Penola and District Residents and Ratepayers Association Incorporated & Anor v Wattle Range Council

[2012] HCATrans 112

[2012] HCATrans 112

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Adelaide  No A19 of 2011

B e t w e e n -

PENOLA AND DISTRICT RESIDENTS AND RATEPAYERS ASSOCIATION INCORPORATED

First Applicant

DUAN BUTLER

Second Applicant

and

WATTLE RANGE COUNCIL

Respondent

Application for special leave to appeal

CRENNAN J
BELL J

TRANSCRIPT OF PROCEEDINGS

FROM CANBERRA BY VIDEO LINK TO ADELAIDE

ON FRIDAY, 11 MAY 2012, AT 2.55 PM

Copyright in the High Court of Australia

MR B.R.M. HAYES, QC:   If the Court pleases, I appear for the applicants with my learned friend, MS G.C. WALKER.  (instructed by Mellor Olsson Lawyers)

MR M.J. RODER, SC:   If the c pleases, I appear for the respondent.  (instructed by Norman Waterhouse Lawyers)

CRENNAN J:   Yes, Mr Hayes.

MR HAYES:   The reasons why we say special leave should be granted in this case is set out in the application book, pages 67 and 68, and I would like to just identify the two main issues which this case raises.  The first is a council that has taken upon itself the – become a trustee of land of which it is a public charitable trust, whether that council as a trustee has the powers that it would otherwise have at general law under the Local Government Act or under the Roads Act, to open a road, a bypass road, over the land which is the subject of the trust where that road has been found by the court not to be included in the objects of the trust.  That is the first issue.  The second one is that if it does not have that power, is the trust an unlawful fetter on its general statutory powers and the second matter raises the issue of executive necessity, as we have put it in the outline of argument and as identified in the court. 

Going back to the first question, if the Court pleases, the Council – if I can take the Court to application book 28 – executed a trust and at paragraph 10 on that page 28 the Full Court sets out the terms of the trust, declares that the land referred to in the schedule is to be subject of the trust created by that instrument and the terms of a trust:

To hold the Subject Land for the public use of the residents of the former District Council of Penola . . . for sporting, agricultural, educational, recreational, community or like purposed (sic) but subject to the conditions specified –

in the trust.  That is the trust that affects the subject land.

CRENNAN J:   Yes.  But bearing in mind there is a unanimous here at appellate level and it upholds the decision of the primary judge, where is the error in the appellate reasoning upon which you seek to rely in this application?

MR HAYES:   The error lies in the fact that what the court did was not to deal with, in any way, the fact that the Council was a trustee and exercised fiduciary obligations as a trustee in addition to its powers under the Act.  The effect of the court’s decision which was to say, well, the Council has its powers under the Act to open a road, albeit the road which we have found is not consistent with the purposes of the trust, the reason why it is able to do that, as we say in our outline of argument, is that they implied, applying the Heytesbury test – and perhaps I can take the Court to application book page 47 which deals with this issue.  On page 47, paragraph 93, your Honours will see that the court referred to the trial judge noting:

the Trust did not specifically prevent the Council exercising its statutory powers in relation to the Commonage and he was not prepared to read into it an implied undertaking by the Council to fetter its powers in this way.  The Judge referred to the important nature of the Council’s planning and road‑making powers –

and then goes on to refer to the Subiaco v Heytesbury case that:

any contractual fetter or limitation on the exercise of executive discretion should be clearly and expressly stated before a court will construe the contract as qualifying freedom of executive action.  His Honour considered that that principle should also be applied to the construction of the Trust.

We say our point is this.  That is the wrong principle to apply to the construction of a trust.  Heytesbury was concerned with a commercial contract which, in turn, fettered the ability of the public authority to carry out some of its obligations.  Here it is the public authority which has the land the subject of a trust which it is a trustee.  In declaring the trust, in our respectful submission, the trust took on the fiduciary obligations which the applicant submits here operate as strongly as express words in a lease to fetter the exercise of a statutory bar, otherwise the effect ‑ ‑ ‑

CRENNAN J:   His Honour Justice White deals with this point, does he not, on the following page in paragraph 97.  I must say, it caught my eye that his Honour in dealing with the appellant’s argument said that the submission that there was some principle which allowed one to distinguish between commercial contracts and charitable trusts in this context was not developed in any way before the court.

MR HAYES:   Well, with respect, it was put to the court.  It may have been put in the context of executive necessity as opposed to the strength or the importance of the Council exercising fiduciary obligations as a trustee under the trust and that relationship to its powers to open a road which was in breach of that trust.  So the issue is relatively straightforward.  If one looks at what has the Council done here?  It is a trustee of land over which a road is not one of the purposes.  Of course it exercises its powers as a local authority over opening new roads.  The question is, if it can open a road, despite its fiduciary obligation as a trustee of this trust which precludes that road under the objects of the trust, what then is the effect of the trust in exercising any of its powers contrary to the trust?  This is the effect, with respect, of the Full Court’s decision at page 50, paragraph 106:

In my opinion, it is appropriate therefore to construe the Trust as being intended to operate in the context of, and subject to, the Council’s statutory powers –

The practical effect is, that is on its proper construction, the trust does not require the Council to continue to hold the land comprising of commonage subject to the terms of the trust if it is required for road‑making purposes.  But that destroys the trust altogether.  The court earlier in its decision ‑ ‑ ‑

CRENNAN J:   Executive necessity is necessarily based on considerations of public policy.

MR HAYES:   Yes.  If executive necessity, as Justice Mason said in the Ansett Case, does not preclude a binding or a fetter of a local authority over some of its obligations.  It is not a bar to it, and that is the second point of our reason for why we think special leave should be given, is because the ‑ ‑ ‑

CRENNAN J:   Where do you point to that in Ansett’s Case?

MR HAYES:   Yes.  If I can take the Court to Ansett at 139 CLR 54. It is the first case in the applicant’s authorities and it is at page 1 but, in particular, page 74. In that first paragraph at about point 2:

There is a general principle of law that a public authority cannot preclude itself from exercising important discretionary powers or performing public duties by incompatible contractual or other undertakings.

A somewhat similar principle seems to have been expressed in relation to government contracts in Rederiaktiebolaget Amphitrite v The King where Rowlatt J acknowledged that the government can bind itself through its officers by commercial contract but went on to say “it is not competent for the Government to fetter its future executive action, which must necessarily be determined by the needs of the community when the question arises.  It cannot by contract hamper its freedom of action in matters which concern the welfare of the State”.  This statement has been criticized on the ground that it is expressed too generally and so it is.

So Ansett did not follow that and that principle has not been applied.

CRENNAN J:   Read the passage at the bottom of the page and over on page 75.

MR HAYES:   Yes, the bottom of the page.

CRENNAN J:   It is rather against you, is it not, those passages?

MR HAYES:   I am sorry, your Honour, page 75?

CRENNAN J:   At the bottom of page 74 where his Honour is speaking about public confidence in government dealings, and over the page.

MR HAYES:   Yes, but they are examples of cases.  The principle, in our respectful submission, of Ansett – there are two limbs.  The first is, is the power a lawful power?  Was it a lawful exercise of the power in the first place, ie, in the Ansett case was the contract authorised?  If the contract was authorised, and in this case we would say is the trust authorised?  Yes, it is.  If it is authorised, then the second point is, was it a power which was compatible with enabling the Council, or the local authority, to continue its obligations under the Roads Act or the Local Government Act?In this case, yes, it is.  It does not preclude the Council from exercising its local government powers.  It might preclude it in this case of opening a road over this land.

BELL J:   Indeed.

MR HAYES:   But Ansett was concerned with ensuring that it was incompatible with its general powers.  It is not.  The Council can open this road over any land and that is part of its powers.  Indeed, the objects of this trust are entirely compatible with the Council’s local government authorities, developing community resources, providing public services, et cetera.

BELL J:   If you turn to application book 49, paragraph 102, the concluding sentence in Justice White’s judgment. this in the context of a declaration of trust voluntarily made by the Council respecting community land that it owned.

MR HAYES:   Yes.

BELL J:   Well, that was not insignificant in the consideration of these issues.

MR HAYES:   Well, we would have to ask, why would it be?  Once you have established a trust which is a lawful trust, the power was there for the Council to impose the trust on the land, which it did.  There is no argument about that.  Once that is established, why should it make a difference as to whether it was a voluntary one or if someone had granted the land to the Council in trust as a gift?  It does not matter.  It is a trust.  The question is, the objectives of the trust enable the Council to operate its local government authority’s powers consistent with the trust, and that is the issue which Ansett was concerned with.  Can I take the Court also to the case of the City of Camberwell – that is No 3 of our applicant’s list – at page 108 of the book.  In the middle of that page:

The judgments in Ansett make it clear that a self‑imposed contractual fetter on the exercise of discretionary power is only unlawful where it is alone without power.  Where the contract, which is said to have the effect of fettering the exercise of a statutory power or discretion in the future, is itself authorised by a power, it is lawful.

Applying that to the facts of this case, where the imposed trust is lawful, which it is, then the contract will not be said to be unlawful in fettering the powers.  The court went on to say, in the middle of the next paragraph:

the High Court by a majority allowed a demurer the effect of which was that the Commonwealth had no case to answer . . . The court did not appear to be other than unanimous that an agreement authorised by an Act of Parliament is well capable of fettering a discretion which a statutory authority or the Commonwealth might otherwise lawfully have.

Pause there.  This is a trust, a lawful trust.  It is perfectly capable of fettering a discretion of the authority which it would otherwise have provided, and the Court went on to say, that it is compatible with the authority’s general powers.  It can hardly be said in this case that the trust objectives are incompatible in any way with the local government authority’s general powers.  With respect, the Full Court, when it came to consider the primary issue of whether the road was part of the trust, could not bring itself to form an opinion which had the effect of demolishing the trust altogether.  Can I take the Court to page 41 of the application book.  At the top of that page, when he was considering the effect of the declaration of land on the trust:

Hence, to construe the expression “community purpose” in the Trust as permitting the construction of a public road under those provisions would mean that the Trust contemplates uses of the Commonage which will result in it, or part of it, ceasing to be subject to the Trust altogether.  In my opinion, this is an improbable construction.  The uses of the Commonage contemplated by the Trust are uses while it continues to be subject to the Trust.

Accordingly, whatever be the reach of the expression “community purposes”, the use for such a purpose would not seem to permit the Council to discharge the relevant portions of the land from the Trust.

Now, your Honour, it was incapable of finding that you could destroy the trust when looking at whether it fitted the community purposes, but yet it finds, irrespective of its fiduciary obligations and irrespective of Ansett, the decision in Ansett and Camberwell, that nevertheless the Council can go ahead and make this road which is inconsistent with the objects of the trust, the effect of which is to really destroy the trust.  There is nothing left of the trust.  That, we would say with respect, is an extremely important issue.  It is wrong because the court has not looked at the fiduciary obligations of the Council as a trustee.  We have not been able to find other cases which are similar and, secondly, the doctrine of executive necessity, the Court has not applied that because it is just taken the use of Subiaco v Heytesbury Case and equated it to commercial contracts which do not deal with the fiduciary obligations of the trustee.  If the Court pleases.

CRENNAN J:   What about a point made by Justice White, to be found at page 43 in paragraph 75, that the issue is rather academic?  As I understand what his Honour is referring to is the fact that the Council might well be able to achieve its objectives anyway through a variety of legislative methods.

MR HAYES:   I think the reference there is to whether or not the Commissioner of Highways might acquire the land and operate ‑ ‑ ‑

CRENNAN J:   Yes, that is right.

MR HAYES:   We would still say the issue of whether ‑ ‑ ‑

CRENNAN J:   But the Council has not so far purported to act on the resolution, has it?

MR HAYES:   No.  We would say that it is not academic because the issue of the Council as a trustee of this land with the existence of the trust being a lawful trust over land will still be of relevance if the Commissioner of Highways comes to exercise his powers, but we do not know the basis upon which – what he will do.  So it is still irrelevant.  It is not academic, with respect.

CRENNAN J:   Thank you, Mr Hayes.  We do not need to hear from counsel for the respondent.

We are not satisfied that this case raises an issue of principle.  Rather, it turns on the construction of a trust executed by the respondent.  There are insufficient prospects of success on any appeal to warrant a grant of special leave.  Special leave is refused with costs.

Adjourn the Court till 10.15 am on Tuesday, 29 May 2012.

AT 3.16 PM THE MATTER WAS CONCLUDED