Ahmau Developments Pty Ltd v Preet

1. [1]

   These proceedings concern off the plan contracts for the sale of land in a sub-division development. The plaintiff, Ahmau Developments Pty Ltd “(Ahmau”), is the vendor. The defendants are purchasers.

2. [2]

   This judgment concerns two contracts. In each case, the purchasers are a married couple.

3. [3]

   Under the first contract the purchasers are Shabad Preet, the first defendant, and Amandeep Kaur, the second defendant. Ms Kaur is also known as Amandeep Preet. For convenience and without intending any disrespect, I will refer to her by that name. The Preets’ contract is dated March 2017.

4. [4]

   The purchasers under the second contract are Ashwarya Bakshi, the fourth defendant, and Ishita Bakshi, the fifth defendant. Their contract is dated April 2017.

5. [5]

   The contracts between Ahmau and the defendants are subject to the statutory regime for off the plan contracts in Part 4, Division 10 (ss 66ZL to 66ZU) of the Conveyancing Act 1919 (“CA”). That regime requires leave from the Court for the vendor to exercise a contractual right of rescission if the purchaser does not consent.

6. [6]

   The sunset dates under the contracts passed in March and April 2021, before the subdivision plan had been registered, triggering a contractual right of rescission. Several months later there was a rezoning of the land which affected, or potentially affected, the number of dwellings which would be permitted in the subdivision. Ahmau sought the defendants’ consent to rescission of their contracts (as had been successfully negotiated for the other pre-sales), but they refused. The plan remains unregistered.

Claims for determination

1. [7]

   The proceedings were commenced in August 2022. Ahmau as plaintiff sought the Court’s leave to rescind the defendants’ purchase contracts under CA s 66ZS. They resisted the grant of leave and cross-claimed for specific performance. The Bakshis’ cross-claim was filed in March 2023. The Preets’ cross-claim was filed in March last year.

2. [8]

   Originally a third contract was the subject of the proceedings. The purchaser under that contract was the third defendant. The proceedings were settled as between Ahmau and that purchaser shortly before the trial.

3. [9]

   The trial took place over five days between 13 and 21 May last year. The time allocated for the hearing was sufficient to complete the evidence but not the parties’ closing submissions.

4. [10]

   The proceedings were adjourned until 7 June for this purpose. But prior to that hearing counsel for the Preets sought leave to supplement the expert town planning evidence which had been presented at the trial.

5. [11]

   The supplementary evidence was to address one of the critical issues which had arisen in the proceedings, concerning the extent to which the 2021 subdivision had made it impossible to register a subdivision plan in the form attached to the purchase contract. Counsel suggested (and there was some justification for this) that the evidence at the trial had proceeded on an incorrect, or at least, an incomplete, basis.

6. [12]

   Counsel for Ahmau wished to have its expert respond to the new evidence from the Preets’ expert. Counsel also sought to amend Ahmau’s claim so as to contend that the subdivision had had the effect of frustrating the contract. If this was correct, no leave was needed to rescind the purchasers’ contracts because the contracts had already been discharged by operation of law. Furthermore, no question of specific performance could arise.

7. [13]

   In these circumstances, the parties recognised that the proceedings could not be completed on 7 June. Directions were made for supplementary evidence from the experts and for the amendment of the pleadings so as to raise Ahmau’s frustration claim. The proceedings were relisted for July.

8. [14]

   Up to this point, the Bakshis had been represented by solicitors and counsel in the proceedings. But their instructions were withdrawn before the resumption of the hearing, which eventually happened on 24 July. On that day, the Preets’ and Ahmau’s planning experts gave supplementary evidence, and the parties’ closing submissions, which now addressed the frustration claim, were presented. Mr Bakshi attended and presented his submission orally. Mrs Bakshi was unrepresented, but no one suggested that there was any separate need for her to present submissions on her own behalf.

Summary and analysis of evidence

1. [15]

   The land owned by Ahmau which is the subject of these proceedings is one of four parcels of land which together make up a larger block at Leppington at the southwestern outskirts of Sydney. That larger block, to which I will refer as “the Leppington Land”, is oblong in shape with its shorter sides running roughly north-south.

2. [16]

   An aerial photograph showing the Leppington Land is reproduced below. The photograph dates from 2021 (or before), but, according to the evidence, the appearance of the site is more or less the same today:

3. [17]

   The photograph is oriented with north at the top. On the eastern side, the Land is bordered by Camden Valley Way. This is a dual carriageway main road. To the south (bottom) is Dwyer Road and to the west (left) is Hulls Road. These are both smaller two-lane roads.

4. [18]

   The four parcels making up the Leppington Land can be seen in the title diagram reproduced below.

5. [19]

   The four parcels are owned by three companies which are, and have at all material times been, in common ownership. The parcel owned by Ahmau which is the subject of these proceedings, Folio Identifier 10/1172863, is the southernmost parcel (bordering Dwyer Road) and has the street address 14 Dwyer Road. The parcel immediately to the north, Folio Identifier 4/858010, has the street address of 1105 Camden Valley Way. It is owned by Allgood Projects (NSW) Pty Ltd (“Allgood”). The next parcel, Folio Identifier 5/858010, has the street address 14 Hulls Road and is also owned by Allgood. The northernmost parcel, Folio Identifier 11/1172863, has the street address 22 Hulls Road and is owned by McInnes Developments Pty Ltd (“McInnes”). I will refer to the parcels owned by the three companies as the “Ahmau Land”, the “Allgood Land” and the “McInnes Land”.

6. [20]

   In 2017, when the parties entered into the contracts which are the subject of these proceedings, the Leppington Land was governed by the Camden Local Environmental Plan 2010. It was zoned “RU4 Primary Production Small Lots”, which zoning prevented its subdivision for residential purposes. It however formed part of the “Leppington Priority Precinct” which had been identified by the State Government as an area for future residential subdivision.

7. [21]

   The Precinct was divided into five stages. The Leppington Land was part of stage 5. In May 2014 an Indicative Layout Plan (“ILP”) was published for the Precinct. The southernmost part of the Precinct, showing stage 5, is reproduced below.

8. [22]

   The dark grey strip on the eastern side of the Precinct is the Camden Valley Way road corridor. The local roads shown in the plan (in light grey) included the existing extension of Dwyer Road across the Precinct on the southern side of the Leppington Land, and Hulls Road on the western side of the Land. The hexagonal green shape on the northeastern corner of the Leppington Land was designated in the ILP as open space.

9. [23]

   The other local roads shown in the ILP between Hulls Road and Camden Valley Way had not been reserved or constructed and represented a proposed layout. They included a local road along the eastern boundary of the Leppington Land, alongside the Camden Valley Way road corridor. This reflected the fact that Camden Valley Way is a “no access” road, so that lots in the Land abutting the corridor would need to be provided with internal road access rather than directly using Camden Valley Way.

10. [24]

    In 2015, stage 1 of the Precinct was brought under the State Environmental Planning Policy (Sydney Region Growth Areas) 2006 (“Growth Centres SEPP”), re-zoning it for residential development. In October 2015, an Indicative Layout Plan (“ILP”) was published for the Precinct. The southernmost part of the ILP, showing stage 5, is reproduced below.

11. [25]

    Brian Garnet Wheadon is, and has since December 2020 been, the sole director and shareholder of Ahmau, Allgood and McInnes. But he holds his shares in trust for two property developers, or entities associated with them. Apparently, it is they who make all of the key commercial decisions. For the purposes of this judgment, I will call them “the Developers” and will treat them as if they were the owners of the Leppington Land, referring only to the interposed companies if it necessary to do so.

12. [26]

    The Developers are Mr Ryan Strauss and Mr Andrew Kavanagh. Mr Kavanagh gave evidence before me. He is, and was at all material times, in day-to-day management control of the Leppington Land, with major decisions being made in consultation between him and Mr Strauss.

13. [27]

    The Leppington Land is not the only property venture in which Mr Strauss and Mr Kavanagh are engaged as business partners. In his evidence, Mr Kavanagh stated that Mr Strauss’ skills lie principally in the acquisition and sale of properties. Mr Kavanagh himself is more concerned with the operational process of subdivision and development.

14. [28]

    The contracts the subject of these proceedings resulted from a campaign by the Developers to pre-sell lots in a proposed subdivision of the Leppington Land. Some of these pre-sales were effected by way of contract for the sale of land, and others were effected by way of option agreement. For convenience, I will refer to all the sales, whether by formal contract or by option agreement, as “the Presale Contracts”.

15. [29]

    In the usual way, the proposed lots were defined in a plan of subdivision annexed to the Contracts. I will refer to the plan as “the Presale Plan”, and to the proposed lots in it as “the Presale Lots”.

16. [30]

    The Presale Plan is reproduced below.

17. [31]

    The Plan depicted 133 Presale Lots in total. Of these, 42 were located on the Ahmau Land. One of those (Lot 1012) encroached onto the Allgood Land.

18. [32]

    The campaign began in late 2016 or early 2017. In all, there were 93 pre-sales. The agent for Ahmau (and, I assume, for Allgood and McInnes) was Mr Bruno Sergi, whose firm was known as “Patrick York Real Estate” (PY).

19. [33]

    The contracting work for the pre-sale campaign was undertaken in-house by Mr Dean Alcorn. His responsibilities were described by Mr Kavanagh as “negotiating contracts with various purchasers (or their legal representatives), for exchanging those contracts and for communicating with various purchasers (or their legal representatives)”. There was no direct evidence as to who gave Mr Alcorn instructions, but seemingly it was mainly Mr Kavanagh.

20. [34]

    The relevant Presale Lots for the purposes of this judgment are Lots 1040 and 1064. Lot 1040 (shaded above in green) was the subject of the Presale Contract with the Preets. Lot 1064 (shaded above in blue) was the subject of the Contract with the Bakshis.

21. [35]

    Both Lots were on the Ahmau Land and in each case the vendor under the Presale Contract was Ahmau (alone). Presumably the same approach was taken for the other Presale Lots, although there is no evidence about this, or how the Lots which extended over parcels of land owned by two different companies were dealt with.

22. [36]

    The Presale Contract between Ahmau and the Preets was dated 21 March 2017. The Contract with the Bakshis was dated 6 April. I will refer to the relevant Contracts as the “Preet Contract” and the “Bakshi Contract” respectively. Caveats were lodged on behalf of the Preets and the Bakshis over the Ahmau Land notifying their interests under the Contracts.

23. [37]

    In each case the area of the Presale Lot was 313 square metres, and the purchase price was $333,971. The Contracts both included terms (set out in full below) providing for a sunset date of 4 years (48 months) within which the Presale Plan was to be registered. If no registration had been effected by that date, either party was entitled to rescind.

24. [38]

    It is common ground that the Presale Plan could not be registered without having first been the subject of a development approval by the relevant consent authority (Camden Council). Before such an approval could be granted, the Leppington Land had to be brought under the SEPP for rezoning, and this required action by the State Government – relevantly, the Department of Planning, Industry and the Environment (“DPIE”).

25. [39]

    There was some debate in the proceedings as to whether work on a development application for the subdivision could, or should, have begun before the rezoning had been effected. I deal with this in more detail below. It is however clear that the Developers did not actually take any action in this regard.

26. [40]

    For three years little if anything appears to have happened with the subdivision as the Developers waited for the rezoning. In April 2020, soon after the outbreak of the Covid pandemic, the Developers retained Mr David Whitting, a consultant project manager, to advise them on, and assist them with, the development of the Leppington Land. Initially, he was asked to address two issues. One was the rezoning. The other was the drainage and sewerage which would be required by Sydney Water Corporation (“SWC”) on the site. Over the next eighteen months or so, Mr Whitting pursued the Council, DPIE and SWC about these issues.

27. [41]

    As I describe in more detail below, nearly all of the Presale Contracts were ultimately rescinded by agreement between the Developers and the relevant purchaser (or, in the case of option agreements, the options were allowed to lapse). Up to the end of June 2020, there were a few isolated rescissions. The pace picked up towards the end of 2020 and the beginning of 2021 as the sunset dates for the Contracts approached, and began to pass, without any rezoning or any apparent progress on the subdivision.

28. [42]

    Both the Preets and the Bakshis were offered a consent rescission, but neither took the offer up. The sunset dates for their Contracts passed in March and April 2021 respectively.

29. [43]

    In mid-July 2021, the Growth Centres SEPP was finally amended so as to bring stages 2 to 5 of the Leppington Priority Precinct within its terms. The effect was to re-zone the rest of the Precinct, including the Leppington Land, for residential development.

30. [44]

    At the same time as the SEPP was amended, the State Planning Department issued its Finalisation Report for stages 2 and 5 of the Leppington Precinct. Among other things, the Report described the general effect of the amendments. It also foreshadowed that further guidelines for the development of the land in question would be contained in a revision of the relevant Development Control Plan (“DCP”), which would be issued in due course. The same point was made in the media release which accompanied the issue of the Report.

31. [45]

    Further amendments were made to the Growth Centres SEPP in late September 2021. The revised DCP (the Camden Growth Centre Precincts Development Control Plan) followed in late October.

32. [46]

    I set out the relevant provisions of the planning instruments (the Growth Centres SEPP and the DCP) in a later section of this judgment. For present purposes it is enough to say that:

    1. (1)

       the July amendments to the SEPP carried forward provisions (the application of which are now disputed) concerning a minimum lot size of 300m², and, for the first time, imposed an overall cap on the number of permitted dwellings;

    2. (2)

       the September amendments to the SEPP introduced, for the first time, a limit of 16.5 dwellings per hectare for residential development;

    3. (3)

       the DCP provided further guidance on the application of these restrictions.

33. [47]

    As I describe in more detail below, even before the land was formally re-zoned, Mr Whitting devised a revised version of the subdivision plan which differed in some respects from the Presale Plan. Work continued on the revised plan following the release of the Finalisation Report (which Mr Whitting received soon after the rezoning was effected). In late September (actually several days in advance to the amendment to the SEPP) Mr Whitting became aware that a density limit of 16.5 dwellings per hectare was to be imposed. It seems that he was not aware of the amendments to the SEPP, but he did obtain a copy of the revised DCP which referred to this restriction in early November, within a week or so of the DCP being released.

34. [48]

    Mr Whitting considered that a 16.5 dwellings per hectare restriction would require further amendments to his proposed subdivision plan, or alternatively the Developers could sell the land. Some negotiations for the sale of the land took place between the Developers and a third party beginning in late 2021, but these negotiations did not ultimately go anywhere. No steps were taken by the Developers to prepare or lodge a development application for the subdivision, whether in the form of the Presale Plan or in any other form.

35. [49]

    Meanwhile, by the end of July 2021, the Developers had obtained consent recissions for 73 of the 93 Presale Contracts. In August 2021, letters were sent by Mr Alcorn to the Preets and the Bakshis (among other remaining purchasers) requesting their agreement to rescind as well. This was the first occasion on which the Developers had contacted them since their respective sunset dates had passed. No agreement was reached.

36. [50]

    By late November 2021, only eight of the Presale Contracts remained un-rescinded. The Developers had Mr Whitting prepare a report to bolster their case for rescission. The report argued that non-registration of the Plan by the sunset dates in the contracts had been unavoidable, and completion of a subdivision was still some years away.

37. [51]

    It was, however, not until April the following year that Mr Whitting’s report was sent to the Preets and the Bakshis. Accompanying the report was a letter formally giving the notice required for rescission proceedings under CA s 66ZS. Correspondence ensued but neither the Preets nor the Bakshis agreed to rescind.

38. [52]

    Ahmau’s originating summons was filed on 29 August 2022. Since then, it seems, no steps have been taken by the Developers either to pursue a subdivision of the Leppington Land or to sell it. The caveats lodged by the Preets and the Bakshis over the Ahmau Land remain in place.

39. [53]

    Evidence was given by Mr Preet on behalf of the Preets and by Mr Bakshi on behalf of the Bakshis. Each of them was cross-examined. I summarise their evidence below.

40. [54]

    For Ahmau, evidence was given by Mr Wheadon, Mr Kavanagh and Mr Whitting. Mr Wheadon’s evidence was limited in scope and his cross-examination, although effective, was brief. Mr Kavanagh and Mr Whitting were cross-examined at length. I refer to their evidence, to the extent necessary, in more detail below.

41. [55]

    Mr Alcorn did not give evidence. According to Mr Kavanagh, Mr Alcorn stopped working for the Developers in early 2022 upon being diagnosed with cancer. He died in 2023.

42. [56]

    As already noted, at the time the parties entered into the Contracts, the Leppington Land was zoned RU4 (Primary Production Small Lots) under the Camden Local Environmental Plan 2010. That zoning imposed a minimum lot size of two hectares on any subdivision of the Land. The RU4 zoning remained in place thereafter, including as at the sunset dates under both Contracts, until 16 July 2021, when it was altered by amendments to the relevant part (Appendix 9) of the Growth Centres SEPP. It is unnecessary for the purposes of this judgment to refer to the clauses of the SEPP itself. All references to clauses are to Appendix 9 (the Camden Growth Centres Precinct Plan).

43. [57]

    The amendments had the effect of re-zoning Stage 5, including the Leppington Land (bordered in red), as shown in the zoning map reproduced below.

44. [58]

    Most of the Leppington Land (coloured pink) was rezoned as R2 (Low Density Residential). Some on the southwestern corner (coloured yellow) was zoned SP2 (Infrastructure: Local Drainage). Some on the northeastern corner formed part of an area zoned RE1 (Public Recreation).

45. [59]

    Part 2 of the Appendix dealt with permitted and prohibited developments. The Land Use Table incorporated therein relevantly provided, for land zoned R2:

46. [60]

    Clause 2.6 provided:

47. [61]

    Part 4 dealt with what were described as “principal development standards”. Three of those standards were the subject of argument by the parties. One of them concerned the minimum lot size. The other two concerned the dwelling density.

48. [62]

    Minimum lot size: minimum lot sizes were dealt with in clauses 4.1 to 4.1AG. Clauses 4.1 and 4.1AA relevantly provided:

49. [63]

    Apparently (and perhaps surprisingly), the Lot Size Map did not make any provision for the Leppington Land (or any other part of Stage 5). Instead, lot sizes for land zoned R2 were governed by cl 4.1AB which relevantly provided:

50. [64]

    Further sub-clauses provided for minimum lot sizes for dual occupancies, semi-detached dwellings, attached dwellings, multi-dwelling houses, “manor homes” and residential flat buildings.

51. [65]

    The relevant Residential Density Map (RDM) is reproduced below:

52. [66]

    The RDM included the following key:

53. [67]

    That part of the Leppington Land which had been zoned R2 was labelled in the RDM as “O2” and coloured pale brown. Thus, the RDM prescribed a dwelling density range of 12.5 to 16.5 dwellings per hectare for the developable part of the Land.

54. [68]

    Clause 4.1AD created an exception to the restraints in 4.1AB(3):

55. [69]

    When promulgated on 26 October 2021, the revised DCP addressed, among other things, the subdivision approval process for Leppington. The DCP specified various “controls”, which included (cl 3):

56. [70]

    The sample BEP and PDP are reproduced below:

57. [71]

    Dwelling cap: clause 4.1AB imposed a maximum number of dwellings for the purpose of residential developments in the Leppington Precinct. The clause relevantly provided:

58. [72]

    The relevant Maximum Dwellings Map (which need not be reproduced for the purposes of this judgment) specified a limit of 500 dwellings for Stage 5 of the Leppington Precinct (of which the Leppington Land formed part).

59. [73]

    Dwelling density: Clause 4.1B dealt with residential density. There was a version of this clause in the Growth Centres SEPP as it stood, following amendment, on 16 July. That version only imposed a minimum density requirement, by reference to the bottom of the range shown in the RDM; there was no maximum density requirement. But that changed when a new version of the clause was substituted by further amendments to the SEPP on 30 September 2021. In its substituted form, that clause relevantly provided:

60. [74]

    Part 6 contained “additional local provisions”. Clause 6.1 relevantly provided:

61. [75]

    The October 2021 DCP also dealt with density controls. Schedule 5, clause 4 relevantly provided:

62. [76]

    The Indicative Residential Density Map was relevantly the same as the RDM in the Growth Centres SEPP ([65]-[66] above). It likewise prescribed a dwelling density range for the developable part of the Leppington Land of 12.5 to 16.5 dwellings per hectare.

63. [77]

    Background and documentary evidence: Mr Preet was born in India and migrated to Australia in 2007. Since 2013 he has worked as a bus driver. Mrs Preet has since 2020 operated a business from home selling products on Amazon. Before that she appears to have been occupied full-time at home looking after the Preets’ young children.

64. [78]

    According to Mr Preet, he first became aware of the Leppington Land subdivision when he saw it advertised in January 2017. At the time the Preets were living in a rented apartment at Granville in western Sydney with their son, who was born in 2015 or 2016.

65. [79]

    The Preets were introduced to the subdivision through a business which traded under the name “Stroud Homes” (“Stroud”). Stroud was marketing house and land packages containing Presale Lots. Initially the Preets paid a $1,000 deposit for Lot 1043, but they were later told that this Lot had become unavailable and the Lot they eventually purchased (Lot 1040) was substituted.

66. [80]

    The advertised price of the house and land package was $565,000. Stroud required the Preets to sign a standard form agreement to proceed. The agreement was styled “Housing Industry Association Preliminary Agreement”. It required the “client” to pay a sum of up to $3,900 to Stroud. Of this sum, one part was described as a “land holding deposit”, which was $1,000. The other part of the sum was described as a “preliminary agreement fee”. It was made up of six specified amounts for the carrying out of tests and surveys, preparation of drawings and the like which could be individually selected by the client. If all the amounts were selected, the fee was $2,900.

67. [81]

    The Agreement was accompanied by a standard form building contract for the type of home selected by the client. But the Agreement stated that it was not a contract for Stroud to carry on any actual construction work. A fixed price construction contract would be entered into later. If so, the preliminary agreement fee would be built into the cost under that contract. But the client was not obliged to proceed with Stroud. The client could use the test results and proceed with another builder. The fee would be refunded if the client decided, before the tests began, not to proceed.

68. [82]

    The agreement also contained a series of special conditions which could be ticked by the client if required. These were:

69. [83]

    The version of the Preets’ Preliminary Agreement which is in evidence is unsigned. The individual components of the $3,900 fee are not ticked, but the Preets paid the maximum fee amount of $2,900, so they must have chosen all the components. The last three special conditions (including the “guaranteed fee refund”) are ticked. There was no evidence about whether the “subject to finance” or “subject to land registration” special conditions were ticked in the executed version.

70. [84]

    The Preets paid the $2,900 preliminary agreement fee in in mid-February. They were asked by Stroud’s office manager to provide the name of a solicitor to act for them so that the matter could be referred to “the developer” for preparation and execution of a formal contract for the purchase of the Lot. The Preets seem not to have had an existing solicitor, and they agreed to use Stroud’s.

71. [85]

    As previously mentioned, the Preets’ Presale Contract was executed on 21 March 2017. The deposit under the Contract was 10% of the purchase price ($33,397), which was paid by the Preets (presumably including the $1,000 “land holding deposit” the Preets had earlier paid to Stroud). The Contract records Mr Alcorn as Ahmau’s representative and the Preets’ solicitor as Juris Australia Lawyers, a firm at Harris Park (presumably the solicitor identified by Stroud). There was no further evidence about the process of negotiating and executing the Contract.

72. [86]

    On an ad valorem basis, the duty on the Contract was $10,500. But the Preets successfully applied for a ‘first home buyer’ concession, which reduced the duty to $5,500.

73. [87]

    In their correspondence with Stroud, the Preets were told that the Presale Plan would be registered by June 2018. But there is no evidence of any of the further dealings, if any, between the Preets and Stroud. There was no suggestion that the Preets had ever entered into a building contract with Stroud, or would not be entitled to do so (at least at the original price) if they were to obtain specific performance of the Contract.

74. [88]

    On the face of it, the Preets would have been entitled to a refund of the $2,900 preliminary agreement fee if they had asked for it and they had not in the meantime requested the tests covered by the fee to be carried out. Whether they in fact obtained a refund, or could now do so if their Presale Contract were rescinded or were found to have been frustrated, was not addressed.

75. [89]

    After entering into the Contract, the Preets continued to live in their rented apartment at Granville. Their second child, a daughter, was born in 2017 or 2018.

76. [90]

    In late 2019, the Preets moved to Spring Farm southwest of Sydney, having bought land in a subdivision there and built a house on it. They continue to live there. The suburb of Spring Farm is about 3km southwest of Leppington and also falls within the Camden local government area.

77. [91]

    It seems that, following entry into their Presale Contract, the Preets made no enquiry of the Developers or their representatives about the progress of the subdivision of the Leppington Land until January 2021, about two months before the sunset date in the Contract. On 11 January, a solicitor acting for the Preets, Mr Khurram Shahzad, wrote to Mr Alcorn:

78. [92]

    Mr Alcorn replied by email at about 10pm the same day. He wrote:

79. [93]

    There was no response from Mr Shahzad to the proposal for rescission. The sunset date passed two months later. Four months after that, the Leppington Land was finally rezoned.

80. [94]

    On 18 August Mr Alcorn wrote a formal letter to Mr Shahzad seeking rescission of the Preet Contract. The letter set out the provisions of SC cl 11.1 and continued (paragraph 3):

81. [95]

    The letter then contained an offer, open until 25 August, to enter into a deed under which the parties were to agree to rescission with a “full refund” of the deposit; to mutual releases, and to bear their own costs. If the offer was not accepted, Ahmau would “proceed to rescission” pursuant to CA s 66ZS.

82. [96]

    Again, there was no response from Mr Shahzad. On 16 September Mr Alcorn sent a further letter. He stated that if the Preets did not agree to rescission within 14 days Ahmau would have to instruct lawyers to make an application to this Court for leave to rescind the Contract under CA s 66ZS. In that application Ahmau would seek an order for costs against the Preets under s 66ZS(8).

83. [97]

    Mr Alcorn explained the threat to seek costs as follows (paragraph 4):

84. [98]

    Again, there was no response from Mr Shahzad. But a month later, on 19 October, one came from the Preets’ new solicitor, Mr Peter Anjos. His letter relevantly stated:

85. [99]

    Mr Alcorn did not reply to Mr Anjos’ letter. This was despite follow-up letters from Mr Anjos in December and January. Mr Anjos lodged a caveat over the Ahmau Land to protect the Preets’ interest under the Contract. This appears to have been lodged after the December letter, and it was specifically referred to in the January follow-up letter.

86. [100]

    Still there was no reply from Mr Alcorn. Mr Anjos sent three follow up letters in March and further follow up letter in April. Mr Alcorn never did reply. Instead the matter was taken over by an external firm of solicitors, Centurion Lawyers.

87. [101]

    On 20 April, Mr Maroun Draybi of Centurion wrote to Mr Anjos with a fresh request for rescission. Mr Draybi began by setting out the changes to the planning instruments which had occurred in 2021. He made two points.

88. [102]

    The first point was that delays in the planning process, over which Ahmau had had no control, had delayed the lodgement of a development application. The rezoning had not occurred until after the sunset date had expired. And even after the rezoning, the Council would not have been prepared to accept a development application until after the revised DCP was issued on 26 October.

89. [103]

    Mr Draybi’s second point was that the changes to dwelling density limits and minimum allotment sizes made in the SEPP had rendered the Presale Plan “obsolete”. Mr Draybi set out the relevant provisions at some length to explain why this was so. These changes had been unforeseen.

90. [104]

    Mr Draybi asserted that, following the issue of the revised DCP on 26 October 2021, and ignoring the density restrictions, a minimum period of 18 months, which he described as “optimistic but unrealistic”, would have been needed to register a plan of subdivision. That would have implied completion in late April 2023 at the earliest. But the new density restrictions would have further delayed registration at least by “some months”.

91. [105]

    In support of these assertions Mr Draybi enclosed a report written by Mr Whitting for Mr Kavanagh in November 2021 (see [223]-[225] below). The report was described as a “planning and approvals precis”. It outlined the steps so far towards obtaining a subdivision of the Leppington Land; described the course of the planning process; and listed the further tasks required to complete subdivision, with an estimated timetable.

92. [106]

    The report stated that the activities completed to date included:

93. [107]

    In his description of the planning process to date Mr Whitting reported:

94. [108]

    The timetable for the remaining tasks estimated that registration of the subdivision plan would occur in February 2024. This was 27 months after the date of the report, although the estimates provided for the tasks in question totalled 30 months.

95. [109]

    In his letter Mr Draybi referred to Mr Whitting’s report as “expert advice”. He summarised the main points in the report, describing the outline of tasks already taken as “the various activities which have been carried out … to progress the development up until November 2021”. He also stated that the 30 month timeline exceeded the 18 month timeline he had earlier provided, but that was because that timeline was, as he himself had stated, unrealistic. The 30 month timetable was the one a reasonable developer would adopt.

96. [110]

    Under the heading “sunset date” the letter repeated that it had been impossible for Ahmau to obtain registration of the Plan by the sunset date and further that changes to the planning instruments had “effectively rendered the [Presale Plan] obsolete”. It added:

97. [111]

    The letter went on, “[b]y reason of the matters set out” in it, to give formal notice under CA s 66ZS(4) of Ahmau’s intention to rescind the contract within 28 days after service. It stated that if consent was not given within that period, Ahmau would commence proceedings under CA s 66ZS. The Preets were invited to give consent to avoid unnecessary litigation. The letter asserted that the Court would be “comfortably satisfied” that rescission would be just and equitable, and that, in Ahmau’s opinion, the withholding of consent would be unreasonable.

98. [112]

    Mr Anjos replied on the same day. He wrote:

99. [113]

    A week later Mr Draybi responded. He stated that Ahmau did not “view the proposal in your letter … as a suitable alternative resolution”. He repeated the invitation to rescind, and foreshadowed, if consent were to be withheld, an application for costs.

100. [114]

     On 11 May Mr Anjos replied (emphasis added):

101. [115]

     There was no further communication (apart from without prejudice correspondence referred to below) between the parties before the proceedings were commenced three months later.

102. [116]

     Mr Preet’s testimony: Mr Preet’s main affidavit was made in March 2023. In it, he deposed that he and his wife “started looking for property to purchase in Sydney” from “around 2016 onwards” because they wished to expand their family and the existing rented apartment at Granville was too small.

103. [117]

     In his affidavit, Mr Preet explained the decision to purchase lot 1040 in the following terms:

104. [118]

     In explaining his reasons for refusing to consent to rescission of the contract, Mr Preet deposed in his main affidavit that since entering into the Contract he had been looking forward to moving to Leppington with his family. He acknowledged that in the meantime he had bought the Spring Farm property, but stated that his plan was to live there only “until Lot 1040 settled”.

105. [119]

     Mr Preet explained that the Spring Farm property is located between two other houses which are occupied by people with disabilities. The behaviour of the disabled residents frightens his children and at times creates disturbances which prevent him and his family from enjoying their home. He stated that he was not aware that this would be the case until after they had moved in. He described this as “a major factor” in the decision not to rescind the contract, and stated that the Spring Farm property was not suitable as a long term home for his family.

106. [120]

     Mr Preet also stated that another “major factor” in his refusal to rescind was that Lot 1040 had greatly increased in value. He referred to the valuation he had obtained of $720,000 and asserted that if the contract was not completed he would “incur a significant loss” and Ahmau would receive a corresponding “windfall”.

107. [121]

     Mr Preet stated:

108. [122]

     Mr Preet added that he was no longer eligible for the first home buyer’s concession and any duty on a new purchase would be levied at the full rate. On the $720,000 valuation the amount of duty would be $27,500. Mr Preet stated that “the rising interest rates and increasing house prices together with the requirement to pay the full amount of stamp duty will make it impossible for me to enter the market in Leppington”.

109. [123]

     Mr Preet went on to state:

110. [124]

     Mr Preet stated that he had seen what he described as “the amended plan of subdivision”, by which he appears to be referring to one of the layout plans prepared by Mr Whitting in 2021. He continued:

111. [125]

     Mr Preet also deposed that he “did not hear anything” from Ahmau between March 2017 and 11 January 2021. He referred to the correspondence between the parties up to May 2022 which I have summarised above. He said that it made him “extremely disappointed and stressed”. This stress had been compounded by the Developers’ “long period of unresponsiveness”.

112. [126]

     In his supplementary affidavit, Mr Preet denied the allegation in Ahmau’s defence that the Preets’ “primary position” was that “they should be awarded some form of damages”. Mr Preet stated that he did not want the contract to be rescinded and he wanted the land at Lot 1040 “or a similar block”. He stated that he was “willing to consider” paying the difference for any larger block the plaintiff might have available once a subdivision was approved.

113. [127]

     Ahmau’s defence to the Preets’ specific performance claim put in issue whether they were ready willing and able to complete the Contract. Mr Preet gave supplementary oral evidence in chief on this subject. He said that his annual earnings were about $60,000 and Mrs Preet’s current annual income from her business was similar. On his and his wife’s earnings, they could borrow up to $550,000.

114. [128]

     Mr Preet also said that, in addition to the Spring Farm property, he and his wife owned an investment property in Queensland. They had about $400,000 in equity in the Spring Farm property, plus another $200,000 in the Queensland property.

115. [129]

     It emerged in Mr Preet’s cross-examination that at the time the Preets entered into the Contract to buy Lot 1040, they owned an investment property at Shortland, Newcastle, which they were renting out. Their prior ownership of this property had not been disclosed in Mr Preet’s affidavits. It had been purchased in 2014 for about $380,000, also under an off the plan contract. At some point after March 2017 it was sold, presumably to fund the purchase of the Queensland property.

116. [130]

     Further details about the purchase of the Spring Farm property also emerged. The land was in fact purchased pursuant to an off the plan contract similar to that which was applied to the Leppington purchase (it likewise contained a sunset clause). The land contract was signed in “2017 or 2018”. The price for the land was about $345,000. Following registration of the plan and completion of the purchase, the Preets entered into a building contract which took “4 or 5 months” to complete before they moved into the property in late 2019. Mr Preet said that the building work cost about $300,000.

117. [131]

     Mr Preet was asked about the delay of almost four years between entry into the Presale Contract for Lot 1040 in March 2017 and the enquiry to Mr Alcorn about progress in January 2021. It was put to him that this showed that he did not care about the completion of the Contract. He denied this, and complained about a lack of action from his solicitor.

118. [132]

     Mr Preet was also cross-examined on the references in Mr Anjos’ letter of May 2022 to compensation ([114] above). Mr Preet agreed that nowhere in the letter did Mr Anjos say that the Preets wanted the Lot itself; all Mr Anjos mentioned was compensation. At one point, counsel for Ahmau put to Mr Preet that it was fair to say that at the time the letter was sent he wanted compensation rather than the land, and he agreed. But when pressed about when and why he had changed his mind, he quickly sought to resile from that position, insisting that he had always wanted the Lot.

119. [133]

     I found Mr Preet’s complaint about not hearing from the Developers puzzling. While it is true that the Developers made no approach to the Preets before January 2021, Mr Preet did not make any approach to them either. There were also significant delays in responding to the rescission proposals put forward by Mr Alcorn in January and August 2021.

120. [134]

     Mr Preet tried to blame his solicitor for this, but there was no evidence that Mr Shahzad was retained before January 2021. Nor, after January 2021, was there any independent evidence of any delay by Mr Shahzad in acting on instructions given by Mr Preet. Certainly, although Mr Alcorn might not personally have been to blame, there was no excuse for the failure to respond to correspondence addressed to him by Mr Anjos. But this only covered the period from October 2021 to April 2022.

121. [135]

     I also found Mr Preet’s testimony about his intentions a bit unconvincing. Clearly, he did not anticipate the problems with the neighbours at the Spring Farm property. The decisions to buy the Spring Farm property, to build a house on it and then move there would have involved significant long-term planning and financial commitments. They are not easy to reconcile with a continuing fixed intention of moving to the Leppington property as soon as he completed its purchase. And of course, on completion of the sale of the Leppington property it would not be possible to move in; it would be necessary to build a house first.

122. [136]

     Once the Preets had moved to Spring Farm, registration of the Presale Plan and completion of the purchase of Lot 1040 would have given them three choices. Those would have been: re-selling the Lot; retaining it as an investment, either as vacant land or with a rental home built on it; or building a home on it for themselves. Given the uncertainty about when (or if) Lot 1040 would become available, the only rational approach would have been to wait and see. Counsel for the Preets submitted that they were not sophisticated people, but Mr Preet was already, at the time, no stranger to property transactions, including off the plan purchases. I can see no reason why he would have followed anything other than the rational approach.

123. [137]

     Admittedly, the problems with the neighbours which emerged at Spring Farm might have increased the attraction of eventually building at Leppington and moving there. But, judging by his lack of enquiries about the Contract before January 2021, Mr Preet seems to have been in no hurry. In January 2021, when he was first asked about rescission, completion of the purchase of Lot 1040 remained at least two years away, and the construction of a new house would have added substantially to the timetable. That remained the case when Mr Preet gave evidence at the trial.

124. [138]

     If the Contract were still on foot, the only rational approach would remain that of waiting and seeing. On the evidence which has emerged about the Preets’ financial firepower, I do not accept that they would be unable to buy a new house in south-western Sydney if they wished. Presumably they have decided to put up with the problems at Spring Farm for the moment.

125. [139]

     In these circumstances, I find it telling that Mr Preet referred in his affidavit to Lot 1040 being an investment and wanting it for his children. I do not accept that the Preets have, nor, probably, that they ever did have, a settled intention to use Lot 1040 to build a new family home for themselves.

126. [140]

     Background and documentary evidence: Mr Bakshi, like Mr Preet, was born in India. He is a software engineer who holds an Indian Post-Graduate qualification in computer science. In 2011, he “relocated” to Sydney to pursue post-graduate study in information systems at the University of New South Wales. There he met his now wife, who was completing a PHD in Medicine at the Garvan Institute of Medical Research (under the auspices of the University of New South Wales). They married in 2012.

127. [141]

     Like the Preets, the Bakshis’ introduction to the Leppington Land came through Stroud. They too signed a Preliminary Agreement and paid Stroud a deposit of $1,000 and a preliminary agreement fee of $2,900. In their case, all of the special conditions were ticked except the one making the Agreement conditional on the sale of an existing home (which, of course, they did not then have).

128. [142]

     The Bakshis paid the $3,900 to Stroud on 8 February and were similarly asked to identify their solicitor for the purposes of preparing their Presale Contract. They retained a firm named VS George Lawyers (“VSG”), to act for them on the purchase. Initially the matter was handled by Mr Jyotsna Singh of that firm.

129. [143]

     Mr Bakshi wished to reduce the deposit payable to 5% and asked Mr Singh to pass the request on to Mr Alcorn. Mr Alcorn was prepared to agree to an instalment arrangement under which half of the deposit (5%) would be paid on exchange and the other half upon approval being granted for the development. This was acceptable to the Bakshis.

130. [144]

     The following emails ensued between Mr Singh and Mr Alcorn:

131. [145]

     As already noted, contracts were exchanged between Ahmau and the Bakshis on 6 April 2017. The Bakshis thereupon paid the balance of the first instalment of the deposit (after taking account of the $1,000 deposit paid to Stroud). The total paid was thus 5% ($16,699). [1]

132. [146]

     Like the Preets, the Bakshis claimed the benefit of the first home buyers’ duty concession on the Contract. They received a complete exemption. Why they received a greater benefit than the Preets was not explained in the evidence or addressed in the parties’ submissions.

133. [147]

     As with the Preets, there is no evidence of the further dealings, if any, between the Bakshis and Stroud after they entered into the Presale Contract. Mr Bakshi said in cross-examination that they had never entered into a building contract with Stroud and he remained unsure about whether they would. What happened, or may yet happen, with the preliminary agreement fee is unknown.

134. [148]

     From 2018 onwards, Mr Bakshi did make regular requests for information from Ahmau on the progress of the development. These requests were made to Ahmau’s agent Mr Sergi.

135. [149]

     The first request for information came in March 2018, 11 months after the Presale Contract was signed. Mr Sergi told Mr Bakshi that development approval was expected at the end of 2018 and registration of the plan of subdivision (and hence completion) at the end of 2019.

136. [150]

     Mr Bakshi’s next enquiry came in November 2018. He was told that there had been some slippage. Development approval was expected in mid-2019 and registration of the plan of subdivision at the end of 2020.

137. [151]

     Mr Bakshi made further enquiries in March and May of 2019. His enquiries focused on the development approval. In March, he was told that it was still on track for mid-2019 and in May that it might be delayed for 6 months for the Council election in the “worst case” but that so far everything was on track.

138. [152]

     In September 2019, the Bakshis bought a residential property at Hammondville. There is no evidence about where they had been living before this, but it was presumably in rental accommodation. The property consisted of an existing house containing three bedrooms. The purchase price was $785,000.

139. [153]

     Three days after the purchase, Mr Bakshi made a further request of Mr Sergi about the progress of the Leppington subdivision. He was told that the development application was expected at the “start of 2020” and registration of the plan of subdivision by “mid-2021”. He made a further enquiry in December 2019 and was told that everything remained on track.

140. [154]

     As most who are reading this judgment will recall, the Covid pandemic came to worldwide attention in February 2020 and restrictions on gathering and movements began in March. In July, Mr Bakshi made a further request for information and was told that as a result of the effect of the pandemic the site would not be ready (evidently for building, i.e. registration of the strata plan) until “2022”. This was clearly well beyond the sunset date on the contract, which was April 2021.

141. [155]

     In early February 2021, Mr Bakshi made a further request for updated information from Mr Sergi. The following emails were exchanged between them:

142. [156]

     There followed an exchange of emails between Mr David Litfin, a solicitor at VSG, and Mr Sergi:

143. [157]

     There was no reply from Mr Litfin for almost six weeks. On 15 March he emailed Mr Sergi stating that the Bakshis did not wish to pull out.

144. [158]

     Almost five months passed. Then on 18 August Mr Alcorn wrote a letter to VSG asking the Bakshis to agree to rescind the contract. The letter appears to have been in almost the same, if not exactly the same, form as the letter sent to the Preets at about the same time ([94] above).

145. [159]

     On the same day Mr Litfin responded:

146. [160]

     There was no immediate reply from Mr Alcorn and six days later Mr Litfin emailed him again. Mr Litfin noted that Mr Alcorn’s letter had given the Bakshis seven days to consent to rescission and had not responded to the request for information. The email went on to state that the offer of rescission in the letter was rejected.

147. [161]

     On 16 September Mr Alcorn wrote again to VSG. The letter was in substantially the same form as the letter sent on the same date to the Preets ([96]-[97] above) and again, asked for consent to rescission within 14 days.

148. [162]

     This prompted a response from Mr Litfin on 1 October. Mr Litfin wrote:

149. [163]

     There was no reply from Mr Alcorn. At the beginning of February the following year Mr Bakshi emailed Mr Sergi asking whether there was “any update on the status” of the Leppington subdivision. Mr Sergi replied that there was none “at this stage”.

150. [164]

     A further two months passed before, on 20 April, Mr Draybi of Centurion wrote to VSG with a fresh request for rescission. Again, the letter from Mr Draybi was in substantially the same form as his letter Preets sent at the same time ([101] above).

151. [165]

     Evidently the letter was passed on to Mr Bakshi but he decided to conduct the further negotiations himself. On 4 May, he emailed Centurion asking them to direct future correspondence to him and undertaking to respond to their letter of 20 April on his return from overseas at the end of the month.

152. [166]

     On 18 April, whilst still overseas, Mr Bakshi sent a letter to Mr Draybi. The letter referred to the provision in the proposed deed of consent which stated that the purchasers had obtained legal advice about their rights. Mr Bakshi stated that the earliest he would be able to obtain such advice would be after his return, but set out a list of questions, by reference to the letter of 20 April and the report from Mr Whitting enclosed with it. Mr Bakshi stated that he was seeking the information was asked so as to be able to make his decision on his return.

153. [167]

     The list of questions was extensive. It included:

154. [168]

     On 3 June, Mr Draybi responded. He took issue with the suggestion, said to be implicit in Mr Bakshi’s communications, that he (Mr Bakshi) had not been able to obtain legal advice. Notwithstanding this, the following responses to Mr Bakshi’s questions were provided:

155. [169]

     Mr Draybi went on to repeat the invitation to execute the deed of consent “to avoid unnecessary litigation”. He noted that the period set out in the 20 April letter had expired on 18 May.

156. [170]

     On 8 August Mr Bakshi sent a reply. He began by complaining that Ahmau had failed to provide the regular update promised by Mr Alcorn in his email of March 2017. Mr Bakshi continued:

157. [171]

     Mr Bakshi’s letter went on to refer to Mr Whitting’s report and the information requested in the letter dated 18 May 2022. He asserted that most if not all of the information requested remained relevant in the course of this part of the letter:

158. [172]

     Among the points addressed was the change in the lot size. Mr Bakshi wrote:

159. [173]

     Mr Bakshi also took issue with the conclusion that leave would be granted. He quoted the provisions of CA s 66ZS and continued:

160. [174]

     There was no response from Mr Draybi to this letter. As previously noted, the proceedings were commenced on 29 August 2022.

161. [175]

     Mr Bakshi’s testimony: Mr Bakshi’s main affidavit was made in February 2023. In it, he deposed that he and his wife “had a goal and a desire to design and build [their] own life-long home in Sydney”. In “about 2016”, they began to consider having children and had been “able to accumulate sufficient funds for a deposit”.

162. [176]

     Mr Bakshi deposed that he and his wife shared, and continue to share, a “common vision” of what they were looking for in the property which they would purchase. These were:

163. [177]

     In his affidavit, Mr Bakshi explained that this decision to buy into the Leppington Land subdivision was based on the following “key factors”:

164. [178]

     In two supplementary affidavits, Mr Bakshi deposed that he and his wife purchased the Hammondville property to provide more space to raise his daughter while “awaiting to build [their] long-term family home in Leppington”. They had decided to buy an “older and less expensive” existing home (on which the duty was $31,000) because they believed they had exhausted their first home buyers’ grant entitlement.

165. [179]

     In explaining his reasons for opposing recission of the Presale Contract, Mr Bakshi stated that the Contract had accommodated his, and his wife’s, “dream” to design a “home that incorporates environmentally sustainable features, smart home technology, child-friendly designs, and safe and convenient layouts for our parents”. Mr Bakshi also deposed that he had noticed that the land value in Leppington had “risen dramatically” and that, if the contract were to be rescinded, he and his wife would effectively be priced out of similar opportunities in a location so proximate to surrounding train stations, the new Western Sydney Airport and local supermarkets.

166. [180]

     A third supplementary affidavit addressed the Bakshis’ claim for specific performance. In this affidavit, Mr Bakshi deposed that he and his wife were ready, willing and able to complete the purchase and comply with an order for specific performance. In support of this, Mr Bakshi outlined various sources of funds, including savings, equity and borrowing options, that he could access for this purpose.

167. [181]

     In cross-examination, counsel for Ahmau asked Mr Bakshi about his requests for information about the progress of the development. He was first taken to Mr Alcorn’s email of 26 March 2017 (above [144]) in response to which he agreed that it “wasn’t clear [to him] when the rezoning would occur and how long the process would take. There was uncertainty”.

168. [182]

     Next, counsel sought an explanation for why he did not seek a further update before buying the Hammondville property in September 2019. Mr Bakshi said that he received all the necessary information about the timeline of the development in response to his May 2019 email and that the price of the Hammondville property was “very good”.

169. [183]

     Then counsel asked about the letter of 1 February 2021, which indicated that registration of the Presale Plan was still a long way off. Mr Bakshi said that he was not concerned about the delay. In his words, he had a roof over his head at Hammondville and he was happy.

170. [184]

     The cross-examination next moved to the two letters sent to VSG in August and September 2021 which sought agreement from the Bakshis to rescind the contract. In response to questioning from counsel about his interpretation of these letters, Mr Bakshi said that he did not believe that sufficient reasons had been provided by Ahmau in the letters to explain why the sunset event had not occurred before the sunset date for the purposes of s 66ZS. At least, he said that the provided reasons were not “just and equitable in all circumstances”.

171. [185]

     Through this line of questioning it was revealed that Mr Bakshi had researched s 66ZS for himself (including reading the second reading speech) at the time. He said that he understood that the provision aimed to put the “purchaser and the developer on the same footing” and that “delays [were] not sufficient reasons for rescission”, in particular, it seems, in situations where “the land value has increased substantially [in which case it was] prima facie unfair”. These factors, said Mr Bakshi, were “why the developer has to go to the Supreme Court to seek recission”.

172. [186]

     Counsel questioned Mr Bakshi about his understanding of the development application process and, in particular, whether he believed that the application would have been accepted by Council if it had been lodged prior to the July 2021 rezoning. Mr Bakshi responded by saying that, at the time of the correspondence from VSG, he did not know how the process worked completely but, having since undertaken further research, his “layman’s understanding” was that the development application could have been lodged with the Council before the SEPP amendments were adopted. As I understood Mr Bakshi, his belief was that Council could have accepted the application prior to the SEPP amendments, held it on their file until the amendments had been made and requested Ahmau to make changes to the application in due course to bring it into line with any new, relevant planning requirements.

173. [187]

     Counsel then took Mr Bakshi to Mr Draybi’s letter of 20 April 2022. Mr Bakshi accepted that, at that point, he knew that the development consent had not yet been obtained and that the completion of the development was “a long, long way still in the future”. Mr Bakshi maintained that in his view the letter still offered insufficient justification for rescission. He said:

174. [188]

     In response to questions from counsel about why, having purchased the Hammondville property two years before the Sunset date, he remained interested in the Leppington property, Mr Bakshi repeated the reasons set out in his affidavit. He added that “there’s a community” in Leppington and that “South West Sydney is one of the probably highest growing areas in Sydney right now”. Mr Bakshi also agreed that another reason he was not interested in recission was that it would forever deprive him of his entitlement to the first home stamp duty exemption.

175. [189]

     It emerged at the hearing that since the proceedings had begun the Bakshis and their daughter had moved to New Jersey. They moved there in October 2022 after the software firm for which Mr Bakshi was working expanded into the United States. They had no immediate plans to return to Australia. Mr Bakshi said that they might do so in 12 or 18 months’ time. Their daughter would then be of primary school age. Mr Bakshi said he would want her to go to a “good school”, but apparently had not identified any particular school in that regard.

176. [190]

     From Mr Bakshi’s evidence in cross-examination it clear was that the Bakshis were in a strong financial position. He repeated that the $785,000 they paid for the Hammondville property had been “a good price” from their point of view. His “best guess” was that the property had increased in value by 40% or so. The Bakshis had not purchased any property in America but had obtained suitable accommodation and in the meantime, presumably, would have been renting out the Hammondville property. Ms Bakshi was not in paid employment, but Mr Bakshi was earning USD$230,000 from his work.

177. [191]

     Mr Bakshi presented, both as a witness and when arguing his case at the supplementary hearing, as astute and keenly focussed on building wealth for his family. I think, however, that his conduct since 2021 may have been coloured by the views he formed as a result of the research he conducted for himself into CA s 66ZS. Mr Bakshi seems to believe that the statute tilts the balance against the vendor much more than I think it actually does.

178. [192]

     Like the Preets, the Bakshis have, since entering into their Presale Contract, bought a family home elsewhere. The delays with the Leppington subdivision have left them in a similar state of uncertainty. It may be accepted that the Bakshis had goals for their family home of the type that Mr Bakshi described, but either those goals were already being satisfied by living at Hammondville or they were not sufficiently important for them to move somewhere else. The goals were not specific to the Leppington area generally, far less to the Lot itself.

179. [193]

     As with Mr Preet, I therefore found it difficult to accept when Mr Bakshi claimed that, despite the Hammondville purchase, he was, and remained, determined to build a family home at Leppington. The obvious course for him, as it was for Mr Preet, would have been to wait and see what happened with the Leppington subdivision. I cannot see how it could possibly have advantaged him to decide what he was going to do before he had to. All the more was that so when he moved, effectively indefinitely, to the United States. I am not satisfied that he had at the time of the trial, or indeed that he ever had, any settled intention to build a family home on Lot 1064 once the Presale Plan was registered. [2]

180. [194]

     Documentary evidence: The documentary evidence before me began with the retainer of Mr Whitting in mid-April 2020. Mr Whitting described his initial role as having been to assist with the planning, approval and subdivision process for the Ahmau Land. In evidence were copies of Mr Whitting’s diary entries over the relevant period which recorded his day-to-day activities in relation to the Land. These entries were conveniently summarised in a table which was also before me as evidence.

181. [195]

     Immediately after his appointment Mr Whitting made enquiries of the Council, DPIE and SWC. He was advised by the Council:

182. [196]

     Mr Whitting reported to Mr Kavanagh on 23 April:

183. [197]

     Over the following seven months, Mr Whitting pursued SWC over the “missing puzzle piece”, namely sewerage facilities for the development. In the end, this required the lodgement of a feasibility application, which was lodged in November 2020 by a consultant retained for the Developers by Mr Whitting. The proposal was accepted by SWC in late January 2021 on 1 February, Mr Whitting wrote to Mr Kavanagh:

184. [198]

     Mr Whitting continued to monitor the status of the rezoning and to report regularly to Mr Kavanagh, but there was no apparent progress and getting a rezoning by the end of 2021 was “touch and go”. On 11 June, he reported:

185. [199]

     At around this time or soon afterwards, Mr Whitting began reconsidering the layout of the proposed subdivision. He undertook an analysis of the “mix” of lot sizes in recently approved development applications in nearby localities and sales data derived from a subscription-based property data web platform, RPData. He compiled his findings, which he referred to as the “local lot mix”, in a spreadsheet headed “Leppington: Lot Mix Analysis”. Using this analysis, he prepared an amended version of the subdivision plan. Mr Whitting’s draft layout is reproduced below:

186. [200]

     On 3 July Mr Whitting sent his draft layout to a surveyor, Mr Simon Cheng, for him to draw up a subdivision plan based on it. Mr Whitting included a number of notes for Mr Cheng to keep in mind. These included: “The overriding control will be lot areas: we are looking to stay as close as possible to the actual lot areas shown on the plan” (presumably a reference to the Presale Plan).

187. [201]

     Mr Whitting sent both the spreadsheet and draft subdivision plan by email to Mr Kavanagh on the following day, 4 July. He wrote in the covering email:

188. [202]

     By this point, there was another matter on Mr Whitting’s plate. Between October 2019 and January 2020, a quantity of fill material had been placed on the parcel of Leppington Land which adjoined the Ahmau Land (1105 Camden Valley Way). It was believed that the fill material was clean but Mr Whitting wished to obtain confirmation of this. On 5 July he retained a consultant to test the fill for compaction and contamination. The consultant’s fees proposal was accepted and a report was eventually provided on 30 August.

189. [203]

     As already noted, the rezoning changes to the SEPP were made on 16 July (a Friday). Mr Whitting became aware of them when he received a media release issued by DPIE on the morning of Monday 19 July (the media release, and the finalisation report, appear to have been issued to the public on that day).

190. [204]

     Mr Whitting immediately sent copies of the zoning diagram and the Finalisation Report to Mr Kavangh. In his covering email he wrote:

191. [205]

     Over the following days, presumably having further consulted the Council’s rezoning package, Mr Whitting refined his lot-mix analysis. In an email to Mr Kavanagh dated 22 July 2021 which attached his updated analysis, Mr Whitting stated:

192. [206]

     The next day, Mr Cheng, instructed by Mr Whitting, finalised an amended version of the subdivision plan which included 145 lots. Mr Whitting sent this plan to Mr Kavanagh on the same day.

193. [207]

     Mr Cheng provided a draft layout plan three days later, on 22 July. Mr Cheng’s plan included 135 lots:

194. [208]

     In late July and early August 2021, Mr Strauss sent Mr Cheng’s 28 July subdivision plan to a variety of real estate agents, requesting quotes for the prices the lots might be sold at.

195. [209]

     Responding to Mr Strauss, Mr Marshall Cobb of Stone New Projects, suggested some changes to Mr Whitting’s layout plan to improve the marketability of the lots created by the subdivision. Mr Cobb’s comments were sent by Mr Strauss to Mr Whitting. On 31 July Mr Whitting responded with his comments. One of those comments addressed what Mr Whitting had been trying to achieve with the layout plan (emphasis added):

196. [210]

     Mr Aladdin Elmir of All Property People then provided a quoted price list to Mr Strauss on 4 August 2021. In the covering email to which the price list was attached, Mr Elmir stated that “[his] pricing had increased [Mr Strauss’] revenue by $4.4 million”. This increase was justified by Mr Elmir in a series of dot points comparing the Presale Lots to other comparable lots nearby.

197. [211]

     On 6 August Mr Andrew Sukkar, of CBRE, provided his price list to Mr Strauss by way of email. Mr Sukkar projected the total price of all 145 lots in the development to be $90 million.

198. [212]

     All three of the above quotes were respectively forwarded to Mr Kavanagh and Mr Whitting by Mr Strauss as he received them.

199. [213]

     It was at this point, in early August, that the Developers’ attention seems have shifted to the preparation of a sales package for the Leppington Land. On 11 August 2021, Mr Whitting sent an email to Mr Kavanagh regarding the preparation of the sales package. In his email, Mr Whitting stated that asbestos testing should be obtained, and a “1-2 pager” summary of the property should be prepared to accompany the existing planning, survey and servicing documents relating to the land. The email continued:

200. [214]

     Mr Kavanagh replied to this email later on the same day instructing Mr Whitting to proceed with everything Mr Whitting had suggested.

201. [215]

     Two days later, on 13 August, Mr Whitting provided a draft “Due Diligence package” to Mr Kavanagh. The package included a two-page summary document describing the ownership, zoning, and size of the parcels making up the Leppington Land as well as a list of further documents which could be accessed by prospective purchasers upon request. Both the revised subdivision plan and the asbestos testing report, which was still in the process of being prepared, were included in that list. In his email to Mr Kavanagh, referring to the provided package, Mr Whitting relevantly stated:

202. [216]

     In early September, the Due Diligence package was finalised and Mr Strauss began sending it to prospective purchasers.

203. [217]

     Notwithstanding the finalisation of the Due Diligence package, discussions about the structure of the subdivision plan between Mr Whitting and Mr Kavanagh continued into September. By 18 September, Mr Whitting’s proposed subdivision plan had a lot yield of 145.

204. [218]

     At some point over the next few days, Mr Whitting became aware of the dwelling density limit of 16.5 dwellings per hectare (it was not in fact formally introduced by the amendment to the SEPP on 30 September). On 24 September, Mr Whitting emailed Mr Kavanagh about the effect of the new limit:

205. [219]

     As already noted, the revised DCP was issued on 26 October. Mr Whitting became aware of it on or shortly after that date. On 1 November, DPIE issued a media release announcing the DCP update, which it described as “new planning controls”.

206. [220]

     Later that day, one of the agents consulted by the Developers about the sale of the Leppington Land, Mr Marshall Cobb, became aware of the media release. He forwarded it to Mr Strauss, who in turn forwarded it to Mr Whitting, who then replied to Mr Strauss. The email chain included:

207. [221]

     Three days later, Mr Whitting wrote to Mr Kavanagh in the following terms (emphasis added):

208. [222]

     It is not clear from the evidence whether there was any further change to the layout plan.

209. [223]

     At some point during the following weeks, Mr Whitting got to work preparing a “precis” document for the Leppington development. An early version (maybe the first) of the “precis” was sent by Mr Whitting to Mr Kavanagh on 18 November 2021. It summarised the new density controls implemented by the DCP and concluded that “the maximum permissible yield [for the Leppington development was] 116 [dwellings]”.

210. [224]

     An amended version of the precis was sent by Mr Whitting to Mr Kavanagh on 26 November 2021. The introduction read, “[t]his document provides a precis of the planning, approvals and subdivisional process relevant to [the Leppington Land].” The document was then divided into three parts, each with its own heading. The first part, headed “[a]ctivities completed to date”, set out in dot point form the various surveys, preliminary plans and environmental reports which had been obtained by the Developers. Under the second heading, “planning process to date” the following summary was provided:

211. [225]

     In the final section of the precis was the below table which set out the remaining required activities necessary to complete the subdivisional works:

212. [226]

     Mr Kavanagh responded to this version of the Precis by way of email to Mr Whitting on 26 November 2021. Mr Kavanagh’s feedback was solely in relation to the required activities table in the third section of the precis. He stated:

213. [227]

     This feedback was duly incorporated by Mr Whitting who returned an amended version of the precis, and a separate Gantt chart indicating the “critical path” towards registration of the subdivision, to Mr Kavanagh the next day. In response to Mr Kavanagh’s feedback, Mr Whitting wrote, “all agreed. [I] was being a little conservative (though now, probably the other way)”.

214. [228]

     The revised version of the timeline for completion was presented in the following table:

215. [229]

     Five months later, in April 2022, the Developers received an offer from a company named New Horizons Pty Limited to purchase the Leppington Land. During the following months, the terms of the sale were negotiated. Because of the then six outstanding pre-sale contracts, an option deed was drafted which required the Developers to use “reasonable endeavours” to rescind the pre-sale contracts prior to the end of a specified call option period, and, in circumstances where a certain period of time had elapsed since entry into the deed without recission being achieved, there was to arise an obligation on the purchasers to “immediately commence legal proceedings” against the purchasers to achieve such recession.

216. [230]

     Multiple iterations of this deed from the period between May and July 2022 are in evidence in which the negotiation of certain terms can be observed. But, for present purposes, it is not necessary to go any further into the proposed transaction with New Horizon other than to say that there is no evidence before me that any deed was ultimately entered into between the parties.

217. [231]

     Rescission data: As already noted, there were originally 93 Presale Contracts in total. Of these, 56 (including the Preet and Bakshi Contracts) were conventional sales contracts and 37 were option contracts.

218. [232]

     By the time these proceedings were commenced in late August 2022, all except three of the sales contracts had been the subject of an agreed recission. Of the option contracts, 13 had likewise been rescinded by agreement, and the remaining 24 had lapsed without the options being exercised by either party.

219. [233]

     In evidence was a summary prepared in December 2022, setting out particulars of the 90 sales contracts which were the subject of agreed rescission (or lapse in the case of options). In the case of the agreed rescissions, the particulars included the date of rescission and the additional amount which was paid out by the Developers, ranging between $660 and $55,000, in consideration of the purchaser’s agreement to rescind.

220. [234]

     The rescission dates for the 66 agreed rescissions up to August 2022, and the additional amounts paid by the Developers to procure some of those agreements, can be seen (cumulatively) in the following graph.

221. [235]

     The graph does not include the lapsing dates for the 24 option contracts which lapsed; this information was not provided in the evidence. However, 12 of the 13 option contracts which were rescinded were rescinded in December 2020 (the other was rescinded in July 2020). I think it is safe to assume that the option contracts which terminated by lapse would have lapsed at about the same time, or soon afterwards.

222. [236]

     Developers’ internal plans for the Leppington Land: The documentary evidence and the rescission data allow the following conclusions to be drawn about the Developers’ internal plans for the Leppington Land over time.

     1. (1)

        Mr Whitting’s estimate in his November 2021 report of the time required to complete the subdivision and register the plan once the rezoning had taken place was 30 months. This was actually the period suggested by Mr Kavanagh for inclusion in the report. There is no reason to think that it would have changed substantially over the life of the Contracts. Mr Kavanagh must have known by early 2019 at the latest that registration of any subdivision plan was unlikely to occur prior to the sunset dates. By early 2020 that would have been a certainty.

     2. (2)

        Furthermore, from April 2020 onwards Mr Whitting was reporting to Mr Kavanagh that the rezoning itself was a long way off. By early 2021 the estimate was that it would be unlikely before the end of that year, if then. This implied a registration date of mid-2024.

     3. (3)

        The rescission data shows that from December 2020 the Developers were prepared to agree to wholesale rescissions of the Presale Contracts. The rescinded Contracts were not replaced by other off the plan sales. Clearly the Developers considered that the increased flexibility they would obtain from rescinding the Contracts was worth the cost of returning the Purchasers’ deposits.

     4. (4)

        By early July 2021, Mr Whitting was working on a revised layout for the development which involved a departure from the Presale Plan, albeit that the lot areas in his layout were intended to be “as close as possible” to that Plan. This was before the rezoning had even occurred.

     5. (5)

        The Developers effectively ceased to use the Presale Plan as a basis for their internal planning from that point. In fact, Mr Whitting was not even informed that there were outstanding Presale Contracts until four months later.

     6. (6)

        When the dwelling number cap was imposed as part of the rezoning in mid-July, Mr Whitting’s layout plan was refined to take account of it.

     7. (7)

        In late July and early August 2021 the Developers took soundings from real estate agents so as to test the market for the sale of the Leppington Land in unsubdivided form. Later in August they had Mr Whitting prepare a due diligence package for prospective purchasers. In that context, Mr Whitting’s layout plan was further refined.

     8. (8)

        From September onwards the Developers began paying additional sums of money (around $1000 or so) to obtain the consent of the remaining Presale Purchasers to rescission.

     9. (9)

        When the 16.5 dwellings per hectare limit was introduced in late 2021 Mr Whitting’s layout plan was amended by reducing the number of lots. The revised plan was incorporated in the due diligence package for prospective purchasers.

     10. (10)

         At the time they became aware of the revised DCP at the beginning of November, the Developers were still hoping to attract offers for the potential purchasers of the Land. They took no steps towards preparing a development application for subdivision.

     11. (11)

         In about April 2022 the Developers received an indicative offer from a prospective purchaser of the land. Negotiations as to the terms of the proposed purchase took place between May and July. The Developers continued to take no steps towards preparing a development application for subdividing the land. At this time the amount they were prepared to pay to obtain consent to rescission from the remaining Presale Purchasers increased into the tens of thousands of dollars.

223. [237]

     Mr Kavanagh’s testimony: Mr Kavanagh’s principal affidavit was sworn at around the same time the proceedings were commenced, in late August 2022. The affidavit identified Mr Alcorn as the solicitor acting for Ahmau, and annexed copies of the correspondence between the Purchasers and him, and later Centurion Lawyers.

224. [238]

     The affidavit then contained a section containing general information about the development and its progress. In it, Mr Kavanagh deposed:

225. [239]

     Mr Kavanagh made a further affidavit in June 2023, responding to the affidavits of Mr Preet and Mr Bakshi. The affidavit contained some further information about the development project.

226. [240]

     Mr Kavanagh acknowledged that PY acted as agent for Ahmau and the other vendor companies in dealing with the Purchasers. But he said that he had not been involved in that firm’s engagement by the Developers nor in determining the terms of its retainer.

227. [241]

     Mr Kavanagh deposed that the Developers had made no arrangements (at least directly) with Stroud. Indeed, according to Mr Kavanagh, he had never heard of that firm before. He deposed that the firm appeared to have been retained by PY, which was a usual commercial practice. But this had not been done at the request, nor with the permission, of the Developers.

228. [242]

     Mr Kavanagh also addressed the future of the development:

229. [243]

     Mr Kavanagh’s account of the development was at best an incomplete one. None of the steps in the evolution of the Developers’ internal plans was disclosed. Instead, Mr Kavanagh referred only to the planning instrument changes, as if to suggest that these were the only things which had influenced the course of events.

230. [244]

     The documentary evidence which established much of what was going on behind the scenes, although not referred to by Mr Kavanagh, was exhibited to Mr Whitting’s affidavit. Mr Kavanagh therefore cannot be accused of actually trying to conceal the rest of the story. But Mr Kavanagh’s description of how Mr Whitting’s report came to be prepared was positively misleading.

231. [245]

     Mr Kavanagh presented the report as having been commissioned so as to give the Developers information on which to decide what to do about the subdivision. In fact, as Mr Kavanagh well knew, it was prepared to bolster the case for rescission. It was simply not true that as a result of receiving the report Mr Kavanagh decided not to proceed with the proposed development. By that time, the decision had already been made. The Developers had been working on a different layout for more than four months.

232. [246]

     Mr Kavanagh was cross-examined at length by counsel for the Bakshis, followed by counsel for the Preets. In all, the cross-examination lasted for more than a day. It focused on the period from July 2021 onwards. Mr Kavanagh was thus not called upon to explain the Developers’ thinking during the period leading up to the expiry of the sunset dates.

233. [247]

     Much of the cross-examination involved taking Mr Kavanagh through the documentary evidence which I have already summarised. Mr Kavanagh was also cross-examined at length about the correspondence passing between the parties from August 2021 onwards concerning rescission, and especially the correspondence in April 2022.

234. [248]

     There was no dispute about the content of the relevant documents, and some of the cross-examination involved putting to Mr Kavanagh propositions which were ultimately matters of argument or interpretation, and thus matters for the Court. I set out below what I consider to be the important points which arose. I otherwise do not find it necessary to go into Mr Kavanagh’s cross-examination in detail.

235. [249]

     It is convenient to begin with the revised layout plans prepared from July 2021 onwards by Mr Whitting (assisted by Mr Cheng). Counsel suggested that the terms of the Presale Contracts allowed Ahmau to alter the sizes of Presale Lots by up to 5% and Mr Kavanagh accepted that interpretation.

236. [250]

     It was put to Mr Kavanagh that the revised layouts were new subdivision plans but Mr Kavanagh responded:

237. [251]

     Mr Kavanagh accepted that from late July onwards the Developers had been exploring a potential sale. Counsel suggested that this was the only course which they were contemplating but Mr Kavanagh did not agree:

238. [252]

     Counsel then asked Mr Kavanagh about the steps required to make a development application:

239. [253]

     Mr Kavanagh accepted that the Developers were “focused” on marketing the Land but “not to the exclusion of all else”.

240. [254]

     Mr Kavanagh accepted that the Developers were “committed” to rescinding the remaining Presale Contracts. The decision was made in late July. Counsel suggested that this was linked to the lack of action in making a development application but again Mr Kavanagh did not agree:

241. [255]

     Counsel for the Bakshis put to Mr Kavanagh, and Mr Kavanagh accepted, that there was no mention of any plan to sell the Land in the letter sent to the Purchasers on 18 August 2021 (see [94] above). Mr Kavanagh responded:

242. [256]

     Counsel for the Preets asked Mr Kavanagh about the email exchange between Mr Strauss and Mr Whitting on 1 November about the revised DCP and the effect of the density limits announced in that DCP:

243. [257]

     In the same vein, counsel for the Bakshis asked Mr Kavanagh about his email to Mr Whitting of 26 November 2021 concerning the draft of Mr Whitting’s report. The following evidence ensued:

244. [258]

     Counsel pressed Mr Kavanagh on the suggestion in the same email to reduce the estimated time for completion from 36 months to 30 months, which Mr Whitting accepted and included in the final report. Counsel put to Mr Kavanagh that he had effectively overborne Mr Whitting but Mr Kavanagh would not agree.

245. [259]

     Counsel then suggested that Mr Kavanagh must have thought that the 30 month period allowed was the right one. In response, Mr Kavanagh made it clear that the estimate would not have been his central estimate. It was a “best case”, and the period allowed was “very tight”.

246. [260]

     Counsel for the Bakshis also cross-examined Mr Kavanagh on the terms of Centurion’s rescission letter of 20 April 2022. Counsel suggested that the Developers wanted to hide information about their sales efforts from the Purchasers. Mr Kavanagh did not accept this interpretation. He said it was simply not their concern.

247. [261]

     In his final submissions, counsel for the Bakshis criticised both the form and content of Mr Kavanagh’s evidence. Counsel submitted that I should not accept him as a credible witness.

248. [262]

     While I have criticised aspects of Mr Kavanagh’s affidavit evidence I do not propose to descend into a detailed analysis of his credit. Mr Kavanagh’s cross-examination was not the sort of cross-examination which presented clear issues of objective fact. Having said that, I think there is no good reason to doubt Mr Kavanagh’s honesty in giving the cross-examination testimony which I have set out above.

249. [263]

     Mr Wheadon’s testimony: Mr Wheadon’s affidavit was made shortly before the proceedings began in May last year. On the face of it, as the sole director and shareholder of Ahmau, Allgood and McInnes, decisions about the development of the land and contractual dealings with the land would have been matters for him. His affidavit confirmed that impression. He deposed:

250. [264]

     But Mr Wheadon’s evidence unravelled spectacularly in cross-examination. He agreed that he was not involved in the “day-to-day” matters and instead would “take instructions” from Mr Strauss or Mr Kavanagh or both of them on such matters, or indeed on any “matters affecting” the companies. He had not been involved in the decisions to rescind the Contracts, for example it was clear that he was not making business decisions for the companies, but rather was acting on instructions from Mr Strauss and Mr Kavanagh. He agreed that they would be the people to tell the Court about whether the companies would be in a position to develop the Leppington Land or not.

251. [265]

     Mr Whitting’s testimony: Mr Whitting’s primary affidavit in the proceedings was made in August 2022, a few days before Mr Kavanagh’s. Most of the affidavit was taken up with a recitation of the emails and other documentary evidence, a bundle of which were exhibited to Mr Whitting’s affidavit.

252. [266]

     Those documents covered Mr Whitting’s reports to Mr Kavanagh from April 2020 onwards; his dealings with SWC and the consultants retained on behalf of the Developers concerning sewerage for the site in 2020-2021; his instructions to Mr Cheng and reports to Mr Kavanagh concerning the revised layout from July 2021 onwards; and his reports to Mr Kavanagh on 19 July, 24 September and 1 November concerning the rezoning of 16 July, the imposition of the 16.5 dwellings per hectare limit in September; and the issue of the DCP on 1 November.

253. [267]

     Mr Whitting also referred to his November 2021 report, which he described as having been prepared on instructions from Mr Kavanagh to advise him “of how long it would take to complete subdivisional works in relation to the Development Site”. Having agreed to be bound by the expert witness code of conduct applicable to giving of expert evidence in this Court, Mr Whitting confirmed the opinions expressed in his November 2021 report.

254. [268]

     The affidavit did not describe or exhibit the correspondence between Mr Whitting, Mr Kavanagh, Mr Strauss and the valuers concerning the valuation of the property or the preparation of the due diligence material. However, the possibility of sale was referred to in Mr Whitting’s report to Mr Kavanagh of 24 September, and perhaps other documents in Mr Whitting’s exhibit.

255. [269]

     In May last year, just before the trial began, a further affidavit was filed from Mr Whitting. In the affidavit, Mr Whitting set out his experience in property development and (having again agreed to be bound by the Expert Witness Code of Conduct) referred to his email to Mr Kavanagh of 24 September 2021 concerning the 16.5 dwelling per hectare limit ([218] above). He expressed the opinion that the subdivision of the Leppington Land in accordance with the Presale Plan (that is, containing 133 lots) would be impossible.

256. [270]

     Mr Whitting also deposed, based on his experience, that the costs of undertaking the works associated with the subdivision depicted in the Presale Plan would have increased significantly since when the Presale Contracts had been entered into. The cost of subdivision and civil work had increased by about 35%. And development contributions had increased by 46% between late 2020 and late 2023.

257. [271]

     Mr Whitting was cross-examined at some length by counsel for the Preets, and then by counsel for the Bakshis. I thought he was an impressive witness. He presented as being knowledgeable and experienced at subdivision, and he gave apparently straightforward answers to the questions that he was asked.

258. [272]

     Mr Whitting was challenged about the shortening of the time estimate in his November 2021 report in response to Mr Kavanagh’s suggestion. I do not think that undermined his professionalism. It was a highly unpredictable matter, and I am satisfied that the reduced period was within the permissible range. Otherwise, no challenge was made by counsel for either of the Purchasers to his expertise or his credit.

259. [273]

     The cross-examination of Mr Whitting largely involved taking him through the documentary evidence which I have already summarised, or parts of it. It was clear that Mr Whitting had only ever acted as a consultant, providing advice and undertaking tasks as requested by Mr Kavanagh and Mr Strauss. He had not been a decision maker and generally did not get involved in commercial negotiations. Any information which he did have about the Developers’ intentions and plans was second hand, being based on what he could recall of what they told him.

260. [274]

     I set out below the evidence Mr Whitting gave about a few specific matters. It is unnecessary to go into his cross-examination in any more detail.

261. [275]

     So far as the preparation of the layout plans was concerned, Mr Whitting said that his work was undertaken in response to an instruction from Mr Kavanagh and was based solely on his (Mr Whitting’s) knowledge of local planning controls and his own best judgement about how to maximise the development potential of the site. He did not rely on the original Presale Plan.

262. [276]

     Mr Whitting said that at the time he prepared his initial layout plan he was unaware that there had even been presales based on the Plan. He did not become aware of this until he prepared his November 2021 report.

263. [277]

     Mr Whitting was asked about the reference in his email of 4 November to there being a “done deal” for the sale price of the Ahmau Land. He said that the information might have come either from Mr Strauss or Mr Kavanagh. His understanding at the time was that some sort of indicative offer had been made for the Land. He could not recall the exact price, but believed it was more than $40 million.

264. [278]

     In his November 2021 report, Mr Whitting described the introduction of density controls as having been “unforeseen”, and this is consistent with the fact that a maximum dwelling density was imposed for the first time with amendments to the SEPP in late September 2021, and confirmed by the DCP. One curiosity is that, in the previous year, Mr Whitting had said that the maximum dwelling density would be 15 dwellings per hectare. But Mr Whitting was not asked about this in cross-examination. In fact, he was not asked about, much less challenged on, any of the statements, whether a fact or opinion, made in his report or in his supplementary affidavit.

265. [279]

     In these circumstances, I think the reference to a maximum limit of 15 dwellings per hectare must remain a mystery. It does not undermine what Mr Whitting said about the subject in his November 2021 report.

266. [280]

     Ahmau and the Preets each obtained expert evidence from a qualified valuer concerning the value of the Presale Lot (Lot 1040) which was the subject of the Preet Contract. The valuers conferred and produced a joint report in which they agreed on valuation figures for the Lot at various dates. The report was admitted without objection and there was no need for oral evidence.

267. [281]

     The valuers arrived at their valuations by determining an agreed figure per square metre, based on the sales evidence for the locality at the relevant dates, and applying that figure to the area of the proposed lot (313m2). This resulted in valuations as follows:

     1. (1)

        August 2021 - $525,000;

     2. (2)

        December 2022 - $690,000;

     3. (3)

        May 2023 - $670,000.

268. [282]

     These valuations may be compared with the price struck in March 2017 for the purposes of the Preet Contract of $333,971. They can be expressed in terms of percentage increase over the contract price, as follows:

     1. (1)

        August 2021 – 57%;

     2. (2)

        December 2022 – 107%;

     3. (3)

        May 2023 – 101%.

269. [283]

     These increases are well above the rate of inflation prevailing over the period since the first half of 2017. The increase between August 2021 and December 2022 was particularly high. The valuers’ explanation for this was:

270. [284]

     There was no valuation evidence concerning the Bakshis’ Lot (Lot 1064). But it was agreed as a fact that the value of that Lot was the same as the value of the Preets’ Lot. I assume that this meant that each of the valuations by the valuers was agreed as between Ahmau and the Bakshis to apply also to Lot 1064 as at the relevant valuation date.

271. [285]

     Ahmau and the Preets likewise both obtained expert evidence from qualified town planners. Ahmau’s planner was Ms Jillian Sneyd. The Preets’ was Ms Katrina Hodgkinson.

272. [286]

     In the usual way, Ms Sneyd prepared a report, dated June 2023 and Ms Hodgkinson responded with a report of her own, dated October 2023. Ms Sneyd and Ms Hodkinson then conferred and produced a joint report in May last year, just before the trial began.

273. [287]

     The day before the joint report from the planners was finalised, Mr Whitting’s further affidavit was filed on behalf of Ahmau. On the following day, Ms Hodgkinson responded with two supplementary reports.

274. [288]

     During the May hearing, Ms Sneyd and Ms Hodgkinson gave evidence in a concurrent session. Mr Whitting did not participate in the concurrent session, but, as we have seen, was cross-examined individually on his evidence, and this included the opinions expressed in his further affidavit.

275. [289]

     As already noted, following an adjournment part of the way through the final submissions, a further supplementary report was produced by Ms Hodgkinson in June last year (it was described as the fourth supplementary report; there is no third supplementary report in evidence). In this report Ms Hodgkinson resiled from some of the opinions that she had earlier expressed. The change of position was followed by the frustration claim being formally raised on Ahmau’s behalf. This was the subject of a further report from Ms Sneyd in July last year, replying to Ms Hodgkinson’s fourth supplementary report. Ms Sneyd and Ms Hodgkinson then gave further concurrent evidence at the supplementary hearing later in July.

276. [290]

     The planners’ evidence ranged over a number of questions, not all of which are, on the views which I have formed, relevant. Rather than summarising the evidence here, I will address the relevant parts at the appropriate points later in the judgment.

Frustration

1. [291]

   Counsel for Ahmau submitted that the changes to the applicable planning instruments in July 2021, although the parties did not realise it at the time, had made it impossible to subdivide the Land in accordance with the terms of the Contracts. If so, the submission ran, the subdivision condition in the Contracts could not thereafter be satisfied and the Contracts had thereby been frustrated.

2. [292]

   I did not understand the Purchasers to dispute that, if the planning changes had truly made it impossible to satisfy the subdivision condition in the Contracts, then frustration would follow. However, they did not accept that such subdivision had become impossible.

3. [293]

   As already mentioned, the vendor under the Preet and Bakshi Contracts was Ahmau alone. The subject land was described in each case as the relevant Presale Lot “in proposed subdivision of” the Ahmau Land (giving the title reference to the Ahmau Land). Attached to the Contract, following the Presale Plan, was the title diagram reproduced at [18] above, showing each of the four parcels making up the Leppington Land, but the title search and planning certificate attached to the Contracts were for the Ahmau Land alone.

4. [294]

   Each Contract used the Law Society standard form Contract for the Sale of Land – 2005 Edition which included 29 standard form (“SF”) clauses. There were also 13 special condition (“SC”) clauses (the Bakshi Contract had a fourteenth SC clause, which provided for the payment of the deposit by instalments).

5. [295]

   SF cl 28 provided:

6. [296]

   SF cl 29 relevantly provided:

7. [297]

   SC cl 4 dealt with completion. It relevantly provided:

8. [298]

   SC cl 11 was headed “deposited plan of subdivision”. It relevantly provided (emphasis added):

9. [299]

   It will be noted that there were two separate sunset clauses in the Contract which permitted rescission if the Presale Plan was not registered by a specified date. The sunset date under SF cl 28.3 was six months after the date of the Contract. Under SC cl 11.1 it was forty-eight months (four years). There was also an overlap between the right of rescission conferred by SF cl 28.3, which applied to unregistered plans, and the right conferred by SF cl 29.8, which applied to unsatisfied conditions generally.

10. [300]

    Similarly, there was an overlap between the obligation on Ahmau under SF cl 28.2 to “do everything reasonable” to have the Plan registered and its obligation under SF cl 29.4 to do “whatever [was] reasonably necessary” to cause any event on which completion was conditional to happen, registration of the Plan being such an event. There was a further partial overlap with Ahmau’s obligation under SC cl 11.1 to pay for the obtaining of consent to the subdivision and for the registration of the Plan. I say “partial overlap” because the making of such payments would have been only some of the steps which would have been reasonably necessary for registration.

11. [301]

    All parties proceeded on the basis that the only relevant sunset clause was SC cl 11. It was effectively treated as having displaced SF cl 28. It is indeed difficult to see how cl 11 could have left any room for cl 28 to operate. I will likewise proceed on the basis that cl 28 was displaced by cl 11.

12. [302]

    In other circumstances, the overlap between SF cll 28.2 and 29.4 (and, similarly, the overlap between SF cll 28.3 and 29.8) might have led to an argument, based on the maxim generalia specialibus non derogant, that the general provision in cl 29 should be read down so as not to apply to registration of an unregistered plan of subdivision. Those responsible for the wording of the Law Society standard form contract may wish to consider clarifying this in the next edition.

13. [303]

    No such question arises in the present case. It was not suggested that the maxim applied, and cl 28 was treated as having fallen out of the Contract. I will therefore proceed on the basis that Ahmau was obliged under cl 29.4 to do whatever was reasonably necessary to cause the Presale Plan to be registered. I will, for convenience, refer to this obligation as the “reasonable endeavours” obligation. It is unnecessary to say anything more about the payment obligations in SC cl 11.1.

14. [304]

    A preliminary question arose as to what the subdivision condition in the Contracts required by way of registration of the Presale Plan. Counsel for Ahmau contended that the Contracts would be frustrated if registration of a plan of subdivision over all four parcels of the Leppington Land could not be achieved. Counsel for the Purchasers disagreed. They contended that frustration would only arise if it would be impossible to subdivide the Ahmau Land to the extent shown in the Plan.

15. [305]

    Counsel for Ahmau submitted that, in referring to the registration of the Presale Plan, SC cl 11.1 was referring to registration of the Plan as a whole. Counsel submitted that what each purchaser was buying was a plot in a residential subdivision. The Plan depicted that subdivision as a whole. Although the boundaries of the four individual lots were identified (and could be discerned from the searches annexed to the Contracts) some of the lots extended across more than one parcel. Furthermore, the access roads were an integral part of the Plan and only made sense in the context of the plan as a whole.

16. [306]

    Counsel for the Bakshis disputed this analysis. Counsel emphasised that the Contracts were for the sale of specified Presale Lots in the Plan. Both the lots the subject of the Contracts in the present case were well within the boundaries of the Ahmau Land. Changes to, or even the absence of, the lots and other features outside the boundaries of the land owned by Ahmau would not affect those lots.

17. [307]

    Counsel also pointed out that, as at the date of the Contracts, Ahmau did not own the other three parcels making up the Leppington Land. The Plan could not be registered as a whole without the consent of the other owners. Counsel’s submission, as I understood it, was that, in these circumstances, the reference to the Presale Plan in cl 11.1 should be read as a reference to that part of the Plan which covered the Ahmau Land.

18. [308]

    Counsel for the Preets supported these submissions but advanced a further argument. Counsel submitted that the obligations owed to the Purchasers under the Contract were “distinct in character” between the Ahmau Land (where Ahmau could provide the necessary consent) on the other hand and the Allgood and McInnes Land (where it could not) on the other. Counsel characterised the annexing of the Presale Plan to the Contracts as “a convenient but confusing way of presenting those obligations together in one graphic”.

19. [309]

    Counsel contended:

20. [310]

    I do not accept the submission that the reference to the Presale Plan in SC cl 11.1 is, as a matter of interpretation, confined to that part of the Plan which depicts the Ahmau Land. It is true that the Contract is for the sale of a lot in the Plan. But as a matter of language, cl 11.1 refers to the Plan, not to a lot or lots depicted on the Plan.

21. [311]

    Furthermore, I accept that, for the reasons identified by counsel for Ahmau, it would be unrealistic and uncommercial to read cl 11.1 down to refer to only the part of the Plan depicting the Ahmau Land. The subdivision depicted on the Plan was plainly designed as a whole. A subdivision confined to the Ahmau Land was not contemplated. In particular, it would have left the lots on the northern side of that Land (numbers 1050 to 1069) without any access, since the internal road servicing those lots was on the adjoining parcel of land.

22. [312]

    For similar reasons, I do not agree that the Contract should be construed to create two separate obligations, one concerning the Ahmau Land and the other concerning the Allgood and McInnes Land. In my view, cl 11.1 clearly imposes a single condition by reference to the Plan as a whole.

23. [313]

    Counsel for the Preets submitted that the test for determining whether there were separate contracts was, or was analogous to, the test applied by the High Court in Thomas Brown & Sons v Fazal Deen (1962) 108 CLR 391 for whether an obligation can be severed, namely whether the severance would change the “extent” but not the “kind” of contract (at 411). But in my opinion, confining the registration condition would produce a contract of a different nature for the purposes of the severance test (assuming that test to be applicable).

24. [314]

    I conclude that SC cl 11.1 required the registration of the Presale Plan as a whole; that is, the registration of all parts of the Plan depicted over the four parcels making up the Leppington Land, whether or not owned by Ahmau at the date of the Contract.

25. [315]

    In this section of the judgment, I summarise the town planning evidence on the effect of the planning instruments on the viability of the subdivision of the Leppington Land in accordance with the Presale Plan. The evidence focussed on the provisions of the Growth Centres SEPP and the October 2021 DCP concerning minimum lot sizes and permissible numbers of dwellings which I have set out earlier. As already noted, the Presale Plan contained 133 lots. Of those, a total of 40 lots (1013, 1019-1028, 1095-1104, 1107-1116, 1119-1124, and 1129-1131) were less than 300 m2.

26. [316]

    The earliest opinion in evidence which concerns the viability of the subdivision is found in Mr Whitting’s email to Mr Kavanagh on 24 September 2021 ([218] above). As already noted, Mr Whitting was operating on the basis of a cap of 16.5 dwellings per hectare, although this was not formally introduced into the Growth Centres SEPP until a few days later when amendments were made to cl 4.1B. Mr Whitting evidently considered that the number of dwellings would define the number of permissible lots, and on this basis, he considered that the maximum lot yield was “around” 118.

27. [317]

    In giving this figure, Mr Whitting thought that some of the lots might eventually be used for duplexes, thus increasing the dwelling yield up to the maximum dwelling cap, which he put at “say” 140 dwellings. But nothing further is mentioned about this idea in the evidence, and I assume that in the end it was not permissible.

28. [318]

    In Ms Sneyd’s June 2023 report, she noted the 500 dwellings limit in Growth Centres SEPP cl 4.1BA, but did not express any opinion about the effect of that limit on the viability of the subdivision. Instead, she focused on the reasonableness of the Developers’ conduct (her evidence on this subject is addressed later in this judgment). She did not refer to any per hectare density limits, or to minimum lot sizes at all.

29. [319]

    The topic was, however, addressed by Ms Hodgkinson in her October 2023 report. Ms Hodgkinson was specifically asked to consider the comments made by Mr Whitting in his September 2021 email and to express an opinion on the maximum number of dwellings which could be obtained on the Leppington Land.

30. [320]

    In her report, Ms Hodgkinson accepted that Growth Centres SEPP cl 4.1AB applied to the Leppington Land and therefore imposed a minimum allotment size of 300m2. But she noted that none of the allotments in the Presale Plan with an area of less than 300m2 were on the Ahmau Land. She concluded therefore that cl 4.1AB did not present an obstacle to the registration of the Plan so far as it applied to the Ahmau Land.

31. [321]

    Ms Hodgkinson also accepted that the dwelling limits (which she described as emanating from the November 2021 DCP) imposed limitations on the lot yield which could be obtained in developing the Leppington Land. Her estimate, based on 16.5 dwellings per hectare, was 124 lots, but she noted that Mr Whitting’s figure of 118 was within her “tolerance”.

32. [322]

    Ms Hodgkinson acknowledged that, if this cap were allocated pro rata between the four parcels of land making up the Leppington Land, the number of lots on the Ahmau Land would be reduced from the 42 in the Plan to “between 29 and 31”. But in her view no such rateable sharing was required. It followed, again, that the restrictions did not, in her view, prevent the registration of the Plan so far as it concerned the Ahmau Land.

33. [323]

    The topic was addressed by the joint expert report prepared by Ms Sneyd and Ms Hodgkinson on 9 May last year. The joint report considered the limitations as they applied both to the Ahmau Land and to the Leppington Land as a whole. Ms Sneyd and Ms Hodgkinson agreed, insofar as the Presale Plan included lots of less than 300m2, the Plan would need to be amended to include a building envelope plan for those lots. Implicitly, both experts accepted that cl 4.1AB was applicable.

34. [324]

    Ms Sneyd and Ms Hodgkinson also both agreed on a yield analysis for the Leppington Land, albeit that the calculations had been undertaken “broadly” and the SP2 and RE1 zoned land would need to be excluded. On this basis, they concluded that the maximum number of lots available under cl 4.1B (16.5 dwellings per hectare) was 127, and the maximum number of lots available under cl 4.1BA (based on a pro rata allocation of the 500 dwellings permissible for Stage 5) was 130. Again, both Ms Sneyd and Ms Hodgkinson implicitly accepted that the number of permissible lots in the Plan would be defined by the number of dwellings permitted under the dwelling restrictions.

35. [325]

    In her first supplementary report, Ms Hodgkinson responded to the opinion in Mr Whitting’s second affidavit that achieving the 133 lots depicted in the Presale Plan was “impossible” because of the dwelling density limits in the DCP. Her views were consistent with those presented in the joint report, which was completed earlier on that same day. She accepted that the dwelling density limit of 16.5 dwellings per hectare would be exceeded. But she argued that this was not necessarily fatal to the proposed subdivision. The provisions of the DCP were only one relevant consideration for the Council to take into account in considering whether to grant approval. Clause 4.6 expressly allowed the Council to depart from the limit.

36. [326]

    Although they do not appear to have realised when giving evidence at the May hearing, both Mr Whitting and Ms Hodgkinson had overlooked that the DCP was not the sole source of the 16.5 dwellings per hectare limit. That limit had been directly imposed by the amended version of the Growth Centres SEPP cl 4.1B, introduced by amendment on 30 September. Moreover, those amendments expressly prohibited the Council as consent authority from granting approval under cl 4.6 to a development which did not comply with the clause.

37. [327]

    The point came out in the supplementary report prepared by Ms Hodgkinson in June. In that report, Ms Hodgkinson acknowledged that the effect of the 30 September amendments had been to prohibit the approval of any development containing more than 16.5 dwellings per hectare. But she argued, for the first time, that this made no difference.

38. [328]

    Ms Hodgkinson stated:

39. [329]

    Ms Hodgkinson also changed her position on the 300m2 minimum lot size. She argued that cl 4.1BA did not actually apply to the Leppington Land. This was because the RDM depicted a dwelling density range of 12.5-16.5 in area O2 and the text of cl 4.1AB (and cl 4.1AD) referred to a dwelling density range of 10-20. She argued that cll 4.1AB and 4.1AD therefore did not pick up area O2 (or indeed any area) in the RDM.

40. [330]

    Ms Sneyd responded in her supplementary report. Some of her evidence was admitted on an interim basis subject to further submission, but no such submission was made. There was no further submission on the admissibility of these passages, and I have therefore proceeded that there was ultimately no objection to them.

41. [331]

    On the dwelling density issue Ms Sneyd stated:

42. [332]

    Ms Sneyd then addressed the lot size restriction:

43. [333]

    Ms Sneyd continued:

44. [334]

    Later Ms Sneyd made a further point about Council approval, based on provisions for “complying developments”, for which approval is not required, in State Environmental Planning Policy (Exempt and Complying Development) 2008 (“Complying Development SEPP”):

45. [335]

    In her report Ms Sneyd also undertook precise calculations of the numerical consequences of the density restrictions. Those consequences (to the extent the restrictions are applicable, which remains a matter for argument) are now common ground. The cap in cl 4.1BA yields a maximum of 131 dwellings for the Leppington Land. The 16.5 dwellings per hectare in cl 4.1B yields (if applicable) a maximum of 114 dwellings (and a minimum of 87) for the Land.

46. [336]

    The issues still in dispute were addressed in the concurrent evidence given by Ms Sneyd and Ms Hodkinson at the supplementary hearing. The evidence included the following, given in response to questions which I asked:

47. [337]

    Ms Hodgkinson responded:

48. [338]

    The issue was pursued further with Ms Sneyd:

49. [339]

    Counsel for the Preets also asked Ms Sneyd about the opinion expressed by her in [5.7] of her supplementary report concerning other permissible uses under the R2 zoning. The following evidence ensued.

50. [340]

    Mr Bakshi followed up by raising the question of use of the surplus lots as “pocket parks”. This resulted in the following evidence:

51. [341]

    Counsel for Ahmau submitted that I should accept the views expressed by Ms Sneyd concerning restrictions on the proposed subdivision of the Leppington Land in terms of lot size (cl 4.1AB) and lot numbers (cll 4.1AB and 4.1B). Counsel invited me to accept those conclusions as a matter of interpretation of the relevant planning instruments, or, alternatively, as restrictions arising from the practice which would be followed by the Council in assessing any development application.

52. [342]

    In particular, counsel submitted that, for the purposes of cll 4.1B and 4.1AB, the reference to dwellings would operate as a reference to lots. Counsel submitted that the Presale Plan plainly depicted a residential development, any in that context it would be unrealistic to treat dwellings as distinct from lots.

53. [343]

    It followed, in counsel’s submission, that the Leppington Land was subject to restrictions:

    1. (1)

       under cl 4.1AB, preventing the creation of lots less than 300m² in area, except subject to compliance with cl 4.1AD (which would at least require the creation of a building envelope plan);

    2. (2)

       under cl 4.1BA, restricting the maximum number of lots to 131; and

    3. (3)

       under cl 4.1B, further restricting the permissible number of lots to 118.

54. [344]

    There was no dispute concerning the application of the maximum dwelling limits under cl 4.1AB. But counsel for the Preets invited me to accept the argument by Ms Hodgkinson concerning the other restrictions. In summary, these were:

    1. (1)

       there was no limitation on the creation of lots less than 300m², because cl 4.1AB did not apply;

    2. (2)

       the limit imposed by cl 4.1BA (and the per hectare dwelling limit under cl 4.1B, if applicable) applied only to restrict the number of dwellings, and did not prevent the registration of a plan containing 133 lots.

55. [345]

    Counsel also challenged the argument from Ms Sneyd, based on the Exempt Development SEPP, that if the Council once approved a subdivision of 133 lots it would be powerless to prevent the construction of a residential building on the lot thereafter. Counsel pointed out that under cl 1.18(b) of the SEPP, in order to qualify as a complying development the development must be permissible with consent. Counsel argued that if, say, 133 lots were subdivided, but 114 lots had already had a residential dwelling constructed on them, then cl 1.18(1)(b) would automatically prevent the development from being a complying one. The applicant would be forced to seek consent in the ordinary way, which the Council could (and indeed would be obliged to) refuse because of cl 4.1B of the Growth Centres SEPP.

56. [346]

    In this section of the judgment I deal with these arguments to the extent that they involved the interpretation of the relevant Growth Centres SEPP provisions. I will address questions of practice, to the extent necessary, later.

57. [347]

    In considering questions of interpretation of the SEPP, I am of course not bound by the opinions expressed by the planning experts; indeed, strictly speaking, those opinions are not even admissible in evidence. I will treat those opinions, and the reasoning on which they were based, as submissions only.

58. [348]

    It is convenient to begin with the hectare per density restriction in cl 4.1B. As has been seen, the argument between the parties concerning the residential density map tended to focus on the wording of cl 4.1AB, which relates to the 300m² lot size limit. The wording of cl 4.1B is different. It does not in terms refer to a range at all. It simply picks up what is depicted on the RDM.

59. [349]

    In my view, it is clear that, whatever the interpretation of cl 4.1AB may be, cl 4.1B imposes a limit of 16.5 dwellings per hectare on any development, including subdivision. In the end, I am not sure that this was disputed.

60. [350]

    The distinction emphasized by Ms Hodgkinson between restrictions on the number of dwellings and restrictions on the number of lots may be accepted. Subclause (2) prohibits the grant of development consent by reference to the density of “dwellings on the land”. But it is not the only restriction in the clause.

61. [351]

    Subclause (3) expressly applies to the grant of development consent for the subdivision of land. Ms Hodgkinson’s argument is that a restriction of this type may be ignored at the subdivision stage, as the density limit can be invoked once building development has started to prevent the construction of more than the specified number of residences. Whatever may be the strength of that argument in the context of subclause (2), it cannot work for subclause (3). The restriction in that subclause must be applied by the Council at the point of development consent being sought for subdivision.

62. [352]

    The wording of subclause (3) has its difficulties. A subdivision plan would not usually (and does not in the present case) contain any information about the use of the lots created by the subdivision, or any buildings to be built on them. But if subclause (3) is to mean anything, it must require the Council to obtain this information, and indeed Ms Sneyd’s evidence is that this is required to be provided with the development application. That is consistent with subclause (6) which refers to the “area of the land to be occupied by the residential development” (emphasis added). The Council must compare the “dwelling density specified for land” by the RDM and compare it with the dwelling density proposed in the application.

63. [353]

    It follows, in my view, that on the true construction of cl 4.1B, it would not be open to the Council to approve an application for subdivision in accordance with the Presale Plan, unless that application were in some way subject to binding conditions which prevented more than 114 lots shown in the plan from being used for the construction of dwellings.

64. [354]

    But it does not follow that the Council would lack legal power to approve a subdivision, even for a ‘residential development’, containing more than 118 lots. The restriction is and remains a restriction on the number of dwellings. Despite Ms Sneyd’s reservations, I see no reason why the Council could not, as Ms Hodgkinson suggested, approve a subdivision containing more than 114 lots, but subject to binding conditions limiting the eventual use of the lot to 114 dwellings.

65. [355]

    There was, unfortunately, no evidence from the planners, and no submission from counsel, on how such a limitation could practically be imposed. But a similar question arose in Hillpalm Pty Ltd v Heaven's Door Pty Ltd 220 CLR 472. It appears from what the High Court said in that case that requiring the applicant for approval to agree to create some sort of restriction on the title could be problematic, but that problem would not arise with the imposition of a condition on the approval itself, which would “run with the land” and prevent future use of it: see at [46]-[49].

66. [356]

    I therefore conclude that as a matter of interpretation of SEPP cl 4.1B, it would not prevent the approval of a subdivision as depicted in the Presale Plan creating 133 lots, provided that the approval was subject to a condition preventing the use of more than 114 of those lots (or 131 of those lots, if considering cl 4.1BA on its own) for construction of, or use as, a dwelling. Whether such an approach is one which the Council would impose in practice is, of course, another thing, and will be dealt with in the next section of this judgment.

67. [357]

    Having regard to the conclusions I have reached, it is unnecessary to reach a final conclusion on whether, as a matter of interpretation, cl 4.1AB picks up the RDM so as to restrict the creation of lots of less than 300m2 shown in the Plan. I should say, however, that as at present advised I would be inclined to agree with counsel for Ahmau on that question. Ms Hodgkinson’s reading of the clause would deprive it of any effect and that is a conclusion which the Court would not lightly reach if there were an alternative.

68. [358]

    The next question is whether imposition of the planning restrictions identified above actually prevented registration of the Presale Plan in accordance with SC cl 11.1 in such a way as to frustrate the Contracts.

69. [359]

    There was no dispute between counsel as to the general principles which govern frustration of contract. The Court of Appeal has endorsed (Chinatex (Australia) Pty Limited v Bindaree Beef Pty Limited [2018] NSWCA 126 at [42]; Woolworths Group Ltd v Gazcorp Pty Ltd [2022] NSWCA 19 at [215]) the following statement by Nettle JA, speaking for the Victorian Court of Appeal, in oOH! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd & Anor (2011) 32 VR 255 at [70]:

70. [360]

    Both parties also referred me to the following further statement by Nettle JA concerning foreseeability at [72]-[74] ([74] was quoted with apparent approval in Woolworths v Gazcorp at [218]):

71. [361]

    Submissions: Counsel for Ahmau submitted that the imposition of each of the minimum lot size, maximum dwelling number and maximum dwelling density restrictions had independently made registration of the Plan impossible and thereby frustrated the Contracts. Counsel identified the date of frustration as 16 July 2021, the date on which the rezoning was affected by amendments to the Growth Areas SEPP. Strictly speaking, the maximum dwelling density restriction was imposed by the later amendments to the SEPP on 30 September, but no point was taken about this in the argument.

72. [362]

    Counsel argued that the conditions stated by Nettle JA were satisfied in the present case. The parties had not merely assumed that the Leppington Land would be rezoned; they had assumed that the Presale Plan would be registered. The imposition of the restrictions prevented this and was not the result of any default on the part of Ahmau. Even if foreseeable in a general sense, those restrictions were not so highly foreseeable that Ahmau should be taken to have assumed the risk, in the sense discussed by Nettle JA in oOH! Media Roadside at [74].

73. [363]

    In submitting that the restrictions rendered the registration of the Presale Plan impossible, counsel invited me to accept Ms Sneyd’s conclusions to that effect. Counsel focused in particular on the maximum dwelling density restriction. Counsel acknowledged that the restriction could be overcome by modifying the Plan so as to show only 114 lots. This, in counsel’s submission, would amount to registration of an entirely different plan from that specified in the Contracts. It would not satisfy cl 11.1.

74. [364]

    Counsel for the Preets submitted that the restrictions did not prevent registration of the Presale Plan (or at least a plan sufficiently similar to the Presale Plan) to satisfy the requirements of cl 11.1. Counsel urged me to accept Ms Hodgkinson’s evidence in preference to Ms Sneyd’s. In particular, counsel disputed Ms Sneyd’s evidence that as a matter of practice the Council would not be prepared to register the Plan. Counsel described this evidence as “unsubstantiated”.

75. [365]

    Counsel also referred me to the decision of Darke J in Opera Properties Pty Ltd v The Uniting Church in Australia Property Trust (NSW) [2021] NSWSC 1436. That case concerned a contract under which the owner of land granted an option to the owner of neighbouring land to subdivide and transfer part of the land (referred to in the judgment as the “Church Land”). Pursuant to the contract, the neighbour paid $160,000 in option fees. Three years later, the local planning instruments were changed, which, it was agreed, made subdivision impossible.

76. [366]

    The option contract contained a special condition, referred to in the judgment as Additional Clause 39, which provided that if the subdivision had not taken place within three years of the date the option contract was entered into, the owner would instead grant to the neighbour an easement allowing access over the owner’s land (referred to in the judgment as the “Road Easement”). The neighbour commenced proceedings against the owner, alleging that the change to the planning instruments had completely altered the commercial circumstances in which the option had been granted, and had frustrated the option contract. On this basis, the neighbour sought return of the option fees.

77. [367]

    Darke J rejected the frustration claim. His Honour reasoned (at [69], [70] and [73]):

78. [368]

    Counsel argued that the present case was the same. Counsel pointed out that at the time the Contract was made the zoning did not permit the subdivision. Counsel submitted that the parties had clearly contemplated the possibility of changes to the subdivision, and it could not necessarily have been assumed that the subdivision could be possible. In effect, in counsel’s submission, the allegedly frustrating event had been foreseen by the parties and this excluded the possibility of frustration.

79. [369]

    Counsel emphasised that Ms Sneyd in the evidence extracted above (at [338]) ultimately accepted that there was a possibility that the Plan could be registered with 133 lots. Ms Hodgkinson was also of the view that registration was possible.

80. [370]

    In this regard, counsel emphasised that the density limits could be complied with by imposing a condition that the “surplus” lots be used for non-residential purposes such as a place of worship or a childcare centre, or even left vacant. The lots less than 300m2 in area could be the subject of a building envelope plan. In neither case would this require any alteration to the Plan itself for the purposes of registration. While this might result in additional expense to the Developers, and reduce the total amount which they might receive from the sale of the Land, it would not actually prevent them from registering the Plan and conveying the lots the subject of the Contracts with the Purchasers.

81. [371]

    Counsel went on to point out that the Plan was not a survey plan which complied with the requirements of the Real Property Act 1900 (“RPA”). For that reason alone it could never have been registered in the precise form in which it was annexed to the Contract. Counsel submitted that the parties had clearly understood that this was so.

82. [372]

    In presenting this submission, counsel emphasised the words “as required by law” in cl 11.1. Counsel submitted that the addition of these words underlined that the final form of the Plan had to be in accordance with the requirements of the law, which in the context included, so counsel submitted, the requirements of the Council as consent authority.

83. [373]

    Counsel also picked up submissions made earlier by counsel for the Bakshis, that the plan as registered did not need to correspond exactly with the Presale Plan annexed to the Contracts in order to satisfy cl 11.1. Counsel described the Plan as an “indicative” or “proposed” plan. Counsel pointed out that cl 11.2 expressly contemplated the possibility of the Plan being registered despite “minor” alterations to the area, measurements or boundaries of the subject lot.

84. [374]

    In her closing submissions, counsel summed up:

85. [375]

    In similar vein, counsel said during her oral submissions:

86. [376]

    In his submissions on the frustration issue Mr Bakshi likewise would not accept that changes to the planning instruments rendered the registration of the Presale Plan, or at least some similar plan, impossible. Mr Bakshi acknowledged that the changes might necessitate “some adjustments” to the Plan but that any such adjustments would fall within cl 11.2 and did not “amount to a radical change in obligations”. Mr Bakshi also pointed out that only 93 of the 133 lots depicted in the plan had been the subject of Presale Contract. That, together with the agreed recission of nearly all the Contracts, left the Developers with ample scope for altering the Plan so as to accommodate the remaining Purchasers.

87. [377]

    Mr Bakshi made two further points based on the conduct of the Developers.

88. [378]

    First, Mr Bakshi picked up the point that the Presale Plan, in the form attached to the Contract, was not registrable, if only because it did not contain the markings and features required for registration. In truth, in his submission, it was only a preliminary effort. He asserted that the Developers had failed to engage in appropriate consultation and preparation in preparing the Plan. As a result, any impossibility in complying with the Plan would be self-induced and could not be relied upon by the Developers.

89. [379]

    Mr Bakshi’s second point was that the Developers had not, at the time the relevant planning instruments were changed, or thereafter, relied on those changes to justify their failure to register the Plan. In fact they had abandoned the Plan (by adopting Mr Whitting’s revised plan and then pursuing the sale of the Land) for quite different reasons. Mr Bakshi submitted that the Developers’ attempt to use frustration to get out of the Presale Contracts was based on commercial, not planning, considerations.

90. [380]

    Conclusions: It is convenient to begin with the limitation in SEPP cl 4.1B. I have concluded that the clause prevents the Council from approving a subdivision of the R2-zoned part of the Leppington Land into 133 lots, except subject to a condition that no more than 118 of them are used for dwellings. The question is whether the Council would, in fact, be prepared to approve such a conditional subdivision, if one were sought.

91. [381]

    I have set out the evidence of the planners on this question above. I appreciate that the economics of a proposed subdivision application are, in the first instance, a matter for the applicant. But I think the starting point for present purposes is that the Council must exercise its powers in accordance with what it perceives to be the public interest. Private commercial arrangements between developers and their customers can have little if any weight that context.

92. [382]

    It follows, I think, that I should proceed on the assumption that the Council would be guided by considerations of good planning practice, rather than any concern to ensure that the sunset clause in the Contracts would be satisfied. I understood this to be implicit in Ms Sneyd’s evidence and I did not understand Ms Hodgkinson to disagree.

93. [383]

    In considering any application for subdivision of the R2-zoned part of the Leppington Land, the Council would, it may be assumed, be guided by the objects stated in subclause 4.1B(1). Those objects include ensuring that the land in question would be efficiently used and would contribute to the availability of new housing.

94. [384]

    Of course, the density limit of 16.5 dwellings per hectare imposed by cl 4.1B put a limit on the extent to which the Council could, in considering the subdivision of the R2-zoned land, give effect to the object of contributing to the availability of new housing. But I think that on the face of it, the efficient use of that land, would, within that limit, involve allocating the land between the dwellings that are to be built. Certainly, the creation of non-dwelling lots by way of “paper subdivision” of the type to which Ms Sneyd referred would not appear to advance the objects stated in sub-clause (1)(b).

95. [385]

    I accept that it might be possible to use the “surplus” 19 lots for other purposes such as childcare centres or places of worship, or even “pocket parks”. But there is no evidence that there is any demand, from a planning perspective, for such facilities.

96. [386]

    Furthermore, there is a practical need to ensure that the development and maintenance of such surplus lots, effectively for quasi-public purposes, would actually happen, so that the lots would not simply remain vacant and neglected in the future. This emerged clearly from Ms Sneyd’s evidence in response to Mr Bakshi’s “pocket parks” suggestion, but it applies equally to the suggestion that lots could be combined and used for the construction of a larger facilities such as a place of worship or a childcare centre.

97. [387]

    As Ms Sneyd pointed out, such facilities have their own requirements, including minimum lot size. It seems to me that, if such an area was to be set aside for such a facility, it would be poor practice to create, say, five lots and then impose a condition (if that were possible) that they be sold to the same purchaser and used for a non-dwelling purpose. The efficient, and transparent, approach would be to alter the Plan so as to create any such larger size “special non-residential use” lots at the point of subdivision.

98. [388]

    In this regard I found persuasive Ms Sneyd’s evidence that the Council would be unlikely to approve a subdivision consisting of 133 residential-sized blocks apparently suitable for the erection of dwelling houses, but not all of which could in fact be used for that purpose. Although Ms Hodgkinson did not seem to agree, she did not answer the points based on proper planning practice to which I have referred.

99. [389]

    Taken as a whole, Ms Hodgkinson’s evidence does not, I think, really rise above the continued assertion that approval of the Plan for subdivision would be possible. But the question is not whether such approval is possible, but about how likely it is. Ms Hodgkinson never actually advanced a positive opinion on that question; she certainly did not say that approval was probable.

100. [390]

     According to Ms Sneyd (and this was not challenged), her views were informed by actual experience on dealing with councils in general, and Camden Council in particular, on issues of this type. Ms Hodgkinson had no such specific experience.

101. [391]

     Ms Sneyd’s views were also consistent with the contemporaneous advice given by Mr Whitting to Mr Kavanagh. As soon as Mr Whitting became aware of the 16.5 dwellings per hectare limit, he recommended to Mr Kavanagh that the Plan be adjusted to reflect the number of lots accordingly. Evidently Mr Whitting considered that the Council would, as a matter of practice, apply the dwelling limit as if it were a limit to the number of lots in the subdivision. There is no reason to think that this represented anything other than Mr Whitting’s best professional judgment at the time, or that he would have had any motivation for reducing the number of lots if he did not consider it necessary. No such suggestion was made in cross-examination.

102. [392]

     In the circumstances, I prefer Ms Sneyd’s view of the matter. I am satisfied, on the probabilities, that once cl 4.1B was introduced the Council would not have been prepared to approve a subdivision consisting of 133 lots as depicted in the Presale Plan.

103. [393]

     I have expressed my conclusion in this way on the assumption that, as the party bearing the onus on the question of frustration, Ahmau had to prove, on the balance of probabilities, that the supervening event rendered performance impossible as a matter of fact. But there may be an argument that the test may not, in the circumstances of this case, be so onerous.

104. [394]

     The argument begins with a proposition stated by Latham CJ in Scanlan's New Neon Ltd v Tooheys Ltd; Caldwell v Neon Electric Signs Ltd (1943) 67 CLR 169 which is well known and accepted (and which was quoted by counsel for Ahmau in his submissions). Latham CJ stated: “the question of frustration or no frustration must be decided at the time when the relevant alleged event happened, that is, upon probabilities and not upon a certainty arrived at after the event.”

105. [395]

     This proposition may be traced back to earlier cases which considered the effect of an event which delays performance or makes it uncertain, but may not definitely render it impossible. In Bank Line Ltd v Arthur Capel & Co [1919] AC 435, where the question was whether a charterparty had been frustrated by the requisition of the relevant vessel, Lord Sumner said (at 454-455):

106. [396]

     Lord Sumner’s statement of principle refers to the question of frustration or no frustration being determined according to how the situation appeared to the parties at the relevant time. Ordinarily the parties will be aware of the supervening event and its effects, or potential effect. But even if the parties are not aware of the supervening event, frustration can occur. As elsewhere in the law of contract, the doctrine is be applied by the court according to circumstances as they are objectively ascertained. I take it therefore that in such cases the test must be what the reasonable inference would have been from the circumstances which in fact existed at the relevant time.

107. [397]

     If that is so, there may be some scope for its application in the present case. Following the introduction of SEPP cl 4.1B the attitude of the Council, while it could be guessed at, was not certain. The revised DCP had not yet been published. Even when it was published, on 26 October, it contained no information as to whether the Council would equate the number of dwellings with the number of lots in a subdivision in a case such as the present. Certainty could only have been achieved, as submissions by counsel for the Preets which I have quoted above acknowledge, by actually making an application and seeing whether the Council refused it.

108. [398]

     In my view, the nature of the contract in the present case is a relevant circumstance. Ahmau was subject to an ongoing obligation to do all that was reasonable to register the subdivision. It was not entitled to “wait and see” what the Council’s approach to the exercise of its powers would be in the context of the new restriction.

109. [399]

     On this analysis the question would not be whether Ahmau had established on the probabilities that the Council would not have consented to registration of the Plan. The question would be whether there was sufficient doubt about consent being forthcoming to make it unreasonable, in a business sense, to have required the parties to go on with the Contract. If the test were stated in the latter terms, Ms Sneyd’s views, supported as they were by Mr Whitting’s conduct, would tend even more strongly to a finding of frustration.

110. [400]

     I turn now to the suggestion by the Purchasers that, if the Plan could not be registered in exactly the form annexed to the Contracts, it could be registered in modified form under SC cl 11.2.

111. [401]

     The starting point in evaluating this suggestion is that satisfaction of the condition in SC cl 11.1 in terms required registration of “the Plan”, not “a plan substantially similar to the Plan” (or some other form of words denoting less than complete identity with the Plan). No doubt registration of a plan containing a “minor” alteration to the Plan under cl 11.2 would still be “the Plan” for the purposes of satisfying that condition. To that extent the need to register “the Plan” was qualified. But in my view the qualification created by cl 11.2 was a very limited one.

112. [402]

     In the first place, the right to alter the Plan under cl 11.2 was a right reserved to Ahmau alone. Nor did it involve input from other parties. Its exercise was expressly a matter for Ahmau’s “sole discretion”.

113. [403]

     At first sight, what I have said overlooks the reference in the clause to alterations “required” by the Council (or LPI). But I do not accept that this reference had the significance attributed to it by counsel for the Purchasers. The clause meant no more than it said. Relevantly, it dealt only with a situation in which the Council, having received an application for registration of the Plan in a particular form, might have made the grant of consent subject to a particular alteration being made to the Plan. Even in such a case, Ahmau would still have been entitled not to accept the condition by declining to pursue the application. The clause never contemplated that Ahmau might in some way be directed by the Council (or LPI) to make amendments to the Plan.

114. [404]

     In these circumstances, I do not think that the reasonable endeavours obligation in SF cl 29.4 extended to requiring Ahmau to make alterations to the Plan under SC cl 11.2. That would have converted an expressly discretionary right into a new and potentially uncertain source of obligation. I say “potentially uncertain” because of the difficulty in determining what the reasonable endeavours obligation would actually require in the present case, a topic which I address in more detail when dealing with specific performance, later in the judgment.

115. [405]

     Even if I am wrong and the reasonable endeavours obligation did apply, the right under cl 11.2 was a right to make alterations to “the area, measurements or boundaries of the Property”. The term “Property” was not defined in the special conditions, but from the context was clearly a reference to the Presale Lot the subject of the Contract. Alterations under the clause were thus limited to the subject Lot and did not extend to other features of the Presale Plan.

116. [406]

     On no view, therefore, would the right conferred by the clause have extended to changing the number of lots, or relocating the lots, in the Plan. In any event, on my findings, it would have been necessary to remove at least 19 lots to obtain registration. I do not think that this would be properly characterised as some sort of “minor” alteration for the purposes of satisfying the condition in cl 11.1.

117. [407]

     I return to the test for frustration stated by Nettle JA. On my findings, the introduction of the new version of cl 4.1B on 30 September 2021 made it impossible to obtain consent to registration of the Presale Plan (or at least made the obtaining of consent sufficiently unlikely to oblige reasonable parties to proceed on the basis that it could not be obtained). This made satisfaction of the condition in SC 11.1 impossible, which in turn meant, having regard to the terms of SC cl 4, that the time for completion could never arrive.

118. [408]

     The terms of the Contracts contained no provision which addressed this situation and would have allowed the deadlock to be resolved. Nor did they allocate the risk of this occurring to either one party or the other. In the language of Nettle JA, neither party took responsibility in this regard.

119. [409]

     In his formulation of the test, his Honour referred to a contractual obligation becoming incapable of being performed “because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract”. On my findings, this is a simpler case. Performance of the Contracts in any form became impossible.

120. [410]

     In such a case, it is not easy to see why foreseeability, in the sense discussed by Nettle JA, should be of any great significance. In any event, I do not think that the degree of foreseeability of the supervening event in the present case would properly be described as “very substantial”.

121. [411]

     In a sense, the parties may be said to have foreseen the possibility that registration would not be achieved by the sunset date, including because of changes to the relevant planning instruments. Indeed, the Contracts could not be completed without a rezoning, which required such a change to take place. But as counsel for Ahmau submitted, the question is not simply whether the parties foresaw the supervening event, but whether they made provision in the contract to accommodate it: See Ardee Pty Ltd v Collex Pty Ltd [2001] NSWSC 836 at [44]; Dyson Heydon, Heydon on Contract: The General Part (Thomson Reuters, 2019) at [23.140].

122. [412]

     In this regard, Opera Properties is in my view clearly distinguishable. In that case, the parties did make alternative provision for the grant of the Road Easement which allowed the transaction to proceed. In the present case they did not.

123. [413]

     Finally, I do not accept that Mr Bakshi’s submissions concerning the conduct of the Developers are an answer to Ahmau’s claim for frustration. In saying this, I leave aside the merits of that conduct, which I will address, to the extent relevant, later in the judgment.

124. [414]

     So far as the Developers’ alleged “negligence” in framing the terms of the Contracts is concerned, the doctrine of frustration operates within the terms of the contract agreed by the parties. If, on the terms of that contract, the court finds that frustration has occurred, the court must give effect to that finding. The doctrine does not allow the court to refuse relief to a party which it considers is in some way responsible for the drafting of the provisions which result in frustration.

125. [415]

     As to the Developers’ conduct around the time of the rezoning, frustration occurs automatically and does not depend upon the intentions of the parties. Whether the parties were in fact complying with their contractual obligations at the time of the frustrating event is therefore immaterial. Still less can it matter what the parties’ subjective beliefs and motivations concerning enforcement were.

126. [416]

     For these reasons, I conclude that the Contracts were frustrated, at the latest, by the introduction of the new version of cl 4.1B on 30 September 2021. I do not propose to go into whether the earlier imposition of a cap of 131 lots, and of restrictions on approval of lots less than 300m2 in size, effected on 16 July 2021, in fact frustrated the Contracts at an earlier date.

127. [417]

     Frustration of a contract discharges the contract from the date of the frustrating event. The discharge is automatic and does not require any action from the parties or from the court. In New South Wales, remedies arising on discharge are provided by the common law, as supplemented by the Frustrated Contracts Act 1978 (“FCA”).

128. [418]

     It was common ground that if the contracts had been frustrated the deposits payable by the Purchasers were repayable pursuant to FCA s 12. FCA s 15 relevantly provides:

129. [419]

     In his submissions in chief on the frustration issue, counsel for Ahmau acknowledged that the Purchasers would be entitled under s 12 to repayment of their deposits. Counsel also stated that Ahmau “[did] not oppose” orders for payment of interest on the deposit “from the time of the payment of the deposit”. Counsel invited the Court to make an order to this effect.

130. [420]

     In her submissions, counsel for the Preets submitted that if the Court found the Contract had been frustrated the Court should make orders for repayment of the deposit together with interest. But counsel submitted that this would not be enough. In addition, the Court should make an order under s 15 “to allow for a portion of the unexpected windfall to be payable to [the Preets] to avoid unjust enrichment on the part of” Ahmau.

131. [421]

     Mr Bakshi likewise submitted that repayment of the deposit together with interest would not be sufficient to do justice between the parties. He put his submission in the following way:

132. [422]

     Mr Bakshi submitted that the Purchasers should be compensated for the “difference in land value from the date of the contract to the present”. This compensation would allow them “to re-enter the market and purchase a similar lot in the area, thereby putting them in the position they would have been in had the contract been performed”.

133. [423]

     In reply, counsel for Ahmau characterised the claim as “some order for damages or money at large”. In counsel’s submission, this was not permissible. Loss of bargain damages were not available because the contract had not been terminated for breach. Moreover, the notion of the gain being a windfall was misconceived. Counsel pointed out that the Presale Lots had not yet (and would if the Contracts were found frustrated, would never) come into existence. Counsel submitted that the only relief should be the repayments of the deposits with interest.

134. [424]

     It seems to me that, in inviting the Court to award interest on the deposit amounts, counsel for Ahmau was effectively conceding that merely to order repayment of the principal amounts of the deposits would be “manifestly inadequate or inappropriate” or would “cause manifest injustice”. Counsel was recognising that, as the contract had come to an end without any fault on the part of the Purchasers, they should receive appropriate restitution for the financial commitment which they made in entering into the contract, over and above return of their deposits.

135. [425]

     I agree with counsel that no question arises of awarding damages or compensation. The contract has not been terminated for breach and awarding an expectation loss is out of the question. Nor is an allowance for some type of reliance loss appropriate. It was clear to the Purchasers that the sale might not ultimately occur. They were always at risk that, in entering the Contracts, they would be giving up other opportunities and would be incurring costs which might in the end be wasted.

136. [426]

     But this does not mean that merely awarding interest on the deposits would be sufficient. I think that the Purchasers should be seen as effectively having been investors in a subdivision project proposed by the Developers. The economics of that project were based on a subdivision of a certain design, containing 133 lots. There has been a change to the planning environment which has made such a subdivision impossible, and thereby altered the economics of any subdivision which might now take place. But in the meantime, the subject land has increased in value by far more than the rate of inflation (or interest).

137. [427]

     Looking at the matter in that way, I think it would be wrong not to make some allowance by way of restitution in the Purchasers’ favour for the increase in value of the land after 2017. But the allowance should not extend to the whole of the increased value of the Land over the relevant period. The Developers provided the Land and this would have been the lion’s share of the “capital” contributed to the project.

138. [428]

     The Developers however had the benefit of the Purchasers’ deposit monies and the Purchasers’ share of the “return” should be proportionate to the amounts of money so provided. In my view the appropriate course is to order a capital payment to the Purchasers, indexed by an amount which reflects the increase in value of the property.

139. [429]

     It is true that the Presale Lots which were the subject of the Contracts have never been created and now probably never will be. When the land is ultimately subdivided, it will presumably be subdivided into fewer and larger lots. Furthermore, the benefit to the Developers is through increased value in the Leppington Land as a whole (including those parts of it zoned SP2 and RE1) rather than being referable to the aggregate value of the 133 notional lots. In theory, also, the increase in value of the Land might have been offset to some extent by expenditure which was rendered nugatory by the rezoning.

140. [430]

     But the parties in this litigation have been happy to proceed on simple per square metre valuations of the proposed Presale Lots. No attempt has been made by Ahmau to quantify any wasted expenditure and to allocate it to the Presale Lots the subject of the Contracts. In assessing the Purchasers’ share of the increased value of the Land, I think I should rely on the indexation factors deriving from the agreed valuations of the Presale Lots which are in evidence.

141. [431]

     A question arises as to the indexation period. It seems to me that there are two possibilities. One would be to use the percentage gain up to the date of frustration (which could be done using the August 2021 indexation figure of 57%) and thereafter, at, say, 5% per annum to reflect the time value of money. The other would be to use the percentage gain up to the date of trial (using the May 2023 indexation figure of 101%). As indexation was not expressly sought by either side, I will leave it to the parties to see whether they can agree. Otherwise, there can be further argument on the question.

Specific performance

1. [432]

   My conclusion that the Contract was frustrated in September 2021 means that the Purchasers’ claims for specific performance must be dismissed. There is no contract to be enforced. But in case I am wrong on frustration, I will consider whether specific performance would be ordered if the Contracts were still on foot.

2. [433]

   In its defences to the Purchasers’ cross-claims for specific performance, Ahmau alleged that specific performance should be refused because it would be impossible for it to obtain registration of the Presale Plan. Specific performance was also resisted on other grounds, including hardship and a need for continuing supervision by the Court.

3. [434]

   One reason given for the alleged impossibility was that Ahmau did not own all of the Leppington Land to which the Plan related. The defences alleged that Allgood and McInnes did not wish to proceed with the subdivision and would not provide the consent required for Ahmau to lodge a development application for the subdivision of their parts of the Land.

4. [435]

   In her submissions, counsel for the Preets sought to meet this point by narrowing the claim for specific performance to a claim requiring the Plan to be lodged only insofar as it covered the Ahmau Land. Counsel referred to this claim as one for “partial specific performance”. The form of the order sought was that Ahmau: “do all things reasonably necessary to obtain consent for the subdivision of [the Ahmau Land] depicted in the [Presale Plan] and, thereafter, to cause registration of that plan”.

5. [436]

   The general principle applicable to contracts for the sale of land is that any particular piece of land is unique and that damages are therefore an inadequate remedy, and specific performance should usually be granted. Counsel submitted that this principle applied and should result in the making of the “partial” order sought.

6. [437]

   Counsel for the Bakshis, in their written submissions, likewise pressed for an order for specific performance on a “partial” basis. The form of order they proposed was somewhat different from that proposed by counsel for the Preets. It was an order requiring Ahmau to “do whatever is reasonably necessary, and to pay such moneys as may be necessary, to obtain consent and cause the registration of lot 1064 (or alternatively a materially similar lot comprising 313m2) at [the Ahmau Land]”.

7. [438]

   In the course of the closing submissions from counsel for the Bakshis (who addressed first), I pressed him on the form of order which he sought. I pointed out that, under the RPA, what is registered is a plan not a lot in a plan. I also put to counsel that the phrase “materially similar lot” raised questions about whether re-dimensioning or relocating the lot would be permissible for the altered lot to remain “materially similar” to that depicted in the Plan.

8. [439]

   Counsel asked for an opportunity to reconsider the formulation of the precise terms of the order sought. But this never eventuated before his instructions were withdrawn. In Mr Bakshi’s final submissions, he simply repeated the reference to the form of order sought in the closing submissions.

9. [440]

   The principles which apply to the grant of “partial” specific performance are not in doubt. For present purposes they are sufficiently stated in Dyson Heydon, Mark Leeming, and Peter G. Turner, Meagher, Gummow, and Lehane’s Equity: Doctrines and Remedies (LexisNexis, 5th ed, 2015) at [20-130]:

10. [441]

    I have already concluded that SC cl 11.1 referred to registration of the Plan as a whole, not merely registration of the part of the Plan covering the Ahmau Land. To the extent that the clause involved any obligation at all, it involved the performance of a single obligation rather than the performance of a series of separate contractual obligations. It follows that, “partial” specific performance confined to the Ahmau Land is not permissible.

11. [442]

    However, it does not necessarily follow that specific performance must be refused because Ahmau is not the owner of the whole of the Leppington Land. The impossibility point was based on affidavit evidence from Mr Wheadon to the effect that Allgood and McInnes would not cooperate with the subdivision shown in the Presale Plan. But any force that evidence might have had was lost when Mr Wheadon conceded in cross-examination that he was not the one making the decisions.

12. [443]

    Ahmau’s reasonable endeavours obligation would at least extend to seeking the consent of Allgood and McInnes to registration of the Plan. I do not think that it should necessarily be assumed that if specific performance were ordered against Ahmau, the Developers, who control all three companies, would necessarily cause Allgood and McInnes not to cooperate. There is no direct evidence from them to that effect (Mr Kavanagh said only that there were “no current plans” on their part to subdivide the Land). To take that course might expose the Developers to ongoing disputes about compliance, including, possibly, an argument that Ahmau was required, by way of reasonable endeavours, to buy the rest of the Leppington Land itself.

13. [444]

    For reasons which I gave in Ryde Ex Services Memorial and Community Club Ltd v Kaloriziko Ryde Pty Ltd (No 2) [2018] NSWSC 317, I think the Court should be slow to decline specific performance on the grounds of alleged impossibility, at least where the alleged impossibility may depend upon how far the defendant is willing to go to make performance possible. In such cases I think it is generally better to put the defendant to the test by ordering specific performance. The Court can then “wait and see” whether performance is truly as impossible as the defendant claims. If it is, then the contract may be terminated, and damages awarded at that point.

14. [445]

    Applying that approach here, I would not have been prepared to refuse specific performance on the ground of alleged impossibility arising from the fact that Ahmau does not own the whole of the Leppington Land.

15. [446]

    It is convenient to refer next to the argument from counsel for the Preets that the Contracts should be seen as contracts for the sale of land, and accordingly that there is a prima facie entitlement to specific performance on the ground that damages cannot be an adequate remedy. I am not sure that this argument is correct. It seems to me that there is a difference in principle between a contract for the sale of an existing separate parcel of land and a contract which will result in a parcel of land (subject to “minor” alterations) being created by subdivision and then sold.

16. [447]

    A related point is the contention for Ahmau that the grant of specific performance would impose excessive hardship. It would indeed seem quite disproportionate for the Court to require, no doubt at considerable expense, for an entire subdivision of 133 lots to be created simply in order to allow for the sale of two of those lots to the Purchasers.

17. [448]

    These considerations, separately or together, might have led the Court to leave the Purchasers to their remedy in damages for loss of bargain. But in the end, it is not necessary to reach a final decision on that question. There is another consideration which militates against the grant of specific performance. That consideration concerns the enforcement of a specific performance order.

18. [449]

    An order requiring Ahmau to “do whatever is reasonably necessary” to obtain registration of the Presale Plan would, among other things, cover the obtaining of consent from the Council to the subdivision proposed in the Plan. As the evidence in this case shows, the procedure would be a lengthy and complex one. It would involve, in all probability:

    1. (1)

       preliminary meetings with council officers to gauge the Council’s likely reaction and identify any likely points of controversy;

    2. (2)

       preparation of the necessary development application together with the supporting reports and other information;

    3. (3)

       further negotiations with council officers, potentially involving requests for amendment and further information and debate about conditions which might be imposed.

19. [450]

    At each stage of the process numerous judgments would have to be made. Where documents were being submitted, it would be necessary to decide how much information to provide, and in what form. In meetings with the Council, it would be necessary to decide what points to press and what points to concede. All of these judgments could be informed by commercial questions, including costs of undertaking the subdivision and potential effects on revenue to be derived from it.

20. [451]

    An order that a party engage in a process such as this creates obvious potential for contest as to how far an obligation to “do all that is reasonable” might extend. The difficulty would be more acute still if, as the Purchasers contended, the reasonable endeavours obligation extended to making alterations to the Presale Plan in order to obtain registration, even if those alterations were limited to ones which were “minor” (which in itself may involve contestable matters of judgment).

21. [452]

    Thus, at every point in the process, Ahmau’s executives and consultants would find themselves asking how many more representations they needed to make, how much more they needed to spend, and how much commercial upside they needed to concede, to comply with the obligation. Nothing in the orders proposed by the Purchasers would help them to decide how to weigh the competing factors in a way which would satisfy the reasonable endeavours obligation.

22. [453]

    As we have seen, the Purchasers ultimately acknowledged that the changes to the planning instruments would require further work on the subdivision contemplated in the Presale Plan. This included the preparation of building envelope and precinct development plans (assuming SEPP cl 4.1AB was applicable) to accompany the Plan. It also included the formulation of usage conditions, or the alteration of the Plan itself, to deal with the surplus lot problem created by cl 4.1B. I think it is telling that, in the end, neither Ms Hodgkinson nor counsel for the Purchasers were prepared to specify what exactly the form of the application should be in this regard. They simply retreated into the generality of saying that Ahmau should “do all that is reasonable to obtain registration” of the Plan, or, even more problematically, of “a plan substantially similar” to the Plan.

23. [454]

    It is well established that an order for specific performance must be refused if it would involve constant supervision by the court. It is also sometimes said that specific performance must be refused if the orders sought, which expose the defendant to risk of prosecution for contempt, are unclear. It is not necessary to decide whether these are two separate rules. In the present case they come to the same thing. The uncertainty in determining the limits of Ahmau’s reasonable endeavours obligations necessarily means that at every point the Court would have to be consulted to determine what the obligation entailed. As a practical matter, the orders sought by the Purchasers would require continual supervision by the Court. Even if I had concluded that the Contract had not been frustrated, specific performance would be refused.

Statutory leave to rescind

1. [455]

   My conclusion that the Contracts were frustrated in September 2021 means that rescission cannot be granted. According to the ordinary principles of contract law, frustration terminated the contract and there is nothing to rescind. It was not suggested by any party that CA s 66ZS altered the position.

2. [456]

   Ahmau’s application for leave to rescind must therefore be dismissed. But again, in case I am wrong in my conclusion on frustration I will consider whether or not I would have ordered rescission had I concluded that the Contracts were still on foot.

3. [457]

   Of course, a conclusion that the application for rescission would be refused does not affect my decision on specific performance. But if I had found that the Contracts were still on foot and had decided to refuse rescission, it would have been possible for the Purchasers to recover loss of bargain damages.

4. [458]

   CA Part 4 Division 10 was originally enacted in 2010. I was referred by the parties to the Second Reading Speech by the relevant Minister (Mr Ajaka MLC). In his introductory remarks, the Minister stated:

5. [459]

   After giving a broad description of the proposed enactment, the Minister continued:

6. [460]

   CA s 66ZS in its present form relevantly provides:

7. [461]

   I was referred to the parties to four first instance decisions on CA Part 4, Division 10. It is convenient to say something about those cases at this point.

8. [462]

   The first decision is Jobema Developments Pty Limited v Zhu & Ors [2016] NSWSC 3 (Black J). That case concerned an off-the plan contract made in 2013 for the purchase of a unit in a residential development. The sunset date was December 2015. In 2014, the plaintiff company bought the development site from the original developer and assumed its obligations under the contract in question. Owing to delay by the original developer, the development was not completed by the sunset date. The plaintiff company, which had not itself been responsible any further delay, applied for leave to rescind.

9. [463]

   At the time the application was heard, in January 2016, completion was not expected until mid-2017. The plaintiff relied, in addition to the delay by the original developer, on various other factors. These were: increased construction costs; inability to obtain construction finance without entering into new off the plan contracts which would reflect the increase in market prices; and the intervening introduction of the then-new legislative regime governing off the plan contracts. But his Honour pointed out that the plaintiff would have been aware of the original developer’s delay; the financial factors were not substantiated on the evidence; and the new legislation was an ordinary business risk. Leave to rescind was refused.

10. [464]

    The second decision is DGF Property Holdings Pty Limited v Di Federico; DGF Property Holdings Pty Limited v Butros [2018] NSWSC 344 (Emmett AJA). That case concerned eight off the plan contracts each of which was for the purchase of a lot in a rural subdivision. Part of the land in the subdivision was being acquired by the developer under a contract with the existing owners, the Di Federicos. Disputes arose about that other contract, which resulted in the subdivision being delayed. The developer applied for leave to rescind. The dispute between the developer and the Di Federicos was heard at the same time.

11. [465]

    In the rescission proceedings against the purchasers, the developer blamed the delays on the Di Federicos. The purchasers alleged that the developer itself had been to blame, at least in part. Their allegations included allegations of bad faith and unreasonableness. There were also issues as to the financial effect of rescission on the developer and on the individual purchasers.

12. [466]

    What was common ground was that the lots had increased significantly in value and that the subdivision could be completed “quickly”. Late in the proceedings, the developer offered the purchasers an undertaking, if leave to rescind were granted, to complete the subdivision as soon as reasonably possible; to re-sell the lots; and to give the purchasers a 40% share of the difference between their purchase prices under the contracts and the price achieved on re-sale.

13. [467]

    His Honour discussed the parties’ rival contentions as to whether the developer was responsible for the delay. He acquitted the developer of bad faith and unreasonableness, but also found that the developer’s conduct had been “less than entirely efficient and competent”. He also did not reach any final conclusion on the financial effects of rescission on the parties. In the end, he decided to offer to the developer a grant of leave to rescind based on a revised undertaking which would allow the purchasers an option to ‘buy back’ their lots at the original contractual price together with an increased amount to make allowance for interest from May 2017 (the Di Federicos having been found liable to the developer in the other proceedings for damages up to that date) onwards.

14. [468]

    The third decision is Silver Star Fashions Pty Ltd v Dal Broi [2018] NSWSC 1445 (Darke J). That case concerned nine off the plan contracts each of which was for a unit in a mixed-use development. The contracts were made in 2014 and the sunset date for each of them was December 2016.

15. [469]

    The development was delayed for various reasons. Some of these were the responsibility of the developer. Others were not; in particular, the builder who had been contracted to undertake the building work became insolvent. In 2016 the developer retained a project manager, OZD, to complete the development. Under the contract between the developer and OZD, OZD took on the commercial risks and benefits associated with the project, including the profit which would result if the contracts were rescinded and the units re-sold. OZD then contracted the completion of the works to a new builder and building resumed, but not in time for the building works to be completed by the sunset date. In January 2017, at the behest of OZD, the developer gave notice of rescission to take effect in March. Rescission proceedings were later brought by OZD in the developer’s name.

16. [470]

    By the time the proceedings came on for hearing in this Court, the strata plan had been registered, and there was no apparent impediment to the completion of the contracts. The units in question had increased substantially in value. Darke J found that the developer had been responsible for a considerable part of the overall delay between inception of the contracts and the registration of the strata plan, but he was not affirmatively satisfied that the developer’s delays had been responsible for the failure to complete the development by the sunset date.

17. [471]

    His Honour found that the notices of rescission, and statements in prior correspondence about rescission, had been inaccurate and incomplete. They failed to provide a complete description of the reasons for the delay, or why the developer was proposing to rescind. His Honour considered that this amounted to unreasonable conduct on the part of the developer (through OZD). They did not, however, induce any relevant change of position on the part of the purchasers.

18. [472]

    His Honour took into account that: there had been significant delays by the developer (all not to the extent of manufacturing events to its commercial advantage); there was no obstacle to the completion of the contracts; failure to do so would deprive the purchasers of a valuable asset, given the increases in market value of the units; rescission would also impose no financial detriment on the developer; and OZD, which would lose the opportunity to profit from rescission, had come into the project with a clear understanding that rescission might not be possible. Leave to rescind was refused.

19. [473]

    The final decision was Paolucci v Makedyn Pty Ltd [2020] NSWSC 1871 (Rein J). The case concerned land which was purchased by a developer from the plaintiff to be subdivided and developed. The sale was accompanied by an off the plan contract for the retransfer of three lots back to the plaintiff with houses built on them. The sunset date was May 2017. This date was not met but neither party sought to rescind, and the plans of subdivision were registered by May 2018. Disputes however arose between the parties as to the dimensions of two of the houses to be built under the re-transfer contract. As a result, the builder did not commence the building work. The plaintiff sought specific performance of the re-transfer contract in accordance with her interpretation of it. The developer cross-claimed for leave to rescind.

20. [474]

    The plaintiff did not in the end allege that the developer had been responsible for the delay in obtaining the subdivision. There was some delay in preparing the plans for the houses, but this had no material effect and had been cured by November 2108. Rein J found that there had been no bad faith or deliberate breach on the developer’s part, and it had not been unreasonable for the developer to delay the building work until the dimensions issue was resolved.

21. [475]

    His Honour found in favour of the developer on the dimensions issue. But once he had done so, this removed the impediment to undertaking the building work (which would take a matter of months) and completing the re-transfer contract. He considered that to grant leave, thus discharging the developer from its obligation to build the houses, would be unduly advantageous to it. Leave to rescind was refused.

22. [476]

    As the developer was not disputing its obligation to proceed with the re-transfer contract (as interpreted by the Court), specific performance was also refused. There was an appeal, but it did not concern the rescission issue: Paolucci v Makedyn Pty Ltd [2021] NSWCA 215.

23. [477]

    In her initial report Ms Sneyd was asked a number of questions which formed the basis of the ensuing debate between her and Ms Hodgkinson. Three of those questions are relevant for present purposes.

24. [478]

    The first question was whether the four-year period allowed in the Contracts for the sunset event (the registration of the Presale Plan) to occur was “reasonable”. Ms Sneyd thought that it was. In saying this, she gave the qualification that the timing of construction works was outside her area of expertise. It seems that she assumed that the construction works would take twelve months, and each of the other steps (the land being rezoned; obtaining development approval and registration of the plans) would take twelve months or so each. The registration of the plan could then be completed in the remaining twelve months.

25. [479]

    Ms Hodgkinson accepted that she also lacked expertise on construction timelines. She pointed out that the rezoning might well take more than twelve months; and obtaining development approval would have likely taken more than twelve months. Nevertheless, she seems to have accepted that four years was a reasonable time to have allowed to complete the process, looking forward from 2017. In the joint report Ms Sneyd and Ms Hodgkinson agreed that the four-year period was “capable of providing sufficient time for registration”. The question was not pursued further when the experts gave concurrent evidence on 13 May last year.

26. [480]

    The second question was why registration of the plan was not achieved prior to the sunset date. Ms Sneyd’s response was that the plan of subdivision could not be registered until the rezoning had taken place and the Council would have lacked power to approve the development application until that had happened. It did not happen until after the sunset date. Until that point, the Council lacked power.

27. [481]

    Ms Sneyd also pointed out that the amendments to the SEPP were not publicly known or exhibited during the public consultation process which took place before the rezoning. Later in her report she stated that there was nothing which Ahmau could have done to bring the rezoning date forward.

28. [482]

    After referring to the Council’s lack of power to approve a subdivision of the Leppington Land until after rezoning had occurred, Ms Sneyd added:

29. [483]

    In her oral evidence, Ms Sneyd provided further information the dealings between her firm and the Council to which she had referred in her report. She explained that, although the amendments to the SEPP were made on 16 July, they would not have been publicised for a day or so (in fact, in the present case, the media release was issued the following Monday, 19 July). The updating of the maps referred to in the rezoning might take a few days longer.

30. [484]

    The DAs for other clients to which Ms Sneyd referred were lodged on 16 July, without reference to the rezoning which was effected on that day. They were accepted by the Council but when the Council became aware of the rezoning, the Council asked that they be withdrawn and not re-lodged until after the new DCP had been issued.

31. [485]

    Ms Hodgkinson accepted that if an application had been lodged for approval of the Presale Plan prior to 16 July, the Council would have had no power to grant it. This was common ground in the joint report. It was also common ground that the changes made to the SEPP on 16 July 2021 (and 30 September 2021) had not been publicly foreshadowed.

32. [486]

    Ms Hodgkinson in her report, while she accepted that Council had no power to approve the rezoning, observed that this would not prevent a development application from being lodged, or at least prepared, before the rezoning took effect. But ultimately, she appears to have accepted that, that while, in theory the Council would have had power to receive a development application based on a foreshadowed rezoning prior to 16 July, in practice the Council would not do so. She maintained, however, that it would be possible for preparatory work to have been done.

33. [487]

    This point was put to Ms Sneyd during her concurrent evidence. She accepted that parts of the supporting reports could be prepared. However, those reports all, to a greater or lesser extent, depended on the nature of the application and there was always a risk of work being wasted if it was undertaken prior to the rezoning. When asked, based on her experience, of what preparatory work of this kind she would expect a developer to have done prior to rezoning, she said:

34. [488]

    The third question upon which Ms Sneyd was asked to advance an opinion concerned Mr Whitting’s November 2021 report ([223]-[225] above). For convenience I set out the critical paragraphs in the report, which I have numbered one to four, again:

35. [489]

    For the purposes of her report Ms Sneyd was asked to comment on Mr Whitting’s point (at [3]) concerning the practicability of lodging a development application for the subdivision contemplated by the Presale Plan before November 2021. She responded that she disagreed but explained:

36. [490]

    In her report, Ms Hodgkinson disagreed with Mr Whitting’s statement (at [2]) that the rezoning and updating of the DCP was accompanied by density and maximum dwelling controls which were “unforeseen”. Ms Hodgkinson pointed out that as early as 23 April the previous year Mr Whitting had understood that there would be a maximum of 15 dwellings per hectare (see [196] above).

37. [491]

    Ms Hodgkinson also disagreed with the statement (at [5]) that it was only in mid-November 2021 that the Developers were in a position to proceed with planning for submission of a development application. Because, in her view, the density restrictions did not create any obstacle to the registration of that part of the plan which covered the Ahmau Land, she did not agree that subdivision or planning works undertaken to that point were rendered obsolete. She also stated that any environmental studies required in support of the development application could have been completed while the rezoning was being undertaken, or, indeed, at any time from the commencement of the contract.

38. [492]

    In her oral evidence, Ms Sneyd agreed that the Developers had an opportunity to progress the subdivision after 16 July 2021. They would not necessarily have had to wait until the DCP was available:

39. [493]

    Ms Sneyd however accepted, when it was pointed out by counsel for Ahmau, that the DCP required that the development application take the DCP into account. The following evidence ensued:

40. [494]

    Counsel for Ahmau also put to Ms Hodgkinson that the DCP ultimately required that its terms be taken into account in formulating the development application, and she agreed. She did not, however, agree with counsel that there was no practical, rather than theoretical possibility council accepting a development application prior to the issue of the revised DCP. She stated that “the balance of the DCP could have been used to substantially inform and assess a development application”.

41. [495]

    But when asked about Camden’s Council’s attitude Ms Hodkinson said:

42. [496]

    Later Ms Sneyd was taken back to the question by counsel for the Preets. The following evidence ensued:

43. [497]

    Counsel for each of the parties presented their submissions by reference to the factors listed in the subparagraphs of s 66ZS(7). In what follows I will adopt a similar approach, discussing the application of each of the subparagraphs (except subparagraph (h): it was common ground that no further matters for consideration had been prescribed by regulation). I will then deal with the balance between the different factors before expressing my conclusion on whether Ahmau I would grant leave to Ahmau to rescind if the Contracts were still on foot.

44. [498]

    Terms of the Contracts (s 66ZS(7)(a)): I have described the relevant provisions of the Contracts at [293]-[303] above, and at [304]-[314] and [400]-[405] I have addressed the questions which arose concerning the interpretation of SC cll 11.1 and 11.2. In summary:

    1. (1)

       Each Contract was a contract for the sale of a proposed Presale Lot depicted in the Presale Plan, but completion of the Contracts was conditional on the registration of the Plan as a whole (that is, extending across the whole of the Leppington Land).

    2. (2)

       Ahmau was obliged to do whatever was reasonably necessary to cause the Plan to be registered.

    3. (3)

       Ahmau had a right, but no obligation, to alter the area, measurements or boundaries of the subject Lots, but otherwise the Contract did not provide for any variation of the Presale Plan.

45. [499]

    A further issue arose between the parties as to the interpretation of the Contracts which I will address at this point. The question was whether Ahmau’s obligation with respect to registration of the Plan ceased once the sunset date passed without registration of the Plan, or continued thereafter.

46. [500]

    A similar question was referred to by Emmett AJA in DGF. As in the present case, the contracts in question incorporated both the Law Society standard conditions (including SF cll 28 and 29) and bespoke special conditions (including a clause providing for a right of rescission if the plan of subdivision was not registered by a specified sunset date). The clause (cl 42.5 in all of the contracts except for one, which was numbered 29.5) provided:

47. [501]

    One of the arguments for the Purchasers was that the vendor had no contractual right of rescission. That right depended, under the terms of each of the contracts, on the vendor having complied with its ‘reasonable endeavours’ obligation. The Purchasers alleged that the vendor had not done so. His Honour stated (at [203]-[205]):

48. [502]

    His Honour returned to the question at [234]:

49. [503]

    His Honour ultimately concluded that there had been no breach by the vendor which had prevented the registration of the plan by the relevant sunset date, nor even a breach which had delayed the registration of the plan during that period. Accordingly, the Purchasers’ argument failed.

50. [504]

    A similar point was referred to by Rein J in Paolucci. Again the relevant contract incorporated both the Law Society standard term and bespoke provisions permitting rescission if the subdivision plan was not registered by the sunset date. Clause 31 of the special conditions relevantly provided:

51. [505]

    Again it was argued that the vendor had no contractual right of rescission because of alleged breaches of its reasonable endeavours obligation. Those breaches were said to have occurred after the sunset date; it was not alleged there had been any breaches prior to that date. It was argued for the vendor (or the purchaser so perceived it) that there was no obligation to comply with the obligation after the sunset date.

52. [506]

    Rein J stated (at [54] and [59]):

53. [507]

    The sunset date was in May 2017. Neither party sought to rescind, however, and the subdivision plan was registered in May 2018. His Honour found that there had been a later failure by the vendor to provide layout plans required for the completion of the building works (cl 32.1(c)) in a timely way. They should have been provided well before October 2018 but were not in fact provided until December 2018.

54. [508]

    The application to rescind was not made until June 2019. It was not suggested that there had been any default which had prevented the registration of the plan before May 2018. His Honour rejected a further argument that the vendor had, by its subsequent conduct, agreed to an extension of the rescission date, and proceeded on the basis that the vendor therefore still had a contractual right to rescind.

55. [509]

    In the present case, counsel for the Bakshis took the lead in presenting the Purchasers’ arguments on this point. Counsel proceeded on the basis that the general provisions of SF cl 29.4 applied to the condition imposed by clause 11.1, thus subjecting Ahmau to an obligation to “do whatever [was] reasonably necessary to cause” registration to take place. As already noted, this appears to have been common ground.

56. [510]

    In his submissions, counsel invited me to apply the conclusion expressed by Rein J in Paolucci. Counsel noted that there had been no criticism of that conclusion on appeal. Counsel also referred me to what Emmett AJA had said in DGF.

57. [511]

    Counsel for Ahmau submitted that, while SF cl 29.4 may have picked up the condition in cl 11.1 prior to the sunset date, it did not do so thereafter. This was because “the event” for the purposes of cl 29.4 was not merely the registration of the Presale Plan. It was registration of the plan by the date specified in cl 11.1. Once the sunset date had passed, the cl 29.4 obligation was spent.

58. [512]

    Counsel submitted that Rein J’s conclusion in Paolucci related to the special condition in the contract in that case, not to SF cl 29.4. At least this was so for the reasoning in [54]. Counsel also submitted that the conclusion was obiter, because it was not essential to his Honour’s ultimate disposition of the case. But if this was not so, I should reject his Honour’s view as incorrect.

59. [513]

    I think it is clear that Emmett AJA’s reasoning in DGF was addressed to the terms of the special condition in that case. The reasonable endeavours obligations in that special condition was different from the reasonable endeavours obligations in the present case, and more onerous from the vendor’s point of view. It obliged the vendor, not merely to take reasonable endeavours to register the plan by the sunset date, but to use all reasonable endeavours to achieve registration as soon as possible. Arguably, it is more difficult to interpret a clause in that form as expiring on the sunset date. Furthermore, his Honour’s reasoning was clearly obiter.

60. [514]

    It is not quite so clear that Rein J in Paolucci was considering only the terms of the relevant special condition. That may be so for [54] but [59] expressly refers to cl 29.4. Moreover, the reasonable endeavours obligation in the special condition being considered by his Honour only referred to registration by the sunset date, and is therefore comparable with the reasonable endeavours obligation in the present case. There may also be room to argue about whether his Honour’s conclusion was obiter or not. In deference to counsel for Ahmau I will, however, consider the question afresh.

61. [515]

    I have difficulty with counsel’s interpretation of the term “the event” in cl 29.4. In my view, in the ordinary use of language, there is a distinction between an event and the date on which it happens. The distinction is, I think, reflected in cl 29 itself, particularly clauses 29.2 and 29.9. I think, therefore, that the more natural reading of the clause as a whole, including cl 29.4, is that “the event” was the registration of the plan, not the registration of the plan by the sunset date.

62. [516]

    I think that this conclusion is supported by considerations of convenience and common sense. A critical factor is that, as both Emmett AJA and Rein J mention, the Contract remained on foot after the sunset date. Ahmau could not rescind unless leave was given. The Purchasers could have rescinded at will, but were not obliged to do so. If counsel’s argument were correct, the parties might remain yoked together indefinitely, without any means of rescinding the Contract on Ahmau’s side or of forcing completion of it on the Purchasers’.

63. [517]

    For these reasons, I conclude that Ahmau’s reasonable endeavours obligation under SF cl 29.4 continued after the sunset dates expired under the Contracts. If the Contracts are still on foot, those obligations would still apply.

64. [518]

    In passing, I should note a significant difference, so far as the contractual right of rescission is concerned, between cl 29.4, so interpreted, and the special conditions considered by Emmett AJA and Rein J. In both DGF and Paolucci, the right of rescission arose as at the sunset date. Subsequent failure to comply with the reasonable endeavours obligation, while a breach of contract and potentially relevant as such to the exercise of any discretion to rescind, did not deprive the vendor of that accrued right. This was because in each case the clause expressly conferred a right of rescission on the vendor if the relevant condition was not satisfied by the sunset date.

65. [519]

    But on my construction of SF cl 29 in the present case, and confining attention to the right of rescission conferred by cl 29.5, that might arguably have not been so in the present case. Clause 29.5 prevented Ahmau from rescinding unless it had “substantially complied” with its obligation. If, as I have concluded, cl 29.4 continued to operate after the sunset date, then arguably the conditionality of rescission, at least for the purposes of cl 29.5, likewise continued.

66. [520]

    This possibility suggests that in future cases where the Law Society standard terms are used, there may need to be careful consideration of the overlap between SF cl 29 and the wording of any special conditions dealing with rescission for failure to comply with a condition on which completion depends. In particular the operation of the maxim generalia specialibus non derogant might need to be considered. Possibly the overlap between cl 28.3, which imposes a condition of “compliance”, and cl 29.5, which requires “substantial compliance” might also need to be considered, and this may be an additional reason why the standard clauses should be reviewed. But none of this was argued in the present case and I can pass it by.

67. [521]

    Alleged breach of reasonable endeavours obligation: Counsel for the Purchasers alleged that, by failing to prepare and lodge a development application for approval of the subdivision depicted in the Presale Plan, the Developers put Ahmau in breach of its reasonable endeavours obligation. Counsel contended that, by the time the sunset dates passed in March and April 2021, Ahmau was already in breach, and it remained in breach thereafter. Counsel for Ahmau disputed the allegation, at least for the period up to the issue of the revised DCP in late October 2021.

68. [522]

    Breach, to the extent established, was accepted by all parties as a relevant factor for the purposes of s 66ZS(7). I will deal with the question under a separate sub-heading without going into whether it arose under subparagraph (a) or subparagraph (b), or perhaps subparagraph (g).

69. [523]

    I have set out the evidence of Ms Sneyd and of Ms Hodgkinson on the question earlier in the judgment ([315]-[340] above). Counsel for the Purchasers essentially invited me to adopt Ms Hodgkinson’s views. Counsel for Ahmau asked me to accept Ms Sneyd’s.

70. [524]

    Counsel for the Purchasers accepted that prior to the rezoning on 16 July 2021 the Developers could not reasonably have been expected to lodge a development application. But counsel submitted that after that date, they could, and should, have done so. Counsel also submitted that the Developers could, and should, have undertaken the task of preparing the application and the supporting reports before 16 July (and indeed before the expiry of the sunset dates). Counsel suggested that had this been done the Developers would then have been able to proceed with the lodgement of the application as soon as the rezoning took place.

71. [525]

    I will deal first with what the Developers should have done before 16 July. Clearly, they could have undertaken preparatory work on a development application. Equally clearly, however, that would have involved the risk of undertaking work prematurely. It might have resulted in costs being incurred unnecessarily early, or being wasted if the rezoning resulted in changes which had not been anticipated.

72. [526]

    Ms Sneyd’s experience was that there was no uniform practice among developers so far as undertaking preparatory works in anticipation of rezoning was concerned. The degree to which this was done depended upon the individual developer’s “tolerance for risk”. This accords with common sense. Ms Hodkinson did not suggest to the contrary.

73. [527]

    Delay in completing the rezoning, and unexpected changes to the planning instruments, were not the only sources of cost risk in the present case. If the sunset date passed without the plan having been registered (which was a certainty by early 2020), either party would have a right to rescind. The Developers might have incurred significant preparatory costs only to find the Purchasers deciding, after the sunset date, to exercise their right of rescission.

74. [528]

    This problem was particularly acute in the period prior to the expiry of the sunset dates. After those dates had passed, steps were available to the Developers to bring the question of rescission to a head. But prior to the expiry of the sunset dates there was nothing that they could do to achieve certainty.

75. [529]

    Even after the sunset dates had passed, the Developers still faced the uncertainty that they did not know how long the rezoning would actually take. Suppose there was a preparatory task which would take two months. Were they obliged to incur the cost of it straight away, even though the rezoning might take another year? Or were they entitled to defer the cost for some period, and if so, for how long?

76. [530]

    The facts of this case show that this point is not merely theoretical. As at the sunset dates, the rezoning was not expected until the end of 2021 at the earliest. The fact that it actually occurred in July came as a surprise.

77. [531]

    The Developers had of course undertaken an obligation to do all that was reasonably necessary to procure the registration of the Plan, and to bear the costs of doing so. But it is another thing entirely to say that they were obliged to shoulder the risk of incurring additional costs which might not in the end prove necessary. They had not undertaken any obligation to procure the registration of the Plan as quickly as possible.

78. [532]

    Of course, there was only a risk of costs being wasted. The risk might not have been very great. But I do not see why it was reasonable to require them to bear any unnecessary risk at all.

79. [533]

    If I am wrong in this view, that would not be the end of the analysis. It would still be necessary to weigh the cost risk facing Ahmau at the time against the benefit which might have been achievable from undertaking the preparatory work in question. The test appears similar to that which the courts apply in determining what precautions a defendant who owed a duty of care to the plaintiff was obliged to take to avoid harm to that plaintiff (the “Shirt calculus”: see Roads and Traffic Authority of NSW v Dederer (2007) 234 CLR 330 at 353 [65]). Even if there is a foreseeable risk, the outcome of the calculus may be that no action is required.

80. [534]

    In undertaking the Shirt calculus, it is essential to identify with precision the precaution which the defendant allegedly should have taken. Until that is done, it is impossible to make any meaningful analysis of the costs and other downsides of taking precautions and the countervailing benefits of doing so. As Isaacs ACJ said in Metropolitan Gas Co v City of Melbourne (1924) 35 CLR 186 at 194:

81. [535]

    This point is important for present purposes. The evidence really went no further than generalised statements that some preparatory work could have been done. There was no identification of specific tasks. Nor was there any analysis of the critical path for the project which might have made it possible to draw conclusions about how much time the Developers would have expected to save by undertaking the preparatory work in question before the rezoning had taken place.

82. [536]

    It is true that Mr Whitting’s report allowed six months for the undertaking of “environmental studies” before the development application process was to begin, and Ms Hodgkinson said that there was no reason why such studies needed to wait for the rezoning. But Mr Whitting wrote his report after the rezoning had been effected (and the DCP had been published). It remains unclear exactly what “studies” could have been undertaken before rezoning and how much time the Developers might have expected to save, and at what cost, by doing so. Mr Whitting would have been ideally placed to answer these questions when he gave evidence, but he was not asked.

83. [537]

    I turn now to whether, once the rezoning had been effected on 16 July 2021, the Developers should have proceeded to lodge their development application (or at least undertake preparatory work to that end) as counsel for the Purchasers contended.

84. [538]

    The evidence of Ms Sneyd about the Council’s attitude to dealing with such applications at the time creates a preliminary obstacle for counsel’s contention. I understood it to be common ground between the parties that, for an application of the type under consideration, the first step would be a pre-DA meeting. How could the Developers pursue an application if the Council was refusing to engage in such meetings? This question went unanswered by Ms Hodgkinson.

85. [539]

    Even if this obstacle could be overcome, there was another factor at work. Until the revised DCP was issued, the Developers could not have been certain that they had all the relevant planning instruments to work from. There was an obvious risk that when the revised DCP did come out, the application would have to be reconsidered, which could make earlier work redundant.

86. [540]

    That this risk was not merely theoretical is shown by subsequent events. The change to cl 4.1B which imposed a maximum density of 16.5 dwellings per hectare on the site was not in fact introduced until 30 September 2021 and, it seems, did not become clearly known until it was incorporated in the revised DCP at the end of October.

87. [541]

    As already noted, the statement in Mr Whitting’s report that the change was “unforeseen” is somewhat strange in the light of the advice he had given to Mr Kavanagh in April 2020, but in the end, there is no reason to reject it. In any event, Mr Whitting could hardly have advised the Developers, before 30 September 2021, to prepare and lodge a development application based on a dwelling per hectare density limit which did not at the time actually exist.

88. [542]

    Counsel’s alternative submission that, after 16 July 2021, the Developers should at least have undertaken preparatory work with a view to later lodgement of the development application, raises the same questions as the pre-16 July submission. I reject it for the same reasons. In my view it was not unreasonable to defer the commencement of the application process, including the production of supporting reports, until after the DCP had been issued. I am not satisfied that there was any breach of the reasonable endeavours obligation until after the issue of the DCP in October 2021.

89. [543]

    At that point, however, the position changed. The way was clear for the Developers to prepare and lodge a development application. Of course, there was no obligation to lodge it as early as possible. It might not have been unreasonable to defer proceeding with an application for a reasonable period to allow rescission negotiations to take place. But between November 2021 and April 2022 the Developers did nothing about rescission or about proceeding with a development application either. In my view, that was a breach of the reasonable endeavours obligation under SF cl 29.4 (if I assume, as I must for present purposes, that approval of the Presale Plan was still possible).

90. [544]

    In the second half of April 2022, the Developers made a fresh attempt to negotiate rescission of the outstanding Contracts. When that failed, they initiated the present proceedings. There is a question as to whether the breach which began in November 2021 continued for the period of the negotiations which began in April 2022 and has continued during these proceedings. It might be argued that it was not unreasonable for the Developers to defer expenditure on a development application while Ahmau exercised its statutory right to apply for leave to rescind. This question was not debated by the parties, and, on the view I have taken, does not need to be answered in this judgment.

91. [545]

    Whether Ahmau acted unreasonably or in bad faith (s 66ZS(7)(b)): Counsel for the Bakshis contended that in its conduct towards them, Ahmau had been guilty of bad faith, or at least unreasonableness, for the purposes of subparagraph (7)(b). This contention was put in two ways.

92. [546]

    First, counsel pointed out that from late July 2021 onwards Ahmau’s commercial strategy was to try to sell the Leppington Land to a third party rather than to carry out the subdivision. Ahmau took no steps to pursue an application for consent with the Council. As counsel put it, Ahmau had “shunned” or “abandoned” the Contracts. This in itself, counsel submitted, constituted bad faith or unreasonableness.

93. [547]

    Counsel’s second contention was that Ahmau’s conduct towards the Bakshis was misleading and deceptive. Counsel made various different allegations in this regard.

    1. (1)

       Counsel submitted that Ahmau, through its agent Mr Sergi, repeatedly represented to Mr Bakshi that the subdivision was “on track”. From 2019 at the latest, this was incorrect. Nothing had happened with the rezoning and there was insufficient time to register the Presale Plan before the sunset dates under the Contract. Through the Developers, Ahmau was aware of this, but no disclosure was made.

    2. (2)

       Counsel next criticised the correspondence from Mr Alcorn in August and September 2021 in which rescission was sought on Ahmau’s behalf. Counsel pointed out that the term implied into the Contract by s 66ZS(4) required a rescission notice to specify, not only what the reason for the sunset event not occurring by the sunset date was, but also “why the vendor [was] proposing to rescind the contract”. Mr Alcorn’s correspondence only mentioned the delay in the timetable owing to the delay in rezoning the Land. It did not mention that, by this point, the Developers had embarked on a strategy of selling the land and had “abandoned” their obligations under the Contracts. In counsel’s submission, the correspondence therefore hid the real reason why rescission was being sought.

    3. (3)

       Counsel submitted that the concealment continued in Mr Draybi’s April 2022 letter to the Bakshis. The letter continued to give the impression that rescission was being sought because of planning delays, but the real reason was that the Developers were now in negotiations to sell the Leppington Land (for a capital profit of tens of millions). That was not disclosed in the letter, or in the subsequent correspondence with Mr Bakshi, despite his extensive requests for information.

    4. (4)

       Counsel also criticised the use made in Mr Draybi’s letter of Mr Whitting’s November 2021 report. The letter presented the report as an independent one which, among other things, described the tasks which had been undertaken to comply with Ahmau’s obligations under the Contracts. In fact, counsel submitted, Mr Whitting was “an employee” of the Developers who was prepared to alter his opinions under pressure from Mr Kavanagh. The tasks in question had been undertaken to help with the marketing of the Land and the Developers had done nothing to pursue a development application. The report was in truth an ex post facto attempt to justify their inaction.

94. [548]

    Mr Preet had not, like Mr Bakshi, made enquiries about the progress of the subdivision before January 2021. Counsel for the Preets therefore did not make any allegation of misleading and deceptive conduct for this period. Otherwise, her contentions ran generally along the same lines as the contentions by counsel for Mr Bakshi.

95. [549]

    The starting point in evaluating these submissions is to determine the scope of unreasonableness and bad faith for the purposes of subsection (7)(b). It is usual to speak of unreasonableness or bad faith in the exercise of some power or discretion. In the case of subsection (7)(b), the obvious candidate is the exercise by the vendor of a right to rescind the off the plan contract.

96. [550]

    Restrictions on such a right are well established as part of the law and form part of the background to the enactment of s 66ZS. The starting point is the rule that a party will be prevented from exercising a right of rescission which results from circumstances created by the breach or illegal conduct of that party: Plumor Pty Ltd v Handley (1996) 41 NSWLR 30 at 34. And the parties’ contractual obligations will usually include an obligation to act reasonably, or at least in good faith: Burger King Corp v Hungry Jack's Pty Ltd (2001) 69 NSWLR 558.

97. [551]

    To my mind, it is clear from the second reading speech that Parliament’s intention was for the new legislation to operate within the framework of the existing law. Its main purpose was procedural: it was designed to relieve purchasers from some of the practical difficulties they would otherwise have had in proving breach.

98. [552]

    The principles restricting rescission which I have described are not confined to equity; they are part of the common law of contract. Nevertheless, they are clearly what the Minister had in mind in stating that a vendor is not entitled to act “arbitrarily or capriciously or unreasonably” in rescinding a contract. It follows, in my view, it is clear that the references to unreasonableness and in bad faith in subsection (7)(b) should be understood in the context of the way those principles operate under the general law.

99. [553]

    In Silver Star, it was submitted that misleading representations made by the vendor to the purchasers did not constitute unreasonable conduct for the purposes of (7)(b) because those representations were not concerned with the construction works. Darke J responded (at [151]):

100. [554]

     His Honour considered that (at [163]-[164]):

101. [555]

     I respectfully agree with his Honour that there is no reason to limit the reach of subsection 7(b) to conduct occurring in the course of construction (or, in this case, subdivision). But I am not sure that s 7(b) covers any conduct whatsoever “in relation to” the contract which is, in a general sense, unreasonable or in bad faith. That would risk turning an application under CA s 66ZS into a Royal Commission into the vendor’s conduct under the contract.

102. [556]

     I think that there must be a connection between the conduct and the vendor’s power of rescission. That connection may be direct (such as where the power is exercised for an improper purpose) or indirect (such as where the conduct is used to manufacture a ground for rescission). Breach of the term implied by s 66ZS(4) would be covered, because that term governs the manner in which the right to rescind must be exercised. But conduct having no effect on the accrual or exercise of the right would not be, although it could be relevant under other sub-paragraphs.

103. [557]

     Returning to the complaints made by counsel for the Purchasers about Ahmau’s conduct, there is a sense in which it is correct to say that the Developers “shunned” or “abandoned” their obligation to proceed with the subdivision. I have concluded that on the true interpretation of the Contracts, SF cl 28.4 obliged Ahmau to do all that was reasonably necessary to procure registration of the Presale Plan, not some plan similar to that Plan. But from early July 2021, even before the rezoning, the Developers were proceeding on the basis that it would be sufficient compliance with the Contract if Ahmau were to convey to each of the Purchasers a lot of equivalent size to the one which was the subject of their Contract, and were located somewhere or other on the Leppington Land. From that point onwards they effectively abandoned the Presale Plan.

104. [558]

     Had the Developers ultimately proceeded to seek approval for a subdivision based on Mr Whitting’s revised layout plan, they would have been in breach of, and, could be said at least to have neglected, Ahmau’s contractual obligations. But to act on a mistaken interpretation of the Contracts could not be described as acting in bad faith, or even unreasonably. Certainly, it would not have been open to the Purchasers to have made that contention, having themselves adopted the same interpretation of the Contracts in the course of negotiations about rescission and in their arguments at trial.

105. [559]

     Mr Kavanagh was no doubt correct in saying that the benefit of obtaining an environmental report on the fill at 1105 Camden Valley Way was not confined to the marketing of the Leppington Land. It might have helped with a development application if the Developers had ultimately decided to pursue one. I do not agree that, simply because it may have been motivated by a potential sale to a third party, it should be ignored. Objectively, it benefited both courses of action.

106. [560]

     But that is not so clear for the work on developing Mr Whitting’s layout plan. Mr Whitting’s advice was that pursuing a development application would have required work of a different nature. More importantly, any benefit for development application purposes would have concerned an application for approval of a subdivision different from that depicted in the Presale Plan. It would not, on the interpretation I have adopted, have assisted with discharging Ahmau’s reasonable endeavours obligation.

107. [561]

     Mr Kavanagh was however correct in saying that at no stage did the Developers take any action which was inconsistent with the eventual pursuit of a subdivision approval. I have found that there was no obligation on them to begin work on a development application until after the revised DCP was issued in late October 2021. I do not see how failure to do so could be unreasonable, let alone conduct in bad faith.

108. [562]

     But I have found that the Developers’ failure to proceed with an application for approval of the Presale Plan between November 2021 and April 2022 (or to pursue rescission negotiations instead) was a breach of the reasonable endeavours obligation. No s 66ZS application had been made at the time, and the breach was, at least in theory, capable of affecting the circumstances in such an application might fall to be determined. In my view it was unreasonable conduct for the purposes of subsection (7)(b).

109. [563]

     I am, however, not prepared to go and find that it was conduct in bad faith. While I have concluded that Ahmau’s reasonable endeavours obligation continued after the sunset date, the contrary view was not unarguable. Indeed, Mr Kavanagh was not asked about his instructions to Mr Alcorn during the period at all. In the circumstances it would not be proper to make a finding of bad faith.

110. [564]

     Turning to the allegations of misleading or deceptive conduct, the time estimates provided by Mr Sergi to Mr Bakshi between 2018 and 2020 involved answering two questions. One was how long it would take for the rezoning to take place. The other was how long after that it would take to obtain consent to the subdivision, construct the subdivision works, and register the subdivision plan.

111. [565]

     Mr Sergi’s estimate on the second question was that the Plan would take 18 months to register after rezoning was granted. Thus, once the rezoning date went past the beginning of 2020, the sunset date would not be achieved. In September 2019 Mr Sergi provided an estimate that the rezoning would take place at the “start of 2020”. On that assumption, there would be less than 18 months following rezoning to complete the registration of a subdivision plan. I am therefore only concerned with the estimates provided prior to that point.

112. [566]

     The advice Mr Sergi gave Mr Bakshi in the first half of 2019, namely that the rezoning would take place by mid-2019, or, perhaps, might be delayed for six months after that date, was said to have come from the Council. There is no reason to doubt that this is what the Council was saying at the time, and no evidence that the Developers knew any different.

113. [567]

     If, in accordance with those estimates, the rezoning had been completed in the second half of 2019, there would have been enough time, on Mr Sergi’s 18-month estimate, to complete the registration of the Plan before the sunset date in April 2021. The question comes down to whether that estimate was accurate.

114. [568]

     As already noted, Mr Draybi described an 18-month estimate as “unrealistic” in his April 2022 letters to the Purchasers. Mr Whitting’s estimate in November 2021 was for 30 months. There is no evidence as to what the Developers believed about the question in 2019, although it is certainly possible that the estimate given by Mr Sergi was too short.

115. [569]

     But even if it was, that had no relevant effect for present purposes. No right of rescission accrued to the Purchasers until the sunset date was reached. Had they been told in the first half of 2019 that the date could not be achieved, they might in theory have sought an early rescission by consent. But there is nothing in their later conduct which suggests they actually would have, and no submission to that effect was made. It was not suggested that Mr Sergi’s statements were made in bad faith, and in my view they did not, even if inaccurate, relevantly amount to unreasonable conduct.

116. [570]

     I turn now to the letters from Mr Alcorn (for Ahmau) to Mr Litfin (for the Bakshis) in August and September 2021. I do not think this correspondence, taken as a whole, amounted to a misrepresentation of the Developers’ “real” intentions as counsel for Mr Bakshi claimed. Neither letter expressly purported to set out the reasons rescission of the Bakshi Contract was being sought. Nor did the letters say anything about the other Presale Contracts.

117. [571]

     The August letter ([94] above) stated baldly that Ahmau had been unable to register the Presale Plan. On its own, that might have suggested that this was the reason, and the only reason, for the request to rescind. But a moment’s reflection would have revealed that the letter did not actually say anything about Ahmau’s intentions for the future. The gap was exposed by Mr Litfin’s response ([159] above) which requested clarification of Ahmau’s reason for rescission. Mr Alcorn’s September letter ([96]-[97] above) pointedly avoided giving one.

118. [572]

     The Preets were in substantially the same position. There was no response to the August and September letters from the Preets’ then solicitor, Mr Shahzad. But their new solicitor, Mr Anjos, effectively exposed the lack of information about the future of the subdivision by proposing in his October letter ([98] above) an extension of the sunset date. Again, there was no response.

119. [573]

     In my view, the overall effect of this correspondence was clear. Ahmau was seeking rescission under SC cl 11.1 on the ground that the sunset date had passed without registration of the Plan (and through no fault of Ahmau’s). But Ahmau was declining to disclose its future intentions, and in particular to say whether it proposed to proceed with the subdivision if rescission was permitted.

120. [574]

     While this was not misleading or deceptive, I do consider that it was unreasonable for the purposes of s (7)(b). Ahmau was effectively refusing to provide its reasons for seeking rescission of the Contracts. For all the Purchasers knew, Ahmau was hoping to rescind their Contracts but proceed with the subdivision and resell their Lots to new purchasers for higher prices.

121. [575]

     In form, the August and September letters were requests for consensual rescission of the Contracts, and did not describe themselves as notices under the term implied into the Contracts by s 66ZS(4). But that term applies wherever the vendor “is proposing to rescind the contract under a sunset clause” and that was the case here. Even if I am wrong on this point, I still consider that, in the context of s 66ZS, it was unreasonable for Ahmau to seek rescission without stating whether or not it intended to proceed with the subdivision if rescission was granted.

122. [576]

     It does not, however, follow that the Developers were obliged to disclose that they were testing the market, subject to obtaining rescission of the remaining Presale Contracts, for the sale of the Leppington Land. Still less does it follow that they were obliged to disclose how much they thought they might receive from such a sale, and how much capital profit they might make.

123. [577]

     Subject to the contractual restrictions I have mentioned, the process of negotiating the rescission of an off the plan contract has traditionally been regarded as an ordinary instance of commercial contractual bargaining. In my view, s 66ZS(4) did not, in the words of the second reading speech, make an “arbitrary” intrusion or impose “unusual” obligations on vendors. It imposed two specific disclosure requirements but otherwise did not disturb what Gleeson CJ called the “traditional secrecy and obliquity” (Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540) of the commercial bargaining process. It certainly did not impose some sort of quasi-fiduciary obligation to disclose all the information which might assist purchasers in such negotiations.

124. [578]

     In my view, the obligation under s 66ZS(4) to disclose the reason that rescission was sought would have been satisfied by a statement that the Developers had decided, subject to obtaining rescission of the remaining Presale Contracts, not to proceed with the subdivision of the Land in the manner set out in the Presale Plan. Absent a claim of financial hardship, the Developers’ commercial motivations and financial calculations behind that decision were not part of the “reason” for the purposes of s 66ZS(4).

125. [579]

     I have concluded that the Developers behaved unreasonably in failing to disclose their wish not to proceed with subdivision in accordance with the Plan. I am not, however, prepared to go further and find that they behaved in bad faith. I have found that Mr Kavanagh was justified in thinking that details of potential sales transactions were none of the Purchasers’ business. Even if that view had been incorrect, it was an arguable one and acting upon it would not have been bad faith.

126. [580]

     The refusal to give any reason at all for the decision to rescind was of course a different thing, but it was not raised with Mr Kavanagh. In the absence of evidence about what he knew about Ahmau’s obligations under the Contracts it would not be proper to find bad faith.

127. [581]

     Nor does my finding of unreasonableness take the Purchasers very far. The request for rescission was rebuffed by them. In the end, there was no s 66ZS application based on the correspondence and it had no ongoing significance as far as rescission was concerned.

128. [582]

     Turning to Mr Draybi’s April 2022 correspondence and the November 2021 report of Mr Whitting which was enclosed with that letter, I should say at once that I do not accept the criticisms of the report itself. The report did not actually state that the tasks undertaken up to November 2021 had been taken in order to discharge the Developers’ obligations under the Contracts. That was a gloss added by Mr Draybi in his letter. As already noted, Mr Whitting was acting as a consultant to the Developers, and I do not accept that he behaved other than professionally in that capacity. There was nothing false or misleading in what he said in his report. Indeed, his recitation of the facts and the opinions which he expressed were not challenged.

129. [583]

     As to the allegation that Mr Draybi’s correspondence itself was misleading or deceptive, I think that the allegation should be rejected for essentially the same reasons as those which have led me to reject the equivalent allegations concerning the August and September 2021 correspondence from Mr Alcorn. The correspondence did not misrepresent Ahmau’s intentions but, rather, declined to disclose them. In the case of the Preets, Mr Anjos directly asked for Ahmau to state its intentions concerning whether it intended to proceed with the subdivision and Mr Draybi pointedly failed to do so.

130. [584]

     Unlike Mr Alcorn’s correspondence, Mr Draybi’s correspondence of April 2022 did refer, in the context of the request for rescission of the Purchasers’ Contracts, to the fact that nearly all the Presale Contracts had been rescinded. Mr Draybi also provided updated details of the rescissions to Mr Bakshi at his request.

131. [585]

     Had they been asked, both Mr Anjos and Mr Bakshi would probably have guessed that the Developers wished to make some other use of the Leppington Land. It was also reasonably apparent that no work had been done on a development application since the issue of the revised DCP at the end of October the previous year. But when specifically asked to state Ahmau’s intention by Mr Anjos, Mr Draybi continued to stonewall. For the reasons I have given earlier, I think this was unreasonable conduct for the purposes of section (7)(b).

132. [586]

     I have already found that the failure to proceed with a development application after the issue of the revised DCP was unreasonable. I also think that the failure to disclose the Developers’ inaction was unreasonable. The term implied in s 66ZS(4) only required disclosure of the reason why the Plan had not been registered by the sunset date, and this was done. But in a situation where the Contracts continued in force, and contained reasonable endeavours clauses which continued to apply, I think it was reasonable to expect some disclosure of what the Developers’ had done to comply with that obligation, and if action had not been taken, why not.

133. [587]

     I am therefore satisfied that the April 2022 correspondence involved unreasonable conduct on the part of Ahmau. Again, however, I am not prepared to go further and find bad faith, because of the lack of evidence on the question.

134. [588]

     Nor, again, does my finding of unreasonableness go very far in practical terms. Again, the request for rescission was rebuffed. It was not suggested that disclosure sufficient to comply with Ahmau’s obligations would have made any difference to the outcome.

135. [589]

     Reason for the sunset event not occurring by the sunset date (s 66Z(7)(c)): The reason in the present case is common ground. Registration could not occur by the sunset dates under the Contracts because the necessary rezoning had not taken place. This was in no sense the Developers’ responsibility. There was nothing they could have done to bring the rezoning forward.

136. [590]

     Likely date on which the sunset event will occur (s 66ZS(7)(d)): For the purposes of answering this question, I continue to assume that approval of the Presale Plan would be possible despite the restrictions in the planning instruments introduced in 2021. On the time estimates given by Mr Whitting, and assuming nothing has been done in the meantime, it would take a minimum of 27 months from now to obtain registration of the Plan.

137. [591]

     But I have concluded that even on that assumption, specific performance would not be available. The Developers could not, against their wishes, be compelled to pursue registration of the Presale Plan. It would be unrealistic to suppose that they would do so merely to avoid liability for loss of bargain damages on the two remaining Presale Contracts. It follows that for the purposes of s (7)(d) the sunset event will never occur.

138. [592]

     Whether the Purchasers’ Lots have increased in value (s 66ZS(7)(e)): As already noted, the parties have agreed on valuations for the Presale Lots in August 2021, December 2022 and May 2023 which were substantially higher than the prices for those Lots in the Contracts. Counsel for Ahmau pointed out, however, that under the definition in s 66ZS(1), a “subject lot” is not actually created until the plan is registered: see s 66ZS(2)(b). Counsel submitted that, strictly speaking, the “subject lots” for the purposes of subsection (7)(e) had not been created, and never now would be created.

139. [593]

     Focussing solely on subsections (1) and (2), this argument would appear to have some force. But it seems difficult to accept that the definition can have been intended to operate that way in subsection (7)(e). The reference to “increase in value” must be an increase above the contract price, and at the time the contract is entered into, the subject lot would, ex hypothesi, not exist.

140. [594]

     It is not necessary to reach a final conclusion on this. I discuss the significance of the valuation evidence for the purposes of s 66ZS(7) below.

141. [595]

     Effect of rescission on the Purchasers (s 66ZS(7)(f)): Counsel for the Purchasers compared the case with Silver Star, where Darke J said (at [172], [175]):

142. [596]

     Counsel submitted that the present case was the same. The Purchasers had been deprived, so counsel had contended, of the intended locations of their family homes. It was also argued that if the Contracts were rescinded, the Purchasers’ conveyancing costs and first home buyers’ duty concessions would be wasted.

143. [597]

     I have already analysed the evidence on this question from Mr Preet and Mr Bakshi earlier in my judgment. In my view the case was quite different from Silver Star. The evidence showed that, contrary to their claims, both the Preets and the Bakshis were at the time the sunset date expired, and remained, well established in the Sydney property market.

144. [598]

     Nor do I accept that the Purchasers had any settled expectations that they would use their Presale Lots to build their ‘dream homes’. It would be more accurate to see the Purchasers as effectively having invested their deposits in a proposed subdivision where they might ultimately choose, depending on the circumstances, to build homes for themselves. The effect of rescission on them would be to require them to cash out of those investments.

145. [599]

     In this regard, it is important to recognise that the Purchasers’ investments in the Contracts should not be equated with the valuations agreed for the purposes of these proceedings. Even if Ahmau could be compelled to complete the subdivision, completion would be a long way off and there would still be many contingencies to be satisfied. The process might easily take longer than the currently projected 2.5 years. Over that time much might happen in the property market. It certainly could not be assumed that the value of the Lots would continue to increase.

146. [600]

     But of course, on my findings Ahmau cannot be compelled to complete the subdivision the subject of the Contracts. The real effect of rescission on the Purchasers would therefore be to deprive them, assuming the Contracts remain on foot, of the opportunity to force the Purchasers into repudiatory breach and then to sue for loss of bargain damages.

147. [601]

     For reasons just given, the agreed valuations would not necessarily be an accurate measure of the Purchasers’ expectation losses. Damages would be calculated on the basis of the value of the Presale Lots as at the date they would have been conveyed to the Purchasers had Ahmau complied with its contractual obligations (less any further conveyancing costs to complete the Contract).

148. [602]

     On the estimate in Mr Whitting’s November 2021 report, completion would have occurred between February and May last year if Ahmau had begun work on a development application immediately. But it has not been established that Ahmau was continuously in breach of its reasonable endeavours obligations from November 2021 onwards; on one view the breaches only lasted until April 2022. That would result in an estimated time for completion (if circumstances had not changed in the meantime) of at least two years from the date of delivery of this judgment. Any loss of bargain damages the Purchasers might recover now would have to be discounted to reflect future completion and valuation risks.

149. [603]

     Should the Contracts be rescinded, the Purchasers would (I assume) be entitled to a refund of the duty which they have paid (in fact, the Bakshis received a full concession and paid no duty). The conveyancing costs they have so far incurred on the Contracts would, however, indeed be wasted.

150. [604]

     It may be accepted that, having both bought properties since entering into the Contracts, the Purchasers will not be entitled, in any future property purchase, to make use of the first home buyer’s concession (it is unclear to me how the Preets’ prior purchase of their property at Shortland fitted in with their entitlements to the concession, but I will pass over that). But they have not made any actual payment which has been wasted. All that happened was that, after entering the Contracts, they were unable to exploit the concession by applying it to another purchase in the meantime.

151. [605]

     Even if that were seen as some sort of loss of opportunity, it would be difficult to quantify. The concessions offered, the thresholds at which they apply, and other terms of the scheme, change from time to time with shifting political and fiscal circumstances (the scheme under which the Purchasers obtained their concessions in March and April 2017 was in fact replaced with effect from July 2017 by a new scheme). Furthermore, the concession can only be obtained by purchasing a property, and increases in property prices would generally, over time, far outweigh stamp duty “savings” on acquisition.

152. [606]

     Other relevant matters (s 66ZS (7)(g)): In the course of his opening submissions, counsel for Ahmau referred, as a relevant circumstance, to the fact that the other Presale Contracts had been rescinded and only the Purchasers had held out. In final submissions, counsel for the Bakshis submitted that this was only, at best, of marginal relevance. Counsel pointed out that the circumstances in which the rescissions were agreed were unknown. Other purchasers may have acted on misleading or incomplete information, or there may have been other factors affecting them which meant they were content to rescind.

153. [607]

     I have referred to the rescission of the other Presale Contracts in the context of the rescission correspondence, and also, by the way, in my discussion of the Purchasers’ specific performance claim. Otherwise, I am not sure that it is of any great relevance. Indeed, in the end I am not sure that counsel for Ahmau placed any great weight on it. I do not propose to say anything more about it.

154. [608]

     Counsel for the Bakshis went on to make various other criticisms of the way that Ahmau had conducted itself in the proceedings, which he suggested would be relevant under s (7)(g). Counsel submitted that Ahmau had sought to give the impression that Ahmau had failed to disclose to the Court the whole circumstances surrounding their decision-making process as summarised above. Information about the sales were only revealed after the production of documents had been sought. I have already referred to counsel’s criticism of Mr Kavanagh as a witness, which was also deployed under this heading. Counsel was similarly critical of Mr Wheadon’s evidence which he described as “embarrassing”.

155. [609]

     I have already indicated that Mr Kavanagh’s affidavit was incomplete and the explanation which he gave in the affidavit for the preparation of the November 2021 report was positively misleading. I have not, however, accepted the criticisms of his oral evidence. One might wonder how Mr Wheadon’s affidavit evidence could ever have been put on, but the incorrect impression that he gave was swiftly and skilfully dispelled in cross-examination.

156. [610]

     These matters may ultimately prove relevant as to costs. But if relevant at all under s (7)(g), they are so marginal that they do not deserve further comment.

157. [611]

     Counsel for Ahmau submitted that the analysis under s 66ZS(7) should be focused on the point at which the sunset period expired. The critical question was why the sunset condition had not been satisfied by that date. Counsel pointed out that this was the question posed by s (7)(c), not the broader question of why the condition had not been satisfied as at the date of the application.

158. [612]

     In this context, Counsel emphasised the reference in the second reading speech to a desire to prevent developers manufacturing delays in order to obtain an unjust benefit from rescission. Counsel submitted that nothing of the sort had occurred in the present case and leave to rescind should accordingly be granted. Counsel also argued that the changes to the planning instruments had made registration of the Presale Plan impossible, and that was a further reason for rescission.

159. [613]

     Finally, in his submissions counsel addressed the possibility of imposing terms on the grant of leave so as to require Ahmau, as a condition of rescission, to pay compensation to the Purchasers. This had apparently been foreshadowed prior to the hearing; indeed, counsel submitted that it was clear from the rescission correspondence that was really what the Purchasers had been seeking all along, rather than conveyance of the Presale Lots in specie.

160. [614]

     Counsel submitted that the power under s 66ZS could not be used for such a purpose. Counsel acknowledged the decision of Emmett AJA in DGF, but noted that Parliament had subsequently amended s 66ZS so as to introduce s (11)(a), which expressly preserves the Court’s power to award damages. Counsel submitted that this provision would not have been introduced, at least in that form, if Parliament had contemplated that the Court would effectively award such damages as a condition of rescission.

161. [615]

     Counsel submitted that the leave should simply be granted to rescind, presumably on the basis that this would result in the deposit being repaid. Counsel said nothing about interest being paid on the deposit.

162. [616]

     Counsel for the Purchasers submitted that the state of affairs as at the sunset date was not the exclusive, or even necessarily the predominant, consideration. Counsel pointed out that the contract remained in force until and unless rescission was granted. In their submission, breaches of the reasonable endeavours clause, and conduct by Ahmau that was unreasonable or in bad faith, even occurring after the sunset date, remained relevant and important. So too did other factors mentioned in s 66ZS(7), principally the effect on the Purchasers.

163. [617]

     Counsel did press for relief by way of specific performance. But it was made clear that, if this was not available, or, perhaps, even if it was, the Purchasers would be satisfied with compensation along the same lines as had been sought by way of relief from frustration, namely compensation for the loss of profit on the Lot together with a refund of the costs incurred in entering into the Contracts.

164. [618]

     As already noted, in his supplementary submissions Mr Bakshi complained about the selection of the sunset period in the first place, suggesting that the Developers should have known that it would not be long enough. He also complained about alleged inadequacies in the Plan. But even if these matters would otherwise have been relevant for the purposes of s 66ZS(7), it was not open to Mr Bakshi to raise them in final supplementary submissions. The point about the length of the sunset period had been rejected by both experts, and the point about the alleged inadequacies in the Plan had not been raised with the experts or the other witnesses.

165. [619]

     There is no need to consider whether some factors under s 66ZS(7) are generally more important than others. I think, however, that in the present case it is significant that the sunset date passed even before a development application could realistically have been made. This distinguishes the present case from all of the other four decided cases.

166. [620]

     I also think that it is relevant that the sunset date was missed by a wide margin (at least two and a half years). The evidence of Mr Whitting about the resulting significant increase in development costs was not contested. In this regard the case is again quite different from the other four cases.

167. [621]

     I agree that another very material factor was the imposition of the 16.5 dwellings per hectare density limit in late September 2021. I have already compared the Contracts to making an investment in a project for the subdivision in the land. Even on the assumption that the changed density limit did not frustrate the Contracts, in my view it should still be seen as having changed the economics of the project fundamentally.

168. [622]

     As Mr Cobb remarked ([220] above), the effect of the change was to reduce the number of lots and increase each lot’s individual value. Mr Bakshi made the same observation. The possibility that planning changes affecting the economics of a development may occur is well known and no doubt is one of the reasons why the parties stipulate for rights of rescission in off the plan contracts in the first place.

169. [623]

     I have found that Ahmau breached its obligations under the term implied by s 66ZS(4) by declining to provide its reason for seeking rescission of the Contracts, and that this was unreasonable conduct for the purposes of s 66ZS(7)(b). But I think that this finding is of limited significance in the present case. It certainly may bear on costs, but I do not think it should be determinative of substantive rights.

170. [624]

     Although s 66ZS(4) requires the vendor to give a reason for seeking rescission, the grant of leave is not dependent upon a finding that the vendor has some “good” reason to rescind, akin to the regime which applies to the termination of a protected tenancy. Indeed the vendor’s reason is not listed as one of the factors which the Court must take into account under s 66ZS(7), and the Court may grant leave to rescind even if no notice was given: Silver Star at [118].

171. [625]

     In the present case, the unreasonable conduct came well after the delay in rezoning and the changes in the planning instruments. It had no practical impact on the right to rescind. The same is true of the breach by Ahmau of its best endeavours obligation between November 2021 and April 2022.

172. [626]

     So far as the effects on the Purchasers are concerned, this is not a case where permitting rescission would put them at risk of being priced out of the market, or where their expectations of living in a ‘dream home’ have been snatched away. As I have said, it would be more accurate to see the grant of rescission as requiring them to cash out of the investments represented by their deposits under the Contracts.

173. [627]

     In a sense, allowing rescission would deprive the Purchasers of their claims for loss of bargain damages as I have discussed. But the Contracts from the outset conferred on Ahmau a right to rescission in the events which have happened, subject to the grant of leave from the Court, which, if obtained, would result in Ahmau not having to proceed with the conveyance of the Presale Lots. I do not think it would be right to exercise the Court’s power on the assumption that Ahmau is in breach of an obligation which it will not have if rescission is permitted.

174. [628]

     Allowing rescission would also result in the waste of conveyancing costs incurred on the Contracts. But I think this has little if any weight in the circumstances. No assurance was ever given by Ahmau that the Plan would in fact be registered and the Presale Lots conveyed. The Purchasers must have been well aware when they entered into the Contracts of the possibility of rescission being sought by the Purchasers if the sunset date was not achieved. Similar observations apply to the “waste” of the first home buyer duty concessions (assuming that some value could be put on them). The Purchasers must have been well aware when they made their later property purchases of the possibility of eventual rescission by Ahmau.

175. [629]

     In my view, the circumstances are such as to justify the grant of leave to rescind. I agree with counsel for Ahmau that this is not a case of a manufactured delay. It is a case of a delay, followed by a significant change in the planning environment, both of which were imposed externally and could not have been avoided. The combined effect has been a fundamental change to the economics of the project which is exactly the type of supervening circumstance which a sunset clause is designed to meet.

176. [630]

     But rescission should only be permitted if there is proper restitution to the Purchasers. I did not understand counsel for Ahmau to contend that there was no power to order rescission on terms. In any event I see no reason why the Court should not do so in a proper case. The imposition of terms is an accepted feature of the equitable jurisdiction to grant rescission in other contexts.

177. [631]

     For reasons I have already given, I do not think it would be right to require compensation by reference to the damages the Purchasers might recover in an action for loss of bargain damages. Nor should Ahmau be required to cover the Purchasers’ wasted conveyancing costs (or stamp duty concessions).

178. [632]

     But I do think it is proper to allow something more than mere repayment of the Purchasers’ deposits, so as to reflect the increased value of the land the subject of the Contracts. Similar considerations in my opinion arise as under the Frustrated Contracts Act, and I would impose a condition on rescission that Ahmau pay the Purchasers sums by way of restitution, calculated by indexing their respective deposits in the manner set out in [428] above.

Conclusions

1. [633]

   I have concluded that:

   1. (1)

      the Preet and Bakshi Contracts were frustrated, at the latest, by the introduction on 30 September 2021 of the new version of clause 4.1B in the Growth Areas SEPP;

   2. (2)

      as a consequence of frustration, Ahmau should be ordered to pay to the Purchasers a sum of money calculated by indexing their respective deposits in the manner set out in [428] above;

   3. (3)

      the Purchasers’ cross-claim for specific performance should be dismissed;

   4. (4)

      so too should Ahmau’s alternative claim for statutory leave to rescind the Contracts under CA s 66ZS.

2. [634]

   On 4 April, I circulated to the parties a draft of the judgment to this point. I invited them to consider what orders were required to give effect to my conclusions and what orders should be made as to costs. The parties were unable to agree on these issues and a further hearing took place before me on 9 May, with the benefit of supplementary evidence and written submissions.

3. [635]

   The balance of this judgment deals with these supplementary issues. When circulating the judgment, I also invited the parties to identify any errors or omissions in it which could conveniently be corrected (that is, without the need for an appeal). I received from counsel for Ahmau some typographical corrections which I have made. I have also further reviewed the draft and made further corrections to it. These corrections are not confined to typographical ones. I have reworked some areas so as to express them better or provide them with more supporting detail. None of the changes affect my reasoning or alter my conclusions.

4. [636]

   In his submissions, Mr Bakshi asked me to make alterations to two other paragraphs of the draft ([145] and [193] above). While he said that he did not challenge my conclusion on frustration, he argued that the findings in question were incorrect and should be modified.

5. [637]

   I have considered Mr Bakshi’s points, but I am not persuaded that, having regard to the evidence and the submissions which I received at the trial, my conclusions were incorrect. I have added a footnote to each of the paragraphs in question explaining why I consider that is so. Mr Bakshi will of course be free, if the findings are material for the purposes of any appeal which may be brought, to pursue his arguments about them at that stage.

6. [638]

   It was common ground that the Court should declare that, in accordance with my conclusion, each of the Contracts had been frustrated. The form of the declaration proposed by counsel for Ahmau was not disputed by the other parties. It was also common ground that Ahmau’s summons should otherwise be dismissed, and so should the Purchasers’ cross-claims.

7. [639]

   In my draft judgment ([1]-[633] above) I expressed the view that proper restitution required more than Ahmau simply refunding the deposits paid by the Purchasers, even with interest. I thought that an indexation factor should be applied to the deposits, calculated by reference to the increase in value of the Lots since the contracts were entered into.

8. [640]

   In his further submissions, Mr Bakshi invited me to reconsider the view that the application of such an indexation factor would yield sufficient restitution. Instead, he argued that a still greater level of restitution was required in order to achieve justice.

9. [641]

   Mr Bakshi pointed out that he did not merely pay a deposit under the terms of their Contract. He also obliged himself to pay the full contractual price when the time arrived for completion. This was a significant financial commitment which might (and, indeed, would usually) have to be funded by borrowing.

10. [642]

    Earlier in my judgment ([425]-[430] above), I expressed the view that the award of compensation (assessed on a loss-of-bargain basis) was not a proper measure of the Purchasers’ entitlement to restitution. This was because the Contracts came to an end without being terminated for any breach on Ahmau’s part. Mr Bakshi expressly accepted this. But he argued that some allowance should nevertheless be made for his contingent liability to pay the balance of the purchase price. He suggested 40-50% of the purchase price as the appropriate figure.

11. [643]

    Counsel for the Preets did not go so far as this. But she did contend for more extensive restitution than I had contemplated.

12. [644]

    Counsel’s calculation of the restitution sum had three components. The first was a refund of the deposit. The second was interest on the deposit at Court rates. The third was a sum calculated by indexing the deposit by reference to the increase in value of the Preets’ lot in the manner which I had suggested.

13. [645]

    As I had contemplated, there was also some debate about fixing the indexation factor. Counsel for Ahmau and counsel for the Preets put forward rival contentions in this regard. Mr Bakshi did not present any further submissions on the question, stating that he was content to accept whatever indexation rate the Court considered appropriate.

14. [646]

    Counsel for Ahmau submitted that the appropriate factor to use would be calculated by reference to the increased value of the Lots to August 2021 (57%), plus 5% per annum thereafter. The August 2021 valuation should be used because it was a reasonable proxy for the date on which frustration of the Contracts occurred. That was when the Contracts came to an end and the Purchasers’ rights to restitution accrued. Counsel submitted that further increases in market value after that date were irrelevant.

15. [647]

    For her part, counsel for the Preets proposed calculating the indexation factor by reference to increase in value to May 2023 (101%), plus 5% per annum (compounded) thereafter. The May 2023 valuation was the latest one, and was the closest to the date of the trial. In fact, the frustration claim had not been advanced by Ahmau until the end of the trial ([12]-[13] above). Furthermore Ahmau continued to retain the deposit after frustration, and after the frustration claim was made. Counsel submitted that it would be artificial to cut the indexation off at the date of termination of the Preets’ Contract, as determined retrospectively.

16. [648]

    The views I expressed earlier about indexing the deposit to provide restitution had not been the subject of full argument and were not final. I have reconsidered the question in the light of the submissions made by Mr Bakshi and counsel for the Preets. But in the end my conclusion stands.

17. [649]

    It is true that, in entering into the Contracts, the Bakshis (and the Preets) assumed a contingent liability to pay the full purchase price under their Contract. But in general the function of awarding restitution is to deprive a party to a frustrated contract of windfall benefits which have in some way been received at the expense of the other party. Ordinarily the payment of the deposit benefits the developer because the deposit monies can be used to fund the development. But it is less easy to see the benefit to the developer from the purchaser’s assumption of a further contingent obligation to pay the purchase price, and which never actually materialises.

18. [650]

    If there were evidence in a particular case that the developer’s entry into a pre-sale contract was seen by the developer’s financier as a form of security, which reduced the developer’s borrowing costs, there might be a case for making an allowance for that in assessing the restitution to be paid to the purchaser in the event of frustration. But nothing of the sort was suggested here (cf Silver Star at [179]).

19. [651]

    Even if there had been a cost to the Bakshis in assuming the contingent obligation to pay the purchase price of their Lot, that would not, in the absence of a corresponding benefit to Ahmau, appear to be relevant to calculating the restitution sum. Rather, it would be part of the “cost base” for the “investment” by the Bakshis in the project, like their conveyancing costs. But in any event no such cost appears to have been incurred. Mr Bakshi’s message to Mr Sergi of 1 February 2021 ([155] above) shows that no finance had been arranged to that point.

20. [652]

    It is also relevant that the calculation which I proposed was based on valuations which were to some extent artificial, in that they were based on a subdivision in accordance with the Presale Plan being carried out when that will no longer occur. Furthermore, those calculations took no account of any costs incurred by Ahmau in pursuing the subdivision which were wasted as a result of the Presale Contracts being frustrated. Had I found Mr Bakshi’s argument persuasive, it might have been necessary, in order to obtain a complete picture of the balance of detriment and benefit to Ahmau, to allow for further evidence to be presented on such questions.

21. [653]

    All of this underlines that the restitution sum sought by My Bakshi was not based on any assessment, based on evidence or otherwise, of the benefits and costs actually derived by the parties. His figure of 40-50% of the purchase price was completely arbitrary.

22. [654]

    Nor do I accept the approach proposed by counsel for the Preets. The purpose of applying an indexation factor to the deposit is to ensure that the Purchasers receive a capital return commensurate to the “investment” in the project which they made by paying their deposits. Adding the unindexed value of the deposit as well, and then adding interest, would plainly involve double counting.

23. [655]

    I do, however, accept the submissions by counsel for the Preets on the indexation factor issue. To my mind, Ahmau’s delay in making the frustration claim is relevant. Even more important is the fact that Ahmau retained, and continues to retain, the benefit of the Purchasers’ deposits. This represents a commercial benefit which is the obverse of the Purchasers' loss of opportunity to invest their deposit monies somewhere else.

24. [656]

    In the present case the selection of the indexation factor is a choice between specified alternatives, made as a matter of judgment, rather than precise calculation based on evidence which covers the range of possibilities. I think that a valuation-based indexation which compounds over time and lasts until restitution is actually paid is the better choice. That seems to me to accord with what would be expected from both a property developer’s and a property investor’s point of view.

25. [657]

    I will therefore order that Ahmau pay the Purchasers an indexed amount based on the value of their respective deposits, using an indexation factor calculated in accordance with the method proposed by counsel for the Preets. To reflect the uncertainty and imprecision involved in the assessment process, the amount payable will be rounded to the nearest thousand dollars.

Costs

1. [658]

   Prior to the hearing I drew the parties’ attention to previous decisions of mine on costs in proceedings involving multiple claims for relief or multiple issues on which there is mixed success. I indicated that, subject to any submissions the parties might make, those earlier decisions would represent my starting point in dealing with costs in the present case.

2. [659]

   In summary, I have taken the approach that in general the rule that costs follow the event should be applied distributively between distinct claims for relief in the proceedings. This means that where a party succeeds on one claim and fails on another that party will receive a costs order in its favour for the costs solely referable to the successful claim and be ordered to pay the costs solely referable to the unsuccessful one. General costs of the proceedings which are common to both claims then follow one or other of the claims according to the significance of those claims in the proceedings as a whole.

3. [660]

   This approach involves distinguishing between a claim for relief on one hand and an issue which arises in the course of determining a claim on the other. Where a party succeeds on a claim but fails on an issue arising in that claim (for instance, in the case of a successful defendant, succeeding on one defence and failing on another) then that party will generally not be required to pay the costs on the issue on which it failed unless those costs are “clearly dominant or severable”: Akierman Holdings Pty Limited v Akerman (No 3); In the matter of Akierman Holdings Pty Limited (No 2) [2021] NSWSC 869 at [67]-[85]; Shun Sheng Pty Ltd v Lei (No 6) [2024] NSWSC 1613 at [25]-[26]; Martinus Rail Pty Ltd v Qube RE Services (No 2) Pty Ltd (No 3) [2024] NSWSC 1483 at [158].

4. [661]

   For the purposes of the arguments about costs, reference was made to various offers which were put the parties prior to and during the proceedings. It is convenient to set these offers out chronologically before returning to the parties’ submissions.

5. [662]

   The first relevant offer was the open request for agreed rescission of the Contracts made by Mr Draybi, Ahmau’s solicitor, to each of the purchasers on 20 April 2022. The Purchasers were invited to consent to the rescission of their Contracts and return of their deposits, but without any allowance for interest or other compensation. The request provoked correspondence from the Purchasers but in neither case was consent to rescission given.

6. [663]

   On 3 June, Mr Draybi made a Calderbank offer to each of the Preets and the Bakshis. The offer provided for the execution by the Purchasers a deed of consent to rescission, and the repayment of the deposit together with a further sum of $20,000.

7. [664]

   On 16 June, Mr Anjos, the Preets’ solicitor, responded. He advised that the offer was rejected but the Preets were prepared to “resolve the matter by acquiring a block of land of similar size in the new subdivision”. There was no formal response from Mr Bakshi; his open correspondence with Mr Draybi in which he was requesting further information continued.

8. [665]

   On 29 July, Ahmau made a further Calderbank offer which followed substantially the same terms as the offer of 3 June. Mr Draybi noted that only three purchasers remained. The additional payment on offer was increased from $20,000 to $35,000.

9. [666]

   Again, the offer was not accepted. As already noted, the proceedings were commenced on 29 August.

10. [667]

    On 3 November, Mr Draybi made further Calderbank offers to the Purchasers. The offers followed an informal settlement conference between the parties which took place on 19 October. Mr Draybi stated:

11. [668]

    The offer proposed an increase of the amount payable on top of the deposit to $55,000. With consent orders granting Ahmau leave to rescind and dismissing the proceedings as against the Purchasers with no order as to costs.

12. [669]

    Again, this offer was not accepted. This appears to have put an end to the negotiations for the time being.

13. [670]

    On 19 April 2023 Mr David Shad, a solicitor acting for the Bakshis, made a Calderbank offer to Mr Draybi. The offer was a complex one. It involved a choice of three options. The first option involved completion of the existing contract for a 313m² block with a 10-metre frontage for a revised price of $60,000 more to accommodate additional development costs. The second involved the substitution of a different lot in the “proposed development”, with an area of not less than 380m² and a frontage of between 10 and 12 metres, for the same increased price. The third option involved rescission of the existing contract with payment of compensation of $298,000. This offer also was not accepted.

14. [671]

    Further offers were made to the Purchasers by Ahmau in April 2024. Unlike the prior offers, these were formal offers under the Rules.

15. [672]

    The offers followed a mediation which had taken place between the parties. The offer provided for Ahmau to have judgment in its favour in the form of an order granting statutory leave to rescind, together with judgment in favour of the Purchasers on their cross-claims for Lord Cairns’ Act damages in the sum of $150,000 each. The parties were to bear their own costs.

16. [673]

    The final offer to which reference was made by the parties in the costs argument was a Calderbank offer made to the Preets on 2 July last year. By this time the frustration claim had been formally raised on behalf of Ahmau. The covering letter expressed the view that the frustration claim would succeed, and the cross-claim for specific performance would fail.

17. [674]

    The offer was for Ahmau to return the deposit, pay interest at Court rates (approximately $13,000) and make a further payment of $50,000. In return the Preets were to be “taken to have provided express consent to rescind” their Purchase Contract. The parties were to bear their own costs.

18. [675]

    This offer was refused, and a counteroffer was made to provide consent to rescission on payment of $100,000 plus the Preets’ costs as agreed or assessed.

19. [676]

    The parties took diametrically opposed positions on costs. Ahmau’s claim was for an order that the Purchasers pay its costs of the proceedings on an indemnity basis. For their part, the Purchasers sought costs orders in their favour against Ahmau for the whole of the proceedings on an indemnity basis.

20. [677]

    As between the Purchasers, counsel for the Preets took the lead in presenting submissions on costs. Counsel’s submissions were adopted by Mr Bakshi, who made some further submission of his own. In what follows I will only refer separately to Mr Bakshi’s submissions where it is necessary to do so.

21. [678]

    Counsel for Ahmau began by contending that, as a matter of substance, Ahmau had been entirely successful in the proceedings. Ahmau had succeeded in its frustration claim. Had it not succeeded on that claim, Ahmau would have obtained an order for statutory rescission in its favour. The cross-claims had failed.

22. [679]

    Counsel submitted that there was no reason to analyse the outcome on a claim-by-claim basis in accordance with my approach in Akierman. Counsel characterised the case as concerning a single question: whether Ahmau should be discharged from the contract. To the extent that Ahmau had failed on any issues, these were subordinate issues which were not “clearly dominant of severable”.

23. [680]

    Counsel submitted that, as a result, Ahmau was prima facie entitled to the whole of the costs of the proceeding on the basis that costs followed the event: UCPR Rule 42.1. The onus thus shifted to the Purchasers to demonstrate a good reason why the Court should order otherwise. He submitted that the Court would not ultimately be satisfied that it should do so.

24. [681]

    Counsel next contended that the costs order in favour of Ahmau should be on an indemnity basis. Counsel relied in particular on the Calderbank offer of 3 November 2022 and the formal offer of 15 April 2024, submitting that the offers were more favourable to the Purchasers than the eventual result of the proceedings. Counsel argued that rejection of the offers had been unreasonable.

25. [682]

    Counsel submitted that the correspondence showed that the Purchasers proceeded on the basis that they would be entitled to compensation, effectively on a contractual basis, for the increased value of the land. This was rejected. It was this unrealistic and erroneous assumption which had been the real cause of the litigation proceeding to hearing.

26. [683]

    Counsel for the Preets submitted, as counsel for Ahmau had submitted, that the proceedings should be seen as having involved a single claim. Counsel therefore agreed that the claim-by-claim analysis in Akierman was not appropriate.

27. [684]

    But counsel characterised the outcome of the claim differently. Although Ahmau’s claim for frustration succeeded to the extent that the Court was satisfied that frustration had occurred, Ahmau was not successful in its further contention that this should result only in the return of the deposits (or the return of the deposits together with interest). And the claim had been a belated one; the claim for statutory leave to rescind which had been the whole focus of the proceedings up until July last year, failed.

28. [685]

    Nor was it correct, in counsel’s submission, to say that the cross-claims had wholly failed. Counsel pointed out that the Preets’ cross-claim was begun only late in the piece (April last year) and was always only ever, as a matter of substance, an alternative to a claim for contractual damages. Counsel submitted that the application for specific performance failed only on discretionary grounds.

29. [686]

    Counsel also put a further, more fundamental submission. This was that the costs of the proceedings were governed by CA s 66ZS(8), which displaced the ordinary provisions under the Rules. Ahmau would therefore be obliged to pay the Preets’ costs of the proceedings unless it could satisfy the Court that they had unreasonably withheld consent to the rescission of their Contract. Counsel submitted that the Court would not be so satisfied.

30. [687]

    Counsel advanced another argument about the interpretation of s 66ZS(8). Counsel submitted that it applied to the costs of all of the claims litigated in the proceedings, including the costs of the cross-claims and of the frustration claim. It followed that, even if (contrary to counsel’s earlier argument) a claim-by-claim approach to the award of costs would otherwise have been appropriate, it was not open in the present case.

31. [688]

    Counsel next contended that the order for costs in favour of the Preets should be made on an indemnity basis. This was because, in counsel’s submission, Ahmau’s conduct in the course of the proceedings had been unreasonable. Counsel relied on the costs decision in Silver Star. Darke J held that s 66ZL(8) (the forerunner of s 66ZS(8)) was no bar to an indemnity costs order being made against the unsuccessful developer.

32. [689]

    His Honour said (at [19]):

33. [690]

    Counsel identified two main types of allegedly unreasonable conduct on Ahmau’s part. The first was associated with the way in which the frustration issue came to be presented to the Court. Counsel pointed out that I had myself raised the question at two earlier stages of the proceedings, and had been told by counsel for Ahmau that no claim was to be made that the contract had been frustrated.

34. [691]

    Counsel submitted that, as a result, much of the evidence which had been led concerning the application for leave for statutory rescission was, including the individual circumstances of the Purchasers and the reasons for which rescission had been sought, were irrelevant. Counsel submitted that if the frustration claim had been made at an earlier point, different forensic decisions might have been made about which issues to contest.

35. [692]

    Counsel also relied, in my understanding by way of analogy, on the frequently cited Court of Appeal for England and Wales in Beoco Ltd v Alfa Laval Co Ltd [1995] QB 137 at 154:

36. [693]

    The second basis for the indemnity costs order sought by counsel was the allegedly unreasonable conduct of the proceedings by Ahmau. This included the failure by Ahmau to provide a full and proper statement of the reasons for which rescission was sought. Counsel also relied on my findings that some of the evidence given by Mr Kavanagh was at best misleading, and the evidence given by Mr Wheadon was incorrect, and embarrassingly so.

37. [694]

    Counsel also relied on allegedly unreasonable refusal of an offer made on 17 July. That offer was for payment of $100,000 including the deposit but with no order as to costs. The offer was calculated on the basis of return of deposit; interest at Court rates; and $53,000 for “restitution or equitable damages”.

38. [695]

    The Bakshis’ cross-claim was brought in March 2023, a relatively early stage of the proceedings and well before the Preets’ cross-claim. I did not understand Mr Bakshi to make the same submission about the belated nature of the cross-claim as was made by counsel for the Preets. But he otherwise supported the submissions made by counsel. He further identified two additional features of Ahmau’s conduct, which, in his submissions, had been unreasonable. The first was, so he alleged, that as an experienced developer Ahmau should have been aware that the contract had been frustrated. This lent additional weight, in his submission, to the complaint about the delay in propounding the frustration claim. Mr Bakshi also relied on the failure to accept the offer made on the Bakshis’ behalf in April 2023, which he characterised as an offer to pay $60,000 more than the Contract price. Thirdly, Mr Bakshi complained about the way in which the pre-trial steps had been conducted. He submitted that there had been numerous breaches and delays on behalf of Ahmau’s part in complying with the timetable, which had lengthened the proceedings and made them more expensive.

39. [696]

    In reply, counsel for Ahmau disputed the Purchasers’ reliance on s 66ZS(8). Counsel submitted that the Ahmau had succeeded on frustration. This was said to be the ratio for the Court’s decision. The special provision in s 66ZS(8) related to proceedings for a statutory leave to rescind and was not engaged.

40. [697]

    Alternatively, counsel submitted that the rule in s 66ZS(8) was not absolute. It was only a “presumption” just like the “presumption” that costs generally follow the event. Counsel also relied, by analogy on the costs power where a compulsory easement is granted under CA s 88K(5). It is established that in dealing with the costs of such an application, the plaintiff will usually have to bear the costs, but the Court has power to depart from that and either deny costs to the defendant or even order the defendant to pay costs if the defendant’s conduct and the circumstances are such as to warrant it doing so: Civil Procedure Act 2005 s 98.

41. [698]

    Counsel further submitted that to treat s 66ZS(8) as a binding rule would give rise to a “moral hazard”. Purchasers facing such an application, once their initial opposition had not been unreasonable, would not be subject to any costs sanctions, and would have no incentive to conduct the litigation sensibly and economically. Counsel referred to passages in the correspondence between the parties prior to the litigation to submit that this in fact had been the attitude of the Purchasers all along.

42. [699]

    Counsel also criticised aspects of the defendants’ conduct of the proceedings as examples of an unreasonable attitude. Counsel submitted that, at base, the Purchasers’ case had always been weak. The Presale Plan had been made absolute by the planning law changes, and this point had been made on Ahmau’s behalf in the April 2022 request for consent to rescission. Instead of accepting this they insisted on contesting the application on a broad basis, resulting effectively in a royal commission type investigation of the circumstances in which the Developers’ decision not to proceed was made. And in the end, the Court found, contrary to the impression which the Purchasers’ sought to convey, that they were relatively experienced in property investment and were well established in the Sydney property market.

43. [700]

    Counsel also criticised some aspects of the conduct of Mr Kavanagh, picking up some of the points made about it at [243] and [244] above. Counsel submitted that this was indicative of an approach which was unconcerned about the minimisation of costs.

44. [701]

    By way of fallback, counsel addressed the reasonableness of Ahmau’s conduct. In this regard, counsel acknowledged my findings that, in certain respects, Ahmau behaved unreasonably. This included a failure to provide full information about its intentions should rescission be granted: [587] above.

45. [702]

    Counsel submitted that the findings which I made in this regard were obiter, being based on an assumption, contrary to my finding, that the Contract had not been frustrated. Counsel submitted that, seen in that light, the findings were less absolute then they seemed and might even have been contestable in terms of their accuracy.

46. [703]

    Counsel submitted, however, that this finding did not have any great significance in the scheme of things; it would not have altered the Purchasers’ determination to pursue the claim, blinded as they were (in counsel’s submission) by the belief that it would result in a bonanza for them in the form of compensation. Counsel also submitted that this conduct had little or no relevance for the purpose of identifying unreasonable conduct. Counsel relied on the following statement by Einstein J in Pioneer Park [2006] NSWSC 1176 at [12] (emphasis original):

47. [704]

    Counsel also focussed on the offers made in June and July 2022. But counsel submitted that unreasonable behaviour did not end there. Counsel pointed to the other offers made in the course of the proceedings, particularly the offers of November 2022 and April 2024. Counsel submitted that when s 66ZS(8) refers to consent being unreasonably refused, it was wide enough to encompass those offers. Consent was what had been asked for.

48. [705]

    Finally, counsel submitted that if any costs order was to be made against Ahmau, Ahmau should only have to pay one set of costs. Counsel submitted that the Preets and the Bakshis ran virtually identical cases counsel submitted that where double representation is involved, the Court should only exercise its discretion to award costs in a way which accepts double representation where the requirements of justice require that to be done, and such cases will only arise rarely: Van Eeden v Henry (2005) 62 NSWLR 301 at [33]. Counsel submitted there was no justification for double representation in the present case.

49. [706]

    Operation of CA s 66ZS(8): The first question for determination is whether s 66ZS(8) displaces the provisions of the Rules which would ordinarily apply to these proceedings, in particular the rule that costs generally follow the event.

50. [707]

    In my view it does. My reasons are as follows.

    1. (1)

       The rule that costs follow the event is only a general one created by subordinate legislation. It must give way to inconsistent statutory provisions.

    2. (2)

       Subsection (8) in terms creates a rule concerning “liability” for the Purchasers’ costs “in relation to” proceedings for statutory leave. The use of this phrase creates imprecision, but it clearly must include the Purchasers’ costs of the proceedings themselves.

    3. (3)

       The comparison with CA s 88K(5), relied upon by counsel for Ahmau, is instructive in this regard. That provision is worded so as to create a general entitlement in favour of the defendant, but allows the Court to make a different order in some circumstances. There is no equivalent power to dispense with the “liability” created by s 66ZS(8).

    4. (4)

       The departure from the usual rule was seen as a significant factor in levelling the playing field between developers and purchasers, which was part of the rationale for the relevant statutory provisions. It was expressly referred to in the Minister’s second reading speech ([458] above)

    5. (5)

       The points made by counsel for Ahmau concerning “moral hazard” would potentially be relevant to the interpretation of s 66ZS(8) if the language or purpose of the enactment were unclear. But on this issue, I do not think it is. Such considerations therefore do not justify the Court in refusing to give effect to the rule laid down by Parliament, although, as will be seen, they may be relevant to the scope of that rule.

    6. (6)

       It follows, I think, that s 66ZS(8) displaces inconsistent provisions of the Rules (this was also the assumption made by Darke J in Silver Star). Unless the Purchasers were unreasonable in refusing consent to rescission of the Contracts, Ahmau is obliged to pay the costs of the s 66ZS proceedings and there is no discretion to be exercised.

51. [708]

    It does not however follow that the costs of the cross-claims and of Ahmau’s frustration claim must be dealt with in the same way. Those claims for relief were legally and factually different from the s 66ZS application. They could have been brought in separate proceedings. The fact that they were included in the s 66ZS proceedings is a procedural accident which should not determine the parties’ costs entitlements so far as they are concerned.

52. [709]

    I think that the statutory language reflects this view. Sub-section 66ZS(8) refers to costs in relation to “proceedings for an order under this section”. The costs of Ahmau’s frustration claim do not answer that description. And no question of consent to rescission arose, so the liability rule created by s 66ZS(8) could not meaningfully be applied. The same is so for the costs of the cross-claims.

53. [710]

    Clearly the s 66ZS application was the main matter litigated in the proceedings. But I do not accept that s 66ZS(8) governs the additional costs solely referable to the frustration claim and the cross-claims. The Court should deal with those additional costs under the ordinary rule that costs follow the event.

54. [711]

    The most difficult question, I think, is whether s 66ZS(8) requires the Court to confine its attention, for the purpose of assessing the reasonableness of the Purchasers’ conduct, to their response to the formal requests for consent which were made on 22 April 2022, or at least their conduct prior to the institution of proceedings, on the one hand, or whether it is open to look at their response to all of the settlement offers that were made after 20 April 2022, on the other.

55. [712]

    Counsel for the Preets submitted that the former approach was required under the terms of the subsection. Counsel submitted that the use of past tense (“unreasonably withheld consent”) referred back to events which pre-dated the institution of proceedings. Specifically, they should be seen as referring to the vendor’s obligation under subsection (4) to give notice of before proceeding to rescission.

56. [713]

    I do not think this is unavoidably so. The past tense requires that consent has been withheld before the costs in question have been incurred, but not necessarily that consent has been withheld before the proceedings have been commenced. It may be possible to read subsection (8) as operating in an ambulatory way, so that the special entitlement to costs which it creates does not apply to costs of the proceedings which are incurred after the continued withholding of consent has become unreasonable.

57. [714]

    In this regard, the “moral hazard” issues raised by counsel for Ahmau might have some significance. A construction of subsection (8) which had the result that a purchaser whose initial refusal of consent had not been unreasonable would be entitled to the whole of the costs of the proceedings, despite having unreasonably refused an offer to terminate them, would be an unattractive one. Rather than evening up the “balance of power” between the purchaser and the vendor, it would cause subsection (8) to operate punitively. It would also tend to reduce incentives for settlement of s 66ZS proceedings once instituted, which is hardly likely to have been what Parliament intended.

58. [715]

    In these circumstances, I propose to proceed on the assumption that s 66ZS(8) does not apply to costs incurred after an unreasonable refusal of consent, even if that consent was sought after the commencement of the proceedings in which statutory leave to rescind is sought. As will appear, this assumption in favour of Ahmau does not affect the ultimate result.

59. [716]

    Unreasonable refusal of consent to rescission: As already noted, counsel for Ahmau relied on the refusal of the various offers outlined above as unreasonable conduct displacing the costs liability prima facie created by subsection (8).

60. [717]

    The first point to make is that the question posed by subsection (8) is not quite the same as the question of unreasonableness which arises when considering a Calderbank offer in ordinary litigation. What needs to be established here is that there was an unreasonable refusal of consent to rescission. This creates a possible difficulty with the offer to the Preets of 2 July last year which provided for a “deemed” rescission rather than an actual one, but in the end, it is not necessary to go into this.

61. [718]

    The argument for Ahmau also faces some difficulties when comparing the terms of the offer with the ultimate outcome in the case.

    1. (1)

       The formal requests for rescission of 20 April 2022 only provided for the return of the Purchasers’ deposits. On any view this was less favourable than the restitution sums which they will recover.

    2. (2)

       The offers of 3 June and 29 July 2022 did provide for further payments on top of the return of the deposits, but the amounts offered were less than the restitution sums obtained (at least so far as the Preets were concerned).

    3. (3)

       The offers of 3 November 2022 did exceed the restitution sums by a significant amount, but by that time the proceedings had been commenced. The offers required the Purchasers to bear their own costs and there was no evidence as to how much they had incurred by way of recoverable costs.

    4. (4)

       The offers of 15 April last year also required the Purchasers to bear their own costs. The evidence does not establish that the $150,000 offered exceeded the restitution sums and the Purchasers’ recoverable costs to that point. Indeed, it seems that the contrary is the case.

    5. (5)

       That is even more clearly the case for the offer to the Preets of 2 July last year (if relevant at all).

62. [719]

    I think however that there is a more fundamental difficulty for Ahmau’s argument. For reasons given above, attention must be focused on the “proceedings for an order under” s 66ZS. No such order was obtained. Ahmau’s application for statutory leave to rescind was dismissed.

63. [720]

    The Purchasers may have refused consent for reasons which were unsound. But objectively the refusal of consent was justified. It is difficult to see how it could have been unreasonable to refuse something to which Ahmau ultimately has been found not to be entitled.

64. [721]

    This is not a merely a formal matter, as counsel for Ahmau suggested. The s 66ZS application necessarily involved a multifactorial analysis of the circumstances set out in s 66ZS(7). The Court was bound to consider matters such as the effect of the rescission on the Purchasers and on Ahmau. Those circumstances have turned out to be irrelevant. The costs of investigating them, which were occasioned by Ahmau’s application, have been wasted.

65. [722]

    It is elementary that to merely make a Calderbank offer which is not accepted and is then bettered by the offering party at judgment is not enough to entitle the offering party to costs. It is necessary to show that the offeree’s refusal was unreasonable at the time and in the circumstances in which it took place.

66. [723]

    The multifactorial analysis required by s 66ZS necessarily involves an exercise of judgment by the Court as to the relative significance of the different factors, as ultimately established by the evidence. That in itself makes it difficult to say that the Purchasers’ responses to the offers were so unrealistic as to be unreasonable.

67. [724]

    Furthermore, a critical point in the interpretation of the Presale Contracts was that Ahmau’s best endeavours obligation applied to registration of the Presale Plan, and only that Plan. But this point only came into focus at the hearing in May last year. Back in 2022 both parties appear to have been proceeding on the assumption that there was room for bargaining under the Contract about the size and shape of the lot to be delivered. This makes it even more difficult to say that the Purchasers’ position was unreasonable.

68. [725]

    The same point can be illustrated in yet another way. The critical issue for the purpose of comparing the offers with the actual result in the case has proved to be the amount payable by Ahmau in addition to the deposit. But the debate between the parties on this question has only emerged since the frustration claim was made and only reached its final stage at the supplementary hearing which preceded this judgment. The valuation evidence on which the rival indexation contentions were based had not even been filed in 2022. The Purchasers could not remotely have been expected, when considering Ahmau’s offers, to evaluate the additional amounts they were being offered in accordance with the perspective ultimately adopted by the Court.

69. [726]

    For these reasons, I do not accept that the refusal of any of the offers manifested unreasonableness on the part of the Purchasers. It follows, subject to the remaining submissions to be addressed, that both the Bakshis and the Preets are entitled to the general costs of the proceedings.

70. [727]

    Costs of cross-claims: As already stated, I consider that the cross-claims gives rise to separate “events” for the purpose of the rule that costs follow the event. The costs solely referable to those cross-claims may not be extensive, but they are identifiable, for instance, those referable to the preparation of the pleadings.

71. [728]

    Nor do I accept the argument from counsel for the Preets that all the cross-claimants were “really” seeking was damages. Indeed, this argument would be unavailing in any event, because the frustration claims actually operated as a defence to the cross-claims. Once I found that the contract had been frustrated, then both specific performance and the award of damages became impossible.

72. [729]

    Costs of frustration claim: The first question is whether, as counsel for the Preets contended, Ahmau should be seen as having been unsuccessful (or at least not wholly successful) on the frustration claim.

73. [730]

    It is true, as counsel for Ahmau himself pointed out, that the effect of the 2021 planning changes was raised from the outset as part of the multifactorial analysis required by s 66ZS. But once the frustration claim was formally made, matters came into sharper focus. If the contract had been frustrated, there was no power to grant statutory rescission. The evidence and submissions in support of the frustration claim (which included the expert evidence given on 24 July) was put forward in support of what was by then a true alternative to the statutory recission claim.

74. [731]

    It is also true that Ahmau only mounted the frustration claim belatedly, and after earlier having rebuffed the idea. But that cannot affect the “event” of the claim once it had been made. In fact, the delay works in the Preets’ favour; if the claim had been made earlier it might have been possible to argue that more costs of the proceedings should be seen as costs referable to it.

75. [732]

    Overall, I think that Ahmau was successful in the frustration claim. The principal issue, which was the subject of the expert evidence and lengthy submissions, was whether there was an entitlement to rescind. That was vigorously contested. It is true that the restitution amounts will be more than Ahmau was prepared to concede in argument, but the difference is relatively small in the scheme of things. The amounts are also significantly less than was ultimately claimed by the Purchasers. I think the question of quantum is best seen as an issue arising in the frustration claim which was not “clearly dominant or separable”.

76. [733]

    Not all the costs incurred after the frustration claim was introduced are, however, costs solely referable to that claim. Part of the further hearing time was spent on finishing the submissions from counsel for the Bakshis on 66ZS issues. That may require some allowance to be made on assessment; in that regard I refer the parties to my comments in Southern Oil Refining Pty Ltd v Hydrodec Australia Pty Ltd (No 2) [2021] NSWSC 336 at [35]-[39]. There has also been the argument about costs itself, which has covered the litigation generally and therefore in my view falls under the general costs of the proceedings.

77. [734]

    Double representation: Van Eeden was a case where the same party (in fact both plaintiff and defendant) was represented by two sets of lawyers in different capacities. That is not the case here. The Preets and the Bakshis were sued separately under separate contracts. There were also factual differences between them. In my view no question of double representation, in the relevant sense, arises.

78. [735]

    Indemnity costs: I do not find the submission of the claim for an indemnity costs order in favour of the Purchasers persuasive. It is true that criticism could be made of some of the evidence of the witnesses for Ahmau. But criticisms could also be levelled at some of the evidence presented by the Purchasers. Some of the points made by counsel about the cross-examination of Mr Kavanagh also have some force.

79. [736]

    This is not to criticise the parties for the way they conducted their case. Events such as these are part of the ordinary course of litigation. In my view, they are not, even when not accompanied by equivalent faults on the other side, a proper basis for awarding indemnity costs.

80. [737]

    Nor do I consider that the Beoco principle has any part to play in the assessment of indemnity costs in the present case. It is true, as I've explained, that the addition of the claim for frustration changed the nature of the issues to some extent, but it is also true that evidence on the subject had been led up to that point. I do not find the analogy helpful in determining whether the costs order which I have found ought to be made should be made on an indemnity basis.

81. [738]

    I also agree with counsel for Ahmau that the offers made by the Purchasers did not reflect the merits of the case as I ultimately found them. Refusal of those offers cannot on any view be seen as having been unreasonable.

Orders

1. [739]

   The orders of the Court are:

   1. (1)

      Declare that the contract for the sale of land between the plaintiff and the first and second defendants dated 21 March 2017 was frustrated by 30 September 2021 at the latest.

   2. (2)

      Order that Ahmau pay the first and second defendants $74,000 by way of restitution.

   3. (3)

      Declare that the contract for the sale of land between the plaintiff and the third and fourth defendants dated 6 April 2017 was frustrated by 30 September 2021 at the latest.

   4. (4)

      Order that Ahmau pay the fourth and fifth defendants the amount of $37,000 by way of restitution.

   5. (5)

      Otherwise dismiss Ahmau’s claims for relief.

   6. (6)

      Dismiss the cross-claim of the first and second defendants and the cross-claim of the fourth and fifth defendants.

   7. (7)

      Order that each of the first and second defendants and the fourth and fifth defendants pay the plaintiff’s costs solely referable to:

   8. (8)

      (a) their cross-claim; and

   9. (9)

      (b) the plaintiff’s claims for relief as against them concerning frustration.

   10. (10)

       Order that the plaintiff otherwise pay the costs of each of the first and second defendants and the fourth and fifth defendants of the proceedings as between it and them.