ESG Epping Pty Ltd v Love
[2019] VSC 250
•17 April 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S ECI 2017 00200
| ESG EPPING PTY LTD (ACN 159 368 760) | Plaintiff |
| v | |
| HELEN MARGARET LOVE | Defendant |
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JUDGE: | ALMOND J |
WHERE HELD: | Melbourne |
DATES OF HEARING: | 25, 26 February, 5 April 2019 |
DATE OF JUDGMENT: | 17 April 2019 |
CASE MAY BE CITED AS: | ESG Epping Pty Ltd v Love |
MEDIUM NEUTRAL CITATION: | [2019] VSC 250 |
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CONTRACT – Whether royalties payable pursuant to fill supply agreement – Alleged partnership – Trustees in bankruptcy – Mortgagee in possession – Access to land given pursuant to licence from mortgagee – Frustration of agreement – Breach of essential term – No longer able to give substantial benefit of contract – Whether fill imported onto property pursuant to work authority or planning permit – Purported transfer of work authority void – Partnership Act 1958 ss 5, 37 – Bankruptcy Act 1966 ss 5, 58, 61 – Transfer of Land Act 1958 s 78, Extractive Industries Development Act 1995 ss 3, 9, 19, 20, 22, 31, 32, 33, 79 – Mineral Resources (Sustainable Development) Act 1990 ss 4, 8AB, 69, 70, 74, 77J, 77M, 77N, 77O, 78A, 79, 81 – oOh! Media Roadside v Diamond Wheels (2011) 32 VR 255 – Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 – Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 – DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 – Vitol SA v Norelf Ltd [1996] AC 800 – R v Toohey; ex parte Meneling Station Pty Ltd (1982) 158 CLR 327.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | C E Shaw | Thomson Geer |
| For the Defendant | Self-Represented |
HIS HONOUR:
This proceeding primarily concerns competing claims to a sum of money held in the trust account of the solicitors for the plaintiff.
By a fill supply agreement made on 7 December 2012 between the plaintiff, ESG Epping Pty Ltd (‘ESG’), and the late Thomas James Love, Mr and Mrs Love agreed to allow ESG the exclusive right to import fill onto property situated at and known as 460 Cooper Street Epping (‘the Property’) until 28 February 2013 (‘Fill Supply Agreement’).[1]
[1]Fill Supply Agreement, 7 December 2012, CB204-CB213.
By a further agreement, ESG and Mr and Mrs Love agreed to extend the Fill Supply Agreement on its terms (Further Agreement), and as amended by the Further Agreement, to 28 December 2017 (collectively, ‘the Agreement’).[2]
[2]CB263-264.
The Agreement included terms that Mr and Mrs Love would provide unrestricted access for ESG to enter onto and import fill onto the Property, in consideration for which ESG would pay Mr and Mrs Love royalties at agreed rates.[3]
[3]Clause 6.1 and recital B of the Fill Supply Agreement; CB205, CB208; Further Agreement, CB263.
At all relevant times the Property was mortgaged to the Commonwealth Bank of Australia Ltd (‘CBA’). On or about 22 January 2016, and pursuant to the terms of the mortgage and s 78 of the Transfer of Land Act, CBA entered into possession of the Property.[4] It is common ground that the CBA did not take physical possession of the Property. On the contrary, CBA advised ESG that it would allow ESG to continue conducting clean fill activity on the Property on terms to be set out in a formal licence agreement.
[4]CB296.
On 3 February 2016, following the making of a sequestration order, Matthew James Jess and Paul Andrew Burness (together ‘the Trustees’) were appointed joint and several trustees of the bankrupt estate of Mr Love.[5] At the time of his bankruptcy Mr Love was the registered proprietor of the Property.
[5]CB325.
In about early February 2016, ESG advised Mr Love that it would not pay further royalties to Mr Love as ESG was accessing the Property by the consent of CBA. In about April 2016, ESG entered into an access licence agreement (‘Access Licence Agreement’) with CBA in order to allow ESG to continue importing fill on the Property.[6]
[6]Access Licence Agreement , CB392; CB414.
On 1 April 2016, Mr Love died. Mrs Love is the executrix and trustee of Mr Love’s estate.[7]
[7]Further Amended Statement of Claim dated 15 March 2019, [14].
Mrs Love and the Trustees each asserted an entitlement to royalties under the Agreement.[8]
[8]Further Amended Statement of Claim dated 15 March 2019, [15]-[16]; Further Amended Defence dated 21 March 2019, [15]; Letter from Cornwall Stodart to Thomson Geer dated 12 July 2016, CB422.
On or about 30 June 2016, ESG offered to enter into an interim arrangement with the Trustees and Mrs Love whereby ESG would pay purported royalties under the Agreement into the trust account of its solicitors pending the outcome of litigation.[9]
[9]Letter from Thomson Geer to Cornwall Stodart and Mason Black dated 30 June 2016, CB419-20.
Pursuant to the arrangement, ESG has paid purported royalties into the trust account of its solicitors. Currently there is approximately $700,000 in the fund. There is a contest about the entitlement to royalties on and from 8 February 2016, being the date which ESG submits is the date the Agreement came to an end.
Originally the Trustees were named as second and third defendants in this proceeding in addition to Mrs Love, who is named as the first defendant. The trial of the proceeding commenced on 25 February 2019. On the second day of the trial the Court was advised that ESG and the Trustees had (subject to documentation) resolved their differences, and that the settlement would involve ESG taking an assignment of rights of the Trustees in respect of the claims. Accordingly the trial was adjourned to enable the terms of settlement to be formalised.
On 14 March 2019, the Trustees formally relinquished any claim they had to the royalties by entering into terms of settlement in this proceeding[10] with ESG. The terms of settlement included an agreement by the Trustees to execute and deliver a deed of assignment to ESG, assigning any of the Trustees’ rights and foregoing any claims on the fund.[11]
[10]Supplementary Witness Statement of David Fletcher Willson dated 26 March 2019, [13].
[11]Further Amended Statement of Claim dated 15 March 2019, [23].
Also on 14 March 2019, ESG and the Trustees entered into a Deed of Assignment pursuant to which the Trustees assigned all their right, title and interest in claims and causes of action including in relation to a Work Authority (termed ‘WA149’ in relevant documentation).[12] WA149 will be discussed further below.
[12]Annexure C to the Supplementary Witness Statement of David Fletcher Willson dated 26 March 2019.
Accordingly, upon the resumption of the trial, the contest with respect to entitlement of the disputed amount held on trust became one solely between ESG and Mrs Love.
Submissions of ESG
ESG submits that:
(a)when CBA went into possession of the Property, the Agreement was frustrated and thus brought to an end; alternatively
(b)Mr and Mrs Love were in fundamental breach of the Agreement, as a result of which ESG brought the Agreement to an end in early 2016, ending its obligation to pay royalties; alternatively
(c)from the time it obtained CBA’s agreement to deposit fill on the land, ESG ceased depositing fill pursuant to the Agreement and was from that time not liable to pay royalties pursuant to the Agreement; and
(d)Mrs Love’s position is not advanced by reason of the fact that she is currently the named holder of WA149.
Submissions of Mrs Love
Mrs Love maintains that she is entitled to 50% of royalties payable pursuant to the Agreement, and seeks an accounting of the amount of royalties payable.
She submits that:
(a)the Agreement was not frustrated when CBA took possession and granted access to ESG;
(b)there was no breach of the Agreement;
(c)she was in partnership with Mr Love and entitled to a half-share of the royalties as an equal partner;
(d)the only authority for ESG to deposit fill on the Property was in accordance with a Work Authority (WA149) and that she is currently the holder of WA149; and
(e)without the Agreement and WA149, ESG had no authority to use the Property as a clean fill site;
(f)ESG admitted its liability to pay royalties for fill imported onto the Property by reason of the arrangements made between solicitors in 2016, whereby ESG would continue to pay royalties into its solicitors trust account pending the outcome of the litigation.
Applicable principles
Frustration
In oOh! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd,[13] Nettle JA (with whom Redlich and Weinberg JJA agreed) considered the principles of frustration against the background of the judgment of Mason J in Codelfa Construction Pty Ltd v State Rail Authority of NSW.[14]In Codelfa, Mason J observed the cases show that a contract will be frustrated when the parties enter into it on a common assumption (found in the contract itself) that some particular thing or state of affairs essential to its performance will continue to exist or be available, neither party undertaking responsibility in this regard; and later, by reason (at least usually if not universally) of a supervening event, that common assumption proves to be mistaken.[15]
[13](2011) 32 VR 255 (‘oOh! Media Roadside’).
[14](1982) 149 CLR 337 (‘Codelfa’).
[15]Ibid 357-359.
Nettle JA formulated the principle as follows:
Consistently with Codelfa, I take the law to be that a contract is not frustrated unless a supervening event:
(a)confounds a mistaken common assumption that some particular thing or state of affairs essential to the performance of the contract will continue to exist or be available, neither party undertaking responsibility in that regard; and
(b)in so doing has the effect that, without default of either party, a contractual obligation becomes incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract.[16]
[16]oOh! Media Roadside (2011) 32 VR 255,273 [70].
Analysis
Frustration
For present purposes, the potentially frustrating event was entry into possession of the Property by the CBA. On 22 January 2016 CBA, by its solicitors, wrote to Mr Love as mortgagor of the Property in the following terms:
We act for the Commonwealth Bank of Australia (Bank), the mortgagee of the Property.
As you are aware, on 25 January 2013, the Bank (via our office) served you with a notice of default pursuant to section 76 of the Transfer of Land Act 1958 (Vic) (Demand). In default of your loan agreement with the bank and the Mortgage, you failed to comply with the Demand.
In accordance with its rights under section 78 of the Transfer of Land Act 1958 (Vic) and the Mortgage, the Bank hereby takes possession of the Property.
We enclose a copy of our letter to Earth Solutions Limited, for your information.[17]
[17]Emphasis added. CB296-297.
Section 78 of the Transfer of Land Act 1958 (Vic) relevantly provides:
78 Power to mortgagee or annuitant to enter into possession or bring ejectment
(1)The mortgagee or annuitant upon default in payment of the principal sum or interest or annuity of any part thereof respectively at the due time―
(a)may enter into possession of the mortgaged or charged land by receiving the rents and profits thereof;
…
Section 78 confers an express authority on a mortgagee, upon default by a mortgagor, to enter into possession of mortgaged lands and receive the profits without the necessity of first bringing an action for possession provided the mortgagee enters peaceably and does not attempt to use force.[18] Mrs Love admits that CBA went into possession of the Property on about 22 January 2016.[19] It is common ground that CBA did not itself go into physical possession of the Property.
[18]WG Goetz & Sons Ltd v Esanda Finance Corporation Limited (2000) V ConvR 54-623 at [14] per Beach J; Lysnar v National Bank of New Zealand Ltd [1936] NZLR 541.
[19]Further Amended Statement of Claim dated 15 March 2019, [9]; Further Amended Defence dated 21 March 2019, [9(a)].
The letter to Earth Solutions Limited referred to in the letter written on behalf of the CBA is also dated 22 January 2016, and is in the following terms:
We act for the Commonwealth Bank of Australia (Bank), the mortgagee of the Property.
In accordance with its rights under the Mortgage, the Bank hereby takes possession of the Property. We note that you are currently operating a business from the Property with the consent of the Mortgagor. The Bank has not consented to your presence on the Property and is not bound by any agreement (whether written or oral) between you and the Mortgagor. The Bank reserves is [sic] right to take vacant possession of the Property at any time…[20]
[20]CB297.
Under the terms of the Agreement, Mr and Mrs Love had agreed to provide unrestricted access for ESG to enter onto the Property to undertake the works (defined as the exclusive right to import fill onto the property).[21]
[21]Fill Supply Agreement, clause 6.1, CB208; Definition of works, Recital B to Fill Supply Agreement, CB205; Further Agreement, CB263.
In applying the principles of frustration it is necessary to determine whether the supervening event, here being loss of possession of the Property, confounds a mistaken common assumption that a state of affairs essential to the performance of the Agreement would continue to exist or be available. In this case, neither party (in terms) undertook any responsibility to the effect that Mr Love would, at all times, be in possession of the land. But for the Agreement to have any utility the parties must have both assumed that the registered proprietor, Mr Love, would remain in possession of the Property and therefore be in a position to give permission to ESG to enter onto the Property so as to provide unrestricted access for ESG to import the fill. That circumstance, following 22 January 2016, was out of Mr Love’s hands.
Mrs Love did not at any relevant time have the capacity to confer any of the rights given to ESG under the Agreement, even though she was a signatory to it. She was not a registered proprietor and, as this Court found in Hill v Love,[22] Mrs Love had no equitable interest in the Property.[23]
[22](2018) 53 VR 459.
[23]Ibid 480-481, [116]-[119].
The question then becomes whether the loss of possession had the effect that the contractual obligation became incapable of being performed, because the circumstances in which performance was called for rendered it a thing radically different from that which was undertaken by the contract.
In my view, the contractual obligation became incapable of being performed. Once CBA was in possession of the Property, the power to grant ESG right of entry onto the Property was no longer capable of being exercised by Mr Love. Entry was at the behest of CBA.
This state of affairs is reflected in the correspondence. CBA wrote to ESG and advised ESG that CBA had not consented to its presence on the Property and was not bound by any agreement made between ESG and Mr Love; it follows that any capacity of Mr Love to grant a licence to ESG to enter onto the Property and conduct its business of importing fill in the normal course until 28 December 2017 (being the end date of the extended term of the Agreement) ceased. In my view the contract was thus frustrated.
As a consequence the Agreement came to an end on 22 January 2016, from which point ESG had no further liability to make payments under the Agreement.
It is not to the point that ESG was able to continue to import fill onto the land. One witness, Mr Wilson, described the day to day position as ‘business as usual’. Outward appearances may have suggested that the Agreement remained on foot. But the substantive position at law had fundamentally changed. ESG was able to continue to conduct its business of importing fill at the site, but did so pursuant to a licence from CBA, initially informally, and then formalised in the Access Licence Agreement.[24]
[24]CB390-408.
In the recitals to the Access Licence Agreement, it is recorded that ESG and Mr Love had a previous agreement for the import of clean fill onto the Property; that CBA had recently taken possession of the Property as mortgagee in possession; and that any previous agreement for access does not apply and is in no further effect from the date the licensor took possession. Recital C states that in order to allow ESG to continue its business activities at the Property, CBA requires ESG to enter into the licence to grant ESG day to day management and control of the Property.
These recitals are consistent with the substantive change in circumstances, to the effect that the access being given to ESG was no longer pursuant to the Agreement but was rather pursuant to a licence from CBA.
Breach of contract
A breach of an essential term will justify termination of a contract. Whether a term is essential so that any breach will justify termination will depend on the common intention of the parties expressed in the language of the contract, understood in the context of the relationship established by that contract and the commercial purpose it served.[25] A sufficiently serious breach of a non-essential term of a contract can also justify termination of the contract. A breach of a term of a contract that is not a condition will entitle a party to terminate a contract where the breach will deprive the party, not in default, of substantially the whole benefit, which it was intended that they should obtain from the contract.[26]
[25]Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 (‘Koompahtoo’), 135-140 (Gleeson CJ, Gummow, Heydon and Crennan JJ).
[26]Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26, 69-70 (Diplock J); Koompahtoo (2007) 233 CLR 115, 138-140 (Gleeson CJ, Gummow, Heydon and Crennan JJ, cf. Kirby J, who disagreed with the joint reasons on this point: Koompahtoo (2007) 233 CLR 115, 156-158).
A party repudiates a contract where, by conduct, that party:
evinces an unwillingness or an inability to render substantial performance of the contract. This is sometimes described as conduct of a party in which the party evinces an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with the party’s obligations… The test is whether the conduct of one party is such as to convey to a reasonable person in the situation of the other party, renunciation either of the contract as a whole or a fundamental obligation under it.[27]
[27]Koompahtoo (2007) 233 CLR 115, 135 [44] (Gleeson CJ, Gummow, Heydon and Crennan JJ).
Repudiation does not depend on a subjective intention to repudiate; the question is determined by reference to the effect of the conduct on a reasonable person.[28]
[28]DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423, 431 (Stephen, Mason and Jacobs JJ).
In Vitol SA v Norelf Ltd,[29] Lord Steyn (with whom Lord Mackay of Clashfern LC, Lords Griffiths, Nolan and Hoffman agreed), stated:
An act of acceptance of repudiation requires no particular form: a communication does not have to be couched in the language of acceptance. It is sufficient that the communication or conduct clearly and unequivocally conveys to the repudiating party that the aggrieved party is treating the contract as an end… the aggrieved party need not personally, or by an agent, notify the repudiating party of his election to treat the contract as at an end. It is sufficient that the fact of election comes to the repudiating party’s intention.[30]
[29][1996] AC 800.
[30]Ibid 810-811.
These principles may be applied to the facts as follows.
ESG submits that clause 6 of the Agreement[31] was an essential term of the Agreement.
[31]CB208.
Clause 6.1 provided:
THE CLIENT will provide unrestricted access for ESG to enter onto the property to undertake the works.
Mr and Mrs Love were defined collectively as the client.[32]
[32]Fill Supply Agreement, CB204.
It is unnecessary to set out the other clauses of the Agreement. It is enough to say that, other than providing for unrestricted access, the Agreement required very little of the client. The client was to indemnify ESG for any known or unknown pre-existing contamination issue.[33] A further term of the Agreement could be granted at the discretion of the client.[34] Otherwise, the obligations were one-sided, with ESG to maintain records; make payment for the fill imported; employ a site supervisor; maintain required haulage roads; take reasonable steps to minimise disruption to the Property; procure and provide all necessary earthmoving machinery; and ensure that machinery brought onto the Property complied with all applicable laws. ESG represented and warranted that the fill was of a certain standard and agreed to provide an indemnity against all claims which may arise from ESG carrying out the works.[35]
[33]Clause 9.3, CB209.
[34]Clause 1.2, CB206.
[35]Clauses 7 and 9.1 respectively, CB208. For completeness, it is noted that the parties agreed to agree on various works on the Property that required the sourcing of assessed fill materials from off-site to complete the works: clause 2.1, CB206.
Both the commercial purpose of the Agreement referred to in the recitals (to provide ESG with the exclusive right to import fill onto the property (‘the works’)) and the express words of the operative clause 6.1 (to provide unrestricted access for ESG to enter onto the property to undertake the works) indicate that the promise to allow ESG unrestricted access to the Property to import fill is the fundamental purpose of the arrangement. In my view, these objective features of the Agreement, viewed as a whole, demonstrate that clause 6.1 is an essential term without which ESG would not have entered into the Agreement.
Once Mr Love lost possession of the Property, he lost the ability to provide ESG with unrestricted access and therefore the capacity to give permission to import the fill onto the Property.
From the time possession was lost, Mr Love, and it follows Mrs Love, were in breach of an essential term of the Agreement. As a consequence, ESG was entitled to terminate the Agreement.
Mr Van Schaik gave evidence that he had a conversation with Mr Love shortly after Mr Love went bankrupt (3 February 2016), during which Mr Van Schaik advised Mr Love that ESG would not pay any further royalties under the Agreement as ESG was accessing the Property with CBA’s consent.[36]
[36]Witness Statement of Anthony van Schaik dated 15 February 2018, [13].
Even if clause 6.1 was not an essential term, on losing possession of the land, Mr and Mrs Love were no longer able to give ESG the substantial benefit of the contract. In my view, this constituted a breach which entitled ESG to terminate the Agreement.
Alternatively, the loss of possession and therefore the inability to fulfil the obligation to give ESG unrestricted access to enter onto the land to undertake the work of importing fill would have conveyed to a reasonable person, in the situation of ESG, repudiation by Mr Love of the Agreement.
Once Mr Van Schaik, then ESG’s general manager, spoke to Mr Love and informed him that ESG was now accessing the land with CBA’s consent and that ESG was not going to pay any further royalties to Mr Love, ESG unequivocally conveyed to Love that it was treating the Agreement as being at an end.
Entering into the arrangement to access the land with CBA’s consent was fundamentally inconsistent with continuing with the Agreement with Mr Love for unrestricted access to the land. By these actions ESG must be taken to have accepted the repudiation of the Agreement by Mr Love and to have brought the Agreement to an end.
ESG advanced a further alternative analysis, being that once CBA went into possession of the land and ESG told Mr Love that it would no longer pay royalties, ESG ceased depositing fill on the land pursuant to the Agreement and began depositing fill on the land pursuant to a licence from CBA. From that point onwards, ESG was not obliged to pay any ‘royalties’ under the Agreement as ESG was not accessing the land under the Agreement.
In my view, the preferable analysis involves termination of the Agreement; however if this is wrong and the Agreement survives loss of possession, I would hold that the importing of the fill continued under the CBA licence and not under the Agreement.
Alleged partnership
Mrs Love submits that she was in partnership with Mr Love and, as an equal partner, was entitled to a half share of the royalties. The gist of the evidence on this point and Mrs Love’s submissions are to the effect that Mrs Love and Mr Love did everything together as partners in marriage. For present purposes, that does not assist her in her quest for a 50% share of the royalties. There was scant evidence of Mrs Love being in partnership with Mr Love of a kind recognised at common law or under the Partnership Act 1958 (Vic) (‘Partnership Act’). There was no evidence of a partnership deed; there was no evidence of an agreement to form a partnership; and there were no tax returns admitted into evidence to indicate that Mr and Mrs Love conducted their commercial affairs in a partnership, that is, that they carried on a business in common with a view to making a profit.[37] Further, the Work Authority WA149 relied on by Mrs Love (and discussed below) was solely in Mr Love’s name at the relevant time (not in joint names).
[37]Partnership Act s 5(1).
Mrs Love made submissions which tended to suggest that Mr Love disavowed the notion of being in partnership with his wife for fear of losing assets.[38] That said, I do not doubt Mrs Love’s evidence to the effect that she was involved in decision making and was frequently consulted on business matters.
[38]T112.6-112.20.
Nevertheless, in my view, the evidence does not support the proposition that Mr and Mrs Love were in partnership at the time of Mr Love’s bankruptcy on 3 February 2016. Had they been in partnership, the consequence of Mr Love’s bankruptcy would have been to dissolve the partnership pursuant to s 37 of the Partnership Act.
Mrs Love relies on s 61 Bankruptcy Act 1966 (Cth), which allows the Court, upon application of a trustee in bankruptcy, to authorise the trustee to commence and prosecute any action in the names of the trustee and the bankrupt, and of the bankrupt’s partner or partners.[39] In such a case, the Court has a discretion, if it thinks fit, to direct that the partner shall receive the share of the proceeds of the action brought by the trustees.[40]
[39]Section 61(1).
[40]Bankruptcy Act 1966 (Cth) s 61(3).
This section does not engage in the circumstances of this case, because the Trustees have not sought to commence and prosecute an action in the names of the Trustees and of the bankrupt’s partner or partners. In any event, in view of my finding that Mrs Love was not at law in a partnership with the bankrupt, the section could never engage on the facts of this case.
Work Authority
Mrs Love submits that fill was imported onto the Property under Work Authority WA149 and a planning permit from the City of Whittlesea.[41] In her further amended defence, Mrs Love alleges that she and Mr Love:
(a)‘held full legal and financial responsibility for [WA149] since 14 December 2012’;[42] and
(b)signed an agreement with a company called Conundrum Holdings Pty Ltd (‘Conundrum Holdings’) to take full legal and financial responsibility for works to be done by ESG under WA149.[43]
[41]Closing Submission, p 2.
[42]Further Amended Defence dated 21 March 2019, [8D].
[43]Further Amended Defence dated 21 March 2019, [8A(i)].
Mrs Love did not clearly articulate what this meant. It seems to me that Mrs Love was endeavouring to contend that WA149 gave ESG the right to deposit fill on the Property and thereby gave an entitlement to Mr and Mrs Love to royalties, either ancillary to the Agreement or directly as a consequence of providing something of value under the Agreement, thereby keeping the Agreement on foot and defeating the notion of frustration or breach.
It is necessary to say something about WA149. WA149 was initially granted to Conundrum Holdings under the now repealed Extractive Industries Development Act 1995 (Vic) (‘the 1995 Act’).
The 1995 Act made it an offence to carry out an extractive industry on any private land without a current work authority.[44] An ‘extractive industry’ under the 1995 Act meant the extraction or removal of stone from land if the primary purpose of the extraction or removal is the sale or commercial use of the stone or the use of the stone in construction, building, road or manufacturing works.[45] In this case, the authority given was an authority to quarry basalt on the land.[46]
[44]1995 Act, s 9(1)(b).
[45]1995 Act, s 3(1).
[46]WA149, CB169.
Under s 19 of the 1995 Act, a person who proposed to carry out an extractive industry could apply to the Minister for a work authority. The work authority would only be provided if the applicant entered into a ‘rehabilitation bond’, complied with any relevant planning scheme and obtained any necessary planning permit under that planning scheme.[47]
[47]1995 Act, ss 19(2)(b), 19(2)(c) and 33(1).
The Minister had the power to impose conditions on work authorities, including conditions about the rehabilitation of land to a safe, stable and visually acceptable condition, and the time when such work must be completed or commenced.[48]
[48]1995 Act, s 20(a) and (b).
The holder of a work authority was required to rehabilitate land in accordance with an approved rehabilitation plan and was required to enter a rehabilitation bond for an amount determined by the Minister.[49] The 1995 Act enabled work authorities to be varied.[50]
[49]1995 Act, ss 31, 32 and 33.
[50]1995 Act, s 22(1).
The relevant work authority for present purposes is a work authority dated 17 October 2005, which provided that Conundrum Holdings was required to undertake progressive reclamation in accordance with an approved rehabilitation plan.[51]
[51]WA149, Workplan Conditions, [18.1]; CB182-190, at 187.
The 17 October 2005 work authority was varied on 2 November 2005 to revoke some conditions and to add some conditions. It was further amended on 12 July 2011 by excision of an area previously covered by WA149. On 16 July 2013, after the Agreement had been entered into, WA149 was transferred from Conundrum Holdings to Mr Love.[52] The named transferee was Mr Love and the transfer was signed by Mr Love and witnessed by a third party. Mrs Love is not named as a transferee.
[52]Transfer of Extractive Industry Work Authority from Conundrum Holdings Pty Ltd to Tom Love dated 16 July 2013, CB 242-244.
The 12 July 2011 variation and the transfer of the work authority occurred under the Mineral Resources (Sustainable Development) Act 1990 (Vic) (‘the 1990 Act’).
As with the 1995 Act, the 1990 Act makes it an offence to carry out an extractive industry without a work authority.[53] The definition of ‘extractive industry’ in the 1990 Act is in very similar terms to the 1995 Act.[54] Under the 1990 Act, a person who proposes to carry out an extractive industry may apply to the Minister for an authority to carry out the extractive industry; the Minister may impose conditions to which an extractive industry work authority is to be subject, including the rehabilitation of the land to a safe, stable and visually acceptable condition and as to the time when rehabilitation work must be commenced or completed.[55] The Minister also has power to vary the work authority, to transfer it or to cancel it.[56] As with the 1995 Act, the 1990 Act requires the holder of an extractive industry work authority to rehabilitate the land in accordance with an approved rehabilitation plan.[57] Under the 1990 Act, the authority holder must rehabilitate land in the course of doing work under the authority and must, as far as practicable, complete the rehabilitation of the land before the authority or any renewed authority ceases to apply to the land.[58]
[53]1990 Act, s 8AB.
[54]1990 Act, s 4(1).
[55]1990 Act, s 77J(1)(a) and (b).
[56]1990 Act, s 77M, s 77N, s 77O.
[57]1990 Act, s 78A; 1995 Act, s 79.
[58]1990 Act, s 81(1).
As transferee of the work authority from 16 July 2013, Mr Love had a work authority to quarry basalt on the land. That work authority required him to rehabilitate the land. ESG submits that nothing in the relevant legislation or in the work authority itself suggests that the work authority was necessary for the depositing of fill. ESG further submits that the work authority does not permit the depositing of fill, but that the depositing of fill was permitted by operation of planning permits, one dated 8 July 1999 (‘the 1999 permit’), the other dated 5 February 2016 (‘the 2016 permit’).[59]
[59]CB177, CB299-305.
The 1999 permit provided permission for the Property to be used for the following purposes:
Extractive industry and ancillary uses and development in accordance with the provisions of any work authority issued under the Extractive Industries Development Act 1995 and associated removal of native vegetation.[60]
[60]The 1999 permit, CB177.
The 2016 permit provided permission for the Property to be used for the following purposes:
Use and development of a materials recycling centre, reduction in the standard car parking requirement together with associated buildings and works in accordance with endorsed plans.[61]
[61]The 2016 permit, CB299.
Condition 5 of the 2016 permit clearly contemplates the depositing of fill on the land. Condition 5 states:
All filling on the site must be carried out, supervised, completed and accorded in accordance with Australian Standard AS3798 (Guidelines on earthworks for commercial and residential developments) and the endorsed plans to the satisfaction of the Responsible Authority. The works must be done under periodical level 2 supervision by a qualified geotechnical engineer.[62]
[62]The 2016 permit, condition 5, CB300.
Under the Whittlesea Planning Scheme, ‘[m]aterials recycling’ is defined as ‘[l]and used to collect, dismantle, treat, process, store, recycle, or sell, used or surplus materials’.[63]
[63]Whittlesea Planning Scheme cl 73.03 (Land Use Terms).
ESG submits, and I accept, that the 2016 permit would allow the importation of fill onto land and that relevantly in this case, from 5 February 2016, the 2016 permit permitted the land to be used for materials recycling, which might have included the importation of fill. ESG also submits, and I accept, that the permission came from the planning permits and not from the work authority. Thus, ESG submits that the authority for ESG to continue to deposit fill on the land after CBA went into possession came from the planning permit which runs with land. The planning permit did not belong to Mr Love. It followed that there was nothing that Mr Love was able to provide which was necessary for the importation of fill by ESG to be able to continue. Though WA149 was necessary for Mr Love to quarry the land, it had no role to play in allowing ESG to import fill onto the land.
It seems to me that, with one potential qualification, ESG’s submissions should be accepted as a correct analysis of the law. The potential qualification is to accommodate a circumstance where the holder of an extractive industry work authority, in fulfilling the requirement to rehabilitate the land in accordance with a rehabilitation plan, is required to deposit fill as part of that rehabilitation plan.
In this case, there is no evidence that the depositing of fill in 2016 was in accordance with an approved rehabilitation plan. On the contrary, there was evidence given by Mr David Willson to the effect that the rehabilitation plan works required to be undertaken under the work authority were completed in the first 18 months of depositing fill pursuant to the agreement.[64] I accept Mr Willson’s evidence on this point.
[64]Evidence of David Fletcher Willson, T41.30-31 – T42.
Accordingly, on the facts it would appear that there is no room to argue that depositing of fill on the land was required to rehabilitate the land under the conditions of WA149.
On 16 July 2013, Conundrum Holdings transferred the work authority to Mr Love.[65]
[65]Transfer of Extractive Industry Work Authority, CB242-244.
On 3 February 2016, Mr Love became a bankrupt and trustees were appointed to his bankrupt estate.
Section 58(1) of the Bankruptcy Act 1966 (Cth) provides that where a debtor becomes bankrupt, the property of the bankrupt, not being after-acquired property, vests forthwith in the trustee.
Section 5 of the Bankruptcy Act defines ‘property’ as ‘real or personal property of every description, whether situate in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property’.
In R v Toohey; ex parte Meneling Station Pty Ltd,[66] Mason J approved the following criteria for a right or interest to be regarded as property:
Before a right or an interest can be admitted into the category of property, or of a right affecting property, it must be definable, identifiable by third parties, capable in its nature of assumption by third parties, and have some degree of permanence or stability.[67]
[66](1982) 158 CLR 327 (‘Toohey’).
[67]Ibid 342, quoting National Provincial Bank Ltd v Ainsworth [1965] AC 1175 (Lord Wilberforce) at 1247-1248.
It is necessary to consider each of the elements in turn:
(a)Whether a work authority is definable: section 77I of the 1990 Act sets out that the Minister may grant an authority to a person to carry out an extractive industry and provides that a Minister must not grant a work authority unless satisfied that the applicant has a work plan (and if necessary, has entered into a rehabilitation bond, complied with any relevant planning scheme and has obtained any necessary planning permit). Section 77J of the 1990 Act sets out the conditions that can be imposed on a work authority. In my view, the granting of a work authority is a process which intrinsically involves definition.
(b)Whether a work authority is identifiable by third parties: under s 69 of the 1990 Act, the Department Head must establish and maintain a mining register which includes a register of work authorities.[68] A work authority has no effect until registered,[69] and the Department Head must allow access at all reasonable times to the register.[70] Third parties can readily identify the work authority by inspecting the register.
(c)Whether a work authority is capable of assumption by third parties: the holder of a work authority may, with the consent in writing of the Minister, transfer the work authority to another person.[71] The Minister must consent to the transfer if the person to whom the work authority is to be transferred has entered into a rehabilitation bond for an amount determined by the Minister and where the Minister is satisfied that the work plan (where a work plan exists) is adequate. If the Minister is not satisfied that the work plan is adequate, the Minister may consent to the transfer subject to a new work plan being submitted for approval within a specified time.[72] Thus, the work authority is capable of assumption by third parties.
(d)Whether a work authority has some degree of permanence or stability: the Minister may cancel a work authority by instrument served on the holder of the work authority if the Minister is satisfied that the holder has not substantially complied with the 1990 Act, conditions of the authority, conditions of the work plan, condition on the approval of the variation of the work plan or any relevant planning scheme, has endangered an employee or a member of the public on or near the land, or has undertaken work other than in accordance with the plan.[73] However, before cancelling a work authority, the Minister must give the holder of the work authority notice of the intention to cancel and request the holder to provide reasons why the work authority should not be cancelled.[74]
[68]1990 Act, s 69(2)(a)(v).
[69]1990 Act, s 70(1).
[70]1990 Act, s 74(1)(a).
[71]1990 Act, s 77N(1).
[72]1990 Act, s 77N(2).
[73]1990 Act, s 77O.
[74]1990 Act, s 77O(2).
A decision to vary or cancel a work authority can be reviewed. It is clear from those sections of the 1990 Act that work authorities have some degree of permanence or stability in that they can only be varied in limited circumstances after the holder of the work authority has had an opportunity to say why the work authority should not be cancelled. In addition, the holder has an ability to have a decision of the Minister reviewed.
In Toohey, Mason J held that the ability of the Minister in that case to cancel a statutory right by notice only, without default, was inconsistent with the submission that that statutory right comprised property. Significantly, under the 1990 Act there is no power for a work authority to be cancelled without cause. In the circumstances, it is evident that work authorities have the requisite degree of permanence or stability.
For the purposes of the Bankruptcy Act, a work authority has all of the characteristics necessary to comprise property within the definition and therefore does comprise property. In the circumstances, upon Mr Love’s bankruptcy on 3 February 2016, the work authority, WA149, vested in the Trustees. At that point, Mr Love no longer had any vested rights in WA149.
Nevertheless, by a Transfer of Extractive Industry Work Authority form dated 4 March 2016, Mr Love purported to transfer WA149 to Mrs Love.[75] The Trustees did not consent to the transfer. In the circumstances, the Trustees were entitled to a declaration that the purported transfer of the work authority from Mr Love to Mrs Love is void. On 14 March 2019, the Trustees assigned all their right, title and interests and claims on causes of action in and relating to WA149 to ESG.[76] Accordingly, ESG is now entitled to a declaration to that effect.
[75]Transfer of Extractive Industry Work Authority Application dated 4 March 2016, CB410-412; Consent to Transfer an Extractive Industry Work Authority for WA149 dated 19 April 2016, CB409.
[76]Supplementary Witness Statement of David Fletcher Willson dated 26 March 2019, Annexure C, clause 2.
On 14 March 2019, ESG demanded that Mrs Love transfer the work authority to it pursuant to its right under the Deed of Assignment.[77]
[77]Supplementary Witness Statement of David Fletcher Willson dated 26 March 2019, Annexure D.
Mrs Love has declined to transfer the work authority to ESG and ESG seeks an order that she do so.
I am satisfied that the work authority WA149 should be transferred by Mrs Love to ESG and will make orders accordingly.
Alleged admission
By an exchange of correspondence between the solicitors for CBA, the Trustees, ESG and Mrs Love, ESG agreed to pay purported royalties into the trust account of its solicitor, Thomson Geer, pending the outcome of the litigation.
Arrangements of this type are commonly entered into pending the determination of rights which are in dispute in litigation. No admission of liability was made by reason of the fact that the parties entered into an interim arrangement pending the determination of rights in the proceedings. This was a sensible arrangement which did not advance or detract from the rights of any of the interested parties.[78]
[78]Letter from Cornwall Stodart to ESG dated 17 May 2016, CB417; Letter from Gadens Lawyers to Cornwall Stodart dated 23 May 2016, CB418; Letter from Thomson Geer to Cornwall Stodart, Mason Black and Gadens Lawyers dated 30 June 2016, CB419-420.
Conclusion
I have concluded that ESG is entitled to the balance of the fund in its entirety. In my view, Mrs Love has no entitlement to the fund.
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