Applicants v First Respondent

2 The applicants have since sold the land, and claim to have received a price that was lower than the price they could reasonably have expected to get if the land had not been reserved. The sale of the land triggered the applicants' entitlement to claim compensation, under ss 99(b) and 106 of the PE Act. The applicants have particularised their claim to be in the order of $25 million. VicRoads' position, as set out in its amended particulars of offer, is that the applicants suffered no financial loss as a result of the application of the 2016 PAO, and are not entitled to any compensation.

3 The applicants sold the land in January 2018 to the second respondent, 1050 Western Port Highway Pty Ltd (the Purchaser). The purchase price was $55 million, which was approximately half the amount that the applicants' valuer considers it was worth after the application of the 2016 PAO. The contract of sale was entered into against a background of dealings between the applicants and persons associated with the Purchaser over more than a decade, and was not regarded by their valuer as an arm's length transaction. I understand that the applicants will contend at trial that the value of the land was not the only matter that affected the agreed purchase price.

4 The contract for the sale of the land included, at Special Condition 30 (SC 30), the following clause:

30. VicRoads compensation

30.1 Definitions

In this special condition 30, "Compensation" means the full monetary amount of compensation which the Vendor receives from VicRoads as a result of its claim for compensation under section 106 of the Planning and Environment Act 1997 (Vic) in respect of Public Acquisition Overlay - Schedule 1.

30.2 Assignment of Compensation

(a) Subject to Settlement occurring and with effect from the Settlement Date, the Vendor assigns to the Purchaser the Vendor's right, title and interest in the Compensation.

(b) To give effect to Special Condition 30.2(a), the:

(i) parties will set up a new bank account in the joint names of the Vendor and the Purchaser with a bank mutually agreed by the parties where both parties are signatories of the account (New Account);

(ii) Vendor will authorise and direct VicRoads to pay the Compensation into the New Account;

(iii) parties acknowledge and agree that once the Compensation is paid into the New Account it is held on trust for the Purchaser and is the irrevocable property of the Purchaser; and

(iv) Vendor authorises the Purchaser to transfer the Compensation from the New Account to its own bank account and it will sign any necessary documents to facilitate this transfer.

(c) After the date on which Settlement occurs, the parties agree that:

(i) the Purchaser may act on the Vendor's behalf in respect of the Vendor's claim for Compensation (Compensation Claim) and, in this regards, the Purchaser will have the full carriage of the Compensation Claim including without limitation doing all things necessary and convenient to prepare, lodge and pursue the Compensation Claim and appointing its own consultants to assist with the Compensation Claim;

(ii) the Vendor must:

(A) not, and must procure that its consultants and/or the Vendor's Legal Practitioner do not take any action in respect of the Compensation Claim including without limitation settling or finalising the claim or accepting any amount of Compensation from VicRoads unless it obtains written instructions from the Purchaser to do so;

(B) at the Purchaser's cost:

(1) promptly provide to the Purchaser copies of all documents, notices or correspondence the Vendor receive[s] in respect of the Compensation Claim;

(2) do all things reasonably required by the Purchaser in respect of the Compensation Claim including executing any necessary documents within 7 days of written request from the Purchaser.

5 VicRoads contends, in its amended particulars of offer, that this assignment is invalid. This contention is made in two alternative ways. First, VicRoads contends that, on the proper construction of the PE Act, an entitlement to claim compensation under Pt 5 is not capable of being assigned.[1] Alternatively, it contends that an assignment of the fruits of litigation which gives control of the litigation to the assignee is void by reason of public policy.[2]

6 The applicants maintain that the assignment is not an assignment of their statutory cause of action and is a valid assignment of the proceeds of their claim for compensation.

7 At VicRoads' instigation, on 6 June 2019, the Purchaser was joined as the second respondent to the proceeding. It is separately represented.

8 VicRoads has applied for an order under rule 47.04 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (Rules) that the following questions be determined by the Court as a separate or preliminary question:[3]

(a) Is the purported assignment in SC 30 of the contract of sale between Brompton Lodge Pty Ltd and Mr and Mrs Carpenter (as vendors) and 1050 Western Port Highway Pty Ltd dated 8 January 2018 (Purported Assignment) an assignment of the 'proceeds of litigation', 'cause of action' and/or 'entitlement to compensation'?

(b) Is the Purported Assignment valid at law?

(c) If the Purported Assignment is a valid assignment of a 'cause of action' and/or an 'entitlement to compensation', is the assignment legal or equitable?

9 The parties are agreed that the principles to be applied in determining an application for the trial of a separate or preliminary question, under r 47.04 of the Rules, are as set out by Derham AsJ in Vale v Daumeke:[4]

Ordinarily, all issues of fact and law in a proceeding will be determined at the one time by the Court following a trial. There are a great many decisions relating to the matters to be considered in the exercise of the discretion to order the separate trial of questions in a proceeding. Many have gathered together considerations relevant to the particular facts and issues in the particular proceeding. All recognise that much depends on the facts at hand. Nevertheless, there are principles, relevant matters and cautions identified that provide guidance in the exercise of the discretion. They are as follows:

(a) The discretion must be exercised with great caution, and only in a clear case;

(b) An order for the determination of a separate question before trial is generally only appropriate where the determination of the question will be likely to end the litigation or substantially narrow the issues in dispute, or where there is a clear demarcation between that issue and the other issues in the case;

(c) Where the preliminary question is one of mixed fact and law, it is necessary that the question can be precisely formulated (ensuring that the terms used have clear meaning) and that all of the facts that are on any fairly arguable view relevant to the determination of the question are ascertainable either as facts assumed to be correct for the purposes of the preliminary determination, as agreed facts or as facts to be judicially determined;

(d) The separate determination of the question should not be attempted where there is uncertainty inherent in the definition of the facts upon which the substantive question must be determined;

(e) In cases where the relevant facts are assumed by one party to be correct for the purposes of the preliminary determination, it is only possible to determine a question of law, not one of mixed law and fact;

(f) Care must be taken in utilising the procedure provided for in r 47.04 of the Rules to avoid the determination of issues not 'ripe' for separate and preliminary determination - for example, where it is simply one of two or more alternative ways in which an applicant frames its case, and determination of the issue would leave significant other issues unresolved;

(g) The advantages of trying separate questions for one party may unfairly disadvantage another party, including because the questions will be determined without the benefit of all the evidence relevant to the proceeding;

(h) Whether a question should be determined separately involves a two-stage process - the first stage requires that the questions for determination be identified clearly and with precision, while the second stage is the actual determination of the question - and the two stages should not be run together;

(i) If the questions involve issues of fact that need to be determined or proved, and the Court cannot see, on the basis of the material presently before it, that the facts can be properly determined, it is inappropriate to make the order;

(j) In some cases, perhaps most cases, it will be inappropriate to order the trial of preliminary questions before discovery of documents relevant to the questions, and before resolving grounds restricting production and inspection of them, such as client legal privilege or public interest immunity;

(k) Factors that tend to support the making of an order include that the separate determination of the question may:

(x) Contribute to the saving of time and cost by substantially narrowing the issues for trial, or even lead to disposal of the action; or

(xi) Contribute to the settlement of the litigation; and

(l) Factors that tell against the making of an order include that the separate determination of the question may:

(i) Give rise to significant contested factual issues both at the time of the hearing of the preliminary question and at the time of trial;

(ii) Result in significant overlap between the evidence adduced on the hearing of the separate question and at trial - possibly involving the calling of the same witnesses at both stages of the hearing of the proceeding - which will be of particular significance if the Court may be required to form a view as to the credibility of witnesses who may give evidence at both stages of the hearing of the proceeding; or

(iii) Prolong rather than shorten the litigation.

10 VicRoads argues that the validity of the assignment is important to the future conduct of the proceeding. If the assignment is invalid, VicRoads submits that the Purchaser will no longer be able to conduct the proceeding on the applicants' behalf and any settlement will no longer require the Purchaser's consent. The applicants will be able to decide for themselves whether they wish to pursue their claim for compensation and how much compensation they are prepared to accept. If the assignment is valid, VicRoads will contend that the applicants are not entitled to any compensation because they have not suffered any loss on the sale of the land. This contention is based on an argument that the purchase price included the value of the applicants' right to compensation under s 98 of the PE Act.

11 VicRoads submits, by reference to the principles set out in Vale v Daumeke, that the validity of the assignment should be determined as a separate question because:

(a) The proposed separate question is a discrete legal issue, of contractual and statutory interpretation, that can be quickly and efficiently disposed of.

(b) It does not involve any factual dispute and there is no need for lay evidence or discovery.

(c) In WorkCover Queensland v Amaca Pty Ltd (No 2),[5] the validity of an assignment was considered 'ripe' for preliminary determination.

(d) VicRoads is unable to make an offer of compensation while the applicants and the Purchaser rely on the assignment, because VicRoads does not consider the Purchaser to be a proper recipient of compensation under the PE Act.

(e) VicRoads contends that the applicants' claim for compensation cannot be determined until the validity of the assignment is determined. It anticipates some adjustment of the purchase price if the assignment is held to be ineffective which, it says, will affect the assessment of the loss suffered by the applicants by reason of the reservation.

(f) The Purchaser is directing the applicants' position in the proceeding, as SC 30 entitles it to do. If the assignment were held invalid, the applicants could take their own position in the conduct of the proceeding.

(g) Determination of the separate question is likely to contribute to the settlement of the proceeding, because it is only once it is determined that it will be clear who has the power to settle the proceeding.

(h) There is a public interest in having the issues the subject of the proposed separate question determined. VicRoads contends that the issues of general interest arise in the context of the expansive public works program currently being pursued by the Victorian Government.

(i) The cost and expense of hearing the proposed separate question is no more than would arise in the final hearing of the matter, and will not prolong the litigation.

12 The applicants and the Purchaser dispute each of these submissions.

13 I do not consider that the validity of the assignment should be determined as a separate question before trial. My reasons for that conclusion are as follows.

14 First, none of the possible answers to the proposed separate question will bring the proceeding to an end. VicRoads accepts that is so. Whether or not the assignment is valid is not determinative of the main issues for resolution, which are whether any financial loss was suffered by the applicants as the 'natural, direct and reasonable consequence' of the 2016 PAO and, if so, the amount of that loss. Moreover, I am not persuaded that determination of the preliminary question will substantially narrow the issues at trial. I note that at [21] of VicRoads' amended particulars of offer, it pleads the issues relating to the assignment as the fifth of five reasons why it says the applicants are not entitled to any compensation.

15 Second, the proceeding is brought by the applicants, not the Purchaser. Whatever the scope and effect of the assignment, this is not a case in which the assignee claims to be entitled to litigate the claim for compensation under the PE Act. For that reason alone, this case is different from Kilmaley Investments Pty Ltd v City of Wanneroo (No 2),[6] relied on by VicRoads. In that case, and in several other cases cited by VicRoads,[7] the assignee sought to prosecute the assigned cause of action in its own name. In this case, the Purchaser makes no claim in the proceeding, and there is no need to determine whether it is the proper claimant.

16 Third, I was not convinced by the submissions made for VicRoads about difficulties that might arise at mediation - or in the conduct of the proceeding generally - because of the applicants' obligations to the Purchaser under SC 30.2(c). There was an element of speculation to those submissions, which was not borne out by evidence or by the way in which the applicants have conducted the proceeding to date. The applicants say, and I accept, that they will pursue their claim for compensation in any event. The Purchaser is separately represented from the applicants, and it is not apparent that it is currently acting on the applicants' behalf in the proceeding, as SC 30.2(c)(i) permits it to do. The Purchaser is now a party to the proceeding and, as things stand, will participate in the forthcoming mediation. VicRoads can take the usual steps to protect its position on costs and interest if it considers that the applicants have unreasonably refused an offer to settle the proceeding.

17 Fourth, I am not persuaded that VicRoads is unable to make an offer while the validity of the assignment is in question. The applicants put their claim based on a before and after valuation of the land that was assessed without reference to the purchase price. It is usual in a 'loss on sale' claim for the claimants to seek compensation for the difference between the unaffected value of the land and the purchase price.[8] In this case, the applicants put their claim on a different basis. They say that the purchase price did not reflect the affected value of the land, because it was arrived at by reference to a broader range of matters. They foreshadowed an intention to present evidence at trial about the background to the contract of sale, which involved more than a decade of dealings between them and interests associated with the Purchaser. VicRoads' query about the validity of the assignment does not constrain it from engaging with the claim made by the applicants and from making an appropriate offer to them.

18 Fifth, I do not accept that the assignment prevents VicRoads from making a payment of compensation to the applicants. VicRoads has a statutory obligation to compensate the applicants for 'financial loss suffered as the natural, direct and reasonable consequence' of their land being reserved for a public purpose. I cannot see that it has an interest in what the applicants do with any compensation that they might receive. Nor do I accept that there is any likelihood of a future adjustment of the purchase price if the assignment is found to be invalid at trial. Neither the applicants nor the Purchaser dispute the validity of the assignment, and they have agreed that any invalid provision should be severed without affecting the rest of the contract.[9]

19 Sixth, I do not accept VicRoads' submission that the time and cost involved in determining the proposed separate question is no more than would arise if the issue were determined at trial. To the contrary, it would involve a real risk that the proceeding would be fragmented and prolonged by appeals, without the countervailing advantage that answering the proposed separate question might end the proceeding.

20 Those are sufficient reasons to refuse the application. There are two additional considerations that reinforce my conclusion, although neither is determinative.

21 The first additional consideration is that there may be an overlap between the evidence relevant to the validity of the assignment and the evidence as to the extent of any loss sustained by the applicants. An overlap of this kind is a factor that tells against the trial of a separate question.

22 The potential for overlap concerns the contention of the applicants and the Purchaser that the Purchaser has a genuine substantial or commercial interest in the outcome of the proceeding, so that the assignment (whether it is of a cause of action, or of the fruits of litigation) is not invalid.[10] During the hearing of the application, VicRoads conceded that the contract gives the Purchaser such an interest. I am unsure how that concession can be reconciled with VicRoads' primary position that the assignment is invalid. On the hearing of the proposed separate question, it might therefore be necessary to determine whether, aside from SC 30 in the contract of sale, the Purchaser has a genuine interest in the applicants recovering compensation from VicRoads. That would involve canvassing the relationship between the Purchaser and the applicants, which extends back to 2007. As already noted, that relationship is also relevant to the applicants' claim for loss on the sale of their land.

23 The final matter that confirms my conclusion is that I am not persuaded that there is any broader public interest in determining the validity of the assignment in SC 30 of this particular contract of sale. There is nothing before me to suggest that it is a standard special condition in contracts for the sale of land affected by a reservation for a public purpose. The limited evidence I have at present suggests that the contract was negotiated in the context of the specific relationship between the applicants and interests associated with the Purchaser.

24 On that basis, VicRoads' application for the determination of a separate question, made in paragraph 3 of its summons dated 22 May 2019, is dismissed.

[1] Relying on Kilmaley Investments Pty Ltd v City of Wanneroo (No 2) [2017] WASC 307.

[2] Relying on Glegg v Bromley [1912] 3 KB 474.

[3] First Respondent's summons dated 22 May 2019, [3].

[4] [2015] VSC 342, [31] (citations omitted).

[5] [2012] 2 Qd R 194. On appeal, the Queensland Court of Appeal answered the separate question differently, but did not query whether it should have been determined before trial: WorkCover Queensland v Amaca Pty Ltd [2012] QCA 240; [2013] 2 Qd R 276.

[6] [2017] WASC 307.

[7] WorkCover Queensland v Amaca Pty Ltd (No 2) [2012] 2 Qd R 194; WorkCover Queensland v Amaca Pty Ltd [2012] QCA 240; [2013] 2 Qd R 276; Pentridge Village Pty Ltd (in liq) v Capital Finance Australia Ltd (2018) 339 FLR 358.

[8] Plunkett v Roads Corporation [2019] VSC 39, [13].

[9] Special Condition 3.12 of the contract of sale provides for the severance of any provision that 'is or becomes void, illegal, invalid or unenforceable', in which case the remaining provisions of the contract are to operate 'as if the severed provision had not been included'.

1. [10] Trendtex Trading Corporation v Credit Suisse [1982] AC 679; Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498, [51]-[53] (French CJ, Crennan and Kiefel JJ). See also Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd [2006] HCA 41; (2006) 229 CLR 386, [90]-[95] (Gummow, Hayne and Crennan JJ).