Bathurst City Council v Pwc Properties Pth Ltd

[1997] HCATrans 377

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S48 of 1997

B e t w e e n -

BATHURST CITY COUNCIL

Applicant

and

PWC PROPERTIES PTY LIMITED

Respondent

Application for special leave to appeal

TOOHEY J
GAUDRON J
HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 12 DECEMBER 1997, AT 9.16 AM

Copyright in the High Court of Australia

MR W.R. DAVISON, SC:   May it please your Honours, I appear with my learned friend, MR D.R. PARRY, for the applicant.  (instructed by McIntosh McPhillamy & Co)

MR B.W WALKER, SC:   May it please your Honours, I appear with MR B.J. PRESTON for the respondent.  (instructed by Clayton Utz)

TOOHEY J:   Yes, Mr Davison.

MR DAVISON:   Your Honours, I begin by adverting to the factual finding by the judge at first instance, which is at page 13 of the appeal papers, at line 46.  His Honour finds that:

it is not necessarily a breach of the terms of the trust to carry out a redevelopment of the site, provided that the duties imposed on the council in relation to the provision of car parking are satisfied.  The question of whether what the council proposes to do will be a breach of trust does not need to be taken any further.

So there was no finding of any prospective breach by the trial judge and upon the hearing on appeal that question was not put into issue; it remained that there was no apprehension of breach of obligation, however the obligation might be described.  What the Court of Appeal then did was to alter the approach taken by the trial judge to find constructive trust rather than express trust.

HAYNE J:   And that is a constructive trust for a perpetual trust in favour of a car park, is it, for the purpose of running a car park?

MR DAVISON:   That is the Court of Appeal’s decision, your Honour, and our concern in respect of that approach is that what it does is create what is, in effect, a new category of trust.  Firstly, it is a public constructive trust, and not much might turn on that; that might be not a difficult step to take from a private constructive trust, in appropriate circumstances.  The permanency of what the effect of the Court of Appeal’s decision is in circumstances where the land is vested in the public is a matter of concern and a matter of general concern.

GAUDRON J:   What is the effect of the further order 2 of the Court of Appeal’s orders on page 51?

MR DAVISON:   The effect, your Honour - so far as that order is concerned, all it does is restrain any dealing with the land until reclassified; that is to say until it is removed from a classification of operational land to community land, two different structures that apply under the Local Government Act.

GAUDRON J:   I see.  So, in effect, the Council is being ordered to classify it as community land?

MR DAVISON:   That is the effect of that order, your Honour, yes.  So far as the - - -

GAUDRON J:   So that means, in effect, what, a permanent declaration, a permanent constructive trust of the land for use as a car park?

MR DAVISON:   Your Honour, the reasoning process - the answer to that, your Honour, is no; it is open to the Council to change by appropriate process that which is identified as community land to operational land.

TOOHEY J:   But is that not part of the problem with this application for special leave?  The respondent contends in the written submissions that there is now a new regime in operation and this sort of situation cannot arise again, as I understand the way the respondent is putting it.  Coming to this particular situation, is it open to the Council to, in a sense, remedy the situation by reclassification of the land?

MR DAVISON:   To remedy that situation?

TOOHEY J:   Yes.

MR DAVISON:   The answer, your Honour, is yes, but if there is, in fact, a trust then the trust applies independently of what the Council does in the exercise of its powers under the Local Government Act.  If there is a declared trust, which is the necessary step in making the order that is here made, then that trust applies in any event. 

GAUDRON J:   But there has not been a declaration of trust, has there?  There has been a declaration that it was community land, albeit that that process was arrived at by what looks like the reasoning of trust, and an order that you be restrained from dealing with it until reclassified.

MR DAVISON:   That is the order, your Honour, but the order - - -

GAUDRON J:   So there is no actual declaration of trust, and order 2 would seem to suggest a deliberate decision not to make such a declaration.

MR DAVISON:   The difficulty about that approach, your Honour, is that there has to have been a determination of trust before order 2 can be made.  The question is:  what is that trust?  The trust that the Court of Appeal has identified is a public constructive trust; it must exist, if that is so, independently of whether there is any apprehension of breach of that trust.  That is the finding which is an essential step towards the making of the order. 

TOOHEY J:   But the order itself, to take what Justice Gaudron has put to you, and the preceding order on page 50, seems to amount to a declaration that the land is classified as community land and a restraint until it is otherwise reclassified.  If it is open to the Council to take steps to reclassify it, why is it that this trust of which you speak would then continue to adhere to the land?

MR DAVISON:   The finding of a trust is the precondition of the determination that it is community land.  The provision of the Local Government Act was that at the time of coming into force of the Local Government Act in 1993 there was a transitional period of 12 months.  Land which was the subject of a trust was required to be identified as community land, and the only question, therefore, was whether this land was the subject of a trust. 

TOOHEY J:   Except that the order itself of the Court of Appeal contemplates that reclassification is available, or may be available to the Council, and if the existing classification depends upon the finding of a trust and that classification can be disturbed, would that not carry the consequence that the trust ceased to exist?

MR DAVISON:   With respect, no, your Honour.  There is either a trust or there is not; the Court has found that there is a trust.   So that even if the Council reclassifies the land from operational to community by processes under the Local Government Act, the trust will remain.

GAUDRON J:   Can it classify it from community to operational?

MR DAVISON:   It can, your Honour, yes.  But so to do is only to alter the constraint which that Act provides, not to deal with the question of whether the land may be dealt with independently or to the exclusion of the trust, which the Court of Appeal has held to exist.

GAUDRON J:   But did not declare.

MR DAVISON:   Did not declare, your Honour, no.  The reasoning process that led to that necessarily means that there was - by the factual circumstances of the Council receiving the land, those factual circumstances gave rise to this new form of trust, a public constructive trust, where there is no threat to act other than in accordance with the intent of the ‑ ‑ ‑

GAUDRON J:   But does not the order suggest that the precise terms of that trust, or the nature of the trust, is one that depends, in fact, on the provisions of the Local Government Act - - -

MR DAVISON:   No, your Honour.

GAUDRON J:   - - - with the consequence that if it is reclassified the trust ceases to exist?

MR DAVISON:   No, your Honour, with respect, that cannot be so; it either is or is not a trust. 

GAUDRON J:   Yes, but what about the terms of the trust?

MR DAVISON:   The terms of the trust that the Court of Appeal has found is a public constructive trust which must be in perpetuity; it cannot be otherwise.  It is this difficulty that we have:  it is the creation of a new trust entity.

GAUDRON J:   It is a new breed of trust that has been - - -

MR DAVISON:   A new breed of trust, your Honour.

GAUDRON J:   Yes, but I am just wondering if the new breed of trust so created is necessarily a trust in perpetuity.

MR DAVISON:   That is again one of the difficulties, your Honour.  The ‑ ‑ ‑

GAUDRON J:   It not having been declared to be so.

MR DAVISON:   Your Honour, if it is not declared to be so, then, with the greatest of respect to their Honours in the Court of Appeal, it cannot be a trust because it is a constructive trust; it is not an express trust.  They have overruled the trial judge a to the fact of it being an express trust and found it to be a constructive trust.  Either there is a finding of that, which is a necessary precondition of the orders that were made, or there is not.  In our respectful submission, it is clear that what the Court of Appeal has done is found this new breed of trust and made an order consequent upon that finding.  Whatever the Council does after that cannot change the fact of trust.  The respondent here or any other person could come to the Court and seek the declaration; it would simply be a formality.

TOOHEY J:   That may be right, but that is a step that troubles me in the argument.  The finding of a trust seems to be a step in order to reach the appropriate classification of the land.

MR DAVISON:   Yes, your Honour.

TOOHEY J:   The land is then classified; it is available to the Council to alter the classification through the appropriate means.  Is it not implicit in that that the trust which was, in a sense, the peg on which the classification was hung then ceases to have any operation?

MR DAVISON:   With respect, your Honour, it cannot because the change that takes place from operational to community is a change which recognises that the trust which initially caused it to be identified as community in the transitional provisions of the legislation had that result.  But the trust is still there and remains.  Even if it is changed so as to enable the Council to exercise powers under the Local Government Act, those powers are necessarily subject to the trust which has been found to exist. 

TOOHEY J:   One wonders then why that order 2 on page 51 was framed in the way that it was.

MR DAVISON:   That is the relief the respondent sought, no doubt carefully sought.  In the proceedings before - and it was the same relief that was sought before the trial judge, where the dual arguments of express and constructive trust were put and the finding of the trial judge was express trust.  The finding of the Court of Appeal is constructive trust and leaves the same order in place, in effect, but the consequence, your Honours, does not change.  If this decision remains, then it necessarily follows that there has been created this new breed of trust and it has wide-ranging ramifications.

There are similar powers to receive land in the development process in the Planning and Environment Act 1987 in Victoria - and if I could hand up a copy of that Act. I do not need to dwell, your Honours, upon the particular provisions; they are Part 3B relating to development contributions and particularly 46K, M, P and Q, but they are to similar effect to section 94 of the New South Wales Act that is referred to in the judgment of the Court of Appeal.

In other jurisdictions there is no parallel power, but the power is that which is identified in the Court of Appeal and existed before the Environmental Planning and Assessment Act 1979 and the Victorian Planning and Environment Act 1987, which is identified as flowing from the reasoning process in Allen Commercial Constructions and in New South

Wales, which has been a course followed in other jurisdictions, of Rockdale Council v Tandel Corporation, the reasoning process that is identified on pages 36 to 39 of the appeal papers in the judgment of the Court of Appeal.

So that the circumstances in terms of the receipt by public bodies of money or lands will exist throughout the country and will exist in circumstances where this decision will apply to that receipt of land or money so as to give rise to a trust, whether or not the Council or the holder of the land or money acts or threatens to act inconsistently with the obligation of receipt of it.  The perpetual nature of the trust that is identified becomes a problem because one takes a simple example of land that is received in the context of a development application to erect a building or series of buildings which requires the provision of a child care centre, because of the nature of that use.

Ten years later the nature of that use changes and a development application is made to change that which generates a requirement for child care to an aged persons development.  The Council still owns this land next door, which it is required to provide for child care.  It cannot provide that facility to serve the now use of the land, aged care, in the form of a senior citizens centre rather than a child care centre.  It cannot, for instance, make the best use of an asset that it holds which provides at ground level that which the dedication of land called for or the payment of money converted into land called for by the utilisation of the air space above to carry out different public activities. 

It is a perpetual restraint and a fetter upon the public discretion and the public duty of the Council to manage its assets in an appropriate way, whether or not there is a detraction from the original intent of the provision of the money or land, that is to say, to provide the facility for the benefit of the particular development.  Those are the practical consequences, your Honours, and, as I have indicated, they apply throughout the country.

TOOHEY J:   Thank you, Mr Davison.  Mr Walker.

MR WALKER:   Your Honours, none of those practical consequences flow because that legal consequence of which my learned friend spoke is simply wrong.  Section 30 of the Local Government Act 1993 says explicitly, not merely implicitly, as your Honour Justice Toohey suggested, must follow from any such scheme anyhow:

On the commencement of a local environmental plan that reclassifies community land as operational land, the land, if it is a public reserve, ceases to be a public reserve, and the land is discharged from any trusts, estates, interests, dedications, conditions, restrictions and covenants affecting the land or any part of the land except for -

matters which are immaterial for the present case, including minerals reservations.  So that, as one would expect in any scheme for the reclassification of so-called community lands to operational lands, those attributes of the land which had rendered it community land - in this case held on a trust for a public purpose - ceased to govern the way in which it can be dealt with.

GAUDRON J:   What is the nature of this trust that the court found?

MR WALKER:   The first answer to that question, your Honour, is that it is not mortmain; it does not perpetually prevent changing circumstances from altering the way in which this land, held for the public by a public entity, can be dealt with.  That is very clear from the statute.  So, whatever it is, it is a trust which can be abrogated by the reclassification process.  The point about the reclassification process, which is captured by the terms of the orders made, is that it is a process which requires public information and participation and a form of delegated legislation in order for it to be accomplished.  That is the protection which my client was concerned to vindicate for this land.  Certainly, if car parking becomes unnecessary because of an outbreak of enthusiasm for public transport or the like, then this is the kind of circumstance which will entitle reclassification or enable reclassification to be carried out.

HAYNE J:   Does the finding of a trust bear upon that reclassification process in any way?

MR WALKER:   Not at law, your Honour.  No doubt, politically, in the public participation process fondness for the original donor, enthusiasm for its continued use, the circumstances being the same now as they were at the time of the creation of the original trust would be circumstances which partisans against reclassification might call in aid.  But that is political, not legal.  I think the proper answer to your Honour’s question is no, it has no continuing effect in law; that is, the question in reclassifiction is whether land is to be moved from that which is subject to the strictures of community land.  That is a title which is fairly accurate as to how the land has to be dealt with and how it may not be dealt with.  It may not, for example, simply be sold on ordinary resolution to lower the rates in an election year.

HAYNE J:   Is the trust, nevertheless, that has been found a perpetual trust?

MR WALKER:   Perpetual in the sense that it inures so long as those are the terms upon which it is held, but it is not ‑ ‑ ‑

HAYNE J:   And may last beyond the perpetuity period?

MR WALKER:   Yes. 

HAYNE J:   And for that reason would be invalid?

MR WALKER:   No, because it is for a public purpose and because trusts ‑ ‑ ‑

HAYNE J:   The public purpose being car parking?

MR WALKER:   Yes.

HAYNE J:   A novel public purpose?

MR WALKER:   No.  Public purposes to do ancillary to transport, both local and regional, are not, in our submission, alien or foreign to the notion of public purpose.

HAYNE J:   But novel?

MR WALKER:   No.  If your Honour is asking me is the public purpose of the provision of land, for example, for walkways or thoroughfares, whether that is novel, the answer is no.  If your Honour is asking me can there be argument about the analogy between car parking, that is land adjacent to a thoroughfare upon which you can park out of the way of the traffic, whether that is an arguable analogy, we would submit not really, because circumstances alter cases, and while there could have been no car parking when there were no cars, no doubt there has always been room off public thoroughfares for the stabling of horses or whatever.  The analogy, in our submission, is not one which is subject to any serious argument; it must, in my submission, be a matter that depends upon circumstances at the time, social and physical conditions.  For those reasons, in our submission, there is nothing novel about what I will call the car parking aspect of the so‑called trust. 

My friend then singles out a number of other matters, but the one I would wish to emphasise most is what we would dub his mortmain argument, the spectre that flexibility of public use of this land has been destroyed by the court finding what my friend urges is a new creature.  He suggests clearly enough to your Honours that this is a product of miscegenation, but it is not.

GAUDRON J:   I wonder if it is not more properly a resulting trust on the terms of the statute than a constructive trust.

MR WALKER:   Your Honour, I cannot put that it comes from the terms of the statute, because the statute in question obviously postdates the events.  We, rather, respectfully seek to support what the Court of Appeal said, namely, that it is a constructive trust imposed in order to answer the dictates of conscience, bearing in mind the dealings between these parties, to which I will just return in a moment.  For present purposes, my main argument against special leave is that the whole matter has been presented to your Honours on a basis which was not ventilated at trial, is not ventilated in the Court of Appeal; there is no trace of this mortmain fear in the Court of Appeal reasons, none at all.  Hitherto, the Council has never said that upon reclassification they will continue to be bound by the trust for a public purpose, which was the ground of it being community land.

My friend has not given your Honours the background of how that came about; it is very simple.  Upon the 1993 Local Government Act amendments bringing in this novel scheme of classification community and operational, there was a need, shortly after it came into effect, to know into what basket different parcels of land fell.  There were two relevant methods by which that could be done.  One was by resolution of the Council.  That was not available if the land was pre-emptively community land by dint of bearing certain characters.  One of those stipulated characters was if the land was held on a trust for a public purpose. 

So the controversy between these parties arose because the Council wanted to deal with this land by way of ordinary resolution.  The statute did not permit that if it was held on a trust for a public purpose. That is why we entirely accept what my learned friend has said, with respect, that that was an essential finding on the way to the ultimate order which was made, namely, that it was held in a trust for a public purpose.  Then one comes down to, in our submission, even if they may to some be interesting, the merely academic question of what kind of trust it is.

The first question is:  does it answer the statutory description “trust for a public purpose”?  It was certainly for a purpose:  car parking.  The very special utterance by which this Council, as it were, extracted this land in the first place was so that it could be provided for car parking.  If the Council had not said that by way of either intention or promise - I do not mean contractually - unless they had said that, it would have been an invalid imposition of a condition.  So from equity’s point of view, the conscience of the Council is thoroughly affected by the means by which it got the title in; it would not have got the title in otherwise.

TOOHEY J:   If the Council could make good the proposition that there was neither constructive trust nor express trust, then, at least from the Council’s point of view, there is an advantage to be gained, because the land ceases to be classified as community land.

MR WALKER:   No, the advantage which was in controversy between the parties, your Honour, was that that decision would be determined by ordinary resolution of the Council rather than by the parliamentary requirement, the legislative requirement.  That is the advantage.  There is no long-term advantage because it can become operational land in any event, whether it was classified by statutory fiat or by Council resolution; it is not prevented from being operational.  We have never argued, and the occasion has never arise to argue, and it is novel this morning, that the Council fears that even if it reclassifies this land to operational land, the trust will continue to have some baleful effect. 

Section 30, which I commenced by reading to your Honours, makes it quite plain that, as one would expect by the very notion of reclassification from land which is embargoed to land operational which can be dealt with, there is no continuing effect of the trust which rendered it community land in the first place.  Parliament has overridden whatever equity would have decreed in relation to the way the land would be held.  So for those reasons there is no ramification either in this case for this land, nor is there some fearsome prospect generally.  Further, as we have put in our submissions, nor is there any continuing difficulty in New South Wales about the binding effect of the purposes for which contributions, in cash or kind, are sought.  That has been dealt with for 17 years by statute.  That will not arise again.

HAYNE J:   But is there a development of the law of trusts?  Leave aside the law of use of public land.  Is there a development of the law of trusts that is reflected in the decision of the Court of Appeal?

MR WALKER:   No.  The law of trusts which was applied was nothing other than the general principles in relation to the imposition of a constructive trust.  That requires me to make good to your Honours’ satisfaction several propositions.  The first is that constructive trusts can and must, according to long‑established principle, be pronounced and shaped according to the particular circumstances of the case.  That proposition, in our submission, is cardinal to this whole area of the law and is incontestable and does not present any special leave point to this Court.

The second proposition is that there were very special elements to this case.  As your Honours are aware, in the Court of Appeal we succeeded as to certain parcels but not as to many others, precisely because of fine factual differences relating to the dealings between the Council and the landowners.  That, in our submission, again is a hallmark of it not being a special leave point and, so far, no departure from incontestable orthodoxy as to the law of constructive trusts.  

The next proposition I would need to make good to answer no to your Honour Justice Hayne is to that a constructive trust need not be pronounced in a way which in the circumstances of the case identify specified persons as the object of the intended benefit in such a way as to, for example, permit vesting within a perpetuity period.  In our submission, it must follow from the first proposition, namely, that equity shapes constructive trusts so as to attach to the conscience of the defendant in the circumstances of the case, but that will not always be so. 

That can be illustrated by some incremental reasoning.  First, there is no doubt that a constructive trust can be pronounced because A has given title to B on condition that A be benefited in a particular fashion.  That is clear.  Second, there can be no doubt that a constructive trust can be imposed by A giving to B legal title on condition that C, the apple of A’s eye, be benefited.  That also is incontestable.  What step in principle, bearing in mind that the principles are that the conscience of the defendant is affected by seeking to deal with the title contrary to the basis upon which it was got in - Rochefoucauld v Boustead, Loke Yew v Port Swettenham, Muschinski v Dodds - bearing in mind that that is the principle, what real step is being taken when A gives the land to B on condition that B will use it to provide for unwed mothers, poor boys, lonely girls in a community centre, for example?

You cannot name them but you have satisfactorily described them.  Why would equity find it any less offensive for B to say, “I’ve got the legal title in now. There are technical rules about the constitution of charitable trusts which have not been complied with.  I am off free, I have the title”.  Equity has never been troubled by Statute of Frauds requirements not being satisfied.

HAYNE J:   The invitation is based on the ease of the step rather than its novelty, is it not?

MR WALKER:   Yes.  The invitation is based on the proposition that if I ‑ ‑ ‑

HAYNE J:   It will not hurt at all.

MR WALKER:   - - - can make the step look easy, then it truly is within the relevant analogy and it is an application of the same principle.  We then just return to the beginning, your Honour, that because this is an area of law where the infinite variety of circumstances dictate the outcome, there is nothing new when a new set of circumstances arise.

GAUDRON J:   In essence, you are saying that in this situation it is just a remedy.

MR WALKER:   Yes.

GAUDRON J:   It is just the appropriate remedy that conforms to the statute.

MR WALKER:   I say that with trepidation, because that gets me into what I have said earlier is academic and might be interesting.  That is not, in my submission, the hallmark of a special leave question when what your Honours have is a controversy, a practical controversy, between these parties to settle with a view to the practical and legal ramifications for others in like position.  There will not be others in like position in this case because of the change in the statutory regime.  There are none of the horrific consequences, which was the burden of the whole of his song, namely, that this will be land somehow sequestered from sensible modernising changes.  That is not the case.  We have never it is the case; the Court of Appeal never had that argued to them.  That being said, in our submission, the only question is, as Justice Hayne puts it, does this present some terrible chink in a respectable wall of doctrine about constructive trusts?  The answer is no.

HAYNE J:   I do not think they are quite the words I used here, Mr Walker.  Perhaps it is the effect of it as you see it.

MR WALKER:   Yes.  However one characterises it, your Honour, in our submission, it is only novel if one regards the matching of doctrine to particular circumstances as in itself always presenting novelty, because in this case the step we wish to take is not a step which in any way changes the approach of equity, which is that if somebody gets in title on the basis that they will deal with land in a particular way, it is offensive to good conscience but, having done so, they then take advantage of technical doctrine, be it the Statute of Frauds, the Torrens system or, as in this case, arcane and, we would say, utterly inapplicable learning about the constitution of charitable trusts so as to defeat the basis upon which they had to hold the land.

There is an extra circumstance in this case which makes the requirements of conscience that much the more urgent.  The Council could not have got this title in because they could not lawfully have imposed or suggested the applicability of such a condition unless they had announced

and held out the intention or promise to deal with it in that particular way.  It would have been unlawful extortion otherwise for them to have got the land in return for the planning permission.  So it goes beyond the dealings that normally relate between private parties and, in our submission, there is an urgent need for public bodies to be reminded that they are as subject to equity as others, subject only to statutory fiat, which in this case is supplied by the new scheme by which they can remove the trust with public participation.  May it please your Honours.

TOOHEY J:   Thank you, Mr Walker.  We need not hear from you in reply, Mr Davison.  There will be a grant of special leave in this matter.

AT 9.52 THE MATTER WAS CONCLUDED