New South Wales Supreme Court CITATION : Chanrich Properties Pty. Limited & Ors. v. Baulkham Hills Shire Council [2001] NSWSC 229 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 2900/96 HEARING DATE(S) : 6, 7, 8, 9, 12 and 13 March 2001 JUDGMENT DATE : 2 April 2001 Chanrich Properties Pty. Limited - 1st plaintiff PARTIES : Hi-Return Investments Pty. Limited - 2nd plaintiff Votraint No.117 Pty. Limited - 3rd plaintiff Bauklham Hills Shire Council - defendant JUDGMENT OF : Hodgson CJinEq at 1 COUNSEL : Mr. M. Tobias QC with Mr. P. Tomasetti for plaintiffs Mr. B.J. Preston SC with Mr. M. Henry for defendants SOLICITORS : Storey & Gough, Parramatta for plaintiffs Coleman & Greig, Parramatta for defendant CATCHWORDS : LOCAL GOVERNMENT - ESTOPPEL - UNJUST ENRICHMENT - Council represents that compensation would be payable for land dedicated as public reserve - Condition of development consent requires specified land to be dedicated as public reserve, and also cash contribution under s.94 of the Environmental Planning & Assessment Act - Council subsequently refuses to pay compensation - Construction of consent - Whether developer entitled to relief on the basis of estoppel or unjust enrichment - Quantum of relief. LEGISLATION CITED : Environmental Planning & Assessment Act s.94 DECISION : See end of judgment IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORAM: HODGSON, CJ in Eq. Monday 2nd April 2001 NO. 2900 OF 1996 CHANRICH PROPERTIES PTY. LTD. & ORS. V. BAULKHAM HILLS SHIRE COUNCIL JUDGMENT 1 On 15th December 1992, the defendant Baulkham Hills Shire Council considered an application for subdivision into 96 residential lots, in four stages, of land in Coonara Avenue, West Pennant Hills, owned by the third plaintiff Votraint; and it passed a resolution granting development consent for Stage 1, and authorising certain Council officers to grant development consent to subsequent stages of the development. 2 On 19th February 1993, the Council issued development consents for Stages 2, 3 and 4 of the development. Condition 16(a) of the consent for Stage 3 required that the plan of subdivision provide for "the dedication of lot 339 as public reserve"; and condition 17(a) of the consent for Stage 4 required that the plan of subdivision provide for "the dedication of lot 423 as public reserve". 3 On 21st September 1994, the linen plan for Stage 3 was registered at the Land Titles Office, with the result that lot 339 was thereby dedicated to the Council. On 9th February 1996, the linen plan for Stage 4 was registered at the Land Titles Office, with the result that lot 421 (the same lot as lot 423 in the original plan for Stage 4) was thereby dedicated to the Council. 4 The Council has made no payment for those lots, and denies any liability to do so. In these proceedings, Votraint, and also the first and second plaintiffs Chanrich and Hi-Return, which are the shareholders of Votraint, claim that they are entitled to compensation and/or damages in respect of those lots, on the basis of estoppel and unjust enrichment. 5 At the time of the hearing, the operative Statement of Claim was the Amended Statement of Claim filed on 6th March 2001. Near the conclusion of the case, an application was made to amend, in accordance with a "Second Amended Statement of Claim" (excluding paragraphs 28 and 29 of that document), and I indicated that I would deal with that application in the judgment. OUTLINE OF FACTS 6 In March 1991, the Council had standard rates per lot in relation to conditions of development consent requiring payment of contributions for provision of public amenities and public services pursuant to s.94 of the Environmental Planning & Assessment Act. In relation to an area identified as Kings Road, that rate was $10,303.00 per lot, made up of $1,035.00 for community facilities, $7,461.00 for open space and recreation, and $1,807.00 for roads, traffic and drainage. By 25th February 1992, this rate had apparently increased to $10,518.00 per lot. 7 On 25th February 1992, the Council gave to a surveyor Mr. Lean notice of a development consent in relation to the subdivision of certain property in Kings Road owned by Chanrich. Condition 12 of that development consent required a cash contribution of $410,202.00 in accordance with s.94 of the Environmental Planning & Assessment Act, that being a contribution at the rate of $10,518.00 per lot. Condition 14(a) of that consent required that the plan of subdivision provide for "the dedication of lot 61 as a public reserve". 8 On 4th April 1992, the principal of Chanrich, Michael Fornari (who has at all material times also been principal of Hi-Return), wrote to the Council noting that condition, and advising that Chanrich wished to finalise the land transfer in relation to lot 61, and that it was understood that this would require the Council to obtain a valuation of the land. 9 On 17th June 1992, the Council wrote to Mr. Fornari advising that the Environmental Services Committee of the Council had resolved that an amount of $32,198.00 (subject to final survey) based on $15.00 per square metre be paid to Chanrich, as compensation for acquisition of lot 61 for open space purposes; and in July 1992, when Chanrich paid its s.94 contribution in respect of this subdivision, it was given credit for $32,205.00 in respect of the dedication of lot 61. 10 On 25th June 1992, Chanrich and Hi-Return agreed with subsidiaries of IBM Australia Limited to purchase shares in Votraint, which owned most of the subject property in Coonara Avenue, namely lot 2 in Deposited Plan 517100 and lot 51 in Deposited Plan 746113, for $136,000.00, together with a loan of about $4.5 million dollars to Votraint (apparently to enable it to satisfy a debt of about $4.8 million to the vendors). There was apparently at about the same time a similar transaction in relation to the remainder of the property, namely a narrow strip along Coonara Avenue at the south of the property, being part of lot 220 in Deposited Plan 774073. This particular land was the land included in Stage 1 of the later subdivision, and does not have direct relevance to the case. 11 There were certain easements affecting the subject land, including an easement for a transmission line which ran across the property from east to west. At the time of the agreement to purchase shares, most of the land to the south of this easement was zoned residential 2(b), and most of the land to the north of that easement was zoned residential 2(d), apart from a parcel zoned open space 6(a), all such zoning being that specified in the applicable planning instrument under the Environmental Planning & Assessment Act Pt.3, namely the Baulkhams Hills Local Environmental Plan 1991. 12 Under both the relevant residential zonings, a house could be erected without development consent. However, the land was also affected by a Development Control Plan adopted by the Council, which set out guidelines for development, which could be varied if sufficient cause was shown. Those guidelines provided that the minimum lot size in residential 2(b) areas should be 700 square metres, and the minimum lot size for residential development in 2(d) areas should be 2,000 square metres. 13 The Local Environmental Plan also provided that the Council could, by resolution, designate an area as a "restricted development area" (or RDA) to retain natural drainage channels, protect vegetation, protect visual amenity, prevent soil erosion, protect topographic features or to reduce the risk of geotechnical hazards. 14 The relevant Development Control Plan contained a similar provision in relation to restricted development areas (RDAs), and also provided that "within the Residential 2(b) zone any allotment created by subdivision, a minimum area of 450m2 is to be provided free of restricted development designation." 15 In fact, in June 1992 there was a strip of land about 25 metres wide, running generally north-east to south-west across the Coonara Avenue property, which had been designated as a restricted development area. This strip ran across the residential 2(b) land. It was slightly curved, and followed a natural depression; and on at least part of it, there were substantial stands of blue gum trees. The remainder of the residential 2(b) area was also timbered, although it seems that the most substantial blue gum trees were within this part of the RDA. 16 On 3rd July 1992, IBM Australia Limited gave written consent to Chanrich and Hi-Return to lodge development applications to enable them to obtain subdivision approval on these properties. 17 On 7th August 1992, Mr. Fornari organised a bus trip to visit RDAs in the West Pennant Hills area, together with the surveyor Mr. Lean and Council officers including Mr. Lee, a Senior Town Planner. On this trip, Mr. Fornari said words to the effect that the Council had allowed development within the RDAs, and that open spaces gave better protection than RDA; and Mr. Lee responded to the effect that it would be better if open space was provided. 18 On 12th August 1992, Mr. Lean sent to the Council three possible plans for subdivision of the residential 2(b) land. One of them provided for a public reserve about 200 metres long and about 50 metres wide, half of which was generally within the RDA, and a drainage reserve about 80 metres long at the south-west end of the RDA, with the rest of the RDA taken up by roads and residential lots. 19 On 20th August 1992, there was a meeting at the Council offices between Mr. Fornari, Mr. Lean, and Council officers including Mr. Lee. Mr. Lee handed to Mr. Fornari a document containing points for discussion, including items referring to open space and a s.94 contribution. He also handed Mr. Fornari a document entitled "Opportunities Plan", being a plan relating to the whole of the subject land, which showed open space at the north of the property, in the residential 2(d) area, in the form of a lookout area fronting Castle Hill Road, another open space generally in the position proposed on Mr. Lean's plan, to which I have referred, and a drainage reserve basin at the southern end of the land at about the south-western end of the RDA. It is common ground that, at this meeting, Mr. Fornari indicated that he wanted compensation for the areas of open space and drainage; and that Mr. Lee said words to the effect that no compensation would be payable in respect of the drainage reserve. Mr. Fornari says that Mr. Lee said compensation would be payable in respect of other open space. 20 On 26th August 1992, there was a further meeting at the Council offices between Mr. Fornari, Mr. Lean, and Council officers including Mr. Dunesky. Mr. Fornari says that similar statements about compensation were made at that meeting by Council officers. 21 On 25th September 1992, Mr. Lean, apparently purporting to act on behalf of Votraint, lodged a development application seeking consent to the subdivision of the land into 96 residential lots, two public reserves, and a residue lot (mainly the 2(d) and 6(a) land) for future subdivision. It was submitted along with a Statement of Environmental Effects, which referred to s.94 contributions at about $10,500.00 per lot, and to values to be placed on the two reserves having regard to their dual functions as open space and drainage detention basins. 22 There is in evidence a Council memorandum dated 7th December 1992 from Janelle Schofield (Manager Development Contributions) to Mr. Lee, which referred to the current rate of s.94 contributions as being $11,348.00 per additional lot, and commented that the dedication of Reserve 2 (the area at the south-western end of the RDA) as drainage reserve formed part of the works associated with the development, and should be wholly provided by the developer and not attributable to s.94. In relation to Reserve 1, being the reserve near the centre of the development, the memorandum said this: Whilst Reserve 1 will also be used as part of the storm water detention system it is noted that the major purpose of this reserve is to retain significant representative vegetation. Dedication of Reserve 1 could be required by a condition of consent under Section 94 of the EP&A Act, however, it is considered that this dedication should be negotiated independent of any consent granted having regard to the fact that the value of the land is as yet unknown and the land area exceeds that which would be required by the 2.83 per 1000 standard. The plans of subdivision should provide for the creation of the reserve as a separate lot with an easement created over the drainage basin area. 23 In a report on the development application for the Council meeting held on 15th December 1992, Mr. Lee wrote recommending variations to the existing Development Control Plan, including deletion of the RDA, and also commenting on the matter of s.94 contributions. The relevant parts of this report are as follows: The applicant has justified the deletion of the Restricted Development area by the creation of public reserves for open space in the place of the area. In any event the land would be disturbed by works needed to meet the requirements of the Upper Parramatta River Catchment Trust for drainage retention. It is noted that elsewhere in the West Pennant Hills Valley where restricted development areas that have been identified they have frequently been cleared of vegetation or altered as a result of ancillary residential activities. It seems probable that if the same treatment was carried out on this land and the restricted development areas were kept in private lots the existing vegetation and character of the land could be lost. .... The applicant's submission raises a number of issues in respect of the open space, drainage, roads and traffic components of Section 94 contributions. Each of these items are addressed below: (1) Open Space The drainage reserve forms part of the works associated with the development and should be wholly provided by the developer and not attributable to Section 94. With respect to the passive open space reserve proposed by the applicant it is considered that this provision should be negotiated independent of any consent granted having regard to the fact that the value of the land is as yet unknown. Part of this reserve is required for drainage purposes and will not be attributable to open space. The value of this open space will have regard to the environmental constraints and may well approximate the value of the zoned pen space in the later stages which is not considered appropriate in its present position. 24 At the meeting on 15th December 1992, the Council resolved to support the proposed amendments to Development Control Plan No.97 as outlined in Mr. Lee's report, granted development consent for Stage 1 of the subdivision, and authorised Council officers to grant development consent to subsequent stages. Condition 12 of the consent was in the following terms: A cash contribution of $102,132 be paid in accordance with Section 94(1) of the Environmental Planning & Assessment Act, 1979, i.e. $11,348 for each of nine (9) additional allotments. The amount payable may vary in the event that the rates are renewed prior to payment. In this case the payment will be required at the rate applicable at the time. 25 Condition 15(a) required that the plan of subdivision provide for "the dedication of lot 11 as a drainage reserve". Lot 11 in fact comprised part of what was referred to in Ms. Schofield's report as Reserve 2. 26 The purchase of shares which had been agreed upon in June 1992 was completed on 30th December 1992, with the result that Chanrich and Hi-Return became legal owners of the shares in Votraint. 27 On 19th February 1993, the Council notified Mr. Lean of approvals given for Stages 2, 3 and 4 of the subdivision. Each of these approvals contained a condition similar to Condition 12 of the approval for Stage 1, with a small variation in the amount ($11,405.00 per lot instead of $11,348.00 per lot) in respect of the Stage 2 and Stage 4 approvals. I do not believe this variation is explained in the evidence, and it seems to be immaterial. The approval for Stage 2 contained Condition 16(b) which required that the plan of subdivision should provide for "dedication of lots 228 and 229 as drainage reserve". Lot 229 was the remainder of the area referred to in Ms. Schofield's report as Reserve 2, while lot 228 was a lot at the south-western end of the area referred to as Reserve 1 in that report. A substantial part of that lot was below the one in a hundred year flood level, and it seems that it was for that reason inter alia that dedication as drainage reserve was required. 28 The consent in respect of Stage 3 contained Condition 16(b), which required that the plan of subdivision provide for the "dedication of lot 339 as public reserve". Lot 339 was a very substantial part of Reserve 1. The approval in respect of Stage 4 contained Condition 17(b) which required that the plan of subdivision should provide for dedication of lot 423 as public reserve. Lot 423 was the remainder of Reserve 1 being a lot at the north-eastern extremity of it. 29 In about late June 1993, Mr. Fornari met Mr. Kremenic, Property Manager for the Council, at the Council offices. On that occasion, Mr. Kremenic said words to the effect that he understood there would be no compensation for the drainage reserve, but that compensation was payable for open space areas. 30 On 16th November 1993, Mr. Fornari wrote as director of Chanrich to Barry Smith, Director of Corporate Services at the Council, a letter in the following terms: The company has completed construction of Stages 1 and 2 of our Estate, with the draft linen plans recently lodged with Council for sealing. These two Stages require dedication of various areas to Council, either as Drainage or Public Reserves. This letter is forwarded so that negotiations can proceed on the compensation payable for the area to be dedicated as Public Reserve. Perhaps some background information may be of assistance. At a meeting with senior officers of Council on 23rd December, 1992 it was agreed that the Lower Reserve (coloured blue on Attachment A) would be dedicated to Council as a drainage reserve, with no S.94 credit. In the Upper Reserve (coloured green on Attachment A), that area beneath the Q100 line would be regarded as drainage reserve and subject to no S.94 credit, with the remainder of the area Open Space and subject to the usual S.94 arrangements. Council's letter of 15th September, 1993, which clarified some Consent conditions for Stage 2, again confirmed these arrangements. The draft linen plan for Stage 2 (Attachment B) lodged with Council proposes to dedicate the Upper Reserve as Lot 228. Attachment C shows the areas of Lot 228 above and beneath the Q100 line, i.e. beneath Q100 : 1040.25M2 (no compensation applicable) above Q100 : 1513.75M2 Total Area Lot 228 2554M2 It would be appreciated if Council could obtain a valuation of the area of 1513.75M2 so that this matter may proceed. I had some preliminary discussions with Mr. H. Kremenic on this subject some time ago. It was agreed that the simplest method of handling this matter would be to dedicate Lot 228 as Public Reserve in the normal course of registration of the Stage 2 linen plan. The Company would pay the full S.94 contribution and be subsequently reimbursed the Open Space compensation as soon as agreement is reached on the applicable amount. Please do not hesitate to telephone me if there are any aspects you wish to discuss. 31 It appears that there was thereafter an amendment of the plans of Stages 2 and 3 so that lot 228 was, apart from a small area, restricted to land actually at or below the hundred year flood level, as shown on Attachment E to Mr. Fornari's letter; and the remainder of lot 228 was added to lot 339. The exercise also involved removing a small area from lot 339, below the hundred year flood level, and adding it to lot 228. 32 On 23rd March 1994, Mr. Fornari on behalf of Chanrich wrote to Mr. Smith requesting a valuation of 8250 square metres, being lot 339 as amended, so that negotiations could be finalised on open space compensation. Mr. Smith sent a memorandum dated 27th May 1994 requesting the Property Officer of the Council to prepare a valuation of this area, and he sent a letter of the same date to Mr. Fornari advising that he had done this. On 19th August 1994, the Property Officer wrote to a valuer Realty Appraisals Pty. Limited requesting a market valuation of lot 339. 33 On 8th September 1994, Realty Appraisals gave a valuation of $664,000.00 for lot 339; and this was subsequently notified to Mr. Fornari. 34 The linen plan for Stage 3 was registered on 21st September 1994, with the result that lot 339 was dedicated to the Council. 35 On 20th September 1994, Mr. Fornari on behalf of Chanrich responded to the Realty Appraisal's valuation, asserting that it was substantially less than their assessment of the value of the lot. 36 On 27th February 1995, Mr. Fornari on behalf of Chanrich wrote to the Council, enclosing a valuation for lot 339 of $750,000.00; and asking for payment of $640,000.00 as an interim measure. The Council responded to this on 1st March 1995, advising that Chanrich's valuation had been referred to Realty Appraisals. 37 There is in evidence an internal Council memorandum dated 28th March 1995 from Peter Molloy, Subdivision Planner, to Manager Subdivision Control, expressing the opinion that, if lot 339 had not become open space, the Council would have retained the RDA over the site, and the use of that land would have been restricted to being added to the rear of residential lots. This memorandum was sent on to Realty Appraisals. 38 On 7th April 1995, Realty Appraisals came up with a new valuation of the land, at $230,000.00. On 19th April 1995, the Council wrote to Mr. Fornari withdrawing its offer of $640,000.00, and offering $230,000.00 instead. 39 On 15th June 1995, the plaintiffs' solicitors wrote to the Council rejecting that offer. 40 On 17th August 1995, Mr. Fornari wrote to the Council requesting that the Council obtain a valuation of lot 421, so that negotiations could be finalised prior to payment of the s.94 fees for Stage 4. (The s.94 contributions had to be paid to obtain release of the linen plan of the subdivision from Council.) 41 On 8th September 1995, the Council's solicitors wrote to the plaintiffs' solicitors withdrawing all offers, and asserting that the conditions of consent required dedication of lot 339 free of charge. A similar letter was sent concerning lot 421 on 20th September 1995. 42 On 9th January 1996, the linen plan for Stage 4 was registered, so that lot 421 was thereby dedicated to the Council. 43 These proceedings were commenced by Statement of Claim filed on 31st July 1996. ISSUES 44 The defendant's do not object to the amendment of the Statement of Claim in accordance with the proposed Second Amended Statement of Claim, except to the extent that it includes an alleged practice of Council as part of the cause of action. It is convenient to consider the issues, as they appear from the Second Amended Statement of Claim (apart from that allegation), the Defence, and the way in which the case was conducted. I will conclude by considering whether the amendment to include the alleged practice as part of the cause of action should be permitted, and if so, the consequences of that. 45 In essence, the plaintiffs put their case in this way. The Council represented to the plaintiffs that it would pay compensation at market value for land dedicated as public reserve, as distinct from land dedicated as drainage reserve, by express oral representations made inter alia on 20th August 1992 and in June 1993, and also impliedly inter alia by the grant of the development consent in the circumstances of the Council's practice and the terms of the report on which it was based. Next, in reliance on those representations, the plaintiffs lodged the development application proposing the dedication of lots 339 and 421 as public reserve, proceeded with the subdivision on getting approval of that application without either appealing or seeking an amendment to it, and thereafter paid its s.94 cash contributions and registered the linen plans. Accordingly, the Council was estopped from denying an obligation to pay compensation. Further, the Council has been unjustly enriched, because the plaintiffs' land has been transferred to the Council without compensation, inter alia because of a mistake by the plaintiffs as to the effect of the development consent. 46 The defendant Council puts all of these allegations in issue, and says the following in addition. The consent on its true construction required dedication of the land without compensation: that was a valid condition, and even if it were not, it could only be challenged by appropriate proceedings in the Land & Environment Court. In fact, the dedication was for consideration, including the approval of a profitable subdivision and release of the RDA. If there was any reliance (and that is in issue), such reliance was unreasonable. 47 I will consider in turn the following issues. 48 First, I will consider factual issues as to what was said, in particular in August 1992, and associated questions of credit. 49 Second, I will consider what was the true effect of the relevant conditions of the development consents. 50 Third, I will consider what representations were made. 51 Fourth, I will consider whether the plaintiffs were mistaken as to the effect of the conditions, and whether any mistake was reasonable. 52 Fifth, I will consider whether the plaintiffs acted to their detriment in reliance on representations and/or mistake: this will involve considering whether, having regard to any consideration the plaintiffs did receive, they truly acted to their detriment, and also the reasonableness of their conduct. 53 Sixth, I will consider whether the Council is estopped, and if so, what remedy is appropriate. 54 Seventh, I will consider whether the plaintiffs have a remedy on the basis of unjust enrichment, and if so, the nature of such remedy. 55 Eighth, I will consider questions of quantum of compensation, if they arise. 56 Ninth, I will consider the matter of amendment to which I have referred. WHAT WAS SAID 57 In considering what was said at various times, it is relevant to have regard to what, if any, practice the Council had in relation to s.94 contributions and dedication of land at relevant times. Although the practice is not considered here as part of the cause of action, it is certainly relevant to the probabilities of other matters which are elements of the cause of action. 58 Mr. Kremenic, who was appointed Council's property officer in January 1991 and continued (in substance) in that position until February 1995, gave evidence on behalf of the plaintiffs that, during that time, the practice of the Council was to pay compensation for land acquired by way of creation of open space upon registration of a plan of subdivision. This evidence was not denied. Indeed, it was confirmed by Mr. Lee, who gave evidence for the defendants, at least in relation to those cases where the development consent required payment of a cash contribution under s.94 at the standard rates adopted by the Council (as occurred in this case). The existence of this practice is also confirmed by what happened in relation to Chanrich's Kings Road development. 59 I find that there was such a general practice. I do not find that it was universally applied, and I cannot say whether there was any practice as to precisely how the amount of compensation was determined and as to when it was paid, although I do find that, in a general sense, the practice was to pay compensation which in a general sense represented the market value of the land. 60 Another consideration going to the probabilities of what was said is the authority of Council officers to bind the Council. I accept that Mr. Lee recognised that he did not have authority to bind the Council in relation to payment of compensation; and I accept that this weighs against the probability of Mr. Lee expressing himself as if he did have that authority. However, I do not think this would have prevented him from conveying what in his belief the Council would or would not do, having regard to his knowledge of the Council's usual practice. 61 Mr. Tobias submitted that I should not accept Mr. Lee as a witness of truth, and Mr. Tobias pointed to inconsistencies in his evidence. I do not think that Mr. Lee gave evidence dishonestly, although I do consider there was confusion in his evidence, which leads me to give it less weight than I otherwise would have. His denials of allegations by Mr. Fornari depend on his recollection as to his understanding and practice, rather than any actual recollection of what was said. 62 As regards other witnesses, I consider that Mr. Fornari had a very clear view as to his understanding of the matter, and a very clear view that he had been wrongly treated, and this to some extent affected his evidence; although I did consider that he gave evidence honestly with reasonable recollection. I consider that Mr. Lean also gave evidence honestly, and with reasonable recollection: I do not consider it significantly affected by his discussions about evidence with Mr. Fornari. As regards other Council officers who gave evidence for the Council, I consider that their evidence was not based on actual recollection of what they said, but rather on their belief as to what they would have said, having regard to their understanding and their practices. 63 I am not able to find what exact words were said on the various occasions. However, I do find that, on 20th August 1992, Mr. Lee did, through his responses to Mr. Fornari and through his own statements, convey to Mr. Fornari that the Council would pay compensation at market value for land dedicated as public reserve, as distinct from land dedicated for drainage reserve. He did not convey that the Council was through him undertaking that it would do so. On the balance of probabilities, I find that he did not convey that the question was simply a matter up for decision by the Council in each case, which the Council might decide one way or the other. He conveyed rather what the Council would do, on the basis of his belief and understanding, and did not convey that there was any doubt about the matter. 64 In about June 1993, Mr. Kremenic said to Mr. Fornari words to the effect that compensation would not be payable for drainage reserve, but would be payable for open space areas. That was Mr. Kremenic's evidence, and it was not challenged. 65 I find that statements to similar effect were made by other Council officers at various times, but it is not necessary to consider that in detail. EFFECT OF CONSENT 66 Before considering further what representations were made, in particular representations by the Council itself in connection with issuing development consent, I need first to consider the legal effect of the consent as granted. 67 The consent documents do not say expressly that the land is to be dedicated free of cost; but Mr. Preston SC for the Council submitted that that is what the documents meant. He submitted that, in construing such development consents, the Court cannot take account of dealings between the Council and the applicant; that the word "dedicated" implies lack of compensation; that the silence of the document on the matter of compensation implies that there was to be no compensation; and that the use of the same language as that used in relation to drainage reserve, for which clearly there was to be no compensation, again points to the same result. 68 The authorities on which Mr. Preston relied establish that a development consent operates in relation to the land rather than the applicant, in the sense that a consent does not concern itself with, and is not limited to the applicant, but rather operates with respect to the world at large in relation to the land which is its subject: see Eaton & Sons Pty Ltd v. Warringah Shire Council (1972) 129 CLR 270 at 293 per Stephen J. In other words, a consent is "not personal to the applicant but enures for the benefit of subsequent owners and occupiers, and in some respects … is equivalent to a document of title.": Ryde Municipal Council v. The Royal Ryde Homes (1970) 19 LGRA 321 at 324 per Else-Mitchell J. 69 One consequence of the fact that development consents are impersonal and equivalent to documents of title is that in construing a consent, it is generally impermissible to go beyond the four corners of that consent and any document incorporated in it: Slough Estates Ltd v. Slough Borough Council (No. 2) (1970) 2 WLR 1187 at 1190-1191 per Lord Reid, with whom Lord Morris of Borth-Y-Gest, Lord Dilhorne and Lord Diplock agreed, Ryde Municipal Council v. The Royal Ryde Homes (1970) 19 LGRA 321 at 323-324, per Else-Mitchell, J, Parramatta City Council v. Shell Co of Australia Ltd (1972) 2 NSWLR 532 at 637, per Hope JA, with whom Jacobs and Manning JJ agreed, Hubertus Schuetzenverein Liverpool Rifle Club v. Commonwealth of Australia (1994) 85 LGERA 37 at 43-46 per Wilcox J, and Woolworths Ltd v. Campbells Cash and Carry Pty Ltd (1996) 92 LGERA 244 at 249, per Sheller JA. 70 On the basis of this authority, I accept Mr. Preston's submissions that I am not entitled to take account of dealings between the Council and the applicant in construing the development consent, or indeed even to look at the intention disclosed by Council's adoption of Mr. Lee's report in relation to the granting of the development consent. 71 There is force in Mr. Preston's other submissions. Of course, one possibility is that the development consent is simply silent on compensation, and so leaves it undetermined whether compensation is to be given or not. I would lean against that interpretation, because it would probably make the condition requiring dedication void for uncertainty, and, because of the significance of that condition to the whole approval, could vitiate the whole approval. In my opinion, the approval should be read either as requiring dedication without compensation, or as requiring dedication with compensation at market value. 72 There is some support for the latter construction from s.94 of the Environmental Planning & Assessment Act, which provides to the effect that a condition requiring the dedication of land free of cost or the payment of a monetary contribution shall be imposed only to require a reasonable dedication or contribution for the provision, extension or augmentation of relevant public amenities and public services. Since the development consent in this case required a cash contribution for these purposes, this could support the inference that it would be contrary to s.94 to require the dedication of land free of cost in addition, and that accordingly this is something the Council would not do. However, to make that inference a strong one, one really needs to go outside the consent itself and have regard to the Council's standard rates for s.94 contributions, to show that the contribution required in this case was the full contribution treated by Council as adequately providing for public amenities and public services; and the cases referred to by Mr. Preston indicate that that cannot be done. 73 On balance, having regard to the use of the word "dedicate", the lack of any provision for compensation or for how the compensation is to be assessed, and the use of the same language as in relation to the drainage reserve, in my opinion the conditions in the consents, on their true construction, do mean dedicate free of cost. REPRESENTATIONS 74 In relation to the oral representations alleged, I have made a finding of fact as to the effect of what was said. 75 A question is raised as to whether these oral representations were made to Votraint, the owner of the land, in circumstances where the contract for purchase of shares was not completed until 30th December 1992. However, in circumstances where Mr. Fornari was the principal of Chanrich and Hi-Return, which had an equitable interest in Votraint's shares by reason of their contract, and which had authority from Votraint's legal shareholders to make the development application, in my opinion Mr. Fornari was relevantly acting on behalf of Votraint in his dealings in August 1992, and representations made to him were effectively made to Votraint. 76 There was also a question of whether the Council officers, in particular Mr. Lee and Mr. Kremenic, had authority from the Council to make the representations, so as to make them representations by the Council. In my opinion, where the Council had a practice as to its conduct in these matters and employed people to deal with developers making applications to the Council, in these circumstances the relevant Council officers did have authority to convey to the developers what the Council's practice was in relation to the circumstances of the developer's application. 77 Turning to the question of whether there was an implied representation by the Council itself, I have found that the consent itself meant that there was to be no compensation. However, I have found that meaning only by the smallest margin, leaving out surrounding circumstances, including the practice of the Council, the dealings between the plaintiffs and the Council, the probable unlawfulness of the Council requiring dedication of land free of charge in addition to cash contributions under s.94 at its standard rates, and other circumstances relevant to the actual intention of the Council, as conveyed to the plaintiffs. In my opinion, when one takes those surrounding circumstances into account, the granting of the consent and communication of it to the plaintiffs did amount to a representation by the Council itself that compensation would be paid in respect of land dedicated for public reserve. 78 The circumstances giving rise to the implication are the following. First, there was the practice of the Council, which I infer was known to the Council itself, and the substance of which had been conveyed to Mr. Fornari by the Council's officers, and also by what had actually happened in relation to the Kings Road development. Next, there was the report to the Council which was adopted by the Council in giving development consent, and which clearly conveyed that compensation would be paid for land dedicated as public reserve: that report was made available to Mr. Fornari, and so Mr. Fornari was made aware of the significance in this respect of the Council's adoption of it. Finally, there was the apparent unlawfulness of the Council requiring both cash contributions and the dedication of land without compensation. MISTAKE 79 It follows from what I have said that in my opinion, the plaintiffs and also the Council itself were mistaken as to the true effect of the consent. So far as the plaintiffs are concerned, I consider that mistake was reasonable. INDUCEMENT AND DETRIMENT 80 It is clear in my opinion that Mr. Fornari and the plaintiffs did believe that the Council would pay compensation at market value for land dedicated as public reserve. If they had believed that the Council would not do this, they would not have lodged the development application in the form in which it was lodged, but rather would have engaged in further negotiations with Council, so as to obtain a valid undertaking from Council to pay compensation, or alternatively they would have lodged a different subdivision application. 81 But for the plaintiffs' belief and mistake, they would not upon receipt of the Council consent have gone ahead with putting the subdivision into effect, without either applying for a variation of the consent under s.102 of the Environmental Planning & Assessment Act, or else appealing against the conditions of the consent. 82 By the time the Council conveyed to the plaintiffs that it was not going to pay compensation, that is September 1995, it was too late for the plaintiffs to take any other course. By carrying out the subdivision, Votraint had subjected itself to the obligation to dedicate contained in the development consents, and by failing to apply for a variation under s.102 and failing to appeal, it had lost any opportunity to avoid that responsibility. By September 1995, it was also fully committed commercially to carrying through the subdivision. 83 In my opinion also, it was reasonable for the plaintiffs including Votraint to have acted in the way they did in all these respects. 84 It was put in effect by Mr. Preston that there was no detriment, because Votraint received the benefit of a beneficial subdivision consent from which it could profit, and in effect in various ways received full consideration for the dedication of the public reserve land, in particular by reason of the development consent itself, and also the release of the RDA. 85 In my opinion, when one has regard to the actual intention of the Council and its officers that full compensation be paid for the land dedicated as public reserve, in addition to whatever other benefits the plaintiffs received, and having regard to the terms of s.94, which prevented the Council validly requiring any benefit for public amenities or public services in addition to the cash contributions required by the development consents, it is clear that the plaintiffs did suffer a detriment. Whether by way of further negotiation with the Council, or by way of an alternative subdivision, or by way of a s.102 application or an appeal, in my opinion the plaintiffs would have done substantially better if they had not gone ahead with the subdivision without any compensation for the public reserve land. ESTOPPEL 86 Mr. Preston referred to the elements of a case of estoppel, and submitted that for the plaintiffs to successfully plead estoppel in the present proceedings, the following six elements would need to be proved: first, that there was in the plaintiffs' mind an expectation that a legal relationship would exist, from which the Council would not be free to withdraw; second, that the Council induced that expectation; third, that the plaintiffs acted in reliance of it; fourth, that the Council intended the plaintiffs to do so; fifth, that the plaintiffs' action would occasion detriment if the expectation was not fulfilled; and finally that the Council had failed to avoid the detriment. He submitted that none of these requirements was made out. 87 As to the first, he submitted that the plaintiffs' expectation was not clear, certain, or unambiguous, and not as to a future legal relationship; that it was conditional on the Council resolving to pay compensation; that it was not held by Votraint; and that it did not continue after 20th September 1995. 88 In my opinion, there was a clear, certain and unambiguous expectation that the Council would pay compensation at market value for lots dedicated as public reserve. In my opinion also, this was relevantly a legal relationship in which the Council either actually did pay or was bound to pay such compensation. It does not matter that such an obligation may not be able to arise under a development consent as a matter of law or that the plaintiffs' claim in contract in this case had been abandoned. It is sufficient that the Council can in various ways become subject to such an obligation. 89 As a starting point for its submission that the plaintiffs' expectation did not relevantly relate to the existence of a legal relationship, the defendant has cited Brennan J's statement in Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 428-429 that: … to establish an equitable estoppel it is necessary for the plaintiff to prove that the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them … . 90 The defendant then claims that, since in the circumstances of the present case there was and could in the future be no contractual, fiduciary, or proprietary relationship between the parties, nor any statutory obligation affecting the relationship between the parties, an estoppel cannot arise. 91 However, it seems to me that the authorities do not require that the relevant expectation relate to a legal relationship in the narrow sense that the defendant defines the term. To begin with, there are statements of principle in subsequent cases which envisage a wider concept of legal relationship. For example, in Austotel Pty Ltd v. Franklin Self Serve Pty Ltd (1989) 16 NSWLR 502 at 610, Priestley, JA stated: … for equitable estoppel to operate, there must be the creation or encouragement by the defendant in the plaintiff of an assumption that a contract will come into existence or a promise be performed or an interest granted to the plaintiff … 92 This statement echoes what was said by Priestley, JA with whom Hope, JA agreed, in the earlier case of Silvoli Pty Ltd v Barbaro (1988) 13 NSWLR 466, namely that: For equitable estoppel to operate … there must be … an assumption that a contract will come into existence or a promise be performed … . 93 These statements suggest that for estoppel to operate it is sufficient, as far as the content of the requisite expectation is concerned, if the expectation is to the effect that a "promise be performed". That is, an expectation relating to the existence of a legal relationship which can be strictly categorised as contractual, fiduciary, proprietary etc, is not required. 94 Furthermore, although the defendant has provided a list of estoppel cases in which the assumption or expectation related to the existence of a legal relationship which could be strictly defined as contractual, fiduciary, proprietary etc (High Trees (1947) KB 130, Waltons Stores (Interstate) Ltd v. Maher (1988) 164 CLR 387, Plimmer v. Wellington Corp (1884) 9 App Cas 699), it seems to me that an estoppel has also been found to arise in cases where the expectation did not relate to a legal relationship in that narrow sense. One example is The Commonwealth v Verwayen (1990) 170 CLR 394. 95 In Verwayen , the Commonwealth made certain statements as to its policy in relation to claims arising out of a collision between Australian naval vessels. These were to the effect that its policy was not to contest liability or to plead a limitation defence. There was a subsequent change in policy. The court held, by majority, that the Commonwealth should be held to its position as represented. 96 Significantly, in my opinion, in that case the Commonwealth was under no obligation, statutory or otherwise, to adopt the original policy which it did. Accordingly, the relevant expectation in the other party's mind could not have been that a provision of a statute existed or would come into existence on which he could rely, nor that a contract existed or would exist between him and the Commonwealth under which the Commonwealth would be obliged to maintain its favourable policy, nor that any other legal relationship capable of strict classification, existed or would exist. The content of the expectation was merely that the Commonwealth would conduct itself in accordance with the representations it had made. 97 To my mind the circumstances of the present case are relevantly not dissimilar to those of Verwayen. I will assume for the sake of argument that, but for the Council's representations, the Council was in fact under no obligation to pay compensation in respect of dedicated land. In those circumstances, submits the defendant, the expectation in the plaintiffs' mind could not reasonably have been that there was or would in the future be a contract for the sale of the land by the plaintiffs to the Council, that there was or would in the future be a fiduciary relationship between the Council and the plaintiffs, or that any other legal relationship capable of strict classification existed or would exist. In my opinion, while this may well be true, it does not help the defendant's case. On the basis of my analysis of The Commonwealth v Verwayen the fact that the expectation was not one as to the existence of a legal relationship capable of strict classification as contractual, fiduciary, proprietary etc is not a reason to deny the plaintiff relief based on estoppel. 98 In my opinion, the expectation was not an expectation conditional upon the Council resolving to pay compensation. In my opinion, it was an expectation held by Votraint, certainly by the time it proceeded with the subdivision. The relevant action to Votraint's detriment had been taken well before September 1995. 99 Mr. Preston submitted that the Council had not induced that expectation, because at most there had been statements by its officers of future possibilities, not binding on the Council. 100 As I have previously found, the statements made by Council officers were clear statements as to what would happen, in accordance with Council's usual practice, and in my opinion the statements were made within the officers' authority. In any event, the implied representation which I have found was likewise a clear representation, and plainly bound the Council. 101 Mr. Preston submitted that the plaintiffs did not act in reliance on the expectation: what they did was mere performance of existing legal duties, and/or action taken to meet commercial needs. He also submitted that, in any event, it would have been unreasonable for the plaintiffs to act in reliance on the expectation in question. 102 In my opinion, in lodging the development application, and in carrying out the approved subdivision without applying to vary it or appealing, Votraint was not acting in performance of existing legal duties, nor acting merely to meet commercial needs. As I have said, but for the representations, in my opinion it would have acted differently. 103 Mr. Preston submitted that the evidence did not show that the Council intended the plaintiffs, or Votraint in particular, to act on any such expectation. 104 In my opinion, it was plain to Council officers who made the representations that Mr. Fornari, and accordingly Votraint, were intending to rely on those representations in acting in relation to the development of the subject land. The same in my opinion was plain to the Council itself in giving approval and impliedly representing that compensation would be paid. It was plain to the Council that Votraint was expecting compensation and would continue to act on that expectation unless disabused of it. In my opinion, that is sufficient to make out the element that reliance was intended. 105 I have already dealt with the question of detriment. Mr. Preston did make some submissions on failure to avoid detriment, but really they came down to the question of unconscionability, which I will come to in a moment. 106 Mr. Preston also made the submission that it would be against public policy to find the Council bound by an estoppel in this case, and he referred to the following authorities showing that the Council cannot disable itself from making a proper discretionary decision in the future: Ransom & Luck Ltd v. Surbiton Borough Council (1949) Ch. 180 at 195, 198; Southend-On-Sea Corporation v. Hodson (Wickford) Ltd (1962) 1 QB 416 at 422-425; Rocca v Ryde Municipal Council (1962) NSWR 600 at 604-605; Ansett Transport Industries (Operations Pty Ltd v. The Commonwealth (1977) 139 CLR 54 at 74-77; Attorney General (NSW) v Quin (1990) 170 CLR 1 at 17-18; Minister for Immigration v Kurtovic (1990) 21 FCR 193 at 207-216. 107 However, in my opinion the Council can make an agreement to purchase land for public purposes. In my opinion, if the Council becomes estopped from denying an obligation to pay for land which has been dedicated to it, at least without providing some remedy to the person that dedicated the land, there is no public policy which necessarily operates: the circumstances simply amount to another way of bringing about a result which is clearly within the Council's power. 108 Turning to the question of whether it is unconscionable for the Council to fail to fulfil the expectation, and what remedy is required to avoid injustice, it is relevant to consider what would have happened if the representations had not been made. 109 As I have already found, but for the representations of August 1992, there would have been further negotiations between the plaintiffs and the Council, possibly giving rise to a different development application. These negotiations may have led to some express undertaking by or on behalf of the Council to pay some compensation, they may have led to a submission of a different subdivision, either without open space or with less open space, or they may have led to something else. As indicated earlier, on the balance of probabilities any of these possibilities would have been more advantageous to the plaintiffs. However, it is not certain that the plaintiffs would have obtained a binding undertaking from the Council to pay compensation at market value, and the other possible alternatives may well have been less advantageous to the plaintiffs than market value compensation. Further, there may well have been further delay and expense associated with exploring these other possibilities. 110 But for the representations made in December 1992 and February 1993 by the developments consents, there would in my opinion have been negotiations seeking a valid undertaking to pay compensation, and/or a s.102 application and/or an appeal. Again, this would have put the plaintiff in a better position than a position where the land was simply dedicated without compensation being paid. Again however, I cannot say that this position is certainly as advantageous as the position where the Council is obliged to pay market value for the relevant lots. 111 These considerations lead me to the view that to require the Council to pay full compensation at market value for the relevant lots would be doing more than necessary to avoid injustice. Estoppel in this sort of situation does not necessarily mean that the party estopped must in effect carry out the relevant representation as if it had been a binding contractual promise. Rather, the party estopped is not permitted to fail to carry out the representation without ensuring that the other side does not suffer injustice through the detriment caused to the other side by its own action taken in reliance on the representation. Having regard to the chances to which I have referred that, but for the representations, the plaintiffs may not have obtained an outcome in all respects as advantageous as a binding promise to pay market value for the dedicated lots, it is in my opinion appropriate to discount that market value by a percentage to reflect that chance. In all the circumstances, in my opinion, 25% is an appropriate percentage. UNJUST ENRICHMENT 112 Through the transactions which occurred, the Council has obtained land which it wanted to have, to enable it to carry out its functions, being land for which it otherwise would have needed to pay market value. In those circumstances, in my opinion the Council has plainly been enriched, even though the land is held on trust for public puroses. 113 As to whether the enrichment was unjust, and such as to require some reimbursement to the plaintiffs, the relevant considerations in my opinion are that the Council obtained this land without payment because the plaintiffs acted on the faith of the Council's representations, which the Council did not fulfil, and on the basis of a mistake induced at least in part by those representations; with the result that detriment was caused to the plaintiffs to the extent and in the manner discussed above. 114 In my opinion, this gives the same result as estoppel: to remedy the injustice of its enrichment, in my opinion the Council should pay an amount calculated on essentially the same basis as in relation to estoppel. QUANTAM 115 In my opinion, the correct approach to quantum involves asking first what compensation Votraint would have been entitled to, had the Council been under an obligation to pay it market value for lot 339 and lot 421. In my opinion, that does not entitle Votraint to say that it should be compensated on the basis of how much better off it would have been if a subdivision had been permitted from the start without any dedication for public reserve at all, so that the whole subdivision could have been designed from the start on that basis. On the other hand, nor do I think it means that one must approach the valuation on the basis that the other lots in the subdivision are unalterable, so that one can only value lots 339 and 421 for the use they would have had given the layout of the remainder of the subdivision. In my opinion, one should start with the subdivision as submitted, but then consider what Votraint as owner could have done, at the time of dedication, to amend the subdivision to obtain a better outcome, if the public reserves could be used as residential land. In my opinion, in undertaking that exercise, it is necessary to have regard to the RDA, and the possibility that, by reason of the RDA and/or significant trees outside the RDA, the Council would not permit the theoretical maximum number of lots. There were apparently in this case also pre-sales of two lots, and it would be necessary I think to make allowance for the possibility that the contracts did not allow for adjustments of the boundaries of those lots or that small adjustments to those boundaries could not have been negotiated with the purchases. 116 On that approach, I think the appropriate exercise is to take the valuations based on the most favourable possible subdivision, namely $1.125 million plus $153,000.00, and discount them because of the risk of difficulties with Council and difficulties in negotiations with the purchasers of the pre-sold allotments. There is already a 20% profit and risk factor in these valuation figures, and I am intending to apply a further discount of 25% as referred to earlier. There is some danger of overlap in these discounts. On balance, I think there should be a total further discount of 35% (including the earlier 25% discount) from the valuation figures. 117 Accordingly, I think the appropriate quantum of compensation on the basis of either estoppel or unjust enrichment, is the figure of $1.125 million less 35% (that is, $731,250.00) for lot 339, and $153,000.00 less 35% (that is, $99,450.00) for lot 421. AMENDMENT 118 The additional element to the plaintiffs' claim added by that part of the Second Amended Statement of Claim objected to by the Council, is essentially the allegation that the plaintiffs acted in reliance on the defendant's usual practice, as well as the representations. 119 It was put by Mr. Preston that if that had been pleaded from the outset, there would have been more investigation into the details of the practice. 120 Having regard to what I consider to be the evidentiary significance of the practice, and the relatively minor difference made to the pleading that I have referred to, I do not think the defendant would be relevantly prejudiced by the allowing of this amendment. 121 In my opinion, the plaintiffs did to some extent rely on the practice as well as the representations, although, as I have found, the reliance on the representations, considered apart from the practice, was material. In my opinion the plaintiffs would not have gone ahead in reliance on the practice alone, if the representations had not been made. 122 Accordingly, while I am prepared to allow the amendment, it does not make any difference to the result. CONCLUSION 123 There were arguments concerning interest. It was submitted for the plaintiffs that interest should be allowed at Supreme Court rates, and compounded. I do not think compounding should be ordered in this case, since there is no evidence to justify it. In my opinion, interest should be allowed, at Supreme Court rates, in the case of the figure concerning lot 339 from 21st September 1994, and in relation to lot 421 from 9th January 1996. 124 At present, I see no reason why the defendant should not pay the plaintiffs' costs of the proceedings. ********** Last Modified: 04/03/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.