_Doneley v Morris_

Supreme Court of Queensland|2001-04-04|Before: Wilson, J

Russell and Company for the applicant first defendant

[1] WILSON J: In this proceeding commenced on 10 January 2001 the plaintiff ("Mr Doneley") sues as the executor and trustee of the estate of his late wife Anne Therese Doneley. By his amended statement of claim filed on 16 January 2001 he claims (inter alia) a declaration that the first defendant has engaged in conduct in contravention of s 52 of the Trade Practices Act 1974 and damages.

[2] The first defendant seeks summary judgment against Mr Doneley or alternatively that the statement of claim be struck out.

[3] The claim concerns a rural property called Beardie near St George and water licences associated with it. Beardie consisted of -

(a) lot 9, being Crown leasehold land held by Mr and Mrs Doneley and mortgaged to the National Australia Bank;

(b) lots 1 and 14 ("the trust land"), being freehold land, the subject of the Doneley Trust, the beneficiaries of which were Mr and Mrs Doneley's sons, Sean George Doneley and Matthew Justin Doneley ("the boys").

[4] The trustee Connellan Nominees Pty Ltd leased the trust land to Mr and Mrs Doneley as joint tenants for 50 years commencing on 7 November 1984 at a rental of $1 per year. The lease was registered in July 1985. In August 1987 Mrs Doneley replaced the company as trustee. About two years later she granted the Bank a mortgage over the trust land to secure the repayment of moneys owing by her and her husband. At the same time Mr and Mrs Doneley mortgaged the freehold land to the Bank to secure the same indebtedness.

[5] Mrs Doneley died on 13 May 1996. Mr Doneley became the executor and trustee of her estate.

[6] Mr Doneley was declared bankrupt on 26 November 1996.

[7] On 30 July 1997 de Jersey J found that the lease to Mr and Mrs Doneley had been granted in breach of trust, and that it was held on trust for the boys. He also found that the Bank was fixed with constructive knowledge of the breach of trust, and accordingly declared that it held its interest in the mortgage of the freehold reversion of the trust land and its interest in the mortgage of Mr and Mrs Doneley's leasehold interest in the trust land on trust for the boys. On 10 September 1997 an order was made appointing the first defendant as trustee in place of Mrs Doneley. The lease to Mr and Mrs Doneley remained on the Land Titles register, and Mr Doneley continued to live on Beardie until January 1999.

[8] At the time the first defendant became trustee, there were (relevantly) three water licences associated with Beardie issued by the Water Resources Commission. Those licences -

(a) were all issued to "JJ, AT, SG & MJ Doneley", ie to Mr and Mrs Doneley and the boys;

(b) all related to the supply of water to lot 9 (the Crown leasehold) and lots 1 and 14 (the trust land);

Mr Doneley contends that the licences were held by the four persons as tenants in common, and that the interest of his wife's estate in them remained on foot until it was extinguished by the Water Resources Commission at the urging of the first defendant. He alleges that as licensee of the water licences Mrs Doneley (or her estate) "was entitled (with the consent of the lessor of [the trust land]) to assign, sublet, or part with possession, occupation or use of [the trust land] for valuable consideration to a purchaser and to thereby confer on the purchaser the benefit of the water licences".

[9] Mr Doneley alleges further that he and his wife were the riparian owners of the water held from time to time in the Beardie lagoon, which was a lake for the purpose of the Water Resources Act 1989. He alleges that his wife (or her estate) was entitled to sell and relocate the water in the lagoon for valuable consideration (subject to the consent of the Chief Executive of the Department of Natural Resources.)

[10] The first defendant entered into negotiations with the Bank which led to the signing of Heads of Agreement dated 12 October 1998 providing for the joint sale of the trust land and the Crown leasehold. The following clause was included in the document -

"(B) It is the intention of NAB and the trustee [the first defendant] that subject to the provisions of the Water Resources Act 1989 the purchaser will be entitled to a transfer of all water licences attached to the trust land and the mortgaged land [the Crown leasehold]."

On the same day the first defendant applied successfully to de Jersey CJ for a direction (pursuant to s 96 of the Trusts Act 1973) that he give effect to and carry out the terms of the Heads of Agreement. Neither Mr Doneley (in his personal capacity or as executor of his wife's estate) nor his trustee in bankruptcy was a party to the application, but there is uncontroverted evidence that he knew about the sale of Beardie and the licences pursuant to the Heads of Agreement, and that he assisted in the transfer and sale of the licences. Beardie was subsequently sold, with the benefit of all existing water licences, for $3.3 million, of which the Doneley Trust received (in accordance with the Heads of Agreement) 42.5%, after payment of agents' commission, solicitors' fees, and other costs and expenses associated with the sale. It is undisputed that the total sale price was enhanced considerably by the water licences.

[11] The plaintiff's claim against the first defendant is based on the following alleged representations to the Water Resources Commission -

(i) on 18 September 1997: that the water licences attached to Beardie (contained in a letter from the first defendant to the Commission dated 18 September 1997);

(ii) in the first and second week of October 1997: that the plaintiff and the other licensees had no right to deal with the water licences or with the water held in the Beardie lagoon (contained in a Notice which the first defendant caused to be published in the Balonne Beacon newspaper);

(iii) on 19 October 1998: that there had been a change of ownership of the water licences in consequence of the order of the Supreme Court on 10 September 1997, ie the order by which the first defendant was appointed as trustee (contained in a letter from the first defendant's solicitors to the Commission dated 19 October 1998); and

(iv) on 29 October 1998: that the first defendant and the Bank were the owners of the water licences (contained in a letter from the first defendant's solicitors to the Department of Natural Resources dated 29 October 1998).

(a) that the representations were misleading or deceptive or likely to mislead or deceive;

(b) that acting in reliance upon the truth of the first two representations, in or about the second week of October 1997 the Water Resources Commission refused an application by him for the sale of the licensee's rights, including those of Mrs Doneley, to the nominated allocation under one of the licences and a proposal that he as executor of her estate and in his personal capacity enter into an agreement to transfer their interest in the water then held in the Beardie lagoon, and to refuse any such future applications and proposals;

(c) that acting in reliance upon the truth of the representations, on 2 December 1998 the Water Resources Commission extinguished "the plaintiff's interest as licensee" by transferring the licences to the first defendant and the Bank or alternatively by amending the licences to delete his name and those of the other joint licensees and replacing them with the names of the first defendant and the Bank;

(d) that in consequence he lost opportunities subsequent to 11 January 1998 to sell the interest of his wife's estate in water allocations and "to assign, sublet, or part with possession, occupation or use of Beardie for valuable consideration to a purchaser and to thereby confer on the purchaser the benefit of the water licences...and to seek the approval of the Chief Executive of the Department of Natural Resources to the transfer of her interest, in such licences and thereby suffered loss and damage".

[13] For a number of reasons I consider that Mr Doneley's claim should be dismissed.

[14] The documents alleged to contain misleading or deceptive representations are all in evidence. There is no dispute as to their authenticity. In all the circumstances there is no reason why I should not determine whether they had that character on this application for summary judgment.

[15] The first alleged representation was that the water licences attached to Beardie. The first defendant commenced his letter to the Water Resources Commission of 18 September 1997 by referring to recent discussions between Sean Doneley and the Commission "concerning water allocations and licences in respect of the freehold portion of the land which previously formed part of the aggregation known as `Beardie' conducted by the Doneley family". He then summarised briefly the litigation concerning the trust land, and went on -

"From the information which I have been able to gather since my appointment, it seems that there is a rather complex situation in respect of the water allocations and licences. However, from what I have been advised by Mr John Justin Doneley, it seems that the following licences are held in respect of portion 1 and/or portion 14:

* Two (2) 660 mm or 26 inch diameter flood harvesting pump licences;

* Two (2) 500 mm or 20 inch diameter irrigation pump licences;

* One (1) 300 mm or 12 inch diameter pump licence with an allocation of 470 megalitres;

* A licence for a barrage or weir across the Big Beardie Lagoon.

There is also, I understand, one licence which applies solely to portion 9, which is apparently for a dam wall.

There are three principal problems which need to be resolved:

(1.) It seems that one of the 660 mm (26 inch) diameter flood harvesting pump licences was originally granted in respect of portion 1, was subsequently transferred to portion 9, and was then re-transferred back to portion 1. I understand that the Bank may be seeking to argue that this licence is covered by the security of their mortgage over portion 9. This will have to be resolved between me and the bank, although I hope that it will not be necessary to go back to court.

(2.) In respect of the other licences and the 470 megalitre allocation attaching to portions 1 and 14, it seems that these (or some of them) may be held jointly in the names of A.T. Doneley, J.J. Doneley, S.G. Doneley and M.J. Doneley, although they attach to land which is (and always was) held on trust for S.G. Doneley and M.J. Doneley.

(3.) The dam or lagoon, which is situated principally on portions 1 and 14, apparently encroached onto portion 9; and the licence relating to the dam wall has been granted in respect of portion 9. If the Bank now proceeds to sell portion 9, and unless suitable arrangements can be made with the purchaser of that land, steps will need to be taken to protect the water storage capacity on portions 1 and 14.

Before making any arrangements in respect of the trust lands, I would like to clarify these three issues, and I would appreciate any guidance that you could give me as to how the situation might be clarified (other than by going back to court)."

In my view that letter does no more than identify "three principal problems which need to be resolved"; it could not fairly be characterised as containing a representation that the licences "attached" to the land in the legal sense. On the question whether such a representation, if it were made, was misleading or deceptive, counsel for both parties addressed me at length on various provisions of the Water Resources Act, particularly ss 44 and 47. However, because I am otherwise of the view that the plaintiff's claim should be dismissed, it is not necessary for me to determine this question.

[16] The second alleged representation was that the plaintiff and the other licensees had no right to deal with the water licences or with water held in the Beardie lagoon. The notice inserted in the local newspaper was in the following terms -

By order of the Supreme Court of Queensland, I have been appointed as trustee of the land described above, which previously formed part of the property known as 'Beardie', to be held in trust for Sean and Matthew Doneley.

Any inquiries concerning this land should be directed to me at the address below. No other person has authority to enter into arrangements concerning this land, or to deal with it (including any water rights relating to it) in any manner whatsoever."

The first defendant's name and address appeared at the foot of the notice. There was no express reference to the water licences or to water held in the Beardie lagoon. There was no misstatement of the facts. There was merely an assertion of rights based on those facts. Whether or not the last sentence was accurate as a matter of law, it did not have the capacity to mislead or deceive.

[17] The third alleged representation was that there had been a change in ownership of the water licences in consequence of the court order of 10 September 1997. When the first defendant's solicitors wrote to the Water Resources Commission on 19 October 1998 they enclosed a copy of the order of de Jersey CJ of 12 October 1998 and the Heads of Agreement. They went on -

"Lots 1, 14 and 9 will now be put to auction by the Trustee Mr Anthony John Hunter Morris and the National Australia Bank Limited `the Bank'. Please note that the Trustee has authorised us to act on his behalf to resolve the water licence issue and to do all things necessary to have "Beardie" auctioned.

Since Beardie is to be sold as set out in the `Heads of Agreement' s 49 of the Water Resources Act 1989 (`the Act') will not apply.

We consider the amendment of the current water licences (including Licence No G43312) can be effected by an application under s 47 of. the Act."

They went on to request the amendment of the licences by changing the name of the owner to the Trustee and/or the Bank and to request the renewal of certain licences. They concluded -

"Since 'Beardie' is to be auctioned on behalf of the Trustee and the Bank as mortgagee in possession, we request that the Department provide us with a written statement of approval in principle that the water licences will be transferred to the new owner upon or after settlement. You will appreciate that both the Trustee and the Bank have certain duties in relation to the sale of 'Beardie'. The water licences and their unhindered transfer to the new owner are an important asset which will be reflected in the overall market value of Beardie'."

The letter did not contain a representation that there had been a change in ownership of the licences.

[18] The fourth alleged representation was that the first defendant and the Bank were the owners of the water licences. In their letter of 29 October 1998 the solicitors for the first defendant said -

"As discussed, upon Mr Leach [of the Commission]'s assurances that once the formal steps have been completed (hopefully in a few weeks time) the approval of our application to amend and reinstate the water licences on 'Beardie' will be complete. 'Beardie' will now be advertised for auction. The auction is to occur on 8 December 1998. The advertising material will inform all prospective purchasers that the ten licences mentioned in our application exist on the property.

We have instructed the real estate agents, Messrs Barker & Devine and Ray White Rural that the property is to be sold as one. We note Mr Leach's advices that the water licence amendments will have to be signed by Mr Fenwick [Director-General, Department of Natural Resources] in Brisbane. Please forward copies of the finalised and amended water licences as soon as possible so these can be available for inspection by the potential purchasers."

The letter was simply a request that the application for amendment of the licences be dealt with expeditiously; it did not contain a representation that the first defendant and the Bank were the owners of the licences.

[19] Whether or not in principle licensees and riparian owners have the rights alleged, Mrs Doneley's interest in the registered lease of the trust land ceased to exist on her death. Mr and Mrs Doneley held the lease as joint tenants, and when she died her interest passed by survivorship to him. Subsequently, when he became bankrupt, the whole leasehold estate passed to his trustee in bankruptcy. And, of course, as de Jersey J held, the leasehold interest was held on trust for the boys. Neither Mr nor Mrs Doneley (or her estate) could claim indefeasibility of title as against the boys or their trustee: Land Title Act 1994 s 185(1)(a); Barry v Heider [1914] HCA 79; (1914) 19 CLR 197 at 205-206; Frazer v Walker [1967] 1 AC 569 at 580. In short, Mrs Doneley's estate had no interest in the trust land with which Mr Doneley as her executor could deal, and accordingly he lost no opportunity to profit from her interest in the licences or as riparian owner by dealing with the leasehold estate and licences and riparian rights appurtenant thereto.

[20] In oral submissions senior counsel for Mr Doneley advanced an argument (not raised on the amended statement of claim) that the interest of a licensee in a licence is an interest entirely separate from his or her interest in the land, and that Mr Doneley's interest in the licences, being an interest as a tenant in common, was not lost to her estate until the Water Resources Commission extinguished the licences in reliance on the allegedly misleading and deceptive representations of the first defendant. He submitted that the statutory scheme in the Water Resources Act is not one whereby the interest in the licence automatically follows the interest in any particular block of land; rather, it is one whereby the interest in the licence may be transferred (subject to consent) after a change in interest in the land; and it is in that sense the interest in the licence relates to the land but does not attach to it. As senior counsel for the first defendant submitted, this argument hinges on her interest in the licences being that of a tenant in common rather than a joint tenant. This is contrary to the many allegations in the amended statement of claim that the four persons were "joint licensees" (paras 2(a) - (f); 13(a), (b); 13(c)(ii); 14(b), (c); 16). Sections 42(5) of the Act provides -

"Two or more persons who desire to construct or use jointly works to which the Act applies and extends may make application for a licence and the application may be dealt with as if it were an application by an individual person."

The licences themselves contain no suggestion of a tenancy in common. I can see no basis for concluding that the four persons held the licences other than as joint tenants.

[21] Senior counsel for Mr Doneley submitted that there was an issue which could not be resolved on a summary judgment application. Section 44(1)(d) of the Water Resources Act provides -

(d) operates for the benefit of the owner for the time being of the land on which the works the subject of the application are constructed or proposed to be constructed or of the person whose proposal it is."

He submitted that whether the licences were issued to the four persons because of their connection with the land or because of their being persons whose proposal it was with respect to the works may be a consideration to be borne in mind when the Chief Executive is considering an application for the transfer of a licence under s 47. He submitted that it was a matter for evidence at trial into which category these persons fitted. I reject this submission because there is no evidentiary basis in the material filed by either side to suggest that the licences may have been issued to these people as the proposers of works rather than because of their interests in the land.

[22] The claim against the first defendant is subject to a three year limitation period: Trade Practices Act ss 82(2) and 87(1CA). Time started to run when loss was first sustained. In so far as the claim is based on representations allegedly made in September and October 1997, time commenced to run in the second week of October 1997 when the Water Resources Commission refused Mr Doneley's application for the sale of licensee's rights to a nominated allocation under one of the licences. The proceeding not having been commenced until 10 January 2001, the claim based on those representations is out of time. The limitation defence would not avail the first defendant with respect to the claim in so far as it is based on representations allegedly made in October 1998.

[23] There were competing submissions made as to whether the impugned conduct of the first defendant was conduct in trade or commerce. Ultimately it is a question of fact whether the first defendant's activities could be so characterised. However, because there are other reasons why Mr Doneley cannot succeed against the first defendant, I would not send the proceeding to trial for the determination of this question.

[24] In all the circumstances I am of the view that the plaintiff cannot succeed in his claim against the first defendant. Accordingly there ought to be a summary judgment in favour of the first defendant.

Water Resources Act 1989

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