Chaudry v Liverpool City Council

[2008] NSWLEC 198

Reported Decision: 160 LGERA 42

Land and Environment Court

of New South Wales

CITATION:

Chaudry v Liverpool City Council [2008] NSWLEC 198

PARTIES:

APPLICANT:
Muhammad Anwar Chaudry

RESPONDENT:
Liverpool City Council

FILE NUMBER(S):

30773 of 2007

CORAM:

Biscoe J

KEY ISSUES:

Compulsory Acquisition of Land :- Whether agreement for payment of compensation reached during the proceedings - Whether such an ambiguity as to subject matter of agreement in relation to statutory interest as to preclude consensus ad idem.

LEGISLATION CITED:

Civil Procedure Act 2005 (NSW), s 100
Land Acquisition (Just Terms Compensation) Act 1991 (NSW), ss 39(1), 39(2), 41, 42, 47 49, 54, 55, 66, 68(1), Pt 3

CASES CITED:

Borg v Howlett (unreported, 10 April 1996, NSWSC)
Borg v Howlett (unreported, 24 May 1996, NSWSC)
Keefe v Marks (1989) 16 NSWLR 713
Raffles v Wichelhaus (1864) 2 HC 906, 159 ER 275
Scriven Bros & Co v Hindley & Co [1913] 3 KB 564
The Life Insurance Company of Australia Limited v Phillips (1925) 36 CLR 60
W & J Sharp v Thomson (1915) 20 CLR 137
Wily v Thomson Media Group Pty Ltd (unreported, 4 December 1997, NSWSC)

DATES OF HEARING:

16-17/06/08

EX TEMPORE JUDGMENT DATE:

17 June 2008

LEGAL REPRESENTATIVES:

APPLICANT:
Ms A Pearman, barrister
SOLICITORS
Williams Boxsell Georgas

RESPONDENT:
Mr J Maston, barrister
SOLICITORS
Marsdens Law Group

JUDGMENT:

THE LAND AND
ENVIRONMENT COURT
OF NEW SOUTH WALES

BISCOE J

17 June 2008

30773 of 2007

MUHAMMAD ANWAR CHAUDRY v LIVERPOOL CITY COUNCIL

EXTEMPORE JUDGMENT

1 HIS HONOUR: These proceedings are an objection under the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (Just Terms Act) by the applicant, Muhammad Anwar Chaudry, to the amount of compensation offered by Liverpool City Council for the compulsory acquisition of his land known as Lot 124 DP 2475 located at 135 McIver Avenue, Middleton Grange. Section 68(1) of the Act provides:

Payment of compensation in respect of matters before the Land and Environment Court is to be made in accordance with any agreement reached during the proceedings or, if no such agreement is reached, in accordance with the decision of the Court.

2 Two issues are now before me:

(a) Was an agreement within the meaning of s 68(1) reached during the proceedings?
(b) If so, what were its terms?

3 The council submits that an agreement within the meaning of s 68(1) was reached late on the afternoon of Friday 13 June 2008 (the last working day before the hearing) in a telephone conference between the solicitors for the parties. At that time the solicitors believed that agreement had been reached because they authorised a communication to the Court later that afternoon stating that the case had settled and that consent orders would be handed up at the commencement of the hearing on Monday 16 June (yesterday).

4 When the matter was called on for hearing yesterday, counsel for the applicant informed the Court that there had been a misunderstanding and that the applicant took the view that the matter was not settled. The parties efficiently agreed that the issues now before me would be litigated later that day once they had gathered their evidence.

5 The Valuer General’s initial determination of compensation which became the statutory offer in respect of which the applicant lodged an objection with this Court, was in the sum of $1,607,000. In February 2008 the council made an advance payment to the applicant as follows:

90 percent of compensation offered $1,446,300.00
Statutory interest pursuant to s 50(1)
to date $76,032.98
Total $1,522,332.98

6 The council submits that the agreement concluded on Friday 13 June 2008 was that the applicant would receive $1,790,000 “inclusive in full and final settlement of the matter.” The council submits that this agreement means that it is obliged to pay the applicant:

The amount of the offer accepted in June 2008 $1,790,000.00
Less the advance payment made in
February 2008 inclusive of statutory interest $1,522,332.90
Balance $ 267,667.10

7 The applicant’s solicitor, Mr John Boxsell, on the other hand, understood that the settlement agreement was to the effect that the council would pay the applicant:

The amount of the offer accepted in June 2008 $1,790,000
Less the advance payment in February 2008
exclusive of statutory interest $1,446,300
Balance $343,700

8 Evidence was given by the solicitors for each party as to the course of communications between them, which did not differ much in substance. The factual background is mainly set out in the affidavit of the council’s solicitor, Mr David Baird.

9 On 29 January 2008 the council’s solicitors wrote to the applicant’s solicitors in the following terms:

We refer to previous correspondence in this matter.

We have been instructed that funds will now be made available by the Department of Planning to allow settlement to take place with respect to payment to your client of 90% of the compensation offered on Friday, 8 February 2008.

Can you please confirm that you and Citigroup Pty Ltd are available on this day.

We confirm that we have calculated the amount payable on 8 February 2008 to be $1,522,332.90. This amount has been calculated as follows;

1. 90% of compensation offered - $1,446,300.00

2. Statutory interest pursuant to section 50(1) of

the Land Acquisition (Just Terms
Compensation) Act 1991 at 5.27% between
16 February 2007 and 10 January 2008 - $68,701.78

3. Statutory interest at 6.38% between

11 January 2007 and 8 February 2008 - $7,331.20

Total $1,522,332.90

We would appreciate you confirming the availability of you and the bank to attend settlement on 8 February 2008 and that you agree with the calculation above. The Council requires 3 clear days before settlement to arrange cheques.

10 Settlement occurred on 8 February 2008.

11 On 11 March 2008 there was a meeting between representatives of the parties. At the meeting Mr Boxsell said that the applicant would settle for $2,083,000 in full settlement of the matter. Shortly afterwards a representative of the respondent said that all he could do was put forward as a full and final offer to settle the matter the amount of $1,790,000. He said, “This is the top offer I can make because council is reliant upon funds from the Department of Planning and this is the maximum amount the Department has authorised.” Mr Boxsell said that they would consider the offer and give their response after they had spoken to Mr Chaudry.

12 In cross-examination Mr Baird agreed that it would be fair to provide a breakdown of the council’s offer if one was requested. I accept Mr Boxsell’s evidence that at the March 2008 meeting the valuer representing the applicant asked for a breakdown to enable the applicant to note precisely how the figure was made up, that the valuer expressed the view that it was unfair not to know the breakdown, but that no breakdown was provided. It is submitted for the council that there was no obligation to provide a breakdown, particularly in circumstances where the council had made plain at the March meeting that the amount of $1,790,000 was the maximum amount the Department had authorised. When a similar proposition was put to Mr Boxsell in cross examination, he indicated he thought that the council’s statement at the meeting as to the maximum amount authorised was just part of the process of negotiation.

13 On 12 March 2008 the solicitor for the council forwarded to the solicitor for the applicant a letter, without prejudice save as to costs, which referred to the conference the previous day. The letter stated:

We confirm that on a without prejudice basis Council made an offer wherein it would pay to the Applicant the sum of $1,790,000.00 in full and final settlement of this matter.

We understand that you will be obtaining your client’s instructions concerning this offer and responding shortly.

14 On 14 March 2008 the applicant’s solicitor replied by letter marked without prejudice except as to costs, advising that the applicant did not accept the council’s offer and making a counter offer of $2,050,000.00 “in full and final settlement of the matter.”

15 On 10 June 2008, the applicant’s solicitor wrote a letter to the council’s solicitor without prejudice except as to costs, referring to discussions that day and stating that they were instructed to offer to settle the matter on the basis that the council pay the applicant the sum of $1,870,000.00 “in full and final settlement with each party to pay his/its own costs.”

16 On 12 June 2008, the council’s solicitor replied by letter marked without prejudice, rejecting that offer of settlement. The letter was sent by facsimile. Later that day, at or shortly after 5.15pm, the applicant’s solicitor Mr Boxsell telephoned the council’s solicitor, Mr Baird. Mr Boxsell noted that the council had only rejected the applicant’s offer and had not made a counter offer. Whilst acknowledging that the council did not have to make a counter offer, on a without prejudice basis he requested Mr Baird to ask the council whether the council would be prepared to reopen the council’s original offer. That was a reference to the offer made on 11 March 2008. Mr Baird obtained his client’s instructions.

17 On Friday 13 June 2008 Mr Baird sent a letter by facsimile to Mr Boxsell in which he confirmed that he was instructed to re-submit the offer originally made to the applicant on 11 March 2008 which was rejected on 14 March 2008. The letter concluded:

We confirm that Council reopens its offer wherein it offers to pay the Applicant the sum of One million seven hundred and ninety thousand dollars ($1,790,000.00) inclusive in full and final settlement of this matter.

18 At about 3.30pm on Friday 13 June 2008, Mr Boxsell telephoned and, according to Mr Baird, said, “My client accepts your offer of $1,790,000 all inclusive.” Mr Boxsell in his evidence did not recall but did not dispute using those words. His recollection was that he said “My client accepts your offer of $1,790,000 inclusive of costs.” I accept Mr Baird’s evidence as to the words that were said by Mr Boxsell. Mr Boxsell also testified, and I accept, that this conversation included the following at the end. He said, “Should we now open this up?” Mr Baird replied, “What do you mean?” Mr Boxsell said, “Should we exchange open letters about the agreement because so far discussions have been on a without prejudice basis?”. Mr Baird replied, “No, counsel [for the council] will draft up terms and will have them ready Monday morning.”

19 At 5.37pm on Friday 13 June 2008, Mr Baird sent Mr Boxsell an email which stated:

I refer to my telephone conversation with Mr Boxsell this afternoon and confirm that the Applicant has accepted the Respondent’s offer of $1 790 000.00 all inclusive in full and final settlement of his claim.

I confirm that short minutes of order to this effect will be handed to the Court on Monday to finalise the Court proceedings.

Counsel for each party will consult with respect to the short minutes of order on Monday however in the meantime should you wish to contact me, I can be contacted on my mobile phone number below.

20 The words “in full and final settlement of his claim” in this email are additional to the words which Mr Baird testified that Mr Boxsell actually used earlier that afternoon. However, the words “in full and final settlement of this matter” did appear in Mr Baird’s earlier letter of 13 June 2008.

21 By the time that this email was sent to Mr Boxsell, he had left his office. He did not see it until approximately 10am on Monday 16 June 2008. He received it simultaneously with receiving page 1 of proposed short minutes of order which had been drafted by counsel for the respondent. That page provided as follows.

By consent:-

1. Compensation for the compulsory acquisition of Lot 124 Deposited Plan 2475 known as 135 McIver Avenue, Middleton Grande (“the property”) in accordance with Part 3 of the Land Acquisition (Just Terms Compensation) Act 1991, together with statutory interest on compensation and the applicant’s costs of the proceedings is agreed in the sum of $1,790,000.

2. Order that the respondent pay to the applicant the amount referred to in order 1 less amounts paid by the respondent to date on account of compensation and interest (being $1,522,332.90), namely the balance amount of $267,667.10 within 28 days of delivery to the respondent of a direction to pay, deed of release and indemnity generally in accordance with the attached drafts and the title deed with respect to the property including a duly executed discharge of any mortgage or encumbrance on the title.

22 It was not until Mr Boxsell saw the first page of the proposed short minutes of order that he realised there was an apparent misunderstanding as to the subject matter of the agreement which the solicitors thought they had reached on the Friday. When the matter was called on before me later that morning counsel for the respondent handed up the short minutes of order. The pages following the first page comprised a deed of indemnity and release.

23 The question is whether in the special context of the Just Terms Act and in the circumstances in which the offer was made and accepted, there was such an ambiguity as to the subject matter as to preclude consensus ad idem with the result that there was no binding agreement. Consensus ad idem may be precluded by insoluble ambiguity as to the subject matter of the contract. If parties are not ad idem as to the subject matter there is no binding contract between them: Raffles v Wichelhaus (1864) 2 HC 906, 159 ER 275; Scriven Bros & Co v Hindley & Co [1913] 3 KB 564; W & J Sharp v Thomson (1915) 20 CLR 137 at 142; The Life Insurance Company of Australia Limited v Phillips (1925) 36 CLR 60 at 79; Borg v Howlett (unreported, 10 April 1996, NSWSC, Young J); Borg v Howlett (unreported, 24 May 1996, NSWSC, Young J); Wily v Thomson Media Group Pty Ltd (unreported, 4 December 1997, NSWSC, Young J).

24 Such cases are rare. If, in the circumstances of the present case, the construction contended for by the council is the only reasonable construction that could be placed on the words of the settlement agreement, or if a reasonable person in the applicant’s position should have construed those words in that way, then in my view the applicant would be bound accordingly even though subjectively the applicant’s solicitor intended by his acceptance something different.

25 If this were conventional civil litigation, terms of settlement such as this could not ordinarily be insolubly ambiguous such as to exclude consensus ad idem. In the present case, the ambiguity issue arises because of the special treatment of interest under the Just Terms Act. In conventional civil litigation statutory interest generally has to be specifically claimed: eg s 100 of the Civil Procedure Act 2005 (NSW), Keefe v Marks (1989) 16 NSWLR 713. That is not so under the Just Terms Act.

26 The Just Terms Act contains compensation and interest provisions which have no parallel in conventional civil litigation. Part 3 governs compensation for compulsory acquisition of land. Section 39(1) provides that a person who wishes to claim compensation under this Part must lodge a claim in accordance with this section with the State authority acquiring the land concerned. Section 39(2) relevantly provides that the claim must be in the form approved by the Minister. The approved form contains no provision for a claim for interest. There is an independent entitlement to interest under s 49 which provides as follows:

49 Interest on compensation

(1) Interest is payable (subject to subsection (2)) on any amount of compensation under this Part from the date the land is acquired until the payment is made. Any such interest becomes part of the amount of compensation payable.
(2) Interest under this section is not so payable on any amount of compensation paid into a trust account under this Part or into the Consolidated Fund by the authority of the State. However, money earned from the investment of any such trust account becomes part of the compensation concerned.

27 Part 3 of the Act provides for the amount of compensation to be offered (ss 41, 47), the amount of compensation to be included in the written notice of compulsory acquisition (s 42), the amount of compensation to which a person is entitled (ss 54, 55) and the lodging with the Land and Environment Court of an objection to the amount of compensation offered (s 66). None of these provisions comprehend an entitlement to interest within the notion of compensation to which they refer. Rather, statutory entitlement to interest is dealt with discretely in s 49. Part 3 distinguishes between the amount of compensation payable without the addition of interest, on the one hand, and the addition of interest on the other. Under the Act there is no provision for statutory interest to be specifically claimed in proceedings before the Court. The Court’s only express power in relation to interest appears in s 66(4) which provides:

(4) If the Land and Environment Court decides that the amount of compensation payable (without the addition of interest) does not exceed by more than 10% the amount of compensation offered by the authority of the State, the Court may cancel or reduce the amount of interest that has accrued under this Act in respect of the compensation since the institution of the proceedings.

28 Thus, the scheme of Part 3 is to segregate statutory interest from the initial claim for compensation from the State authority, the determination by the Valuer General of the amount of compensation to be offered, the offer of compensation that is made, and later (where applicable) the determination of the amount of compensation by the Court.

29 Given this statutory context, when parties seek to reach an “agreement” during the proceedings, as contemplated by s 68, it seems to me that there is the potential for insoluble ambiguity in the absence of clarity as to whether or not the amount offered includes or does not include statutory interest which has been paid in advance. In the present case there are circumstances of the case which bear upon that potential. The first circumstance is that in February 2008 the applicant was paid the sum of $1,500,332.90 which comprised 90 percent of the compensation offered with the balance of just over $76,000 comprising statutory interest pursuant to s 49. That interest had not been claimed in the proceedings. That is, it was not the subject of the objection to compensation which had been lodged with the Court. There was no provision for it to be claimed. It was a discrete entitlement under s 49. Another circumstance particular to the case is that at the settlement meeting between the parties in March 2008 when the offer of $1,790,000 was first made by the council, the council declined to particularise the offer although requested to do so. Had there been particularisation then or indeed at any time before the morning of Monday 16 June 2008, it would have immediately become apparent to the applicant’s solicitor that the offer was not what he understood it to be. It would have dispelled any ambiguity.

30 In my opinion, in the special context of the Just Terms Act and the particular circumstances of the case, there is insoluble ambiguity as to whether the words of the settlement agreement related to the issues in dispute in the proceedings – which did not include statutory interest – or also included the independent entitlement to statutory interest under s 49 which had been paid in advance. Accordingly, in my opinion, there was no “agreement reached during the proceedings” within the meaning of s 68(1). It follows that payment of compensation in respect of matters before the Court now has to be made in accordance with the decision of the Court, unless the proceedings are resolved by future agreement.

31 I make the following orders:

1. Declaration that no agreement has yet been reached during the proceedings within the meaning of s 68(1) of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW).

2. The costs of determination of that issue are reserved.

3. The parties are to approach the registry forthwith to obtain the earliest available hearing dates for the further hearing of this matter

(with an estimated hearing time of two days).

4. The exhibits in relation to the agreement issue may be returned.