(2001) 113 LGERA 279 (2001) 10 BPR 18,657 [2001] ANZ ConvR 367 Reported Decision : (2001) NSW ConvR 55-972 (2001) NSW Conv R 55-972 (2001) 51 NSWLR 424 [2001] NSWSC 200 [2001] ACL Rep 265 NSW 19 New South Wales Supreme Court CITATION : Hillebrand & Anor. v. The Council of the City of Penrith & Ors. [2001] NSWSC 200 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 3391/00 HEARING DATE(S) : 20/3/01 JUDGMENT DATE : 28 March 2001 Bernard Hillebrand - 1st plaintiff Lindy Gai Hillebrand - 2nd plaintiff PARTIES : The Council of the City of Penrith - 1st defendant Richard Mork - 2nd defendant The Registrar-General of NSW - 3rd defendant JUDGMENT OF : Hodgson CJinEq at 1 Mr. J. Whittle SC with Mr. H. Woods for plaintiffs COUNSEL : Mr. J. Campbell QC with Mr. D. Robinson for 1st defendant Mr. J. Loofs for 2nd defendant Submitting appearance for 3rd defendant Roberts Mann Davies, Windsor, for plaintiffs SOLICITORS : Gadens, Sydney, for 1st defendant Mark Solomon & Associates, Castle Hill, for 2nd defendant K.C. Hall, Solicitor for Registrar-General, for 3rd defendant CATCHWORDS : LOCAL GOVERNMENT - PROPERTY - Council purports to sell land in respect of which rates not overdue for more than five years - Whether conveyance validated. LEGISLATION CITED : Local Government Act 1919, ss.602, 604. Cousins v. Gosford Shire Council (1970) 92 WN(Pt1) 263 at 271 CASES CITED : Morgan v. 15 Bannerman Street Pty. Ltd. (1971) 1 NSWLR 601 at 608 Logue v. Shoalhaven Shire Council (1979) 1 NSWLR 537 Blacktown Municipal Council v. Custom Credit Corporation (1968) 71 SR(NSW) 365 DECISION : See end of judgment IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORAM: HODGSON, CJ in Eq. Wednesday 28th March 2001 NO. 3391 OF 2000 HILLEBRAND & ANOR. V. THE COUNCIL OF THE CITY OF PENRITH & ORS. JUDGMENT 1 By a conveyance dated 12th August 1980, the plaintiffs Mr. and Mrs. Hillebrand became owners of Old System land facing an unmade road Emily Street, Londonderry, being Lots 18 and 19 in Registered Plan 610, which lots included Lots 17 and 20 and part of Lot 31 in Section C in Deposited Plan 976412. 2 On 5th September 1991, the first defendant Council resolved that certain land be sold for unpaid rates pursuant to s.602 of the Local Government Act, and that the Town Clerk's certification of unpaid rates be received. 3 On 7th September 1992, the Council fixed a time and place for the auction of that land, the date fixed being 10th December 1992. Newspaper advertisements for the sale appeared on 8th September 1992. 4 The advertisements included reference to Lot 17 Emily Street, owned by R. Gropley; Lot 20 Emily Street, owned by K. Moore; and Lot 31 Section C Emily Street, owned by B. J. Wells. In relation to each of these properties, the advertisement alleged that an amount in each case of approximately $2,700.00 of rates were overdue for more than five years, and that the total rates and charges due on each lot were an amount in each case approximating $6,500.00. The advertisements contained no reference to plan numbers, nor to the plaintiffs; and although rate account numbers were quoted, these were not the rate account numbers under which the plaintiffs were rated for their land. In fact, there never were rates five years overdue on the plaintiffs' land. 5 The auction was held on 10th December 1992, and the second defendant Mr. Mork was the successful bidder for lots 17 and 20. 6 By conveyance dated 9th February 1993, in purported pursuance of ss.602 and 604 of the Local Government Act 1919, and in consideration of $565,650.00 paid to itself, the Council purported to convey to itself land including Lot 31 Section C Deposited Plan 976412. 7 By conveyance dated 13th April 1993, in purported pursuance of s.604 of the Local Government Act 1919, in consideration of $3,050.00, the Council purported to convey to Mr. Mork Lots 17 and 20 Section C Deposited Plan 976412. 8 In these proceedings, the plaintiffs claimed declarations to the effect that they were entitled to Lots 17, 20 and part of Lot 31, in Section C in Deposited Plan 976412, and consequential relief; and alternatively, damages against the Council. Mr. Mork put on a cross-claim against the Council for damages, in the event that the plaintiffs were found to be entitled to Lots 17 and 20. ISSUES 9 The proceedings were commenced on 28th July 2000; and in relation to the claim for damages against it, the Council put on a Limitation Act defence. On the application of the Council, the claim for damages against it was summarily dismissed by Austin, J. in November 2000, on the ground that it was statute-barred. 10 By an Amended Statement of Claim submitted at the hearing, the plaintiffs claimed that the Council held the purchase money of $3,050.00 on trust for the plaintiffs. 11 The Council has conceded that the sale of the plaintiffs' land was not authorised by s.602, because there were no rates in respect of the land which were overdue for more than five years. It conceded that the plaintiffs were entitled to the part of Lot 31 which the Council had conveyed to itself, and also to the $3,050.00 purchase money received by the Council for Lots 17 and 20. 12 The Council also conceded that, if the plaintiffs were entitled to Lots 17 and 20, Mr. Mork was entitled to damages against the Council, and that an enquiry as to those damages should be directed. 13 The only issue before me was whether the conveyance to Mr. Mork of Lots 17 and 20 was effectual by reason of s.604 of the Local Government Act 1919. This in turn involved two sets of questions: first, questions concerning the extent of breaches of s.602 of the Local Government Act 1919; and second, questions concerning the interpretation of s.604. Those sections are in the following terms: 602. (1) Where any rate levied in respect of any land before or after the commencement of the Local Government (Further Amendment) Act, 1952, is overdue for more than five years the council may, in accordance with the provisions of this Act, sell the land on which the rate is owing. Any rate so overdue is hereinafter in this Division referred to as an overdue rate. The council shall not sell any land in pursuance of this section unless the town or shire clerk first certifies in writing what rates are due or payable to the council in respect of the land, with particulars of the rates, when the same were made and how levied and when they became due or payable. Where land on which a rate so overdue is situated in any county district to the county council of which a power to rate has been delegated the council shall not exercise its power to sell the land for an overdue rate unless it first ascertains from any such county council that it has not resolved to sell the land for an overdue rate nor shall such a county council exercise its power to sell land for an overdue rate unless it first ascertains from the constituent council and any other such county council in whose area or district such land is situated that it has not resolved to sell such land for an overdue rate. (2) Where the council has resolved to sell land for an overdue rate it shall- (a) fix a convenient time (being not more than six months and not less than three months from the publication in a newspaper of the advertisement referred to in paragraph (b)) and a convenient place for the sale; (b) give notice in or to the effect of the prescribed form by advertisement in the Gazette and in a newspaper; and (c) make a search against the land and give notice to any person who appears from search to have an interest in the land. (3) Where, before the time fixed for the sale- (a) an overdue rate, and all other rates due and in arrears, are paid to the council; or (b) an arrangement satisfactory to the council for payment of all such rates is entered into by the ratable person, the council shall not proceed with the sale. (4) Any sale of land in pursuance of this section shall be by public auction. The council may- (a) sell in one lot of adjoining parcels or in separate parcels the land under such conditions of sale as it may deem proper; (b) employ an auctioneer; and (c) do such other acts as it deems expedient for selling the land at its full value and for carrying out the sale. If the land is not sold by public auction at the time originally fixed the council may from time to time fix such time and place as it may deem proper for the sale of such land by public auction or may sell the land by private contract if a satisfactory offer is received in the meantime. (5) If the land is sold the purchase money shall be paid to the council, and its receipt shall be an effectual discharge to the purchaser therefor. (5A) At any sale by public auction under this section the council may bid for and purchase the land. Where the council purchases any land under this subsection the purchase price shall be paid by transfers from and to the appropriate funds under this Act. Any such transfer shall, for the purposes of subsection (1) of section 604, and subsection (2) of section 605, be deemed to be payment to the council of the purchase price of the land purchased by the council, and any moneys transferred to a fund of the council under the provisions of this subsection shall, for the purposes of subsection (1) of section 606, be deemed to be purchase money received by the council upon the sale of land for overdue rates. (6) Where any land has been subdivided and a portion sold under this section any unpaid rates in respect of such land may- (a) where the land is valued under the Valuation of Land Act, 1916-1951, be apportioned accordingly on the recommendation of the Valuer-General; or (b) where the land is not so valued be apportioned accordingly on the recommendation of the council's valuer. 604(1) The council upon payment to it of the purchase money may convey or transfer the land to the purchaser by virtue of the authority conferred by this Act: Provided that if the land has only been brought under the provisions of the Real Property Act, 1900, for an estate less than the fee-simple the land shall be conveyed and transferred by two separate instruments, that is to say by a conveyance so far as the estate not under the provisions of that Act is concerned, and by a transfer so far as the estate under the provisions of that Act is concerned. (2) Any conveyance or transfer by the council purporting to be made under this Act shall vest the land in the purchaser for an estate in fee-simple in possession, freed and discharged from all trusts obligations estates interests contracts charges and rates, but subject to any exceptions for the benefit of the Crown and reservations to the Crown in any Crown grant or recorded in respect of the land in any folio of the Register kept under the Real Property Act, 1900, and to any easements restrictive covenants and public rights of way affecting the land: Provided that where the land has only been brought under the provisions of the Real Property Act, 1900, for an estate less than the fee-simple, the two separate instruments of conveyance and transfer by the council purporting to be made under this Act shall be necessary so to vest the land, but shall not operate to bring the fee-simple under the provisions of the Real Property Act, 1900, and the transfer shall for the purposes of that Act pass only the estate already under the provisions thereof: Provided also that where the land or any estate therein is under the provisions of the Real Property Act, 1900- (a) the transfer shall by virtue of this Act be registrable under the provisions of the Real Property Act, 1900, notwithstanding anything in such Act contained; (b) the transfer shall not operate at law until the same is registered under the Real Property Act, 1900. (3) Where the land or any estate therein is under the provisions of the Real Property Act, 1900, the Registrar-General upon the production to him of any transfer made by the council and purporting to be made under this Act shall register the transferee as the proprietor of the land or estate as the case may be: Provided that- (a) the Registrar-General may make such recordings in the Register kept under that Act, create or cancel such folios of that Register and issue such certificates of title as, in his opinion, are required to give effect to the provisions of this section; (b) except as regards such of the following as may immediately before the registration of the transferee as proprietor be recorded in the relevant folio of that Register, that is to say except as regards any exceptions for the benefit of the Crown or reservations to the Crown or any easements restrictive covenants and public rights of way affecting the land, it shall not be necessary for the Registrar-General to make any recordings with respect to any of the same, and it shall be sufficient to record in the relevant folio of that Register that the proprietor holds subject to the provisions of this section; (c) * * * * * (d) in any case where the duplicate Crown grant or certificate of title is not presented with the transfer, such duplicate shall be deemed to be wrongfully retained within the meaning of subsection (1) of section 136 of the Real Property Act, 1900, and the provisions of that Act applicable in respect of a grant certificate or instrument wrongfully retained shall apply in respect of such duplicate; (e) the forms to be used for carrying this section into effect, other than any transfer by the council which shall be in the form approved under the Real Property Act, 1900, by the Registrar-General, may be prescribed by ordinance; (f) the fees payable to the Registrar-General for the making of any recording or for doing any act under the authority of this section may be prescribed by regulations made under the Real Property Act, 1900. (4) Neither the purchaser nor the Registrar-General nor any official to whom a transfer made by the council and purporting to be made under this Act is produced for registration shall be concerned to inquire whether the provisions of this Act in respect of the sale or transfer have been complied with or otherwise into the regularity or validity of the sale or transfer. (5) This section shall apply to and in respect of land other than land to which section 605 applies. 14 The Local Government Act 1919 has since been repealed, and replaced by the Local Government Act 1993. There are provisions somewhat similar to ss.602 and 604 in ss.713-726 of the 1993 Act. BREACHES OF SECTION 602 15 As previously mentioned, it is common ground that the plaintiffs' Lots 17 and 20 did not fall within the first paragraph of s.602(1). 16 As regards the second paragraph of s.602(1), the Council was subpoenaed to produce relevant documents, and it did not produce a Town Clerk's certificate. However, Mr. Campbell QC for the Council submitted that I should infer that a certificate was given, because of the reference to it in the Council's resolution and because of the presumption of regularity. Mr. Whittle QC for the plaintiffs submitted that the Council proffered no evidence of search for a certificate, and offered no explanation for its non-production. 17 Even if I were to infer that a certificate was given, I would infer that the certificate related to Lots 17 and 20 noted in the Council's records as being owned respectively by Gropley and Moore, under the rate accounts specified in the advertisement, and in respect of which rates were overdue for more than five years. That is, I would infer that any such certificate did not relate to the plaintiffs' Lots 17 and 20. Accordingly, the second paragraph of s.602(1) was not complied with in respect of the plaintiffs' lots. For what it is worth, however, I indicate that I would not have inferred that no certificate whatsoever was provided. 18 Turning to s.602(2), it is clear that the Council did fix a time and place for sale, but again, this was not in respect of a sale of the plaintiffs' land, but in respect of some other Lot 17 and Lot 20. It did give notice by advertisement, but again not in respect of the plaintiffs' Lots 17 and 20. The notice may also have been defective in the inadequate description of land, but I need not determine that. 19 The Council did make a search against the plaintiffs' land, but that search was defective in that it reached only a predecessor in title to the plaintiffs, and did not disclose the plaintiffs' interest. The evidence does not establish that the Council did not give notice to the person disclosed by the search, whose name was neither Gropley nor Moore. 20 Accordingly, so far as concerns the plaintiffs' land, there was no compliance with s.602(2)(a) and (b); and as to whether there was a breach of s.602(2)(c), this would depend on whether the defect of the search and the Council's failure to appropriately pursue the result of the search meant that that paragraph was not complied with. In my view, it would not. 21 Turning to s.602(3), here there was no "overdue rate", so the subsection does not apply in its terms. INTERPRETATION OF SECTION 604 Submissions 22 Mr. Whittle SC provided a written summary of relevant principles of statutory construction. He submitted that a statute is not to be construed as intended to interfere with vested interests unless such an intention is made very clear: Clissold v. Perry (1904) 1 CLR 363 at 373; Commonwealth v. Hazeldell Limited (1918) 25 CLR 552 at 563; Colonial Sugar Refinery v. Melbourne Harbour Trust Commissioners (1927) AC 343 at 359. Similarly, a statute will not be read as authorising expropriation of property without payment unless such an intention is very clear: C.J. Burland Pty. Limited v. Metropolitan Meat Industries Board (1968) 128 CLR 400 at 406 and 415; London & North Western Railway Co. v. Evans (1893) 1 Ch. 16 at 28; Methuen-Campbell v. Walters (1979) 2 QB 525 at 542; Wade v. NSW Rutile Mining Co. Pty. Limited (1969) 121 CLR 177 at 181. And, where a statute contains a provision derogating seriously from the rights of individuals, such provision should be given a restrictive interpretation: Board of Fire Commissioners (NSW) v. Ardouin (1961) 109 CLR 105 at 116; Suatu v. Australian Postal Commission (1989) 86 ALR 532. 23 Mr. Whittle referred me to Cousins v. Gosford Shire Council (1970) 92 WN (Pt.1) 263 at 271, as demonstrating that failure to comply with the requirements of s.602 invalidated a sale. He referred me also to Morgan v. 15 Bannerman Street Pty. Limited (1971) 1 NSWLR 601 at 608, where Hope, J. said: "It is clearly arguable that if there was no sale authorized by s.602, there can be no conveyance under s.604, and even if the council purports to execute such a conveyance, it would have no operation despite the provisions of s.604(2) and (4), if only for the reason that the conveyee would necessarily have knowledge and be party to the infringement of the Act." Mr. Whittle noted that, in Logue v. Shoalhaven Shire Council (1979) 1 NSWLR 537, the Court of Appeal had held that the effect of s.604(2) was to exclude invalidity for failure to comply with the Act; but submitted that this case was distinguishable from Logue and indeed all previous cases in that, in the present case, the power in s.602(1) had never arisen in the first place. Mr. Whittle also referred me to Blacktown Municipal Council v. Custom Credit Corporation (1968) 71 SR(NSW) 365, in which it was held that s.604(2) had no application until the transfer or conveyance was actually made. 24 Turning to the wording of the sections, Mr. Whittle submitted that the first paragraph of s.602(1) used the expression "any land", and then limited that expression to a more limited category to which all later provisions apply. Accordingly, where later provisions referred to "the land", they must be taken as referring to land within the more limited category fixed by the first paragraph of s.602(1). When one comes to s.604(1), "the land" in that provision must mean land within the category specified by the first paragraph of s.602(1); and the same must apply to "the land" as it appears in s.604(2). Certainly, he submitted, that must be the result, having regard to the principles of statutory interpretation to which he had referred. 25 Mr. Campbell QC for the Council provided a written outline of submissions, which I will leave with the papers. 26 He submitted that the protective provisions in s.604 applied to Old System land: Morgan at 606. He submitted that the conveyance to Mr. Mork purported to be made in exercise of the power contained in s.604 of the Act, as stated in the conveyance itself, and see also Phonogram Limited v. Lane (1982) 1 QB 938 at 942-3, 945. Accordingly, s.604 was effective to protect the purchaser: Logue at 540, 542, 550. 27 Mr. Campbell submitted that "the land" in s.604(2) meant the land the subject of the conveyance or transfer referred to in that provision. There was nothing in the language to limit s.604(2) to minor failures to comply. The purchaser would be in no position to know whether rates were overdue for five years on the land, any more than the compliance with other requirements of s.602. It was not surprising that the conveyance should be conclusive: undoubtedly, if it had been a transfer under the Real Property Act, registration under that Act would have given the purchaser indefeasible title. Similarly, s.604(4) was not limited to minor or procedural defects. 28 As regards the principle of statutory construction relied on by Mr. Whittle, Mr. Campbell submitted that this was not expropriation without compensation: the purchase price could only be used for payment of any rates and charges actually owing to the Council, and the balance would go to the true owner of the land. Mr. Campbell referred me to Pearce, Statutory Interpretation in Australia, 4th Ed., par.5.12, and submitted that the presumption was displaced where the legislation disclosed an object of overriding property rights. Mr. Campbell referred me to Durham Holdings Pty. Limited v. State of New South Wales (1999) NSWCA 324, (2001) HCA 7. Mr. Campbell also referred to the analogous case of exercise of mortgagee's power of sale: Life Interest & Reversionary Securities Corporation v. Hand-In-Hand Fire & Life Insurance Society (1898) 2 Ch. 230; Brigers v. Orr (1932) 32 SR(NSW) 634. 29 Mr. Loofs for Mr. Mork adopted Mr. Campbell's submissions. He also provided a written outline of argument. He submitted that the Council's interpretation of s.604(2) would not have far-reaching consequences, such as effective transfers by a council of land outside its area, because the sale of such land could not be a sale purporting to be under the Act. Mr. Loofs submitted that the plaintiffs' construction would produce curious consequences. Land where rates had been overdue for a period of five years, but which had been paid, would be caught by s.604(2), but land in respect of which a council mistakenly believed rates were five years overdue, but which were in fact four years and eleven months overdue, would not. The broad language of s.604(2) was designed precisely to avoid such arbitrary distinctions. Decision 30 Although, as submitted by Mr. Campbell, this is not a case of expropriation for no consideration, it is an expropriation where the consideration (the price received at a council auction) is likely to be substantially less than the value of the property. I think a presumption against a wide construction does apply. Further, although there is no question that if this were Real Property Act land, and the transfer had been registered, the plaintiffs' title would be defeated, I do not believe that is a weighty consideration. The Real Property Act itself recognised the possibility of injustice being caused to defeated owners by the indefeasibility provisions, and makes provision for compensation of such owners. There is no such provision here. 31 However, I do think the wording of the provisions is too clear to permit of the construction contended for by the plaintiffs. 32 "The land" where it appears in s.604(1) means the land in respect of which the purchase money was paid pursuant to a sale under s.602. If that provision stood alone, it would require a valid sale under s.602 for it to be effective. "The land" where it appears in s.604(2) must be restricted at least to the land the subject of any conveyance or transfer by the Council purporting to be made under the Act; and because the word "purporting" is used, the requirement that there be a valid sale under s.602 is excluded by clear words. In my opinion, it would be gratuitous, as a matter of language, to introduce any further restriction on the meaning of "the land" as those words appear in s.604(2). 33 Mr. Whittle submitted that there should be the restriction of those words to land in respect of which rates have become more than five years overdue, or in respect of which the power of sale has arisen, because that is what "the land" means wherever it appears after the first paragraph of s.602(1). 34 However, I do not think that "the land" or "land" is consistently used in s.602 and subsequent sections in a way such that, as a matter of language, it refers back to the first paragraph of s.602(1); although no doubt the provisions after that first paragraph do proceed on the assumption that the Council is going about selling land in respect of which it has a power of sale. 35 I accept Mr. Loofs' submission that Mr. Whittle's approach would lead to difficult and illogical distinctions. Would Mr. Whittle's proposition apply where the rates were at one time more than five years overdue, but where they were paid in full before the time when the Town Clerk gave a certificate, or between that time and the time when the Council resolved to sell the land? Many other difficult examples could be formulated. 36 Furthermore, s.604(4) does not appear to be limited to defects in Council's compliance with procedural requirements. It could be argued that the words "complied with" are limited to actions taken by the Council, rather than the circumstances giving rise to the power; but the word "validity" appearing later in that subsection is plainly apt to cover all possible defects, including a defect as to satisfaction of the first paragraph of s.602(1). 37 Finally, this approach is supported by the authority of the Court of Appeal decision in Logue. I accept that that case was one where the power of sale had arisen, and that the case was concerned only with a defect in the procedure of sale. Accordingly, the relevant dicta of the Court of Appeal judges do not have the weight which they would have, in their application to the present case, if Logue had been a case where the power of sale never arose. However, the dicta are in terms wide enough to cover this situation, and in my opinion are authority for the proposition advanced by the defendants. 38 As regards the statements by Hope, J. in Morgan, in my opinion they must be read as limited to cases where there are defects in compliance with s.602 that are so patent that the conveyance cannot truly be said to purport to be in exercise of the Council's powers, and/or to cases where the purchaser has such notice of the defects that the purchaser would be subject to an equitable obligation in favour of the previous owner. Neither of those circumstances apply in this case. 39 Accordingly, the plaintiffs fail in their claim for Lots 17 and 20. The plaintiffs' submissions were reasonably arguable, but on balance I consider that they are excluded by the wording of the relevant legislation. I come to this conclusion reluctantly. Both the plaintiffs and the purchaser are innocent parties, and the Council was in my opinion at fault in selling land which it had no power to sell, in respect of which rates had been levied by the Council and paid by the plaintiffs, and where the Council had a search suggesting that something was wrong. Had I found in the plaintiffs' favour, the purchaser would have been entitled to full compensation from the Council; whereas the plaintiffs can recover only the purchase price of $3,050.00 plus interest, an amount likely to be well short of the value of the land. CONCLUSION 40 In the result, the plaintiffs' claim of entitlement to Lots 17 and 20 will be dismissed. I will make an order that the Council re-convey the relevant part of Lot 31, and pay to the plaintiffs $3,050.00 plus interest at Practice Note rates from 13th April 1993. 41 There will need to be further submissions on costs. It seems clear that the plaintiffs will have to pay Mr. Mork's costs. As between the plaintiffs and the Council, it seems to me that the question is not so clear. On one view, the Council, through selling land which it had no power to sell, created a situation where the title to land was unclear, and one of two innocent parties would have to suffer. On that approach, there is much to be said for the view that the Council should bear the costs of resolving a legally unclear situation, which it created through its wrongful conduct. *********** Last Modified: 03/28/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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