CZIPO-BARNA v THE COUNCIL OF THE CITY OF ORANGE

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

3067/98 FRANK CZIPO-BARNO & 1 OR v COUNCIL OF THE CITY OF ORANGE.

1 HIS HONOUR : These proceedings relate to the plaintiffs' claimed entitlement to extension of their lease from the defendant of the land and buildings known as the Blackman's Swamp Reserve Trust, formerly the site of the Springside Public School on the Cadia Road, about 10 kilometres from Orange, New South Wales. The City Council is the trustee of the Reserve lands, and at the time of the more significant events the land-holding was regulated by Pt III B of the Crown Lands Consolidation Act 1913. That Act ceased to have effect on 1 January 1990, but for present purposes it is sufficient to refer to it. 2 The plaintiffs were unrepresented at the hearing. The second plaintiff, Mr Stephen Czipo-Barna, appeared and conducted the proceedings, of course for himself, and claimed to do so on behalf of the first plaintiff who did not attend. 3 The plaintiffs' more recent lease, referred to as the Second Lease, is dated 23 October 1984 and registered V 658145. They earlier held a lease referred to in the pleadings as the First Lease dated 4 June 1980 in which the lessor was the City Council, for a term of 20 years from 26 January 1979 at a nominal rent of $1 a year. There were onerous covenants in the First Lease which required them to renovate and put in order the buildings on the property, and they did so at considerable expense. The house on the property then became their home and still is. The Second Lease was expressed to be made in replacement of the First Lease and granted a term commencing on 23 October 1984 and terminating on 25 January 1999, that is several months ago. The Second Lease contained an acknowledgment that the plaintiffs had fulfilled their obligations under clause 4 of the First Lease as regards repair and renovation of the buildings and certain other obligations relating to clearing the Reserve Lands. The plaintiffs continued to hold the property at a nominal rental of $1 per annum until the Second Lease expired. 4 The Statement of Claim sets out a claim based on equitable estoppel or proprietary estoppel. It appears from the terms of the Statement of Claim that it was informed by the propositions stated by Priestley JA in Silovi v Barbaro (1988) 13 NSWLR 466 at 472, including proposition 5 which, as modified by Priestley JA in Austotel Pty Ltd v Franklins Self Serve Pty Ltd , (1989) 16 NSWLR 582 at 610 is as follows: "For equitable estoppel to operate, there must be a creation or encouragement by the defendant in the plaintiff of an assumption that a contract will come into existence, or a promise be performed or an interest granted to the plaintiff by the defendant, and reliance on that by the plaintiff in circumstances where departure from the assumption by the defendant would be unconscionable." 5 The modification added the reference to an interest to be granted, and is apposite to this case. 6 An aspect of the law of proprietary estoppel of some importance now was expressed in this form by the learned authors of Meagher, Gummow and Lehane "Equity Doctrines & Remedies" 3rd Edition, paragraph [1721]: "…the interest or expectation.... must be one which [the defendant] could lawfully satisfy...." . 7 For land owned by public authorities with statutory controls over their powers this limitation of proprietary is well borne out by authority in New South Wales. In Attorney-General v The Municipality of the Council of Sydney (1919) 20 SR NSW 46 at 58 Mr Acting Justice Owen, after reviewing a number of authorities in which observations had been made about the implications of statutory regulation of land ownership by the Crown, and applying Plimmer v The Mayor of Wellington , (1884) 9 App. Cas. 699, a classic case in this field, said: "In all these cases the court held that where the Crown's power of alienation was not fettered by statute on equity somewhat similar to that claimed by the defendant council might be established as against the Crown. It seems to me, however, that in cases where the Crown only has power to alienate or dispose of Crown lands in accordance with statutory provisions, no Minister or Ministers of the Crown could by any Act or Acts create an interest in Crown lands in any manner which is not authorised by the law, and that this applies to any interest which the Crown has power to dispose of (see the observations of the Chief Justice of the High Court in O'Keefe v Williams (5 CLR, at 225)." 8 The same area of the law was considered by Chief Justice Jordan in New South Wales Trotting Club Limited v The Council of the Municipality of Glebe (1937) 37 SRNSW 288 at 307 to 309, and his Honour, after referring again to the classic cases in this field and to other authorities and the principles involved, said at 308-309: "Neither of these principles can, however, be applied if the interest sought to be established against the owner of the land is an interest which he has no power lawfully to create: (Attorney-General v Municipal Council of Sydney 20 SR46." 9 The basis in principle of this view appears to me to be the truism that it is of no value to establish that a person is estopped from denying that some particular obligation exists, or that some particular state of facts exists, if were the obligation or state of facts to exist, that person would not be able lawfully to carry out what is required of him. 10 The facts of this case, and the evidence in detail of the dealings between the parties, must in my view be understood to be heavily overhung by the restrictions created by Pt III B of the Crown Lands Consolidation Act 1913 on dealings with Reserve Land, and on the formalities required before there could be any effectual dealing. 11 In both leases the City Council is the lessor, but its limited position as a Reserve Trustee is expressly set out in the First Lease, and it appears at a number of places in the evidence and the pleadings that the parties knew of it. There was recurring advertence in the communications in evidence between the plaintiffs' solicitors and the City Council to the need to refer to the Lands Department if anything effectual was to happen. The concept that the City Council as Reserve Trustee owned the Reserve Land was true only for limited purposes established by the provisions of Pt III B, and declared by s 37 X, a provision difficult to follow, to the effect that the trustees are deemed to have a fee simple estate for the purposes only of Pt III B. I understand the provision to mean that operations by trustees in accordance with the Part had effect as if they had a fee simple estate, but that any operations which were not in accordance with Pt III B would not be within that supposition. It is expressly declared in subs 37 X (2): "The trustees of a reserve are not capable of alienating, charging, granting leases of, or licences in respect of, or in any way disposing of the reserve or any part of the reserve except in accordance with Div 3." 12 Div 3 at s 37 J J and following creates an elaborate procedural regime for obtaining the consent of the Minister to transactions including leases, and to preparing leases and bringing them into effect. 13 It is plain, in my view, that it is only by following the course so indicated that anything effectual could happen with respect to creating a lease or an entitlement to a lease of Reserve Land, and that without the Minister's consent obtained in the prescribed way the City Council could do nothing; it could not grant a lease which had any effect, and it could not agree to grant a lease in any way which was binding on the City Council or the Crown, or in any sense binding on the land itself. 14 In the Statement of Claim a number of allegations are admitted. These establish the facts in which the Council is the Reserve Trustee, and some history of the constitution of the reserve trust and of the leases. 15 The pleadings and admissions in them show that on 18 January 1985 and again on 13 March 1985, that is after the Second Lease had been granted, the plaintiffs' solicitors asked the City Council to extend the term of the lease by a period of twenty-five years. It is alleged (SC para 9) and the City Council disputes, that the City Council on 13 February 1985 and on 26 April 1985, with the knowledge and approval of the Crown, offered to extend the term for a period of ten years so as to expire on 25 January 2009. Particulars of paragraph 9 name two letters which are said to have this effect. The letter of 13 February 1985 (Exhibit B), advised the plaintiffs' solicitors: "The Lands Department raises no objection to the term of the lease being extended for a further ten (10) years ... It would seem that this is a reasonable compromise and if Mr Barna is prepared to accept an extension of this lesser term, a recommendation to such effect will be placed before Council shortly." 16 The second letter of 26 April 1985 passes on this information: "The Land Board Office has now advised by letter dated 16th April, 1985 that ... the Land Board Office is only prepared to agree to the term of the Lease being extended for a further ten (10) years ..." 17 In my view the terms of these letters in no way constitute an offer to extend the term of the lease. They must be taken with the overhanging knowledge of the limits on what the Council could do, and the officer who wrote the letters speaks of no more than a readiness to place a recommendation before Council. 18 Even if they were offers, they would have no effect unless the plaintiffs accepted the proposal that there be an extension for ten years or adhered to it in some way. Quite otherwise, other correspondence in evidence shows that for some years the plaintiffs pursued their wish to obtain a much longer extension, and later moved to a project of obtaining the freehold itself. There is no evidence of any clear acceptance by them of the proposal that there should be an extension of ten years. 19 Particulars to paragraph 9 of the Statement of Claim also say to the effect that the Council, or it may be the Crown, acknowledged that there was an offer to extend the term for ten years - "The acknowledgment was oral and made by Mr M J Boss an employee of the Defendant to the Plaintiffs' then solicitor Robert Graham Bloore." 20 Mr Bloore did not give evidence in the proceedings and hence did not affirm that there ever was any such acknowledgment. Mr Bloore wrote a letter, in evidence as part of Exhibit 3, dated 16 October 1991 which opened: "We refer to the discussions between the writer and yourself in regard to the present lease of the above mentioned premises, including your acknowledgment that the present term of the lease has been extended for a further ten (10) years to the year 2009." 21 As the letter was marked "attention Mr Boss" , it probably meant that it was asserted that Mr Boss had acknowledged this. The letter went on to deal with another subject, obtaining the freehold title from the Crown and getting the Council's support in the form of an indication that the Council would raise no objection to sale of the reversion and relinquishment of its trusteeship. The letter concluded by asking that the request be submitted to Council for a decision to be made. This project did not go on to any conclusion and, as far as I see from evidence, no decision was made. 22 The correspondence does not show that the assertion that Mr Boss had made an acknowledgment was ever expressly denied. On the other hand the assertion was made can have very little weight as there are no particulars of the time or manner or terms of the acknowledgment. Mr Bloore does not give evidence verifying that there was an acknowledgment, and in his letter he only made incidental reference to it, quite off the main theme of the letter, and did not assert that any arrangement about extending the lease term ought to be carried any further. 23 Mr Boss also did not give evidence, but that is well explained by evidence of difficulties in arranging his attendance at short notice. The short notice was necessary because I made directions for the parties' evidence-in-chief to be on affidavit, and the plaintiffs did not comply, and did not put forward until the hearing either Mr Bloore's own evidence, or any suggestion that inferences were to be based on his letters, leaving the defendant with nothing to reply to until I departed from my direction and allowed the plaintiffs to put material into evidence otherwise than on affidavit. 24 I see nothing in the circumstances of the correspondence in which it was the duty of the City Council or of Mr Boss to enter into a debate on such a vague suggestion when it was not apparently being relied on; nor do I see any circumstances which would raise a constructive admission out of not taking up debate on the subject at the time. 25 It is very improbable that Mr Boss, as a rational person as I must attribute to him, ever gave the plaintiffs or their solicitor any assurance which purported to override or to go behind or ignore the statutory procedures. 26 As I have no real statement from Mr Bloore of what he claims that Mr Boss did, I cannot really address closely a finding on the probabilities of what he may have said. There is nothing for him to answer and it is very unlikely that if he did give any assurance, the plaintiffs' solicitor, or even for that matter the plaintiffs themselves would have thought that there was any effectual commitment in the absence of the consent of the Minister for Lands. Knowledge of the statutory context could well have created a sense of immunity in which somewhat freer language might have been used than otherwise could have been used. It is incorrect to concentrate on the absence of Mr Boss from evidence. The key element in a finding about the agreement attributed to Mr Boss is the absence of Mr Bloore, and there is very little to show what Mr Boss was to say or to reply to, if he had attended here and attempted to deal with the matter put against him. 27 In oral evidence Mr Stephen Czipo-Barna gave evidence of a conversation which occurred in February 1985 on an occasion when Mr Boss and the plaintiff were present. As I understand this evidence it was that Mr Boss said to the effect (transcript 9 and 10) that an extension to the lease would have to be a matter for discussion with Council, that Mr Boss could see no impediment to guaranteeing a loan, and that he would put matters in train to extend the term of the lease by a period of ten years. Mr Boss said to the effect that he did not think at that time that the length of time would be agreeable but he would submit it to Council nevertheless. This material, if correct, would not well bear out the allegation in the particulars, as it could not have been understood to have been an offer to extend the term of the lease for ten years. But further, at a later point in his evidence (transcript 22), the witness accepted that the conversation which he had on his mind must have taken place earlier, before acceptance of the Second Lease. 28 For these reasons I find that in fact the defendant did not offer to extend the term of the lease for a period of ten years as alleged. 29 No offer established by evidence could have given rise to any equitable estoppel, and of course there has been no agreement, however informal, by the defendant for the grant of an extension of the lease. Considerations relating to the circumstances in which specific performance of partly performed agreements for the grant of interests in land may be ordered by the Court are simply not raised by the facts; nor indeed, were they raised by the pleadings. 30 It is also alleged in the Statement of Claim paragraph 11 that the plaintiffs, induced by an assumption formed on the City Council's conduct that the term of the lease had been extended, and relying upon the assumption, incurred expense which they would not otherwise have incurred. This is disputed. This allegation is apparently continued in the Statement of Claim paragraph 14, which alleges to the effect that by reason of that expense the value of the land has been improved so that it would be inequitable for the City Council to re-enter into possession without compensating the plaintiffs for the improvements. However, in evidence the second plaintiff accepted that expenditure on improvements did not go beyond the covenant obligations, which included obligations relating to maintenance and repairs, and withdrew the allegation in the Statement of Claim paragraph 14. 31 In these circumstances there can be no finding that even if there had been some conduct of the City Council giving rise to an assumption as alleged, the plaintiffs had acted on that conduct to their detriment, and there can be no finding that in any other way it became unconscionable for the City Council to rely on the absence of any enforceable arrangement. 32 The evidence of communications between the parties over the many years after 1985 when their leasehold relationship continued appears to me to show that the plaintiffs long persisted with their attempts to get a 25 years extension, not a 10 year lease extension, and then moved to seeking purchase from the Crown of the freehold. In the course of this they received some encouragement from the City Council to press for a 10 year extension, which at least at one stage the Lands Office at Orange was prepared to support; this appears from Exhibit D, the Lands Office letter of 25 June 1986. What the City Council did was no more than to encourage and indicate support for an endeavour by the plaintiffs to get a 10 year extension. The City Council did not in any way act the part of the grantor of the 10 year extension nor, as far as the evidence shows, did the plaintiffs take up the project of the 10 year extension until the very late stage of commencing these proceedings on 7 July 1998, when the Second Lease had little more than six months still to run. 33 In his evidence at transcript 13 the second plaintiff said to the effect that by reason of the correspondence and discussions the plaintiffs had with the City Council he was of the belief that the term of the Second Lease had been extended for 10 years. When I take this statement with the rest of his evidence and the findings I have made about those communications, I am of the view that there was not a reasonable basis in the defendant's conduct for him to hold that belief. His evidence on this subject must be taken with his evidence in cross examination at transcript 25 which establishes that he was aware throughout that it was not up to the Council to extend the leases, but it was up to the Lands Board and the Minister for Lands to approve, and that getting the Council on side was only one step on the way. 34 The Crown and the Minister for Lands are not parties to these proceedings. The expressions of support for an extension of 10 years which were at one stage given by the Lands Office at Orange did not in any way take the place of the statutory requirements for the Minister's consent, and for the consent to be obtained in accordance with the statutory procedure. 35 In my opinion whatever the merits may be and however strong a claim may be to have the Minister's favourable consideration, and whatever advice the Minister may receive from departmental officers, there could be no effectual dealing with an interest in Crown land under Part III B unless the statutory procedure had in fact been followed and the Minister's consent had in fact been given. I would think that unless those things had happened there could be no equitable claim against the Crown, no matter what dealings had taken place. However that may be the Crown is not a party and it is even less open to doubt that there can be no equitable claim against the City Council as trustee, unless the statutory course has been followed. 36 The plaintiffs' principal claims are a claim for a declaration that the term of the Second Lease has been extended and for orders requiring this declaration to be given effect to by variation of the Second Lease. 37 There were subsidiary claims, but these were not pressed at the hearing 38 In my opinion the plaintiffs are not entitled to the relief claimed. 39 The order is: I give judgment for the defendant with costs. I certify that paragraphs 1-39 are the reasons for judgment of the Honourable Justice John Bryson.

Dated: 13 April 1999 (J.Stevenson) Associate

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