Newcastle City Council v Caverstock Group Pty Ltd [2008] NSWCA 249 (10 October 2008)

Last Updated: 15 October 2008

NEW SOUTH WALES COURT OF APPEAL

CITATION:
Newcastle City Council v Caverstock Group Pty Ltd [2008] NSWCA 249


FILE NUMBER(S):
40226/2008

HEARING DATE(S):
25 September 2008

JUDGMENT DATE:
10 October 2008

PARTIES:
Newcastle City Council (Applicant/Appellant)
Caverstock Group Pty Ltd (First Respondent)
Minister for Planning (Second Respondent)


JUDGMENT OF:
Spigelman CJ Bell JA Handley AJA

LOWER COURT JURISDICTION:
Land & Environment Court

LOWER COURT FILE NUMBER(S):
10448/2008

LOWER COURT JUDICIAL OFFICER:
Pain J and Sheahan J

LOWER COURT DATE OF DECISION:
4, 9 and 24 July 2008

LOWER COURT MEDIUM NEUTRAL CITATION:
[2008] NSWLEC 225; [2008] NSWLEC 208; [2008] NSWLEC 215

COUNSEL:
B W Walker SC with P W Larkin (Applicant/Appellant)
J A Ayling SC with M D Seymour (First Respondent)


SOLICITORS:
Sparke Helmore (Applicant/Appellant)
Mallesons Stephen Jaques (First Respondent)
Department of Planning, Legal Services Branch (Second Respondent)

CATCHWORDS:
PRACTICE & PROCEDURE – Payment into court – UCPR r 25.3
PRACTICE & PROCEDURE – Freezing order – UCPR r 25.11
LOCAL GOVERNMENT – Development consent – Monetary contribution – Payment while application to modify and appeal pending
WORDS & PHRASES – “Fund” – UCPR r 25.3(3)

LEGISLATION CITED:
Civil Procedure Rules 1998 (UK)
Environmental Planning and Assessment Act 1979
Land and Environment Court Act 1979
Uniform Civil Procedure Rules 2005


CASES CITED:
Allchin v Coulthard [1942] 2 KB 228
Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380
Frevcourt v Wingecarribee Shire Council [2005] NSWCA 107; (2005) 139 LEGRA 140
Myers v Design Inc (International) Ltd [2003] EWHC 103 (Ch); [2003] 1 WLR 1642
Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd [1981] HCA 7; (1981) 148 CLR 457

TEXTS CITED:


DECISION:
1. Leave to appeal granted.
2. Appeal allowed.
3. Set aside Order 1 of the Land and Environment Court of 9 July 2008 and Direction 1 and Order 1 of 24 July 2008.
4. Notice of Motion of 4 July 2008 in the Land and Environment Court dismissed.
5. The monies paid into court pursuant to the order of Sheahan J of 24 July 2008 together with interest be paid to the appellant.
6. The first respondent pay the appellant’s costs of the appeal and of the proceedings in the Land and Environment Court.
7. Stay orders 2-6 until the applicant files a Notice of Appeal in this Court.



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40226/08

SPIGELMAN CJ

BELL JA

HANDLEY AJA

10 October 2008

Newcastle City Council v Caverstock Group Pty Ltd & Anor

Judgment

1 SPIGELMAN CJ: The applicant (“the Council”) seeks leave to appeal from judgments in the Land and Environment Court (“L&E Court”) by Pain J and Sheahan J in order to set aside the following orders:

(a) an ex parte freezing order made by Pain J on 4 July 2008 pursuant to r 25.11 of the Uniform Civil Procedure Rules (“UCPR”) relating to $953,561.83 obtained by the Council on 25 June 2008 by calling on a bank guarantee provided by the first respondent (“Caverstock”);

(b) an order made by Sheahan J on 9 July 2008 continuing the freezing order until further notice; and

(c) a further order made by Sheahan J on 24 July 2008 pursuant to UCPR r 25.3 requiring the Council to pay an equivalent amount into the L&E Court.

2 The order made by Pain J on an ex parte basis was made “until further order”. Sheahan J’s order of 9 July was such an order. Her Honour’s order is entirely spent. The attempt to appeal from the freezing order of Pain J is misconceived.

3 The Council has, pursuant to the 24 July order of Sheahan J, paid the amount into court. That order and its implementation have superseded the freezing order made by Sheahan J on 9 July 2008. However, if the Court finds that the payment into court order should not have been made then an issue does arise with respect to the order of 9 July. That order was also made “until further order” and I would have thought it was also spent. Nevertheless, Sheahan J ordered the applicant to pay costs of the proceedings on 9 and 24 July. Furthermore, there appears to be a real prospect that Caverstock may again seek such an order if the Court orders repayment of the monies paid into court. Accordingly, this Court should also deal with the challenge to the freezing order.

Background Facts

4 The Minister for Planning is the second respondent, who submitted to the jurisdiction of the Court save as to costs. The Minister granted a development consent under the Environmental Planning and Assessment Act 1979 (“the EPA Act”) for a substantial mixed commercial, retail and residential development within the Honeysuckle foreshore area of Newcastle. Condition B31 of the consent required the payment of $907,480, indexed in accordance with the CPI, to the Council prior to the issue of a construction certificate. The condition was imposed pursuant to s 94(1) of the EPA Act which authorises a condition requiring a monetary contribution because of increased demand for public amenities and services arising from a proposed development.

5 Caverstock is an agent of the developer and the project manager for the development. It applied to the Minister to vary condition B31, pursuant to s 96 of the EPA Act, on the basis that it should be given credit for works carried out by it which it contends constituted a “material public benefit” within s 94(5) of the EPA Act.

6 Section 96 authorises a consent authority to modify a consent and allows a disappointed applicant to appeal to the L&E Court against the determination of an application for modification.

7 Pursuant to s 94(5) the consent authority, relevantly in this case the Minister or the L&E Court on appeal, “may accept ... the provision of a material public benefit ... in ... satisfaction of a condition” requiring payment of a monetary contribution under s 94(1). The condition required payment not to the Minister as the consent authority, but to the Council. It is not clear that s 94(5) applies where the consent authority and the beneficiary of the condition are not the same. But that issue is not before the Court.

8 As I have noted, condition B31 required the contribution to be paid “prior to the issue of a construction certificate”. During the period that the application to the Minister for modification of the condition was under consideration, Caverstock requested the Council to accept an unconditional bank guarantee for the s 94 contribution required by the condition in lieu of immediate payment and issue of the construction certificate. The unconditional bank guarantee would be subject to a condition preventing the Council calling on it for six months whilst Caverstock pursued its s 96 application to the Minister.

9 The Council’s Development Contributions Plan No 1 2005 permits a bank guarantee to be provided for a s 94 monetary contribution. The Council agreed to the proposal. The bank guarantee was supplied and the construction certificate was issued.

10 On 7 March 2008 the Minister refused Caverstock’s application. However, on 6 May 2008, still within the six month period, Caverstock appealed to the L&E Court from this refusal. The appeal is a merits review in the Class 1 jurisdiction of that Court.

11 Caverstock sought an undertaking from the Council that it would not call on the bank guarantee pending the determination of the appeal. The Council refused to give such an undertaking. On 24 June 2008 the Council called on the guarantee and received $953,561.83 which was paid into its General Fund Account at its bank which held the Council’s other funds.

12 There is no issue in the present proceedings that as and from 21 June 2008, being six months from 21 December 2007, the bank guarantee became unconditional. From that time the Council had a right to get in monies that were properly payable to it. It would of course have obtained those funds earlier if Caverstock, in order to obtain a construction certificate, had paid the amount in accordance with the terms of condition B31.

13 Caverstock took no steps after the Minister’s rejection of its application on 7 March, or after the lodgement of its appeal on 6 May, to protect its position before the expiry of the six month period other than by requesting an indulgence from the Council. After payment under the guarantee Caverstock lodged a notice of motion on 4 July, which led to the ex parte freezing order made by Pain J on that day.

The Payment Into Court Issue

14 Sheahan J made the order that monies be paid into court in purported exercise of the power found in UCPR r 25.3. That rule relevantly provides:

“25.3(3) In proceedings concerning the right of any party to a fund, the court may order that the fund be paid into court or otherwise secured.”

15 In his ex tempore judgment on this aspect of the case, Sheahan J said:

“[4] I am satisfied that this Court has the power to direct the payment into Court of such an amount by the Council. I accept Mr Ayling’s submissions to this effect, relying upon Rules 25.3 and 41.1 to 41.8 of the Uniform Civil Procedure Rules 2005. He has made the entirely sensible suggestion that, in the event that I make such an order, once the Court receives the payment, the monies should be paid in turn to the Public Trustee to be invested pursuant to, or as if pursuant to, the provisions of s.36A of the Public Trustee Act 1913.”

16 The submissions in this Court on the part of the Council commenced with the proposition that the L&E Court had no power to order repayment of the amount received under its bank guarantee. Reliance was placed on this Court’s decision in Frevcourt v Wingecarribee Shire Council [2005] NSWCA 107; (2005) 139 LEGRA 140. Indeed both before Sheahan J, and in this Court, it was common ground that the Court had no such power, as Sheahan J expressly noted at [19] of his judgment of 9 July 2008.

17 Mr B W Walker SC, who appeared with Mr P W Larkin for the Council, submitted that merits review proceedings in the Class 1 jurisdiction of the L&E Court are not capable of answering the description of “proceedings concerning the right of [a] party to a fund” within UCPR r 25.3(3).

18 Mr J A Ayling SC, who appeared with Mr M D Seymour for Caverstock, submitted that the Rules of the court should not be given a narrow or technical construction which would have the effect of preventing a court from exercising effective control over the matters before it and which may inhibit the provision of justice to the parties. He further submitted that the proceedings concerned the right of a party to a fund and, accordingly, the order made by Sheahan J was within power.

19 On the submissions before this Court, no issue arises as to the exercise of the discretion to grant the order. The question is a pure question of law based on the proper interpretation of UCPR r 25.3(3).

20 Mr Walker emphasised that the Council is even not a party to the Class 1 proceedings. It claims that it is a necessary party, but Caverstock has resisted and continues to resist its joinder. Mr Ayling submitted that the “party” within r 25.3(3) is Caverstock.

21 Mr Walker submitted that the Class 1 proceedings contain no claim for relief directed to anything that can be characterised as a fund. Mr Ayling submitted that the monies paid to the Council, pursuant to its call on the guarantee, represented a fund.

22 Regulation 35 of the Environmental Planning and Assessment Regulation 2000 makes provision for the treatment of s 94 contributions. It imposes a requirement on the Council to maintain accounting records that allow s 94 contributions to be distinguished from other monies held by the Council. The accounting records for a contributions plan must indicate the contributions received and the public amenities or services for which they have been received.

23 The word “fund” is protean and will take its colour from its context. It is capable of applying to an accounting entry. As Lord Greene MR said in Allchin v Coulthard [1942] 2 KB 228 at 234:

“The word ‘fund’ may mean actual cash resources of a particular kind (eg money in a drawer or a bank), or it may be a mere accountancy expression used to describe a particular category which a person uses in making up his accounts.”

24 The latter, in my opinion, is not the sense in which the word is used in r 25.3(3). It is used in the former sense of money held in a particular and separate form such as a trust fund. A party does not institute proceedings concerning a “right” to a book entry.

25 When a provision in a statute or in subordinate legislation such as the Rules falls to be interpreted, the context of the provision must be considered in the first instance and not only if some kind of ambiguity is identified. Judges no longer approach a statute with scissors in one hand and a dictionary in the other. Of particular significance is the immediate statutory context in which the particular section appears.

26 Rule 25.3(3) appears in Pt 25 of the UCPR which is concerned with “Interim preservation”. This clearly refers to identifiable and separate property capable of being ‘preserved’, to which the particular rights attach.

27 This is even clearer in r 25.3(1) which states:

“25.3(1) In proceedings concerning property, or in which any question may arise as to property, the court may make orders for the detention, custody or preservation of the property.”

Again the need for a separately identifiable item of property is a clear requirement.

28 This is confirmed by other provisions in Pt 25 of the UCPR including:

· Disposal of perishable property (r 25.4);

· Distribution of property or income not required to answer claims on the property (r 25.5 and r 25.6);

· The making of a freezing order restraining disposal or dealing with assets (r 25.11).

29 The context strongly supports the proposition that a fund must have some separate and distinct existence as an item of property. An accounting entry of some character is insufficient.

30 The only relevant authority of which I am aware is the decision of Lightman J in Myers v Design Inc (International) Ltd [2003] EWHC 103 (Ch); [2003] 1 WLR 1642. In that case his Honour was concerned with the equivalent English rule which is quite explicit on the issue because of its different terminology. Rule 25.1(1)(l) of the Civil Procedure Rules resembles the UCPR rule under consideration but is different in a pertinent respect. It provides:

“25.1(1) The court may grant the following interim remedies–

...

(l) an order for a specified fund to be paid into court or otherwise secured, where there is a dispute over a party’s right to the fund;

...”

The word “specified” qualifying the word “fund” is a significant difference.

31 In Myers the defendant was being sued for repayment of a loan and an order was sought under this rule to prevent the defendant from rendering a judgment against it unenforceable by disposing of its assets. A freezing order could have been appropriate but, Lightman J held, such a contention could not justify a payment into court. The debt in question did not constitute a “specified fund”. In my opinion, the same result arises under UCPR r 25.3(3) notwithstanding the absence of the word “specified”.

32 In my opinion, the following observations of Lightman J are equally applicable to the present case:

· “The reference in the rule to the party’s right to the fund connotes the existence of a proprietary right or interest in the fund.” (at [10])

· “[T]hough [the moneys] may have constituted such a fund on receipt by the defendant, that fund no longer exists and further the claimant never had any proprietary or other right in that fund.” (at [11])

· “Any debt owed by the defendant to the claimant is a chose in action vested in the claimant. It is not itself a specified fund nor does it give rise to the existence of a specified fund in which the claimant has a proprietary interest. Nor are there any moneys, let alone specified fund, held by the defendant over which the claimant has any proprietary rights.” (at [12])

33 In my opinion, in the present case, there is no “fund” within the meaning of r 25.3(3). It is sufficient, for present purposes, to say that any such fund disappeared upon payment of the monies into the general bank account of the Council.

34 Furthermore, I am of the view that the proceedings in Class 1 of the L&E Court’s jurisdiction are not “proceedings concerning the right of [Caverstock] to” monies, however described. The proceedings, if successful, may give rise to a claim to repayment of the monies paid under the guarantee as a s 94 contribution. Proceedings to recover the payment on some restitutionary or other basis may or may not be maintainable. However, the proceedings presently before the L&E Court do not ‘concern’ the “right” of Caverstock to any payment even if, contrary to my view, there was anything that could answer the description of a “fund” within the meaning of the rule. The proceedings may or may not create a legal right to repayment but are not themselves ‘concerned’ with any legal, by which I include equitable, right to a fund or otherwise.

The Freezing Order

35 The freezing order made on 9 July by Sheahan J was made pursuant to UCPR r 25.11, which provides:

“25.11(1) The court may make an order (a freezing order), upon or without notice to a respondent, for the purpose of preventing the frustration or inhibition of the court’s process by seeking to meet a danger that a judgment or prospective judgment of the court will be wholly or partly unsatisfied.

(2) A freezing order may be an order restraining a respondent from removing any assets located in or outside Australia or from disposing of, dealing with, or diminishing the value of, those assets.”

36 In the course of his reasons on this issue Sheahan J said:

“[19] During yesterday’s hearing counsel for the Council declined several invitations by the Court to resolve the current impasse by undertaking that, in the event of the Applicant’s success in its appeal, Council would refund any excess of funds taken by Council pursuant to its calling in of the guarantee. Indeed, the Court was told only that Council would obey any order made by this Court for any moneys to be refunded, although it is common ground that this Court has no jurisdiction to make such an order. It was even put to me that the funds obtained may already be pooled, and so no longer able to be identified and refunded. They are now ‘public funds’, and if no refund is possible it was the Applicant’s ‘own fault’, the submission went.

[20] This would appear to me to be precisely the type of attitude, and overall situation, that Mareva relief and Rule 25.11 are designed to remedy.

[21] If funds cannot or will not be refunded, despite the proven sound financial position of the Council, any decision of this Court favourable to the Applicant will be ‘unsatisfied’, as required by the Rule ...

...

[23] As Ritchie observes (in par 25.11.10), the power in Rule 25.11 is ‘complemented by the more specific provisions in r 25.14’, but I do not accept Mr Larkin’s submission that Rule 25.14 restricts Rule 25.11, such that it cannot apply to cases where a judgment debt is not the preferred or likely outcome. If that were so, the specific and intentional application of the provisions of Rule 25.11 to classes 1 to 3 of this Court’s jurisdiction would be a nonsense, given its general lack of power to make monetary orders, as such.”

37 The Council submitted that the L&E Court, being a statutory court, has no inherent or accrued jurisdiction and its powers are defined by the statute and the rules pursuant to which it exercises jurisdiction. The Council submitted that the power of the Court to make a freezing order under the Rules requires there to be a “danger that a ... prospective judgment of the court will be wholly or partly unsatisfied”.

38 The submission of the Council before Sheahan J was not appropriately characterised by him as a situation “where a judgment debt is not the preferred or likely outcome”. The Council said it submitted, and continues to submit, that a judgment of the L&E Court could only be “unsatisfied”, for the purposes of the Rule, if it required the doing of an act, such as the payment of money, and the act was not done.

39 The Council submitted that Sheahan J erred in holding that a judgment of the L&E Court in merits review proceedings was a judgment that could be “unsatisfied” for the purposes of UCPR r 25.11. That could not be the case because the proceedings could not lead to a judgment of the character required. Furthermore, there was no evidence of any “danger” within the meaning of the Rule.

40 As noted above, it was common ground that the L&E Court had no power to order repayment of the money. Sheahan J, in the extracts set out above, proceeded on that basis. The submissions in this Court proceeded on the same basis.

41 Mr Ayling submitted, on behalf of Caverstock, that if his client were successful in its Class 1 appeal it could be denied the benefit of that success if it were unable to secure “the fund[s] in the Council’s hands” until after the appeal was resolved. It was sufficient for Sheahan J to find, he submitted, that if the money was spent or pooled by the Council prior to the resolution of the merits appeal, that appeal could be frustrated because “the resolution of the appeal would leave [Caverstock’s] entitlements thereunder unsatisfied”.

42 It is not an objection to a freezing order against a person that no substantive relief is sought against that person. (See Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380; r 25.13 and the definition of “respondent” in r 25.10.)

43 The context of r 25.11 is, as indicated above, in a Part of the Rules concerned with interim preservation. The rule is a formulation of the Mareva injunction jurisprudence, which is a comparatively recent development of the common law, based upon the power of a court to prevent the frustration of its process and to ensure that its judgments are not without value. I accept that a narrow or technical approach to such a power is not appropriate.

44 As indicated in the extracts from his judgment that I have set out above, Sheahan J was of the view that the Council’s very contention that it may not be obliged to refund any excess was within the scope of this rule. That was because, it appears, the modification of condition B31, if eventually ordered by the Court, may prove to be of limited practical significance to Caverstock if it could not recover any overpayment.

45 That may or may not be a consequence of the legal rights of the parties following modification of the condition. That is not a matter before this Court. However, in my opinion, there was no basis on which a freezing order could be made in the present case “for the purpose of preventing the frustration or inhibition of the court’s process”. The only “process” in the L&E Court sought modification of a condition. What legal right to the payment of monies flowed from any such order was not a matter before that Court on that appeal. It was common ground that the L&E Court could not order the repayment of any money. Indeed, the Council is not even a party to the Class 1 proceedings. The Court could only modify the consent. What consequences could or would flow from such an order is, as I have said, of practical significance and involves, in a general sense, the ‘satisfaction’ of the party. It does not, however, involve the ‘satisfaction’ of any court judgment that could possibly result from the proceedings.

46 Furthermore, in my opinion, no “prospective judgment” of the L&E Court in the Class 1 proceedings could be “unsatisfied” within the meaning of r 25.11.

47 Finally, there was no evidence that the Council would in any way seek to frustrate such rights as Caverstock may have to repayment by dissipating assets or taking any other step. Indeed, Sheahan J did not address any such issue. His Honour’s reliance on the Council’s contention that it would have no obligation to repay is not capable of constituting a “danger” within the rule. That contention is either right or wrong as a matter of law. If it is right, then nothing would result from the order freezing the money. If it is wrong, then there was no evidence, indeed no contention, that the Council would not pay.

Conclusion

48 During the course of oral submissions Mr Ayling referred to s 22 of the Land and Environment Court Act 1979, without identifying the basis on which it was applicable. That section repeats the longstanding Judicature Act formulation about granting “all remedies to which any of the parties appears to be entitled” so that “multiplicity of proceedings ... may be avoided”. This provision confers power, not jurisdiction. (See Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd [1981] HCA 7; (1981) 148 CLR 457 at 489.)

49 It was not suggested that the Land and Environment Court had jurisdiction to determine Caverstock’s right to a repayment. Indeed, it has been common ground throughout that the Court could not order repayment. In any event, the Council is not a party to the proceedings. Section 22 has no relevant application.

50 The situation that has arisen is somewhat unusual in that payment has been made pursuant to a condition before its content has been finally determined. It is clearly desirable, in the interests of avoiding further proceedings, that the Land and Environment Court should be able to determine whether or not a person who has made a payment pursuant to a condition of a consent which is challenged is entitled to a refund and, if so, how much. Although the legal principles involved in such proceedings are not within the usual jurisdiction of that Court, such an issue is so clearly related to the issues before the Court that they should be resolved together. It may be that the requisite jurisdiction is conferred by s 16(1A) of the Land and Environment Court Act, but that section was not relied upon in these proceedings. I note that in Frevcourt the issue of jurisdiction under s 16(1A) was not raised.

51 The orders I propose are:

1 Leave to appeal granted.

2 Appeal allowed.

3 Set aside Order 1 of the Land and Environment Court of 9 July 2008 and Direction 1 and Order 1 of 24 July 2008.

4 Notice of Motion of 4 July 2008 in the Land and Environment Court dismissed.

5 The monies paid into court pursuant to the order of Sheahan J of 24 July 2008 together with interest be paid to the appellant.

6 The first respondent pay the appellant’s costs of the appeal and of the proceedings in the Land and Environment Court.

7 Stay orders 2-6 until the applicant files a Notice of Appeal in this Court.

52 BELL JA: I agree with Spigelman CJ.

53 HANDLEY AJA: I agree with the Chief Justice.

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LAST UPDATED:
13 October 2008