City of Holdfast Bay v Colley Terrace Pty Ltd - [2012] SASC 60

SUPREME COURT OF SOUTH AUSTRALIA
(Appeal from a Master: Civil)
CITY OF HOLDFAST BAY v COLLEY TERRACE PTY LTD & ANOR
[2012] SASC 60
Judgment of The Honourable Justice David
17 April 2012
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - PLEADINGS - GENERALLY
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - AMENDMENT
Appeal from a Master – the appellant is the plaintiff in an action in which it seeks the enforcement of an encroachment permit against the first and/or second defendants (the first and second respondents) – the appellant sought permission to file a second statement of claim which added an alternative cause of action in restitution/unjust enrichment – the appellant contended that should the alternative claim succeed, the appellant was entitled to restitution from the first respondent in the amount of the benefit the first respondent derived from its use of the encroachments – the first respondent opposed the granting of permission and the second respondent neither consented to nor opposed the application – the Master refused the appellant permission to file a second statement of claim – whether the proposed amendments disclosed a reasonably arguable cause of action.
Held: appeal allowed – the appellant should not be denied the right to present an argument as to how compensation should be assessed in relation to a claim for unjust enrichment – the correct approach to the assessment of the appellant’s claim for unjust enrichment is a matter for the trial Judge to determine.
Supreme Court Civil Rules 2006 (SA) r 104, referred to.
Whitham v Westminster Brymbo Coal Co [1896] 2 Ch 538; Stoke-on-Trent City Council v W & J Wass Ltd [1988] 1 WLR 1406; Lumbers v W Cook Builders Pty Ltd (2008) 232 CLR 635; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2006) 230 CLR 89; Penarth Dock Engineering Co Ltd v Pounds [1963] 1 Lloyds Reports 359; Biviano v Natoli (1998) 43 NSWLR 695, considered.

CITY OF HOLDFAST BAY v COLLEY TERRACE PTY LTD & ANOR
[2012] SASC 60
Appeal from a Master
DAVID J.
Introduction

This is an appeal against a decision of a Master refusing an application by the appellant to amend its statement of claim.
The appellant is the plaintiff in an action in which it sues both respondents for the enforcement of a permit. The first respondent in this matter is a developer who wished to develop their land at Glenelg by building an apartment block. They asked the appellant, the local council (the plaintiff in the original action), for permission to extend the proposed building beyond their land and onto the appellant’s road reserves on three sides. They did this for the purposes of increasing the efficiency of the car park layout. The appellant and first respondent entered into a permit which authorised the encroachment upon the appellant’s land. The permit provided that the first respondent would pay a quarterly permit fee to the appellant for the term of the permit, which was 42 years. The total annual permit fee was $64,850. The second defendant at trial (the second respondent on this appeal) is the strata corporation representing the purchasers of the units that were built by the first respondent.
There will be a contest at trial as to whether the permit entered into between the appellant and the first respondent was assigned by the first respondent to the second respondent. However, for the purposes of the present appeal the second respondent plays no part.
As originally pleaded, the appellant brings an action for the enforcement of the permit as, allegedly, neither respondent has made payment. The claim is for a sum representing past use pursuant to the permit and a declaration in respect of the future use. As pleaded, the first respondent contends that the permit fee was unenforceable as the amount of the fee is unreasonable.
The action was commenced on 21 September 2010 in the terms set out above, namely an action seeking a declaration that the permit remained binding on the first respondent or the second respondent and judgment for fees accrued which at the time amounted to $398,079.
In its defence, the first respondent pleaded that the permit fees were excessive and also that it was the liability of the second respondent to pay those fees as there had been an assignment of the permit. The second respondent denied that there had been any valid assignment. That issue has nothing to do with this appeal. The second respondent also pleaded that even if it was bound by the permit, it was void on various grounds.
On 28 September 2011 the appellant issued an application seeking permission to file a second statement of claim. That new statement of claim sought to be filed (which is attached to the affidavit of Anthony Kelly, solicitor for the appellant, sworn on 17 November 2011 and marked “AK11”) is the subject of this appeal. The first respondent actively opposed the granting of permission and the second respondent remained neutral.
After hearing argument on the matter, the Master refused permission for the appellant to file a new statement of claim in the terms of AK11. The appellant now appeals against that refusal and seeks permission to file a second statement of claim in essentially the same terms as that which the Master refused.
The proposed amendments to the statement of claim
In essence, the first respondent objects to those parts of the proposed amended statement of claim which add an alternative cause of action for unjust enrichment and restitution if the primary claim of enforcement of the permit should fail. In particular, the following paragraphs are objected to:
20.If the underground encroachment was not an element of the design of the Apartment Development, it would have been necessary for the proposed development to be altered so as to:
20.1. construct an additional level or levels of underground car parking space below the proposed apartment building; or
20.2. reduce the total number of apartments in the proposed apartment building.
21.The changes described in paragraph 21.1 above would have resulted in substantially greater construction costs to the first defendant than resulted from the use of the proposed underground encroachment, being the difference between:
21.1. the cost of construction of underground car parking in reliance on the underground encroachment; and
21.2. the cost of constructing additional underground car parking levels that would not have encroached.
22.The changes described in paragraph 21.2 above would have resulted in substantially diminished profits to the first defendant than resulted from the use of the proposed underground encroachment, such that the first defendant benefitted from increased profits as a consequence of the construction and sale of the additional apartments permitted as a result of the underground encroachment.
…
53.In the alternative, in the event that payment of the Permit Fee is not enforceable for any reason, the plaintiff claims from the first defendant the benefit that the first defendant derived from constructing the encroachment.
54.By constructing the encroachments, the first defendant:
54.1. built on the plaintiffs land to the plaintiff’s detriment and the first defendant’s benefit;
54.2. derived benefit as set out in paragraphs 20-22 herein.
55.In the premises, the plaintiff is entitled to restitution from the first defendant in the amount of the benefit the first defendant derived from constructing the encroachments.
In his reasons for refusing the amendment, the Master said:
[10]The plaintiff submitted that if the Permit was void, which it denied, then in the alternative it could recover on the principle of restitution/unjust enrichment not merely an equivalent of the Permit fee but the benefit which the first defendant had derived from the encroachments as set out in paragraphs 20-22. It contended that on the general principles of the law of restitution such recovery was available to it, although it could not cite any precedent for such an award under that principle for occupation and use of a claimant’s land. The first defendant submitted that it was not reasonably arguable in law that such a remedy was available to the plaintiff in these circumstances and hence these paragraphs of 2SOC were an abuse of process for the purposes of 6R 104(b).[1]
[11]There is a line of established cases which lays down that where a landowner cannot establish loss to himself by a wrongful use by another of his land, he is entitled against the trespasser to recover as damages the reasonable letting value of the land for its user by that trespasser.[2] As this alternative plea only arises if the Permit is unenforceable, it would seem that the defendants would then be trespassers in their subterranean use of the plaintiff’s roads. It was not suggested that the plaintiff could show it had suffered any actual damage from this subterranean use of the roads.
[12]There is a line of High Court authorities referred to by the first defendant that the development of the unjust enrichment/restitution principles should not be used to supplant established remedies in areas where they had been held to apply.[3]   As the plaintiff seems to have a remedy in law if the defendants as unauthorised trespassers used its roads, it is not reasonably arguable that an additional head of liability for such use should be imposed on restitutionary principles.
(Footnotes in original)
[1]    See Civil Procedure South Australia Volume 1, [6R 104.25].
[2]    Whitham v Westminster Brymbo Coal Co [1896] 2 Ch 538; Stoke-on-Trent City Council v W & J Wass Ltd [1988] 1 WLR 1406.
[3]    Lumbers v W Cook Builders Pty Ltd (2008) 232 CLR 635 at [77]-[80]; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2006) 230 CLR 89 at [156].
Mr Henry SC, counsel for the appellant, put to me that the Master was saying that if the action for the enforcement of the permit fails then the appropriate remedy would be in trespass and not unjust enrichment.
It is common ground that in deciding whether an amendment to a pleading should be allowed I am guided by r 104 of the Supreme Court Civil Rules 2006 (SA) (“the Rules”) which provides:
104—Court's power to strike out pleading
The Court may strike out a pleading in whole or part if the pleading—
(a)does not comply with these rules; and
(b)is an abuse of the process of the Court or prejudices the proper conduct of the action.
If this were an application to strike out the amendment which is sought to be pleaded, then the test would be whether I found the pleading disclosed no reasonable cause of action. That same test applies when there is an application to amend a pleading. There appears to be no argument that that is the appropriate test.
Appeal
In short, Mr Henry argues that the discretion exercised by the Master not to allow the amendment has miscarried as it is based upon a mistake. He argues that the mistake is that if the appellant were not to succeed in its action to enforce the permit, an action in trespass could never lie and unjust enrichment must be available as an alternative. He argues that just because a debt has not been satisfied it does not follow that the appellant would be a trespasser as it was there pursuant to the permit. Mr Henry puts that an alternative claim in unjust enrichment is a perfectly proper and logical pleading because the respondent has had the use of that space for car parking for a number of years and restitution should be made accordingly.
Mr Livesey QC, for the first respondent, argues that in fact the whole of the basis of Mr Henry’s argument is misconceived because there is no dispute that unjust enrichment is an appropriate alternate cause of action. He puts that is not what the respondent is complaining about. Rather, Mr Livesey argues that the plaintiff’s amended pleading is erroneous on the basis that it seeks an account of profits as a remedy for unjust enrichment. In particular, he points to [55] of the amended pleading which talks about “the plaintiff being entitled to restitution from the first defendant in the amount of the benefit the first defendant derived from constructing the encroachments” and again in [22] which talks about the possibility of diminished profits if the encroachment was not allowed.
Mr Livesey puts that in the event that unjust enrichment is made out, any question of profit that the respondent might have made due to the encroachments is not to be considered in determining what would constitute a reasonable fee payable for the respondent’s use of the appellant’s land. He points out a number of cases concerning the unauthorised use of land, none of which allow compensation to extend to the question of profits when allowing a plaintiff to claim for a reasonable market rental for the unauthorised use of land irrespective of what cause of action it may come under, of which unjust enrichment is one.[4] In other words, the first respondent argues that there is no objection to an alternate pleading of unjust enrichment, but there are objections to it having been pleaded whereby the compensation involves the question of profits gained by the respondent because of the unauthorised use. Mr Livesey argues that if a pleading was sought in terms that did not seek an account of profits as a remedy for unjust enrichment, there would be no objection.
[4] Whitwam Westminster Brymbo Coal [1896] 2 Ch 538, 542-543, Stoke-on-Trent City Council v W & J Wass Ltd [1988] 1 WLR 1406, 1416, Penarth Dock Engineering Co Ltd v Pounds [1963] 1 Lloyds Reports 359, Biviano v Natoli (1998) 43 NSWLR 695, 704.
Mr Henry’s response to that argument is that it is at least arguable that, in considering the question of appropriate compensation for unjust enrichment as a reasonable fee based on a market assessment, it is logical that one may look at the question of the respondent’s profits gained in its use of the land. He puts that it is not an extension of the user principle but just an application of the basis of the trial Judge establishing what is a reasonable fee.
Conclusion
I remind myself that this is a pleading matter. It is certainly not anywhere near the final resolution of this case. At this stage I find it difficult to deny one of the parties the right to at least present an argument as to how compensation in relation to unjust enrichment should be approached. It might well be that what Mr Livesey has put is the correct approach and the trial Judge may be confined, if it comes down to a question of unjust enrichment, to setting a reasonable fee without recourse to the question of profits. It is not a matter of saying that a cause of action is not available; this question is whether I should preclude any pleadings on how compensation should be assessed pursuant to that cause of action, if successful. In my view, that is very much a matter for the trial Judge.
Other matters
There was mention in argument of a further paragraph to the amended statement of claim which did not appear to be before the Master, or at least was not mentioned in his reasons, namely [55A] which says:
55A.In the alternative to paragraph 55, the plaintiff is entitled to payment of a reasonable fee for the first defendant’s use of the plaintiff’s land.
It appears as though that was an amendment suggested to the Master if the application to amend before him failed. Mr Livesey indicated that there would be no objection on his part as that pleading, on his argument, represents the appropriate form of pleading for unjust enrichment in this case.
I will hear the appellant as to whether it wishes to pursue that further amendment.
Orders
1.I allow the appeal.
2.I set aside Orders 1, 2 and 4 of the Master dated 22 December 2011.
3.I give permission to the appellant to file a second statement of claim in the terms of AK11.
4.I will hear the parties both as to costs and the question of the proposed paragraph [55A].