Tyneside Property Management Pty Ltd & ors v Hammersmith Management Pty Ltd & ors

HIS HONOUR: Under contractual arrangements comprising a Profit Deed and a Management Agreement made on 4 June 1999, the first plaintiff Tyneside Property Management Pty Ltd (Tyneside), of which the third plaintiff Mr Roy Haggis and the third defendant Mr John Oliver were principals, was engaged by the first defendant Hammersmith Management Pty Limited (Hammersmith), which had been acquired by the second defendant Roche Group Pty Limited, to manage the development of land near West Wallsend (relevantly lots 102/1000408, 103/1000408, 104/1000408 and 105/1000408) which Hammersmith purchased from BHP. The second plaintiff Namlot Nominees Pty Ltd - of which Mr Haggis was also a principal - was to receive a specified share of the profits generated by the development, calculated according to a formula contained in the Profit Deed (as were two other companies, the fourth defendant Tasmanian Prosperity Investments Pty Limited (a company associated with the seventh defendant Mr Frederick Boswell) and the fifth defendant Bluegrass Nominees Pty Limited (a company associated with Mr Oliver). It was envisaged that the project, which became known as Pambulong Forest, would entail a subdivision of 1550 lots, with construction to commence in February 2000, sales commencing in the third quarter of 2000, and a profit of almost $70 million by March 2011. However, by early 2003, construction had commenced only on a lake and fore bay, and council approval had been obtained only in respect of one precinct of 37 lots (including some master lots, capable of further subdivision producing a total of 63 lots). The first and second defendants (who were the only active defendants and, for convenience, are hereinafter referred to as "the Defendants") primarily contend that the Management Agreement was terminated by mutual consent at a Hammersmith board meeting on 28 January 2003 when, consequent on Tyneside's resignation as project manager, it was agreed that Roche Group would assume management of the project; and that the Profit Deed was terminated by notice given on 11 March 2003. Alternatively, they contend that Hammersmith and Roche Group terminated the Management Agreement and the Profit Deed on 11 March 2003, being entitled to do so on the bases, first, that Tyneside had repudiated the Management Agreement and the Profit Deed by its resignation on 28 January 2003, and secondly, that Tyneside was in default in several respects.

In proceedings 03/83732, Tyneside and Namlot, having abandoned an earlier claim for specific performance, claim damages for the alleged repudiation by Hammersmith of their contractual arrangements: Tyneside claims the management fees which it would have but did not earn under the Management Agreement, and Namlot claims the profit share to which it would have been entitled had the contracts been performed. Hammersmith cross-claims to recover an advance of $100,000 made to Tyneside under the Management Agreement, and also for return of the management fees paid under that agreement. Repayment of the advance was previously demanded by way of creditors' statutory demand on 29 April 2003 and 2 December 2004, and by interlocutory process in proceedings 03/83732 (as to the first notice) and originating process in proceedings 04/181624 (as to the second notice), Tyneside applied pursuant to Corporations Act, s 459G, to have those demands set aside.

The main issues are: (a) Was the Management Agreement discharged by agreement at the Hammersmith board meeting on 28 January 2003? Alternatively, did Tyneside repudiate the Management Agreement by resigning on that occasion? (b) Did Tyneside commit events of default under (1) the Management Agreement and/or (2) the Profit Deed, entitling Hammersmith to terminate those agreements (as it purported to do on 11 March 2003)? (c) If no to (a) and (b), what are Tyneside's damages for Hammersmith's repudiation of the agreements? Associated with this, was Lot 107/1000408 included in the project the subject of the agreements? (d) If yes to (a) or (b), is Hammersmith entitled to recover the advance of $100,000 and/or the management fees paid to Tyneside under the Management Agreement? (e) Should the creditor's statutory demands be set aside?

What follows is a chronological outline of some of the main events concerning the relationship of the parties and the Pambulong Forest project, in order to provide context for and facilitate understanding of the discussion of the issues. It does not purport to be a complete chronology of those events. Additional detail is provided, where relevant, under the particular issues addressed later.

The West Wallsend land was owned by BHP, which in late 1998 was prepared to sell lots 102, 103, 104 and 105 for $4.635 million. Mr Haggis, a property developer, perceived that this was perhaps half of its true value. He, Mr Oliver and Mr Boswell incorporated Hammersmith for the purpose of acquiring the land, and contracts for sale were prepared. Exchange was due to occur on 2 March 1999, but Hammersmith, Mr Haggis and Mr Oliver did not then have the requisite 10% deposit of $463,500. They were seeking an investor, and a firm of financial consultants, Fay & Cannon, were assisting in their search. In late February 1999, Fay & Cannon introduced Mr Haggis and Mr Oliver to Mr William (Bill) Roche of Roche Group.

On 27 February 1999, Mr Haggis and Mr Oliver met with Mr Bill Roche of Roche Group and Mr Bob Frost of Fay & Cannon at a Paddington restaurant, when there were preliminary discussions concerning a potential investment by Roche Group in the proposed development. A further meeting ensued, on 2 March 1999, at Apollo Motor Inn, Charlestown between Mr Haggis and Mr Oliver (Hammersmith), Mr B Roche and Mr David Hall (Roche Group) and Mr Fay (Fay & Cannon). Mr Haggis and Mr Oliver provided Roche Group with a project assessment report in respect of the proposed development of the land (the Report), which had been prepared by Hammersmith - principally by Mr Haggis - and which contained timeframes for the development and sale of the land, and projections as to the profit that could be generated. The Roche Group representatives were also provided with a copy of Mr Haggis' "Profile" (or resume). After considering the Report and after being told by Mr Haggis and Mr Oliver that they were capable of managing the proposed development of the land, Roche Group agreed to purchase Hammersmith for $2, to place Hammersmith in funds sufficient to enable it purchase the land, to appoint a vehicle to be incorporated by Mr Haggis and Mr Oliver to manage the development, and to give them a share of the profits or losses. Notes forming the basis of an agreement governing their future relationship were handwritten onto a copy of the Report, and signed by the participants.

Consequent upon that meeting, on 2 March 1999, Roche Group agreed to acquire the shares in Hammersmith for $2, and paid the $463,500 deposit for the land. Hammersmith thereupon exchanged contracts with BHP for the purchase of the land.

Messrs Haggis and Oliver incorporated Tyneside as their intended project management vehicle on 30 March 1999.

The share transfers in Hammersmith were registered on 16 April 1999. Mr B Roche, Mr D Roche and Mr Hall were appointed directors of Hammersmith; Mr Oliver resigned, but Mr Haggis remained a director to represent the interests of Tyneside.

Hammersmith completed the acquisition of the land on 17 May 1999, for a total purchase price of $4,635,000, funded by Roche Group.

Between 2 March and 4 June 1999, the terms of the Management Agreement and Profit Deed were negotiated. Mr Robert Miles of Bartier Perry, solicitors, represented Tyneside, and Mr Mark Lamb of Corrs Chambers Westgarth represented Hammersmith. Several drafts of each of the Profit Deed and the Management Agreement passed between the parties.

On 4 June 1999, at a meeting at Roche Group's premises, between Mr Hall and Mr Damian Roche for Hammersmith/Roche Group, and Mr Haggis and Mr Oliver for Tyneside, after some negotiations (the subject matter of which included clause 12.1(f) of the Profit Deed), the Profit Deed and the Management Agreement were executed, in a form that included clause 12.1(f) in the Profit Deed unaltered. In or about late June 1999, copies of the executed Profit Deed and Management Agreement were provided to Mr Haggis. Pursuant to the Management Agreement, Hammersmith advanced $100,000 to Tyneside, and commenced payment of monthly management fees of $22,500.

The Management Agreement contemplated that, with Hammersmith's consent, Tyneside might undertake a "best practice" study in relation to the development. During the latter part of 1999, a "best practice" study was undertaken. This resulted in a change of direction for the project, from a conventional subdivision to one using community title, and to proceeding by way of a Local Environment Plan rather than only a Development Application.

The Report contemplated that other land (in addition to lots 102, 103, 104 and 105) owned by BHP in the vicinity might be added in the project. At a meeting of the Hammersmith board on 24 June 1999, Mr Haggis recommended that Hammersmith seek to acquire lot 107/1000408, and Hammersmith subsequently did so.

In September 1999, Lake Macquarie City Council placed on public exhibition their subsequently adopted Lifestyle 2020 Strategy document, which included provision for a district business centre on Lot 104, and urban rezoning of Lot 107.

On 8 December 1999, Mr Haggis and Mr Oliver discussed with Mr Hall the terms on which Namlot and Bluegrass might be entitled to a profit share in respect of Lot 107. There is an issue as to whether, as a result, Lot 107 was added to or incorporated in the project, so as to entitle Namlot to a profit share in respect of it.

According to the Report, construction was to commence in February 2000.

On 7 April 2000, Asquith & de Witt, surveyors, wrote to Tyneside advising that there were potential difficulties with community title, which could be resolved by a reasonably detailed Master Plan. On 27 March 2001, Asquith & de Witt again wrote to Mr Haggis, recommending that at least an indicative Master Plan be prepared.

On 23 July 2001, the council resolved that the proposed amendment to the Lake Macquarie Local Environment Plan be forwarded to the Minister with a recommendation that it be made, and approved draft Development Control Plan 42 - Pambulong Forest, to become effective from the date of gazettal of the amendment to the Local Environment Plan. The amendment was gazetted on 12 October 2001.

A Development Application and Statement of Environmental Effects for Precinct 1 was lodged with the council on 18 October 2001.

On 26 October 2001, Hammersmith lodged objections to the council's draft s 94 contributions plan.

In November 2001, Tyneside lodged with the Council a development application for community title subdivision, incorporating a community management statement and environmental management plan.

At a Hammersmith board meeting on 30 November 2001, Tyneside put proposals for the construction works to the Hammersmith board. These included a recommendation that Delamere Homes Pty Limited, a company owned and operated by Mr Haggis' daughter Ms Maryann Florence and her husband Mr Wayne Florence, be retained as the contractors for the initial construction works, being the lake and fore bay. Mr Haggis disclosed the interest of his daughter and son-in-law Florence in Delamere, and there was no objection by the board to the appointment of Delamere as the civil works contractor.

In December 2001, the council issued a revised s 94 contributions plan. On 22 March 2002, Hammersmith instituted an appeal to the Land and Environment Court from the council's decision in respect of s 94 contributions. Points of claims were filed on 19 April 2002. Subsequently, on 24 June 2002, Mr Hall asked Mr Haggis to avoid committing to unnecessary expenditure in the meantime "until we know everything is proceeding".

On 26 April 2002, the council issued notice of determination of a construction certificate in respect of Lot 104 for the construction of a water quality treatment facility, including storm water detention, landscaping and associated drainage structures. In early May 2002, Delamere commenced construction work on the lake and fore bay. There was no written contract with Delamere.

In early 2002, the council was considering "back-zoning" parts of lots 105 and 107 to create conservations zones through the municipality as wildlife corridors. This, if implemented, would have affected the extent to which those lots could be developed. This issue appears to have been resolved by about 4 July 2002. Once the zoning issues had been more or less resolved with the Council, Mr Haggis on 10 July 2002 issued an "Urban Design Brief" to advance planning by stages, in which the first stage was to include sufficiently detailed design for preparation of development applications.

In June 2002, the council gave development consent for Precinct 1.

By early July 2002, difficulties had emerged with the administration of the civil works being undertaken by Delamere. By this time, according to the original feasibility study and cash flow model in the Report, a quarter of the lots should have been completed. Mr Haggis commissioned an experienced civil engineer, Mr Simpkins, to undertake a review. He delivered a report on 24 July 2002 ("the Simpkins report"), which identified significant deficiencies in the management and supervision arrangements, and recommended that a project manager be appointed.

Tyneside provided the Simpkins report to Mr Hall. Simultaneously, Mr Oliver, Mr Haggis' co-director, was becoming increasingly concerned about Tyneside's management of the project, and on or about 7 August 2002, Mr Oliver conveyed his concerns to Mr Hall.

On 8 August 2002, there was a meeting at the site including Mr B Roche and Mr Hall (from Roche Group), Mr Haggis and Mr Oliver (Tyneside), Mr Florence (Delamere), and Mr Walsh and Mr Truswell (respectively a construction engineer and a civil and structural engineer, retained as consultants by Roche group). The evidence relating to this occasion is further discussed below. Hammersmith claims to have directed Tyneside not to incur any further costs, and to cease work on the project, save for the completion of the dam and fore bay, until a review of the project by Mr Walsh and Mr Truswell had been completed. Hammersmith alleges that after that date, and contrary to that direction, Mr Haggis instructed Mr Holland of DEM Urban Planning Designers (DEM), and Mr Robinson of Asquith & de Witt Pty Ltd, to undertake various tasks, in connection with preparation of a master plan.

On 15 August 2002, there was a meeting at Roche Group's offices, attended by Mr B Roche, Mr Hall, Mr Haggis, Mr Oliver, Mr Truswell and Mr Walsh. In the course of this meeting, the Roche Group learnt that there was no "master plan" for the project, one consequence of which was that Mr Haggis was unable to inform those present of the anticipated lot yield.

On 26 August 2002, at Mr Haggis' suggestion, Mr B Roche travelled with Mr Haggis and Mr Walsh to Adelaide, to view what Mr Haggis suggested was a comparable development, at Mawson Lake. The plaintiffs say (and the defendants dispute) that in the course of this trip Mr B Roche instructed Mr Haggis to prepare a master plan.

Mr Truswell provided an interim report on 29 August 2002, which was critical of Tyneside's administration of the project, describing it as "terribly flawed".

During the period August to December 2002, there were ongoing disputes relating to progress claims made by Delamere, and payment of them.

In late August and early September 2002, Mr Truswell and Mr Walsh met with various consultants who had been engaged by Tyneside. Mr Walsh and Mr Truswell delivered their final report ("the Walsh/Truswell report") to Hammersmith/Roche Group on 26 September 2002. It summarised the views expressed by the various consultants, and was critical of Tyneside's management of the project.

On 9 October 2002, Mr Hall requested Mr Haggis' and Mr Oliver's availability for a board meeting, inter alia to discuss the Walsh/Truswell report. Mr Oliver arranged for the meeting take place on 31 October, due to the unavailability of Mr Haggis before then.

On 6 November 2002, Mr Holland of DEM prepared a "Summary report to Bob Walsh and John Oliver 6th November 2002", summarising work done by DEM at the request of Tyneside. Following a site meeting on 7 November, at which it appeared that DEM had been engaged, after 8 August 2002, to prepare a master plan and a landscape plan for the project, Mr Walsh on 11 November 2002 sent a facsimile to Mr Hall, and on 11 or 12 November 2002, Mr Hall (on behalf of Hammersmith) directed Mr Oliver (on behalf of Tyneside) to instruct DEM to cease all work it had been directed to do by Tyneside after 8 August 2002, and not to incur any further costs in relation to the development until further notice.

The hearing of the appeal to the Land and Environment Court in respect of the s 94 contributions was on 25 November 2002, when judgment was reserved.

On 29 November 2002, Mr Hall wrote to Mr Haggis and Mr Oliver requesting that Tyneside provide the current status of all aspects of the project, including all matters with consultants and the status of their work, by the following Wednesday, together with a detailed plan and proposal as to the management system and construction procedures to be implemented, "particularly taking into account the recommendations and management system recommended by Gary Trusswell & Associates Pty Limited and discussed at recent Board meetings". Mr Hall emphasised that it was "absolutely essential" that the Hammersmith board have "a very clear understanding of the present day status of all matters relating to the project including those with consultants". Mr Haggis' response, provided on Thursday 5 December 2002, noted that most items were "on hold", and did not explain the stage which the various components of the project had reached. After further correspondence, Mr Hall made arrangements for a board meeting, which was eventually convened for 28 January 2003.

In the meantime, during January 2003, Mr Haggis (on behalf of Tyneside) re-engaged DEM to perform further work.

The defendants contend that, at the meeting of the Hammersmith board on 28 January 2003, Tyneside - by Mr Haggis - resigned as Manager, and that the Management Agreement was thereupon terminated by mutual consent. Between 28 January and 11 March 2003, there were negotiations (which were ultimately unsuccessful) between the parties as to their future relationship and entitlements.

Judgment in the s 94 appeal was delivered on 13 February 2003; it was substantially favourable to Hammersmith. On 14 February 2003, Mr Haggis wrote to Hammersmith that Tyneside was ready, willing and able to perform its obligations under the Management Agreement.

On 6 March 2003, Clayton Utz, for Hammersmith/Roche Group, wrote to Mr Miles, for Tyneside, that unless the draft Management Agreement Termination Deed and New Profit Deed that had been submitted on 27 February were returned executed by 10 March, the offer would be withdrawn and the extant agreements terminated for default. On 11 March 2003, the negotiations having been unsuccessful, Roche Group and Hammersmith gave Tyneside written notice of termination of the Management Agreement, and required delivery up by 14 March 2003 of documents containing the project information, relevantly as follows: Take notice that Roche Group Pty Limited and Hammersmith Management Pty Limited hereby terminate the Management Agreement dated 4 June 1999 pursuant to clause 12.2 with effect from the date of this letter for default under clause 12.1 ...

On the same day, Roche Group and Hammersmith also gave Namlot and Mr Haggis a notice of termination of the Profit Deed, relevantly as follows: Roche Group Pty Limited and Hammersmith Management Pty Limited advise that the Management Agreement dated 4 June 1999 has been terminated. Take notice that Roche Group Pty Limited and Hammersmith Management Pty Limited hereby terminate the Profit Deed dated 4 June 1999 pursuant to clause 12.2 with effect from the date of this letter for default under clause 12.1.

Also on the same day, Hammersmith demanded repayment, by 8 April 2003, of the advance of $100,000 made to Tyneside under the Management Agreement.

Mr Kalyk, solicitor, who was acting for Tyneside, immediately responded to Clayton Utz on the same day, disputing the entitlement of Roche Group and Hammersmith to terminate. Clayton Utz extended, to 17 March, time for return of the executed new profit deed, but negotiations appear to have collapsed by 7 April 2003, following which Tyneside instituted these proceedings, initially for specific performance; on 6 March 2009 however, Tyneside gave notice of termination of the Management Agreement and Profit Deed, asserting repudiation on the part of Hammersmith and Roche Group.

Each of the Profit Deed and Management Agreement was expressed to be for a 12-year term expiring 1 March 2011. The Management Agreement was a schedule to the Profit Deed. The Report was included in a schedule to the Management Agreement.

By the Management Agreement: The services to be provided by [Tyneside] to Hammersmith in relation to the development ... as more particularly described in this Deed and the carrying out of all activities, which are necessary or desirable to enable Hammersmith to complete the Development profitably and in accordance with the Report ...

By the Profit Deed:

There was originally an issue about the status of clause 12(1)(f), with Tyneside contending, on various bases, that it ought not be treated as part of the agreement, but this was withdrawn during the hearing.

It is appropriate at this stage to make some observations about several of the principal witnesses, the reliability of whose evidence is material to the outcome.

Mr Haggis was the principal witness in the Plaintiffs' case. Initially, he gave the impression of having a good and reasonably precise recollection and understanding of relevant issues and transactions. However, in the course of his cross-examination, it soon appeared that his recollection of many matters - particularly matters that were potentially adverse, such as details of the projects referred to in his resume, and the events of the board meeting of 28 January 2003 - was not good. As the cross-examination proceeded, it became clear that he was determined to make and support his case from the witness box. On reflection, I think he knew his case very well, as distinct from having a very good recollection of the facts; and he was an advocate for his case, rather than a detached historian. His evidence repeatedly showed signs of a lack of objectivity in reluctance to make concessions that were called for (such as the misleading character of his profile, referred to below; or that the Walsh/Truswell report contained material critical of the management of the project), and in seeking to resile or escape from concessions when their consequences became apparent (such as that the directions of 8 August and 20 November 2002 were given).

A number of particular matters affecting his credit must be mentioned.

Mr Haggis provided to Roche Group a seriously misleading resume (called a "profile") that he must have known would be relied upon, and when its deficiencies were exposed gave spurious excuses. The profile overstated his experience, conveyed the impression of far greater involvement in property development and project management than transpired to be the case, and suggested that he had a history of extensive involvement in a wide range of high value projects, including three over $10 million. He suggested that his profile was given to Roche Group not by him but by Mr Oliver, but he knew they had it, and he must have been its author. Ultimately, when compelled to concede that it was misleading, he sought to explain it on the basis that it was intended to refer to having undertaken feasibility studies, not the projects themselves. The resume did not disclose that in 1991-2 his companies had gone into liquidation and he had become a bankrupt. He suggested that it was for Roche Group to ascertain what experience he was bringing to the table, and they did not ask about his profile or background - yet at the time, he had queried whether the warranty of competence was too broad, and commented that Roche Group had his profile.

Mr Haggis gave false evidence that he was not under commercial pressure to conclude a deal with Roche Group, and manipulated the minutes of a meeting with Fay & Cannon to falsely assert that they had underwritten the purchase. BHP had imposed a deadline for exchange of contracts of 2 March 1999, the date on which Mr Haggis and Mr Oliver met with Mr B Roche and Mr Hall in Charlestown. Mr Haggis gave evidence to the effect that it was not a commercial imperative for him to deal with Roche Group, and that other options were available to him. (This was important in the context of the case, originally advanced though later abandoned, that he relied on certain representations of Roche Group in executing the documentation). Mr Haggis deposed that Fay & Cannon had agreed to fund the purchase if they had not found an equity partner or other source of funds. In cross-examination he denied that completing the deal was a matter of commercial survival. However, even while the contracts with Roche Group were still being negotiated, he wrote "In the March 2 negotiations, commercial survival took precedence over legal niceties ... We had few options when negotiating a commercial solution". He and Mr Oliver were not then in a position to fund the deposit. His evidence that he could have sourced the purchase moneys from other sources, within 24 hours, and that he could access sufficient funds to pay the deposit, is quite contrary to the position he adopted in his contemporaneous communications Ms Peta Boswell and Mr D Roche.

Mr Haggis annexed to his affidavit minutes of a meeting with Fay & Cannon to corroborate the assertion that they had agreed to underwrite the purchase, which he said he typed immediately after that meeting. However, I am unable to accept his affidavit evidence that these minutes were written up immediately, at least in the form in which they were annexed to his affidavit; the inescapable inference from the provenance of the different versions that emerged is that they must have been altered after 7 April 2009, when an earlier version, not containing the assertion that Fay & Cannon had agreed to provide bridging finance, was sent by Mr Haggis to Mr Roche. Rather, they appear to have been deliberately reconstructed later, to answer Mr Oliver's affidavit evidence that he and Mr Haggis were unable to fund the deposit. Thus these minutes were materially altered after their initial creation, and utilized by Mr Haggis in his affidavit to justify the false position that he had sufficient money to enter into the contracts and was not desperate for Roche Group's support at the date of the contract.

Mr Haggis gave false evidence that representations were made at the 4 June 1999 meeting that the Profit Deed would be treated as a stand-alone document, and that he would not have executed the documentation but for those representations. This arose in the context that originally, the plaintiffs contended that the defendants were precluded - by misrepresentation or estoppel - from relying on clause 12.1(f) of the Profit Deed, a result that was said to arise from representations that the Management Agreement and the Profit Deed were separate "stand-alone" agreements, and that default under the Management Agreement would not be relied upon to trigger determination of the Profit Deed - on which the plaintiffs claimed to have relied in committing themselves full time to a very large project, thus foregoing opportunity to undertake other ventures, when the management fee under the Management Agreement had been negotiated at a low level because of the profit share incentive. A claim for rectification to omit cl 12.1(f) of the Profit Deed was abandoned at an early stage, and at the commencement of the third week of the hearing, the plaintiffs abandoned any case - whether founded in estoppel or misrepresentation or under the Trade Practices Act - that the defendants were precluded from relying upon termination of the Management Agreement, on whatsoever ground, as a ground justifying termination of the Profit Deed. However, the contentions gave rise to significant issues of credit, which remain relevant to resolution of other issues in the case.

The terms of the Profit Deed and Management Agreement were negotiated between 2 March and 4 June 1999. Each side was legally represented, and several drafts of the documents were exchanged. On 22 April, Tyneside received the first version of the drafts. On 20 May 1999, Mr Haggis, Mr Oliver and Mr Miles (for Tyneside) met with Mr Hall, Mr D Roche and Mr Lamb (for Roche Group). On or about 25 May, but before 31 May, Mr Haggis received a draft Profit Deed, which did not contain a clause corresponding to what became clause 12.1(f). On 1 June 1999, for the first time, Roche Group proposed that clause 12.1(f) be inserted into the Profit Deed. This first came to Mr Haggis' attention on 2 June, and he did not agree to it. It was contrary to previous discussions. Nonetheless, on 1 June 1999, and again on 2 June 1999, a draft of the Profit Deed, which included the controversial 12.1(f), was provided to Tyneside's solicitor, Mr Haggis and Mr Oliver. Between 1 and 4 June, Mr Haggis had discussions with Tyneside's solicitor Mr Miles, and with Mr Oliver, and agreed on a course to be taken on 4 June. Mr Haggis claims that his solicitor told him that Roche Group had agreed to the deletion of clause 12.1(f), but there must (as he conceded) have been some remaining doubt. His evidence that Mr Oliver and Mr Miles told him that Roche Group had agreed to the deletion of clause 12.1(f) from the Profit Deed became increasingly diffident, as his recollection in other respects was undermined.

The meeting on 4 June 1999, at Roche Group's premises, was attended by Mr Hall and Mr Damian Roche on behalf of Hammersmith and the Roche Group, and Mr Haggis and Mr Oliver on behalf of Tyneside. No solicitors were present. Mr Haggis recalled only discussion about clause 12.1(f), and that it was agreed that it would be deleted. However, no other participant shares that view. There was undoubtedly discussion as to the terms of the Profit Deed, including clauses 12.1(e) and (f). Roche Group and Hammersmith agreed to amend 12.1(e), but not 12.1(f). Amendments were made to the draft Profit Deed on a computer at Roche Group's premises, and a final version was printed, which contained cl 12.1(f), and it was executed in a form that contained that clause.

Mr Haggis said that the Profit Deed was executed in a form in which clause 12.1(f) had been struck through by Mr Oliver, and initialled by all present, but there is no documentary or other support for that view. Notwithstanding that Mr Haggis said that he would not have signed if clause 12.1(f) were retained, the Profit Deed, as executed, contained clause 12.1(f). (In cross-examination, Mr Haggis' evidence became "That is not my recollection", rather than absolute denial). Within a few weeks after 4 June 1999, Mr Haggis was provided with a copy of the Profit Deed and Management Agreement as executed.

I am unable to accept Mr Haggis' version of these events. First, all of the other witnesses to the execution contradict his evidence. Secondly, the contemporaneous documents also contradict his evidence. Thirdly, the allegation that clause 12.1(f) had been ruled through by Mr Oliver and initialled by those present, only to be replaced by a version with clause 12.1(f) intact, is preposterous - it is propounded only by Mr Haggis, and denied by all others present, including Mr Oliver - especially given that Roche Group/Hammersmith provided a copy of the executed Management Agreement and the Profit Deed, containing clause 12.1(f), to Tyneside's solicitors shortly after 4 June 1999. Fourthly, it is inherently commercially unlikely that the alleged representations were made: in circumstances where the only contribution of Mr Haggis and Mr Oliver to the development was their represented management expertise, it made commercial sense for their entitlement to a profit share to be tied to their management performance; otherwise, the profit share was no more than a gift, or some kind of "spotter's fee". Fifthly, each of the Management Agreement and the Profit Deed contains a "No Representations" clause (clause 16.16), by which the parties agreed that all prior representations were of no force or effect and gave rise to no liability.

In my view, Mr Haggis and Mr Oliver sought the deletion of clause 12.1(f), but Hammersmith and Roche Group would not agree. Thereafter, Mr Haggis and Mr Oliver signed the contracts because they were eager to start receiving management fees, and the initial advance of $100,000, and would receive a profit share provided they performed as they had contracted (which they were confident that they could). The alleged representations were not made.

Moreover, cross-examination of Mr Haggis demonstrated that his claim to have relied on any such representation was constructed. Mr Haggis' evidence of reliance was detailed and comprehensive (paragraphs 27 to 44 of his 1 September 2005 affidavit). He claimed that Mr Oliver asked four pre-arranged questions at the meeting on 4 June 1999. The first question was whether the Profit Deed was "stand alone"; the second was whether the Report was a definitive statement or just a guide; the third was whether the Report was accurate as at 2 March 1999 and whether the Manager could be held responsible for changes afterwards; and the fourth was whether the guarantee and indemnity clause would be operative if the project failed to make the projected profit. In cross examination, however, Mr Haggis said that the questions were asked after execution of the documentation, and conceded that he could not have signed the documents in reliance on a representation made that day that they were "stand-alone" documents.

Mr Haggis reluctantly admitted that his elaborate affidavit evidence supporting the claim of reliance was "wrong" and "accidentally misleading", but even if so it demonstrates, at the least, that he would carelessly assent to elaborate propositions perceived to be necessary or advantageous to his case, when they could not have been correct. This was no mere oversight - he knew that he had to establish reliance, and he supplied detailed and comprehensive evidence in an elaborate attempt to do so, which could not conceivably have been true. He was more concerned with proving essential aspects of his case, than with the need for accuracy.

Other matters that impact adversely on Mr Haggis' credit include his repeated incorrect assertion to Hammersmith in October 2002 that the lake and fore bay works by Delamere were 90% complete when Delamere claimed that they were only 80% complete a month later; and his false assertion to Hammersmith in July 2002 that he and Ms Florence had lent $200,000 to a consortium of three plant owners that Delamere was said to be co-ordinating. His denials or non-recollections concerning the events of the 28 January 2003 meeting were not credible. He prevaricated when asked about his diary entry for 28 January, initially denying that Mr Oliver had said to him immediately after the meeting "I'm surprised you did that. You resigned, Tyneside didn't", until confronted with his own note to that effect.

These matters compel me to regard Mr Haggis as an unreliable witness.

Ms Florence is Mr Haggis' daughter and a principal of Delamere, the contractor for the civil works in the development. She has funded the litigation to the extent of hundreds of thousands of dollars, which would be repaid out of any judgment. For these reasons, she cannot be regarded as independent or impartial. She appeared reluctant to give direct answers to adverse questions.

The evidence of a computer expert, Mr Garnett, who analysed the diary notes of 28 January 2003 prepared by Ms Florence, established that what were eventually three documents (MF Diary Notes 31.1.03, Diary notes 31.1.03 in DX24, and Diary notes 31.1.03 in PX25) had a common origin, which was created by "Florence" on 31 January 2003 (therefore, not contemporaneously with the conversation of 28 January). Sometime before 19 February 2003, that document was sent to "Roy Haggis", in the form of "MF Diary Notes 31.1.03", and on 19 February saved by him in that form. After that transmission to "Roy Haggis", the original was edited by "Florence", and by 20 March 2003, was in the form of "Diary notes 31.1.03" in PX25. Subsequently, it was further edited by "Florence" until it was in the form of "Diary notes 31.1.03" in DX24. The changes to the date and time of the conversation with Mr Oliver, the insertion of an additional paragraph, and changes to amounts in the first conversation reported, must have been made after 20 March 2003. This seriously affects the reliability of the notes as contemporaneous, and undermines Ms Florence's denials of editing them after the event.

Mr Hall was, at the time of the relevant events in the early 2000s, a chief protagonist on behalf of Roche Group and Hammersmith. He has since retired from Roche Group. However, he remained determined to make his points critical of Tyneside, and of Delamere. He was initially reluctant to accept that Hammersmith was responsible for payment of Delamere as and when due, and his justifications for withholding of payments from Delamere appears to have been dissembling at times. He consistently endeavoured to avoid making concessions by giving indirect answers; his non-responsive answers when asked about the discussions between him, Mr Haggis and Mr Oliver concerning their prospective profit share in respect of Lot 107 was one instance of this. He was always seeking to add qualifications and avoid direct commitments. Concessions, when given, were reluctant and begrudging; of this, his reluctance to concede that, on his version of the discussions concerning Lot 107, Tyneside was working on that lot for nothing, was a paramount example. He was a partisan and unreliable witness.

Mr Damian Roche had a limited recollection of many events, and his evidence often involved considerable reconstruction. However, he did not appear to be affected to the same degree as Mr Hall by partiality.

Mr Oliver seemed basically careful, to have a reasonable recollection, and to be consistent. However, he struggled when cross-examined about his knowledge of the direction to DEM to produce a master plan, and betrayed some signs of having formulated his evidence to suit his belief and the defendants' case, rather than to give his actual recollection, which was demonstrated (and at least in one respect conceded) to be faulty - in a manner that favoured Roche Group.

He changed his evidence, as recorded in paragraph 95 of his affidavit, to omit "will" from the statement he attributed to Mr Haggis at the 28 January 2003 board meeting, "I will resign". This was potentially very significant and material. He says that he had discussed the change with counsel beforehand, but given the invariable practice during the trial of Mr Williams SC to ask every witness, in chief, whether there was anything in their affidavit that they wished to correct, this seems highly improbable.

He dissembled over the statement he attributed to Mr Haggis in paragraph 96 of his affidavit, after that meeting, "They were not happy with my management style so I resigned". He says that he was trying his best with events that took place a long time ago, but this would have been more convincing if he had said he could not now be sure, rather than revert to his affidavit. At times, he became evasive and non-responsive. Parts of his affidavit - for example paragraph 65, in which he effectively sets out particulars of perceived shortcomings of Tyneside's performance of its project manager functions, seem extraordinarily closely aligned with Roche Group's case. I think it very likely that those opinions are ex post facto conclusions reached after proceedings were commenced.

Mr Oliver was determined to put his version and have "his" case heard, so that his evidence assumed an aspect of advocacy. His evidence must be treated with caution.

Mr Walsh's recollection was poor. Instances of this include his confused account of the sequence and location of the 8 August 2002 site meeting, and his fluctuating evidence as to when John Holland said that he had been instructed to prepare a master plan. His poor recollection of these matters, in combination with his inability to recount conversations orally, also casts grave doubt on his detailed affidavit recounts of conversations.

On matters of expert opinion, he was not closely familiar with the material on which his opinions were based. His calculations of costs were seriously flawed, for example using (at least twice) incorrect rates for compaction in his analysis of Delamere's costs. The gradient rules he adopted when opining as to the viability of driveways on proposed lots appeared unduly conservative. Other assumptions he made, concerning side verandas, and the asserted location of garages at highest points of 10 lots, were erroneous. In all, he afforded a good illustration of why the Court usually requires expert witnesses to be independent.

Mr Truswell's evidence was essentially reasonable and objective, although he was clearly conscious when preparing his report that his client was Roche Group.

The defendants called Mr Gregory James Incoll as an expert project manager. It emerged that he had limited experience with broad acre green field subdivisions, but he had been a project director or equivalent for perhaps three. He had very limited if any experience with community title, but this does not seriously affect his qualifications to opine on development project management practices.

I did, nonetheless, find some of his evidence very difficult to accept, in particular his insistence that it would be preferable to pursue the original (low density) model before looking at "best practice" options; and - given his concessions that he understood that the house designs lodged with the development application were indicative only and not binding on purchasers, his conclusion that they were inflexible and lacked strategic vision.

It follows that I cannot generally prefer the evidence of one particular witness to another, and it would be difficult to accept the version of a single witness, except where it was against interest. However, there are few critical incidents in which the evidence is "one on one"; there are usually multiple witnesses to most controversial meetings, and often though not invariably notes or other contemporaneous records. Where it matters, the manner in which I have resolved particular factual controversies is explained below.

The defendants contend that at the meeting of the Hammersmith board on 28 January 2003, after Mr Haggis was questioned critically about Tyneside's performance as manager, he - on behalf of Tyneside - resigned, and that Hammersmith and Tyneside thereupon agreed that the Management Agreement was terminated. Alternatively, the defendants contend that the resignation was an act of repudiation, which Hammersmith accepted on 11 March 2003, by its notices of termination of the Management Agreement and the Profit Deed.

At the 28 January 2003 meeting, Mr B Roche, Mr D Roche, Mr Hall and Mr Haggis were in attendance as directors of Hammersmith, and Mr Walsh (for the first part of the meeting) and Mr Oliver were also present by invitation. On any view, the first part of the meeting comprised a discussion of criticisms, issues and queries raised by the Roche parties with Mr Haggis concerning the progress and management of the project; and this was followed by a statement by Mr Haggis to the effect that he would or did resign (though whether this was immediate or prospective and qualified or not is in dispute), and discussion about the actual or potential consequences of that course.

Mr D Roche took comprehensive notes of the meeting, by hand, as it progressed; they record, chronologically, the events of the meeting. He explained that he had his head down writing throughout the meeting, and was struggling to keep up, and thus made little verbal contribution. Later, he had his notes typed up by a secretary, Lena Gyftopolous, and checked the typescript against the handwritten notes; he then discarded the handwritten notes. The typescript notes record extensive discussion of issues relating to the project, including the criticisms and queries, and Mr Haggis' responses, which occupied the first part of the meeting. They then conclude as follows: Management RH - looks like you need a new manager DH - yes that's where we are at - raised loan repayments WR - we take it back ourselves with BW to run it with most existing consultants + RH + JO to help with introductions to consultants/Council DH - terminating Management Agreement will cause Profit Deed to terminate RH - thought Management Agreement was stand alone WR - we do not intend to cancel your profit shares RH/JO Suggestions RH - keep Community Title - build shareways + keep design plan at least for Precinct 1 - going to torrens title may be financially unpalatable? - Wayne do RTA fill + finish lake + noise mounds WR - RH/JP to make suggestions about way forward + then get together again eg JO - sewer easements - copy of rough masterplan to be sent (3 copies) + practical statement on Community Title

However, Mr D Roche says that there is a gap in his notes, after "yes that's where we are at" and before "raised loan repayments". He says that at that point Mr Haggis said "Then I resign", and this so stunned him that he put down his pen and looked up, in absolute astonishment, and so did not record that part of the conversation, in which Mr Hall said, "It's not you. It's Tyneside that has to resign", and Mr Haggis responded, "Yes. We accept that". He has no recollection of Mr Oliver saying anything to the contrary - he said that Mr Oliver remained silent. However, he also says that no one said "We are moving to terminate the Management Agreement", or anything to that effect.

Mr Hall's evidence is that Mr Haggis said, "It looks like you need a new manager", to which Mr Hall answered "Yes that's where we're coming from". Mr Haggis replied "There's no point in us continuing on if you are not happy with us as the success of the venture is most important. I resign". Mr Hall responded, "It's not you who has to resign. It's Tyneside, what we want is your approval for the Management Agreement to be terminated", and Mr Haggis and Mr Oliver said, "We agree". (In cross-examination, Mr Hall accepted that Mr Haggis said something to the effect, "It looks like you need a new project manager. I'll find you one. I'll resign". Mr Hall says that he then said, "The Management Agreement is with Tyneside and is to be terminated", that Mr Haggis responded, "I agree", and that Mr Oliver also said, "Agreed", or words to that effect). Mr Hall then said, "Whilst we can now terminate the Management Agreement, termination will mean that the Profit Deed can be terminated. It was not our intent that you would lose your profit, provided there is a spirit of goodwill, we will confirm an offer to you in writing that your profit share will continue on the existing basis and that the loan could continue for the month of February. Roche will take over the management of the project and all records should be provided to us". Mr Haggis and Mr Oliver again said, "We agree", and Mr Hall said, "The proposal will be confirmed in writing". Mr Haggis then made a number of suggestions as to the best way forward for the project, as recorded in Mr D Roche's notes.

Mr Hall - who had not made notes during the meeting - subsequently dictated formal minutes of the meeting. He did so, he says, within 24 hours or so after the meeting, and in Mr D Roche's presence, although without the benefit of Mr Roche's notes; the accuracy of what he dictated was not disputed by Mr Roche. Mr Hall's secretary subsequently typed these minutes. They attribute to Mr Haggis a statement "that it looked like a new manager was needed, that the long term interests of the project were most important and as it was apparent that there was overall dissatisfaction with his performance he resigned". They then record a unanimous resolution that Tyneside's Management Agreement be terminated forthwith; that Roche Group be forthwith appointed manager of the project; and that - subject to and conditional upon Messrs Haggis and Oliver's goodwill and co-operation together with a smooth handover of the project management and records, introductions to consultants and council officers and future assistance where required - Hammersmith would prepare and forward to them terms for their ongoing involvement in the project and renewal of their profit share entitlements under the Profit Deed.

Mr Oliver's affidavit evidence was that Mr Haggis said "You're obviously unhappy with my work, I will resign". (In cross-examination, Mr Oliver maintained that Mr Haggis said "I resign", not "I will resign"). Mr Hall replied "Are you sure Roy?". Mr Haggis responded "Yes, I'll apply for the dole tomorrow", and Mr Hall said "In that case Tyneside does not have the capability of performing its duties under the Management Agreement so the Management Agreement should be terminated, is that agreed?", to which Mr Haggis answered "Agreed". Then, Mr Hall said "Regardless of this termination we do not intend to remove your profits". Mr Haggis said "I didn't think they were linked", and Mr Hall replied "Well they are". Mr Oliver says that he was in shock, and though he can recall Mr B Roche saying something about asking Mr Oliver and Mr Haggis to make suggestions about the way forward at the end of the meeting, he was no longer focusing on what was happening. Mr Oliver denies that he expressed agreement with the statement that the Management Agreement should be terminated or that Tyneside resigned.

Mr Haggis says that the meeting was disjointed and shambolic, that he felt that he was being ambushed, and that a number of criticisms of Tyneside's performance - which he believed unwarranted - were made by Roche Group, and in particular by Mr Walsh. Amongst the complaints that he could recall - there were many that he could not - were that many house designs were inappropriate; that Tyneside had not commissioned a master plan; that construction of the dam and fore bay had been poorly managed; and that Tyneside had engaged DEM in contravention of Hammersmith's direction, said to have been given on 8 August 2002, to cease work and incur no further commitments until a review had been completed. Mr Haggis disputed these complaints. He says that some resulted from misunderstandings; that he produced (albeit for the first time) a precinct plan, which he had received only about a week before the meeting; and that construction of the dam and fore bay had progressed particularly well. Mr Walsh suggested that the way forward was to get rid of the urban design and traffic consultants, and engage a new surveyor.

Mr Haggis does not recall, but does not deny, saying, "It looks like you need a new manager". Nor does he deny, though he does not recall, Mr Hall's response, "That's where were coming from". In his affidavit evidence, he claimed to have said, "If you are not happy with what I have done, I will find you another project manager. I will resign", and that he also said that he would respond in writing to the issues that had been raised by Bob Walsh. In cross-examination, he said that he forecast that he would resign "if they could prove that I had been negligent". He denied that he and Mr Oliver agreed that Tyneside would resign and the Management Agreement be terminated. He denies that there was a conversation about the Profit Deed not being terminated, and does not recall there being any reference to a proposed offer to permit Tyneside to retain entitlement to a profit share. However, he recalls Mr Hall observing that the Management Agreement and Profit Deed were linked, although professing no recollection of the context in which that arose.

According to Mr Oliver, immediately after the 28 January meeting, he had a conversation with Mr Boswell, to whom he said "Roy has just resigned at a Board meeting", to which Mr Boswell responded "Well don't forget Roy resigned not Tyneside". Then, in the car park outside the meeting, Mr Haggis had a conversation with Mr Oliver, of which he made the following note in his diary: John Oliver - Car Park discussion 1. Surprised I did that - you resigned Tyneside didn't 2. The solution to this is for you to get out of Tyneside. It's you they don't want

According to a diary note made by Maryann Florence, at 2.00pm on 28 January she received a telephone call from Mr Oliver, who said that Mr Haggis had resigned, and that Roche Group had asked Mr Oliver to proceed with project management works and organize the landscaping, but were happy with Delamere's work and, no matter what was the dispute with Mr Haggis, wished Delamere to continue. Although, as I have mentioned, there is controversy as to the contemporaneity of this record, it at least tends to confirm that Mr Oliver was then asserting that there had been an immediately effective resignation on the part of Mr Haggis.

Later that day, Mr Haggis had a telephone conversation with Mr Hall, of which he made the following diary record: David Hall - telephone discussion (Home) 1. We are going to have work together for a long time, we want all this to be amicable. 2. We are not going to cut your fees off - We will pay next months fee to a new agreement is sorted out.

On 29 January, Mr Haggis made computer diary notes of the meeting, which refer to a number of complaints or criticisms, and attribute to himself the following: RH said if the Board had lost confidence in his management style and the direction I had taken the project then I will find another project manager.

These notes also record: WR said that Bob (Walsh) was happy with Delamere's work and they could carry on. ... Roche Group may think RH wants to be out.

Again, there is controversy as to the contemporaneity of these notes. While Mr Haggis originally claimed that they were prepared on 28 January, from notes taken by him at the meeting, it emerged (from Mr Garnett's examination of the metadata) that the note was first created on 29 January and was subject to six revisions; moreover, no-one else remembers Mr Haggis taking notes at the meeting.

On 31 January 2003, the first and second defendants paid the first plaintiff's management fee for the month of February 2003.

On 1 February, Mr Haggis sent an email to Mr Oliver: You seem to be passing on the message that I have resigned, though resigned from what is unclear. Tyneside has a current project Management Agreement with Hammersmith and I am co-ordinating all construction and planning work for Pambulong Forest, always have done and still are. I am also a director of both Hammersmith and Tyneside and have a responsibility to do everything possible for the proper management of both companies, and that I am doing. The Hammersmith Board have expressed concern with my management style and the direction I have taken the project, an issue that I am obliged to respond to. If however the Board has lost confidence in my work then I will stand down subject to satisfactory management arrangements being put in place. I also have a substantial investment in Pambulong and that investment need to be protected, as do you. I am continuing to manage those parts of the project that are in my domain until this matter is settled. I am however referring all decisions to David Hall for verification.

On 3 February, Mr Haggis sent an email to Mr Hall: I will be responding to the criticism of the Pambulong strategy and my management style that arose out of last Tuesday's (January 28) Board meeting and other recent assessments. While some points may be valid others have arisen through a misunderstanding of the process and direction. The objective has always been to achieve the highest and best use (and profit) for the property assets using industry best practice and working within planning and statutory constraints. This I believe we have achieved. ... I will attempt to complete my responses quickly, however they do need to be thorough.

In a facsimile of 3 February 2003, Mr Hall sought advice from Messrs Haggis and Oliver as to why a memorandum and fee proposal from DEM had been confirmed by Tyneside, without recommendation to or approval of the Board, and "after the onsite meeting at Pambulong Forest where it was agreed by the Board that no further instructions were to be given or new work to be commenced or undertaken until the project review was finalized and addressed by the Board which occurred only at last week's meeting when it was unanimously agreed that this Company would promptly take over the project management" [emphasis added].

On 4 February, Mr Oliver had a conversation with Mr Holland of DEM on the subject of instructions allegedly given by Mr Haggis in breach of the stop work direction. He told Mr Holland that he was not to commence any new work without instructions from himself or David Hall.

On 5 February, Mr Hall (on behalf of Roche Group) wrote to Messrs Haggis and Oliver (on behalf of Tyneside) "Further to our meeting on 28 February 2003 ..." setting out on a without prejudice basis "the proposed new arrangements to implement the agreed decision that the Roche Group Pty Limited will undertake the future project management" [emphasis added]. This proposal, which was expressed to be "based on your acceptance, goodwill and ongoing support", included that the Management Agreement be terminated with effect from 28 January 2003; that the entitlements of Namlot and Bluegrass under the Profit Deed be unaffected; that the existing advances of $75,000 to each of Namlot and Bluegrass continue to accrue interest and be repayable out of profit distributions; that the existing advance of $100,000 to Tyneside accrue interest from 1 March 2003 and be repayable out of profit distributions; that Tyneside receive an ongoing but reduced consultancy fee until 1 December 2003; and (implicitly) that Mr Haggis would remain a member of the Hammersmith board. It concluded: Roy and John, we look forward to your prompt agreement to this proposal in the best ongoing interests of the project and with this aim advise that Bob Walsh and Gary Truswell will attend for a handover and explanation of the current status of all relevant files next Monday and Tuesday at your offices in Wollongong.

On 6 February, Mr Haggis wrote to Mr Oliver: As these proposed changes affect Tyneside's only revenue earning asset it will be necessary to call a Directors meeting and possibly a shareholders meeting to ensure that all parties affected by the proposed changes are properly notified. ... As for any handover - I do not have any Hammersmith files in my possession. ... If Tyneside agrees to amend it's Management Agreement then it will be necessary to prepare full briefing statements on each aspect of the Pambulong development program. ... With everything proceeding so smoothly I intend taking next week off to consider my future having regard to the current position with Hammersmith. ...

On 7 February, Mr Hall (on behalf of Roche Group) wrote to Messrs Haggis and Oliver (on behalf of Tyneside): We understand that Tyneside ... is unwilling to hand over all relevant files next Monday and Tuesday and advise that unless we receive a satisfactory response to our proposal as set out in our facsimile of 5 February 2003 by 14 February 2003 we intend to explore other avenues to conclude this matter promptly.

In response, in a letter dated 10 February, Mr Oliver expressed to Mr Haggis the view that they should endeavour to achieve a commercial settlement with Roche Group along the lines of their letter of 5 February "which would involve, of course, handing over all files".

Also on 10 February, Mr Oliver wrote to Maryann Florence at Delamere, advising that Tyneside was the Project Manager, not Mr Hall or Mr Walsh, and that all correspondence or enquiries should be directed to the principals of Tyneside. And on the same day, in response to a proposal from Mr Haggis, Roche Group requested Tyneside to proceed with certain works in connection with the lake and fore bay.

On 12 February 2003, Mr Hall wrote to Maryann Florence, stating that "unless you are advised to the contrary" Delamere's line of engagement and communication remained with Tyneside, who would make recommendations to Hammersmith.

As has been noted, on 13 February 2003, the Land and Environment Court delivered judgment in the s 94 appeal, substantially in favour of Hammersmith.

On 14 February 2003, Mr Haggis wrote to Mr Hall, asserting that Tyneside had at all times complied with its obligations under the Management Agreement and the directions given by Hammersmith, and that he did not understand Mr Hall to suggest otherwise; maintaining that Tyneside remained ready, willing and able to perform its obligations under the Management Agreement; but observing that "for reasons which I do not quite understand" it appeared that Roche wished to terminate the Management Agreement and: I am prepared to take part in discussions designed to meet the Roche Group's objectives whilst as the same time protecting the investment and interest, which the Participant companies and the Manager have in the development.

Mr Hall said he did not recall receiving this letter but would not have regarded it as of concern, as it did not apparently advance a position inconsistent with Roche's ends. But I agree with the plaintiffs' submission that its effect was to assert (on the plaintiffs' part) that there was still a binding Management Agreement, while acknowledging that Tyneside was prepared to negotiate.

On 20 February 2003, solicitors for Tyneside wrote to Roche Group, without prejudice, confirming that Tyneside and its principals were prepared in good faith to proceed with the implementation of the proposals in Roche Group's 5 February letter - which "will of course involve the orderly handover of all files and documents with appropriate briefing sessions" - and anticipating receipt of documentation to implement them.

On 26 February, Mr Winterbottom - the town planning consultant engaged by Tyneside who had played a significant role in the management of the development - wrote to Mr Haggis: Thank you for your call this morning. I was very distressed to hear that you no longer wish to be involved in the Pambulong Forest project and that there is considerable doubt about the future role of Tyneside. I understand that our arrangement ... for the retention of my services is now at an end. ...

On 27 February 2003, Clayton Utz (for Roche Group) submitted to Macquarie Legal (for Tyneside) for execution drafts of a New Profit Deed and a Management Agreement Termination Deed. The draft Management Agreement Termination Deed included, as Recital B: The parties have terminated the Management Agreement with effect from 28 January 2003.

Operative clause 2(a) was as follows: Subject to clause 2(b), the parties terminate the Management Agreement effective on 28 January 2003.

During February, Mr Haggis had on several occasions sought the minutes of the 28 January meeting. On 7 February, Mr D Roche informed him, by email: The notes taken are messy and have not been typed. I will now have them typed and sent to you hopefully early next week.

On 6 March, Clayton Utz wrote to Macquarie Legal that they had not received the executed deeds, nor any comments, more than a week after their submission, proposing some alterations, and indicating that unless executed documents were received by 10 March, Roche would withdraw its offer, terminate the Management Agreement under clause 12.2, terminate the Profit Deed under clause 12.2, and require repayment of the advances. On 10 March, Mr Kalyk, solicitor, now acting for Mr Haggis and Tyneside, responded that the deadline could not be met for practical reasons, proposed a meeting, and stated that his client had no objection in principle to accommodating Roche Group's wishes to terminate the Management Agreement and amend the Profit Deed: "It is only a matter of properly recording an agreement in that regard".

The notices of termination issued the following day, 11 March.

The first issue is what happened at the 28 January meeting. This is a question of fact, requiring resolution of the competing versions of events. It is undisputed that Mr Haggis said something at the meeting about resigning. The crucial areas of dispute are whether Mr Haggis' resignation statement was immediate or prospective, whether it was qualified or unqualified, whether it was expressed to be a resignation by Tyneside (and if so whether Mr Oliver assented to it), and what if anything was said about termination of the Management Agreement. It is unsurprising that there are differences in detail between the accounts given by the witnesses of the meeting. Not all those differences require resolution; the essential questions are whether what was said conveyed immediate or prospective resignation, and whether reference was made to termination of Tyneside as manager.

Generally, Mr Haggis did not have a good recollection of what was said at the meeting. Of it, he said "I don't remember too much. Just a few odd little comments that I recall". To the question "Can you remember anything that you said in the course of that meeting?", he responded "Not specifically, no". Moreover, there were significant internal inconsistencies in his evidence. The first was that, in respect of his resignation statement, his affidavit version was to the effect "If you are not happy with what I have done, I will find you another project manager. I will resign"; whereas in cross-examination emerged a version to the effect "If you can prove I was negligent, I will resign". The second was that whereas he maintains that the meeting ended abruptly after his resignation statement, he concedes that there was some discussion about the relationship between the Management Agreement and the Profit Deed. Other reasons for caution in the treatment of Mr Haggis' evidence are discussed elsewhere in these reasons.

Mr D Roche's notes of the meeting bear the ring of contemporaneity, accuracy and detail, and they record its events in apparently impartial terms. That they may well not have been typed until after 7 February does not detract from their reliability, as the typescript merely transcribes the contemporaneous handwritten record. Although it was submitted, for the plaintiffs, that his explanation for the omission of any reference to Mr Haggis' resignation statement was improbable, I do not agree. It must be born in mind that on Mr Haggis' own version, he at least said "I will resign" - though in one version it was qualified by the statement "if you can show I've been negligent", and in another by a statement to the effect "if you're not happy with what I've done". Thus on any view, Mr Haggis made a statement, qualified or not, to the effect that he would resign, which does not appear in Mr Roche's notes. This confirms that such a statement was made, though not recorded by Mr Roche, and reinforces the credibility of his explanation.

While much attention was directed to whether Mr Haggis said "I will resign" or "I resign", this is not determinative: the words "Then I'll resign" are capable, in context, of conveying immediate resignation. It is the effect of what was said, and not the precise words used, that is decisive; and the effect of words is influenced by their context, and the manner in which they are expressed. For that reason, the impression they make on those present is important; this is an area in which "lay opinion" evidence, which was given without objection, can be informative, though it must be treated with care. In this case, the impression created on the three witnesses (other than Mr Haggis, who had little recollection) was consistent. One of them, Mr Oliver, was by no means wholly aligned with the Roche Group interests. I do not accept that in circumstances where those three witnesses were called, and Mr Haggis' recollection of the meeting was admittedly poor, any adverse inference should be drawn from the circumstance that the Defendants did not call yet another witness, Mr B Roche.

Mr Haggis' note of his "car park conversation" with Mr Oliver immediately after the 28 January meeting ("Surprised I did that - you resigned Tyneside didn't"), strongly suggests that what he had said at the meeting conveyed an immediate resignation, rather than indicating that he might or would do so in the future. Other contemporaneous statements of Mr Oliver - to Mr Boswell and Ms Florence - are to the same effect. Moreover, each of Mr D Roche and Mr Hall understood what Mr Haggis said as conveying an immediate resignation. The Delphic reference in Mr Haggis' diary note "Roche Group may think RH wants to be out" bespeaks awareness that his statements conveyed more than he now wished to concede.

The plaintiffs submitted that it told against this view that during the meeting, Mr Haggis sought an opportunity to reply to Mr Walsh's criticism, after the minutes were produced - an exercise that would have been futile had he intended that he personally, or Tyneside, resign on the spot. However, I am unpersuaded that Mr Haggis sought such an opportunity at the meeting (as distinct from in subsequent correspondence); it was denied by Mr D Roche, Mr Hall and Mr Oliver; it was not recorded in any contemporaneous documentary record of the meeting; and it is not assisted by Mr Hall's acceptance that he believed that Mr Haggis was going to provide "some further information", as that is entirely consistent with Mr Haggis providing further information to facilitate the handover and progress of the project. And if he did seek such an opportunity, it would not necessarily have been inconsistent with resignation: it might have been sought before he decided to resign, or - despite his decision to resign - because he nonetheless wanted to answer the criticisms made of him.

In short, all three witnesses (other than Mr Haggis, who had no real recollection) were left with the impression of an immediate resignation. Documents and statements made immediately after the meeting are to the same effect. I am therefore satisfied that what Mr Haggis said, in context, were words that conveyed immediate resignation, rather than an offer or proposal to resign in the future. I am also satisfied that he did not merely forecast that he would resign if he were shown to be negligent (as he asserted in cross-examination), nor merely offer to find another project manager if the Board had lost confidence in his management style and the direction in which he had taken the project (as suggested in his diary note). This conclusion is confirmed by the conclusions reached below in respect of the subsequent events at the meeting.

Each of Mr D Roche, Mr Hall and Mr Oliver say that following Mr Haggis' resignation statement, reference was made to the position of Tyneside as distinct from Mr Haggis - Mr Hall and Mr Roche say that it was pointed out that it was Tyneside, not Mr Haggis, that had to resign; while Mr Oliver says that Mr Hall said that, Mr Haggis having resigned, Tyneside did not have the capability of performing its duties and the Management Agreement should be terminated. All three say that Mr Haggis expressed agreement; Mr Hall alone says that Mr Oliver also did so.

Mr Haggis denies that there was reference to Tyneside's position. While this derives some support from his note of the car park conversation, in which Mr Oliver emphasized that Mr Haggis and not Tyneside had resigned, this must be seen in the light that this was a point that Mr Oliver had by then been instructed by Mr Boswell to emphasise - in the light of Mr Haggis' unilateral conduct in resigning without prior consultation - apparently with a view to retrieving the position if they could.

While it is clear that there was no formal resolution to terminate the Management Agreement, as Mr Hall's minutes would suggest, Mr D Roche's notes record that, after the resignation discussion, Mr B Roche said "we take it back ourselves with BW to run it with most existing consultants + RH + JO to help with introductions to consultants/Council". Moreover, that the relationship between the Management Agreement and the Profit Deed was discussed after the resignation statement, as it unquestionably was (even on Mr Haggis' version), is inexplicable unless there was discussion about the termination of the Management Agreement, and its potential consequences for the Profit Deed. Two contemporaneous documents - the letter from Mr Hall to Messrs Haggis and Oliver of 3 February 2003, and the letter from Mr Hall to Mr Haggis of 5 February 2003 - refer to an agreed decision that Roche Group would take over the project management. That Mr Haggis was asked to make suggestions about the way forward, to meet again with the Board, and to provide copies of the "rough master plan" and a "practical statement on Community Title" is not only not inconsistent with this, but tends to reinforce it: these were steps to implement what had been agreed by facilitating the handover of the project management to Roche Group, not enabling Tyneside to continue in that role. I am therefore satisfied that at the meeting, following his resignation statement, Mr Haggis assented to the proposition that Tyneside's Management Agreement be terminated and that Roche Group assume management of the project.

However, I am unpersuaded that Mr Oliver overtly expressed assent to that proposition. Only Mr Hall said that he did so; Mr Oliver denied it, and Mr D Roche said that Mr Oliver remained silent. I find that Mr Oliver remained silent, and expressed neither assent nor dissent. The consequences of this will require further consideration.

It is next necessary to consider what were the legal consequences of what transpired at the meeting, as I have found the facts to be. Despite the form of Mr Hall's minutes of 28 February, the defendants do not contend that Hammersmith then exercised a right of termination arising from inability on the part of Tyneside to perform its contractual obligations; rather, the defendants' case is that the Management Agreement was there and then terminated consensually. While articulated in terms of Hammersmith accepting Tyneside's resignation, the legal characterization of what the defendants contend for is discharge by agreement. For there to be discharge by agreement, the ordinary requirements of a contract, including consideration, apply; where, as here, the agreement remains executory on both sides, that usually presents little difficulty, as the consideration is to be found in mutual releases of the outstanding obligations of each party.

Whether there was a discharge by agreement made on 28 January 2003 involves whether Mr Haggis' resignation statement bound Tyneside, and whether the parties intended to be immediately bound by what took place.

Mr Haggis was one of two directors of and one of three shareholders in Tyneside. While it is true that Mr Haggis was also a director of Hammersmith, and was present at the 28 January 2003 meeting in that capacity, it is not possible to divorce Mr Haggis (or Mr Oliver, who was also present) from Tyneside; Mr Haggis in particular was present not only as a director of Hammersmith but also to answer questions about Tyneside's performance, and thus he was present also in his capacity as a representative of Tyneside. So too was Mr Oliver, whose presence is only explicable by his role in Tyneside.

Mr Haggis was the normal spokesman for Tyneside in dealings between Tyneside and Hammersmith. On 28 January 2003, Mr Haggis did what he did without demur from Oliver: Mr Oliver was present and did not express dissent. In circumstances where Mr Haggis was Tyneside's spokesman, and his co-director was present and did not dissent, his conduct bound Tyneside. As Mr Oliver explained: ... Roy was the elected representative for Tyneside. He had the authority from Tyneside to make decisions at board level. When he resigned it moved fairly quickly after that. I was trying to catch up to things myself. He resigned and so did Tyneside. That was my belief.

As to whether the parties intended to be immediately bound, in my judgment there is little room for doubt that, at the conclusion of the 28 January meeting, the objective observer would have concluded that it had been agreed between Tyneside and Hammersmith that the Management Agreement was discharged and Roche Group was assuming management of the project. At the end of the meeting, there was no question whether Mr Haggis or Tyneside was going to resign, or Roche Group assume management; it is clear (from the car park conversation, and Mr Oliver's communications, as well as the evidence of Mr D Roche, Mr Hall and Mr Oliver, and the documents of 3 and 5 February) that everyone was of the view that he had resigned, and all that remained was to implement handover of project management to the Roche Group. As the defendants submitted, invoking the dictum of Kitto J in Creamota Ltd v The Rice Equalization Association Ltd (1953) 89 CLR 286 (at 325), it was "abundantly clear to every man in the room" that the Management Agreement was at an end. The parties did not leave the meeting with a view that its outcome was conditional upon execution of a formal document, even if written confirmation of the proposal for Namlot's and Bluegrass' ongoing profit share entitlement was contemplated. The meeting of 28 January produced an agreement in the first, or alternatively fourth, class of Masters v Cameron: the parties intended to be immediately bound, even if a document recording and more fully stating their agreement was in contemplation.

I do not accept that the subsequent conduct of the parties during February 2003 precludes a conclusion that there had already been a discharge by agreement on 28 January. So far as conduct on the part of Tyneside or Mr Haggis is concerned, there is no doubt that within a short time after the meeting Mr Haggis had second thoughts and then endeavoured to retrieve his position; but while he prevaricated, he did not at the time distinctly deny that he had resigned at the meeting: "You seem to be passing on the message that I have resigned, though resigned from what is unclear". An assertion that he had not resigned at the meeting would have been contrary to fact. His subsequent second thoughts cannot reverse what had already happened. The statement in his 1 February 2003 email to Mr Oliver, "I am continuing to manage those parts of the project that are in my domain until this matter is settled. I am however referring all decisions to David Hall for verification" [emphasis added], suggests that Mr Haggis appreciated that his status had changed, though he had had second thoughts and was endeavouring to retrieve the position. Similarly, Mr Oliver's conversation with Mr Holland on 4 February, and his letter of 10 February to Maryann Florence to the effect that Tyneside was the Project Manager, to whom all correspondence should be directed, are self-serving and explicable as part of Tyneside's attempt to retrieve the position.

So far as conduct on the part of Roche Group is concerned, it is not inconsistent with there being a concluded agreement as at 28 January for them to seek a formal written document embodying or more fully stating its terms, or incorporating additional terms. This is particularly so where it was contemplated that Mr Haggis and Mr Oliver would, through their associated companies, retain a profit share, which nonetheless required some renegotiation.

In particular, it is not inconsistent with a discharge agreement having been concluded that, still at the 28 January 2003 meeting, Mr B Roche asked Mr Haggis to make suggestions for the way forward for the project, meeting again with the board, sending three copies of a rough master plan to the board, sending a practical statement on Community Title to the board, and instructing contractors to complete certain works relating to the lake. These steps were for the purpose of facilitating a handover or further smooth conduct of the development under new management, and so understood are not inconsistent with termination. Payment on 31 January 2003 of Tyneside's management fee for the month of February 2003 is not inconsistent with a discharge agreement having been concluded, given the Defendants' case that they offered to do this voluntarily in connection with the termination pending finalisation of the new profit share arrangements. The proposal of 5 February is explicable as an attempt to secure a formal record of the agreement made on 28 January, with additional terms relating in particular to the ongoing profit share arrangements. Although it contained a proposal that the Management Agreement be terminated, that was to be with effect 28 January, consistent with the view that that was when the agreement to be documented had been made.

The high point of Tyneside's case in this respect is Roche Group's request of 10 February to Tyneside to proceed with certain works; and Roche Group's letter of 12 February to Delamere that, unless advised to the contrary, their line of engagement and communication remained with Tyneside. But this was in the context that Tyneside had not yet handed over management to Roche Group, and retained the project documentation, so that for the current works to proceed at all, pending the formal handover, it was necessary for Tyneside to continue to fulfill the role. This is not inconsistent with there being a concluded discharge agreement; because the agreement contemplated a handover, which had not yet taken place. The absence of protest at Tyneside's ongoing role after 28 January is explicable on the basis that the handover, though agreed, had not yet been effected.

There were ongoing and ultimately inconclusive negotiations for formalisation of what had been agreed on 28 January 2003. It is true that, at least from 14 February, Tyneside while exploring whether variations could be agreed was doing so on the footing that the Management Agreement was still on foot. But it could not change history by adopting that position. Roche Group, on the other hand, was doing so on the footing that there was already a concluded discharge agreement. Not insignificantly, the draft Management Agreement Termination Deed submitted on 27 February not only - like the proposal of 5 February - proposed termination with effect from 28 January, but it also recited that the Management Agreement had been terminated on 28 January; while (because the written form was never executed) that does not evidence the fact recited, it reinforces the view that the ongoing negotiations on the part of Roche Group were not inconsistent with termination having already been agreed on 28 January 2003. While Roche Group was seeking to refine and document the terms of the discharge agreement, they were doing so in the context that a binding agreement had already been struck.

The plaintiffs submit that on 11 March 2003, the defendants purported to exercise powers of termination under clause 12.1 of the Management Agreement and clause 12.1(f) of the Profit Deed on the basis that both of those agreements were on foot and executory and could be and were being relied upon. It is true that the notices of 11 March 2003 were not expressed to be without prejudice to any earlier termination, but it was not necessary to their efficacy that they do so, and they could not revive an agreement that had already been terminated; accordingly I do not think that they amount to an admission, or otherwise evidence, that the Management Agreement remained on foot. They represented an attempt by Roche Group to cover every base.

Accordingly, I accept that there was a consensual termination of the Management Agreement on 28 January 2003, when it was discharged by agreement.

The defendants alternatively contend that they terminated the Management Agreement on 11 March 2003, by their written notice of termination of the Management Agreement, purportedly pursuant to clause 12.2 thereof, of that date, for repudiation by Tyneside, being the resignation announced at the meeting on 28 January. Although the plaintiffs submit that a resignation could not be 'accepted' by a termination relying on the contractual power of termination under clause 12.2, and that the notice of 11 March 2003 was not an acceptance of a resignation, I disagree. There is no reason why an unequivocal statement on behalf of a manager that it resigns - or will at a future date resign - could not constitute a repudiation, capable of acceptance by termination. A purported termination can be justified on any available ground, whether or not it was expressly relied on, or even known of, at the time of the termination. There is no reason why the notice of 11 March 2003 could not be justified as acceptance of a repudiation, manifested by a previous unequivocal statement of intention to "resign".

However, whatever he said on 28 January 2003, prior to 11 March 2003, Mr Haggis' position had shifted, and he no longer adhered to the position that he had resigned; rather, he said that he might be prepared to do so, upon certain terms. Even if his intention had been apparently unequivocal on 28 January, it was not so by 11 March. To the contrary, he was maintaining that Tyneside was ready, willing and able to perform its contractual obligations. Accordingly, if there had been repudiatory conduct on 28 January, it did not remain available and capable of acceptance by termination after 14 February. It was not available for acceptance on 11 March.

I would therefore not accept the defendants' alternative case that they terminated the Management Agreement on 11 March 2003 for repudiation by the resignation statement made on 28 January 2003. However, the conclusion that there was a consensual discharge of the Management Agreement on 28 January is dispositive. The Plaintiffs' case fails on that basis.

Under clause 12.2 of the Management Agreement, the party or parties not in default were entitled to terminate the agreement upon the occurrence of an event of default. Clause 12.2 of the Profit Deed was identical. In each agreement, clause 12.1 specified the events of default; but while there are many similarities, they are not identical. The events of default relied upon by the defendants are: (1) non-compliance with directions from Hammersmith (Management Agreement, 12.1(b)); (2) failure of the development to achieve 90% of the profit stated in the Report (Management Agreement, 12.1(f)), and failure of the development to achieve 90% of the profit stated in the Report provided that the time periods in the report will be extended for the duration of any delay caused by any matter beyond the control of Tyneside (Profit Deed, 12.1(e)); (3) falsity or incompleteness of representations, covenants and warranties (Management Agreement, 12.1(c); Profit Deed, 12.1(b)); and (4) termination of the Management Agreement for any reason (Profit Deed, 12.1(f)).

Under clause 12.1(b) of the Management Agreement, it is an event of default if the manager (Tyneside) does not comply with the directions of Hammersmith in relation to the development. "Development" is defined by clause 1.1 of the Management Agreement as "the subdivision of the Land in accordance with the requirements of all competent Authorities and development, marketing and sale of the Land in accordance with the provisions of this Deed". Clause 12.1(b) must be considered in the light of clause 7.1(n), which obliges Tyneside as manager to "comply with all lawful directions of Hammersmith".

There is no equivalent event of default in the Profit Deed, but termination of the Management Agreement on the basis of this event would trigger an event of default under clause 12.1(f) of the Profit Deed, so as to authorise the termination of the Profit Deed. As has been mentioned, while, initially, the plaintiffs contended that clause 12(f) of the Profit Deed was not available for that purpose, this contention was abandoned in the course of the hearing.

The defendants allege that Tyneside failed to comply with two directions said to have been given by Hammersmith. The first - said to have been given on 8 August 2002 - was to the effect that Tyneside not incur any further costs and cease further work in relation to the development, other than completing the dam and the fore bay, until Mr Truswell and Mr Walsh had completed a review of the development. It is said that this direction was ignored, in that Tyneside subsequently, and at considerable potential cost to Hammersmith: (a) instructed DEM to prepare a master plan, and an upgraded landscape plan, for the development (which potentially increased the estimated budget for landscaping from $250,000 to $1.1million), and conducted meetings with DEM; and (b) instructed Asquith & de Witt, the consultant surveyors, to carry out various tasks in relation to "mapping the first part of the Master Plan".

The second direction - said to have been given on about 12 November 2002, after Hammersmith discovered that Tyneside had engaged DEM to undertake further work - was to the effect that Tyneside instruct DEM to cease all work that it had been directed to do by Tyneside after 8 August 2002, and not to incur any further costs in relation to the development until further notice. It is said that despite this (and the 8 August 2002 direction), Mr Haggis on behalf of Tyneside re-engaged DEM to provide layout options for Lot 104.

By August 2002, following the provision to them of the Simpkins report and the communication to them by Mr Oliver of concerns he had about Tyneside's management of the project, Hammersmith had developed some concerns at Tyneside's performance. A site meeting was convened for 8 August 2002. Roche Group arranged for the attendance of two consultants, Mr Truswell (a consulting engineer) and Mr Walsh, in addition to Mr Hall, Mr B Roche, Mr Haggis, Mr Oliver and Mr Florence. With the exception of Mr Truswell, who did not arrive until after Mr Hall had left, they walked around the site and reviewed its current status, sometimes in smaller groups.

According to Mr Hall, in the course of the meeting it was agreed that a total review of the project was to be conducted by Mr Truswell assisted by Mr Walsh, and he directed Mr Haggis and Mr Oliver, in the presence of Mr B Roche and Mr Walsh, in the terms "There are to be no further costs incurred and no further work done, other than completing the dam and fore bay, until the review is completed". He says that all present, including Haggis and Oliver, responded to the effect "We agree", or "Yes".

According to Mr Walsh, Mr B Roche said "While David and I are away and this review is being carried out, no works are to be undertaken in connection with the project except for completion of the works already under construction". Mr Haggis replied "That's fine, but there are some clearing works which could be carried out in Precinct 1 which I assumed Delamere will be doing. Is it alright for Delamere to proceed with that work?", to which Mr Roche responded "No. No new works are to be commenced until after the review". Mr Haggis, Mr Oliver, and Mr Florence acknowledged and assented to that statement. In cross-examination, Mr Walsh was unsure whether the reference was to "works" or "work", but he understood the direction to apply to all work, not just construction works.

According to Mr Oliver, after the participants had left the edge of the lake and were inspecting the sediment bays, Mr Hall said that Messrs Walsh and Truswell were to undertake a total review of the project, and "No new work, except current work in progress, is to be authorised until further direction by the board of Hammersmith". (The versions he gave in cross-examination differed, but not materially so, other than that he did not recall the words "except current work in progress" in his oral evidence, but on being shown them in his affidavit, adhered to them). Mr B Roche said something to the same effect, including "Stop all new work". Mr Oliver took this to refer to all types of work; but that it did not inhibit any work that had already been commissioned. He allows that Mr Haggis could have asked a question about clearing works, but does not recall it. His best recollection was that the reference was to any new work, not just construction works; he understood that all new work was to stop.

Mr Truswell gives no evidence of any such direction, but he was not present for the entire meeting, and as he arrived after Mr Hall had left, would have arrived after any such direction was given.

Ms Florence's diary note of 8 August of the site meeting does not refer to any such direction, nor to anything about a review, although Messrs Walsh and Truswell are recorded as being present. She denies that any such instruction was given. Mr Florence also denies that any such instruction was given in his presence. However, it is not apparent that they were present with the others throughout.

Mr D Roche did not attend the meeting and cannot recall being aware of it in advance. Prior to that date, he was not dissatisfied with progress at Pambulong; although he had some concern at the time it was taking, he understood that there were reasons why it was taking so long, and he accepted those reasons, and that the costs being incurred were appropriate and reasonable. He gave evidence that following the meeting of 8 August, Mr Hall told him that it had been agreed that Messrs Walsh and Truswell would conduct a review and that no further works would be incurred, except essential works for the dam and fore bay (and possibly the tramway road). He thinks this came as a surprise to him. He agreed that he did not understand it as a direction that no further work be done - because he anticipated that Tyneside would continue doing the work it had been doing. However, he does not recall thinking that Tyneside would continue with planning of the urban subdivision of Lots 103, 104, 105 and 107. He says that he did not turn his mind to the specifics - Mr Hall simply said, this was the instruction given.

Mr D Roche agrees that he did not convey the first direction by letter, or by phone, to Tyneside. He says that Mr Hall told him that everyone was clear on it, and it did not occur to him to place it in writing. Indeed, there does not appear to be any contemporaneous diary note that records any such direction. However, its having been given is mentioned to in later correspondence, referred to below.

Mr Haggis, in his affidavit of 1 September 2005, denied that any such instruction was given. But in cross-examination he agreed that he had attended a site meeting on 8 August at which Mr B Roche said that he would like Messrs Truswell and Walsh to carry out a review of the project, and Mr Hall had said that there was to be no further construction work done, other than the lake and fore bay, until the review was complete. He said that he did not recall Mr Hall saying that there were to be no further new costs incurred, but added "but there was no intention to do any other work", as expenditure was being minimised because of the pending s 94 dispute, which might indefinitely delay the project. He then acknowledged that he had agreed at that meeting that he would not do any further work or incur further expense, apart from completing the lake and fore bay contract. Later, he confirmed that Mr Hall had made clear to him that he did not want any new expenditure incurred or new work undertaken. Subsequently, he said that the instruction was not confirmed in writing; and that he did not even recall being told not to incur any further expense. Then (after the alleged disobedience had been put to him) he said that he did not "specifically recall getting a direction to stop all further work", but then confirmed that he had twice earlier acknowledged getting such a direction, and (once) that it was on his advice that they not start any new work.

Following the 8 August site meeting, Mr Haggis held meetings with DEM in relation to the master planning process, and permitted other consultants to do so, and thereby incurred expense. While there was dispute as to the scope of these discussions and instructions, it is clear at least that, in response to a request from Mr Haggis, DEM wrote to Mr Haggis on 22 August, setting out their understanding of a revised scope of works (to include a schematic design for Lots 103, 104, 105 and 107) indicating the proposed subdivision layout, road network and open space, for which DEM proposed fees of $56,000 plus GST; and on 25 August, Mr Haggis accepted that proposal and asked DEM to proceed post-haste with the assessment and survey work. This preceded his trip to Adelaide with Mr B Roche and Mr Walsh on 26 August, during which Mr Haggis claims that Mr Roche instructed Mr Haggis to prepare a master plan.

On 26 September, DEM sent a memorandum to Mr Haggis which included a quote for the preparation of a documentation package for tendering and construction purposes (the effect of which would have been to increase the landscaping budget from about $250,000 to more than $1 million). On 8 October, Mr Haggis wrote to Mr Holland, stating that the priority at this stage was completing documentation for landscape works for the development consent and construction certificate conditions for the lake and fore bay, and that DEM was to prepare a schematic design only for the final lake and park works in accordance with their recommended budget of $1.1 million; with no further work to be carried out until the RTA filling Tramway Road and Precinct 1 works had commenced and the final profile of the park was determined.

On 10 and 22 October, Mr Winterbottom met with representatives of DEM to review and discuss the Stage 2 master plan proposals.

After 8 August, Mr Haggis also gave a series of instructions to Asquith & de Witt to perform various tasks related to the mapping of the first part of the master plan.

In a facsimile to Tyneside of 17 October 2002, Mr Hall wrote: I should also remind you that at the Board Meeting conducted on site at Pambulong it was agreed that no changes would be made pending receipt and consideration of the review to be undertaken by Gary Truswell, and Bob Walsh. On behalf of Hammersmith Management Pty Limited you are specifically required to comply with this Board decision and not discuss the matter with any of the consultants or vary any arrangements until after the Board has finalised its review and decisions.

In early November 2002, Mr Walsh told Mr Oliver that, in the course of his review, he had received correspondence from DEM relating to their account for preparation of a master plan and a landscaping plan. Mr Walsh asked "Why has this been done after you were instructed not to commission any further work?", and Mr Oliver said that he was unaware that such instructions had been given and would get a summary of all instructions issued to DEM. He then spoke to Mr Holland at DEM and asked him to prepare a summary of instructions given by Tyneside. When he called Mr Holland some time later to chase it, Mr Holland informed him that Mr Haggis had told him not to prepare the summary. Mr Oliver, and then Mr Walsh, received the DEM summary on or about 6 November.

According to Mr Walsh, at a site meeting on 7 November he was provided with a copy of the project plan, which incorporated the landscape plans prepared by DEM on 24 September 2002, and asked Mr Haggis and Mr Oliver "Why have you had DEM prepare these plans? At the Hammersmith board meeting in August you were instructed to do no more work on the project and I thought those instructions were clear". Mr Walsh says that Mr Haggis responded by saying that he did not know that the work was being done, but when shown a copy of the plans with dates was silent.

Following that meeting, Mr Walsh reported to Mr Hall by facsimile of 11 November: John Oliver handed us a copy of the D.A. plans and a project summary given to him by DEM prepared on Wednesday after my telephone call to him explaining my frustration of the documents received the previous day. Roy explained that they had re-developed the original concept that was prepared over twelve months ago. When asked why DEM had been recently working on the original drawings, if the design concept had been revised, he said that no such work had been carried out. Dated drawings showed works being done on 24.09.02 and when asked said he had no knowledge of this. When it was shown that he had received memos from DEM on 24.09.02 and 26.09.02, nothing further was said.

After receiving Mr Walsh's facsimile, Mr Hall had a telephone conversation with Mr Oliver to the following effect: Hall: "I understand that DEM have been instructed to do further work in relation to the Project. This is not what we agreed. No further work was to be commenced until the review was completed. Please instruct DEM to cease further work". Oliver: "I will immediately instruct DEM to stop work".

Mr Oliver then instructed DEM to stop further work, and on 12 November 2002 wrote to Mr Hall confirming that: As a result of our telephone conversation this afternoon, I have instructed DEM (John Holland) to stop all work until further notice.

Mr Haggis was aware that DEM had been instructed to cease all further work: Q. ... On or shortly after 12 November Mr Oliver told you, didn't he, that he had received a call from Mr Hall directing DEM to cease all further work. You were told about that, weren't you? A. I was told that, yes.

Indeed, Mr Haggis relayed that instruction to Mr Winterbottom.

In a facsimile to Tyneside of 6 December 2002, Mr Hall wrote: Furthermore, we do not understand why so much is "on hold" when the agreement and instructions were and consistently have been to "commence no new works or instructions until the review was completed". Indeed as a very simple example why is the "Community Title - Business Plan" "... on hold" when it is stated "Tyneside will complete the bulk of this work"?

In the "Notes for 28 January 2003 Board Meeting", prepared by Mr Hall and Mr D Roche in preparation for that meeting, the following observations were made with respect to clause 4.1(j) of the Management Agreement (which provided that Tyneside would not engage contractors or sub-contractors without notifying Hammersmith of the particulars and receiving Hammersmith's prior written consent):

When this issue was raised at the 28 January 2003 board meeting, in answer to a question "Did you instruct DEM to do new work after our direction at our board meeting in August, on the project site, to not commence further work?", Mr Haggis responded "No, they did some work outside what they were instructed to do, I am querying them".

On 3 February 2003, Mr Hall wrote to Mr Haggis and Mr Oliver attaching DEM's 3 November and 20 December invoices, and inquiring: It would also be greatly appreciated if you could promptly advise why the memorandum and proposal was confirmed without recommendation to the Board and Board approval and indeed why they were signed and confirmed after the on-site meeting at Pambulong Forest where it was agreed by the Board that no further instructions were to be given or new work to be commenced or undertaken until the project review was finalized and addressed by the Board which occurred only at last week's meeting where it was unanimously agreed this company would promptly take over the project management.

There was no response to this query.

The first direction. As pleaded, the first direction was an oral direction given in person on 8 August 2002 by David Hall on behalf of Hammersmith to Mr Haggis and Mr Oliver on behalf of Tyneside, "... not to incur any further costs and to cease further work in relation to the project, other than completing the dam and the fore bay, until a review of the project had been completed". The plaintiffs submit that the evidence establishes no more than that Mr Hall said that there were to be no "new works" (as distinct from "new work"), and that in the context of a site inspection, this was reasonably understood to refer to construction works, not planning.

Although there are discrepancies between the various versions, it is not necessary to resolve all of them. It is clear that at the 8 August site meeting, Mr Hall on behalf of Hammersmith directed Mr Haggis and Mr Oliver, who acknowledged the direction, that no new work was to be undertaken or authorized until the Board had considered the outcome of the proposed Review and given further direction. Indeed, Mr Haggis accepted that such a direction was given, and was disobeyed. He gave the following evidence: Q. And is this the case, that you agreed at that time meeting that you wouldn't do any further work or incur further expense, apart from completing the lake and fore bay contract? A. Yes. ... Q. Mr Hall had made it clear to you at the meeting on 8 August that he didn't want any new expenditure incurred or new work undertaken, didn't he? A. He did. Q. And nobody had told you differently, had they? A. No. Q. But you went ahead and committed was it Tyneside or Hammersmith for the payment of this money? A. I - we authorised this work to be done, yes. Q. On behalf of Hammersmith? A. On behalf of Hammersmith. Q. Without telling them that you were doing so? A. No. It wasn't new work. ... Q. You had received an instruction and accepted instruction on 8 August not to incur any further expense, hadn't you? A. No. That was never confirmed in writing. I don't even recall being told not to incur any further expense. Q. When you say it wasn't confirmed in writing, you accept that the direction was given to you, don't you? You accept that, don't you? A. Yes, on my advice. Q. And contrary to the direction, you decided that you would go and retain DEM to undertake a master planning activity? A. I was fulfilling the Bard's request to determine the total number of lots, or the total development plan for the property ...

His quibble that the direction was not confirmed in writing does not detract from his concession that it was given; there was no requirement that it be in writing.

It is also clear that, notwithstanding the controversy as to whether the direction referred to "new work" or "new works", it was understood by all not to be limited to construction works, but to extend to new instructions to consultants. No one who heard it given professed a different understanding of it. The preponderance of the evidence favours "work" in any event. But the most telling indicia are Mr Haggis' own responses when the instructions he subsequently gave to DEM were raised with him in 2002 and 2003: when at first he told Mr Holland not to prepare the summary of instructions requested by Mr Oliver for provision to Mr Hall; then denied that DEM had done any such work; then denied knowledge of such work being done; then, when his knowledge was established, was silent; later (at the 28 February meeting) alleged that DEM had done work outside of the scope of their instructions; and, finally, did not respond to Mr Hall's request for an explanation. That the direction included commissioning consultants is also entirely consistent with clause 4.1(j) of the Management Agreement, which required Hammersmith's prior approval for the engagement of consultants.

Mr Haggis said that his advice was that they not start any new work, and that the master planning work undertaken by DEM was not new work, but an extension of existing work to resolve issues arising from LEP 2001. However, the terms of the 22 August 2002 and Mr Haggis' 25 August response make clear that it was indeed new work, that had not previously been commissioned. He suggested that Mr B Roche instructed him to have a master plan prepared at the 15 August meeting; but at the highest at that meeting Mr Haggis offered to locate, or obtain, a master plan, which falls well short of authority to incur expense by instructing an external consultant to prepare one. He also suggested that he was instructed to do so by Mr B Roche during their Adelaide trip on 26 August 2002, but that was after DEM's proposal on 25 August, and the highest Mr Haggis' evidence of any instructions given on 26 August rose was "When we were in Adelaide, Bill Roche asked me how many housing lots are we getting at Pambulong"; to interpret a query as to the number of lots Pambulong would generate as authority to commission DEM to prepare a master plan, in the light of the direction given on 8 August, is untenable. Mr Haggis claimed that he told Mr Hall and obtained his approval for retaining DEM to prepare a master plan, and said that this would have been in a board report; but he was not providing board reports at that stage, and there is no other evidence of any communication informing Roche Group or Hammersmith that he was intending to retain DEM for that purpose. Moreover, the tenor of all the communications after Hammersmith discovered that DEM had been so retained is to the contrary - on both sides - as not only was Hammersmith's objection to the retainer stridently articulated, but there was no hint in Mr Haggis' responses that such retainer had previously been advised and approved.

Accordingly, Tyneside did not comply with the first direction.

The second direction. As pleaded, the second direction was one given by telephone by Mr Hall on behalf of Hammersmith to Mr Oliver on behalf of Tyneside, to the effect that Tyneside instruct DEM to cease all work it had been directed to do by Tyneside after 8 August 2002, and not to incur any further costs in relation to the development until further notice. Mr Haggis also clearly conceded that he did not comply with the second direction: Q. Mr Oliver gave an instruction to DEM to cease all further work as a result of that direction, didn't he? A. Yes. Q. You countermanded that instruction, didn't you? A. Yes, I needed the work. Q. Didn't you? A. Yes, I did, I needed that work for the works program. Q. You re-engaged DEM to provide layout options for Lot 104 based upon the master plan, didn't you? A. Only in respect of the edge design for the bushfire. Q. You did that in January of 2003? A. That work was urgent.

Although Mr Haggis again quibbled that the direction was not in writing and that the work in question was essential, this was an unambiguous concession that the direction was given, and disobeyed.

Authority. The Plaintiffs submit that any such direction was not an effective direction under the Management Agreement because Mr Hall had no authority to give it, being only one of the four directors of Hammersmith, let alone on the occasion of an informal site meeting where people were wandering around the site. However, this overlooks that, although Mr Hall was not the managing director of Hammersmith, he was Roche Group's and Hammersmith's usual representative in dealings with Tyneside, and the direction was given by him in the presence of and after discussion with Mr B Roche, who confirmed it. In my judgment, the direction given by Mr Hall was within the scope of his authority and was an effective direction by Hammersmith.

Lawfulness. The next question is whether the first direction was "lawful", in the sense that it was one that Hammersmith was entitled to give in accordance with the Management Agreement. The plaintiffs submitted that Hammersmith was bound, by the Profit Deed and the Management Agreement, to execute the development, and not to impede Tyneside's ability to derive the benefits the contract conferred on it; and that the effect of a direction to cease further work (albeit with an exception) was so inimical to Tyneside's appointment as project manager as to amount in substance to a derogation from the grant of the office of project manager. Such a direction was also, they submitted, inconsistent with Hammersmith's contractual obligations of mutual co-operation and participation and of good faith, and Tyneside's obligation to prosecute the development as manager.

As the plaintiffs submit, clause 12.1(b) of the Management Agreement must be construed in the context of the agreement as a whole. Clause 12.1(b) is not an independent source of power for Hammersmith to give directions, but refers to directions lawfully given under the Management Agreement. Clause 7.1(n) obliged the Manager to comply with lawful directions of Hammersmith. Those directions would not be lawful if they would prevent performance of Tyneside's contractual obligations (such as, under clause 7.1(a) of the Management Agreement, to use its best endeavours to procure completion of the development in the most timely and efficient manner and in accordance with the Report) or deprive Tyneside of benefits to which it was entitled under the Agreement; if they were inconsistent with the Management Agreement; or if they exposed Tyneside to an event of default, such as that under clause 12.1(f) of the Management Agreement and 12.1(e) of the Profit Deed, which occurred if profit projections were at any time not met within a tolerance of 10%.

However, it is noteworthy that Tyneside's obligation under clause 7.1(a) was to use its best endeavours to procure completion of the Development in the most timely and efficient manner and in accordance with the Report or as otherwise directed by Hammersmith. Similarly, in the Profit Deed, Tyneside warranted that it would to the best of its ability carry out the Services promptly, punctually and efficiently and would complete them within the time periods specified by Hammersmith. Moreover - as discussed below under the "second event of default" - the event of default in clause 12.1(e) of the Profit Deed, entitling Hammersmith to terminate, "if the Development fails, at any time to achieve ninety per centum (90%) of the profit stated in the Report" was subject to the proviso, "provided that the time periods in the Report will be extended for the duration of any delay caused by any matter beyond the Manager's control", and this had the effect that failure to attain the profit schedule would not authorise termination of the Profit Deed insofar as delay was beyond Tyneside's control. In any event, by clause 4.1(j) of the Management Agreement, Tyneside covenanted that it would not engage contractors or sub-contractors without notifying Hammersmith of the particulars and receiving Hammersmith's prior written consent to the engagement, so that quite apart from the directions, Tyneside was not entitled to engage consultants without consent.

In that context, even if a direction to cease all work indefinitely would be inconsistent with the contract and on that basis unlawful, a direction not to commence new works while a review of the project was undertaken was not. It did not prevent progression in the meantime of works already authorized - which included the lake and fore bay contract, which was on any view at that time the main effort - bearing in mind that expenditure was in any event being minimised because of the pending s 94 dispute, which had the potential indefinitely to delay the project. To the extent that the direction would cause delay, the provisions referred to in the preceding paragraph accommodated the position.

It follows that Tyneside did not comply with the lawful directions of Hammersmith, in both respects alleged, and thereby committed the event of default referred to in clause 12.1(b) of the Management Agreement.

The Plaintiffs submitted that Hammersmith was in any event not entitled to terminate because it was not innocent, nor ready willing and able to perform its own contractual obligations. This was said to arise under clause 12.2 of both agreements, which provides that if an event of default occurs, "the party or parties not in default" may terminate by notice in writing.

In this context, in my judgment, the term "party ... not in default" means no more than the other party, where one has committed an event of default. It does not require that the party seeking to terminate have punctiliously performed every aspect of its contractual obligations. For instance, a party that was in breach of an obligation - falling short of a material or persistent breach in respect of which notice to remedy under clause 12.1(a) had been given - could still be a "party ... not in default" for the purposes of clause 12.2. Moreover, for the reasons already given, the directions did not place Hammersmith in default. A direction not to commence or commission new work while a review was undertaken was not inconsistent with the parties' contractual rights and obligations.

Hammersmith was therefore entitled to terminate the Management Agreement pursuant to clause 12.1(b), whereupon Hammersmith was also entitled to terminate the Profit Deed under clause 12.1(f) of that Deed.

Clause 12.1(f) of the Management Agreement provided that it was an event of default, entitling Hammersmith to terminate, "if the Development fails, at any time to achieve ninety per centum (90%) of the profit stated in the Report" (emphasis added).

There is a similar provision in clause 12.1(e) of the Profit Deed, which however contains the proviso, which was inserted in the Profit Deed as a result of the last minute discussions on 4 June, "provided that the time periods in the Report will be extended for the duration of any delay caused by any matter beyond the Manager's control", and there is no pleaded allegation that this proviso was satisfied. The Plaintiffs contend that this proviso should be imported into the Management Agreement, or at least should operate to preclude termination of the Profit Deed on the basis of breach of the equivalent event of default in the Management Agreement unless the proviso is satisfied. In the event, these questions are not necessary to the determination of the issue. However, in my view, absent a claim for rectification, the proviso could not be imported into the Management Agreement. On the other hand, however, I agree that reading the documents together it would defeat the intention of the parties reflected in clause 12.1(e) of the Profit Deed for an event of default under clause 12.1(f) of the Management Agreement to authorise termination of the Profit Deed unless the proviso is satisfied. It is I think clear that it was intended that failure to attain the profit schedule would not authorise termination of the Profit Deed insofar as delay was beyond Tyneside's control, and that Profit Deed clause 12.1(f) could not be used to outflank the restriction imposed by the proviso in clause 12.1(e). This result can be supported on the basis that the particular (Profit Deed 12.1(e)) overrides the more general provision (Profit Deed clause 12.1(f)); and that the proviso to clause 12.1(e) - a deliberately negotiated late amendment - would otherwise be deprived of utility and rendered otiose.

There is no definition of "Profit" in the Management Agreement. There is a definition in the Profit Deed, clause 1.1, which defines "Profit" as the net audited before tax profit of Hammersmith arising out of the Development before the deduction of fees and amounts payable by Hammersmith to the "Participants" (that is, the co-venturers) and is to be calculated in accordance with clause 10 of the Profit deed. Clause 10 envisages a progressive calculation of profit, from year to year. In any year, profit is to be reduced by a sum equal to Hammersmith's losses on the development in any year. This means that prior years' losses are deducted before profit in any year becomes distributable by Hammersmith to its co-venturers. Clause 11.2 also provides for reservation out of profits of funds sufficient for ongoing capital requirements, but does not change the character of the reserved funds as profits in the relevant year. However, assuming that this definition can be imported into the Management Agreement, which is itself a schedule to the Profit Deed, it does not materially inform resolution of the present issue.

The Report contains a number of schedules, which assume the conventional low-density development model, and contemplate that a number of issues would need to be examined to improve the development. Schedule 8 to the Report contains a cash flow projection, which sets out "inflows" and "outflows" for each quarter of the development. The "inflows" are generated by lot sales and are therefore dependent upon there being sales of lots. According to this projection (which assumed the low-density model) cash flow would not become positive until the second quarter of 2003, with an "accumulative total" first projected to be positive for the second quarter of 2003: $64,420 at 30 June 2003, and $1,201,210 as at 30 September 2003.

I accept that the "profit stated in the Report", for the purposes of Management Agreement clause 12.1(f), is the "accumulative total" stated in Schedule 8, for each quarter. On the third page of Schedule 8, a handwritten note "equals profit on basis of worst possible scenario" linked to the "accumulative total" for the fourth quarter of 2011 (being an amount of $68,946,669) was made at the 2 March 1999 meeting, in Mr Haggis' presence, before those present signed the copy Report, following a representation by Mr Haggis that that figure was the minimum profit that could be expected and was the worst possible scenario.

As originally pleaded, the defence (par 61) alleged that the Report provided that the development would achieve a profit commencing in the third quarter of 2000 and each quarter thereafter. This is not discernible from the Report. The defence (as subsequently amended) pleaded an alternative case, that the Report projected that profit would commence from the second quarter of 2003. As ultimately advanced, the defendants' case was (1) that the actual accumulative total could be positive only if sales of lots had occurred, and their proceeds exceeded accumulated expenditure; (2) that as at the date of termination on 11 March 2003, no sales had occurred and there was no prospect of any occurring before the end of 2003; (3) that there was therefore, as at the date of termination, no possibility that any profit could have been achieved as at 30 June and 30 September 2003, let alone 90% of the projected figures; and (4) accordingly that Hammersmith was on 11 March 2003 entitled to terminate for anticipatory breach as Tyneside was wholly and finally disabled from performing its obligations.

The Plaintiffs argued that because the projections in the Report were based on the conventional low-density model, they were not relevant for the "best practice" development that was actually pursued. But while it is true that the Report contemplated exploration of enhancements or improvements, this cannot have contemplated a deterioration or diminution in the yield or profits. No variation to the profit schedules was proposed or negotiated. It was not implicit in the contemplation of a more intensive development that the minimum profits would be diminished or deferred. Indeed, it is more consistent that the profits anticipated in that scenario might have been increased. There is no suggestion of any representation or expectation that the requirement would no longer be applicable. Exploration and pursuit of the "best practice" approach does not undermine the provision for determination for failure to achieve profit milestones; clause 12.1(f) specifies a level of profit as a standard which, if not achieved, whatever mode of development might be pursued, provided a ground on which Hammersmith would be entitled to terminate.

However, the defendants' argument fails at the fourth and final step. Clause 12.1(f) of the Management Agreement was not promissory, and did not impose a contractual obligation on Tyneside. Tyneside could not therefore commit an anticipatory breach merely by becoming disabled from performing any such obligation. Clause 12.1(f) stipulated an event of default, upon which Hammersmith was entitled to terminate. Assuming the correctness of every other step in the Defendants' argument, that event would not occur until, at the earliest, 30 June 2003. It had not occurred at the date of purported termination, 11 March 2003. As at 11 March 2003, therefore, this was not an available event of default upon which Hammersmith could rely to terminate the Management Agreement.

Accordingly, the second alleged event of default, that the development failed, at any time, to achieve 90% of the profit stated in the Report, was not available to justify termination as at 11 March 2003.

As has already been recorded, by clause 4.1 of the Management Agreement (and clause 5.1 of the Profit Deed), Tyneside gave Hammersmith and Roche Group a series of covenants and warranties, six of which are relevant, namely: (1) that Tyneside had the skill, competence, experience and ability necessary to provide the Services it was required to provide in accordance with the provisions of the Management Agreement (Management Agreement 4.1(a); Profit Deed 5.1(a)(i)); (2) that Tyneside would provide all required and necessary personnel to effectively and timeously meet its obligations under the Management Agreement (Management Agreement 4.1(e); Profit Deed 5.1(a)(iii)); (3) that Tyneside would, to the best of its ability, carry out the Services promptly, punctually and efficiently, and would complete them within the time periods specified by Hammersmith (Management Agreement 4.1(f); Profit Deed 5.1(a)(iv)); (4) that Tyneside would regularly and diligently keep Hammersmith informed about all aspects of the Services and the Development as appropriate, but not less often than monthly (Management Agreement 4.1(h); Profit Deed 5.1(a)(vi)); (5) that Tyneside would not engage contractors or subcontractors without notifying Hammersmith in writing as to (inter alia) the likely costs, time, and alternative quotes, and obtaining Hammersmith's prior written consent (Management Agreement 4.1(j)); and (6) that Tyneside would carry out and complete the Services in accordance with the Management Agreement (Management Agreement 4.1(d)), and [Mr Haggis] covenanted and warranted that the Services would be carried out and completed in accordance with the provisions of the Management Agreement (Profit Deed 5.1(c)).

Clause 6.1 of the Management Agreement (and clause 7.1 of the Profit Deed) provided that each warranty was continuing and did not merge upon execution of the agreement, and was separate and independent and not limited by reference to any other warranty, representation or provision of the deed.

Clause 12.2 of each of the Management Deed and the Profit Deed provided that if an event of default occurred, the party or parties not in default may terminate the relevant agreement by notice in writing to the remaining parties. Under clause 12.1 of the Management Agreement, the following (relevantly) each constituted an event of default: (a) if Hammersmith, the Owner or the Manager commits a material or persistent breach of any of their respective obligations under this Deed and, after service of a notice specifying the breach, fails to remedy the breach within twenty (20) Business Days of receipt of that notice; (b) if the Manager does not comply with the directions of Hammersmith in relation to the Development; (c) if any of the representations, covenants and warranties made by the Manager herein are not true, complete or correct; ... (f) if the Development fails, at any time, to achieve ninety per centum (90%) of the profit stated in the Report.

Under clause 12.1 of the Profit Deed, the events of default included those referred to in (a), (c) and (f) - but subject to an additional qualification - above, and also: (f) if the Management Agreement is terminated for any reason.

Thus while the event of default defined by clause 12.1(a) of the Management Agreement occurs when Hammersmith, Roche Group or Tyneside has committed "a material or persistent breach of any of their respective obligations under this Deed", and then fails to remedy that breach within 20 business days after service of a notice specifying the breach; that defined by clause 12.1(c) occurs "if any of the representations, covenants and warranties made by the Manager herein are not true, complete or correct."

Clause 4.1 of the Management Agreement is expressed as a covenant and warranty by the manager to Hammersmith and Roche Group. It contains warranties about present or past states of affairs (paragraphs (a), (b), (k), (l), (m) and (n)), as well as promissory warranties. There are further promises by the manager in other parts of the agreement, principally clause 7. There are also a number of mutual promissory covenants. There is a degree of overlap between the various promissory warranties, particularly between those in clause 4.1 and those in clause 7.

The language of the event of default in clause 12.1(c), of "not true, complete or correct" naturally applies to a present or past fact or state of affairs. The plaintiffs contend that a promissory warranty is not capable of being "untrue, incomplete or incorrect", and accordingly submit that the event of default prescribed by clause 12.1(c) is not capable of applying to a failure to fulfill a promissory warranty. Against that, the defendants contend that because each warranty is expressed to be "continuing", it can be said to be untrue if falsified after the date of the agreement by subsequent events, as it speaks not only from the date of the agreement but from every subsequent date.

In my view, the provision that "each warranty ... is continuing and will not merge upon execution of this Deed" means exactly that - that it does not merge on execution, so that execution does not waive a pre-existing state of affairs that amounts to a breach which therefore remains available notwithstanding execution, and the promissory warranties continue in operation after execution. But it does not mean that a warranty that speaks of a state of affairs as at the date of the agreement is repeated for every subsequent date.

That clause 12.1(c) does not apply to a failure to fulfill a promissory warranty is confirmed by the need to afford an appropriate role to clause 12.1(a), which applies to breaches of obligation and requires the giving of a notice of breach and consequent failure to remedy it. If clause 12.1(c) applied to promissory warranties, then clause 12.1(a) would be deprived of effect in so far as it applies to obligations of Tyneside, and the plain intent that a party in breach be entitled to notice and an opportunity to remedy would, in Tyneside's case, be illusory. Accordingly, I accept that clause 12.1(c) does not apply to a failure to fulfill a promissory warranty - except, perhaps, insofar as it may be established that such a warranty was false when given, in the sense that Tyneside had no intention of fulfilling it. For the same reasons, the same applies in respect of the corresponding provision in the Profit Deed (clause 12.1(b)).

The warranty of competence (Management Agreement, clause 4.1(a); Profit Deed, clause 5.1(a)(i)) relates to a present matter, namely the skill etc of Tyneside as at the date of the agreements. This is reflected in the use of the word "has". The other relevant warranties are promissory, reflected in the use of the word "will". Accordingly, with the exception of the complaint concerning the warranty of competence, the alleged breaches of warranty relied on by the defendants concern promissory warranties. In the absence of any suggestion that they were false when given, and otherwise of any notice specifying the breach, they cannot found an event of default under clause 12.1(c) of the Management Agreement or under clause 12.1(b) of the Profit Deed.

However, that does not apply in respect of the warranty in clause 4.1(a) of the Management Agreement, and clause 5.1(a)(i) of the Profit Deed, by which Tyneside covenanted with and warranted to Hammersmith and Roche Group that it had the skill, competence, experience and ability necessary to provide the Services it was required to provide in accordance with the provisions of the Management Agreement ("the warranty of competence").

The term "Services" was defined in clause 1.1 of the Management Agreement as "the services to be provided by the Manager to Hammersmith in relation to the Development as more particularly described in this Deed and the carrying out of all activities which are necessary or desirable to enable Hammersmith to complete the Development profitably and in accordance with the Report". The same definition is incorporated by reference in the Profit Deed. "Development" was also defined in clause 1.1, as "the subdivision of the Land in accordance with the requirements of all competent Authorities and the development, marketing and sale of the Land in accordance with the provisions of this Deed".

The definition of "Services" thus contains two limbs: the first comprises the services to be provided by Tyneside in relation to the development "as more particularly described in this Deed"; and the second comprises "the carrying out of all activities which are necessary or desirable to enable Hammersmith to complete the Development profitably and in accordance with the Report".

As to the first, the Management Agreement recited that Hammersmith had agreed to appoint Tyneside to be the manager of the development (Recital E). By clause 3(d), Tyneside agreed "to use its best endeavours to procure delivery of the development in accordance with the Report or as otherwise agreed in writing by the parties to this Deed". Clause 7.1 (Manager to Perform the Services) provided that Tyneside shall throughout the Term (of 12 years commencing 2 March 1999 and expiring on 1 March 2011): (a) use its best endeavours to procure completion of the Development in the most timely and efficient manner and in accordance with the Report or as otherwise directed by Hammersmith; (b) maintain all relevant and appropriate Authorisations for the Development; ... (e) keep and maintain financial and other records (including supporting documentation) of the Management and the Development to enable it to properly record and authorise the incurring of debt, all contractual arrangements, payments and receipts in a prudent and businesslike manner for passing to Hammersmith to make the payments and collect the receipts for which it is responsible under this Deed; (f) make recommendations to Hammersmith as to the sale price of lots in the Land but the sale price of the lots in the land shall be entirely at the discretion of Hammersmith and the Manager shall have and raise no objection claim or demand in relation thereto; (g) provide all administration and supervision in relation to the obtaining of all approvals and the development; (h) provide full costings and obtain quotes in relation to any work required to be carried out for the purposes of the Development; (i) advise as to changing economic conditions as they affect the Development; (j) coordinate the Development and the performance of the Services; (k) make recommendations to Hammersmith in respect of any additional work or engagement of consultants; (l) attend and participate as required in meetings with Hammersmith, the Owner and other consultants; (m) comply with all statutory requirements in respect of the Services and the Development; (n) comply with all lawful directions of Hammersmith; (o) provide information and report to Hammersmith, in writing if required, in relation to any aspect of the Services or the Development; ... (q) act in good faith and bona fide towards Hammersmith with a high degree of professional skill, care, competence and diligence and in the best interests of the successful, timely and cost effective completion of the Development for and on behalf of and for the benefit of Hammersmith; and ...

Clause 7.2 (Manager to prepare Reports) provided that Tyneside as manager was to issue written monthly reports to Hammersmith in a form approved by Hammersmith by the seventh business day of each month during the term, and specified the contents of such reports, including: (a) the position in relation to the Report and any variations to it; (b) the position in relation to obtaining any approvals from competent Authorities; (c) a full breakdown and details of the Manager's expenditure on behalf of Hammersmith during the month; (d) a full breakdown and details of the Manager's proposed expenditure on behalf of Hammersmith during the following month; (e) full details of lot sales during the month; (f) any recommendations of the Manager together with full details and costing; (g) any other information which Hammersmith reasonably requires.

The Management Agreement contemplated that Tyneside would provide the Services through its key personnel, Mr Haggis (whose claimed experience was in property development) and Mr Oliver (whose background was in marketing and sales). Accordingly, at least except in respect of marketing and sales, Tyneside's relevant skill, experience etc was that of Mr Haggis, there being no other relevant permanent staff.

The plaintiffs emphasise that clause 7.1(a) (like clause 3(d)) of the Management Agreement obliged Tyneside only "to use its best endeavours to procure completion of the Development in the most timely and efficient manner and in accordance with the Report or as otherwise directed by Hammersmith", and thus emphasise that, while Tyneside was engaged to project manage a very large development, the express terms of the Management Agreement provided that, as manager, Tyneside had a coordinating role (clause 7.1(j)); that other consultants might be engaged (clause 7.1(k) and (l)); and that Hammersmith would indemnify the manager for approved expenses and that the direct costs of the development (including insurances arranged by the manager) were to be borne by Hammersmith (clause 11). Further, clause 11.5 expressly contemplated that Tyneside might carry out a "best practice" study (subject to Hammersmith's consent), and the Report envisaged that intensification or improvement of the development might occur as a result.

Thus the plaintiffs submit that Tyneside did not warrant that it would procure completion of the development regardless of whatever obstacles might arise, nor that it had the competence to do so, but only to use its best endeavours to procure that outcome. I accept that Tyneside did not warrant that it would procure completion of the development, but only to use its best endeavours to procure that outcome. However, I do not accept that the warranty of competence was no more than a warranty that Tyneside had the competence etc to use its best endeavours, and the Plaintiffs, while emphasising that the obligation was not absolute, did not submit as much. I accept that the Management Agreement contemplated the potential engagement of other consultants (clause 7.1 (k) and (l)). However, that does not detract from the obligation of Tyneside to "provide all administration and supervision in relation to obtaining of all approvals and the Development" (clause 7.1(g)), and to "co-ordinate the Development and the performance of the Services" (clause 7.1(j)). Tyneside was in effect warranting that it had the skill, experience, competence and ability to do those things, amongst others.

This is reinforced by the second limb of the definition of "Services", namely "the carrying out of all activities which are necessary or desirable to enable Hammersmith to complete the Development profitably and in accordance with the Report". Tyneside's warranty was, in substance and effect, that it had the skill, experience, competence and ability to project manage the development to completion, profitably and in accordance with the Report. The content of this warranty is informed by the context of the development. As described in the Report, this was a (worst-case) $68 million profit project on a vast scale, involving creation of 1,500 lots in multiple precincts including a commercial precinct - effectively an entire new suburb. It is also informed by clause 7.1(q), which imports a "high degree of professional skill, care, competence and diligence". Accordingly, Tyneside warranted that, as at the date of the agreements, it had the skill, experience, competence and ability of a project manager of complex, very large-scale, green fields developments. It is analogous to a warranty by a skilled professional to a client, that he or she has the skills and competence of a skilled practitioner of the relevant kind - such as a patient about to undergo a major operation might seek from a surgeon (and which might in any event well be implied), to the effect that the surgeon had the skill, experience, competence and ability to perform such operations.

The defendants sought to prove that Tyneside did not have the requisite qualities in a number of ways, both by establishing that it had no relevant qualifications, training or experience; and by inference from its performance as manager. However, the truth or falsity of this warranty must be judged according to the date from which it speaks, namely the date of the agreements. The warranty is concerned more with the background and qualities of the professional as at the date when it is given, than with performance. Thus proof of a departure from the standards of a skilled professional, though it may amount to negligence, does not of itself establish that the professional did not have the requisite skill, experience and competence, but only that it was not exercised on that occasion. Lack of the requisite qualities would not readily be inferred from a single negligent act or omission in the performance of the contracted services. Returning to the surgical analogy, the truth of such a warranty is not established by the circumstance that an inexperienced surgeon manages to complete the operation without catastrophe; nor is its falsity established by the commission by a competent surgeon of an isolated negligent act or omission in the course of its performance.

It is important to bear firmly in mind that in alleging a breach of this warranty, the defendants bear the onus of proof, and the plaintiffs bear no burden of establishing that Tyneside had the requisite competence etc. Thus the defendants undertook the difficult task of proving a negative. However, once there is some evidence to establish the negative proposition, failure of the plaintiffs to adduce evidence to refute it - by establishing the possession of relevant skill, competence, experience and ability - would facilitate an ultimate conclusion that Tyneside did not have them.

I turn first to the particular grounds which were said by the defendants to manifest Tyneside's lack of the requisite skill etc. Broadly, there were three: (1) failure to produce a master plan for the development; (2) failure adequately to supervise the construction and/or costs of the civil works undertaken by Delamere; and (3) failure to competently plan implementation of the project.

As to the first ground - Tyneside's alleged failure to produce a master plan for the project - the defendants' case was that a master plan is an essential tool for a large-scale suburban subdivision, as it enables an integrated and cost efficient approach to be taken to the placement of access roads, internal roads, water mains, and electricity; it also enables the manager and the various consultants to understand the impact of work undertaken by one consultant upon the work undertaken by others; and it permits development approval to be obtained for the whole project at an early stage, reducing the risk of exposure to the introduction of more stringent planning controls at a later point. Mr Haggis, on the other hand, maintained that proceeding on a precinct-by-precinct basis, using a Local Environmental Plan and Development Control Plan, with a "structure plan", had the advantage of allowing flexibility in the development of later precincts, especially when there were unresolved zoning issues.

On 7 April 2000, Asquith & de Witt, consulting surveyors, wrote to Tyneside identifying a number of potential difficulties with community title in the absence of a reasonably detailed master plan. On 27 March 2001, Asquith & de Witt again wrote to Mr Haggis, recommending that at least an indicative master plan be prepared.

Once the zoning issues had been more or less resolved with the council (on 4 July 2002), Mr Haggis issued an "Urban Design Brief" (on 10 July 2002) to advance planning by stages, in which the first stage was to include sufficiently detailed design for preparation of development applications. During August 2002, Mr Haggis gave instructions to DEM and Asquith & de Witt to prepare a master plan.

Mr Incoll, who was called by the Defendants as an expert project manager, gave evidence that a master plan generally comprises a drawing or set of drawings and an accompanying descriptive document, describing the future direction of the development as a whole, land uses for the development as a whole, proposed precincts within the development, proposed facilities within the development, proposed road layouts, proposed accesses, proposed lot layout, services reticulation strategy for the whole development, and timing for delivery of the development. He said that preparation of a master plan was one of the steps usually undertaken by a project manager during the statutory planning phase of a development; and that the standard approach to a development of this size, nature and complexity involved developing a master plan in association with the relevant council and other relevant authorities, and combining it with a marketing and sales strategy. The master plan, with relevant supporting documentation and studies, is then lodged for approval of the development as a whole. Subsequent DAs are lodged for each precinct or stage, and amendments made to the master plan as conditions require. Failure to produce a master plan can lead to difficulties in obtaining approvals from authorities, establishing easements for services, and integrating the successive stages of the development. In cross-examination, Mr Incoll accepted that the term "master plan" assumes a variety of different meanings in different contexts, and means different things to different people. He accepted that it would be reasonable to negotiate with the council to try to resolve the principal questions before proceeding to detailed lot layout design.

Mr Walsh gave evidence that a master plan was a comprehensive and essential document that enables forward planning of a development and the location of essential services relative to the proposed development areas, as well as the approval of the overall development concept by the council, and further consents for individual precincts to be obtained in a much more streamlined manner. An approved master plan precluded the council from making amendments to existing approvals and changing the LEP and DCP. A master plan also permits design of all connecting infrastructure works for the entire subdivision, generates economies in civil works design (from development of the site as a whole) and in staging the development within infrastructure catchment areas, and provides a plan for positive marketing work towards actual sales. He said that a master plan was very important for marketing, as potential purchasers generally liked to know the extent of the entire proposed development before committing. He said that an approved master plan was essential to enable time to be saved in the long term and provide the necessary certainty for the project. He opined that a reasonably competent project manager would not proceed without certainty in respect of council's attitude to the master plan, because council's attitude to developments can change over time, and in the absence of an approved master plan there was nothing to prevent council from refusing to allow ongoing development in the manner desired, nor any proper reference point from which to negotiate with the council in the event that changes become necessary. Mr Walsh's above evidence was not challenged.

Mr Truswell gave evidence that a master plan was a practical planning document, periodically updated, showing with precision the location of proposed roads, precincts, drainage and other services, to enable the physical implementation of the development concept. A key purpose was to ensure that the various precincts ultimately link up properly in terms of drainage, roads and services. He opined that given the nature and size of the Pambulong Forest project, it was a fundamental requirement that a master plan be prepared, so that all parties, contractors, consultants, developers and financiers had a common reference for all current and future activities, and that lack of a master plan created inherent problems because there was no overall plan. However, he accepted that individual lot layouts were not a necessary element of a master plan.

Mr Robinson, of Asquith & de Witt, the surveyors, who has been involved in surveying, town planning and subdivision project management since about 1984, said that a master plan involved a development footprint (being the areas of the project that were to be subject to development activity), a plan setting out the layout of the roads, the approximate extent of major drainage lines and water quality facilities, the location and general nature of the non-residential component (being the commercial area), location of access points between the development and the adjacent arterial road, the location and extent of public open spaces, and areas where no development was proposed. He was of the view that a master plan could probably have been prepared within a 6-month period between mid-1999 and April 2000.

Mr Robinson had expressed the view as early as 27 January 2000 that it would be desirable to have a master plan. On 16 February 2000 he wrote to Mr Winterbottom to the effect that it was, practically speaking, difficult to achieve an overall scheme with a single tier management structure, which was desirable from a sales and marketing perspective, without a precise and comprehensive master plan. On 7 April 2000 he again commented on the difficulty of predicting where mains and reticulation would need to run in the absence of a detailed master plan; however, he also acknowledged that there were, in the circumstances, practical difficulties in doing so. Later, he was to point out that lack of forward planning was "fraught with disaster" and "lack of a master plan makes it almost possible to create any statutory easements etc that may be required". In his evidence, he said that "master plan" was not a defined term, but that every project in which he had been involved had "some degree" of detailed planning about what the development would ultimately comprise. He conceded that one could not say that the project could not proceed with a document such as that produced by Mr Haggis in early 2003 - "the master plan process is about reducing project risk. One cannot say that the project could not proceed with a document such as that one, it just proceeds at a higher level of risk than if you had more detail to start with".

Opposition to the concept of a master plan, from Mr Winterbottom and Mr Haggis, included that it would lock the development into "a huge range of issues which we will have no hope of changing".

Mr Fallon, who was called by the Plaintiffs to give evidence on damages, gave evidence in cross-examination to the effect that before recommending a change of course from a "conventional" subdivision to a "community title" development, a competent project manager would investigate the advantages and disadvantages of the two alternatives, including any difference in potential lot yield, and comparable market appetites. He agreed that one of the purposes of a master plan was to enable calculation of the lot yield. He agreed that a master plan could be and sometimes was used as a fundamental tool for planning. But he also said that he had done projects without a master plan.

As the plaintiffs submitted, the evidence revealed a considerable diversity of views as to what constituted a master plan. It was not established that there was any industry-wide standard or practice in this respect. Only Mr Incoll stipulated that a master plan must show lot layouts, and even he accepted that, if there was a zoning risk, lot layouts might not be included. The preponderance of the evidence supports the view that lot layouts were not an inherent requirement of a master plan. The most that can be said is that one would ordinarily expect a "master plan" to include at least the location of proposed precincts, roads, drainage and other services, to ensure that the various precincts, roads, drainage and services ultimately linked up properly.

The defendants argued that a master plan was essential in order to enable an appreciation of what the development was going to produce in terms of lot numbers and size - and therefore sales revenue, and that when the intention migrated from a "conventional" subdivision to the "best-practice new-urbanism community title" concept, there was no robust basis for calculating and comparing lot yield - and ultimate profitability - under the alternative models, which deprived Hammersmith of perhaps the most important integer in making that decision. There is considerable force in this argument. In particular, a decision to change direction from a conventional subdivision to a community title subdivision was one with very great potential implications. A project manager should be able to advise the developer of the likely outcomes in terms of lot yield. A reasonably robust calculation of lot yield, value and cost is a necessary precondition to embarking on a project of this scale. Yet none of Mr Haggis' plans enabled one to know what would be generated at the end of the development - even as late as a week before 28 January 2003, the latest plan showed only approximately where the precincts might be, still leaving the ultimate lot yield to be derived by approximation. Mr Fallon, called as an expert by the plaintiffs (though not on this point, on which his views were elicited in cross-examination) agreed that before recommending such a change of course, one would need to examine the comparative lot yields and their likely selling prices of the alternatives. Community title involves smaller lots; therefore more lots would be required to achieve a comparable economic outcome. However, evidence emerged that suggested (though it did not conclusively establish) that Mr Haggis' "best practice" approach might prove inferior, or at least not superior, to the original conventional subdivision approach. A master plan should have enabled this to be identified before the decision to change course was made; and it would also have contributed to co-ordination of the efforts of the drainage and traffic engineers.

However, while all that appears logical, it cannot be reconciled with the evidence that lot layouts were not considered an essential requirement of a master plan. Moreover, there are other means of deriving approximate lot yields, without preparing a detailed lot layout. Mr Haggis agreed that, even as at 28 January 2003, Tyneside had no intention to develop the precincts in any particular order, had not determined a program as to how the precincts would be developed, had not determined how big each precinct would be, had not determined the location of each of the roads, did not have a delineation of where it was that any of the precincts would be built, and did not have a delineation of where any of the internal roads would be. But he explained that there was an issue that prevented determination of the size of the precincts (apparently referring to the "back-zoning" proposal by the council); that it was necessary to determine what land was suitable for residential development before the location and size of the precincts and detailed design could be determined; that there was no sense in determining the location and size of precincts until the "back-zoning" issue had been resolved; that there was no necessity to detail Lot 104 until after the dam and fore bay was completed and construction of the infrastructure service for Lot 104 was approaching; that determination of the road layout was being deferred until the s 94 appeal was resolved; and that there was no purpose in doing work before it was required.

Ultimately, I am unconvinced that proceeding by way of master plan, at least until the time when Mr Haggis took steps towards having one prepared in the latter part of 2002, was the only way in which a competent manager would have proceeded. I cannot say that the reasons advanced by Mr Haggis for proceeding in the way he did are unreasonable.

The second ground said by the defendants to manifest Tyneside's lack of the requisite skill etc was its alleged failures (1) to provide proper directions and instructions in relation to construction of the dam and fore bay area, in failing properly to supervise the construction and/or construction costs of the civil works undertaken by Delamere (another sub-particular, of failing to commission a geotechnical report, fell away when it became apparent that such a report had been obtained) and (2) to competently monitor and control expenditure on the project within budgeted costings, in particular the bill of quantities prepared by Keller Civil Engineers.

The construction works on the lake and fore bay were the first significant civil works of the project. In a report to the Hammersmith board dated 30 November 2001, Tyneside foreshadowed a construction management process that would involve a construction engineer preparing drawings, specifications and preliminary estimates; a tender process; and the establishment of an on-site project office to administer the construction and maintenance work, to be staffed by Tyneside and Ms Florence, whose duties would include processing progress claims and valuing the work. The potential conflict of interest between Tyneside and Delamere, of which Mr Haggis' daughter Ms Florence and her husband were the principals, and which Tyneside was proposing as the contractor, was noted.

A bill of quantities (BOQ) for the works was produced by Kellers on 19 February 2002, with a total costing of $1,467,700. Construction drawings were finalised by the end of February 2002, and on 14 March Kellers produced a revised BOQ, with a total costing of $1,397,600. The Rose Group (Rose) - including Robinson GRC and Rose Consulting - which was to be the contract superintendent, was the subject of a scheme of arrangement with creditors for a period, whereupon Ms Florence was moved to Tyneside's Wallsend office to supervise the work and negotiate the approvals directly. By 31 March, the restructuring of the Rose Group had settled. The council issued a construction certificate on or about 26 April 2002, and Delamere commenced the works in early May 2002, without any written contract in place.

By 2 July 2002, Rose was reporting that they had "lost control of works" and were "unable to assess the status of the contract". Mr Haggis and Ms Florence agreed to conduct an audit of the works, to determine the status and cost of works to date. Mr Haggis acknowledged that, by July, the contractual and supervision arrangements "weren't going very well" and "were in a bit of a mess". On 8 July, Tyneside appointed Mr Simpkins, an experienced and independent construction engineer, to conduct the audit. Mr Simpkins delivered his report on 24 July. He reported that Rose had been unsure of their role and how much supervision was expected of them, given that there was no contract for them to administer and the lack of clear instructions as to their responsibilities, but that as a result of discussion their role had been resolved to their satisfaction - a matter that was confirmed by Rose in a letter of 8 August 2002. He concluded with a recommendation that a project manager be appointed to look after the interests of Tyneside for the project.

Despite evidence of Mr Haggis and Ms Florence that a draft contract for Delamere was prepared on 5 May 2002, the date it bears, I am satisfied that it was not prepared until early August, after receipt of the Simpkins report: as at 16 May, Mr Haggis was still "foreshadowing" the drafting of a contract; Mr Simpkins reported that none had been prepared as at 24 July; the first reference to it is in a facsimile of 6 August from Mr Haggis to Mr Hall attaching it. Even then, it was less than adequate: schedules referred to in it were missing; it contained no detailed description of the works, and no start date or finish date. It was expressed to be on a "cost reimbursement" basis, although it stated a value of the works as in the Keller BOQ, which was said to form part of the contract. Mr Haggis said that it was no more than a heads of agreement, and agreed that it was not suitable for a "full contract".

On 31 July 2002, Mr Hall took issue with the adequacy of certificates provided by Rose in respect of progress payments. By 15 August 2002, Mr Hall was seeking clarification of discrepancies between amounts claimed by Delamere and the certificates issued by Rose, including a total budget of $2,087,668 by Delamere against $1,334,272 by Rose. Mr Hall instructed Mr Walsh to examine the discrepancies, and there ensued a chain of correspondence in the course of which Mr Haggis, on 11 October 2002, represented that the cost of the lake to date was $1,270,576 and, with 90% of the work complete, was under the budgeted completion cost by $233,306 - a claim that was repeated at a board meeting on 31 October 2002. Mr Haggis acknowledged that this claim was inaccurate, as Delamere was only claiming that the works were 80% complete a month later on 28 November 2002.

Following a site meeting on 7 November 2002, involving Mr Truswell, Mr Walsh, Mr Haggis, Mr and Ms Florence, and Mr Collison, Mr Walsh reported that the Delamere and Tyneside representatives were unable to provide any explanation for discrepancies in the variations claimed and between the total of the variations and the difference between the budget and the adjusted budget. However, Mr Haggis explained that the BOQ was irrelevant - which objectively was a correct statement in the context of a "cost plus" or "cost reimbursement" contract. Variation claims would also appear irrelevant in such a contract. Mr Walsh observed that Mr Haggis had little involvement in the meeting.

Ultimately, in their submissions, the Defendants identified five particular alleged deficiencies in Tyneside' management and supervision of the Delamere contract: (1) no written contract; (2) basis of charging unclear; (3) no clear definition of scope of works; (4) no testing of assumptions underlying the BOQ; and (5) no proper certification process for progress claims.

The first three of these matters are closely related. Lack of clarity of the basis of charging and the scope of works are consequences of the absence of clearly defined contractual terms.

The plaintiffs objected that these allegations - essentially of failure to ensure that there was a written contract with Delamere - were outside the particulars, and that there was potential prejudice in that it had not been possible to locate the scope of works for Rose, which might well still be with the Plaintiffs' former solicitors, and which might have corroborated Mr Haggis' claim that they had been instructed to prepare the contract. However, the allegations were the subject of cross-examination. Mr Haggis admitted that the works commenced without a written contract being in place. And even if Rose had been instructed to prepare the contract - which seems improbable for reasons explained below - that would not excuse the project manager from ultimate responsibility for ensuring that the contractual arrangements with a major contractor were in place before works commenced.

Mr Haggis agreed that a competent project manager would have ensured that a written contract was in place before works commenced, yet Tyneside did not do so. Two explanations for the absence of a written contract were advanced by Mr Haggis: first, that the task was the responsibility of Rose, who had failed to produce a contract; and secondly, that there was urgency in commencing the works, inter alia due to a long range weather forecast for rains.

As to the first explanation, it is improbable in the extreme that Rose were instructed to prepare the contract. There is no contemporaneous evidence that Rose were expected to prepare such a contract. Mr Simpkins reported, on 24 July 2002, that Rose were unsure of their own role, and specifically that they did not prepare such a contract, because they had not been asked to do so. Mr Haggis reported to the Board on 31 March 2002 that Rose, who prided themselves on their project management services, were not required to perform that role at Pambulong. The draft contract bearing the date 5 May (albeit, as I have found, prepared later) was not prepared by Rose. Moreover, even if Rose had been so instructed, that would not excuse the project manager from ultimate responsibility for ensuring that the contractual arrangements with a major contractor were in place before works commenced. This was if anything all the more critical when there was potential for a conflict of interest, with Mr Haggis' daughter Ms Florence a principal of Delamere.

As to the second explanation - the claimed urgency - the prospect of Delamere performing the civil works had been alive since November 2001; Mr Haggis says he instructed Rose to prepare the contractual documentation in mid-2001 and expected it to be ready by January 2002; even if so, another four months passed during which the position could have been remedied before works commenced; and even after works commenced, it took until early August for a draft - and less than adequate - contract to be prepared.

As to the basis of charging, while the contract may not have been documented, it is clear enough that the basis on which Delamere was retained was "cost reimbursement", where the costs included a margin for administration and profit charged at industry standard rates. Sometimes this was referred to as "cost plus", although there was lack of clarity as to what the "plus" was. Mr Haggis said that it was a margin for administration and profit, but did not know what the margin was and said that it was not necessary to know; yet he denied that it was a schedule of rates contract. Mr Florence said the "plus" was materials. The role of the Kellers BOQ remained somewhat unclear: while, if that matter had to be litigated, it might well be that it would have been held that the BOQ was irrelevant in the context of a "cost reimbursement" contract, the absence of clear contractual terms undoubtedly contributed to confusion in the latter half of 2002.

As to the scope of works, while it is true that the Kellers BOQ did not cover all the works ultimately performed, and that not all of the discrepancies were attributable to unexpected variations, I am unpersuaded that there was significant ambiguity or doubt as to the scope of what Delamere was to do.

The fourth matter - that there was no testing of the assumptions underlying the BOQ - is in a different category. Ultimately, the works cost about $1.6 million, against the BOQ of $1.397 million.

Mr Walsh reported on Delamere's costs in late November 2002, and his analysis then ($1,532,765) did not differ substantially from Delamere's final claim of 28 February 2003 ($1,535,715). However, he repeated the exercise on 24 January 2003, and revised the result - downwards and substantially - to $1,376,518. This was supposed to demonstrate that Delamere was excessively expensive, but Mr Walsh's revised analysis was shown to be unsupportable in cross-examination - he applied incorrect rates for several items - and the re-examination, while explaining one aspect that he had been unable to explain in cross-examination, by no means rehabilitated the remainder of his evidence.

Thus it was not demonstrated that Delamere was unreasonably expensive. That the costs of the works ultimately exceeded those in the BOQ does not bespeak incompetence. The Kellers BOQ did not include all of the items of work ultimately done: for example, there was a variation for draining approximately 3 hectares of residential land in Precinct 2; the BOQ did not allow at all for landscaping, professional engineering, excavating into rock, or importing fill material or rock material for use in water control structures, or adequately for supervision fees. There is no doubt that the BOQ was based on some assumptions that turned out to be incorrect. For example, much more topsoil had to be excavated than the BOQ allowed, and there was excavation into rock, for which Kellers had made no allowance. Nor had Kellers specified a rate for the mixing of crushed rock with unsuitable material.

Although Mr Haggis agreed that a competent project manager would have ensured that, to the extent that a contract was to be based on a BOQ, the BOQ was based on accurate assumptions, first, this contract was a cost reimbursement contract and not based on the BOQ; secondly, a BOQ is necessarily an estimate based on assumptions, the accuracy of which cannot always be known in advance; and thirdly, an allegation that Tyneside failed to procure an appropriate geotechnical investigation (which might have exposed relevant inaccuracies) fell away when it emerged that such an investigation had been undertaken. I do not consider that it has been established that a competent project manager would have done more than Tyneside did in this respect.

The fifth matter - that there was no proper certification system for progress claims - was again related to the absence of clearly defined contractual terms. Rose was constrained in its ability to provide certification in the absence of a contract that specified what Delamere was to do and how they were to be remunerated. However, there were no substantial difficulties with payment of the first five progress claims. It was not until claim 6, which was due for payment on 30 September 2002, that difficulties emerged, and this was contemporaneous with the deterioration in the relationship between Roche Group and Tyneside, when Hammersmith declined to pay even undisputed portions of Delamere's invoices. Mr Walsh scrutinised the progress claims by comparison with the Kellers BOQ, and insisted that the accounts be presented in a form that facilitated that comparison, which was inconsistent with the requirements of a "cost reimbursement" or "cost plus" contract. Mr Walsh does not appear to have appreciated this - or if he did to acknowledge it. I am unpersuaded that issues with certifying progress claims are attributable to incompetence on the part of Tyneside.

Accordingly, by no means all of the matters invoked by the defendants as demonstrative of inadequacies on the part of Tyneside as a project manager in connection with the administration of the Delamere contract were established. But some were, including in particular that Rose were unsure of their role and by 2 July 2002 were reporting that they had lost control of the works and were unable to assess the status of the contract; that by Mr Haggis' own admission the contractual and supervision arrangements "weren't going very well" and "were in a bit of a mess"; that it was necessary to retain Mr Simpkins to conduct an audit to determine the status and cost of works to date (which with competent project management should not have been required); that Mr Simpkins saw it appropriate to recommend that a project manager be appointed (when Tyneside was supposed to be the project manager); and that Mr Haggis twice misrepresented the status of the works to Hammersmith as 90% complete. These matters were largely attributable to the absence of a written contract between Hammersmith and Delamere. In the absence of an acceptable explanation, the failure to ensure that there was a written contract in place with Delamere before works were commenced is a significant indicium of incompetence, though not on its own probative of it.

The third ground said by the defendants to manifest Tyneside's lack of the requisite skill etc was Tyneside's alleged failure to competently plan the implementation of the project, including: (1) failure to address obstacles to progressing with community title; (2) failure to settle the traffic infrastructure; (3) approval of deficient designs for precinct 1; (4) failure to achieve forecasts; (5) failure to competently manage and coordinate the consultants; and (6) inability to perform the Services without Mr Winterbottom.

The first of these matters is the allegation that Tyneside failed to address issues concerning community title raised by solicitors retained by them, Sparke Helmore, in a letter to Tyneside dated 31 October 2001. The letter outlined a number of potential problems with use of a community title scheme for Pambulong Forest. But contrary to the defendants' submissions, the advice was not that "wide ranging legislative change ... would be required to achieve a community title sub-division as envisaged by Tyneside for the project". Rather, it was that "the best way to resolve these problems would be to lobby the State Government for special legislation" allowing the developer to excise lots from the precinct, empowering a commercial committee to levy special interest members, and permitting a separate commercial committee for commercial members; that "consideration should be given to seeking an amendment to the legislation" permitting owners to submit development applications without the need for consent from the various associations; and that "consideration should be given to lobbying parliament to amend the ... legislation to allow the creation of additional community property at a later point in time without the need for unanimity". The advice concluded by listing "the major weaknesses of the application of the Community Title Legislation to the development" and then recording (emphasis added): Various methods have been incorporated into the Management Statement to overcome the above problems. Difficulties and anomalies in the legislation however, may require legislative amendment to enable to development to proceed as intended.

After contending that none of the legislative amendments referred to in the advice were achieved while Tyneside was project manager, the defendants' submissions then proceed to argue that the project would have progressed more smoothly had Tyneside not been so fixated on community title but proceeded with a Torrens title subdivision - which is a rather different complaint from failure to address the issues raised.

The evidence establishes that Mr Haggis had meetings with the Registrar-General's office, Parliamentary counsel and the local member on these issues. Failure to achieve legislative reform is hardly a mark of incompetence as a project manager. Moreover, the Sparke Helmore advice responded to instructions from Mr Haggis to, inter alia, 'list changes we are seeking to make to the Act and the reasons for those changes', and sought to detail 'the weaknesses of the Community Titles legislation and how these issues have been overcome in the Community Management Statement and Precinct Management Statement'. Thus, the advice itself states that various actions had already been taken or were proposed by the solicitors to mitigate the problems (including the passing of resolutions after registration of plans and the inclusion of provisions in contracts for sale of land); the occasion for performance of those matters had not arrived when Tyneside was dismissed.

Further, an email from Mr Hickey of Sparke Helmore to Mr Haggis of 29 November 2002 reported on a meeting between Mr Hickey, Mr D Roche and Mr Hall at which (emphasis added): The titling issues were discussed, and in particular the draw backs concerning Community Title development as opposed to Torrens freehold development, namely the obligations on lot owners to manage common property roads and community facilities; I discussed the benefits of Community Title being the architectural guidelines themed development which runs in perpetuity with each of the lots by virtue of a management statement which captures building design and architectural themes; I discussed with them my view that the project was able to operate in its current form notwithstanding the restrictions that the legislation imposes on large community schemes. I went through with them each of the restrictions as detailed in our earlier letter of advice including ...

The email then listed the matters referred to in the 31 October 2001 letter. While Mr Roche and Mr Hall give a different version of their meeting with Mr Hickey, I prefer the contemporaneous email record. Nor do I consider that Mr Hickey was so clearly in the camp of the plaintiffs to justify drawing any adverse inference from their failure to call him, particularly as the email appears plain enough.

In any event, approval for community title subdivision, including a town centre, was obtained for the whole of Lot 104.

In the light of those matters, I do not think it can be concluded that proceeding with a community title subdivision in the face of the issues raised by Sparke Helmore was misconceived, foolhardy or incompetent. I therefore do not accept that failure to achieve legislative amendment of the community titles legislation, nor persistence in a community title development, manifests lack of the requisite qualities on the part of Tyneside.

The second matter raised was failure to settle the traffic infrastructure, and in particular failing to secure a final approval from the Roads and Traffic Authority for the access points to the development. On 7 June 2001, the RTA gave "in principle approval" to two of the three proposed access points, indicating that the final location and form of the accesses would have to be established through appropriate studies, and a revised access control plan submitted following RTA endorsement. The Walsh/Truswell Report of 26 September 2002 identified that Sinclair Knight Merz (SKM), who were retained to design the intersections, had completed the design of the major roundabout, but had not yet been asked to address the design of the other two planned roundabouts, and did not think that the RTA would consider allowing two, but only one; and that a protracted series of meetings and preliminary designs would normally be required to resolve such questions. The suggested inference is that Tyneside did nothing to progress this.

However, there is considerable evidence of endeavours on the part of Tyneside in this domain; the following summary is not exhaustive. On 3 October 2001, Mr Haggis wrote to the RTA (Mr Nunn) expressing concern that the RTA may be reconsidering its agreement to the access points and asking it to complete the matter as soon as possible. The RTA (Mr Mike Walsh) responded in a letter that referred to the 'three approved access points' and confirmed that 'RTA has agreed to the proposed locations for access', and referred to progress with the detailed design and a meeting with consultants Mr Kneist (of Rose) and Mr Stapleton (traffic engineering consultant) on 28 September 2001. Following the issue by the RTA to the Council of an "Integrated Development Assessment" letter on 13 November, Mr Haggis wrote to Mr Nunn on 18 December 2001, submitting that the RTA ought urgently reappraise a recent reversal of its 2000 agreement to three intersections. Mr Nunn responded on 21 December, that 'in principle agreement has been given to the three access points ... for the development, with intersection details to be worked through', and 'Rose Consulting has significantly progressed design details of the access at Withers Street to serve its first stage of development and in so doing has gained RTA input'. "RTA Issues" were an item under "Tasks" in Tyneside's 10 January 2002 Pambulong Forest Issues Report. At a meeting with Rose Consulting on 8 April 2002, Mr Haggis "stressed ... need to compress the design program for the roundabout modification ... Need to have ... works designed approved and under construction in the quickest possible time" and that "RTA have stressed the necessity for a safety audit to be completed on the roundabout reconstruction. Sean Morgan can carry out this work".

In a letter to Mr Hall of 10 May 2002, Mr Haggis reported that the general layout and safety audit of the Withers Street roundabout was being undertaken by Sinclair Knight Merz (Newcastle) who had taken over the traffic engineering work as Mr Stapleton "had got to be expensive and a bit slow". On 27 June 2002, Mr Haggis wrote to Mr Hall requesting priority payment of SKM's 21 May invoice, and mentioned that they were preparing engineering drawings for the roundabout modification and carrying the traffic modeling for the s 94 dispute and master plan. A 2 July 2002 minute of a site meeting with Rose Consulting records that Mr Kneist and Sean Morgan were to meet the RTA on final roundabout design. By 30 August 2002, the road safety audit and traffic management plan were complete.

The above demonstrates attention to establishing the traffic infrastructure. In principle agreement to three access points was secured, although the focus was understandably on the major roundabout, which would provide access to the first precinct. Moreover, Mr Walsh accepted that the project would be perfectly viable, even without a third roundabout. In that context, I am not persuaded that there was negligent inattention to settling the traffic infrastructure, or that incompetence is manifested by the failure to secure final approval for three access points.

The third matter of complaint is that Tyneside approved a design plan for Precinct 1 that is said to have contained a number of serious design defects. The alleged defects, mentioned in Mr Walsh's "Development Appraisal" of 27 January 2003, include (1) a disconnect between the small lot sizes (playing to the lower end of the market) with housing designs (calculated to attract all sections of market, some requiring substantial initial and ongoing maintenance costs); (2) for some blocks the nominated house design and small lots meant that retaining walls of up to 2.2m would be required; and (3) for 10 of the house sites it was proposed that side verandas face a sheer wall 2 metres away. Other criticisms originally advanced by Mr Walsh, including in respect of driveway gradients, were not pressed, no doubt in the light of the impact on his views of cross-examination.

The first of these criticisms is difficult to reconcile with Mr Walsh's opinion that 83% of the house designs were less than 165 square metres and in his view "far too small". In any event, Mr Walsh is not an architect. The drawings on which his opinions were founded, and his workings, were not produced. The drawings on which his opinions were based were draft plans, prepared by Rose Consulting, in contemplation of a future application for a construction certificate. However, they were merely indicative of the types of houses that might be built, and not prescriptive of what must be built, on each lot. In my view, nothing in this respect supports an allegation of negligence, let alone general incompetence, against Tyneside.

The fourth matter of complaint is that Tyneside failed to achieve (1) a cash flow forecast prepared as at 31 October 2001, which relevantly forecast that in the period June to December 2002 the project would achieve between 50 and 100 sales and thereafter between 75 and 100 sales in each 6 month period; and (2) a construction program contained in its 30 November 2001 report to the Hammersmith board, which provided for completion of the lake and earthworks by mid-April 2002.

It is true that no sales at all were achieved in the period June to December 2002, nor indeed before the board meeting of 28 January 2003. It is also true that the construction program timeframe was not met, as the construction certificate for the lake and fore bay works was not issued until 26 April 2002, and the construction works were not completed until early 2003. However, the mere fact that a forecast is not met does not mean that the project manager is negligent, let alone incompetent. Mr Haggis explained to Mr Hall, in a letter of 30 July 2002, that a number of factors had altered the cash flow outlook since November 2001, including that the Dam Safety Committee had upgraded the lake, the RTA had revisited the Withers Street roundabout design, the Council had adopted a 'recalcitrant' s 94 plan in December 2001 contrary to previous assurances, and the Christmas bushfires resulted in a rushed new SEPP and new Act in June 2002. He said that "these all delayed the approval process and our revenue base", and not unreasonably commented that "Even with the perception of Merlin we would have been battling to predict this lot". The pendency of the s 94 appeal, and subsequent direction by Mr Hall to avoid committing to unnecessary expenditure in the meantime "until we know everything is proceeding", and then the "stop work" directions, could only have exacerbated the delay. These were not matters within Tyneside's control, and provide a sufficient alternative explanation for the non-achievement of the relevant forecasts that it would not support an inference of incompetence.

The fifth matter of complaint was that Tyneside failed to competently manage and coordinate the consultants. As was contemplated by the Management Agreement, Tyneside engaged and instructed a number of consultants, including a hydraulic engineer, a landscape architect, a traffic engineer, a surveyor, an architect, a geotechnical engineer, a fire hazard consultant, an ecological consultant and an archaeologist. It was not submitted that this was without any requisite approval of Hammersmith. It is not in doubt that a function of a project manager generally is to co-ordinate the work of the consultants; and this was explicitly a function of Tyneside under the Management Agreement. Failure of co-ordination is calculated to lead to delays, errors, incomplete works, unnecessary duplication, redundancy, and frustration and lack of focus by the consultants.

The Walsh/Truswell report found that "a pattern has emerged of disquiet among some consultants" and that there was "a lack of direction" being provided by Tyneside. But when it comes to specifics, the matters chiefly advanced by the Defendants as manifesting this are (1) that DEM (landscape architects and planners) were belatedly instructed (after the 8 August 2002 site meeting) to prepare a master plan for the project; (2) that Robinson GRC had not had a meeting with other consultants for over 8 months, when it was vital to ensure that their work was being conveyed to town planners and drainage designers to avoid redundancy; (3) that SKM had been commissioned to design the major roundabout but not yet asked to design the other two, and had not had a meeting with other consultants in more than 6 months; (4) that Rose Consulting had only one site supervisor and one draftsman to design and coordinate the roads, water, sewerage and electricity and had not work in tandem with Robinson GRC, which could lead to problems in the future. Moreover, Rose's relationship with Delamere in respect of the construction of the dam and fore bay had broken down; (5) Asquith & de Witt were concerned that the lack of a master plan was fraught with disaster and that use of community title was exceptionally onerous, and also that pre-determined housing designs for each allotment would not work in the Newcastle market.

Substantially for the reasons already given in connection with the complaint about failure to prepare a master plan, I am unpersuaded that the failure to instruct DEM, or anyone else, to do so before August 2002 is necessarily indicative of inadequate co-ordination. For the reasons already advanced in connected with the allegation of failure to settle the traffic infrastructure, I am likewise unpersuaded that the circumstance that SKM had not yet been asked to design the second and third roundabouts is of significance. And substantially for reasons already given, I would not conclude from Asquith & de Witt's concerns about the use of community title that there was an inadequacy of co-ordination.

However, there is a significant body of evidence and opinion that supports the contention that Tyneside's co-ordination of consultants was deficient. In a review by Mr Winterbottom of the project in April 2000, he acknowledged that Tyneside's "failure to be sufficiently clear about where their internal co-ordination stopped and our project management role started, nor about the different roles of the three of us", had contributed to the unsuccessful management of the consultants as a team. Mr Haggis accepted this. According to the Simpkins report - which it will be remembered was commissioned by Tyneside, not Hammersmith - Rose was unsure of its role in respect of contract supervision with Delamere, and this resulted at least in part from the lack of a written contract, and the absence of clear instructions as to the particular activities that Rose should be undertaking. Mr Truswell's interim report of 29 August 2002 - prepared on the instructions of Roche Group to review the project - described the administration of the project as "terribly flawed". The final Walsh/Truswell report of 26 September 2002 concluded that there was "a lack of direction" being given to consultants by Tyneside.

The Walsh/Truswell report made the following observations that bespeak a serious failure of co-ordination: RCG believe the minimum road width is 3.5 meters. The traffic engineers are of the opinion that it is 4 meters RCG believe they will develop the internal road layout in each precinct. DEM believe they will develop the internal road layout in each precinct. RCG believe that the traffic engineers are to review traffic aspect of their work. The traffic engineers are not aware of this.

Mr Incoll, the defendants' project management expert, was of the opinion that there was a lack of coordination of the consultant services, particularly in areas of procurement planning, scheduling for tender phase, and external authorities planning, and that this led to delays, uncertainties and inefficiencies. In cross-examination he said that the standard function of recording what consultants are to do, who is to do it and when, was missing. Eventually, when pressed in cross-examination that this was being somewhat perfectionist, he answered "To the contrary. I would say the administration of the design team is the worst I have seen in my 30 years of practice, but I wasn't so harsh in my report". Notwithstanding my reservations about some aspects of Mr Incoll's evidence, I give his opinion on this issue weight, as it was uncontradicted by any expert called by the plaintiffs, and it accords with my independent appreciation of the position as discussed above.

If anything, the circumstance that the project was not "master-planned" increased the importance of careful and detailed co-ordination of the consultants. In my judgment, Tyneside's co-ordination of the consultants was deficient, and seriously so. That would not of itself establish that Tyneside lacked the requisite qualities referred to in the warranty of competence, but it is a matter to be included in the ultimate assessment.

The sixth and final matter of complaint under this ground is that Tyneside was unable to perform the Services required of it under the Management Agreement without Mr Winterbottom. Tyneside engaged Mr Winterbottom as a permanent consultant, to perform a substantial part of the Services, at Hammersmith's expense. He was engaged in the management of the project from a very early stage, and came to form part of the Tyneside team, sometimes working from the Tyneside office and using Tyneside letterhead. The project management tasks he performed included preparing programs and schedules of activities for projects, identifying and defining activities and estimates of the costs, preparing and issuing briefs for activities, assessing consultant responses and recommending appointments, managing consultants on a weekly basis, liaising with local government and other agencies on specific projects, integrating consultant inputs and submissions, and on-going liaison during the implementation phase. These were functions that fell within the description of the Services that Tyneside had contracted to provide.

Mr Oliver considered that Mr Winterbottom was the de facto manager of the project. While this overstates the position, it is plain that he performed a substantial part of the project management function. Mr Incoll, from his review of the available documentation, formed the view that Mr Winterbottom was responsible for many of the day-to-day aspects of project management. He was clearly doing more than performing statutory planning functions, as suggested by Mr Haggis. He prepared all (but possibly one) of the briefs to consultants; he arranged all the consultants for a design conference in August 1999; he undertook a written review of the project; he was instrumental in engagement with many external advisers (such as Mallesons, in respect of the s 94 issue).

It may be accepted that the Management Agreement did not oblige Tyneside itself to undertake every project management function. However, as the defendants emphasise, the work described above and performed by Mr Winterbottom was all within the description of the Services that Tyneside had contracted to perform, for the price stipulated in the Management Agreement; yet it was being performed by Mr Winterbottom, who was retained as a consultant at additional cost to Hammersmith. That Mr Winterbottom's services were required to deliver the Services, in addition to the resources existing within Tyneside, points to a lack on the part of Tyneside of the ability to perform the Services. This is consistent with, and reinforced by, Mr Haggis' statement at the 15 August board meeting at Roche Group's offices, as reported by Mr Truswell: I'm over stretched, I'm having difficulties coping with the Project and I believe I'm going to need help to do it. At the moment I've engaged a planner, surveyor, an ecologist, a landscape architect, an architect, an urban designer, a traffic engineer, a geotechnical engineer, and a civil design engineer as well as the civil contractor.

It is next appropriate to consider the submission that lack of the requisite qualities on the part of Tyneside can be inferred from the overall status of the project as at mid-2002. In short, it was years behind what the Report contemplated. No development approval had been obtained for the whole of Lot 104; indeed the only development approval was for 37 lots in Precinct 1 (some of which were "superlots", with potential for further subdivision into a total of 63 lots). None of the 21 precincts ultimately contemplated (including Lot 107) - other than Precinct 1, and a little of Precinct 2 - had been planned. Even by January 2003, Tyneside had not produced a subdivision with a single saleable lot - and did not anticipate doing so before the end of 2003. This of course fell short, by a long way, of what was envisaged by the Report, which included completion of planning by 2002; construction of the third of eleven stages by mid-2002, and the commencement of the fourth at the beginning of 2003; and sale of 199 lots by end 2002, with the project to become cash-flow positive in mid-2003. Accordingly, the milestones in the Report were not being achieved, and were not close to being achieved. Moreover, Tyneside's 31 October 2001 forecast that there would be sales of 50-100 lots between June and December 2002, and thereafter sales of 75-100 lots each 6 months, was not fulfilled, and again the shortfall was not marginal - no sales were made.

Failure to achieve the milestones in the Report does not of itself mean that Tyneside lacked the requisite qualities, though it invites consideration of whether the failure to achieve those milestones was attributable to lack of competence on the part of Tyneside, or to other cause or causes. Notwithstanding that the milestones in the Report were not achieved, there had been a measure of progress. The "best practice" study was undertaken, as the Management Agreement contemplated it might, and this incurred some delay. The project was expanded, to include Lot 107. The board was not unhappy with the progress made by Tyneside in mid-2001. The council indicated that it wished to see the LEP resolved before considering any development applications; an LEP and DCP was proposed and carried through the Council, effecting a rezoning, in September 2001. Tyneside lodged a development application for Precinct 1 in October and for community title in November 2001. Meanwhile, in October 2001, Tyneside lodged objections to the draft s 94 contributions plan, and following release of the final plan in December 2001 caused an appeal to be filed in the Land & Environment Court in March 2002. As has been mentioned, pending the outcome of the s 94 appeal, Mr Hall on 24 June 2002 requested Mr Haggis, to proceed only with essential matters pending the outcome of the appeal. The back-zoning issue had to be resolved before detailed planning of precincts and lot layouts could sensibly proceed, and that issue was substantially resolved by 4 July 2002; on 10 July 2002, Tyneside issued its Urban Design brief. In addition, in March 2002, a new SEPP arising out of the previous Christmas bushfires impeded progress. Also contributing to some delay was that Gilbert Rose entered into a scheme of arrangement, when in the midst of preparation of construction drawings for the lake.

Thus, by mid-2002, the zoning issues had largely been resolved; council's agreement to a town centre had been secured; a Development Control Plan was in place; the back-zoning threat was averted; consideration had been given to the community title form of development; four development applications were underway, including community title for the entirety of Lot 104; construction of the lake and fore bay, the Tramway Road and some other smaller jobs was well-advanced; the urban design brief had been issued and instruction given for the commencement of master planning; and the s 94 appeal had been instituted and was being prosecuted.

The project was a complex one. While it is undoubtedly true that it was just such a project that Tyneside warranted that it had the requisite qualities to manage to successful completion, delays in development projects do not necessarily bespeak incompetence on the part of the project manager. In this case, delay had been incurred by reason of the (contemplated) investigation and adoption of the "best practice" alternative for the development, particularly because it led to the requirement for an LEP and planning processes at the front end of the project; through the proposal to add Lot 107 to the project; through the s 94 appeal to the Land and Environment Court - and more particularly on account of Hammersmith's request only to undertake essential work until the s 94 appeal was resolved; by the requirement to address emergent planning issues under the Bushfire Act; and by the back-zoning issue, which was substantially resolved only in June 2002. Thereafter, the "cease new work" directions of 8 August and 12 November 2002 effectively restrained further progress, in particular the brief to DEM to develop a master plan. None of these matters was attributable to deficiencies of Tyneside as manager. I am therefore unable to conclude, from the status of the development project as at January 2003, that Tyneside lacked the requisite qualities as at the date of the Management Agreement.

However, the defendants' case did not rely solely on the drawing of inferences from supposed deficiencies in performance, or lack of progress in the development. In addition, the defendants contended that as at the date of the Management Agreement, the relevant skill, experience, competence and ability of Tyneside was that of Mr Haggis, and that when one examined Mr Haggis' background, it became apparent that he did not have the requisite qualities.

Between 1962 and 1969, Mr Haggis was employed as City Planning Officer for Salisbury, South Australia. That does not evidently involve experience in project managing developments. He claimed that between 1970 and 1980, he practised as property development consultant, in partnership, and that between 1970 and 1999, he advised on and undertook development works in relation to various projects. In the profile provided to Roche Group on 2 March 1999, on which he must have known they would rely in entering into the venture, Mr Haggis described his career during the period 1990 to 1997 as "Property developer specialising in small home and unit development, land subdivision projects and building renovation schemes". He listed, as a "selection of projects completed in the past ten years or currently being undertaken", some 21 projects. At first sight, this conveyed that Mr Haggis was a successful property developer whose group of companies had completed or were undertaking the listed projects. However, in the early 1990s, most of the companies with which he was associated went into liquidation; Mr Haggis himself became a bankrupt in 1992 (he was discharged in 1995); during that period, he worked on projects for his daughter and son-in-law's company, Delamere. For many of the projects listed, his only involvement was to "assess" them. With the exception of two, none of the projects since 1990 had been developed by Mr Haggis or companies associated with him. Many were not completed, or even commenced, and the values attributed to them bore no relationship to his role - or, in many cases, to reality. The two in which he had personal involvement - Parmenter and Parrish Avenue - were sites that he had acquired, but in respect of which he had undertaken virtually no subdivision activity. They were not comparable in any way to Pambulong Forest.

Mr Haggis had no formal qualifications or training as a developer or project manager. He had never before undertaken a project of, or remotely approaching, the scale of Pambulong Forest. He agreed that none of the larger subdivisions with which he claimed to have been involved many years earlier in Adelaide were in any way comparable with Pambulong Forest. Moreover, this claimed experience with larger developments is itself dubious - the three largest with which he claimed to have been involved did not appear on his "profile", where one would have expected to see any relevant experience, and I conclude that if he had some involvement in subdivisions in the order of 300 lots in Adelaide, it was not relevant to an assessment of his competence to project manage a development of the scale of Pambulong Forest.

I readily accept that formal training and qualifications are not the only way in which one may acquire relevant "skill, competence, experience and ability". I also accept that experience in smaller projects may equip one with the requisite experience to undertake a larger one. However, the proved absence on the part of Mr Haggis of relevant training, qualifications and experience as a project manager of developments even vaguely comparable to Pambulong Forest, or even of involvement in the management of any such project, raises a powerful case that Tyneside did not have the qualities referred to in the warranty, and no evidence was forthcoming to establish that he did have those qualities.

This is then reinforced by other matters to which I have referred: the failure to ensure that there was a written contract in place with Delamere before works were commenced; the deficiencies in the management and co-ordination of the consultants; the reliance on Mr Winterbottom to perform many of the project management services for which Tyneside was responsible; and Mr Simpkins' recommendation that a project manager be appointed - implying that there was no effective project management by Tyneside. These matters confirm the conclusion, from the proved absence of relevant training, qualifications and experience in project management of developments even vaguely comparable to Pambulong Forest, that Tyneside did not have the qualities referred to in the warranty of competence.

While it is entirely correct that merely establishing that certain things were not achieved does not mean that it was the manager's fault or that it was caused by want of skill etc, failures in achievement can illuminate deficiencies in the manager's qualities. The defendants' case that Tyneside lacked the experience, skill, competence or ability to perform the services is established by proof of Mr Haggis' lack of relevant training, qualifications and experience in management of projects of the relevant kind; confirmed by the various shortcomings in performance to which I have referred, which are manifestations of the deficiency of experience, skill, competence or ability; and not refuted by any positive evidence of possession of the relevant qualities.

Accordingly, I conclude that as at the date of the Management Agreement, Tyneside did not have the skill, experience, competence and ability of a project manager of complex, very large-scale, green fields developments such as Pambulong Forest, and accordingly that the relevant warranty was not true or correct. Hammersmith was therefore entitled to terminate the Management Agreement and the Profit Deed, pursuant to clauses 12.1(c) and 12.1(b) respectively of those agreements.

Clause 12.1(f) of the Profit Deed authorised termination of the Profit Deed if the Management Agreement was terminated for any reason.

The consensual termination of the Management Agreement on 28 January 2003 was nonetheless a termination (for any reason) of the Management Agreement. Thus that termination of the Management Agreement constituted an event of default under the Profit Deed, whereupon Hammersmith was entitled to terminate the Profit Deed, as it did by the notice of 11 March 2003.

For the reasons advanced above, Hammersmith was also entitled to terminate the Profit Deed pursuant to clause 12.1(b) (that a warranty made in the Profit Deed, namely the warranty of competence, was not true and correct).

The Profit Deed contains no event of default similar to that in Management Agreement clause 12.1(b) (failure to comply with directions), and so that basis for termination of the Management Agreement does not directly support termination of the Profit Deed. However, if the Management Agreement were terminated on that ground, termination of the Profit Deed would also be supported by clause 12.1(f) of that deed.

As I have concluded that the plaintiffs fail, first on the basis of discharge of the Management Agreement by mutual consent, and alternatively on the basis that termination of the Management Agreement by Hammersmith for default was authorised both on the ground of non-compliance with directions and on the ground that the warranty of competence was not true and correct, it is unnecessary to embark on the difficult and complex task of assessing the plaintiffs' damages. In the event that a different view on the liability issues ultimately prevails, the task of assessment can be undertaken with the evidentiary material and submissions already available. However, there are two major issues affecting the Plaintiffs' claim for damages that it is convenient to resolve now: whether Lot 107 became incorporated in or was added to the project; and the question of construction as to whether any claim to profit share is limited to profit earnt during the term of the Profit Deed.

The Report envisaged (p15, under "Added Opportunity") that additional land holdings of BHP in the vicinity, zoned for future urban development, might be incorporated into the Development. Lot 107 was such a holding. The plaintiffs contend that the parties agreed to incorporate Lot 107 in the development, and to increase Namlot's base profit share in respect of it to 10%, through discussions that took place, particularly between Mr Haggis and Mr Hall on 8 December 1999, and the subsequent procurement from Mr Boswell of a disclaimer of any interest in Lot 107; and alternatively, that the defendants are estopped from denying that Lot 107 was to be added to the development and subject to the profit share arrangements.

Mr Haggis recommended investigation of Lot 107 at a Hammersmith board meeting on 24 June 1999. On 8 August 1999, Hammersmith (over the signature of Mr Oliver) made an offer to BHP of $800,000 for Lot 107. On 1 September 1999, Hammersmith made a further offer for Lot 107, this time over Mr Hall's signature, of $1 million, nominating Mr Oliver as its point of contact. At a meeting on 16 September 1999, Mr Oliver advised that a decision was expected shortly from BHP on the offer for Lot 107. On 25 November 1999, Tyneside (by Mr Oliver) wrote to BHP, confirming a telephone discussion of 24 November in which BHP had indicated acceptance of Hammersmith's offer of 1 September. On 2 December 1999, BHP confirmed that contracts had been forwarded to the purchaser.

According to Mr Haggis, at a Hammersmith board meeting on 8 December 1999, he proposed that there be new (and simpler) agreements in respect of Lot 107. Mr Hall referred to the need to obtain a release from Mr Boswell, in light of difficulties experienced with his daughter, and proposed increasing the base profit on any new scheme to 10% each. (Importantly, Mr Haggis gave different versions of this: first, "We could increase your base profit on any new scheme to 10%, that is each"; and later, "If this can be done we will increase your profit for Lot 107 at the base level to 10% if Fred isn't there"). Mr Hall also said that Lot 107 would need to be part of a separate agreement, and that there would be no increase in Tyneside's management fees.

Mr Haggis has a handwritten diary note for 8 December 1999. The following appears, covering the times from 08.15 to 11.30; I infer that it records a conversation that took place that day, but not that it coincided with those times: David Hall: issues on Lot 107 (1) Fred could be a problem to us down the track, if anything happens to Fred we know what is daughter is like - could make life difficult for all of us. It would be better if we could get him out of 107. (2) We could increase your profit on the base level to 10% if Fred wasn't there. (3) 107 would need to be a separate agreement. (4) There will be no increase in the management fees - that is already a sore point with Bill.

Then there is an entry at 3.00, "Roche Group meeting". There is no record of anything else that happened at that meeting.

Mr Hall disputes Mr Haggis' version of this conversation. Mr Hall did not recall, but did not deny, a discussion with Mr Haggis and Mr Oliver about Lot 107. He did not deny, though he did not recall the specific words, that Mr Haggis said "We need to prepare new agreements for Lot 107", and "They can be much simpler than existing ones". He did recall a discussion in which it was drawn to his attention that Mr Haggis and Mr Oliver had had adverse experience with Mr Boswell's daughter, a lawyer - something along the lines "We know what his daughter is like", or "They could make life very hard for us". He does not think he said "It would be a lot easier if we can take him out of 107", but rather that it was a case of obtaining an acknowledgment that he (Mr Boswell) had no claim in respect of Lot 107. He accepted that he might have said that there would be no increase in Tyneside's management fee, but he resisted the proposition that in those circumstances the reward would be by way of profit share. He said that nothing was agreed in respect of any profit share for Lot 107, and that a proposition that Mr Oliver and Mr Haggis could each have a 10% profit share would have been very inconsistent with what BHP said about Lot 107 (apparently, that they would not deal with Mr Haggis and Mr Oliver).

According to Mr Oliver, Mr Hall said something to the effect, "If we aren't transparent with Fred, we might have problems later on". He recalls that all were in agreement that Mr Boswell should not be a party to the Lot 107 agreements. He recalls that there was discussion about increasing the base profit share, but says that no agreement was reached. Subsequently, he acknowledged that Mr Hall could have said, "We could increase your profit share to 10%", though he was not sure about "each". He recalls Mr Hall saying "There will be no increase in management fees", though not specifically at the 8 December 2009 board meeting. He also recalls Mr Hall saying, "There would need to be a separate agreement" in respect of Lot 107. One reason for this was that Lot 107 could not be "directly" part of the project, because it had not been rezoned.

According to Mr D Roche, Mr Oliver and Mr Haggis raised the possibility of Hammersmith acquiring Lot 107 in early Board meetings, but did not play any role in its acquisition, which was effected by Mr B Roche and Mr Hall, not Mr Haggis. Documents were provided to Mr Haggis, to keep him informed of progress. Mr Roche understood Lot 107 to be a "separate venture", outside the extant Profit Deed, and he never heard any suggestion that it was part of the existing arrangements. There was some general discussion about whether Mr Haggis and Mr Oliver might become entitled to a profit share if Lot 107 was rezoned and developed. Mr B Roche said, "There's enough work for Tyneside to do on the development of Lot 104 and the other parcels of land acquired with Lot 104 that are already zoned residential. We'll deal with Lot 107 when it is rezoned in due course". He said that Lot 107 may have been discussed on 8 December as a matter for "separate agreement" at some later time; but there was no agreement about increasing the base profit share to 10%, or otherwise. He acknowledged that there were discussions about profit share, but says they were never concluded. Mr Boswell's acknowledgement that he had no interest was obtained for abundance of caution. It was put to him that the deal was that Mr Haggis and Mr Oliver would receive profit share on the same basis as they were receiving profit share under the existing profit share agreement in relation to the other lots, to which he answered "I don't recall any agreement about that, no".

On 20 December 1999, Mr Boswell signed an acknowledgement that he had no interest in any land purchased or to be purchased by Roche Group or Hammersmith other than Lots 102, 103, 104 and 105. On 14 January 2000, Roche Group forwarded a copy of the acknowledgement to Tyneside.

In a letter to Mr Roche that he drafted on or about 27 January 2000, Mr Oliver, on his own behalf and on behalf of Mr Haggis, argued that their total interest should be 25% - that is to say, 12.5% each. This is inconsistent with there already being a concluded agreement for 10% each.

In the course of the negotiations that followed the 28 January 2003 board meeting, a "New Profit Deed" was submitted to Tyneside, which included a reference to Lot 107.

It is clear that the question of Mr Haggis and Mr Oliver (or their companies) being entitled to a profit share in respect of Lot 107, and that it might be increased to 10% if Mr Boswell's disclaimer could be secured, was discussed between them and Mr Hall on 8 December 1999. However, it is also clear that, even on Mr Haggis' version, the evidence does not establish a concluded agreement made in December 1999 to the effect that Lot 107 would be included in the existing arrangements, or that they would have a 10% profit share under new arrangements. It was discussed, and it was left at the state that it would be the subject of a new agreement. That new agreement was never concluded. There was a proposal, but not a concluded agreement, that Mr Haggis' and Mr Oliver's profit share would be increased to 10% each. Important indicia of the absence of an intention to be immediately bound by the conversation of 8 December 1999 - even if Mr Boswell's acknowledgement were duly obtained - include, first, that the existing contractual arrangements in respect of Lots 102, 103, 104 and 105 were in writing and comprehensive and followed protracted negotiations, and in that context it would be remarkable if the parties intended to be bound by a new agreement that was oral and informal; and secondly, that the discussions specifically contemplated a new, simpler and separate agreement (not that Lot 107 would be treated as part of the land under the existing agreements). Mr Haggis' own version "We need to prepare new agreements for Lot 107" is indicative of this. The letter drafted by Mr Oliver on 27 January 2000, arguing for a 25% profit share, is inconsistent with there already being a concluded agreement for 10% each.

Obtaining Mr Boswell's acknowledgment that he had no interest in Lot 107 was in furtherance of reaching the agreement that was anticipated - it was a prerequisite if there were to be any prospect of securing a higher base profit share easier - but it did not itself amount to acceptance of an offer that was open for acceptance. While I found Mr Hall's evidence on this topic in particular unsatisfactory - his denial that a profit share was discussed, and his reluctance to concede that on his version Tyneside were working on Lot 107 for nothing, being two incredible aspects of it - I do not accept Mr Haggis' second version of what Mr Hall said ("If this can be done we will increase your profit for Lot 107 at the base level to 10% if Fred isn't there"); the earlier version is much more consistent with his diary note.

It is true that Tyneside proceeded to do some work in respect of Lot 107; but it had already done some before 8 December 2009, when on no view was there any contract in place. Again, that work is explicable on the basis that Tyneside anticipated reaching an agreement with Hammersmith on terms that would provide them with a profit share from Lot 107; but they had not yet done so.

It is also true that at a meeting between Mr Hall, Mr D Roche and Mr Oliver on 19 July 2001, Mr Oliver referred to the need to allocate costs "bearing in mind the different lots having a different agreement with both Roy, John & Fred (104) also Roy & John (107)". But it would be reading too much into this to treat it as an assertion that there was a concluded agreement; rather, it recognised that, on any view, the interests in Lot 107 differed from those in the original lots in that Mr Boswell was not involved in Lot 107; and it reflected the anticipation that they would conclude an agreement in respect of Lot 107, but as yet had not done so.

Finally, inclusion of a reference to Lot 107 in the "New Profit Deed" offered to Namlot and Bluegrass on 27 February 2003, for an 8.33% base share in common with the other lots, does not amount to evidence that there was previously a separate agreement in respect of Lot 107 for a 10% (or any) profit share.

In my view, in and following December 1999, it was anticipated that there would, in due course, be an agreement addressing Lot 107 and making some provision for Mr Haggis and Mr Oliver, through their companies, to have a profit share, but the terms of that agreement remained unresolved. Because of the absence of consensus as to the terms, there is no room for an estoppel of the type referred to in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387.

The plaintiffs' claim for damages includes profits derived from sales of lots occurring after the expiry of the term of the Profit Deed, on 1 March 2011. The defendants submit that, as a matter of the proper construction of the Profit Deed, the participants - relevantly Namlot - had no entitlement to profits generated after the expiry of the term.

By clause 3.1 of the Profit Deed, the parties acknowledged and agreed relevantly as follows: (b)Hammersmith has appointed the Manager as the manager of the development, pursuant to the provisions and for the duration of the term of the Management Agreement, for the purpose of assisting Hammersmith in relation to the Development; (c)... (d)Subject to their due and punctual compliance with their obligations under this Deed, the Participants are entitled to receive a Profit Share in accordance with clause 11 of this Deed.

The participants were Namlot, Bluegrass and Mr Boswell's company, Tasmanian Prosperity Investments Pty Ltd.

Clause 11.1 of the Profit Deed provided that if a profit was achieved in respect of the development, the participants were each entitled to a specified profit share, payable in accordance with that clause. The profit share escalated according to the amount of the profit, commencing at 8.33% each of profit up to but not exceeding $30,000,000; 10% each of profit exceeding $30,000,000 but not exceeding $68,950,000; and 16.666% of profit exceeding $68,950,000. By clause 11.2: The Profit Share shall become payable only after such time as all debt, borrowings and capital costs of the Development are repaid and then the Profit Share shall be payable only to the extent of the surplus cash funds then remaining in excess of funds required for the ongoing completion and finalisation of the Development.

Clause 11.3 provided: Any Profit Share payable shall be paid within twenty (20) Business Days of the issue by the auditors of Hammersmith of the audited annual accounts of Hammersmith relating to the Development and the surplus cash funds of the Development.

Clause 11.4 provided for any losses suffered in respect of the development to be shared on a like basis.

Clause 10.1 provided for the method of calculation of the profit, which broadly involved deducting from the gross proceeds of the completed sale of any lots subdivided from the land of the costs of acquisition, development, management and interest. Clause 10.2 provided: The Profit is to be reduced by a sum equal to any losses incurred by Hammersmith in relation to the Development in any year during the Term, before calculating the fee payable to each Participant in accordance with clause 11.

Clause 2 of the Profit Deed provided: The Deed shall remain in force for the Term unless it is terminated by any party pursuant to the provisions of clause 12.

Clause 1.1, contained the following relevant definitions: "Profit" means the net audited before tax profit of Hammersmith arising out of the Development before the deduction of all fees and amounts payable by Hammersmith to the Participants pursuant to the provisions of clause 11 and calculated in accordance with clause 10. "Profit Share" means a portion of the Profit calculated in accordance with clause 11.1 "Term" means, subject to the provisions of this Deed, twelve (12) years commencing on the Purchase Date and expiring on 1 March 2011.

As has been mentioned, the Report formed a schedule to the Management Agreement, which was in turn a schedule to the Profit Deed. Schedule 8 to the Report was a cash flow model, which provided for the project to commence in the first quarter of 1999, to become cash flow positive in the second quarter of 2003, and to be completed in the fourth quarter of 2011 with accumulated profits of $68,946,669; the correlation of this amount with the upper tier of Profit Share is noteworthy. The cash flow model also envisaged construction of the development in twelve stages, each taking six months, one per year from 2000 until 2011; the final stage of construction was envisaged to occupy the first two quarters of 2011, and on that basis would not be complete - let alone sales realised - before the term expired on 1 March 2011. Thus, according to the cash flow model, the third tier of profit share would not be achieved until the end of 2011, after the expiry of the term. It is not likely that the parties intended that profit in that tier, generated by sales after expiry of the term, be beyond the reach of the participants.

Moreover, as has already been noted, clause 12.1 made it an event of default if the development failed, at any time, to achieve ninety percent of the profit stated in the Report, subject to the proviso that the time periods in the Report would be extended for the duration of any delay caused by any matter beyond the manager's control. In the light of that proviso, it is improbable that the parties intended that, notwithstanding that delay was caused by a matter beyond Tyneside's control, expiry of the term would deny the participants an entitlement to profit share derived from subsequent sales.

The "Term" as defined coincided with the period of Tyneside's appointment as Manager. The term of the Management Agreement was defined in identical terms. The principal function of the concept of the "Term" was to define the period of Tyneside's appointment as manager. In the Profit Deed, where it was intended that obligations or rights be dependent on the term, express reference was made to it. Thus a number of provisions of the Profit Deed limit obligations of ongoing performance by reference to the term: clauses 8.1 (Vendors and Participants to Assist), 8.5 (Parties to Co-operate), 9.1 (Participants may nominate a board Member), 9.2 (Owners may nominate three board members), and 9.3 (No more than four directors of Hammersmith). However, the entitlement to and obligation to pay profit share is not so limited. As the plaintiffs submit, nothing in clauses 3.1(d), 10 and 11 limits the participants' entitlement to profit share to profit derived from sales made during the term.

In particular, clause 11.1 speaks of a "Profit ... in respect of the Development" - not limited to the term. While the scheme of clauses 10 and 11 involved the progressive annual distribution of profit share as it accrued (after the recoupment of costs, including prior year losses, and subject to retention of funds required for the ongoing completion and finalisation of the development), ultimately the concept of profit share was an overall one for the development as a whole, not an annual one. That this is so is illustrated by clause 11.1, in which the references to the various tiers of profit are explicable only on the basis of total project profit. True it is that the references to "net audited before tax profit" in the definition of profit, and "audited annual accounts" in clause 11.3, suggest an annual calculation, but this relates to annual calculation each year of an interim distribution on account of the ultimate entitlement to profit share.

In my view, therefore, the preferable construction therefore is that, by performing their obligations during the term, the participants became entitled to their profit share in respect of the total profits achieved in respect of the development, regardless whether they were derived from sales made during of after the term. The strongest indicator to the contrary is clause 10.2, which provides for losses incurred "in any year during the Term" to be deducted before calculating the fee payable to each participant. I accept that if profit share was payable in respect of profits derived from sales after the expiry of the term, it would be curious if only losses incurred during the term, but not after, were to be deducted. However, on reflection, the formula in clause 10.1 ensures that the ultimate calculation takes into account all relevant expenditure as well as income, so that prior year losses will be taken into account. Clause 10.2 merely ensures that for the purpose of the annual calculations and payment required by clause 11, prior year losses be covered before a profit share becomes payable.

By its cross claim, Hammersmith claims against Tyneside as principal and Mr Haggis as guarantor, first, repayment of the advance of $100,000 paid in June 1999 and interest under the terms of the Management Agreement; and secondly, damages for breaches of the various warranties alleged to support the 2003 alleged termination, calculated as comprising the whole of the management fees paid to Tyneside ($1,057,500), on the footing that Tyneside did not provide the services it contracted to provide.

Under clause 9.2 of the Management Agreement, the advance was repayable by Tyneside in monthly instalments of $2,000 from the second anniversary of the date of the agreement (which in the events that happened was June 2001). Further, by clause 9.3 provision was made that "in the event that this Deed is validly terminated by Hammersmith ... at any time prior to the repayment by the Manager to Hammersmith of the Advance, the Manager shall, within twenty (20) Business Days of the date of termination, repay to Hammersmith any part of the Advance which has not, as at the date hereof, been repaid by the Manager to Hammersmith". Under clause 9.4, "In the event that the Manager defaults in payment to Hammersmith of any monthly instalment and such monthly instalment remains unpaid following the expiration of a period of ten (10) Business Days from the date of issue of a notice from Hammersmith to the Manager to pay the said monthly instalment or instalments', Hammersmith shall be entitled to demand repayment of the unpaid balance of the Advance, and charge interest.

The basis for the first claim is that the sum became payable under the terms of the Management Agreement in the event that the agreement was validly terminated by Hammersmith. This requires the exercise by Hammersmith of a power to terminate. As I have found that there was a consensual discharge of the agreement, this basis for the claim is not established.

The second basis for the claim is that that Tyneside failed to make monthly instalment payments from June 2001. The Plaintiffs submitted that as the Management Agreement, by clause 9.2, provided for these to be offset against the monthly management fee, and Hammersmith made no deduction from the management fee in respect of them, it waived the requirement for the instalment payments, so that there was no default. However, the entitlement to offset is expressed to be in Hammersmith's "sole discretion at any time after the date being the second anniversary of the date of this Deed and from time to time". Failure to exercise the discretion to offset in those circumstances could not be a waiver of the obligation to make the payment. Hammersmith served notice to pay the unpaid instalments on 10 November 2004; however, in that notice it asserted that the unpaid instalments amounted to $100,000, when at that stage they did not. The fifty instalments of $2,000 required to repay the advance in full would have expired only in July 2005. However, on any view, the full $100,000 has been due and payable since that date, and Hammersmith is entitled to judgment against Tyneside for that sum.

Mr Haggis is a guarantor of Tyneside's obligation. The guarantee was given jointly by him and Mr Oliver, and there is nothing in its terms to indicate that it was intended to bind them severally as well as jointly; in those circumstances, they were joint obligors. Although the plaintiffs complained that Mr Oliver had not been sued, that is no obstacle: there is no legal imperative to proceed against all the joint obligors, and nowadays, judgment against one does not extinguish the claim against the others [(NSW) Civil Procedure Act, s 95]. Hammersmith is entitled to judgment also against Mr Haggis.

As a matter of discretion, having regard to the notice given on 10 November 2004, the formal demand of 26 November 2004, the proportion of the advance that was already repayable as at 10 November 2004 (84%) and the terms of the contract, I would be inclined to allow interest at court rates from 1 January 2005. However, as this question was not argued, I will afford the parties an opportunity to address it

The second claim is for the return of the management fees paid (amounting to a total of $1,057,500) as damages for breach of contract, on the footing that Tyneside failed to provide the services that it contracted to provide. There are at least two reasons why that claim must fail. The first is that it was implicit in the consensual termination of the agreement that each party released the other from all outstanding claims and obligations. The second is that the Management Agreement provided, by clause 12.3, that termination did not affect accrued rights. The management fees earned and paid up to the alleged termination were accrued entitlements. The claim to recover those fees as damages would depend upon a contention that there was a total failure of consideration for the management fees, which on no view could be sustained.

On 29 April 2003, Hammersmith issued and served on Tyneside a creditor's statutory demand, claiming $100,000 said to be owing pursuant to the Management Agreement. By interlocutory process filed on 20 May 2003, Tyneside applied pursuant to Corporations Act, s 459G, to have it set aside.

On 2 December 2004, Hammersmith issued and served on Tyneside a further creditor's statutory demand, claiming $100,000 said to be owing pursuant to the Management Agreement, and relying on the notice of default of 10 November 2004 as having made the total advance repayable. By originating process filed on 23 December 2004 in proceedings 2004/181624 (formerly 6947/04), Tyneside applied pursuant to Corporations Act, s 459G, to have that notice also set aside.

Determination of the s 459G application made by interlocutory process in respect of the first notice was adjourned to the final hearing of the substantive proceedings. On 1 March 2005, an order was made in proceedings 2003/ 83732 (formerly 2631/03) that they be heard together with proceedings 6947/04, the s 459G application in respect of the second notice. However, that order does not appear to have been noted on the file in the 2004 proceedings, as a result of which they were, in the absence of the parties, dismissed on 26 April 2005. Given the circumstances in which those proceedings in respect of the second notice were dismissed in the absence of the parties, I would be inclined to set aside the order of dismissal to enable the application to be disposed of on the merits.

It follows from my above conclusions that, as at the date of the first notice, Tyneside was indebted to Hammersmith for only $46,000 (being 23 instalments of $2,000 each), and as at the date of the second notice, for only $84,000 (being 42 instalments). In principle, it would seem open to vary the first notice to $46,000; however, in light of the second notice there would appear to be no utility in doing so, and I would therefore be inclined to set aside the first notice. As to the second notice, although there was a genuine dispute (or an offsetting demand) as at the date of the notice in respect of the whole amount claimed, there can now no longer be a dispute to the extent of $84,000, and it would seem that the notice should be varied pursuant to Corporations Act, s 459H(4), to that effect.

However, as these matters were not covered in submissions, I will afford the parties an opportunity to address them.

The events the subject of these proceedings took place in the period 1999 to 2003. Proceedings were instituted in 2003 but, for whatever reason, did not come to trial until eight years later, when they were heard over a period of four weeks in February to March 2011, following which they were adjourned part-heard for a further week's hearing in early May 2011, and, after the exchange of written submissions, concluded with three days' oral submissions on 27 May 2011. The time taken since then has been my responsibility, and for that I apologise to the parties; however, the time I have taken needs to be seen in the context of what preceded it, and while judgment could have been given earlier had I confined my consideration to one issue that proved dispositive, that would not have done justice to the arguments of counsel, nor to the investment of the parties in the litigation.

For the reasons set out above, I have reached the following conclusions.

I accept that there was a consensual termination of the Management Agreement on 28 January 2003, when it was discharged by agreement. I would not accept the defendants' alternative case that they terminated the Management Agreement on 11 March 2003 for repudiation by the resignation statement made on 28 January 2003. However, the conclusion that there was a consensual discharge of the Management Agreement on 28 January is dispositive. The plaintiffs' case fails on that basis.

As to the first alleged event of default, that Tyneside did not comply with the directions of Hammersmith, Tyneside did not comply with directions given on 8 August 2002, and on 12 November 2002, to the effect that no new work was to be undertaken or commissioned. Accordingly, had the Management Agreement not already been consensually discharged Hammersmith would have been entitled to terminate it pursuant to clause 12.1(b), which in turn would have entitled Hammersmith to terminate the Profit Deed under clause 12.1(f) of that Deed.

The second alleged event of default, that the development failed, at any time, to achieve 90% of the profit stated in the Report, was not available to justify termination as at 11 March 2003.

As to the third alleged event of default, that covenants and warranties made by Tyneside were not true, complete or correct, I accept that clause 12.1(c) of the Management Agreement, and its equivalent in the Profit Deed, does not apply to a failure to fulfill a promissory warranty. With the exception of the complaint concerning the warranty of competence, the alleged breaches of warranty relied on by the defendants concern promissory warranties and cannot found an event of default under clause 12.1(c) of the Management Agreement or clause 12.1(b) of the Profit Deed.

I am unconvinced that proceeding by way of master plan, at least until the time when Mr Haggis took steps towards having one prepared in the latter part of 2002, was the only way in which a competent manager would have proceeded. I am also unable to conclude, from the status of the development project as at January 2003, that Tyneside lacked the requisite qualities as at the date of the Management Agreement. However, the proved absence on the part of Mr Haggis of relevant training, qualifications and experience in project management of developments even vaguely comparable to Pambulong Forest, raises a powerful case that Tyneside did not have the qualities referred to in the warranty of competence, a conclusion that is all the more readily to be drawn in the absence of evidence of possession of the relevant skill, experience, competence and ability. That conclusion is reinforced by Tyneside's failure to ensure that there was a written contract in place with Delamere before works were commenced; its serious deficiencies in the management and co-ordination of the consultants; its necessity to rely on Mr Winterbottom to perform many of the project management services for which Tyneside was responsible; the implicit view of Mr Simpkins - who recommended that a project manager be appointed - that there was no effective management by Tyneside of the Delamere contract; and Mr Haggis' statement on 15 August 2002 to the effect that he was over-stretched, having difficulties coping with the project, and needed help.

I therefore conclude that as at the date of the Management Agreement, Tyneside did not have the skill, experience, competence and ability of a project manager of complex, very large-scale, green fields developments such as Pambulong Forest, and accordingly that the relevant warranty was not true or correct. Accordingly, had the Management Agreement not already been consensually discharged, Hammersmith would have been entitled to terminate it (and the Profit Deed) pursuant to clauses 12.1(c) and 12.1(b) respectively of those agreements.

It follows that, on the plaintiffs' claim, there should be judgment for the defendants.

On its cross-claim, Hammersmith is entitled to recover the advance of $100,000 from Tyneside, and from Mr Haggis as guarantor. I will hear the parties on the question of interest, but prima facie am inclined to allow interest at court rates from 1 January 2005 (see paragraph 335). The claim for return of the management fees fails.

It follows that, on Hammersmith's cross-claim, there should be judgment that the cross-defendants Tyneside and Mr Haggis pay the cross-claimant the sum of $100,000 and interest;

Prima facie, the plaintiffs should pay the defendants' costs.

It seems that the creditor's statutory demand issued and served by Hammersmith on Tyneside on 29 April 2003 should be set aside; that the order dismissing Tyneside's application to set aside the creditor's statutory demand issued and served by Hammersmith on Tyneside on 2 December 2004 should be set aside, and that that notice should be varied pursuant to Corporations Act, s 459H(4), by substituting for the amount of the claim the sum of $84,000 (see paragraphs 339 and 340). However, as these questions were not covered in submissions, I shall afford the parties an opportunity of addressing them.

I direct that the defendants bring in short minutes to give effect to this judgment, at a time to be fixed. At that time I will deal with any submissions that the parties may wish to make concerning interest, the s 459 notices, and costs.