Medlik & or v Toowoomba CC

[1998] QSC 106

IN THE SUPREME COURT

OF QUEENSLAND

No.3063 of 1996

Brisbane

Before             Hon. Justice White

[Medlik & Or v Toowoomba C.C.]

BETWEEN:

FRANK LESLIE MEDLIK and

ROBYN LORRAINE MEDLIK

Plaintiff
AND:

THE TOOWOOMBA CITY COUNCIL

Defendant

REASONS FOR JUDGMENT - WHITE J

Judgment delivered 3 June 1998

This hearing is to decide a preliminary issue, namely, whether, by reason of an agreement between the parties a compromise was effected of certain claims which the plaintiffs seek to litigate in the within proceedings so as to preclude their continuation.

Procedure

The plaintiffs, who are husband and wife, issued a writ against the Toowoomba City Council (“the Council”) on 12 April 1996 claiming damages for negligence associated with the resumption of their property in Toowoomba.  By their statement of claim, delivered 10 May 1996, they seek damages for certain losses allegedly sustained by virtue of negligent advice given to them by an officer of the Council.  In its defence delivered 20 June 1996 the Council, apart from denying liability, pleads that the claim has been compromised and alleges that the plaintiffs are thereby precluded from litigating the same issues.

A successful application was made by the parties to the Senior Judge Administrator to have the issue of the compromise decided as a preliminary point by written/documentary evidence on the basis of a draft summons (exhibit 2).  That summons inadvertently was never filed and no directions were given but the parties have proceeded in conformity with what was sought in the draft summons without, prior to the hearing, settling on the precise nature of the relief sought.  The parties have tendered an agreed statement of facts consisting largely of a bundle of correspondence and pleadings (exhibit 1).  In order to establish the parameters of  their agreement in 1994 the correspondence over some two years needs to be examined.  From the letters it is clear that meetings in person occurred but these oral communications are not said to have been different from what is contained in the written communications.    

Facts

By a contract made on about 5 June 1992 the plaintiffs agreed to purchase a convenience store situated at 235 Bridge Street, Toowoomba for a purchase price of $170,000.  Completion was effected on 12 June 1992.

By a letter dated 27 May 1992 Clewett Corser & Drummond (“CC&D”), solicitors for the plaintiffs asked the Council to attend to a property search.  On 5 June 1992 the Council issued a document sent to CC&D indicating that there were “nil” town planning requisitions and, in respect of realignments, resumptions, or easement requisitions: “not unless registered on title”.

On 3 June 1992 the Council’s works committee had recommended that the city engineer be requested to investigate local traffic management schemes to overcome traffic problems in, inter alia, the West Street/Bridge Street intersection areas.  On 9 June 1992 the Council resolved to have the city engineer investigate traffic management schemes to cover traffic problems in the West Street/Bridge Street intersection areas and, on 3 August 1992 the city engineer reported back to the works committee.

On 13 August 1992 the Council wrote to the plaintiffs stating that it proposed to improve the intersection and at its meeting on 10 August 1992 had adopted in principle a concept plan including widening the streets.  It was noted that “only a limited number of properties would be affected by the proposal” and invited the plaintiffs to view a preliminary plan.  By letter dated 23 September 1992 CC&D sought clarification from the Council about proposals for acquisition of the plaintiffs’ property.  They noted that the Council’s proposals to carry out the road works had not been decided at the time they acquired the business “for the total price of $178,947 including the freehold, business, equipment, stock and goodwill” and complained that because of the proposed works the business was virtually unsaleable.  They concluded:

“Our clients’ particular concern is that if the process of resumption and relocation of residences takes place prior to the acquisition of our clients’ freehold and business, our clients’ business will be disrupted throughout that period resulting in substantial losses of profit for which our clients would ultimately claim compensation.  Our clients therefore believe that it is in the interests of both the Council and themselves that the question of acquisition of our clients’ freehold and business and compensation be determined quickly and prior to any other works being commenced.”

An officer  told the plaintiffs’ solicitors that the Council could not respond until after its meeting in November.

The plaintiffs’ new solicitors wrote to the Council on 30 August 1993 seeking as a matter of urgency an indication as to when the Council would make an offer to purchase since the plaintiffs wished to make future plans regarding their financial affairs. The plaintiffs themselves wrote an angry letter to the Council on 26 November 1993 referring to their stress over the whole issue of failure to be warned of the proposed plans for the intersection prior to purchase and the disruption that it had had on their lives.  About 2 weeks later an offer was made to the plaintiffs’ solicitors that a proposal could be put to Council recommending the purchase of the property for a sum not exceeding the purchase price plus documented capital outlays provided the plaintiffs would enter into a lease back arrangement on a 3 plus 3 year basis at a rent of  $300 per week with CPI adjustments.

The solicitors made a counter offer by letter dated 22 December 1993, to sell the property for $190,000 excluding stock but including plant and equipment with a lease for 3 years with one option of 3 years at a rent of $250 per week with CPI increases.  There was an apparently minor matter of a flue which the plaintiffs wished the Council to pay for.

The Council made a counter offer on 15 February 1994,  that the Council would purchase the property for $170,000 plus $8,000 being for the estimated legal costs associated with the purchase, a lease for 3 years with no option to renew at $250 per week with CPI adjustments.  There were a number of other minor variations and the offer was valid for 30 days.

The solicitors put a further offer by letter dated 25 February.  They explained how the amount of $190,000  was arrived at being the contract price plus legal costs and capital expenditure in the sum of $10,943 and enclosed invoices evidencing payment of $9,255 of that amount.  They claimed to have incurred interest in the sum of $26,096 to 31 December 1993, in respect of borrowings associated with the purchase price.  There were other matters of detail which it is not necessary to set out and a request that if agreement could not be reached then a conference should be held in an attempt to resolve the outstanding matters.

CC&D resumed conduct of the plaintiffs’ dealings with the Council.  A medical certificate from Dr John Kibble stated that since October 1993 Mr Medlik had been suffering from symptoms of acute anxiety and depression relating to his financial and business affairs.  It is not clear whether this document went to the Council but it is included in the bundle of documents and it seems a reasonable inference that it did.

A further offer was made by the Council by letter dated 4 March on terms that the Council would purchase the property for $180,000, excluding the plant and equipment, to be leased to the plaintiffs for 3 years with no option at a rent of $250 per week with CPI adjustments.  There were other terms, some of which had earlier been proposed by the plaintiffs but it is unnecessary to refer to them.  The offer was open for 30 days.

A conference was held between the plaintiffs and officers of the Council on 11 and 14 March. CC&D wrote that the plaintiffs were prepared to settle the matter “on the basis set out in your letter of 4 March”  but that the purchase price be $185,000 to include some equipment and that the lease conditions be a term of 18 months with an option for a further 18 months.

The Council wrote on 21 March that it accepted the counter-offer made by the plaintiffs.  The letter set out the terms and included a schedule of plant and equipment to be included in the sale.  A Council inspection was held and a draft lease agreement was sent to CC&D on 18 April.  The plaintiffs were not entirely happy with the draft lease and proposed certain amendments.  There did not appear to be major differences and the plaintiffs agreed to carry out some necessary minor works.  The settlement date was stipulated to be 11 May “because Mrs Medlik has recently suffered a back injury as the result of which she will be admitted to hospital on 12 May 1994 for treatment”.

On 6 May CC&D wrote that the plaintiffs would prefer not to proceed with the proposed lease back of the premises.  On medical advice Mr Medlik had obtained employment away from the shop and was thus unable to assist his wife in the operation of the business.  The solicitors noted that her health had deteriorated as she suffered from spinal disc degeneration causing her significant pain.  She was also said to be suffering from acute stress and anxiety relating to the ongoing delays in negotiations over the shop and did not believe that she was in a position to commit herself to an 18 months lease.  The plaintiffs were said to be otherwise pleased to proceed with the sale of the shop and business as agreed.

The Council  withdrew its offer to purchase  and engaged a valuer to prepare a report on the property and subsequently offered to purchase the property, with improvements,  plant and equipment, for $147,130, such offer to remain open for 30 days.  The plaintiffs did not accept the withdrawal of the previous offer  but asked to see the valuation report.

In a long (5 page) letter CC&D wrote to the Council on 9 June 1994 stating:

“Our clients wish us to set out a brief history of this matter to enable you to give proper consideration to their claim in context”. 

This letter is of  significance since it was written close to the date when the subject compromise was eventually achieved.  The circumstances of the shop purchase were set out and the failure of the Council to advise of the proposed road widening. The Solicitors pointed out that Council officers over the previous 2 years had consistently advised against the plaintiffs expending any money on the business with a view to improving its profitability contrary to their initial intentions.  Proposals to expand into other areas of business  were not proceeded with because of Council recommendations not to spend money on improvements.  The solicitors state that Council officers had indicated that the plaintiffs’ property would be acquired in priority to other properties because their business would be affected by other acquisitions in the area and the impending works.  The solicitors noted  an agreement had been reached  in March 1994 to purchase the property for $185,000 with a lease. They said that they had advised the plaintiffs that they could enforce that contract against the Council and “that our clients have not and do not repudiate that agreement”.  The solicitors expressed the view that the acquisition of the property and the lease back were separate agreements which were, they suggested, severable.  They wrote:

“The sole question which has to be determined is the fair market value of the real estate and the business”

adding that the“offer made by Council is ludicrous” having regard to their own enquiries. They stated:

“Our clients have asked us to advise you that they have “had enough”. The events of the last couple of years have destroyed them both financially and in terms of their own personal health.  They are not prepared to tolerate any further delays or inconsistencies by Council.

They are determined to finalise this matter as quickly as possible by whatever means are available to them.  We have advised them of their right to sue Council for damages arising out of Council’s failure to notify them of the intersection proposal at the time they acquired the property and also for the conduct of Council and its officers over the last two years in the various promises which have been made to our clients and subsequently broken.

In addition, a national current affairs programme has approached our clients with a view to running the story on national television and our clients are in the process of negotiating arrangements for the televising of a story.  Our clients are also in contact with local media outlets.

Unless we receive your confirmation in writing within seven (7) days that Council will acquire our clients’ property and business for $185,000.00 plus stock at valuation, payment to be made by 30th June, 1994, our clients intend to discontinue negotiations and take any other steps they consider appropriate to force a satisfactory resolution of this matter.

Our clients have asked us to stress that they have no wish to embarrass the Council unnecessarily.  However, they have been brought to this point by complete and utter frustration with the delays and inconsistencies on the part of the Council.  We have been instructed also to emphasise that our clients re absolutely determined to pursue their right to fair compensation and will not accept anything less than fair market value for their real estate and business.”

On 29 June the Council proposed that  a “without prejudice” meeting be held since negotiations had broken down and be conducted by an independent arbitrator in an attempt to finalise matters.  The plaintiffs were invited to comment on the proposed arbitrator or to nominate another person as arbitrator.

Meetings and discussions occurred between the parties and their representatives and by letter dated 12 July 1994 the plaintiffs offered to sell their property to the Council for $185,000 plus stock at valuation and a contribution towards their legal costs associated with the lengthy negotiations in the sum of $2,500.  The Council rejected that offer and submitted a “final” counter offer of a purchase price of $178,000 comprising $170,000 being the original purchase price and $8,000 legal costs and stamp duty on the  original purchase, together with improvements and plant and equipment.  The counter offer was valid for 7 days:

“... and also takes into account any costs associated with the disruption and dislocation caused to the business”.

That offer was rejected and a further offer of $181,500 was made by the plaintiffs on the same terms and conditions.

Agreement was finally reached and on 27 July 1994 the Council wrote:

“Council, at its Ordinary Meeting of 26 July 1994 accepted your offer of One Hundred and Eighty One Thousand, Five Hundred Dollars ($181,500) for the purchase of the property located at 235 Bridge Street and more particularly described as Lot 1 on Registered Plan 17059, together with the improvements, and plant and equipment as detailed in Appendix A, but excluding stock which is to be retained by your client.  This offer also includes any costs associated with the disruption and dislocation caused to the business.”

The parties executed a  contract of sale dated 5 August 1994 for “shop premises and dwelling” together with an inventory of plant and equipment for the price of $181,500.  The contract completed on 29 August 1994.
The Proceedings

The writ of summons was issued on 12 April 1996.  In the statement of claim the plaintiffs set out as the matrix of facts the request to Council for a property search prior to purchase, the failure to advise about  investigations concerning resumption of land for road widening purposes, reliance on the advice and their purchase of the property and business.  They allege breach of an alleged duty of care in respect of the advice, said to be misleading and negligent.  As a consequence of the road works and the proposed property resumption the plaintiffs allege that their business became unsaleable; they incurred loss of income and were unable to embark upon prior plans to develop and expand the business.  Their losses are pleaded as:

“(a)Capital loss in the value of the business;

(b)Loss in the value of the joint assets owned by the Plaintiffs;

(c)Economic loss on the operation of the business prior to the sale of the land to the Defendant;

(d)Economic loss after the sale of the business to the Defendants;

(e)Incidental loss suffered in the course of moving out of the premises.

The present nett value of the loss suffered by the plaintiff is still being calculated but it is estimated to be not less than $300,000.”

The Council contends in its defence that each of those elements of damage was expressly or by necessary implication encompassed in the compromise reached in July 1994 the details of which it provided in its further and better particulars in July 1996.
The Compromise Agreement

Mr Daubney submitted that the agreement was not  simply a matter of the Council acquiring the real property, but of paying a price for the real property and business in the context of claims made  including opportunity lost by the business not being redeveloped during the two years of negotiation and associated losses and personal distress.  He pointed out that there was no suggestion that what was involved was simply compensation as understood in the Acquisition of Land Act 1967.

Ms Philippides, who appeared for the plaintiffs, submitted that other claims could be brought either by way of amendment or in fresh proceedings.  She mentioned a possible Hungerfords v Walker (1990) 171 CLR 125 (loss of use of money) claim and a Poseidon Ltd v Adelaide Petroleum N L (1994) 68 ALJR 3 13 (loss of opportunity) claim as well as a possible claim for damages for injury to health. The defence is pleaded, of course, in respect of claims made in the action. There has been no application to amend nor is one foreshadowed. Any claim for any damages for personal injury arising out of the conduct of the Council is, it would seem, time barred.

The dispute between the plaintiffs and the Council is not confined simply to the value to be placed on the property and the business but what flowed from the Council’s alleged  negligence in failing to advise of road widening plans.   In their letter to the Mayor of Toowoomba of 26 November 1993 the plaintiffs referred to family stress and distress and threatened to go to the media “so that future investors in this city know how easy it is to be duped by Council negligence and we may save them some needless heartache and financial distress”.  That the plaintiffs were concerned to obtain more than the value of their property can be seen in the letter of 28 February 1994 when it was explained that the sum of $190,000 proposed as the purchase price was made up of sale price, legal costs and capital expenditure.  The reference to interest costs in the sum of $26,096 was clearly to indicate how reasonable their offer was. 

When the plaintiffs declined to proceed with the lease it was on the basis of stress associated with the conduct of the Council and when negotiations broke down the Council offered to purchase the property with plant and equipment for $147,130 on a valuer’s report.  The letter in response of 9 June was to enable the Council to reassess the “claim in context”  and there was a reference to an observation by the mayor that the plaintiffs would not be “left out of pocket”.   When the solicitors stated that what was in issue was the fair market value of the real estate and business it must be seen in the context of severing the agreement to lease from the price for the property.  The conclusion that the plaintiffs had been advised of:

“their right to sue Council for damages arising out of Council’s failure to notify them of the intersection proposal at the time they acquired the property and also for the conduct of Council and its officers over the last 2 years”

clearly encompasses a great deal more than a property and business valuation.

Against the background of all that had gone before it seems clear that the parties intended  to settle once and for all all matters associated with the property and business arising out of the Council’s alleged negligent advice, the subsequent proposed property acquisition and the  consequences of any inappropriate delay. The plaintiffs had the assistance of capable solicitors throughout.  Had it not been their intention to settle all claims, something to that effect would surely have been included in the correspondence given the detailed nature of the formal negotiations.

Conclusion

The compromise is a complete defence to the claims made by the plaintiffs in the present action.  Despite Ms Philippedes submission that this matter ought to go to a “proper full trial of the issues” the parties in my respectful view, appropriately, to save costs, agreed to the present hearing.  The order sought by Mr Daubney is judgment for the defendant in the action and that is the order of the court.

I will hear submissions as to costs.