Blackley Investments Pty Ltd v Burnie City Council

• Jurisdiction: Tasmania
• Judge: Evans J,Blow J,Wood J
• Judgment Date: 24 October 2011
• Court: Full Supreme Court
• Date: 24 October 2011
• Docket Number: 951/2010

[2011] TASFC 6

[2010] TASSC 48

SUPREME COURT OF TASMANIA (FULL COURT)

Evans, Blow and Wood JJ

951/2010

Blackley Investments Pty Ltd

and

Burnie City Council

REPRESENTATION:

Counsel:

Appellant: S B McElwaine and E Judd

Respondent: M E O'Farrell SC and D Crampton

Taylor v Johnson (1983) 151 CLR 422, distinguished.

W Scott, Fell & Co Ltd v Lloyd (1906) 4 CLR 572, applied.

Aust Dig Equity [1270]

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, distinguished.

Thompson v Palmer (1933) 49 CLR 507, referred to.

Aust Dig Estoppel [1047]

Equity — Equitable remedies — Rescission — Mistake — Unilateral mistake — Contract for sale of land — Vendor's mistaken belief contract conditional upon rezoning approval — Purchaser aware of mistake and did not correct it.

Estoppel — Estoppel by conduct — Promissory estoppel — Particular cases — Contract for sale of land — Vendor's mistaken belief contract conditional upon rezoning approval — Purchaser aware of mistake and did not correct it.

Order of the Court

• 1 Appeal allowed.

• 2 Judgments on the claim and counterclaim set aside.

• 3 Order that judgment be entered for the appellant against the respondent for damages pursuant to the Supreme Court Civil Procedure Act 1932, s11(13)(a), to be assessed, such assessment to be listed before the Associate Judge provided he is available.

• 4 Counterclaim dismissed.

REASONS FOR JUDGMENT

FULL COURT

Evans J

1 I agree with the reasons for judgment of Blow J and the orders he proposes.

Blow J

2 This is the second Full Court appeal concerning a contract for the sale of some land owned by the respondent council at Camdale. The council entered into a contract to sell the land to the appellant company. The land was and is zoned ‘Industrial’ under the Burnie Planning Scheme 1989. Both parties intended that the purchaser would undertake a housing development on the land. The planning scheme prohibits such developments in areas zoned Industrial, but they are not prohibited in areas zoned ‘Residential A’ if a planning permit is granted. The contract therefore required the purchaser to make a combined application under the Land Use Planning and Approvals Act 1993 (‘the LUPA Act’), s43A, for a change of zoning and a planning permit. It contained clauses requiring the purchaser, if that application was successful, to undertake a substantial part of the proposed housing development. It also contained a provision allowing the purchaser to rescind the contract if that application was unsuccessful. The application was unsuccessful, but the purchaser decided not to rescind the contract. The company wished to proceed with the purchase, but the council did not wish to proceed. The council claimed that, as a result of the s43A application having been unsuccessful, the contract was at an end. In the alternative, it claimed to have the right to terminate the contract, and purported to do so. The purchaser sued the council for specific performance.

3 The unfortunate history of the litigation is as follows:

• • The action went to trial before Tennent J. Her Honour held that, once the s43A application was unsuccessful, the council had the right to terminate the contract, and that it had done so. The action was dismissed: Blackley Investments Pty Ltd v Burnie City Council [2008] TASSC 74.

• • The purchaser appealed, and was successful. This Court, differently constituted, held that the refusal of the s43A application neither brought the contract to an end nor entitled the council to terminate it: Blackley Investments Pty Ltd v Burnie City Council[2009] TASSC 63. However, although the appeal was successful, this Court was not in a position to determine what the outcome of the action should be. There were issues between the parties that had not been the subject of findings by the learned trial judge or argument before the Full Court, eg an issue as to whether the purchaser was ready, willing and able to complete the purchase. This Court therefore ordered on 12 August 2009 that the action be remitted to a judge for determination.

• • Thereafter the remitted proceedings were dealt with by the same judge. On 21 September 2009 her Honour allowed the council to make extensive amendments to its defence. Amongst other things she allowed the council to plead a defence of unilateral mistake, the basis of which is discussed below, even though it had been content to go to trial the previous year without pleading such a defence. The council also made a counterclaim, seeking a declaration to the effect that it had validly rescinded the contract on the basis of mistake, and an order for the cancellation of documents.

• • There was a second trial of the action over four days commencing on 28 June 2010. Her Honour once again dismissed the action: Blackley Investments Pty Ltd v Burnie City Council (No 2) [2010] TASSC 48. She made a declaration that the council had lawfully rescinded the contract, holding that it had been entitled to do so on the basis of unilateral mistake. Her Honour based her orders on a conclusion that the council entered into the contract with a mistaken belief that the contract would be at an end if the s43A application was unsuccessful. Her Honour did not determine all of the issues between the parties. She did not address an estoppel defence pleaded by the council, nor did she address the issue as to whether the purchaser was ready, willing and able to complete the contract.

• • The purchaser has again appealed. The parties have agreed that, if the appeal succeeds to the extent that the Court must determine whether to order specific performance or to award damages in lieu of specific performance, the Court need not order specific performance, but that there should instead be an award of damages.

4 It is good that the parties wish to avoid a third trial. It is a pity that there was a second trial, particularly in the light of the High Court's comments in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175. However none of the grounds of this appeal relate to the order granting leave to amend the defence in September 2009.

Findings of fact as to unilateral mistake

5 When the learned trial judge dismissed the purchaser's action for the second time, she made findings of fact to the following effect:

• • When the council entered into the contract it believed, wrongly, that completion of the contract was conditional upon the purchaser successfully obtaining approval to enable it to complete the proposed development.

• • When the council entered into the contract it believed, wrongly, that, if the purchaser was unable to obtain the necessary approval, there would be no completion of the contract.

• • The purchaser company, by its directors Mr and Mrs Blackley, knew that circumstances existed which indicated that the council was entering into the contract under some serious mistake or misapprehension.

• • The purchaser had a ‘fall-back position’, involving the development of the land for industrial purposes if the proposed residential development was not approved, which its directors made no mention of at all to the council before the contract was signed.

• • The directors of the purchaser company either knew or ought to have known that the council entered into the contract believing it was conditional upon the proposed development being approved.

• • The council only agreed to sell the land to the purchaser on the basis that it would get the proposed development, or at least a substantial portion of it.

• • There was no direct evidence of any conscious decision by the directors of the purchaser company not to tell the council of their intentions prior to signing the contract.

• • The ‘only inference to be drawn from the evidence is that their failure to do so, in circumstances where they had to have been aware the Council would react adversely to such advice, was an omission they knew might ultimately benefit them.’

6 The purchaser has chosen not to challenge any of those findings of fact in this appeal. It now contends, rightly in my view, that, even on the facts as found, the council was not entitled to rescind the contract, and is still bound by it.

7 Her Honour made no finding of fraud, of misrepresentation, of any special relationship obliging the purchaser to disclose any of its thinking during the pre-contractual negotiations, of sharp practice, or of misleading or deceptive conduct on the part of the purchaser. None of those matters were pleaded.

Unilateral mistake

8 Ground 1 of the amended grounds of appeal asserts that the learned trial judge erred ‘in her formulation of the legal principle as to rescission in equity for unilateral mistake’.

9 Unilateral mistake is a species of mistake that occurs when one party is mistaken, and the other party either knows of the mistake or must be taken to know of it. The leading Australian case on the subject is Taylor v Johnson (1983) 151 CLR 422. In that case a vendor granted an option for the purchase of some land, mistakenly believing that the price was $15,000 per acre rather than $15,000 in total, when the purchaser was aware of that mistake. The unmistaken purchaser had been aware of the vendor's mistake, set out to take advantage of it, and induced her to grant the option to him for the purchase of the land at the total price of $15,000. The New South Wales Court of Appeal set aside the contract. The purchaser unsuccessfully appealed to the High Court. In the majority judgment at 432, Mason ACJ, Murphy and Deane JJ said:

‘The particular proposition of law which we see as appropriate and adequate for disposing of the present appeal may be narrowly stated. It is that a party who has entered into a written contract under a serious mistake about its contents in relation to a fundamental term will be entitled in equity to an order rescinding the contract if the other party is aware that...