Supreme Court New South Wales Medium Neutral Citation: Johnson Property Group Pty Ltd v Thornton [2015] NSWSC 1389 Hearing dates: 14, 15, 16, 21 and 22 September 2015 Date of orders: 22 September 2015 Decision date: 22 September 2015 Jurisdiction: Equity Before: Young AJA Decision: Proceedings dismissed with costs Catchwords: CONTRACT – alleged oral contract to co-operate in good faith with land developer – fails on facts EQUITY – proprietary estoppel – developer adds value to defendants' land by his activities after conversation with defendants whether either because of proprietary estoppel or unjust enrichment developer entitled to compensation WORDS AND PHRASES – co-operate; good faith Legislation Cited: Conveyancing Act 1919 (NSW) Corporations Act 2001 (Cth) Environmental Planning and Assessment Act 1979 (NSW) Cases Cited: Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30; (2012) 247 CLR 203 Anshn v Port Melbourne Authority [1981] HCA; 45 (1981) 147 CLR 589 Cadorange Pty Ltd (in liq) v Tanga Holdings Pty Ltd (1990) 20 NSWLR 26 Cobbe v Yeoman's Row Management Ltd [2008] UKHL 55; [2008] 1 WLR 1752 David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 353; (1992) 175 CLR 343 East India Co v Vincent (1740) 2 Atk 83; (1740) 26 ER 451; [1558-1774] All ER Rep 615 Falcke v Scottish Imperial Insurance Co (1886) 34 ChD 234 Foskett v McKeown [1998] Ch 265; [1998] 2 WLR 298 Leichhardt Municipal Council v Green [2004] NSWCA 341 Guo v Xiao (No 2) [2014] NSWSC 1416 McMahon v National Foods Milk Ltd (2009) 25 VR 251 Paccaccio v ANZ Banking Group Ltd [2015] FCAFC 50 Raphael Shin Enterprises Pty Ltd v Waterpoint Shepherds Bay Pty Ltd [2014] NSWSC 743 Texts Cited: The Law of Proprietary Estoppel, Ben McFarlane (Oxford University Press, 2014) Category: Principal judgment Parties: Johnson Property Group Pty Ltd – first plaintiff Vermont Quays Pty Ltd – second plaintiff Bona Vista Properties Pty Ltd – third plaintiff Fernadell Properties Pty Ltd – fourth plaintiff David Robert Thornton – first defendant Christopher Michael Thornton – second defendant Representation: Counsel: T S Hale SC with Ms Z Steggall – for the plaintiffs D L Cook with S Nash – for the defendants Solicitors: Andrews and Holm Lawyers – for the plaintiffs Holding Redlich – for the defendants File Number(s): 2014/278066 Judgment 1. The plaintiffs are property developers. The defendants are the proprietors of land which had been used for agricultural purposes for many years. The present dispute concerns land at Pitt Town, an old established village on the Hawkesbury River in the Hawkesbury River County Council area, which council is based in Windsor. Mr Keith Johnson is the controller of the four plaintiffs and he took the view that it would be a worthwhile project to redevelop land at Pitt Town adjoining the river. It is not necessary to go into details, but he spent some time and energy getting together like-minded landowners and with them, fought off pressure groups from other local residents, so that in due course the redevelopment of Pitt Town became a viable proposition. His general method of carrying out land development was to form a single venture company with minimal subscribed capital for each of his distinct projects. 2. There are four plaintiffs in the instant case. The first plaintiff is a company Johnson Property Group Pty Ltd, which the evidence discloses was incorporated in October 2002. The second plaintiff is Vermont Quays Pty Ltd, which was formed in October 2001. The third plaintiff, Bona Vista Properties Pty Ltd, was incorporated on 14 December 2000. And the fourth plaintiff, Fernadell Properties Pty Ltd, was incorporated in 2004. Mr Johnson himself is not a party to these proceedings. 3. The basal contention of the plaintiffs is that in the year 2000, there was an agreement between the Johnson interests and the defendants that the Johnson interests would obtain all necessary approvals and all things necessary over land owned by the defendants, so as to permit the subdivision and sales of both land owned by the defendants and land owned by the various companies in the Johnson interests. That agreement is said to have been oral. I will deal with the details shortly. From 2002 onwards, a series of options was given by the Thorntons to a company in the Johnson camp, the second plaintiff, whereby in consideration of option fees totalling $200,000, options were granted over the land so that that Johnson company could purchase the land owned by the Thorntons for $10 million. Initially the option was for a period up to 2006, but eventually it was extended to 4 April 2013. However, the option was never exercised and lapsed on 4 April 2013. 4. However, the development in the area has proceeded. On 26 July 2006, a Voluntary Planning Agreement was entered into between the plaintiffs and the State of New South Wales. This agreement involved liability on the four plaintiffs (and under Clause 18 of the Voluntary Planning Agreement their liability was joint and several), to pay for various pieces of infrastructure that it was considered, at least by the government, to be necessary to provide for the increased population of Pitt Town, including at least at one stage a new school. It seems to be common ground that without that Voluntary Planning Agreement, no rezoning of the land involved in this case would have been possible. 5. However, once the Voluntary Planning Agreement was entered into, the way forward for rezoning of the land came about and amendment 145 to the Hawkesbury local planning instrument was gazetted on 18 August 2006. This agreement covered three groups of land which have been identified in evidence as the Blighton, Cleary and Thornton precincts. The names appear to have come from the surnames of the previous proprietors of the land before they were brought into the Johnson fold. Now, of course, the Thornton lands never did become part of the land under the Johnson fold, though it is quite clear that for a number of years all the parties proceeded on the basis that in due course they would be. The development costs were borne by the Johnson interests, and I say that loosely because it would seem that the costs were paid by a company in the Johnson Group other than the four plaintiffs, but I will come back to that in due course. 6. The evidence shows that that company in the Johnson Group paid about $1.6 million to fulfill the developer's obligations under the Voluntary Planning Agreement. In brief, the plaintiffs say that the expenditure has increased the value of the defendants' land by about $1,320,000. Basically they claim damages in this amount, or alternatively equitable compensation. In the latter case, they are content merely for a declaration of liability and for that amount to be secured by an equitable charge over the Thornton land for the sum and the court rate of interest. 7. Now, that essentially is what this case is all about, but it is now necessary to deal with its myriad aspects in some detail. 8. The case commenced on Monday, 13 September 2015. Mr T S Hale SC and Ms Z Steggall of counsel appeared for the plaintiffs, and Mr D Cook and Mr S Nash, both of counsel, appeared for the defendants. The hearing lasted until Wednesday, 15 September 2015. The matter had been set down for six days. However, Mr Hale sought at the end of the third day and I granted, though not with the consent of Mr Cook, an adjournment to prepare submissions. I granted this on the basis that the plaintiffs' written submissions would be submitted by 17 September at 10am and the defendants' by 4pm that same day and counsel could speak to them today. These times were adhered to. 9. The issues that I have to address are: A. Apart from the written option agreements, was there any contract between the parties, and if so, between what parties and what were its terms? B. If there was such a contract, has there been a breach of it? C. Was there a collateral contract with respect to a detention pit? D. If so, has there been any breach of that collateral contract? E. Was there any operable proprietary estoppel because of the conduct of the parties? F. If so, are the plaintiffs entitled to relief, and if so what? G. Have the defendants been unjustly enriched? H. If so, what orders should be made? I. Other issues. J. The plaintiffs' application for the Court to impose an easement under Section 88K of the Conveyancing Act, 1919 K. The result of the case. 1. I will deal with each of these issues in turn. However, I must state that because of the urgency of the case and the fact that my current sittings terminate next Friday, I have to deliver this as an ex tempore judgment which will not be as detailed as I would like. However, the result I think is completely clear. If either set of counsel wish further reasons and they ask at the end of the judgment or within a reasonable time thereafter, I will supply additional reasons. 2. Before dealing with the issues I must set out the salient facts and circumstances. The 'facts' have been taken for the present purposes basically from the plaintiffs' chronology. The plaintiffs say that in 2000 there was a meeting between the parties and an oral agreement was made to work together to develop the Thornton land and to sell that Thornton land in terms to be agreed in good faith. Now, that is obviously something that needs to be fleshed out and I will come back to it. On 4 April 2002, a deed of option was signed between the Thorntons, that is two brothers, Christopher and David Thornton, on the one hand, and Vermont Quays Pty Ltd on the other hand, and I shall turn to that deed. 3. The parties are shown as David Robert Thornton and Christopher Michael Thornton, called 'the vendor', and Vermont Quays Pty Ltd called 'the purchaser'. Paragraph 1 deals with the grant of an option. Clause 2 deals with the option fee, which in due course amounted to some $200,000. Clause 5 allows the option to be exercised by a nominee of the purchaser. Clause 7 reads as follows: 7.1 The vendor must allow the purchaser (or its nominee) and its officers, servants, agents, consultants, and employees access to the property (with or without necessary equipment) at all reasonable times on reasonable notice for the purposes of: (a) preparing any applications for the purchaser's proposed use or development of the property; and (b) obtaining geotechnical, survey, environmental or other reports in relation to the property. 7.2 When accessing the property the purchaser must cause minimal disruption to the vendor or any occupiers of the property, and must use its reasonable endeavours not to cause any interference to any of the services connected to the property. 7.3 The vendor or the vendor's officers, servants, agents, consultants, and employees must not: (a) object to the purchaser's (or its nominee's) proposed use of development of the property; and (b) hinder the purchaser (or its nominee), and its officers, servants, agents, consultants, and employees in the exercise of its rights under cl 7.1. 1. Clause11.4 reads: This document contains everything the parties have agreed on in relation to the matters it deals with. No party can rely on an earlier document, or anything said or done by another party, or by a director, officer, agent or employee of that party before this document was executed, save as permitted by law. 1. Clause 11.6 reads: The parties will promptly do and perform all acts and things and execute all documents that may from time to time be required, and at all times will act in good faith, for the purposes of and to give effect to this document. 1. That document was executed on 4 April 2002. It was varied or amended in 2003. 2. The plaintiffs' chronology deals with reference to various conversations between members of the Johnson Group and either of the Mr Thorntons between 2003 and 2006, but it is difficult to see how they could have any bearing on the case and Mr Hale says that it is necessary to remember that the continued co-operation between the parties was vital to the whole enterprise. As I have said, the Voluntary Planning Agreement was entered into on 26 July 2006 and the land was rezoned on 18 August 2006. 3. In September 2007 the Thorntons gave consent for part of the process needed by the Johnson interests to continue to develop the land. In October 2007 the relevant Minister declared the project under Part 3A of the Environmental Planning and Assessment Act 1979 and also in 2008, the Minister for Planning granted concept plan approval for certain of the lands and there was an amendment to the Major Projects State Environmental Planning Policy gazetted on 18 August 2008. As I have already indicated, there were extensions of the option up until 4 April 2013. 4. There were further discussions between the parties in October 2013 off and on through to mid-2014 and discussions were actually terminated on 25 August 2014, and thereafter the plaintiffs were refused access to the Thornton land. The significance of that is that the Blighton and Cleary land are only able to be subdivided with the consent of the local authority if there is a retention basin, sometimes called a wetlands facility, which will capture rainwater overflow before it enters the Hawkesbury River. The proposal is environmentally necessary because if the water is not retained somewhere in a dam or reservoir or the like, the water will bring with it, not only silt, but also perhaps undesirable pollutant material from the lands over which the water has flowed, which are not desirable to go into the Hawkesbury River. If there is a retention facility, then the concept is that the water will lie in the retention facility, the sediments will drop to the bottom and the water can then be siphoned off into the river and in its relatively pure form. 5. Council officers have made it quite clear to Mr Johnson that they will only give the go ahead to the release of subdivided lands in the Cleary subdivision if such a facility is built. Up until August 2014 it was assumed, certainly by the Johnson interests and probably by everybody, that that permission would be given. However, after August 2014, it became clear that the Thorntons were no longer willing to have that retention facility built on their land. 6. The Johnsons interests say that that facility is vital. It is blocking their subdivision going ahead and it is blocking the sale of lots, at least from the Cleary subdivision. There is an alternative of putting the retention pit onto the Cleary land but that is further away from the river and the extra costs will be quite considerable. I have received an aide memoir dealing with those costs. The costs seem to me to be inflated because, for instance, in a claim for $952,258, $270,840 is for asbestos removal from the material discovered at the temporary dam site. It would be very difficult to see how that could be part of the damages for failure to honour an agreement to put the dam or reservoir on the Thornton land. How could anybody have anticipated (a) that asbestos would be found on that site; or (b) that the cost of removal would be quarter of a million dollars. 7. But I can accept that the cost of putting a temporary dam somewhere else would amount to some hundreds of thousands of dollars that were not anticipated if the Thornton land cannot be used for the retention pit. 8. The evidence shows that at least a temporary retention pit has now been constructed on the Cleary precinct. 9. So then the plaintiffs say virtually that before the option agreement of 2002, there was a contract and that contract is as set out in paragraph 16 of the Statement of Claim. That, unfortunately, was defective. The defect only became apparent to the plaintiffs' lawyers after the defendants' address. The plaintiffs this afternoon said that they wanted to further amend their Statement of Claim to cure the defect and they put as a reason why this application was made so late that, until the defendants' address, they had not been aware of the point and that they had been taken by surprise. 10. I will set out the original Clause 16. It needs to be read with paragraphs 14 and 17 which need consequential amendments, but paragraphs 16 and 17 set out the problem. 11. Paragraphs 16 and 17 as originally drafted were as follows: 16. In or about 2000, Mr Johnson on behalf of the plaintiffs and the Thorntons agreed that JPG would obtain all necessary approvals and do all things necessary over the Thornton lot so as to permit the subdivision and sale of both the Thornton lot and the plaintiffs' lots for the mutual benefit of both parties (development agreement). Particulars (a) The agreement was oral; (b) The Development Agreement was comprised in a number of conversations between Mr Johnson and the Thorntons; (c) The agreement was later evidenced in writing by reason of the matters pleaded in paragraphs 18 to 42 below. 17. The terms of the Development Agreement were: (a) Mr Johnson, on behalf of the plaintiffs, would include the Thornton lot in any rezoning application for the Pitt Town development; (b) The Thorntons would provide all necessary landowner's consent in respect of the Thornton lot to enable the rezoning and inclusion of the Thornton lot in the Pitt Town development, including access to the Thornton lot from time to time; (c) The Thorntons agreed to sell the Thornton lot to Vermont in terms to be agreed upon in good faith; (d) Mr Johnson and the Thorntons would cooperate and act in good faith to achieve the development of subdivision of the plaintiffs' lots and the Thornton lot. 1. The writing which is said to evidence this agreement appears to be merely the option agreements, the Voluntary Planning Agreement, to which of course the Thorntons were not a party, the variations to the options and what is called the stormwater agreement, to which I will refer in due course. It is hard to see how any of these evidence the alleged agreement. 2. However, there are a number of fatal flaws in that allegation. The basic one is that as at 2000, unless it was after 14 December, and there is no suggestion of that, none of the plaintiffs existed. I have set out the dates of incorporation. When he realised this, Mr Hale sought to amend and he said that it was fair and appropriate that he be given leave to amend because he had only discovered the defect when Mr Cook had given his final submissions just before lunch today. 3. The defence to paragraph 16 was that the defendants deny they entered into the Development Agreement with Mr Johnson and they deny that any subdivision of the land in the Pitt Town area was to be for the benefit of the defendants, for the mutual benefit for Mr Johnson or the plaintiffs, and generally denied the plaintiffs. 4. At 17 the answer was that there was a denial there was any development agreement and that the terms of the sale of the defendants' land were dealt with in the option deed. 5. Mr Hale said that there should have been a specific denial, that none of the plaintiffs existed at the relevant time and that because there was no specific denial, he has been misled into thinking there was no point involved. I have some sympathy with that, but I do not, with great respect, consider it to be necessary for this particular point to have been specifically focused upon. It may have been friendly to have shown the point, but people must draw their pleadings, especially verified pleadings, as this is a verified statement of claim, with due care and that if plaintiffs allege that in 2000 someone on behalf of four entities that do not exist entered into an agreement, and verifies that on their oath, then one would have expected that they would have investigated the facts and not made a statement which was plainly wrong. I am not saying that there is any perjury involved, I am just saying that the point should have become clear from the proper preparation of the case and it is not really, apart from pleading rules, the function of defendants to point out to the plaintiffs all the defects in their pleadings. 6. Mr Hale, though he kept saying that he really needed more time to do it properly, sought amendments such as by inserting: In or about 2000 Mr Johnson on behalf of one or more of the four plaintiffs and the Thorntons agree that one or more of the plaintiffs would obtain all necessary approvals with consequential amendments to 14 and 17. 1. But again, this really does not get any further, especially when one sees 17(c) which alleges that the Thorntons agree to sell the Thornton land to Vermont, which could not have been the case in 2000 because Vermont was not formed until October 2001. In any event, there is no material under Section 131 of the Corporations Act 2001 to show that any of these companies, when they were incorporated, adopted what Mr Johnson had purportedly done on their behalf. Accordingly, it seemed to me for that reason, it was a waste of time giving leave to amend. It was also a waste of time because there are other reasons why the plaintiffs' claim must fail on contract and it was just prolonging the agony to see if 16 and 17 could be put in better terms. 2. The question of parties is actually quite important. Mr Johnson himself was never a party to any of the proceedings and damages are claimed, but it is very hard to see how, if it is a joint promise as it would be as pleaded, because it is quite clear that if there is not a joint and several promise clause, or part of the oral agreement that the contract is joint only, then it is hard to see how Fernadell could have suffered any damages with relation to any breach of the alleged agreement. In any event, because it would seem that it was not the JPG company, that is the first plaintiff, that spent money on the development, but rather another company in the group, in any event there might be great difficulty in claiming damages. That is really a fatal flaw to the plaintiff succeeding on contract, but there are other fatal flaws as well which I will come to when I deal with section A of the alleged contract. 3. I do not think at the moment there is any need to look at further facts, and so I will deal with the issues A to K, probably in an abbreviated way because of time constraints, but hopefully in a sufficiently comprehensive way. A. Apart from the written option agreements, was there any contract between the parties, and if so, what were its provisions? 1. The pleaded agreement cannot be the contract for the reasons that I have already given. However, was there a contract that emerged from the discussions that Mr Johnson had with the Messrs Thornton in or about 2000 to the general effect that the Thornton lot would be included in any rezoning application for the Pitt Town development; that the Thorntons would provide all necessary consents to enable that to be processed; that they would sell the Thornton land to Vermont Quays in terms to be agreed upon in good faith and that they would cooperate and act in good faith to achieve the development of subdivision of the plaintiffs' lots and the Thornton lot? 2. It will be noted that the words 'good faith' appear in both (c) and (d) of paragraph 17 of the statement of claim. That is significant because as the law has developed the principles involved in parties agreeing to make an agreement in good faith are different to the later development that people should carry out a contract in good faith. To try and alleviate this problem, Mr Hale kept saying that the vital word was not so much 'good faith,' but 'co-operate', so that there was a general agreement to co-operate and act in good faith. There are problems with this allegation on the facts which I will come to shortly, but there are also conceptual problems. One would have expected with an experienced developer, that there would be some sort of joint venture agreement whereby the parties entered into a proposal whereby the landowners would provide the land; the developer would provide the expertise; there would be consultation between them; that neither party would do anything which would impede the successful consummation of the agreement and so on. But there was not. 3. The concept of co-operation, to my mind, involves two people, each of whom have input into what was happening. However, it is quite clear that the so‑called agreement to co-operate that has been put up by the plaintiffs was not of this style at all. The whole idea was that the Johnson Group would proceed with the Pitt Town development in the way that it thought best, that it expected the Thorntons to sign all necessary letters and to provide all necessary consents so that the Johnson interests proposed for the development would succeed. There may have been a point beyond which it would have been unreasonable for the Johnson interests to require the Thorntons to 'co-operate', but up until then they had no input, they merely had to nod the head to the proposals by Mr Johnson. On the other hand, Mr Johnson does not appear to be under any obligation to do anything and it is difficult to see how, if he found some more profitable development somewhere else, he could not suspend or abandon this proposal and the Thorntons might have no recourse. So it is difficult to see, as a matter of conception, how paragraph 17(d) fits in with the agreement as the plaintiffs on the evidence present it. 4. In any event, there is the option agreement and I have already set out the basal terms of the option agreement. The option agreement does seem, as I have indicated, to cover much of the ground that is said to have been established by the so-called development agreement. The development agreement included 17(c), the Thorntons agree to sell the land to Vermont Quays on terms to be agreed, so it was really an agreement to agree, and the agreement was to be made in good faith. The option agreement shows the way in which that was to happen, namely that an option was granted for an option fee to be exercised within a particular time. There was then Clause 7, which I have set out in full, which gave the relevant consents et cetera, and permissions to enter the land, so that it covers that sort of area too. One would ask, remembering that the option agreement was drawn by the developer's solicitor, Mr Mutton, and that he was the adviser of the developer at all material times, why it was necessary to do all that in the option agreement when it had already been covered by the so-called development agreement. 5. Then there is the question as to whether the so-called development agreement, if it was made, runs afoul of Sections 23C and 54A of the Conveyancing Act because it was an agreement with respect to interest in land. There has been relatively little argument on that point. Mr Hale says that there were two aspects of the agreement: (a) an agreement to use good faith in the agreement to agree to sell the Thornton lot to Vermont Quays and (b) the agreement to co-operate until that came about and that (b) could not be at all affected by 23C or 54A. I think that is right and so I will not worry too much more about 23C and 54A because the principal sale of land agreement was the option agreement which was duly made in writing. 6. I then turn to the question of the evidence. Mr Johnson initially made an application for an injunction and in that application he swore an affidavit which was called in evidence the first Johnson affidavit. That was an affidavit made on 22 September 2014. He said in paragraph 27 and following that he first met the Thorntons in about 2000 and he realised that more land should be included in the rezoning application so commenced discussions. The parties would meet in a barn on the Thornton property. He said: At the time I said to them words to the following effect: 'I would like to enter into an option agreement to acquire your property and then it can be included in the rezoning. I would need at least a four year option period as the rezoning is proving difficult. I would be prepared to pay a good price, well above its current market value'. 1. The Thorntons allegedly replied, 'yes, we want our property included in the rezoning, we would be interested in entering into the option.' Then the affidavit says, 'following a series of further meetings and negotiations with their lawyer, a deed of option over the Thornton property was entered into.' Then in paragraph 39, which takes it into 2006, Mr Johnson said he would speak to the Thorntons regularly concerning progress with the rezoning and shortly before the option was extended in April 2006 he said, 'as you know, the rezoning is proving very difficult. I don't know when it's going to happen. I need to get your agreement to extend the option period,' to which the Thorntons replied, 'Keith, we know. We are aware of all the hard work you are putting in. We agree to extend the option period'. Then later in 2006, in paragraph 42, he said: I am having to negotiate a planning agreement with the State concerning the Pitt Town land. It is going to apply to your land as well. The land is not going to get rezoned unless it is included in the planning agreement. Is that okay? 1. And the Thorntons replied, 'yes, we agree for our land to be included, please keep us informed'. 2. The second affidavit was made by Mr Johnson on 19 February 2015. Now, the first conversation which I have set out from the first affidavit ended at the words with the Thorntons saying that they would be interested in entering into the option. In paragraph 30 of the new affidavit Mr Johnson continued: I would like to include the Thornton land in the rezoning process that JPG is conducting with council. I want to be the person that develops your land. To get you the full value for your land, it's going to need your cooperation when it comes time to develop. I will get all the approvals at my cost, but I need your undertaking that you will consent where necessary and that we will always work together to get the land rezoned and then developed. There will have to be significant studies on your land to support the rezoning, and a lot of access by consultants and others is going to be needed. I must be assured at the end of this that I will be the purchaser of your land. As rezoning land is such a long and difficult process, if a landowner isn't going to work with me on all these things, and always act in good faith, I can't proceed. I need to know now if you agree to this. 1. And he says that both David and Chris Thornton said, 'yes, we agree to this. We always do the right thing and honour our word. Yes, we want our land rezoned. We know it will add to its value.' It is hard to see how that conversation could have taken place, because JPG just didn't exist for another two years. 2. However, putting that aside, Mr Cook strongly cross‑examined Mr Johnson on that conversation and put to him that, while it was a vital conversation, why was it not mentioned in the first affidavit, to which Mr Johnson virtually said that the first affidavit had to be put together in a hurry to seek an injunction and that, as he had further recollection, he remembered more and more of what happened. 3. There was also in paragraph 36 another conversation that is put out which did not appear in the earlier affidavit, that is that Mr Johnson told the Thorntons that the rezoning was subject to a lot of objectors and costing more money and taking more time than anticipated, and then asked, 'are you still happy for your land to be included and to work with me?'; to which the Thorntons said, 'yes, we want you to continue. It's important for all of us that you keep going. We will honour our part of the agreement'. The conversation in 2006, the reply of the Thorntons was expanded. As I have said, originally the affidavit said, 'Keith, we know. We are aware of all the hard work you are putting in. We agree to extend the option period'. However, at this time further words were added, 'we are men of our word, we will stand by our agreement. We will continue to work with you'. 4. Whilst I do understand that an affidavit put forward for an injunction can be put forward in a hurry and it is possible for people to overlook some part of a conversation, I should say a couple of things about that. First of all, the Court expects when people are applying for an injunction that they will, despite the shortness of time, actually give the best information they possibly can to the Court and that involves considering the relevant conversations. Now, as I have said, the conversation could not possibly have mentioned JPG, though it might have perhaps said 'my group of companies' or words to that effect. But secondly, there seem to be relatively so many times where what are now thought by Mr Johnson to be significant words, have been omitted from the conversation and then added later in February, that it is very hard to credit that the version in the second affidavit represents what was said. 5. It is always very difficult for anyone 15 years later to remember a conversation and I do not say for a moment that Mr Johnson is intending to mislead the Court. The experience of judges is that it is a natural phenomenon that people tend to remember things in the best light to themselves and so can 'remember' parts of a conversation favourably to themselves, which perhaps never took place, and sincerely believe it. The Thorntons however, gave evidence about these conversations. They denied the words which Mr Johnson put. They were strongly cross‑examined by Mr Hale but, despite that, adhered to their evidence. 6. I have to make a determination on the balance of probabilities, and on the balance of probabilities I must prefer the Thorntons' evidence to that of Mr Johnson. Accordingly, both for factual and legal reasons, I do not find that there was any development agreement as pleaded. 7. I should have mentioned that the evidence given by Christopher and David Thornton was that they had a completely different idea of the outcome of the conversations they had with Mr Johnson. They knew – though perhaps that is too strong a word – that they would be selling their land in due course to Mr Johnson and receiving $10 million, and that this would be secured by option, and of that $10 million, $200,000 would be the option fee. Their evidence was that they assumed that in due course the land would be resumed and that in due course Mr Johnson, or one of his companies, would exercise the option. 8. Accordingly, they never considered themselves as being in a position where they were going to develop any land, or that they were going to get the benefit of any increase in value because of the resumption. Their reward was capped at $10 million. Accordingly, they say, and I accept, that they were quite content to sign any piece of paper that Mr Johnson put before them, which he said was to aid getting the land resumed and all the other technicalities with the planning department and the local council that had to be gone through to bring that to fruition. 9. This version is also completely compatible with the subsequent conduct of the parties. Mr Johnson says so is his version, and that may well be right, but it is important to note that so is the Thorntons' version. My conclusion on this point is reinforced by a number of other factors, but I do not put these as highly as the ones with which I have already dealt. Mr Cook's submissions contain at the back, a schedule of documents and the penultimate page of the submissions cites 13 documents and note that some of these at least were inconsistent with what Mr Johnson puts forward as the appropriate versions of the conversations. 10. Then there is the constant repetition by Mr Hale and by Mr Johnson himself of the words, 'good faith'. I thought when we first started this case that I would need to look into the cases on 'good faith' and it is an interesting thought, because historically the principle of good faith has been used to look at good faith of people entering into contracts, and it is really only since cases like Andrews v Australian and New Zealand Banking Group Ltd [2012] HCA 30; (2012) 247 CLR 205 and Paccaccio v ANZ Banking Group Ltd [2015] FCAFC 50 which followed, that attention has been drawn to the quite different concept of good faith in performance of a contract. As I indicated earlier, the statement of claim pleads both, yet it does not seem that this distinction was ever brought to mind to anybody. However, whatever 'good faith' may mean, it does not mean that one party to the contract can tell the other party to the contract to do as he or she is told. 11. To a great extent that seems to be the attitude that Mr Johnson took and indeed to a great extent, the Thorntons were happy for him to take that view, that is, he was the professional developer, he knew his way about and he was the one that was going to make the profit because the amount that the Thorntons would receive was capped. However, that does not seem to me to be within the concept of 'good faith'. 12. Indeed it is not within the concept of 'co-operate', because 'co-operate' indicates that there are two parties and each of them has input and each of them agrees to work together. It does not cover the situation where one party trusts the other party to do everything and the other party expects the first party to do as he or she is told. My finding must be that there is no development agreement as claimed by the plaintiffs. B If there was such a contract, has there been a breach of it? 1. This falls away because there was no contract to breach. C Was there a collateral contract with respect to a detention pit? 1. One then turns to the so‑called collateral agreement with respect to the detention pit. As Mr Cook's submissions point out, it is just a little unclear whether this is put forward as an independent agreement or as a sub‑agreement of the development agreement. If it is put forward as a sub‑agreement of the development agreement, then as there is no development agreement, this falls away. If it was a collateral contract of the development agreement or an adjunct to the option, then there would be problems with Clause 11.4 of the option agreement which contains an entire agreement clause. 2. There is debate as to how far one can have a collateral contract when one has an entire agreement clause. Unfortunately, with respect, the waters are muddied a bit by the Court of Appeal in Victoria in McMahon v National Foods Milk Ltd (2009) 25 VR 251 which essentially holds that there is no problem. 3. However, the basis of the decision of Nettle JA, with whom Neave and Dodds‑Streeton JJA agreed, is that he relied on academic writings to the effect that entire agreement clauses operate as part of the rule against parole evidence. With respect, I cannot accept that on the authorities. However McMahon is a decision of an interstate Court of Appeal and, generally speaking, unless it is plainly wrong, one must follow it. With respect, I consider some of the propositions in it are wrong, but not that the decision is plainly wrong. It may be that the real rule is that worked out by Sackar J in Raphael Shin Enterprises Pty Ltd v Waterpoint Shepherds Bay Pty Ltd [2014] NSWSC 743 at [353] and following where his Honour says that the answer probably is that one must construe the entire agreement clause to see exactly what it covers. If it in fact mentions collateral contracts, then they are excluded. If it does not, then one must look to see whether that is implied, and one works out the answer accordingly. But as there is no principal agreement here, all of that is by the by. 4. So then what is being put forward in the events which have happened is whether there is a stand-alone contract with respect to the detention pit, and as Mr Cook puts, that argument raises the same sort of problems for the plaintiffs as occurred when dealing with the development agreement. Again, Mr Johnson swears an affidavit, his second affidavit, at paragraph 83, that in early 2009 he spoke to Christopher and David Thornton and said: As you know, the concept plan puts a stormwater detention basin on part of your property. I am going to apply for a DA now on the Cleary land. I assume it's still okay for the DA to put the basin on your land where the concept plan has it located? I will pay all the costs in obtaining approval for DA and the basin and for the construction of the basin. I will need to get your consent as landowners for the approval and construction of the basin. I believe this is of benefit to your land as we will need the detention basin when your land is developed. If this is not okay I can still have the plans redesigned. 1. He says that David and Christopher Thornton said: Yes we agree. You can apply for the DA for the basin with council. You don't need to redesign the plans. We are happy to have the basin on our property. What do you need us to sign? 1. Again, there is a problem with his first affidavit, which at page 2004 of the court book he says at paragraph 89 that in 2009 he instructed his then development manager to seek a development consent. He proposed that the stormwater detention basin be on the Thornton property and then said to Messrs Thornton: As you know, the concept plan puts a stormwater detention basin on part of your property. I am going to apply for a DA now on the Clearly land. I assume it's okay for the DA to put the basin where the concept plan has it located, and they said 'Yes we agree'. 1. It can be seen that the second affidavit has inserted extra words favourable to the Johnsons. That is, for instance, 'I assume it's still okay to put the basin on your land' and then the further words that the Thorntons are alleged to have said other than, 'yes, we agree'. 2. Again, in Mr Cook's submissions in the last page there are a series of documents referred to which tend to show that the conversation was unlikely to have happened in exactly this way. 3. Again, too, there is no evidence that the Thorntons ever really knew what was in the concept plan. All we have, as far as I can recall, is page 240 of the court book which was a draft letter sent to the Thorntons by the Johnson interests for them to sign and send to the appropriate authorities to clear the way for the concept plan. They duly signed it, but there is no evidence that they really ever knew that the basin was going to be put on their land. 4. Furthermore, the so-called development agreement is rather vague because it does not indicate what rights are being given to the Johnson interests with respect to the detention basin. Is it a case that the Johnson interests have exclusive possession of part of a land? If so, the agreement may well run afoul of Section 23C of the Conveyancing Act 1919. Is it a profit à rendre in that silt and other material will be added to the Thornton land and would become owned by the Thorntons as being a fixture to their soil? A profit à rendre is an interest in land and again, would run afoul of Section 23C. Is there to be some perpetual licence? Is there to be a licence for a reasonable period? It is all left extremely vague, and as Mr Cook points out, really once you say that there is no development agreement on which this so-called sub‑agreement can attach, it is all very, very difficult to see how it can stand alone. 5. There is also the point that there is no consideration given and the agreement is oral so it is not by deed, it needs consideration. What was the consideration given if this is a stand-alone agreement by the Johnson interests for putting this basin on the Thorntons' land? It may be argued, but it never was, that the land would increase its value, but this is really no consideration because the Thorntons always considered that the scenario would be that the Johnsons would exercise the option and that their value was really capped at $10 million. Accordingly, I would answer this question no. D Has there been a breach? 1. Again it falls away because there had been no contract. E Was there any operable proprietary estoppel because of the conduct of the parties? 1. This is probably the most difficult part of the case. It is not assisted by the way in which the case is pleaded. Paragraph 71 of the amended statement of claims says: In the period from 2000 to date, the Thorntons were aware of, and encouraged, the incurring of costs by the plaintiffs for the benefit of the Thornton lot in: (a) performance of the development agreement…and/or (b) performance of a stormwater agreement that…; (c) performance of the terms deal agreement pleaded in paragraph 51. 1. Paragraph 51 deals with an alleged agreement made after the options expired on 4 April 2013, which has really not featured in the evidence at all, or in any cross-examination. So that there is an encouragement, but an encouragement to do what? The answer is the incurring of costs. 2. Proprietary estoppel is an equitable concept which has grown over the years. The Ben McFarlane book, The Law of Proprietary Estoppel, Oxford University Press 2014, says that there are three categories of it. One category based on acquiescence, one based on representation and one based on promise. The one based on promise is the most dominant one. 3. However, proprietary estoppel traditionally involves a promise made in respect of land, and the locus classicus is that a son works on the father's farm and the father says, 'son, I'm not paying you, but one day all this is going to be yours'. And the son, encouraged by that and relying on that, to his detriment continues working, then the father leaves it to his mistress. There, equity will say that there has been a promise of an interest in land which has been acted upon and equity will usually fulfil the promise, or if it feels that because of proportionality it should not, it gives equitable compensation. 4. Now, it is not the case that whenever anyone incurs costs for the benefit of someone else, encouraged by someone else, that the proprietary estoppel principle applies. Here there was never any promise that the Johnson interests would get the Thornton land. That was dealt with by the option agreement. As I have said on previous occasions, one just cannot use concepts such as proprietary estoppel to take the place of contract, and a fortiori, where there is a contract which covers the field, there is little if any room for proprietary estoppel. Then proprietary estoppel only applies in a situation where people trust in the promise and do not know the true facts. 5. If a party knows the true facts, then he or she cannot say that they have been relying on an assumption encouraged by the other party. In the instant case, Mr Johnson at all material times knew the true facts. At all material times he knew that there was an option agreement and he knew exactly what was happening with the development. 6. So too it must also be remembered what was said by the English Court of Appeal in Falcke v Scottish Imperial Insurance Co (1886) 34 ChD 234. In that case Bowen LJ said at p 248: The general principle is, beyond all question, that work and labour done or money expended by one man to preserve or benefit the property of another do not according to English law create any lien upon the property saved or benefited, nor, even if standing alone, create any obligation to repay the expenditure. Liabilities are not to be forced upon people behind their backs any more than you can confer a benefit upon any man against his will. 1. Cotton LJ said at 241: A man by making a payment in respect of property belonging to another, if he does so without request, is not entitled to any lien or charge on that property for such payment. If he does work upon a house without request, he gets no lien on the house for the work done. 1. See also Foskett v McKeown [1998] Ch 265; [1998] 2 WLR 298, particularly at [276]. The exceptions to that rule are (a) when there is a request, express or implied, for the payment to be made, (b) salvage cases in admiralty, or (c) proprietary estoppel. There is no general exception. So the mere fact, if it be the fact, that the Johnsons have expended $1.6 million and that the land of which the Thorntons are the proprietors has increased in value, would not of itself be sufficient to require compensation. 2. I also dealt with this problem in Cadorange Pty Ltd (in liq) v Tanga Holdings Pty Ltd (1990) 20 NSWLR 26 at [37]. I there quoted, with approval, what Lord Hardwicke LC said East India Co v Vincent (1740) 2 Atk 83; (1740) 26 ER 451; [1558-1774] All ER Rep 615 at [615 to 616]: There are several instances where a man has suffered another to go on with building upon his ground, and has not set up a right till afterwards, when he was all the time cognisant of his right and the person building had no notice of the other's right, in which the court would oblige the owner of the ground to permit the person building to enjoy it quietly and without disturbance. But these cases have never been extended so far as where the parties have treated upon an agreement for building and the owner has not come to an absolute agreement; there, if persons will build notwithstanding, they must take the consequences, and this is not such an acquiescence on the part of the owner as will prevent him from insisting on his right. 1. After referring to that case and some others I said at page 38, and I adhere to this: Accordingly, when one is seeking to invoke equitable principles where one has expended money on the land of another, there must be encouragement or acquiescence, and the acquiescence must be with actual knowledge of the person whose land is improved and with actual ignorance on the part of the person making the improvement. 1. There was no actual ignorance in the present case on the part of the Johnson interests. Accordingly, even if one works out the answer to the question posed by Mr Cook, '3stoppel as to what', and one ignores the rules that to get this sort of proprietary estoppel one must have a promise with respect to a proprietary interest, usually land, and that there must be a promise, one cannot get a proprietary estoppel in the instant case on the facts which I have considered. 2. Mr Hale submitted in connection with both proprietary estoppel and unjust enrichment, that this case was very much like Cobbe v Yeoman's Row Management Ltd [2008] UKHL 55; [2008] 1 WLR 1752, a decision of the English House of Lords. It is factually similar, but that is no reason why it should be determinative. Unfortunately, legal research with the use of computers these days tends to throw up similar fact situations rather than similar legal situations. The proprietary estoppel claim in Cobbe was rejected and Lord Walker said at 1788 [91]: Mr Cobbe's case seems to me to fail on the simple but fundamental point that, as persons experienced in the property world, both parties knew that there was no legally binding contract, and that either was therefore free to discontinue the negotiations without legal liability - that is liability in equity as well as at law ... Mr Cobbe was therefore running a risk, but he stood to make a handsome profit if the deal went ahead and the market stayed favourable ... Whatever his reasons for doing so, the fact is that he ran a commercial risk, with his eyes open, and the outcome has proved unfortunate for him. 1. I think those remarks could well apply to the plaintiff. However, it is also true that the House of Lords allowed a quantum meruit claim. The point of distinction is that in that case the expenditure was solely for the benefit of the Yeoman's company, whereas in the instant case, as I have said, the benefit was not only for the Thorntons' land but also for the Johnson land. Now, that will be added in, in the appropriate places, in the judgment when I revise it.(?) 2. Accordingly, this part of the case also fails. F Are the parties entitled to relief? 1. Accordingly, I do not need to consider what relief should be given. G Have the defendants been unjustly enriched? 1. I now pass to unjust enrichment. Unjust enrichment is not a cause of action (see David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 353; (1992) 175 CLR 343). Mr Hale in his address said that what he was relying on was 'quantum meruit or quantum valebat', that is that work was done by Mr Johnson and his companies in circumstances where it was always considered by everybody that he was not doing it for free but would be doing it for reward, in which case he should be given a fair recompense for his work. Now, Mr Hale in answer from the bar table said that what he was relying on was purely common law restitution and I think, with great respect, that was a fair concession. The pleadings are rather vague. Paragraph 79 to 81 read as follows: 79. The effect of the improvements and expenditure pleaded in paragraphs 22 to 57 above have been, and was known and intended by the Thorntons to be, a substantial increase in the value of the Thornton lot. 80. Further and in the alternative, by reason of the benefits pleaded at paragraph 22 to 57 above, the Thorntons have been unjustly enriched at the expense of the plaintiffs. 81. The plaintiffs claim restitutionary damages. 1. With great respect, this is not a way of pleading a quantum meruit case. It gives the impression that somehow or other it is always unjust if the effect of expenditure by A increases the value of the property of B. I have already noted the cases which show this is a complete fallacy. 2. There are two basic types of quantum meruit (quantum valebat is in the same plight); (a) where there is a contract yet the contract does not fix the price, in which case parties are presumed to have agreed on a reasonable price and a reasonable price can be worked out on how much it is worth – quantum meruit as the Latin is translated. The other type (b) is where there is no contract. This is sometimes times called quasi contractual quantum meruit, though perhaps with the restitutionist school that term has now gone out of use. But it applies to a situation where someone asks for assistance and someone else provides that assistance, but it is well known by both parties that there will be a charge. So that if my toilet cistern is overflowing and I see a plumber in the street and I say, 'hey Jack, come and fix my tap, my cistern, and he comes, as he is a professional plumber I would expect to pay him, he would expect to be paid, and that is a case of quasi contractual quantum meruit. 3. Now, in the instant case we have not got that scenario at all. What we have is a situation where there is an option agreement. We have a situation where both parties, for most of a period extending over 13 years, have expected the option to be exercised and in that regime one party has expended money. That money has doubtless increased the value of the Thornton land, but it has also increased the value of the land held by the Johnson interests. 4. It is not a case where the Johnson interests have paid money in situations where everyone would agree they were to be reimbursed for their reasonable expenditure. The money was paid out to benefit the whole of the proposed development and on the basis that the probabilities were that the Johnson interests would acquire the land. 5. It would seem that at some time prior to 2013, because of the global financial crisis or other reasons, the Johnson companies went into administration and then came out of administration because of a Deed of Company Arrangement. It may be that the reason why the option was not exercised was because the economic climate did not allow the Johnsons to be able to pay the $10 million at that point in time. 6. Whatever it was, it would seem that this was not a situation that either party took into account when they made the original agreement in the year 2000. 7. Be that as it may, it does not mean that the whole arrangement can be now revisited and one can point to the fact that the Thornton land has increased in value and that that was at the expense of the Johnson interests and say, well, there has been an unjust enrichment. 8. There may well have been an enrichment, but I will say something about that in a moment. There is no material to show that that was unjust within the meaning of that term. 9. I say that there may well have been an enrichment. The Thorntons say that they have no immediate intention of selling the land, so that any increase in value is a paper profit only and with changing economic conditions, it may increase in value or it may decrease. 10. Furthermore, there is a problem that the Voluntary Planning Agreement entered into by the Johnson interests seems to have the effect that the Johnsons are in control of economic provision of services, so that if the Johnson interests do not acquire the Thornton land, the Thorntons will have to go to considerable expense to provide the services which are needed before there can be a subdivision. 11. There is some evidence to suggest that the cost of providing those services will mean that it will be close to a break-even point as to whether there is any profit on development of the Thornton land by itself in the hands of the Thorntons, or anybody that they sell it to, other than the Johnson interests. 12. Indeed, it would seem from Mr Johnson's own evidence in cross-examination that he considered that he now had the Thorntons in a position where really, their land was frozen for development unless they dealt with him. However, Mr Lunney, the valuer, would suggest that that is not quite the case, but it is very difficult when Mr Johnson, an experienced property developer, obviously takes a different view, unless he is just bluffing. 13. Accordingly, the unjust enrichment case fails also. H What orders should be made? 1. That means that I do not need to consider if any relief should be given. I Other issues 1. There are no other issues as far as I can remember that I need to consider, except the question of costs which I will consider after the conclusion of these reasons. J The plaintiffs' application for the Court to impose an easement under Section 88K of the Conveyancing Act, 1919 1. Mr Hale at the directions hearing, indicated that if all else fails, he would seek relief under Section 88K of the Conveyancing Act 1919 for the Court to impose an easement, so that the retention pit could be put on the Thornton land. This raises a whole lot of different issues and I indicated that it might be appropriate to deal with that as part of this case, so there would be no suggestion of any problems with Anshun v Port of Melbourne Authority (1981) 147 CLR 589, but that I would only deal with that part of the case after I dealt with all the rest of it. So that shortly I will make directions as to how that case should be dealt with. 2. [Later Mr Hale abandoned this application]. K The result of the case 1. Accordingly, the plaintiffs' case to date fails. 2. I now turn to the question of costs. The defendants have succeeded, and an application was made after I delivered the preceding judgment for an order for costs on the indemnity basis after either 11 December 2014 or 14 August 2015, the basis being a Calderbank offer made on those two days. In each case the offer was that there be judgment for the defendants and no order as to costs. The application was accompanied by an affidavit from a solicitor of the defendants' solicitors' firm which says, and this was disclosed, 'the costs incurred by the defendants at the relevant point exceeded $30,000 even by December 2014'. 3. It seems to me clear from the authorities, particularly Leichhardt Municipal Council v Green [2004] NSWCA 341, recently followed by Kunc J in Guo v Xiao (No 2) [2014] NSWSC 1416, that that sort of offer is capable of being a genuine offer of compromise, even though no money is actually offered. Were it not the case, as Santow JA said in the Leichhardt case, there would be an encouragement for defendants always to offer at least some token amount of money, and that is not going to help the court process at all. As Santow JA said in Leichhardt at [39], after one has reached that conclusion: The next step is to consider whether the particular offer in the circumstances represented a genuine attempt to reach a negotiated settlement, rather than merely to trigger any cost sanctions. 1. In view of the evidence of Mr Haines that $30,000 had already been amassed in costs and that is costs on a solicitor and client basis rather than a party and party basis, but even so they were substantial, meant that the offer was one which involved substantial sacrifice on behalf of the defendants. It seems to me then that this was a genuine offer. Accordingly, one gets to the stage where the general rule is that if there is a genuine offer of compromise and at the trial the person to whom the offer is made gets a less favourable result, then unless the Court otherwise orders, indemnity costs follow. Despite what Mr Hale has said, it seems to me there is insufficient to show that I should otherwise order. 2. Accordingly: 1. I note that the claim under Section 88K of the Conveyancing Act 1919 is not to be pursued. 2. I dismiss the claim with costs, the costs to be paid on the ordinary basis up to and including 11 December 2014 and thereafter on the indemnity basis. 3. I note that the undertaking of the defendants not to deal with the subject land without 14 days' notice is to expire on 6 October 2015. 4. I order that the exhibits be returned after 28 days or, if there is an appeal, after the appeal is concluded. ********** 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: 25 September 2015