PORT Stephens Council paid a developer $750,000 – and approved paying $750,000 more – for a confidential agreement that eventually wasn’t worth the paper it was printed on.
The council paid the money in 2007 as “insurance” to stop development company Melaleuca Estate, then owned by Brian Cornwell, ever taking legal action against it over a messy and very costly drainage case at an up-market Nelson Bay housing estate.
The “insurance” failed in the NSW Supreme Court on Monday – and ratepayers officially wasted $750,000 – because it only applied as long as the estate wasn’t sold.
During a 30-minute hearing NSW Supreme Court Justice Michael Pembroke slammed the council after it took two months to concede the agreement could not be used to stop developer David Vitnell, who eventually bought Melaleuca Estate’s Nelson Bay development, from pursuing the council for millions of dollars over the drainage issue.
It was “blindly obvious” the 2007 agreement between Port Stephens Council and Mr Cornwell’s Melaleuca Estate could not be used by the council as a defence to stop Mr Vitnell, Justice Pembroke said during the Sydney hearing.
“Why would you wait to come to court and incur the costs of four barristers to have an argument about something blindly obvious?” Justice Pembroke asked a barrister for the council.
“One should not have on the record allegations which have no conceivable basis for them.”
The $750.000 was made out to Melaleuca Estate but, because of a charge over the company, was forwarded to a New Zealand finance company.
A confidential council report on December 18, 2007 on the agreement with Melaleuca Estate noted the $750,000 payment and council undertaking to pay another $150,000 per year for five years as an access fee to the Nelson Bay estate that became the Lagoons Estate.
The report described the history of drainage issues in the area, including a 2006 court decision ordering the council to stop diverting stormwater drainage from roads and a neighbouring estate onto Lagoons Estate.
The report notes that the settlement agreement and payment of $1.5 million over five years was “insurance for council that costs will not be further expended on this matter in court”.
Mr Vitnell is pursuing the council in the Supreme Court and arguing drainage works carried out by council after the 2006 court decision have not stopped stormwater from coursing across Lagoons Estate, or fulfilled requirements of the order.
The matter returns to court in August.