Tellamist Pty Ltd v Port Stephens Shire Council & Anor

[2005] HCATrans 365

[2005] HCATrans 365

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S489 of 2004

B e t w e e n -

TELLAMIST PTY LIMITED

Applicant

and

PORT STEPHENS SHIRE COUNCIL

First Respondent

DARACON ENGINEERING PTY LIMITED

Second Respondent

Application for special leave to appeal

GLEESON CJ
GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 27 MAY 2005, AT 10.11 AM

Copyright in the High Court of Australia

MR D.F. JACKSON, QC:   If the Court pleases, I appear with my learned friend, MR J.S. DRUMMOND, for the applicant.  (instructed by Hartmann & Associates)

MR A.J.L. BANNON, SC:  I appear with my learned friend, MR A.A. HENSKENS, for the respondent.  (instructed by Cantle Carmichael)

GLEESON CJ:   Yes, Mr Jackson.

MR JACKSON:   Your Honours, this is a case where we obtained nominal damages of $1,000 for a series of admitted trespasses which had the result that a band of trees and vegetation 10 to 25 or 30 metres wide, some of the trees being 20 to 60 years old, were completely knocked down and, as the primary judge said at page 31, paragraph 59:

The outlook changed from that of a pleasant bushland setting to a harsh and arid-like landscape.

GLEESON CJ:   What was the legal issue dividing the majority in the Court of Appeal from the minority and the trial judge?  Forget about exemplary damages.

MR JACKSON:   Yes, of course, your Honour.  The position simply seems to have been this, that the majority took the view that the method of calculation of damages was to determine the difference that would be made in the value of our property, this band of trees and vegetation having been taken away.  They said that because one of the conditions of an approval which we had involved dedication of the land for a public reserve but that people should have known, or a willing purchaser should have known, that the Council would rather use it for a drainage reserve – put a drain right through the middle of it – and that, therefore, the willing purchaser, having knowledge of all the circumstances, would value the land as having no increased value because of the trees that were there in a public reserve. 

So it turns on the concept that the willing purchaser would have found out what the Council proposed to do immediately after granting the consent on land that was – but if ultimately we went ahead with the project and dedicated the land, that the Council would then knock it down, put a drain there ‑ ‑ ‑

GLEESON CJ:   That turns on the question of the extent of the knowledge that you would, in the particular circumstances of this case, attribute to the hypothetical purchaser.

MR JACKSON:   Yes.  It is not just a factual question, your Honour, it is a legal question as well.  That is the essence of the first aspect of the case.

GLEESON CJ:   Sounds like a legal question of some particularity or related to a pretty particular circumstance.

MR JACKSON:   It arises, of course, in particular circumstances, your Honour, but it was one that was of significance because the way in which the majority went about it was to take the view that a purchaser would be fully acquainted with everything and that Spencer’s Case required that it be fully acquainted with everything, including what the Council’s actual intentions might be, whether they were legal or not, and matters of that kind.  Your Honours, I was going to go into a little more detail, if I may, but that is the essence of the case. 

Your Honours, could I just say this, that we had obtained a development consent on 7 August 1991 to divide our land into a substantial cluster housing development and two of the conditions were conditions that provided for there to be a buffer area – the conditions one can see relevantly at page 14, paragraph 23 – a substantial buffer area and a public reserve and there was to be a play area built in it.  The consent was valid for two years.  We might or might not have proceeded with that development, but a few days after it was granted the Council entered on the land, knocked down all the vegetation and began to construct a very huge drain.

GLEESON CJ:   Was that on the basis that the consent required you to transfer the land to the Council?

MR JACKSON:   It required us to dedicate the land to the Council as a public reserve. 

GLEESON CJ:   And how come it was not dedicated?

MR JACKSON:   Your Honour, we had not proceeded with the development.  We had a consent; we did not have to do it.  It was a few days after it was granted this was knocked down.  We had the option; we did not have the chance to exercise it. 

Your Honour, the purpose of the drain was to benefit an industrial development by the Council on its own land which adjoined ours and it was to benefit that development because in varying the development, or in making it, the Council had raised the level of its land.  Your Honours can see that referred to, if I can go very briefly to page 20, paragraphs 35 to 37.  Your Honours will see got the consent on 7 August 1991.  A few days later – paragraph 35 – all the trees and shrubs were knocked down;  paragraph 36, they commenced the excavation of the drain; and your Honours will see in paragraph 37 that the Council maintained until the fifth day of the trial that they had an entitlement to enter our land.

If one goes to page 25, paragraph 43, they re-entered and then, in paragraph 45 on the same page, they removed a number of seedlings we had planted there.  If one is looking at some idea of the scale of what is involved, your Honours can see it in the plan in the supplementary documents volume, tab 5.  The plan consists of two adjoining and overlapping things, but we have outlined in blue what was to be the public reserve and in yellow the drain, and there is not much left of the public reserve. 

Your Honours, the primary judge awarded compensatory damages of $365,000 – that is at page 52, paragraph 103 – and exemplary damages against the Council of $25,000.  They were reduced to nominal damages by the majority in the Court of Appeal because it was said the hypothetical purchaser would know that the Council intended to construct a drain on the public reserve which we were to dedicate and accordingly, it was said, there would be no difference in value.  Your Honours will see that at page 265, paragraphs 474 to 475. 

GUMMOW J:   You want an increase to $1.5 million, do you not?

MR JACKSON:   Yes, we do, your Honour.  That is what we do want.  Even the minority in the Court of Appeal would have given us four hundred and something thousand dollars. 

GUMMOW J:   I am just looking at page 299.

MR JACKSON:   Your Honours, could I say that it was said there would be no difference in value for the reasons set out in paragraph 474.  It was said, your Honours, in paragraph 491 at page 270:

it is not to the point –

this is based on Spencer –

whether the Council might or might not have informed the hypothetical willing purchaser of the drainage plans and its intention to remove the trees.  It is to be assumed that the Council would have told the hypothetical purchaser the truth.

But it was said in any event the hypothetical purchaser would have been aware of them for the reasons set out in paragraph 495.  Could we just note, your Honours, that the date there referred to is after the trees had been knocked down.  The conclusion arrived at is at page 276, paragraph 525.  Your Honours, in our submission, the views adopted have, with respect, an air of unreality ‑ ‑ ‑

GLEESON CJ:   Sorry, that is Justice Santow’s judgment.

MR JACKSON:   No, it is not, your Honour.

GLEESON CJ:   You said page 276, paragraph 525.

MR JACKSON:   Yes, your Honour.  That is Justice Ipp, I think.

GUMMOW J:   We were innocently looking at the stamp at 277.

MR JACKSON:   I think I might be right, your Honour, with respect.

GLEESON CJ:   We will not launch an investigation.

MR JACKSON:   No, your Honour.  May I pass on from that.  Paragraph 525 is what is set out as being the conclusion.  Your Honours, what I was going to submit was this.  The propositions, we would submit, have an air of unreality and Justice Santow’s reasons demonstrate pretty convincingly that they are incorrect.  May I take your Honours very briefly to the relevant passages.  Page 128, paragraphs 109 and 110 are dealing with the fact that the plans were not made available until after the August trespass.  That is by way of introduction. 

GLEESON CJ:   Was it established as a fact that Tellamist did not know that the Council intended to construct a drain?

MR JACKSON:   Your Honour, it also goes a little further and that is that the Council – and there is this passage and some others – were keeping quiet, to put it shortly, the fact that they proposed to construct the drain there.  The second thing, your Honours, page 132, paragraph 116, and then the conclusions at page 134, paragraph 129.  I do not think your Honours need to read all of that, with respect.

GLEESON CJ:   The Council intended to construct a drain – leave to one side for the moment your point about your client having the option as to whether it would exercise development consent – Council kept that from Tellamist, and the question that divided the judges in the Supreme Court of New South Wales was whether or not you attribute to the hypothetical purchaser for the valuation exercise of the land knowledge of the Council’s intention.

MR JACKSON:   Yes, your Honour, Council’s intention, kept to itself.  That is dealt with by Justice Santow at page 147 and your Honours will see in paragraph 153 he said:

I do not consider a willing buyer of the land making proper enquiries at the relevant time would have known of Council’s intention –

et cetera.  That goes through to paragraph 154.  Ultimately it becomes a question of what the hypothetical purchaser is to be treated as having known.

GLEESON CJ:   In other words, the question is whether the hypothetical purchaser would have paid too much for the land because Council was keeping quiet about its intentions.

MR JACKSON:   Yes, and, your Honour, there are also of course other questions that arise in relation to it and that is that what the Council did, even if the land had been dedicated to it, was something that it could just do without there being a further series of consents, including the application of a tree preservation order and matters that would be taken into account by a hypothetical purchaser, or whether there was any entitlement of the Council to do it.  We put in our written submissions the reasons why the Council just was not entitled to do this at all.  So the hypothetical purchaser not only ‑ ‑ ‑

GLEESON CJ:   What was the finding of Justice Santow about that?

MR JACKSON:   Your Honour, that is at page 159, paragraph 183.  In conclusion (e) he said “there is at the least substantial legal doubt”.  That was dealt with a little earlier in the passage which commences, I think, at paragraph 175 on page 155.  Your Honours will see references to the tree preservation order that was applicable throughout the area at paragraphs 176 and 177.  Your Honours will see then paragraphs 178 and 179. 

Could I say, your Honours, in our submissions in the matter we have set out in some detail the provisions which would be applicable.  Your Honours will see those at page 306, paragraph 39 through to paragraph 51 on page 308.  If one goes, for example, to paragraph 47, there would have to be an environmental impact statement in circumstances where the activity was likely to significantly affect the environment, and this was an area which was to be a buffer zone between an industrial development on the one hand and a residential development on the other. 

GLEESON CJ:   Presumably, what would interest a hypothetical purchaser would be the Council’s draining plans rather more than the prospect of successfully litigating to prevent the Council doing what it intended to do. 

MR JACKSON:   Your Honour, what would interest a prospective purchaser would be that the prospective purchaser was buying a property which at the least had a developmental consent issued a few days before which described this area as being dedicated as a reserve, in effect, and also dedicated as an area with retained trees and landscaped as necessary for the barbeque and play area.  The purchaser is buying a place that has a developmental consent for large cluster housing with this to separate it from the industrial area.  The hypothetical purchaser is hardly likely to think that a few days later the whole of this area, assumedly dedicated to the Council, would then be knocked down and used as a drain in circumstances where there is no reason even to look for a drainage plan in relation to it. 

So, your Honour, the case does raise questions about the need for what a hypothetical purchaser is to assume and that is a question which, we would submit, merits the attention of the Court.  Could I just say, your Honours, in relation to it, this is a case also where, we would submit, the result that is arrived at in terms of $1,000 for a trespass of this kind is, with respect, ridiculous. 

Your Honour, we have raised an issue of developer’s profit in the summary of the argument.  We wish to keep open, if we might, the appropriate quantification of damages if the matter were dealt with by the Court ‑ ‑ ‑

GUMMOW J:   This application is out of time, is it not?  I am looking at page 297.

MR JACKSON:   I am sorry, your Honour, I have overlooked that.

GUMMOW J:   I may be wrong.

MR JACKSON:   Yes, your Honour, I think I may.  In that case I would seek an order that there be, in effect, an extension of time in terms of paragraph 3.

GLEESON CJ:   Thank you, Mr Jackson.  Yes, Mr Bannon.

MR BANNON:   The only damages case put forward on behalf of the applicant pursued on the appeal was one which assumed that the value of the land was to be assessed by reference to the development approval and the implementation by the putative purchaser, the hypothetical purchaser, of a development, in accordance with that approval.  That is the so‑called 35 lot development, a condition of which was dedication of the strip of land on which the trees were knocked down as a public reserve.  No other damages case was pursued, for example, the value of the knocking down of the trees.  It was a once and for all type claim.  So that any hypothetical purchaser, in order to achieve that profit or a value referable to that development, had to proceed with the development, in which case the plan lodging would be lodged which would dedicate the land as public reserve and the fee simple would vest then in the Council. 

There was absolutely no issue but the Council intended that a drain be placed in that swale.  It was an open grass drain and the plan was to have it revegetated.  There were plans which were approved in November 1990.  The view was that they needed that drain otherwise it would badly affect the area, both blocks of land.  That is referred to in their letter at the top of 254 of the application book.  It is said:

your client’s residential development was approved on the basis that it would drain into this line.  Without this drain inter-allotment drainage will be necessary and Council will be obliged to withhold all building consents until this is provided.

Then, on the question of hypothetical purchasers, if I could invite your Honours to turn to page 267 of the application book – this is the judgment of Justice Ipp – paragraph 480 records the evidence given by Mr Fagan, the valuer called by Tellamist:

Mr Fagan . . . agreed that a prudent purchaser of the cluster development land would be “most interested” in knowing what was going to occur on the Public Reserve Land and would make enquiries of the Council as to what would be located there.

So it was common ground on that issue and the next paragraph records his concession that if he had been told of the Council plans then the value with or without the trespass was the same.

GLEESON CJ:   There is an inference of fact referred to in paragraph 492 also.

MR BANNON:   Quite so.  That is where the majority at 492 and following dealt with their findings that on the evidence there was no reason to suppose that the Council would have deliberately misled the hypothetical purchaser.  In effect, the applicant wishes to pursue in this Court a case, the effect of which is that damages could be assessed on the basis that a hypothetical purchaser would have been not only misled but deliberately misled by the Council.  That represented fair compensation notwithstanding as a matter of fact the land was affected by the Council’s determination believing it is appropriate to do so, the drain that would be affected.  It would be an outcome which would offend common sense.

There were no findings by her Honour the trial judge which said that the Council would have so misled the hypothetical purchaser mainly because this issue was not really addressed.  It was not put this way.  There was almost an assumption by her Honour that the land was affected by the Council’s plans and she said there were four questions as to whether or not they would have been successful in pursuing them but her Honour did not resolve the questions.  So in effect the first time this factual question – and it is a factual question – comes up for resolution is at the Court of Appeal and the court divides.  There is no suggestion the majority – it was not open to them to come to the view they did and Justice Santow came to a different view on those facts, but there is no wider question raised than that.

Could I just add this reference.  Perhaps as testament to the fact that her Honour did not address and perhaps the applicant did not pursue at trial this question as to what knowledge a hypothetical purchaser would have acquired may be gleaned from what appears at page 16 of the application book which records some evidence at paragraph 27 by Mr Rennie, who was the surveyor employed by Tellamist.  He says in a conversation – and there was debate about the exact terms of the conversation, but taking the applicant’s case at its highest, that in March or April he says he asked of Mr Atkinson, who was a consultant to the Council:

My client is the owner of the lands immediately adjacent . . . It has come to our attention that the Council is proposing to construct a drain along the common boundary.

Granted that – there was debate as to precisely what was said in response to that, but they did not come and explain how it was he got that information, whether he got it from making an inquiry of a Council officer.  If they were going to pursue seriously this issue that the Council would have misled a hypothetical purchaser, then that is exactly the sort of inquiry which would have been warranted and indeed one may say the very fact that they did not lead evidence to say how he got that information warrants the inference that it would not have helped their case on the Ferrcom principle.

As Justice Ipp records at the bottom of 270 at paragraph 495:

it was not put to any witness of the Council in cross‑examination that the Council would attempt to conceal its intention with regard to the drain and the trees.

So the case really does resolve to this factual question as to what the Council would have done in response to the inquiry of the hypothetical

purchaser.  It does not raise any wider question of principle.  It is a very fact‑specific case.  It does in one sense involve this rather curious conclusion that the Council would have been interested in misleading a hypothetical purchaser and exposing itself to potentially a massive claim in damages.

GLEESON CJ:   What it seems to lead to is a conclusion that the hypothetical purchaser would have paid more for the land than it was worth.

MR BANNON:   Correct.  Justice Ipp in the majority did deal with this question as to whether or not the Council could as a technical matter go through all the hoops of removing the trees legally, but Justice Ipp found on balance they could, Justice Santow said that there may be doubt.  The point made by Justice Ipp and agreed in by Justice Charles was the very fact that the Council, the evidence was, were determined to do it is something that a hypothetical purchaser would naturally take into account.

GLEESON CJ:   Thank you.  Mr Jackson.

MR JACKSON:   Your Honours, may I deal with four matters.  The first is that the letter that is referred to by our learned friend at page 254 is a letter written after the event.  It was written in September 1991, the trespass taking place earlier than that.

The second thing, your Honours, is that the trial judge did actually deal with the issue of what the state of knowledge was.  That is at page 49 – or state of communication – paragraph 97.  Your Honours will see in about line 36 she said:

If the Council had informed the plaintiff that it wished to construct a drain on the proposed public reserve, negotiations could have taken place . . . The problem was that the plaintiff was ambushed.

That was in the light of the evidence.

The third feature, your Honours, is this.  At page 16 my learned friend referred to paragraph 27.  Your Honours will see that the first comment of Mr Rennie is:

the Council is proposing to construct a drain along the common boundary.

This area was land of ours that was – this was in our land.  The other matter, your Honours, is that our learned friends picked up what was said by Justice Ipp about various matters not having been put to any witness.  We

have dealt with that in paragraph 2 of our submissions in reply at page 320.  Your Honours will see that.

The observation your Honour the Chief Justice made about the purchaser might have paid too much is not, with respect, correct because the position was, as we have submitted and would submit, that this was something that the Council did.  It was something the Council would not be entitled to do, was not entitled to do.  In those circumstances one would not expect the hypothetical purchaser to be conscious of the Council proposing to act ultra vires or illegally.

GLEESON CJ:   Or wanting to take on a dispute with the Council.

MR JACKSON:   Your Honour, certainly.  One would not expect though, if I could put it this way, in circumstances where the Council had on one day granted approval in terms that there was to be a public reserve, a few days later come and knock down everything in the public reserve with a view to building a drain.  At the very least, we would be in a situation where the prospect of that happening might be a feature and that might reduce the amount of damages but it would not make it $1,000.

GLEESON CJ:   We are of the view that this case does not raise an issue suitable to a grant of special leave and we are not persuaded that the interests of justice require it.  The time is extended to bring the application for special leave, but the application is dismissed with costs.

AT 10.40 AM THE MATTER WAS CONCLUDED