Hawkesbury City Council v Grewlan Investments Pty Ltd
[2007] NSWSC 1376
•29 November 2007
NEW SOUTH WALES SUPREME COURT
CITATION: Hawkesbury City Council v Grewlan Investments Pty Ltd [2007] NSWSC 1376
JURISDICTION: Equity
FILE NUMBER(S): 6071/06
HEARING DATE{S): 27 & 30 April, 4 & 15 May, 9 & 23 October 2007
JUDGMENT DATE: 29 November 2007
PARTIES:
Hawkesbury City Council (P)
Grewlan Investments Pty Limited (D)
JUDGMENT OF: Hamilton J
LOWER COURT JURISDICTION: Not Applicable
LOWER COURT FILE NUMBER(S): Not Applicable
LOWER COURT JUDICIAL OFFICER: Not Applicable
COUNSEL:
M R Gracie (P)
M J Slattery QC and P T Newton (D)
SOLICITORS:
A R Walmsley & Co (P)
JP Lawyers (D)
CATCHWORDS:
EQUITY [76] – General principles – Mistake – Equitable relief in case of mistake – Rectification – Generally - Necessity for mutual mistake – Necessity to show common intention with which document executed - ESTOPPEL [34] - Estoppel in pais – Equitable estoppel – Other matters – Defendant represents to plaintiff Council that if parties enter into deed under which Council will organise construction of road giving access to allotments including land of the defendant, defendant will not claim compensation for land dedicated to Council – Defendant estopped from claiming compensation for dedicated land.
LEGISLATION CITED:
Fair Trading Act 1987 s 42
Trade Practices Act 1974 (Cth) ss 52, 80, 87
CASES CITED:
ACCC v Real Estate Institute of WA Inc (1999) 95 FCR 114
ACCC v Z-Tek Computer Pty Ltd (1997) 78 FCR 197
Bush v National Australia Bank Ltd (1992) 35 NSWLR 390
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31
DTR Securities Pty Ltd v Sutherland Shire Council (1993) 79 LGERA 88
Equity Access Pty Ltd v Westpac Banking Corporation (1990) ATPR 40-994
Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Pty Ltd (1978) 140 CLR 216
In re Preston [1985] AC 835
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191
Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477
Smith v Smith (now Vocalan) (2004) 12 BPR 23,051
Taylor v Johnson (1983) 151 CLR 422
The Commonwealth of Australia v Verwayen (1990) 170 CLR 394
Vitol SA v Esso Australia Ltd (The “Wise”) [1989] 2 Lloyd’s Rep 451
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Yorke v Lucas (1985) 158 CLR 661
Handley, Estoppel by Conduct and Election (2005) [3-001], [3-007], [3-012]
Meagher, Gummow & Lehane’s Equity Doctrines and Remedies (4th ed, 2002) at [17-110], [17-115]
Miller’s Annotated Trade Practices Act (28th ed, 2007) [1.52.35], [1.52.53], [1.80.16]
Spencer Bower, The Law Relating to Estoppel by Representation (4th ed, 2004) [III.4.1], [XIV.2.12-14]
DECISION:
Defendant estopped and restrained from pursuing claim for compensation.
JUDGMENT:
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
HAMILTON J
THURSDAY, 29 NOVEMBER 2007
6071/06HAWKESBURY CITY COUNCIL v GREWLAN INVESTMENTS PTY LIMITED
JUDGMENT
HIS HONOUR: The subject matter of these proceedings is whether the defendant is precluded from seeking compensation from the plaintiff in respect of part of the land known as 286 Windsor Road Vineyard and being Lot 2 in DP 808875 (“the land”) by reason of the defendant’s representations or conduct leading to the entry into of a deed, which provided for the acquisition by the plaintiff from the defendant of that part of the land.
Facts
The following facts are easily found or are undisputed, except where they are stated to be disputed.
Eddy DeMarco is a director of the defendant. The defendant owns two pieces of real property. The first is a property at North Parramatta that it acquired in about 1974. On that property there is erected a retail showroom. The rental of that property provides income for Mr DeMarco and his wife. The second piece of property is the land, which the defendant acquired in 1990. The defendant acquired the land as an investment and has not formed any plan to use it or to develop it up to the present time. The defendant’s intention was and is to realise the investment at some stage by sale of the land.
The land is one of a number of adjoining allotments facing Windsor Road (“the allotments”). Prior to the construction of the road known as Industry Road, access to all these allotments was from Windsor Road only. The development of the allotments was likely to be restricted by reason of traffic problems on Windsor Road, which would be caused by vehicles having access to and from the allotments via Windsor Road. Even as early as 1990, the plaintiff had in mind a proposal for the construction of a road parallel to Windsor Road, giving access to the allotments. Access to the allotments from the access road would not cause traffic problems on Windsor Road and would facilitate development of the allotments. Their development would not be allowed until the construction of the access road. The construction of the access road would cut off a portion (“the cut off portion”) of each of the allotments from the main part of the allotment. It was the plaintiff’s intention that each of the owners should dedicate to the plaintiff free of cost the cut off portion, comprising not only the land on which the road was to be constructed, but the portion between Industry Road and Windsor Road (“the buffer zone”), which would form part of a reserve/recreational area.
The defendant acquired the land in 1990 by an agreement with AGL. The transfer by AGL to the defendant of the land required the subdivision of an existing lot. On 9 November 1990, the plaintiff granted consent to a three lot subdivision, imposing as condition 10:
“The transfer, in fee simple, to Council of a 25m buffer strip and a 20m wide area for a future service road across the front of the site, for the sum of $1.”
The defendant’s solicitors, Gordon Robilliard and Associates, protested at the imposition of this condition on the ground that it was invalid. Thereafter, the plaintiff, on 20 December 1990, granted approval to a two lot subdivision omitting condition 10 and replacing it with requirements of restrictive covenants concerning access from the land to Windsor Road. It must have been clear to the defendant from this time onward that the construction of an access road, which has since taken the form of Industry Road, would be a requirement of the development of the land and that the Council was desirous of having both the site of the access road and the buffer zone dedicated to it at no cost or at a nominal cost.
By 1997, only about 35 per cent of Industry Road had been constructed. In August 1997 the plaintiff commenced to promote a scheme whereby it would undertake the construction of the balance of Industry Road to accelerate the development of the allotments. The proposal was that, if the owners would agree to this proposal and dedicate the cut off portions of their respective allotments to the Council without seeking compensation, the Council would coordinate and organise the building of Industry Road. Although the owners would meet the actual cost of the construction of the road, they would receive the benefit that the new access road would be constructed in its entirety in the near future. This would accelerate the development opportunities, as compared with Industry Road being built in sections over an indefinite number of years.
The scheme was that the plaintiff would commission and incur liability for the construction of Industry Road in the first place, but that the owners of the allotments would recompense the plaintiff in respect of the cost of the portion of Industry Road adjacent to their respective allotments. The plaintiff convened a meeting on 14 October 1997 of the owners of the allotments to discuss the proposal. Chris Daley, now the Director of Infrastructure Services of the plaintiff, wrote inviting the defendant to the meeting. Mr Daley deposed that at that meeting he said the following:
“This meeting is to discuss how Council may assist in further development of the area along Windsor Road between Groves Avenue and Park Road. You will be aware that as part of the development of the land in that area owners will be required, as a condition of any development consent of this land, to construct a service road at the front of their property and dedicate it and the land between that road and Windsor Road to Council free of cost.
I propose that Council would, subject to agreement by all owners, undertake the construction of the road on behalf of the owners including project management of the work following which each land owner will pay for their proportionate share. This will avoid piecemeal construction of the road and may encourage development of the area.”
Robert Calvert, who was then the Mayor of the plaintiff, deposed that he recalled Mr Daley saying during the meeting:
“No compensation will be paid for the land that had to be transferred to the council, so that the road may be constructed. The principle [sic] agreement that Council manages the construction of the road is dependant upon this”
He said that Mr DeMarco, at the end of the meeting, thanked him in the following words:
“De Marco: ‘I just want to thank you for organising this meeting; we really need to do something about getting this service road on the way so that we can develop the land.’”
Mr DeMarco said that he could not recall anything being said at that meeting about the absence of compensation.
Thereafter, the project stalled for some time owing to lack of cooperation from the owner of one of the allotments. The project was revived in late 2002. In a letter dated 29 January 2003, the plaintiff acknowledged the in principle agreement of the landowners to participate in the construction of Industry Road. The letter also stated:
“As the road should be dedicated as a public road on completion, it would seem appropriate that the road area and the area between Industry Road and Windsor Road be dedicated a public road and public reserve respectively to Council free of cost as part of this process. As you would be aware, this action would be necessary when development of your property proceeds.”
That letter was signed by Mr DeMarco on behalf of the defendant to acknowledge that it was “still in agreement to [sic] the proposal”.
In 2003, the plaintiff forwarded a form of deed to the defendant for its execution. That form of deed contained a recital G and a cl 16 by which the landowner would give up any right to compensation in respect of the acquisition of the portion of the land on which Industry Road was to be constructed and the buffer zone between Industry Road and Windsor Road.
The defendant sought legal advice (of which the plaintiff was unaware) concerning whether he was entitled to delete recital G and cl 16 before executing the deed. Whilst the advice it received was quite perfunctory, Mr DeMarco in fact crossed out those provisions before executing the deed and returning it to Council. It is to be noted that cl 2 of the deed provided for the transfer by the defendant to the Council of the relevant land “for acquisition purposes free of cost.” These words were not crossed out before the deed was executed and returned.
On about 12 May 2003, the plaintiff received the deed executed by the defendant. Mr Daley deposed that upon receipt of the deed from the defendant he telephoned Mr DeMarco and had a conversation with him to the following effect:
“Daley:‘You have struck out recital G and clause 16 of the deed. I can’t go ahead with any of this if you are going to make a claim against Council for compensation. What are your intentions?’
De Marco:‘I have no intention of making any claim. I just didn’t like the clauses.’”
Mr DeMarco said that that telephone conversation with Mr Daley was to the following effect:
“Mr Daley:‘Why did you strike out those clauses? Is it because you intend to seek compensation?’
I said:‘It is not because I intend to seek compensation, it is because I do not agree with them.’”
On 4 November 2003, the plaintiff sent a copy of the deed executed by it to the defendant. It was accompanied by a letter to the defendant dated 4 November 2003. There is no satisfactory explanation as to why the reply was so long delayed. But nothing of present significance appears to have happened in the meantime. In that letter, Mr Daley wrote:
“In relation to the clauses you have struck out your reason for this action is acknowledged, however, it is also acknowledged during conversations relating to this matter that you have no intention of making a claim in relation to Clause 16.”
Industry Road has since been constructed and the defendant has paid its share of the cost. The defendant has not transferred the cut off portion to the plaintiff. The defendant has now brought proceedings against the plaintiff claiming compensation for the acquisition of the cut off portion of the land and those proceedings are pending in the Land and Environment Court, awaiting the determination in this Court of these proceedings.
The plaintiff’s claim
The plaintiff puts its claim on three bases:
(1)That the defendant is estopped from asserting that it has an enforceable claim to compensation in respect of the acquisition of the cut off portion of the land.
(2)That the defendant was guilty of misleading or deceptive conduct in trade or commerce within the meaning of s 52 of the Trade Practices Act 1974 (Cth) (“the TPA”) or s 42 of the Fair Trading Act 1987 (“the FTA”) and should be granted relief on that basis.
(3)That the deed ought be rectified by including the excised cl 16 or a clause to the effect that the defendant would not seek compensation for the cut off portion of the land.
The evidence concerning the representations
It is necessary to examine closely Mr DeMarco’s evidence, written and oral, concerning the representations in the context of the other evidence concerning them.
Mr DeMarco deposed in his affidavit sworn 15 November 2006 and filed in the Land and Environment Court proceedings as follows:
“14The first time I became aware that Council sought the transfer of the land without the payment of compensation was when I received two unsigned copies of the Deed in about March 2003 from the Council.
……
25As I have set out above, it was my understanding that the Deed was to formalise the arrangement in that Grewlan would be paying for all of the costs associated with the construction of the road.
26As I understand the Deed, that is the effect of cl.2. That is [sic] that the owner will transfer to the Council the land in the plan for acquisition purposes free of cost. Those costs [sic] included, as I have set out above, the costs of construction of the road, subdivision of the land, survey costs, legal costs and the drainage infrastructure costs. It was my understanding that it was only cl.16 that related to the potential payment of compensation for the land itself. I considered cl.16 to be the only reference to the payment of compensation for the transfer of the land. As a result it was only cl.16 that I struck out, because I disagreed with it. ……
28With the benefit of hindsight, perhaps I could have been clearer in my conversation with Mr Daley. It is correct to say that at the time I had no intention to claim compensation. That is because I simply had not made any decision as to whether a claim for compensation was going to be made. However, because I did not agree with cl.16 as it appeared in the Deed, I was not willing to sign the Deed waiving the Company’s rights, if any, for the payment of compensation for the transfer of the land.”
In his affidavit sworn 15 February 2007 in these proceedings, Mr DeMarco said:
“5My state of mind at the time I struck out recital G and clause 16 of the Deed and at the time I had the conversation referred to above was that if compensation was available I wanted to reserve that entitlement and I did not want Grewlan to be barred from later pursuing any entitlement that it had against the Council for compensation in relation to the Land.”
In cross examination, Mr DeMarco gave the answers as set out below:
“Q Why were you prepared to spend money on the construction of Industry Road?
A Because council wanted it built and I considered it, I would be a stick in the mud if I was the middle property that didn’t facilitate it being completed.”Most significant were his answers to the following questions:
“Q ‘So in your mind it [the land] had a substantial value?’
A ‘Absolutely.’Q ‘In 1997?’
A ‘Yes.’Q ‘And in your mind you wanted to protect yourself on the question of compensation if you were somehow required to transfer or forfeit that land to council?’
A ‘I felt that that land had value and I didn’t want to hand it over to council without some compensation for it.’Q ‘When did you tell council that?’
A ‘That I didn’t –‘Q ‘When did you say to Mr Daley I don’t want to hand that land over to you without compensation.’
A ‘I didn’t.’Q ‘Ever?’
A ‘I believe not.’Q ‘In a conversation with Mr Daley?’
A ‘I believe not.’Q ‘And that was in 1997 you first formed that view and that view remained current right up until you deleted those clauses in the deed, is that correct?’
A ‘I may have formed that opinion before 1997.’Q ‘But the view remained current from 1997?’
A ‘Yes.’”As to seeking compensation, he said:
“Q ‘Then it must be [sic] follow I suggest to you that you were intending at some time to ask them for money?’
A ‘Well even at the time of striking out the clauses in the deed I hadn’t formed an opinion that I would seek compensation. ……’Q ‘At some time you were going to have to ask council for money for the transfer of that land to council?’
A ‘Even though I hadn’t thought about it you can take that as –‘Q ‘As a yes.’
A ‘Yes.’Q ‘You were going to have to approach them at some point and require compensation for that land?’
A ‘Yes.’Q ‘Tell me if this is an unfair paraphrase or characterisation of your evidence, what you are saying is you knew you had to do it but you hadn’t formed a view as to when you would do it?’
A ‘Or if it was possible to do it.’”Concerning his telephone conversation with Mr Daley, he said:
“Q ‘And he rang you to clarify your intentions?’
A ‘Yes.’Q ‘And it’s true isn’t it that at the time that you struck out those clauses you were wanting to reserve your rights or the company’s rights to claim compensation at a later date?’
A ‘I wanted to preserve the right but I hadn’t made any decision about seeking compensation because I didn’t know whether it was possible.’Q ‘Did you tell him that you wanted to reserve your rights to claim compensation?’
A ‘I can’t recall.’Q ‘Do your best.’
A ‘Ill [sic] do my best.’HIS HONOUR
Q ‘What is the answer?’
A ‘I don’t believe I did.’”Finally, he was asked why he did not tell Mr Daley he wanted to reserve his rights. He did not give any satisfactory answer.
There are a number of findings that I propose to make in relation to conflicts in the evidence and in relation to the evidence as to the representations. I shall deal first with the credit of witnesses.
Credit of witnesses
As to Mr DeMarco, I find that his credit is compromised. I do not mean by this that I reject or doubt everything he says. The compromise arises from the conflict between certain of his statements and his hesitation and equivocation in answering important questions. An example of conflicting statements is his statement to Mr Daley that he did not intend to claim compensation and his statements on other occasions that he did intend to make such a claim if he could. An example of hesitation and equivocation is his reluctance at the end of the last passage of cross examination quoted above to admit that he had not told Mr Daley of his desire to reserve the defendant’s rights as to compensation. Another example is that his evidence was equivocal and not very credible as to the benefit to the defendant of the construction of Industry Road. I also take into account his demeanour in the witness box.
As to the plaintiff’s witnesses, those whose evidence is principally in contention are Mr Daley and Mr Calvert. I found them both straightforward witnesses, who were apparently trying to give the Court an accurate account of past events and conversations. In general terms, I prefer their evidence to Mr DeMarco’s in case of conflict. They were not shaken in cross examination in relation to any of that conflicting evidence.
Findings of fact concerning the representations
First, I do not accept that the first time that Mr DeMarco became aware that the plaintiff sought the transfer of the land without the payment of compensation was when he received the form of deed in 2003.
Secondly, I accept the evidence of Mr Daley and Mr Calvert concerning the meeting on 14 October 1997 and, in particular, their evidence to the effect that it was announced at that meeting that part of the scheme being propounded was that the cut off portions were to be dedicated to the plaintiff free of cost or without compensation.
Thirdly, I accept Mr DeMarco’s evidence that, from 1997 and possibly before then, he regarded the cut off portion as having substantial value and that he did not want to hand it over to the plaintiff without compensation for it. I regard as inherent in this state of mind an awareness that the plaintiff was desirous of acquiring the cut off portion without compensation.
Fourthly, bearing in mind the previous findings, I do not accept that Mr DeMarco believed that the expression “free of cost” in the plaintiff’s letter of 29 January 2003 referred only to the cost of road construction. I do not accept that the words “free of cost” in that letter escaped his attention, bearing in mind the care with which it is clear that he read the development consent of 9 November 1990 and the form of deed sent to him in May 2003, particularly with regard to the terms of acquisition of the cut off portion and in view of his ongoing concern to have compensation, if possible, for its loss.
Fifthly, I accept Mr Daley’s version of the conversation he had with Mr DeMarco, when he telephoned Mr DeMarco after receiving the deed executed by the defendant with excisions. There is no substantial difference between their versions of Mr DeMarco’s response. But there is a significant difference in their versions of what Mr Daley said that evoked that response. I accept Mr Daley’s version. This is partly because of my general preference for his evidence over Mr DeMarco’s. It is also because I think it inherently probable, bearing in mind Mr Daley’s concern not to recommend the proposal to the plaintiff except on the basis that the cut off portions be dedicated to the plaintiff free of cost, that he should have been quite explicit about the terms of the assurance he was seeking and about which he had specifically made the telephone call. It is significant that Mr Daley’s words, the substance of which I accept he used, were in terms of whether Mr DeMarco was “going to make a claim against Council for compensation”, words importing an element of futurity. The response and its effect upon the hearer must be viewed in that light.
Sixthly, the inference that I draw concerning the intention with which Mr DeMarco’s response was given is that it was carefully couched in terms which could afterwards be represented as being a reference to a present concluded intention only, without reference to an intention or reservation that such a claim would be made in the future, if it were confirmed as possible. The reason not to refer to that future intention at the time was to ensure that the scheme proceeded, but that the defendant could have its cake and eat it too by later claiming compensation, if so advised. Mr DeMarco’s motives for ensuring that the scheme proceeded may well have included the desire not to be regarded as “a stick in the mud” and also the advantage to the defendant of the acceleration of the availability of such road access as would permit the development of the land. Even if, as he said, Mr DeMarco had no present intention to develop the land himself (and this I am inclined to accept), the availability of access and the consequential opportunity to develop would be likely to enhance the saleability and price of the land, which the defendant did at some time intend to sell to realise its investment.
Seventhly, I find that Mr DeMarco was aware of the terms of the plaintiff’s letter of 4 November 2003. I find that Mr Daley intended to convey that he took Mr DeMarco’s assurance as being an assurance that there was no intention to make a claim for compensation at any time; that it was entirely reasonable in the circumstances for him to do so; and that it was apparent to Mr DeMarco that that was what Mr Daley was intending to convey. In those circumstances, the defendant was under a duty to disabuse Mr Daley of his error. It deliberately did not do so. This representation was made after the plaintiff had executed the deed but before it implemented it. It confirmed the earlier representation. Furthermore it was part of the basis on which the plaintiff proceeded to implement the deed.
Submissions of parties
I shall set these out under each head of the plaintiff’s claim.
That the defendant is estopped from asserting that it has an enforceable claim to compensation in respect of the acquisition of the cut off portion.
The plaintiff submitted that the defendant, through Mr DeMarco, induced the plaintiff to assume or expect that the defendant would not ever make a compensation claim against the plaintiff. The plaintiff submitted that the defendant induced that assumption or expectation by making two representations to the plaintiff. First, it submitted that the effect of Mr DeMarco’s telephone conversation with Mr Daley (as set out in [14] above) was that the defendant represented to the plaintiff that it would not ever make a compensation claim in relation to the acquired land. Secondly, it submitted that Mr DeMarco’s silence, after the plaintiff confirmed its understanding that the defendant would not make a compensation claim in its letter to the defendant dated 4 November 2003 (as set out in [16] above), constituted a representation to the plaintiff that the defendant would not ever make a compensation claim in relation to the acquired land.
The plaintiff submitted that it acted in reliance on that assumption or expectation by proceeding to execute the deed and to arrange for the construction of the road and works on the reserve/recreational area and that, if the defendant is allowed to resile from its representations, the plaintiff will suffer detriment in the form of potential liability to compensate the plaintiff for the acquired land from which it would otherwise have been exempted.
The plaintiff referred to the six criteria to establish an equitable estoppel set out by Brennan J in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 428 - 429 and submitted that they had all been made out in this case.
The defendant submitted that the deed as executed by the parties set out the legal relationship between the plaintiff and the defendant and that the deed did not release the plaintiff from liability to any claim for compensation. The defendant submitted that the clearest representations by the defendant in relation to the potential for a future compensation claim were its deletion of recital G and cl 16 from the deed and Mr DeMarco’s statement to Mr Daley that he did not like or did not agree with the clauses.
The defendant submitted that Mr DeMarco’s telephone conversation with Mr Daley could not have constituted a representation that the defendant would never make a compensation claim in relation to the acquired land, because, during that telephone conversation, Mr DeMarco made statements as to his current intention or the current intention of the defendant, but did not ever say that the defendant would never make a claim for compensation or that the defendant would release the plaintiff from any entitlement it had to compensation.
That the defendant was guilty of misleading or deceptive conduct within the meaning of s 52 of the TPA or s 42 of the FTA.
The plaintiff submitted that the oral representation of Mr DeMarco as set out in [14] above and the failure of the defendant to correct the plaintiff’s understanding that the defendant would not make a claim for compensation as set out in its letter of 4 November 2003 in [16] above constituted misleading and deceptive conduct in contravention of s 52 of the TPA and s 42 of the FTA.
The defendant submitted that Mr DeMarco’s conduct in making the oral representations was not misleading or deceptive in the circumstances of the case and referred to Equity Access Pty Ltd v Westpac Banking Corporation (1990) ATPR 40-994 at 50,950. The defendant submitted that the statement made by Mr DeMarco was no more than a statement of the defendant’s state of mind at that time and was not a representation that the defendant would not make a compensation claim in the future.
The defendant also submitted that the relevant conduct was not “in trade or commerce” and that there was therefore no contravention of the statutes and that the plaintiff is not entitled to any form of relief under them.
That the deed ought be rectified by including the excised cl 16 or a clause to the effect that the defendant would not seek compensation for the cut off portion.
The plaintiff initially submitted that the defendant, by Mr DeMarco, and the plaintiff, by Mr Daley, had an actual common intention, at the time of execution of the deed, that the defendant not be permitted to make a compensation claim and that rectification of a deed is usually made in such a circumstance and referred to Bush v National Australia Bank Ltd (1992) 35 NSWLR 390. The plaintiff submitted that the precise words required to rectify the deed can be ascertained because they were set out in the deleted cl 16.
The defendant submitted that it did not share any intention the plaintiff might have had to include a term in the deed that precluded a compensation claim. The defendant submitted that the strongest evidence of the defendant’s intention was its objection to and deletion of recital G and cl 16 from the deed. The defendant also submitted that, whether or not it did not intend to include such a term in the deed, it did not intend to waive any entitlement it might have to compensation, because, at its highest, Mr DeMarco’s statement in his telephone conversation with Mr Daley was a statement as to the defendant’s intention at that time, but not at all future times.
The plaintiff later referred to Smith v Smith (now Vocalan) (2004) 12 BPR 23,051 in which Barrett J at [48], [50] adverted to situations in which rectification of a unilateral mistake is permissible if the party not under the misapprehension is guilty of fraud, whether actual, constructive or equitable, as follows:
“[48]In the case of unilateral mistake, where the actuating misapprehension is said to have operated upon one party but not the other, rectification is generally not permissible. There is, however, an exception where the party not under the misapprehension is guilty of fraud, whether actual, constructive or equitable. The relevant principle was stated by Mason ACJ, Murphy and Deane JJ in Taylor v Johnson (1983) 151 CLR 422 at 432-433 as follows:
‘The particular proposition of law which we see as appropriate and adequate for disposing of the present appeal may be narrowly stated. It is that a party who has entered into a written contract under a serious mistake about its contents in relation to a fundamental term will be entitled in equity to an order rescinding the contract if the other party is aware that circumstances exist which indicate that the first party is entering the contract under some serious mistake or misapprehension about either the content or subject matter of that term and deliberately sets out to ensure that the first party does not become aware of the existence of his mistake or misapprehension. ... In such a situation it is unfair that the mistaken party should be held to the written contract by the other party whose lack of precise knowledge of the first party’s actual mistake proceeds from wilful ignorance because, knowing or having reason to know that there is some mistake or misapprehension, he engages deliberately in a course of conduct which is designed to inhibit discovery of it.’
…….
[50]The cases to which I have referred were cases in which equitable remedy by way of rescission or rectification was granted to redress unconscionability emerging from or founded on unilateral mistake. There is no reason why other equitable remedies should not be available where the elements justifying relief exist. The essential elements are, first, that one person enters into a contract under a very serious mistake about its content in relation to a fundamental matter; second, that the other party is aware that circumstances exist indicating that the first person is entering into a contract under a serious mistake about the content or subject matter of that aspect of the contract; and, third, that the second party deliberately sets out to ensure that the first party does not become aware of the existence of the mistake, either by positive acts or omitting to bring it to their attention.”
The plaintiff submitted that the deed ought be rectified because it was clear that, at the time of execution of the deed, Mr DeMarco intended to reserve whatever ability the defendant might have had to claim compensation in future, but that his statements in his telephone conversation with Mr Daley and his silence after receiving the plaintiff’s letter of 4 November 2003 induced the plaintiff to misapprehend that intention.
The defendant submitted that the representations made by Mr DeMarco, at their highest, merely communicated the defendant’s intention at the time the statement was made, but did not communicate what its intention would be at some future time.
Conclusions
Estoppel
The plaintiff’s claim in estoppel against the defendant was pleaded as follows in the statement of claim:
“9In or about November 2003, and before execution of the Deed by Mr Geoffrey Banting, the then Acting General Manager of the Council, Mr Christopher Daley, a Director of the Council, enquired of Mr De Marco as to his deletion of Recital G and clause 16 in response to which Mr De Marco advised Mr Daley that Grewlan had no intention to claim compensation against the Council in respect of any transfer of the land to the Council under clause 2 of the Deed (the representation).
……
11Acting solely in reliance upon the truth and accuracy of the representation Mr Banting executed the Deed and Mr Daley witnessed his signature on behalf of the Council and Mr Daley proceeded to arrange for the construction of Industry Road.
……
“17Further, or alternatively, the Council repeats paragraph 11 above and says that acting solely in reliance upon the matters pleaded in paragraph 9, the Council has acted to its detriment such that the conduct of Grewlan is unconscionable and Grewlan should therefore be estopped from denying that at all relevant times, it had no intention of making a claim for compensation against the Council is [sic] respect of the transfer of the land by Grewlan to the Council pursuant to clause 2 of the Deed.”
As stated in [40] above, the plaintiff relied on the formulation of what is required to found an equitable estoppel by Brennan J in Waltons Stores at 428 – 429. That formulation is as follows:
“In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant's property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff's reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs.”
I agree with the plaintiff’s submission that the estoppel claimed is made out by reference to those requirements as follows. First, the plaintiff assumed a particular legal relationship between it and the defendant. The relationship was based on the whole course of events between the plaintiff and the defendant concerning the land, including the meeting on 14 October 1997, the plaintiff’s letter of 29 January 2003 and the defendant’s signature indicating agreement to it, the form of deed, the telephone conversation between Mr DeMarco and Mr Daley after the defendant’s receipt of the form of deed, the plaintiff’s letter of 4 November 2003 and the defendant’s silence after receipt of that letter. The nature of the legal relationship was that the plaintiff would arrange for the construction of Industry Road; the defendant would pay its share of the cost; the relevant portion of the land would be transferred to the plaintiff after construction of the road; and the defendant would not make any claim for compensation. This flows from my acceptance of Mr Daley’s evidence of the communications between him and Mr DeMarco. That silence may constitute a representation to found an estoppel, if the silence is in circumstances where there is a duty to speak, is undoubted: see, eg, Vitol SA v Esso Australia Ltd (The “Wise”) [1989] 2 Lloyd’s Rep 451; and see generally Spencer Bower, The Law Relating to Estoppel by Representation (4th ed, 2004) [III.4.1], [XIV.2.12-14]; Handley, Estoppel by Conduct and Election (2005) [3-001], [3-007], [3-012]. There was in my view in the circumstances of this case a duty to speak by making a corrective response to the plaintiff’s letter of 4 November 2003.
Secondly, the defendant induced the plaintiff to adopt and maintain that assumption or expectation. That much is clear from the conversation between Mr DeMarco and Mr Daley after Mr DeMarco had deleted recital G and cl 16 from the deed and from Mr DeMarco failing to contradict Mr Daley’s understanding as set out in the letter of 4 November 2003.
Thirdly, the plaintiff acted in reliance on that assumption and expectation. Mr Daley recommended that the plaintiff proceed with the project following his telephone conversation with Mr DeMarco. He told Mr Banting, the Acting General Manager of the plaintiff, that he could execute the deed on the basis that Mr DeMarco had conveyed to him that he had no intention of making a claim for compensation in respect of the acquisition of land under the deed. The plaintiff therefore proceeded with construction of the road. The road was completed.
Fourthly, the defendant intended Mr Daley to act on that assumption or expectation. Mr Daley told Mr DeMarco that the project would not proceed if the defendant intended to claim compensation. The findings that I have made concerning Mr DeMarco’s state of mind at this time and at earlier times are set out above. After the conversation between Mr DeMarco and Mr Daley and after the deed was returned under cover of the plaintiff’s letter of 4 November 2003, which stated the plaintiff’s understanding as to the defendant’s intentions, the road was constructed.
Fifthly and sixthly, the defendant's refusal to fulfil the assumption or expectation it created has caused and will cause detriment to the plaintiff. The plaintiff undertook the trouble of commissioning and supervising the road construction and now faces proceedings for compensation in the Land and Environment Court, which it would not now be facing if it had not proceeded with the scheme and had not executed the deed. What would have happened in the future if the scheme had not proceeded is hypothetical and speculative. It cannot in my view be concluded that the plaintiff would in any event have wound up meeting a claim for compensation for the whole of the cut off portion, so that it could be said that it suffers no detriment by facing that claim now.
On the basis of the factual findings I have made and the analysis set out above, it is unconscionable that the defendant should now demand compensation. I note that Talbot J in the Land and Environment Court held a developer estopped from disputing the validity of a condition of development consent precluding a claim for compensation in somewhat similar circumstances in DTR Securities Pty Ltd v Sutherland Shire Council (1993) 79 LGERA 88. It should be declared that the defendant is estopped from making a claim for compensation in respect of the acquisition of land by the plaintiff under the deed.
Misleading or Deceptive Conduct
It is even easier to conclude that the defendant engaged in misleading or deceptive conduct and therefore contravened s 52 of the TPA and s 42 of the FTA. The reason for this is that the intent of the defendant is not relevant under these provisions: Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Pty Ltd (1978) 140 CLR 216 at 223 per Stephen J; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 197 per Gibbs CJ; Yorke v Lucas (1985) 158 CLR 661 at 666 per Mason ACJ, Wilson, Deane and Dawson JJ; and see generally Miller’s Annotated Trade Practices Act (28th ed, 2007) [1.52.35]. In my view, the representation that was made in the telephone conversation after receipt by the plaintiff of the deed as executed by the defendant and continued by its silence after receipt of the plaintiff’s letter dated 4 November 2003 was, in the context of the history of the matter, a representation that the defendant did not intend to make at any time a claim for compensation in respect of the acquisition effected by the deed. Silence may constitute a representation as much for the purposes of s 52 of the TPA and s 42 of the FTA as in respect of an estoppel (as to which, see [53] above): see Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477; Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31; and see generally Miller op cit [1.52.53]. The representation was misleading, because, as I have found, at the time the statement was made and at the time the defendant remained silent, the defendant did desire to make and did have the intention of making a claim for compensation, if entitled to do so.
A submission was made that the conduct, even if misleading, was not in trade or commerce. I reject that submission. The defendant held the land as an investment property for resale at a profit. It was engaged in a contractual dealing with the plaintiff to procure the construction of a road, the existence of which would enhance the development potential and value of the land. In my opinion it was in that dealing engaged in trade or commerce.
The plaintiff seeks relief by way of either or both of variation of the deed under s 87 or the grant of a permanent injunction under s 80 or s 87 of the TPA. I shall not refer specifically to the corresponding provisions of the FTA. As to the claim for variation under s 87, the variation sought is by way of reinsertion in the deed of cl 16 or the insertion of a provision to similar effect. I do not propose to grant s 87 relief. This is essentially for the same reasons as I give in relation to the claim for rectification of the deed in [62] below, namely, that the parties were of a common mind that the deed should not contain such provisions as recital G and cl 16. The claim for injunctive relief under s 80 or s 87 I shall deal with under the appropriate heading below, along with the claim for injunctive relief arising from the estoppel.
Rectification
Clearly this is not a case in which the parties had an actual common intention that was not embodied in the deed. The defendant objected to the inclusion of recital G and cl 16. The plaintiff accepted the exclusion of these provisions from the deed, and was prepared to and did execute the deed in their absence. This was done on the basis of a representation as to the defendant’s future conduct. But rectification is not available on the basis that there was an actual common intention to embody recital G and cl 16 in the deed.
If one goes to the class of case where rectification of a unilateral mistake is possible because the misapprehension is produced by the “fraud” of the other party, the problem remains the same. As is made clear in Smith v Smith (now Vocalan), and in the passage from Taylor v Johnson (1983) 151 CLR 422 at 432 - 433 cited by Barrett J in Smith as set out in [48] above, the unilateral mistake or misapprehension which in case of fraud may found rectification is a mistake or misapprehension “about either the content or subject matter” of a fundamental term. There was no unilateral mistake of that sort that the plaintiff in this case was under. As noted in the last preceding paragraph, the plaintiff was as clear as was the defendant that recital G and cl 16 were not be included and there was to be no provision as to that subject matter in the deed as executed. The plaintiff was prepared to forgo provisions of that sort in the deed, but to proceed on the basis of a representation as to the defendant’s intent as to future conduct. In the absence of a unilateral mistake of the requisite sort, the remedy of rectification is not available on the basis of a unilateral mistake induced by fraud.
Injunctive relief
By reason of the estoppel that I have found operative, the plaintiff claims that the defendant should be restrained by injunction from maintaining its claim for compensation, either by continuing the present proceedings in the Land and Environment Court or otherwise. It seems to me that that relief is appropriate.
The availability of injunctive relief as a remedy in cases of estoppel has been acknowledged in high appellate authority. In the House of Lords in In re Preston [1985] AC 835 Lord Templeman said at 866 - 867:
“In the present case, the appellant does not allege that the commissioners invoked section 460 for improper purposes or motives or that the commissioners misconstrued their powers and duties. However, the H.T.V. case and the authorities there cited suggest that the commissioners are guilty of ‘unfairness’ amounting to an abuse of power if by taking action under section 460 their conduct would, in the case of an authority other than Crown authority, entitle the appellant to an injunction or damages based on breach of contract or estoppel by representation. In principle I see no reason why the appellant should not be entitled to judicial review of a decision taken by the commissioners if that decision is unfair to the appellant because the conduct of the commissioners is equivalent to a breach of contract or a breach of representation.”
In the High Court in The Commonwealth of Australia v Verwayen (1990) 170 CLR 394 Mason CJ said at 412:
“It follows that, as a matter of principle and authority, equitable estoppel will permit a court to do what is required in order to avoid detriment to the party who has relied on the assumption induced by the party estopped, but no more. In appropriate cases, that will require that the party estopped be held to the assumption created, even if that means the effective enforcement of a voluntary promise.”
The flexibility of equity in granting appropriate remedies is discussed and illustrated in Meagher, Gummow & Lehane’s Equity Doctrines and Remedies (4th ed, 2002) at [17-110], [17-115].
Whilst it may be thought that it is sufficient to deter the further progress of the proceedings in the Land and Environment Court that this Court has declared that the defendant is estopped from pursuing that claim, it must be borne in mind that the defendant has commenced those proceedings, prosecuted them to date and maintained in this Court that it is entitled to continue to pursue those proceedings. In those circumstances, to ensure finality, in my view it is the better course to grant a permanent injunction restraining the defendant from continuing those proceedings.
A submission was faintly made that the plaintiff was precluded from injunctive relief by reason of the “clean hands” doctrine, in that it was unconscionable for it to seek to circumvent the defendant’s right to compensation for its land. This was not pleaded, as would be required if the defence was to be relied on. In any event, it is just not possible to characterise the plaintiff’s conduct that has been traversed in this case as unconscionable.
The plaintiff is therefore entitled to an injunction restraining the defendant from proceeding in face of the estoppel.
The plaintiff also claimed that it is entitled to injunctive relief under either s 80 or s 87 of the TPA. For injunctive relief to be granted under s 80, the cases show that there must be a sufficient nexus between the contravention of the TPA which is proved and the conduct in respect of which relief is sought: ACCC v Z-Tek Computer Pty Ltd (1997) 78 FCR 197; ACCC v Real Estate Institute of WA Inc (1999) 95 FCR 114; and see generally Miller op cit [1.80.16]. Whilst there may be a difficult evaluative exercise as to whether a sufficient nexus exists, it is not necessary to enter into it in this case, since the defendant in a written submission dated 18 October 2007 accepted “that there is a nexus between the application for compensation and the alleged representation”. Since I have concluded that the representation was made, I do not see why the injunctive relief proposed is not also supported by s 80 of the TPA.
As injunctive relief is available by reason of the estoppel and under s 80, there is no need to consider whether injunctive relief should be granted under s 87 of the TPA.
Conclusion
On the conclusions I have come to, the plaintiff is entitled to appropriate declaratory relief and a permanent injunction restraining the defendant from continuing with a claim for compensation by prosecuting the proceedings in the Land and Environment Court or otherwise. Short minutes should be brought in to embody my decision. Questions of costs can be debated on that occasion.
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LAST UPDATED: 3 December 2007
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