Supreme Court New South Wales Medium Neutral Citation: Rockdale City Council v Calibre Construction Corp Pty Ltd [2015] NSWSC 1980 Hearing dates: 17 November 2015 Date of orders: 23 December 2015 Decision date: 23 December 2015 Jurisdiction: Common Law Before: Fagan J Decision: Plaintiff's claim dismissed Catchwords: CONTRACTS – construction – conditions of development consent – contribution value – whether estimated contribution value was binding – whether quantity surveyor erred in determining contribution value of access road – scope of "construction of the road" WORDS AND PHRASES – "construction of the road" – "structures" Legislation Cited: Environmental Planning and Assessment Act 1979 (NSW) Road Transport (Mass, Loading and Access) Regulation 2005 (NSW) Cases Cited: Agricultural & Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570 APN (Outdoor Trading) Pty Ltd v Melbourne City Council [2012] VSC 8 Australian Vintage Ltd v Belvino Investments No 2 Pty Ltd [2015] NSWCA 275 Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 Legal and General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314 Ooralea Developments Pty Ltd v Civil Contractors (Aust) Pty Ltd [2013] QSC 254 Ward v Griffiths (1987) 9 NSWLR 458 Category: Principal judgment Parties: Rockdale City Council (Plaintiff) Calibre Construction Corp Pty Ltd (Defendant) Representation: Counsel: Jason Lazarus (Plaintiff) Nigel Cotman SC (Defendant) Solicitors: David Creais (Plaintiff) Michael Ayache (Defendant) File Number(s): 2015/117490 Publication restriction: Nil Judgment 1. On 5 August 2009 the plaintiff, as consent authority under the Environmental Planning and Assessment Act 1979 (NSW) ("the Act"), granted to Brewster Murray Pty Ltd approval for a multi-storey residential development on a parcel of land within the plaintiff's local government area. The subject site is at 9 – 11 Woolongong Road, Arncliffe in Sydney's South-East ("the site"). Pursuant to s 94 of the Act the plaintiff required, as Condition 67 of the development consent, that the holder of the consent ("the developer") should pay $2,132,763.18 by way of contribution towards the cost of local infrastructure and facilities. 2. The site has at all material times been owned by Mahmoud Mohanna and Mohammad Mouslimani. On 23 February 2005 Messrs Mohanna and Mouslimani caused the defendant to be incorporated as a special purpose vehicle to undertake all activities in relation to a proposed development of the site. In about March 2006 the defendant on behalf of the owners consented to Brewster Murray Pty Ltd, a firm of architects, making a development application. After the development consent had issued on 5 August 2009 to Brewster Murray Pty Ltd, in late 2010 either that company or the landowners authorised the defendant to act on the consent and appointed it as builder of the development. Upon the defendant receiving this authorisation and appointment it became bound by the conditions upon which that consent had been issued. 3. The development has now been completed by the defendant and the plaintiff claims from the defendant an alleged unpaid balance of the contribution sum referred to in [1] above. Namely, a balance of $729,680. 4. On 25 January 2012 the plaintiff and defendant entered into a Works-in-Kind Agreement. Under the terms of this Agreement the plaintiff agreed to accept, in part satisfaction of the contribution payable under Condition 67, the carrying out by the defendant of three items of work on and adjacent to the site. The amounts to be credited for Work Items 1 and 3 in this Agreement were specified in Schedule 4 to a total of $1,074,331. The Agreement stipulated that Work Item 2 should be the construction of a new access road. The amount to be credited against the contribution on account of that Work Item would be: "The current estimated cost of construction of the road to the design approved by the Council, as determined by a quantity surveyor engaged by the Council, in accordance with clauses 4.3 to 4.7." 1. Pursuant to the Works-in-Kind Agreement on 4 September 2013 the plaintiff appointed a quantity surveyor, Aquenta Consulting Pty Ltd ("Aquenta"), to determine the "current estimated cost of construction of the road". The road is variously referred to in contemporaneous documents as "the new access road", "Access Road East" and "Bidjigal Place". Aquenta produced a report dated 18 December 2013 which purported to determine the "estimated cost of construction of the road" in the sum of $336,534.80 exclusive of GST. With the addition of GST this became $370,188. 2. By adjustments which are not explained in the evidence the contribution amount referred to at [1] and the credit allowances for Work Items 1 and 3 (as referred to at [4]) were slightly increased. The resulting calculation of the sum now claimed by the plaintiff is as follows. (There is a reconciliation error of $1, presumably due to rounding). S 94 contribution as required by Condition 67 $2,217,989 Allowance for Works-in-Kind Items 1 and 3 ($1,102,268) Allowance for Works-in-Kind Item 2 (the new access road) ($370,188) Payment on account ($15,852) Balance owing $729,680 1. The defendant disputes its liability for this balance amount upon the basis that the allowance for Works-in-Kind Item 2 has not been validly ascertained and is too low. The defendant says Aquenta's purported determination of the "estimated cost of construction of the road" was not carried out in accordance with the Works-in-Kind Agreement and is therefore not binding. Aquenta excluded from its determination the cost of certain elements of work which the defendant alleges should properly have been treated as part of the "construction of the road". 2. The road was required to be built over a large concrete stormwater holding tank which was constructed underground as part of the development. The defendant has argued that Aquenta erroneously excluded from its costing all of the work which was in any way associated with the construction of the holding tank, whereas the cost of that work should have been treated, either wholly or in part, as part of the cost of construction of the road. The defendant contends that this has resulted in an understatement of the credit to which it is entitled and a corresponding overstatement of the balance of the contribution due. Statutory provisions for contribution and for works in kind 1. Section 94 of the Act provides as follows, so far as relevant to the present proceedings: "Contribution towards provision or improvement of amenities or services (1) If a consent authority is satisfied that development for which development consent is sought will or is likely to require the provision of or increase the demand for public amenities and public services within the area, the consent authority may grant the development consent subject to a condition requiring: (a) the dedication of land free of cost, or (b) the payment of a monetary contribution, or both. (2) A condition referred to in subsection (1) may be imposed only to require a reasonable dedication or contribution for the provision, extension or augmentation of the public amenities and public services concerned. (3) If: (a) a consent authority has, at any time, whether before or after the date of commencement of this Part, provided public amenities or public services within the area in preparation for of to facilitate the carrying out of development in the area, and (b) development for which development consent is sought will, if carried out, benefit from the provision of those public amenities or public services, the consent authority may grant the development consent subject to a condition requiring the payment of a monetary contribution towards recoupment of the cost of providing the public amenities or public services (being the cost as indexed in accordance with the regulations). (4) A condition referred to in subsection (3) may be imposed only to require a reasonable contribution towards recoupment of the cost concerned. (5) the consent authority may accept: (a) the dedication of land in part or full satisfaction of a condition imposed in accordance with subsection (3), or (b) the provision of a material public benefit (other than the dedication of land or the payment of a monetary contribution) in part or full satisfaction of a condition imposed in accordance with subsection (1) or (3)." 1. Contributions plans made by councils under s 94EA of the Act have an important role in the imposition of development consent conditions which require monetary contributions. Section 94B(1) provides as follows: "94B Section 94 or 94A conditions subject to contributions plan (1) A consent authority may impose a condition under section 94 or 94A only if it is of a kind allowed by, and is determined in accordance with, a contributions plan (subject to any direction of the Minister under this Division)." 1. Section 94EA of the Act confers power upon councils to make contributions plans. Relevantly to the present proceedings the plaintiff prepared a plan entitled Rockdale Section 94 Contributions Plan 2004 ("the Rockdale Contributions Plan"). This came into effect on 1 June 2004 and has been amended in various respects since. Section 3.4 of the Rockdale Contributions Plan made the following provision, in the period relevant to these proceedings, with respect to payment of contributions by way of execution of works-in-kind: "3.4 What are the methods of payment available? Council will accept section 94 payments by monetary contribution, or by a combination of money, a material public benefit (works in kind) or the dedication of land. Works in kind or the dedication of land will be accepted by Council only under the following circumstances: 1. A written request is made to Council by the applicant or other person entitled to act upon the relevant consent, and 2. Council determines that the works in kind are, or the land to be dedicated is, appropriate, and 3. The works to be carried out are, or the land to be dedicated is, identified in the works schedule attached to this contributions plan, and 4. a. The value of the works to be undertaken or the land to be dedicated is at least equal to the value of the contribution assessed in accordance with this plan, or b. Where the value of the proposed works in kind or the land to be dedicated is less than the monetary value of the contribution, the difference will be met by way of a monetary contribution." 1. The evident purpose of item 3 of the "circumstances" quoted above from s 3.4 is to limit the categories of work, execution of which the plaintiff may accept in lieu of cash payment. Item 3 refers to a "works schedule attached to this contributions plan" but in fact there is no single works schedule attached. Instead, each of ss 7 and 9 to 16 inclusive of the Rockdale Contributions Plan identifies a number of elements of local infrastructure, facilities and services within several nominated precincts of the local government area. Several work schedules appear in the Plan. There is one work schedule for each of the nominated precincts respectively and there are some schedules for works of particular classes spread across the entire municipality. 2. Section 6.3 of the Plan defines an area referred to as the Bonar Street Precinct. This comprises seven parcels of land identified as development sites, across three blocks bounded by streets in the commercial area of Arncliffe. The site which is the subject of the present proceedings is identified as Site 5 in the Bonar Street Precinct. 3. Table 15.1 (at page 181) of the Contributions Plan sets out the location and description of works which the plaintiff planned to implement in the Bonar Street Precinct to enhance urban infrastructure and facilities for the benefit of the public. Figure 15.1 (on page 182) is a location plan for these proposed works. Table 15.4 (commencing on p 187) is entitled "Works schedule – Local infrastructure and facilities – Bonar Street Precinct". This works schedule identifies which of the public facilities, infrastructure, improvements and services, as planned for the Bonar Street Precinct, is or are required to be constructed or developed in connection with the development of each of the Precinct's seven sites, respectively. 4. This works schedule for the Bonar Street Precinct specifies that in connection with the site which is the subject of these proceedings the provision of the following "facility or service" was required: "Construct and landscape internal access road (east) (including road design and pedestrian and cycle routes) and dedicate land free of cost". 1. Taking the Bonar Street Precinct work schedule together with item 3 in s 3.4 of the Rockdale Contributions Plan (as quoted at [11] above) the result is that it was open to the plaintiff to accept, in partial satisfaction of the s 94 contribution stipulated in Condition 67 of the development consent, construction by the defendant of the new access road at the defendant's expense. The plaintiff's conditions of consent for development of the site 1. The Development Application in respect of the site was submitted to the plaintiff on behalf of Brewster Murray Pty Ltd on 30 March 2006 (Ex 1, p 252). The site was at that time in use as a bus depot with an associated motor vehicle repair facility and office area. Two large brick buildings were erected on the property. For the most part the site was surfaced with asphalt and concrete. 2. The site was in the shape of a T, the stem of which was aligned on an axis from northwest to southeast. The bottom of the T, being in the southeast, had a frontage onto Woolongong Road. The cross of the T lay on an axis from southwest to northeast. At its northeast end, the cross of the T had a frontage onto Martin Avenue. Martin Avenue was aligned perpendicular to the alignment of Woolongong Road. The proposed new access road which has been referred to above was to be constructed along that part of the site which constituted the cross of the T, intersecting with Martin Avenue at the northeast extremity of the site. 3. The Development Application was for the construction of two residential apartment blocks, one to be located towards the Woolongong Road frontage (referred to as Building H) and a second towards the back of the site, fronting on to what would become the new access road (referred to as Building G). The Development Application was for building H to comprise 87 apartments and Building G 93 apartments. At the time the Development Application was submitted to the plaintiff there was a 1200mm diameter stormwater pipe under the site and under the property which adjoined it to the southwest, being 13 – 15 Woolongong Road. This stormwater pipe was aligned more or less from east to west across the two parcels of land. The Development Application proposed that the stormwater pipe be replaced by a box culvert 4 metres wide by 2 metres deep (Ex 2, p 264). The Development Application also sought consent "to demolish the two existing buildings on the site". 4. The consent granted to Brewster Murray Pty Ltd on 5 August 2009 was subject to 208 conditions. The conditions were amended from time to time thereafter but it is not necessary to trace the course of the amendments. The conditions quoted in these reasons are as they appear in a consolidation of the amended consent document dated 30 September 2011. The conditions in the terms here quoted are those which were applicable at times relevant for the determination of the issues in the case. 5. Condition 66 required that the developer pay to council a contribution of $1,507,236.82 to be applied to the provision or improvement of amenities of the plaintiff's local government area generally. It is not necessary to consider further this condition or the contribution which was required under it. Condition 67 was in the following terms (so far as relevant): "67. A further s 94 contribution of $2,132,763.18 shall be paid to Council (in cash or, where the applicant so offers, as a material public benefit, or a combination of both) towards Local Infrastructure and Facilities within the Bonar Street Precinct, such contribution only to be used towards the provision or improvement of those amenities and services. …Council will accept an offer from the applicant to provide a material public benefit (work in kind), in lieu of a monetary contribution, in part or full satisfaction of this condition, for the provision of certain works required as conditions of this consent, subject to the following terms: a. the offer must be made and accepted by council prior to the issue of the construction certificate for works above natural ground level, and b. the requirements of clause 3.4 of Rockdale Section 94 Contributions Plan 2004 relating to works in kind are met, and c. The works in kind being limited to the works required by: i. Condition 116 relating to the construction and streetscaping of the new access road and the construction of the pedestrian safety fence on the south-eastern side of Woolongong Road… and ii. Conditions 96 and 97 relating to stormwater drainage works and d. the value of the material public benefit contribution for the works identified in each of these conditions is limited to the estimated cost of those works, as identified in Rockdale Section 94 Contributions Plan 2004 and as annually reviewed under clause 3.2 of the plan, and e. …" 1. The conditions which are cross-referenced in item c. of Condition 67, being conditions which required the developer to carry out certain works which might then be treated as "work in kind" by way of credit against the contribution payable, were as follows: "96. The existing 1200mm pipe across 9 – 11 Woolongong Road is to be removed and a new culvert designed and constructed to carry the 1 in 100 year flow through the site, including flows from [the new access road]. … 97. A surcharge pit is to be designed and constructed within 9 – 11 Woolongong Road to allow for the net flow between the 1 in 100 year main trunk flow and the flow carried by the existing downstream 1200mm pipe to surcharge and safely flow to Woolongong Road…" "116A. Public infrastructure requirements of the development are as follows: (i) the applicant shall design and construct the new access road and associated streetscaping extending from Martin Avenue through the site…(the exact alignment, design and levels of the road to be determined in consultation with Council's Technical Services section) including temporary vehicular access to Martin Ave, all paving, kerb and gutter, drainage, the provision of car parking bays, including any associated line marking and signage, footpaths, tree planting, landscaping, lighting, undergrounding of electricity to supply the development [and an adjoining site] together with the provision of underground mains, water, sewer, Telstra, Optus/foxtel and gas if available for the development [and the adjoining site]. Such work to be designed and carried out in accordance with the specifications in Rockdale [Development Control Plan] No 80 and the Wolli Creek and Bonar Street Precinct Public Domain Plan to the satisfaction of Council." 1. By Condition 68 the developer was required to dedicate to the plaintiff at no cost, for the purpose of public roads, inter alia the land area of the new access road being a strip 18.4 metres wide extending from Martin Avenue across the entire width of the site. That is, across the full length of the portion of the site which resembled the cross of the T. 2. Condition 93 was concerned with a flood and drainage study to determine inter alia surface overflows of the site in the event of a 1 in 100 year event. This condition permitted the developer, as one alternative means of managing rain water falling on and flowing over the site, to install a 270 cubic metre stormwater reuse tank collecting surface flows from "the remainder of the site". That is, from the remainder after excluding roof areas. (Another tank of equivalent volume would be required to collect water from roof areas only). Condition 94 of the development consent was in these terms: "The finished ground levels of the site below the 1 in 100 year flood level are to be adjusted to ensure no net loss of floodplain storage volume. In undertaking this calculation Council will exempt from consideration the volume lost for the carpark entry. Prior to the issue of the Construction Certificate, the Certifying Authority is to be satisfied that this requirement has been achieved." The developer's proposal for a holding tank under the new road 1. Two quite distinct aspects of handling stormwater were addressed by the conditions of the development consent. First, Conditions 96 and 97 were concerned with the carriage, in a below ground culvert, of stormwater collected on streets and properties at elevations higher than the subject site. No doubt stormwater from the site itself would be channelled into this culvert as well but it was required to be constructed as a trunk culvert which would allow stormwater from other surfaces and locations to pass through the site. The "surcharge pit" which was called for under Condition 97 was an adjunct to this culvert, intended to provide additional volume in which peaks of flow could be absorbed and managed. 2. Secondly, Conditions 93 and 94 were directed to ensuring that in the development of the site it would suffer no reduction in capacity to hold, temporarily, rainwater which might fall directly onto it. The purpose of this appears to have been to ensure that the change in surface conditions which would result from carrying out the development would not exacerbate the rate at which rain falling on the site would run off it. An increase in the rate of runoff might, in times of heavy rain, overload the capacity of downstream drainage infrastructure by intensifying high flow rates. 3. By an email of 3 August 2010 a representative of the developer (which at that stage was Brewster Murray Pty Ltd) proposed to the plaintiff's project manager and design engineer that Condition 94 be amended. In conjunction with that proposal the email contained the following suggestion: "In any case we still need to provide flood storage at the subject property. We would like to provide the required flood storage under the proposed road at the rear of the subject property. We consider this storage to be more permanent than the storage that may be provided on the surface elsewhere on the subject site and will not take out any deep soil planting area, it will also provide the advantage of providing flood storage at a lower level than what a surface basin would provide". 1. The quoted passage was directed to compliance with Condition 93 and Condition 94, unamended. In the event Condition 94 was never altered and it always remained in the terms quoted at [24]. One way of preserving the floodwater storage capacity of the site and avoiding any acceleration of runoff (which might otherwise result from the development) would have been to create a surface basin, presumably in the open space between Buildings G and H. A sub-surface holding tank under the rear access road was the alternative solution raised for consideration. 2. The plaintiff's design engineer replied on 9 August 2010 as follows: "After consideration, we think that Condition 94 has to be maintained since the study [needs] to show that the existing storage volume at the site is not compromised in any way after the developments stop. Therefore the flood study would essentially be comparing the storage volumes before and after the development and matching if not increasing the storage in post-development scenario… Council is primarily opposed to any development under public infrastructure like roads. But, any flood/detention under the proposed road at the rear of the property is only feasible subject to council approvals for any other similar sub structure like basement carpark that had been consented for prior to this solution. Although this solution would not be considered as the preferred option to substitute the storage volume of the site". 1. The reference to "council approvals for any other similar sub structure like basement carpark" was apparently intended to mean that if a holding tank beneath the new access road were to be approved Council's structural requirements in respect of it would be similar to those which had been stipulated for the underground carparks of Buildings G and H. 2. On 12 August 2010 the developer's representative replied to the plaintiff's design engineer thus: "As you are aware we still believe that providing the flood storage under the proposed road at the rear is the most suitable solution. Based on that we are proposing to collect all the surface water (2000L/s) and direct it to the proposed OSD [On Site Drainage] tank". 1. By 17 August 2010 the plaintiff had still not been convinced to permit construction of a holding tank under the new access road. The plaintiff's design engineer wrote: "I understand that you are inclining towards the storage under the New Road East, but as I stated earlier this solution may not be the preferred solution by Council and may become acceptable only if a substructure like the basement car park had been approved prior to this concept." 1. The engineer's email went on to quote levels and flow rates which were predicted to result from the 1 in 100 year Australian Rainfall Intensity value. From those figures he concluded: "I believe we may have an issue with sufficient storage under the New Road". 2. Notwithstanding the reservations of the plaintiff's design engineer, by 23 September 2010 the plaintiff had been persuaded to accept the construction of a holding tank under the new access road to address the requirements of stormwater detention as per Condition 94. A meeting between the plaintiff's representatives and Brewster Murray Pty Ltd's surveyor took place on that day, as referred to in a letter from the surveyor to the plaintiff dated 30 September 2010. This letter outlined the legal and title requirements of having a holding tank (for which the proprietors of the developed site would be responsible) located under a road (in which title would be held by the plaintiff). The surveyor suggested that there could be created an easement to drain water, burdening the lot upon which the road would be constructed. He suggested that a covenant of support for the road and a further covenant to maintain the tank could be given in favour of the plaintiff by the proprietors of the developed site. 3. On 24 November 2010 the surveyor wrote to Brewster Murray Pty Ltd to report upon his most recent discussion with the plaintiff's officers. In this letter, the reference to Lot 2308 is to the development portion of the site, comprising the stem of the T shape upon which the two residential buildings were to be constructed. The surveyor's report contained the following points: "1. Council now feels its best that the proposed stormwater detention tank still be under the proposed new road but be under the ownership of the lot being developed (i.e Lot 2308). As such Council now requires the submitted subdivision plan to be amended so that the tank structure be located wholly within the lot 2308 and the road carriageway and road reserve be contained within a separate overlaying stratum lot (i.e Lot 2311)… 2. As a result of this the subdivision plans submitted will not need to be amended now but rather when the tank is nearing completion, so that it [that is, the tank] may be wholly located within the proposed stratum lot (i.e Lot 2311) [meaning wholly located within the boundaries of the stratum lot, in plan view]. 3. An Easement for Support will have to be placed over the tank to support the road structure above (i.e Lot 2311). The easement dimensions are subject to the tank structure being built. 4. Also, an Easement to Drain Water will have to be created over Lot 2308 to accommodate the stormwater runoff from Lot 2311. The easement dimensions are subject to the tank structure being built. … 8. Council at this stage will also require a (sic) preliminary road design drawings to be submitted." 1. According to Recital D of the Works-in-Kind Agreement made 25 January 2012, by that date the defendant had become "entitled to act upon the development consent". The agreement also recorded that the Rockdale Contributions Plan and the Development Consent "authorise the Parties to enter into this Agreement to make provision for the carrying out of the Works by the [defendant] in part satisfaction of The Development Contribution". 2. The Development Contributions are defined in this agreement as the monies required to be paid under Condition 67. The Works are defined as the three items described in Schedule 4 to the Agreement, as follows: "1. Construction of the trunk drainage culvert and surcharge pit required by Conditions 96 and 97 of the Development Consent; 2. Construction of the new access road required by Condition 116A(i) of the Development Consent; 3. Construction of the pedestrian safety fence on the south-eastern side of Woolongong Road required by Condition 116(B)(iv) of the Development Consent." 1. Recital G of the Works-in-Kind Agreement is as follows: "G. Section 94(5)(b) of the Act authorises the Parties to enter into this Agreement to make provision for the carrying out of the Works by the [defendant] in full or part satisfaction of [the contribution required under Condition 67]". 1. Clause 4 is as follows (emphasis supplied): "4 Determination of Value 4.1 For the purposes of this Agreement, the Parties acknowledge that: 4.1.1 the Contribution Values specified in Column 6 of Schedule 4 in respect of Items of Work 1 and 3 specified in Column 1 of that schedule are the agreed values of the completed Items of Work, 4.1.2 the Contribution Value specified in Column 6 of Schedule 4 in respect of Item of Work 2 specified in Column 1 of that Schedule is the estimated value of the completed Item of Work determined by a suitably qualified quantity surveyor in accordance with clauses 4.3 to 4.7, and 4.1.3 the Contribution Values include all costs associated with the provision of the completed Works, including the costs of design, project management, consultants and any fees and charges incurred by the Developer. 4.2 … 4.3 When the Developer has prepared and submitted to the Council the design for the New Access Road, the Council must, once it has approved the design, engage a quantity surveyor to determine the Contribution Value for that Item of Work. 4.4 Upon receipt of the calculations of the Contribution Value from the quantity surveyor, the Council must provide a copy of the calculations to the Developer. 4.5 The Developer may, within 30 days of the receipt of the calculations, make a submission to the Council in respect of the calculations. 4.6 Upon receipt of any submission from the Developer, the Council must provide a copy of the submission to the quantity surveyor, together with any submission it may make of its own. 4.7 The quantity [surveyor] must consider any submissions made by the Developer or the Council and must, within 14 days, at his sole discretion: 4.7.1 alter or amend the calculations and submit these altered or amended calculations to the Council, or 4.7.2 decline to alter or amend the calculations and advise the Council to that effect." 1. Clause 3 of the Works-in-Kind Agreement, the central operative provision, contains the following relevant subclauses: "3 Offset against Development Contributions 3.1 The Council is to accept the Works in full and final satisfaction of the Developer's obligation under The Development Consent to make The Development Contributions, but only to the sum of all the Contribution Values specified in Column 6 of Schedule 4. 3.2 Where the sum of all the Contribution Values is less than the value of all The Development Contributions, the Developer is to make a monetary contribution to Council for the Deficient Value: 3.2.1 within 90 days of the receipt of a written notice from the Council, provided that such notice is not issued until the Council has obtained the quantity surveyor's final determination of the Contribution Value of the New Access Road under clause 4.7, or 3.2.2 prior to the issue of the first Occupation Certificate for the Development, whichever is the sooner." 1. Schedule 4 to the Agreement contains the description of Work Item 2, the new access road, as quoted at [37] above. In Column 6 of the Schedule, against that Work Item there is specified the amount of the Contribution Value in respect of it – in the terms quoted at [4] above. In Column 2 headed "Specification", Schedule 4 states the following with respect to construction of the new access road: "The design is to be prepared in accordance with the following Design Specifications and approved by the Council: The Council's Design Brief set out in Schedule 4B. The Council's Engineering Drawing Guide: for works in conjunction with developments and subdivisions. Construction is to be carried out in accordance with the following Construction Specifications and the design approved by the Council: AUS-SPEC – to be compiled by a registered subscriber to NATSPEC in accordance with the Council's Engineering Specification Guide: for works in conjunction with developments and subdivisions and submitted to the Council for approval." The plaintiff's approval of design of the holding tank and new access road 1. By 13 February 2012 the defendant had provided to the plaintiff drawings for the new access road, the holding tank below it (including structural construction details) and the culvert. By email of 13 February 2012 the plaintiff's executive engineer wrote to the defendant in these terms: "3. The structural plans that have been provided for the tank detail the method of construction however the plans have not been signed by the Structural Design Engineer. Therefore prior to releasing the plans please forward an Engineer's Certificate verifying the proposed design satisfy (sic) the relevant Australian Standards and the tank will support a standard loading for a Council Garbage Truck or equivalent." 1. On 22 February 2012 the plaintiff approved and issued the drawings which the defendant had by that date submitted. These comprised the following: * Three drawings of standard details for various elements of the road design, such as curb and guttering sections. * Layback curb sections, vehicular crossing details, pavement construction details and connections between the gutters and gully traps of the new road and the holding tank below. * Seven drawings of the new road, including a survey plan of the roadway, a general arrangement plan, cross-sections and longitudinal sections of the surface of the road and adjoining footpaths and the location of signage and line marking. * Five drawings of the design of Woolongong Road, as it was to be altered in accordance with Conditions 55 and 116B(ii) and (iii). * One sheet of construction notes for the concrete holding tank, prepared by Birzulis Associates, constructing and civil engineers. * A sheet of plans and one of construction details for the concrete holding tank, prepared by Birzulis Associates. * Four sheets of plans and construction details for the culvert and surcharge pit, required to be constructed under Conditions 96 and 97 and referred to as Work Item 1 in the Works-in-Kind Agreement. 1. The issue of these drawings, stamped as approved, was accompanied by a letter from the plaintiff dated 6 days earlier. That is, 16 February 2012. This letter referred to "…your submission dated 3 February, 2012 requesting approval to undertake the following Civil Works associated with the development on [the site]: A. Construction of New Road [East] and Storage Tank. B. Stormwater Culvert Works. C. Streetscaping works on Woolongong Road including curb and gutter, drainage pits, footpaths, fencing, street lighting, driveways and landscaping. The plans have been assessed and approval has been granted pursuant to s 138 of the Roads Act 1993 subject to the following conditions: …" There followed 15 conditions which are not material for present purposes. 1. Item A in the above approval is a combined reference to Work Item 2 of the Works-in-Kind Agreement (the new access road) and work which was required to be carried out under Condition 94 but for which the defendant was not entitled under the Works-in-Kind Agreement to any credit against the Condition 67 contribution amount (the underground holding tank). Item B was a reference to Work Item 1 of the Works-in-Kind Agreement (the culvert). Item C referred to works which were required to be carried out on Woolongong Road under Conditions 55 and 116B(ii), for which the defendant was not entitled under the Agreement to any credit against the Condition 67 contribution amount. 2. There were a mixture of items approved on 22 February 2012; some were Works-in-Kind items for which the defendant was entitled to credit against the Condition 67 contribution amount and others were elements which the defendant was simply required to complete at its own expense in satisfaction of the conditions of consent. The same applies to the content of the drawings stamped and approved on 22 February 2012 (as described at [43]). Quantity surveyor's costing of the New Access Road 1. By about September 2013 construction of the holding tank and of the new access road on top of it was complete. Prior to commencement of these works the land surface in this area had been at least partly paved with either asphalt or concrete or both. In order to excavate for the construction of the holding tank the paving had to be ripped up and the substrate excavated. The cross-sectional drawings of the holding tank as approved by the plaintiff are not fully dimensioned but photographs of the site during construction of the tank indicate that the depth of excavation required was in the order of 3 metres. 2. The excavated material had to be disposed of. A report of Newton Fisher and Associates Pty Ltd (quantity surveyors engaged by the defendant) dated 6 November 2013 indicates that the ground conditions were poor and the material removed was classified as "solid waste" for tipping purposes. I infer that this applies to the material at shallow depths of excavation because the Newton Fisher Report identifies it as arising from the necessity to "cut and fill". This would apply to material near to the natural surface of the land which would have to have been cut and filled to adjust that surface to the designed road surface, as shown in the approved cross-sectional drawings of the road. 3. The plaintiff engaged Aquenta on about 4 September 2013. The documents in evidence show that the quantity surveyors were given very little guidance as to what they were to cost, beyond a copy of the Works-in-Kind Agreement and the approved drawings of the road and tank. By email of 13 September 2009 an instruction was given that: "…any relocation of services and infrastructure is to be only included in the costing of the road if it is resultant of the road only. This excludes any work completed to allow for the developer's stormwater infrastructure". 1. That email records that a site meeting took place between a representative of the plaintiff and the Aquenta quantity surveying consultant on 12 September 2013. I infer that some instruction about the scope of the costing would have been conveyed during that meeting but no evidence has been given as to the content of any such oral instructions. 2. Aquenta produced a report dated 17 September 2013. By letter of 26 September 2013 this first report was provided to the defendant, in accordance with Clause 4.4 of the Works-in-Kind Agreement. In response, the defendant commissioned a report of Newton Fisher dated 24 October 2013. Subsequently, the defendant commissioned the further report from Newton Fisher dated 6 November 2013, referred to at [48] above. 3. On 27 November 2013 a solicitor on behalf of the defendant wrote to the plaintiff enclosing the further report from Newton Fisher and listing a number of respects in which it was asserted Aquenta had omitted elements of the design and construction of the new access road from its costing, thereby rendering the costing invalid insofar as it purported to be a determination of the estimated cost of the new road for the purposes of quantifying the defendant's credit against the Condition 67 contribution amount. The defendant's solicitor asserted that the "stormwater retention structure" should have been taken into account in the costing exercise and was "in fact part of the works our client was required to perform pursuant to the WIK Agreement". 4. The solicitor's letter of 27 November 2013 also complained that "no road excavation has been allowed for in the estimate" and, more generally, that "the estimate was based on the road works only and excluded any other aspects of construction". There were other complaints but those quoted are the most important in light of what subsequently developed and having regard to the issues which have now arisen in these proceedings. 5. The defendant's solicitor's letter of 27 November 2013 was treated by the plaintiff as the developer's submission for the purposes of Clause 4.5 of the Works-in-Kind Agreement (see [39]). The letter and the reports of Newton Fisher were duly provided to Aquenta pursuant to Clause 4.6. The evidence does not include any further submission which the plaintiff may have made to Aquenta under that clause. 6. Aquenta considered the defendant's submission and thereafter issued a final report on 18 December 2013. The report states that it is based on, inter alia, "a traditional construct only project delivery" and "design approved by council". In a later passage the report states that it has been "updated since the 17/09/2013 Issue to reflect… design costs…". Further, the breakdown of Aquenta's calculations includes "design fees @ 8% $20,062". 7. A table on page 2 of Aquenta's final report of 18 December 2013 shows that it allowed nothing for "Demolition Works" and nothing for "Excavation Works". These omissions are explained as follows: "Demolition is excluded from the Aquenta costs as this would have been done irrespective of road construction. Excavation is excluded from the Aquenta costs as any clearance would have been undertaken for the tank installation". 1. In further explanation, the report states at p 4: "No excavation has been included in this estimate. A stormwater retention structure extends for the full width and length of the road and was completed shortly before the road works commenced". 1. The report allowed a modest sum, $9,440, for stormwater drainage from the road. It is stated at p 2 that "Aquentas' estimate includes for direct connection between the gullies and stormwater tank as outlined by council". As the road was built over the top of a stormwater holding tank, drainage of stormwater from the road would necessarily be a simple affair, comprising drainage outlets to allow the water to drop from the guttering of the road into the tank below. I infer that if the road had been constructed directly onto a graded and compacted substrate, rather than on top of the holding tank, the provision for stormwater drainage would have been more elaborate. It would have involved collection pits at intervals along the gutters and sub-surface stormwater drains to carry away the rainwater collected in those pits. 2. At p 3 the report states that one of its key assumptions is the following: "The road is constructed on top of a large stormwater retention structure. This structure is excluded from these costs as well as any utility re-locations necessary in order to construct this stormwater structure. The New Road pavement base, sub base, asphalt and bitumen surfacing as outlined in Section 3.1.3.5 [a reference to a section of Aquenta's detailed Table of Figures]." 1. To similar effect, at p 6 the report listed one of the exclusions from the cost estimate as: "stormwater retention tank and all associated works". 2. Page 3 of the report contained these statements regarding the design documents and specification upon which the quantity surveyors had relied for the purpose of ascertaining the nature and extent of the work which they were to survey: "A number of elements of the estimate rely on specific details that will be contained in the detailed design specification to the contract documents. As these documents are not currently available. Recent experience from similar projects has been utilised to generate costings for these elements. … This report is based on all drawings and other information provided by Rockdale City Council up to 13 September 2013 (a summary of this information is contained in Appendix A)." 1. Appendix A listed all of the drawings which had been approved on 22 February 2012 as described at [43] above. It further listed the following items: "• Works-in-Kind specification', 9-11 Woolongong Road Arncliffe DA 2006/453. • Email on 13 September [2013]; Albert Jean [council officer] to Dominik Lynch [Aquenta] [quoted at [49] above]. • Site visit with Albert Jean and Jamie Millner clarifying on scope definition. • Email on 4 September [2013]; Albert Jean to Eric Little and Peter Daly; titled 'engagement of Aquenta Consulting for quantity surveying services'. • Works-in-Kind Agreement, DA-2006/453-9-11 Woolongong Road Arncliffe… dated 25 January 2012". 1. The plaintiff's letter of 7 January 2014 by which it served Aquenta's report upon the defendant asserted that the quantity surveyor had been correct to exclude demolition and excavation costs: "In the determination of the Contribution Value for Bidjigal Road East, only works that occur after the completion of the stormwater detention tank are to be included. This is because the stormwater detention tank would have been constructed with or without the road. Therefore the demolition and excavation costs identified in [Newton Fisher's] submission are not included in the final cost estimate". Construction of the quantity surveyor's assignment and departure from it 1. The issue of whether Aquenta's cost report is binding on the defendant, thereby limiting the defendant's credit entitlement in respect of building the new access road to the sum of $370,188, turns upon what the parties agreed the quantity surveyor should do according to the proper construction of the Works-in-Kind Agreement. Four features of the background against which the Agreement was made appear to be significant to this contract construction issue. 2. First, at the date the Agreement was executed both parties understood that the new road was to be built not upon a land surface cut, filled, graded and compacted as would be usual in road construction, but over a sub-surface concrete holding tank having approximately the same footprint on the land as the road itself. 3. Secondly, the conditions of development consent had from the outset required that the new access road be designed and constructed by the developer: Condition 116A(i), quoted at [22]. This Condition pre-dated the developer's proposal for a holding tank to go under the road (first put forward on 3 August 2010 – see [27]). Fulfilment of Condition 116 was always, from the date of issue of the development consent on 5 August 2009, going to require that the developer (a) rip up whatever paving was installed on the land's surface in way of the road construction; (b) excavate to remove whatever soil or fill was in situ to a sufficient depth for the placement and compaction of a stable road base and (c) remove and dispose of the excavated spoil. 4. Thirdly, there was nothing in Condition 116A(i) or elsewhere in the development consent to indicate that the new road was to be constructed to anything less than the standard load bearing capacity which would be sufficient for carriage of a full range of axle loads, to the limits permissible for heavy vehicles on public roads under the Road Transport (Mass, Loading and Access) Regulation 2005 (NSW) (as in force at the date of development consent and as amended from time to time up to the date of design approval for the new road). 5. Fourthly, prior to the Works-in-Kind Agreement being entered into the plaintiff had stipulated that it would require an easement of support over the tank for the benefit of the road above (see [35]). This was a condition of the plaintiff approving placement of the holding tank below the surface within the lot which the developer was required to dedicate to the plaintiff for the purpose of a public road under Condition 68(c). 6. Taking into account those considerations I conclude that the work described in Item 2 of Schedule 4 to the Agreement, "construction of the new access road", for which the quantity surveyor was required to determine an "estimated value", was intended by the parties to embrace so much of the ripping up of surface paving and so much of the excavation (and removal and tipping of material) as was necessary for the placement of a roadway in the subject location. In my opinion this extent of surface clearing and excavation was inherently and unavoidably a part of the construction of the road. Whether a holding tank should be placed under the road or whether the road should be constructed on a conventional sub-grade, this much clearing and excavation had to be done in order for the road to go in. It was inextricably a part of road construction and the parties must have intended that it be costed as a part of the quantity surveyor's determination of the "estimated cost of construction of the road". 7. The lowest reduced level to which the excavation would have to be taken in order to accommodate the road – being the level necessary for conventional sub-grade to be placed and compacted – was a minimum depth of excavation forming part of the road construction. Upon my view of the correct interpretation of the Agreement's description of what Aquenta was required to cost, any excavation below that minimum depth was required only for the holding tank and was not part of the work of constructing the road. 8. Contrary to this construction of the Agreement, the quantity surveyor excluded all surface pavement removal, excavation and disposal and tipping, upon the basis that that work had been done in the course of building the holding tank. Aquenta considered that the scope of construction work for the road, of which it was to assess a value, should be ascertained by looking at the road as something that would only commence when the tank was already in place. 9. I do not consider that the Agreement bears an interpretation under which the scope of "construction of the road" should be ascertained in this manner, driven by the actual sequence of physical construction work. The Works-in-Kind Agreement was made before the holding tank had been built. It would be wrong to construe the expression "estimated cost of construction of the road", as it appears in the Agreement, as if that expression had been adopted and the parties' intentions with respect to it were to be imputed after the tank was in place. 10. The area to be stripped of paving and to be excavated would be readily ascertainable by the quantity surveyor from the drawings approved on 22 February 2012, referred to at [43]. The third dimension for the excavation, its depth, was ascertainable from the same source. The drawings indicate the contours and slope of the starting point surface of the land and the design finished surface level at various points along its length and breadth. Using those parameters the quantity surveyor could make allowance for excavation to the minimum depth necessary for placement and compaction of a conventional road base, being the extent of excavation which was necessary and sufficient for construction of the road without the tank and which was therefore inherently attributable to the road. 11. I reject the plaintiff's submission that removal of surface paving in way of the road was something which the defendant was obliged to do independently of its obligation to construct a new road under Condition 116A(i). The plaintiff founded this argument upon two parts of the development consent. First, the description of the "proposal" on the first page which includes the words "demolition of existing structures…". Secondly, Condition 132 which stipulates that "existing buildings/structures shall be demolished and removed from the site prior to works commencing". The plaintiff has argued that "structures" in these parts of the development consent includes paving. That is not a natural meaning of the word. In this setting the second of the alternative meanings given in the Macquarie English Dictionary is apposite: "2. Something built or constructed: a building, bridge, dam, framework, etc". 1. The term "structure" normally conveys the idea of something with constituent parts arranged and fixed together; it connotes something which is erected in the sense of standing above the level of the ground or other surface upon which it stands. 2. The plaintiff cited Ward v Griffiths (1987) 9 NSWLR 458 at p 460A-E; APN (Outdoor Trading) Pty Ltd v Melbourne City Council [2012] VSC 8 at [35] – [43]; Ooralea Developments Pty Ltd v Civil Contractors (Aust) Pty Ltd [2013] QSC 254 at [25] – [31]. In each of these cases the meaning of the word "structure" or "building" in various legislative contexts was considered. These cases are sufficient to show that the meaning of these terms may vary according to their context and that on occasions courts have found a particular context sufficient to support a construction whereby a roadway or a concrete driveway may be regarded as a structure. 3. However none of these authorities assists me to find anything in the context of the consent conditions which would justify construing the word "structure", where it is used as referred to at [74] widely enough to embrace the paved surface of this development site in way of the new access road. Particularly is that so where the utilisation of the terms "structures" and "buildings/structures" is readily explicable as intended to apply to the substantial buildings which were on the site at the time when development consent was granted. 4. I do not accept the defendant's argument that once the plaintiff had approved placement of the holding tank under the road the whole of the cost of building the tank became part of the "estimated cost of construction of the access road", within the meaning of the Agreement. I consider that the quantity surveyor did not depart from the task contractually assigned to him when he left the costs of the tank construction (including excavation below the minimum depth previously referred to) out of his determination. 5. The tank and the road were conceptually, functionally and in every way distinct from each other. They were, respectively, referable to discrete conditions of the development consent. There is no basis for finding that the parties to the Agreement mutually intended that the tank should be regarded as an element of the building of the road, to be costed as part of Work Item 2. That would involve that the defendant should have a credit against its Condition 67 contribution for the cost of doing work which it had to do in order to satisfy Conditions 93 and 94, in circumstances where the plaintiff had agreed that these conditions might be fulfilled through the placement of the tank under the road against its own preference and as a concession to the developer's request and convenience. Clear words indeed would have to be found in the Works-in-Kind Agreement to lead to a conclusion that the plaintiff shared an intention that that be the operation of the Agreement. Such a construction would be manifestly to the plaintiff's very significant disadvantage. No clear words to support the defendant's construction are to be found in the document. 6. The plaintiff correctly pointed out that the building of the holding tank would not fall within any of the descriptions of work in Table 15.4 of the Rockdale Contributions Plan (see [14] above). Hence it was not open to the plaintiff under the terms of the Contributions Plan to accept the cost of building the tank as part of a works-in-kind arrangement to discharge the Condition 67 contribution. The defendant knew of the limitations of the Rockdale Contributions Plan because Condition 67 expressly provided that works-in-kind could only be accepted in discharge of the contribution if they met the requirements of the Plan. The Plan's limitations, being a matter in the common knowledge of the plaintiff and the defendant when the Works-in-Kind Agreement was entered into, supports a construction of that Agreement whereby the cost of the tank should not be credited towards the contribution sum. 7. The defendant relied upon the plaintiff's approval of all of the drawings referred to at [43] above, being drawings of both the road and of the holding tank, as an indication that the tank formed part of the road construction. But the plaintiff's conduct in approving those drawings occurred after the making of the Works-in-Kind Agreement had been made and does not, in the circumstances, aid in its proper construction: Agricultural & Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570 at [35]; Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 at [26]. Further, the letter which accompanied the issue of the stamped drawings concerned approval of an item that clearly, on the contentions of both parties, did not fall within the Works-in-Kind Agreement. Namely, Item C: refer to [44] and [45] above. Thus the fact that approval for design drawings was given in respect of multiple aspects of the works at the one time does not signify that all of those aspects were within the Works-in-Kind Agreement, either as a matter of fact or as a matter of the intention of the plaintiff. 8. In the alternative the defendant argued that some part of the work of constructing the holding tank should be regarded as within the scope of the costs which the quantity surveyor had to estimate. Namely, any extra structural components and any increased sizing or reinforcing of components which may have been called for to enable the holding tank to support the road above and which would not have been required if the holding tank were merely to have had a lid placed on top of it. 9. The obstacle in the way of this construction is that, before the Works-in-Kind Agreement had been entered into, the parties had agreed that the owner of the tank, which would be the proprietor of the development lot, would give a covenant in favour of the plaintiff to support the road: see [35] above. This covenant – and, before it was entered into, the promise to give it – necessitated that the developer construct the holding tank to sufficient specifications to support the road above. If this were not done the proprietors of the main development lot would soon fall into breach of the covenant. 10. Given that this was one of the significant circumstances in which the Works-in-Kind Agreement was entered into, I consider that it precludes the imputation of any mutual intention of the parties that the expression "estimated cost of construction of the road" should embrace costs attributable to the defendant having to enhance the structure of the holding tank to ensure that the covenant of support was fulfilled. The Works-in-Kind Agreement makes no cross-reference to that covenant. Rather, the Agreement appears to have been made in a context where both parties knew of the covenant and expected it to be performed, independently of the Agreement which they made on 25 January 2012. 11. Schedule 4 of the Agreement set out the requirements for design of the road as quoted at [41] above. The "Design Brief" referred to therein and set out at Schedule 4B to the Agreement contains considerable detail of the parameters for design of the road. Within that design brief the following item appears: "1.26 Structural Details ● The flood storage tank provides structural support of the road and is to be designed strictly in accordance with 0061-Bridges and other structures." 1. The defendant relied upon this as showing that enhancements to the structure of the holding tank for the purpose of enabling it to support the road were intended by the parties to fall within the scope of "construction of the road" for all purposes, including costing by the quantity surveyor. I do not consider that this follows. Given that the tank would sit under the road it was inevitable that the design brief and, subsequently, the design itself would address the structural interdependency of the two elements. The fact that this interdependency was expressly recognised in Clause 1.26 of Schedule 4B of the Agreement does not mean that the parties intended that such work as was necessary to strengthen the tank to carry the road should be regarded as a constituent of the construction of the road for the purposes of establishing its "Contribution Value" through the quantity surveyor's determination. 2. I conclude that the parties intended that the cost of enhancing the support capability of the tank was an additional element of the tank construction rather than of the road construction, it being an aspect of making the tank fit to be placed under the road and fit to fulfil the covenant of support. Consequences of the quantity surveyor's error 1. It follows from the above that Aquenta's report of 18 December 2013 does not fulfil the requirements of a quantity surveyor's determination under the Works-in-Kind Agreement in the respect, and only in the respect, that it fails to allow for the cost of pavement removal, excavation and disposal of spoil as referred to at [69] – [73]. The determination is therefore not binding upon the defendant and the plaintiff has not established its entitlement to the amount claimed under the calculation referred to at [6]. It remains open to the plaintiff to engage the same or a different quantity surveyor to make a redetermination under Clause 4.3. That clause permits the determination to be made at any time after the design of the new access road has been approved. 2. This is not a case where the quantity surveyor has merely made an error in the discretionary judgment which the parties agreed he should be entitled to exercise. Rather, he has failed to undertake his contractually appointed task because he has failed altogether to estimate the cost of a significant aspect of the road construction: compare Legal and General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314 per McHugh JA at 335D – 336B; Australian Vintage Ltd v Belvino Investments No 2 Pty Ltd [2015] NSWCA 275 per Bathurst CJ at [25], [74] – [86]. 3. I do not construe Clause 4 or Schedule 4 or any other part of the Works-in-Kind Agreement as having the effect that it should be part of the remit of the quantity surveyor to determine for himself what work fell within the concept of "construction of the road", in a manner which would be binding upon the parties. It is significant that the expert who was to make the determination of the "Contribution Value" for the road was to be a quantity surveyor, not a civil engineer or an experienced road-building contractor. That is a clear indication that the task of the appointed expert was limited to estimating cost for given works. A quantity surveyor would not be expected to have the qualifications appropriate to discriminate between the work which should be regarded as part of the road and that which should be seen as part of constructing the tank. Conclusion 1. For these reasons the plaintiff's claim will be dismissed. As each party has been in part successful I will hear submissions as to an appropriate order for costs. ********** 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: 23 December 2015