Excel Quarries Pty Ltd v Payne [2000] QCA 213

SUPREME COURT OF QUEENSLAND CITATION: Excel Quarries P/L v Payne [2000] QCA 213 PARTIES: EXCEL QUARRIES PTY LTD ACN 010 056 407 (plaintiff/appellant) v BRENDA CORAL PAYNE (defendant/respondent) FILE NO/S: Appeal No 3339 of 1999 SC No 123 of 1998 DIVISION: Court of Appeal PROCEEDING: General Civil Appeal ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: 2 June 2000 DELIVERED AT: Brisbane HEARING DATE: 3 April 2000 JUDGES: Thomas JA, Ambrose and Helman JJ Separate reasons for judgment of each member of the Court, each concurring as to the orders made ORDER: Appeal dismissed with costs CATCHWORDS: CONVEYANCING – LAND TITLES UNDER THE TORRENS SYSTEM – CAVEATS AGAINST DEALINGS – WHO MAY LODGE EQUITY – EQUITABLE CHARGES AND LIENS – MONEY EXPENDED OR BENEFIT CONFERRED ON PROPERTY OF ANOTHER EQUITY – UNJUST ENRICHMENT RESTITUTION – RESTITUTION RESULTING FROM UNENFORCEABLE, INCOMPLETE, ILLEGAL OR VOID CONTRACTS – RECOMPENSE FOR SERVICES RENDERED – GENERAL PRINCIPLES – contract terminated by prospective lessor for failure of condition requiring rezoning of land – appellant obtained rezoning of only half of the land to extractive industries – constructive trust alleged to arise from benefit obtained by prospective lessor – whether caveatable interest – whether constructive trust – no joint venture or relationship – whether equitable -- 1 of 8 -- 2 lien created by restitutionary remedy – no unconscionable conduct by respondent – no free acceptance of benefit – no failure of consideration Baumgartner v Baumgartner (1987) 164 CLR 137, distinguished Excel Quarries Pty Ltd v Payne [1996] Q Conv R 54-473, considered Muschinski v Dodds (1985) 160 CLR 583, distinguished Stern v McArthur (1988) 165 CLR 489, considered Walton Stores Interstate Ltd v Maher (1988) 164 CLR 387, distinguished COUNSEL: D Gore QC for the appellant P McMurdo QC with R Derrington for the respondent SOLICITORS: Hunt & Hunt for the appellant Hynes Hartnett for the respondent [1] THOMAS JA: This is an appeal against a decision of the Chief Justice sitting in the trial division ordering the removal of a caveat. [2] The land in question is situated in the Yandina area and comprises a little over 88 hectares. It contains material suitable for quarrying. Its owner is the respondent Mrs Payne. The appellant Excel Quarries Pty Ltd is the assignee of the rights of another company which entered into a deed in 1989 with Mrs Payne and her husband who is now deceased. [3] The appellant sought specific performance of the deed against Mrs Payne but failed before Shepherdson J who delivered reasons on 24 May 1995. An appeal to this court against that decision was unsuccessful on 16 February 19961. It was accepted in argument that at least for the purposes of the proceedings for removal of the caveat the parties are bound by the findings of fact appearing in Shepherdson J's judgment. That judgment of course raises various estoppels against the appellant, but in view of this concession their precise limits do not need to be defined at this point. [4] The central point upon which the appellant lost was its failure to satisfy a condition in the deed for the re-zoning of the whole of the land to extractive industry. The appellant had only achieved a dual rezoning under which roughly half the land was rezoned to extractive industry and the remainder to special facilities (ancillary quarry operations). Despite the non-fulfilment of that condition the view was expressed in the Court of Appeal that the contract had not been avoided and that it remained alive for either further performance or avoidance by an innocent party. [5] Subsequently, on 9 May 1996, the respondent notified the appellant of her termination of the agreement. The appellant's solicitors thereupon contended that this could be done only if the respondent offered "proper compensation for the incontrovertible benefit she has received from our client's actions". This was 1 Excel Quarries Pty Ltd v Payne [1996] Q Conv R par 54-473. -- 2 of 8 -- 3 followed early in 1998 by the appellant lodging the present caveat and commencing an action in the Supreme Court claiming entitlement to an equitable lien over the respondent's land and seeking restitution of expenses and obligations incurred by the appellant in obtaining the dual rezoning which had failed to satisfy the contract but which had rendered the land more valuable. [6] The alleged interest of the appellant in the respondent's land is postulated on a number of alternative bases, the main one being that a constructive trust should be identified under which the appellant is entitled to a proportional interest in the respondent's land calculated according to the proportion of enhanced value inferred upon it by the appellant's activities. Alternatively it is submitted that the appellant has a restitutionary remedy for the expenditure incurred (and to be incurred) in obtaining the rezoning and that such entitlement is of a nature that creates an equitable lien over the land. [7] Parts of the deed relevant to deciding upon its proper construction have been set out in the reasons for judgment of Shepherdson J, and again in the reported reasons of the members of the Court of Appeal2. It will not be necessary to quote extensively from the deed for present purposes. It is enough to note that the appellant's predecessor ("Suncoast") was an intending lessee which obtained the right from the owners of the land (the respondent and her husband) to enter the premises and conduct a site exploration program to enable it to decide whether it could conduct a viable business operation of extractive industry, and to seek to obtain a rezoning of the land to extractive industry. Recitals C and D indicate the basic intentions of the parties. These included that the intending lessee proposed to take a lease of the land for 21 years commencing on a defined date "immediately following the date upon which the said land is rezoned to extractive industry subject to the terms hereof"; and that "the intending lessors and the intending lessee have agreed to enter into and execute the lease contained in the second schedule hereto … upon and subject to the fulfilment of the terms and conditions contained in this deed". The relevant conditions were then stated in the following clauses, particularly clauses 2, 4, 4A, 5, 6 and 7. The proposed rent, in the event that the lease came into operation, was a minimum rent which would be increased according to the volume of crushed rock removed for sale, posited on a return to the lessor of 50 cents per cubic metre. [8] Suncoast established the viability of the site to its own satisfaction, and proceeded with an application for rezoning of the land to extractive industry. A number of objections were received, and in May 1990 the council refused the application. Suncoast then lodged an appeal in the Local Government Court. At this point Suncoast assigned its right to the appellant which elected to continue those proceedings. [9] On 23 January 1992 the Planning and Environment Court published reasons for judgment which included the following statement: "Prior plans to quarry the western knoll have been abandoned, and that area is not included in the land now sought to be rezoned". During the proceedings before the Planning and Environment Court, apparently influenced by arguments of objectors, the appellant had prepared revised plans proposing development based on extraction from the eastern knoll only, but it had 2 Excel Quarries Pty Ltd v Payne [1996] Q Conv R 54-473. -- 3 of 8 -- 4 at no stage sought to limit the area that should be rezoned to extractive industry. The concept of a split zoning seems to have come from the court rather than from the appellant. But in the event that was all that was obtained. After a substantial delay during which conditions were negotiated between the appellant and the council, the Planning and Environment Court ordered a rezoning under which part only of the land was rezoned to extractive industry and the balance to "special facilities – ancillary quarry operations". [10] On the findings of Shepherdson J, neither the respondent nor her husband became aware of the position concerning the split zoning, and Mrs Payne remained unaware of that fact until late May 1994. Without further consultation with Mrs Payne, the appellant, finding the split zoning satisfactory to itself continued negotiations with the council which culminated in the appellant entering into a rezoning deed on 29 November 1993. This was followed in due course by gazettal of the rezoning in 1994. Upon being notified of the position in May 1994, the respondent did not immediately affirm or disaffirm the contract, but in due course contended that she was not bound to proceed with it because of non-fulfilment of the rezoning condition. That contention was upheld in the Supreme Court. [11] Mr Gore QC for the appellant now submits that although his client has no contractual rights against the respondent it has an equitable remedy of the kind mentioned in paragraph [6] above. He submits that the respondent has received a benefit, namely a valuable rezoning of her land, at the appellant's expense in unforeseen circumstances and that it is unjust for her to assert an entitlement to retain the full benefit of the increased value of her property without compensating the appellant for its contribution. He submits that the concept underlying the claim is unjust enrichment, although that concept does not itself afford a cause of action under Australian Law3. The primary claim is said to be based upon a constructive trust of the kind identified by the High Court in Muschinski v Dodds4 and Baumgartner v Baumgartner5. Particular reliance was placed upon statements of Deane J in Muschinski and in particular: "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 by one party 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 specially 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."6 [12] Mr Gore submitted that the original deed contemplated four situations in which the quarry would not proceed, namely: 3 David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353, 378-379; cf Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221, 256-257. 4 (1985) 160 CLR 583. 5 (1987) 164 CLR 137. 6 Per Deane J at p 620. -- 4 of 8 -- 5 • non-satisfaction of the appellant after exploration (clauses 2(b) and 3); • refusal of the rezoning application, followed either by no appeal or by a failed appeal (clauses 2(a) and 4); • successful objector's appeal to the Planning and Environment Court (clause 4A); and • approved rezoning containing conditions that were not satisfactory to the appellant (clauses 2(a) and 4). In all such cases he conceded that the development costs would have to be borne by the appellant alone. The present case however, he contends, is different because the dual zoning, although not satisfying the contract, conferred a benefit or windfall upon the respondent. It was a benefit not foreseen at the time and not covered by the deed. The contribution of the appellant has been the cost of investigation and of the legal costs of the planning and environment appeal which produced the partial rezoning. Furthermore, when the appellant entered into its rezoning deed, it was required to give a bond to guarantee construction of roadworks that would be associated with any future quarrying operation. The bond was in the sum of $1.35 million. The bond may be enforced in the event that the respondent or her successor or assignor or some person with the permission of any of such persons proceeds with quarrying operations. [13] Mr Gore relies upon "the general underlying notion" that "a person should not be permitted to use or insist upon his legal rights to take advantage of another's … misadventure for the unjust enrichment of himself"7. At the same time he concedes that a constructive trust will not be imposed "in accordance with idiosyncratic notions of what is just and fair"8. It was further submitted that the same considerations apply here as in the following passage in Baumgartner: " It is the assertion by (the male) of his legal entitlement in the unforeseen circumstances which arose on the collapse of their relationship and planned venture which lies at the heart of the characterisation of his conduct as unconscionable. Indeed, it is the very absence of any provision for legal defeasance or other specified and effective legal device to meet the particular circumstances which gives rise to the need to call in aid the principle of equity applicable to preclude the unconscionable assertion of legal rights in the particular class of case."9. [14] The final part of the submission is that when the respondent became aware of the dual zoning it was open to her to have accepted it, that is to say to have joined with the appellant in waiving that condition of the deed. However she took the point that the condition had not been satisfied, which, according to the submission, smacked of sharp practice. Having successfully avoided the burden of completing the agreement, it is submitted that it is unconscionable for her now to retain the benefit of the non-contractual zoning, without assenting to an adjustment which will compensate the appellant for its unintended loss. 7 Stern v McArthur (1988) 165 CLR 489, 526-527. 8 Baumgartner above at p 148. 9 Muschinski above at p 622. -- 5 of 8 -- 6 [15] I do not consider that the case which is advanced raises or requires the formulation by the court of a constructive trust. I accept the submission of Mr McMurdo QC for the respondent that the relationship of these parties was not in the nature of a joint relationship or endeavour and was not truly analogous to such concepts. This was an arm's length agreement in relation to property in which a developer and an owner made a particular agreement which was capable of resulting in the developer obtaining the right to exploit the property on certain conditions. They would never have become joint venturers even if the agreement were fully carried out. They remained in a defined contractual relationship until its termination. Thereafter there has been no further relationship. [16] An identifiable analogy between joint venturers and persons who live together in a relationship has been drawn in Baumgartner and Muschinski and in a body of case law dealing with the property rights and duties that may arise in such relationships. Depending on the circumstances of the particular case, a constructive trust may be imposed to restrain unconscionable advantage being taken of legal rights which one party may have over the other. However the relationship of persons who make a commercial agreement for the transfer or leasing of property does not of itself place such parties in any relationship other than the legal relationship that they have created. The present situation should be seen as an agreement for the grant of a lease upon conditions, not as the commencement of a relationship or joint venture between the parties. The essential co-adventure, joint venture or endeavour that is a pre-condition for a trust such as that contemplated in Baumgartner does not exist. Moreover, there was no ensuing relationship between the parties other than the performance or failure of performance of the contract. The respondent was not guilty of any misleading conduct or activity which caused the appellant to act to its detriment. Her decision to insist on her rights under the contract did not smack of sharp practice. [17] The second level upon which the claim must fail is the absence of unconscionable conduct on the respondent's part. Had she known of the nature of the dual entitlement to rezone and then encouraged or otherwise contributed to the appellant's proceeding with such rezoning and committing itself to the roadworks bond, equity would prevent the respondent from taking advantage of such consequences, consistently with the principles of Waltons Stores Interstate Ltd v Maher10. But nothing of this kind occurred. Having sent a notification to the respondent within a few days of publication of the Planning and Environment Court's reasons for judgment in January 1992, which Shepherdson J found was ineffective to apprise the respondent of the actual situation, the appellant gave no further indication to the respondent of what was happening for another two years and four months, by which time it had committed itself to the rezoning deed. In the absence of a finding that the respondent or her husband knew of such facts, it is impossible to find unconscionability in her decision, after ascertainment of the true position in May 1994, to exercise her legal rights. [18] It may be noted that the decision in the Planning and Environment Court in no way compelled the appellant to pursue the dual rezoning. On the contrary, as that decision did not comply with the necessary contractual condition, it is surprising that it unilaterally proceeded to incur further commitments, on the assumption (that 10 (1988) 164 CLR 387. -- 6 of 8 -- 7 it was not entitled to make) that the respondent would agree to the altered scheme. Mrs Payne's assent seems to have been taken for granted. In the event the appellant committed itself unwisely to still greater expenditure. The fact that the respondent in due course exercised her legal rights was not unconscionable. [19] The arguments presented on appeal were largely those that were raised and dealt with in the proceedings before the Chief Justice. Whilst some criticism was advanced of his Honour's reference to the contract as the "manifesto" of their relationship, and of his Honour's statement that one should not assume that a scenario such as the present one had been overlooked in the agreement, his Honour's principal reasons for rejecting the basis of the alleged constructive trust are essentially similar to those which have been here mentioned. [20] It is true that Mrs Payne has received a windfall and that the appellant has come out of the project badly. But more than that is necessary before the court will intervene to identify a constructive trust. In truth this case is little different from the great number or commercial dealings where a developer conditionally purchases (or leases) a property subject to proof of feasibility for a purpose or a variety of conditions such as rezoning, subdivisional approval, bore testing, engineering feasibility or other matters. In most if not all of such cases losses are incurred by the developer when the project does not proceed, and at least in some of them there are windfall benefits to the owner. In such cases however, in the absence of inequitable conduct by the other party contract law is the source of the respective rights of the parties. [21] It is not necessary to say a great deal about the alternative formulation of a restitutionary remedy, which is confined to reimbursement for the legal costs of rezoning and of the obligation arising under the bond. Mr Gore conceded that a recognised category of claim needed to be identified and that "unjust enrichment" is not itself a cause of action11. He submitted that the present situation was sufficiently analogous to be identified as expenditure for a consideration that wholly fails. However, as Mr McMurdo for the respondent submitted, there was no failure of consideration; the respondent provided consideration, namely rights of entry to her property and the opportunity for the appellant to satisfy the necessary condition that would lead to a lease, and the necessary co-operation (including assent to the appellant's application) to pursue the desired rezoning. It might be added that she was also prevented from dealing with her land for some years until the contract was terminated. So far as the appellant's liability under the bond is concerned, Mr McMurdo submitted that this obligation did not arise under the contract, and was indeed undertaken by the appellant inconsistently with it. Mr Gore alternatively submitted that the present case might be seen as justifying a restitutionary claim arising upon "free acceptance" by Mrs Payne of benefits12. Such cases generally require the free acceptance of a benefit, with an opportunity to reject it, in the knowledge that the service in question was not intended to be gratuitous. Mrs Payne was not informed of the variation to the rezoning, and was not in a position to "freely accept" whatever benefits were being bestowed at any 11 David Security Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353, 378-379; Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221, 256. 12 Cf Goff & Jones The Law of Restitution (5th ed) pp18-22. -- 7 of 8 -- 8 material time. The "free acceptance" cases in my view bear no resemblance in fact or in principle to the present case, and I do not propose to discuss them further. [22] I do not consider that any alternative claim for a restitutionary remedy is sustainable. [23] The learned Chief Justice was correct in concluding that there is no serious question to be tried in relation to the interest in the land that is asserted in the caveat, and in further concluding that it should be removed. The appeal should be dismissed with costs. [24] AMBROSE J: I agree. [25] HELMAN J: I agree with the order proposed by Thomas JA and with his reasons. -- 8 of 8 --