Tamworth Regional Council v Hanson

[2016] NSWSC 1334

Supreme Court

New South Wales

Medium Neutral Citation:	Tamworth Regional Council v Hanson [2016] NSWSC 1334
Hearing dates:	24 March 2016
Decision date:	21 September 2016
Jurisdiction:	Common Law
Before:	Button J
Decision:	(1) Appeal upheld. (2) The order of 16 October 2015 of Stapleton LCM in the Local Court giving judgment in favour of the defendants, G T Hanson and C C Hanson, is quashed. (3) Judgment for the plaintiff, Tamworth Regional Council, in a sum to be determined. (4) The order of 16 October 2015 of Stapleton LCM in the Local Court for indemnity costs against the plaintiff, Tamworth Regional Council, is quashed. (5) The defendants, G T Hanson and C C Hanson, must pay the costs of the proceedings before Stapleton LCM in the Local Court on the ordinary basis. (6) The defendants, G T Hanson and C C Hanson, must pay the costs of the proceedings before me on the ordinary basis. (7) Quantum is reserved pending receipt of calculations from the parties giving effect to [93] of my judgment.
Catchwords:	CIVIL – construction of a Deed – whether clause within Deed can act as a bar to proceedings – construction of undefined term within Deed – whether Council empowered to waive rates previously assessed
Legislation Cited:	Civil Procedure Act 2005 (NSW) s 60 Local Court Act 2007 (NSW), ss 39, 39(1), 40(1) Local Government Act 1993 (NSW), ss 21, 220, 220(1)
Cases Cited:	Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337; [1982] HCA 24 Fitzgerald v Masters (1956) 95 CLR 420; [1956] HCA 53 Jones v Bradley (No 2) [2003] NSWCA 258 Peregrine Mineral Sands Pty Ltd v Wentworth Shire Council [2014] NSWCA 429 SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 Watson v Phipps (1985) 63 ALR 321; (1985) 60 ALJR 1
Category:	Principal judgment
Parties:	Tamworth Regional Council (Plaintiff) G T Hanson (First Defendant) C C Hanson (Second Defendant)
Representation:	Counsel: S Bell (Plaintiff) B D Kaplan (Defendants)   Solicitors: SR Law (Plaintiff) Harris Wheeler Lawyers (Defendants)
File Number(s):	2015/332780
Decision under appeal	Court or tribunal: Local Court of New South Wales Jurisdiction: Civil Date of Decision: 4 September 2015, 16 October 2015 Before: Stapleton LCM File Number(s): 2014/192839

Judgment

Introduction

1. This is an appeal brought by Tamworth Regional Council against a decision of Stapleton LCM in the Local Court of 16 October 2015 (the hearing was on 27 July 2015, judgment was provided on 4 September 2015, and, after further submissions from the parties, orders were made on 16 October 2015). The defendants to the appeal are Mr G T Hanson and Mrs C C Hanson. For ease of comprehension, I shall refer to the plaintiff as the Council and the defendants collectively as the Hansons.

2. The Local Court proceedings concerned a claim by the Council for unpaid rates from the Hansons. In those proceedings, the Hansons successfully submitted that a Settlement and Release Deed dated 5 April 2013 (the Deed) absolved them from paying the rates, and Stapleton LCM ordered indemnity costs against the Council.

3. The Deed was made in settlement of previous District Court proceedings between the parties. In those proceedings, the Hansons were the plaintiffs in a claim for negligence (and originally nuisance) concerning the construction of a stormwater drain by the Council. The proceedings were dismissed by her Honour Judge Sidis in a judgment of 7 March 2012. That decision was appealed by the Hansons to the New South Wales Court of Appeal. Before the appeal was heard, the matter was settled by entry into the Deed and payment of a settlement sum of $400,000 by the Council to the Hansons.

4. An unsuccessful party in the Local Court in its General Division can appeal as of right to the Supreme Court of New South Wales on a question of law, pursuant to s 39(1) of the Local Court Act 2007 (NSW). The relevant section is as follows:

39 Appeals as of right

(1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court may appeal to the Supreme Court, but only on a question of law.

5. A party to Local Court proceedings can also appeal to the Supreme Court on a question of mixed fact and law with leave of the Supreme Court, pursuant to s 40(1) of the Local Court Act. The section is as follows:

40 Appeals requiring leave

(1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court on a ground that involves a question of mixed law and fact may appeal to the Supreme Court but only by leave of the Supreme Court.

6. In a nutshell, the primary submission of the Council on the appeal before me was that her Honour misconstrued the Deed, thereby committing an error of law, and that in truth it should be read as not prohibiting the Council from suing the Hansons for the unpaid rates.

Background

7. I turn to discuss the background of the matter in more detail, and in a generally chronological format.

8. In 1975, a subdivision of land was approved, and registered early the next year. The land included Yarmouth Parade, Tamworth, and the land that was to be subsequently purchased by the Hansons. At approximately the same time as the subdivision, there was construction of a stormwater pipe, roads and infrastructure around the subdivided area. These works were vested in, and became controlled by, the Council.

9. In 1976, the Hansons purchased the land on Yarmouth Parade that formed the subject matter of their longstanding dispute with the Council.

10. In 1977, the Hansons constructed a house upon the land, which construction was approved by the Council.

11. From 1977, the Hansons experienced structural damage to their house and property which was alleged to be a result of uncontrolled fill having been placed in a nearby gully during the period of subdivision, and also as a result of problems with the stormwater pipe.

12. On 2 October 2009, the Hansons filed a statement of claim against the Council in the District Court of New South Wales. The claim was founded upon the construction of the stormwater pipe, the placement of uncontrolled and uncompacted fill from the construction on the property of the Hansons, and the adverse effect of those actions on their house. The relief sought included various orders relating to the stormwater pipe, and damages in the sum of $750,000 (plus interest and costs).

13. The hearing in the District Court commenced on 28 November 2011. On 7 March 2012, Judge Sidis found in favour of the Council.

14. The Hansons filed a notice of appeal to the New South Wales Court of Appeal on 29 March 2012. Prior to the hearing of the appeal, an agreement was reached between the parties.

15. On 5 April 2013, the Hansons and the Council entered into the Deed in respect of the District Court proceedings and subsequent appeal. As I have said, construction of that Deed is central to the proceedings before me.

16. On 27 June 2014, the Council filed a statement of claim in the Local Court for unpaid rates and charges in the amount of $24,016.92 (including interest). It was agreed between the parties that $361.32 of this amount was in respect of the period after the Deed was executed, and that amount was duly paid by the Hansons.

17. On 28 January 2015, the Hansons filed a defence to that claim in the Local Court. In short, they argued that they were not liable for the rates and payments charged because the Deed, properly construed, released them from that obligation.

18. The hearing of the matter in the Local Court was before Stapleton LCM on 27 July 2015. On 4 September 2015, her Honour gave reasons for judgment in favour of the Hansons. On 16 October 2015, Stapleton LCM delivered an ex tempore judgment in respect of final orders in favour of the Hansons, and also gave reasons for ordering indemnity costs against the Council.

19. The Council filed a summons commencing this appeal on 12 November 2015, and filed an amended summons on 8 December 2015. The Hansons filed a notice of contention on 20 November 2015.

The Deed

20. The Deed contains the following salient provisions, which are replicated verbatim:

RECITALS

A. The Appellants commenced proceedings against the Respondent by way of statement of claim in the District Court of NSW at Newcastle (case number 205/09) on or about 2 October 2009 (‘the proceedings’).

B. The proceedings progressed to a full hearing and a judgment of Sidis DCJ for a verdict in favour of the Respondent on or about 7 March 2012 (‘the decision’).

C. On or about 29 March 2012 the Appellants filed a Notice of Appeal in respect of the decision (‘the appeal’).

D. The parties have agreed to settle the appeal on the terms set out in this document.

THE PARTIES AGREE:

1. DEFINITIONS AND INTEPRETATION

1.1 Definitions in the Dictionary

A term or expression starting with a capital letter. [sic]

(a) Which is defined in the Dictionary in Schedule 1 (‘Dictionary’), has the meaning given to it in the Dictionary.

…

3. MUTUAL RELEASE

In considerations [sic] of the terms of this document the Appellants and Respondent hereby release and discharge each other from all claims which it/they have or which but for this document could, would or might at any time hereafter have or have had against the [sic] each other (in relation to the Respondent including it’s directors, officers, employees or agents) arising out of the proceedings and the appeal;

4. BAR TO PROCEEDINGS

This document may be pleaded as a full and complete defence by any of the parties to any proceedings or claims arising out of the facts, matters and circumstances referred to in the Dispute.

…

SCHEDULE

DICTIONARY

1. DICTIONARY

In this deed:

…

Dispute means all liabilities, claims, demands, suits, causes of action, damages, debts, verdicts and judgments whatsoever whether at law or in equity or under any statute arising out of or in connection with the Project.

21. No definition of the term “Project” appears in the Deed, whether in the Dictionary or elsewhere. Nor is that word used on any other occasion in the document.

Judgment in the Local Court

22. As I have said, her Honour provided reasons for her judgment in favour of the Hansons on 4 September 2015. Her Honour identified the main issues in dispute at [3] as the following: whether, on the proper construction of the Deed, the Council had released and discharged the Hansons from the claim brought against them up to the date of the Deed (that being 5 April 2013); whether the Deed operated as a full and complete defence to the claim; and whether the Council was estopped from part of its claims up to the date of the District Court judgment (that being 7 March 2012).

23. Stapleton LCM discussed principles relevant to the construction of a Deed: at [5]-[7]. Her Honour determined that the purpose of the Deed was to resolve the litigation between the parties: at [15]. Her Honour noted that there had been evidence regarding 3 years of unpaid rates and charges in the proceedings in the District Court, but found that that evidence had been adduced for the purpose of context, and determined that it did not mean that a claim for unpaid rates was “arising from” proceedings. Consequently, her Honour rejected the submission of the Hansons that cl 3 of the Deed released them from the claim: at [22]-[23].

24. However, when interpreting the term “Dispute” in cl 4, Stapleton LCM determined that the use of the term “the Project” in the definition was an obvious mistake. Her Honour substituted the term “the Property” at [32], which encompassed both the land and the dwelling. As a result of that substitution and interpretation of the clause, her Honour found that cl 4 of the Deed could be argued by the Hansons as a full and complete defence at [36], in that a claim for arrears for rates is a proceeding arising out of the facts, matters and circumstances of the dispute between the parties in connection with the property.

25. In short, her Honour accepted the submission of the Hansons that the Deed disentitled the Council from any unpaid rates owing before the date of entry into the Deed.

26. Her Honour then turned to an ancillary submission of the Council. It was submitted that it did not have the power to release the Hansons from paying rates pursuant to the relevant statute, the Local Government Act 1993 (NSW).

27. Her Honour found in favour of the Hansons in that regard as well. In the judgment at [40], her Honour referred to s 220 of the Local Government Act which her Honour understood to state that “Council is a body corporate”. Her Honour found that that meant that the Council was empowered to do all the things that a body corporate could do. Her Honour said at [40] that the Council did not cite any authority to support the proposition that, in settling litigation, a Council cannot resolve an existing dispute about rates or charges.

28. In short, her Honour was not persuaded that the entry into cl 4 of the Deed was ultra vires the powers of the Council conferred by statute: at [41].

29. Finally, her Honour rejected at [48] an argument put forward by the Hansons that the Council was estopped from pursuing their claim for unpaid rates for the period up to 7 March 2012, the date of judgment in the District Court proceedings. That submission was made on the basis that, not having mounted a cross-claim with regard to rates in the proceedings about the fill and the stormwater drain, the Council should not thereafter be entitled to pursue those rates. Because counsel for the Hansons specifically disavowed any reliance upon that proposition before me, however, I shall not discuss it further.

30. In the second judgment of 16 October 2015, orders were made that formally reflected the determination in favour of the Hansons. The Council was also ordered to pay the costs of the Hansons. Finally, her Honour also ordered the Council to pay those costs on an indemnity basis after 27 January 2015. That was because her Honour found that it was unreasonable for the Council to have rejected an offer that the Hansons had made some time before to pay 50% of the amount claimed by the Council.

Submissions of the appellant

31. Counsel for the Council made the following submissions before me.

Construction of the Deed

32. First, he impugned the approach taken by Stapleton LCM, whereby her Honour interpreted the term “Project”, which was contained in the definition of the term “Dispute”, as meaning “Property”. He submitted that it would be more appropriate to interpret the term “Project” as referring to the stormwater drain works or the issue about subsidence. He noted that neither of these were explicitly mentioned within the Deed, but submitted that they were mentioned in other documentation relating to the proceedings and which formed the subject matter of the previous dispute. He submitted that, once the appropriate substitution was made for the word “Project”, encompassing either the stormwater drain works or the subsidence issue, it became clear that the Hansons could not rely on the terms of the Deed in the current proceedings with regard to unpaid rates.

33. Secondly, and in the alternative, he submitted that, if the phrase “the Project” was indeed a mistake, it should be construed as meaning “the proceedings”. That is because the settlement of the proceedings in truth forms the subject matter of the entirety of the Deed. He submitted that, taking this second approach, the Hansons could not rely on the terms of a Deed settling proceedings about negligent Council works in order to avoid paying Council rates.

34. Thirdly, he submitted that, speaking generally, construction of a particular provision of the Deed requires interpreting the document as a whole, and that cll 3 and 4 could not “stand alone”. He endorsed the finding of her Honour that cl 3 of the Deed did not release the Hansons from a claim for payment of rates or charges, and submitted that cl 4 could not be independently used as a defence to a claim that was not encompassed within the subject matter of cl 3. In a nutshell, he submitted that because the claim for rates was not encompassed within the subject matter of cl 3, and the Deed did not provide a release as to rates and charges, cl 4 of the Deed could not be used as a bar to proceedings in relation to a subject matter that was not dealt with by cl 3.

35. Fourthly, turning to legal principle with regard to the appeal-creating provision, he submitted that the High Court in Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337; [1982] HCA 24 stated that one cannot characterise the meaning of a word in a clause as a question of fact; rather, the whole meaning of a clause within a contract, deed or statutory instrument is a matter of construction. Construction of a deed is a legal function. Therefore, he submitted, the alleged error made by Stapleton LCM in construing the Deed was a question of law that founded a right of appeal, or, at the least, a question of mixed fact and law, with regard to which leave should be granted to his client.

36. Fifthly, he submitted more fundamentally that the dispute, and the proceedings arising from it, that were being settled by the Deed did not involve the question of rates. He noted that the term “rates” might have been included in the transcript of the District Court proceedings as a matter of evidence, but it was neither in the statement of claim, the defence, the judgment of the District Court, nor the grounds of appeal. He submitted that it would either need to be the subject matter, or close to the subject matter, of the dispute for it to be “arising out of the facts, matters and circumstances referred to in the Dispute” (to use the words contained in the Deed). In short, he submitted that the question of unpaid rates did not form part of the subject matter of the proceedings. Accordingly, if the dispute meant the proceedings, then the Deed did not prevent the Council successfully suing for its rates.

Power of the Council

37. Sixthly, he repeated the ancillary submission made at first instance that the Council did not have the power to enter into the Deed, if (contrary to his primary position) its true reading is that it prohibited the Council from suing for its rates. He referred to s 21 of the Local Government Act, which was, at the relevant time, as follows:

21 Functions under this Act

A council has the functions conferred or imposed on it by or under this Act.

38. He submitted that the absence of any provision in the statute providing the power to the Council to fail to require rates to be paid, or to waive that requirement, should be interpreted to mean that the Council does not have that power, and for it to purport to do so would be ultra vires.

39. He drew a distinction between any provisions that refer to the ability of Council to write off rates and this situation, in that he submitted that the term “write off” is an accounting term that means that something has become a bad debt that is not going to be enforced. But that phrase, he submitted, does not refer to a power to waive the requirement to pay.

40. Counsel relied on the case of Peregrine Mineral Sands Pty Ltd v Wentworth Shire Council [2014] NSWCA 429 to demonstrate that waiving the requirement to pay rates by way of the Deed would be an action that would be ultra vires the powers conferred by statute.

41. Counsel submitted that the Council’s lack of power to waive the requirement to pay rates had two consequences.

42. First, construction of the Deed should take into account the fact that Council did not have the power to waive the requirement to pay rates. In other words, he submitted that, in determining the objective intention of the parties as evidenced by the Deed, I would be slow to infer that it shows an intention on the part of the Council to bind itself in a way that, in truth, it was not empowered to do.

43. Secondly, he submitted that, if construed in favour of the Hansons, the Deed would be unenforceable, because the Council did not have power to enter into it, and therefore it could provide no protection to the Hansons in the proceedings about rates.

Indemnity costs

44. Seventhly, and finally, he made submissions in relation to the order of Stapleton LCM for indemnity costs. His primary submission was that if the appeal were upheld on the question of construction of the Deed, or the power of the Council to enter into the Deed, there could be no question of indemnity costs, and they must be quashed. But he further submitted that, even if his substantive submissions were not accepted, the Council should not be required to pay any costs on an indemnity basis. That was said to be for two reasons.

45. First, he submitted that Stapleton LCM incorrectly interpreted and applied s 60 of the Civil Procedure Act 2005 (NSW). He submitted that her Honour incorrectly interpreted that provision as imposing an obligation on the Council to accept the offer of compromise in question.

46. Secondly, he submitted that the offer to pay half the amount of the claim was made prior to a defence being filed, with the effect that the Council did not have the information it required to assess the offer, or understand the basis upon which it was made. Further, the Council was not given reasons by the Hansons when the offer was made, but simply provided with a “dollar figure” that amounted to half the amount claimed. Counsel referred to the case of SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323, as discussed in Jones v Bradley (No 2) [2003] NSWCA 258, in order to support the proposition that more than simply financial considerations must be taken into account when considering an offer of compromise.

47. In short, he submitted that it was not open to her Honour to find that it was unreasonable for the Council to reject the offer when it was made.

Submissions of the respondent

48. Counsel for the respondent made the following submissions before me.

Construction of the Deed

49. First, he submitted that cl 3 (the mutual release clause) and cl 4 (the plea in bar clause) were intended to do different work within the Deed, and therefore they have a different scope. That interpretation was based on the different language used in the clauses, distinguishing them from other examples of construction in which the subject matter of the plea in bar clause is identical to the sphere of operation of the mutual release clause.

50. He also submitted that I would need to read cl 4 in the context of the entire Deed, including its recitals, but that if there were a discord between cl 4 and the recitals, then the former must prevail over the latter.

51. Secondly, he submitted that the meaning given to a word that is used in its ordinary sense is a question of fact only, and would therefore not enliven s 39 of the Local Court Act. He submitted that, at the most, the issue for my determination could be characterised as a question of mixed fact and law. He submitted that if the question of construction was indeed one of mixed fact and law, then the Hansons would only need to demonstrate that the conclusion to which her Honour came in interpreting the word “Project” was a reasonable one. And in any event, he submitted that the approach of her Honour was correct: the term “Project” did refer to the property, that being the land and home, and the question was appropriately determined based on the evidence placed before her Honour.

52. Thirdly, he conceded that if there was only one conclusion open to her Honour, and she reached a different conclusion, then that would give rise to a question of law and it would be appropriate for me to intervene. But he submitted that that was not the case here: there was no single conclusion open to her Honour; so much is demonstrated by the fact that even the Council had proposed alternative meanings for the crucial term.

53. Fourthly, he submitted that the process undertaken by her Honour in substituting the word “property” for the word “Project” was the correction of a clerical error. He submitted that that was not a process of rectification, which he defined as the correction of a mistake as to the legal effect of a written agreement, and said that it would not have been within the power of her Honour to rectify the Deed by way of an equitable remedy.

54. Fifthly, he submitted that, if I were to characterise the question of construction as a question of mixed fact and law, then I should consider additional factors when determining whether to grant leave: there is no question of principle raised; the appeal does not raise a question of public importance; and the amount in dispute is $23,000 (which the costs of the proceedings have already exceeded).

55. Sixthly, if I were to find that the words “dispute” and “Project” did mean “the proceedings”, he relied on correspondence that was placed before the judge in the District Court proceedings to the effect that the Hansons would not pay rates and charges until they were compensated by the Council. He relied on the characterisation of the dispute by her Honour in the first sentence of [31] of the judgment. The entirety of that paragraph is as follows:

[31] The dispute between the parties from 2001 was whether in the circumstances of the damage to their land and home the Hansons were obliged to pay rates, whether they were entitled to a refund of rates actually paid and whether the Hansons were entitled to compensation for the loss they had suffered in relation to their land and home. In the District Court proceedings the parties litigated the part of the dispute relating to the council’s responsibility for the damage to the Hansons’ land and home.

56. Counsel submitted that the “dispute” was much broader than the subject matter of the proceedings, and that I would find that it did indeed encompass the question of the payment of rates.

57. Seventhly, he submitted that it would of course be unnecessary for me to turn to his notice of contention if I were satisfied, on the basis of his analysis of cl 4, that I should dismiss the appeal. But he submitted that, if I do turn to the issue, her Honour was incorrect in her interpretation that cl 3 did not release both parties in relation to these proceedings. He submitted that cl 3 and cl 4 of the Deed used different language, and were intended to deal with different subject matter. For convenience, cl 3 of the Deed is repeated in its entirety below:

3. MUTUAL RELEASE

In considerations [sic] of the terms of this document the Appellants and Respondent hereby release and discharge each other from all claims which it/they have or which but for this document could, would or might at any time hereafter have or have had against the [sic] each other (in relation to the Respondent including it’s directors, officers, employees or agents) arising out of the proceedings and the appeal;

58. He submitted that the use of the term “the proceedings” in cl 3 should not be interpreted as comprising only the causes of action raised in the pleadings before Judge Sidis. He submitted that if that were the case there would be no utility in the words “or which but for this document could, would or might at any time hereafter have or have had against the [sic] each other (in relation to the Respondent including it’s directors, officers, employees or agents)”. He submitted that the words of cl 3 of the Deed effect the release of two categories of claims: the first being all causes of action that arose in the proceedings; and the second being future causes of action. He submitted that the wording of the clause specifically contemplated future causes of action that were not raised in the pleadings.

59. In support of that analysis, he submitted that the discontinued nuisance claim of the Hansons in the District Court would not be captured by the term “proceedings” on a strict interpretation either; his contention was that that can hardly be correct.

60. Eighthly, he submitted that, even if (contrary to his primary position) the term “Project” were to be interpreted as meaning “proceedings”, then I would be satisfied that the claim for unpaid rates “arose from” the proceedings, in light of the breadth of that phrase.

Power of the Council

61. Ninthly, he submitted that, when considering the submission of Council that it did not have the power to release the Hansons from payment of rates, I would look to the Local Government Act, and in particular s 220(1).

62. He submitted that I would find that the Council has and had the power to enter into contracts, and that there is nothing in the Local Government Act to indicate that the Council was fettered in its power to enter the Deed upon the construction posited by the Hansons. He distinguished Peregrine Mineral Sands Pty Ltd v Wentworth Shire Council on the basis that that case dealt with a fetter on future discretion of a Council, and not with the function of settling disputes from the past.

Costs

63. Tenthly, he indicated that if the Hansons were to lose on the appeal on the basis that the Council had acted ultra vires, he would like to make further submissions in relation to costs in the court below, on the basis that the issue was not properly notified and had surprised counsel appearing for the Hansons in the court below.

64. Eleventhly and finally, he submitted that the indemnity costs order should not be altered. That was because a bona fide offer made by the Hansons was rejected by the Council, and thereafter the Hansons were successful at first instance.

Determination

Construction of the Deed

65. I respectfully consider that the learned Magistrate committed an error of law in construing this Deed. That error operated adversely to the Council. I also reject the notice of contention of the Hansons. It follows that I shall allow the appeal, reverse the order giving judgment for the Hansons in the Local Court, and adjust the order for costs made in the Local Court as well.

66. I come to the view that there has been an error of law by way of the following process of analysis.

67. First, I consider that the reference to “the Project” is an obvious mistake in the Deed. To that extent, I respectfully agree with her Honour. I come to that view for the following reasons.

68. First, the document is, regrettably, riddled with typographical and punctuative errors; that supports the proposition that, reading the document as a whole, the reference under consideration is also an error.

69. Secondly, the word “Project” appears once only in the document. If that word were used repeatedly, it would be far more difficult to characterise it as unintentional.

70. Thirdly, although the word “Project” is capitalised, one finds no definition of it in the dictionary to the Deed. That oddity supports the proposition that its inclusion in the Deed is an error.

71. Fourthly, the objective context surrounding the Deed, including the long history of the matter, supports the proposition that the reference to “the Project” was an erroneous one. After all, there was never any sort of joint venture or property development; rather, there was a sub-division and purchase of a parcel of land many decades ago, Council works, and a long-standing dispute arising from the alleged deleterious effects of those works on the property and the structures upon it.

72. In short, I am firmly of the opinion that the reference to “the Project” is a mistake. I repeat: her Honour and I are ad idem in that regard.

73. Secondly, that characterisation of mine gives rise to the principles discussed in Fitzgerald v Masters (1956) 95 CLR 420; [1956] HCA 53 and Watson v Phipps (1985) 63 ALR 321; (1985) 60 ALJR 1. In summary, it was said in the former case that, when confronted with such a mistake, courts are perfectly entitled to supply, omit or correct words in an instrument, even if the result may be directly contrary to the words actually used in the instrument being construed.

74. Thirdly, I cannot accept that the use of the phrase “Project” was a mistaken reference to the property. Rather, I am well-satisfied that the dispute to which the Deed was referring was that in and arising from the proceedings. That is so for the following reasons.

75. First, the subject matter of the document as a whole is unquestionably the settlement of the proceedings in the form of the appeal lodged by the Hansons against the judgment obtained against them by the Council in the District Court.

76. Secondly, the recitals in the Deed of themselves powerfully set the scene for what comes after in the body of the Deed. And yet the recitals say nothing of the property of the Hansons; rather, they repeatedly refer to the litigious dispute that had developed between the Council and the Hansons.

77. Thirdly, the objective context – that is, the entry of judgment in the District Court in favour of the Council and against the Hansons; the lodging of the appeal against that judgment by the Hansons; and the subsequent negotiations between the parties – powerfully supports the proposition that the subject matter of the Deed was the proceedings, not the property that the Hansons had possessed for many years.

78. In short, I construe the reference to the dispute in cl 4 of the Deed, itself defined as being “arising out of or in connection with the Project”, as in truth being a reference to “the proceedings”.

79. Fourthly, I reject the submission of counsel for the Hansons that cl 3 and cl 4 of the Deed are to be read disjunctively. To the contrary, I consider that they are two sides of the same coin: cl 3 has the effect that the parties mutually release each other from claims, and cl 4 bars further proceedings arising from the pre-existing dispute encapsulated in the proceedings. Contrary to the submission of counsel for the Hansons, I consider that these two contiguous clauses in a short Deed must be read conjunctively. It follows that I do not accept that construction of the relationship between cl 3 and cl 4 aids the case for the Hansons by way of the notice of contention or otherwise.

80. Fifthly, as I have said, I consider that the general subject matter of the Deed was the proceedings, and that the particular meaning of the phrase “the Project”, which forms the subject matter of the dispute referred to in cl 4, is in truth the proceedings. Contrary to the ancillary position of counsel for the Hansons, I do not accept that the rates were in any sense part of the proceedings between the parties. In particular, I do not consider that the rates were a subject matter “arising out of the facts, matters and circumstances referred to in the proceedings”. That is so for the following reasons.

81. The proceedings were about damage to the property of the Hansons by way of actions of the Council. It is true that the refusal of the Hansons to pay rates – perhaps to be characterised as a de facto cross-claim or set-off – was mentioned elliptically in the proceedings in the District Court. But the question of rates was raised in neither the pleadings, nor the judgment, nor the notice of appeal. Merely because the refusal to pay rates may have been mentioned as a matter of evidence in the proceedings in the District Court by no means brings that refusal within the Deed. I repeat: the proceedings in the District Court were founded upon an assertion that there had been damage to the property of the Hansons by way of works of the Council.

82. Sixthly, accordingly, my conclusion is that the unpaid rates otherwise owed by the Hansons to the Council are not “protected” by the Deed. To my mind, the subject matter of the Deed was not, in truth, the unpaid rates. In other words, I determine the primary dispute about construction in favour of the Council, and I reject the notice of contention with regard to construction as well.

Power of the Council

83. Because I have accepted the primary argument of the Council, there is no need for me to speak at length about the ancillary position of the Council, founded upon statutory interpretation, that it was not empowered to enter into a Deed whereby it fettered itself from obtaining rates owing in the past. And of course, the following comments are obiter dicta as a result. But if that submission were determinative, I would not accept it, for the following reasons.

84. First, the case upon which the Council relied show that what is prohibited is a fettering by a Council of itself prospectively with regard to rates that may be payable in the future: see Peregrine Mineral Sands Pty Ltd v Wentworth Shire Council at [24], [30], [152] and [175].

85. Secondly, s 220 of the Local Government Act was, at the time of entry into the Deed, as follows:

220 Legal status of a council

(1) A council is a body politic of the State with perpetual succession and the legal capacity and powers of an individual, both in and outside the State.

(2) A council is not a body corporate (including a corporation).

(3) A council does not have the status, privileges and immunities of the Crown (including the State and the Government of the State).

(4) A law of the State applies to and in respect of a council in the same way as it applies to and in respect of a body corporate (including a corporation).

[emphasis added]

86. Without delving into a deep analysis of that Act, I cannot accept that an individual does not have the legal capacity and power to settle a dispute about previously levied rates.

87. In short, if it were determinative, I would reject the ancillary submission of the Council.

Conclusion

88. In my opinion, properly construed, and whether one follows a direct or indirect path, the effect of the Deed is that the rates payable by the Hansons before the execution of the Deed are not part of its subject matter. It follows that the learned Magistrate was in error. Contrary to the submission of counsel for the Hansons, a question of construction of a contract, deed, or statutory instrument is a question of law. Accordingly, no question of leave arises. The result is that the Council should succeed on the appeal, and the judgment of the Local Court must be reversed.

89. If I am wrong in my characterisation of a question of construction as a question of law, and in fact it is a question of mixed fact and law, I would nevertheless grant leave to appeal, because I respectfully consider that the Council has established an error that should not be permitted to stand.

90. Both at first instance and before me, it was agreed between the parties that this question of construction is determinative of the claim for rates of the Council. In other words, that question having been resolved by me, there is no reason why judgment should not be entered in favour of the Council now.

Costs

91. As can be seen from the foregoing, I have not upheld the appeal on the ancillary position of the Council. It follows that I do not need to receive further submissions from counsel for the Hansons about costs.

92. It inevitably follows from the success of the appeal of the Council that the order for indemnity costs made at first instance against it must be reversed. The Council did not submit that costs at first instance should be payable on anything other than the ordinary basis. Nor did the Council make any similar submission with regard to the costs of the proceedings before me. For those reasons, I shall simply order that the Hansons must pay the costs at first instance and the costs of the proceedings before me, both on the ordinary basis.

93. Because I am not entirely confident of the precise amount in which judgment should be entered, I invite the parties to provide me with an agreed calculation in that regard, along with a draft consent order. If those documents are forthcoming, I shall make the final order in Chambers. If they are not forthcoming, I would be obliged to receive written submissions in support of the calculation of each party or no more than three pages in length; thereafter, there will need to be a very brief hearing of no more than 30 minutes at a mutually convenient time. Either way, I would be obliged to receive those documents within two weeks of today’s date.

Orders

94. I make the following orders:

1. Appeal upheld.

2. The order of 16 October 2015 of Stapleton LCM in the Local Court giving judgment in favour of the defendants, G T Hanson and C C Hanson, is quashed.

1. Judgment for the plaintiff, Tamworth Regional Council, in a sum to be determined.

2. The order of 16 October 2015 of Stapleton LCM in the Local Court for indemnity costs against the plaintiff, Tamworth Regional Council, is quashed.

3. The defendants, G T Hanson and C C Hanson, must pay the costs of the proceedings before Stapleton LCM in the Local Court on the ordinary basis.

4. The defendants, G T Hanson and C C Hanson, must pay the costs of the proceedings before me on the ordinary basis.

5. Quantum is reserved pending receipt of calculations from the parties giving effect to [93] of my judgment.

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Decision last updated: 21 September 2016