Fensom v Cootamundra Racecourse Reserve Trust
Case
•
[2000] NSWSC 1072
•24 November 2000
No judgment structure available for this case.
CITATION: FENSOM & ANOR v. COOTAMUNDRA RACECOURSE RESERVE TRUST & ORS [2000] NSWSC 1072 CURRENT JURISDICTION: EQUITY FILE NUMBER(S): SC 2869/95 HEARING DATE(S): 23-26/10/00 JUDGMENT DATE: 24 November 2000 PARTIES :
Albert Charles Fensom - First Plaintiff
Cheryl Fensom - Second Plaintiff
Cootamundra Racecourse Trust - First Defendant
Simon Bragg - Second Defendant; Michael Twomey - Third Defendant; Graham Last - Fourth Defendant; John Scott - Fifth Defendant; Steven Tolmie - Sixth Defendant; Phillip Bassingthwaighte - Seventh Defendant - Donald Phillips - Eighth Defendant; Cootamundra Racecourse (D.620014) Reserve Trust - Ninth DefendantJUDGMENT OF: Bryson J at 1
COUNSEL : C. Hogg - Plaintiffs
M. Leeming - First to Seventh and Ninth DefendantsSOLICITORS: J. Pappas - Plaintiffs
Crown Solicitor - First to Seventh and Ninth DefendantsCATCHWORDS: RESTITUTION - improvements to trust property in absence of formal lease, agreement or contract - improvements and work on property encouraged or accepted by trustees - value of improvements awarded - CROWN LANDS - reserve trust - occupation and improvement of Crown land without lease or legal title - continuing negotiations for formal lease - informal arrangement of caretaking of racecourse trust property - no capacity for trustees to enter agreement of nature proposed - plaintiff claimed offer of 40 year lease with 40 year option - conflicting evidence as to terms of negotiations - no compliance with legislative requirements for consent to lease of Crown land LEGISLATION CITED: Conveyancing Act 1919 ss 23C, 23D, 54A
Crown Lands Consolidation Act 1913 (NSW) ss 6, 26, Pts III, IIIB
Crown Lands Act 1989 (NSW) ss 6, 100, 101, 102,
122, Sch 8 Pt 1
Fair Trading Act 1987 (NSW) ss 68, 72
Trade Practices Act 1974 (Cth) ss 82, 87
Supreme Court Act 1970 (NSW) s.63CASES CITED: Angelopoulos v Sabatino (1995) 65 SASR 1
Austotel Pty Ltd v Franklins Self-Serve Pty Ltd (1989) 14 NSWLR 582
Brewer Street Investments Ltd v Barclays Woollen Co [1954] 1 QB 428
Cadorange Pty Ltd (in liq) v Tanga Holdings Pty Ltd (1990) 20 NSWLR 26
Clancy v Salienta [2000] NSWCA 248
Craven-Ellis v Canons Ltd [1936] 2 KB 403
Falcke v Scottish Imperial Insurance Co (1866) 34 Ch D 243
Fibrosa Spolka Akcynja v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32
Pavey & Matthews v Paul (1986) 162 CLR 221
Ramsden v Dyson (1866) LR 1 HL 129
Rover International Pty Ltd v Cannon Film Sales [1989] 1 WLR 192
Sabemo Pty Ltd v North Sydney Municipal Council [1977] 2 NSWLR 880
Sunstar Fruit Pty Ltd v Cosmo [1995] 2 Qd R 214
Van den Berg v Giles [1979] 2 NZLR 111
William Lacey (Hounslow) Ltd v Davis [1957] 1 WLR 932DECISION: see para 104
1 Index to Judgment
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISIONBRYSON J.
24 November 2000
2869/95 - ALFRED CHARLES FENSOM & ANOR v. COOTAMUNDRA RACECOURSE TRUST & 7 ORS
JUDGMENT
Index to Judgment [1] Introduction [2] The Racecourse Trust and Crown Lands Legislation [3]-[9] Nature and Context of the Proceedings [10]-[19] Evidence of Negotiations Between the Parties [20]-[22] (a) Mr Fensom’s evidence [23]-[32] (b) Mr Bragg’s evidence [33]-[36] (c) Mr Twomey’s evidence [37]-[41] Findings on the Negotiations [42]-[44] Work Done on the Cottage [45]-[50] The Westpac Loan in 1990 [51]-[53] Negotiation of a Form of Lease in 1992 [54]-[57] Termination of the Arrangement [58]-[61] Work Performed by the Plaintiffs [62]-[72] Grounds of Claim Not Established [73]-[75] Claim for Restitution [76]-[98] Adjustment of the Parties’ Entitlements [99]-[103] Orders [104] Introduction
2 The plaintiffs make claims against Cootamundra Racecourse Trust arising out of arrangements under which Mr Fensom worked as caretaker of the Cootamundra Racecourse for some years from July 1989, and Mr and Mrs Fensom and their family lived at the Cootamundra Racecourse. Until January 1995 they occupied a Colorbond Shed or garage there as a dwelling, and they also built a new cottage, which was not complete when they left, and remains incomplete. Their principal claim is for compensation or damages in respect of improvements which they carried out, principally on the cottage, but also on other structures. The principal claim is not based on contract, but on Restitution principles, or in earlier terminology on Quasi-contract.
3 Cootamundra Racecourse is an area of land in the countryside about 3.7km from the town centre; it is owned by the Crown, and it seems that it has never been alienated by any grant. It is Portion 86 of the Parish of Cootamundry: Lot 86 DP 753601. The interests of the State in Crown land are managed by the Department of Conservation and Land Management (CaLM), often still referred to as the Lands Department. The Racecourse land was reserved, that is reserved from sale or lease or licence, by a Gazette notice of 17 October 1896. On 13 June 1986 a corporation with the name “Cootamundra Racecourse Trust” was constituted under s.37Q of the Crown Lands Consolidation Act 1913 (CLCA). When dealings between the parties began in February 1989, the second to seventh defendants, Messrs Bragg Twomey Last Scott Tolmie and Bassingthwaighte, had been appointed Trustees and were still in office. Mr Bragg was first appointed in 1973, and was reappointed on 10 August 1984, at which time Messrs Scott Tolmie and Bassingthwaighte were appointed. Messrs Twomey and Last were appointed on 21 February 1986. All these appointments expired on 18 July 1989. Through some administrative oversight the trustees were not reappointed when their appointments expired, the fact that their appointments had expired was not adverted to by them or by government officers at that time, and they continued to function in fact as the trustees until 29 December 1995. The Lands Department office at Wagga Wagga adverted to the fact that the appointments had expired in July 1991, and asked Mr Twomey to have application forms filled in by persons who wished to be appointed. For some reason this was not pursued. The view has been held in CaLM that the corporation formed on 13 June 1986 went out of existence on 1 May 1990 when the Crown Lands Act 1989 came into effect; this view is based on there being no de jure trustees in office at that time. 4 On 29 December 1995 a corporation named Cootamundra Racecourse (D.620014) Reserve Trust was established by a Gazette notice pursuant to s.92(1) of the Crown Lands Act 1989. Mr Terrence Mecham, a government officer, was then appointed and remains administrator of the Trust. 5 Under the CLCA, general provisions relating to reserve land were made in Pt.III and applied to land reserved under earlier legislation: see s.3. Under s.26 trustees could be appointed, and were charged with the care and management of the land. Until 1974 trustees were not given a grant or other title to reserve land, and leases could be granted by the Minister, but only in accordance with prescribed procedures. All dealings in reserve lands and other Crown lands were subject to the overriding control in s.6 of the CLCA which had the effect that all dealings with Crown land including leases must be made in accordance with statutory authority. This should be regarded as a constitutional principle for New South Wales. 6 From 1974 on, management and dealings with reserve land were dealt with by Pt.IIIB of the CLCA. By s.37R trustees were charged with the care, control and management of the reserve. By s.37X trustees were deemed to have an estate in fee simple in the reserve for the purposes only of Pt.IIIB and of any by-law. Under subs.37X(2):
The Racecourse Trust and Crown Lands Legislation
7 Section 37KK contained provisions relating to the Minister’s consent to leases of reserve land (and to other dealings). The Minister’s consent was to be obtained after a procedure in which the trustees passed a resolution that the dealing was desirable on specified terms or conditions, and applied in writing to the Minister for consent to the dealing and furnished a full statement of the related facts. The Minister had power to grant consent to or refuse the application, and the grounds on which the Minister was to act were not specified by s.37KK. In the present case the procedure of resolution and application was not ever followed and the Minister was not ever asked to consent, and did not consent, while the CLCA remained in operation. 8 Under the Crown Lands Act, which commenced on 1 May 1990, s.6 again enacted the principle that Crown land is to be dealt with in accordance with that Act, and not otherwise. The dedication and reservation of land is dealt with in Pt.5 which provides for the formation of reserve trusts in Div.4. In Sch.8 to the Crown Lands Act, which relates to savings, transitional and other provisions, Pt.1 cl.4 continues earlier reserve trusts; but it operates where trustees held office immediately before the commencement of the Crown Lands Act, creating doubt as to whether the Cootamundra Racecourse Trust incorporated in 1986 was continued. It is not necessary to resolve that question, for reasons which I will state later. 9 A reserve trust created or continued under the Crown Lands Act has powers over reserve land under Pt.5 Div.5 including, under s.100, an estate in fee simple in the reserve for limited purposes, namely for the purposes of Pt.5 and by-laws under Pt.5. Controls over reserve land include subs.100(2) by which a reserve trust is not capable of granting leases or licences except in accordance with Pt.5, and s.102 which states the conditions under which a trust may lease reserve land or grant a licence; these conditions include the Minister’s consent in writing to the proposal. Subsection 102(2) requires a special procedure to be followed if the Minister is to give a consent for a lease exceeding five years; that procedure was not followed in the present case. CaLM’s policy documents, which the officer having delegated authority from the Minister would have conformed with, show that it is not practically possible that consent would have been forthcoming for a long term lease, or for any lease which gave a tenant the right to the value of improvements. The trustees and the corporation simply had no power and no capacity to grant a lease of Cootamundra Racecourse land, and any agreement to do so would have been of no effect.
The trustees of a reserve are not capable of alienating, charging, granting leases of, or licenses in respect of, or in any way disposing of the reserve or any part of the reserve except in accordance with Division 3.
10 The plaintiffs commenced these proceedings on 13 July 1995. The Statement of Claim named as the first defendant the Cootamundra Racecourse Trust and alleged that “the first defendant is a Reserve trust duly incorporated under the Crown Lands Act 1989 (NSW)”. In its Defence the Trust in para.2 alleged the appointment of individual trustees, the creation of a corporation in 1986, that corporation going out of existence on 1 May 1990 and the creation of Cootamundra Racecourse (D.620014) Reserve Trust in 1995. In effect, para.2 took the position that the corporation with which the plaintiffs dealt in 1989 had gone out of existence, the individual trustees had gone out of office, and the corporation formed in 1995 was established too late to be involved in the events; so the plaintiffs could not succeed because they had not sued relevant parties and there no longer were any. The technicalities of the position include that the 1995 corporation was not formed until after the Statement of Claim was filed, which seems to show that it is not the corporation referred to as the first defendant, although it filed a Defence in terms which appear to accept that it was. During the hearing counsel who appeared for all defendants told me that para.2 was no longer relied on. 11 An appearance for the first defendant Cootamundra Racecourse Trust was filed on 11 October 1995, before Cootamundra Racecourse (D.620014) Reserve Trust was brought into existence. In the Defence filed on 5 May 1998 the first defendant alleged in para.1 that it is properly titled Cootamundra Racecourse (D.620014) Reserve Trust and that it was constituted on 29 December 1995. There is still room for doubt as the identity of the first defendant, as it is unresolved whether the corporation created in 1986 still existed when the Statement of Claim was filed and when the appearance was entered, and it is clear that the corporation created in 1986 is not the same as the corporation which filed the Defence and conducted the proceedings. For good order and to make the record correspond with the way in which the proceedings have been conducted the Cootamundra Racecourse (D.620014) Reserve Trust should be made a defendant in the proceedings and appointed as representative party for all persons who are or at relevant times have been trustees of the land at Cootamundra dedicated for a racecourse notified in the Government Gazette of 17 October 1896. 12 Counsel’s withdrawal of para.2 and the manner in which the hearing was conducted show that no position based on technical matters was taken in defence to the plaintiffs’ case, and that the litigation was conducted on the basis that the Trust in its various emanations is to be treated as the one entity throughout. One aspect of this is that the six individual defendants who actually functioned as Trustees throughout all the relevant events, whether or not on a strict view they held office as such, are liable only in their character as Trustees; any liability was incurred only as representatives of the Trust. The concept of unjust enrichment, which is central to the restitution claim, cannot be applied to those defendants as individuals because they do not have any interest in the reserve land as individuals. The limited estate, and the Trust’s continuing control, mean that advantages related to improvements should be perceived as accruing only to the Trust. I will retain control over the enforcement of judgment with a view to preventing the imposition of personal liability. 13 A further defendant Mr D.J. Phillips was joined in the Statement of Claim, but he was not a Trustee at any relevant time and the plaintiffs have discontinued proceedings against him. 14 The plaintiffs’ claim is principally based on an agreement or arrangement which they assert was formed in the period from February to June 1989 when Mr Fensom was appointed caretaker of the Cootamundra Racecourse. The plaintiffs claim that the Trustees agreed that the plaintiffs would have a long lease of the caretaker’s cottage and surrounding land containing stables and a paddock. The terms of the arrangement are disputed. The object for which the plaintiffs sought a long lease was that they should be able to carry out improvements, particularly to the cottage, and have tenure for a long period so that Mr Fensom could pass the property to his children in due course. 15 An arrangement of that kind was unenforceable for a number of reasons. The overriding reason is that the Trust lacked capacity to grant such a lease. To my mind the unenforceability of the arrangement should have been obvious to any reasonable person. Determination of this case should, however, be approached with the understanding that for a considerable time both sides acted on the basis that some such arrangement could in some way be made workable. 16 Other reasons why the arrangement was unenforceable include:
Nature and Context of the Proceedings
17 The arrangements under which Mr Fensom and his family lived at Cootamundra Racecourse for well over five years would have a very strange appearance if tested by the usual standards for conditions of employment. Mr Fensom was not paid wages, and Mr and Mrs Fensom and their dependants lived for some years in accommodation which was not appropriate for family living by ordinary community standards. These arrangements could be made to appear very unsatisfactory or exploitative. I do not think that that would be an appropriate view. Other aspects of the arrangements were that Mr Fensom suffered from a significant disability for which he received an invalid pension, and it would not be appropriate for him to attempt to undertake full time employment, or to take a competitive part in the market for labour. He had experience and a licence as a trainer of racehorses and was engaged in training in Queanbeyan before moving to Cootamundra. It was very suitable for his interests and style of life for him to live on a racecourse, to have some duties which would not occupy a full working week, and to have the opportunity to pursue his interest in training horses and, it may be, make a business of it. The fact that he was training horses himself gave him a special interest in his caretaking and maintenance work. His activities could complement each other. 18 Although training was continuous at the racecourse there were only about five race meetings each year, and racing could not generate a strong income stream to support Trust affairs; little revenue could be raised from trainers, and the racing clubs which leased the course for race meetings were not economically strong. There was not enough revenue to employ staff. The Trustees acted on a voluntary basis, largely motivated by their interest in maintaining horse racing at Cootamundra. All the individual Trustees were also members of the Committee of the Cootamundra Turf Club, the principal race club operating there. In understanding the arrangements, I have to keep in mind the place of horse racing in rural life, its very wide community interest, and the social context in which racing was managed voluntarily by graziers and professional people to serve that community interest. There were real advantages to the Trust and the land in having Mr and Mrs Fensom live on the racecourse and having Mr Fensom’s part time services as a caretaker without payment. The Trust had strong motivations to seek some arrangement under which Mr and Mrs Fensom would have a long term presence. 19 Also to be considered is the social context in which the Trustees would have a strong and natural reluctance to take very firm action against Mr Fensom, such as, for example, evicting him with all his family, even if there were some unsatisfactory aspect of the arrangements, or of his conduct. Evicting him could create social problems which community leaders might have to face in some other way.
(1) There never was an agreement establishing, in sufficient detail to enable enforcement, what was to be the term of the lease, or what were to be its conditions.(2) In particular, the parcel of land which was to be leased was never defined, either by marking out the boundaries on the ground, or by describing the boundaries; and its area was not defined. Obviously enough, there was never any idea that the plaintiffs would have a lease of the whole of the racecourse.
(3) There was no lease in writing and no evidence in writing of an agreement for a lease which would satisfy s.23C, s.23D or s.54A of the Conveyancing Act 1919.
(4) No subdivision approval was obtained from the Cootamundra Shire Council, and any agreement for a long term lease would have been conditional on obtaining such approval. If the subdivided land did not have road access, subdivision approval was not practicable.
(5) There was no development consent for subdivision of land from the racecourse land. As the racecourse land was zoned Rural, development consent for creation of a housing lot was unlikely.
20 In my finding the witnesses on both sides sincerely endeavoured to be truthful and to narrate the facts as accurately as they were able. However the chain of significant events began more than 11 years before the witnesses came to give evidence, and none of the witnesses was in a good position to give evidence about conversations at the formation and during their relationship so as to establish in a completely reliable way the terms of the arrangements made in those conversations, or even the dates and places of significant early conversations or who was present at them. There are remarkable differences about the times of conversations or even whether a significant conversation took place at a club, the Cootamundra Ex-Servicemen’s or C&S Club, or whether the significant arrangements were made at meetings at the racecourse. 21 There were no contemporaneous minutes of the early meetings. A letter from Mr Main, solicitor of Messrs Garland Seaborn, to Mr Twomey of 6 March 1989 contained statements of facts which were probably based on instructions given by Mr Twomey at about that time, and in the circumstances statements in the letter are some indication of what was then under consideration. The general proposal of the arrangement between the parties was there described as:
Evidence of Negotiations Between the Parties
22 The letter also shows that a number of other matters had received consideration, including: subdivision and the expense of subdivision; the need for subdivision for leases exceeding five years; the need for Lands Department approval for improvements; and the impact of Crown lands legislation on the terms on which leases could be granted. The letter also shows that at that time what was under consideration was the construction by the trainer of a removable or portable home. It also shows that consideration was given to questions of rent, rent review, the need for the consent of the Trustees, CaLM and the Shire Council to any building work and a number of other problems.
a The Trustees will lease about 5 acres on the southwestern corner of
the Racecourse to a trainer for 20 years.
b The trainer will be required to construct stables to remain for the
benefit of the Trustees.
c The trainer will be allowed to construct a removable home.
23 In the account given by Mr Fensom in evidence, the position as caretaker of the Cootamundra Racecourse was first raised with him early in 1989 by Mrs Pat O’Donnell. Mrs O’Donnell represented the Cootamundra Turf Club and not the Trustees. At that time Mr and Mrs Fensom lived in a house in Queanbeyan which they owned. Mr and Mrs Fensom travelled to Cootamundra and met Mrs O’Donnell, who showed them around the racecourse proper and explained what she expected of a caretaker. On the following weekend they again travelled to Cootamundra where Mrs O’Donnell introduced them to Mr Bragg and Mr Twomey at the racecourse. Mr Fensom was told to the effect that if he wanted to move to Cootamundra the Trustees would try to help him find some position. Mr and Mrs Fensom were introduced to a real estate agent, who showed them land which was available; Mr and Mrs Fensom decided they were not interested and returned to Queanbeyan. These events probably happened in February 1989 if not a little earlier. 24 Later in February 1989 Mr Twomey telephoned Mr and Mrs Fensom and asked whether Mr Fensom was interested in the position as caretaker of the racecourse. This led to Mr and Mrs Fensom again travelling to Cootamundra, meeting Mr Bragg and Mr Twomey and inspecting the cottage at the racecourse. Mr Fensom’s evidence was that he and Mrs Fensom had a conversation with Mr Bragg during which Mr Fensom said extensions would be needed to the cottage as they had three children and the cottage was too small as it was; Mr Bragg is said to have responded “There will be no problems with that if you are prepared to use your own money. A lease will be prepared to cover your improvements on the cottage.” There was then discussion about when Mr Fensom could start duties; he said he had to complete renovations and painting on their home in Queanbeyan but that he should be able to commence duties in June 1989. 25 Mr Fensom says that he with his family travelled to Cootamundra about June 1989, and that on this occasion Mr and Mrs Fensom met all six Trustees at a meeting at the C&S Club. Mr Fensom’s evidence is that Mr Twomey then orally offered him the position as caretaker on terms that Mr Fensom perform 14 hours maintenance work per week; a 40 year lease, with an option to renew for a further 40 years, would be given on the cottage, stables and land on the west side from the entrance gate to the dump paddock; a valid and proper lease would be drawn up, to be signed at the Trustees’ solicitor’s office. After some more discussions Mr Fensom was told that he was appointed and there were some further discussions in the presence of all the Trustees. It was again pointed out that the cottage was too small for the family. On being asked about his plans by Mr Bragg, Mr Fensom proposed to put up a steel framed kit home. Mr Twomey explained that approval for a new house on the racecourse Reserve could not be given but that extension or renovation of the old cottage was permissible. Mr Twomey told the Fensoms they would have to pay for any extensions, and that at the conclusion of the lease ownership of the house and the improvements would pass to them; Mr Twomey undertook to “fix up the lease”; and when asked by Mr Fensom if approval of the Lands Department was needed, Mr Twomey said the Trustees had been given full control of the Reserve. It was agreed Mr Fensom would start by 1 July 1989. 26 Mr Fensom came to live in Cootamundra by 1 July 1989. At first Mr Fensom lived at the racecourse in a caravan he had taken to the property with two of his children. They did not live in the cottage. Mrs Fensom returned to Queanbeyan. It was some time before she could move to Cootamundra. She was in hospital for some time and was unwell after an operation. She also attended to selling the Queanbeyan house, which took some months and was completed on 3 November 1989. The sale price of the house was $112,000 and it appears that the two registered mortgages had earlier been repaid. The balance received on settlement was $104,637.90. 27 Mr Fensom says that there was a meeting between Mr and Mrs Fensom and all six Trustees at the cottage about late September 1989. Mrs Fensom pointed out reasons why the cottage was not livable. One matter was that on a weekend which may have been late in July 1989 while Mr Fensom was in Queanbeyan collecting some belongings the cottage had been invaded and fouled by a herd of goats. Although the cottage was cleaned Mr Fensom says that he was unable to occupy the cottage or remove the overpowering smell of goats. Mr Bragg lifted a floor board and found dry rot and agreed the cottage was in bad need of repair. At this time Mr Bragg assured Mr and Mrs Fensom they had permission to do what was necessary to the cottage in order to make their family comfortable. Mr Fensom claimed that while Mr Twomey had pointed out the Fensoms would have to use their own money for work on the cottage, they would receive the ownership of the house and improvements. It was claimed Mr Twomey made a “solemn guarantee that you have permission” to do the work. Further terms of this discussion were that the Trust was to have the first option to purchase the house in the event of the Fensoms leaving, at a purchase price to be determined by them; if that sale did not proceed the house could be placed on the market to be sold to any registered horse trainer. 28 During discussions about the cost of work on the old cottage, Mr Fensom described contemplated work in which the wall lining and floor coverings would be ripped out and replaced and the old framework would be used. Evidence was given that Mr Twomey repeated that he was sure that the Trustees were authorised to give permission for the work; Mr Bragg told Mr Fensom, “As far as I am concerned you are here for as long as you want”. Mr Fensom suggested he would need to put up a Colorbond shed to live in and put furniture in during the building work. Mr Bragg said that was all right. Mr Twomey said that the use of the stables, feed room and sand roll formed part of the payment Mr Fensom was to receive for his work. An inspection of these showed them to be in a state of disrepair; Mr Twomey authorised Mr Fensom to obtain materials for their renovation to a useable condition, with Mr Fensom to be reimbursed, and to erect new fencing around the stables. Mr Fensom consented to this arrangement. 29 Mr Twomey later told Mr Fensom that a sketch plan which Mr Fensom had prepared of work on the cottage was not satisfactory to the Lands Department and suggested using Cootamundra Design and Drafting Service to draw a proper plan. Mr Fensom did this and the Service’s plan of “Proposed alterations and additions to caretaker’s cottage”, dated 21 November 1989, was used to support a building application to the Cootamundra Shire Council, dated 16 November 1989. 30 Mr Main, solicitor of Garland Seaborn, Cootamundra wrote to Mr Fensom on 17 October 1989. In a letter he said “We understand the Trustees of the racecourse have agreed to give you a 20 year lease of the caretaker’s cottage plus stables plus horse yard.” The letter went on to refer to a rent of $100 per week starting on 1 October 1989 and said, “Instead of paying rent you will apparently do some improvements work … The Trustees would like to have a lease signed as no doubt you would also. There are some aspects we would like to talk to you about. Is it possible for you to call to see us?” Mr Fensom did see Mr Main who, he says, told him the lease was to be for 20 years with a 20 year option. Other terms included that the house and improvements would revert to the Trust at the end of the 20 year option; Mr Fensom said he would not agree to those terms. At that meeting Mr Main said, “I have to inform you that this lease does not protect you. It only protects the trustees. In my view it is not valid anyway because the trustees do not have the power”. 31 Mr Fensom’s evidence is that soon afterwards in response to a specific request Mr Bragg assured him that the lease arrangement was legal and that there was no need for the Minister’s consent. Mr Fensom says there continued to be a lot of discussion about having a lease signed. “I asked for a formal lease from the second and third defendants on numerous occasions.” This went on until 1992 when he was shown a form of lease. 32 Mrs Fensom gave evidence of meetings and conversations with Trustees and Mr Main which, for the events in which she took part, substantially confirms Mr Fensom’s evidence.
(a) Mr Fensom’s Evidence
33 Mr Bragg’s evidence is that his dealings with Mr Fensom opened with a letter from Mr Fensom which Mrs O’Donnell handed to him, it would seem early in 1989. The letter is undated and while not very specific it expresses interest in availability of land and housing on or near the racecourse for Mr Fensom to operate as a trainer. The letter says “As this is a large investment a satisfactory lease contract would have to be made with myself retaining ownership, not reverting to the government after a certain time if the racecourse is on Crown land.” He says that there was a meeting about February 1989 between Mr Bragg, Mr Twomey and Mr and Mrs Fensom at the racecourse. Mr Bragg gave an account of the conversation in which discussion about renting the cottage, stables and other facilities was inconclusive. He claims he told Mr and Mrs Fensom they could not build on the racecourse ground and confirms introducing them to a real estate agent. 34 Mr Bragg says that the second meeting took place about March 1989 and denies Mr Fensom’s account of the conversation at their second meeting. He says that at the second meeting he told Mr Fensom a 40 year lease was not possible. He says that by the time of the second meeting the Trust had already approached Mr Main’s firm of Messrs Garland Seaborn to find out what could be included in the lease because it was Crown land, and that he was aware that the lease would have to be approved by the Department of Lands. Mr Bragg’s evidence is corroborated by the letter of advice written by Messrs Garland Seaborn on 6 March 1989. This letter discussed a general proposal which is not close to any proposal which the oral evidence from either side says was under consideration. The letter of advice shows that many potential problems were adverted to at this early stage. The existence of this letter and the advice in it make it improbable that any unqualified assurance was ever given by Trustees that Mr and Mrs Fensom would have or could have a long term lease. 35 By June 1989 Messrs Garland Seaborn took some steps towards arranging with Mr and Mrs Fensom’s Queanbeyan solicitors for a subdivision of the racecourse, but there was no response. 36 Mr Bragg denies discussing any need for the Department of Lands’ approval for a lease in the presence of the Fensoms; he says “I was well aware that we needed the Department of Lands’ approval to lease the land …”. I accept that he was so aware; it would be very remarkable if any Trustee, or for that matter any other citizen, were not aware that there was some restriction on leasing the racecourse land. Mr Bragg denies the whole of the conversation which Mr and Mrs Fensom say occurred at a Cootamundra club about June 1989. His evidence confirms that he inspected the cottage, and that it was in poor shape; he says that he offered to clean it out with a high-power hose from a fire truck. Mr Bragg denies approving of Mr Fensom’s proposal to extend the cottage and erect a Colorbond shed, and denies having seen the plans which were submitted to Council. He denies giving any permission to lease the land or carry out any building work and says that he was aware that he had no power to authorise those things. He accepts that he knew that the first plaintiff proposed to work on the cottage, and to put up a shed, and gave evidence that in that connection he told the Fensoms to obtain a lease before doing any building work. He denies giving any assurances about the availability of a lease. He denies giving Mr Fensom an assurance that if he expended money on improvements to the stables, fencing or other improvements Mr Fensom would be reimbursed.
(b) Mr Bragg’s evidence
37 Mr Twomey also gave an account of the dealings throughout 1989 commencing with Mr O’Donnell giving him Mr Fensom’s letter in about February of that year. His evidence was a rather full account of the conversations with the Fensoms in February. Among other things he says that when Mr Fensom said he had been given a long lease for stables at Queanbeyan Racecourse which the Lands Office at Goulburn had approved, Mr Twomey said “I will contact our solicitor and see what can be done.” Mr Twomey then contacted Mr Main of Messrs Garland Seaborn; this contact led to the letter of advice of 6 March 1989. Mr Twomey says that he had a second meeting with the plaintiffs at the racecourse on about 11 or 12 March 1989. There was discussion about Mr Fensom doing an average of 14 hours per week ground maintenance in return for, meaning in lieu of, rent on the cottage and stables. There was discussion about repair work and Mr Twomey said “If you repair them to your use, then it is at your cost as the trust would have to charge you rent to cover its costs.” In Mr Twomey’s account of the conversation the need for a lease and the fact that there was a difficulty about granting a lease was recognised; Mr Twomey said “Our solicitor is finding out and will be in contact with you.” Mr Twomey also denies having a third meeting at the club in about June 1989. 38 Mr Twomey says that on no occasion did he offer the plaintiff a 40 year lease with a 40 year option. Like Mr Bragg he denies the substance of the conversations given by Mr and Mrs Fensom about their plans to extend the cottage and build the shed. Mr Twomey says that there was a meeting in about September 1989 in which Mr Fensom told him he wanted to make extensions to the cottage and Mr Twomey pointed out the need for a building approval, and said that the Council (and he was a Councillor) had sometimes given approvals to use garages temporarily during building work, which use would need Council approval. Mr Twomey says that he told Mr Fensom that the Trust was not able to pay for the extensions; that Mr Fensom replied that he would pay for the extensions with money from the sale of the house in Queanbeyan; and that Mr Twomey expressed concern at the absence of a lease, suggesting Mr Fensom’s solicitor be in contact with the Trustees’ solicitor. Mr Twomey knew of the building plans Mr Fensom had drawn up soon after their 21 November 1989 date. Mr Twomey says he pointed out to the plaintiffs several times the need to sign a lease and referred to the letter from Garland Seaborne to Mr Fensom of 17 October 1989, which expressed the Trustees’ desire to have a lease signed. 39 Another of the Trustees Mr Bassingthwaighte gave evidence and was cross-examined, but was able to give little in detail about these distant events. Others were not cross-examined, on the basis (clearly correctly) that the parties were at issue, and no comment on their not being cross-examined was made. Cross-examination exposed the difficulty which all witnesses naturally were under when recalling detail of conversations which occurred in 1989. 40 In the circumstances, such written records as there are of events in 1989 have a significant place in my findings of the facts. So too do the overall probabilities of the behaviour of those concerned and the likely influence on their behaviour of even rudimentary understanding of the facts that the Crown had an interest in the land and that the Department of Lands and its Minister had a place in decisions about leasing. Another influence on my findings about the probabilities of the arrangements is that the Trust had very little money, in practical terms no money with which to conduct its affairs, and this makes it improbable that the Trustees undertook any commitment which could lead to liability to pay money. 41 Overall it is extremely improbable that any of the Trustees would have given Mr and Mrs Fensom an assurance of any kind that a lease or other long term interest would be granted; it is probable that any discussion on such a subject would be qualified by reference to the need to get the approval of the Lands Department or its Minister; and in any event that need must have been obvious to all concerned.
(c) Mr Twomey’s evidence
42 Notwithstanding the practical impossibility of conferring a long term lease on Mr and Mrs Fensom, and the insecurity of Mr and Mrs Fensom’s position, the Trustees for some years pursued an ill-defined object of bringing about some satisfactory arrangement. They did so in the knowledge that they did not have power to grant a long lease. It should be obvious to any reasonable person in this community that trustees of public reserves such as racecourses cannot grant long term leases of part of reserve land without the approval of the State government; the ordinary reasonable person would not have any detailed knowledge of how an effective lease would be obtained, but the broad outlines should be obvious. The Trustees’ solicitor Mr Main pointed out the lack of power in a letter of advice of 6 March 1989. Mr and Mrs Fensom claimed in evidence that they did not know that there was such a limitation. I find it impossible to accept this. In my finding, from the beginning they knew in a general way that there was some such limitation. It was expressly pointed out to Mr Fensom by Mr Main in October 1989, before the major expenditure on building the cottage was incurred. 43 I find that in the course of the conversations which led to Mr Fensom’s employment and up to the commencement of work on the cottage late in 1989:
Findings on the Negotiations
44 In Mr Fensom’s mind he already had the approval of the Trustees to carry out building work on the land to extend the cottage when he started the work, and he had their agreement to the grant of a long term lease. I am satisfied that his understanding of what the Trustees had indicated to him about these matters was mistaken; he had not been given an indication that he would have a long term lease, or that it was in order for him to carry out building work. On the contrary, it was pointed out to him several times during 1989 that he should not carry out building work or incur significant expenditure unless and until he had a lease. Mr Fensom had a number of dependants for whose housing he was responsible, and he had a real need for accommodation at the racecourse, and I am satisfied that he formed an unduly strong impression of the features of the transaction which suited his purposes. Mr Fensom did not allow the warnings about the need to obtain a lease to influence him as they should have.
(a) Mr Fensom made it known that he wished to obtain a long term lease of the cottage and of the stables and related facilities. At different stages a term of 40 years with an option of 40 years was mentioned and term of 20 years with an option of 20 years was mentioned.(b) Mr Fensom made it known that he wanted leasehold arrangements so as to ensure that he remained the owner of the improvements, or (to express that idea as a lawyer would see it) that he was entitled to receive the value of the improvements at the conclusion of the lease or pass that value on to a purchaser.
(c) Mr Fensom made it known that he proposed to carry out work on extending the cottage, at the expense of himself and Mrs Fensom, and on the repair and renovation of the stables and other facilities.
(d) The Trustees made known to Mr and Mrs Fensom that they were prepared to support arrangements under which Mr and Mrs Fensom had a long term lease or some other long term right of occupation, and could carry out considerable extensions; but the Trustees did not give an indication that they supported any arrangement in which Mr and Mrs Fensom would in some way remain entitled to the improvements or the value of the improvements.
(e) The Trustees did not give a commitment to grant a lease; all discussion of a lease or other long term occupation was qualified, there were references to the Trustees’ not having power to make such a commitment and to the need to get approval of the Department of Lands or its Minister; and indeed this need was obvious.
(f) The Trustees did not give any permission, approval or encouragement for Mr and Mrs Fensom to proceed to carry out extensions or improvements, except for references to extensions or improvements to be carried out when and if there was a lease. Mr and Mrs Fensom did not obtain the consent of the Trustees prior to commencing building work. This was in substance what was required by a condition of the building permit.
(g) The Trustees repeatedly pointed out to Mr Fensom the need for him to obtain a lease. He did not pay due regard to these warnings when he decided to go ahead and erect improvements.
(h) There was nothing in the events which constituted an agreement or an assurance of any kind that Mr and Mrs Fensom would have any protection in respect of expenditure on improvements.
(i) When Mr Fensom took up duties as caretaker, and when the garage was erected and Mr and Mrs Fensom took up occupation, the Fensoms and the Trustees wanted to bring about a situation where the Fensoms had a long lease or some other long term security of occupation, so that they could build improvements and be protected against losing the value of the improvements. They knew, as was obvious, that they could not arrange these things among themselves, and that some arrangement, which neither side could see in detail, had to be made with CaLM.
45 In September 1989 Mr Fensom applied to the Shire Council and obtained building approval to erect the Colourbond shed, and this was done in a short time, using a pre-fabricated garage building. In November he obtained building approval for an extension of the original cottage; the plans submitted provided for extensions which in effect would treble the existing structure. 46 The conditions of the building approval, dated 28 November 1989 (Ex B), included:
Work Done on the Cottage
47 (Here, as often, the Trustees of the Reserve and the Cootamundra Turf Club were confused). Mr Fensom did not specifically ask for further approval; he took the view that the oral arrangements earlier in 1989 had given approval. In this as in other ways Mr Fensom pressed on with what he wanted to do without paying prudent regard to the interests of others and information from them. 48 In January 1990, at an early stage in the work of extending the cottage, the existing cottage collapsed during minor preparatory work for the renovations. It was not deliberately demolished, and it collapsed because the structure was deteriorated. Mr Fensom was directed by the Council’s Building Inspector not to re-erect the collapsed building because the timbers were affected by rot. He proceeded with his builder, Mr Winchester, and other assistance, with a new construction on the same plan as the collapsed portion of the cottage in addition to what had earlier been proposed as an extension. The new cottage was built with timber framing and brick veneer. It was much larger and more substantial that the old cottage. Most of the work was complete by October 1990. There had been some disagreement and Mr Winchester had by that time left. The Building Inspector prepared a report, also in evidence, describing the state of work. Further work was done at a later time, although the exact time was not identified. The new structures were illustrated by photographs in evidence, and overall are obviously quite substantial. When Mr and Mrs Fensom gave up possession in January 1995 work on the cottage was largely completed but there were some significant building jobs outstanding, principally in the nature of finishing trades. Since possession was retaken, the cottage has not been occupied and the work has not been completed. 49 From early on in the work being done on the cottage, in particular from the time when the previous cottage collapsed and throughout the period of reconstruction, the Trustees were fully aware of the building work performed on the cottage. They were also aware that the project of constructing a cottage had many shortcomings, most particularly that there was no lease, that they had no power to grant a lease, and that there were circumstances which made a lease for a long term very unlikely. It was apparent that it would have taken more than ordinary advice and warning to deflect the Fensoms from any course which they had decided to take, but the Trustees were in the legally strong position of having authority in the care and management of the reserve, and power to stop building or any other activity on the racecourse reserve, even to dismiss the Fensoms and require them to leave. 50 The actions of the Trustees were to the opposite effect. The Trustees treated the cottage as a Trust asset and the management of affairs relating to the cottage as a concern of the Trustees. This was done in a number of ways, notably by borrowing money for construction work and by treating the cottage as an appropriate subject for them to include in proposals for a lease and in demands for payment of rent. The conduct of the Trustees was limited by their not having any significant revenue or funds. While the project was foisted on them by the Fensoms, from an early stage the Trustees associated themselves with the building works and did not disavow them. It would be too much to say that they adopted the building project, but they involved the Trust in construction to the extent of contributing a loan of $10,000.
6. The applicant shall obtain the consent of the Trustees of the Cootamundra Racing Club prior to commencing building work.The Westpac Loan in 1990
51 The collapse of the old cottage brought the reality and scope of the Fensom’s building operations home to the Trustees. At about the same time Mr Fensom sought payment from the Trust for other improvements he carried out with respect to the stables, feed room and sand roll; the Trustees were not in a position to make any payment. What emerged from these events and ensuing discussions was an arrangement under which the Trustees borrowed $10,000 from Westpac Banking Corporation on their own credit and paid the amount borrowed to Mr and Mrs Fensom on terms that the Fensoms were to repay the Bank (Ex E). Westpac’s letter of 14 February 1990 to the Trustees refers to their “request for assistance in the construction of a home at the Cootamundra Racecourse …”. The Trustees then personally made an application to the Bank for a term loan and incurred liability to the Bank for that loan which was approved and advanced. Mr and Mrs Fensom received the amount of the advance; presumably it was used in relation to the building operations as was intended. Minutes of the Trust meeting of 13 March 1990 show the following decision: “Cottage Loan - a loan of $10,000 would be made to A & C Fensom to complete the house construction. This loan was obtained from Westpac over six years with monthly repayment of $250. The Fensoms indicated that they hoped to pay out the loan in December 1991 with funds invested.” 52 Mr and Mrs Fensom set about making payments to the Bank against the loan. Approximately monthly they paid instalments of $250; by 10 October 1991 they had paid 16 instalments. They made several payments of $200 and on 11 March 1993 began to make a series of payments of $70, at first approximately weekly. By 10 August 1993 they had paid 10 payments of $70. Since 10 August 1993 they have made no further payments. On two different occasions the Turf Club paid $750 off the Westpac account, on 29 October 1991 and 2 August 1994. The balance outstanding on 31 December 1994, a few days before the Fensoms left the racecourse, was $9686.24. Since the Fensoms left in January 1995 further interest has accrued and a number of further payments have been made by the Turf Club, but some of the loan is still outstanding. The payments made by the Turf Club should be treated as made for the benefit of whoever may have been liable for the Westpac loan. 53 From late in 1990 onwards there seems to have been a stalemate between the parties which lasted for a remarkably long time. As I have said, some work but relatively little was done to the cottage after that time and the cottage remains incomplete. Nothing was done with respect to approaching CaLM to further the grant of a lease to the Fensoms. I attribute this to a realisation that it was not practically possible to obtain a long lease.
54 About the end of 1992 a form of lease was prepared, it would seem by Mr Main as solicitor for the Trustees. A copy of this document is Annexure J to Mr Twomey’s affidavit. The document was prepared on a Torrens System form but contained a statement that the lease was not to be registered. There was no provision for the Minister’s consent. A description was given in Schedule 2 of the land to be leased; the description is not precise, refers to fences and approximate length of boundaries, and does not refer to any registered plan. The form of lease provided for a five year term from 1 December 1992 with options to renew for four successive terms of five years, and provided in cl.2 for the owner to pay the tenant the fair value of all improvements on termination. The lease provided for payment of rent of $5200 per year, with inflation adjustment. Mr Fensom regarded this as unacceptable and rejected the document. He regarded it as unsatisfactory because it did not confer a lease for 40 years. It is just as well that this document was not executed, as it would not have created any leasehold interest in the absence of Minister’s consent. It was unsatisfactory in other ways, including effecting an unauthorised subdivision. Its significance is that it shows that the Trustees were dealing with Mr and Mrs Fensom for a lease on the basis that the cottage was in existence, that it would remain after termination of their leasehold interest, and that Mr and Mrs Fensom were to incur obligations to the Trust in respect of it, including maintenance obligations. 55 On 30 November 1992 Mr Twomey on behalf of the Trustees wrote to Mr and Mrs Fensom stating that as from 1 December 1992 the rent payable for the cottage was to be $100 per week. This letter seems to have been related to the preparation of the form of lease which the Fensoms did not accept. The Fensoms did not act on the demand. Except for the payments relating to the Westpac loan they have never paid any sums in respect of their occupation, and although at one or two places those payments were referred to, inaccurately, as rent, they did not ever make any payment in the nature of rent. 56 Mr Fensom’s evidence is to the effect that Mr Twomey spoke to Mr and Mrs Fensom at the cottage during 1992 and produced a standard form of residential tenancy agreement stipulating a term of 40 years; Mr Twomey indicated the lease had been prepared for their signature, but Mr Fensom would not sign as it was not in accordance with the original agreement. Mr Fensom gave evidence that Mr Twomey again attended the cottage in 1993 with a standard form of residential tenancy agreement stipulating a term of five years with four five year options. This was rejected again by Mr Fensom as not what had been agreed to. 57 Mr Twomey denies presenting a standard form residential tenancy agreement stipulating terms totalling 40 years. He confirms that in 1993 he produced a lease agreement following the Torrens system form. His evidence was that he told Mr and Mrs Fensom such an agreement was as far as the Trust would agree to. The Fensoms rejected this proposal and sent an undated memorandum, stating a number of grievances.
Negotiation of a Form of Lease in 1992
58 The relationship continued in a state of drift. There were inconclusive claims and discussions relating to payment for the minor improvements. By a letter of 1 April 1993 Mr Fensom said that he resigned; he says that this did not take effect as it was not accepted, and that he went on performing the tasks of the caretaker until several months before he gave up possession. The Trustees do not accept his claim that his resignation was not accepted, but it is difficult to see any practical impact which his letter of resignation had upon the conduct of either side. One indication that the purported resignation did not signal the end of Mr Fensom’s occupation is that on 1 October 1993 he was told that an area of racecourse land called the dump paddock and racetrack centre was available to him free of rental for four years. This no doubt was in contemplation of his using it for at least four years for his own activities. This permission was given to him in a letter signed by Mr Twomey on behalf of the Cootamundra Turf Club, a sign of the pervading confusion about who was in control of events at the racecourse. 59 Minutes of the Cootamundra Turf Club in evidence show that that Club from time to time gave consideration to questions relating to Mr and Mrs Fensom’s occupation and entitlements. However positions taken by the Club are not significant for determining the obligations of the Trust. Minutes of the Racecourse Trustees’ meeting of 17 February 1994 show that the Trustees considered the need to determine their financial position to pay Mr Fensom for money he had spent. Minutes of the Trustees’ meeting of 7 July 1994 show that the Trustees considered seeking agreement on the fair value of improvements. There was some correspondence from CaLM requiring the Trustees to lodge accounts in accordance with s.122 of the Crown Lands Act, and after great delays accounts to 1992 were lodged showing that, in recent years, there was no significant revenue. 60 On 8 July 1994 Messrs Garland Hawthorne Brahe solicitors, who were the successors to Garland Seaborn but on this occasion acted for the Cootamundra Turf Club, wrote to Mr Fensom making proposals to end his position as caretaker, acknowledging on behalf of the Turf Club that it should pay fair compensation for the work done on the cottage and other buildings, and offering a sum of money. This initiative did not produce any resolution. It will be seen that it was not an initiative of the Trustees. 61 In 1994 CaLM became active in the affairs of the Cootamundra Racecourse, initially it would seem as a result of a complaint by a trainer on a matter not related to present issues. Until then the Department had very largely left affairs in the hands of the Trustees, appropriately enough, and no departmental officer had made a recorded inspection since 1986. When Mr Robinson, the CaLM officer, inspected the track on 18 March 1994 to deal with the trainer’s complaint, he met Mr Fensom and learned that Mr and Mrs Fensom had been in occupation since 1989 and wished to have a lease. Mr Robinson expressed concern that no lease had been formalised and pointed out the requirement for the Minister’s consent to any lease. This initiated interest and activity on behalf of CaLM which eventually prompted the Trustees to deliver, in November 1994, notices requiring vacant possession of the property, and a notice of termination of what was said to be a residential tenancy agreement relating to the cottage. These notices required possession on different dates, the later being 15 January 1995. The Fensoms gave up possession shortly before then.
Termination of the Arrangement
62 The plaintiffs purchased a garage in kit form from Cootamundra Fabrications for $5600 in October 1989. The shed was erected in five days in October 1989 by Mr Winchester, a builder, and another person who were paid $2900 for labour, for the concrete slab and for electricity used in the work. This is the structure referred to as “the Colourbond shed”. 63 The plaintiffs built a carport between the shed and the cottage. Mr Fensom said that the construction of the carport was at a cost of approximately $1000. 64 Early in 1990 Mr Fensom carried out renovation works on the pre-existing stables. The work consisted of:
Work Performed by the Plaintiffs
65 Mr Fensom’s evidence is that he spent a total of $2994 for materials being wood, bricks, sand, mesh and Creosote, and he has claimed $2600 for his labour, being 130 hours at $20 per hour. 66 Mr Fensom also performed work on the feed room, as part of the stables, in about February 1990, lining it and pouring concrete for the floor. His evidence verifies a list of expenses totalling $1015.50 for wood, concrete, sand and gravel and he claims $900 for 45 hours of his labour at $20 per hour. 67 The sand roll is a fenced enclosure containing a bed of sand for horses to roll in after working and before being hosed. Mr Fensom rebuilt the sand roll using the existing concrete footings, steel posts and door, and he erected new wooden framework and double palings and supplied new sand. He has verified expenditure on materials totalling $1092.80 for palings and other wood, nails, bolts and nuts and sand, and claimed $1100 for labour. Most of the labour was performed by Mr Fensom himself though he obtained assistance for some of it. 68 The work on the stables, feed room and sand roll should be regarded as producing permanent improvements, of continuing value after Mr and Mrs Fensom left the premises. 69 Mr Fensom also built a sheep yard, fowl house and fowl run and storage bays in or around February 1990. He has claimed $433 for materials for the sheep yard, $282 for materials for the fowl house and run and $332 for materials for the storage bay. He has also claimed $400 for 20 hours of labour at $20 per hour. These items were erected for the use of Mr Fensom and his family, and they related to his occupation of the shed as a family home. They were not erected at the request, suggestion or prompting of anyone on behalf of the Trust, and they were of no continuing value after his occupation ended. They were removed by Mr Fensom when Mr and Mrs Fensom left the premises, at the suggestion, which must in the circumstances be regarded as a direction of Mr Robinson the officer of CaLM. In my view the plaintiffs are not entitled to any remedy in respect of the sheep yard, fowl house, fowl run and storage bays. 70 In connection with his occupation Mr Fensom brought some sheep onto the racecourse land and kept the sheep in an area which was fenced off with a temporary fence. In Mr Fensom’s evidence he was told about October 1991 by Mr Bragg and Mr Twomey that there had been allegations that sheep had got on to the race track. Mr Fensom denied that sheep had escaped on to the track, but says that he was told by Mr Bragg that to stop all arguments, the area where he kept his sheep would have to be fenced off with netting to ensure the sheep could not get through. His evidence is that he was also told that the Trust could not give him any money towards the fencing at the moment but that he would be reimbursed. Shortly after October 1991 he constructed new internal fencing to contain his sheep. He has verified particulars of expenditure and materials totalling $3893.05 and has claimed $3200 for 160 hours of labour at $20 per hour. He also claimed $800 for moneys paid to others who assisted in the labour. 71 With respect to the improvements to the stables, feed room and sand roll, Mr Bragg and Mr Twomey deny Mr Fensom’s evidence to the effect that Mr Twomey promised that Mr Fensom would be reimbursed for materials used in renovating the stables, feed room and sand roll. Mr Fensom’s affidavit evidence does not support the claim that he was promised that he would be paid for labour used in doing this work. At a relatively late stage in the parties’ relationship he made a claim for payment for materials in doing this work and that claim did not include a claim for labour. Further it appears to me that if Mr Fensom had a belief that he was entitled to payment of significant sums for materials provided for the stables, feed room and sand roll it is very unlikely that he would have entered into the arrangement in March 1990 under which he received $10,000 in loan moneys from the Westpac Bank and undertook to repay the loan. If Mr Fensom held that belief it is also unlikely that he would actually have gone on to pay significant sums off the bank loan; this seems inconsistent with a sense of entitlement to be paid much the same amount of money without a loan. Overall I am unable to find on the probabilities that Mr Fensom carried out the improvements on the stables, feed room and sand roll on the basis of any promise or other assurance that he would be paid, either for materials or for labour. Even if such an assurance were given, it is unlikely that it would have been unqualified or unconnected with reference to the need for approval of the Lands Department. 72 In my view the repairs to the stables, feed room and sand roll should be regarded similarly to the work on the cottage and shed, as work carried out and paid for by Mr and Mrs Fensom on the overly optimistic view that they would obtain some long term interest in the property which would justify their expenditure on improvements and provide for some entitlement to the value of improvements on termination of their interests. The plaintiffs had no contractual entitlement to payment for this work on the basis of the actual expenditure or the fair value of the materials used or of the work in labour done.
(a) fitting brick floors throughout;(b) supplying sand;
(c) relining the stables with six-inch timber and applying Creosote;
(d) supplying and fitting mesh;
(e) supplying and fitting new doors to six stables.
73 A number of grounds of claim raised in the Statement of Claim or Counsel’s submissions can be dealt with shortly. There is a claim for specific performance of the parties’ arrangement, but specific performance can not be ordered. There are many reasons for this, the first being the absence of any lawful authority for any arrangements made by the Trust to be given effect in the absence of the Minister’s consent. There were also references to s.72 of the Fair Trading Act 1987 (NSW) and s.87 of the Trade Practices Act 1974 (Cth) as bases for a claim for specific performance; these were not the subject of detailed submissions. Nor were claims for damages by reference to s.68 of the Fair Trading Act and s.82 of the Trade Practices Act, and I am unable to see any basis for such claims. 74 Counsel for the plaintiff contended that remedies should be granted under doctrines relating to proprietary estoppel and promissory estoppel. I was referred to proprietary estoppel cases, beginning with Ramsden v. Dyson (1866) LR 1 HL 129 and proceeding through to Austotel Pty Ltd v. Franklins Self Service Pty Ltd (1989) 16 NSWLR 582 and also to Clancy v. Salienta Pty Ltd [2000] NSWCA 248. In my opinion the facts can not be analysed to produce a proprietary estoppel. There was no conduct which conveyed to the plaintiffs any belief that they were entitled to build the shed or the cottage, or that they would be protected if they did. They were warned not to build without a lease. The plaintiffs are not seeking to defend an entitlement of any kind to be granted a long term lease and to be restored to occupation; they gave up occupation upon a notice to quit initiated by the Trust, they have no arguable right of occupation as against the Crown and the difficulties of there being no lawful authority and no definition of the supposed interest stand in the way of any proprietary estoppel. If the Trust had done everything of which it was capable to confer a lease on the plaintiffs, there would have been no effectual result; it was simply beyond their capacity, from the beginning and throughout, to confer any lease or other interest. 75 Nor are the facts capable of analysis in terms of promissory estoppel; the plaintiffs did not point to any entitlement under a previous legal relationship in respect of which they were promised forbearance.
Grounds of Claim Not Established
76 The claim presented at the hearing which requires detailed consideration is the claim for Restitution on the ground of unjust enrichment by benefits which have accrued to the Trust from improvements carried out by the plaintiffs during their occupation. In Pavey & Matthews Pty Ltd v. Paul (1986) 162 CLR 221 the majority of the High Court recognised that a principle of law, not an express or implied contract or contractual promise, underlies an obligation to pay a fair value for work executed under an unenforceable contract. That decision, and many others referred to in the judgments, relate to recovery of payment for work executed under an unenforceable contract. The general principle is not one which can be expressed completely and applied directly. Justice Deane, in the majority, regarded it as unlikely that the circumstances in which the common law imposes such obligations would be greatly affected by the perception that the basis of the obligation was not contractual: see at 256. The High Court’s decision does not supplant earlier authorities which establish that remedies are available. Observations in the judgment of Mason and Wilson JJ, at 228-30, show that it is a necessary element that the defendant should have received or accepted the plaintiffs’ work without paying the agreed remuneration. The choice of the word “enrichment” in the terminology of this principle (and the word “enrichment” is a little tendentious) is a reflection of the element of receipt or acceptance. 77 An element of receipt, adoption or acceptance of the plaintiff’s work is significant in Restitution claims because it takes the circumstances out of the general principle that liabilities are not to be forced upon people behind their backs, stated forcefully in Falcke v. Scottish Imperial Insurance Co. [1886] 36 Ch D 243 at 248 by Bowen LJ. That general principle is a landmark in Restitution law, although it is not always a boundary mark. Its importance as a starting point was stated by Young J in Cadorange Pty Ltd (in liq) v. Tanga Holdings Pty Ltd (1990) 20 NSWLR 26 at 32, and reflected in his Honour’s observation at 35:
Claim for Restitution
78 The facts of this case make it unlike cases where the parties formed, and at some stage were bound by an enforceable agreement which ceased to have effect for some reason arising from its own terms, or from default or repudiation. Such cases include those between a vendor and purchaser of land under a contract which contemplated or permitted improvements pending completion, where the equitable interests of the parties are to be adjusted after termination. The entire want of effect of the parties’ arrangements at any time distinguishes the present case from those in which it might be thought that there once was an interest in improvements and that the interest has been forfeited, raising the potential for equitable adjustment. The present facts are also different in material ways from cases where the parties’ agreement was affected by some illegality in which some legal rule forbad making the agreement or made what was to be done under it punishable or illegal; the highly indefinite arrangements which the parties contemplated were beyond the Trust’s capacity, but only in that sense were they illegal. 79 I was referred to several cases where payment for services was awarded where the services had been rendered to a company under contracts which, for one reason or another, were void: see Rover International Pty Ltd v. Canon Film Sales [1989] 1 WLR 192 and Craven-Ellis v. Canons Ltd [1936] 2 KB 403. These are cases where acceptance of the benefit of the services can be seen clearly: the void contracts provided for the services. The relationship of the parties in the present case was even less concrete; if it can be given a classification it should be placed with “contracts which fail to materialise”, a category of inherently ineffective contracts recognised in Mason & Carter, Restitution Law in Australia, Butterworths, Sydney, 1995, Ch 10. 80 Counsel for the Trust referred me to a number of cases where contracts for sale of land had been terminated after improvements had been made. Sunstar Fruit Pty Ltd v. Cosmo concerned parties who had made an enforceable contract and the issues related to entitlements including adjustments in equity on its termination for breach. As well as deciding issues more directly related to contractual entitlements and equitable adjustments, Derrington J addressed the claim for restitution in respect of costs outlaid by the purchaser for improvement on the property during the purchaser’s occupation: see at 224-8. After reviewing a number of cases relating to improvements affected by purchasers under instalment contracts where the contracts were not completed Derrington J concluded, in relation to the doctrine of restitution (at 226-7):
Indeed, it must be a rare case in which the Court can impose a liability where there was no request or adoption, and where, had the person benefited had any say in the matter, he or she might very well have rejected the offer of benefit.
See too Sunstar Fruit Pty Ltd v. Cosmo [1995] 2 Qd R 214 at 225-226 (Derrington J). Where the benefit is accepted the claims of justice are different, the general principle in Falcke does not apply and the absence of a contractual obligation does not have the same significance.
81 Later, at 227, he observed:
However, its justification flows from the vendor’s knowledge of the right of the purchaser to effect the improvements though not necessarily of the act in exercise of that right.
82 In Clancy v. Salienta Pty Ltd, Sunstar Fruit and the cases to which Derrington J referred in this connection were considered by the New South Wales Court of Appeal. That case also related to improvements made pending completion of an instalment contract which was enforceable, but was terminated for the purchaser’s default. There was a division of opinion on whether the purchaser was entitled to relief on restitutionary principles in respect of the improvements. In the majority view - see Giles JA at [226] - the case law did not establish the purchaser’s entitlement to be compensated as a matter of course in respect of permanent improvements if the vendor terminates for the purchaser’s default. In my understanding Giles JA recognised that an allowance in respect of the improvements might be made in the course of equitable adjustments following the termination of the contract, but on considering in detail the circumstances of that case an equitable adjustment was not appropriate. I observe that the circumstances included that the purchaser had worked the property and had the benefit of use for production of the improvements as they progressed over a number of years. 83 The circumstances of the present case differ markedly from any vendor and purchaser case in that there never was any enforceable agreement between the parties, there has been no default, there is no concept of forfeiture and no basis for any equitable adjustment or for the exercise of discretions to mould the remedy to be awarded. 84 In Sabemo Pty Ltd v. North Sydney Municipal Council [1977] 2 NSWLR 880 Shepherd J considered and granted a claim for restitution for work done in relation to a contract which failed to materialise. Shepherd J’s consideration was throughout highly particular to the facts of that case, which when addressed in detail do not resemble the present facts in any close way, and to the state of development of the law at the time his Honour spoke. In Sabemo’s case the plaintiff responded to an invitation to tender for a proposal for leasing and redeveloping the defendant’s land. The tender was accepted, but its express provisions showed that acceptance of the tender did no more than bring the parties together so that they could plan the project until a point was reached where they would enter into a contractual relationship, a building lease. On this basis the plaintiff worked co-operatively with the defendant for several years towards planning the redevelopment, in contemplation of an advantage which would take the form of its position as lessee under the building lease and the economic opportunities which that would bring. No actual improvements on the land were carried out. The building lease failed to materialise because of a profound change in the defendant’s intentions for development of its property, and not because of any shortcoming in the plaintiff’s participation. Justice Shepherd made a very extensive review of the case law to that time; there were two decisions in which analogies could be seen and remedies had been granted: Brewer Street Investments Ltd v. Barclays Woollen Co. [1954] 1 QB 428 and William Lacey (Hounslow) Limited v. Davis [1957] 1 WLR 932. There were other authorities adverse to any remedy. 85 Justice Shepherd, at 899-900, said:
The operation of the doctrine of restitution under analogous heads requires a participation by the vendor in such a way as to render his subsequent enrichment unjust, for enrichment alone is not ipso facto unjust at law. This factor as it is manifested in the instalment contract cases can only be in the form of the implied approval by the vendor to the improvements by reason of the nature of the contract itself which allows the purchaser to have possession for a sufficient period in circumstances where the possibility of his effecting improvement is to be expected. That would also be logical in cases other than instalment contracts where the same considerations apply.
86 His Honour went on to apply the principle to the facts, and in doing so said, at 900:
The question I must ask myself is whether, at this stage of the development of the law in this country, it is right to say that, in some circumstances, in a case of this kind, there will be occasions when the law, irrespective of the common intention of the parties, will impose on one an obligation to pay the other for work done. After due reflection I have reached the conclusion, notwithstanding the weighty authority which the early Australian decisions have, that there is such a principle in existence.
87 Later, at 901, Shepherd J said:
In a judgment of this kind it would be most unwise, and in any event impossible, to fix the limitations which should circumscribe the extent of the right to recover. It is enough for me to say that I think that there is one circumstance here which leads to the conclusion that the plaintiff is entitled to succeed. That circumstances is the fact that the defendant deliberately decided to drop the proposal.
88 The basis decision in Sabemo was narrow and closely related to the facts of the case, and the determining factor was unlike anything in the present case. Sabemo was decided before the establishment of the principle of Restitution in Pavey & Matthews. Mason and Carter commented on Sabemo at para [1035], where other considerations of the decision are also referred to. In a developing area of the law, where Pavey & Matthews is a very significant later turning point, Sabemo’s continuing significance is its significance for factual situations which present close analogies with its facts. In my opinion the principle on which Shepherd J acted is not applicable to the present facts. 89 I look for instances in which quantum meruit or like remedies have been awarded in circumstances which are analogous to the present case, recognising that it is in the nature of analogies to be somewhat imperfect. A closer analogy to the present facts is the decision in Van den Berg v. Giles [1979] 2 NZLR 111, where the plaintiff had carried out extensive structural alterations and refurbishment of a house property in the expectation that the property would be sold to him, whereas there was no enforceable agreement to sell the property and there were no defined terms. The defendant, who denied making any agreement, had actively encouraged the work and accepted the benefit of it. Justice Jeffries reviewed the law on which he acted at 120-3, referring to the general statement relating to remedies for unjust enrichment or unjust benefit in the speech of Lord Wright in Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd [1943] AC 32 at 61-3, and to the judgment of Denning LJ in Brewer Street Investments Ltd v. Barclays Woollen Co. Ltd [1954] 1 QB 428 at 436. Justice Jeffries also noted decisions in Canada and the United States. 90 The facts on which his Honour acted may be summarised as:
To my mind the defendant’s decision to drop the proposal is the determining factor.
91 It is significant that Jeffries J’s conclusion was that the plaintiff was entitled to be reimbursed “… to the extent that his services have enhanced the value of the defendant’s property”. 92 In Angelopoulos v. Sabatino (1995) 65 SASR 1 compensation on Restitution principles was awarded in respect of work carried out by a proposed lessee of hotel premises during negotiations for a lease which did not lead to a binding agreement to lease. Chief Justice Doyle, with the concurrence of Duggan and Nyland JJ, reviewed the judgments in Pavey & Matthews at 6-10 and the law there established. His Honour, at 9, said:
(1) the plaintiff showed that he performed services on the defendant’s property which she accepted without demur and quite freely;(2) the services enhanced the value of the defendant’s property;
(3) the plaintiff acted on the basis that he had a right to purchase the property at a fixed price; and
(4) the plaintiff had been induced to believe that by the defendant’s conduct and representation: see Van den Berg , at 121-2.
93 And later at 9-10:
… there is significant emphasis in the judgments of the majority upon the notion of acceptance of a benefit from the performance by the claimant of an action which confers a benefit or enrichment upon the other person. However, to my mind it is equally clear from the majority judgments that the existing case law in this area has not been overturned.
94 Chief Justice Doyle went on to consider earlier case law including Van den Berg. His Honour also gave consideration to the choice of remedy which was appropriate, in the Angelopoulos case the cost of improvements and not the value which they added to the value of the property. The judgment of Doyle CJ, which was not available to the authors of Mason & Carter, has the considerable advantages, for present purposes, of speaking with appellate authority on the subject of a claim for improvements to land effected in anticipation of a lease which failed to materialise, and with the benefit of insights derived from Pavey & Matthews. 95 Of the elements mentioned in the passage in the judgment of Doyle CJ last set out, acceptance by the Trust of the benefit of improvements to the racecourse land in the present case is clear. The basis on which the Fensoms as providers of the benefit acted was a general expectation that in some way a long term interest would emerge. This expectation is not a very satisfactory basis on which to ground a remedy as it was objectively not possible for the expectation to be fulfilled, the plaintiffs ought to have had an understanding of that, and they did not have that understanding because their attention was fixed on the elements of the situation which were potentially advantageous to them. The Trustees however shared in an ill-defined and not altogether reasonable expectation that some long term outcome would emerge. Consideration of the choice which the Trustees had in deciding whether or not to accept the benefit of the improvements points towards according the plaintiffs a remedy, as the Trustees were in a position to stop the improvements, notably when the improvements were forcibly brought to their attention by the collapse of the old cottage about January 1990; the Trustees could have forbidden all further improvements and could even have gone to the length of ejecting the Fensoms, but their conduct had the opposite tendency. The conduct of the Trust having regard to the Trustees’ knowledge of what the plaintiffs were doing and the basis upon which they were doing it favours the grant of a remedy; from January 1990 onwards the Trustees treated the improvements as an affair of the Trust, endorsed the improvements by advancing money for them, and sought advantages from them in leasehold negotiations. 96 The categories of case in which Restitution remedies are awarded are diverse, and not made less so by the decision in Pavey & Matthews. However they include cases where improvements are carried out to property in the expectation, created or contributed to by the defendant, that the plaintiff will acquire some interest in the property, for example as purchaser or lessee, but the expectation is not fulfilled for some reason such as that the proposed contracting parties never actually reach an agreement, or that they reach an apparent agreement which for some reason is void or unenforceable. I would put to one side cases relating to adjustment of interests between vendors and purchasers and relief against forfeiture of interests in land. 97 In relation to improvements the concept of acceptance of improvements by the owner of land is made difficult because it is the nature of improvements to become part of the property itself, and taking back possession of the property with the improvements is not always acceptance of the benefit of the improvements. The supposed acceptance, the whole circumstances of the parties’ dealings and the plaintiffs’ conduct in making the improvements must be evaluated and a conclusion must be reached overall as to whether the circumstances give rise to an obligation to make fair and just restitution. As with other areas of the law which require decisions to be based on evaluation and the application of standards, a clear and complete exposition of all supporting reasoning is hardly possible. The principles on which the remedy is awarded do not allow precision of statement. In my view the concept of acceptance of benefit as used in the context of unjust enrichment was fulfilled for the improvements and their value, and not for the plaintiffs’ actual expenditure or labour. 98 The plaintiffs’ claim for restitution is a claim which can only be satisfied by awarding a judgment at law for a sum of money for debt. Although the award of a remedy is not discretionary, the range of considerations available for determining what sum of money is appropriate is not highly defined and may include some of the considerations which affect the selection of an equitable remedy. In Pavey & Mathews, Deane J at 251 referred, apparently with approval, to a statement in Chitty’s Treatise on Pleadings, 7th ed, 1844, Vol.1 p.351, in which the amount payable on a quantum meruit basis was referred to as “so much money as he therefore reasonably deserves to have”. Further, at 253, Deane J referred to the amount to be recovered as “reasonable remuneration”. These expressions are not restrictive of the range of considerations affecting the deserts and merits of the parties which can be regarded in determining quantum. Conduct of the defendants in that case which contributed to the work being done has a bearing not only on whether the defendant incurred liability for the work but also on assessment of what remuneration it is reasonable to award.
In the present case we are dealing with an anticipated or hoped-for contract which did not come into being. However, the decision in Pavey’s case suggests that acceptance of a benefit is relevant as a basis for recovery in restitution. However, it is clear that more is involved than the simple fact of acceptance. The consideration of the judgments in Pavey’s case, and of other case law in this area, suggests that one must also consider the basis upon which the provider of the benefit acted, the choice which the recipient of the benefit had in deciding whether or not to accept the benefit and the conduct of the defendant, by which I mean the defendant’s knowledge of what the plaintiffs were doing and the basis upon which they did it.
99 Mr Robinson, the CaLM Officer, inspected the racecourse land on 22 and 23 June 1995 for purposes which included determining details of the improvements claimed by Mr and Mrs Fensom. In his report he made estimates of the cost of the fencing materials at $3700 and of the cost of materials used in other structures; the costs which are now relevant relate to repairs to the stables ($2800), repairs to the sand roll ($950), repairs to the feed room and tack room ($950). Mr Robinson reported that “Mr and Mrs Fensom and the trust had previously agreed” to the cost of materials for various items but there is no evidence establishing such an agreement. Mr Robinson, who gave evidence in the proceedings, was not in a position to establish the basis for this part of his report. 100 In 1984 the Lands Department lent the Trustees $4000 for improvements to buildings and this was expended on the cottage. Notwithstanding this expenditure, by 1989 the cottage was in very poor condition. There is no evidence of its value. I attribute no value to the old cottage as it was not reasonably suitable for occupation and collapsed when some work was done on it. 101 Mr Valuer Barry Edgell, an officer of the State Valuation Office, gave in evidence his reasoned valuation of the amount which the improvements constructed by Mr and Mrs Fensom added to the value of the Reserve Trust land as of 15 June 1999, the date of his inspection. The value attributed by Mr Edgell to the cottage complex, being the cottage, double garage and carport, was $55,500, and to the stable, feed room, sand roll and fencing was $8700. There was no countervailing evidence. Aspects of Mr Edgell’s evidence were challenged by counsel in cross-examination and in submissions on the grounds of the artificiality of some assumptions he made. The artificial elements related to moving between valuation based on improvements on town land and valuation of the improvements on an unsubdivided part of the racecourse land. The circumstances were such that a valuer could not avoid relying on comparisons which were not completely satisfactory, and in my view Mr Edgell’s valuation should be accepted and relied on. There is no other basis on which the value of the improvements can be found. 102 In my view the amount outstanding in respect of the Westpac loan, for which the second to seventh defendants remain personally liable, should be regarded as an obligation of the plaintiffs to the Trust. An award to the plaintiffs of a restitution remedy in respect of improvements to the property should be on the basis that the amount of the loan obligation as it stood at the time the Fensoms left the racecourse land should be set off in assessing the amount awarded. Both those matters ought to have been resolved at about the time of the Fensoms’ departure. If the rights of the parties had been adjusted promptly, in a fair way, the amount outstanding to Westpac would have been set off or deducted from the amount otherwise due to the Fensoms and the Westpac debt would have been repaid at that time. A claim was made in the Statement of Claim and in the opening address of Counsel that there had been an effective agreement to release the loan obligation; the evidence did not support that claim, but the merits and rights of the parties in relation to the Westpac debt were debated at the hearing and were the subject of Counsel’s submissions. Both parties accepted that I should, if appropriate, award a remedy in respect of it. I am obliged by s.63 of the Supreme Court Act 1970 to grant remedies so as completely and finally to determine all matters in controversy. In my understanding, the allowance which I make for this obligation in awarding a restitution remedy will have the effect required by s.63. 103 In my view the amount which should be awarded in restitution is the value of the improvements, that is $64,200, with a deduction of the amount outstanding on the Westpac loan at the time the plaintiffs vacated the land namely $9686.24. I propose to award the balance of $54,514. In my view the plaintiff should recover interest on this amount calculated from 1 January 1995, which is approximately the time when the Fensoms vacated the land, until judgment is entered, and interest should be calculated at the rates usually applied to judgment debts. Interest to the date of judgment amounts to $33,998.08.
Adjustment of Parties’ Entitlements
104 Order that:
Orders
(1) Cootamundra Racecourse (D.620014) Reserve Trust be added to the proceedings as the ninth defendant.
(2) The ninth defendant be appointed to represent all persons who are or have been Trustees of the Cootamundra Racecourse Reserve established by Gazette notice on 17 October 1896.
(3) Give judgment for the plaintiffs against the first to seventh inclusive and ninth defendants for $88,512.
(4) Order that execution against the first to seventh defendants be stayed until further order.
(5) Costs are reserved.
(6) I direct that orders 1-5 be not entered before 1 December 2000.
(7) Each party has liberty to apply in the meantime as to the form of the orders on one day’s notice.
Last Modified: 01/03/2002
Cases Citing This Decision
60
Sckaff v Sckaff
[2024] NSWCA 207
Sckaff v Sckaff
[2024] NSWCA 207
Sckaff v Sckaff
[2024] NSWCA 207
Cases Cited
6
Statutory Material Cited
7
Abigroup Contractors Pty Ltd v ABB Service Pty Ltd
[2004] NSWCA 181
Angelopoulos v Sabatino
[1995] SASC 5230
Legione v Hateley
[1983] HCA 11