WMJ Attractions Pty Ltd v Ireland
[2008] QSC 140
•30 June 2008
SUPREME COURT OF QUEENSLAND
CITATION:
WMJ Attractions Pty Ltd v Ireland & others [2008] QSC 140
PARTIES:
WMJ ATTRACTIONS PTY LTD ACN 104 760 232
(plaintiff)
AND
GARY IRELAND
(first defendant)
AND
IRELAND GROUP PTY LTD ACN 072 392 600
(second defendant)
AND
ROCKHAMPTON WATER SPORTS PTY LTD as Trustee for the ROCKPOOL ENTERPRISES TRUST ACN 108 980 203
(third defendant)
FILE NO/S:
7290 of 2006
DIVISION:
Trial Division
PROCEEDING:
Application
ORIGINATING COURT:
Supreme Court of Queensland
DELIVERED ON:
30 June 2008
DELIVERED AT:
Brisbane
HEARING DATE:
17 January 2008
JUDGE:
Daubney J
ORDER:
1. Summary judgment for the defendant pursuant to Uniform Civil Procedure Rule 1999 (Qld) r 293
CATCHWORDS:
PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER RULES OF COURT – Summary judgment – where the plaintiff entered into an agreement with the third defendant to design and construct a mini-golf attraction – where, by this agreement, the third defendant represented that it was the registered lessee of the land when, in fact, the lease was in the name of the second defendant – where the plaintiff agreed to construct the works at a reduced rate in exchange for the payment of a percentage of takings – where the third defendant agreed to pay a percentage of the goodwill portion of the sale price relating to the business upon sale or assignment of the lease – where the business performed poorly and only limited payments in respect of the takings were made – where the business sold but no portion of the sale price was ascribed to goodwill – where the plaintiff seeks damages in deceit, damages under the Trade Practices Act, claims a quantum meruit and seeks declarations that it has an equitable lien over the lease and/or the proceeds of the sale of the business – where the defendants seek summary judgment in respect of the plaintiff’s claims – whether the plaintiff has no real prospect of success – whether there is a need for a trial of the matter
EQUITY – EQUITABLE CHARGES AND LIENS – MONEY EXPENDED OR BENEFIT CONFERRED ON PROPERTY OF ANOTHER – where the contract for the works was between the plaintiff and the third defendant – where the lease over the property on which the mini-golf attraction was erected was in the name of the first respondent – whether, to satisfy the needs of justice and good conscience, the plaintiff should be granted an equitable lien or constructive trust over the propertyRESTITUTION – RESTITUTITION RESULTING FROM UNENFORCEABLE, INCOMPLETE, ILLEGAL or VOID CONTRACTS – RECOMPENSE FOR SERVICES RENDERED – QUANTUM MERUIT – GENERAL PRINCIPLES – where the plaintiff alleges that the agreement between the parties was, by reason of the defendants’ misrepresentation, void or voidable – where the plaintiff does not allege that the third defendant has failed to perform its obligations under the agreement – whether the defendants should be required to pay reasonable remuneration for the works
TRADE AND COMMERCE – TRADE PRACTICES ACT 1974 (CTH) AND RELATED LEGISLATION – ENFORCEMENT AND REMEDIES – ACTIONS FOR DAMAGES – Assessment or availability of damages – Generally – where the plaintiff contends that the defendants engaged in misleading and deceptive conduct – where plaintiff seeks damages and/or compensation under ss 82, 87 of the Trade Practices Act 1974 (Cth) and ss 99, 100 of the Fair Trading Act 1989 (Qld) – whether the plaintiff has suffered or is likely to suffer loss or damage as a result of the defendants’ conductACCC v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51
Gould v (1984-1985) 157 CLR 215
Henderson v Miles [2005] NSWSC 710
Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494
Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388
Muschinski v Dodds (1985) 160 CLR 583
Trade Practices Act 1974 (Cth)
Fair Trading Act 1989 (Qld)COUNSEL:
FJ Redmond for the plaintiff
PW Hackett for the defendantSOLICITORS:
Price & Roobottom Solicitors for the plaintiff
Southern Gold Coast Lawyers for the defendant
The plaintiff, WMJ Attractions Pty Ltd (“WMJ”), is in the business of designing theme parks and amusement parks, including the facilities known as mini-golf courses.
By an agreement dated 12 May 2005 between WMJ and the Third Defendant, Rockhampton Water Sports Pty Ltd as trustee for the Rockpool Enterprises Trust (“RWS”), WMJ agreed to design and construct a pirate themed mini-golf attraction at the Northside Swimming Pool complex in Rockhampton. In the agreement, WMJ was referred to as the “licensor” and RWS as the “licensee”.
The agreement contained the following recitals:
“A.Rockhampton City Council (the Council) is the trustee of land comprised in Certificate of Title Volume 49023005 being part of Lot 226 on LN 2756 which is part of State Reserve 750 reserved for park and recreation on which land is erected a water park leased by the licensee and situated at Berserker Street, North Rockhampton in the State of Queensland (‘the land’).
B.The licensee is registered lessee of the land pursuant to a lease for a term of 25 year commencing 14 July 2003 and expiring on 30 June 2028.
C.The licensee has applied to the Council for permission to construct, keep, maintain and use upon the land a themed Pirate Putt Putt mini golf attraction (‘the Business’) to complement and add value to the licensee’s water park.
D.The licensee has requested the licensor to provide its expertise in the creation of the mini golf themed attraction to be constructed by the licensor on the licensee’s land.”
Clause 1 of the agreement provided for the construction of the works. Clause 3 provided for the payment of the design, project management and construction costs in a total fixed price by stated instalments by RWS to WMJ. (It is not in issue that the original fixed price of $220,000 inclusive of GST was subsequently varied to $275,000 inclusive of GST),
Clauses 4, 5 and 6 of the agreement provided:
“4. Fee Payable
(4.1)In consideration of the licensor performing the constructions of works at a reduced rate, the licensee shall pay to the licensor during the term of this agreement, a fee of 12% (inclusive of GST) of the gross takings from admission fees payable by members of the public to gain admission to the Business.
(4.2)Such fee shall be payable on the gross takings as listed in (4.1) above after the deduction of reasonable repairs and maintenance costs as agreed by the licensee and licensor.
(4.3)The fee shall be payable on the first of each month to the licensor.
(4.4)The admission fee payable by members of the public to enter the Business will be jointly determined by the licensor and licensee from time to time as may be required.
5. Duration of Agreement
(5.1)This agreement will remain in force until one of the following conditions is met at which time the agreement will be considered to be terminated.
(a)Wayne Johnston no longer owns a share or is no longer a director of WMJ Attractions Pty Ltd, or
(b)Rockhampton Water Sports Pty Ltd as Trustee for Rockpool Enterprises Trust no longer holds the lease of the land or sells the business.
6. Assignment of the Lease/Sale of the Business
(6.1)In the event of the licensee assigning the lease over the land to a third party or the sale of the business within, the licensee agrees to pay the licensor the equivalent of 12% of the goodwill portion of the sale price relating to the business.”
Between March and September 2005, WMJ designed and built the mini-golf course. By instalments, the last of which was paid on 13 February 2006, WMJ was paid $251,428.07 plus GST, which is just in excess of the $275,000.00 inclusive of GST required to be paid to it under the agreement. Nothing turns on this discrepancy.
From September 2005, WMJ also received a number of payments of the 12% fee referred to in Clause 4 of the agreement:
September 2005 $1,570.89
October 2005 $1,614.27
November 2005 $1,493.55
December 2005 $1,601.01
January 2006 $1,307.73
The principal of WMJ, Mr Wayne Johnson, says that when these payments stopped, he telephoned the principal of RWS, Mr Gary Ireland, and had discussions regarding the non-payment. He said that Mr Ireland told him that the “business wasn’t going well”. Eventually, he says, Ireland stopped taking his calls.
Before proceeding with the narrative, it is necessary to say something about RWS. Mr Ireland, who is the First Defendant and the principal of the Second Defendant, Ireland Group Pty Ltd (“IGPL”), has over 20 years experience as the lessee of public swimming pools and other such aquatic facilities. In 2003, IGPL successfully tendered for the lease of the Northside Swimming Pool from the Rockhampton City Council. After running the complex for a year, from September 2004 Mr Ireland entered into a quasi-partnership with Mr Brian Parker to operate the complex. The vehicle for this quasi-partnership was RWS as trustee of a unit trust in which Mr Parker and IGPL held units. Mr Ireland deposes to the fact that RWS, as trustee of the unit trust, operated the complex. Mr Ireland says, in effect, that the impetus for development of the mini-golf course in the complex came from Mr Parker, who, according to Mr Ireland, effectively had all the dealings with Mr Johnson concerning the matter. In the material before me, including affidavits by Mr Parker, the degree of Mr Ireland’s knowledge of, and involvement in, the development and construction of the mini-golf course is the subject of dispute.
For completeness, it should be noted that the agreement recording the partnership arrangements between Mr Ireland and Mr Parker is in evidence as an exhibit to Mr Parker’s affidavit sworn 7 December 2007. The terms of their arrangement are not relevant to the present dispute, but it is clear from that affidavit that the partnership arrangements between them terminated on 24 February 2006. Mr Ireland asserts that one of the reasons for the dissolution of their partnership was the lack of patrons for the mini-golf facility.
In any event, Mr Ireland says, in effect, that the dissolution of the partnership was the catalyst for the following letter dated 21 March 2006 which he wrote to WMJ:
“Dear Wayne,
Due to the recent restructuring of The Rock Pool Water Park, Rockhampton Water Sports Pty Ltd as Trustee for Rockpool Enterprises Trust, the agreement between the abovementioned and WMJ Attractions Pty Ltd entered into on the 12th May, 2005, has been terminated and will formally cease on April 1, 2006. Please find enclosed the patronage figures for Feb 2006. You will note several deductions relating to the upkeep and maintenance of the Business as per 4.2 of the agreement, and as a result any payment to you at this time has been negated. We envisage the same result for March. Patronage numbers have reduced and already during March further repairs and maintenance have been necessary. We will forward you the March figures at the months end.
The Ireland Group Pty Ltd is the entity which holds the lease of the land on which The Rock Pool Water Park and Pirate Putt Putt are situated. Therefore, the agreement is considered terminated as per 5.1(b) of the agreement. In relation to 6.1 of the agreement, there isn’t any portion of goodwill relating to the business at this stage of its development and thus any payment to WMJ Attractions in relation to this issue is negated.
If you have any further enquiries, please direct all correspondence to our solicitor Kerry Connolly, on 07-49277939.
Regards,
Gary Ireland
Rock Pool Water Park”
As appears from that letter, the fact was that, contrary to Recital B to the agreement, RWS was not, and never had been the registered lessee of the swimming pool complex. Mr Ireland describes how this eventuated as follows:
“6.Rockhampton Watersports traded as Rockpool Water park and operated our partnership business. As part of the partnership arrangements, The Trustee lease was to be transferred to Rockhampton Watersports, but this transfer was delayed for a long time because a survey plan of the land had to be prepared and registered before the Trustee lease would issue from the Department of Natural Resources. Until this occurred we could not transfer the Trustee lease into the name of Rockhampton Watersports.
7.The survey plan did not register with the Department of Natural Resources until approximately early December 2005 and Ministerial consent was not obtained to the proposed transfer from The Ireland Group to Rockhampton Watersports until early January 2006. Until then, the Trustee lease remained in the name of the Ireland Group even though the business was being operated by Rockhampton Watersports.”
On 25 May 2006, RWS entered into a contract for the sale of the pool and aquatic centre business to an unrelated third party, Fun Pty Ltd, for a total sale price of $2,900,000.00. Part of the consideration thereunder was the transfer to RWS of a residential unit at Yeppoon at an agreed value of $1,600,000.00. The Sale of Business contract provided, inter alia:
“3. Lease
The parties acknowledge and accept the following in relation to the Lease referred to in Item R.
1.The Lessee is the Ireland Group Pty Ltd (“the Lessee”), a company associated with the Seller. The Seller will arrange at the Sellers’ expense for the Lessee to sign all documents necessary to assign the Lessee’s interests in the lease to the Buyer and to obtain all necessary consents to the assignment to perfect the registerable assignment of the Existing Lease prior to completion.”
An application by WMJ in August 2006 for an injunction to restrain the sale from proceeding was resolved to enable the sale to proceed on an undertaking by the defendants to hold $200,000 in their solicitor’s trust account.
The proceeding has progressed through various interlocutory phases since then, including a previous application for summary judgment by the defendants. In October 2007, the plaintiff delivered a further amended statement of claim (“FASOC”). This prompted the defendants’ application with which I must now deal, which is for:-
(a) summary judgment under UCPR Rule 293;
(b) alternatively, an order that the FASOC be struck out under Rule 171;
(c) alternatively, for the striking out of specific paragraphs in the FASOC,
and other orders for disclosure and further and better particulars.
It is therefore necessary to analyse the FASOC, which articulates the following claims in its prayer for relief:
“1. As against the second defendant:
(a)a declaration that the second defendant holds its lease subject to an equitable lien in favour of the plaintiff to the extent of the windfall benefit;
(b)in the alternative, a declaration that the second defendant holds its lease as constructive trustee for the plaintiff;
(c)an injunction restraining the second defendant from selling, transferring, assigning, encumbering or otherwise dealing with the business.
2.As against the third defendant:
(a)a declaration that the third defendant holds the proceeds of the sale of the business subject to an equitable charge in favour of the plaintiff to the extent of the windfall benefit;
(b)in the alternative, a declaration that the third defendant holds the proceeds of the sale of the business as constructive trustee for the plaintiff;
(c)an injunction restraining the third defendant from selling transferring, assigning, encumbering or otherwise dealing with the business.
3. As against the first, second and third defendants:
(a) damages for deceit:(i)$191,256.93 as particularised for the purpose of paragraph 23(d) above.
(b)damages pursuant to s. 82 of the Trade Practices Act 1974 and s. 99 of the Fair Trading Act 1989;
(i)$557,101.00 (the windfall benefit);
(ii)in the alternative, $191,256.93 as particularised for the purpose of paragraph 23(d) above.
(c)such order pursuant to s. 87 of the Trade Practices Act 1974 and s. 100 of the Fair Trading Act 1989 as the Court may deem meet;
(d)in the alternative, quantum meruit;
(i)$557,101.00 (the windfall benefit);
(ii)in the alternative, $191,256.93 as particularised for the purpose of paragraph 23(d) above.
(e)Interest on damages;
(f)Costs.
The FASOC pleads preliminary oral and written (including email) negotiations between Mr Johnson and Mr Parker in the period December 2004 to March 2005, including the provision of proposed licence agreements. WMJ asserts that these negotiations contained express representations that RWS was “the lessee of the site on which the swimming pool and water park were operated” (paras 5 and 8(a)) and an implied representation that property in the mini-golf attraction would pass to RWS (para 8(b)).
It is then alleged:-
(a) by para 8A, that Mr Parker made these representations with the intention that they be acted upon by WMJ, and
(b) by para 9, that Mr Ireland knew that Parker had made the representations with that intent, that Mr Ireland was “under a duty to disclose to the plaintiff that the second defendant was the lessee of that site”, that he failed to make that disclosure, and that his failure “induced the plaintiff to enter into the agreement on the basis of the truth of the representations.”
WMJ then pleads that:-
(a) in reliance on, and induced by, the representations and Mr Ireland’s silence, it accepted the agreement (para 10);
(b) between March 2005 and September 2005, it performed its obligations under the agreement and constructed the mini-golf attraction (para 11);
(c) the value of the work and materials expended by WMJ on the mini-golf attraction was some $375,227 (para 12);
(d) by para 13, “under its standard contract to supply and install the mini-golf attraction applying a margin of 20%, the sum charged by the plaintiff would have been $450,272”;
(e) in accordance with the agreement (with the price varied to $275,000 inclusive of GST), WMJ was paid $251,428.07 plus GST (para 14 and 15).
WMJ alleges, in para 16, that “by the installation of the mini-golf attraction the value of the second defendant’s lease was increased by $557,101.00 (‘the windfall benefit’).”
The FASOC then sets out the payments made to WMJ under clause 4.1 between September 2005 and January 2006, the terms of the letter of 21 March 2006, and the contract of sale to Fun Pty Ltd.
The plaintiff then pleads that the representations referred to above, and Mr Ireland’s failure to disclose, was conduct which was misleading or deceptive, or likely to mislead or deceive, in contravention of s 52 of the Trade Practices Act 1974 (Cth) (“TPA”) and s38 of the Fair Trading Act 1989 (Qld) (“FTA”), and that Mr Ireland was “knowingly concerned directly or indirectly” in this conduct (para 20).
The FASOC continues:-
“21.The first defendant, the second defendant and the third defendant knew that the representations were untrue or were recklessly indifferent as to whether they were true or not.
22.In the premises:
(a)The first defendant engaged in unconscionable conduct in contravention of s51AC(2)(b) of the Trade Practices Act;
Particulars
Unfair tactics were used by the first defendant in inducing the plaintiff to enter into the first contract [ie. The agreement of 12 May 2005] and in termination of the first contract.
(b)In breach of Section 51AC(1)(b) of the Trade Practices Act:
Unfair tactics were used by the second and third defendants in inducing the plaintiff to enter into the first contract and in the termination of the first contract.
23. By reason of:
(a) The deceit; and
(b) The contraventions of:(i) s52 of the Trade Practices Act;
(ii) s38 of the Fair Trading Act;
(iii) s51AC of the Trade Practices Act
on the part of the first defendant, the second defendant and the third defendant:
(c) the first contract is void or voidable;
(d) the plaintiff has suffered damage.
Particulars
Standard contract to design and construct $450,272.00
Payment of cost of construction $251,428.07
Discount on design and construction $198,843.93
Less 5 monthly payments received ($7,587.00)
$191,256.93
24.In the premises the second defendant has been enriched at the expense of the plaintiff.
25.The second defendant would be acting unconscientiously if it were to dispose of the lease to Fun Pty Ltd without the consent of the plaintiff or before accounting to the plaintiff.
Equitable lien
26.In the premises the plaintiff is entitled to a lien over the second defendant’s lease to the extent of the windfall benefit.
Constructive trust
27.In the alternative, the second defendant is liable to account to the plaintiff as constructive trustee to the extent of the windfall benefit.
28.The consideration payable by Fun Pty Ltd under the second contract consists of:
(a)a deposit of $2,000 on the signing of the contract payable to the third defendant on completion;
(b)$1,298,000 payable to the third defendant on completion;
(c)the transfer of unencumbered title to Lot 15 on SP112046 County of Livingstone Parish of Yeppoon Title reference 50299887 with a value accepted by the third defendant of $1,600,000.
29.In the premises:
(a) the second defendant is divesting itself of property held in trust for the plaintiff in favour of the third defendant;
(b) to the knowledge of the third defendant and with the assistance of the third defendant property held in trust for the plaintiff is being misapplied or transferred in breach of that trust;
(c) the third defendant is liable to account to the plaintiff as construct [sic] trustee.”
It is to be noted that the damages pleaded and claimed under para 23 of the FASOC amount to the difference between the amounts paid to WMJ under the agreement and the amount which it says it would have charged under a standard contract containing a 20% margin. It is also to be noted that WMJ does not allege that it has been underpaid, or not paid everything otherwise agreed to be paid, under the agreement; indeed no case is sought to be made by WMJ in this proceeding for breach of the agreement. Instead, the cases sought to be mounted in the pleading:
1. are for damages for the “misrepresentation” said to be constituted by the representation that RWS was the registered lessee of the complex under causes of action in the tort of deceit and under the TPA and the FTA. By the prayer for relief, however, it appears that the $191,256.93 difference between the moneys paid under the agreement and the so-called “standard” price is only sought in the common law deceit claim, while the damages claimed under s 82 of the TPA and s 99 of the FTA are said to be equal to the “windfall benefit”, and there is a general claim for orders under s 87 of the TPA and s 100 of the FTA;
2. claim an entitlement in equity, by way of an equitable lien or under a constructive trust, over IGPL’s lease of the complex to the extent of the amount which the plaintiff contends the value of the complex was improved as a consequence of the work performed on and material supplied to the complex by WMJ.
I also note that there would, on the material before me, clearly be a factual dispute for trial as to whether WMJ relied on the alleged misrepresentations. The defendants have pointed to material which suggests that WMJ received legal advice prior to entering into the agreement which informed it of the actual state of the registered leaseholding as at that time. For the purpose of dealing with this application by the defendants for summary judgment, however, I will assume that it would be accepted at trial that the representations pleaded in paragraphs 5 and 8 of the FASOC were relied on by WMJ.
The claim as pleaded for damages for deceit is, it seems to me, fundamentally flawed. Assuming in the plaintiff’s favour that it would establish that the defendants made the false representations knowingly or with reckless indifference to the truth or otherwise of the representations, the damages to which WMJ would be entitled would, on first principles, be the amount necessary to put the plaintiff, so far as possible, in the position in which it would have been if it had not acted on the fraudulent inducement.[1] It is not pleaded that WMJ would have been in any different position than that in which it found itself, it not being asserted that WMJ has not been paid all the amounts to which it was entitled under the agreement it entered into with RWS, and notwithstanding that IGPL was the registered lessee of the complex rather than RWS. Nor is it pleaded, for example, that WMJ lost the opportunity to enter into some other contract with another party charging its “standard rate” as a consequence of having committed itself to undertaking the work for RWS under the subject agreement. The difference between the amounts paid under the agreement with RWS and the sum which WMJ would have charged on its “standard rates” is not a loss which WMJ has suffered. In my view, nothing turns on the fact that RWS purported to terminate the agreement by the letter of 21 March 2006 – the termination was never accepted by WMJ, and in any event, it is not pleaded that WMJ has not been paid everything to which it was entitled under the agreement.
[1]Gould v Vaggelas (1984-1985) 157 CLR 215, per Gibbs CJ at 220-221
Impediments similarly arise in consideration of the claims for damages under s 82 and compensation under s 87 of the TPA. The damages claimed under s 82 are the so-called “windfall benefit”. This is not a loss or detriment which the plaintiff has suffered. Section 82(1) provides that “a person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV … or section 51 AC may recover the amount of the loss or damage by action against that other person …”. But it is clear that the “loss or damage” for which recovery is available under s 82 is loss or damage which the plaintiff has actually suffered, and that it is necessary to identify the detriment which is said to be the loss or damage which has occurred[2]. The plaintiff in this case does not claim to have suffered an actual loss as a consequence of entering into the agreement. Rather, it claims entitlement to the increase in value in the complex which it says resulted from the work performed on the complex by WMJ, for which it was paid the amounts it bargained to receive for having done that work. In point of principle, awards of damages are compensatory, not aspirational, in nature. The case advanced by the plaintiff does not articulate an identifiable detriment which constitutes the “loss or damage” required for the purposes of a claim under s 82 of the TPA.
[2]Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388 at 407-408; Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 532
Similarly, in order to found an order for compensation under s 87 of the TPA, it is necessary that the Court find that the plaintiff “has suffered, or is likely to suffer, loss or damage”. This section “invites attention to whether any of a wide range of orders might be made to compensate, in whole or in part, for the loss or damage or to prevent or to reduce the loss or damage”.[3] Neither the amount representing the difference between what WMJ was paid under the agreement and the amount it would have charged on the “standard basis” nor the “windfall benefit” is a loss which WMJ has suffered, or is likely to suffer, as a consequence of entering into the agreement on the basis of a representation that RWS was the registered lessee of the complex. A causal connection between the loss suffered, or likely to be suffered, and the contravening conduct is necessary for the purposes of obtaining relief under ss 82 and 87.[4]
[3]Murphy v Overton Investments at 408
[4]Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494, per McHugh, Hayne and Callinan JJ at [38]
The same considerations apply to defeat the relief sought under the cognate provisions of the FTA.
For completeness, I should also mention that I would, in any event, have had grave reservations about the case advanced by WMJ under sub-sections 51AC(1)(b) and (2)(b) of the TPA. Whilst contending that the defendants engaged in unconconscionable conduct, in contravention of those sub-sections, the only particulars given of such conduct was that the defendants used “unfair tactics … in inducing the plaintiff” to enter into the agreement and in terminating the agreement.[5] When pressed in the course of argument, counsel for WMJ submitted that the unconscionable conduct was constituted by the making of the representations that RWS held the lease of the complex. Even having regard to the fact the statutory provisions of s 51AC are “intended to build on and not to be constrained by the common law case law”[6] and, accordingly, the term “unconscionable” in this particular statutory context is given a broader interpretation than the meaning of conduct which is “unconscionable within the meaning of the unwritten law” (to use the language of s 51AA), I would have thought it difficult to characterize the making of the representations in the context of this case as “unconscionable”. In light of my conclusions on the claims for damages and orders for compensation, however, it is not necessary for me to say anything further about this aspect.
[5]Presumably a reference to s 51AC(3)(d) of the TPA
[6]ASIC v National Exchange Pty Ltd [2005] FCAFC 226 at [30]
Before turning to the balance of the plaintiff’s pleaded case, I should mention that two arguments were advanced in submissions by the plaintiff’s counsel which do not seem to find any reflection in the FASOC. These arguments appear to arise out of the fact that, whilst the agreement was made between WMJ and RWS, IGPL was in fact the registered lessee of the complex on which WMJ performed the work. Counsel for the plaintiff submitted:
“9.Whether [the agreement was] void or voidable, until 22 March 2006 the plaintiff was entitled as against RWS to recover on a quantum meruit basis the value of the improvements.
10.In fact the plaintiff erected improvements on the property of [IGPL].
11.In doing so:
(a)the plaintiff acted under a mistake as to the title to the land;
(b)erected the improvements on the faith of that mistaken belief;
(c)the Ireland Group:
(i)knew its rights; and
(ii)knew the mistakes made; and
(iii)encouraged the erection of the improvements.”
Counsel then proceeded to make lengthy submissions on the doctrine of equitable estoppel but, with respect, it was not made clear what particular assumptions or state of affairs are said to be covered by the estoppel, how that estoppel arises, against which of the defendants it arises, and how this estoppel forms part of the case pleaded in the FASOC.
The submission that the plaintiff may have had an entitlement to claim against RWS on a quantum meruit is arid. Counsel for the plaintiff submitted on numerous occasions that the agreement was “void or voidable”. But the agreement was not void at law – it was not illegal in formation in performance, nor was it prohibited by statute. It is not pleaded that either of the contracting parties, WMJ and RWS, did not perform their respective obligations under the agreement. It is not alleged that WMJ did not receive everything it bargained to receive under the agreement. Even if the plaintiff had a right to seek to avoid the agreement as a consequence of the alleged misrepresentations, it did not do so. The relationship between WMJ and RWS was governed by the agreement, and there is no plea that it was not fully performed on both sides. In particular, it is not alleged that WMJ did not receive all of the compensation which it had agreed to received, and which it was entitled to receive, under the agreement. In such a case, there would be “neither occasion nor legal justification for the law to superimpose or impute an obligation or promise to pay a reasonable remuneration” by resort to the restitutionary remedy of a claim for a quantum meruit.[7]
[7]Pavey & Matthews Pty Ltd v Paul (1986-1987) 162 CLR 221, per Deane J at 256
The plaintiff’s case, as pleaded and argued before me, then contends in effect that because the work performed by WMJ (and for which it was paid as agreed) was performed on land of which the registered lessee was not RWS, as represented, but IGPL, WMJ had an equitable lien over, or an interest as beneficiary under a constructive trust in, IGPL’s leasehold interest in the subject land. The plaintiff submitted that “the plaintiff has expended moneys on the property of the Ireland Group in circumstances in which it would be unconscionable for the Ireland Group to retain the benefit”. This, so it is submitted, gives rise to an entitlement on the part of the plaintiff to the “windfall benefit”.
Before going any further, I observe the artificiality of this submission, ignoring as it does that the plaintiff was paid under the agreement it had with RWS, and does not contend that it has not received everything it bargained to receive for performing the work under the agreement, regardless of who the registered lessee of the complex was.
In Henderson v Miles (No 2)[8], Young CJ in Eq said:
[8][2005] NSWSC 867
13 Where a family joint venture breaks down without attributable blame, it is unconscionable for one of the parties to retain a windfall which the parties never contemplated that that party would receive.
14 This equity was first identified in modern times by Deane J (with whom Mason J agreed) in Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583 at 620, who thus expressed the principle:
“the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specifically provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do.”
15 Deane J cited immediately after that statement some partnership cases such as Atwood v Maude (1868) LR 3 Ch App 369 at 374-5 and Lyon v Tweddell (1881) 17 Ch D 529.
16 The passage has been applied on many occasions since, see eg Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137 at 147-8 and Luke v Chamberlain [2000] NSWSC 626 discussed later in these reasons.
17 In Lyon v Tweddell (1881) 17 Ch D 529 the partnership agreement between the parties required the plaintiff to pay a premium of 600 pounds in 1875 and a further 500 pounds in 1879. In 1880 as a result of constant disagreements between the partners, the partnership was dissolved. At that stage, Bacon VC ordered that, on taking accounts, the unpaid portion of the premiums should not be charged to the plaintiff and this was upheld on appeal. Atwood v Maude was a similar case.
18 As can be seen from its roots in cases such as Lyon v Tweddell, the expression "without attributable blame" in the standard formula does not mean that the court must try and work out which of the parties in a domestic relationship was of the greater fault; see Callaghan v Callaghan (1995) 64 SASR 396 at 407, where Perry J said that the question as to whether equity gives relief does not turn on the nice question as to where the blame lies.
19 I will refer to the equity identified in Muschinski v Dodds as “the Windfall Equity”. It would be classed as a general equity. Other general equities are Proprietary Estoppel, Promissory Estoppel and the Ocean Island Equity based on the unconscionability of a person who has taken the benefit of a transaction while not assuming its burden; see Tito v Waddell (No 2) [1977] Ch 106.
20 However, it should not be assumed that the remedy for each general equity is the same. This is so even though: (i) the remedy in each case is prescribed as "the minimum equity" to assuage the defendant’s conscience; and (ii) there are unifying processes at work with respect to the different types of estoppel at equity and common law.
21 In particular, one must note the late Professor Birk’s comment as to where one draws the line between making an order which fulfils expectations and one which atones for detriment. He said in his “Introduction to the Law of Restitution” (Clarendon Press, Oxford, 1985) at p 291 that the only justification for regarding expectations is that the defendant did something to induce those expectations. At
p 293 he said that courts must distinguish between cases based on promise and the cause of action based on free acceptance.
22 I will now analyse the authorities relied on by Miss Pentelow in the order in which she noted them to see whether, if properly analysed, they give support to her proposition that the minimum equity that the plaintiff should obtain is the value of the rented premises for the expected term of her life.
23 However, I should note at once that there is a basic fallacy in this approach. Most of the authorities relied on by Miss Pentelow are proprietary estoppel cases strictly so called. These raise equities based on unfulfilled promises. The windfall equity is quite different: the promise has been fulfilled, but the resultant arrangement has come to an end in circumstances not contemplated by the parties, leaving the legal interests in one party who, if equity were not to intervene, would obtain an unconscionable benefit.
The reference to the family joint venture in para [13] of that judgment is explicable by the fact that the case before His Honour concerned, as do many such cases, a breakdown in relations between family members and the consequences of that breakdown on the domestic living and financial arrangements which existed between the parties. In Henderson, a mother, who had separated from her husband, had built a house for herself on land owned by her daughter and son-in law. Some years later, there was a major falling out between the parties. In his initial judgment in the case, Young CJ in Eq found[9] that there had been an arrangement between the parties that the plaintiff could live in her house rent free until she dies or permanently vacated. He assessed the increase in the value of the land due to the presence of the house built by the mother on it at $39,000.00, and held that the minimum equity on the facts of the case was for the plaintiff to have an equitable charge over the property for a proportion of that $39,000.00. In reaching that conclusion, His Honour observed[10]:
“Cases such as Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583 and Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137, make it clear that if there is a premature collapse of a joint venture whether commercial or non-commercial, then it is ordinarily contrary to justice and good conscience for any one party to retain a windfall because of that collapse. In such a situation equity gives relief against the unconscionable conduct on the part of, in this case, the landowners who would otherwise retain the windfall. However, the Court only awards to the plaintiff the minimum equity that is sufficient to atone for what would otherwise be unconscionable; see eg Nichols v Nichols (1986) 4 BPR 9240.”
[9]Henderson v Miles [2005] NSWSC 710 at [35]
[10]Ibid at [34]
In Henderson v Miles (No 2), His Honour was required to deal with arguments which had been advanced to him with respect to the appropriate orders to be made in the matter. In the course of that judgment, he essayed his reasons for his original decision and noted the type of equity with which the court was dealing by the exposition in the passage I have quoted above in para [36]. His Honour then went on to deal with arguments which had been put in relation to the extent of the equitable lien he had found existed in favour of the plaintiff, with particular reference to the authorities which explain the nature and meaning of the term “minimum equity”. He concluded[11] that “in windfall cases, one looks not to the detriment that might be suffered because the arrangement did not continue, but merely to the detriment of losing a fund to the other party to the arrangement through unexpected circumstances, where such loss would result in the other having an unconscionable gain”.
[11]Henderson v Miles (No 2) at [95]
An example of a constructive trust being found in a commercial context to avoid an unconscionable betterment of the position of one party to a joint enterprise may be found in Carson v Wood [12]. In that case, two families had for many years been engaged in a joint enterprise manufacturing commercial catering equipment. The trademarks used in the business were owned by one of the families until 1983, when they entered into a written agreement which recorded that the other family paid a sum of money for 50% of the goodwill, trademarks, patents and the like, as well as the sales organisation presently conducted under the first family’s family trust. The trademarks were transferred to a company, in which each party held equal shares, which was responsible for sales of the products. The parties subsequently agreed to split the manufacturing and distribution arms of the business between the two families. The agreements executed for that purpose contemplated that the trademarks were to be assigned to a new company, equally owned by the two families, with that company to enter into a trademark user agreement with the manufacturer. The shares in the sales company, which held the trademarks, were transferred to one family. Through oversight, the trademarks were not transferred to the new company. The parties, however, continued making and selling the equipment on the basis that the trademarks were available to be used by both the manufacturing and distributing companies until an acrimonious termination of relations between the two families. Clarke JA, with whom Kirby P agreed, said at 17:
“The assertion by the Woods, and Woodson (Sales) Pty Ltd, that it was the sole beneficial owner of the trade marks and that the Carsons had no interest in them involved the subversion of the intention which underlay cl 2 and the transfer of the share holding in Woodson (Sales) Pty Ltd. It is, in these circumstances inequitable and unconscionable for Woodson (Sales) Pty Ltd to persist in that claim and the appropriate remedy available to the Carsons is the declaration of a constructive trust.”
[12](1994) 34 NSWLR 9
Clarke JA referred to the following oft-cited passage from the judgement of Deane J in Muschinski v Dodds[13]:
“The use or trust of equity, like equity itself, was essentially remedial in its origins. In its basic form it was imposed, as a personal obligation attaching to property, to enforce the equitable principle that a legal owner should not be permitted to use his common law rights as owner to abuse or subvert the intention which underlay his acquisition and possession of those rights. This was consistent with the traditional concern of equity with substance rather than form. In time, the relationships in which the trust was recognized and enforced to protect actual or presumed intention became standardized and were accepted into conveyancing practice (particularly in relation to settlements) and property law as the equitable institutions of the express and implied (including resulting) trust. Like express and implied trusts, the constructive trust developed as a remedial relationship superimposed upon common law rights by order of the Chancery Court. It differs from those other forms of trust, however, in that it arises regardless of intention. For that reason, it was not as well suited to development as a conveyancing device or as an instrument of property law. Indeed, whereas the rationale of the institutions of express and implied trust is now usually identified by reference to intention, the rationale of the constructive trust must still be found essentially in its remedial function which it has predominantly retained: el. Waters, op. cit., pp. 37-39. The constructive trust shares, however, some of the institutionalized features of express and implied trust. It demands the staple ingredients of those trusts: subject-matter, trustee, beneficiary (or, conceivably, purpose), and personal obligation attaching to the property: cf. Sir Frederick Jordan, Chapters on Equity in New South Wales, 6th ed. (1947: Stephen ed.), pp. 17-18. When established or imposed, it is a relationship governed by a coherent body of traditional and statute law. Viewed in its modern context, the constructive trust can properly be described as a remedial institution which equity imposes regardless of actual or presumed agreement or intention (and subsequently protects) to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle.
[13](1985) 160 CLR 583 at 613-614
Sheller JA came to the same conclusion as Clarke JA, saying[14]:
Equity will impose a constructive trust on property as a remedy to preclude the retention or assertion of beneficial ownership of the property to the extent that such retention or assertion would be contrary to equitable principle. It is a remedy available when warranted by established equitable principles or by the legitimate process of legal reasoning, by analogy, induction and deduction, from the starting point of a proper understanding of the conceptual foundation of such principles. In this regard notions of fairness and justice are relevant to the traditional equitable notion of unconscionable conduct, an operative component of the principles of modern equity: see, generally, per Deane J in Muschinski v Dodds (1985) 160 CLR 583 at 614-616. In the present case the matters which, in my opinion, introduce the necessary element of unconscionable conduct by the Wood family in denying to the Carson family any interest in the Australian trade marks and combine to entitle the Carson family to relief are the purchase from the Wood family by the Carson family of a one-half share of the Australian trade marks for valuable consideration in 1983, the common intention that the Carsons would continue to retain that share after the 1986 agreement came into effect and the retention by the Carson family of that share as an essential precondition to the transfer to the Wood family of the Carson interests in the trade mark proprietor Woodson (Sales). In this case, the appropriate relief would be a declaration that Woodson (Sales) has since the transfer by the Carson family of their shares in that company held the Australian trade marks in trust as to one-half interest therein for such company as the Carson family may nominate.
[14]Carson v Woods at 26
It is unnecessary in the present case for me to seek to contribute to the wealth of judicial commentary on the meaning of the word “unconscionable”.[15] It is sufficient for me to say that, in order to succeed in its claim in the present case for either the imposition of an equitable lien or the finding of a constructive trust, WMJ would need to plead and prove that such a remedy was necessary in the circumstances to satisfy the needs of justice and good conscience. The plaintiff, in my respectful opinion, has no real prospect of achieving that result in respect of its claims for an equitable lien or to the benefit of a constructive trust. The “arrangement” between the parties in the present case was governed by the agreement between WMJ and RWS. That arrangement, in contrast to the situations contemplated by cases such as Henderson v Miles, made specific provision in cl 6.1 of the agreement for an outcome upon termination of the ongoing profit-sharing arrangement as a consequence of the sale of the complex. It is not pleaded or alleged that there has been default in respect of this provision. This is not a case of the collapse of a commercial venture between parties in circumstances not contemplated by the express terms of the arrangement between them leaving the legal interests in one party who, if equity were not to intervene, would obtain an unconscionable benefit. It not being asserted in this pleading by the plaintiff that it has not been paid all that was due to it under the agreement (including cl 6.1). I do not see that the fact that the lease was in the name of IGPL rather than RWS, which is the only matter relied on by WMJ, could give rise to a circumstance of unconscionability.
[15]See, for example, ACCC v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51 per Gummow and Hayne JJ at [42] ff
It follows that I am of the view that WMJ has no real prospect of succeeding on any part of the claim pleaded in the FASOC.[16] Nor, having regard to my views as to the fundamental defects in the claims pleaded in the FASOC, am I at all persuaded that there is otherwise any need for a trial. Accordingly, there should be summary judgment for the defendant pursuant to UCPR rule 293.
[16]within the meaning of that term in Rule 293, as understood in light of the observations of the Court of Appeal in Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232.
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