New South Wales Supreme Court CITATION : Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2010] NSWSC 828 16/06/08, 17/06/08, 18/06/08, 19/06/08, 20/06/08, 23/06/08, 24/06/08, 25/06/08, 26/06/08, 27/06/08, 30/06/08, 04/07/08, 28/07/08, 29/07/08, 27/08/08, 28/08/08, 24/11/08, 25/11/08, 26/11/08, 27/11/08, 28/11/08, 10/06/09, 11/06/09, 24/08/09, 25/08/09, 26/08/09, 27/08/09 Written submissions: 01/09/09, 03/09/09 HEARING DATE(S) : Judgment: 05/02/10 Written submissions: 19/03/10, 22/03/10 Further hearing: 23/03/10 Written submissions: 21/06/10, 16/07/10 JUDGMENT DATE : 29 July 2010 JURISDICTION : Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : 1. Short minutes to be brought in. 2. Question of costs continues to be reserved. CATCHWORDS : LANDLORD AND TENANT - whether tenant has restitutionary claim against landlord for expenditure improving land - whether tenant liable to reimburse landlord for rates - whether original findings on applicastion of Conveyancing Act s 129(1) require re-assessment - PROCEDURE - findings announced by court - submissions sought as to any further matters requiring attention - whether court should determine further matters not affecting outcome - whether court should re-visit existing findings LEGISLATION CITED : Civil Procedure Act 2005, s 100 Conveyancing Act 1919, s 129(1) CATEGORY : Consequential orders Fensom v Cootamundra Racecourse Trust [2000] NSWSC 1072 Lexane Pty Ltd v Highfern Pty Ltd [1985] 1 QdR 446 CASES CITED : Lumbers v W Cook Builders Pty Ltd [2008] HCA 27; (2008) 232 CLR 635 Sopov v Kane Constructions Pty Ltd (No 2) [2009] VSCA 141; (2009) 257 ALR 182 Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2010] NSWSC 29 World Best Holdings Pty Ltd v Sarker [2010] NSWCA 24 Tim Barr Pty Limited - First Plaintiff PARTIES : Timothy James Barr - Second Plaintiff Narui Gold Coast Pty Limited - Defendant FILE NUMBER(S) : SC 2002/62056 COUNSEL : Mr R G McHugh SC (to 4/7/08; from 24/11/08 to 18/5/09; from 24/8/09); Mr I M Barker QC (from 28/7/08 to 28/8/08); Mr J E Lazarus (to 4/7/08; from 24/11/08) - Plaintiffs Mr M L Einfeld QC/Mr R E Dubler SC/Mr A C Harding (to 27/6/08); Mr A C Harding (30/6/08); Mr I M Neil SC/Mr A C Harding (from 28/7/08) - Defendant SOLICITORS : Corrs Chambers (to 25/2/09); Tzovaras Legal (from 26/2/09 to 24/11/09); J T Law Pty Limited (from 25/11/09) - Plaintiffs Verekers - Defendant IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BARRETT J THURSDAY, 29 JULY 2010 2002/62056 TIM BARR PTY LTD & ANOR v NARUI GOLD COAST PTY LTD JUDGMENT The position reached 1 Reasons published on 5 February 2010 (Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2010] NSWSC 29) culminated in the conclusion that TBPL is not entitled to specific performance of any contract for the sale of the Cudgen Paddock arising from purported exercise of an option to purchase contained in the lease dated 23 June 2000. 2 In accordance with paragraph [590] of those reasons, the parties made both written and oral submissions on whether findings on additional matters are necessary or desirable. After receipt of the written submissions, I heard oral submissions on 23 March 2010. 3 Thereafter it became necessary for me to raise with the parties the question whether the conclusions at paragraphs [237] to [239] of the reasons of 5 February 2010 required re-consideration in the light of the decision of the Court of Appeal in World Best Holdings Pty Ltd v Sarker [2010] NSWCA 24. That question was raised by means of a letter from my Associate dated 22 April 2010. Written submissions on that matter were later received, the last of them on 16 July 2010. Matters requiring attention 4 There is no dispute that I should proceed to determine, in addition to matters already decided: (a) TBPL's claim for an order for restitution in respect of moneys to the extent of $333,743.24 spent on the plantation; and (b) NGC's claim that TBPL is liable to NGC for local council rates on the Cudgen Paddock from 1 July 2000 to 3 May 2002 in the sum of $86,261.15 plus interest at court rates. 5 The fact that both parties have filed written submissions on the Court of Appeal's decision in World Best Holdings Pty Ltd v Sarker indicates that I should also address the question raised in the letter of 22 April 2010. Matters on which there is no agreement 6 Beyond that, the parties have different views on whether findings on additional matters are necessary or desirable. 7 NGC says (but TBPL does not agree) that the court should address additional discretionary barriers to the grant of an order for specific performance in favour of TBPL. 8 TBPL urges upon the court a need to make a series of additional findings (which NGC says should not be made): (a) that a copy of the invoice of 10 March 2000 was discovered by NGC; (b) that references in letters from Barr to Shigeo referring to 2.1 million lemon myrtle trees must be a reference to the 300,000 trees ordered on 10 March 2000 and the 1.8 million ordered on 28 May 2000; (c) that Shigeo's knowledge of all relevant matters is to be attributed to NGC; (d) that there was no causal link between TBPL's activities and the issue of the stop work orders and the interim protection orders; (e) that there was no ultimate detriment to NGC arising out of the Land and Environment Court proceedings; (f) that the lack of any continuing relationship between NGC and TBPL is relevant to relief against forfeiture of the option; (g) that the share sale transaction was a fraud on the Japanese creditors of Narui Narin; (h) that adverse inferences should be drawn against NGC in light of the failure to call any of Messrs Brinsmead, Hickey, McDermid and van der Velde; (i) that NGC did not plead any "no unauthorised profit" fiduciary duty on the part of Shigeo; (j) that the joint venture agreement with Shigeo was not a matter that was material to NGC's decision whether or not to consent to the lease; (k) that NGC is bound by Palmer J's finding that Austcorp had a proprietary interest in the land; (l) that a contingent interest in land nonetheless remains a proprietary (equitable) interest; (m) that the relevant knowledge of Austcorp for the purposes of the "third party rights" argument is knowledge of the circumstances giving rise to the trust, not merely the pleaded claims; and (n) that imposing a constructive trust in favour of NGC would give it unfair priority because of NGC's postponing conduct. 9 Some of the matters raised by TBPL were, in part, prompted by an apprehension that I had overlooked supplementary written submissions of the plaintiffs dated 3 September 2009 (those submissions were not mentioned on the 5 February 2010 cover sheet). However, as I informed counsel at the hearing on 23 March 2010, I did consider those submissions. Indeed, several of the decided cases mentioned in them are referred to in the reasons of 5 February 2010. Decision on the question whether to address the matters not agreed 10 In relation to the controversial matters raised by each party (paragraphs [7] and [8] above), I am not persuaded that there is a need for the court to address them. Those raised by NGC, if determined in the way for which it contends, would do no more than leave intact a particular result on which it has already achieved success. The suggestion is, in substance, that the court should drive more nails into an already closed coffin. 11 In relation to the matters put forward by TBPL, there is a substantial element of re-agitation, in that the additional findings the court is urged to make contradicts or is, by necessary implication, inconsistent with an existing finding. That course can only be appropriate if the existing decision has miscarried because of some obvious misapprehension of fact or law that warrants corrective attention by the trial judge. Also, there appears to be a desire to obtain – no doubt for appeal purposes – additional findings which, in the light of findings and decisions actually made, are not required. 12 At the conclusion of the long hearing of this matter, NGC produced a decision flow chart of very significant complexity indicating matters to be decided in various permutations and combinations depending on issues decided at earlier stages. I did not follow precisely the sequence there indicated; nor did I work entirely according to TBPL's less formidable (but still very comprehensive) table of issues for decision. To have decided each and every point raised would have been, in some areas, to decide matters rendered moot or unnecessary by other conclusions. 13 I have decided to determine the three particular matters identified at paragraphs [4] and [5] above and that it is neither necessary nor desirable that I address those at paragraphs [7] and [8] above. TBPL's restitutionary claim 14 In light of the conclusion that the lease of the Cudgen Paddock was validly terminated by NGC by means of the notice of 3 May 2002, TBPL considers itself entitled to an order for restitution in respect of its expenditure on the plantation after such termination. 15 TBPL submits that it is well-established that where a vendor terminates a contract for the sale of land, the purchaser is entitled, subject to contractual forfeiture provisions, to have any instalments of purchase price returned and also "entitled to restitution in respect of permanent improvements made to the land while in [the purchaser's] possession to be measured by the extent to which the value of that land has been enhanced" (these are the words of McPherson J in Lexane Pty Ltd v Highfern Pty Ltd [1985] 1 QdR 446. 16 As is pointed out in TBPL's submissions, such a claim is also available where an intending purchaser has made improvements in the expectation of a contract but no contract has materialised: Fensom v Cootamundra Racecourse Trust [2000] NSWSC 1072. 17 TBPL relies on these principles and also on the following statement of principle in Lumbers v W Cook Builders Pty Ltd [2008] HCA 27; (2008) 232 CLR 635 at [79]: "The doing of work, or payment of money, for and at the request of another, are archetypal cases in which it may be said that a person receives a 'benefit' at the 'expense' of another which the recipient 'accepts' and which it would be unconscionable for the recipient to retain without payment. And as is well apparent from this Court's decision in Steele v Tardiani , an essential step in considering a claim in quantum meruit (or money paid) is to ask whether and how that claim fits with any particular contract the parties have made. It is essential to consider how the claim fits with contracts the parties have made because, as Lord Goff of Chieveley rightly warned in Pan Ocean Shipping Co Ltd v Creditcorp Ltd , 'serious difficulties arise if the law seeks to expand the law of restitution to redistribute risks for which provision has been made under an applicable contract'. In a similar vein, in the Comments upon §29 of the proposed Restatement , (3d), 'Restitution and Unjust Enrichment' the Reporter says: Even if restitution is the claimant's only recourse, a claim under this Section will be denied where the imposition of a liability in restitution would overturn an existing allocation of risk or limitation of liability previously established by contract." 18 TBPL's claim in this respect is pleaded on the following basis: (a) NGC received a benefit from TBPL's expenditure. (b) TBPL was unable to harvest the trees it planted since they first became suitable for harvesting in about July 2002 because NGC refused to consent to an application to the Council for permission to harvest. (c) It would be unjust for NGC to retain the benefit of TBPL's work and expenditure without paying TBPL a reasonable remuneration. 19 TBPL's claim, in this respect, is for its actual expenditure, being at least $333,743.24 as established by the schedule of tea tree expenses in evidence. 20 NGC responds that restitution on the basis postulated is available only where the other party's expenditure effects some permanent improvement and that, in this case, there was no improvement, permanent or otherwise – merely a crop. That, it seems to me, is not a persuasive submission. If one party plants a crop and, in the light of events, that party is prevented from having the benefit of the crop and the other party (who has incurred no expenditure) derives that benefit, then there has been relevant accretion of value to that other party which it would be unconscionable for that other party to retain without rendering restitution. 21 More persuasive, to my mind, is NGC's contention that the party benefited can be forced to render restitution only by reference to any accretion in value, not by reference to actual outlay. One can imagine a range of circumstances in which money is spent in significant amounts to produce benefits that are, in objective terms, minor or even illusory. Imagine the case of a creek that divides a property exactly into halves and a tenant or prospective purchaser who diverts it to make the northern section larger than the southern. It may be that that suits the particular plans of that party but would be burdensome to someone whose plans focus on the now smaller southern section and quite neutral in any assessment of the objective worth of the whole. 22 TBPL says that it is well-established that the value of work done can be proved by evidence of costs actually incurred, as in the case of a quantum meruit claim. It refers to the decision, in that respect, of the Victorian Court of Appeal in Sopov v Kane Constructions Pty Ltd (No 2) [2009] VSCA 141; (2009) 257 ALR 182 at [30] where it was held that the reasonable cost of constructing a building is a perfectly sensible measure of the value of the benefit conferred since the owner would have incurred that cost had it undertaken the construction itself. 23 I am persuaded that the approach advocated by TBPL is correct in this case. It suited NGC and was in its interests for the plantation to be established and nurtured by TBPL since that was consistent with NGC's desire to have land on which native regrowth was kept to a minimum. Whatever may have been the intrinsic worth of the trees (itself an advantage to NGC), the plantation represented an improvement to the land from NGC's perspective. 24 TBPL's restitutionary claim is therefore valid and its proved outlay of $333,7843.24 should be taken to reflect the value it provided to NGC. NGC's claim for outgoings 25 NGC contends that TBPL is liable to it for Council rates payable in respect of the Cudgen Paddock from 1 July 2000 to 3 May 2002 in the sum of $86,261.15 plus interest thereon pursuant to s 100 of the Civil Procedure Act 2005 from 17 October 2002 to 5 February 2010 in the amount of $57,239.88. 26 Clause 3.1(b) of the lease obliged TBPL to pay to NGC outgoings including rates and taxes levied on the leased land. TBPL admits that it did not pay any such outgoings. 27 TBPL's position is that it would have no such liability had the lease been terminated ab initio. I do not understand it to resist NGC's claim in the overall result that has emerged, that is, that the lease subsisted until terminated through NGC's notice of 3 May 2001. 28 NGC will therefore be awarded the sum it seeks. World Best Holdings Ltd v Sarker 29 At [237] to [239] of the reasons of 5 February 2010, I addressed the question whether s 129(1) of the Conveyancing Act 1919 applied to NGC's right, according to contract law principles, to terminate the lease for breach of a term deemed by the parties themselves to be essential. I expressed the opinion that s 129(1) did not apply as it is concerned only with a specific right to re-take possession from the tenant or to deprive the tenant of the leasehold estate, being a right created by the lease itself. I stated the further opinion that termination for breach of an essential term destroyed the tenant's right to possession and the leasehold estate but that that destruction was a consequence of the ending of the contract, not of the exercise of a right of re-entry or forfeiture "under any proviso or stipulation" in the lease, that being the matter with which s 129(1) is concerned. 30 Paragraphs [237] to [239] were expressed in these terms: "237 Section 129(1) of the Conveyancing Act 1919 applies to the exercise of the lessor's clause 8.1 right but not to exercise of the independently existing right flowing from clause 9.1 as a matter of general law. That section is as follows: 238 The reference here to "forfeiture" is a reference to forfeiture of the leasehold estate: see Warner v Sampson [1959] 1 QB 297 where Lord Denning MR traced the history of the concept of forfeiture in relation to leases and leaseholds. The right contemplated by s 129(1) is a "right of re-entry or forfeiture" created by the lease itself (that is the force of the words "under any proviso or stipulation in a lease"). The relevant right is accordingly a specific right to re-take possession from the tenant or to deprive the tenant of the leasehold estate. Each of these rights is distinct in nature from the right that a contracting party has to terminate the contract for fundamental breach. Where the relevant contract is a lease, termination in exercise of such a right destroys the tenant's right to possession and the leasehold estate. But that destruction is a consequence of the ending of the contract, not of the exercise of a right of re-entry or forfeiture "under any proviso or stipulation" in the lease, that being the matter with which s 129(1) is concerned. 239 I adopt, in this respect, the analyses made by Meagher JA in Marshall v Council of the Shire of Snowy River (1994) 7 BPR 14,447 at 14,457 (Kirby P and Powell JA concurring) and by Williams AJA in Apriaden Pty Ltd v Seacrest Pty Ltd [2005] VSCA 139; (2005) 12 VR 319 at [66]ff. 31 On 15 April 2010, in World Best Holdings Ltd v Sarker (above), Handley AJA said at [42] to [44] (with the concurrence of Tobias JA and Campbell JA): "42 Section 129(1) applies where a landlord wishes to terminate the lease 'for a breach of any covenant, condition or agreement … in the lease'. It may be accepted that the tenant's repudiation of the lease is not within this language and that the landlord's common law right to accept the repudiation and terminate the lease is not affected. 43 Breaches of contract or covenant, falling short of repudiation, fall squarely within the language of the section. The Court must start with the section and give full effect to its language. There is nothing, other than the dicta in Marshall [ie, Marshall v Council of the Shire of Snowy Mountains ], to support the view that compliance with the section is optional so that a landlord is free to choose between exercising an express right of termination or forfeiture which required compliance with s 129, and his common law right of termination for fundamental breach where that is not necessary. 44 A landlord cannot contract out of s 129(1) by making any or all of the tenant's covenants essential terms, and providing that any breach or fundamental breach thereof will give rise to a right of termination. Section 129 exists for the protection of tenants, and subs (10) provides that it 'shall have effect notwithstanding any stipulation to the contrary'." 32 TBPL submits that paragraphs [237] to [239] of the reasons of 5 February 2010 cannot stand in the light of this decision of the Court of Appeal. That being so, the submission continues, the conclusion that s 129 did not preclude termination of the lease by NGC is left to depend wholly on the "better view" expressed at paragraph [371] (that is, that the breach of clause 4.3 of the lease was not, in terms of s 129, "capable of remedy"); and it is therefore necessary to consider that "better view". 33 NGC says that there is no warrant to re-visit the finding described at paragraph [371] as the "better view". I accept that submission. To canvass that finding at this stage would be to entertain quite inappropriate re-agitation of the kind referred to and rejected at paragraph [11] above. 34 This is alone sufficient to dispose of this aspect. In short, even if paragraphs [237] to [239] cannot stand consistently with the decision of the Court of Appeal, the result ultimately reached in the reasons of 5 February 2010 remains unaffected because of the paragraph [371] finding. 35 NGC points, in any event, to what I consider to be a significant distinction between the lease in this case and the lease considered by the Court of Appeal, being a distinction that makes the Court of Appeal's analysis inapplicable to this case. At paragraphs [237] to [239], I sought to distinguish between a general law right to terminate a contract for breach and what s 129(1) describes as a "right of re-entry or forfeiture under any proviso or stipulation in a lease, for a breach of any covenant, condition, or agreement (express or implied) in the lease . . ." (emphasis added). The lease before the Court of Appeal contained a provision as follows: "We may end this lease by giving you notice or by re-entry if you: (a) repudiate your obligations under this lease; (b) do not comply with an essential term of this lease . . ." 36 There was thus, in that case, a "proviso or stipulation" in the lease itself "under" which a right of "re-entry" was given for a "breach" of the kind encompassed by the paragraph (b) words "if you . . . do not comply with an essential term of this lease". The circumstances were thus within the express words of s 129(1). In the present case, by contrast, no "proviso or stipulation in" the lease was the source of (in the sense derived from the word "under") the right that was exercised by NGC when it terminated the lease for breach of an essential term. 37 NGC makes other submissions as to why the decision in World Best Holdings Ltd v Sarker does not warrant any modification of the decision announced on 5 February 2020. In view of the two reasons already stated for making no change, there is no need to deal with those other submissions. Conclusion 38 Now that all remaining matters have been dealt with, the parties should agree short minutes of orders to give effect to the reasons of 5 February 2010, as supplemented by these reasons. I will then make orders in chambers and reserve the question of costs which is now the only matter requiring submissions and decision. ********** 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.