F. Ferguson Wool Pty Ltd v Mayback Pty Ltd
[2017] VCC 1562
•1 November 2017
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-15-03447
| F. FERGUSON WOOL CO PTY LTD | Plaintiff |
| v | |
| MAYBACK PTY LTD and TIMOTHY O’SULLIVAN | Defendants |
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JUDGE: | HIS HONOUR JUDGE WOODWARD | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 9-11, 14 and 15 August | |
DATE OF JUDGMENT: | 1 November 2017 | |
CASE MAY BE CITED AS: | F. FERGUSON WOOL PTY LTD v MAYBACK PTY LTD | |
MEDIUM NEUTRAL CITATION: | [2017] VCC 1562 | |
REASONS FOR JUDGMENT
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Subject: CONTRACTS
Catchwords: Terms of settlement – construction – breach – pursuing alternative remedies – misleading and deceptive conduct – “no transaction” case – basis for assessing loss – assessment of damages – damages for loss of opportunity
Legislation Cited: Civil Procedure Act 2010 (Vic) s23; County Court Act 1958 (Vic) s50; Evidence Act 2008 (Vic) s131(2)(f); Supreme Court Act 1986 (Vic) s60; Water (Resource Management) Act 2005 (Vic); Water Act 1989 (Vic) s33F, 51, 64, 64AL, 64AK, 64AM, 67, 71, 75 and 306
Cases Cited:Agripower Barraba Pty Ltd v Blomfield [2015] NSWCA 30, (2015) 317 ALR 202; Ailakis v Olivero [No 2] [2014] WASCA 127; Apple and Pear Australia Ltd v Pink Lady America LLC [2016] VSCA 280, (2016) 343 ALR 112; BHP Billiton Iron Ore Pty Ltd v National Competition Council (No 2) [2007] FCA 557; Braeside Bearings Pty Ltd v HJ Brignell and Associates (Boronia) [1996] VSC 348, [1996] 1 VR 17; Chen & Ors v Chan & Ors [2009] VSCA 233; Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24, (1982) 149 CLR 337; Coleman v The Queen [2014] VSCA 338; (2014) 100 ACSR 524; Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54, (1991) 174 CLR 64; Eon Metals NZ v Commissioner of State Taxation (WA) (1991) 22 ATR 601; Firebird Global Master Fund II Ltd v Republic of Nauru [No 2] [2015] HCA 53, (2015) 90 ALJR 270; Galafassi v Kelly [2014] NSWCA 190; Gates v City Mutual Life Assurance Society Limited [1986] HCA 3, (1986) 160 CLR 1; Hawkins v Ross Human Directions Ltd [2015] NSWCA 264, (2015) 326 ALR 556; Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358; Hosking v Ipex Software Services Pty Ltd (No 2) [2004] VSC 343; Henville v Walker [2001] HCA 52, (2001) 206 CLR 459; Howe v Teefy (1927) SR (NSW) 301; Kenny & Good Pty Ltd v MGICA [1999] HCA 25, (1999) 199 CLR 413; Marks v GIO Australia Holdings [1998] HCA 69, (1998) 196 CLR 494; Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited [2015] HCA 37; (2015) 256 CLR 104; National Australia Bank Limited v Blacker [2000] FCA 1458; (2000) 104 FCR 288; Never-Stop Railway (Wembley) Ltd v British Empire Exhibition (1904) Inc [1926] Ch 877; Osborn v McDermott [1998] 3 VR 1; Robert Deutsch & Ors v Erwin Deutsch & Ors [2012] VSC 227; Robinson v Harman (1848) 1 Exch 850, (1848) 154 ER 363; Sargent v ASL Developments Ltd [1974] HCA 40, (1974) 131 CLR 634; Secretary to Department of Social Security v Siviero [1986] FCA 382, (1986) 68 ALR 147; Sellars v Adelaide Petroleum NL [1994] HCA 4, (1994) 179 CLR 332; Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8, (2009) 236 CLR 272; TEC Desert Pty Ltd v Commissioner of State Revenue [2010] HCA 49, (2010) 241 CLR 576; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52, (2004) 219 CLR 165; United Australia Ltd v Barclays Bank [1997] UKHL 17, [1941] AC 1; Wardley Australia Limited v Western Australia [1992] HCA 55; (1992) 175 CLR 514; Wenham v Ella [1972] HCA 43, (1972) 127 CLR 454; Wincant Pty Ltd v South Australia [1997] SASC 6287, (1997) 69 SASR 126
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S C Smith | Thexton Lawyers |
| For the Defendant | Ms E Tadros | Nicholsons Lawyers & Consultants |
HIS HONOUR:
Introduction and parties
1 On the banks of the Campaspe River in Goornong about 35 kilometres north-east of Bendigo, two disused pumps and electric motors sit side by side on a rusty steel gantry. The gantry is mounted on rails about 12 metres in length, sloping down towards the river. The rails are attached to a structure of steel pipework and posts that are fixed to substantial concrete foundations sunk into the riverbank. Electrical cables are suspended on a wire above the pumps and rails. This proceeding concerns rights of ownership and use of these pumps and the associated infrastructure, referred to during the trial (and in these reasons) as “the pumping infrastructure”. The pumping infrastructure is on Crown land, a meter or two outside the title boundary of the neighbouring farmland.
2 The plaintiff (“Ferguson”) is the owner of 68.57 hectares of land immediately abutting the Campaspe River to the west of the river (“Lot 2”). The sole director of Ferguson is David Martin. The first defendant (“Mayback”) is the trustee of the O’Sullivan Family Trust and, in that capacity, sold Lot 2 to Ferguson under a contract of sale dated 15 August 2013 (“Ferguson Sale Contract”). The second defendant Timothy O’Sullivan, was appointed the sole director of Mayback on its registration on 20 July 2011. Timothy O’Sullivan was 20 years old at the time of his appointment. He ceased as a director of Mayback on 29 April 2016 and was replaced by his father Dale O’Sullivan. Despite Timothy O’Sullivan’s period as sole director, the evidence establishes that Dale O’Sullivan has been the controlling mind of Mayback since its registration.
3 Another person who features prominently in this proceeding is Helen Hartup. Ms Hartup owns the property comprising 25.96 hectares that borders Lot 2 to the west (“Lot 1”). Ms Hartup bought Lot 1 from Mayback (as trustee of the O’Sullivan Family Trust) under a contract of sale dated 16 July 2015 (“Hartup Sale Contract”). That contract also effected the transfer to Ms Hartup of another parcel of land owned by Mayback, on a separate title, being certificate of title volume 9836 folio 330 (“the 30 acres”).
4 This proceeding began in the Magistrates’ Court at Bendigo as a claim for rights over the pumping infrastructure and related water licences, based on (among other things) an alleged implied term in an earlier contract of sale between Mayback, Ferguson and Ms Hartup dated 1 August 2011 (“First Sale Contract”). The alleged implied term was to the effect that Mayback was obliged to transfer the pumping infrastructure and associated licences to Ferguson (“original claim”). It was later uplifted to this Court and went through a number of amendments and interlocutory applications until 2 March 2016, when the parties signed written terms of settlement following a mediation that day (“Ferguson Settlement Deed”).
5 Of particular relevance to this proceeding, the recital to the Ferguson Settlement Deed stated:
“Parties are in dispute regarding the transfer of a Water Works Licence for the benefit of Lot 2, 241-255 Bendigo-Murchison Road, Goornong and ownership of equipment namely, a pumping station, pumps and infrastructure as well as power shed.”
And clause 6 of the Deed provided that:
“The First and Second Defendants agree to transfer their interest in property including pumping station, gantry pump and foundation situated on crown land, as well as power meter shed.”
6 On 4 March 2016, two days after the Ferguson Settlement Deed was signed and on the same day as the parties lodged with the Court consent orders striking out the proceeding, Ms Hartup’s solicitors wrote to Ferguson stating (among other things):
“We advise that we act on behalf of the above named [Ms Hartup] in the purchase of the above property [Lot 1 and the 30 acres] from Mayback Pty Ltd.
Our client has requested we correspond with you to advise you that she purchased the following as part of the transaction to purchase the said property:
a) Pumps and Pump Infrastructure located on or adjacent to the Water Supply Easements.
…”
7 Ferguson has alleged that, by this letter, Ms Hartup was asserting ownership of the same pumping infrastructure that Mayback had purported to transfer to Ferguson only two days earlier. On 19 October 2016, Ferguson applied successfully to reinstate the proceeding, relying on the defendants’ failure to transfer the pumping infrastructure to Ferguson or to pay Ferguson the sum of $93,630, being the asserted value of the pumping infrastructure. The orders of Judicial Registrar Burchell reinstating the proceeding, also provided for the filing of amended pleadings.
8 By its second further amended statement of claim filed on 17 November 2016 pursuant to those orders, Ferguson sought, in the alternative to its original claim, a claim based on breach of the Ferguson Settlement Deed. It developed that claim further in its third further amended statement of claim filed 28 April 2017, to include associated claims based on misleading and deceptive conduct and negligent misrepresentation. At trial, Ferguson elected to pursue only the claims based on the Ferguson Settlement Deed. I discuss later in these reasons the implications of these various developments in Ferguson’s pleaded case.
Issues
9 The issues in this proceeding and my brief answers to each are as follows:
(a) Has the Ferguson Settlement Deed been repudiated or rescinded by Ferguson maintaining its original claim until the second day of trial? Answer: no. If so, what are the consequences of that repudiation or rescission? Answer: does not arise.
(b) Is clause 6 of the Ferguson Settlement Deed to be construed as purporting to transfer ownership of the pumping infrastructure to Ferguson and, if so, have Mayback and Timothy O’Sullivan breached the Ferguson Settlement Deed by failing to effect that transfer? Answers: yes and yes.
(c) Have Mayback and Timothy O’Sullivan engaged in misleading and deceptive conduct or negligent misrepresentation by purporting to offer or agree to transfer ownership of the pumping infrastructure to Ferguson? Answer: no.
(d) What remedies can Ferguson claim for any breach of the Ferguson Settlement Deed, misleading and deceptive conduct or misrepresentation by Mayback and Timothy O’Sullivan? Answer: Ferguson is entitled to $47,653.20 in damages for breach of the Ferguson Settlement Deed.
Chance Lodge and the sale contracts
10 Before being subdivided in early 2013, Lots 1 and 2 were a single parcel of land at 219-255 Bendigo-Murchison Rd, Goornong, known as “Chance Lodge”. Chance Lodge at this time was on a single title (certificate of title volume 7463 folio 171) and comprised a substantial Georgian reproduction residence, an equestrian complex and associated equine facilities, buildings known as the “veterinary centre” and other sheds and outbuildings. The farmland comprised areas of pasture as well as approximately 16 hectares of land serviced by 16 irrigation outlets, on lasered irrigation bays (“irrigation land”). Chance Lodge is apparently famous for once being owned by the singer John Farnham. A company associated with Mr Farnham sold Chance Lodge and the 30 acres to the O’Sullivan Family Trust (with a Mr Anderson as trustee), in October 2009. Mayback replaced Mr Anderson as trustee of the O’Sullivan Family Trust in July 2011.
11 Ferguson is a company that has been in existence since 1870. Its primary business is wool trading, but it also markets liquid fertiliser and fencing products to farmers. Mr Martin is engaged full time in running Ferguson’s business. He was looking at rural properties and became aware of Chance Lodge during his work trips into the Goornong the area. The property was not on the market, but a friend of his suggested he contact Ms Hartup, who was living at the property, to see if they could come to some arrangement to purchase the property. He met with Ms Hartup in about March or April 2011 and she introduced him to Dale O’Sullivan in about May of that year.
12 Negotiations between Mr Martin, Ms Hartup and Dale O’Sullivan took place intermittently over the ensuing weeks, until 1 August 2011 when Mayback (as vendor) and Ms Hartup and Ferguson as purchasers (as tenants in common), entered into the First Contract of Sale. The terms of the sale included the transfer to the purchasers of a water share under the Water Act 1989 (Vic) (“Water Act”) totalling 79 megalitres. It also contemplated that Chance Lodge would be subdivided before settlement into 2 lots, with Ms Hartup taking a smaller area of around 20 hectares in the south-west corner comprising the smaller residence she was then occupying, the equestrian complex and other equine facilities and Ferguson purchasing around 74 hectares, comprising the main residence, other buildings and the bulk of the farmland, including the irrigation land.
13 Mayback at this time retained ownership of the 30 acres. The precise location of the 30 acres is unclear. However, based on the certificate of title plan for the 30 acres and Ms Strachan’s evidence that it was on the Elmore-Barnadown Rd, I take it to be the roughly rectangular area of land that abuts the western boundary of Lot 1 (at the northern end of that boundary) and runs further to the west, having its eastern boundary at the Elmore-Barnadown Rd. Thus the western boundary of Lot 2 abuts the Campaspe River, Lot 1 is immediately to the west of Lot 2 and has no river frontage and the 30 acres is still further to the west and away from the river.
14 Mr Martin and his wife (then fiancée) moved into the main residence at Chance Lodge in October 2011. Within a few months, the parties and Ms Hartup were in dispute over the details of the proposed subdivision, and have been engaged in litigation and other conflict of one kind or another ever since. This has included a proceeding to enjoin an alleged variation on the subdivision as originally proposed, proceedings in the Supreme Court and this Court to enforce settlement of sale contracts, proceedings in the Magistrates’ Court alleging trespass and damage to property, applications for intervention orders (also involving Mr Martin’s wife), complaints to the police and this proceeding.
15 This satellite litigation has only limited relevance to the issues remaining to be resolved in this proceeding. However, it provides the backdrop to the level of animosity that exists among the parties and Ms Hartup, that was all too evident during the trial. Although at least one of the proceedings involved Ms Hartup suing Mayback, it seems that in more recent times the battle lines have been drawn with Mr and Mrs Martin on one side and Dale O’Sullivan and Ms Hartup on the other.
16 In the midst of all this disputation, the parties and Ms Hartup were able to finalise the subdivision of Chance Lodge into Lot 1 and Lot 2 and enter into the Ferguson Sale Contract and the Hartup Sale Contract. The Ferguson Sale Contract was executed on 15 August 2013. It included a special condition and acknowledgement by Ferguson that it purchased Lot 2 subject to all of the easements and covenants set out on the plan of subdivision PS649249Q. Those easements included a water supply easement running in a westerly direction from the location of the pumping infrastructure, across the middle of Lot 2 to the boundary of Lot 1. For practical purposes, this easement meant that Ms Hartup could run a pipe from the site of the pumping infrastructure across Ferguson’s land to her property, thus giving her access to water from the Campaspe River.
17 The Ferguson Sale Contract provided that the land included all improvements and fixtures and the “goods sold with the land” included all “fixtures and fittings of a permanent nature”. There was no express reference in the Ferguson Sale Contract to the pumping infrastructure or any water shares or licences. However, simultaneously with the execution and settlement of the Ferguson Sale Contract, on 15 August 2013, Mayback and Ferguson executed documents that enabled Ferguson to be registered as the proprietor of Water Share numbers WEE057245 and WEE056865 comprising in total 39.5 megalitres of water. Although the water shares were not in evidence, I understand it is not in dispute that the source for the water shares is the Campaspe River.
18 Proceedings in this Court brought by Ms Hartup against Mayback in relation to the original sale in August 2011 went to trial in March 2015. But while judgment was still pending, Ms Hartup and Mayback signed a new contract of sale and on 3 September 2015 signed a settlement deed (“Hartup Settlement Deed”), pursuant to which the Hartup Sale Contract was completed. That contract provided that the goods sold with the land included “the pumps located on or adjacent to the water supply easements”. It also provided for the sale by Mayback to Ms Hartup of a water share and other water licences as follows:
(a) Water Share WEE057246 of 2.5 megalitres. Again, I understand it is not in dispute that the source for this share is the Campaspe River.
(b) Works Licence WLE055454, relevantly providing:
· Works type: Pump
· Works sub-type: Fixed
· Manufacturer: 250mm Centrifugal Pump
· Maximum extraction rate: 12.000 megalitres per day
· Use of water: Irrigation – as well as domestic and stock use, dairy use, and general non-irrigation farm use
· Works location: Easting 284064, Northing 5947865, Zone 55
· Other land description: Volume 9836 folio 330, Lot 1 of Plan TP118994E [being the title particulars of the 30 acres]
· Related water-use entities: WUL024459
(c) Works Licence WLE057484, relevantly providing:
· Works type: Pump
· Works sub-type: Fixed
· Manufacturer: Grundfos Pressure Pump
· Maximum extraction rate: 0.100 megalitres per day
· Use of water: Domestic and stock use – as well as general non-irrigation farm use
· Works location: Easting 284064, Northing 5947865, Zone 55
· Other land description: Volume 9836 folio 330, Lot 1 of Plan TP118994E [being the title particulars of the 30 acres]
· Related water-use entities: WUL024459
(d) Works Licence WLE055453, relevantly providing:
· Works type: Pump
· Works sub-type: Fixed
· Manufacturer: Onga Pressure Pump
· Maximum extraction rate: 4.000 megalitres per day
· Use of water: Irrigation – as well as domestic and stock use, dairy use, and general non-irrigation farm use
· Works location: Easting 284064, Northing 5947865, Zone 55
· Other land description: Pump on Crown Land C/A 2013, Parish of Campaspe
(e) Water Use Licence WUL024459, in respect of Lot 1 and the 30 acres
19 Despite the anomalies in some of the specifications in each of the works licences referred to above, the evidence (notably from Ms Strachan) established that Works Licences WLE055454 and WLE057484 relate to each of the two pumps forming part of the pumping infrastructure, described in more detail below. The third works licence (Works Licence WLE055453) relates to a smaller “Onga” brand portable pump that was installed by Ms Hartup on the ground underneath the pumping infrastructure, and supplies river water to Lot 1 through a pipe running over Lot 2 along the path of the water easement (“Onga pump”).
Current condition of the pumping infrastructure
20 The pumping infrastructure is on Crown land about a metre or two outside the title boundary of Lot 2. The two pumps and their electric motors are similar in appearance, but differ in size. The larger pump and its electric motor together are a substantial piece of machinery - cylindrical in shape and about 1.5m long and 0.50m in diameter (“irrigation pump”). Works Licence WLE055454 describes the irrigation pump as a 250mm centrifugal pump with an extraction rate of 12 megalitres per day for irrigation as well as domestic and stock use. The smaller pump and its motor are about half the size of the irrigation pump (“stock and domestic pump”). Works Licence WLE057484 describes this pump as having an extraction rate of 0.1 megalitres per day for domestic and stock use.
21 When last in use more than a decade ago, the pumps and gantry were lowered by a manual winch to the bottom of the rails, so the suction pipe extending for about 8 meters from the base of each of the pumps, entered a deep hole in the river. A flange at the top of each pump was bolted to pipes suspended near the base of the rails, that carried the water from the pumps to a brick-lined pit located on the nearby farmland (now Lot 2). When not required or when there was risk of flood, the pumps could be detached from these pipes and winched away from the river to the top of the rails. It appears that the pumping infrastructure first went into disuse in the early 2000s, with the start of the drought. It later became entirely submerged during a flood in 2011, and possibly on one other occasion.
22 The experts were divided on whether the repair of the pumping infrastructure is commercially viable. In his report, Mr McLeod stated on this topic only that “it is my experience that a rebuild would cost more than a new pump”. Although in evidence he said that “we do repairs” on this type of pump, it was clear that his direct experience in repairing pumps and the associated cost was limited, at best. His evidence was that his firm did repairs “maybe once a year” and that the irrigation pump was the largest he had ever seen.
23 In contrast, Mr Long’s report included a reasonably detailed description of what would be involved in repairing the irrigation pump and electric motor and both his report and evidence established that he had considerable experience in pump repairs. His report states that “a large number of pumps working today along the Campaspe and Loddon rivers have been reconditioned or installed by KEV Engineering during the last 38 years”. KEV Engineering is Mr Long’s engineering firm. His evidence was that “I’m not into buying second hand pumps, I’m into doing them up, right, and I’ve never had to replace a pump in 30 years or so that I’ve been doing it. I’ve always been able to repair ‘em”.
24 I am satisfied Mr Long’s considerable direct experience in repairing pumping equipment similar to that forming part of the pumping infrastructure, made him significantly better qualified than Mr McLeod to assess the viability and cost of repairing the irrigation pump and motor. And in my view his confidence in being able to effect the repair was not misplaced. I therefore accept Mr Long’s evidence that the cost of repair of the irrigation pump and associated safety improvements would be $9,092. I also accept his evidence that once repaired and improved in the manner proposed by Mr Long, the pumping infrastructure would have a value of approximately $55,000 and, if maintained thereafter, could be expected to last another 20 years. However, I note that Mr Long acknowledged in his evidence that there is a risk that the pump and motor could not be repaired, and replacing these with second hand equipment would cost roughly $3,245.
Ownership of the pumping infrastructure
25 It is not in dispute that ownership of the pumping infrastructure passed to the O’Sullivan Family Trust when it purchased Chance Lodge in 2009. By a document titled “Contract and Receipt of Sale” bearing the date 25 July 2011 and signed by each of Timothy O’Sullivan and Dale O’Sullivan, Mayback purported to sell to Dale O’Sullivan for $1,500 cash, a number of items including the following:
“…
2.“Power meter shed and associated electrical supply and waters [sic] pipes infrastructure for purchasers [sic] use or salvage.
3.Underground power cables, pits, water piper [sic] and supply infrastructures within existing and proposed easements upon Lot 2, in a proposed subdivision of Chance Lodge.
4.Large river pump situated on Crown Land and its electricity supply and water pipes, known as service address 315 Bendigo-Murchison Road Goornong.
5.Retain Origin power river pump account in the name of Dale O’Sullivan or Lot 1.
To protect from isolation the power and water supply in favour of V9836 F330 and Lot 1 in any propose subdivision of ‘Chance Lodge” [emphasis in original]
26 Timothy O’Sullivan could not recall when he signed this document or the circumstances in which he came to sign it. He could not recall his father Dale O’Sullivan giving him $1,500 in cash. However, he resisted the suggestion put to him in cross-examination that the document had been signed only after his father and Mr Martin first became embroiled in proceedings in 2012. He agreed that item 4 in the list seemed to refer to the irrigation pump on the gantry, but he had limited knowledge of the location and appearance of the pumps on or near Lot 2.
27 While I accept that Timothy O’Sullivan’s lack of recollection about when he signed the document was genuine, I am not satisfied that it was signed on the date it bears. However, nothing turns on the question of whether this document was back-dated. Mr Martin’s evidence was that he first saw this document in about December 2013, so it is clear that it had been created and signed by then. Further, in my view, there can be no doubt that item 4 in the document is a reference to the pumping infrastructure. Accordingly, on any view of the dating of the document, it purported to effect the transfer the pumping infrastructure from Mayback to Dale O’Sullivan long before the date of the Hartup Sale Contract in August 2015 and the Ferguson Settlement Deed signed in March of the following year.
28 The next document in evidence purporting to effect a transfer of any pumps, is the Hartup Sale Contract. As noted above,[1] this states that the goods sold with Lot 1 and the 30 acres included “the pumps located on or adjacent to the water supply easements”. Timothy O’Sullivan’s evidence initially was that he was not sure what pumps these words described, and then suggested that “any pumps located adjacent to easement on the way down would be in the contract, but not the pumps on Crown land”. When pressed on what pumps (plural) the words could be describing, he made reference to pumps that Ms Hartup was using and the bore pump on Lot 2. However, he ultimately conceded that he did not make any enquiries at to what pumps were being transferred by Mayback under the Hartup Sale Contract.
[1]At [18]
29 In examination-in-chief, Ms Hartup was taken to the description of “Goods sold with the land” under the Hartup Sale Contract and asked what she understood she was getting in relation to pumping infrastructure. Her evidence was as follows:
A. Dale has always said he’s owned the pump.
Q. Personally?
A.Personally, and I said to Dale O’Sullivan many a time, “If you own it, remove it”. It’s still sitting there.
Q. So what did you think you were getting in terms of ---
A. The infrastructure.
Q. Yes?
A. And the pump.
30 I understood the effect of this evidence to be that, although Ms Hartup had been told by Dale O’Sullivan that the pumping infrastructure was owned personally by him, she believed it was transferred to her under the Hartup Sale Contract. That understanding was reinforced by Ms Hartup’s evidence-in-chief a little later that she arranged for her lawyers to send the letter of 4 March 2016 claiming that she had purchased pumps and pump infrastructure located on or adjacent to the water supply easements,[2] “before they [referring to Mr and Mrs Martin] started to try and do anything with the pumps and that down there”.
[2]Extracted in part at [6] above
31 However, Ms Hartup’s evidence in cross-examination was that the reference to “pumps” in the Hartup Sale Contract was to “my little Onga pump, to the stock and domestic pump”. I then asked her to clarify her answer and the following exchange occurred:
Q.Sorry, but when you entered into that contract, can you just identify which pumps are being referred to in that, as you understood it?
A. Just the Onga pump.
Q. Just the Onga pump?
A. Yep
Q. It does say, “pumps” plural?
A.Yeah, and then we’re talking about the rest of the pumps that are on the property. There’s one, two – there’s about five or six other pumps on the property.
Q.So as you understood it at the time of this contract, you weren’t being transferred to two pumps on the gantry?
A. No.
32 Later in cross-examination, Ms Hartup asserted that the letter from her solicitors Rogers & Every sent on 4 March 2016, was likewise referring to “my little Onga and all the other pumps that are on the property”. Ms Hartup was then taken to one of the photographs of the pumping infrastructure in evidence. Her evidence was that: “the two pumps, two little pumps sitting on top there… Are both removable… Whatever is left after those little pumps are picked up and removed, are the infrastructure… You pick those two little pumps up and move them and then the rest is the infrastructure.” Ms Hartup said in evidence that she owned the infrastructure (being, according to her evidence, the pumping infrastructure not including the two pumps and motors) because “that’s part of your works licence”.
33 Although on the whole I considered Ms Hartup to be a truthful witness, on this issue her evidence was disingenuous and unconvincing. Her initial evidence in cross-examination that the reference to pumps in the Hartup Sale Contract was “just the Onga pump” was difficult enough to accept. It makes no sense that the contract would purport to effect the transfer to her of a pump which she already owned. But even that evidence was undermined by her sudden shift when it was pointed out to her that the Hartup Sale Contract referred to “pumps” plural. Her suggestion that this could somehow be referring to “five or six other pumps on the property”, was implausible. It is far from clear which (if any) of those five or six other pumps is “on or adjacent to the water supply easements” and no evidence that Ms Hartup has ever maintained a claim to any pumps on or adjacent to those easements, except for the pumps forming part of the pumping infrastructure.
34 Ms Hartup’s repeated references to the pumps on the gantry as the “two little pumps” was similarly disingenuous and implausible. Each is in fact a substantial piece of machinery. Even the smaller stock and domestic pump is probably too heavy to be removed by hand and the irrigation pump certainly is. The expert Mr Long confirmed that removing that pump would require a crane and Mr McLeod’s evidence was that: “It’d take a few blokes to get it out and a crane”.
35 Further, I do not accept Ms Hartup’s evidence that there is any basis in fact for distinguishing between the pumps sitting on the gantry and the rest of the pumping infrastructure. They together comprise an integrated mechanism for water extraction from the river and are the subject matter of the two works licences, which identify both the make of pump (albeit, in the case of the stock and domestic pump, inaccurately) and the GPS coordinates of the extraction point. In my view, my initial understanding of Ms Hartup’s evidence-in-chief states the true position, namely, that she believed that the Hartup Sale Contract effected the transfer to her of the entirety of the pumping infrastructure and her solicitors’ letter to Ferguson of 4 March 2016 reflected that belief.
36 Ultimately, however, what either Ms Hartup or Timothy O’Sullivan subjectively believed was meant by the words “pumps located on or adjacent to the water supply infrastructure” in the Hartup Sale Contract, has no bearing on the proper construction of that term.[3] In my view, the objective circumstances leave no real doubt that term should be construed as referring to the entirety of the pumping infrastructure. In particular:
[3]Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40]
· it meets the description of “pumps located adjacent to the water supply easements”;
· there is no evidence of any other pumps (plural) being adjacent to the water supply easement except for the Onga pump, which was only one pump and was in any event already the property of Ms Hartup;
· while there was some suggestion by Timothy O’Sullivan that the bore pump might have been in the vicinity of the water supply easements, this is not supported by other evidence (notably the A1 size map) and there has never been any suggestion that any party apart from Ferguson had any right to claim any interest in the bore pump; and
· an intention on the part of the parties to the Hartup Sale Contract to transfer the pumping infrastructure to Ms Hartup is consistent with the contract also effecting the transfer to Ms Hartup of the two works licences relating to the pumping infrastructure.
37 That leaves the question of how Mayback could transfer the pumping infrastructure to Ms Hartup when it had by then already executed a document purporting to transfer it (among other things) to Dale O’Sullivan. One possible answer to that question is that Mayback and Dale O’Sullivan (as the agent and controlling mind of Mayback) were no longer treating the document has having any legal effect, or were otherwise cooperating in effecting the transfer of any remaining interest in the pumping infrastructure to Ms Hartup.
38 In any case, I am satisfied that at least as against Ms Hartup, Dale O’Sullivan effectively gave up any entitlement to any interest he may have had in the pumping infrastructure when he signed the Hartup Settlement Deed on 3 September 2015. As discussed above, that Deed effected the settlement of the proceedings between Ms Hartup and Mayback in this Court, and by clause 2.1 bound Ms Hartup and Mayback to comply with and settle the Hartup Sale Contract (which was attachment 1 to the Deed). Relevantly for present purposes, by clause 9.9 of the Hartup Settlement Deed each party (which included Ms Hartup, Mayback and Timothy and Dale O’Sullivan) agreed:
“…to promptly do or arrange for others to do everything, including execution any documents, reasonably necessary to give full effect to this Deed and the transactions contemplated by this Deed and as required to give the other Parties the full benefit of this Deed.”
39 The Hartup Sale Contract is plainly a “transaction contemplated by” the Hartup Settlement Deed. Thus in my view Dale O’Sullivan was and is obliged to do everything reasonably necessary to give effect to the Hartup Sale Contract, including the term providing for the sale of the pumping infrastructure to Ms Hartup. And while this proceeding is not concerned with enforcing Ms Hartup’s rights under the Hartup Sale Contract, it is concerned with the question of the capacity of either Mayback or Timothy O’Sullivan in February or March 2016 to effect the transfer of the pumping infrastructure to Ferguson.
40 For the reasons discussed, I consider that the effect of the Hartup Settlement Deed and the Hartup Sale Contract was that each of Mayback, Timothy O’Sullivan and Dale O’Sullivan relinquished altogether their capacity to deal with the pumping infrastructure. Thus, in my view:
· the letter from Rogers & Every to Ferguson of 4 March 2016 correctly asserts that Ms Hartup purchased the pumping infrastructure as part of her purchase of Lot 1; and
· on and from 3 September 2015 at the latest, only Ms Hartup had power to transfer ownership of the pumping infrastructure.
41 For completeness, I reject the defendants’ submission that the pumping infrastructure is “owned” by the Crown. While it is likely that at least part of the pumping infrastructure (particularly the concrete foundations) is a fixture at law,[4] the better view is that at least the two pumps and possibly also the gantry, pipes and structural supports are not.[5] Even for any part of the pumping infrastructure that is a fixture, in my view it can be removed from the Crown land by the owner for the time being of the pumping infrastructure and is therefore not “owned” by the Crown unless and until it can be shown to have been abandoned by the owner.
[4]Agripower Barraba Pty Ltd v Blomfield (2015) 317 ALR 202 at [74]-[81]
[5]See, for example, Eon Metals NL v Commissioner of State Taxation (WA) (1991) 22 ATR 601 and National Australia Bank Ltd v Blacker (2000) 179 ALR 97
42 The pumping infrastructure is installed, maintained and operated pursuant a “works licence” under s67 of the Water Act, discussed further below. In my view, at least for so long as a valid works licence is maintained in respect of the pumping infrastructure, it probably has the character of a tenant’s fixture.[6] As such, it can be removed by the owner of the pumping infrastructure, providing that the owner first applies for and is granted a works licence under s67 of the Water Act, for decommissioning and removal. I note that, given the regime for operation and removal provided for under the Water Act, it may even be arguable that the pumping infrastructure retains the character of a chattel despite being fixed to the land.[7] Either way, in my view, it is not presently the property of the Crown.
[6]For a case that confirms that the principles applicable to tenant’s fixtures extends to tenure akin to a tenancy under a licence, see Never-Stop Railway (Wembley) Lid v British Empire Exhibition (1924) Incorporated [1926] Ch 877, per Lawrence J at p885, cited and applied in Wincant Pty Ltd v State of South Australia (1997) 69 SASR 126
[7]See, for example, TEC Desert Pty Ltd v Commissioner of State Revenue (2010) 241 CLR 576
The Water Act and water licensing
43 A proper examination of the issues in the proceeding requires a reasonably thorough understanding of water licensing regime under the Water Act, including aspects of how that regime operates in practice. Evidence about the practical operation of the Water Act (at least as administered by Goulburn-Murray Water, the authority responsible for managing the Campaspe River) was given by Ms Lyndley Strachan. Ms Strachan’s title is “Customer Services Officer, Diversions” with Goulburn-Murray Water. She has been in that role for just over six years and has worked with Goulburn-Murray Water and its predecessor authorities since 1978.
44 In 2004, the Victorian Government released its white paper Securing Our Water Future Together. It set out a number of key priority areas to underpin the future sustainable management of water resources in Victoria, including by proposing that water allocations and entitlements and irrigation be restructured to provide for a more secure and efficient water market. Amendments later introduced (primarily by the Water (Resource Management) Act 2005 (Vic)) saw water allocations converted into independent, legally recognised and tradeable entitlements (by auction or tender process). The reform “unbundled” water rights, with the result that water rights were no longer tied to particular parcels of land and could be traded separately
45 Since that reform, the Water Act has provided that a landowner wishing to take water from a source such as the Campaspe River for irrigation or stock and domestic use, must have three rights or licences, namely, a “water share”, “water use licence” and a “works licence”. I will deal with each of these in turn.
46 A water share is an entitlement to a share of the water available in a waterway.[8] The authority to take water under a water share may be subject to conditions such as the place where water can be taken from, and the times or rates which the water can be taken.[9] The volume of a water share is defined as a maximum amount of allocation that can be made against it each year. In practice, water shares are often sold separately to the property, and there is now a mature market for buying and selling water shares. As indicated above,[10] at the same time as settling on the purchase of Lot 2, Ferguson also purchased from Mayback water shares no. WEE057245 and WEE056865, representing a total water share of 39.5 megalitres.
[8]Water Act s33F(2)
[9]Water Act s33F(3)
[10]At [17]
47 A water use licence authorises the use of untreated river water for the purpose of irrigation on the land specified in the licence.[11] The licence sets out the conditions for use, such as the amount of water that can be used on the land in a single irrigation season.[12] Ordinarily, water use licences are tied to the land – the holder of a water use licence is always the owner of the land described in the licence. When the property is sold, the water use licence will stay with the land and will automatically transfer to the new owner.[13] Where the land is covered by a single water use licence, and the land is subdivided, the water use licence is automatically cancelled and the owners of the subdivided lots must each apply for a separate water use licence.[14] The Minister has the power to cancel[15] or revoke[16] a water use licence.[17]
[11]Water Act s51(1)(a)
[12]See, for example, Act s64(1)
[14]See, for example, Act s64AL
[16]Water Act s64AK
[17]Other powers to cancel water use licence - Water Act s64AM
48 A works licence is a licence to construct, operate, alter, decommission or remove works associated with the extraction of water. This applies to pumping infrastructure that is designed to irrigate or be used for stock and domestic purposes (or both).[18] Generally speaking, a separate works licence must be applied for each step in the process. That is, a works licence to construct works, then a further works licence to operate and, finally, a works licence to decommission and remove.
[18]Water Act s67(1)
49 Unlike, for example, motor vehicle registration, there is nothing in the Water Act to suggest that a works licence operates to recognise or confer on holder of the licence any title to or ownership of the pumping infrastructure described in the works licence. A licence may be subject to conditions.[19] The works licences in evidence in this case include a condition that: “The licence holder must keep all works…associated with this licence …in a safe and operable condition …”. Section 75 of the Water Act makes it an offence to carry out unauthorised operation of the works.
[19]Water Act s71
50 The process for the transfer of a works licences is set out in s74 of the Water Act. The licence holder may apply to the Minister (or delegate) for approval to transfer the licence. Section 74(4) provides that the application must be in the prescribed form (Form 31), and the form requires the signatures of all licence holders for a transfer. The explanatory notes to the Form include, in point 9:
“Reasons for refusal of the works licence may include:
i. Applicant is not the owner of the Works.
ii. All Works Licence owners have not signed the application.”
51 Section 74(5A) provides that, in circumstances where the transfer is intended to be a permanent one to a successor in title to the owner of the land to which the works licence relates, the Minister (or their delegate) need not have regard to the matters set out in other provisions. Thus this provision contemplates a seamless transfer of a works licence to a successive owner of the land, but there is nothing in the Water Act that deems or prescribes that the licence is transferred with the land. Ms Strachan’s evidence was that, in practice, most works licences are transferred to the new owner of the land on the date of settlement.
52 Failure to comply with a condition of a works licence (such as a condition relating to future maintenance and operation of the works) is an offence under the Water Act, but the Act does not expressly provide for cancellation of a works licence. There is nothing in the Act itself, the regulations or extrinsic material that explains why (unlike water use licences), the Water Act does not provide for cancellation of works licences or for what happens with works licences on sale or subdivision of the land.[20] Ms Strachan gave evidence that where there is a breach of a works licence, a notice of breach would be issued and Goulburn-Murray Water had the authority to cancel the licence. However, she has never been involved in cancelling a works licence for breach.
[20]Victoria, Parliamentary Debates, Legislative Assembly, 10 August 2006, 2803-2808 (John Thwaites, Minister for Water); Explanatory Memorandum, Water (Governance) Bill 2006 (Vic)
53 The Minister for Water has issued a policy document for managing works licences (“Policy”),[21] which appears to have been issued pursuant to the Minister’s power of delegation under the Water Act.[22] This policy document:
[21]Lisa Neville MP, Minister for Water, Policies for Managing Works Licences (2 September 2010), available at: s6, definition of ‘delegate’, and s306 of the Water Act which allows the Minister to delegate “any power, discretion, function, authority or duty of the Minister under this or any other Act or under any subordinate instrument made under this Act…”, with some exceptions
· prevents a works licence to operate works being issued if another person already holds a licence to operate the works,[23] (which , consistently with Form 31 under the Water Act, would prevent Ferguson from applying for a licence to operate the works where Ms Hartup holds the existing works licences in respect of the pumping infrastructure);
[23]See section 8(1) of the Policy
· provides for circumstances where more than one works licence has been issued for operation of the same works,[24] (which suggests that it is possible to issue two or more works licences in relation to the same pumping infrastructure); and
· suggests considerations to assist with determining appropriate terms for works licences.[25]
[24]See section 8(2) of the Policy
[25]See section 11 of the Policy
54 Ms Strachan gave evidence that Goulburn-Murray Water generally works under the assumption that the applicant for a works licence owns the pumping infrastructure which the applicant intends to operate under the works licence. The same assumption applies when there is an application to transfer a works licence. No checks to confirm ownership are carried out. Ms Strachan’s evidence was that the works licences relating to the pumping infrastructure in this case were transferred from Mayback to Ms Hartup in December 2015 and any changes to the works licences therefore required Ms Hartup’s consent.
55 Ms Strachan acknowledged that the way the application process and licencing regime currently operates, it is theoretically possible for someone to own infrastructure and for another person to hold the licence to operate the infrastructure. However, the licencing regime does not expressly provide for circumstances where the owner of the pumping infrastructure does not allow the works licence holder to operate the pumping infrastructure, or where the works licence holder does not consent to the owner of the pumping infrastructure taking a transfer of the works licence or applying for a second works licence.
56 Consistently with the Policy and the Water Act, Ms Strachan gave evidence that another works licence could be granted on the same pumping infrastructure, but this was only possible if the existing works licence holder consented. Ms Strachan observed that having two works licences over the same works even with consent, can create difficulties with sharing the actual usage, particularly where the parties are in dispute. This is consistent with the Policy, which discourages the issue of licences to more than a single individual or incorporated body, unless they are using the water for a shared business.[26]
[26]See section 8(3) of the Policy
57 On the question of whether Ms Hartup might have been willing to share the use of the pumping infrastructure with Ferguson (such as by consenting to Ferguson having a second works licence), Ms Hartup’s evidence was that she understood following the mediation that Ferguson would be approaching her with a proposal for shared use, but no approach was ever made. On the question whether she would have countenanced such a proposal, her evidence was as follows:
Q.Can I just ascertain from you whether, if such a proposal were made and it involved getting your consent or assistance in securing access to existing infrastructure through a further works license being issued, what your attitude to that would be?
A.Um, up until last week I would have been probably quite happy to do that, but certain events have happened since then, which I find very distasteful and I don't want to go into all that, but I would maybe be a bit reluctant at this stage to have anything to do with the Martins.
Q.But it's something you might have contemplated in around March…?
A.I would have, Your Honour
Q.Last year?
A.I would have, yep.
58 It is not in dispute that since settlement of the Ferguson Sale Contract, it has been open for Ferguson to apply to Goulburn-Murray Water for a works licence for new pumping equipment to be installed in or adjacent to the Campaspe River at the boundary of Lot 2. Ms Strachan’s evidence was to the effect that the only requirement that Goulburn-Murray water was likely to impose, was that it be located at least 10 to 15 meters from the existing pumping infrastructure. This would ensure that the GPS coordinate for any new equipment was different from that allocated to the existing pumping infrastructure and Ms Hartup’s Onga pump.
The circumstances of the Ferguson Settlement Deed
59 The mediation was self-evidently a negotiation aimed at settling the proceeding as it then stood. Accordingly, the starting point for any consideration of the surrounding circumstances of the agreement reached at that mediation, is the claims, defences and counterclaims then being pursued in the proceeding. More particularly, a proper analysis of the objective meaning of clause 6 of the Ferguson Settlement Deed, begins with consideration of the parties’ competing claims in respect of the pumping infrastructure.
60 Most of the amendments to Ferguson’s original claim made in the period up to the mediation on 2 March 2016, have concerned the claims to the various water licences and particularising Ferguson’s alleged loss and damage. Ferguson’s claims concerning the pumping infrastructure have been relatively static. In particular, there were no material changes to the allegations affecting the pumping infrastructure between Ferguson’s amended statement of claim dated 14 November 2014 and its further amended statement of claim dated 31 August 2015.
61 Ferguson’s claims in respect of the pumping infrastructure as at the date of the mediation were in substance as follows:
· as at 1 August 2011 and thereafter, there was situate on and attached to Lot 2: “Irrigation piping with pumps and electrical motors attached” (comprising part of what was defined as “the Equipment”) (amended statement of claim at [9]);
· pursuant to (among other things) the First Sale Contract and the Ferguson Sale Contract, Ferguson “became entitled to ownership and possession of the Equipment” (amended statement of claim at [10]);
· on 24 October 2013, Dale O’Sullivan stated in open court that he had purchased the Equipment from Mayback and was the owner thereof (amended statement of claim at [12]);
· by letter from Dale O’Sullivan to Ferguson’s solicitors dated 10 December 2013, Dale O’Sullivan claimed to be the owner of the Equipment (amended statement of claim at [13]);
· by letters sent in October and November 2013 from Ferguson’s solicitors to Mayback’s solicitors, Ferguson sought clarification from Mayback that Ferguson had purchased the Equipment from Mayback and was the owner thereof but did not get a response (amended statement of claim at [14]);
· having regard to the foregoing, Ferguson sought a declaration that it is the owner of the Equipment (amended statement of claim at [15]); and
· further or in the alternative, if Dale O’Sullivan had purchased the Equipment from Mayback before the parties entered into the First Sale Contract, then Mayback failed to advise Ferguson that it was no longer the owner of the Equipment and Mayback was in breach of the First Sale Contract and Ferguson has thereby suffered loss and damage being the cost of replacing the Equipment (amended statement of claim at [15D]).
62 The defendants’ defence to those claims as set out in their amended notice of defence dated 4 December 2014 was in substance that, before they entered into the First Sale Contract, Mayback advised Ferguson that the items being sold under the First Sale Contract did not include the items referred to in paragraph 9 of Ferguson’s amended statement of claim (including the pumping infrastructure), as it had sold the items to Dale O’Sullivan (amended notice of defence at [3]). The defendants alleged further and in the alternative that the items were situated on and formed part of the easements granted in favour of Lot 1, and also that the easements included “the right to unimpeded possession, control and use of infrastructure installed thereon for the purpose of drawing water from the Campaspe River” (amended notice of defence at [12(d) and (e)]).
63 The defendants also made an allegation in the following terms:
“Further and in the alternative by reason of the scope of the aforesaid easements the First and Second Defendants have either retained legal ownership of all infrastructure associated with the taking and distribution of water that was present on the easements on 12 March, 2012 or are entitled to assume the rights of ownership to the exclusion of the Plaintiff over that infrastructure.” (amended notice of defence at [12(f)])
This allegation is particularly notable for present purposes. Although made “further and in the alternative” to the allegation that Mayback had sold the pumping infrastructure to Dale O’Sullivan, it is nevertheless an unqualified assertion to the effect that both Mayback and Timothy O’Sullivan “retained legal ownership” or “were entitled to assume the rights of ownership to the exclusion of [Ferguson] over” (among other things) the pumping infrastructure.
64 Mayback was also at this time pursuing a counterclaim (dated 17 December 2014) against Ferguson. The counterclaim alleged that Mayback was the owner of Lot 1 and Ms Hartup was in occupation of that Lot (counterclaim at [8]). It included allegations in effect that from 12 March 2012 to 15 August 2013, the easements benefitting Lot 1 contained infrastructure that was specifically related to the supply of water to Lot 1. It further alleged that Ferguson had interfered with the ability of “the occupier of Lot 1” (Ms Hartup) to make use of the easements, including by: “Seeking to claim ownership or alternatively rights equivalent ownership of” the pumping infrastructure. The counterclaim sought relief that included declarations and injunctions preventing Ferguson from continuing to interfere with Lot 1’s use of the easements and the infrastructure associated with the easements.
65 I am satisfied from the defendants’ pleadings as a whole, that references in those pleadings to:
· “items referred to in paragraph 9” of Ferguson’s amended statement of claim;
· “infrastructure…for the purpose of drawing water from the Campaspe River”;
· “infrastructure associated with the taking and distribution of water that was present of the easements”;
· “infrastructure that was concerned with the supply of water to Lot 1”,
and like terminology, were all intended to, and did, include the pumping infrastructure.
66 Ferguson’s defence to the counterclaim dated 22 January 2015 repeated its allegations that the infrastructure (including the pumping infrastructure) was “situate on Lot 2 and exclusive possession thereof belonged to [Ferguson] pursuant to the provisions of the [First Sale Contract]” (counterclaim at [5(b)]).
67 Thus as at the date of the mediation between the parties, there were effectively four alternative claims in respect of the ownership of the pumping infrastructure:
· Ferguson’s claim relying on the pumping infrastructure being attached to Lot 2 and thereby transferring to Ferguson pursuant to (among other things) the First Sale Contract and the Ferguson Sale Contract;
· the defendants’ claim that the pumping infrastructure had to the knowledge of Ferguson been sold to Dale O’Sullivan before the First Sale Contract;
· the defendants’ claim that, by reason of the easements agreed by the parties, the pumping infrastructure belonged to Lot 1; and
· the defendants’ claim that, by reason of the easements agreed by the parties, each of Mayback and Timothy O’Sullivan owned or were entitled to assume the rights of ownership to the pumping infrastructure.
68 In July 2015, Ferguson became aware that Mayback and Ms Hartup were seeking to settle the proceedings between them. By letters dated 13 July 2015, Ferguson’s then solicitor Mr Cahill wrote to each of the defendants’ solicitors Nicholsons, Ms Hartup’s solicitors Rogers & Every and Goulburn-Murray Water, seeking (among other things) assurances in relation to dealings in works licences then held by Mayback. In particular, the letter to Nicholsons stated as follows:
“My client wishes to point out, that in proceedings against your client which are in the course of transferred to the County Court, my client is seeking certain relief concerning ownership of the pumping equipment and Works and Use Licences, from your client. Pending the outcome of these Court proceedings, my client is of the view that your client should not make any arrangements with Mrs Hartup concerning the matters of water, transfer of and or Use Licences, etc... I would seek your client’s undertaking that it will not deal with the pumping equipment, the Works Licences Numbers WLE057484 and WLE055454 or any other Works Licences that Mayback Pty Ltd may hold in respect of the site of the pumping equipment.”
69 No undertakings of the kind requested were provided on behalf the defendants and Mr Cahill later received notification from Goulburn-Murray Water that it had received an application to transfer the works licence relevant to the matters raised in Mr Cahill’s letter. Accordingly, by summons filed 20 July 2015, Ferguson applied for orders that Mayback be restrained from dealing with the works licences. The summons did not seek any orders in relation to any dealings in the pumping infrastructure. The application was heard by His Honour Judge Cosgrave on 10 and 18 August 2015. By a ruling made on 21 August 2015, His Honour refused the application.
70 Relevantly for present purposes, none of the affidavits filed on behalf of the defendants disclosed what had occurred or was proposed in relation to any transfer of ownership of the pumping infrastructure. Nor is there anything in His Honour’s reasons to suggest that any submissions were made to him concerning any proposal to transfer the pumping infrastructure to Ms Hartup, or otherwise.
71 Indeed, an affidavit by the solicitor for the defendants Ms Doyle affirmed on 7 August 2015 filed in opposition to the application referred to the Hartup Sale Contract, but exhibited only two pages of the Contract; the signing page and the page containing the provisions for the transfer of the various water licences (pages 2 and 4). It omitted page 3, which was the page containing the term pursuant to which (as discussed above[27]) Mayback transferred ownership of the pumping infrastructure to Ms Hartup. I hasten to say that I make no criticism of Ms Doyle in relation to this matter. It is apparent from her affidavit that these were the only pages of the Hartup Sale Contract sent to her and the evidence was that Nicholsons did not act for Mayback in relation to the Hartup Settlement Deed or the Hartup Sale Contract.
[27]At [40]
72 On 22 February 2016, nine days before the mediation, the defendants’ solicitors sent a “without prejudice” letter to Ferguson’s solicitors with an offer to settle the dispute. The letter also stated that Mayback could not transfer any works licences to Ferguson, as it was no longer the licence holder. Counsel for the defendant initially resisted admission of the letter on the basis of “without prejudice” privilege, but later conceded (correctly, in my view) that it fell within the exception to the exclusion of evidence of settlement negotiations provided for in s131(2)(f) of the Evidence Act 2008 (Vic).
73 The full text of the letter is as follows:
“We refer to the abovenamed matter and your telephone conversation with Ms Siobhan Doyle of our office on 15 February 2016.
As discussed the mediation for 24 February 2016 has been cancelled in light of both parties agreement that the matter will be settled before the scheduled hearing at the County Court beginning 7 March 2016.
We are instructed that our client cannot transfer any works licences to your client. Our client is no longer a works licence holder. Further, it has been confirmed by Ms Louise Secomb, Solicitor for Goulburn Murray Water, that your client can apply for a new works licence. Your client is simply required to apply for a new works licence and construct the necessary infrastructure. This has been our client’s position from the start of this unnecessary litigation.
Pursuant to paragraph 9 of your clients Further Amended Statement of Claim dated 28 August 2015, our client has instructed that it is willing to transfer ownership of the following to your client:
1. Power pole and electrical supply wire;
2.The shed containing electrical supply metres, power points and electrical wiring; and
3. Irrigation piping and pumps and electrical motors attached.
Our client has expended considerable financial resources defending this matter. In order to settle this dispute before the scheduled hearing beginning on 7 March 2016
Our client will require your client to pay our clients legal fees calculated on a standard basis. We are instructed that our client will require payment of $50,000. This figure is calculated using both the Magistrates Court Scale of Costs and the County Court Scale of Costs. This figure does not include the costs of negotiating and drafting a settlement deed. If the drafting of a deed is overly complicated due to disagreement between the parties further costs will be necessary. The payment of funds and the agreement regarding the power shed and pumping infrastructure will all be set out in a settlement deed in the usual form to be agreed by both parties.
We look forward to your urgent response. If the matter is not resolved by 24 February 2016 a mediation must be urgently arranged and scheduled before the hearing.
Yours faithfully,
Nicholsons Lawyers & Consultants
74 Given the reference in the letter to paragraph 9 of Ferguson’s further amended statement of claim dated 28 August 2016, there can be no doubt that the “irrigation piping and pumps and electrical motors attached” is the pumping infrastructure, and thus the letter is in substance an offer to “transfer ownership” of (among other things) the pumping infrastructure. Notably the letter also states: “The payment of funds and the agreement regarding the power shed and pumping infrastructure will all be set out in a settlement deed in the usual form to be agreed by both parties”. The offer was not accepted by Ferguson. However, in my view, these aspects of the letter provide important context for the Ferguson Settlement Deed executed at the mediation.
75 Timothy O’Sullivan gave evidence that he recalled speaking to his solicitor Ms Doyle about offers to settle, but did not recall whether he gave her specific instructions to make the offer in the letter of 22 February 2016. He added that Dale O’Sullivan may also have had some input in the formation of the offers to settle as he had a good understanding of the case, and provided him with most of his information.
76 The mediation on 2 March 2016 was attended by barrister Carey Nichol (as mediator), Mr and Mrs Martin, Ferguson’s solicitor Glen Thexton, Dale and Timothy O’Sullivan and their solicitor Ms Doyle. Mr Thexton gave uncontested evidence that at the commencement of the mediation he objected to Dale O’Sullivan being in the room but Dale O’Sullivan insisted on being there on the basis that he was Mayback’s agent. Timothy O’Sullivan said he thought his father was still Mayback’s agent at the time of the mediation and “he relied on him [Dale O’Sullivan] for my decisions”.
77 The mediation proceeded in the orthodox fashion, commencing with a brief joint session where parties stated their respective positions, including by exchanging written position papers. The position papers of both parties did little more than summarise the pleaded case of each party. Ferguson’s position paper includes the assertion that: “The Plaintiff has suffered further loss in the form of the Equipment [which included the pumping infrastructure] being sold to Dale Gary O’Sullivan”.
78 Timothy O’Sullivan gave evidence that the main discussion in the joint session was about the works licences. He said there were questions about who owned the works licences and “we told them that that Mayback didn’t own any works licences, that they had been transferred”. Consistently with Timothy O’Sullivan’s earlier evidence concerning his father Dale being the primary decision-maker for Mayback, his evidence was that he did not say much in the open session: “It would have been my Dad, Dale, who did most of the speaking as well as my representation [Ms Doyle] and I think Glen Thexton”. Mr Martin also gave evidence that most of the discussion during the mediation was with Dale O’Sullivan and there was very little input from anyone else from the defendants’ side.
79 The joint session was followed by private sessions, where the main focus appears to have been negotiating a settlement sum to be paid by the defendants to Ferguson. The amount ultimately agreed was $20,000. Mr Martin’s evidence was that the difficulty at the mediation “was not on the transfer of the pumping infrastructure and power pole and so on, that was clearly accepted”. He said that what took the time was agreeing on a figure for damages. Mr Martin’s recollection was that once this figure was agreed, the parties came back together, and Mr Thexton wrote up the terms of settlement.
80 In the course of the drafting up of the terms of settlement, there was some discussion between those present about how the pumping infrastructure should be described, which resulted in Mr Thexton making some alterations to the wording of clause 6 of the terms. Mr Martin’s evidence about this was to the effect that this change was made in the context of Dale O’Sullivan making a comment in passing that: “the terminology he thought Helen Hartup used was pumping infrastructure” . Mr Thexton’s evidence was that Ms Doyle was engaging primarily with Dale O’Sullivan about these amendments, and the original words in clause 6 were struck out at Ms Doyle’s request and replaced with words that more clearly identified the pumping infrastructure.
81 Timothy O’Sullivan’s evidence was that his father Dale crossed out the words in clause 6 and made the changes to that clause This is unlikely, given the handwriting in the document (including the alteration) is Mr Thexton’s. Regardless, it is clear that Dale O’Sullivan was actively involved in the making of the changes. Mr Thexton said that the effect of what was said during these discussions was: “we will give you the equipment”. The only other evidence about what was said at the mediation about the subject matter of clause 6, was the evidence of:
· Mr Martin, that there was no mention that Ms Hartup had some interest in the pumping infrastructure;
· Mr Thexton, that he had no personal knowledge or suspicion of any transference of title in the pumping infrastructure by or between the defendants; and
· Timothy O’Sullivan, that he could not recall himself or anyone on his behalf saying that neither he nor Mayback had any interest in the pumping infrastructure.
82 At some point during the mediation, Dale O’Sullivan had a telephone conversation with Ms Hartup. There is no evidence that any of the other attendees at the mediation were in earshot when that conversation occurred. Timothy O’Sullivan recalled his father leaving the room to talk to Ms Hartup. Ms Hartup gave evidence that she was called by Dale O’Sullivan and asked by him to consider whether she would allow the Martins to have the big pump and, “that’s when I said the Martins can come and talk to me”. She had earlier given evidence that Mr Martin did approach her after the mediation and she asked him to put a proposal to her, but he never got back to her.
83 I am satisfied that the joint discussion at the mediation about the pumping infrastructure was consistent with the recital and clause 6 to the Ferguson Settlement Deed. In particular, I am satisfied that at no point did anyone on behalf of the defendants disclose to Ferguson that ownership of the pumping infrastructure had already been transferred to Ms Hartup or that, despite clause 6, neither defendant in fact had any interest in the pumping equipment to transfer. I am also satisfied that Ferguson (by its sole director Mr Martin) relied on the discussion at the mediation and the Ferguson Settlement Deed, as giving effect to the transfer to Ferguson of ownership of the pumping infrastructure.
Ferguson’s alternative claims in the proceeding
84 Since filing its second further amended statement of claim dated 17 November 2016 pursuant to the orders of Judicial Registrar Burchell made 19 October 2016, Ferguson has sought to advance two alternative claims in this proceeding. First, the original claim which, in addition to the claims to ownership of the pumping infrastructure summarised above, claimed in effect that:
· there was an implied term of the First Sale Contract that Mayback would do all things and sign all documents necessary to enable Ferguson to take a transfer of Mayback’s works licences in respect of the pumping infrastructure;
· in breach of the First Sale Contract, Mayback failed to do all things and sign all documents necessary to enable Ferguson to take a transfer from Mayback of the works licences and lawfully operate the pumping infrastructure;
· Ferguson has thereby suffered loss and damage, being the loss of opportunity to irrigate the irrigation land; and
· if Ferguson is unable to obtain a transfer of the works licences and has to construct another pumping site, Ferguson will incur a cost in doing so of $93,633.
85 Secondly, Ferguson’s claim based on the Ferguson Settlement Deed. That claim is to the effect that, by that Deed, Mayback and Timothy O’Sullivan agreed that they and each of them would transfer to Ferguson their interest in the pumping infrastructure and, in breach of the Deed, Mayback and Timothy O’Sullivan and each of them have failed to transfer the pumping infrastructure to Ferguson. Ferguson pleads further and in the alternative that, by entering into the Ferguson Settlement Deed, Mayback and Timothy O’Sullivan and each of them represented that they had an interest in the pumping infrastructure and were legally entitled to transfer their interest to Ferguson. Ferguson alleges that the representation was misleading or deceptive or likely to mislead or deceive contrary to s18 of the Australian Consumer Law 2010 (Cth) (“ACL”) or, alternatively, negligent.
86 Ferguson’s claim based on the Ferguson Settlement Deed as pleaded in its second further amended statement of claim (paragraphs 20 to 23) were struck out by Her Honour Judge Lewitan on 24 February 2017. Her Honour ordered that any application by Ferguson to amend its statement of claim be made by 24 March 2017. That application was duly made by summons dated 23 March 2017.
87 On 31 March 2017, the defendants’ solicitors wrote to Ferguson’s solicitors declining to consent to Ferguson’s proposed third further amended statement of claim, essentially on the basis that the Ferguson Settlement Deed was an “accord and satisfaction” type of agreement such that Ferguson’s original claim ceased at the time of entering into the Ferguson Settlement Deed. The letter went on to assert that by reinstating the original claim, Ferguson had repudiated the Ferguson Settlement Deed, the defendants accepted the repudiation and considered the Ferguson Settlement Deed at an end. The letter sought restitution of the $20,000 paid by the defendants under the Ferguson Settlement Deed and costs.
88 Ferguson’s application for leave to file and serve its third further amended statement of claim came on for hearing before His Honour Judge Macnamara on 28 April 2017. The application was opposed by the defendants on the basis that Ferguson’s obligation to elect between its two alternative claims arose “at the point of pleading” and that a pleading that failed to make the election is, for that reason, objectionable. His Honour heard argument on the election issue, including by being taken to the decision of Osborne v McDermott (1998) 3 VR 1, and the commentary in Williams, Civil Procedure Victoria on pleading alternative relief and electing at the trial which relief to ask for.
89 His Honour granted Ferguson leave to file and serve the proposed third further amended statement of claim, stating that:
“I asked Ms Tadros if she were able to refer me to any authority which would indicate an obligation to make an election earlier. Clearly, for instance, in contractual terms, a party which is confronted with a repudiatory breach must, within a reasonable time, elect either to treat the contract as repudiated and discharged on the one hand, or affirm the contract and lose the ability to treat the contract as discharged. Here, of course, the underlying events have taken place already and the debate is as to what the legal consequences are and how those events should be legally characterised. In my view, Mr Smith’s submission that it is possible for a party to advance concurrently inconsistent cases upon that point is correct, and the obligation to elect arises only immediately prior to judgment in accordance with the authorities that are referred to in the passage from paragraph 13.02.45 of Civil Procedure, which I have already quoted.”
90 Despite His Honour’s clear finding on this issue, the defendants have persisted at trial with their argument that, by reinstating the proceedings on 19 October 2016 and proceeding with “its original cause of action as its primary cause of action (at least until abandoning it on the second day of trial)” [emphasis added], Ferguson has breached the Ferguson Settlement Deed, entitling the defendants to exercise their right to terminate that Deed. They maintain that the Ferguson Settlement Deed is an “accord and satisfaction” type of agreement and Ferguson’s original claim was extinguished upon execution of the Ferguson Settlement Deed.
91 The defendants have also submitted that if the Court finds that Ferguson Settlement Deed is an “accord and conditional satisfaction” type of agreement, there are two possible consequences. If the Court is satisfied that the defendants have complied with their obligations under the Ferguson Settlement Deed, then the release provided for in that Deed is in effect and Ferguson has repudiated the Ferguson Settlement Deed by persisting with its claims in this proceeding.
92 If, on the other hand, the court finds that the defendants have failed to comply with their obligations under the Ferguson Settlement Deed, then Ferguson was obliged to make an election within a reasonable time to accept the defendants’ alleged repudiation and terminate the Ferguson Settlement Deed to litigate its original claim, or to keep the Ferguson Settlement Deed on foot and sue to enforce that Deed. The defendants allege that Ferguson could not do both, citing Robert Deutsch & Ors v Erwin Deutsch & Ors (“Deutsch”).[28] Again the defendants assert that, by filing its second further amended statement of claim “in which it litigated its original cause of action as its primary claim” [emphasis added], Ferguson should be taken to have elected to terminate the Ferguson Settlement Deed.
[28][2012] VSC 227 at [82]-[102]
93 The defendants do not explain the basis for the assertion that Ferguson has proceeded with the original claim since reinstating the proceeding “as its primary cause of action”. The most that can be said about it is that the original claim has appeared first in the iterations of Ferguson’s pleadings since it reinstated the proceeding. This is hardly surprising. As a matter of drafting convenience, it is less disruptive to a document to insert added paragraphs alleging an alternative cause of action at the end rather than in the middle of an existing document.
94 However, even if the assertion were well-founded, I am satisfied that Ferguson has at all material times since reinstating the proceeding until the second day of trial, sought to maintain, in the alternative, both the original claim and a claim based on the Ferguson Settlement Deed. For the reasons discussed below, in my view, this is sufficient to answer the defendants’ arguments on this issue. On the second day of trial, Ferguson elected to proceed only with its claim under the Ferguson Settlement Deed.
Analysis
Has Ferguson repudiated or rescinded the Ferguson Settlement Deed?
95 The starting point for the consideration of this question is leading case of United Australia Ltd v Barclays Bank Ltd[29] (“United Australia”), a decision of the Privy Council. In that case, a cheque payable to the plaintiff was converted by MFG Trust Ltd and collected for that company by the defendant bank. The plaintiff originally brought proceedings against MFG Trust Ltd alleging money lent or money had and received, but later discontinued that proceeding. The plaintiff then sued Barclays in conversion. Barclays conceded the conversion of the cheque, but defended the proceeding on the basis that by first suing MFG Trust Ltd for breach of contract, the plaintiff had waived its right to bring the second action in tort.
[29][1941] AC 1
96 Passages in the decision of Lord Atkin have been the wellspring for numerous later authoritative statements on both the law relating to election and to the distinction between alternative rights and alternative remedies. In relation to the former, His Lordship said:
“On the other hand, if a man is entitled to one of two inconsistent rights it is fitting that when with full knowledge he has done an unequivocal act showing that he has chosen the one he cannot afterwards pursue the other, which after the first choice is by reason of the inconsistency no longer his to choose. Instances are the right of a principal dealing with an agent for an undisclosed principal to choose the liability of the agent or principal: the right of a landlord where forfeiture of a lease has been committed to exact to the forfeiture or to treat the former tenant is still tenant and the like. To those cases the statement of Lord Blackburn in Scarf v Jardine applies ‘where a man has an option to choose one or other of two inconsistent things when once he has made his election it cannot be retracted.’”[30]
[30][1941] AC 1 at p30
97 But where alternative remedies are claimed, the point at which an election must be made is deferred:
“I therefore think that on a question of alternative remedies no question of election arises until one or other claim has been brought to judgment. Up to that stage the plaintiff may pursue both remedies together, or pursuing one may amend and pursue the other: but he can take judgment only for the one, and his cause of action on both will then be merged in the one.
· about 10 days earlier, Nicholsons had made an offer to settle the proceeding on behalf of “our client”, that included an offer transfer of ownership of the pumping infrastructure to Ferguson; and
· the Ferguson Settlement Deed expressly recited that the parties were in dispute over the ownership of the pumping infrastructure.
121 In my view, those circumstances would have led a reasonable businessperson in the position of the parties, inexorably to the conclusion that the interest the defendants were agreeing to transfer by clause 6 of the Ferguson Settlement Deed was the interest consistent with the interest they claimed in by clause 12(f) of their amended notice of defence dated 4 December 2014. Namely, legal ownership or an entitlement to assume the rights of ownership of the pumping infrastructure to the exclusion of others. In other words, the very interest they had transferred to Ms Hartup in August of the previous year.
122 I reject the defendants’ submission that “it makes commercial sense” for clause 6 to encompass the transfer of no interest at all, essentially on the basis that the parties knew the question of ownership of the pumping infrastructure was in dispute and uncertain.[50] While it is indeed the case that Ferguson itself was claiming ownership, so were the defendants. What makes commercial sense is that Ferguson was seeking by the Ferguson Settlement Deed to put the issue beyond doubt, by taking a transfer of the interest that the defendants (including Mayback’s agent Dale O’Sullivan) claimed and in fact held, until they transferred it to Ms Hartup.
[50]Defendants’ submissions at [9]
123 I also do not accept the submission that there was nothing further that the defendants were required to do following execution of the Deed with respect to complying with clause 6.[51] If it were not for the fact that they had already passed effective ownership and control to Ms Hartup, they could have given to Ferguson the same ownership and control that they gave to her. Namely, access to and possession of the pumping infrastructure, free of competing claims. The only impediment that would then have subsisted to Ferguson’s unfettered access to, and use of, the pumping infrastructure, was the two works licences in the name of Ms Hartup attaching to the irrigation pump and the stock and domestic pump.
[51]Defendants’ submissions at [11]
124 It follows that, in my view, by failing to pass rights of ownership or an entitlement to assume the rights of ownership to the exclusion of others, the defendants were in breach of the Ferguson Settlement Deed.
Has there been misleading and deceptive conduct or negligent misrepresentation by the defendants?
125 Essentially for the same reasons that clause 6 of the Ferguson Settlement Deed should be construed as conferring an ownership interest in the pumping infrastructure, I am satisfied that each of the letter of 22 February 2016 and the defendants’ agreement to the recital and clause 6 of Ferguson Settlement Deed, constituted a representation to the effect alleged by Ferguson.[52] And it is not in dispute that the representation was false and misleading, in the sense that neither of the defendants nor Dale O’Sullivan as Mayback’s agent, in fact had any interest in the pumping infrastructure at the relevant time. I am also satisfied that Ferguson (by its sole director Mr Martin) relied on the offer in the letter of 22 February 2016 and the proposed terms of the Ferguson Settlement Deed in entering into the Deed.
[52]Ferguson’s third further amended statement of claim at [27]
126 However, there is a flaw in Ferguson’s submission on misleading and deceptive conduct and negligent misrepresentation that makes it unnecessary for me to consider further the issues raised in the parties’ submissions on these matters. Ferguson has submitted that:
“The Plaintiff’s claim in damages/compensation is to be put in the position it would have been in had the representation not been false and the contract had not been breached by the failure of the Defendants to transfer ownership of the pumping infrastructure to the Defendants [sic]. But for the misrepresentation and/or misleading and deceptive conduct that induced the Plaintiff to enter into the Terms of Settlement, the Plaintiff (subject to undertaking repairs/re-commissioning of the pumps and obtaining a license to operate) would have… become the owner of the pumps.”
127 In my view, this submission fundamentally misstates the basis for determining loss and damage for misleading and deceptive conduct and negligent misrepresentation in the circumstances of this case. The measure of damages recoverable under s236 of the ACL does not necessarily coincide with the measure of damages applicable in tort (including negligent misrepresentation).[53] It is clear both from the early leading cases on the principles of damages for misleading and deceptive conduct beginning with Gates v City Mutual Life Assurance Society Limited (“Gates”),[54] and the extensive subsequent analysis of those principles,[55] that the question is considerably more nuanced.
[53]Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525 at ??
[54](1986) 160 CLR 1
[55]Recent examples by intermediate appeal courts include BHP Billiton (Olympic Dam) Corporation Pty Ltd v Steuler Industriewerke GmbH & Co [2014] VSCA 338, per Tate, Santamaria and Kyrou JJA at [540]-[588] and Cummins Generator Technologies Germany GMBH v Johnson Controls Australia Pty Ltd (2015) 326 ALR 556; [2015] NSWCA 264, per Beasley JA at [111]-[130] and
128 In particular, in assessing damages for contravention of s236 of the ACL, once a causal connection is established (by proving loss or damages suffered “because of” the contravening conduct), there is nothing in the section which suggests that the amount that may be recovered should be limited by drawing some analogy with the law of contract, tort or equitable remedies.[56] But very often the amount allowed for a contravention of s18 “will coincide with what would have been allowed in an action for deceit”.[57] It is also clear that there is no strict requirement to prove a “no transaction” or “different transaction” case.[58]
[56]Marks v GIO Australia Holdings Ltd (1998) 196 CLR 495 at [38]
[57]Marks v GIO Australia Holdings Ltd (1998) 196 CLR 495 at [41]
[58]Cummins Generator Technologies Germany GMBH v Johnson Controls Australia Pty Ltd (2015) 326 ALR 556; [2015] NSWCA 264, per Beasley JA at [133]
129 However, the starting point for misleading and deceptive conduct and negligent misrepresentation is still to ask “what the plaintiff would have done had he not relied on the representation”.[59] Or, put another way, it is necessary to compare the position that the plaintiff is in having been misled, with the position it would have been in but for the misrepresentation.[60] The relevant question is not (as Ferguson would have it) how much better off the claimant would have been if the misleading or deceptive statements had been true (or, as Ferguson submits, not false),[61] but how much worse off it was by having relied on the statement.[62]
[59]Gates v City Mutual Life Assurance Society Limited (1986) 160 CLR 1 at p13
[60]BHP Billiton (Olympic Dam) Corporation Pty Ltd v Steuler Industriewerke GmbH & Co [2014] VSCA 338, per Tate, Santamaria and Kyrou JJA at [540(3)]; Marks v GIO Australia Holdings Ltd (1998) 196 CLR 495 at [42]
[61]Gates v City Mutual Life Assurance Society Limited (1983) 68 FLR 101, per Fox, Lockhart and Fitzgerald JJ at p104
[62]BHP Billiton (Olympic Dam) Corporation Pty Ltd v Steuler Industriewerke GmbH & Co [2014] VSCA 338, per Tate, Santamaria and Kyrou JJA at [540(3) and (5)]
130 There is scant evidence on what Ferguson would have done had it not been misled about the defendants’ capacity to pass ownership of the pumping infrastructure. However, as the defendants have submitted, what evidence there is clearly establishes that had Ferguson known that the defendants could not transfer “ownership” of or “interest” in the pumping infrastructure, it would not have entered into the Ferguson Settlement Deed”.[63] Thus this case falls squarely into the “no transaction” category of case, where “if the contravening conduct had not occurred which misled the plaintiff, the plaintiff would not have embarked upon the transaction…at all”.[64]
[63]Defendant’s submissions at [41]
[64]BHP Billiton (Olympic Dam) Corporation Pty Ltd v Steuler Industriewerke GmbH & Co [2014] VSCA 338, per Tate, Santamaria and Kyrou JJA at [540(8)], citing Henville v Walker (2001) 206 CLR 459 and Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413; see also Gates at p14-15
131 In my view, the defendants have accurately identified the various respects in which Ferguson’s position would have differed if it had not entered into the Ferguson Settlement Deed.[65] I have been given no assistance in Ferguson’s submissions in finding an answer to the question of in what way and to what extent (if any) Ferguson was left worse off by entering into the Ferguson Settlement Deed. Logically, of all the matters identified in the defendants’ submissions, the only one that might have provided a basis for establishing loss is giving up its original proceeding. However, as discussed above, Ferguson in fact persisted with its original proceeding until the second day of trial when it elected to abandon it, in favour of pursuing claims under the Ferguson Settlement Deed.
[65]Defendants’ submissions at [41]
132 In those circumstances, I am inclined to agree with the defendants’ submission that the only loss and damage that Ferguson can say it has suffered as a result of entering the Ferguson Settlement Deed, is its legal costs associated with the consent terms and reinstating the original proceeding, less the $20,000 settlement sum. But even if Ferguson could claim that its loss is in fact the full value of the original proceeding, there is neither evidence nor submissions before me to assist me to determine what that value might be. Indeed, the reasons of His Honour Judge Cosgrave for dismissing Ferguson’s application for an injunction restraining Mayback from dealing with the works licenses,[66] would suggest that the value of the original proceeding is speculative at best.
[66]F. Ferguson Wool Co Pty Ltd v Mayback Pty Ltd [2015] VCC 1552
133 I therefore agree with the defendants’ submission that, on the evidence before me, Ferguson cannot be said to have suffered any loss because of the defendants’ misleading and deceptive conduct or any negligent misrepresentation. As loss is at the essence of both these causes of action, Ferguson’s claims in reliance on them must fail.[67]
[67]Defendants' submissions at [41]-[43] and defendants' submissions in reply at [14]
What remedy is available to Ferguson?
134 Based on the analysis above, the only remedy available to Ferguson is for breach of the Ferguson Settlement Deed. The general rule which forms the starting point of a consideration of the assessment of damages, is that “where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be paid placed in the same situation with respect to damages, as if the contract had been performed”.[68] The result to be achieved is one which provides reasonable compensation for breach of contract without imposing a liability upon the other party exceeding that which he could fairly be regarded as having contemplated and been willing to accept.[69]
[68]Robinson v Harman (1848) 1 Exch 850 at 855, recently affirmed as the “ruling principle” by the High Court, see Tabcorp v Bowen Investments Pty Ltd (2009) 236 CLR 272 at p13, citing the example of Wenham v Ella (1972) 127 CLR 454 at p460, 471
[69]Wenham v Ella (1972) 127 CLR 454 per Walsh J at p466
135 In Commonwealth of Australian v Amann Aviation Pty Ltd (“Commonwealth v Amann”),[70] Mason CJ and Dawson J explained that the award of damages for breach of contract protects a plaintiff’s expectation of receiving the defendant’s performance: “That expectation arises out of or is created by the contract… a plaintiff must prove, on the balance of probabilities, that his or her expectation of a certain outcome, as a result of performance of the contract, had a likelihood of attainment rather than being mere expectation.” However, their Honours also observed that: “The corollary of the principle in Robinson v Harman is that a plaintiff is not entitled, by the award of damages upon breach, to be placed in a superior position to that which he or she would have been in had the contract been performed.”[71]
[70](1991) 174 CLR 64 per Mason CJ and Dawson J at p80
[71](1991) 174 CLR 64 per Mason CJ and Dawson J at p82
136 This is not a case where Ferguson’s loss is to be assessed based on the simplistic notion that it contracted for the purchase of pumping equipment and the defendants failed to deliver that equipment, so its loss and damage is the cost of purchasing replacement equipment (less the cost of repair, plus consequential losses). In my opinion, that would place Ferguson in vastly superior position to the one it would have been in had clause 6 of the Ferguson Settlement Deed been performed. Ferguson’s expectation of performance by the defendants was subject to known and substantial risks. Allowing in its favour damages equivalent to the cost of new equipment that was capable of being installed at a new site on the river, would entirely and impermissibly ignore those risks.
137 Ferguson’s expectation was to have ownership or exclusive access to and control of particular pumping infrastructure at a fixed and permanent location on Crown land on the banks of the Campaspe River (namely, the pumping infrastructure). Further, the pumping infrastructure concerned had at the time of purchase been in a state of disuse for more than a decade and was in need of substantial repair and restoration. It is possible that much of it would have needed to be replaced.
138 More significantly, it was the subject of works licences that were, to the knowledge of Ferguson, owned by a third party who may or may not have cooperated with Ferguson in either agreeing to transfer the licences or consenting to the issue of additional works licences in respect of the infrastructure. Thus the risks were, first, that the pumping infrastructure could not be brought into working order at a reasonable cost. And, second, that Ferguson would be unable to secure the works licences it needed to operate the infrastructure at that location. There are also risks associated with Ferguson’s consequential loss of profits claim.
139 The defendants have submitted that the correct way to assess Ferguson’s alleged loss of profits, is as a loss of chance.[72] I would go further and say, given the uncertainties attending the successful repair and operation of the pumping infrastructure referred to above, the correct way to assess Ferguson’s damages claim as a whole, is as a loss of chance. In Commonwealth v Amann, the High Court rejected the argument that damages for loss of the chance of benefit should be confined to cases where the creation or existence of a chance was promised, and held that damages for loss of chance may be recovered whenever its loss is foreseeable as a probable result of the breach.[73] Damages are thus awarded for deprivation of any commercial opportunity resulting from breach of contract.[74]
[72]Defendant's submissions at [22]
[73](1991) 174 CLR 64, at p91-2, 102 and 118-20
[74]Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at p355
140 I am satisfied on the evidence that the commercial opportunity that Ferguson contracted for under the Ferguson Settlement Deed comprised the opportunity to:
· repair and recommission the pumping infrastructure and associated equipment to full working order;
· negotiate with Ms Hartup for the transfer of the works licences or her consent to additional works licenses being issued in respect of the pumping infrastructure;
· alternatively, persuade Goulburn-Murray Water to revoke the works licences held by Ms Hart up and issue new licences to Ferguson; and
· irrigate the irrigation land and grow sorghum for the purpose of grazing and fattening crossbred lambs, as alleged in paragraph 16 C of Ferguson’s third further amended statement of claim dated 28 April 2017.
141 Contrary to the defendants’ submissions, I am satisfied on the balance of probabilities that the combination of opportunities identified above was something of real value. In particular, in my view the evidence establishes that the pumping infrastructure is probably repairable and that there was a real and substantial prospect of Ferguson entering into an arrangement with Ms Hartup in about March 2016 enabling Ferguson to secure a works licence for the irrigation pump. Thus, in my view, Ferguson has met the threshold requirement of establishing that performance of the Ferguson Settlement Deed would have created a chance or opportunity that had some value, and was not merely speculative or negligible.[75] However, the assessment of the valuation of that chance or opportunity is far from straightforward.
[75]Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at p355 and 357
142 Turning first to the pumping infrastructure, as discussed above, I prefer the evidence of Mr Long that the irrigation pump was repairable and the cost of its repair and the associated safety improvements would be $9,092. However, I consider that some further allowance should be made for the possibility that certain parts (such as the electric motor) need to be replaced and (as submitted by the defendants[76]) other direct costs associated with re-commissioning the pumping infrastructure including testing and repair of piping and the cost to apply for the a works licence and purchase a water meter ($3,711). In my view, the further allowance for these matters should be rounded off to a total of $5,000. I also accept Mr Long’s evidence that once repaired and improved in the manner proposed, the pumping infrastructure would have a value of approximately $55,000 and, if maintained thereafter, could be expected to last another 20 years. On that basis, it could have expected under clause 6 of the Ferguson Settlement Deed to have an asset with a value net of repair and recommissioning costs of $40,908.
[76]Defendants’ submissions at [13]
143 Considering next the claim for loss of profit from fattening cross-bred lambs for the 2016/2017 season, I broadly accept the evidence on this issue of Mr Poole (supplemented by the evidence of Mr Martin), with two qualifications. First, I agree with the defendants that Mr Poole has made insufficient allowance for grazing management, including fencing and labour costs. Second, I also agree with the defendants that there should be a deduction in relation to opportunity for Ferguson to mitigate its loss for the season by selling its water share and income from the ongoing use of the irrigation land in its unirrigated state.[77]
[77]Defendants’ submissions at [24]
144 As to labour, I am not persuaded that Mr Martin, with his full time commitments to the business of Ferguson, could alone have managed to undertake all the care and management of the stock as described by Mr Poole in his evidence. Mr Poole made no allowance for additional labour in his calculations. Making such an allowance will also ameliorate any concerns arising from the evidence of Mr Martin’s previous history of inadequate stock management.
145 Apart from the evidence of Mr Poole as to the net income from lamb finishing for the 2016/2017 season of $43,300 and his figure for the income that was available to Ferguson for the sale of its water share ($1,136), the evidence on these matters is sketchy. Mr Poole gave evidence that the fencing cost would be “under $10,000”. Mr Martin’s evidence was that he could drench about 1000 sheep in a day, that he was re-fencing the property anyway and that he pays his assistant $21 per hour. However, the authorities are clear that where damages are difficult to assess because the plaintiff has produced evidence which, while establishing loss or damage, does not permit the court to make as reliable an assessment as should have been possible, the court must do the best it can.[78] Doing the best I can, I propose to allow five days of additional labour ($840) and a total of $2,000 to cover temporary fencing and income from using the irrigation land in its unirrigated state. On this basis, I would reduce Mr Poole’s net income figure to $39,324.
[78]Howe v Teefy (1927) 27 SR (NSW) 301 at 306 per Street CJ (Gordon and Campbell JJ concurring) (approved Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at p125; 104 ALR 1 at p43; 66 ALJR 123 per Deane J)
146 The final step left for me in calculating the value of Ferguson’s loss of opportunity is to assess the probability of it securing a works licence for the irrigation pump, and discounting the total of the two figures above ($40,980 plus $39,324, giving $79,422) accordingly. In undertaking this exercise, I am proceeding on the assumption that Ferguson would only have proceeded ot incur the cost of repairing and recommissioning the pumping infrastructure, if it had first secured the works licence. Thus the net value of the working pumping infrastructure referred to above would only have accrued to Ferguson if the chance of securing the works licence had been realised.
147 In my view, the analysis of the relevant provisions of the Water Act above[79] establishes that there is no express provision in the Water Act or the Policy to deal with the situation where the holding of a works licence and the ownership of the equipment specified in that licence, are separated. This is somewhat surprising, given that (as Ms Strachan acknowledged) it is theoretically possible for this to occur. Indeed, given the cost associated with pumping equipment, it might be expected, for example, that a landowner may from time to time grant a security interest in such equipment as part of financing that cost. This in turn would give rise to the possibility of the security interest holder wanting to remove and on-sell the equipment on default, thus severing ownership from the licence.
[79]Commencing at [43]
148 However, in the absence of any legislated regime or departmental policy for cancelling works licences or otherwise managing this process, I am unable to ascribe any real degree of possibility to Ferguson securing the co-operation of Goulburn-Murray Water in cancelling Ms Hartup’s two existing works licences in respect of the pumping infrastructure and issuing a new works licence to Ferguson for the irrigation pump. Even if it were possible to do so, the degree of uncertainty is such that it would be considerably lower than the prospect of securing the cooperation of Ms Hartup, to which I now turn.
149 Ms Hartup’s evidence about her willingness to cooperate with Ferguson is set out above.[80] It was to the effect that if a proposal were made to her on behalf of Ferguson in around March 2016 involving her consent or assistance in securing access to the pumping infrastructure through a further works license being issued, she would have been “quite happy to do that”. However, I am not satisfied that the prospects of Mr and Mrs Martin and Ms Hartup reaching an agreement on these matters were as good as this answer would suggest. In my view, the evidence of the level of conflict in their dealings up to that point would indicate a real risk of negotiations failing. And if the negotiations were successful, that success is likely to have come at an additional cost to Ferguson.
[80]At [57]
150 Taking all these matters in to account, I consider that the prospect of Ferguson securing a works licence for the pumping infrastructure and thereby crystallising in its favour the value in that infrastructure and in its use in the 2016/2017 season as set as above, as slightly above even, or 60%. I therefore assess Ferguson’s damages for the defendants’ breach of the Ferguson Settlement Deed as 60% of $79,422 or $47,653.20.
What orders should be made on costs and interest?
151 On the question of costs, Ferguson has essentially succeeded on the claim that it took to judgment, albeit for a sum assessed to be less than half of the sum claimed. Further, it elected on the second day of trial not to pursue its original claim, resulting in (among other things) a significant reduction in the amount of its potential loss of profit damages. Thus the question arises as to whether there is a proper basis for an order that departs from the usual order that costs follow the event.
152 Although I will hear the parties further on the question of costs, it is appropriate that I express a tentative view on these issues in the hope that this will assist the parties in agreeing the final order and thus avoid even further costs. I do so in the absence of any information about any offers of compromise or other settlement offers, which (if made) could significantly affect the orders that would otherwise be made on costs.
153 I am reluctant to impose a penalty on Ferguson for abandoning its original claim on the second day of trial. I have determined above that Ferguson was entitled to proceed with both its original claim and its claim based on the Ferguson Settlement Deed in the alternative. It had also secured the imprimatur of His Honour Judge Macnamara in doing so. Ferguson has submitted[81] (and I accept) that the decision to elect to proceed with the latter claim alone was at least in part driven by the uncertainty surrounding the admissibility of the letter of 22 February 2016. The withdrawal of opposition to the admissibility of that letter was (so Ferguson submitted) significant in the timing of Ferguson’s election.
[81]Ferguson’s submissions at [3]
154 A party will often make a forensic decision early in a trial that an alternative claim or allegation reasonably made, is unlikely to succeed and should therefore be abandoned. Indeed, doing so is consistent with a party’s overarching obligation to narrow the issues in dispute under s23 of the Civil Procedure Act 2010 (Vic) and should be encouraged. The risk of an adverse costs order will have the opposite effect. In my view, such an order should therefore be imposed sparingly, such as where the abandoned claim lacked merit and imposed a significant evidentiary burden on the parties. This was not such a claim, particularly in circumstances where the vast bulk of the costs in relation to Ferguson’s original claim merged in the Ferguson Settlement Deed and are therefore unlikely to be recoverable based on the tentative conclusion expressed below.
155 Subject to my comments below on the effect of the Ferguson Settlement Deed on cost, my tentative view is that this proceeding falls into the category of case where the general rule that costs should follow the event should apply. Ferguson is the successful party and should recover its costs, even though it has not succeeded on all of its claims.[82] Applications to apportion costs according to success or failure of one party should be approached with great caution.[83] Further, as the High Court has made clear in Firebird Global Master Fund II Ltd v Republic of Nauru [No 2][84] there are “good reasons not to encourage applications regarding costs on an issue-by-issue basis, involving apportionments based on degrees of difficulty of issues, time taken to argue them and the like”.
[82]Chen v Chan [2009] VSCA 233 at [110]
[83]Hughes v Western Australian Cricket Association (Inc) [1986] ATPR 40-748 at p48,136, cited in BHP Billiton Iron Ore Pty Ltd v National Competition Council (No 2) [2007] FCA 557.
[84][2015] HCA 53
156 The effect of my judgment in this proceeding is to restore in money terms what Ferguson was entitled to expect from the defendants under the Ferguson Settlement Deed, and thus restore the bargain made by that Deed. The Deed is not rescinded or otherwise rendered void from the outset. Accordingly, clause 7 of the Ferguson Settlement Deed, which provides that there be no order as to costs, continues to bind the parties in respect of the proceeding as it stood at the time of the Deed. In my view, the effect of this is that costs outstanding as at the date of the Ferguson Settlement Deed merge in the Deed and any costs order I make will therefore apply only to the proceeding from the day after the Deed was executed, namely on and from 3 March 2016.
157 For completeness, I note that I consider it highly unlikely that Ferguson could succeed on any claim that it is entitled to legal costs as part of its loss and damages for breach of the Ferguson Settlement Deed and thus claim those costs effectively on an indemnity basis. It is not the function of an award of damages to compensate a plaintiff for the cost of obtaining compensation, and the recovery of the cost of bringing proceedings is governed by rules of court, not the principles governing damages for breach of contract.[85]
[85]Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358 at p365-6
158 Finally on the question of interest, ordinarily this would be a case where interest was awarded pursuant to s60 of the Supreme Court Act 1986 (Vic) (made applicable to this Court pursuant to s50 of the County Court Act 1958 (Vic)) and thus would run from the date of the writ. There is clear authority that the section looks to the date for commencement of the proceeding, notwithstanding that the head of damage on which a party succeeded was added to the proceeding at a later time by amendment.[86] However, the section does contain the proviso “unless good cause is shown to the contrary”. In my view, this is a case where good cause is likely to be shown.
[86]Braeside Bearings Pty Ltd v HJ Brignell & Assocs (Boronia)[1996] 1 VR 17
159 What amounts to a “good cause” has to be measured against the purposes of the statutory power to award interest. These have been recognised as twofold. First (and most importantly for present purposes) to compensate the plaintiff for the loss or detriment which he or she has suffered by being kept out of his or her money and deprived of its use during the relevant period. Second, to encourage early resolution of the litigation.[87] As with the costs, the Ferguson Settlement Deed had effectively cleaned the slate of the original claim. It cannot reasonably be said that Ferguson has been kept out of its entitlements under that Deed before the Deed existed. In my view, having regard to the effect of the Ferguson Settlement Deed but applying by analogy the principle discernible from the decision of the Court of Appeal in Braeside Bearings Pty Ltd v HJ Brignell & Assocs (Boronia),[88] the appropriate order in this case is that interest should run from the date of reinstatement of the original claim, being 19 October 2016.
[87]Hosking v Ipex Software Services Pty Ltd (No 2) [2004] VSC 343, per Habersberger J at [6]
[88][1996] 1 VR 17
160 Based on the above analysis, my tentative view is that the orders in the proceeding should be in terms as follows:
(a) There be judgment for the plaintiff against the defendants in the sum of $47,653.20.
(b) The defendants pay the plaintiff interest on the judgment sum at the rate prescribed from time to time under s2 of the Penalty Interest Rates Act 1983 (Vic), on and from 19 October 2016.
(c) The defendants pay the plaintiff’s costs of the proceeding (including reserved costs) on and from 3 March 2016 to be taxed on the standard basis in default of agreement.
161 I will hear further from the parties on the final form of the orders.
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Certificate
I certify that these 64 pages are a true copy of the reasons for Judgment of His Honour Judge Woodward delivered on 1 November 2017.
Dated: 1 November 2017
Simone Karmis
Associate to His Honour Judge Woodward
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