Liao v Cemcon Developments Pty Ltd
[2021] TASSC 37
•25 August 2021
[2021] TASSC 37
COURT: SUPREME COURT OF TASMANIA
CITATION: Liao v Cemcon Developments Pty Ltd [2021] TASSC 37
PARTIES: LIAO, Chien Cheng
v
CEMCON DEVELOPMENTS PTY LTD
FILE NO: 2708/2020
DELIVERED ON: 25 August 2021
DELIVERED AT: Hobart
HEARING DATE: 7 May 2021
JUDGMENT OF: Blow CJ
CATCHWORDS:
Procedure – Civil proceedings in State and Territory courts – Ending proceedings early – Summary disposal – Summary judgment for defendant or respondent: stay or dismissal of proceedings – Whether claims untenable – Claims by vendor against purchaser re security deposit held by council pending completion of stormwater works.
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, applied.
Aust Dig Procedure [1305]
REPRESENTATION:
Counsel:
Appellant: J Jovanovic
Respondent: B Cassidy
Solicitors:
Appellant: J Jovanovic & Associates
Respondent: Page Seager
Judgment Number: [2021] TASSC 37
Number of paragraphs: 26
Serial No 37/2021
File No 2708/2020
CHIEN CHENG LIAO v CEMCON DEVELOPMENTS PTY LTD
REASONS FOR JUDGMENT BLOW CJ
25 August 2021
This is an appeal from an interlocutory decision of a magistrate, Mr R Marron, in a civil case about a conveyancing transaction. The appellant, Mr Liao, was the purchaser. The respondent to the appeal, Cemcon Developments Pty Ltd, was the vendor. The transaction concerned a house property in Rose Bay, which is within the municipal area of the Clarence City Council.
The sale was completed on 26 August 2019. On 11 September 2020 the vendor instituted proceedings against the purchaser in the Civil Division of the Magistrates Court claiming $15,394.16 plus costs. That claim comprised three components:
· A claim for $10,000, which was an amount that the vendor had paid to the council in connection with works required by the council.
· A claim for the reimbursement of legal costs of $3,080 paid by the vendor in attempting to obtain a refund of the $10,000 from the council.
· A claim for $2,314.16 in respect of the adjustment of land tax.
The proceedings were defended. On 13 October 2020 the purchaser made an interlocutory application seeking orders for the striking out of those parts of the vendor's claim that related to the $10,000 and the legal costs of $3,080. That application was heard by the learned magistrate on 29 October 2020. He dismissed it. This is an appeal from that order.
In substance the grounds of appeal raise two contentions:
· That the learned magistrate erred in law because he determined the interlocutory application without providing any reasons for his decision.
· That the learned magistrate should have granted the application because the claims for $10,000 and $3,080 cannot possibly succeed.
The learned magistrate provided absolutely no reasons for his decision to dismiss the interlocutory application. After receiving submissions from both sides, and telling a representative of the vendor company that he had a "preliminary view" to the effect that the purchaser was not under any obligation to pay the company anything, he addressed counsel for the purchaser and said:
"I'm not going to grant your application today, Ms Jovanovic. I will set the matter for a hearing. The application to strike out the claimant's claim is dismissed. There is an order for formal discovery. The hearing date – I will set the matter for hearing for a half day on the 20th January 2021."
His Honour went on to talk about arrangements for a final hearing.
A judicial officer has an obligation to give reasons for his or her decisions, and the failure to give reasons amounts to an error of law: Pettit v Dunkley [1971] 1 NSWLR 376 at 382; Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 259; Potts v Frost [2012] TASFC 6 at [28]. The duty to give reasons exists because, when there is a right of appeal to a higher court, the appellate court will need to know the basis of any decision that is challenged. See, for example, Soulemezis (above) per Kirby P (as he then was) at 256-261. In this case it is impossible to discern whether the magistrate suddenly saw some possible merit in the vendor's claims, or whether he thought it would be a good idea not to think about the purchaser's contentions at an interlocutory stage, given that there had to be a hearing about the land tax issue at a later date anyway. Those are two likely possibilities, but it may be that his Honour dismissed the application for some other reason beyond my imagination.
Because of his Honour's obvious error of law, I could allow this appeal, set aside his order, and remit the interlocutory application for re-determination by another magistrate. Or I could perhaps make an order requiring him to state his reasons. However, since the merits of the application were fully argued before me, I think it preferable to rule on the merits of the application myself, rather than perpetuating the litigation in the lower court.
The Magistrates Court (Civil Division) Rules 1998 do not contain any provisions as to the striking out of unmeritorious parts of a claim. In that situation, r 10(b) of those rules empowers a magistrate to adopt the practice and procedure of the Supreme Court in relation to the taking of such a step. This Court has powers to strike out pleadings that do not disclose a reasonable cause of action, both pursuant to r 259 of the Supreme Court Rules 2000 and as part of its inherent jurisdiction. The principles applied by this Court in determining whether to strike out a statement of claim, or parts of a statement of claim, are as stated by Barwick CJ in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 in the following passage at 128-130:
"The plaintiff rightly points out that the jurisdiction summarily to terminate an action is to be sparingly employed and is not to be used except in a clear case where the Court is satisfied that it has the requisite material and the necessary assistance from the parties to reach a definite and certain conclusion. I have examined the case law on the subject, to some of which I was referred in argument and to which I append a list of references. There is no need for me to discuss in any detail the various decisions, some of which were given in cases in which the inherent jurisdiction of a court was invoked and others in cases in which counterpart rules to Order 26, r 18, were the suggested source of authority to deal summarily with the claim in question. It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action—if that be the ground on which the court is invited, as in this case, to exercise its powers of summary dismissal – is clearly demonstrated. The test to be applied has been variously expressed; 'so obviously untenable that it cannot possibly succeed'; 'manifestly groundless'; 'so manifestly faulty that it does not admit of argument'; 'discloses a case which the Court is satisfied cannot succeed'; 'under no possibility can there be a good cause of action'; 'be manifest that to allow them' (the pleadings) 'to stand would involve useless expense'.
At times the test has been put as high as saying that the case must be so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed; or 'so manifest on the view of the pleadings, merely reading through them, that it is a case that does not admit of reasonable argument'; 'so to speak apparent at a glance'.
As I have said, some of these expressions occur in cases in which the inherent jurisdiction was invoked and others in cases founded on statutory rules of court but although the material available to the court in either type of case may be different the need for exceptional caution in exercising the power whether it be inherent or under statutory rules is the same. Dixon J (as he then was) sums up a number of authorities in Dey v Victorian Railways Commissioners (1949) 78 CLR 62 where he says [at 91] 'A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury. The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process.' Although I can agree with Latham CJ in the same case when he said that the defendant should be saved from the vexation of the continuance of useless and futile proceedings [at 84], in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand, I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff's claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed."
The sequence of events
In 2017 the vendor was the owner of a property at 6 Chatsworth Street, Rose Bay. It made arrangements to acquire some land at the rear of the adjacent property, 4 Chatsworth Street, with a view to constructing four dwelling units on its enlarged property. It applied to the council for a permit under s 57 of the Land Use Planning and Approvals Act 1993 ("the LUPA Act"). On 22 September 2017 the council issued a planning permit for the proposed boundary adjustment and for four dwelling units on the enlarged property at 6 Chatsworth Street.
The council imposed a permit condition pursuant to s 51(3A) of the LUPA Act requiring the vendor to carry out certain stormwater works. The permit required the stormwater works to be completed before the council sealed a final plan in respect of the boundary adjustment. The vendor needed a building permit from the council to authorise the construction of the four proposed dwelling units. The vendor could not obtain the necessary building permit until the stormwater works were completed. The stormwater works could not be completed before the final plan was sealed. There was a deadlock. The vendor and the council decided to resolve the deadlock by entering into an agreement under Part 5 of the LUPA Act.
They executed a Part 5 agreement on 5 February 2019. That agreement contained terms to the following effect:
· By cl 4.1(a), the vendor covenanted with the council that it would undertake the stormwater works "before commencing any works under a building permit in relation to the Development and no later than 12 months from the date of this Agreement".
· By cl 4.1(b), the vendor covenanted with the council that it would, on the date of signing the Part 5 agreement, enter into a bond agreement in accordance with a form of agreement that was attached to the Part 5 agreement.
An unsigned form of bond agreement was attached to the Part 5 agreement. It included terms as follows:
· By cl 1.1, the vendor undertook to carry out the stormwater works.
· By cl 1.2, the stormwater works were required to be completed in accordance with the requirements of all permits and to the satisfaction of council's appointed superintendent prior to a completion date which was specified as "Within 12 months of the date of signing this Agreement" or such later date as council notified.
· By cl 2.1, the vendor agreed to provide security in relation to its obligations under the bond agreement by providing $10,000, to be lodged as a cash bond.
· Clause 3.1 provided for the council to issue a certificate of practical completion after satisfactory completion of the stormwater works. Under cl 3.2, the council was then obliged to return the bond money to the vendor.
· Clause 5 dealt with the possibility that the works would not be completed, or not completed satisfactorily. Under cl 5.1, the council was empowered to issue a notice specifying what additional or remediating works were required, and fixing a date for such works to be completed. Clause 5.2 empowered the council, if that notice was not complied with, to proceed without further notice to do the stormwater works, or to arrange for them to be done, and to recover the costs by recourse to the bond money. Clause 5.3 authorised the council, in the event of the bond money being insufficient, to recover any additional costs and expenses from the vendor.
The vendor and the council did not ever execute a bond agreement in the required form. However the vendor lodged $10,000 with the council. The evidence strongly suggests that it was lodged shortly after the signing of the Part 5 agreement, and that the vendor and the council agreed that they would have rights and obligations as if the bond agreement had been signed.
The council issued a building permit to the vendor on 19 February 2019. The contract for the sale of the property by the vendor to the purchaser is dated 4 July 2019. When the contract was signed, the stormwater works had not been undertaken.
The contract contained no mention of the $10,000 bond money, but there was a reference to the Part 5 agreement in cl 3.1. That clause read as follows:
"The Purchaser acknowledges that the Part 5 Agreement under the Land Use Planning and Approvals Act, dated 5th February, 2019 between the Vendor and the Clarence City Council may be registered on the title to the Property."
As I have said, the sale was completed on 26 August 2019. The council still has the $10,000. No one has undertaken the stormwater works. According to par 3(v) of the purchaser's Particulars of Defence, the Part 5 agreement was registered under the Land Titles Act 1980 on 7 February 2019.
Part 5 agreements
Part 5 of the LUPA Act provides a mechanism for the creation of restrictive covenants that run with the land burdened by them. Its more significant provisions can be summarised as follows:
· Under s 71(1), a planning authority may enter into an agreement with an owner of land in the area covered by a planning scheme. (In this case the council was the planning authority.)
· Under s 72(2)(a), an agreement may provide for the prohibition, restriction or regulation of use or development.
· Under s 72(1), such an agreement binds the owner to the covenants specified in the agreement.
· Under s 78, such an agreement can be registered under the Land Titles Act.
· By virtue of s 79(a), one effect of registration is that the burden of any covenant in the agreement runs with the land as if it were a restrictive covenant to which s 102(2) of the Land Titles Act applies.
· By virtue of s 79(b), another effect of registration is that the agreement becomes enforceable between the parties to it and any person deriving a title under any such party as if it were an agreement entered into by a landowner for the benefit of adjacent Crown land.
· Under s 73A(1), a Part 5 agreement may include a provision for "a payment or other contribution for infrastructure to be made by any party to the agreement". [My emphasis.] Under s 73A(2)(b), such an agreement may make provision "for works ... to be undertaken by the owner on behalf of the planning authority ...".
· Under s 73(1)(a), a Part 5 agreement may include a condition that the owner is to deposit with the planning authority a sum of money fixed by the agreement. Under s 73(2), the agreement may provide that that sum or part of it is forfeited if there is any failure by the owner to carry out the agreement to the satisfaction of the planning authority. Under s 73(3), any money paid must be returned to the owner on a date or dates specified in the agreement to the extent that it has not been forfeited.
· Under s 74(2), an agreement may provide that it ends on or after the happening of any specified event, or after a specified time, or after the cessation of a use or development for a specified purpose.
· Under s 74(3), an agreement may be ended by the planning authority, either with the approval of the Tasmanian Planning Commission or by agreement with all persons who are bound by any covenant in the agreement.
The parties' contentions
In an outline of submissions filed shortly before the hearing of this appeal, the solicitors for the vendor suggested that it had two arguable causes of action, as follows:
"(i)An action based on an implied term in the sale contract that the purchaser (the appellant) would do all things necessary to give effect to his obligations as owner of the property under the Part 5 agreement which included substituting the bond;
(ii)A 'unjust enrichment' type claim for the conferral of an incontrovertible benefit on the appellant which it would be unconscionable for the appellant to keep without paying a reasonable sum therefor."
After the hearing of the appeal, I invited further submissions from the parties as to the proposition that the contract of sale contained an implied term that the purchaser would undertake the stormwater works in accordance with cl 4.1(a) of the Part 5 agreement. I subsequently received written submissions on behalf of both parties. Not surprisingly, the solicitors for the vendor argued that there was such an implied term and the solicitor for the purchaser argued that there was not.
An arguable case?
I do not think that the vendor could have any sort of cause of action based on unjust enrichment. Rather than being the basis of a cause of action, unjust enrichment "constitutes a unifying legal concept which explains why the law recognizes, in a variety of distinct categories of case, an obligation on the part of a defendant to make fair and just restitution for a benefit derived at the expense of a plaintiff and which assists in the determination, by the ordinary processes of legal reasoning, of the question of whether the law should, in justice, recognize such an obligation in a new or developing category of case": Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 per Deane J at 256-257; David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 378-379; Christiani & Nielsen Pty Ltd v Goliath Portland Cement Co Ltd (1993) 2 Tas R 122 per Wright J at 129 and per Zeeman J, with whom Crawford J (as he then was) agreed, at 169-172.
However the vendor appears to be on stronger ground in contending that it arguably has a good claim for damages for breach of an implied term. First of all it is necessary to consider the rights and obligations of the parties following completion of the sale. The position appears to be as follows:
· Since the Part 5 agreement had been registered, the burden of the covenant in cl 4.1(a) to undertake the stormwater works, running with the land, passed to the purchaser.
· If the purchaser completed the stormwater works on time and satisfactorily, cl 3.2 of the bond agreement would then require the council to return the bond money to the vendor, which is referred to in that agreement as "the Developer". There is nothing in the bond agreement or the contract of sale to suggest that the vendor's rights in relation to the bond money were assigned to the purchaser.
· If the purchaser did not complete the stormwater works both on time and satisfactorily, the council would be able to have recourse to the bond money and, if it was insufficient, recover the balance from "the Developer" (the vendor) pursuant to cl 5.3 of the bond agreement.
The prerequisites for the existence of an implied term of a contract are as stated by Lord Simon of Glaisdale, Viscount Dilhorne and Lord Keith of Kinkel in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283:
"... for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying'; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract."
If the purchaser undertakes the stormwater works in accordance with the requirements of the Part 5 agreement, he will have to pay for them, and the vendor will get its $10,000 back. If the purchaser elects never to undertake the stormwater works, in breach of the Part 5 agreement, and if the vendor is bound by the terms of the bond agreement, the council will be entitled either to treat the $10,000 as forfeited, or to undertake the works, have recourse to the $10,000, and recover any excess costs from the vendor. Without an implied term obliging the purchaser to undertake the works, he would be better off to ignore his obligation to undertake them and treat the $10,000 as a subsidy contributed by the vendor. In my view it is at least arguable that the contract of sale contained an implied term that would prevent the purchaser from taking unfair advantage of the vendor in that way. An implied term that the purchaser would undertake the stormwater works as required by the Part 5 agreement arguably would satisfy the five conditions formulated in BP Refinery.
The vendor contends that the contract contained an implied term to the effect that the vendor would, by arrangement with the council, pay $10,000 to the council, to be substituted for the vendor's bond money, which would be released. In my view it is not arguable that the implication of such a detailed term is necessary to give business efficacy to the contract, nor that an implied term to that effect is so obvious as to go without saying.
However I think it is arguable that the purchaser has breached an implied term that he would undertake the required stormwater works. Clause 4.1(a) of the Part 5 agreement required the stormwater works to be undertaken no later than 12 months from the date of that agreement, which was 5 February 2019. The vendor commenced proceedings in the Magistrates Court after that time expired, on 11 September 2020. There may be difficulties as to whether $10,000 is an appropriate amount to award by way of damages, given that there is a chance that the council will refund the $10,000, especially if the purchaser completes the stormwater works. There may be doubt as to whether the vendor's damages should include $3,080 in respect of the legal costs that it paid in relation to attempts to get the council to refund the $10,000. However I do not think it can be said that the vendor's claims for $10,000 and $3,080 are so obviously untenable that neither can possibly succeed, at least in part.
I do not know whether the learned magistrate considered all of the issues that I have discussed. If he had done so, the only appropriate order would have been one dismissing the interlocutory application. He made such an order. This appeal must therefore be dismissed.
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