Felixstowe Pty Ltd v Council of the City of Gladstone [1994] QPEC 37

)04 \ · 1 . ·, State Reporting Bureau ) TRANSCRIPT OF PROCEEDINGS (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bureau.) PLANNING AND ENVIRONMENT COURT JUDGE O'SULLIVAN P & E Appeal No 1 of 1992 FELIXSTOWE PTY LTD and COUNCIL OF THE CITY OF GLADSTONE BRISBANE .. DATE 11 /05/94 JUDGMENT Appellant Respondent 4th Floor, The Law Courts, George Street, Brisbane. Q. 4000 Telephone: (07) 227 4360. Facsimile: (07) 227 5532 -- 1 of 13 -- 110594 D.1 T 4/JLS M/T CMS85/94 (O'Sullivan DCJ) HER HONOUR: I publish my reasons. HER HONOUR: This matter is listed for mention at 9.30 next - Friday. 2 JUDGMENT 10 20 • 30 40 50 60 -- 2 of 13 -- IN THE PLANNING AND ENVIRONMENT COURT HELD AT BRISBANE QUEENSLAND P & E Appeal No. 1 of 1992 BETWEEN: FELIXSTOWE PTY. LTD. Appellant COUNCIL OF THE CITY OF GLADSTONE Respondent REASONS FOR JUDGMENT - O'SULLIVAN D.C.J. Delivered the ll. i(. __ day of 19~ This matter has been remitted from the Court of Appeal, in accordance with ~ts Judgment delivered 28 June 1993. The Court of Appeal remitted the following issues: "(a) Whether clause 9 of the rezoning deed is unlawful as being in contravention of s.33(16C)(d) of the Local Government Act 1936. (b) Whether the said clause 9 is unenforceable as being a penalty or in the nature of a penalty. ( c) Whether Felixstowe Pty Ltd was in breach of the rezoning agreement as varied and if so whether the Council was precluded from relying upon clause 9 thereof by waiver, estoppel or election, having regard to the conduct of the Council and Felixstowe on and after 5 February 1 986 to and including 7 December 1990." -- 3 of 13 -- 2 I propose to deal with each of these in turn. Unlawful condition: The Claimant/Appellant, Felixstowe Pty Ltd ("Felixstowe"), contends that clause 9 of the rezoning deed ("the Deed") offends Section 33(16C)(d) of the Local Government Act (1936) (as amended) because it is an unlawful condition not reasonably required by the rezoning. The Respondent, the Council of the City of Gladstone ("the Council"), contends that the clause is lawful and seeks to rely on it. Senior Counsel for Felixstowe referred to the passage cited in Sabdoran Pty Ltd v Hervey Bay Town Council (1983) 2 Qd.R. 172, 178 from Allen Commercial Constructions Pty Ltd v North Sydney Municipal Council (1970) 123 CLR 490, 499-500, as follows: "In accordance with a well-recognized rule, s. 40 ( 1) ought to be understood (quite apart from the limitation contained in its opening words) not as giving an unlimited discretion as to the conditions which may be imposed, but as conferring a power to impose conditions which are reasonably capable of being regarded as related to the purpose for which the function of the authority is being exercised, as ascertained from a consideration of the scheme and of the Act under which it is made. This purpose may be conveniently described, in accordance with the expression used by Lord Jenkins in Fawcett Properties Ltd v Buckingham County Council (1961) A.C. 636, at p. 684, as being 'the implementation of planning policy', provided that it is borne in mind that it is from the Act and from any relevant provisions of the Ordinance, and not from some preconceived general notion of what constitutes planning, that the scope of planning policy is to be ascertained". -- 4 of 13 -- 3 Senior Counsel for the Council submitted, and I accept, that it is relevant that these proceedings do not involve an appeal by way of rehearing from the imposition of any condition imposed by the Council. Accordingly, the Court's power to determine that clause 9 is invalid is circumscribed. It cannot be any greater than the power of a Court in proceedings in the nature of administrative review. In this context I adopt the reasoning of Priestley JA in ULV Pty Ltd v Scott and ors. (1990) NSWLR 190. Thus, Felixstowe must show that clause 9 fails to satisfy the test from Associated Provincial Picture Houses Ltd v Wednesbury Corp. (1948) 1 K.B. 223, namely, that it is so clearly unreasonable that no reasonable planning authority could have required it. Senior Counsel for the Council submitted that clause 9 satisfies this test; it is in the nature of security for performance, which the Courts have accepted as valid content for rezoning agreements. Mr Schomburgk, the Town Planner who gave evidence at the original hearing on behalf of Felixstowe, considered that clause 9 was not entirely unreasonable (He expressed the opinion that there must be better ways of ensuring that if development is not commenced or completed within a reasonable period the local authority can back-zone). I consider that clause 9 satisfies the Wednesbury test~ I find that clause 9 does not offend s.33(16C)(d) of the Local Government Act (1936) (as amended). -- 5 of 13 -- 4 Penalty: Felixstowe contends that clause 9 is a penalty and thus unenforceable. Even if clause 9 may be characterized as a penalty, notwithstanding that it does not call for payment of money, I do not consider that equitable relief is appropriate. I rely on the following passages in Geraldton Food Distributors Pty Ltd and ors v Spencer (1985) 59 LGRA 401: At page 403: "It is, I think, important to appreciate that this agreement was in no sense a commercial agreement. It contains no covenant on the part of the respondent and the respondent had no pecuniary interest in its performance. It was in essence a unilateral undertaking by the company entered into so as to obtain the approval of the board of its plan of subdivision. One can express that by saying that it was within the price to be paid by the company for the board's approval." At page 407: "So it can be seen that the bond stipulates as its condition the doing of acts which if not done, would cause no damage or loss to the obligee although clearly the non- performance by the company of what it had agreed to do would defeat the policy of the Town Planning and Development Act 1928". At page 408: "On those facts, I am unable to see why and how equity should operate so as to relieve the company or the second -- 6 of 13 -- 5 and the third appellants from paying the price which they had ~gre~d to pay fo~ ~he board's approval of the company's application to subdivide and in this way defeat the board in its implementation of the Town Planning and Development Act 1928". At page 415: "Equity relieved against the penalty only insofar as it was used to secure the performance of an obligation, and monetary compensation would be awarded proportionate to damage actually resulting to the obligee from failure of such performance: Meagher Gummow and Lehane, Equity, Doctrines and Remedies, 2nd ed, par 1815". At page 416: "The condition of entering into the agreement was the price the company agreed to pay for the right to subdivide. In my view, equity would not lend its aid to help the company now say it bought the right to subdivide at too high a price". I refer also to Lloyd v Robinson (1962) 107 CLR 142, 154. I accept the submission of Senior Counsel for the Council that I the primary purpose of clause 9 is to provide security for performance of a particular form of development. Senior Counsel for Felixstowe referred me to Steffanetto v Forestry Commission of New South Wales (1975) 1 NSWLR 332, 341; (1975-1976) 133 CLR 507, 514, 519; Acron Pacific Ltd v Offshore Oil N.L. (1985) 157 CLR 514, 520; Campbell v Cotton (1991) Q.Conv.R. 54-411 at 59, 132. ... -- 7 of 13 -- 6 I do not consider that these authorities support the proposition that equitable relief ought to be granted in respect of clause 9. Election: Senior Counsel for the Council submitted that where there is the issue of affirmation of the contract and abandonment of the right to terminate, the High Court made relevant comments in Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) (1993) 67 ALJR 537 including the following: At page 544: citing Spencer Bower and Turner, The Law Relating to Estoppel by Representation: "It is of the essence of election that the party electing shall be 'confronted' with two mutually exclusive courses of action between which he must, in fairness to the other party, make his choice". At page 545: "The point is that where the right to rescind is a continuing one, it is not so readily concluded that the party entitled to rescind has abandoned that right completely as opposed to taking no action to exercise the right at the time in question." Senior Counsel for the Council submitted that the first date on which the Council was confronted with a choice was 7 December 1990, a date which is after the four events relied on by Felixstowe as constituting election. I do not propose to recite the full chronology of this matter, -- 8 of 13 -- 7 which I did in my Reasons delivered 17 November 1993. It includes the following: (a) The Council had the right to back-zone after 18 June 1988; (b) At the meeting on 15 March 1989 the Council officers said they could see no problem with the zoning and no impediment to the construction of units in accordance with the existing zoning. no problems in stage"; There is a diary note - "They could see regard to densities or zonings at this ( c) On 1 2 December 1989 Felixstowe sought advices from the Council as to when it may expect to receive formal building approval for 12 townhouses. At this stage the time for completion had expired for 18 months; (d) On 11 January 1990 the Council wrote to Felixstowe. I accept the submission of Senior Counsel for Felixstowe that by its terms the letter of 11 January 1990 was clearly an insistence by the Council that Felixstowe comply with the rezoning agreement. I agree with Senior Counsel for Felixstowe that at that time the Council had a "confrontation" (refer Immer (supra)), a choice between two mutually exclusive courses of action. I accept that in fairness to the other party (Felixstowe), which it knew was incurring expense, and taking steps necessary to build the first stage of an overall development, the Council had to make a choice, between enforcing the Deed and back-zoning. I find that by that letter it elected to enforce the Deed. I acknowledge that s.33(18D)(g)(ii)(B) of the Local Government Act (1936) (as amended) would preserve the building approval of 25 July 1990. I find that the Council by that conduct lost the right to back-zone in reliance upon any then existing failure of -- 9 of 13 -- 8 Felixstowe to complete construction in accordance with the Deed. Time of the essence: Senior Counsel for Felixstowe submitted that the Council had by its conduct given Felixstowe to understand that it was not insisting upon the essential quality of time and tha~ being so it was then incumbent upon the Council to give a proper notice that it intended to enforce the Deed to re-make time of the essence and to permit it to exercise its rights under clause 9 of the Deed. He cited Mehmet v Benson (1964-65) 113 CLR 295, 303 as follows: "+f the party entitled to insist on the essential quality of the stipulated time leads the other party to understand that its essentiali ty is not being maintained, time for payment will cease to be essential without some further circumstance, such as a proper notice in that behalf, apt to restore its essential quality. The loss of the essential quality of the time for payment may thus happen by the party entitled to rescind doing some act inconsistent with his insistence on the essential quality of time". He also cited Spencer v Cali (1986) 2 Qd.R. 456, 466 as follows: "However if the vendor leads the purchaser to understand that essentiality is not being maintained time will cease to be essential without some further circumstance, such as a proper notice in that behalf, apt to restore its essential quality: Mehmet v Benson (1965) 113 CLR 295, at 303. An act by the vendor inconsistent with his insistence on the. essential quality of time is apt to have this result: ibid. Thus continued failure to insist on payment at stipulated times and continued assertions of readiness to accept payment out of time were held to have this result in Mehmet v Benson". By letter dated 5 February, 1986 Felixstowe sought an extension of the terms of the Deed for a further period of say 2 years". -- 10 of 13 -- 9 In reply by letter dated 18 March, 1986 the Council advised that it was presently reviewing its Town Plan and "consideration will be given to the desirability of the existing zoning at that time". Thereafter, the Council remained silent until well after the time had expired for strict compliance with clause 9. Such conduct amounts to giving Felixstowe grounds to believe that precise performance on time as contracted will not be insisted upon. Senior Counsel for Felixstowe submitted that the conduct of the Council was such that it could not exercise its rights under clause 9 to apply to back-zone without first giving Felixstowe reasonable notice requiring it to comply with the provisions of clause 9. No such notice was given. The application for back- zoning cannot therefore attract the protection of clause 9 of the agreement. He submitted that as to the reasonableness of time required for such a notice, it would have to have been of considerable length given, amongst other factors, the acceptance by the Council of the proposition that Felixstowe could proceed by way of constructing 12 units first. Senior Counsel for the Council described as "new" the proposition that principles relating to the essentiality of time can apply to a clause like clause 9 where there is unlimited time after the expiry of a defined period under which a party may act in accordance with the agreement. I find that the Council cannot rely on clause 9 of the Deed, by -- 11 of 13 -- 10 reason of the conduct I have outlined and its failure to give notice. Compensation for stages 2 and 3: Senior Counsel for Felixstowe submitted that there was no relevant breach entitling the Council to back-zone stages 2 and 3 until 15 June 1991, and thus Felixstowe is entitled to compensation in respect of the back-zoning of stages 2 and 3. I repeat what I said in my Reasons delivered on 17 November, 1993, and I consider that to accept this submission would be to allow a completely new case to be presented. In any event, I consider that an interpretation of the words "development of any part or parts of the said lands" in clause 9 means that if there has been default in relation to stage 1 ~ which continues for one year the right to back-zone in relation to the whole of the site inclusive of stages 2 and 3 arises. Waiver: I accept that waiver requires an intentional act with knowledge: Craine v CML (1920) 28 CLR 30; a conscious and unequivocal abandonment of a right: Commonwealth v Verwayen (1990) 170 CLR 394. I find that there has not been waiver. Estoppel: -- 12 of 13 -- 11 I find that the evidence does not disclose a representation that the Council would not rely upon clause 9 of the Deed. Summary: 1. Clause 9 of the Deed is not unlawful as being in contravention of s.33(16C)(d) of the Local Government Act (1936) (as amended). 2. Clause 9 of the Deed is not unenforceable as being a penalty. 3. Felixstowe was in breach of the Deed. (a) The Council is not precluded from relying on clause 9 of the Deed by waiver. ( b) The Council is not precluded from relying on clause 9 of the Deed by estoppel. (c) The Council has elected not to be bound by clause 9 of the Deed. 4. The Council cannot rely on clause 9 of the Deed without giving reasonable notice of its intention to do so, and such notice has not been given. -- 13 of 13 --