the Developer (first plaintiff) under the C4 Agreement. The first plaintiff's "key obligations" under the C4 Agreement include an obligation to perform its obligations as required under the PDA (including the due management of all costs, contributions and profit sharing amounts under that agreement): clause 2.1(a). It is required to carry out and complete the Development Works (defined by clause 1.1 to include the design and construction of Building C4), for the benefit of the Owner, in accordance with the C4 Agreement: clause 2.1(c). Other provisions of the C4 Agreement elaborate these, and related, obligations: eg, clauses 2.1, 4.2, 8.1, 8.9, 9.1, 9.2, 13.4, 27.1. 217Obligations of the Owner under the C4 Agreement. The obligations of the Owner under the C4 Agreement include an obligation to make payments to the first plaintiff under clause 18 of the C4 Agreement, an obligation to accept the Call Offer made by the defendant under PDA clause 27 in relation to Building C4, and an obligation to comply with obligations in relation to granting tenant leases: clause 2.2. 218Clause 18 of the C4 Agreement is the present focus of attention. It provides for the Owner to make three types of payment to the first plaintiff: (a)"CFA Amounts" are monthly amounts payable to the first plaintiff, for it to fund the construction and other costs to be incurred by [it] in connection with the Development Works carried out on behalf of the Owner and for the benefit of the Owner": C4 Agreement clauses 18.1(a), 18.2, 18.3, 18.4 and 18.6, together with the definition of "CFA Amount" in clause 1.1. Each payment of a CFA amount is subject to certification of the first plaintiff's progress in construction of Building C4: clause 18.2, read with clause 1 definitions of "Certifier", "Cost to Complete", "Development Works" and "Portion". (b)A "Nomination Rights Fee" is payable in consideration of the first defendant agreeing to nominate the Owner as the Nominee entitled to accept the Call Offer (in respect of the "Ground Lease" under the terms of the Investor's Side Deed), in accordance with, and subject to, the terms of the C4 Agreement: clause 18.1(b), second occurring. The Nomination Rights Fee is a capital sum (defined by clause 1.1 of the C4 Agreement) payable (pursuant to clause 18.7) in two instalments. Clause 18.7 provides that the first instalment is payable on the date the first CFA amount is paid, and the balance is payable after practical completion of specified works: C4 Agreement, clause 1.1 definitions of "Settlement Date" and "First Payment Date". (c)The "Adjusted Total Consideration", less the "Nomination Rights Fee", is payable in consideration for the first plaintiff procuring at its cost completion of the Development Works on behalf of the Owner and performing its obligations (referable to marketing Building C4 with the intention of locating potential lessees and procuring tenancy proposals) under clause 27 of the C4 Agreement: 18.1(a), second occurring. 219The Adjusted Total Consideration is calculated on each of four dates specified in clause 18.5. Those dates are, at least to some extent, governed by the progress of the first plaintiff in construction of Building C4. On each date, there is a reconciliation to ensure that the aggregate amounts paid by the Owner (including the CFA Amounts) equal the Adjusted Total Consideration as calculated at that time. The reconciliation takes the form of payment of an additional CFA Amount: clause 18.4. 220There is an admission by the defendant, on the pleadings in these proceedings, that the CFA Amounts are monthly amounts that the Owner is required to pay to the first plaintiff "to fund the construction and other costs incurred by [the first plaintiff] in connection with the Development Works carried out on behalf of [the Owner] and for the benefit of [the Owner]": Commercial List Statement (filed 6 December 2012), paragraph 20 and Commercial List Response (filed 20 December 2012), paragraph 20. 221The external investors who participate in the Barangaroo Project through the trust of which the Owner is trustee earn the equivalent of "interest" on the "progress payments" made during construction of Building C4 by adjustments that find reflection in a formula, found in clause 18.5(b) of the C4 Agreement, for calculation of the "Adjusted Total Consideration". That formula involves adding and subtracting a number of components, including a subtraction for "the Computed Return calculated in accordance with clause 18.10". 222Clause 18.10 is in the following terms: "18.10 Computed Return The Computed Return is an amount calculated by applying the Funding Rate [an "effective rate of return compounding monthly in arrears" in accordance with a definition of 'Funding Rate' in clause 1.1] applicable (at the date the relevant calculation is made) to each of the CFA Amounts and the Nomination Rights Fee paid to [the first plaintiff] from the date on which the Owner paid the relevant amount to [the first plaintiff] and until the First Payment Date [defined by clause 1.1 by reference to a "Date for Practical Completion", also defined by clause 1.1]." 223The effect of clauses 8.5 and 18.10 is that an amount (equal to the Funding Rate applied to the CFA Amounts and the pre-payment of the Nomination Rights Fee) is deducted from the total amount that the Owner must pay to the first plaintiff under the C4 Agreement: 18.1(b), first occurring. The Investor's Side Deed 224It is not necessary, for present purposes, to analyse in detail the Investor's Side Deed relating to Building C4, entered into on the same date as the C4 Agreement. It is sufficient to notice that: first, it is, in substance, a "Financier's Side Deed" of the type which, by PDA clause 43.6, the defendant agreed to enter; secondly, it is described in the C4 Agreement as the "BDA Side Deed" (clause 1.1); and, thirdly, it prospectively placed the "Investor" (the "Owner" in the C4 Agreement) in the position of a Tenant from the defendant. 225Its function is to serve as a bridge between the PDA and the C4 Agreement, tying them together. The defendant agrees that the Investor (the C4 Owner) is an "Acceptable Tenant" for the purpose of a PDA Call Offer: clause 2.1(a). For the purpose of PDA clause 29.6, the first plaintiff nominates the Investor (C4 Owner) as being entitled to accept the Call Offer. 226This arrangement may affect characterisation of payments made by the "Owner" to the first plaintiff under the C4 Agreement, with an impact on the operation of paragraph (f) of the definition of "Current Market Value" in PDA Schedule 3 clause 1.1. PRINCIPLES OF CONSTRUCTION 227It is axiomatic that a contract must be construed as a whole: Australian Broadcasting Commission v Australasian Performing Right Association Limited (1973) 129 CLR 99 at 109; K Lewison and D Hughes, The Interpretation of Contracts in Australia Law Book Co, Sydney, 2012) paragraph (7.02); JW Carter, The Construction of Commercial Contracts (Hart Publishing, Oxford, 2013) para [13-29]. 228A contract is to be construed by reference to the intention of the contracting parties, objectively ascertained. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean; that, normally, requires consideration not only of the text but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction: Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165 at 179 [40], citing Pacific Carriers Limited v BNP Paribas (2004) 218 CLR 451 at 461-462 [22]. According to the "objective" theory of contract law, the legal rights and obligations of contracting parties turn upon what their words and conduct would be reasonably understood to convey, not upon actual beliefs or intentions: Equuscorp Pty Limited v Glengallan Investments Pty Limited (2004) 218 CLR 471 at 483 [34]. 229In Pacific Carriers Limited v BNP Paribas, at 218 CLR 462 [22], the High Court grounded its reference to the need to consider, not only the text of documents, but also the surrounding circumstances known to contracting parties, and the purpose and object of their transaction by reference to the judgment of Mason J in Codelfa Constructions Pty Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 at 350. 230That judgment remains the definitive Australian authority governing reference to evidence of "surrounding circumstances" extrinsic to a contract in construction of the contract: Western Export Services Inc v Gireh International Pty Limited [2011] HCA 45; 86 ALJR 1 at [3]-[5], citing Royal Botanic Gardens and Domain Trust v South Sydney City Council (2009) 240 CLR 45 at 62-63 [39]. 231It is not necessary to set out the whole of Mason J's definitive judgment in Codelfa, which spans 149 CLR 351-353. It is sufficient to set out the following passage: "The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although ..., if the facts are notorious knowledge of them will be presumed. It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But insofar as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself.... Consequently when the issue is which of two or possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except insofar as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and the parties' presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract. ..." 232These observations have direct application in the current proceedings insofar as the plaintiffs have endeavoured to rely upon documents wholly extrinsic to the PDA; that is, documents neither physically comprising part of the PDA nor arguably incorporated by reference. Those documents are inadmissible aids to construction of the PDA. 233A more particular question, touching upon Codelfa, arises upon a consideration of particular terms of the written contract here under consideration. PDA clause 57.17 (set out above) takes the form of a "entire agreement" clause which, in substance, it is not. It purports, implicitly, to incorporate by reference "Project Documents" that are defined (in PDA clause 1.1) in terms which could, at least in some respects, invite challenge on the ground of uncertainty. The fact that no such challenge has been made in these proceedings is, perhaps, a reflection of the fact that only two classes of document in the definition of "Project Documents" require consideration; one is the PDA deed itself, the other is documentation described in the PDA as the "Final Proposal". 234The other idiosyncratic provision of the PDA that invites attention is clause 1.6, set out above. It purports, subject to a contingency (the existence of "ambiguity or inconsistency") to attribute an "order of priority" to Project Documents in the resolution of "that ambiguity or inconsistency". 235In an endeavour to circumvent problems that may arise in connection with the construction or operation of PDA clauses 1.6 and 57.17, the plaintiffs contend that: first, where there are several documents, forming part of a composite transaction, the rule that a contract must be construed as a whole is applied to the transaction as a whole (JW Carter, The Construction of Commercial Contracts, para [13-34]); and, secondly, it does not matter that some of the documents to which it is necessary to have regard do not themselves have contractual force. 236It is not necessary to traverse these contentions, or to do more than notice them. The question(s) of construction identified for decision cannot be answered without negotiating the complexity of the parties' contractual arrangements. However, that done, answers are available within the text of the PDA. That much, at least, is common ground between the parties despite the length and breadth of their debates about the meaning, and their different perspectives, of that text. 237Emerging from the thickets through which I have been bound to wander, I am comfortably satisfied that the Court can, and should, focus on the text. ANALYSIS Exposition of Current Market Value and the Valuation Process 238The valuation exercise for which PDA schedule 3 clause 1.2, and the definition of "Current Market Value" in clause 1.1 of the Schedule, provide is a hypothetical one, based on assumptions, albeit informed by actual, real world facts. 239The valuation method contemplated by the definition of "Current Market Value" is one in which, upon assumptions, a valuer notionally erects a hypothetical building upon the land to be valued and capitalises the anticipated net return from the development. 240Described in valuation literature as a "hypothetical development method" (AA Hyam, The Law Affecting Valuation of Land in Australia (Federation Press, 4th ed, 2009, Sydney), pp 188-190, citing AG Robertson Limited v Valuer-General (1952) 8 LGR (NSW) 261 at 262, Australian Provincial Assurance Association Limited v Commissioner of Land Tax [1942] ALR 156 at 158 and Boland v Yates Property Corp Pty Limited (1999) 74 ALJR 209 at 268 amongst other cases), care needs to be taken not to substitute shorthand labels for the text that defines, and governs, the valuation task to be performed. 241One might, as do the parties here, equally describe the valuation method prescribed by the PDA as a variant of the "Discounted Cash Flow" method: Hyam, op cit at pp 209-217 citing, inter alia, Albany v Commonwealth (1976) 60 LGRA 287 at 293-294 and Boland v Yates Property Corp Pty Limited (1999) 74 ALJR 209 at 268. 242At day's end, in the current proceedings one is driven back to the text of the PDA as the source of instructions to the Approved Valuers, setting the task that the parties have agreed is to be performed. 243As prescribed by the definition of Current Market Value in PDA Schedule 3 clause 1.1, an Approved Valuer is required to determine a value of property by reference to two hypothetical parties (compendiously described as "Purchaser" and "Vendor" respectively) having, by virtue of paragraph (a) of the definition, a character similar to that commonly associated with Spencer v Commonwealth (1907) 5 CLR 418 at 432 and 441. Those hypothetical parties are required to be viewed as "willing", but acting in an arm's length transaction, after proper marketing, with knowledge and prudence, and without compulsion. 244Because the property to be valued is the subject of a hypothetical development, and the hypothetical Purchaser is assumed to be acquiring property for the purpose of effecting that development, attention not unnaturally focuses on the perspective of the hypothetical Purchaser. However, the valuation exercise required to be undertaken requires a reconciliation of the respective perspectives of both the hypothetical Purchaser and the hypothetical Vendor. 245The hypothetical Purchaser (whose particular perspective lies at the heart of these proceedings because of the centrality of paragraph (g) of the definition of Current Market Value to the parties' dispute) cannot be simply identified with the Developer (the first plaintiff), notwithstanding: (a) references in the definition to the Developer as a source of information about the development; and (b) the temptation to associate the real life Developer with the hypothetical Purchaser because of the similarity of their roles vis á vis the property the subject of the valuation exercise. To treat them as one and the same for the purpose of the valuation exercise is an invitation to error. 246The personality charged, by paragraph (d) of the definition of Current Market Value, with responsibility for undertaking the hypothetical development is the hypothetical Purchaser, not the real-life Developer, notwithstanding definition of the hypothetical Purchaser's development obligations by reference to those of the Developer under the PDA. 247The costs of the hypothetical development, required by paragraph (e) of the definition to be assumed, are not necessarily those actually incurred by the real life Developer. That is evident, for example, in the requirement that, for the purposes of valuation, the amount of "design and construction costs" to be taken into account is an amount determined by a Quantity Surveyor to be reasonable. 248On the other side of the accounts of the hypothetical development, the hypothetical revenue stream, required by paragraph (f) of the definition to be assumed, is equally distinct from actual revenues, received or anticipated as prospective, by the Developer. Both limbs of paragraph (f) contemplate that individual lots in the hypothetical development will have been taken up by end-users (with a commitment rate of "not less than x%" of an applicable measure) at market rates. 249At each step along the way in the valuation exercise there may be scope for an application of expert judgment, informed by real life facts, but always within the context of a hypothetical development constrained by express assumptions. The concept of "market" rates embedded in paragraph (f) marks out territory classically occupied by valuation expertise. 250Because the parties' dispute in these proceedings is focussed on the revenue side of the valuation exercise required by the definition of Current Market Value to be undertaken, particular attention must be given to paragraph (f), governing as it does the revenue assumption required to be made by Approved Valuers. 251Upon a consideration of paragraph (f) several points must be noticed. 252First it speaks of revenue anticipated to be received by the hypothetical Purchaser, rather than revenue actually received by the real-life Developer. 253Secondly the assumed revenue stream flows from prospective end-users of individual lots, rather than any larger, global concept of property that must, in the nature of things, be the focus of the Developer's experience in arranging funding for, or marketing, a Works Portion such as the C4 and C5 Buildings. 254Thirdly, there is no necessary, or direct, correlation between the commercial decisions, and market conditions affecting decision-making, of the Developer and its investors (on the one hand) and (on the other hand) the hypothetical end-users (tenants and buyers), operating in a different level of market, involving an assessment of "market rent" and "market incentives" or "market price". That is so, notwithstanding that, as paragraph (f) implicitly acknowledges, real life experience of the Developer in marketing the actual development may inform an expert assessment of the market rates that are to be assumed for the purpose of paragraph (f). 255When paragraph (g) is read in the context of preceding paragraphs of the definition of Current Market Value, and bearing in mind that the subject of the assumption for which it provides is the hypothetical Purchaser (not the actual Developer), the intended operation of the paragraph is clear. The task of an Approved Valuer is to determine "the amount" which the hypothetical Purchaser would pay to the hypothetical Vendor (assuming that they have the characteristics ascribed to them by paragraph (a) of the definition of Current Market Value) upon an assumption that the hypothetical purchaser is entitled to a specific, nominated rate of return (described in valuation literature as a "profit and risk factor") arising from capitalisation of an anticipated net return, based upon assumptions about costs, and revenue. 256There is no foundation within the definition of Current Market Value for inclusion, on the revenue side of the calculation, of any of the amounts actually received by the Developer pursuant to clause 18 of the C4 Agreement (or clause 19 of the C5 Agreement). 257That conclusion does not depend (or, perhaps more accurately, does not only depend) on attribution of a particular meaning to the expression "a pre-financing (ungeared) project IRR of x%" (in paragraph (g) of the definition of Current Market Value) which has absorbed the attention of the parties in these proceedings. 258Whatever coincidence there may be in the economic perspectives of the hypothetical Purchaser and the Developer, the focus of paragraph (g) is upon the assumed entitlement of the hypothetical Purchaser in the context of the assumptions about costs and revenue prescribed by the definition of Current Market Value. It is not upon the actual position of the Developer vis á vis its investors. 259The expression "a pre-financing (ungeared) project IRR of X%" in paragraph (g) reinforces this conclusion, and is itself reinforced by the irrelevance attributed to "costs of funding" in paragraph (c) of the definition of Current Market Value, and in the "worked example" reproduced as PDA Annexure W. 260Payments made to the Developer pursuant to clause 18 of the C4 Agreement (or pursuant to clause 19 of the C5 Agreement) cannot, on the proper construction of the PDA, be fed into the discounted cash flow exercise for which paragraph (g) of the definition of Current Market Value (read with the definition of IRR) provides. 261Those payments may inform the valuation exercise insofar as they may bear upon an assessment of the "market rents" and "market incentives" required to be the subject of an assumption under paragraph (f)(i), or insofar as they may be thought by an Approved Valuer, acting within his or her area of expertise, to bear upon the reasonableness of a determination of value. However, they are not necessarily, or directly, an ingredient in the valuation exercise. Elaboration, commencing with Paragraph (g) 262Paragraph (g) of the definition of "Current Market Value" lies at the core of the parties' perception of their dispute about the proper construction of the PDA. That is evident in formulation of the "central question" they proferred for determination. 263However, that "central question" is asked against the background of a broader question about whether (and, if so, how) payments made to the first plaintiff under clause 18 of the C4 Agreement are relevant to a determination of "Current Market Value" pursuant to PDA Schedule 3 clause 1.2. 264That broader question supplies one reason why the focus of attention cannot rest only on the text of paragraph (g) of the definition of Current Market Value. Even if (as I find) C4 Agreement clause 18 payments have to be ignored for the purpose of an application of paragraph (g) - because they do not come within the expression "a pre-financing (ungeared) project IRR" read with the definition of "IRR" - there is a broader question whether (and, if so, how) they can, or must, be taken into account, in the course of a determination of Current Market Value. 265Another reason why the focus of attention cannot rest solely on the text of paragraph (g) is that paragraph (g) itself has to be placed in the broader context of the following provisions (listed in ascending order of generality): (a)the terms of the definition of "Current Market Value" in PDA Schedule 3 clause 1.1, including paragraph (f) of the definition. (b)the definition of "Premises Land Value" in PDA Schedule 3 clause 1.1, read with clauses 1.2(f)(i) and 1.2(g)(iii) of the Schedule. (c)the definition of "Premises Land Value" (in PDA Schedule 3 clause 1.1) as picked up by the definition of "Premises Land Value" in PDA clause 1.1 and given operative force by PDA clause 4.5 (entitled "Value Sharing Payment"). (d)PDA clause 4.5 as picked up by PDA clause 4.2(b), in the context of PDA clause 4.1, which make provision for payment by the first plaintiff to the defendant of an amount equal to the Value Sharing Payment for Premises immediately prior to the Lease Commencement Date for the Lease of those Premises. (e)in the broader context of the PDA as a whole, including provisions incorporated in PDA clause 4.2(b) by the incorporation of definitions found in PDA clause 1.1 and, underlying them all, machinery provisions (such as PDA clause 27.1(b), 27.2(d)(v), 27.3, 29.6 and 29.1(a)) that culminate in the grant of a 99 year lease, at a nominal rental, in favour of a nominee of the first plaintiff. (f)in the still broader context of the PDA as varied, or affected, by the C4 Investor's Side Deed and, by association, the C4 Agreement. 266From the perspective of the defendant, PDA clause 4.1 is the prime contractual provision via which it stands to gain economically from development of its land. In expressing the point that way, I do not overlook the defendant's broader public interest objectives, enumerated in PDA clause 2.1, or the objects of the Barangaroo Delivery Authority Act 2009 NSW (s 3). PDA clause 4.1 is important at a less abstract level. It invokes the language of contract law by identifying the "Development Rights Fee" payable by the first plaintiff to the defendant as "consideration for the right granted to [the first plaintiff] to undertake the [Barangaroo] Project" in accordance with [the PDA]." 267As PDA clause 4.2 provides, the Development Rights Fee comprises two components. One is a "Fixed Payment Amount" payable by instalments: PDA clause 4.2(a). The other is an amount equal to the Value Sharing Payment (PDA clause 4.2(b)), literally a means by which the first plaintiff and the defendant have an opportunity to share the benefits of an increase in the value of the Barangaroo land by reason of its development. 268Adoption of a contractual mechanism for sharing an increase in land value does not, of itself, import notions of "fairness" or "reasonableness" as governing principles in construction of the contract. The contracts that the parties to these proceedings have made, the PDA and the Investor's Side Deeds chief amongst them, must be construed objectively in accordance with established authority. 269PDA clause 4.2(b) focuses attention on PDA clause 4.5 (entitled "Value Sharing Payment") which defines such a payment by reference to a percentage of "Premises Land Value", a concept defined (by PDA Schedule 3 clause 1.1) to mean "the unimproved value of the Premises... based on the Current Market Values provided by the Approved Valuers". 270Read in isolation, the expression "based on" might suggest that the concept of Premises Land Value is not strictly tied to the concept of Current Market Value. However, the definition of Premises Land Value contains references to PDA Schedule 3 clause 1.2 that specifically tie it to the Current Market Value as defined by PDA Schedule 3 clause 1.1: PDA Schedule 3 clause 1.2(f), 1.2(g)(iii) and 1.2(i). 271In the definition of Current Market Value the introductory words point to the nature of the concept. Current Market Value "means", not only an "amount", but "the" amount that hypothetical parties ("a purchaser/assignee" on the one hand and, on the other hand, "a vendor/assignor") would transact business. In particular, it is the amount a hypothetical purchaser/assignee "would pay" to a hypothetical vendor/assignor "for the grant of a Lease of the Premises on which the relevant Works Portion is to be constructed" making specified assumptions. 272The hypothetical purchaser/assignee is not an emanation of the Developer (the first plaintiff), even if real world experience of the first plaintiff may inform an assessment of the assumed costs of construction referred to in paragraph (e) of the definition of Current Market Value, or the assumed pre-commitments on the revenue side (for which paragraph (f) of the definition provides) in the discounted cash flow analysis to be undertaken by the Approved Valuers. The material task of the Valuers is to form an opinion, within these parameters, about what a hypothetical purchaser/assignee would pay to achieve a "pre-financing (ungeared) project IRR of x %" as contemplated by paragraph (g) of the definition. 273The word "value" in the context of the definition of "Current Market Value", and the procedural framework of the valuation process for which PDA Schedule 3 clause 1.2 provides, jointly and severally encapsulate the concept of an expert evaluation of a dollar amount. 274There is no indication, or at least no express indication, in the definition of Current Market Value that the assumptions specified in the definition are exhaustive of the factors that can be, and are to be, taken into account in the assessment of the "amount" to be attributed to Current Market Value. 275However, the concept of Current Market Value is implicitly constrained by the terms of the definition, the fact that it is to be applied by expert valuers possessed of particular professional qualifications and experience and the valuation process which the parties have contractually bound themselves to follow in good faith. 276There are various indicators in the definition of Current Market Value and in delineation of the Valuation Process leading to a quantification of Current Market Value that, although constrained by the assumptions for which the definition of Current Market Value provides, the expert assessment to be undertaken by the Approved Valuers can, and should, be informed by available information as to actual facts. 277This is illustrated by the proviso to paragraph (f) of the definition of Current Market Value. Where the first plaintiff, as Developer has pre-sold or pre-leased premises including in the Works Portion for which the Current Market Value is being determined, the first plaintiff must provide that information to the Approved Valuer(s), who must take account of it. The reference to pre-sales ties in with paragraph (f)(ii). The reference to pre-leased premises refers back to paragraph (f)(i). 278The expression "must take account of" found in the proviso requires the Approved Valuers to give consideration to particular information; but, apart from implying that that information is or may be relevant to the task they are called upon by the PDA to perform, it does not dictate to them the significance or weight to be given to it. 279In the context of paragraph (f)(i) - the particular provision of paragraph (f) applicable to the C4 Building - the information referred to in the proviso could reasonably be supposed to be likely to bear upon, if not generally to inform, an Approved Valuer's assessment of the "market rent [or] incentives that reflect current market incentives" at the date, and of the type, required by the PDA to be assumed. 280The proviso to paragraph (f) is not the only indication in the PDA that the Approved Valuers are to, or may, take into account evidence of actual facts in their assessment of a hypothetical value. 281Other indicators of that can be found in PDA Schedule 3 clause 1.2. Clause 1.2(d) requires the first plaintiff, as Developer, to give each Approved Valuer a Valuation Brief (in the nature of the pro-forma reproduced as Annexure M to the PDA) which has been approved by the defendant, acting reasonably. Clause 1.2(e) requires the first plaintiff to provide additional information if requested by either Approved Valuer to do so. 282Information of the character identified by clause 1.2(d), clause 1.2(e) and Annexure M includes real world facts, not merely assumptions of fact. 283Furthermore, PDA Annexure M confirms that each Approved Valuer is required to address actual facts. In that connection, both parties refer to clauses 5.6 and 5.7, which direct attention to market conditions and cash flows. 284These provisions confirm that a determination of Current Market Value by an Approved Valuer is not a rote, mechanical or purely mathematical exercise. It requires an exercise of independent professional judgement involving qualitative, as well as quantitative, decision-making. 285However, particular significance attaches (in favour of the plaintiffs' contentions) to the provisions of clause 5.7(a)(ii) which require that the "DCF [Discounted Cash Flow] Valuation... include ... [the] Current Market Value which must be calculated as an amount which enables the purchaser of the land to achieve exactly a pre-financing (ungeared) project IRR of x% on the development costs." 286Consistently with this, the definition of Current Market Value in PDA Schedule 3 clause 1.1 (and clause 1.1(c) of the pro-forma Valuation Brief found in PDA Annexure M) provide, in PDA Annexure W, a "worked example", available "for information purposes only", "showing how the Current Market Value might be determined" by an Approved Valuer. 287In this "worked example" and in paragraph (g) of the definition of Current Market Value, the x % nominated as the IRR (internal rate of return) must be construed as providing for an element of profit, and an allowance for risk, to the hypothetical purchaser/assignee in the calculation of the amount which the hypothetical purchaser/assignee would pay for the grant of a lease. 288The meaning of the expression "a pre-financing (ungeared) project IRR" must take substantial colour from that worked example. 289Whatever meanings may be attributed to the words "pre-financing" and "ungeared", jointly or severally, in other contexts, their joinder in a composite expression, in the context of the definition of Current Market Value and in the broader context of the PDA as a whole counsels caution against more than passing reference to lexicons indicative of word meanings in the abstract. Albeit by a "worked example", the parties have adopted their own dictionary. 290The concept of a "pre-financing (ungeared)" rate of return is there deployed as a rate of return calculated without regard to cash flows associated with how the (hypothetical) Purchaser may finance, or fund, the Works. 291In my assessment, the plaintiffs are correct in their contention (illustrated by PDA Annexure W and reinforced by, but not dependent upon, reference to antecedent materials incorporated in the contract) that performance of the discounted cashflow analysis required of the Approved Valuers by the definition of Current Market Value does not allow the Approved Valuers to include on the revenue side the moneys periodically received by the first plaintiff under clause 18 of the C4 Agreement. 292To include those payments on the revenue side on the cashflow analysis would be to treat the hypothetical Purchaser as if it earned a return on those amounts at the percentage rate identified in paragraph (g) of the definition of Current Market Value. This is contrary to the substantive effect of the C4 Agreement, which provides for the Developer to make in favour of the Owner (Investor) an allowance (defined in clause 18.10, harking back to clause 1.1 definitions of "Computed Return" and "Funding Rate" in the C4 Agreement), in the nature of interest, predicated, one may assume, on a commercial assessment of the end value of the Works financed. 293In three distinct, but inter-related ways this disparity tells against attribution to the hypothetical Purchaser of a finance-driven income stream of the Developer. First, it highlights that the valuation exercise required to be undertaken by the Approved Valuers must be viewed from the perspective of hypothetical parties, particularly a hypothetical purchaser/assignee, not that of an actual party, the Developer (first plaintiff). 294Secondly, it invites recognition that the revenue assumption for which paragraph (f) of the definition of Current Market Value provides focuses on an assessment of market rates attributable to individual lots within the Works, the subject to valuation, whereas clause 18 of the C4 Agreement has as its subject matter, the whole of a Works Portion. 295Thirdly, it supports a conclusion that payments to the Developer, under clause 18, are conceptually different from the assumed revenue stream available to the hypothetical Purchaser within the terms of paragraph (f). 296That does not mean, however, that an Approved Valuer is precluded, generally, from taking into account payments made to the first plaintiff under clause 18 of the C4 Agreement. 297It is not correct to characterise those payments only as "funding" or "financing" payments. They bear that character but, to some extent, they also implicitly bear the character of consideration for "purchase" of an interest in the defendant's land. 298The Approved Valuers are at liberty to consider whether regard might reasonably be had to the clause 18 payments for the purpose of taking into account, in their evaluative process, so much of those payments as may fairly represent, in substance, payment on account of acquisition of an interest in land owned by the defendant. 299The Approved Valuers are entitled, on the proper construction of the PDA, to take into account the substantive character of clause 18 payments as implicitly including an element of a "purchase price", having regard to the timing and amounts of such payments and a reasonable apportionment of those payments between the provision of finance and the receipt of consideration. 300To the extent that those payments bear the character of a purchase price they may be as indicative of market conditions as transactions the subject of the proviso to paragraph (f) of the definition of Current Market Value and, although not literally falling within the terms of paragraph (f), available to be taken into account in the assessment of Current Market Value. 301They are available to be taken into account as bearing upon an assessment of "market rent", "market incentives" or "market price", within the meaning of paragraph (f), and, accordingly, for the purpose of assessment of the revenue stream for which paragraph (f) provides, as part of the Discounted Cash Flow valuation exercise which is at the core of the definition of Current Market Value. 302There is no necessary, direct correlation between (on the one hand) the notional value attributed to the C4 Building by an investor funding its construction and marketing to individual end-users and (on the other hand) the market rent, market incentives or market price, attributable to individual parts of it for the purpose of paragraph (f); but, within the field of his or her expertise, a valuer could take the view that the investor's assessment of market conditions is relevant to the valuation task at hand. 303The fact that the first plaintiff, implicitly, pays "interest" indirectly (in the form of a price reduction or discount to account for the fact that the bulk of the clause 18 payments have to be paid before completion) should not, as a matter of substance, preclude the Approved Valuers from taking clause 18 payments into account (so far as such payments may, in their professional judgment, rationally reflect the value of the property to be valued) when making an assessment of market conditions for the purpose of making a determination of Current Market Value. 304The fact that imprecision may attach to characterisation of some part of clause 18 payments as attributable to an acquisition of land owned by the defendant does not relieve the Approved Valuers from any obligation they may have to consider whether (and, if so, how) it can, and should, be done. 305Any difficulty attaching to such a decision-making exercise has been accommodated by the parties in their deliberate entrustment of it to the professional judgement of experts, possessed of particular qualifications, and an orderly dispute resolution mechanism leading to an assessment of value. Implicit in the valuation exercise is a need to exercise sound professional judgement, informed by training and experience, where minds may reasonably differ. 306On the proper construction of the PDA, the definition of "Current Market Value" in PDA Schedule 3 does not require (but, subject to qualifications addressed in these Reasons for Judgment, permits) an Approved Valuer, when assessing the Current Market Value for the premises for the C4 Building, to take into account an allowance for some part of the cash contributions received by the first plaintiff as Developer under clause 18 of the C4 Agreement. 307On the proper construction of the definition of "Current Market Value" in PDA Schedule 3, an Approved Valuer is permitted to take into account the cash contributions received by the first plaintiff under clause 18 of the C4 Agreement to the extent that those payments: (a)may, in substance, fairly represent, or be indicative of, a payment implicitly made on account of an interest in land owned by the defendant; and (b)might reasonably be thought by a person having the qualifications of an Approved Valuer (as defined by PDA Schedule 3 clause 1.1) as having a bearing upon an evaluation of the amount (ie, rationally affect an assessment of the amount) which the hypothetical Purchaser would pay to the hypothetical Vendor, for the property the subject of valuation, identified in the introductory words of the definition of "Current Market Value". 308Characterisation of part of the moneys periodically paid to the first plaintiff under clause 18 of the C4 Agreement as referable, in substance, to a payment on account of acquisition of an interest in land owned by the defendant (and hence indicative of land values) involves an evaluative process which the PDA contemplates will be conducted by one or more Approved Valuers leading, in the case of dispute, to an outcome determined by PDA Schedule 3 clause 1.2. 309This is consistent with the assumption for which paragraph (g) of the definition of "Current Market Value" 310However, the expression "a pre-financing (ungeared) project IRR" in paragraph (g), read with the worked example in PDA annexure W, is, on the proper construction of the PDA, intended to encapsulate the idea that the valuation exercise for which PDA Schedule 3 clause 1.2 provides is to result in a determination of "value" not affected by decisions that may have been made by the plaintiffs about how construction of a building is to be financed, whether by debt or equity financing. 311The words "pre-financing" and "ungeared" jointly and severally point in that direction, elliptical though they are. PDA annexure W is to the same effect. The fact that the subject matter of paragraph (f) is an "entitlement" attributed to the hypothetical Purchaser and going to the presumptive profitability of the project reinforces the same conclusion, and tends against factoring into a mathematical IRR calculation cash flows which, though they may bear upon market conditions, are driven by the plaintiffs' funding arrangements. 312This is reinforced by the assumption for which paragraph (c) of the definition provides, reading it (as I have determined it must be read) as providing that the hypothetical Purchaser is to be taken not to have incurred funding costs before the grant of a Lease The funding cash flows of the Purchaser (and, for completeness, it must be said, those of the first plaintiff as Developer) are to be ignored in determining Current Market Value. 313The plaintiffs contend (and I agree) that the Approved Valuers may have regard to the C4 Agreement and the amounts paid under clause 18 of that Agreement, but not, as the defendant would have it, as moneys required to be used as inputs in the IRR calculation contemplated, by paragraph (g) of the definition of Current Market Value, as indicative of an assumed entitlement of the hypothetical Purchaser. 314The principal dispute between the parties focuses, not so much on whether those amounts can be taken into account, but how they may be taken into account. 315Provided that the Approved Valuers adopt a valuation methodology consistent with the assumptions for which the definition of Current Market Value provides (including an assumption that the method by which a building is to be financed is not allowed to be an operative factor affecting valuation), how they go about making their determination of value is a matter entrusted to their professional judgement and the peer review, dispute resolution mechanism for which PDA clause 1.2 provides. CONCLUSION 316Subject to allowing the parties an opportunity to make submissions as to the precise form of declarations to be granted consequent upon these Reasons for Judgment, I propose to make the following declarations: (1)Declare that, upon the proper construction of the Project Development Agreement between the first plaintiff as "Developer", the second plaintiff as "Guarantor" and the defendant, entered into on 5 March 2010 and subsequently amended on 1 April 2010, 8 June 2010, 30 July 2010, 23 December 2010 and 14 June 2012 ("the PDA"), an Approved Valuer, in making a determination of the Current Market Value for the grant of a Lease of the Premises on which the proposed Building C4 is to be constructed (for the purpose of clause 1.2 of schedule 3 to the PDA) is not entitled to input as cash inflows, in performing a discounted cash flow valuation for the purpose of paragraph (g) of the definition of "Current Market Value" in clause 1.1 of schedule 3 to the PDA, those cash contributions paid before Practical Completion to the Developer (by the Nominee nominated by the Developer to accept a Call Offer) referred to in clause 18 of the agreement dated 7 July 2012 entitled "Stage I Project Agreement, Wharf Tower Building C4, Barangaroo South Sydney". (2)Declare that, upon the proper construction of the PDA, an Approved Valuer, in making a determination of the Current Market Value for the grant of a Lease of the Premises on which the proposed Building C5 is to be constructed (for the purpose of clause 1.2 of schedule 3 to the PDA) is not entitled to input as cash inflows, in performing a discounted cash flow valuation for the purpose of paragraph (g) of the definition of "Current Market Value" in clause 1.1 of schedule 3 to the PDA, those cash contributions paid before Practical Completion to the Developer (by the Nominee nominated by the Developer to accept a Call Offer) referred to in clause 19 of the agreement dated 7 July 2012 entitled "Stage 2 Project Agreement, Wharf Tower Building C5, Barangaroo South Sydney"; but 317I do not propose to incorporate in any declaration views here expressed about the use that an Approved Valuer can make of the fact, timing or structure of payments under clause 18 of the C4 Agreement or clause 19 of the C5 Agreement. 318Those views lack that degree of essentiality to the determination of the issue tendered for determination (about the proper construction and operation of paragraph (g) of the definition of Current Market Value) necessary to attract rules, governed by cases such as Blair v Curran (1939) 62 CLR 464 at 531-533, that render them binding on the parties. 319Moreover, the Court should be slow to give independent legal force to what might be perceived to be a gloss on the language of a contract governing the rights and obligations of litigants about a valuation question and, thereby, to convert into "law" a question which is , and should remain, essentially a question for the expertise of a valuer. 320Hopefully, what has been written may be of assistance to the Approved Valuers. Whether or not it is, any declarations that are made should be expressed in terms tightly focussed on the issue tendered for determination. 321Prima facie, if costs are to follow the event, the plaintiffs are entitled to an order that the defendant pay their costs of the proceedings. The parties are, however, at liberty to address me on that question. 322The only order presently necessary to move the proceedings to a final determination is an order that the parties bring in short minutes to give effect to these reasons for judgment. Those short minutes should address: (a) the form of declarations to be made; (b) the costs orders, if any, to be made; and (c) the form of any ongoing orders under the Court Suppression and Non-Publication Orders Act 2010 NSW. ADDENDUM 323These Reasons for Judgment were published to the parties on 12 December 2013. On the application of the plaintiffs, and without objection by the defendant, on 13 December 2013 Lindsay J revised the Reasons by deleting from paragraph 248 a number erroneously recorded there and substituting the letter "x". 324On 13 December 2013 his Honour also made Orders giving effect to the Reasons for Judgment as revised, including declarations in the terms set out in paragraph 316. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 May 2020