Upper Hunter Timbers Pty Ltd v Forestry Commission of New South Wales
[2001] NSWCA 64
•3 April 2001
CITATION: Upper Hunter Timbers Pty Ltd v Forestry Commission of New South Wales [2001] NSWCA 64 FILE NUMBER(S): CA 40048/00 HEARING DATE(S): 11, 16 October 2000 JUDGMENT DATE:
3 April 2001PARTIES :
Upper Hunter Timbers Pty Ltd - Appellant
Forestry Commission of New South Wales - RespondentJUDGMENT OF: Handley JA at 1; Stein JA at 25; Giles JA at 26
LOWER COURT JURISDICTION : Supreme Court - Equity Division LOWER COURT
FILE NUMBER(S) :3609/97 LOWER COURT
JUDICIAL OFFICER :Bryson J
COUNSEL: D J Hammerschlag & M Wright - Appellant
L Aitken & N Beaumont - RespondentSOLICITORS: Deacons Graham & James - Appellant
Crown Solicitors Office - RespondentCATCHWORDS: CONTRACT - implied term to take steps necessary to ensure plaintiff had benefit of agreement - previously found that defendant obliged to have environmental impact statement when it issued timber licences to plaintiff - whether contract empowered under Forestry Act - what breaches of contract proved - whether necessary for plaintiff to have applied for timber licences - whether further evidence should have been allowed - turns on facts. ND CASES CITED: Ansett Transport Industries (Operations) Pty Ltd v The Commonwealth (1977) 139 CLR 54;
Butts v O'Dwyer (1952) 87 CLR 267;
The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64;
Gray v Dalgety & Co Ltd (1916) 21 CLR 509;
Heyman v Darwins Ltd [1942] AC 356;
Lambert v Lewis [1982] AC 225;
McRae v Commonwealth Disposals Commission (1951) 84 CLR 377;
Meehan v Jones (1982) 149 CLR 591;
Robinson v Harman (1848) 1 Ex 850; 154 ER 363;
Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245;
Urban Transport Authority v Nweiser (1992) 28 NSWLR 471.DECISION: (By majority) (1) Appeal allowed; (2) Set aside the determination made by Bryson J on 17 December 1999 that the respondent was not to any extent in breach of the agreement made on 14 November 1988 during the period on and from 14 August 1991 to 31 December 1996, and in lieu thereof determine that the respondent was in breach of the agreement made on 14 November 1988 during the period on and from 14 August 1991 to 31 December 1996 to the extent that at the time it issued timber licence 18677 expressed to have effect from 1 January 1993 to 31 December 1993 it had not complied with Part 5 of the Environmental Planning and Assessment Act 1979 in respect of the logging operations thereby purportedly permitted as required by s 6 of the Timber Industry (Interim Protection) Act 1992; (3) Set aside the judgment for the respondent with costs ordered by Bryson J on 17 December 1999; (4) Remit the proceedings to the Equity Division for determination of the amount of damages, if any, to which the appellant is entitled by reason of the breach as determined; (5) Make no order as to the costs of the appeal; (6) Order that the past costs of the proceedings in the Equity Division be disposed of as ordered by the judge determining the appellant’s damages.
THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL
CA 40048/00
EQ 3609/97
HANDLEY JA
STEIN JA
GILES JA
Tuesday 3 April 2001
JUDGMENTUPPER HUNTER TIMBERS PTY LTD v FORESTRY COMMISSION OF NSW
1 HANDLEY JA: I have had the benefit of reading the draft reasons for judgment of Giles JA in this appeal. I adopt his summary of the facts and the history of the proceedings and I substantially agree with his judgment on the issues with two exceptions. These concern the breach of contract which should be found and whether the earlier decision of this Court has left it open for this Court to determine that question in accordance with principle.
2 As Giles JA notes, on the first appeal there was no need to consider with any precision the nature of the breaches of contract committed by the Commission before 14 August 1991 because they were statute-barred. The present appeal has led to a closer analysis of the obligations of the Commission under its contract, and the nature of their breach, and it has therefore become necessary to determine whether the Court is free to give effect to its own view of these matters.
3 Since the Commission did not have a valid environmental impact statement (eis) when it entered into the contract, its implied obligation was to do all that was reasonable to obtain an eis within a reasonable time so that it could issue timber licences to the appellant. See Butts v O’Dwyer (1952) 87 CLR 267, 280; Meehan v Jones (1982) 149 CLR 571, 591. If the respondent failed to do this it would be in breach but it would not be in immediate breach on the making of the agreement. Nor would it be in breach of that obligation merely because it issued an invalid timber licence before an eis had been prepared. A breach of that particular obligation would not occur unless and until the Commission had failed to do all that was reasonable on its part to obtain an eis.
4 The finding of Bryson J in his fourth dot point (para 41 of the judgment of Giles JA) was that “the Commission was in breach of its obligation to comply with s 112 (1) of the EPA Act on each occasion until 12 March 1992, when it granted another timber licence”. Sheller JA agreed and considered that the appellant was entitled to damages for the Commission’s failure to comply with s 112 (1) when licences were granted (para 42 of the judgment of Giles JA which incorporates para 55 of Sheller JA’s judgment).
5 As I read the judgment of Sheller JA, the breach of contract he referred to was the issue of a licence without having complied with s 112 (1), and not the failure to obtain an eis as such. The Commission did not have an absolute, but only a qualified, obligation to obtain an eis.
7 The findings of Bryson J in his dot points relating to the period after 12 March 1992 were:6 The only relevant licence was that granted on 4 February 1993. The question is whether there was then a breach of contract, and if so, the nature of the breach. The statement by Sheller JA in par 55 of his judgment (para 42) that “UHT was entitled to damages for the Commission’s failure to comply with s 112 (1) of the EPA Act at the time of granting licences for the period on and after 14 August 1991 up to the timber licence granted for 1992” does not apply, in terms, to the licence issued on 4 February 1993 which was subject to the TIIP Act and not s 112(1).
8 Bryson J focussed on the Commission’s underlying obligation to take reasonable steps to overcome the prohibition in the TIIP Act, and found no breach. Sheller JA did not expressly dissent from these findings but said (para 55):
“ . That, after the commencement of the TIIP Act, the implied contractual obligation would have obliged the Commission to take reasonable steps, in respect of the eight compartments to which Schedule 1 of the TIIP Act applied, to overcome the prohibition found in s 6 by obtaining an environmental impact statement and the Minister of Planning’s determination under s 9 if there were to be any operations in the eight compartments.
. That the Commission, in not submitting an acceptable environmental impact statement and not obtaining a determination from the Minister of Planning under the TIIP Act, was not in breach of the Commission’s implied obligation”.
He added (para 56):
“Thereafter, as I understand it, because of the limited areas covered by the licences subsequently issued, either there was no breach of contract or, alternatively if there was, no damage [was] suffered”.
“… the Commission may well have been under a contractual obligation to issue licences, … breach of which would have entitled UHT to damages”.
9 Sheller JA did not, in terms, express even a tentative view about the existence of breaches after 12 March 1992. In para 56 he merely said “the Commission may well have been” and in para 57 he said that the matter should be “remitted to the Equity Division for a determination of the extent (if any) to which the Commission was in breach of the agreement”. An order for a new trial or rehearing, such as that previously made by this Court, does not create any issue estoppel as to the matters remitted because such an order is not final. See Gray v Dalgety & Co Ltd (1916) 21 CLR 509, 520. This principle must apply with added force where the express terms of the order for rehearing leave the question open.
10 The appellant made no attempt during the first trial to establish a breach of the Commission’s implied obligation to do all that was reasonable on its part to obtain an eis. The issue of a timber licence contrary to the restrictions in the TIIP Act does not establish that the Commission was then in breach of that contractual obligation. It only establishes that the licence was invalid. In my judgment the only breach available to the appellant is the breach of an implied term that any licence issued would be valid.
11 The Commission was in breach of that term because it did not have an eis which could have made the licence effective. However the damages that flowed from that breach cannot be based on the loss flowing from the Commission’s failure to obtain an eis. The breach was the issue of an invalid licence, not the failure to issue a valid licence. The Commission’s inability to issue a valid licence on 4 February 1993 was not itself a breach of contract because its issue was prohibited. Its inability may have been due to its earlier failure to take reasonable steps to obtain an eis, but that was neither alleged nor proved.
12 The expectation damages recoverable for the issue of an invalid licence should not exceed those that would be recoverable if the licence had not been issued. The Commission should not be worse off, in terms of expectation damages, by issuing an invalid licence than it would be if it refused to issue a licence. The appellant could only recover substantial damages for the failure to issue a licence if it established that the Commission could have issued a valid licence or could have done so but for its earlier breach of contract.
13 The damages for breach of the Commission’s implied obligation to do what was reasonable to obtain an eis that would be approved by the Minister would depend, in the first instance, on the chance of preparing such a document and on the time necessary to do this and obtain approval. The damages would also depend on the further chance that the Commission, taking into consideration the matters disclosed in the eis, could have issued a licence which was not vulnerable to judicial review in Class 4 proceedings in the Land and Environment Court.
15 The general principle governing the award of damages for breach of contract is that stated by Mason CJ and Dawson J in The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 (Amann) at 80:14 The issues of liability and quantum have been separated but an assessment by a Judge or an inquiry by a Master should only be ordered if there is some realistic prospect that they would result in an award of more than nominal damages.
16 Their Honours continued at 80-81:
“The general rule at common law, as stated by Parke B in Robinson v Harman (1848) 1 Ex 850, 855 [154 ER 363, 365] is ‘that where a party sustains a loss by reason of a breach of contract he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed’.”
17 They added at 86:
“The award of damages for breach of contract protects the plaintiff ’s expectation of receiving the defendant’s performance. That expectation arises out of or is created by the contract. Hence damages for breach of contract are often described as ‘expectation damages’. The onus of proving damages sustained lies on a plaintiff and the amount of damages awarded will be commensurate with the plaintiff ’s expectation, objectively determined … [W]here it is not possible … to demonstrate whether or to what extent the performance of a contract would have resulted in a profit for the plaintiff, it will be open to a plaintiff to seek to recoup expenses incurred, damages in such a case being described as reliance damages, or damages for wasted expenditure”.
“… where it is not possible to predict what position a plaintiff would have been in had the contract been fully performed … it is not possible as a matter of strict logic to assess damages in accordance with the principle in Robinson v Harman. But the law considers the just result in such a case is to allow a plaintiff to recover such expenditure as is reasonably incurred in reliance on the defendant’s promise”.
18 Where the plaintiff, as here, cannot recover damages for loss of the bargain as on a repudiation, but relies on particular breaches, the rule in Robinson v Harman requires one to focus on the particular promise that has been breached. This was the implied promise not to issue an invalid licence, or if you will, not to issue a licence without having first obtained and properly considered an eis. The breach was the issue of the invalid licence, not the failure to obtain an eis.
19 The rule in Robinson v Harman requires the damages to be assessed “as if the contract had been performed”, and in this case, as if an invalid licence had not been issued. The appellant cannot recover any expectation damages for this breach because, without a licence, it could not harvest any timber. In the language of Mason CJ and Dawson J in Amann (at p 81) performance of the contract in this respect, which would have required the Commission to refrain from issuing an invalid licence, would not “have resulted in a profit for the plaintiff ”.
20 However the appellant may be entitled to reliance damages. The relevant principles were discussed and applied by Dixon and Fullagar JJ in McRae v Commonwealth Disposals Commission (1951) 84 CLR 377, 412-5 (McRae) . The Commission had sold the plaintiffs an oil tanker supposedly stranded on an identified reef off New Guinea, but there was no such tanker. The plaintiffs failed to recover expectation damages because the contract contained no description of the tanker, but they recovered damages for their wasted expenditure in accordance with the principles they stated (at p 415) which were later applied by Mason CJ and Dawson J in Amann (at p 88-9) .
21 Dixon and Fullagar JJ found (at p 413) that the plaintiffs had been entitled to rely upon the Commission’s promise and had not acted unreasonably in doing so. In Amann (at p 86) Mason CJ and Dawson J held that the measure of reliance damages was “such expenditure as is reasonably incurred in reliance on the defendant’s promise”.
22 Lambert v Lewis [1982] AC 225, 275-7 involved a claim by the buyer of goods against the seller for indemnity against his liability for damages to a third person caused by a breach of warranty. Lord Diplock held that the buyer was entitled to rely upon the warranty until he became aware that the goods had become defective. That case involved a different type of reliance damages, but the same principles applied.
23 With one minor qualification the appellant is not entitled to recover reliance damages because it knew that the licence was invalid. It made no attempt to have the permanent injunction against logging operations dissolved by the Land and Environment Court, and it made no attempt to exercise the licence. There is no basis shown for a finding that the appellant ever relied on the licence for any purpose. It is however entitled, in accordance with McRae, to recover its wasted expenditure consisting of the licence fee paid on or about 4 February 1993 together with interest thereon at Court rates. No good purpose would be served by remitting the proceedings for the assessment of additional damages. The appeal should otherwise be dismissed.
24 The recovery of judgment for $160 plus interest means that the appeal has failed in substance and the appellant should be ordered to pay the Commission’s costs of the appeal.
26 GILES JA: The appellant claimed damages from the respondent for breach of an agreement for the sale and harvesting of timber from the Mount Royal State Forest. Liability was heard separately from and prior to quantum. At first instance Bryson J gave judgment for the respondent. On appeal this Court set aside the judgment and remitted the proceedings for further hearing. Bryson J again gave judgment for the respondent. This is an appeal from his Honour’s second judgment.25 STEIN JA: I have had the benefit of reading in draft the judgments of Handley JA and of Giles JA. I agree with the analysis by the latter of the judgment of Sheller JA in the first appeal (of which Court I was a member along with Priestley JA). I also agree with the reasons given by Giles JA for the orders which he proposes. Accordingly, it is my view that the appeal should be disposed of in the manner proposed by his Honour.
The agreement
28 On 24 March 1988 the respondent invited tenders for the sale of -27 The respondent was constituted under the Forestry Act 1916 (“the Act”), and subject to the Act had the control and management of State forests with the power to take and sell timber within such forests and to enter into agreements for the supply of timber by way of sale and the issue of timber licences for the taking of timber.
29 An information brochure described the resource and the tendering procedure. It said that the resource would be available for harvesting over a period of ten years, and identified it as contained in two “sections” of the forest marked on an attached map, the Davis Creek section and the Carrowbrook section. It said that harvesting operations would be conducted in accordance with an order of working specified by the District Forester, Cessnock, after consultation with the successful tenderer, and that all operations would be subject to harvesting plans prepared by the District Forester, Cessnock, for individual logging areas. A tender form was attached, as were general conditions of tender and a form of questionnaire to be completed by the tenderer dealing with its commercial status and viability, its equipment and experience, and how it proposed to process and dispose of the timber. The general conditions of tender included -
“ … a parcel of timber located mainly in the Davis Creek/Cross Creek section of Mt Royal State Forest.
Logs will be sold on a flat rate gross basis.
It is expected that the following volumes will be available:
2. up to 25,000 cubic metres gross of hardwood logs which do not meet the standards in (1) above. This material will, in the course of harvesting logs in (1), be available in the form of heads, butts, reject trees and other trees not required for retention under the Commission’s harvesting prescription.”1. up to 45,000 metres gross of hardwood logs which meet the Commission’s compulsory utilization standards.
“5. Supply of timber to the successful tenderer/s will be made under, and subject to, the provisions of the Forestry Act , 1916, the Forestry Regulation 1983 and subject to the conditions of licences issued under these statutes.”
30 On 8 September 1988 the appellant submitted a tender on the tender form with respect to the class 1 timber. The tender form provided for a “Proposal to Utilize the Resources” for “Year 1”, “Year 2”, “Year 3” and “Thereafter”. The figure “2000”, meaning 2000 gross cubic metres, was filled in for each of the years and thereafter.
32 In his first judgment Bryson J held that the agreement came into existence upon acceptance of the appellant’s tender on 14 November 1988 and that entry into such an agreement was within the respondent’s powers under the Act. Neither conclusion was challenged in the first appeal. When the Court expressed some reservations in this appeal as to the coming into existence of an agreement, neither the appellant nor the respondent sought to disturb the former conclusion. It must therefore be accepted in this appeal. A question arose in this appeal as to the latter conclusion, to do with the Minister’s approval under s 11(1)(m)(ii) of the Act.31 On 14 November 1988 the respondent informed the appellant that it had “approved that [sic] your tender … be accepted in principle and confirmed subject to satisfactory negotiation of harvesting arrangements”. A meeting was then held at which harvesting arrangements were agreed.
Relevant legislation
34 Section 27 of the Act made it an offence to take timber from Crown-timber lands, which included State forests, unless inter alia in pursuance of a timber licence. Section 27A provided for the issue by the respondent of a timber licence authorising the holder -33 According to the general conditions of tender part of the agreement, the appellant’s utilisation of the resource - that is, its taking of timber - was under and subject to the provisions of the Act, the Forestry Regulation 1983 (“the 1983 Regulation”) and the conditions of licences issued under this legislation.
35 Regulation 39 of the 1983 Regulation provided that an application for a licence should be made to the Office of the District Forester for the District in which the land to which the licence was intended to relate was situated. No form of application was prescribed. The prescribed fee was to be paid before the licence was issued (reg 40), and the respondent could refuse to issue a licence for such reason as it considered sufficient (reg 41). By reg 42 -
“ … subject to the regulations and subject to the conditions and limitations of the licence to take timber, or such class or description of timber as is specified in the licence, on Crown-timber lands”.
The term of a timber licence could not exceed five years without the prior written approval of the Minister, and in any event could not exceed 20 years. It was common ground that a timber licence was necessary in order that the appellant take timber in accordance with the agreement.
“A licence, which shall be in the approved form, shall describe the area or locality on and from which the timber, … specified in the licence, is … authorised to be taken.”
36 The 1983 Regulation was repealed and replaced by the Forestry Regulation 1994 (“the 1994 Regulation”) as from 1 September 1994. The effect of the 1994 Regulation was similar to that of the 1983 Regulation. A timber licence fell within the generic description of a written authority (reg 34). An application for a written authority relating to Crown-timber land had to be lodged at the office of the District Forester for the District in which the land was located (reg 35). It had to be made in the approved form (reg 36), and the prescribed fee had to be paid before it issued (reg 38). The respondent could refuse to issue a written authority for any reason that it considered appropriate (reg 39). A written authority was to be in a form determined by the respondent, and a timber licence had to describe the locality from which the relevant timber was authorised to be taken (reg 40).
37 As at November 1988 there was a constraint outside the Act and the 1983 Regulation upon the respondent issuing a timber licence or licences to the appellant. By s 112 of the Environmental Planning and Assessment Act 1979 (“the EPA Act”) a determining authority could not “grant an approval in relation to” an activity that was likely to significantly affect the environment unless it had obtained or been furnished with and had examined and considered an environmental impact statement in respect of the activity. The environmental impact statement had to be made available for public inspection, any representations then made had to be examined and considered, and any requisite approval of the Minister had to be obtained. The respondent was a determining authority within the meaning of the EPA Act, the issue of a licence was a grant of approval to the activity of taking timber, and taking timber from the Mount Royal State Forest was likely to significantly affect the environment: all this was common ground. Thus the respondent could not issue a timber licence or licences to the appellant unless there was what I will call for short a valid environmental impact statement.
39 Everything changed with the coming into force on 1 January 1997 of the Forestry Revocation and National Parks Reservation Act 1996. The Mount Royal State Forest became the Mount Royal National Park, and further performance of the agreement was impossible. It became common ground in the proceedings that the agreement was thereby frustrated and, at least in the first appeal, it was held that the Frustrated Contracts Act 1978 applied to it.38 This constraint upon the issue of a timber licence or licences remained until 12 March 1992, when the Timber Industry (Interim Protection) Act 1992 (“the TIIP Act”) commenced and substituted its own requirements relating to environmental impact statements. As applied to the Mount Royal State Forest, for some parts of the forest the respondent could not approve or permit logging operations unless it had a valid environmental impact statement pursuant to the EPA Act in respect of those operations, and even then unless the Minister for Planning (“the Minister”) had also determined that it might do so (ss 6, 9: “the s 6 regime”). For other parts of the forest the application of the relevant part of the EPA Act in respect of logging operations being carried out or proposed to be carried out was suspended until 31 December 1994, but a broadly equivalent obligation to obtain an environmental impact statement in respect of the logging operations was imposed and the Minister was then to determine whether the respondent might approve or permit the logging operations (ss 8, 9: “the s 8 regime”). For the parts of the forest under the s 8 regime and until 31 December 1994 logging operations could be approved and permitted in the absence of a valid environmental impact statement pursuant to the EPA Act. As at the commencement of the TIIP Act, it ceased to operate on 31 December 1994 and the application of the EPA Act returned. The date was later extended, ultimately to 31 December 1998. I will include the environmental impact statements required under the TIIP Act in what I have called a valid environmental impact statement.
40 In the period from 14 November 1988 to 1 January 1997 the respondent purported to issue a number of timber licences to the appellant. The appellant carried on other logging operations, and the licences were not necessarily for, or wholly for, the taking of timber from the sections of the Mount Royal State Forest the subject of the agreement. The timber licences were -
Timber licences and environmental impact statements
(a) a licence for the period 1 May 1989 to 31 December 1989 in relation to compartments 180, 184, 185, 187, 201, 202, 203 and 204 in the forest: all those compartments were within the sections the subject of the agreement, compartments 180, 184, 185 and 187 being in the Carrowbrook section and compartments 201 to 204 being in the Davis Creek section;(b) a licence for the calendar year 1990 in relation to the same compartments;
(c) a licence for the calendar year 1991 in relation to compartment 183; it was not within the sections the subject of the agreement;
(e) a licence for the calendar year 1993 which in his first judgment Bryson J found was limited to the same four compartments as the 1992 licence; in his second judgment his Honour said that he had been mistaken and that it also included compartments 200 to 204 constituting the Davis Creek section the subject of the agreement.(d) a licence for the calendar year 1992 in relation to compartments 180, 181, 182 and 187: only the first and last of these compartments were within the sections the subject of the agreement; and
41 There was no evidence of any applications pursuant to which these licences were issued, or of any applications for other licences (particularly with respect to the period 1994-1996).
42 All available timber was removed from the Carrowbrook section of the Mount Royal State Forest by January 1992. It was common ground in this appeal, although it seems but lately recognised by the parties, that the appellant’s claim is effectively concerned only with the Davis Creek section, that is, compartments 200 to 204.
43 At no relevant time on or after 14 November 1988 did the respondent have a valid environmental impact statement in respect of the taking of timber from the Mount Royal State Forest. At no relevant time after 12 March 1992 did the respondent have a valid environmental impact statement and a determination by the Minister that it could approve or permit logging operations in respect of the taking of timber from the Mount Royal State Forest - the environmental impact statement it prepared was rejected by the Minister as inadequate. The timber licences which were issued as earlier described were therefore issued invalidly.
45 In October 1996 the appellant wrote to the respondent stating that “recent events” indicated that the respondent was not proceeding with obtaining an environmental impact statement. The letter said -44 On 16 January 1990 interim orders were made in the Land and Environment Court the effect of which was to restrain the respondent and the appellant from engaging in logging activities in the Davis Creek section of the Mount Royal State Forest without a valid environmental impact statement. The orders were continued and then replaced by permanent orders and undertakings having the same effect. To this time the appellant had taken only a small amount of timber from the Davis Creek section. The respondent set about obtaining an environmental impact statement. Its consultants prepared an environmental impact statement dated September 1993, by which time the TIIP Act was in force. The environmental impact statement was submitted to the Minister, but was rejected as so inadequate that the Minister could not assess the impact of the proposed logging operations in order to decide whether they should be approved. How the timber licences earlier described, particularly the 1993 licence, came to be issued was not explained in the evidence.
46 The appellant alleged the agreement, in the terms that the respondent had agreed to sell to it a parcel of timber in the Mount Royal State Forest and to make the timber available for harvesting by it. It alleged that it was an implied term of the agreement that the respondent would -
“This company regards the Commission as being in breach of the contract for the harvesting of timber in that an EIS was not obtained prior to the calling of tenders, and in that the Commission, without reference or notification to us, has decided that notwithstanding the advice to us that an EIS would be prepared consequent upon the injunction, that will not now be done.
We have suffered a substantial loss by reason of this breach.”
The appellant’s claim in the proceedingsThe loss was explained and compensation was claimed.
47 The breach or breaches alleged were not particularised. It proved difficult to ascertain how the appellant had put its case before Bryson J and in the first appeal. The appellant stated in this appeal that it had “always stuck with the same breach”, namely that the respondent “never took the steps to have the EIS.” It was said that the respondent breached the agreement by not having an environmental impact statement as at 14 November 1988. It was said that the respondent was in continuing breach thereafter, because of failure to have an environmental impact statement. The notion of continuing breach was important to the appellant’s case in this appeal.
(a) do all such things as were necessary on its part to enable the plaintiff to have the benefit of the agreement; andThe appellant then alleged that in breach of the agreement the respondent had refused to permit it to continue to harvest the timber and had “otherwise failed to take such steps as are necessary on its part to ensure that the plaintiff has the benefit of the agreement”.(b) refrain from doing anything which would prevent the plaintiff from having the benefit of the agreement.
Bryson J’s first judgment
48 The proceedings had been commenced on 14 August 1997, and the respondent had relied on the Limitation Act 1969. Accordingly, Bryson J held that the appellant’s “remedies” must be limited to damages caused by breaches of contract which had occurred on or since 14 August 1991. His Honour added, “For lack of a licence to take timber after 1 January 1994 there can have been no entitlement to take timber and there can be no damages after then”.
49 Bryson J then recorded the appellant’s contention that the implied term “operated to require the Commission to issue all necessary licences under s 27A [of the Act] … “. His Honour had earlier said that the respondent did not give any contractual commitment that timber licences would be issued, particularly in the light of reg 41 of the 1983 Regulation, and that “notwithstanding its contractual force the agreement could only have effectuality if harvesting timber under it were authorised by timber licences”; hence the statement that for lack of a licence to take timber after 1 January 1994 there could have been no entitlement to take timber and there could be no damages after then. His Honour did not accept the contention, saying that the contractual obligation did not extend to oblige the respondent “to exercise the discretionary statutory power [to issue a timber licence] in any particular way”.
51 His Honour dealt first with the period prior to the commencement of the TIIP Act on 12 March 1992. He said -50 The appellant’s contention as recorded may not be consistent with a case of breach in that the respondent “never took the steps to have the EIS”. However, his Honour then recorded that the appellant also contended that the implied term “required the Forestry Commission to comply with s 112 of [the EPA Act} by preparing an Environmental Impact Statement”.
52 His Honour then described the effect of the TIIP Act, noting that compartments 200 to 204 were subject to the s 6 regime and that compartments 180, 181, 182, and 187 were subject to the s 8 regime. He then said -
“In my opinion the Forestry Commission came under the need to comply with sub-section 112 (1) [of the EPA Act] when it entered into the agreement on 14 November 1988, and as it did not comply it was then in breach of its implied obligation because conduct by both Upper Hunter Timbers and Forestry Commission under the agreement was liable to be restrained by injunction and subjected to penalties. Such conduct continued to be liable to be restrained for the whole period until 12 March 1992, and indeed was restrained by undertakings and interim injunctions made against these parties by the Land and Environment Court on 16 January and 13 March 1990 and by undertakings and a final injunction of 12 June 1990, the making of which was not opposed and indeed could not have been opposed. From the time of those injunctions and undertakings timber-getting at Davis Creek ceased and has never been resumed. Almost all timber available in the Carrowbrook section had been removed by then, but operations in the Davis Creek section were at an early stage. The Forestry Commission again came under the obligations of sub-section 112 (1) and was in breach on each occasion until 12 March 1992 when it granted another timber licence, but those breaches did not operate to cause timber-getting to be restrained, that was caused by the original breach and the injunction to which it led, which occurred more than six years before the commencement of the proceedings. Claims for damages caused by the original breach are statute-barred.”
53 In summary, his Honour held that -
“For the eight compartments in Sch.1 [of the TIIP Act] to which the prohibition in s 6 applied the Forestry Commission came under a new prohibition in sub-section 6 (1) against permitting logging operations when the TIIP Act came into effect on 12 March 1992, and its implied contractual obligation would have obliged it to take reasonable steps to overcome that prohibition by obtaining an Environmental Impact Statement and the Minister of Planning's determination under s 9 if there were to be any operations in those eight compartments. The timber licence which Upper Hunter Timbers had by then obtained for 1992 did not relate to any of those compartments, so no action in relation to them was contractually required of the Forestry Commission. With respect to other parts of the Mount Royal State Forest, which I take it included compartments 180, 181, 182 and 187 to which the 1992 licence applied, the Forestry Commission came under the need to comply with s 8 by obtaining an Environmental Impact Statement and a determination from the Minister of Planning. The Forestry Commission did not do so as its Environmental Impact Statement was rejected by the Minister of Planning as inadequate. However this did not have the result that logging operations were forbidden. The TIIP Act did not forbid logging operations on land in Schedule 4, and as the terms of the timber licence for 1993 did not identify the relevant land by compartments the plaintiff has not shown by evidence whether the prohibition in s 6 had any operation in respect of the land subject to that licence, or whether that prohibition was a practical impediment to getting timber in accordance with the licence.
In my opinion the Forestry Commission's not submitting an acceptable Environmental Impact Statement and not obtaining a determination from the Minister of Planning under the TIIP Act was not a breach of the Forestry Commission's implied obligation, and if it had been a breach it has not been shown to have had any effect as a cause of damage because it has not been shown to have had any effect to prevent logging operations on any land which the plaintiff could otherwise have worked. The cause of the plaintiff's inability to work the Mount Royal State Forest throughout the whole six years before commencement of the proceedings and earlier was the injunction, which arose out of the Forestry Commission's failure to comply with s 112 (1) in 1988; and claims for damages arising from that breach are statute-barred.”The operation of s 112 of the EPA Act was suspended for compartments which are identified in the 1992 licence, so that there was no effective prohibition under the EPA Act on logging operations on them, although the injunction of 12 June 1990 continued in effect and so far as evidence shows was not varied or suspended. With the expiry of the TIIP Act on 31 December 1994 the state of affairs which had led to the injunction again operated.
(a) there was a breach of contract on 14 November 1988;
(b) the cause of action for that breach was statute barred;
(c) there were breaches of contract thereafter when timber licences were issued in the period until 12 March 1992, because the respondent then “came under the obligations of s 112(1) [of the EPA Act]”;
(d) none of these breaches caused loss because the restraint on timber getting was caused by “the original breach and the injunction to which it led”;
(e) there was no breach of contract in the period after 12 March 1992 when the 1993 timber licence was issued because, although the respondent “came under the need to comply with s 8 [of the TIIP Act]”, when it had not been shown that the timber licence was in respect of part of the Mount Royal State Forest under the s 6 regime it had not been shown that the respondent had to have an environmental impact statement; and
(f) in any event, breach after 12 March 1992 would not have caused loss because the restraint on timber getting was still caused by the original breach and the injunction.
55 I have omitted from the account of Bryson J’s first judgment a number of matters not relevant to this appeal, and also one matter relevant to this appeal concerning the Minister’s power of approval under s 11(1)(m)(ii) of the Act. I will deal separately with the last matter later in these reasons.54 It is to be noted that the later breaches found or contemplated by his Honour were not manifestations of the original breach on 14 November 1988, but were fresh breaches occurring, according to the implicit reasoning, at the times when timber licences were issued for the effectiveness of which an environmental impact statement was necessary. His Honour’s slip because the operation of the TIIP Act had been extended to 31 December 1998 did not affect the result. The respondent was in breach of the agreement when it purported to exercise its statutory power to issue a timber licence, and this only as to the 1989, 1990, and 1992 licences. Although this was not expressly stated, the 1992 breach was the only cause of action which was not statute barred. But, still according to the implicit reasoning, the fresh breaches were not by way of breach of warranty that the issued timber licences were valid. They were breaches of an implied obligation under the agreement to have a valid environmental impact statement when the licences were issued.
The judgment in the first appeal
56 The judgment comprised reasons give by Sheller JA with which Priestley and Stein JJA agreed.
58 Bryson J had been assisted to his conclusion that the respondent lacked power to enter into the Stewarts Brook State Forest agreement by the view that the respondent could not fetter its statutory discretion to issue licences by promising to exercise the discretion in a particular way. With reference to the judgment of Mason J in Ansett Transport Industries (Operations) Pty Ltd v The Commonwealth (1977) 139 CLR 54 at 76-7, Sheller JA pointed out that a statute could authorise a contract in which such a promise was made, and that the promise was valid, but that the discretion was not fettered because compliance with the promise could not be enforced and the only remedy for its breach was damages. His Honour said -57 Before Bryson J the appellant had also claimed damages from the respondent for breach of an earlier agreement for the sale and harvesting of timber from the Stewarts Brook State Forest. Bryson J had given judgment for the respondent, holding that the Act as it stood at the earlier time prevented the respondent from entering into an agreement to dispose of timber or grant licences and that in any event the agreement had not been made out. In the first appeal the Court disagreed on the question of power to enter into the agreement but agreed that the agreement alleged had not been made out. In the course of his reasons in relation to the Stewarts Brook State Forest claim Sheller JA discussed the issue of fettering the discretion to issue licences, and what his Honour then said is important to an understanding of what was later said in relation to the Mount Royal State Forest claim.
59 Early in that part of his reasons to do with the Mount Royal State Forest claim his Honour noted that at the heart of the appeal in relation to that claim was the sentence at the conclusion of the passage in the reasons of Bryson J last set out, namely -
“[40] In Ansett at 77 Mason J observed:
‘Where statutory approval for the making of the contract exists and the contract contains an undertaking that the statutory power will be exercised in a particular way, there is no room for the notion that the undertaking is invalid on the ground that it is an anticipatory fetter on the exercise of a statutory discretion. The contract, assuming it to be within constitutional power, is valid and the undertaking is free from attack. There is in such a case the initial question: does the statute which approves the making of the contract expressly or impliedly amend, for the purposes of the contract, the pre-existing law providing for the exercise of the discretion? The statute may impose on the repository of the discretion a duty to exercise it in conformity with the undertaking or it may leave him with a discretion to arrive at some other result. If it be the former, then the contracting party may be able to compel the government and the person in whom the discretion is vested, though it has been relevantly converted into a duty, to comply with the undertaking. If it be the latter, then the undertaking if it is enforceable, will be enforceable by an action for damages only.”
[41] Thus, if the Commission had contracted to grant to a sawmiller a licence to extract timber up to a particular quota each year for a period into the future and the contract was subject to the provisions of the Act and any regulations it would not have involved any divestiture by the Commission of its powers or duties. The statutory discretion to grant or refuse a licence would have remained unfettered. If the discretion was exercised otherwise than in accordance with the contract, the other party would have been left to its remedy in damages. In the words of Mason J in Ansett at 76 such an outcome works a reasonable compromise between the desirability of recognising the binding nature of contracts and the need to preserve the free and unfettered exercise of the discretion.”
“The cause of the plaintiff's inability to work the Mount Royal State Forest throughout the whole six years before commencement of the proceedings and earlier was the injunction, which arose out of the Forestry Commission's failure to comply with s 112 (1) in 1988; and claims for damages arising from that breach are statute-barred.”
60 His Honour noted that the respondent did not challenge Bryson J’s decision that a contract was made on 14 November 1988 and that in failing to take steps to obtain an environmental impact statement it was in breach of its contract; he said that “the Mount Royal claim failed because statute barred”.
61 Plainly enough recounting the appellant’s argument on appeal, Sheller JA said that the appellant claimed “damages for the loss of its bargain”, claiming to be put into the position it would have been in if the contract had not been broken or, in other words, if the contract had been performed. In putting its case in that way the appellant must have been arguing that the effect of the failure to have an environmental impact statement was not confined to failure as at 14 November 1988, but was on-going, and culminated in its loss of bargain. In the appellant’s submissions in this appeal its argument in the first appeal was said to have had at its core that Bryson J had erred in finding that the cause of action had accrued before August 1991 “because the Appellant was claiming loss of bargain damages and that cause of action did not accrue until the bargain was lost”. I consider this information may be acted upon.
62 But the argument was not accepted. Sheller JA pointed out that loss of bargain damages are recoverable only if the contractual obligation of the injured party had been brought to an end by the wrongful conduct of the defendant, because only then is the bargain lost, citing Heyman v Darwins Limited (1942) AC 356 at 399 and Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 at 260, 273. The agreement made on 14 November 1988 did not come to an end due to the respondent’s wrongful conduct. Rather, it was frustrated on 1 January 1997 by the coming into force of the Forestry Revocation and National Parks Reservation Act , and at that time the appellant’s cause of action for damages for loss of bargain had not accrued.
64 His Honour explained the application of the Frustrated Contracts Act to the agreement, referring to ss 7 and 8 of that Act and saying -63 No doubt because they had arisen in the course of argument, however, Sheller JA went on to deal with other matters.
“These sections confine [the appellant's] right to recover damages to damages for breach of promise under the contract before the time of frustration. Except to the extent necessary to support such a claim, if a promise under the contract was due to be, but was not performed before the time of frustration, the promise was discharged. Since the contract had not been terminated by the [respondent's] wrongful conduct, the frustration defeated any claim for damages for loss of bargain and left [the appellant] to such claim for damages for breaches of promise before the time of frustration, as it might otherwise have. These in turn would be defeated by s14(1) of the Limitation Act 1969 if the cause of action had accrued before 14 August 1991.”
66 It is important, I think, to repeat the findings set out by Sheller JA against the dot points. They were -65 His Honour observed that Bryson J had found that the cause of the appellant’s inability to work the Mount Royal State Forest throughout the whole six years before the proceedings began and earlier was the injunction which arose out of the respondent’s failure to comply with s 112 of the EPA Act in 1988. He noted that the injunction applied only to compartments 200 to 204, that is, to the Davis Creek section of the forest. He said that in addition Bryson J had made a number of “findings”, which he set out against ten dot points. Some of the findings set out were matters of fact, others were matters of law, and the findings were in substance most of Bryson J’s conclusions as to the respondent’s relevant contractual obligations or lack of obligations under the agreement and breach of the contractual obligations.
67 Sheller JA then said -
“ That no evidence dealt with whether UHT sought or was refused licences to take timber in the Mount Royal State Forest for periods after 31 December 1993. Accordingly, there was no contractually effectual entitlement to take timber from 1 January 1994 due to the effect of General Condition 5 which provided -
‘Supply of timber for the successful tenderer/s will be made under, and subject to, the provisions of the Forestry Act , 1916, the Forestry Regulation 1983 and subject to the conditions of licences issued under these statutes.’
That the Commission when it entered into the agreement on 14 November 1988 was obliged to comply with s112 (1) of the EPA Act and was in breach of its implied obligation under the contract to do so.
That the contractual obligation did not extend to oblige the Commission to exercise the discretionary statutory power to issue licences in any particular way.
That the Commission was in breach of its obligation to comply with s112 (1) of the EPA Act on each occasion until 12 March 1992, when it granted another timber licence.
That, after the commencement of the TIIP Act, the implied contractual obligation would have obliged the Commission to take reasonable steps, in respect of the eight compartments to which schedule 1 of the TIIP Act applied, to overcome the prohibition found in s6 by obtaining an environmental impact statement and the Minister of Planning's determination under s9 if there were to be any operations in the eight compartments.
That the timber licence which UHT had by then obtained for 1992 did not relate to any of those compartments, so no action in relation to them was contractually required of the Commission.
That with respect to other parts, which included compartments 180, 181, 182 and 187 to which the 1992 licence applied, the Commission needed to comply with s8 by obtaining an environmental impact statement and a determination from the Minister of Planning but, as its environmental impact statement was rejected by the Minister of Planning as inadequate, it failed to do so.
That the Commission, in not submitting an acceptable environmental impact statement and not obtaining a determination from the Minister of Planning under the TIIP Act, was not in breach of the Commission's implied obligation.
That, as the terms of the timber licence for 1993, did not identify the relevant land by compartments, UHT had not shown by evidence whether the prohibition in s6 had any operation in respect of the land subject to that licence or whether that prohibition was a practical impediment to getting timber in accordance with the licence.”That, if it had been a breach, it had not been shown to have had any effect to prevent logging operations on any land which UHT would otherwise have worked and therefore as a cause of damage. The TIIP Act did not forbid logging operations on land in schedule 4, presumably because during the period of operation of the Act the application of Pt 5 of the EPA Act in respect of logging operations being carried out or proposed to be carried out on land specified in schedule 4 was suspended.
“[55] The result of these findings would be that, although the claim for damages caused by breaches of contract which had occurred before 14 August 1991 was statute barred, UHT was entitled to damages for the Commission's failure to comply with s112 (1) of the EPA Act at the time of granting licences for the period on and after 14 August 1991 up to the timber licence granted for 1992. It is not clear whether any damages in the sense of any loss of timber harvesting was suffered during this period. Thereafter, as I understand it, because of the limited areas covered by the licences subsequently issued, either there was no breach of contract or, alternatively if there was, no damage [was] suffered. This was particularly so from 1 January 1994.
[56] In the course of submissions the Court was told that the extent to which compartments were covered by the various licences, which his Honour analysed, were not the subject of any argument before him. However, for reasons that I have sought to explain, the Commission may well have been under a contractual obligation to issue licences, an obligation the performance of which could not be enforced but the breach of which would have entitled UHT to damages.
[57] In all the circumstances, in my opinion, the appeal against his Honour's decision to dismiss the Mount Royal claim should be allowed, his Honour's order dismissing this claim set aside and the matter remitted to the Equity Division for a determination of the extent, if any, to which the Commission was in breach of the agreement made on 14 November 1988 during the period on and from 14 August 1991 to 31 December 1996 and the damages, if any, the result of such breach for which the Commission is liable having regard to the provisions of the Frustrated Contracts Act .”
68 The formal orders were in accordance with para [57] in this passage, including an order for remittal in the terms there proposed.
69 It will be noted that Sheller JA did not cast doubt on Bryson J’s findings in the dot points. On the contrary, the findings were accepted for what his Honour said in para [55] in the passage last set out. In the first appeal, therefore, it was accepted that the respondent was not obliged to exercise its discretion in any particular way.
70 Notwithstanding that its argument for damages for loss of bargain had not been accepted, the appellant succeeded in the first appeal. Sheller JA accepted that there was breach of contract by reason of the respondent’s failure to comply with s 112(1) of the EPA Act at the time of granting licences in the period from 14 August 1991 to the grant of the 1992 licence, and that there may have been damage suffered (para [55] first sentence). His Honour’s belief was that there was no breach or no damage suffered thereafter “because of the limited areas covered by the licences subsequently issued”, but there was doubt because of inadequate analysis of the coverage before Bryson J (para [55] second and third sentences, para [56] second sentence). Because the injunction applied only to compartments 200 to 204, it could not be said that the 1988 breach and the injunction to which it led caused any loss suffered through inability to take timber from other compartments, so causation was not necessarily an answer to the appellant’s claim: it depended on the compartments in relation to which the respondent was obliged to have an environmental impact statement. This was the first departure from Bryson J, although as I have said it is now accepted that the appellant’s claim is effectively concerned only with the Davis Creek section of the Mount Royal State Forest. There was further departure from Bryson J in that it was accepted that a breach after 19 August 1991 might have caused loss, so the appeal was upheld on causation itself - the restraint on timber getting, in the event of a breach, was not caused by the 1988 breach and the injunction to which it led.
71 Although not explicit, no doubt the second departure from Bryson J was because having a valid environmental impact statement would itself remove the restraint of the injunction. Bryson J’s findings that the breaches until 12 March 1992 and any later breach did not cause loss because the cause was the 1988 breach and the injunction to which it led were conspicuously absent from the dot points, and if there had not been disagreement with his Honour in this respect the appeal would have been dismissed. What is not so clear is whether, from the second sentence of para [56], Sheller JA also considered that there may have been breach in connection with failure to issue licences.
72 It has been seen that the appellant contended before Bryson J that the implied term required the respondent “to issue all necessary licences under s 27A [of the Act]”. Bryson J had held, and Sheller JA had accepted, that it was not obliged to exercise its discretion in any particular way. That did not mean, however, that it could not be liable in damages if, because it did not have a valid environmental impact statement, it did not issue timber licences. When in para [56] Sheller JA took up the “reasons that I have sought to explain”, it seems to me his Honour was taking up his discussion of fettering the discretion to issue licences. The respondent could not be obliged to exercise its statutory discretion to issue timber licences in any particular way, in that the issue of licences could not be enforced. But if “a contractual obligation to issue licences” was breached, the appellant had a remedy in damages. In this respect also there was a departure from Bryson J: as well as breach when licences were issued because the respondent did not have a valid environmental impact statement, there could be breach in connection with failure to issue licences.
73 The framing of the order of remitter can then be appreciated. It was limited to the period on and from 14 August 1991, because the effect of the statutory bar was undisturbed. The period extended to 31 December 1996 to expose breach in connection with failure to issue licences. And the words “the extent, if any” catered both for the uncertainty, due to the inadequate analysis of coverage, of the extent of breach when licences were issued because the respondent did not have a valid environmental impact statement and also for the possibility of breach in connection with failure to issue licences.
74 I have used the phrase “breach in connection with failure to issue licences”. Sheller JA did not expressly confine breach of a contractual obligation to issue licences to breach because the respondent did not have a valid environmental impact statement. As earlier noted, the appellant’s contention as first recorded by Bryson J appeared to go beyond a case of breach in that the respondent “never took the steps to have the EIS”. The appellant’s statement of issues on the remitter in due course provided to Bryson J did not clearly confine its case in the manner stated before us in this appeal, although it must be said that it was not particularly clear in any respect. However, if the appellant’s case was a case of breach in that the respondent did not have a valid environmental impact statement, it was accepted that it was in breach of the agreement when it issued timber licences which were for that reason invalid, and Sheller JA may have contemplated that the respondent might be in breach of the agreement if for that reason it did not issue timber licences. For reasons which will appear, I do not think it matters whether the possible breach of a contractual obligation to issue licences is confined to breach because the respondent did not have a valid environmental impact statement.
76 The judgment in the first appeal said nothing about the Minister’s approval under s 11(1)(m)(ii) of the Act.75 Importantly, Sheller JA did not say that there was breach of a contractual obligation to issue licences, only that there “may well have been” such an obligation. He did not find, in the language used when discussing fettering the discretion to issue licences, that the respondent had contracted to grant to the appellant a licence or licences to take timber.
Bryson J’s second judgment
78 The appellant sought to put further evidence before Bryson J, which his Honour declined to receive. He said in the second judgment -77 The remitter fell to Bryson J. His Honour said in the judgment that he understood that the order “refers to breaches on and from 14 August 1991 to 31 December 1996, and does not refer to breaches committed before that period which had continuing effects”.
“When the proceedings came before me for determination of the matter remitted the plaintiff's counsel told me that he proposed to read two further affidavits on the issue of liability; these affidavits, which have been filed are those of Mr Bromley sworn 23 June 1999 and Mr R.J. Sims sworn 22 July 1999. Defendant's counsel opposed this course. I did not allow the affidavits to be read because the trial of the proceedings took place earlier and the parties' evidence on the issue of liability was heard then, the appeal did not involve fresh evidence and the evidence proposed to be read could not have been fresh evidence, no ground was advanced on which leave to re-open the evidence ought to be given, and the order of the Court of Appeal did not order a new trial but ordered only the determination of stated questions, in terms which require determination in relation to the issues and the evidence as they already are. While there is power to re-open a hearing and allow further evidence after judgment has been reserved, that power is only to be exercised where there is some substantial ground for exercising it. I refused the application and embarked on determining the question of liability under the Court of Appeal's order on the evidence at the earlier hearing. I did not embark on hearing or determining any question of quantum, as I earlier decided that quantum would be decided separately. Nothing has happened which limits the evidence which parties may read on quantum.”
80 His Honour then went to the judgment in the first appeal, including setting out paras [55] and [56]. His Honour said -79 After referring to the agreement and its breach as originally alleged, Bryson J said that to establish what matters of fact or law were required to be decided to determine the matter remitted it was necessary to identify the parts of his earlier decision which were erroneous and were set aside. He said, “It is not appropriate to reopen any other matter.”
[14] The last two sentences of paragraph 55 and first sentence of para 56 deal with a connected subject. The Court of Appeal's view was that because my findings about the extent to which compartments were covered by various licences had not been the subject of argument, there should be an opportunity to determine again what areas the licences covered so as to establish whether it was correct to understand that either there was no breach of contract or that no damage was suffered because of the limited areas covered by the licences. Questions of fact relating to which Compartments were covered by various licences have been reopened for argument and determination.”“[13] In my understanding the holding in the first sentence of para 55 is to the effect that it was erroneous to find that the cause of Upper Hunter's inability to work the Mount Royal State Forest throughout the whole six years before the proceedings began and earlier was the injunction which arose out of the Commission's failure in 1988 to comply, in 1988 [sic] with s112(1) of the Environmental Planning and Assessment Act 1979. The holding on appeal was to the effect that, because (finding 4) [this was a reference to the finding in the fourth dot point] the Forestry Commission was in breach of its obligation to comply with s112(1) of the Environmental Planning and Assessment Act 1979 on each occasion until 12 March 1992 when it granted another timber licence, the breaches of contract committed on each of those occasions could have caused damages which Upper Hunter is now entitled to recover. Sheller JA observed in the second sentence of para 55 that it was not clear that any damages in the sense of any loss of any timber harvesting was suffered during this period. It is a subject for further determination whether any damages in that sense had been suffered and the quantum.
82 His Honour went on -81 His Honour’s understanding thus far of the effect of the reasons in the first appeal was to the same effect as the understanding which I have indicated.
“[15] I understand Sheller JA's reference in the second sentence of paragraph 56 to a contractual obligation to issue licences which the Commission may well have been under as a reference to paragraphs 37 and 41 of his Honour's reasons which dealt with whether the making of such a contract as was alleged had been made for Stewart's Brook would amount to an anticipatory restriction or stultification of the ambit of the Forestry Commission's statutory licensing discretion.
[17] This view was erroneous and the correct view was stated at paragraph 41 by Sheller JA:[16] I dealt with this question in my earlier judgment particularly in pages 5 and 6 and was of the view that "A contractual arrangement which committed the Forestry Commission to issue a licence for a future year, or a series of future years, would be inconsistent with [the] statutory regime for issuing licences for fixed periods..." and that such an arrangement "... could not be binding on the Forestry Commission because of its inconsistency with the discretionary nature of the power to issue licences which must be exercised on whatever relevant considerations presented themselves at the time when the proposed issue of a licence for a period came to be considered".
"Thus, if the Commission had contracted to grant to a sawmiller a licence to extract timber up to a particular quota each year for a period into the future and the contract was subject to the provisions of the Act and any regulations it would not have involved any divestiture by the Commission of its powers or duties. The statutory discretion to grant or refuse a licence would have remained unfettered. If the discretion was exercised otherwise than in accordance with the contract, the other party would have been left to its remedy in damages. In the words of Mason J in Ansett at 76 such an outcome works a reasonable compromise between the desirability of recognising the binding nature of contracts and the need to preserve the free and unfettered exercise of the discretion."
[18] The second sentence of paragraph 56 shows that the Court of Appeal did not proceed to conclude that the Forestry Commission actually was under a contractual obligation to issue licences, because some matters of defence pleaded by the Forestry Commission had not been adjudicated, and would be an appropriate subject for determination in the Equity Division.”
83 Implicit in paras [15] to [18] of Bryson J’s second judgment is his Honour’s understanding that error had been found in his earlier reasons in that, subject to other matters of defence, the respondent was under a contractual obligation to issue timber licences, at least in the sense that it could be liable in damages for failure in that obligation. That may have gone beyond the understanding which I have indicated, not only because his Honour does not seem to have confined breach of the contractual obligation to issue licences to breach because the respondent did not have a valid environmental impact statement but also because Sheller JA did not find that the respondent had contracted to grant to the appellant a licence or licences to take timber.
84 It was not suggested to Bryson J on the remitter that the 1991 and 1992 licences covered compartments other than those earlier found. As to the licence issued for 1993, in the course of his reasons his Honour said that his earlier finding as to the compartments to which it related was incorrect and that it relevantly related to compartments 200 to 204. It seems that by this time the parties had appreciated that, as earlier noted, the appellant’s claim was effectively concerned only with compartments 200 to 204. Early in the reasons his Honour observed that “[n]o evidence establishes or deals at all with the terms of the application for licences for 1991, 1992 or 1993, or shows whether an application was made for licences covering Compartments 200 to 204, or shows for what reasons licences for those Compartments were not granted”.
85 Bryson J considered the respondent’s obligation to issue timber licences and its obligation to have an environmental impact statement in respect of the licences it had issued. He concluded “that there was no contractual obligation and that if there was, there was no breach”.
87 His Honour then said -86 His Honour first observed that as the agreement included the need to obtain licences it could not be said that there was any breach by the respondent in not issuing a licence to take timber in compartments 200 to 204 “unless the procedure prescribed by legislation including Regulations 39, 40 and 41 was followed. If it was not, General Condition 5 would not be fulfilled.”
88 After correcting his earlier finding and saying that the compartments to which the 1993 licence related included compartments 200 to 204, his Honour said -
“[22] With respect to the year 1991, any failure to comply with s 112(1) of the Environmental Planning and Assessment Act 1979 at the time of granting the licence occurred on the date of issue of the licence on 7 February 1991 and the recovery of damages caused thereby is time-barred. As the licence did not relate to any compartment which was within the contract or within the injunction, there was no failure.
[23] The licence for the year 1992 Appeal Book 551 covers four Compartments, 180 and 187 which are within the contract, and 181 and 182 which are not. The injunction did not affect working in these areas. There can be no finding that any failure by the Forestry Commission to comply with s 112(1) of the Environmental Planning and Assessment Act 1979 caused loss for the year 1992, because there is no evidence and there can be no finding that the plaintiff applied for a licence to take timber in the Davis Creek Compartments 200 to 204 for that year, and the Forestry Commission did not have a contractual obligation to grant licences to take timber from those Compartments. If there was a failure, there is no time-bar.”
“[26] If there had been an application for a timber licence in relation to any of the Davis Creek Compartments for 1993, the Forestry Commission would have been obliged to take reasonable steps to overcome the prohibition found in s.6 of the Timber Industry Interim Preservation Act 1992: see Sheller JA at para 54(5) [this was a reference to the finding in the fifth dot point in the judgment of the Court of Appeal]. An application of that kind would have required compliance with the Forestry Commission's implied contractual undertaking to do all such things as were necessary on its part to enable Upper Hunter to have the benefit of the Agreement. However as there was no such application there was no further breach in 1993.
[27] I turn to the last two sentences of paragraph 55 of Sheller JA’s Judgment. The licence issued for 1993 is not limited in area in a way which shows that there was no breach of contract. It was [sic: has] not been established that any relevant licence was applied for or was issued for the years 1994 or later and hence the understanding stated by Sheller JA for that period has not been disturbed. There were no breaches in respect of the years 1994, 1995 and 1996.”
90 Bryson J also referred to s 11(1)(m)(ii) of the Act, it seems for an independent reason why there was no breach of the agreement - indeed, as the reason why there was no agreement. As earlier noted, I will deal separately with this matter.89 I confess to some difficulty with these passages, but Bryson J’s essential reasoning seems to have been as follows. The breaches accepted in para [55] of the judgment in the first appeal did not lead to damages because the licences were not in relation to compartments 200 to 204. Concentrating on compartments 200 to 204, so far as it was contended that the respondent was under a contractual obligation to issue timber licences, there was no obligation unless application were made for a licence or licences; further, in the absence of evidence of an application, there was no occasion to have a valid environmental impact statement. There was therefore no breach of the agreement, whether as to the 1993 licence which had been issued or otherwise.
91 The appellant submitted that Bryson J was in error -
This appeal
(a) in his construction of the order of remitter;(b) in failing to determine whether any damages were suffered as a consequence of “the breach committed by the Respondent and persisted in at all times from 14 November 1988”;
(d) in failing to admit the evidence in the affidavits of Messrs Bromley and Sims.(c) in finding that the respondent’s liability depended upon the appellant having made and the respondent having refused an application for a licence; and
92 Matters (a) and (b) in the appellant’s submissions ran together. The appellant argued that the Court of Appeal had accepted in the judgment in the first appeal that the breach as at 14 November 1988 had (in the appellant’s words) “continued thereafter”, so that “the damages claim arising from the breach since 1988 had not expired”; that the remitter was to enable it to be determined whether any damages had been suffered; and that Bryson J had been incorrect in saying that the order did not refer to breaches committed before 14 August 1991 which had continuing effect. The appellant relied on the notion of continuing breach to which I earlier referred, from which it further argued for damages on the basis of loss of a chance of obtaining “meaningful licences”.
93 In my opinion the submissions misunderstood the reasons of the Court of Appeal. The first judgment of Bryson J and the reasons of the Court of Appeal had set the context in which there was to be a determination as to breach and damages, namely, that there had been breach as at 14 November 1988 as to which the cause of action was statute barred, that subject to the analysis of compartments there had been breaches thereafter at the times when timber licences were issued, and that there may have been breach in connection with failure to issue licences. The former breaches were distinct breaches on the occasions of the issue of licences, the product of what could be seen as a continuing obligation on the respondent to have a valid environmental impact statement on those occasions but not a continuing breach since 14 November 1988. Any breach of the latter kind had to be a breach on or after 14 August 1991. On my reading of the judgment, the Court of Appeal did not accept that the breach as at 14 November 1988 continued thereafter, whatever that may mean, but on the contrary in the fourth to sixth dot points in particular accepted that there was distinct later breach when timber licences were issued - otherwise it would have been sufficient to say that the respondent fell into breach on 14 August 1991. The Court of Appeal relevantly ordered the remitter so that there could be a proper determination of any distinct breach after 14 August 1991 and a determination of whether damages flowed.
94 With the scrutiny to which it was subjected in this appeal, there is artificiality in these later breaches, and even in the breach as at 14 November 1988. An understandable implied obligation, undertaken by the respondent upon the making of the agreement, would be an obligation to take steps to obtain a valid environmental impact statement within a reasonable time (if the respondent did not already have one, as was the case), so as to be able to issue appropriate timber licences to the appellant if a decision was otherwise made that they should be issued. There could be breach if the respondent then failed to take steps to obtain a valid environmental impact statement within a reasonable time. But there would not be breach immediately on the making of the agreement, and there would not be distinct later breach upon the issue of an invalid timber licence - the breach of the implied obligation would be complete if, at the expiry of the reasonable time, the respondent had not obtained a valid environmental impact statement. The issue of timber licences which were ineffective because the respondent did not have a valid environment impact statement would neither help nor hinder the appellant in taking timber from the sections of the Mount Royal State Forest the subject of the agreement, and would not give it any entitlement to damages.
95 However, the course of these proceedings has been otherwise. The breach as at 14 November 1988 found by Bryson J in his first judgment, and undisturbed in the first appeal, must have been on the basis that the respondent’s obligation to do all things necessary to enable the appellant to have the benefit of the agreement required it to be in a position immediately to issue timber licences with respect to the sections of the Mount Royal State Forest the subject of the agreement. It seems that there was no occasion for the finding of breach as at 14 November 1988 to be questioned in the first appeal, and neither party sought to question it in this appeal. In the first appeal it was accepted that there was distinct later breach when a timber licence was issued, subject only to analysis of the compartments. This approach to immediate and then later breach of the agreement was endorsed by the Court in the first appeal and in the order of remitter. The respondent indirectly sought to displace the approach in this appeal. The appellant did not seek to displace the approach, for unexpressed but understandable reasons. If it were displaced the appellant would not have the benefit of breach when timber licences were issued and, because it did not present a case of failure to take steps to obtain a valid environmental impact statement within a reasonable time, the appellant would not have proved any other breach.
96 In my view, it is too late to depart from this approach to immediate and later breach. There is no question of a continuing breach since 14 November 1988. The taking of timber was subject to the issue of timber licences, and the respondent was required to have a valid environmental impact statement when a timber licence was issued so that it would be effective to enable the taking of timber. The immediate breach was statute barred, and any later breach would occur at the time when, the respondent having in the exercise of its discretion purported to issue a timber licence, the licence was ineffective to enable the taking of timber for want of a valid environmental impact statement.
97 In my opinion, therefore, Bryson J was correct in addressing breaches after 14 August 1991, and did not err in failing to address whether damages flowed from persistence in the 14 November 1988 breach.
98 There is an inaccuracy in matter (c) in the appellant’s submissions, in that Bryson J did not say that liability depended on the appellant having made and the respondent having refused an application for a timber licence. Refusal was no part of his Honour’s reasoning. But, at least in relation to breach in connection with failure to issue licences, I do not think his Honour was in error in considering that liability depended on the appellant having made an application for a licence.
99 The respondent was not required to issue a timber licence or licences for all times and all compartments in the sections of the Mount Royal State Forest the subject of the agreement, individually or cumulatively good for the life of the agreement and for the whole of the relevant area. Its obligation to have a valid environmental impact statement was qualified accordingly. Although it does not seem this happened, perhaps an understanding of the licences required could have flowed from the order of working or the harvesting plans, but always it was necessary that licences be issued and under the 1983 Regulation application for a licence and payment of a fee were required. The respondent was not obliged to do more than respond to the appellant’s application or applications for a licence for such period and such compartments as the appellant considered necessary for its reasonable logging operations.
100 As to breach in connection with failure to issue licences, therefore, it does not matter whether or not the possible breach of a contractual obligation to issue licences is confined to breach because the respondent did not have a valid environmental impact statement. The respondent had to have a valid environmental impact statement, but (on the approach in the proceedings to which I have earlier referred) only when the licence was issued. It did not have to issue a licence and it did not have to have a valid environmental impact statement whereby a licence it issued would be effective, unless the appellant applied for a licence.
101 The only licence issued after 14 August 1991 and relevant to the Davis Creek section of the Mount Royal State Forest is the 1993 licence. Bryson J had said that there was no evidence of applications for timber licences with respect to compartments 200 to 204, and in para [26] of the second judgment that there was “no … application” for 1993. Although not a matter raised by the appellant, it emerged in the course of argument that the 1993 licence as issued recorded the date of issue of 4 February 1993 and payment of a licence fee, giving a receipt number. This was taken up by the appellant without objection from the respondent. Where the evidence was otherwise silent one way or the other, in my view it is to be inferred that the appellant had in some manner applied for the licence, there being no prescribed form of application, and had paid the fee.
102 It follows that the respondent was in breach of the agreement, because when it issued the 1993 licence it did not have a valid environmental impact statement whereby the licence was effective under the s 6 regime in the TIIP Act. (The parties appeared to regard having the Minister’s determination as part of having what I have called a valid environmental impact statement, and I proceed on that basis). On the approach to which I have earlier referred, which I respectfully question but consider must be adhered to, the breach was failure to have a valid environmental impact statement when the licence was issued, and the appellant’s cause of action was for breach of the agreement in that respect. The invalidity of the 1993 licence must be treated as part of the causal chain to any damages, and the appellant is entitled to such damages as flowed from the breach - for example, if it proves that it would have taken timber in 1993 and made profits if the licence had been effective. That, however, is the full extent of its entitlement.
103 There remains matter (d) in the appellant’s submissions, the affidavits of Messrs Bromley and Sims. The affidavits dealt with many topics, although in this appeal the principal significance attributed to them by the appellant concerned what was said about what occurred, or more correctly did not occur, in relation to applying for timber licences. That was a minor part of the affidavits. It is plain that at the second hearing before Bryson J the appellant was endeavouring significantly to amplify its evidentiary case on liability.
105 His Honour could in his discretion permit the appellant to re-open its case. The principles on which re-opening may be permitted have been considered in Urban Transport Authority v Nweiser (1992) 28 NSWLR 471, although the consideration was principally directed to an application to re-open made before the hearing was concluded. It was recognised (at 478) that the principles relating to the calling of fresh evidence may be relevant where the application to re-open is made after judgment. That was in substance the position in the present case. Bryson J had given his first judgment, and the Court of Appeal had corrected him in relation to causation from the 1988 breach and the injunction and the issue of licences and had thought it proper to allow an opportunity further to analyse the compartments. It was very much a case where the parties should have their rights and liabilities determined on the existing evidence, without a windfall chance to endeavour to improve their evidence on further consideration and with the benefit of the reasons of the trial judge and the Court of Appeal. As his Honour noted, the evidence in the affidavits of Messrs Bromley and Sims was not fresh evidence, meaning that it could have been put before him in the beginning, and I do not think error has been shown in the exercise of his discretion against the appellant.104 Nothing in the judgment in the first appeal or the order for remitter amounted to an order for a new trial or set the evidence at large, or endorsed going beyond the existing evidence when determining the remitted questions. Bryson J was correct in saying that those questions were to be determined on the existing evidence.
106 In his first judgment Bryson J referred to provisions of the Act as it stood in 1988 empowering the respondent to enter into an agreement such as the agreement. They included, and he specifically set out, s 11(1)(m)(ii) whereby the respondent -
The Minister’s approval under s 11(1)(m)(ii) of the Act
107 His Honour’s judgment included, as well as that the agreement did not oblige the respondent to exercise its discretion as to the issue of timber licences in any particular way, that the agreement did not oblige the respondent “to obtain the Minister’s approval to an agreement to do so”. Indeed, his Honour regarded the former as supported by the latter, and his language indicated that he did not see the agreement as an agreement to issue timber licences within the meaning of s 11(1)(m)(ii) -
“(m) may enter into an agreement with any person -
…
(ii) under which the commission, with the approval of the Minister, agrees to issue to that person timber licences or products licences or timber licences and products licences for the taking, at such intervals or during such periods, of such quantities and kinds of timber or products or timber and products, as may be specified in the agreement from lands within any area so specified.”
“In my opinion the contractual obligation does not extend to oblige the Forestry Commission to exercise the discretionary statutory power in any particular way. This is made even more clear than it earlier was by the terms of the Forestry Act as they had become by 1988, as paragraph 11(1)(m)(ii) by then provided machinery by which such a commitment could be given, and that machinery was not followed, either by making an agreement to issue timber licences during a period or by obtaining the Minister’s approval. The implied contractual obligation could not have extended to obtaining the Minister’s approval because no agreement was made in terms to which such an approval could be relevant.”
109 In his second judgment Bryson J said -108 The respondent’s defence had included in para 4(b) that the agreement was beyond the powers of the respondent under the Act. In his first judgment Bryson J did not expressly hold that the agreement was within power, but his reasons proceeded on the basis of his finding that the agreement had come into existence. The first appeal seems also to have proceeded on the basis that the agreement was a valid agreement, that is, not vitiated because beyond the powers of the respondent under the Act. The order of remitter presupposed a valid agreement. However, it seems to have been accepted that some matters of defence raised by the respondent had not been dealt with because the decisions had rested on other matters, and that the question of power remained open, see para [18] of Bryson J’s second judgment set out above and the paragraphs next set out.
“[31] I return to the question of the Forestry Commissions’ powers raised by the Amended Defence para 4(b). In my earlier judgment I dealt with the question of the Minister’s approval and the operation of sub-section 11(1)(m)(ii) of the Forestry Act 1916 at pages 24 and at 27 to 28 but I did not dispose the proceedings on that basis. Section 11 now deals with the powers and duties of the Commission in an altogether different way to its provisions in force at the earlier time to which Sheller JA gave detailed attention at paragraph 29 and following of his judgment when dealing with contractual commitment to issue discretionary licences. There is now undoubtedly power in the Forestry Commission to enter into an agreement by which the Commission agrees to issue timber licences; the terms of the agreement can be very wide with respect to the time, quantity and kinds of timber to be taken, so they could extend to a commitment for a number of future years. The existence of an effective agreement of that kind would in practical terms be an overwhelming consideration when the time came to exercise the discretion. There is no room for the concern I earlier felt about pre-committing a discretionary decision. However the approval of the Minister of the agreement to issue the licences is one of the necessary circumstances for the power to exist and be exercised. Evidence established that the approval of the Minister has not been given.
[32] In my opinion the meaning and effect of s 11(1)(m)(ii) are that a purported agreement to issue timber licences which is not made with the approval of the Minister is outside the Forestry Commission’s power and has no effect: it is not the Forestry Commission’s agreement, and it is not an agreement at all. To adopt expressions used by Sheller JA at paragraph 39, it is impliedly prohibited by and it is incompatible with s 11(1)(m)(ii).
[33] The requirement is established by the terms of sub-s 11(1) to be a limitation on the power of the Commission to enter into such an agreement; in this respect the legislation is quite different from the legislation considered in Australian Broadcasting Corporation v Redmore Pty Ltd (1989) 166 CLR 454. In that case the legislation, in a directory provision separate from the provisions conferring powers, required the Corporation to obtain the Minister’s approval for contracts of a certain value, and in the opinion of the majority this provision did not limit the powers of the Corporation to make the agreement. That analysis is not available for subsection 11(1)(m)(ii).”
111 Resolution of the issue, in my view, goes against the respondent. As I have said, Sheller JA did not find that the respondent had contracted to grant to the appellant a licence or licences to take timber. I do not think that the respondent agreed to issue a licence or licences. The agreement expressly provided that the supply of timber was under and subject to the Act, and at most the respondent agreed to give due consideration to the issue of a licence or licences - it did not promise to issue them, even so as to be liable in damages if it did not do so. With respect, Bryson J’s understanding that the Court of Appeal had found that, subject to other matters of defence, the respondent was under a contractual obligation to issue licences was erroneous, and in consequence his finding that the purported agreement fell within s 11(1)(m)(ii) and there was no agreement was erroneous.110 The respondent submitted in this appeal that Bryson J had found against the appellant on the remitter for the independent reason that there was no agreement. Arguably the appellant’s grounds of appeal were wide enough to encompass a challenge to this conclusion, although the appellant’s submissions had not taken up such a challenge. Through the respondent’s submission, the correctness of his Honour’s view became an issue in the appeal. The appellant did not submit that the question of power, and so the assistance of the agreement, had not remained open for determination on the remitter. The respondent did not submit that a challenge lay outside the appellant’s grounds of appeal.
112 The appellant will obtain a favourable order in this appeal, but not on the submissions on which it relied and by reason of a short factual issue which arose in the course of argument. In my view justice between the parties will best be done if no order is made as to the costs of the appeal, so that the appellant and the respondent each bear their own costs. The proper disposition of the costs below will depend inter alia on the ultimate outcome of the appellant’s claim, and should be left for the judge who deals with the next, and one hopes last, stage of this protracted litigation.
Costs
113 I propose the following orders -
Orders
(1) Appeal allowed;
(2) Set aside the determination made by Bryson J on 17 December 1999 that the respondent was not to any extent in breach of the agreement made on 14 November 1988 during the period on and from 14 August 1991 to 31 December 1996, and in lieu thereof determine that the respondent was in breach of the agreement made on 14 November 1988 during the period on and from 14 August 1991 to 31 December 1996 to the extent that at the time it issued timber licence 18677 expressed to have effect from 1 January 1993 to 31 December 1993 it had not complied with Part 5 of the Environmental Planning and Assessment Act 1979 in respect of the logging operations thereby purportedly permitted as required by s 6 of the Timber Industry (Interim Protection) Act 1992;
(3) Set aside the judgment for the respondent with costs ordered by Bryson J on 17 December 1999;
(4) Remit the proceedings to the Equity Division for determination of the amount of damages, if any, to which the appellant is entitled by reason of the breach as determined;
(5) Make no order as to the costs of the appeal;
(6) Order that the past costs of the proceedings in the Equity Division be disposed of as ordered by the judge determining the appellant’s damages.___________
Key Legal Topics
Areas of Law
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Contract Law
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Administrative Law
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Statutory Interpretation
Legal Concepts
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Appeal
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Breach
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Damages
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Remedies
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Statutory Construction
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