In brief

The joint matters of Crown Sydney Property v Barangaroo Delivery Authority; Lendlease (Millers Point) v Barangaroo Delivery Authority [2018] NSW 1931 concerned applications for declaratory relief to the Supreme Court of New South Wales in respect of the construction of similar clauses within two agreements concerning the development of Barangaroo, which is an area on the eastern shore of Darling Harbour. The agency responsible for the development of the area was the Barangaroo Delivery Authority (Authority). The two developers were Crown Sydney Property (Crown) and two related entities of Lendlease (Millers Point) (Lendlease). 

Relevant context 

Crown and Lendlease were proposing to develop an integrated hotel resort and luxurious residential apartments in a precinct of Barangaroo immediately adjacent to the Central Barangaroo precinct (Proposed Development). Crucially, the Proposed Development would (to varying degrees) have views of the Sydney Harbour Bridge and the Sydney Opera House over the low rise development in the Central Barangaroo precinct. 

The Concept Plan for Central Barangaroo maintained height limits on the development within Central Barangaroo. However, the State Government proposed constructing a metro station in Barangaroo which would allow for more intensive and thus higher development in the area. 

Both Crown and Lendlease independently entered into agreements with the Authority in respect of the Proposed Development (Agreements). Both Agreements contained similar clauses that dealt with the views from the Proposed Development of the Sydney Harbour Bridge and the Sydney Opera House (Sight Line Clauses). The Court summarised the relevant elements of the Sight Line Clauses to be as follows (at [7], emphasis added):

1. "recognise that optimisation of the development of Central Barangaroo is of critical importance to the Authority;

2. recognise that retention of the sight lines is of critical importance to Crown and Lendlease respectively; and

3. provide that if any application is made for development on Central Barangaroo different to that provided for in the Concept Plan, the Authority must discuss and negotiate in good faith with Crown and Lendlease to seek to agree changes that would retain the sight lines while at the same time optimising development opportunities." 

The Authority released a request for development bids to develop Central Barangaroo which resulted in a preferred bid by a third party which for convenience is referred to as Grocon (Grocon). This preferred bid was progressed through to an application to the NSW planning authority to modify the Concept Plan to account for higher development in the Central Barangaroo precinct, which would relevantly partially block Crown and Lendlease's views. 

Crown and Lendlease were only given the opportunity to discuss and negotiate in good faith with the Authority about the changes to the Concept Plan after extensive discussion and analysis had occurred between the Authority and Grocon regarding its proposed development and Grocon was prepared to submit an application to the NSW planning authority. 

Having completed the extensive discussion and analysis with Grocon, the Authority started the discussions and negotiations with Crown and Lendlease from the position that the relevant views would not be retained. 

Construction of the contract

Both parties relied on the rules for the construction of contracts set out in Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544 which were summarised by the Court as follows (at [81]):

"[The Court is required to] give to the words of the parties’ bargain the meaning that a reasonable business person, cognisant of the relevant matters of background and context, would give them. And it requires the Court, so far as possible, to give all parts of the contract work to do, to read them so far as possible harmoniously, and to avoid so far as possible commercial absurdity." 

The Court found that the following were relevant matters of background and context known to the parties:

1. how the Authority would conduct the process of entertaining and dealing with bids for the development of Central Barangaroo;

2. it was possible that a metro station would be located at Barangaroo;

3. that the presence of a metro station would support and justify more intensive development within and around Barangaroo;

4. that the only land available for development in the Barangaroo precinct was in Central Barangaroo. 

The Court held that, in light of the relevant matters of background, the purpose of the Sight Line Clauses was to give Crown and Lendlease "a seat at the table", which would enable them to negotiate with the Authority about the form of development in Central Barangaroo if it were proposed to differ from that provided for in the Concept Plan. 

Meaning of the word "application"

In issue was whether the reference to "application" within the Sight Line Clauses was a reference to a specific type of application, such as a development application, or to an application as defined in ordinary language, which would include bids. The term "application" is otherwise a defined term in the Agreements and a reference to the defined term appears capitalised. 

The Court held that the absence of the capitalised defined term indicated that the ordinary meaning of the word "application" was intended. Further, that the factual background supported an interpretation that was not narrowly confined, in particular that the Authority had no power to approve development applications. 

The Sight Line Clauses therefore allowed Crown and Lendlease an opportunity to have good faith discussions and negotiations about the future development of Barangaroo from the moment an "application", "request" or "bid" to develop Barangaroo was given to the Authority. 

The Court held that Grocon's application to be a preferred bidder satisfied the ordinary language in the definition of "application", and that negotiations should have commenced once the application was received. 

Position of the Authority in respect of the sight lines

The Court held that the language of the Sight Line Clauses distinguishes between the absolute and unqualified retention of sight lines and the many ways in which development in Central Barangaroo may be optimised. 

The Court considered that the retention of the sight lines was a fixed or objective quality, while the optimisation of development opportunities is of a subjective and judgemental quality. The Court therefore held that the Sight Line Clauses required that when negotiating, the parties should at least start with the proposition that the relevant views were to be retained. 

Whilst the Court was only called upon for declaratory relief, as the Authority never contemplated, even as a starting point, the retention of the sight lines for the purpose of the negotiations and discussions in good faith, the Authority had not complied with the Sight Line Clauses of the Agreements. 

Conclusion

Crown and Lendlease were both seeking declaratory relief in respect of the construction of the Sight Line Clauses within the Agreements. 

It was the Court's view that, on the proper construction of the Sight Line Clauses, the Authority should have engaged in discussions and negotiations in good faith with Crown and Lendlease once Grocon became a preferred bidder and those negotiations should have started from the position of the retention of the relevant views. 

The Court made orders that the Authority had breached the relevant parts of the Sight Line Clauses and ordered the Authority pay Crown and Lendlease's costs.

This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2020.

Related Articles