Miles Condon SC and Nicholas Bentley appeared in the Supreme Court of NSW for Norcross Pictorial Pty Ltd (Norcross) and PTL Land Pty Ltd (PTL) (together, the Plaintiffs) against Central Coast Council (Council) in a successful claim arising under a joint venture agreement (JVA) concerning the construction of a residential and commercial development at 6 Pine Tree Lane, Terrigal (the Land).
The Plaintiffs sought, and PTL was granted, relief for costs and losses incurred from:
- having to identify and excavate contaminated material and waste (asbestos, acid sulphate soil and general solid waste) which the Council had warranted was not on the Land, and had otherwise indemnified the Plaintiffs for (warranties and indemnity claim); and
- delays caused to the completion of the building project by the Council’s failure to grant an easement during construction to supply electricity to the Land (Council’s failure to grant easement).
Some of the key issues for determination were:
- whether PTL was Norcross’s “successor” for the purposes of the JVA (the effect of which was to extend the benefit of the warranties and indemnities in the JVA to a “successor” of Norcross) since PTL was not named in the JVA but had carried out the construction and incurred the losses and costs claimed (Succession Issue);
- whether the claim in respect of the warranties and indemnities was statute barred (Limitation Issue);
- whether, in failing to grant the requested easement, the Council breached the JVA (Easement Issue);
- whether, pursuant to a cross-claim brought by the Council, Norcross engaged in misleading or deceptive conduct in failing to disclose the presence of acid sulphate soil, so that the warranties and indemnities under the JVA should be declared void (Cross-Claim Issue).
Succession Issue: Justice Stevenson held that even although PTL was not a named party in the JVA, clause 19.9 of the JVA allowed Norcross to name PTL as its successor under the JVA. His Honour found that this occurred when Norcross nominated PTL under the Call Option to purchase the Land which was executed on the same day as the JVA.
Limitation Issue: The parties agreed that for the warranties claim, time would run from the date of breach, and that as breach occurred when PTL contracted to buy the PTL Land on 18 March 2005, any claim by PTL under the warranties was statute barred and out of time (the proceeding was commenced on 17 November 2017). However, Stevenson J accepted the Plaintiffs’ argument that an additional indemnity in the JVA could be used to overcome this issue. It provided that the Council would indemnify the Plaintiffs against loss and damage that may arise by reason of any breach by the Council of its “obligations” under the JVA. Since the Council admitted that by giving the warranties it “assumed an obligation to the effect that what was so warranted and represented was true” and the warranties had been breached, the Council was found to have breached its JVA warranty “obligations” so as to enliven the additional indemnity. This overcame the Limitation Issue since Stevenson J accepted that the Plaintiffs’ right to seek the indemnities (in contrast to the warranties) only arose when loss was suffered (when the contamination and waste was discovered in 2015) not when the Land was acquired.
Easement Issue: The JVA required the Council to “promptly … do all things reasonably requested by [Norcross] and necessary to…sub-divide the Land in the manner disclosed in the Plan of Subdivision and create such easements as shall be requested by [Norcross] (acting reasonably) including a right of carriage way which will permit access to…” the Land (emphasis added).
Although the Council had originally approved the request for an easement to supply electricity to the Land, the approval was subsequently withdrawn without any detailed explanation.
The Council argued that it was only obliged to grant an easement “necessary to allow physical access to and from” the Land or, alternatively “necessary” for the purposes of the subdivision generally. This was rejected by Stevenson J who noted that the word “necessary” in the chapeau to cl 4.1(a) was directed to what the Council was obliged to do when “reasonably requested” by Norcross (or PTL) to grant an easement. The word “necessary” was not directed to the question of whether the easement was or was not “necessary”. The Council’s reading of the clause also failed to account for the use of the word “including” and incorrectly limited the breadth of the obligation to subdivisions and right of carriageways.
Having accepted that the request for the easement was reasonable, his Honour found that the Council had breached the JVA by failing to grant the easement.
Cross-claim issue: By its cross claim, the Council contended that Norcross engaged in misleading or deceptive conduct for the purposes of s 52 of the TPA by failing to disclose to the Council “the contamination risk” disclosed in a geotechnical report Norcross received prior to entering into the JVA. This claim was rejected for a number of reasons, including (1) the fact that the Council led no evidence as to what it would have done had the report been disclosed prior to the JVA, (2) the fact that after the report was disclosed to the Council in 2004, the Council reaffirmed the warranties and indemnities concerning acid sulphate soil, and (3) the Court accepted the evidence that no conscious decision was made by Norcross to not refer to the contents of the geotechnical report prior to entering into the JVA.
Accordingly, the Plaintiffs were entitled to their primary claims and awarded costs.
A copy of the substantive judgment is available here.
A copy of the judgment concerning the judgment sum and costs is available here.
A copy of an interlocutory judgment handed down during the course of the hearing where the Council was refused leave to amend its List Response is available here.
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