Secretary to the Department of Economic Development, Jobs, Transport and Resources v MG Pastoral Company Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

VALUATION, COMPENSATION & PLANNING LIST

S CI 2014 04601

BETWEEN:

SECRETARY TO THE DEPARTMENT OF ECONOMIC DEVELOPMENT, JOBS, TRANSPORT AND RESOURCES	Applicant
v
MG PASTORAL COMPANY PTY LTD	Respondent

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JUDGE:	EMERTON J
WHERE HELD:	Melbourne
DATE OF HEARING:	12 and 20 May, 24, 25 June, 24 November 2015
DATE OF JUDGMENT:	29 April 2016
CASE MAY BE CITED AS:	Secretary to the Department of Economic Development, Jobs, Transport and Resources v MG Pastoral Company Pty Ltd
MEDIUM NEUTRAL CITATION:	[2016] VSC 187

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LAND VALUATION AND COMPENSATION – Separate questions – Whether Respondent had an ’interest’ in land under the Land Acquisition and Compensation Act 1986 as a party to an agreement purportedly made under s 173 of the Planning and Environment Act 1987 – Land compulsorily acquired belonged to other parties, but Respondent’s land formed part of land that was to be developed by the other parties upon its transfer to them – Agreement provided for the other parties to make development contributions prior to certification of plans of subdivision – Agreement to be recorded on titles to Respondent’s land within the development area – Whether Respondent’s agreement to recording created a charge over Respondent’s land – Whether power to enforce certain terms of the Agreement created a right, power or privilege in, under, over, affecting or in connexion with land owned by other parties to the Agreement – Planning and Environment Act 1987 ss 173, 174, 175, 177, 181, 182, 183; Land Acquisition and Compensation Act 1986 ss 3(1), 24(1)(b), 37(1).

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APPEARANCES:	Counsel	Solicitors
For the Applicant	Mr S Morris QC Mr I Munt	Herbert Smith Freehills
For the Respondent	Mr J Delaney QC Mr P Chiappi Ms C van Procter	Minter Ellison

HER HONOUR:

Introduction

MG Pastoral Company Pty Ltd (‘MGP’), Manor Lakes (Werribee) Pty Ltd (‘MLW’) and Manor Commercial Company Pty Ltd (‘MCC’) are related entities in the Dennis Family group of companies. The Dennis Family group is involved, among other things, in the development of residential estates in the outer suburbs of Melbourne. One of its ‘master-planned communities’ is Manor Lakes Estate at Wyndham Vale, which is in the course of being developed. MLW is undertaking the residential subdivision; MCC is developing the shopping and major activity centre.

The Dennis Family group has owned the land upon which Manor Lakes Estate is being developed for many years. In about 1988, MGP acquired the original farming property, Manor Park, which is being progressively transferred to MLW and MCC for the staged development of Manor Lakes Estate pursuant to a series of option agreements. The process for the development of Manor Lakes Estate is for MGP to hold the Manor Park land as rural land until MLW (and/or MCC) is ready to subdivide it, at which point discrete parcels of land are transferred to the relevant developer for residential and/or commercial development. A number of stages of Manor Lakes Estate have been completed and many more are being undertaken or are to be undertaken. The staged development has taken place from the eastern side of the land, progressing in a generally westerly direction.

On 16 January 2006, MGP, MLW, MCC and Wyndham City Council (‘Council’) entered into a Deed of Agreement (‘Deed’) expressed to be made pursuant to s 173 of the Planning and Environment Act 1987 (‘Act’) for the purpose of agreeing the terms on which development contributions would be made to the Council in respect of the area of approximately 350 hectares forming the eastern part of Manor Lakes Estate, referred to as the ‘Manor Lakes Estate Development (Eastern Section)’ (‘ML East’).

On the same day that it entered into the Deed, MLW entered into a further agreement to lease to the Council a corridor of land running through ML East (‘Corridor Lease Agreement’) to enable the Council to pursue the development of a train line (sometimes referred to as a ‘transport corridor’) on the leased land. By the Corridor Lease Agreement, MLW agreed to refrain from pursuing the development of the corridor land for a ten year period and the Council agreed to facilitate the use of the corridor land for sporting, recreational or cultural activities pending any railway development.

At the date of the Deed and the Corridor Lease Agreement, each of MGP, MLW and MCC were the registered proprietors of parcels of land in ML East. The land owned by MLW in ML East (other than the corridor land) was being developed for residential purposes, the land owned by MCC was being developed for commercial purposes and the remaining land, comprising parcels in the northern and western parts of ML East, was held by MGP as rural land pending its transfer to MLW or MCC for residential or commercial development.

By the Deed, MLW and MCC agreed to undertake certain works or to make payments to the Council in lieu of the works and the Council agreed to use the funds so contributed in the manner specified to provide roads, community facilities and open space in ML East. The Deed sought to achieve, in substance, what would or could have been achieved under a development contributions plan made pursuant to the Act. The land affected by the obligations in the Deed, in the sense that it was the land slated for development by MLW and MCC, was the entirety of the 350 hectares comprising ML East, referred to in the Deed as the ‘Subject Land’.

MGP, as the owner of parts of the Subject Land, consented to the Council recording the Deed as an agreement made under s 173 of the Act on the Register of titles of the land owned by it. The Deed also purported to confer on MGP a right to request the Council to cancel the recordings of the Deed on its titles and those of MLW and MCC once MLW and MCC had complied with their obligations to make development contributions or provide works pursuant to the Deed.

Most of the development contributions to be made under the Deed were ‘Arterial Road Network Contributions’. These contributions were to be used in the first instance to provide the road works specified in Schedule B to the Deed, including the upgrade of ‘Middle Ring Road’ (then known as Armstrong Road) as an arterial road with the intersection works shown on a plan in Schedule D (the ‘OD Plan’). The OD Plan showed road and intersection works in the area defined by an Outline Development Plan made by the Council for the area corresponding with ML East. Among other things, the OD Plan provided for four signalised intersections along Middle Ring Road.

Although the Deed was expressed to be an agreement made pursuant to s 173 of the Act and it therefore contemplated that it would be recorded on the titles in question, because of ongoing issues with the identification of the titles of the land affected by the Deed, the Deed was never recorded on the Register of titles pursuant to s 181 of the Act. However, MLW proceeded to make development contributions in accordance with the Deed, and some works were carried out. This process was interrupted by the compulsory acquisition of some of the land affected by the Deed for the purposes of the Regional Rail Link (‘RRL project’).

The RRL project involved the construction of rail lines for a new regional service along the corridor land, along with a railway station and car park.

By four separate notices of acquisition published in the Government Gazette on 19 December 2011, 3 April 2012 and 19 June 2013 respectively, the Secretary to the Department of Transport[1] (‘Authority’) compulsorily acquired part of ML East for the purposes of the RRL project. The land compulsorily acquired by the Authority took the form of a narrow strip of land for the rail tracks, broadening in the north to accommodate the new Wyndham railway station and an adjacent rectangular parcel of land for a car park. It included the land that was the subject of the Corridor Lease Agreement between MLW and the Council and possibly some of the land identified in the OD Plan for construction of Middle Ring Road and designated signalised intersections.
[1]Later the Secretary to the Department of Transport, Planning and Local Infrastructure, and now the Secretary to the Department of Economic Development, Jobs, Transport and Resources.

The land in ML East acquired by the Authority for the RRL project (‘Acquired Land’) was owned by MLW and MCC, as it was on the eastern side of ML East and in an area already subject to residential and commercial development. None of the Acquired Land belonged to MGP, which, at the relevant dates, retained only remnant parcels of land to the west and north of ML East.

However, on 19 December 2013, MGP made a claim for compensation pursuant to s 37(1) of the Land Acquisition and Compensation Act 1986 (the ‘LAC Act’) in relation to the compulsory acquisition of the Acquired Land. MGP claimed that:

(a)pursuant to the Deed and certain other agreements, it had a right, charge, power or privilege in, under, over, affecting or in connection with the acquired land;
(b)this interest was divested or diminished by the acquisition of the Acquired Land; and
(c)it is therefore entitled to compensation in its own right and, in the alternative, to make such a claim by MLW for the increased cost burden concerning Ison Road.

It is necessary to explain the relevance of Ison Road. ML East is bordered on its western side by Ison Road. At the date of the Deed, the land to the west of Ison Road remained almost entirely in the ownership of MGP. Like the land in ML East, it was contemplated that MGP would in due course engage in the staged transfer of the land west of Ison Road to MLW and MCC for development as part of the Manor Lakes Estate.

Before the RRL project, the road which is marked on the OD Plan as ‘Middle Ring Road’ was to be a major or arterial road. MGP contends that, as a consequence of the RRL project, it cannot be developed to its previously intended capacity. Instead, Ison Road will have to be increased in capacity to carry the traffic that would otherwise have been carried by Middle Ring Road.[2] This, so it is contended, will result in loss to MGP as the owner of most of the land to the west of Ison Road, as development contributions for the Ison Road up-grade will be significant.
[2]A precinct structure plan for the western section of the Manor Lakes Estate that is incorporated into the Wyndham Planning Scheme states that, ‘Over time, Ison Road will be developed as a six lane primary arterial road to provide a key regional north-south arterial road function’.

MGP’s claim for compensation is therefore based on the additional cost of up-grading Ison Road as a result of Middle Ring Road not being constructed as provided for in the OD Plan and contemplated by the Deed.

On 19 June 2014, the Authority served a statement pursuant to s 37(4) of the LAC Act, rejecting MGP’s claim. The Authority disputes that MGP has an interest in the Acquired Land, either by reason of being a party to the Deed or otherwise.

Separate questions

On 31 October 2014, the Court ordered the trial of the following six questions:

(a)On 19 December 2011, did MGP have an ‘interest’ in land within the meaning of s 3(1) of the LAC Act in the land known as parcel 37 on SP2169B, parcel 47 on SP22170A, parcel 66 on SP22171B and parcel 67 on SP22171B [the acquired land]? If yes, what was the nature of that interest?
(b)If the answer to question (a) is ‘Yes’, on 19 December 2011 did the Authority divest or diminish that interest under s 24(1)(b) of the LAC Act by virtue of the acquisition of all the interests in the land known as parcel 37 on SP2169B, parcel 47 on SP22170A, parcel 66 on SP22171B and parcel 67 on SP22171B?
(c)On 3 April 2012, did MGP have an ‘interest’ in land within the meaning of s 3(1) of the LAC Act in the land known as parcel 107 on SP22176B, parcel 86 on SP22174B and parcel 98 on SP22175B? If yes, what was the nature of that interest?
(d)If the answer to question (c) is ‘Yes’, on 3 April 2012 did the Authority divest or diminish that interest under s 24(1)(b) of the LAC Act by virtue of the acquisition of all of the interests in the land known as parcel 107 on SP22176B, parcel 86 on SP22174B and parcel 98 on SP22175B?
(e)On 19 June 2013, did MGP have an ‘interest’ in land within the meaning of s 3(1) of the LAC Act in the land known as parcel 51 on SP22170D? If yes, what was the nature of that interest?
(f)If the answer to question (e) is ‘Yes’, on 19 June 2013 did the Authority divest or diminish that interest under s 24(1)(b) of the LAC Act by virtue of the acquisition of all the interests in the land known as parcel 51 on SP22170D?

MGP contends that the answers to the questions posed at paragraphs 1(a), 1(c) and 1(e) are ‘Yes’ because of rights and obligations arising from the Deed.

The Authority submits that the Court should reject this contention because the provisions of the Deed did not confer an ‘interest’ in the Acquired Land upon MGP within the meaning of s 3(1) of the LAC Act. It says further that even if the Deed had that effect, MGP’s purported ‘interest’ in the Acquired Land was not ‘divested or diminished’ by the acquisition of the Acquired Land so as to give rise to an entitlement to compensation pursuant to s 30 of the LAC Act.

Statutory framework

The Deed purports to be an agreement made under s 173 of the Act. Such agreements are hybrid instruments,[3] operating planning controls over land as well as private agreements. When recorded on title, they bind the owners of land from time to time to the covenants specified in the agreement, and their terms may be enforced by persons other than the parties to the agreement.
[3]Solid Investments [2004] VCAT 2356.

The statutory framework for s 173 agreements in force at the date of the Deed forms part of the context in which the Deed was made and informs its construction as well as, potentially, dictating its operation. It is convenient to set out the relevant provisions of the Act at the relevant date.

As at 16 January 2006, the statutory scheme in the Act for making, recording, amending and terminating s 173 agreements was as follows:

(a) Section 173 provided:

(1)A responsible authority may enter into an agreement with an owner of land in the area covered by a planning scheme for which it is a responsible authority.
(2)A responsible authority may enter into the agreement on its own behalf or jointly with any other person or body.
(3)A responsible authority may enter into an agreement under sub-section (1) with a person in anticipation of that person becoming the owner of the land.
(4)Despite anything in this Division, if an agreement entered into with a purchaser in anticipation of the purchaser becoming owner is registered by the Registrar of Titles, it does not bind the vendor unless the vendor assumes the purchaser’s rights and obligations under the agreement.

(b) Section 174 provided:

(1)An agreement must be under seal and must bind the owner to the covenants specified in the agreement.
(2)An agreement may provide for any one or more of the following matters—
(a)the prohibition, restriction or regulation of the use or development of the land;
(b)the conditions subject to which the land may be used or developed for specified purposes;
(c)any matter intended to achieve or advance—
(i)the objectives of planning in Victoria; or
(ii)the objectives of the planning scheme or any amendment to the planning scheme of which notice has been given under section 19;

(d)any matter incidental to any one or more of the above matters.

(c) Section 175 provided for s 173 agreements to include a condition that the owner deposit with the responsible authority a sum of money or an undertaking to pay that sum together with security, and for the forfeiture of that sum (or part of it) if the owner failed to carry out the agreement. Section 175(4) provided that any money payable under s 175 was a charge on the land the subject of the agreement.

(d) As to the recording or registration of s 173 agreements and the effect of recording or registration, s 181 provided:

(1)A responsible authority may apply to the Registrar of Titles to register an agreement relating to land other than Crown land.
(2)An application must include a copy of the agreement to which it relates and the prescribed particulars.
(3)The Registrar of Titles must make a recording of the agreement in the Register.

(e) Section 182 provided:

After the making of a recording in the Register—
(a)the burden of any covenant in the agreement runs with the land affected; and
(b)the responsible authority may enforce the covenant against any person deriving title from any person who entered into the covenant as if it were a restrictive covenant despite the fact that it may be positive in nature or that it is not for the benefit of any land of the responsible authority.

(f) Section 178 provided for the amendment of s 173 agreements in the following terms:

An agreement may, with the approval of the Minister, be amended by agreement between the responsible authority and all persons who are bound by any covenant in the agreement.

(g) Section 177 provided for a s 173 agreement to end as provided in the agreement itself or ‘wholly or in part or as to any part of the land by the responsible authority with the approval of the Minister or by agreement between the responsible authority and all persons who are bound by an any covenant in the agreement’.

(h) Section 183 then provided:

(1)The responsible authority must tell the Registrar of Titles in the prescribed manner without delay of the ending of any agreement wholly or in part or as to any part of the land or any amendment to an agreement.
(2)The Registrar of Titles must, as appropriate, cancel in whole or in part or alter the recording of the agreement in the Register or make a recording in the Register of the matters notified under subsection (1).

Pursuant to s 114 of the Act, any person could apply for an enforcement order if the use or development of land contravened a s 173 agreement.

These provisions therefore contemplated that a s 173 agreement would contain covenants affecting the use and development of land, and that the owner of that land would be bound by those covenants. Once the agreement was recorded on title, it would bind the successors in title to the owner, as the covenants would run with the land.

The Deed

The Deed is expressed to be an agreement made under s 173 of the Act. It provides, however, that if it is held not to have been validly made under the Act or is unenforceable under the Act, it remains a contract between the parties and is enforceable as a contract.

The Deed establishes a regime for MLW and MCC to make contributions towards roads, community facilities and open space in (or servicing) ML East. Thus, the recitals record its purpose to be to document the manner in which MLW and MCC will satisfy their obligations to make the required development contributions.[4]
[4]More generally, the purpose of the Deed is expressed to be to give effect to the requirements of the Policy Framework for Infrastructure Financing in the City of Wyndham dated 21 October 1996 and to achieve the objectives of planning in Victoria and the objectives of the Wyndham Planning Scheme in respect of the Subject Land.

The Deed defines MGP as the ‘Owner’, although MGP retained only part of the land comprising ML East at the date of the Deed and, further, it was not anticipated that MGP would develop the land itself. MLW and MCC are defined collectively as the ‘Developers’ and as the ‘Residential Developer’ and the ‘Commercial Developer’ respectively. The land to which the Deed applies is the ‘Subject Land’, which, while described as a series of titles, is the land developed or to be developed as ML East.

Relevantly, the recitals (or introductory clauses) to the Deed record as follows:

B.The Owner is the registered proprietor of some of the Subject Land, and in particular of the land on the Title to which a memorandum of this Agreement is to be registered. The remainder of the Subject Land is owned by the Developers or persons who have purchased through them.
C.The Residential Developer intends to subdivide and develop part of the Subject Land into a residential development and the Commercial Developer intends to develop part of the Subject Land into a commercial development that together will form the eastern section of the Manor Lakes Estate Development (Manor Lakes Estate Development (Eastern Section)) in accordance with the approved OD Plan [Outline Development Plan].
E.The residential and commercial components of the Manor Lakes Estate Development (Eastern Section) will give rise to separate Development Contribution obligations. The Residential Developer will make the Required Development Contributions relating to the residential development and the Commercial Developer will make the Required Development Contributions relating to the commercial development.
F.The Owner, Developers and Council agree that the Development Contributions required in respect of the Manor Lakes Estate Development (Eastern Section) will be made on the basis set out in this Agreement.
G.The Developers’ preference is to provide the Required Development Contributions to Council in the form of completed works, and subject to the consent of Council, to only provide the Required Development Contributions in the form of payments where works are not practicable.

Clause 12.2.7 provides for these introductory clauses or recitals to form part of the Deed.

Clauses 1 and 2 of the Deed set out the Developers’ principal obligations under the Deed, which are to make the ‘Required Development Contributions’ described in Schedule A. ‘Required Development Contributions’ are divided into Arterial Road Network Contributions, Community Centre Contributions and Active Open Space Development Contributions.

Schedule A is divided into three parts.

The first part of Schedule A lists works already completed by the Developers and the value of the completed works as at 1 January 2005. The completed works are valued at approximately $953,000.

The second and largest part of Schedule A deals with future contributions. It is in the form of a table listing the relevant stage, which of MLW or MCC is responsible for development contributions at that stage, the type of contribution and the value of the contribution.

The table sets out the contributions that must be made by the Developers prior to certification of plans of subdivision. It provides for contributions to be made at 200 lot intervals, with the final payment obligation linked to certification of the plan of subdivision creating the 3,000^th lot. At each stage, MLW is required to make a specified contribution for the Arterial Road Network, the Community Centre and for Active Open Space Development. MCC is required to make only one contribution, being an Arterial Road Network Contribution, prior to the certification of the plan of subdivision creating the 3,000^th lot.

The third part of Schedule A is a summary of contributions referable to each of the Arterial Road Network Contribution, Community Centre Contribution and Active Open Space Contribution.[5] The Arterial Road Network Contribution requires by far the largest contribution.
[5]In each of these categories, the contributions are broken down into ‘total contribution’ and contribution per hectare.

The works to be funded by the Arterial Road Network Contribution (defined as the ‘Works’) are described in Schedule B and shown on the OD Plan in Schedule D. Four separate Works are described, involving road construction, road upgrade and the intersection works shown in the OD Plan. One of the Works is:

Construction of the Middle Ring Road, 2 lanes from Ballan Road to the Northern boundary of the “Walsh Property” [land contained in Certificate of Title Vol 8827 Folio 154].

The Works also include the construction of intersection works on Middle Ring Road shown on the OD Plan. They include four signalised intersections.

Schedule A provides for Arterial Road Network Contributions totalling $10,776,393. Only $606,317 of this is to be contributed by MCC and only at the final stage. The required development contributions for MLW and MCC combined is $12,920,299.

Returning to the substantive provisions of the Deed, cl 1.2 provides that, with the consent of Council, MLW may elect to alter the value of its Arterial Road Network Contribution, its Community Centre Contribution and its Active Open Space Development Contribution, provided that the total amount contributed for the stage is equal to the total value for all the components required for that stage and that, by the conclusion of the development, the total contribution is equal to what it would have been.

The clauses of the Deed that follow contain the machinery for making development contributions and set out the steps to be taken in accordance with the provisions of the Act to ensure that the obligations in the Deed run with the Subject Land.

Clause 3.1 provides that MLW and MCC may elect to make the Required Development Contributions by paying the amounts in Schedule A or, in cl 3.2, with the written consent of Council, by providing works-in-kind constructed by them at a cost equal to the value in Schedule A or by a combination of payments and works-in-kind that together equal that value.

Clause 3.4 permits MLW and MCC to request the Council to vary or defer the timing of a development contribution on the basis that the Council will not unreasonably withhold its consent. Correspondingly, cl 4.1 provides for the Council, upon application by a Developer, to vary or defer ‘for any stage to a subsequent stage’ the requirement for either Developer to make some or all of one or more components of a Required Development Contribution.

Contributions may also be varied pursuant to cl 5.3. Clause 5.3 provides for the Required Development Contributions agreed between the parties to be calculated based on the net developable area and that, if the Council and Developers agree in writing that the net developable area has changed, for the amounts of the Required Development Contributions set out in Schedule A to be adjusted accordingly.

Clause 4 contains the Council’s obligations. Clause 4.2 provides that if the Developers elect to make a Required Development Contribution for any stage by payment of the value in Schedule A, the Council must use the money provided to meet its obligations under cl 4.3. Clause 4.3 provides, relevantly, that the Council must use any Arterial Road Network Contribution firstly to carry out the Works (as described in Schedule B) and, if any funds remain after completing the Works, the Council must apply them in accordance with the note to Schedule B. The note provides for ‘remaining contributions’ to be directed to the upgrading of other arterial roads according to the provisions of the Werribee West Concept Plan and the Development Contributions Framework Policy dated April 1996.[6]
[6]The Council must also use the Community Centre Contribution and the Active Open Space Development Contribution to construct facilities that are within the Werribee West Conceptual Plan area in consultation with the Residential Developer. In addition, the Council is obliged to plan the type and location of community facilities and open space to acknowledge the scale of the development of the Subject Land, and locate the community facilities and open space to properly serve the community of the Werribee West Concept Plan area.

By cls 4.4 and 4.5, the Council acknowledges that the Required Development Contributions made by MLW and MCC discharge their obligation to make development contributions for ML East and agrees that it will not require further development contributions from them in respect of ML East.

Clause 5.8 is central to the issues that arise for determination in this case because it provides the basis upon which MGP contends that it charged its land in favour of the Council to secure the obligations of MLW and MCC under the Deed and that, as a result, it obtained an interest in the land owned by MLW and MCC, including the Acquired Land.

By cl 5.8, MGP, MLW and MCC consented to Council making an application to the Registrar of Titles in accordance with s 181 of the Act to make a recording of the Deed on the Register of the titles specified in the clause.

Clause 9.1 is related to cl 5.8 and is also submitted to be important. Pursuant to cl 9.1 each of MGP, MLW and MCC is required to ensure, in respect of land registered in its name, that until such time as the Deed is recorded on the certificates of title identified in cl 5.8, successors in title will give effect to the Deed and execute a deed agreeing to be bound by the terms of the Deed.

The same titles are referred to in cl 5.8 and cl 9.1. Those titles covered all of the land in ML East. However, the ‘Subject Land’ in the Deed is defined by reference to an additional five titles. The Court was told that this was because some titles in ML East had been cancelled and replaced with new titles as the subdivision progressed and the solicitors preparing the Deed adopted a ‘belts and braces’ approach which saw them include both the cancelled and replacement titles in the definition of ‘Subject Land’.

It is tolerably clear that the Subject Land, being the ‘land affected’ by the covenants in the Deed for the purposes of s 182 of the Act, was intended to be the land covered by the titles referred to in cls 5.8 and 9.1.

Clause 5.9 provides that the parties will do all things necessary to give effect to the Deed.

Clause 8.1 is headed ‘Owner’s warranties’ and provides:

Without limiting the operation or effect which this Agreement has, the Owner warrants that apart from the Owner and any other person who has consented in writing to this Agreement, no other person has any interest, either legal or equitable, in the Subject Land which may be affected by this Agreement.

There is no equivalent provision for Developers’ warranties.

Clause 11.2 provides for the Deed to terminate when the Developers have complied with all the obligations imposed on them in the Deed. Clause 11.3 then provides that as soon as reasonably practicable after the Deed has terminated, the Council will, at the request and cost of MGP, make application to the Registrar of Titles under s 183(2) of the Act to cancel the recording of the Deed on the Register.

Again, no provision is made for the Developers to request the Council to apply to the Registrar of Titles to cancel the recording of the Deed on the Register. However, this is of no consequence as s 183(1) of the Act requires the responsible authority to tell the Registrar of Titles without delay of the ending of a s 173 agreement. A ‘request’ by MGP is also unnecessary and cl 11.3 is superfluous (other than insofar as it provides for the costs of the application to be borne by MGP).

Finally, under the heading ‘Interpretation’, and following a number standard interpretation clauses (providing for the singular to include the plural and so forth), cl 12.3 provides as follows:

The obligations of the Owner under this Agreement, will take effect as separate and several covenants which are annexed to and run at law and equity with the Subject Land provided that if the Subject Land is subdivided, this Agreement must be read and applied so that each subsequent Owner of a lot is only responsible for those covenants and obligations which relate to that Owner’s lot.

Again, there is no equivalent provision for the obligations of the Developers, which are, in reality, the substantive obligations under the Deed.

Preliminary issue: status of the Deed

The Deed is expressed to have been made under s 173 of the Act. Agreements that comply with the statutory requirements for s 173 agreements may be recorded on title, and the obligations (or ‘covenants’) in the agreement run with the land. Because of the semi-public nature of s 173 agreements, the Act imposes a number of requirements directed to securing transparency and requiring approvals to be obtained if changes are made to the arrangements recorded in the agreement.

At the relevant time, s 178 of the Act provided:

An agreement may, with the approval of the Minister, be amended by agreement between the responsible authority and all persons who are bound by any covenant in the agreement.

In this case, changes were twice made to the titles referred in cls 5.8 and 9.1 and in the definition of ‘Subject Land’. At no point were these changes approved by the Minister. As a result, because of the statutory requirements in force at the relevant time for the amendment of s 173 agreements, there is a question as to whether the Deed is an agreement validly made under s 173 of the Act.

The first version of the Deed (the version that was originally provided to the Court as the only and definitive version of the Deed) referred to MGP as the registered proprietor of some of the Subject Land and, in particular, of the land on title to which a memorandum of the Deed was to be registered. Clause 5.8 then recorded that MGP consented to the Council making an application to the Registrar of Titles to make a recording of the Deed on a single certificate of title[7] (referred to as the ‘western land’). Clause 9.1 required MGP to ensure that, until such time as a memorandum of the Deed was registered on the title to the western land, successors in title would be required, in substance, to give effect to the Deed. However, the ‘Subject Land’ was defined by reference to titles of land held by MGP, MLW and MCC in ML East, but not the title on which the Deed was apparently intended to be registered, namely, the western land. In fact, the western land did not form part of ML East, but was a parcel of land owned by MGP at the western extremity of Manor Park.
[7]Crown Portion B section 7, Volume 10034, folio 620.

Shortly after execution of the original version of the Deed on 16 January 2006, the Council sought to have it recorded on the title to the western land. However, the Registrar of Titles refused to record the Deed on the title as requested because MGP had not affixed its common seal to the Deed (as required under s 174(1) of the Act) and because the land on which the Deed was to be recorded (the western land) did not form part of the Subject Land, that is, the land to which the Deed related. After a series of communications between MLW and the Council, the Council confirmed that the Deed was to be registered on the land affected by the Deed (the Subject Land) and requested that clauses 5.8 and 9.1 be amended accordingly.

Initialled replacement pages were inserted into the Deed, deleting the title reference to the western land in cls 5.8 and 9.1 and substituting eight titles in ML East, apparently representing a number of ‘super-lots’, being lots that had not, at that time, been subdivided. Again, however, the Registrar identified problems with the nominated titles.[8] The identification of the titles on the Subject Land was generally complicated by the existence of both ‘super-lots’ and ‘child titles’, the complication arising, as I understand it, from the need to cancel titles and issue new ones as the subdivision of the Subject Land progressed.
[8]Including with a title that was nowhere near the ML East and was registered in the name of a person who had nothing to do with MGP, MLW or MCC.

A third (and the current) version of the Deed was prepared in late 2007, again by way of initialled replacement pages, to amend title references in cls 5.8 and 9.1, along with the definition of ‘Subject Land’. Once again, however, the Registrar of Titles refused to record the Deed on the titles on the ground that some of the titles listed in the application had been cancelled.

Searches undertaken since 18 May 2015 do not disclose any further attempts to record the Deed or any further changes to it.

The parties agree that the third version of the Deed is the version that was current as at 2011 to 2013 (the period covered by the dates of acquisition), noting that parent titles mentioned in the Deed have been subdivided since 2007. The parties also agree that the Deed was never recorded on the Register of Titles in accordance with s 181 of the Act.

It is uncontroversial, therefore, that the Deed is not a registered s 173 Agreement. The covenants in the Deed do not run with the Subject Land.

At the trial, submissions were made about whether the third version of the Deed was simply a contract or whether it was also an unregistered s 173 agreement. The approval of the Minister was neither sought nor obtained when replacement pages were inserted into the Deed purporting to amend cls 5.8 and 9.1 and the definition of ‘Subject Land’. However, at the relevant times, termination of a s 173 agreement and entry into a new s 173 agreement was permitted without the approval of the Minister. It was submitted by the Authority that the changes to the Deed could be described as a termination of the old agreement and the entry into a new one.

The distinction between variation and termination of a contract may be fine one. The effect of a variation may be to terminate the original contract and replace it with a new one, or to modify the original contract without terminating it.[9] Depending on the intention of the parties, a variation may bring about the termination of a contract, its partial termination or the addition of terms without a termination.[10] The question whether there has been a variation or a termination is dependent on the intention of the parties, objectively determined, from the words of the contract.[11] Whether or not the parties intended termination can sometimes be inferred from the degree to which their contract has been modified.[12]
[9]See the discussion in N C Seddon, R A Bigwood and M P Ellinghaus, Cheshire and Fifoot: Law of Contract (LexisNexis Butterworths, 10^th ed, 2012) ch 22.
[10]Ibid [22.5].
[11]Seven Cable Television Pty Ltd v Telstra Corp Ltd [2000] FCA 350, 132.
[12]Tallerman & Co Pty Ltd v Nathan’s Merchandise (Vic) Pty Ltd (1957) 98 CLR 93, 113.

In this case, there is an argument to be made that the Deed was not substantially modified, because cl 5.8 is otiose, as will be explained later in these reasons. On the other hand, modifications to what land is affected by the covenants in the Deed - what is included in the ‘Subject Land’ - could be regarded as significant.

The Deed itself expressly provides that the parties intended it to operate as a s 173 agreement, and in its form the Deed reflects an intention to comply with the statutory regime for s 173 agreements. The repeated attempts by the parties to put the Deed in registrable form shows that the parties (subjectively at least) intended that it operate as such. It is open to infer that, in compliance with the statutory regime, the parties intended to terminate rather than vary the earlier versions of the Deed.

Were it necessary to do so, I would find that the Deed operated as an unregistered s 173 agreement at the relevant dates.

However, nothing turns on whether the Deed was an unregistered s 173 agreement or simply a contract. On any view, the Deed remained enforceable as a contract. As none of the preliminary questions require the Court do decide whether the Deed is also an unregistered s 173 agreement, I do not propose to determine that issue. Neither party submitted that the question required an answer and no legal submissions were made on the (potentially complex) question of contractual variation versus contractual termination in the context of the statutory regime for s 173 agreements.

MGP’s case

MGP claims, by virtue of being a party to the Deed and by reason of the rights and the obligations the Deed confers and imposes, to have had an interest in the Acquired Land that was divested or diminished by its compulsory acquisition.

‘Interest’, in relation to land, is defined in s 3(1) of the LAC Act as:

(a)a legal or equitable estate or interest in land; or
(b)an easement, right, charge, power or privilege in, under, over, affecting or in connection with land.

MGP does not claim to have had a legal or equitable estate or interest in the acquired land, but submits that by reason of the Deed, it had a right, charge, power or privilege, in, under, over, affecting or in connection with the Acquired Land. Such an interest, so it says, arose principally in two ways:

(a) By consenting to the recording of the Deed on its titles in cl 5.8, MGP agreed that its cl 5.8 land stand as security for the performance by MLW and MCC of their obligations to make development contributions pursuant to the Deed. Having charged its land in favour of the Council, it had right of subrogation to the Council, giving it an equitable lien over the land in ML East owned by MLW and MCC, including the Acquired Land;

(b) Further, as a party to the Deed, MGP had a right or power to have MLW, MCC and the Council specifically perform their obligations under the Deed, including to make the Required Development Contributions and carry out the Works on and in connection with the Acquired Land.

MGP submits that it was entitled under the Deed to the benefit of the Works and, in connection with the security that it gave to the Council, had the power to have the Developers specifically perform their obligations so as to obtain the benefit of its right to have the Deed removed from its titles. It submits that because the notices of acquisition had the effect of vesting the Acquired Land in the Authority freed of all encumbrances, it has lost its equitable lien over the Acquired Land along with its right to the benefit of the Works on the Acquired Land, as provided for by the Deed.

The Macquarie Dictionary contains the following definitions of ‘right’, ‘power’ and ‘privilege’:

Right … a just claim or title, whether legal, prescriptive or moral. That which is due to anyone by just claim: to give one his or her rights …
Power … ability to do or act; capability of doing or effecting something … the possession of control or command over others; dominion; authority; ascendancy or influence …
Privilege … a right or immunity enjoyed by a person or persons beyond the common advantages of others.

The Authority concedes that the plain words in the definition of ‘interest’ in s 3(1) of the LAC Act are sufficiently broad to include the full range of proprietary rights, plus certain contractual rights that permit a person to occupy land when such occupation might otherwise constitute trespass. It submits that this reflects both the breadth of the words themselves and the requirement to construe compulsory acquisition legislation liberally in favour of persons whose interests are affected, in accordance with the statement of principle expressed by Gaudron J in Marshall v Director General Department of Transport.[13]
[13](2001) 205 CLR 603, 623 (‘Marshall’).

In Marshall, Gaudron J observed that although the rule that legislative provisions are to be construed according to their natural and ordinary meaning is a rule of general application, it is particularly important that it be given its full effect when, to do otherwise, would limit or impair individual rights, particularly property rights:[14]

The right to compensation for injurious affection following upon the resumption of land is an important right of that kind and statutory provisions conferring such a right should be construed with all the generality that their words permit. Certainly, such provisions should not be construed on the basis that the right to compensation is subject to limitations or qualifications which are not found in the terms of the statute.

[14]Ibid 623.

The Authority submits that the challenge that confronts MGP is that no court or tribunal has ever found that an agreement made pursuant to s 173 of the Act (or a comparable interstate provision) creates an ‘interest’ in land within the meaning of land acquisition and compensation legislation. According to the Authority, the absence of authority on this point is not due to any lack of authority on what constitutes an ‘interest’ in land for the purpose of land acquisition and compensation legislation. Courts interstate and exercising Commonwealth jurisdiction applying cognate definitions have found the following to constitute ‘interests’, the acquisition of which may found an entitlement to compensation:

(a)a licence to use a carpark in Sorrento Medical Services Pty Ltd v Chief Executive, Department of Main Roads;[15]
(b)the right to access a public road adjoining private land in Minister for Education v Tanner;[16]
(c)a tenancy at will in Mooliang Pty Ltd v Shoalhaven City Council;[17]
(d)a mining exploration licence in Commonwealth v Western Australia;[18]
(e)a permissive occupancy in Rakus v Energy Australia;[19]
(f)a purchaser of land under a contract of sale in Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd;[20]
(g)the holder of a right for the owner to remediate land before sale, also in Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd;[21]
(h)a statutory right to access common areas under a lease in LGM Enterprises Pty Ltd v Brisbane City Council[22] and Mekpine Pty Ltd v Morton Bay Regional Council;[23] and
(i)a restrictive covenant in Tavitian v City of Playford.[24]

[15](2007) 151 LGERA 328 (‘Sorrento’).

[16](2003) 128 LGERA 281.

[17](2001) 114 LGERA 45.

[18](1999) 196 CLR 392.

[19](2004) 138 LGERA 373.

[20](2005) 63 NSWLR 407.

[21]Ibid.

[22](2008) 165 LGERA 232.

[23](2014) 202 LGERA 120.

[24](2014) 202 LGERA 87, 19.

In each of these cases, the claimant had or had acquired an entitlement to physically access and use the land in question.

In Hornsby Council v Roads and Traffic Authority of New South Wales,[25] the New South Wales Court of Appeal, while recognising that the definition of ‘interest’ in the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) was a liberal one, stated that absurdities might arise if no limitation was placed on its ambit. Justice Meagher limited the words in paragraph (b) of the definition of ‘interest’ to ‘jura in re aliena, proprietary or quasi-proprietary rights less than a fully-fledged estate, that is, easements, charges, profits a prendre, profits a render, licences coupled with interests, etc.’[26]
[25](1997) 41 NSWLR 151 (‘Hornsby’).
[26]Ibid 155.

However, subsequently, in Sorrento,[27] the Queensland Court of Appeal recognised no such limitation, Chesterman JA commenting that the statement in Hornsby went further that the facts of the case required and reiterating that the statutory definition must be considered according to the ordinary meaning of the words. Having reviewed the authorities, his Honour held that an ‘interest’ under cognate Queensland legislation[28] included a right of personal property (in contradistinction to a real property right). Such a right was one that could be valued in money.[29]
[27]Sorrento Medical Services Pty Ltd v Chief Executive, Department of Main Roads (2007) 151 LGERA 328.
[28]The definition of ‘interest’ in relation to land appeared in the Acts Interpretation Act 1954 (Qld) but was then picked up in ss 12 and 18 of the Acquisition of Land Act 1967 (Qld).
[29](2007) 151 LGERA 328.

Leave to appeal to the High Court from the decision in Sorrento was refused, and in Moreton Bay Regional Council v Mekpine Pty Ltd,[30] Gageler J referred with approval to Sorrento, the correctness of which was not in issue in the appeal.
[30](2016) 90 ALJR 420.

There is therefore no occasion to identify an immutable rule, such as the presence or absence of a right to physically occupy or use land, to distinguish between rights, powers and privileges that are ‘in, under, over, affecting or in connexion with land’ and those that are not. The ordinary and natural meaning of the words must be applied. The Court must determine whether MGP had an interest in the Acquired Land resulting from the rights, powers and privileges conferred by the Deed consistently with the approach articulated by Gaudron J in Marshall, that is, without limitations or qualifications not found in the statute itself.

However, it is convenient to consider whether the Deed conferred on MGP a right, charge, power or privilege in, under, over, affecting or in connexion with the Acquired Land by reference to the two principal ways in which it asserted its interest.

Was there an ‘interest’ in the form of an equitable lien?

MGP submits that at the dates of acquisition it held an equitable lien over the Developers’ land, including the Acquired Land, by reason of its right of subrogation arising from the security given to the Council over the cl 5.8 land. MGP submits that its right of subrogation came into existence upon the execution of the Deed and was conferred and held to protect it in the event that the security was called upon by the Council.

The Deed contains no express words by which MGP guaranteed the obligations of the Developers or offered its cl 5.8 land as security for the performance of those obligations. Any such arrangement must be implied from the terms of the Deed and its context.

It is settled law that to create a charge in equity by deed or writing it is not necessary that any general words of charge should be used. ‘It is sufficient if the court can fairly gather from the instrument an intention by the parties that the property therein referred to should constitute a security.’[31]
[31]Cradock v Scottish Provident Institution (1893) 69 LT 380, 382. See also: Paul & Paul Pty Ltd v Shacklock [2014] VSC 407; Sadri v Samian (No 3) [2010] VSC 251; Allen's Asphalt Pty Ltd v SPM Group Pty Ltd (2009) 255 ALR 588 and Raptis v Wija Investments Development Pty Ltd [2007] NSWSC 870. See also AVCO Financial Services Ltd v White [1977] VR 561.

As to how that intention might be identified, in Allen's Asphalt Pty Ltd v SPM Group Pty Ltd,[32] the Queensland Court of Appeal, when considering whether words in an agreement created an equitable interest in land, stated:[33]

Whether those words create a charge over the appellant's land depends on determining the intention of the parties. That intention is to be determined objectively by reference to ‘what a reasonable person would have understood [the words] to mean’. And to ascertain that ‘normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction’. Such a reasonable person is one who has all the background knowledge which would reasonably have been available to the parties in the situation which they were in at the time of the contract.

[32](2009) 255 ALR 588.

[33]Ibid 212-213 [47] [Citations omitted].

MGP’s argument that it charged its land in favour of the Council and obtained a corresponding right of subrogation in respect of the Council’s rights over the Developers’ land is based on cl 5.8 of the Deed, whereby MGP and each of the Developers ‘consented’ to the Council applying to the Registrar of Titles to have the Deed recorded on the titles to the Subject Land. This involved agreeing to a form of restriction on the development of the Subject Land that would operate, upon recording, as a restrictive covenant running with the Subject Land by virtue of the Act. MGP submits that the substance of cl 5.8 is the provision of the nominated titles as security for the Developers’ performance of their obligations to make development contributions under the Deed. This, so it says, is supported by the agreement in cl 11.3 that the Deed remain recorded on the cl 5.8 titles for so long as any part of the development contributions remained unpaid by the Developers, giving the Council an implied right to retain its security over the Subject Land until the obligations of the Developers were discharged.

MGP submits that the existence of a charge over its cl 5.8 land is further supported by the following clauses in the Deed:

(a) cl 9.1, which constitutes an agreement to bind successors in title pending recording of the Deed on the titles to cl 5.8 land;

(b) cl 12.3, which refers to the covenants annexed to the Subject Land running at law and equity with the Subject Land; and

(c) the express agreement in cl 5.9 to do all things necessary to give effect to the agreement in the Deed and the implied obligation to do all things reasonably necessary to secure the performance of the agreement.

MGP also points to the existence of what is says is its power to compel the Council to register the Deed on the titles of the Subject Land, including the Acquired Land, so as to enable it to obtain the benefit conferred by subrogation.

MGP submits that it obtained a right relating to or in connection with the property of MLW and MCC, including the Acquired Land, that arose ‘automatically by implication of equity’[34] when it charged its land in favour of the Council to secure the performance by MLW and MCC of their obligations under the Deed. Having assumed the obligations of the Developers to the Council, MGP says that it was entitled to stand in the Council’s shoes in respect of the security taken by the Council over the cl 5.8 land owned by MLW and MCC. Its lien over this land, including the Acquired Land, could have been enforced by sale of the land in pursuance of a court order in the event that it was called upon to satisfy the indebtedness of MLW or MCC to the Council.
[34]In Hewett v Court (1983) 149 CLR 639, 663 Deane J described an equitable lien as follows:
An equitable lien is a right against property which arises automatically by implication of equity to secure the discharge of an actual or potential indebtedness. Though called a lien, it is, in truth, a form of equitable charge over the subject property in that it does not depend upon possession and may, in general, be enforced in the same way as any other equitable charge, namely, by sale in pursuance of court order or, where the lien is over a fund, by an order for payment thereout.

According to MGP, apart from its right of subrogation, the benefits that it enjoyed in connection with the security included a right to lodge a caveat in support of the equitable lien which existed in, over or in connection with the Developers’ land forming part of the Subject Land, including the Acquired Land; a right in respect of the rateable liability for development contributions of subsequent owners of the land, which also applied to the Acquired Land; a power to require the Council to apply to record the Deed on the titles to the Acquired Land by virtue of s 182 of the Act, along with the express covenant in cl 12.3 of the Deed, which specified that the Deed ran with the land; and the consequential right to marshal the securities in relation to the Developers’ property forming part of the Subject Land, including the Acquired Land.

It is a function of the way in which MGP identifies its interest in the Acquired Land arising from the operation of cl 5.8 of the Deed, that it must establish not only an intention that it guarantee the performance of the Developers’ obligations to make the development contributions, but also an intention that:

(a) MLW guarantee the performance of MCC’s obligation to make development contributions and give its land in ML East as security for its own obligations and those of MCC; and

(b) MCC guarantee the performance of MLW’s obligation to make development contributions and give its land in ML East as security for its own obligations and those of MLW.

The Deed is to be construed having regard to what a reasonable businessperson would have understood its terms to mean. Its construction requires consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by it. Appreciation of the commercial purpose or objects is facilitated by an understanding of the genesis of the transaction, the background, the context and the market in which the parties are operating.[35]
[35]Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640. See also Regreen Asset Holdings v R [2015] VSCA 286.

The introductory clauses to the Deed describe some of the context in which the Deed was made and shed light on its purpose:

(a) Recital C records that the Developers proposed to subdivide and/or develop the Subject Land in accordance with the approved Outline Development Plan (‘ODP’);

(b) Recital F records that the MGP, the Developers and the Council have agreed that development contributions required in respect of ML East would be made on the basis set out in the Deed;

(c) Recital H records that the parties entered into the Deed, as well as for generic planning reasons, to document the manner in which the Developers would satisfy their obligations to make Required Development Contributions.

The object or purpose of the Deed was plainly to require the Developers to provide designated infrastructure for ML East in order to obtain the necessary permissions to carry out the proposed subdivision. The development of ML East for residential and commercial purposes required the provision of infrastructure. The Council had both a policy for sourcing infrastructure funds from developers and an outline development plan for ML East showing proposed roads and intersections (the OD Plan). The Deed provided for the Developers to provide the infrastructure works for ML East themselves or, if not practicable, to make payments which would be applied by the Council to secure the provision of the infrastructure. Development was to be carried out in stages and contributions would also be made in stages prior to the certification of the plans of subdivision creating further lots. In the absence of agreement between the Developers and the Council to vary the obligation to make development contributions, the development of the ML East would not proceed if development contributions were not made.

Importantly, the Deed left it to the Developers to decide the timing of the payments depending on their own development schedules and, indeed, to decide not to make any or further contributions at all by deciding not to develop any further lots. The triggering of a requirement to make development contributions and the timing of such contributions was within the control of the Developers.

The Deed did not impose on MGP any express obligation to make payments or provide works or secure the making of payments or the provision of works by others. It did not provide for MGP to become indebted to the Council in any way. This is unsurprising, as MGP was not the developer or proposed developer of any of the Subject Land. It entered into the Deed as the owner of remnant parcels of undeveloped land in the area designated in the OD Plan for development (ML East) that would be transferred to the Developers for subdivision in due course. The development of ML East would take place as staged development and the obligation of the Developers to make development contributions would arise as and when they sought approval for successive plans of subdivision as the development of ML East progressed.

MGP’s obligations under the Deed were limited to the following:

(a)consenting to the Council making an application to the Registrar of Titles to make a recording of the Deed in the Register on the six titles it owned on the Subject Land;

(b)doing all things necessary to give effect to the Deed;
(c)agreeing that the Deed was made under s 173 of the Act, and that if the Deed was held not to be an agreement validly entered into or enforceable under the Act, it remained an enforceable contract between the parties;
(d)warranting that apart from MGP itself and ‘any other person who has consented in writing to this agreement’, no other person had any interest, either legal or equitable in the Subject Land that might be affected by the Deed;
(e)ensuring, in respect of the land registered in its name, that until such time as a memorandum of the Deed was registered on all of the relevant certificates of title, successors in title to its land would be required to give effect to the Deed and execute a deed agreeing to be bound by the terms of the Deed;
(f)once the Deed ended, requesting the Council to make application to the Registrar of Titles to cancel the recording of the Deed on the Register and paying the costs of that application; and
(g)complying with the dispute resolution mechanism in cl 6 of the Deed in the event that a dispute arose.

Given that MGP’s argument rests in large part on its ‘consent’ to the recording of the Deed on the Register of its cl 5.8 titles and on what it says was its power under cl 11.3 to request the removal of the recording of the Deed on the Register of all of the cl 5.8 titles, it is necessary to consider the statutory regime that provides for these matters in order to understand the legal effect of those clauses.

As at the date of the Deed, the recording of s 173 agreements on title was discretionary and the discretion lay with the responsible authority. The Council could choose whether or not it would apply to have the Deed recorded on the cl 5.8 titles pursuant to s 181 of the Act. Section 182 of the Act provided for the burden of any covenant in the agreement to run with the land affected and enabled the Council to enforce the covenant against any person deriving title from any person who entered into the covenant. The effect of recording or registration was to make the Deed enforceable against persons who were not parties to the Deed. A decision to register (or record) the Deed on title might depend simply upon whether the Council thought it necessary or desirable to bind successors in title to the obligations in the Deed.

The ‘consent’ given in cl 5.8 was therefore unnecessary. No consent was required. Clause 5.8 identified the titles upon which the Deed could be recorded as the land affected by the covenants in the Deed and, at its highest, operated as an acknowledgement of the Council’s right to have the Deed recorded on the titles under s 181 of the Act.

As to the removal of the recording of the Deed on the titles in question, s 183 of the Act required the Council to tell the Registrar of Titles in the prescribed manner ‘without delay’ of the ending of the agreement and the Registrar was then required to cancel the recording. This was neither optional nor dependent upon a request by any party.

It follows that MGP’s obligations in respect of recording or registration of the Deed on title were scarcely obligations at all. If the Deed was a valid s 173 agreement, the Council had a right to apply to the Registrar of Titles to have the Deed recorded on the titles to the Subject Land, whether or not consent was given by the owners of the land. If the Deed was not a valid s 173 agreement, there was no occasion for it to be recorded on the titles, with or without consent, and the obligations would not run with the land simply by agreement between the parties. Likewise, a ‘request’ to remove or cancel the recording of the Deed on the titles was of no consequence. The Council was required under s 183(1) of the Act to tell the Registrar of Titles when the Deed came to an end and the Registrar was then bound to cancel the recording.

MGP submits that cl 12.3 is a substantive provision providing for the covenants in the Deed to run with the Subject Land. I disagree. Obligations in a contract (including an unregistered s 173 agreement) do not run with land unless they operate as restrictive covenants or there is a statutory provision (such as s 182 of the Act) that so provides. Subsequent owners of the land were not bound by the obligations in the Deed unless they agreed to be bound. So much was recognised by cl 9.1 of the Deed.

In my view, therefore, cl 12.3 did not have the operation or effect contended for by MGP. The obligations in the Deed were intended to take effect as separate and several covenants and cl 12.3 provided for the Deed to be construed in that way. It was an interpretation provision that anticipated something that did not occur, namely, the recording of the Deed on the relevant titles pursuant to s 181 of the Act. Clause 12.3 did not (and could not) effect what would be effected by recording the Deed on title under s 182 of the Act.

Clause 12.3 is one of a number of clauses in the Deed expressed to apply to MGP as the ‘Owner’ that fail to take into account the role of the Developers in the arrangements for which the Deed provides. Insofar as it has any substantive operation, cl 12.3 should plainly also apply to the obligations of the Developers. MLW, in particular, intended (and was known by the parties to have intended) to subdivide and sell the land to ‘subsequent owners’ who were not parties to the Deed. MGP proposed to sell its land on to persons who were parties to the Deed and bound by its provisions, namely MLW and MCC.

For this reason, it was also illogical for the warranty in cl 8.1 as to the ownership of the Subject Land to be given only by MGP.

Further, Recital B recorded that MGP, as ‘Owner’, was the registered proprietor of ‘the land’ on title to which a memorandum of the Deed was to be registered. However, cl 5.8 anticipated that the Deed would to be recorded on all of the titles to the cl 5.8 land, including the land already belonging to the Developers. Recital B reflected neither the substance of the Deed nor the particular arrangements between the parties.

Similarly, Schedule C contained consents by mortgagees to the ‘Owner’ entering into the Deed and recorded that if the mortgagee became a mortgagee in possession, it would be bound by ‘the covenants and conditions’ of the Deed. Why would the same not be required of any mortgagees of land owned by MLW or MCC? It is telling that the registered mortgages referred to in the operative version of the Deed are exactly the same as those in the original version of the Deed, which provided for the recording of the Deed on the title to the western land. The mortgagee consent has apparently been given in relation to land that is not part of the cl 5.8 land (and therefore not part of the Subject Land). Once again, the Schedule fails to reflect the substance of the Deed and the arrangement between the parties.

It is evident from these anomalies that the Deed is based on a precedent s 173 agreement reflecting the more conventional position for agreements of that kind that ‘the Owner’ is the registered proprietor of the land affected by the covenants in the agreement – the Subject Land – and the person undertaking the principal obligations relating to the development and/or use of the Subject Land. The scheme of Division 2 of Part 9 of the Act is that an agreement will be made with ‘the owner of land’ and that the agreement will bind the owner to covenants affecting the land. This will usually involve a prohibition or restriction on the use or development of the subject land, or the imposition of a condition for the use or development of that land. In this case, the subdivision of the land comprising ML East cannot be proceed without the Developers first making the required development contributions, but no contributions are required from the ‘Owner’ as the Owner does not propose to develop the land.

The Deed must be construed having regard to the fact that it is plainly deficient in a number of respects. Although MGP is defined as the ‘Owner’, it had limited obligations under the Deed, consistently with it not seeking to develop the Subject Land itself. The use of a hastily and carelessly modified precedent s 173 agreement means that while the Deed correctly makes reference to the tripartite ownership of the Subject Land at the relevant date, it fails to reflect the fact that the development necessitating the development contributions and for which subdivision approval is required is to be undertaken by MLW and MCC, while MGP merely holds some of the Subject Land as rural land pending its transfer to MLW or MCC for development.

The fact that MGP’s cl 5.8 land is intended to be transferred to and developed by the Developers explains why it is burdened by the covenants in the Deed.

Section 182 refers to the effect of registration on ‘the land affected’ by the covenants. The ‘land affected’ by the promise to provide or fund the infrastructure specified in the Deed is the land to be developed, namely, the 350 hectares comprising ML East, being the land shown in the OD Plan and defined in the Deed as the Subject Land. This is the land identified as the ‘subject’ of the agreement. It includes the land still owned by MGP.

In my view, the Act contemplates registration of the s 173 agreement over all or none of the land that is the subject of the agreement. In this case, assuming it was necessary to so provide, the Deed provided for the Council to make application to the Registrar to record the Deed on the titles of all of the Subject Land, being the land affected by the proposed development.

MGP was a necessary party to the Deed as the owner of some of the land in ML East that was to be developed by the Developers. The Deed provided comprehensively for the making of development contributions for the development of ML East in accordance with the Council’s policy framework. It contained an acknowledgment by all parties to the Deed that development contributions would be made on the basis set out in the Deed and an acknowledgment by the Council that the Developers’ obligation to make development contributions for the development of ML East would be discharged by the making of the required development contributions under the Deed. In other words, the Deed was intended to exhaustively describe the requirement for developer contributions for the development of ML East.

This is why MGP was a party to the Deed, why its land was included in the Subject Land and why, in or by cls 5.8 and 9.1, MGP effectively acknowledged that the Council could register the Deed on its titles and thereby have the obligations in the Deed run with the land. However, this does not amount to an agreement to guarantee the Developers’ obligations to make development contributions under the Deed.

MGP submits that it was bound to assume the obligations of MLW and MCC in the Deed as the vendor of the cl 5.8 land to one or both of them. Section 173(3) of the Act permits a council to enter into a s 173 agreement with a person who is not the owner of the subject land in anticipation of the person purchasing and becoming the owner of the land. Section 173(4) provides, however, that the s 173 agreement does not bind the vendor of the land unless the vendor assumes the purchaser’s rights and obligations under the agreement. MGP argues that by expressly agreeing to the recording of the Deed on its land, and by agreeing in cl 9.1 that if it subdivided the land it would pass on the obligations to the registered proprietors of the child titles, MGP agreed to be bound by the obligations of MLW and MCC in the Deed, which it was not otherwise required to do.

I have found that the Deed was intended to resolve the question of development contributions for the whole of ML East, including the land still owned by MGP. The subdivision in respect of which development contributions were to be made was to extend across ML East, including, ultimately, the land owned by MGP.

The Deed anticipated that MLW and/or MCC would become the owners of the land owned by MGP in ML East prior to MLW or MCC triggering the requirement to make development contributions by seeking approval for plans of subdivision for that land. The staged development of ML East was reflected in the staged payment schedule for development contributions. It was not contemplated that MGP would seek approval of plans of subdivision for lots on its land. That was always to be the role of the Developers, having first acquired the land from MGP. The Developers’ obligations would not arise in respect of the development of MGP’s land unless and until the Developers acquired that land and moved to develop it. There was therefore no need for MGP to assume the obligations of the Developers to make the development contributions associated with the development of those lots.

Section 173(4) did not, in my view, require MGP to guarantee the obligations of the Developers.

There is no warrant in these circumstances to infer from clauses 5.8, 9.1 and 12.3 a promise by MGP to guarantee the development contributions of MLW and MCC and to give its land as security for the performance of those obligations. The Developers’ obligations were significant financial obligations. MLW promised to make contributions of almost $12 million to secure approval for the residential subdivision of the Subject Land. It is unlikely that MGP, as a rural land-holder and farming operation, would agree to assume a liability of that size other than by the clearest language. Indeed, even MCC’s contribution obligations were small compared to those of MLW. On MGP’s construction of cl 5.8, however, MCC gave its land as security for the performance of MLW’s obligations under the Deed as well as for the performance of its own much smaller obligation. If MCC is taken to have guaranteed the obligations of MLW (and vice versa), there is striking unevenness in the arrangement. This is even more pronounced if MGP is taken to have guaranteed the obligations of the Developers.

I have therefore concluded that MGP did not guarantee the performance of MLW’s and MCC’s obligations under the Deed and did not give its cl 5.8 land as security for the performance of those obligations. It held no equitable lien over the Acquired Land by reason of the Deed.

The authorities to which MGP referred do not lead to any different conclusion.

In Pico Holdings Inc v Wave Vistas Pty Ltd,[36] the High Court held that an equitable mortgage had been created by entry into a specifically enforceable contract to deposit title deeds with a lender. MGP argued that its position was analogous to the position in Pico, submitting that an equitable charge was created by entry into a specifically enforceable contract – the Deed – to provide MGP’s cl 5.8 titles to secure the performance of the Developers’ obligations. However, in Pico, two loans were documented in two secured promissory notes. The loans were made. Security was given in writing, then further or substitute security was promised in the course of an uncontested conversation in which the first respondent promised to provide the title deeds to a particular property. This conversation was reproduced in a letter confirming that ‘additional substitute collateral’ would be provided for the extension of the loan in the form of the deed for the property. The lender instituted proceedings against the borrower for the recovery of the loan and obtained judgment in this Court. It then instituted proceedings against the first respondent in the Supreme Court of Queensland claiming an equitable mortgage, which the High Court found to have been created.
[36](2005) 214 ALR 392; [2005] HCA 13.

Pico is distinguishable from the present case in that there were loans creating indebtedness (in respect of which judgment was entered) and an express promise to provide security for that indebtedness.

In Re Molton Finance,[37] a firm of stockbrokers lent money to a company. In order to secure repayment, the company gave to the stockbrokers sub-charges on properties and deposited deeds and documents with them on the terms of a memorandum which said it was ‘to the intent that the same may be equitably charged with the repayment’ of the monies borrowed. The English Court of Appeal recognised that an equitable mortgage or charge was created by the deposit of the title deeds. In that case, there was a loan and an intention, unambiguously expressed in writing, to provide security for the repayment of the loan.
[37][1965] 1 Ch 325.

Likewise, in Lavin v Toppi,[38] there was an express guarantee of a loan from a company to a bank. The guarantee was given jointly and severally by two parties. The question was whether the surety that paid the creditor a disproportionate amount of the guaranteed debt was entitled to recover contribution from the co-surety in circumstances where the creditor had given the co-surety a covenant not to sue for payment of the guaranteed debt.
[38](2015) 316 ALR 366.

In Paul & Paul Pty Ltd v Shacklock,[39] the respondents sought possession and sale of a Porsche following the non-repayment of a $50,000 loan, arguing that a charge over the Porsche secured the obligation to repay the loan. Justice Dixon determined that a charge over the Porsche had been created by the words, ‘I hereby charge all my interest in [the Porsche]’. The Porsche was charged with the debt referred to in the other paragraphs of the document (being the only debt mentioned in the agreement). The words of the loan agreement expressly created a charge over the Porsche.
[39][2014] VSC 407.

In Murphy v Wright (No 2),[40] there was a written guarantee of a loan providing that on default by the borrowers, the lender was entitled to attach the debt to any of the assets of the guarantor and that the lender might register a caveat as against any property registered in the name of the guarantor. The court held that as a result of lodging a caveat, the lender had an equitable charge over the relevant property of the guarantor as security for the debt. A power over property conferred by its owner, when exercised by the donee, was found to create a specific security over that property. The action of the lender in lodging a caveat over the property operated as an exercise of its option to attach its debt to the subject property and created an equitable charge over the property. Once again, there was a clear debt and an intention to guarantee its repayment.
[40][1992] NSWCA 168.

In none of these cases was there a question as to whether there was an indebtedness in the first place or an intention to guarantee the indebtedness.

As a final matter, I note that there were special provisions in the Act to provide for the creation of charges over land in respect of monies payable under s 173 agreements. Section 175 of the Act provided for conditions in s 173 agreements for the deposit of a sum of money which would be forfeited if the owner failed to carry out the agreement to the satisfaction of the responsible authority and for the provision of security. Section 175(4) provided for a charge over land in respect of money payable under s 175. The parties to the Deed evidently chose not to avail themselves of this facility. According to MGP, they relied instead on provisions in the Deed that did not expressly provide for any kind of guarantee or any kind of security to be given.

Having regard to the terms of the Deed as whole, I consider it to be unlikely that MGP and each of the Developers intended by cl 5.8 to guarantee the performance by the others of their obligations under the Deed and to give their land as security for that performance.

Was there an interest arising from any right to enforce the Deed?

MGP submits that it had a number of rights under the Deed that gave it an ‘interest’ in the Acquired Land. In particular, it says it had the power to:

(a) have the Developers specifically perform their obligation to carry out the Works and, in the alternative, to pay the development contributions to fund the Works on the Acquired Land; and

(b) have the Council specifically perform its obligation to use the development contributions to fund the Works on the Acquired Land.

MGP also refers to a variety of other (interrelated or overlapping) powers that it enjoyed under the Deed, including:

(a) a right or power under the Deed and by reason of s 182 of the Act and its right to marshal the securities in relation to the Developers’ titles, to require the Council to record the Deed on the titles to the cl 5.8 land, including Acquired Land;

(b) a right or power to have the record of the Deed removed from the titles of the cl 5.8 land, including the Acquired Land, which was contingent on the Developers meeting their obligations;

(c) a right or power under cl 12.3 to require the Developers to ensure that subsequent owners of the cl 5.8 land, including the Acquired Land, became rateably liable for development contributions.

I have already rejected the proposition that MGP guaranteed the performance of the Developers’ obligations under the Deed by giving its cl 5.8 land as security. I have also rejected the proposition that cl 12.3 had the substantive operation contended for by MGP. As a consequence, I do not accept that MGP enjoyed the rights and powers that it claims as a result of charging its land in favour of the Council to secure the obligations of MLW and MCC.

It remains to consider whether MGP had interest in the Acquired Land resulting from any right to obtain specific performance of the obligations in the Deed – in other words, to require the Works to be carried out.

The fundamental complaint made by MGP is that because of the compulsory acquisition of the Acquired Land, the Middle Ring Road could not be constructed with the four signalised crossings or intersections that appear on the OD Plan. Its claim that it has a specifically enforceable right giving rise to an interest in the Acquired Land is based on its asserted power under the Deed to require the construction of the Middle Ring Road as described in Schedule B.

There is a real question as to whether a court would order specific performance of the obligations in the Deed if damages were available (particularly in the light of the dispute resolution clause in the Deed and the availability of an arbitral award). I consider to be fanciful the proposition that a court would order a public authority to construct a relatively important public road simply on the basis of an agreement with a local landowner. Middle Ring Road was contemplated to be an arterial road extending well beyond the boundary of ML East, and its planning and construction would inevitably raise wider transport and urban planning issues. In my view, MGP, as a party to the Deed, would be left to pursue its rights under the dispute resolution clause and/or any remedy that it had in damages for breach of contract.

However, it is unnecessary to decide whether the Deed would be specifically enforced by a court, as there is an anterior question, and that is whether there is any relevant obligation affecting the Acquired Land that is capable of being specifically enforced by MGP.

As discussed, the Deed provides for MLW and MCC to make development contributions in accordance with Schedule A. They can make the contribution in the form of payment of the value specified in Schedule A or, with the consent of the Council, in the form of works in kind at a cost equal to that value and ‘to the satisfaction of Council’ or as a combination of payments and works in kind that together equal the value in Schedule A. Before giving its consent to works in kind, the Council may request the Developers, among other things, to define the works in kind and specify the value that they consider should be allowed for them.

The Deed therefore contemplates that the Developers may propose and the Council may agree to the provision of works other than the Works specified in Schedule B.

Moreover, the contributions schedule in Schedule A does not require contributions to be made by any particular date or at all. Contributions must be made ‘prior to’ the approval of plans of subdivision for designated numbers of lots. It is therefore a matter for the Developers to determine the timing of the contributions based on their readiness and preparedness to develop the next stage of ML East. They may choose not to proceed with the development at all, in which case no contributions will be required.

The Deed gives the Developers and the Council flexibility in relation to the timing and amount of contributions generally: the type and amounts of contribution may be varied in accordance with cl 1.2; contributions may be varied or deferred in accordance with cls 3.4 and 3.1; and there may be adjustments to contributions required based on changes to the net developable area. Furthermore, cl 5 permits MLW to request the crediting of the value of some or all of the completed works to one or more of the contributions required for a stage.

The construction of the Works is anticipated by cl 4.2, which provides that if the Developers elect to make the Required Development Contribution for any stage by payment of the value in Schedule A, ‘Council must use the money provided to meet its obligations under clause 4.3 below’. The obligation imposed on the Council is an obligation to use payments received from the Developers in a particular way, but this obligation is predicated both on an election by the Developers to make a payment rather than provide works in kind and on the receipt by the Council of a payment of the requisite value.

Clause 4.3.1 requires an Arterial Network Contribution received by the Council to be used to carry out the Works. However, Schedule B contains four different ‘Works’. The Deed does not require the Council to use payments received to carry out the Works in any particular order (or, indeed, within any particular timeframe).

Furthermore, the location of the Works described as ‘Construction of the Middle Ring Road’ in Schedule B is imprecise. The OD Plan is in the form of a sketch. Although the Middle Ring Road as shown on the OD Plan appears to be in the vicinity of Armstrong Road and the corridor land, it is unclear whether, and if so, to what extent, the proposed location of the Middle Ring Road in fact coincides with the Acquired Land.

In any event, I do not consider that the Deed conferred rights on MGP enabling it to obtain orders from the Court to require either the Developers or the Council to construct or cause the construction of the Middle Ring Road with its four signalised intersections as shown on the OD Plan on land that was or formed part of the Acquired Land.

In my view, MGP had no power under the Deed to require the Developers to make the Required Development Contributions and, even if the Required Development Contributions were made by the Developers, it had no power to require the Council to apply the Contributions to the construction of the Middle Ring Road. In addition, even if MGP did have power under the Deed to require the Council to apply the Contributions to the construction of the Middle Ring Road, that power did not extend to requiring its construction on the Acquired Land.

If I am wrong and the Deed did confer on MGP the right to require the Council or the Developers to construct the Middle Ring Road on the Acquired Land so as to give it an interest in the Acquired Land, the Deed would confer upon MGP the same ‘interest’ for the purposes of the LAC Act in the land upon which the other Works were to be carried out, including land under and adjacent to Ballan Road and Greens Road that did not belong to any of the parties to the Deed. This seems to me to be absurd.

I have therefore concluded that MGP did not have an interest in the Acquired Land as a result of any right or power it may have had to enforce the terms of the Deed. The Deed did not give MGP a right, power or privilege in, over, affecting or in connection with the Acquired Land.

Answers to separate questions

The answers to the separate questions in paragraph 18 above are therefore as follows:

(a) No.

(b) The question does not arise.

(c) No.

(d) The question does not arise.

(e) No.

(f) The question does not arise.

[2016] VSC 187

29 April 2016