HORNSBY QUARRY QUESTION OF CONTRACT TO TRANSFER QUARRY LAND TO

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					     HORNSBY QUARRY: QUESTION OF CONTRACT TO TRANSFER QUARRY
                                           LAND TO COUNCIL




                                  MEMORANDUM OF ADVICE




                                      --------------------------------

INTRODUCTION

1.     I am asked to advise whether Council enjoys any contractual rights arising
       from an offer made in 1966 by Farley and Lewers Ltd, the then quarry owner
       to transfer the quarry and surrounding land to Council upon the cessation of
       quarrying activities.

2.     It is axiomatic that no formal agreement expressing an intention to bind
       Council and Farley and Lewers Ltd can be found.                                  From enquiries and
       searches, none appears to have been made. Rather, an agreement was
       reached between the parties comprising a letter from Farley and Lewers to
       Council on 15 August 1966, a further letter of 25 November 1966 and a
       resolution of Council of 15 December 1966.                            These transactions can be
       analysed in traditional offer and acceptance terms, and it is best to assume
       that there was an agreement between Council and Farley and Lewers,
       although whether the parties intended it to be legally binding is a different
       matter.   But in any event, it was not an agreement to transfer the quarry to
       Council upon completion of the quarry. It was a very different proposal, of
       which only one element involved the transfer of the quarry.                                 It imposed
       numerous other obligations on Council, as well as Farley and Lewers, whose
       performance was envisaged before any right would arise to require the
       transfer of the quarry. Performance did not take place, at least as envisaged
       by the agreement. Indeed, there is a strong ground for supposing that any
       such agreement was abandoned.

                 Liability limited by a scheme approved under Professional Standards legislation
                                    Memorandum of Advice
Page 2                                                                   21 August 2006


3.       These events give rise to the following legal questions:

         1.     Was there an agreement between the parties which included a term
                requiring Farley and Lewers Ltd to transfer the quarry land to Council
                upon completion of the quarry?

         2.     If so, was that agreement a legally binding contract?

         3.     If so, does the contract presently exist, or was it discharged by
                abandonment?

         4.     If the contract is on foot, was it enforceable before the owner-initiated
                resumption against CSR Ltd, the successor in title to Farley and
                Lewers Ltd?

         5.     Does Council have any remedies today in light of the fact that it now
                owns the quarry lands by dint of the resumption?

         Questions 4 and 5 need not be answered if no contract was ever brought into
         existence, or if the contract was subsequently abandoned or otherwise
         terminated.

4.       For a contract to have been formed, four elements must have been present:
         identifiable parties, certain terms, real consideration and the parties must
         have intended to subject their agreement to the adjudication of the courts.
         The correspondence and resolution to which I have referred comprises an
         exchange of mutual promises together with benefits and detriments to both
         parties, which is sufficient consideration for the agreement.    A question may
         arise concerning the certainty of the terms of the agreement.          Generally
         speaking, the courts strive to keep parties to their bargains, especially if there
         is a commercial element involved: Banque Brussels Lambert SA v. Australia
         National Industries Ltd (1989) 21 NSWLR 502. The real question is whether
         the parties intended the agreement to be legally enforceable at all, and if so,
         whether it was to await formal contract.
                                    Memorandum of Advice
Page 3                                                                    21 August 2006


5.       Both this question and the question whether any such contract was
         abandoned require close examination of the facts:

               “Because the enquiry about this last aspect may take account of the
               subject matter of the agreement, the status of the parties to it, their
               relationship to one another, and other surrounding circumstances, not
               only is there obvious difficulty in formulating rules intended to prescribe
               the kinds of cases in which an intention to create contractual relations
               should, or should not, be found to exist, it would be wrong to do so.
               Because the search for the “intention to create contractual relations”
               requires an objective assessment of the state of affairs between the
               parties (as distinct from the identification of any uncommunicated
               subjective reservation or intention that either may harbour) the
               circumstances which might properly be taken into account in deciding
               whether there was the relevant intention are so varied as to preclude
               the formation of any prescriptive rules”: Ermogenous v. Greek
               Orthodox Community (2002) 209 CLR 95 at [25].

          For these reasons, my instructing solicitor has at my request caused
          searches to be made of archival records with Council, its former solicitors,
          local newspapers, the Department of Local Government and the State
          Records Office for documents relevant to the offer.          I have many of the
          relevant documents, with the exceptions that I note below. I have been able
          to infer the contents of some missing documents from later documents which
          refer to them.

6.        It has been necessary to examine closely the events of 1966, as well as
          subsequent events to ascertain whether the conduct of the parties to the
          supposed contract was consistent with the existence of a legally binding
          agreement.       In Ermogenous, the High Court reaffirmed that the search for
          contractual intention did not involve a search for the uncommunicated
          subjective motives or intentions of the parties but rather

               “It describes what it is that would objectively be conveyed by what was
               said or done, having regard to the circumstances in which those
               statements and actions happened.” ibid at [25]

          Although evidence of actual intention is probably not admissible to construe
          a contract (see the difference of opinion in Spunwell Pty Ltd v. Bab Pty Ltd
          (1994) 35 NSWLR 290 and Sportsvision Australia Pty Ltd v. Tallglen Pty Ltd
          (1998) 44 NSWLR 103), subsequent conduct may be relevant to prove the
                                   Memorandum of Advice
Page 4                                                                 21 August 2006


          existence of a contract and its terms (Howard Smith & Co Ltd v. Warawa
          (1907) 5 CLR 68 at 78 per Griffith CJ) or to show that a party is estopped
          from asserting or denying a contractual right or has waived it: Brambles
          Holdings Ltd v. Bathurst City Council (2000) 53 NSWLR 153 at [24]-[27].

THE 1966 AGREEMENT

7.       Farley and Lewers Ltd operated a quarry in an area known variously as Old
         Man or Old Man’s Valley. In 1961, Hornsby Council successfully sued Farley
         and Lewers Ltd in the Supreme Court for nuisance caused by its quarrying
         activities: Council of the Shire of Hornsby v. Farley and Lewers Ltd (1961) 78
         WN (NSW) 936; Farley and Lewers Ltd v. The Attorney-General (1963) 63 SR
         (NSW) 814 (on appeal).      The Court granted an injunction that prevented
         Farley and Lewers from carrying out quarrying activities in such a manner as
         to cause a public nuisance by blasting or other noise generating activities.
         The injunction extended only to land then being quarried within a particular
         lease, and not to any other land which from time to time might be quarried by
         the company.

8.       On 5 July 1965, Council’s Pool Sub-committee recommended that Council
         acquire land, within the Estate of Harrington to increase the area of Hornsby
         Park, and to dedicate Quarry Road, then used by Farley and Lewers as its
         private road access to the Quarry, as a public road to afford rear access to the
         Park. On 21 October 1965, Council resolved to resume three parcels of land
         to add to Hornsby Park. Notices of resumption were served in January 1966.
         The parcels were described as land in the Estates of Harrington and
         McKenzie and one acre adjacent to Hornsby Park owned by McKinnon. In
         March 1966 Council advised the Hornsby District Rugby Union Football Club,
         which had affirmed its willingness to participate in “the scheme”, that it
         intended to develop the Old Man Valley area generally, presumably as a
         recreation area, and to retain full control of the area when the development
         had been completed. A scheme had been formulated to develop recreational
         facilities on the land once it was acquired but no document can be found in
                                   Memorandum of Advice
Page 5                                                                  21 August 2006


         early 1966 which clearly explained it. However, the nature of the scheme can
         be inferred from the subsequent events.

9.       On 5 May 1966, Council met to consider the operation of the quarry following
         the injunction restricting quarrying activities. According to correspondence
         dated 6 May 1966 from the Hornsby Valley Preservation Association (“HVPA”)
         to the Department of Local Government, the Shire President at this meeting
         stated that

                “Farley & Lewers Ltd had offered to partially reimburse Council for the
                costs of acquisition by the Council of properties adjoining Farley &
                Lewers Ltd in the Valley.”

         HVPA asked the Department

                “[i]s the Council of the Shire of Hornsby legally permitted to accept
                such payment” and “[w]hy or for what consideration is such an offer
                being made by Farley & Lewers Ltd.”

          The HVPA was prescient because an offer in those terms was later made by
          the company to Council (see para. 17 below).

10.      On 19 May 1966, an article was published in the Advocate entitled “Firm
         Offers Sports Grounds in Hornsby Valley.” The article was accompanied by a
         photo of a scale model of “the four sports grounds offered to” Council. After
         referring to the previous week’s Council meeting, the article stated

                “… the company had offered to undertake without charge all the
                necessary earthwork and landscaping for the preparation of four sports
                field … Mr Farley said his company proposed to dedicate to the
                Council to areas of land … the company also proposed building a new
                road … in return, the company was seeking approval for access to the
                10 acre area between its existing property and the proposed sports
                area.

                Mr Farley said that the company was making its offer as a
                demonstration that it was a good corporate citizen of the Hornsby area
                … .”

          The article claimed that the company would expend about $75,000.00 as a
          contribution to “the council’s scheme.”
                                    Memorandum of Advice
Page 6                                                                    21 August 2006


11.      The Department of Local Government forwarded the correspondence to
         Council on 27 May 1966 seeking detailed comments, but on 25 July 1966
         Council resolved to defer replying to this letter, to refer the matter to the Shire
         Clerk for the preparation of a draft letter and to consider the contents at the
         next Works Committee Meeting.        The Department sent a follow up letter on
         30 June 1966 again requesting information, to which Council finally
         responded on 18 August 1966 (para. 19 below).

12.      On 7 June 1966, the Hornsby-Killara & District Tennis Association asked the
         Shire Clerk whether it could participate in any future discussions relating to
         “the provision of four recreation grounds within the Shire boundaries” as it was
         “in receipt of advice from Messrs Farley and Lewers” relating to the grounds.

13.      On 16 June 1966, the Advocate published a letter to the editor about the
         proposal, which stated

                “Many sporting organizations in Hornsby Shire may have been lulled
                into temporary appeasement by the announced plan by Farley and
                Lewers Ltd, for sports grounds within the Old Man Valley.

                Before deciding their attitude they would do well to take a good look at
                the enormous advantages to the company, versus the somewhat
                nebulous advantages to themselves, and to ask the following
                questions:

                             1)      Can the company assure, in legally binding terms,
                                     a date on which the first oval would be ready for
                                     turfing?

                             2)      Within the present quarry boundaries, space for
                                     dumping overburden would appear to be short.
                                     Would it not be an advantage IN ITSELF to the
                                     company to supply filling for the sports grounds, in
                                     that they would be saved the expense of dumping
                                     it further afield?

                             3)      Could the proposed offer not simply be a blind on
                                     the part of the quarrymasters to obtain extra
                                     quarrying rights, and extra land on which to deposit
                                     overburden, ad infinitum.

               Like the so called “acoustic wall” on the northern aspect of the valley it
               could go on for years and years whilst today’s sportsmen are growing
               too old for sport.”
                                    Memorandum of Advice
Page 7                                                                    21 August 2006


          It is of interest to note the writer’s call for an assurance from the company “in
          legally binding terms” of a completion date for construction of the first sports
          ground. Farley and Lewers was careful not to provide any such assurances.

14.      On 21 June 1966, the Secretary of St Peter’s Church of England sought
         information from Council about the “proposal of Farley and Lewers Ltd to
         develop Hornsby Valley”. Council resolved on 27 June 1966 to inform St
         Peter’s Church of England

                “that Council is not in a position to make available details of proposals
                by Farley & Lewers Limited to develop the Hornsby Valley as such has
                not yet been submitted to Council for its consideration”.

15.      At this stage the Department of Mines notified Council of the results of an
         investigation into the quarry operations showing that “excessive noise was
         being created by the channelling machine” and that “[t]he manager of the
         quarry agree to fit a silencer to the exhaust of the machine”, but in the
         Department’s opinion “in view of the limited blasting being carried on … little
         can be done to further minimise any noise resulting from this source”.

16.      On 22 July 1966, the Eastwood & District Junior Rugby Union advised Council
         of its “appreciation at the enterprise of this company” in light of its receipt of a
         “circular letter” from Farley and Lewers “regarding the construction of playing
         fields in [Hornsby] Council area”.

17.      After some months of lobbying the local sporting groups and, apparently,
         negotiating with Council, Farley and Lewers made its proposal to Council on
         15 August 1966:

                “I refer to discussions between your Council and ourselves relating to
                the formation of playing fields on land adjoining the company’s quarry.
                Following these discussions we now respond to your President’s
                suggestion that we put forward definite proposals for Council’s
                consideration. To illustrate the proposals the accompanying plan has
                been prepared.

                The land referred to comprises about 31 acres in three parcels to the
                east of and adjoining the quarry and edged blue on the plan. It is
                understood that your Council is acquiring this land.
                            Memorandum of Advice
Page 8                                                           21 August 2006


         To give adequate and safe access to the proposed playing fields from
         the Highway we believe it would be advisable for Council also to
         acquire the rear portions of some properties adjoining the extension of
         Bridge Road as shown on the plan. This land is zoned residential but
         the contours of the area make it marginally useful for this purpose.

         The proposals of my Company are: -

         a. The Company to form by earth filling and excavation a platform on
            the area shown green on the plan at about the 400 foot level of an
            area large enough to accommodate four sports fields. The filling
            will be brought in from the area now worked as a quarryand [sic]
            also from the area referred to in the next paragraph. The Company
            will perform this work free of cost to the Council.

         b. The Council to transfer to the Company that part of the subject land
            immediately adjoining the quarry, which is surplus to the area
            required for the platform mentioned above, with approval for
            excavation for filling and for working as part of the quarry. The
            Company will be prepared to pay for this land a price proportionate
            to the price or compensation being paid by Council for the whole
            area. In connection with the development consent which we
            assume to be necessary, we are prepared to agree that if and when
            our Company abandons its Pit as a Quarry and permanently ceases
            to operate the same, the Pit can be transferred to and vested in the
            Council provided that this shall not necessarily apply to any surface
            land comprised in the Company’s tenure not excavated and not
            forming part of the Pit.

         c. The Company to dedicate to the Council its land adjacent to Dural
            Street on which a right of way and well constructed roadway are
            located. This will provide additional access to the playing fields.

         d. The Company to transfer to Council about 1½ acres of its land
            which provides for portion of the platform referred to above and
            which includes the historical burial ground.

         It is estimated that, with the co-operation of Council in carrying out any
         drainage or other ancillary works required, filling could be provided at a
         rate which would permit an area sufficient for one playing field to be
         formed within twelve months and the whole project to be completed
         within three years.

         It will be the company’s intention to continue the construction of the
         acoustic earth wall along the northern boundary of its existing property
         at the same time as the playing field area is under construction.

         The wall has been designed to screen, both visually and acoustically,
         those residences on the southern side of Manor Road which could be
         at all affected by quarrying operations. The wall already contains
                                  Memorandum of Advice
Page 9                                                                 21 August 2006


              300,000 tons of material removed from the quarry and is constantly
              being improved both acoustically and aesthetically by the planting of
              large numbers of additional trees as part of the company’s afforestation
              plan for its property. Under this plan, more than 1,000 trees have
              already been planted on the property and are cared for by a full-time
              gardener.

              Our proposal is now submitted in broad outline for your consideration.
              If we are advised that it is approved in principle we can obtain further
              survey information, prepare engineering drawings and furnish such
              detailed information as you may require.”

         I have been briefed with plan 2/077, dated 23 June 1966, prepared by Farley
         and Lewers and entitled “Sports Ground Proposal in Old Man Valley”.        It is
         clearly the plan with green and blue colouring which is referred to in this
         letter and it better enables the proposal to be understood.    Some land has
         also been shaded “properties owned by Farley and Lewers Ltd to be
         transferred to H.S.C.” including the cemetery and the land adjoining Dural
         Street.   The quarry itself is not shaded.      The proposal by the company
         involved land sales, land swaps, resumptions, the opening and construction
         of public roads, disposal of quarry tailings by landfilling, earthworks, the
         construction of sports grounds, extensions to the quarry and development
         approvals. It was a complex and sophisticated scheme involving mutual
         benefits and detriments, and necessarily depended upon Council favourably
         exercising its statutory powers to resume land, open and construct roads
         and grant development consent.       Of particular concern was the proposal to
         extend the quarry (and therefore its life and noise impacts) on land
         ostensibly resumed for recreation.     This was the quid pro quo which the
         company sought for the public benefits (constructing sports grounds and
         rationalising access to the Valley) which it offered.    Whether the offer to
         transfer the quarry upon completion was a benefit to Council is a moot point.
         However, the benefits of such an agreement to the company were obvious:
         Council could hardly complain of nuisance when the spoil from the existing
         and extended quarry was the source of the fill for its sports grounds.     The
         company could neutralise the threat of enforcing the injunction (para. 7
         above) by making Council and at least a sector of the community a
         beneficiary of the quarry. Moreover, the injunction itself did not apply to the
                                  Memorandum of Advice
Page 10                                                               21 August 2006


          lands proposed for resumption. In order to prevent a recurrence of the noise
          nuisance, Council would have to negotiate an agreement requiring Farley
          and Lewers to observe the terms of the injunction on those lands. Council
          was alive to this problem by September 1966 (para. 23) and it remained a
          stumbling block in 1969 (para. 32).

18.   On 16 August 1966, the HVPA attached a proposal for the utilisation of the
      Hornsby Valley envisaging “implementation of the Deputy Town Planning
      Officer’s recommendation to zone the Old Man Valley as open space …[to]
      enable the Valley to be ultimately used as a picnic-playground area”. I am not
      briefed with the Deputy Town Planner’s report, but Council appears to have
      consistently adhered to the view that the Valley should be used for recreation
      and other open space uses.         On 5 September 1966, Council resolved to
      advise the HVPA “that the plan submitted by them for development of playing
      fields in Hornsby Valley is being kept in mind for future development of the
      Valley and that they be thanked for the interest shown”.

19.   On 18 August 1966, Council advised the Department that

               “… Council has been expecting a proposal from Farley & Lewers Ltd,
               but that has not as yet been officially received. Discussions took place
               between the Shire President, the Writer and representatives of Farley
               & Lewers Ltd – on their representations – soon after it was known that
               Council was proposing to acquire by resumption three separate tracts
               of land in the Hornsby Valley for recreation purposes and the results of
               these discussions have been made known from time to time to Council
               …

               … Farley & Lewers Ltd have given great publicity to a proposal
               whereby Farley & Lewers Ltd will assist Council very considerably in
               the construction of these recreation areas by making available over-
               burden, etc.

               … Farley & Lewers Ltd have indicated that their proposal to assist
               Council would be, amongst other aspects, contingent upon Council
               making available, either by lease or otherwise, to them a further area of
               land adjoining their present holdings for the future extension of their
               activities.”

20.   In August or early September 1966, Council resolved that the Farley and
      Lewers proposal was unacceptable in its present form:
                                  Memorandum of Advice
Page 11                                                               21 August 2006


               “The proposal submitted by Messrs. Farley & Lewers Limited for
               playing fields in the Hornsby Valley be rejected at the present time on
               the grounds that dedication of the pit alone to Council is unacceptable
               and that the President be authorised to discuss the proposal further
               with the Company. Further, the proposals be submitted to Council’s
               Solicitors for an expression of opinion.”

          If the letter of 15 August 1966 (para. 17 above) constituted an offer, rather
          than an invitation to treat, then this resolution was a rejection of it. Upon
          rejecting an offer (or upon making a counter offer), the offer lapses:       it
          ceases to have contractual effect and is thus incapable of acceptance unless
          renewed: Tinn v Hoffman & Co (1873) 29 LT 271 at 278.

21.   On 12 September 1966 a meeting was held at the Council Chambers
      between the Shire President and Mr Farley junior.           The minutes of the
      meeting disclose that Council was not prepared to agree to the proposal (and
      advised Farley as much), whereupon Farley stated that he would discuss the
      matter with the Board and advise Council of the Board’s view:

               “The President informed Mr Farley that Council had given
               consideration at its last meeting to his proposal and that it was not
               prepared to agree to only the pit area of the Quarry being subsequently
               dedicated to Council. He told Mr Farley that Council expected the full
               area to be given to it once the quarry ceased operating.

               Mr Farley said that the Board had offered the pit and this was as far as
               they felt they could go at the time, having regard to the fact that the
               Company is a public company and must protect the interests of his
               shareholders. He said the company believed it was giving a great deal
               to Council in providing the playing fields, dedicating a constructed
               access from Dural Street, dedicating the site of the cemetery and
               buying from Council the land needed for the quarry extensions. He
               said there would be approximately 20 acres left after the pit was
               worked out and this could quite easily be very valuable real estate at
               some stage in the future. However, he said that in the view of
               Council’s attitude he was prepared to discuss the matter further with
               his Board and advise Council of their feelings on the subject.”

22.   On 14 September 1966 Council referred the matter to Whitehead, Green &
      Cooper, Solicitors, noting:

               “Following discussion, Council resolved that the proposal submitted by
               Messrs. Farley & Lewers Limited for playing fields in the Hornsby
               Valley be rejected at the present time on the grounds that dedication of
                                 Memorandum of Advice
Page 12                                                                 21 August 2006


             the pit alone to Council is unacceptable and that the President be
             authorised to discuss the proposal further with the Company”.

      It is of interest that neither in its resolution rejecting the offer nor in its
      instructions to its solicitors did Council raise any objection to the proposed
      quarry extension and the resale of part of the land to be acquired for sports
      grounds.    However Council’s solicitors did raise that, and other difficulties
      with the proposal.

23.   Whitehead, Green & Cooper advised Council on 16 September 1966 as
      follows:

             “In view of the difficulties which the Council has experienced with
             Farley & Lewers Limited in the past, and because of the continuing
             concern of local residents about noise eminating [sic] from the valley,
             we would recommend that in any agreement a clause should be
             inserted requiring Farley & Lewers Limited to carry out the work
             provided for in the agreement as quietly as possible. The agreement
             should also provide that nothing contained in it should imply Council’s
             acceptance of any operation or method of working as being
             satisfactory. Notwithstanding the agreement Council should be free to
             take action against the Company should its activities create a public
             nuisance.

             One question which will require consideration is that of the time to be
             allowed the Company to carry out the work. In this respect it should be
             kept in mind that if the time limit is too short, it would put pressure on
             the company to work at high pressure over possibly longer hours, thus
             giving rise to complaints regarding continuous noise levels.

             It seems that the only reason that the company has referred to the
             acoustic wall being built by it is to warn the Council that not all waste
             material will be used in filling for the playing fields project. Council may
             wish to discuss the question of priority between the two projects with
             the company.

             We agree with you that it would not be satisfactory for Council to have
             the right to obtain a transfer to it of the pit only when quarrying activities
             have ceased permanently. From a survey point of view alone it would
             be desirable for at least some surrounding land to be available to
             Council. We have noted that further negotiations on this point will be
             carried out by Council.

             We have noticed that it is proposed that Council should transfer to the
             company part of the land being resumed by it. Council’s primary power
             of resumption is to resume land for the purposes of the Act. The
             provision of playing fields is one such purpose. In this case, however,
                                 Memorandum of Advice
Page 13                                                                21 August 2006


             it is proposed that some of the land resumed shall be transferred to
             another party and accordingly it would be necessary to see that the
             land to be transferred to the company falls within paragraphs A or B of
             Sub-Section 2 of Section 532 of the Local Government Act.

      The reference in the advice to s. 532(2)(a) and (b) of the Local Government
      Act 1919 (now repealed) is to the power conferred on Council to resume land
      (“the former land”) forming part of or adjoining the land proposed to be
      resumed for Council purposes (“the latter land”), even though the former land
      is not required for the resumption purpose and is proposed to be resold to
      fund Council works on the latter land.     These provisions would authorise the
      Farley and Lewers’ proposal, so long as Council did in fact require the latter
      land for the purpose of recreation: C.C. Auto Port Pty Ltd v Minister for Works
      (1965) 113 CLR 365; Gaffney v Camden Council (Court of Appeal,
      Unreported, 3 September 1997). It is evident that Council was considering
      the proposal in a serious, that is, contractual context, but that its solicitors, at
      least, contemplated that an agreement could only be concluded after further
      negotiations on matters of detail which were to be recorded in a formal
      document. Council’s interests required protection and in particular, it needed
      to quarantine its regulatory responsibilities and immunise itself from any co-
      liability for nuisance. Council formally received the advice on 4 October 1966.
      It must have proceeded to negotiate with the company in the knowledge that
      its solicitors had warned it that risks to Council should be minimised by entry
      into a formal agreement.

24.   On 10 October 1966, the Beecroft Cheltenham Civic Trust expressed its
      strong support for “moves being made by ratepayers of the Hornsby Valley
      area to preserve the floor of the Hornsby Valley as “Open Space””. On 18
      October 1966, the HVPA registered the Association’s “strong objection” to
      Farley and Lewers proposal due to their proposal having a “condition that they
      receive rights to extend quarrying activities on a part of the said resumed
      land” on the basis that “the whole of the resumed land should be used
      immediately as playing fields, general recreation, or similar purposes”.          It
      stated that “[as] you are well aware, we believe, and are prepared to prove,
      that the present quarrying activities are currently in breach of the Court
                                    Memorandum of Advice
Page 14                                                                21 August 2006


      Injunction granted by the full Supreme Court, and any extension of the
      quarrying activities would aggravate an already intolerable position”.

25.   The significance of this correspondence is that, despite the support for the
      proposal (at least to construct the playing fields) from local sporting interests,
      the expansion of the quarry which was the quid pro quo for the offer to fund
      the purchase and construction of the playing fields, was controversial and, no
      doubt, politically risky.     Moreover, Council’s solicitors had warned Council
      about the possibility of a recurrence of the noise nuisance, that its statutory
      power of resumption could only be exercised for a proper purpose (recreation)
      and to ensure that any acquisition of land to be used for the quarry was within
      power.     The discussion by the solicitors of the need for survey and further
      negotiations concerning the terms of any agreement is predicated upon the
      need for a formal agreement. No such agreement was ever made.

26.   On 21 October 1966 Council’s Works Committee recommended that Council
      resume land forming part of Old Man’s Valley “for the improvement and
      embellishment of the area”.             There was no suggestion that the purpose
      included making some of the land available for quarrying. The resolution is
      significant and I set it out in full:

               “That, having considered the question of the development of Hornsby
               Valley, it is recommended that Council take action to resume an area
               of approximately twelve (12) acres ten (10) perches, adjacent to the
               parkland, said to be in the ownership of the Estate of the late A.E.
               Harrington, in addition to an area of sixteen (16) acres three (3) roods
               nine (9) perches approximately, adjacent to the park and said to be in
               the name of the Estate of the late Clara McKenzie, and one (1) acre,
               adjacent to Hornsby Park, said to be owned by Mr. A. McKinnon, for
               the improvement and embellishment of the area, it being noted that all
               properties are situated to the east, and north of the existing Hornsby
               Park boundaries and form part of Old Man’s Valley, Hornsby.
               Recommended further that the objection lodged by the Hornsby Valley
               Preservation Association in their letter (L.3814) be noted and the letter
               received.”

      It appears that this recommendation was adopted by Council on 31 October
      1966, but that is an inference from an annotation on the document and the
      fact that Council did proceed to negotiate for the acquisition of the land, as
                                Memorandum of Advice
Page 15                                                             21 August 2006


      well as subsequent correspondence which assumes that a decision to do so
      was made in 1966.        The Farley and Lewers’ letter of 15 August 1966
      concerns land of about 31 acres (the cumulative area referred to in the
      recommendation) in three parcels, which “it is understood that your Council is
      acquiring …”. The proposal to acquire the 3 lots predated the Farley and
      Lewers’ offer, and was not pursued by Council in order to implement an
      agreement with Farley and Lewers, although later resolutions suggest that it
      may have been pursued (for a time) so as to enable a later agreement to be
      made with the company (para. 32). In any event, the decision to acquire the
      lots was made at a time when Council had rejected the first approach by the
      company.    In the absence of any evidence that Council was aware then that
      the Farley and Lewers’ offer would be amended and renewed, it can be
      considered as an independent act at this time which did not evidence
      acceptance or part performance of any contractual obligations.

27.   On 22 November 1966, the Department asked about Council’s position
      concerning the resumption of land in Hornsby Valley and permitting Farley
      and Lewers to extend its quarrying activities on part of that land, particularly
      “whether it is intended to permit the Company to use any land proposed to be
      resumed”.    I have been instructed that no response to this letter is on
      Council’s files. The Department’s file on the matter could not be located in the
      State Records Office.

28.   On 25 November 1966, Farley and Lewers in a letter identified by Council as
      L. 5913, acknowledged Council’s rejection of its proposal and made an
      amended offer:

          “We duly received your letter of the 14th September last, informing us that
          dedication of the pit alone to Council is unacceptable. We further
          understand that it will meet your Council’s wishes if we agree that when
          the pit is worked out and abandoned as a pit, we will transfer to the
          Council the surrounding land as well as the site of the pit itself.

          The parcel of land in question has a total area of over 50 acres with
          considerable potential value. However, we consider that the provision of
          playing fields will make a material contribution to the amenities available
          to the people of Hornsby and we are prepared to extend our offer to the
          extent suggested.”
                                 Memorandum of Advice
Page 16                                                               21 August 2006


29.   On 26 November 1966 the Shire President and Michael Farley met:

          “Mr Farley sought an interview with the President to inform him that his
          Company, Farley & Lewers Ltd had further considered Council’s condition
          that the whole of the Company’s land revert to Council when the pit was
          exhausted and was now prepared to agree to this request.

          Mr Farley handed to the President a copy of a letter to this effect which
          had previously been forwarded to the Shire Clerk.”

30.   On 12 December 1966, the Works Committee noted that Farely and Lewers
      was prepared to transfer the land surrounding the pit as well as the site of the
      pit itself when it was worked out and resolved that the letter be received and
      the company be thanked for its offer “which Council accepts”. This resolution
      was in the same terms as Council’s subsequent resolution. On 14 December
      1966, Farley and Lewers placed a half page ad in the Advocate with a photo
      of the scale model of the quarry and sports grounds.            It congratulated
      “Hornsby Shire” on 60 years of progress and in large print it stated:

             “Just as all ratepayers are eager to see this Shire benefit from the fruits
             of progress, so do the Management and Staff of Farley and Lewers
             Limited, who are pleased to be able to assist with the proposed
             development of playing fields for the use of all residents.”

      It was surely no coincidence that the following day Council dealt with the
      proposal by accepting the company’s offer.

31.   On 15 December 1966, Council resolved:

          “That L.5913 from Farley & Lewers Ltd, concerning the proposed playing
          fields in Hornsby Valley, and stating that they are prepared to transfer to
          Council the land surrounding the put as well as the site of the pit itself
          when such pit is worked out, be received and the Company be thanked for
          its offer which Council accepts.”

      I have been instructed that no officers’ report which related to this item of
      business was received by Council, but a resolution in similar terms had been
      adopted by Council’s Works Committee on 12 December 1966. Nor have I
      been briefed with any letter by Council to Farley and Lewers accepting its
      offer, despite the terms of the resolution. Any such letter would be of critical
      significance in determining whether Council intended to be bound by its
      acceptance.    An acceptance of an offer is incapable of having contractual
                                 Memorandum of Advice
Page 17                                                               21 August 2006


      effect unless it is communicated to the offeror. There is no evidence that the
      acceptance was communicated to the company.            However, so unlikely is it
      that Council’s officers disobeyed this resolution and so high profile was the
      issue that I think it reasonable to assume that a letter was sent in terms of the
      resolution, and I do not rest any part of my reasoning upon its absence from
      my brief. I shall return in due course to this resolution.

32.   In the following years until August 1969, Council’s records make sporadic
      reference to the Quarry, most frequently in the context of the historic
      cemetery.     On 13 September 1967, an article was published in the local
      newspaper referring the recent discussions with Hornsby Council concerning
      the development of a 20 acre sports centre and the company’s offer to
      dedicate two acres of land to council, one the cemetery and the other the
      access way from Dural Street. There is no suggestion in this article that an
      agreement to implement the offer had been reached with Council.             On 9
      January 1968 Farley and Lewers responded to Council’s enquiries concerning
      the cemetery by stating that

               “at a future date when a final development of our holding has been
               determined we will give consideration to dedicating the cemetery to
               Council. In the meantime we would be please to co-operate with
               Council in determining and providing some security for the cemetery.”

      This letter is inconsistent with Council having accepted, in a legally binding
      manner, the offer by Farley and Lewers. That offer did indeed involve the
      dedication of the cemetery. Plan 2/077 (para. 17) clearly indicates that the
      “historical cemetery” was to be dedicated to Council.             This letter is
      inconsistent with Farley and Lewers having already accepted an obligation to
      do so.     Moreover, Council entered no protest when it received this letter,
      which was consistent with an assertion that a legally binding agreement had
      already been formed, imposing an obligation to dedicate. Instead, Council
      resolved to thank Farley and Lewers for its assurances and to inform it “ that
      Council looks forward to the future co-operation of the Company” (resolution,
      25 January 1968).       Council communicated this resolution to Farley and
      Lewers by letter of 1 February 1968. However, in August 1968 the Farley and
      Lewers proposal was revived by some of the councillors. Initially, the Shire
                                  Memorandum of Advice
Page 18                                                               21 August 2006


      Clerk had reported upon the resumptions in Old Man Valley. I am instructed
      that his report cannot be found. It was considered by Council at its meeting of
      8 August 1968. The following recommendation was put to the meeting:

             “That the Shire Clerk’s report number 189/68 concerning resumption
             proceedings concerning resumption proceedings in Old Man Valley and
             the matter of the values of the land in question be received, and the
             Shire Clerk acquaint the Valuer General with the purposes for which
             Council wishes to acquire the area, namely -

                    1)     Provision of recreation facilities for the benefit of the
                           Shire.

                    2)     An arrangement for the sale or lease of part of the land for
                           quarrying purposes conditionally upon it reverting to
                           Council when the quarry has been worked out.

                    3)     To involve the properties in Council’s plans for the future
                           development of the whole of the Valley, as the acquisition
                           of these properties together with the ultimate acquisition
                           of the present quarry will place the whole of the Hornsby
                           Valley area in the hands of Council.

                    4)     Resultant benefits to the whole of the Shire in acquiring
                           this and adjacent lands for Open Space purposes.

             Further, that the Shire Clerk pursue by all means available to Council
             the acquisition of these three (3) properties”

      An amendment that para 2 of the recommendation be deleted was lost. An
      amendment to delete the final sentence of the recommendation and to add
      the following words to it

             “and that the Shire Clerk seek a legal opinion concerning the Court
             injunction and control on adjoining land should Council cooperate in the
             scheme as proposed by Farley and Lewers”

      was passed. The immediate effect of this motion was to inform the Valuer
      General, who was valuing the three (3) properties proposed for presumption,
      of the public purposes for which Council proposed to resume the land.
      Apparently, there was no suggestion that the resolution be communicated in a
      contractual context to Farley and Lewers.          Indeed, the amendment to the
      recommendation was premised upon a future agreement by Council “should
      Council co-operate in the scheme as proposed by Farely and Lewers”, and,
                                Memorandum of Advice
Page 19                                                              21 August 2006


      despite the terms of the recommendation, and its communication to the Valuer
      General, the actual resolution of Council is inconsistent with it having already
      agreed in a contractual context with the 1966 offer by Farely and Lewers. On
      19 August 1968, the Shire Clerk reported to Council that the injunction
      granted by the Supreme Court (see para 7 above) did not extend to the land
      proposed to be resumed and leased back to Farley and Lewers for quarrying
      purposes. Moreover, the Shire Clerk pointed out that the land was proposed
      to be zoned for recreation purposes under Council’s draft planning scheme
      which would prohibit quarrying.      Unless a consent was obtained for the
      quarrying within 12 months of the commencement of the scheme, then the
      company would not acquire existing use rights and it could not then use the
      land proposed for resumption in accordance with its 1966 offer. The Shire
      Clerk also noted that although quarrying was then permissible, the consent
      authority was the State Planning Authority and not Council, and, in addition,
      any lease with a term longer than two (2) years required the approval of the
      Minister for Local Government. He recommended that the conditions of any
      approval should include a clause requiring Farley and Lewers to consent to
      the extension of the injunction to its operations on the land proposed for
      resumption. Within two (2) weeks Council had received eight (8) letters of
      objection to the course upon which it had embarked.             Whether those
      objections influenced Council to change its mind is not known, but by
      December 1968, Council had resolved to negotiate the acquisition of the land
      “for recreation purposes” on the basis of the evaluation prepared by the
      Valuer General. It appears to me that Council was keeping its options open if
      it wished to proceed with the Farley and Lewers proposal, but had not bound
      itself to do so. It was pointless entering into an agreement with Farley and
      Lewers if Council could not even effect the resumption of three (3) lots which it
      had first resolved to resume in 1965. In any event, that was the position by
      the end of 1968.

THE 1969 OFFER

33.   By mid 1969 Council was concerned that the cemetery in Hornsby Valley had
      been vandalised. On 22 July 1969, Council renewed its request to Farley and
                                  Memorandum of Advice
Page 20                                                             21 August 2006


      Lewers to transfer the cemetery to Council to ensure its preservation. Farley
      and Lewers replied the next day, offering to cooperate with Council but
      refusing to transfer it. It then said that

             “as previously stated, at a future date when final development of our
             holding has been determined, we would give favourable consideration
             to dedicating the cemetery to Council. In the meantime, let us jointly
             determine how the graves should be restored and the form of security
             necessary”.

      On 7 August 1969, the Council resolved to ask the Shire Engineer to cost the
      erection of a security fence around the cemetery. Of course, had the 1966
      offer, which involved the dedication of the cemetery, resulted in a legally
      binding agreement, Council could have simply asserted its rights under that
      agreement. It did not do so, and its conduct was again consistent with the
      parties having failed to reach a final agreement. On 12 August 1969 Farley
      and Lewers reopened discussions with Council. After noting the previous
      offer made to Council about the playing fields in relation to which “no
      formalised arrangements were made”, the company made a new offer:

          “Recently we have received enquiries from several sporting clubs asking
          whether this Company’s offer to construct playing fields in the Valley
          Hornsby was still open.

          We did have negotiations with a previous Council on this matter and whilst
          agreement was reached no formalised arrangements were made.

          In view of the recent approaches, we take this opportunity of making the
          following offer to Council.

          The Company would be prepared to design and carry out the earth works
          necessary to form four full size playing fields on the area adjacent and to
          the east of the quarry. We understand that resumption of this land by
          Council has been completed.

          We would be prepared to carry out this work at no cost to Council and as
          a service to the youth of the community.”

      The renewal of the offer did not include the quid pro quo.         It made no
      suggestion that Council should sell, lease or licence part of the acquired land
      in order to extend the quarry. It did not propose a land swap to rationalise
      access to the valley. It made no offer to relinquish the quarry or surrounding
                                  Memorandum of Advice
Page 21                                                                 21 August 2006


      land upon its exhaustion.       The reference to the previous agreement was
      qualified by the statement about the absence of any formalised arrangements.
      It is apparent that the company believed that:

      a.      no binding agreement with Council had been made;

      b.      any agreement was subject to the need for formal recordal.

      The actions of Council in the ensuing months demonstrated that it shared the
      company’s beliefs.

34.   On 18 August 1969, Council referred the letter to the Shire Clerk for
      investigation and report. It resolved

           “That Council’s Engineer confer with Farley and Lewers with a view to the
           company placing on plan its proposals for the siting of four (4) full size
           playing fields in Hornsby Valley on the understanding that no commitment
           or approvals will be given by Council for any work to be carried out until
           the properties have been acquired and the total areas properly planned”.

35.   On 1 September 1969, the Shire Clerk responded that the Deputy Shire Clerk
      had spoken to Michael Farley to clarify whether the recent offer related to the
      earlier negotiations. He was told by Farley that

               “the offer is as stated in his letter, namely – “The Company would be
              prepared to design and carry out the earthworks necessary to form four
              (4) full size playing fields on the area adjacent and to the east of the
              Quarry”.

      He responded that

              “it is not proposed to construct these playing fields free of cost to
              Council as drainage could be involved and the expense of turfing and
              fencing in of the areas would need to be met by Council”.

      The Deputy Shire Clerk recommended that if Council wished to avail itself of
      the offer that the Company be asked to consult with Council’s Engineer

              “with a view to placing on plan its proposals for the siting of the four (4)
              full size playing fields on the understanding that no commitment or
              approvals will be given by Council for any work to be carried out until
              all properties have been acquired and the total area properly planner”
              [sic].
                                Memorandum of Advice
Page 22                                                              21 August 2006


      Council’s Works Committee meeting of 1 September 1969 resolved to this
      effect, and Council confirmed its resolution on 4 September 1969.

36.   On 18 November 1969, Farley and Lewers offered to discuss the proposal
      with Council representatives and attached a letter “outlin[ing] our intentions”
      (which is referred to as L.16234 in Council’s minutes). The letter is not briefed
      to me, but its contents can be discerned from subsequent discussions and
      reports to Council.   In response to it, Council resolved on 8 December 1969
      to defer the proposal and instruct the President and the Shire Clerk to
      “interview representatives of the Company at an early date”. The interview
      took place on 3 February 1970. The minutes of the interview disclose the
      following:

          “The proposal envisaged the construction of four full sized playing fields
          on land in Old Man’s Valley presently being acquired by Council for
          recreation purposes, and in response to the President’s question the very
          direct answer given was – ‘there were no strings attached to the offer
          whatsoever’ and that they confirmed the details of their written
          submission. They did point out however that whilst their programme of
          construction envisaged completion over a period of four years, they would
          be quite happy to vary the order in which the fields were proposed to be
          constructed to meet Council’s wishes. They stated they were prepared to
          move as soon as Council gave their consent.

          They propose to have survey plans prepared for Council’s approval, and
          they were quite happy to have these plans prepared by a nominee of the
          Council if necessary. They felt that as the detailed survey plans could
          take some three months to complete, that if Council approved the
          proposal in principle the work could in fact commence prior to survey
          plans being completed. In other words if Council was prepared to place
          enough confidence in them the work could be progressing concurrently
          with the design plans.”

      The basis of these discussions must have been an acceptance (at least on
      the part of the company) that no final agreement had been reached in 1966.

COUNCIL ACCEPTS AND IMPLEMENTS THE 1969 OFFER

37.   On 9 February 1970, Council resolved to receive letter no L.16234 from
      Farley and Lewers Ltd:

          “concerning the sportsground proposal for Old Man Valley and the
          Minutes of Interview between representatives of the Company and the
                                Memorandum of Advice
Page 23                                                              21 August 2006


          Shire President, concerning the sports ground proposal for Old Man
          Valley, and that the firm be informed that Council accepts its offer to
          construct playing fields in Hornsby Valley as indicated in their letter of 18
          November 1969 and that they be also requested to proceed forthwith
          under the direction of the Shire Engineer”.

      Had there been an extant agreement to do so in 1966, it would have been
      unnecessary for Council to accept the fresh offer. This, then, is evidence that
      Council, too, proceeded on the assumption, now common between the
      parties, that no final agreement was reached in 1966.

38.   In about July 1970, Gutteridge, Haskins & Davey on behalf of Farley and
      Lewers submitted a report and plans to Council. In this report, the proposal
      was summarised as

          “placing approximately 0.76 million cu.yd. of overburden from the Quarry
          over a period of 3 to 4 years in order to provide about 9 acres of land
          which could be developed into a sportsfield complex for Hornsby Shire
          Council.”

      Council’s Engineer then recommended that Council begin the laying of piping
      and commence acquisition of land affected by the construction of the access
      road to the playing fields so that Farley and Lewers could begin its work on
      the proposal:

          Farley & Lewers proposal covers only (1) The supply and compaction of
          overburden to indicated levels – (2) Rough formation of road works – (3)
          Construction surrounding upward graded section and provision of 8ft.
          safety fence and tree planting. (4) Provision of open drains

          Council would therefore be responsible for such items as Roadworks
          other than rough formation, buildings, pipe drains, completion of play area
          surface (soil, grass, etc.), paving and marking of parking areas, provision
          of power and water and land acquisition. The rough estimated cost of
          which is $50,000.00 excluding land acquisition and buildings.

          The most immediate need so far as Council is concerned is to supply and
          lay the various pipes and to commence land acquisitions. The former in
          order to comply with Farley & Lewers schedule is required to be
          completed by the end of this year. (estimated cost $8,000.00)

          Recommendation:

          That Council allocate an initial $8,000.00 to cover cost of piping and
          commence requisite land allocation for road access.
                                Memorandum of Advice
Page 24                                                                21 August 2006


39.   On 21 September 1970, the Shire Clerk recounted in his report to Council the
      history of the offers made by Farley and Lewers:

            Council at its last meeting deferred consideration of Engineer’s Report
            No.M.435/70, concerning the [proposal of Farley and Lewers] and
            referred it to me for a full and complete report.

            I have interpreted this to mean the submission of details of any
            arrangement or agreement entered into with Farley and Lewers on the
            question of constructing the playing fields.

            Soon after it was known that Council was proposing to acquire, by
            resumption, three (3) separate properties in the Hornsby Valley, Farley
            and Lewers sought an interview with the then Shire President and at
            this interview the general development of the area was discussed.

            Council was acquainted with the details of this interview and Farley and
            Lewers subsequently prepared a model showing the possible layout of
            the Valley and made known publicly its desire to assist Council in the
            development of the area by making overburden available.

            In the early discussions, Farley and Lewers stated that their assistance
            was contingent upon Council making available, by lease or otherwise, a
            further area of land adjoining their holding for future extension of their
            activities.

            About the same time, the Hornsby Valley Preservation Association had
            forwarded a plan and a proposal for the development of the whole of
            the Valley in three (3) stages, including the use of the quarry site.

            Council resolved to keep the Association’s proposals in mind for the
            future development of the Valley.

            The Farley and Lewers proposal was deferred and a further meeting
            was held between Mr Farley Jnr and the President. This was reported
            to Council and a further letter was subsequently received from the firm
            indicating that it would “when the pit is worked out and abandoned as a
            pit”, transfer the pit and extend its offer to include this (ie in addition to
            constructing playing fields).       On 15th December, 1966, Council
            accepted Farley and Lewers’ offer.

            The matter lay dormant for a few years, then on 14th August, 1969, it
            was raised again by Farley and Lewers when it made the following
            offer:

            “The Company would be prepared to design and carry out the earth
            works necessary to form four full size playing fields on the area
            adjacent and to the east of the quarry. We understand that resumption
            of this land by Council has been completed.
                              Memorandum of Advice
Page 25                                                             21 August 2006


          We would be prepared to carry out this work at no cost to Council and
          as a service to the youth of the community.”

          When this offer was placed before Council, I was directed to report
          further having regard to the earlier discussions, concerning the transfer
          of some of the land to the Company for quarrying purposes.

          By report dated 1st September, 1969, Council was advised that Mr
          Farley gave his assurance in the terms of his offer. Council was also
          informed that it was “not proposed to construct these playing fields free
          of cost to Council as drainage could be involved and the expense of
          turfing and fencing of the areas would need to be met by Council”.

          Following consideration of this report, Council resolved “that Council’s
          Engineer confer with Farley and Lewers with a view to the Company
          placing on plan its proposals for the siting of four (4) full size playing
          fields in Hornsby Valley on the understanding that no commitment or
          approvals will be given by Council for any work to be carried out until all
          properties have been acquired and the total area properly planned”.

          On 18th November, 1969, Farley and Lewers submitted the following
          proposal accompanied by a plan –

          “Farley and Lewers Limited is prepared to perform the following work at
          no cost to the Council: -

          1.   The work includes the supply and compaction of fill material
               generally to the levels and layout as shown on Plan 2/127A. The
               surface will be dozed to a grade for Council to place topsoil and
               turf;

          2.   Doze and rough-out access roads from Dural Street and Bridge
               Road to a suitable grade and alignment;

          3.   Construct an earth wall barrier on the western perimeter of the
               sports ground area where it adjoins the quarry property;

          4.   Erect an 8ft. high fence on top of the earth wall;

          5.   Plant a suitable tree barrier on the earth wall;

          6.   Provide open unlined drains to divert water and drain sports area;

          7.   Prior to commencement of construction, supply drawings of
               design details for your Engineer’s approval.

          The programme of construction would provide for the earth works of
          one field to be finished each twelve (12) months.

          Year 1        Southern field
                                Memorandum of Advice
Page 26                                                              21 August 2006


            Year 2        Northern field

            Year 3        Central field

            Year 4        Second central field.

            This letter outlines our intentions and we would be pleased to discuss
            our proposal with representatives of your Council at a time convenient
            to you.”

            Following discussion, Council asked the President and the Shire Clerk
            to interview representatives of the Company at an early date and, after
            the interview took place and the report considered by Council, Council
            resolved as under –

            “That L.16234 from Farley and Lewers Limited and the Minutes of
            Interview between representatives of the Company and the Shire
            President, concerning the sports ground proposal for Old Man Valley,
            be received and that the firm be informed that Council accepts its offer
            to construct playing fields in Hornsby Valley as indicated in their letter
            of the 18th November, 1969, and that they also be requested to
            proceed forthwith under the direction of the Shire Engineer.

            The proposal now submitted is the follow through from this resolution.”

40.   Although this report was prepared four years after the events in 1966, the
      circumstances would have been relatively fresh in the minds of Council
      officers, and the report accurately states the effect of the correspondence and
      reports to which I have referred above.     It is fundamentally inconsistent with
      the existence of a final contract between Council and Farley and Lewers
      based on the 1966 agreement which both parties have by now abandoned. It
      was a further two years before Council raised again with its officers (but not
      Farley and Lewers) whether the 1966 agreement to transfer the quarry lands
      would be observed by the company (see para 48(c) below).

41.   On 4 December 1970, Council informed Farley and Lewers that “after
      considering the proposal and an Engineer’s report on the matter, Council has
      resolved to allocate the sum of $8,000.00 to cover the cost of piping the area”.
      He advised that because the Council had not finished the land acquisition
      process, “any work which is undertaken with regard to the construction of the
      sports grounds will need to be undertaken in the first instance on the Council
      owned land”.
                                Memorandum of Advice
Page 27                                                             21 August 2006


42.   On 25 January 1971, the Shire Clerk reported to Council that the acquisition
      of the Harrington land had been delayed because of the failure to agree on
      the acquisition price, which itself was a result the complexity of Harrington’s
      estate. The clerk noted that the McKenzie and McKinnon lands had already
      been acquired. The Shire Engineer asked the Shire Clerk on 15 April 1971
      for individual plans to be prepared so that the land acquisition process could
      continue. Subsequent memos dated 28 April 1971 and 1 June 1971 to the
      Shire Engineer indicate that these plans had not been completed.
      Correspondence dated 15 May 1972 from the Deputy Shire Clerk to two land
      owners the subject of land acquisition concerning their failure to reply to
      correspondence in relation to the acquisition demonstrates that the land
      acquisition process was not yet complete by mid-1972.          Had the 1966
      agreement remained on foot, the failure to resume this land would have either
      breached or frustrated the agreement, because land acquisition by Council
      was the predicate for the obligations of the company and the benefits
      (including the transfer of land to Council) which Council might have obtained
      from it. Yet there are no records of any allegation by the company of breach,
      and no evidence at all that either party was aware that the failure by Council
      to resume the land had any contractual consequences.        These events are
      only consistent with the abandonment of the 1966 agreement.

43.   On 15 June 1972, Council established the Hornsby Valley Sporting Complex
      Sub-Committee. The Shire Clerk had reported to this Council meeting on the
      history of proposals relating to the Valley, and had annexed relevant
      documents.     I am instructed that this report cannot be located, but its
      contents are summarised in a later report to Council (see para. 50 below).




WORK GRINDS TO A HALT AS COUNCIL REVIEWS ITS PRIORITIES

44.   On 24 July 1972, the Engineer reported on the work that was required to be
      undertaken by Council and Farley and Lewers in relation to the playing fields
      proposal, and how much of this work had in fact been completed. It noted
                                 Memorandum of Advice
Page 28                                                               21 August 2006


      that Farley and Lewers was undertaking work which it had not consulted
      Council about, and recommended that its activities cease at once.

          B. Present Situation

          Work has been commenced and in operation for some time by Farley and
          Lewers with spoil dumped on Council land and spilled into the creek
          dividing Council’s land from that of the estate of Harrington, north of
          Council’s property. The exact location would have to be determined by
          survey.

          C. Conclusion

          (i) It appears that Farley and Lewers did not consult the Shire Engineer
          before starting work.

          (ii) No drainage (open drains) appear to have been constructed to protect
          the filled area.

          (iii) Apparently there has been no effort by Farley and Lewers to key the
          fill to the existing natural surface.

          (iv) There is no provision to drain the main creek free of seepage which
          may result in a particularly unstable 130 ft embankment. The boulders
          which have interrupted the natural flow of the creek as a result of the end
          dumping of the overburden cannot be claimed to act as a filter medium in
          the future as their interstices will fill with fine materials and further, the
          boulders, being a breccia, will most probably decompose rapidly to a
          clayey grit.

          D. Recommendation

          (i) That Farley & Lewers’ activities cease at once.

          (ii) That Farley & Lewers’ Engineer be required to consult with the Shire
          Engineer before any resumption of work takes place.

      Council so resolved on 27 July 1972.

45.   On 17 August 1972, Farley and Lewers informed Council that following
      discussions with the Council’s Engineer, the Company had “commenced
      placement of fill on Council’s land at the area for the Proposed Playing Fields”
      and that they would “prepare the western lower extremity of the Playing Field
      area prior to resumption of work”. An indication of when Council would be
      resuming the affected land was sought as this would affect Farley and Lewers’
      future programming of works. A note made by someone from Council on the
                                Memorandum of Advice
Page 29                                                             21 August 2006


      letter states that “No drainage can be undertaken until F & L have decided on
      the amount of overburden they will need to dispose of”. On 4 September
      1972, Council resolved to advise “the Company that Council cannot give the
      Company any indication at this stage as to when Council will be successful in
      acquiring the third parcel of land”. This was, presumably, a reference to one
      of the three parcels which Council had proposed to acquire in 1966 for the
      sports fields, and to which the 1966 offer by Farley and Lewers related.
      Again, there is no suggestion in the correspondence that the failure to resume
      this land had any contractual consequences.

46.   On 17 August 1972, Hornsby District Rugby Union Football Club asked
      Council for a meeting to discuss the acquisition of land for Club premises and
      parking requirements. Council resolved on 4 September 1972 to advise the
      Club “that Council’s proposals for the Hornsby Valley are only in the
      preliminary stages and no indication as to its final use can be made at this
      time”.

47.   On 25 August 1972 the Deputy Shire Clerk requested the Engineer to prepare
      reports giving details of the cost of construction of access roads including “an
      access road from the Dural Street right-of-way through the reserve roads in
      the area shown on plans to the southern properties recently purchased by
      Council”.

48.   Notwithstanding that Farley and Lewers had commenced to fill the Council
      land under the 1969 agreement, Council sought advice as to whether that part
      of the 1966 agreement which conferred a benefit on Council remained on foot.
      On 3 October 1972 it resolved that:

          a. The Engineer suitably mark the approximate extremities of the area
             which will be available to Council after all lands have been acquired;

          b. That the Shire Clerk progress the acquisition of the Harrington land as
             quickly as possible and advise Council of the recommended means of
             financing the acquisition;

          c. The Shire Clerk advise Council if there is a legal agreement with Farley
             and Lewers for the dedication of all its land when quarrying ceases as
             well as the obligations of Farley and Lewers to restore the site if any;
                                 Memorandum of Advice
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          d. The Engineer report on the feasibility of reducing the level of the
             proposed fields to maintain part of the existing homesites as picnic
             areas and plan an alternate layout incorporating two (2) only playing
             fields (this to be considered after a visit to the site with the members of
             the Sub-Committee);

          e. The Engineer to report to the Sub-Committee on the cost of providing
             an access road from Bridge Road;

          f. Subject to (d) and (e), the Engineer arrange with Messer Farley and
             Lewers for a schedule of filling.

      It does not appear that Council was aware that the quid pro quo for the 1966
      agreement was an extension of the quarry and the sale of part of the acquired
      land to the company.

49.   On 15 June 1973, the Engineer made various recommendations concerning
      the placement and levelling of fill, the acquisition of land and the access roads
      in Old Man’s Valley. This report was deferred until the Shire Clerk could
      report on the arrangements entered into with Farley and Lewers regarding
      developing the playing fields and the Engineer could report on the proposals
      of Councillor Mathews concerning road access, re-siting of the Scouts and
      Guides and the filled area. It is evident that the problem of access to the
      sports fields had not been resolved and any option would involve Council in
      significant costs.   There is no suggestion in this or subsequent reports from
      the Engineer that the land swap which Farley and Lewers proposed in 1966 to
      achieve access from Dural Street or the proposed acquisition shown on Plan
      2/077 for access (see para. 17 above) was still alive, and no steps appear to
      have been taken by Council to accept the offer to transfer to it the company
      land adjoining Dural Street.

50.   On 23 July 1973, the Deputy Shire Clerk Mr Woodward reported to Council
      that, in light of the fact that the issue of Farley and Lewers’ proposal “went into
      abeyance” until 1969 when the company made a fresh offer which did not
      refer to the dedication of the lands, “it cannot necessarily be assumed that the
      offer to dedicate their lands still applies”, recommending that enquiries be
      made of Farley and Lewers Limited in order to clarify this issue:
                                Memorandum of Advice
Page 31                                                               21 August 2006


          I enclose herewith a copy of a report and attachments which were
          submitted to the Hornsby Valley Sporting Complex Sub-Committee on
          13th June, 1972 [I am not briefed with this report] outlining the history of
          the project to that time and which report was that read to Council at its last
          Meeting.

          …

          Clause 2 refers to the proposals made to Council by Farley & Lewers.
          Although that company’s offer of 1966 agreed to dedicate to Council all
          the lands owned by the company once the pit had been worked out and
          although Council accepted the offer, I consider that because the matter
          went into abeyance until 1969 when the company made a fresh offer
          which did not refer to dedication of their lands it cannot necessarily be
          assumed that the offer to dedicate their lands still applies. Council could
          no doubt determine this question via direct enquiry of the company.

          All of the land which was once zoned “Green Belt” was subsequently
          zoned “Undetermined” under the Cumberland Scheme and “Reservation
          for Open Space” under the Hornsby Local Planning Scheme. No formal
          objection was lodged by Farley & Lewers to this zoning.

      There is no evidence of any inquiries having been made of Farley and
      Lewers. This report is consistent with the conclusion that no steps were taken
      by either party to implement the 1966 agreement.         It does not refer to the
      quid pro quo to that agreement.

51.   At its meeting of 23 July 1973, Council resolved that “the monies allocated for
      piping be reallocated by the appropriate Ridings”.

52.   On 20 August 1973, the Engineer recommended that “Council authorise
      construction of the cricket oval and junior football field and access road as
      shewn on the plans and that Messrs Farley & Lewers Ltd be requested to
      supply the requested fill material to be placed under the Engineer’s
      supervision” and, further, that “the appropriate action be taken to create a
      public road access from Dural Street to public reserve” and that “any work
      within “Harringtons land” be stayed until title is obtained”.     On 23 August
      1973, Council deferred the recommendation until after negotiations for the
      purchase of the remaining lot.

53.   An offer made to the trustees of the Harrington’s estate was rejected on 4
      October 1973 and the Shire Clerk then recommended resumption.
                                 Memorandum of Advice
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54.   Various verbal reports of the Hornsby Valley Complex Sub-Committee were
      received at Works Committee meetings on 26 November 1973, 11 February
      1974, 4 March 1974, 10 June 1974, 8 July 1974, 6 August 1974, 2 September
      1974, 20 January 1975, and 1 April 1975. Minutes of a Presidential interview
      with representatives of the Hornsby Rugby Union Club on 15 April 1975
      disclosed that the necessary land acquisitions for the playing fields had been
      completed and that it was Council’s intention to provide playing fields in the
      Valley, but it does not appear that Council ever resolved the problems of
      access or, for that matter, endorsed the Engineer’s recommendation to
      construct a cricket oval, football field and access using fill supplied by Farley
      and Lewers, which it deferred in 1973.

55.   On 10 June 1975, the Hornsby District Rugby Union Football Club advised
      Council that

              “After consultation with Mr Michael Farley of Farley & Lewers Ltd, it
             became apparent that some time will elapse before the area is
             completely filled to enable construction of a first class ground”.

      Also the Club offered its services to develop a field for use in the meantime
      and noted that

             “Mr Farley has kindly offered the services of his company to convert
             the existing entrance track into a suitable loose metal road and enough
             area would be available to park sufficient cars for junior play”.

      The Club asked for Council’s assistance in relation to piping a nearby
      watercourse. Consideration of this letter was deferred and it was resolved in
      June 1975 that the Shire Engineer submit a report as to whether it would be
      possible to construct the fields.

COUNCIL’S CHANGING INTENTIONS

56.   In or about 1981, Farley and Lewers Ltd entered into a scheme of
      arrangement with CSR Ltd, with the effect that it became a wholly owned
      subsidiary of CSR.

57.   In 1981, the Shire Engineer reviewed the history of proposals in the Valley:
                                Memorandum of Advice
Page 33                                                              21 August 2006


          … many years ago Council purchased land in Hornsby Valley with the
          ultimate intention of building sporting fields for use by the public.

          Council has considered my [sic? – many?] schemes and is now almost to
          the point of adopting a variation (yet to be submitted) on the Engineer’s
          last submission.

          Progress of the development in the foreseeable future is now possible
          because of the assistance both in cash and kind made possible by Messrs
          Farley & Lewers Ltd. As regards ‘kind’, this takes the form of a large
          quantity of fill from the quarry workings and which would, if it were not for
          this project, have to be disposed of elsewhere. Its use by Council would
          therefore not appear to affect the quarrying intentions of Farley& Lewers
          nor further detract from the environment of the area.

          It must be noted that the quarry, although perhaps undesirable, is an
          existing industry of long standing, has existing use rights and is much
          older than many of the residents who now complain.

58.   On 10 November 1986, an internal report concerning various parks in the
      Council area noted the cost of completing the Hornsby Valley park project, but
      that it was proposed to make ‘Field 1’ available in April 1988.          Council
      resolved, however, to assign a low priority to the development of sports fields
      in the Hornsby Valley and to seek a contribution to its cost from the Rugby
      Club.

59.   Council’s intentions towards the Valley appear to have changed in the late
      1980s. On 3 April 1990, Hemmings J gave judgment in Taylor v. Hornsby
      Shire Council (1990) 69 LGRA 281. The Council had granted development
      consent to itself for “increased levels of filling of Old Man Valley in the
      construction of playing fields”. Development for the purpose of recreation
      was permissible with consent, but landfill was not.         Council wished to
      encourage the re-development of the Hornsby town centre and saw the
      subject land as providing an appropriate landfill depot for the commercial
      depositing of the extensive fill material which would be generated by the
      development over an expected period of at least ten years. It was envisaged
      by the Council that after the land’s use for fill ceased that Council would adapt
      the land for use for the purpose of recreation. The applicants, who were local
      residents and members of an unincorporated body known as “Concerned
      Hornsby Residents”, claimed that the proposed development was prohibited.
                                Memorandum of Advice
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      Hemmings J held that the consent was invalid because, having regard to the
      nature and extent of the proposed filling and other features of the matter, it
      was not reasonably open to the Council to come to the conclusion that the
      purpose of the proposed use was for recreation:

          The subject land fill enterprise will inevitably destroy an existing playing
          field and prevent the use of the recreation area for the purpose for which it
          has been zoned and reserved, for more than a decade. There is no time
          limit upon the use of the land for the land fill enterprise. There can be no
          doubt that the decision to place such massive filling over and above the
          existing playing fields, and the determination of its ultimate bulk, height or
          location, was not for or incidental to the use of the subject land for playing
          fields. The amount of filling to be placed on the land was determined by
          the volume likely to be generated by re-development of the central
          business district. In my opinion, no other conclusion is open than that the
          nature and extent of this filling, its levels and rates of emplacement, and
          the selection of the subject land have been determined for the purpose of
          a land fill depot as a lucrative commercial enterprise. Such development,
          if not carried out on the subject land, would be located at another site and
          not necessarily have an ultimate use for recreation. In my judgement, on
          no basis could it be determined by Council that the placing of
          approximately one million tonnes of fill upon the existing playing field was
          required for a recreational use of the land or incidental thereto.

          The subject land has been intended for use for sporting activities since
          1982. Council clearly does not have an intention to use the land and the
          proposed filling for recreation in the next decade, and has placed no time
          limit on the land fill use. On completion, whenever that might be, the
          surface of the depot might be used for recreational purposes, but any
          intention to do so is clearly incidental to the subject development. In my
          opinion, in the circumstances of this case no reasonable mind could have
          categorised the enterprise described in the application for which
          development consent was sought as other than for the purpose of a large
          scale commercial land fill depot.

          In my judgement, Council’s determination that the land fill depot was for a
          purpose for which consent would be granted pursuant to the PSO was not
          reasonably open to it. (at 287-288)

COUNCIL’S LATER INQUIRIES ABOUT THE 1966 AGREEMENT

60.   On 4 May 1996, Councillors and senior staff had a site meeting at Old Man
      Valley with CSR Readymix at which the following matters were raised:

      a. quarry operations and estimate life of the quarry;

      b. future use of the quarry;
                                 Memorandum of Advice
Page 35                                                              21 August 2006


      c. crushing and sieving material;

      d. recycling hardfill materials; quarry access road;

      e. access to Council land adjoining the quarry;

      f.   future use of Council’s land (proposed Plan of Management);

      g. possible involvement by CSR in Council’s operations/facilities; and

      h. other related issues.

      On 13 May 1996, a Council officer briefed Council on the matter, and
      attached notes, presumably from the site meeting. Paragraph 1 of the notes
      stated

           CSR Quarry – letter of undertaking from Farley and Lewers – former
           owners of the quarry that the land – the site of the quarry – would be
           transferred to Council when no longer required, i.e. letter around the mid-
           60’s. There has been counsel advice related to the binding nature of the
           letter of undertaking.

           Council of the day had a vision that the land be used as a ‘fill site’ to be
           developed as playing fields when no longer required by the
           quarrymasters.

      Paragraph 2 discloses that the formed up area for the playing fields is
      Council-owned, material for the “platform” constituting overburden from the
      quarry.

61.   A Councillor then requested on 14 July 1996 a copy of “a letter from a
      previous owner of the Hornsby quarry that it would be handed over to Council
      at the completion of the operations’ and advice from Counsel regarding the
      legal status of the letter.    The former document has now been located
      (although Councillor Blunt’s description of it is inaccurate), but there is no
      evidence of any advice from Counsel having been sought or obtained on the
      enforceability of any agreement.

62.   In response, the General Manager advised that “a search of Council’s files …
      has failed to reveal any letter from former owners of the Quarry agreeing to
      transfer same to Council when operations are complete”, although “[e]nquiries
      of long serving and former Council staff would indicate a general awareness
                                 Memorandum of Advice
Page 36                                                              21 August 2006


      of such a letter”.   Despite noting that an exhaustive search of Council’s
      records might uncover a letter, the General Manager was of the view that
      “[t]he value of such a search may not be great, noting that the current owners
      have indicated both verbally and in writing that the current economic life of the
      Quarry extends to thirty years at current extraction rates”.

63.   In about 2002, James Farrington of Council made enquiries of Abbott Tout
      concerning any possible contract between Council and Farley and Lewers.
      No written advice was provided. I am instructed that the documents enclosed
      with Storey and Gough’s letter of 31 March 2006 were the subject of
      discussions between Abbott Tout and Keith Woodward, who was Deputy
      Shire Clerk from 1962 to 1977 and Shire Clerk from 1977 to 1988.            I am
      instructed that Abbott Tout and Mr Woodward “were of the view that there was
      no evidence on file obliging CSR Limited to transfer the Hornsby Quarry lands
      to Council at no cost.”    Although there is clear evidence in the documents
      which I have reviewed (taken largely from Council files) of an agreement to do
      so, what is important is whether that agreement constituted a legally binding
      contract.

64.   Abbott Tout has subsequently advised that no letter of advice had ever been
      forwarded to Council because Abbott Tout had concluded from its review of
      the issue that:

      1. Any agreement with Farley & Lewers would have been lost with the
         gazettal of the LEP in 1994; and

      2. The changed ownership from Farley & Lewers to CSR would have
         forfeited any contractual arrangements.

      With respect, I disagree. The zoning could not have possibly affected a pre-
      existing contractual obligation to transfer the land free of cost.    By taking
      advantage of the owner-initiated acquisition clause, performance of the
      contract may have been prevented, but there is nothing inconsistent with the
      supposed contract in the provisions of the LEP.        The result of giving the
      acquisition notice may have been (assuming that CSR was bound by the
      contract):
                                Memorandum of Advice
Page 37                                                              21 August 2006


      a.     breach of contract (i.e. CSR’s promise to transfer the land upon
             cessation of quarrying) for which Council could recover damages;

      b.     frustration of the contract, for which no damages were payable and
             both parties would be discharged from further performance;

      c.     a proprietary equitable right belonging to Council in the land and for the
             acquisition of which it would be entitled to compensation, thereby
             reducing significantly CSR’s entitlement to full market value of the land
             under the Land Acquisition (Just Terms Compensation) Act;

      d.     mere expectancy or inchoate right which was defeated upon Council’s
             acquisition of the quarry, if quarrying only ceased upon acquisition and
             not before: see e.g. Sonenco (No. 77) Pty Ltd v Silvia (1989) 24 FCR
             105.

      Which result may have occurred is purely hypothetical in light of my other
      conclusions, but it is wrong to say that the rezoning of the land could itself
      have discharged the parties from future performance. The second error was
      to assume that the transfer of title of the quarry to CSR Ltd brought any
      contract to an end.    In conventional parlance, CSR “took over” Farley and
      Lewers. Both were public companies. It is inconceivable that CSR could
      have asset-stripped Farley and Lewers without regard to its current and future
      creditors. From internet searches, I gather that Farley and Lewers became a
      wholly-owned subsidiary of CSR, and its business became part of CSR
      Readymix, one of CSR’s business units, by way of a scheme of company
      arrangement.    Such schemes must be approved by the Supreme Court, and
      except where the companies are financially distressed, the Court would
      ensure that the liabilities of the target company (Farley and Lewers) would be
      assumed by the offeror (CSR) before the former could be deregistered. The
      James Hardie position is a case in point.          Its asbestos liabilities were
      transferred to a charitable corporation which, it had assured the Court, had the
      financial capacity to meet them. The assurance was worthless, but the point
      is that the Court would never have approved the scheme of arrangement
                                 Memorandum of Advice
Page 38                                                               21 August 2006


      without dealing with the future liabilities of the Australian parent which was to
      become defunct under it.

65.   On 24 February 2006, Peter Waite wrote to the General Manager of Council,
      enclosing Council documents which might support a view that there may have
      been a legal agreement between Farley and Lewers to fill the quarry and
      transfer it to Council at no cost to Council. I have reviewed those and many
      other documents relating to the matter for the purposes of this advice.




WAS THERE AN AGREEMENT BETWEEN COUNCIL AND FARLEY AND
LEWERS?

66.   There was an agreement in 1966 comprising the 15 August and 25 November
      1966 letters from Farley and Lewers, and Council’s resolution of 15 December
      1966 and the assumed communication of that resolution to Farley and
      Lewers. Farley and Lewers described the matter as a proposal, and Council
      embraced that terminology. In its resolution of 15 December 1966, however,
      Council described the proposal as an offer, and it accepted it. Does the use
      of the language of offer and acceptance suggest that Council intended that its
      acceptance should give rise to a legally binding contract?

67.   There are numerous indicia which suggest that the parties did not intend that
      the negotiations between them in 1966 should be resolved by such a contract.

68.   First of all, the Farley and Lewers letter of 15 August 1966 described the
      proposal as “submitted in broad outline for your consideration”. It then said
      that “if we are advised that it is approved in principle we can obtain further
      information, prepare engineering drawings and furnish such detailed
      information as you may require”. In other words, the “offer” was itself made in
      tentative language, seeking only an approval in principle and recognising a
      need for further detail to be worked out.     I consider below the significance of
      the phrase “in principle” in this context (para. 80).
                                  Memorandum of Advice
Page 39                                                              21 August 2006


69.   The second matter to notice is the nature of the proposal itself. Not only did it
      involve land swaps, but it would have required Council to purchase or resume
      land.    Resumptions were subject to Ministerial approval.             In these
      circumstances, one would expect some contractual provision which dealt with
      the consequences of withholding such approval. Moreover, one would expect
      a contractual provision which made it clear that Council did not intend to fetter
      its statutory power of resumption.

70.   Thirdly, the proposal involved extending the quarry to land which Council had
      acquired. This envisaged either the resale of the land or the leasing of it to
      Farley and Lewers. The quarry had existing use rights for its land, but those
      rights would not have extended to any other land.          Accordingly, as the
      proposal itself recognised, Farley and Lewers would need development
      consent if they wished to quarry the Council land. The contract would need to
      make it clear that Council was not fettering the future exercise of its
      discretionary power to grant or refuse development consent.         It would be
      expected to state the consequences for the parties in the event that consent
      was refused.

71.   Fourthly, although the proposal was accompanied by a plan with a boundary
      line indicating the area which Farley and Lewers wished to quarry, that area
      was subject to survey, engineering plans and other considerations (para. 25).
      It would be different if Council then owned the land, but it did not. In other
      words, the proposal related to land which neither party owned, and which may
      not have come into Council ownership for some years, if at all. In those
      circumstances, it is unlikely that the parties intended to bind themselves
      immediately to the boundaries shown on the plan without further investigation.
      In the absence of a fixed or ascertainable allotment, the subject matter of the
      agreement would be uncertain, which supports an inference that the parties
      had not yet concluded their agreement: Scammell v. Ouston [1941] AC 251
      at 268-9 per Lord Wright.

72.   Fifthly, although a reasonable time is usually implied as a matter of law where
      an agreement is silent on the time for performance, an agreement of the kind
                                Memorandum of Advice
Page 40                                                              21 August 2006


      contemplated by the proposal would, it might be expected, have contained
      time stipulations in order to make the agreement work. For example, it is
      hardly likely that Council would have committed itself to resuming land within
      a particular timeframe, unless Farley and Lewers had committed itself within
      another timeframe to commencing or completing the construction of the sports
      ground. Obviously, the availability of fill was dependent on the progress of the
      quarry.   Equally, Council would be concerned to ensure that the sports
      grounds were available by a particular time, as it may have been necessary
      for the sporting organisations which were intended to use them to make
      arrangements to hire other facilities in the meantime. The reference to time in
      the proposal was vague and non-committal.

73.   Sixthly, the proposal was unclear about the extent of work which Farley and
      Lewers would perform to construct the sports ground. Para. a. of the proposal
      referred to filling and excavation to construct a platform “large enough to
      accommodate 4 sports fields”. Despite the misleading appearance created by
      the publicity given to the model of the sports fields, the company was not
      offering to construct them. On the contrary, it was merely providing the base
      materials and performing the earthworks to fill the ground sufficient for playing
      fields to be formed. The sporting organisations which had supported Farley
      and Lewers believed that the company was offering to construct the grounds.
      So did the Advocate (see para. 10 above). So did Council, when a different
      offer was made in 1969, until the Engineer disabused it (paras. 35, 38).
      Before any agreement could be responsibly concluded with Farley and
      Lewers, Council would need to define with some particularity the works which
      were included in it. This was done when Council accepted the 1969 offer (see
      paras. 38, 39).

74.   Seventhly, some of the work would be undertaken on Council land. Had it
      caused a nuisance, Council may have been liable. It was apparently the
      dumping of soil on Council land and its spilling into the creek which brought
      about the cessation of work in 1972 (para. 44). In order to attribute legal
      liability, including public liability, it would have been essential for the
      agreement to stipulate whether Farley and Lewers was constructing the works
                                Memorandum of Advice
Page 41                                                             21 August 2006


      as Council’s agent or as an independent contractor. It would also have been
      necessary to allocate the burden of insurance and to determine what
      warranties Farley and Lewers offered upon completion of the work.

75.   Eighthly, the proposal involved the physical extension of the quarry. This
      would have inevitably extended the life of the quarry. Council had recently
      engaged in lengthy and expensive litigation to constrain the operation of the
      quarry because of excessive noise.        The continuation of quarrying was
      opposed by at least some community groups who considered that the Valley
      should be parkland (paras. 9, 18, 24, 25). The decision to resume the land
      was consistent with this purpose (para. 26).      To embrace the Farley and
      Lewers proposal (with the quid pro quo) was therefore risky and would have
      aroused political controversy and opposition, as it had done when first
      proposed (para. 13). In addition, this injunction against the Company did not
      include quarrying the resumed land, It was therefore necessary for Council to
      negotiate an extension of the injunction (which would otherwise be worthless
      if the Company had exhausted its existing resources) and that was never
      done (paras. 17, 23,25,32). This fact strongly suggests that Council intended
      not to reach a final agreement until such terms were agreed and recorded.

76.   For these reasons, it is in my opinion highly unlikely that the 1966
      correspondence and resolution amounted to anything more than an
      agreement in principle.   I have referred when discussing the facts to the
      “pitch” which Farley and Lewers made to the community and Council in 1966.
      It was, quite misleadingly, inferred that this was an gratuitous offer by Farley
      and Lewers to benefit the community, whereas in fact the offer contained a
      quid pro quo of great value to Farley and Lewers. The existence of a quid pro
      quo is consistent with a contractual intention, because it will provide the
      consideration which binds the parties to the agreement. On the other hand,
      the language of the offer was tentative and envisaged further agreement
      being necessary.

77.   In addition, both Council and Farley and Lewers later recognised that the
      1966 negotiations did not result in a final agreement (paras. 32, 33 and 40)
                                Memorandum of Advice
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      and acted on the common assumption that they were free to negotiate an
      agreement which was inconsistent with the basis on which the 1966
      agreement was propounded. Subsequent conduct by the parties is relevant
      to determining whether an earlier contract had been formed (see para. 6
      above). This conduct is consistent with my conclusion that no final agreement
      was reached in 1966.

78.   The fact that Council was a public authority would usually suggest that it
      would not intend to enter into a contract unless formal documents were
      executed: Lake Macquarie Municipal Council v. S & R Bortolus (1982) 46
      LGRA 292 at 296. The circumstances in which the courts have held councils
      to informal agreements are radically different to those obtaining in this case.
      For example, in West v. Port Stephens Shire Council (1976) 1 BPR 97015,
      Council agreed to purchase land for $6,000.00 and appointed solicitors to
      exchange contracts. The agreement was preceded by the issue by Council of
      an onerous certificate under the Local Government Act 1919 stating that the
      land was zoned in a manner which would permit the erection of a dwelling
      house. After the owner had accepted Council’s offer, Council resolved to
      reconsider the purchase price. However, the Court found that Council was
      bound to the contract. It had decided upon a policy of acquiring the land, the
      vendor was willing and the only matter for negotiation was price, which was
      agreed after a valuation by the Crown. Council had authorised the Shire
      Clerk to make a contract binding on Council and to negotiate the purchase of
      this land. The Court considered that the specific authority given to the Shire
      Clerk to negotiate with the plaintiff together with the policy of Council to
      acquire his land rebutted any weight that ought to be given to the assumption
      that Council would not ordinarily enter into a contract unless formal
      documents were executed (at 9197). Similar circumstances arose in Bortolus.
      What was important in that case was that the transaction was uncomplicated:
      it was merely an exchange of land owned by Council and a developer in order
      to facilitate a road widening. The relevant titles of land were owned by the
      parties and there were no difficulties of survey (the transaction was expressed
      to be subject to field survey). Although the parties intended to have a formal
                                Memorandum of Advice
Page 43                                                              21 August 2006


      contract drawn up, that did not negate their intention to be presently bound by
      the agreement (op.cit at 297).     The court adopted the principle in Upper
      Hunter County Council v. Australian Chilling Company (1968) 118 CLR 429 at
      437 that no narrow or pedantic approach is warranted in the search for a
      party’s intention.

79.   For these reasons, I do not consider that the parties reached a legally binding
      agreement by December 1966.         Whatever the subjective intention of the
      parties might have been, an examination of the objective circumstances
      strongly suggest that, by December 1966, the parties had reached an
      agreement in principle, neither party contemplated that that agreement was
      ever intended to bind the other. It was possible, and probably inevitable that if
      Council resumed land with the intention of reselling part of it to the quarry in
      exchange for the quarry’s promise to construct the sports grounds and, at the
      end of quarrying, to transfer the quarry lands to Council, then at some point a
      formal agreement would have been necessary.            It was of considerable
      importance to Council that any such agreement should include a term
      requiring the Company to quarry the resumed lands in accordance with the
      1961 injunction.     There is no evidence of any agreement by Farley and
      Lewers to do so. Equally, it is possible that, once Council had obtained the
      permission of the Minister to resume the land, an agreement would also be
      necessary if it intended to fund the resumption (or purchase) in part by the
      company’s promise to meet the proportionate cost of acquisition (i.e.
      proportionate to the area of land to be resold to the company).       If Council
      decided to proceed with acquisition and resumption only if the company
      promised to pay for part of it, then a formal agreement to that effect would be
      expected.    I doubt that either party would have moved without a legally
      binding agreement. However, Council proceeded to acquire and resume the
      land without seeking a contribution from the company.          This took place
      between 1967 and the mid 1970s. Equally, Council did not transfer to the
      company any of the land so acquired. The quarry did not extend its activities
      to that land. In other words, none of the events contemplated by the 1966
      agreement took place in accordance with its terms. Although the company
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      contributed fill and partially emplaced it in the area of the proposed sports
      grounds, it clearly did so pursuant to a separate agreement, first proposed in
      1969 and then accepted by Council in the following year (para. 37 above). In
      other words, the only conduct by either party consistent with the 1966
      agreement was the contribution of quarry spoil and the filling of that spoil on
      the Council land, but that conduct was pursuant to and consistent with
      another agreement and not with the 1966 agreement.

80.   Moreover, the 1966 agreement clearly contemplated that these events should
      occur before any obligation on the part of the company should arise to
      transfer the quarry lands to Council. This was not, in my opinion, a separate
      and independent obligation.      If it was, it would be difficult to see what
      consideration was given for it. On the contrary, it was part and parcel of the
      proposed agreement and was subject to a condition precedent: performance
      of the earlier obligations requiring land acquisition, transfers and sale,
      extended quarrying and so on.        Those conditions precedent were never
      fulfilled. Indeed, no part of the proposed agreement was ever performed.
      That fact has implications for a matter which I shall later address, but for
      present purposes it is a relevant fact in determining whether the parties had in
      December 1966 an intention to create legal relations. In my opinion, they did
      not.

81.   It is traditional to formulate this problem in accordance with the three
      categories of supposed contract discussed in Masters v. Cameron (1954) 91
      LCR 353 in these terms:

             “Where parties who have been in negotiation reach agreement upon
             terms of a contractual nature and also agree that the matter of their
             negotiations shall be dealt with by a formal contract, the case may
             belong to any of three classes. It may be one in which the parties have
             reached finality in arranging all the terms of their bargain and intended
             to be immediately bound to the performance of those terms, but at the
             same time propose to have the terms restated in a form which will be
             fuller or more precise but not different in effect. Or, secondly, it may be
             a case in which the parties have completely agreed upon all the terms
             of the bargain and intend no departure from or addition to that which
             their agreed terms express or imply, but nevertheless have made
             performance of one or more of the terms conditional upon the
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            execution of a formal document. Or, thirdly, the case may be one in
            which the intention of the parties is not to make a concluded bargain at
            all, unless and until they execute a formal contract.

            In each of the first two cases there is a binding contract …

            … cases of the third class are fundamentally different. They are cases
            in which the terms of the agreement are not intended to have, and
            therefore do not have, any binding effect of their own. The parties may
            have so provided either because they have dealt only with the major
            matters and contemplate that others will or may be regulated by
            provisions to be introduced into the formal document … or simply
            because they wish to reserve to themselves a right to withdraw at any
            time until the formal document is signed.

            … the question depends upon the intention disclosed by the language
            the parties have employed, and no special form of words is essential to
            be used in order that there shall be no contract binding upon the
            parties before the execution of their agreement in its ultimate shape.”
            (at 360-362)

      In my opinion, for the reasons I have given, the agreement falls into the third
      class, that is, where the parties have expressed their intention not to enter
      legal relations at the stage which their negotiations had reached. I consider
      that that intention was expressed by the nature of the proposal, being
      tentative and seeking agreement only in principle. In G R Securities Pty ltd v.
      Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 361, McHugh JA
      said of an offer that “on receipt of such written acceptance, our client would
      consider there to be a legally binding agreement in principle … until such time
      as formal contracts were exchanged” as follows:

            “Mr Simos QC for the vendor argued that the words “in principle”
            confirmed the conclusion that no binding contract was intended by this
            correspondence. He argued that the sale of a hospital containing 62
            beds necessarily involved many complex matters which required the
            contractual imposition of rights and obligations extending far beyond
            the rudimentary conditions in the correspondence. The matters to
            which Mr Simos refers would ordinarily require a conclusion that there
            was no binding agreement until formal contracts were exchanged. But
            the express words of the correspondence leaves no room for the
            inference which would otherwise be drawn from the complexity,
            magnitude and subject matter of the transaction.” (at 636)

      The words “in principle” usually convey the message that acceptance of
      proposed terms is not final: (1997) 71 ALJ 117, and the cases cited therein.
                                Memorandum of Advice
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      Unlike G R Securities, in this case the proposed transaction was of
      considerable complexity and magnitude and the words “in principle” were
      used in the proposal (which Council accepted) as a reservation of the parties’
      position and to rebut any contractual intention.

82.   I have not found it necessary to rely upon formal requirements for writing as
      rebutting contractual intent.   At the relevant time, Council had a statutory
      power to contract: s.516, former Local Government Act 1919. The exercise
      of that power was governed by Ordinance 23, the effect of which was to
      require contracts to be in writing.      Generally speaking, the creation or
      disposition of interests in land must be in writing:        ss.23C and 54A,
      Conveyancing Act.        This would be satisfied by an exchange of
      correspondence: Lifoon Pty Ltd v. Gillard [2006] NSWCA 182 at [42]. It is not
      difficult to satisfy these requirements. No question of authority arises because
      in each case Council resolved to authorise the communications.

WAS ANY SUCH AGREEMENT ABANDONED?

83.   I have previously concluded that no legally binding agreement arose in 1966.
      It is unnecessary to consider whether any contract arose from the offer by
      Farley and Lewers in 1969, because it is evident from the facts which I have
      discussed above that Farley and Lewers did not renew its offer to transfer the
      quarry to Council upon the cessation of quarrying activities (see para. 33
      above). However, the existence of the 1969 offer and subsequent agreement
      with Council without reference to transferring the quarry but in relation to the
      construction of the sports grounds is powerful evidence that the parties had by
      1969 abandoned their previous agreement and had decided to substitute the
      subsequent arrangement for it. This fact looks back to the intention of the
      parties in 1966 as well as forwards to the conduct of the parties, which was
      inconsistent with the performance of the obligations which would have arisen
      had the 1966 agreement been legally binding.

84.   A contract can be abandoned by non-performance. If neither party intends
      the contract to performed, the parties must be regarded as having abandoned
      or abrogated the contract (Summers v. The Commonwealth (1918) 25 CLR
                                Memorandum of Advice
Page 47                                                              21 August 2006


      144 at 151-2 per Isaacs J; DTR Nominees Pty Ltd v. Mona Homes Pty Ltd
      (1978) 138 CLR 423 at 434 per plurality), whereupon it is treated as having
      been discharged by mutual consent. In Fitzgerald v. Masters (1956) 95 CLR
      420, Dixon CJ and Fullagar J said as follows:

              “There can be no doubt that, where what has been called an
              “inordinate” length of time has been allowed to elapse, during which
              neither party has attempted to perform, or called upon the other to
              perform, a contract made between them, it may be inferred that the
              contract has been abandoned … what is really inferred in such a case
              is that the contract has been discharged by agreement, each party
              being entitled to assume from a long-continued ignoring of the contract
              on both sides that … the matter is off altogether … .” (at 432)

      It is obviously easier to infer discharge where the contract is executory under
      which neither party has acquired any proprietary right or interest. If each party
      had promised to do something and for a long period no act was done in
      performance of the contract and no step was taken to require any act to be
      done in performance of it, abandonment can readily be inferred: Fitzgerald v.
      Masters, ibid.

85.   That is the case here. The only work done which could be referable to the
      1966 agreement was done pursuant to the later agreement.             Otherwise,
      Council resumed or acquired the relevant land, but did so pursuant to a pre-
      existing “scheme” (para. 8), for improvement and embellishment and not for
      resale (para. 26) and plainly did not do so in performance of the 1966
      agreement because it neither looked to Farley and Lewers to partly fund the
      acquisition, nor did Farley and Lewers call upon Council to transfer part of that
      land to it in order to extend its quarrying activities. Although in 1968 it may
      have hoped that, once resumed, the Farley and Lewers proposal could be
      revived (para. 32), that did not occur. In those circumstances, I have
      concluded that, if contrary to my earlier conclusion, a legally binding
      agreement was formed, that agreement was discharged by abandonment by
      1969.
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86.   It is therefore unnecessary to consider to the other interesting questions which
      might have arisen had I been of the view that there was a presently binding
      agreement between the parties.




………………………………………………

T. F. ROBERTSON SC

Frederick Jordan Chambers

6 August 2006

				
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Description: HORNSBY QUARRY QUESTION OF CONTRACT TO TRANSFER QUARRY LAND TO