New South Wales Supreme Court CITATION : Musgrave v Greenfields Mountain Pty Ltd and Anor [2002] NSWSC 668 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 4057/00 HEARING DATE(S) : 25 July, 2002 JUDGMENT DATE : 25 July 2002 Raymond Jackson Musgrave - Plaintiff PARTIES : Geoffrey Alan Burn - Plaintiff Greenfields Mountain Pty Ltd - Defendant/Respondent Byron Shire Council - 2nd Cross Defendant/Appellant JUDGMENT OF : Palmer J COUNSEL : P.C. Tomasetti - Appellant P.R. Clay - Respondent SOLICITORS : Wilshire Webb - Appellant Stacks the Law Firm - Respondent CATCHWORDS : PRACTICE AND PROCEDURE - CROSS CLAIM - Whether relief sought in a cross claim was "relating to or connected with the subject of" the proceedings between the plaintiff and the defendant within the meaning of s.78(3) Supreme Court Act - what is the "subject" of proceedings for the purposes of the section. WORDS AND PHRASES - "Subject of proceedings". LEGISLATION CITED : Supreme Court Act, s.78(3) CASES CITED : - RT & YE Falls Investments Pty Ltd v New South Wales (unrep., 14 May 1998, Santow J) - House v King (1936) 55 CLR 499 DECISION : Appeal from the Master dismissed with costs. EX TEMPORE: 1 This is an appeal under Pt 60 r 10 of the Supreme Court Rules from a decision of Master Macready. The Appellant ("the Council"), applied to the Master by Notice of Motion filed on 12 October 2001 for an order dismissing a Second Cross Claim in which the Respondent ("Greenfields") sought, inter alia, damages against the Council for negligence. On 6 May 2002 the Master dismissed the Council's Motion, and on 30 May 2002 the Council filed a Notice of Appeal from that decision. The Plaintiffs in these proceedings ("MB") do not appear on the hearing of this appeal, as they apparently have no interest in the result. 2 The facts of the matter are somewhat complex and need to be stated in some detail. 3 Greenfields is the Defendant in proceedings commenced by MB, who are the registered proprietors of Lot 6 in DP 874320 ("Lot 6"). Greenfields is the registered proprietor of an adjoining parcel of land, being Lot 103 in DP 856767 ("Lot 103"). 4 On 5 February 1999 a Deed of Agreement was entered into between MB and Greenfields. By Clause 5 of that Deed MB agreed to grant to Greenfields a right of way over Lot 6 for the benefit of Lot 103, varying between 16m and 18m in width. By Clause 7 Greenfields agreed to obtain the Council's consent to construct a public road within the alignment of the right of way, and to provide services, such as electricity, telephone and water, for the purposes of subdivision of Lot 103. It was further covenanted that the road construction would meet the engineering standards adopted by the Council. 5 An important term of the Deed, which has given rise to these proceedings, was that upon construction of the road Greenfields would agree to the extinguishment of the right of way created over Lot 6. The reason for the creation of the right of way over Lot 6 was to provide a means of easy access to Lot 103. The reason for this requirement requires some explanation. 6 On 14 October 1998, Greenfields obtained judgment against the Council in the Land & Environment Court of NSW, whereunder the Court declared that the Council was bound to acquire Lot 103 from Greenfields, pursuant to a request by Greenfields under Clause 43 of the Byron Local Environment Plan. The acquisition was to be at a price reflecting the value of Lot 103, such value to be determined, inter alia, by reference to the ease of access to Lot 103 from an existing public road. An appeal by the Council to the Court of Appeal against that decision was dismissed. 7 On 5 February 1999, MB and Greenfields entered into the Deed to which I have referred, and on 30 July 1999 MB registered a transfer granting an easement over Lot 6 to Greenfields in accordance with that Deed. 8 On 15 September 1999, Greenfields' town planning consultants lodged, on behalf MB, a Development Application with the Council for a proposed eleven-lot subdivision of Lot 6. The Development Application included a proposal for the extension of a public road to the boundary between Lot 6 and Lot 103. On or about 21 March 2000 the Council notified MB that it had consented to the Development Application. 9 At some time between March and June 2000, MB constructed an extension of the public road over Lot 6 towards the western boundary of Lot 103. However, it seems to be accepted that that road terminated approximately four metres short of the common boundary between Lot 103 and Lot 6. 10 By their Statement of Claim filed on 24 September 2000, MB seek an order compelling Greenfields to execute all documents necessary to extinguish the right of way over Lot 6. Alternatively, the Statement of Claim seeks damages or equitable compensation. 11 By its Defence, Greenfields pleads that MB have not fulfilled the condition precedent to their entitlement to extinguishment of the right of way, in that they have not constructed a public road within the alignment of the right of way, and that the road does not comply with the engineering standards of the Council. 12 Greenfields has filed a Cross Claim against MB pleading causes of action for breaches of the Trade Practices Act , breaches of the Fair Trading Act , misrepresentations, breach of a collateral contract, rectification, and breach of contract. The essence of the Cross Claim is the complaint by Greenfields that MB promised and represented that public road access would be provided across Lot 6 in such a manner as to allow a residential subdivision of Lot 103, and that Greenfields has breached that promise and representation. 13 Greenfields' Second Cross Claim against the Council, which is the subject of this appeal, is founded upon the alleged breach of a duty of care owed by the Council to Greenfields in approving the subdivision application lodged by Greenfields on MB's behalf. Greenfield alleges that the public road, as approved by the Council, and as constructed, does not provide proper access to Lot 103, and has not been constructed in accordance with the normal standards of engineering adopted by the Council. Greenfields claims damages from the Council, being diminution in the value of Lot 103, or the cost of reconfiguring the road constructed over Lot 6 to Lot 103. 14 There are some additional circumstances to which reference must now be made. On 14 December 2001, the Council caused to be gazetted an Acquisition Notice in respect of Lot 103 under the Land Acquisition (Just Terms Compensation) Act, 1999 . Upon gazettal of the Notice, Greenfields' title in Lot 103 was extinguished and was converted to a claim for compensation. 15 It follows that MB's claim against Greenfields for extinguishment of the right of way cannot proceed since it is now beyond the capacity of Greenfields to affect any interest in Lot 103. MB's claim against Greenfields is, therefore, proceeding as a claim for damages or equitable compensation for the losses which it says it has suffered by reason of being unable to market the whole of the subdivision of Lot 6 during such time as Greenfields wrongfully refused to release the right of way. 16 The Valuer-General has made a determination of the market value of Lot 103 pursuant to the Land Acquisition (Just Terms Compensation) Act , and Council has made an offer of compensation to Greenfields in accordance with the procedures set out in the Act. The offer has not been accepted and the dispute is now the subject of proceedings in the Land & Environment Court. Those proceedings have not yet been determined. 17 It was against that background that the Master had to consider the Notice of Motion filed by the Council on 12 October 2001. That Notice of Motion sought orders pursuant to Pt 6 r 4A and Pt 8 r 6 of the Supreme Court Rules that Greenfields' Second Cross Claim against the Council be dismissed; alternatively, that the Second Cross Claim be stayed until such time as the acquisition by the Council of Lot 103 has been finalised; alternatively, that Greenfields' Second Cross Claim be tried separately. The Master declined to dismiss the Second Cross Claim, or to order separate trial of the Second Cross Claim at that stage. 18 The argument before the Master as to the first order sought focussed upon whether the Second Cross Claim against the Council could be entertained by the Court in the proceedings commenced by MB against Greenfields, having regard to the provisions of s.78(3) of the Supreme Court Act . The Council's contention was that the relief sought by the Second Cross Claim against the Council was not "relief relating to or connected with the subject" of MB's proceedings against Greenfields within the meaning of those words in s 78(3). 19 The Master concluded, for reasons to which I will come, that there was a connection between the relief sought in the Second Cross Claim and the subject of MB's claim against Greenfields. In the exercise of his discretion, he then declined to order at that stage that the Second Cross Claim be tried separately. The Master noted that the proceedings in the Land & Environment Court as to the amount of compensation to be paid for Lot 103 would probably be heard this year, before the present proceedings come on for hearing. He then said: "Given that it is not possible at the moment to determine the issues (and the time thus involved) on damages, it is not possible to accurately assess the extent to which some parties will be forced to be present for part of the hearing with which they have no concerns. This, coupled with the need to determine all factual matters concerning the parties' knowledge of the subdivision process at the one time, means that the application should be refused. It may be that closer to the hearing a clearer picture in respect of damages will emerge. If this happens it may be appropriate to separate such issues or, alternatively, plan the conduct of the hearing so that the parties' time is not wasted. Thus the dismissal of the present motion should not preclude any later application based upon a change in circumstances or clarification of the damages issues." 20 By its Notice of Appeal the Council raises two grounds of appeal: first, that the Master erred in finding that a sufficient relationship existed between MB's case against Greenfields and Greenfields' Cross Claim against the Council to justify the claims being tried together in accordance with the provisions of s.78 of the Supreme Court Act ; second, that the Master erred in finding that there were relevant common factual elements to the claim by MB and the Second Cross Claim so as to warrant the claims being heard together. 21 The Council now seeks not so much the dismissal of the Second Cross Claim but that, if that Cross Claim is to proceed at all, it proceed separately from the trial of the proceedings between MB and Greenfields, so that the Council is not compelled, so it is said, to participate in a trial much of which will be irrelevant to any issue affecting it. 22 Mr Tomasetti, who has argued the case most cogently for the Council, submits that when one has regard to the causes of action pleaded as between MB and Greenfields in the Statement of Claim, the Defence and the Cross Claim between those parties, and then has regard to the causes of action pleaded as between Greenfields and the Council in the Second Cross Claim, one can see that there is no overlapping, correspondence or connection whatsoever. He says that the substantial issue between MB and Greenfields is whether or not the Deed of 5 February 1999 was performed by MB such as to have entitled it to a release of the right of way and whether there is some other right of action which Greenfields has against MB which would have entitled Greenfields to retain the benefit of the right of way and now entitles Greenfields to damages against MB for, in effect, failing to construct the road in a manner which was agreed at the time the Deed was entered into. He says that those issues have nothing to do with the issues of negligence raised against the Council by Greenfields. Greenfields simply alleges against the Council, he says, that the Council has been guilty of negligence in approving the construction of the subject road contrary to proper standards and contrary to its usual engineering requirements. 23 Superficially, that is an attractive submission. However, as the Master observed, it does not take account of the substance of the problem which has embroiled these three parties. 24 Section 78 of the Supreme Court Act relevantly provides: "(1) Subject to subsection (3), the Court may grant to the defendant in any proceedings (in this section called the first proceedings) all such relief against any person as the Court might grant against that person if the person were a defendant in separate proceedings commenced by the defendant for that purpose. … (3) The Court may not, under this section, grant against a person not a plaintiff in the first proceedings relief not relating to or connected with the subject of the first proceedings." Whether a Cross Claim is properly made within proceedings for the purposes of s.78(3) requires a careful identification of what is "the subject of the first proceedings" for the purposes of the subsection. 25 In my opinion, the "subject" of proceedings is not identified merely by reference to causes of action pleaded. It might well have been otherwise if the subsection had required a relationship or connection with "the issues" in the first proceedings. The word "subject" is, however, much wider and, I think, deliberately so. One has to look at the substance of the dispute in the proceedings, which may be demonstrated not only by the pleadings but also by the evidence which is likely to be adduced. In pleadings, it is common to find many causes of action alleged in the alternative, all revolving around an essential complaint, or an essential set of circumstances. That essential complaint or set of circumstances is, in my opinion, the "subject" of the proceedings for the purposes of s.78(3). 26 In the proceedings between MB and Greenfields, MB says that it was entitled to a release of the right of way because it had constructed a public road in the manner required by the Deed of 5 February 1999, and in a manner approved by the Council. By way of defence, Greenfields says that the road was not constructed in accordance with the Deed, despite Council approval, and it says against the Council that if the Council had properly performed its statutory duty, then the road would have been constructed so as to provide to Greenfields such sufficient access to Lot 103 as it desired: Greenfields would not have been compelled to insist upon retaining its rights under the right of way granted over the land of MB, which is now the subject of MB's claim against it. 27 Accordingly, at the heart of Greenfields' claim for damages against the Council, and at the heart of MB's claim for damages against Greenfields, is the question whether the public road provides a proper and convenient access to Lot 103. In my opinion, the Master correctly identified this as the common factual circumstance which connected the relief sought by Greenfields against the Council to the subject of the proceedings between MB and Greenfields. The Master said at paragraph 35 of his judgment: "An important factual matter in the defence to the plaintiffs' claim is the construction of the road in the form that it now takes. It was the Council who approved the construction in that form when it gave the development approval, which is complained about in the second cross claim. The word "subject" used in s 78 (3) covers both factual and legal matters. In my view there is the necessary connection." 28 Once the Master had found – correctly, in my opinion – that there was the requisite connection between relief sought in the Second Cross Claim and the proceedings between MB and Greenfields so that the Second Cross Claim should not be dismissed, it was then a matter for him, in the exercise of his discretion, to determine whether the connection was so close that the interests of justice required the two disputes to be heard together, or whether, on the other hand, there should be some separation of the issues which would absolve the Council from the necessity of participating in the whole of the trial between MB and Greenfields. 29 The Master was of the view that, as matters then appeared, there was a sufficient commonality of issues between all parties to lead to the result that separate hearings could produce a substantial waste of time and a risk of inconsistent results. However, he did not endeavour to decide that matter once and for all. As I have noted above, he reserved for future consideration whether there should be a separate trial of some issues in the light of circumstances as they developed consequent upon the hearing which is about to take place in the Land & Environment Court. In other words, the question whether there should be separate questions tried or whether the proceedings as a whole can otherwise be conducted in such a way as to result in maximum efficiency and saving of expense to the parties, has been reserved and is subject to review as the matter proceeds towards trial. 30 In my opinion, the Master's decision in that regard was a classic instance of the exercise of the Master's discretion in a matter of procedure. It should not be interfered with at an appellate level, unless the Court is clearly satisfied that the Master has acted upon a wrong principle, has allowed extraneous or irrelevant matters to affect him, has mistaken the facts or has failed to take into account some material consideration: see e.g. House v King (1936) 55 CLR 499, at 504-505. I agree with the approach of Santow J in RT & YE Falls Investments Pty Ltd v New South Wales (unrep., 14 May 1998) that, if none of those circumstances are shown, an appellate tribunal should be slow indeed to substitute its own views as to the exercise of discretion in procedural matters decided by a Master or, if it comes to that, by a Registrar. Those judicial officers of the Court have daily familiarity with the practicalities of procedure and unless clear error of principle or other factors, such as are referred to in House v King , are demonstrated, the predisposition of an appellate tribunal must be to refrain from interfering with the exercise of their discretion. 31 As it happens, with great respect to the Master, I think that the way in which he exercised his discretion was a perfectly sensible and correct one. However, even if I had had a different view as to the practicalities or convenience of the matter, I could not, for that reason alone, have set aside the Master's decision as to the way in which the trial of the matter should be conducted in the future. 32 For those reasons, in my opinion, the appeal by the Council should be dismissed. 33 The Appellant will pay the costs of the appeal. – oOo – Last Modified: 07/30/2002 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.