Northern Beaches Council v Built Development (Manly) Pty Ltd

[2018] NSWCA 193

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:	Northern Beaches Council v Built Development (Manly) Pty Ltd [2018] NSWCA 193
Hearing dates:	23 August 2018
Date of orders:	23 August 2018
Decision date:	03 September 2018
Before:	Basten JA, White JA
Decision:	(1)   Grant the applicant leave to appeal from the judgment in the Equity Division given on 25 May 2018. (2)   Direct that the applicant file within seven days a notice of appeal in the form of the draft notice of appeal contained in the white folder filed on 20 August 2018. (3)   Allow the appeal and set aside order (1) made on 25 May 2018 and the order as to costs of the motion made on 29 May 2018. (4)   In lieu thereof, order that the amended notice of motion dated 21 May 2018 be dismissed and that the plaintiffs pay the defendant’s costs of the motion. (5)   Order that the respondents pay the applicant’s costs of the proceedings in this Court.
Catchwords:	APPEAL – interlocutory ruling – strike out of part of commercial list response – application of Practice Note   CIVIL PROCEDURE – strike out of part of commercial list response – whether primary judge misunderstood scope of pleaded case – relevance of context to allegations of misrepresentation and estoppel
Legislation Cited:	Local Government (General) Regulation 2005 (NSW) Civil Procedure Act 2005 (NSW), Pt 6 Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law, s 18
Cases Cited:	In Re the Will of F B Gilbert (Deceased) (1946) 46 SR (NSW) 318
Category:	Principal judgment
Parties:	Northern Beaches Council (Applicant) Built Development (Manly) Pty Ltd (First Respondent) Athas Holdings Pty Ltd (Second Respondent) Built Development Group Pty Ltd (Third Respondent)
Representation:	Counsel: R Cheney SC with B Connell (Applicant) C H Withers with F T Roughley (Respondents)   Solicitors: HWL Ebsworth Lawyers (Applicant) Corrs Chambers Westgarth (Respondents)
File Number(s):	2018/193927
Decision under appeal	Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Division – Commercial List Citation: [2018] NSWSC 750 Date of Decision: 25 May 2018 Before: Ball J File Number(s): 2017/324554

Judgment

1. THE COURT: The applicant Council sought leave to appeal from a procedural ruling in the Equity Division striking out a number of paragraphs of a commercial list response filed by the Council in proceedings in which it was the defendant.

2. In accordance with the long-established principle expressed by Jordan CJ in In Re the Will of F B Gilbert (Deceased), [1] this Court is slow to grant leave to appeal from interlocutory judgments dealing with pre-trial proceedings. However, prior to the commencement of the hearing the Court indicated that it would consider making final orders disposing of the appeal if leave were to be granted.

   1. (1946) 46 SR (NSW) 318.

3. On 23 August 2018 the Court granted the applicant leave to appeal, allowed the appeal and made consequential orders. Reasons were reserved. These are the Court’s reasons.

4. Before turning to the merits of the application, it is convenient to address a procedural complaint raised by the applicant. Paragraph 62 of the Practice Note relating to matters in the Commercial List states a “general rule” that strike out applications and applications for summary judgment will not be entertained. The Practice Note recognises that there were will be exceptions, but anticipates that they will be tightly controlled. The applicant submitted that the primary judge had failed to give proper regard to this rule.

5. While it is not possible to divorce a discussion of the application of the general rule from the circumstances of the particular case, it should be observed that, by entertaining the application, the primary judge was led into an exercise which involved some degree of speculation as to precisely how the defendant’s case in reliance on the impugned particulars would be run. On the other hand, the concern that the impugned particulars raised “a broad ranging factual inquiry” of limited potential relevance to the primary issues in dispute was a consideration that could properly be entertained pursuant to the requirement to ensure the just, quick and cheap disposal of the issues in dispute, pursuant to Pt 6 of the Civil Procedure Act 2005 (NSW).

6. The difficulty with the approach taken by the primary judge was that the plaintiffs’ case, as set out in an amended commercial list statement, permitted such a response, for reasons which will shortly be identified. Although the commercial list statement and response were not strictly pleadings, the parties treated the judge’s ruling as effectively constraining the issues which could be the subject of evidence at a trial.

7. It is also convenient to note the plaintiffs’ claim that there was a lack of prejudice to the Council in the form of the order. That was because the Council was given leave to “replead” in a form which would identify the relevance of the particular matters sought to be relied on to specific elements of the plaintiffs’ claims. However, the Council submitted that, if the striking out of the paragraphs was wrong as a matter of principle, the error should be corrected at this stage. That submission should be accepted.

Merit of application

8. The case brought by the plaintiffs turns on a deed entered into between them and the Manly Council (the predecessor to the present applicant) for the redevelopment of an area presently occupied by the Whistler Street carpark and Manly Library. As initially pleaded, the plaintiffs’ claims alleged wrongful repudiation of the deed.

9. By its Commercial List Response the Council alleged that the deed was invalid and of no effect, on the grounds that, (a) the deed was executed by the Council’s General Manager pursuant to authority delegated to him, but that requirements of the Local Government (General) Regulation 2005 (NSW) in relation to the affixation of a seal to documents by council were not complied with; (b) the General Manager acted contrary to the authority delegated to him in that the first plaintiff, who was the other party to the deed, was not the successful tenderer; and (c) because of disparities between the successful tender and the deed, the Council contravened subclause 178(2) of the Regulation in purporting to execute the deed.

10. Pursuant to an amended commercial list statement filed on 12 March 2018, the plaintiffs added pleadings alleging (a) misleading and deceptive conduct on the part of the Council in breach of s 18 of the Australian Consumer Law (b) estoppel by representation and (c) estoppel by convention.

11. More specifically, the plaintiffs alleged [2] that the Council engaged in what it characterised as four kinds of conduct. The first, Tendering Conduct, was, broadly, issuing invitations to tender and acceptance of the Developer’s tender. The second, Execution Conduct, was, broadly, acceding to the Developer’s request to substitute a special purpose company in lieu of the tenderer in the deed and making representations, either expressly or by conduct, in its execution of the deed. The third, Post-Execution Conduct, was, broadly, steps initially taken with the Developer to implement the deed and, later, advising the Developer of its resolution to terminate the deed by asserting that certain conditions precedent had not been fulfilled, but not relying upon any alleged invalidity of the deed, and then entering into a Negotiation Deed for without prejudice negotiations with respect to matters in dispute, including the validity of the Council’s purported notice of termination of the deed. Fourthly, the plaintiff alleged that the Council engaged in Extension Conduct, that broadly involved the Council and the Developer agreeing to extend times under the deed for, amongst other things, the satisfaction of conditions precedent.

    2.    Amended Commercial List Statement, pars 85-93.

12. The plaintiffs further alleged: [3]

“By the Tendering Conduct, the Execution Conduct, the Post-Execution Conduct and the Extension Conduct (individually, or cumulatively in any combination) the Council represented to the Developer that the Council’s conduct of the tender process, entry into the Development Deed, and Extension Letter, was authorised, was within power and was done in accordance with all applicable laws.”

3.    Amended Commercial List Statement, par 94.

13. The plaintiffs alleged that the Council, (a) by its Tendering Conduct, represented that it had the authority to enter into the deed; [4] (b) by its Execution Conduct and the Post-Execution Conduct, represented that it had the authority to execute, and had validly and lawfully executed, the deed and, further, that the deed created an enforceable contract between the parties; [5] and (c) by reason of a recital in the Negotiation Deed, represented that the development deed was lawfully executed. [6]

    4.    Amended Commercial List Statement, par 112.

    5.    Amended Commercial List Statement, par 113.

    6.    Amended Commercial List Statement, par 121.

14. The plaintiffs also alleged that they were reasonably entitled to expect that the Council would inform the Developer if it had reason to believe, or proposed to contend, that the Development Deed was invalid or unenforceable for any of the reasons alleged in the Commercial List Response, [7] and that:

“109 By reason of its failure to inform the Developer of its contention that the Development Deed is invalid or unenforceable prior to November 2017, the Council engaged in misleading and deceptive conduct in contravention of section 18 of the [Australian Consumer Law].

110   At all material times, the Developer held the view that the Development Deed was valid and binding on all of the parties to it.”

7.    Amended Commercial List Statement, par 107.

15. The plaintiffs alleged that, (a) had the Council disclosed to the Developer that it had reason to believe that the Development Deed was invalid and unenforceable, or would so contend, the Developer would have taken different action; [8] and (b) had the Council disclosed to the Developer that it had reason to believe that the Development Deed was invalid and unenforceable or would so contend, the Developer would have made such enquiries and requests of the Council as were necessary to determine whether the Deed was validly executed by the Council and would have requested the Council validly to execute the Deed.

    8.    Amended Commercial List Statement, par 111.

16. The same grounds of alleged misrepresentation were pleaded as giving rise to an estoppel by representation and an estoppel by convention.

17. The Council responded by identifying a broad range of matters which it said the plaintiffs knew or ought to have known of. These matters were said to demonstrate that the plaintiffs could not reasonably have relied on the representations as pleaded, that there was no common understanding as to the status of the deed and that the plaintiffs could not have been misled or deceived, or induced to rely on the Council’s intention to proceed with the development. These matters were briefly described as “context”.

18. The reasoning of the primary judge focused upon the absence of any necessary connection between the matters raised by the Council by way of context and the primary basis of its challenge to the plaintiffs’ reliance upon the deed. Thus the Council alleged that the deed had not been made pursuant to an applicable regulation and, in so far as it was executed by the General Manager, it fell outside his delegated authority.

19. The Council accepted that the new matters did not directly engage with its challenge to the validity of the deed. Rather, it contended that the new matters related to the pleaded representations which were said to be misleading and deceptive. They also related directly to the claim of estoppel by convention, providing a basis for disputing that there was any common assumption as to the validity of the deed and as to whether it had been lawfully executed by the Council. The new matters also went to questions of reliance by the plaintiffs.

20. The primary judge summarised the broad range of matters raised by the paragraphs of the Council’s Commercial List Response that were struck out as follows:

“(a)   That Built Group and the Developer knew or ought to have known ‘of matters pertaining to events within Manly Council and the Manly local government area in relation to the proposed development of the Project … and of Manly Oval’ (CLR, para 167a)). The reference to Manly Oval is a reference to the redevelopment of the Manly Oval carpark, the granting of development consent for which was a condition precedent to the Deed. No particulars are given of the ‘events’ which it is said the Built Group and the Developer knew or ought to have known;

(b)   The prospects of the redevelopment being a PPP (public private partnership) (and as a result being the subject of various regulatory requirements) was the subject of consideration by Manly Council and the subject of publicity (CLR, paras 170-1);

(c)   The proposed redevelopments were controversial, widely criticised and strongly opposed by members of the community and by Councillors, and on occasions debate about them in Council was prevented by Mr Wong or the Mayor, all of which was the subject of substantial adverse publicity (CLR, paras 178-181);

(d)   The administrative practices and governance of Manly Council and Mr Wong, including in respect of the Project and the Manly Oval carpark, were criticised in reports of the New South Wales Ombudsman and in correspondence of the Office of Local Government (CLR, para 185);

(e)   There were substantial differences between the Invitation Brief and the Tender. The Tender was inconsistent with Manly Council’s planning controls and the structures it contemplated greatly exceeded the 15 metre maximum permitted height. As a result, it was reasonable to expect concern from members of the public and Councillors and for those opposed to the Project to press for inquiries to be conducted in relation to the tender process (CLR, paras 187-192);

(f)   The meeting approving the Project was conducted in the absence of the public, without an agenda being publicly notified and in circumstances where there was intensive dispute among the Councillors. Those matters were the subject of wide publicity at the time, which caused various bodies to question the legality of the meeting and the validity of the relevant resolutions (CLR, paras 196-200);

(g)   At the time, council mergers including the merger of Manly Council were under active consideration by the NSW Government and upon a merger being implemented, the Councillors of Manly Council would lose their position and Mr Wong would lose his position as General Manager, which were matters known by Mr Wong (CLR, paras 202-9). It is also pleaded that Mr Wong and representatives of Built Group and Athas negotiated and finalised the terms of the Deed and the Development Deed relating to the Manly Oval as a matter of urgency in order to execute them before the proposal to merge Manly Council with other councils was implemented (CLR, para 210);

(h)   There were risks that the Deed would be found to be an agreement to agree, void for uncertainty, that the condition precedent would not be satisfied and that the Project would not be completed (CLR, para 211);

(i)   There had been widely publicised concerns expressed by Councillors as to the adequacy of investigations of the risks and benefits to Council in circumstances where the Project had the potential to generate significant profits for Built Group and the Developer (CLR, para 213);

(j)   It was reasonably likely that upon a merger, the new administration would investigate the Project and suspend implementation of the Deed pending the outcome of an investigation (CLR, paras 215-16);

(k)   In or about May 2016, the Council commenced an investigation into the Project and suspended implementation of the Deed during the investigation. Those matters received wide publicity (CLR, paras 218-21);

(l)   It was reasonable to expect that Mr Wong would not be General Manager of any merged Council and that by 20 May 2016, he had no authority to deal with Built Group or the Developer in relation to the Project (CLR, paras 223-6).”

21. The ground upon which these paragraphs were struck out was explained by the primary judge as follows:

“12   ... The paragraphs in question raise a broad-ranging factual enquiry about the conduct of the Council in relation to the Project. However, there is no logical connection between those facts and the misleading and deceptive conduct relied on by the plaintiffs. If the conduct complained of is found to be misleading and deceptive, that must be because the Deed was invalid for one or more of the reasons pleaded in para 20 of the CLR and the Council failed to inform the plaintiffs of that fact. But none of the matters pleaded in the paragraphs to which objection is taken can shed any light on whether the plaintiffs were misled or deceived concerning the invalidity of the Deed for the reasons set out in para 20, whether they relied on the views they formed on that question for doing what they did or whether it was reasonable for them to rely on the views they formed on those questions (because, for example, it was obvious that those views were incorrect).

13   The defence that it appears the Council wishes to raise is a defence that, whatever the position in relation to the CLR para 20 grounds for invalidity, it must have been obvious to the plaintiffs that there was such opposition to the Project and such controversy about how approval of it was obtained from the Council that the Project would not have proceeded in any event, so that the plaintiffs could not have relied on any view they formed on the para 20 grounds for invalidity in deciding to proceed with the Project, or at least it was not reasonable for them to have done so.

14   However, that is not what is currently pleaded. Moreover, to the extent that that defence is concerned with actual reliance rather than reasonable reliance, it is difficult to see how it could be made out. The fact is that the Developer did enter into the Deed. It is difficult to see why it would have done so if it believed that doing so was a waste of time because, for one reason or another, the Project would not proceed. That is, it is difficult to see how it could be said that the plaintiffs did not rely on the (allegedly misleading and deceptive) conduct in relation to the CLR para 20 grounds of invalidity because they realised that the Project would not proceed in any event when the Developer entered into the Deed and the plaintiffs proceeded on the basis that it was enforceable.

15   On the other hand, it may be possible for the Council to plead an arguable case that any reasonable developer in the position of the plaintiffs would have appreciated that there was little prospect of the Project proceeding because of the opposition to it and the conduct of the Council, and that for that reason the plaintiffs could not reasonably have relied on the allegedly misleading and deceptive conduct in doing what they did. One difficulty that case may face is that none of the additional matters relating to the opposition to the Project and the conduct of the Council is pleaded as matters affecting the validity of the Deed. Consequently, if the Deed were valid but for the CLR para 20 grounds of invalidity, it is not apparent why a reasonable developer in the position of the plaintiffs would nonetheless take the view that it would never receive the benefit of it and therefore would not have entered into it.”

22. The plaintiffs alleged that the Council engaged in misleading and deceptive conduct essentially by representing either expressly or by its conduct that the Development Deed was valid and enforceable. The context in which conduct took place and in which the alleged representations were made will be important in determining what representations were impliedly conveyed by the Council and whether the plaintiffs relied on representations expressly or impliedly conveyed. The issues will not, as the primary judge appears to have thought, be limited to the question whether the plaintiffs acted in reliance on their assumption that the deed was valid and enforceable, but will include whether the Council’s conduct conveyed the representation that the deed was valid and enforceable and whether the plaintiffs relied upon any representation expressly or impliedly conveyed by the Council.

22. In the absence of any further amendment to the Commercial List Response (and none was suggested) it is correct that if the conduct complained of is found to be misleading or deceptive, that must be because the deed was invalid for one or more of the reasons pleaded in par 20 of the Commercial List Response. But it is not correct that if the conduct complained of is found to be misleading and deceptive, that must be because the Council failed to inform the plaintiffs of the fact that the deed was invalid for one or more of the reasons pleaded in par 20 of the Commercial List Response. The particular grounds upon which the deed might be invalid formed no part of the representations alleged by the plaintiffs. Their contention is that the Council expressly or impliedly conveyed that the deed was valid and enforceable and they relied on that both in entering into the Deed and in steps taken or not taken thereafter. There is no reason the contextual matters pleaded by the Council need demonstrate a logical connection with the grounds upon which the Council now contends that the Deed was invalid.

23. That is, the plaintiffs allege that the Council either expressly or by its conduct represented that the deed was valid and enforceable. Its allegation was not that any representation was expressly or impliedly conveyed in relation to the particular grounds on which the Council now says that the deed was invalid and unenforceable. The contextual matters alleged by the Council that were summarised by the primary judge and quoted at [20] above are relevant to the Council’s contention that the Council’s conduct either did not convey the representations alleged, or that the plaintiffs did not rely upon the representations alleged, or that both parties did not adopt the representations alleged as the conventional basis of their relationship.

24. As an example, the Council’s allegation summarised by the primary judge at [9](b) of his reasons (quoted at [20] above) is that there was a publicly debated issue as to whether the proposed development was a public/private partnership that was subject to regulatory requirements that had not been met. That is not one of the grounds upon which the Council alleges that the deed was invalid and unenforceable. But if the facts alleged were established they could be relevant, at least to the question of whether or not the plaintiffs relied upon anything said or done, or not said or done, by the Council in adopting an assumption that the deed was valid and enforceable, as distinct from relying upon their own assessment of the validity and enforceability of the deed.

25. As a matter of principle, the form of pleading adopted by the Council was available. Quite properly, the primary judge did not seek to identify specific aspects of the Council’s pleading, the relevance of which might be in question. That would have been a matter to be addressed at trial. On the other hand, the new claims based on misleading and deceptive conduct, estoppel by representation and estoppel by convention could properly be resisted by reference to contextual matters which were actually known to or which ought to have been known to the plaintiffs at the relevant times. Accordingly the judge was in error in striking out the impugned paragraphs in the commercial list response.

26. If the result of this conclusion is that the trial will be longer than it would otherwise have been and that some aspects of the Council’s defence will prove to be misconceived, the former characteristic is a consequence of the plaintiffs’ causes of action and the latter can be dealt with, as appropriate, by costs orders after the evidence has been considered.

Orders

28. For these reasons the Court made the following orders:

1. Grant the applicant leave to appeal from the judgment in the Equity Division given on 25 May 2018.

2. Direct that the applicant file within seven days a notice of appeal in the form of the draft notice of appeal contained in the white folder filed on 20 August 2018.

3. Allow the appeal and set aside order (1) made on 25 May 2018 and the order as to costs of the motion made on 29 May 2018.

4. In lieu thereof, order that the amended notice of motion dated 21 May 2018 be dismissed and that the plaintiffs pay the defendant’s costs of the motion.

5. Order that the respondents pay the applicant’s costs of the proceedings in this Court.

**********

Endnotes

Decision last updated: 03 September 2018