Donnelly v Kempsey Local Aboriginal Land Council
[2019] FCCA 3152
•5 November 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| DONNELLY v KEMPSEY LOCAL ABORIGINAL LAND COUNCIL | [2019] FCCA 3152 |
| Catchwords: BANKRUPTCY – Application to set aside a bankruptcy notice – whether Applicant has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt that formed the basis for the bankruptcy notice. |
| Legislation: Aboriginal Land Rights Act 1983 (NSW) |
| Cases cited: Aon Risks Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 Bhagat v Global Custodians Ltd [2002] FCA 223 James v Australia and New Zealand Banking Group Ltd [2018] NSWCA 41; (2018) 356 ALR 497 Massih v Esber [2008] FCA 1452; (2008) 250 ALR 648 Melbourne v Relativity Pty Ltd [1999] FCA 160 |
| Applicant: | LYNETTE JOY DONNELLY |
| Respondent: | KEMPSEY LOCAL ABORIGINAL LAND COUNCIL |
| File Number: | SYG 1313 of 2018 |
| Judgment of: | Judge Barnes |
| Hearing date: | 4 December 2018 |
| Delivered at: | Sydney |
| Delivered on: | 5 November 2019 |
REPRESENTATION
| Counsel for the Applicant: | Mr Batley |
| Solicitors for the Applicant: | Sparke Helmore |
| Counsel for the Respondent: | Mr Maconachie |
| Solicitors for the Respondent: | Higgins & Dix |
ORDERS
The application is dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 1313 of 2018
| LYNETTE JOY DONNELLY |
Applicant
And
| KEMPSEY LOCAL ABORIGINAL LAND COUNCIL |
Respondent
REASONS FOR JUDGMENT
The Proceedings
This is an application by Ms Donnelly to set aside Bankruptcy Notice BN223395 issued on 11 April 2018. The bankruptcy notice was issued on the application of Kempsey Local Aboriginal Land Council (the Land Council). It claimed that Ms Donnelly owed the Land Council $78,770.13 based on a judgment of 25 September 2017 of the Local Court of NSW, Port Macquarie for $71,431.21 and interest.
The Local Court judgment arose from the filing by the Land Council of certificates issued by a costs assessor pursuant to the Legal Profession Act 2004 (NSW) in relation to the costs of Supreme Court proceedings between the parties in which (as discussed below) Ms Donnelly sought a declaration that there was an agreement for a lease of property between herself and the Land Council and specific performance. In response, in a cross-claim the Land Council successfully sought judgment for possession of the property in issue. The proceedings (referred to below as the Supreme Court proceedings) were resolved by consent orders which dismissed Ms Donnelly’s application and gave the Land Council judgment for possession. The consent orders of 25 August 2015 included an order that Ms Donnelly pay the Land Council’s costs. It is these costs that formed the basis for the Local Court judgment and the bankruptcy notice.
Section 40(1)(g) of the Bankruptcy Act 1996 (Cth) (the Bankruptcy Act) is as follows:
(1) A debtor commits an act of bankruptcy in each of the following cases:
…
(g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not:
(i) where the notice was served in Australia—within the time specified in the notice; or
(ii) where the notice was served elsewhere—within the time fixed for the purpose by the order giving leave to effect the service;
comply with the requirements of the notice or satisfy the Court that he or she has a counter‑claim, set‑off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter‑claim, set‑off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained; …
Section 41(7) of the Bankruptcy Act provides:
Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, the debtor has applied to the Court for an order setting aside the bankruptcy notice on the ground that the debtor has such a counter-claim, set-off or cross demand as is referred to in paragraph 40(1)(g), and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter-claim, set-off or cross demand, that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied.
Ms Donnelly submitted that the court could be comfortably satisfied that she had a bona fide claim that she could not have set up in the proceeding in which the Local Court judgment was obtained with sufficient substance and a fair chance of success such that the bankruptcy notice should be set aside.
Ms Donnelly contended that she could not have set up her asserted claim in the proceeding in which the Local Court judgment was obtained because substantive claims between parties could not be set up in the context of a costs assessment or filing of a costs assessor’s certificate in the Local Court such that it operated as a judgment of that court (see ss.368(5) and 369 of the now repealed Legal Profession Act 2004 (NSW) and Massih v Esber [2008] FCA 1452; (2008) 250 ALR 648 at [41] per Flick J). The Land Council did not dispute that the asserted claim could not have been set up in the proceeding under which the Local Court judgment was obtained. Hence it is not necessary to consider this issue further.
What is in issue is whether Ms Donnelly has satisfied the court that she has a counter-claim, set-off or cross demand of the kind described in s.40(1)(g) of the Bankruptcy Act such that the bankruptcy notice should be set aside.
Both parties referred to Glew v Harrowell, in the matter of Glew [2003] FCA 373; (2003) 198 ALR 331 at [9] - [12] per Lindgren J as a convenient and authoritative summary of what a debtor must establish in seeking that a bankruptcy notice be set aside on this basis. His Honour stated at [9] – [12]:
9. There are authorities suggesting that Glew and Tresidder must satisfy me of the following interrelated and sometimes overlapping matters:
• that they have a "prima facie case", even if they do not adduce evidence which would be admissible on a final hearing making out that case (Ebert v The Union Trustee Co of Australia Ltd (1960) 104 CLR 346 ("Ebert") at 350; Re Brink; Ex parte Commercial Banking Co of Sydney Ltd (1980) 44 FLR 135 ("Brink") at 141; Gomez v State Bank of NSW Ltd [2002] FCAFC 101 at [17], [18]);
• that they have "a fair chance of success" or are "fairly entitled to litigate" the claim: Brink at 141; Re Gould; Gould v Day [1999] FCA 1650 at [27], [28]; Re Capsanis; Capsanis v The Owners - Strata Plan 11727 [2000] FCA 1262 at [11]); and
• that they are advancing a "genuine" or "bona fide" claim (Re Capsanis; Capsanis v The Owners - Strata Plan 11727 [2000] FCA 1262 at [11]).
It may be that the first and second formulations are intended to cover the same ground. In Brink Lockhart J treated (at 141) the reference to a "prima facie case" in Ebert as a reference to "a fair chance of success".
10. In Brink Lockhart J said (at 141) that the Court is not required to "undertake a preliminary trial of the counter-claim, set-off or cross demand". But, clearly, the application of the criteria above requires the Court to make some kind of preliminary assessment, though obviously not to determine the counter-claim, set-off or cross demand finally. And in Guss v Johnstone (2000) 171 ALR 598, Gleeson CJ, Gaudron, McHugh, Kirby and Callinan JJ stated (at 606):
[40] The state of satisfaction referred to in s40(1)(g), and s41(7), involves weighing up considerations as to the legal and factual merit of the claim relied upon by the debtor, and the justice of allowing the bankruptcy proceedings to go ahead or requiring them to await the determination of the claim.
11. Plainly, in order to "satisfy" the Court for the purposes of s 40(1)(g), the debtor is not required to prove, as on a final hearing, the asserted entitlement to recover from the creditor. Accordingly, evidence tendered on an application to set aside is to be tested for admissibility, not as if the proceeding were one in which the debtor's claim was being finally determined, but by reference to the question whether the Court should be satisfied that the debtor has a claim deserving to be finally determined.
12. Perhaps little more can usefully be said than that a debtor must satisfy the Court that there is sufficient substance to the counter-claim, set-off or cross demand asserted to make it one which the debtor should, in justice, be permitted to have heard and determined in the usual way, rather than be forced to comply with the bankruptcy notice by payment or to commit an act of bankruptcy.
Ms Donnelly relied on her affidavit affirmed on 9 May 2018 (which included, as an annexure, her affidavit of 22 October 2014 filed in the Supreme Court proceedings) and affidavits of James Frances Clohesy, solicitor, affirmed on 27 July 2018 and 17 October 2018. The Land Council relied on an affidavit of Anthony Patrick Maher, solicitor, sworn on 12 September 2018. I have borne in mind the observations in Glew v Harrowell at [11] in considering this evidence for the purposes of the present application.
Counsel for Ms Donnelly submitted that the asserted claim against the Land Council could be described as an equitable claim for constructive trust or equitable compensation for the value of improvements made by Ms Donnelly to property owned by the Land Council that was the subject of the Supreme Court proceedings. This claim was said to be best described in the caveat over the property lodged by Ms Donnelly after these proceedings commenced, described at [49] below.
Chronology
It is necessary to outline the circumstances in which this claim is said to have arisen as described in Ms Donnelly’s evidence and in the Land Council’s chronology.
Ms Donnelly’s evidence is that in the early 1990s she asked the co-ordinator of the Land Council how to go about getting a lease for some land and was told:
… if you join the Land Council and attend the meetings you can request that the Lease be put on an agenda. You should be entitled to get a peppercorn Lease paying $1.00 per year for 99 years.
Ms Donnelly claimed that she joined the Land Council and subsequently attended meetings.
At a Land Council meeting in about November 1991, the sale of the Figtree Estate, South West Rocks (which was owned by the Land Council) was discussed. On 25 November 1991 Ms Donnelly wrote to the Land Council expressing interest in buying two of the houses then located on the Figtree Estate which it appears were demountable or otherwise relocatable. In that letter she stated that she believed the old homes “would still be in good use when I receive my lease at Gowings Hill Rd. Burnt Bridge”.
On the same day (25 November 1991), at the Land Council’s annual general meeting, a “motion” that “Lynette Donnelly wished to buy 2 of the old houses at Figtree Estate for a reasonable cost and transportation fees assisted by Kempsey LALC” was carried.
On 4 June 1992 an advertisement was placed in a Kempsey newspaper advising that a Land Council “Special Lease Meeting” was to be called on 9 June 1992 under the Aboriginal Land Rights Act 1983 (NSW) to discuss the grant of a lease to Ms Donnelly over land owned by the Land Council, being Lot 187/39682 at 142 Gowings Hill Road, South Kempsey NSW (the property). At that time s.40B of the Aboriginal Land Rights Act relevantly provided that a Local Aboriginal Land Council may lease land vested in it “with the approval” of the NSW Aboriginal Land Council (NSWALC), but only if the lease had also been approved at a meeting of the Local Aboriginal Land Council specifically called for that purpose at which a quorum was present.
At the Land Council Special Lease Meeting of 9 June 1992 the motion “That Lynette Donnelly be granted a lease to Lot 187, Gowings Hill Road, Title Deed Volume – 15255, Title Deed Folio – 191” was carried unanimously.
In her Supreme Court affidavit Ms Donnelly claimed that in about July 1992 she became aware of another motion carried at a Land Council meeting to the effect that she may not be able to purchase the two Figtree houses as they were badly damaged. On 6 August 1992 she wrote to the Land Council asking if she could buy one house on the Figtree Estate. In that letter she stated:
Now my lease at Gowing Hill Road, Burnt Ridge is now finalized. I have no home to put on the land.
Ms Donnelly’s letter of 6 August 1992 was tabled at a Land Council meeting on 31 August 1992. Relevantly, the minutes of that meeting recorded:
Lynette Donnelly asked about the option of buying two homes at Figtree. At this stage, there is only one house for sale. Lynette Donnelly to liaise with the Co-Ordinator in regards to the house.
On 2 September 1992 Ms Donnelly paid $200 to the Land Council which she says was to purchase the Figtree house. She was given a receipt for this amount.
One of the agenda items for the Land Council’s meeting of 28 September 1992 was described as “Lynette Donnelly’s Draft Lease”. The minutes of that meeting are not in evidence, but Ms Donnelly’s evidence is that after this meeting she was provided with a copy of a draft of a 99 year lease of the property from the Land Council to her which provided for rent of $1 per year. This is not disputed.
The draft lease recited that the Land Council “may lease any land vested in it by virtue of the powers conferred and the conditions imposed under Section 40 of the Aboriginal Land Rights Act (NSW) 1983, as amended”. A term of the draft leave was that Ms Donnelly was “to use the premises for the housing of Aboriginal people and for other similar purposes as may be for the benefit of the Aboriginal Community and for any other purpose, subject to the provision of the Aboriginal Land Rights Act (NSW) 1983, as amended.” Ms Donnelly was to pay for gas, electricity, water and council rates and to observe municipal and other requirements. The draft lease also provided that:
NOTHING contained therein shall prevent the Lessee from constructing or altering on an agreed portion of the premises hereby demised, dwelling houses to be occupied PROVIDED THAT such dwelling houses are constructed or altered in accordance with the requirements of the Local Government authority and PROVIDED THAT the Lessor shall approve the plans and/or specifications of the dwellings to be erected thereon, or any alterations thereto AND PROVIDED FURTHER that such approval shall not be unreasonably withheld by the Lessor.
On or about 24 February 1995 Ms Donnelly lodged a building application with Kempsey Shire Council to relocate the Figtree house to the property.
On 28 February 1995 the Kempsey Shire Council wrote to Ms Donnelly asking her to provide evidence of ownership of the property and, if she was not the owner, “a letter from the current owner granting you approval to lodge the application”.
On 1 March 1995 the acting co-ordinator of the Land Council wrote to the Kempsey Shire Council stating: “This letter is to confirm that Lynette Donnelly has applied for and been granted a lease on Lot 187 Gowings Hill Road, by the K.L.A.L.C on 9.6.92 … Hopefully this meets your requirements”.
On 27 March 1995 Kempsey Shire Council issued a building permit to Ms Donnelly allowing her to erect the relocatable Figtree house on the property. The special conditions included a statement that the consent “does not permit the habitation of other structures on the subject site. One (1) dwelling only is permitted” and provided that the building was not to be used or occupied prior to a completion inspection and approval by the Kempsey Shire Council. Also included in the conditions were requirements for vehicle access, a septic tank or other waste disposal, rainwater storage tanks of specified minimum capacity with an outlet and also separate water storage for firefighting purposes.
In about April 1995 Ms Donnelly relocated and started to install the Figtree house on the property.
According to Ms Donnelly, over the course of the next 22 years she made numerous improvements to the property. These included (but were not limited to) relocating and installing the Figtree house; extensive concrete paving; extensive landscaping and planting a large protea planation; trenching to connect water to the relocated and installed Figtree house; and arranging for and paying the cost of erecting a builder’s power pole and thereafter the main power pole (the improvements). Ms Donnelly’s evidence is that from the time she took possession of the property in April 1995 until July 2008 she also attended to the payment of all electricity and water rates for the land. Included in the documents relied on in the Supreme Court proceedings are copies of rate notices from this period addressed to the Land Council c/- Ms Donnelly, electricity accounts issued to Ms Donnelly and receipts.
In her Supreme Court affidavit Ms Donnelly stated:
Over the years I also kept approaching various members of the KLALC requesting that my Lease be finalised. For about two (2) years I attended upon the KLALC on a weekly basis. I would say “has my lease been finalised yet?”. I received the same reply mainly from Karen Kelly “I haven’t heard anything back yet”.
On 18 May 2001 the Kempsey Shire Council inspected the relocated Figtree house on the property and subsequently gave Ms Donnelly permission to occupy it.
On 7 August 2008 the Land Council’s solicitors gave Ms Donnelly written notice to vacate the property by 22 August 2008 as the Land Council wished to obtain possession. The letter stated that the Land Council had instructed that Ms Donnelly did not have “a lease or any other authority” from the Land Council to occupy the property and that she did not pay any rent or rates for the property.
Ms Donnelly claims that she had been paying rates, water and electricity accounts relating to the property, but that after 7 August 2008 the Kempsey Shire Council advised her it “cannot accept rate payments from you as we have been told you do not have a right of occupation”.
Ms Donnelly did not vacate the land in 2008 and (according to her statement of claim in the Supreme Court proceedings) made several demands through her solicitors that the Land Council execute the lease.
The Supreme Court Proceedings
On 30 October 2013 Ms Donnelly commenced proceedings in the NSW Supreme Court against the Land Council in which she sought a declaration that there was an agreement for lease of the property between herself and the Land Council in the form of the unexecuted draft lease. She also sought specific performance of that agreement and costs. She did not seek damages or equitable compensation. However it was alleged in the statement of claim that there was a “claim in estoppel” on the basis that on 9 June 1992 the Land Council had represented to Ms Donnelly that it would grant her a lease of the property for 99 years at a rent of $1 per year and that in reliance on that representation she had acted to her detriment (in transporting and erecting the Figtree house, making improvements, occupying and residing on the land and paying water and council rates). It was pleaded that the Land Council knew that Ms Donnelly was acting and relying on the representation to her detriment and that it was estopped from denying her demand that it execute a lease. Ms Donnelly was legally represented in the Supreme Court proceedings.
In its defence of 5 March 2014 the Land Council admitted that it had agreed, subject to approval by the NSWALC, to Ms Donnelly’s application to lease the property, but pleaded that there was no agreement as to the terms of the lease; that any grant of the lease was conditional on approval by the NSWALC; that the NSWALC did not approve the lease; and that the lease would only have come into effect if it had been executed in compliance with Division 4 of Part 2 of the Aboriginal Land Rights Act as in force at the relevant time and that this had not occurred. The Land Council admitted that it had refused to execute a lease after August 2008, but claimed that at all material times it was not capable of entering such a lease otherwise than with the approval of the NSWALC. It was also pleaded that the terms of the draft lease were inequitable to and not in the interest of the Land Council or its members “and so were not and would not be” approved by the NSWALC.
Following mediation between the parties, James Flanagan of Opteon (property advisors) prepared a valuation report of 20 July 2014 in respect of the property, apparently in connection with an attempt to negotiate settlement (the Opteon report).
Correspondence between the solicitors for the parties ensued, some of which is in evidence, in particular a letter from Ms Donnelly’s solicitor to the solicitor for the Land Council dated 14 August 2014 which noted “your instructions that your client never sought approval of the land dealing” by the NSWALC and enclosed a letter to be sent to the NSWALC seeking such approval.
In a response of 24 September 2014 the Land Council’s solicitors stated that:
At no time has our client stated or indicated that they ‘never sought approval of the land dealing by the New South Wales Aboriginal Land Council’. The only representation that has been made on behalf of our client is that the lease has not been approved, not that our client did not seek any approval.
Ms Donnelly’s solicitor sought clarification from the Land Council’s solicitors as to whether approval had in fact been sought from the NSWALC and if not, why not, in a letter of 30 September 2014. There is no evidence before me as to whether there was a reply. More generally, there is no evidence before me that such approval was in fact sought by the Land Council. It is not in dispute that that the Aboriginal Land Rights Act relevantly had the effect that the Land Council could not lease or otherwise deal with land vested in it, except in accordance with the applicable provision of the Act (which required approval of the NSWALC). It is also not in dispute that there has been no approval by the NSWALC of a lease of the property by the Land Council to Ms Donnelly.
By cross-claim filed in the Supreme Court proceedings on about 15 October 2014 the Land Council sought judgment for possession of the property, leave to issue a writ of possession, damages and costs.
On 25 August 2015 Young AJA made consent orders dismissing Ms Donnelly’s statement of claim in the Supreme Court proceedings and giving judgment to the Land Council for possession of the whole of the property. Leave to the Land Council to file any writ of possession in respect of the property was withheld until further order. The consent orders noted that “the issue as to the plaintiff’s removal of the dwelling, fixtures and fittings” on the property was “reserved”. Ms Donnelly was ordered to pay the Land Council’s costs. Those costs were the subject of a costs assessment application by the Land Council and subsequent certificates of determination of costs in the amounts of $70,214.92 and $1,036.29. These were the basis for the Local Court judgment relied on in the bankruptcy notice.
On 20 October 2015 Darke J ordered that a writ of possession of the property issue on 17 November 2015 in favour of the Land Council.
On 16 November 2015 Ms Donnelly filed what was described as a “cross-claim” in the Supreme Court proceedings seeking that the Land Council pay her $155,000 which was said to be the “value” of the improvements that she had made to the property (as assessed in the Opteon report). The cross-claim pleaded reliance by Ms Donnelly on the Land Council’s letter to the Kempsey Shire Council to move the Figtree house onto the property and that she made substantial improvements and paid rates and bills until 2008. It was claimed that between 1995 and 2008 Ms Donnelly made numerous inquiries of the Land Council as to finalisation of her draft lease.
At the same time, the cross-claim asserted a claim for damages of $155,000 on the basis that this amount was “expended” by Ms Donnelly on the erection of buildings and development of infrastructure to the property.
Ms Donnelly’s cross-claim was dismissed with costs by White J on 17 November 2015 (the day after it was filed) in accordance with short minutes of order (which are not in evidence). The dismissal was expressed to be on terms that the order “shall not prevent [Ms Donnelly] from bringing any fresh proceedings or claiming the same relief in fresh proceedings”. A notice of motion that was filed in court on 17 November 2015 by the Land Council was “otherwise dismissed”. Counsel for Ms Donnelly made submissions on the basis that these orders were made by consent. Counsel for the Land Council suggested that the orders were in response to its application for summary dismissal.
The Land Council obtained possession of the property in November 2016. Mr Maher, the solicitor for the Land Council, gave evidence of an inspection report on the condition of the property and photographs provided to him by the firm of process servers who had attended the property as agent for the Land Council with the NSW Sheriff. Annexures to Mr Maher’s affidavit include an email to him from a Kempsey Shire Council officer who confirmed on 30 November 2017 that he had inspected the property and identified an addition to the dwelling on the property that had not been approved and was “likely to be dealt with by way of order from the Council”.
Mr Maher also attested to correspondence with Clayton Utz who were said to be representing Ms Donnelly on a pro bono basis in 2017 in relation to a possible settlement with Ms Donnelly. On 2 May 2018, after the bankruptcy notice was issued and served on Ms Donnelly, Legal Aid NSW wrote to the Land Council’s solicitor seeking a settlement and referring to Ms Donnelly’s personal circumstances. This proposal was rejected by the Land Council.
Ms Donnelly filed the application to set aside the bankruptcy notice on 9 May 2018.
On 16 October 2018 Ms Donnelly lodged a caveat in respect of the property in which she claimed an interest in the land as “beneficiary of a constructive trust of the dwelling and improvements to the property”. This interest was said to arise by virtue of the fact that:
In June 1991 [intended to be a reference to 1992] the registered proprietor (RP) promised the caveator a 99 year lease of the property. Relying on the promise, between 1995 and 2016 the caveator constructed a dwelling and made other improvements to the property. The RP was prevented by law from granting the lease and has obtained an order for possession of the land. It is unconscionable of the RP to retain the benefit of the dwelling and improvements.
Submissions for Ms Donnelly
Ms Donnelly asserts that she has a claim within s.40(1)(g) of the Bankruptcy Act which is such that the bankruptcy notice should be set aside. In essence, her claim is that she relocated and installed the Figtree house and made the other improvements to the property in reliance on representations and conduct of the Land Council and that principles of equitable estoppel would apply.
Ms Donnelly contended that the Supreme Court proceedings had not resolved her entitlement to the improvements to the property or to the value of those improvements and that she had a counter-claim for the value of those improvements. Such a claim was said to be a claim of equitable estoppel based on well-established equitable principles (see Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 at 428 – 429). Counsel for Ms Donnelly referred to the observations of Mason CJ and Wilson J in Waltons Stores at 404 as follows:
… a person whose conduct creates or lends force to an assumption by another that he will obtain an interest in the first person's land and on the basis of that expectation the other person alters his position or acts to his detriment, may bring into existence an equity in favour of that other person, the nature and extent of the equity depending on the circumstances…
Ms Donnelly relied on the six propositions required to set up promissory estoppel that were outlined by Brennan J in Waltons Stores at 428 to 429 as follows:
In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed or expected that a particular legal relationship exists between the plaintiff and the defendant or that a particular legal relationship will exist between them and, in the latter case, that the defendant is not free to withdraw from the expected legal relationship; (2) the defendant has induced (either actively or by a failure to deny the correctness of the expectation or assumption relied on by the plaintiff knowing that detriment will be caused to the plaintiff if the expectation or assumption is not fulfilled) the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled, and (6) the defendant has failed to act to avoid the detriment whether by fulfilling the assumption or expectation or otherwise.
It was submitted that these propositions would be satisfied on the basis that Ms Donnelly assumed that a particular legal relationship existed or would come to exist between herself and the Land Council (namely a 99 year lease of the property); that the Land Council induced her to adopt this assumption or expectation by resolving to grant her a 99 year lease, providing her with a copy of a draft lease and advising the Kempsey Shire Council that she had been granted a lease over the property; that she acted on the faith of her assumption or expectation by making the improvements; that the Land Council knew of her action or intended her to act in that way; that her action caused her to suffer detriment in reliance on that assumption or expectation; and that the Land Council had failed to act to avoid the detriment, whether by fulfilling Ms Donnelly’s expectation or otherwise.
It was submitted that the expectation of a 99 year lease which, it was suggested, could be left to beneficiaries under a will, was of significant value to Ms Donnelly and that there was a significant detriment when that expectation was not fulfilled.
Ms Donnelly suggested that in acting on the assumption induced by the Land Council she added at least $155,000 to the value of the property through the improvements and additions to the land, although it was accepted that the improvements and additions formed part of the property obtained by the Land Council under the writ of possession.
Counsel for Ms Donnelly suggested that the asserted claim was in the nature of an unliquidated claim or a claim for a remedy that could be described as either a counter-claim based in equity or a cross-demand which arose as a counter to a claim of a debt against her.
It was suggested that the Land Council had not taken any steps to remedy the loss suffered by Ms Donnelly that had been brought about by its failure to fulfil the expectation that she would have a 99 year lease and the fact that the Land Council had obtained possession of the land and the improvements. Ms Donnelly submitted that it was unconscionable for the Land Council to take advantage of the situation without compensating her for the value of the improvements.
Ms Donnelly accepted that it was not possible for the Land Council to fulfil her assumption or expectation by granting her a lease of the property in the absence of approval by the NSWALC.
As it stood in 1992, s.40 of that Act stated:
(1) The New South Wales Aboriginal Land Council or a Local Aboriginal Land Council may not sell, exchange, lease, dispose of, mortgage or otherwise deal with land vested in it, except in accordance with this Division.
(2) Any sale, exchange, lease, disposal of or mortgage of, or other dealing with, land in contravention of this Division is void.
(3) This Division does not apply to land purchases as an investment under section 29 or 31.
At that time, ss.40B(2) and (3) of the Aboriginal Land Rights Act relevantly provided:
(2) A Local Aboriginal Land Council may, subject to the provisions of any other Act and with the approval of the New South Wales Aboriginal Land Council:
(a) lease or change the use of the land vested in it; and
(b) grant an easement over land vested in it; and
(c) release an easement benefiting the land vested in it,
but only if the lease, change of use or the grant or release of the easement has been approved at a meeting of the Local Aboriginal Land Council specifically called for that purpose at which a quorum was present.
(3) The New South Wales Aboriginal Land Council may not refuse to give an approval of a lease or change of use under this section except on the ground that the terms or conditions of the lease are inequitable to the Local Aboriginal Land Council concerned or that the change of use would be detrimental to the interests of other Local Aboriginal Land Councils.
However, insofar as the Land Council argued that a lease of the property could not be granted to Ms Donnelly, this was said to be based on assumptions which were not borne out by the evidence before the court. It was pointed out that there was no evidence that the Land Council had in fact made any application to the NSWALC that had been rejected and, indeed, no evidence of anybody being aware of the taking of any steps to communicate with the NSWALC in relation to the lease at the relevant time.
In any event, even if a lease could not be granted, Ms Donnelly contended that a court could fashion an appropriate remedy to meet the equity and to do justice between the parties, for example by declaring a constructive trust under which the Land Council owned the property subject to a beneficial interest in her favour equivalent to the value of the improvements, or by ordering payment of damages or equitable compensation (see Waltons Stores; Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101; PSAL Pty Ltd v Raja [2016] WASC 295 at [86] – [88]). In particular, it was argued that the detriment Ms Donnelly had suffered could, to some degree, be avoided by compensating her for the value by which the improvements increased the value of the land (Sidhu v Van Dyke [2014] HCA 19; (2014) 251 CLR 505 at [85]).
Ms Donnelly submitted that the Opteon valuation report showed that her improvements had increased the value of the land by $155,000. It was suggested that this comfortably exceeded the amount of the Local Court judgment and that, regardless of any incorrect assumptions relied on in the Opteon report, the court could be satisfied that the improvements to the land were not worth less than $72,000. It was submitted that any absence of the necessary Kempsey Shire Council approval would not be such as to reduce the value of the improvements to an amount less than $72,000.
Ms Donnelly contended that in 1992 the NSWALC could not have refused to approve a lease unless the terms or conditions of the lease were inequitable to the Land Council or the change in use would be detrimental to the interests of other local land councils under s.40B(2) of the Aboriginal Land Rights Act as it stood at that time. After the hearing counsel for Ms Donnelly provided copies of the Aboriginal Land Rights Act as it stood in 1992 (including s.40D of the Act). It was argued that the assumption that the land could be sold as freehold with vacant possession could be made good, subject to the restrictions of the Aboriginal Land Rights Act. However the approval requirements under the Act as it stood at the time of the valuation differ from those applicable in 1992 (see ss.42E and 42G of the Aboriginal Land Rights Act).
Ms Donnelly submitted that in any event it was not necessary to confine the approach that might be taken to the way in which relief may be fashioned in relation to the asserted claim and contended that regardless of the relief that may be awarded, the value of her claim exceeded the $72,000 judgment debt which was the foundation for the bankruptcy notice.
On this basis counsel for Ms Donnelly argued that, whether characterised as a cross demand or counter-claim, this court could be satisfied that Ms Donnelly had a bona fide claim that she should be entitled to litigate which exceeded the amount of the bankruptcy notice within ss.40(1)(g) and 41(7) of the Bankruptcy Act.
Ms Donnelly acknowledged that the consent orders made by Young AJA in the Supreme Court proceedings had the effect of dismissing her claim for a declaration and for specific performance in relation to a lease of the property, but submitted that no other substantive rights had been definitively determined against her. It was pointed out her subsequent cross-claim in the Supreme Court had been dismissed by White J on the basis that the order would not prevent her from bringing any fresh proceedings or claiming the same relief in fresh proceedings. It was argued that this indicated that in consenting to the orders made by White J, Ms Donnelly had expressly reserved her rights in relation to bringing proceedings concerning the question of the Land Council accounting to her for the value of the improvements that she had made to the property.
Ms Donnelly conceded that principles of issue estoppel and res judicata would apply in relation to the issues in her initial statement of claim in the Supreme Court proceedings, but submitted that the matters resolved by those proceedings were limited to whether there was a promise to grant a lease that could be enforced and whether specific performance should be ordered to fulfil that promise. It was submitted that the Supreme Court proceedings did not resolve any issues other than those issues which were pleaded and were put before the court for resolution. It was contended that while those proceedings effectively “determined” that any lease of the property to Ms Donnelly would be void because of the provisions of the Aboriginal Land Rights Act, this had not determined any legal issue relating to detrimental reliance on the offer of the lease.
In relation to Anshun estoppel, counsel for Ms Donnelly cited the comments of French CJ, Bell, Gageler and Keane JJ in Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28; (2015) 256 CLR 507 at [22]. Their Honours stated that Anshun estoppel:
…operates to preclude the assertion of a claim, or the raising of an issue of fact or law, if that claim or issue was so connected with the subject matter of the first proceeding as to have made it unreasonable in the context of that first proceeding for the claim not to have been made or the issue not to have been raised in that proceeding...
(footnotes omitted)
Ms Donnelly suggested that in considering the relevance of principles of Anshun estoppel in the present proceedings, the court must make an evaluative determination as to whether a proceeding that might have been brought in connection with earlier proceedings between the parties should be barred from being brought at a later stage. It was also submitted that the evaluative process referred to in Guss v Johnstone [2000] HCA 26; (2000) 171 ALR 598 required the court to weigh considerations as to legal and factual merit and the justice of allowing the bankruptcy proceedings to go ahead.
It was contended that the court must consider its obligation to do justice to the parties, take into account all the material that was before it in relation to why the claim was not brought in the first proceedings, and consider whether there would be any prejudice suffered by the other party to the proceedings.
Counsel for Ms Donnelly acknowledged that she had not commenced any legal proceedings in relation to the asserted claim since the Supreme Court proceedings. There is no evidence of any proposed statement of claim in relation to the claim now asserted (other than the statement of claim in relation to the cross-claim that was dismissed by White J in 2015) or of any intention on the part of Ms Donnelly to commence such proceedings, except insofar as counsel drew the court’s attention to the caveat over the property. It was submitted that while Ms Donnelly had not expressly stated that she would pursue the asserted claim in further legal action, the caveat was sufficient evidence that she was “serious” about this claim. It was pointed out that it would be in Ms Donnelly’s interest to pursue legal proceedings in relation to the asserted claim because if she did not do so she would go without the value of the improvements she had made to the land.
It was said to be anticipated that the Land Council could serve a lapsing notice in relation to the caveat which would then require Ms Donnelly to maintain the caveat if she wished to protect her interest. It was suggested that in such circumstances Ms Donnelly would bring an application in the Equity Division of the Supreme Court of NSW to initiate a substantive claim in respect of her asserted interest and that relief in the form of equitable compensation could be either in the amount of the value which Ms Donnelly had added to the land or in the form of compensation for the detriment she had suffered in terms of moving the Figtree house and efforts in constructing it and making improvements.
Counsel for Ms Donnelly conceded that it would be open to Ms Donnelly to commence proceedings in relation to the asserted claim whether or not the Land Council took action in relation to the caveat and whether or not the application to set aside the bankruptcy notice was successful. However it was contended that Ms Donnelly had not been sitting on her hands and failing to take any steps. In particular, it was said to be clear from the evidence that she had attempted to resolve the matter outside of litigation.
Ms Donnelly submitted that while the court must consider the justice of allowing bankruptcy proceedings to go ahead or requiring such proceeding to “await” the determination of the asserted claim (see Guss v Johnstone at [40] cited in Glew v Harrowell at [10] per Lindgren J), the court’s power in this respect was not conditional on there being proceedings on foot in relation to the asserted claim.
Submissions for the Land Council
The Land Council submitted that Ms Donnelly’s asserted claim was unable to be articulated precisely. It was suggested that the counter-claim or cross demand that Ms Donnelly now asserted was relevantly identical to her cross-claim in the Supreme Court proceedings which similarly lacked clarity and was dismissed by White J on 17 November 2015, being for the same amount of money and relying on virtually the same facts.
It was contended that the lack of clarity in the description of the asserted claim reflected the fact that Ms Donnelly did not have a case that could be described as a genuine or bona fide claim or a claim that had a reasonable prospect of success.
The Land Council also submitted that the six propositions required to set up promissory estoppel outlined by Brennan J in Waltons Stores could not be met in this case such that the claim did not have sufficient prospects of success.
It was suggested that there was no relevant assumed state of affairs. The Land Council pointed to the fact that Ms Donnelly’s affidavit filed in the Supreme Court proceedings included the following:
Over the years I also kept approaching various members of the KLALC requesting that my Lease be finalised. For about two (2) years I attended upon the KLALC on a weekly basis. I would say “has my lease been finalised yet?”. I received the same reply mainly from Karen Kelly “I haven’t heard anything back yet”.
The Land Council submitted that this showed that Ms Donnelly knew that she did not have a lease of the property and that she had been repeatedly informed that the Land Council had not received any approval from the NSWALC. It was argued that the fact that Ms Donnelly had continued to inquire of the Land Council about whether the lease had been approved or not indicated that there was no assumed state of affairs. Hence the Land Council contended that Ms Donnelly could not have relied or acted on any such assumed state of affairs.
It was also argued that Ms Donnelly went beyond acting on any assumption, as she undertook developments on the property without consent (as indicated in Mr Maher’s evidence) and in doing so breached the terms of any purported lease in the form of the draft lease. It was contended that Ms Donnelly had taken a risk in the hope that the lease would eventually be approved and also that the additions that she made in excess of what was originally approved would not fall foul of either the Kempsey Shire Council or the Land Council. The Land Council argued that any detriment to Ms Donnelly by reason of her developing the land in this manner was caused by her taking this risk and not by any unconscionable conduct on its part (cf Sidhu v Van Dyke at [85]).
Counsel for the Land Council also submitted that there was also no evidence that it had induced Ms Donnelly to adopt an assumption as to a lease. It was submitted that the Land Council did what it could to grant Ms Donnelly a lease and in doing so did not induce any state of mind in Ms Donnelly. Conversely, it was argued that Ms Donnelly had moved the Land Council to do what it could to give her a benefit. She was said to be aware that the finalisation of the proposed lease was beyond the Land Council’s control and therefore that it was not possible for the Land Council to fulfil her expectation by granting her a lease.
Further, the Land Council contended that the only claim to survive the orders of Young AJA of 25 August 2015 was a claim in relation to the “removal” of certain items from the property and that no such claim had been brought.
The Land Council contended that despite the fact that the Figtree house had been brought from another place and had been a demountable at one point in time, it was now connected to the land by utilities such as power, water and a septic tank and was affixed to the land. It was submitted that it was highly unlikely that Ms Donnelly had any right of removal, because items affixed to land to any extent (other than by resting on their weight) would be presumed to be fixtures and thus to form part of the land and hence the subject of the order granting possession of the land to the Land Council. It was pointed out that Ms Donnelly would bear the onus if contending otherwise (see National Australia Bank Limited v Blacker [2000] FCA 1458; (2000) 104 FCR 288 at [17] cited with approval by the High Court in TEC Desert Pty Ltd v Commissioner of State Revenue [2010] HCA 49; (2010) 241 CLR 576) and that she had never made any attempt to establish that she was entitled to remove any article from the property.
The Land Council also submitted that even if Ms Donnelly did have some right of removal of some article from the property, the order that it have possession of the whole of the property could not be turned into a forced purchase of articles that the Land Council regarded as a detriment and a liability and that, even if Ms Donnelly could establish an entitlement to remove items from the property (which she had not sought to do), she could not abandon that entitlement and instead claim compensation for having forced such items upon the Land Council.
The Land Council contended that, except insofar as it remained open for Ms Donnelly to bring any claim in respect of the narrow issue of the removal of the dwelling, fixtures and fittings in fresh proceedings, all other issues between the parties in relation to the land were foreclosed by principles of issue estoppel, res judicata or Anshun estoppel. It was also suggested that while there was no evidence as to the reasons White J had dismissed the cross-claim, the obvious reason was because such a claim was not open to Ms Donnelly because principles of res judicata, issue estoppel or Anshun estoppel would apply to such a claim.
The Land Council argued that as judgment had been entered against Ms Donnelly in its favour for possession of the whole of the property, she could not now claim some special status arising from an equity that (had it existed) had either merged in the Supreme Court judgment or was the subject of one or other of the estoppels discussed by French CJ, Bell, Gageler and Keane JJ in Tomlinson v Ramsey at [22] (also see James v Australia and New Zealand Banking Group Ltd [2018] NSWCA 41; (2018) 356 ALR 497 at [23], [37] and [38]).
Issue estoppel was said to arise because Young AJA had dismissed Ms Donnelly’s statement of claim and given judgment for possession of the whole of the property to the Land Council, leaving open only the issue of removal of the dwelling, fixtures and fittings.
In any event it was contended that principles of res judicata would apply. The Land Council argued that when Young AJA made orders giving it possession of the whole of the land, all of the rights in respect of that land as between these two parties merged in that judgment. It was submitted that there was no basis for any other right to survive, save for the express right for Ms Donnelly to raise an issue regarding the removal of certain things from the property.
Counsel for the Land Council pointed out that the Supreme Court had not been bound by the relief sought in the Supreme Court proceedings and could determine orders such as to do justice as between parties. It was argued that the claim that Ms Donnelly improved the property such that it had a greater value than when she came into possession of it was fundamentally tied in with the issues that Young AJA had determined in the consent orders and hence could not be re-litigated. It was submitted that to allow Ms Donnelly to bring that issue in fresh proceedings would be against the central principle in Port of Melbourne Authority v AnshunPty Ltd [1981] HCA 45; (1981) 147 CLR 589.
On this basis the Land Council argued that, even allowing for the theoretical possibility that some of the issues now asserted may have survived the Supreme Court proceedings, the principles of Anshun estoppel would preclude Ms Donnelly from raising them in fresh proceedings as it would have been appropriate for her to have raised them in the earlier proceedings.
It was submitted that Ms Donnelly’s asserted claim did not have a sufficient chance of success such as to warrant setting aside the bankruptcy notice because it was so connected with the subject matter of a prior proceeding (the Supreme Court proceedings) as to make it unreasonable that the claim was not made or raised in the context of that first proceeding (see Tomlinson v Ramsey at [22]).
In any event, the Land Council submitted that the court could not be satisfied that there was a fair chance that the damages or compensation claimed would exceed the amount of the judgment debt (see Melbourne v Relativity Pty Ltd [1999] FCA 160 at [33] - [35]).
A copy of the Opteon report was annexed to Ms Donnelly’s affidavit. She sought to rely on it in these proceedings as evidence in relation to the value of her asserted claim. Initially the Land Council objected to the admissibility of this report in these proceedings on the basis that it had been prepared in connection with an attempt to negotiate a settlement of the dispute between the parties in the Supreme Court proceedings (see s.131(1)(b) of the Evidence Act 1995 (Cth)). However in the course of the hearing the Land Council withdrew its objection and consented to this evidence being adduced in these proceedings (see s.131(2)(a) of the Evidence Act). However the Land Council submitted that invalid assumptions upon which the Opteon report rested made it incapable of bearing any weight and that the report should be given no weight in relation to the value of the improvements.
It was pointed out that the Opteon report was only current for 90 days from the date of valuation (18 July 2014). More critically, it was suggested out that the report was based on a number of incorrect assumptions. First, it was expressed to be prepared on the assumption that there were no encumbrances over the property, in circumstances where the property was in fact quite significantly encumbered by the provisions of the Aboriginal Land Rights Act to the effect that any dealing in respect of the land was void unless approved by the NSWALC. The effect of such encumbrance was said to be that the land could not be dealt with on the registered proprietor’s own terms.
Further, the Opteon report was prepared on the assumption that any dwelling on the property either benefited from all necessary council and other approvals or that such approvals could be gained with minimal cost. It was submitted that it was apparent that certain “improvements” to the property lacked council approval. It was pointed out that the Kempsey Shire Council stamped plan of the property annexed to Mr Maher’s affidavits showed one kitchen and one bathroom, whereas 2016 photographs of the property showed two kitchens and two bathrooms. Further, a Kempsey Shire Council inspector had confirmed that upon attendance at the property in November 2017 he had identified additions to the dwelling that had not been approved by Kempsey Shire Council. It was submitted that such unapproved improvements to the property represented an unquantifiable liability and that the evidence indicated that the Kempsey Shire Council was likely to address unapproved additions by way of an order to obtain approval or a demolition order, both of which were likely to significantly impact on any value of the improvements.
On this basis, the Land Council submitted that the Opteon report was of no value to the court in assessing what, if anything, was the value of the improvements to the property. It was argued that Ms Donnelly could not place any monetary value upon her asserted claim as she had no probative evidence to ascribe value to the improvements.
The Land Council also submitted that the delay by Ms Donnelly in bringing the asserted claim was relevant. It was pointed out that in Guss v Johnstone, the High Court had indicated (at [45] - [47]) that delay by a debtor in bringing a counter-claim was a matter properly to be taken into account in relation to the question of satisfaction as to the existence of a debtor’s asserted claim in the context of an application to set aside a bankruptcy notice.
The Land Council submitted that Ms Donnelly had significantly delayed raising the asserted claim after it issued the notice to vacate in August 2008. It was pointed out that in her statement of claim in the Supreme Court proceedings Ms Donnelly had sought specific performance of the lease, but had not expressly sought any alternative form of relief such as damages, equitable damages, restitution or any entitlement by way of trust should her claims for a lease failed. It was also contended that the Supreme Court cross-claim which was dismissed by White J in 2015 was virtually the same as the currently asserted claim raised in response to the bankruptcy notice and that Ms Donnelly had had ample opportunity to bring the claim she now asserted, but had not done so. It was submitted that her delay in doing so directly called into question the genuineness of the asserted claim which, it was suggested, was raised merely to avoid the bankruptcy proceedings going forward.
Counsel for the Land Council also pointed to the fact that although it obtained possession of the property on 9 November 2016, Ms Donnelly did not lodge a caveat over the property until 16 October 2018 and that this was despite the fact that she had asserted a claim since at least November 2015 when the relevantly identical claim was brought before the Supreme Court in her cross-claim. Further, while Mr Clohesy’s evidence had foreshadowed on 27 July 2018 the lodging of a caveat over the property, the caveat was only lodged in October 2018. The Land Council submitted that Ms Donnelly’s “inordinate” delay in lodging the caveat spoke to the weakness of the asserted claim and that the ultimate timing of lodging the caveat was “questionable” in circumstances where her solicitors had been instructed to lodge the caveat nearly three months before they did so. This was said to support an inference that it was lodged merely to show that Ms Donnelly had done something, albeit the bare minimum, to vindicate her asserted right. It was also suggested that after a caveat was issued, the caveator should bring the ultimate claim that was sought.
On this basis the Land Council submitted that Ms Donnelly had not satisfied the court that “there is sufficient substance to the counter-claim, set-off or cross demand asserted to make it one which the debtor should, in justice, be permitted to have heard and determined in the usual way, rather than be forced to comply with the bankruptcy notice by payment or to commit an act of bankruptcy”, as referred to in Glew v Harrowell at [12].
Consideration
As set out at [8] above, in Glew v Harrowell Lindgren J addressed what a debtor must establish to satisfy the court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt such as to satisfy the court that a bankruptcy notice should be set aside. It is not for the court to determine or undertake a preliminary trial of the asserted claim in this context, but rather for the debtor to satisfy the court that there is sufficient substance to the asserted claim to make it one which the debtor should, in justice, be permitted to have heard and determined in the usual way, rather than be forced to comply with the bankruptcy notice by payment or to commit an act of bankruptcy.
The circumstances in which Ms Donnelly finds herself arouse some sympathy. In 1992 the Land Council passed a unanimous motion to grant her a lease of the property. It is of concern that there is no evidence before me that the Land Council ever sought the approval of the NSWALC to such a lease or, if it did, of any response from the NSWALC. Moreover, it is not disputed that in 1995 the acting co-ordinator of the Land Council advised the Kempsey Shire Council that Ms Donnelly had been granted a lease of the property on 9 June 1992. She subsequently made the improvements to the property.
However, it is not sufficient that a debtor believes that he or she has a genuine or bona fide claim. The court must weigh up “considerations as to the legal and factual merit of the claim … and the justice of allowing the bankruptcy proceedings to go ahead or requiring them to await the determination of the claim” (as stated in Guss v Johnstone at [40] cited in Glew v Harrowell at [10]).
Ms Donnelly’s asserted claim relies on principles of equitable estoppel. The precise basis for the asserted claim has not been clarified by reference to any proposed statement of claim, but rather by reference to the terms of the caveat. However, it has been described in terms which clearly assert some type of equitable estoppel.
In Ms Donnelly’s statement of claim in the Supreme Court proceedings, the type of claim was described as “Equity, Contract, Part-Performance, Estoppel”. A “claim in Estoppel” was pleaded on the basis of a representation on 9 June 1992 that the Land Council would grant Ms Donnelly a 99 year lease of the property, in reliance on which she was said to have acted to her detriment in transporting and erecting a dwelling, making improvements, occupying and residing on the land and paying water and council rates.
The statement of claim went on to plead that the Land Council knew Ms Donnelly was acting and relying on the representations to her detriment. While the asserted estoppel was pleaded only in terms of estopping the Land Council from denying Ms Donnelly’s demand that it execute a lease in the terms of the draft lease, it is clear that some claim based on principles of estoppel was raised in the Supreme Court proceedings.
The cross-claim filed by Ms Donnelly (after Young AJA dismissed her claim in the Supreme Court proceedings by consent) did not clarify, beyond assertions of fact, the basis on which she claimed (under the heading “Relief Claimed”) an order that the Land Council pay her $155,000 being as the assessed value of the improvements she made or as the amount “expended by [her] on the erection of buildings and development of infrastructure to the land”. However it appears that it was intended to assert some form of equitable estoppel.
The basis on which Ms Donnelly asserted an interest as a beneficiary of a constructive trust of the dwelling and improvements in her October 2018 caveat was briefly expressed. It relied on a June 1992 promise of a lease (incorrectly described in the caveat as having occurred in June 1991). Ms Donnelly was said to have constructed a dwelling and made other improvements in reliance on that promise. The caveat recites that the Land Council “was prevented by law from granting the lease” and that it had obtained an order for possession of the land. It was said to be “unconscionable” for the Land Council to retain the benefit of the dwelling and improvements.
The parties appear to be in general agreement that the propositions outlined by Brennan CJ in Waltons Stores must be made out to establish an equitable estoppel of the kind in issue. As the Land Council submitted, there would be evidentiary obstacles in this respect depending on the precise basis on which an equity might be said (in any future proceedings) to exist. In particular, insofar as Ms Donnelly’s evidence suggests that she knew that a lease had not been finalised, this would raise an obstacle to any claim that there was a relevant assumption or expectation on her part and that she acted in reliance on that assumption or expectation. Further evidence would also be necessary in relation to whether the Land Council induced her to adopt any such assumption in circumstances where approval of the NSWALC was a prerequisite.
The fact that Ms Donnelly may have made improvements contrary to the terms of the draft lease referred to at [22] above could also prove an obstacle to establishing that the Land Council’s 1992 resolution induced her to adopt such an assumption or expectation, either actively or by failing to deny the correctness of that assumption or expectation knowing that detriment would be caused to her if the expectation or assumption was not fulfilled.
While resolution of such issues would require consideration of evidence from the Land Council as well as further evidence from Ms Donnelly, even if the elements of equitable estoppel could be established, there are additional significant obstacles in the possible application of principles of issue estoppel, res judicata and Anshun estoppel.
It is not for this court to determine whether the asserted claim would in fact be barred by any such estoppel, but the contentions in that respect are relevant in the preliminary assessment of the legal merit of the asserted claim (Glew v Harrowell at [10] and see Guss v Johnstone at [40]).
Whether issue estoppel or res judicata would operate would depend on a determination of whether the issues of fact and/or law Ms Donnelly now intends to raise are the same as the Supreme Court pleaded claim as well as a consideration of the effect of the reservations to the orders of both Young AJA and White J. Consideration of these matters is hampered by the absence of any pleaded asserted claim (beyond the unclear 2015 cross-claim and the briefly expressed caveat).
Principles of issue estoppel would be confined to the matters of fact and law determined in the Supreme Court proceedings. Estoppel was clearly pleaded (and reference is made to a claim in equity in the statement of claim in the Supreme Court proceedings), albeit that Ms Donnelly sought only a declaration and specific performance in relation to a lease of the property.
Insofar as the estoppel pleaded in the Supreme Court proceedings was the same as is now asserted, the Supreme Court proceedings were resolved by consent orders which dismissed Ms Donnelly’s claim and granted the Land Council the relief it sought, being judgment for possession of the property. Res judicata may well apply. The express reservation of the issue as to Ms Donnelly’s “removal of the dwelling, fixtures and fittings” was not expressed in terms that clearly reserved a right to seek equitable compensation on the basis that improvements were made in reliance on a representation by the Land Council.
Further, insofar as the asserted claim reflects the subject of the cross-claim dismissed by White J in 2015, it did not clearly relate to “removal” of the dwelling, fixtures and fittings. As the Land Council submitted, the cross-claim sought the relief now said to form the basis of the asserted claim and it appears it was intended to rely on the same factual matters and principles.
On 17 November 2015 White J dismissed Ms Donnelly’s cross-claim, apparently on the motion of the Land Council. There is no evidence before me as to the precise basis for the dismissal (just speculation by counsel) or as to whether the fact that the dismissal was on terms such that Ms Donnelly was not prevented from bringing fresh proceedings amounted to more than an acknowledgment of the effect of dismissal of proceedings (see s.91(1) of the Civil Procedure Act 2005 (NSW)).
In any event, even if the presently asserted claim is not barred by principles of res judicata or issue estoppel, as the Land Council contended there would be a significant obstacle in the possible application of Anshun estoppel on the basis that the claim now asserted is “so connected with” the subject matter of the Supreme Court proceedings as to make it unreasonable for that claim not to have been made in those proceedings.
As the Land Council submitted, such estoppel is premised on the underlying public interest that there should be finality in litigation and that a party should not be twice vexed in the same matter (see Aon Risks Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 at [33] - [34] per French CJ citing Johnson v Gore Wood & Co [2002] 2 AC 1 at [31]). There is considerable strength in the Land Council’s submission that if issues such as are now asserted have survived the Supreme Court proceedings, principles of Anshun estoppel may well preclude Ms Donnelly from raising the asserted claim in fresh proceedings. Having regard to the apparent nature of the asserted claim and its subject matter, it would be strongly arguable that it would have been unreasonable for Ms Donnelly not have raised and relied on such a claim in the Supreme Court proceedings. To the contrary is the limited reservation by Young AJA, Ms Donnelly’s subsequent cross-claim (albeit that it lacks clarity), the terms of the dismissal by White J on 17 November 2015 and the need to consider whether there were circumstances justifying Ms Donnelly not litigating the now asserted issue in the Supreme Court proceedings in the sense considered in Port of Melbourne Authority v Anshun Pty Ltd at 602 – 603.
Even if the asserted claim was not so precluded and was successful, there would be further critical obstacles in relation to quantification of the asserted claim.
Notwithstanding the broader approach taken by the High Court in relation to equitable relief in Giumelli (in a case of proprietary estoppel), if Ms Donnelly were to establish an equitable estoppel of the nature now contended for, the extent of any relief would have to be determined by reference to all the circumstances of the case. A remedy would not necessarily be calculated on the basis of rewarding the expectation or by an order for compensation based on the “market” value of the improvements.
Ms Donnelly relied upon the Opteon report to value the improvements to the property in the amount of $155,000. Even if it is appropriate to take into account the market value of the improvements (as distinct from Ms Donnelly’s expenditure or the detriment she suffered), the interest valued was “fee simple vacant possession”. Contrary to the notation that there were no apparent encumbrances of adverse effect and the assumption of a “normal freehold title”, the property was encumbered in the sense of being burdened or impeded by the conditions in the Aboriginal Land Rights Act.
While the provisions of the Aboriginal Land Rights Act referred to at [59] - [60] above had been amended as at the time of the 2014 Opteon report, it remained the case that the Land Council as registered proprietor could not deal with the property otherwise than in accordance with the Aboriginal Land Rights Act and could only deal with the land vested in it with the approval of the NSWALC (see ss.42E and 42G).
The Opteon report expressly disregarded the provisions of the Second Schedule to the title to this effect. Indeed, the report included a comment that for the purposes of the valuation the report assumed the encumbrances listed under the Second Schedule were not likely to impact on the market value or marketability of the property and reserved the right to review and amend the valuation should there be significant issues relating to those notifications. Under s.42G of the Aboriginal Land Rights Act as it stood in 2014, the NSWALC could refuse to approve a land dealing if it considered that dealing was or was likely to be contrary to the interests of the members of the local land council or other Aboriginal persons within the area of that council (which would include Ms Donnelly and other Aboriginal occupants of the property) (and see s.42G(3) of the Act).
More significantly for present purposes, the Opteon report also proceeded on the assumption that any improvements to the property had the benefit of the necessary council approvals or that such approvals could be gained with minimal cost. However Mr Maher’s evidence suggests not only that some considerable “improvements” to the property lacked the approval of the Kempsey Shire Council, but also that an officer of that Council was of the view that it would likely deal with non-compliance in this respect by way of an order. The Opteon report noted that a “substantial extension” to the living area was then “currently” underway almost to lock up stage and referred to extensive renovation and extensions over time. Mr Maher’s evidence includes a comparison between the limited extent of the Kempsey Shire Council approval and the extent of the developments on the property as at 2016. There is no evidence of building approval beyond the 1995 approval for a single dwelling. That approval did not permit the habitation of other structures on the land. Ms Donnelly has not disputed in these proceedings that there are “improvements” which would enliven this concern.
While Ms Donnelly clearly expended some amount on improvements which have some value, the present evidence in this respect is of very limited value. It is not sufficient to satisfy me that it is clear that (even if market value is the appropriate measure) the asserted claim is equal to or exceeds the amount of the judgment debt which is the basis for the bankruptcy notice. On the limited evidence available, I am not satisfied that there is a fair chance that the amount expended by Ms Donnelly, or any other measure of remedy for her detriment, would equal or exceed the amount of the judgment debt.
Finally, there is the issue of delay. Not only has Ms Donnelly not brought the asserted claim in the time since dismissal of her cross-claim in 2015, but there is also no satisfactory evidence that she intends to do so. It is well-established that mere production of a proposed statement of claim would not in itself suffice (see Re Cox (1934) 7 ABC 98). The only statement of claim produced in this case is the 2015 cross-claim which is somewhat lacking in clarity. It has also been suggested that it does not suffice to merely propound a claim and state how the debtor proposes to establish it (see Bhagat v Global Custodians Ltd [2002] FCA 223 at [53]). The debtor must satisfy the court that there is sufficient substance to the asserted claim such as to warrant the setting aside of the bankruptcy notice.
In Glew v Harrowell at [12] Lindgren J referred to the need for a debtor to satisfy the court that:
… there is sufficient substance to the counter-claim, set-off or cross demand asserted to make it one which the debtor should, in justice, be permitted to have heard and determined in the usual way, rather than be forced to comply with the bankruptcy notice by payment or to commit an act of bankruptcy.
This assumes that the asserted claim is to be heard and determined, not that bankruptcy proceedings should be prevented indefinitely because in theory a debtor has asserted the existence of a claim.
It is the case that Ms Donnelly has now lodged a caveat on the property and that there were past attempts to settle her dispute with the Land Council outside litigation. Yet the delay is significant and the absence of evidence of any clear intention on the part of Ms Donnelly to in fact pursue the asserted claim in the Supreme Court (unless forced to do so by the actions of the Land Council in relation to the caveat) tells against my ability to reach a state of satisfaction as to the genuineness of the assertion as to the existence of a bona fide claim that is equal to or exceeds the amount of the judgment debt.
On balance, having regard to all these issues in relation to the legal and factual merit of the asserted claim, I am not satisfied that the bankruptcy notice should be set aside. I note that this does not preclude Ms Donnelly from bringing such a claim in the Supreme Court.
I certify that the preceding one hundred and thirty-two (132) paragraphs are a true copy of the reasons for judgment of Judge Barnes
Associate:
Date: 5 November 2019
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