1-5 Pottery Lane

Council adopted the Major Projects Strategic Plan in 2007 which outlined a series of projects involving Council recycling existing property assets to leverage the land value to create new community assets to meet the needs of the community. The Little St site (now 1-5 Pottery Lane) previously comprised an 86 space at grade car park with no connection to the Aquatic Centre. The primary objective of undertaking the development of the site was to create additional car parking (total 200 spaces) a connection to the Aquatic Centre and other community facilities. To fund these works Council would allow the development of units in the airspace above making the project cost neutral to Council.

Council was the landowner and obtained the original development consent for the project. Council later engaged EDG (WN Developments) to construct the entire building, including Council’s retained assets (200 space car park, air-bridge to the Aquatic Centre, entire ground floor office space and amenities, the Lane Cove Music and Cultural Centre and Terrace Function Room) and the residential component of the building. Council was not involved in procurement of the builder or any construction activities on the site.

Council’s primary focus was the delivery of Council’s retained assets, and like any normal building contract paid WN Developments for construction of these assets.

At the Council Meeting  of 17 March 2014, having originally called tenders for the project, the outcome of the negotiations undertaken to improve the commercial terms was considered, with EDG (WN Developments) making the following (best) offer:

i. “The completion of Council’s retained assets (200 space car park, air-bridge to the Aquatic Centre, entire ground floor office space and amenities, the Lane Cove Music and Cultural Centre and Terrace Function Room) for $12,500,000.

ii. A return to Council based on a profit share arrangement with a minimum return of $13,850,000 (irrespective of gross sales) plus a profit share to Council, ratcheting up from 30% up to 50% dependent on actual revenues achieved.

iii. Securitisation by:

a) the land staying in Council’s ownership until final sales of the units.

b) provision of a 10% retention during the construction of Council’s retained assets, to be held in a solicitors trust fund. The Retention monies held to reduce to 5% on issue of the interim occupation certificate for the community space and public carpark whichever occurs last.

c) submission of a further $2.5m unconditional bank guarantee to Council prior to the commencement of any residential works above the first floor level.”

Council anticipated a surplus from the transaction of $1,350,000.

Council’s actual surplus from the transaction was$10,647,820 (a 688% increase over anticipated). This is based on actual revenue of $23,147,820 less $12,500,000 for the construction of Council’s retained assets.

The surplus was used as part of the funding for The Canopy, avoiding the need for Council to use debt funding for that project.

Under the legislation, in terms of responding to defects the order of responsibility is, initially the builder, secondarily the developer. As Council was the landowner throughout the entire project, Council is deemed to be a co-developer, despite not having any responsibility for the construction and sale of the residential units, which was the sole responsibility of WN Developments.

Council retained ownership of the land throughout the project as a security measure, to ensure that Council would retain the site even if the developer experienced financial difficulty during the transaction. Council’s advice was that if it sold the land to a developer, despite any contractual obligations, if the developer experienced financial difficulty, ultimately a receiver could sell the land to another party without fulfilling all the contractual obligations of the developer. This would have seen a strategic site lost, that could never be replaced.

Council utilised King and Wood Mallesons Lawyers to prepare all documentation with WN Developments, a Global Law Firm utilising the direct services of the partner Stuart Dixon-Smith, the National Head of the Australian Real Estate Practice.

The builder, Trinity Constructions is in administration, while WN Developments is still in existence. Council was advised on 13 December 2022, that:

“NSW Fair Trading, Department of Customer Service (DCS) deployed a team of inspectors to the development on 10 March 2022 and subsequently issued an inspection report to the developer on 28 April 2022. Inspectors then met with the Developer, WN Developments, and their remediation representative on 6 June 2022 and again on 28 November 2022 to discuss the findings. As DCS remains in discussions with the Developer in relation to the rectification of defects in this development, there is no further action required by Council at this time.”

NSW Fair Trading has never provided Council with any information regarding the results of that investigation.

Council received advice on 11 May 2023 of NSW Fair Trading’s intention to issue a Draft Remediation Order. Council responded by indicating WN Developments should be wholly responsible.

As the defect relates to a roof membrane that is currently not directly affecting the inhabitants, NSW Fair Trading has taken some time to enforce rectification. No explanation has been provided to Council as to why NSW Fair Trading is no longer pursuing WN Developments. Council is concerned that the building should be fixed without further delay and is currently evaluating how repairs can be undertaken, before seeking legal recourse from WN Developments and others.