Esposito v The Commonwealth

Outline of applicants' case 18 The applicants complain that the Commonwealth effected an acquisition of property because it sterilised all reasonable use of the applicants' land. They say that the actions of the Commonwealth in imposing a national park over developable land is sufficient to constitute an acquisition of property requiring just terms. They complain that the Commonwealth is party to an arrangement with the other respondents, whereby the applicants are being offered only a fraction of the true value of their land and on a "take it or leave it basis". It might be noted in this context that reference was made in the Recommendation Report by the Commonwealth Department to the Minister that another report (the Stubbs report) stated in 2008 that the market value of lots in the Heritage Estates at that time was $18,000 with the then current zoning. It is evident that many of the applicants now consider that the market value of their land is worth considerably more than that, if the land were to be rezoned to permit residential development. 19 The applicants say that this arrangement between the various polities and the Foundation amounts to a "circuitous device" designed to evade the just terms constitutional guarantee and that it does not matter that the arrangement: (a) involved both the Commonwealth and third parties; or (b) was to be achieved by a contract or an informal arrangement (citing P J Magennis Pty Ltd v Commonwealth (1949) 80 CLR 382 at 401 per Latham CJ). 20 The following primary final relief is sought in the originating application: (a) a declaration that the Commonwealth has effected the acquisition of the applicants' property at Heritage Estates for a purpose in respect of which the Commonwealth Parliament has power to make laws other than on just terms, in particular pursuant to the EPBC Act and the direction dated 13 March 2009 with respect to the applicants' land made under that Act by the Minister; (b) an order pursuant to s 519 of the EPBC Act that the Court fix the reasonable amount of compensation paid to the applicants; (c) further or alternatively, a declaration that the Commonwealth itself or in combination with the second, third and fourth respondents by effecting the expropriation without compensation of the applicants' property on other than just terms has been unjustly enriched and that the applicants are entitled to equitable compensation; (d) alternatively, an order that the respondents vary the offer to sell made in the pro forma letter dated 12 March 2013 to provide for just terms; (e) directions for an inquiry as to compensation to be paid to the applicants; and (f) alternatively, damages. 21 By an amended interlocutory application, the applicants also seek the following interlocutory relief: (a) an order expediting the proceedings; (b) an order restraining the Foundation from entering into further contractual agreements with Heritage Estates' landowners pending determination by the Court of the questions in this matter in the form of the offer to sell accompanying the Foundation's letter dated 14 May 2013 except upon an undertaking to pay just terms; (c) an order restraining the Foundation from taking any steps to acquire land at the Heritage Estate on terms that prevent any vendor from claiming compensation or unjust enrichment arising from such sale; and (d) an order restraining the Commonwealth from withdrawing its funding from the Foundation. 22 The interlocutory application first came before me as duty judge on Tuesday, 28 May 2013. In view of the short notice given to the respondents and the fact that not all had been served with the relevant documents, I adjourned the hearing of the interlocutory application to 9:30 am on Friday, 31 May 2013. Prior to the matter resuming on that day, evidence was filed on behalf of the Commonwealth and the Foundation. I will refer to some of that evidence below.

Consideration 23 I shall deal first with the question whether there is a serious question to be tried before addressing the balance of convenience and other relevant discretionary matters.

Is there a serious question to be tried? 24 The applicants' argument that there is a serious question to be tried may be summarised as follows. They say that the collaborative arrangements described above between the respondents involve a circuitous device to circumvent the constitutional obligation imposed by s 51(xxxi) of the Constitution. That constitutional requirement is then embodied in s 519 of the EPBC Act. They also raised the matters summarised in [18] and [19] above. During the course of the oral hearing today the applicants have also alleged that they have arguable causes of action for unjust enrichment and/or false or negligent misstatement. It is significant to note that no statement of claim has yet been filed in the proceedings. Those fresh alleged causes of action are perhaps most fully described in [6] and [7] of the applicants' revised document headed "Outline of oral case of applicants: hearing of interlocutory application" which was handed up at the start of this morning's hearing: 6. Each Applicant and each class Applicant also has a claim against the Commonwealth's fellow joint venturer State which takes the transfer of the land from the Foundation at the end of the 'Project' for unjust enrichment [see the transferee under the typical transfer: Bradshaw page 96]. The four elements of unjust enrichment are: [i] an enrichment; [ii] of the defendant [the State]; at the expense of the claimant; [iv] in unjust circumstances. Enrichment includes loss in value of land. Unjust circumstances include 'duress' [in this case induced panic funds] and 'mistake' [induced by the erroneous representations of the Fourth Respondent, with probable knowledge of the other Respondents]. 7. Each Applicant and each class Applicant also has a claim against the Foundation for false and negligent misrepresentation in relation to the whole 'Acquisition' Project: a. Whilst each 'Offer' is in similar form each is different to the next tranche and the representations were ramped up as the Offers progressed; in the first Offer dated 31 October 2012 [see Hutton at Tab 27], and repeated in the second Offer of 11 March 2013 [see Hutton at Tab 27] and third Offer of 14 May 2013 [see Esposito second affidavit] (i) the course adopted for the "Project' was unconscionable because not only is each Offer presented as a take it or leave it offer in a circumstance of economic duress [in an unlawful attempt to avoid paying just terms] but it is intended to create a panic or stampede effect by representing there are only limited funds and that first in best dressed [and May 2013 Offer page 1, condition 6 - see Esposito sw 24/5/13 Annex JYE - 2; see Bradshaw paragraph para 26]; (ii) in addition, a false representation is made in each Offer [and repeated in subsequent Offers] that the invitation to sell at $5,000] is 'a fair and reasonable price for the land' [eg Question 5 in the first Offer] when the true position was that the fair and reasonable price for the land exceeded $21,500 for most blocks [eg Ms Esposito - see rating valuation at Esposito affidavit sworn 24 May 2013, annexure JYE - 2]; or at least $15,000 for Mr De Maria [see his Annex SDM - 5 page 27] - in other words 300% at least. 25 For the purposes of this interlocutory application, it should be accepted that, as a matter of general principle, an arrangement or scheme involving the Commonwealth and other tiers of Government could give rise to a "circuitous device" which is aimed at avoiding the constitutional requirement. 26 There is, however, a central aspect of the applicants' case which seems to me to be highly problematic in terms of whether or not there is a serious question to be tried. That fundamental problem is as follows. On the basis of the existing evidence, it is difficult to see how the challenged arrangements involve the "acquisition" of land within the meaning of both the constitutional requirement and s 519 of the EPBC Act. For the constitutional guarantee to be engaged there needs inter alia to be an element of compulsory or non-voluntary acquisition of property. Thus, for example, in Waterhouse v Minister for the Arts and Territories (1993) 43 FCR 175 at 180, Black CJ and Gummow J said: Section 51(xxxi) is to be treated both as abstracting from other heads of power (including the incidental power) all content which would otherwise have enabled the compulsory acquisition of property, and as subjecting the power with respect to the acquisition to an obligation to provide just terms; the paragraph thus ensures that whenever property is compulsorily acquired pursuant to a law of the Commonwealth just terms must be provided, because the totality of power of compulsory acquisition is embodied in the paragraph… (emphasis added). 27 The same point was made by Dixon J in British Medical Association v The Commonwealth (1949) 79 CLR 201 at 270-271, where his Honour said: The view has been expressed that s 51(xxxi) covers voluntary acquisition. The view has also been expressed that it covers acquisitions of property authorised by Federal law even although the property is not acquired by the Commonwealth… No doubt if you combine these views a dialectical argument may be constructed to support the conclusion that as the acquisition of the medicine from the chemist by the customer is authorised by Commonwealth law s 51(xxxi) must apply. But it is a synthetic argument, and in my opinion is unreal… There is here no compulsory acquisition by the customer of the drugs he obtains from the chemist when he presents a medical prescription. The chemist is legally free to supply them or not as he pleases. 28 This passage from Dixon J's judgment was approved in ICM Agriculture Pty Ltd v Commonwealth (2009) 240 CLR 140 at [81] and [82] per French CJ, Gummow and Crennan JJ. 29 The limitation of the constitutional guarantee or protection to acquisitions which are involuntary is implicit in the fact that, in its terms, s 51(xxxi) applies to the power of the Commonwealth Parliament to make laws with respect to the acquisition of property etc. In other words, the acquisition needs to be effected by the operation of a Commonwealth law (possibly in conjunction with other matters which have the practical result of effecting a non-voluntary acquisition of property). There is necessarily an element of compulsion or obligation in the concept of property being acquired by operation of a Commonwealth statute (possibly in some cases in combination with other actions by persons other than the Commonwealth). I cannot accept the applicants' oral submission made today that s 51(xxxi) applies to an acquisition of property even if there is no element of compulsion involved. I also reject the applicants' submission that P J Magennis supports their position on this issue. It should be noted that in that case, part of the arrangement with the Commonwealth was that the State would acquire compulsorily private land to use for soldier settlements. 30 The relevance of s 519 of the EPBC Act does not obviate the need for there to be an element of compulsion or non-voluntariness in the acquisition. That statutory provision depends on the premise that, apart from the provision itself, the operation of the EPBC Act would result in an acquisition of property which would be invalid because of s 51(xxxi) of the Constitution. It is only when that premise exists that a statutory obligation arises under s 519 and obliges the Commonwealth to pay an affected person a reasonable amount of compensation. But if there is no "acquisition" for the purposes of the constitutional requirement, s 519 is not engaged. 31 Here, the landowners who do not wish to sell their land under the project are free to continue to hold their land subject to any relevant land use restrictions. They are in no different position in that respect to any other landowner whose right to use their land is subject to zoning restrictions which, while normally imposed by State or local government laws, may themselves be the indirect consequence of an order made by the Commonwealth Minister under the EPBC Act. But even if it were to be accepted that the proposed rezoning to E-2 is the consequence of the Minister's direction under s 130 of the EPBC Act, the overall effect of these regulatory matters is that the use of land will be limited to specific purposes. No possessory or proprietary rights are vested or divested so as to engage either s 51(xxxi) of the Constitution or s 519 of the EPBC Act. 32 As the Commonwealth points out, in the recent High Court decision in J T International SA v Commonwealth (2012) 86 ALJR 1297 (the Plain Packaging Case), all six Justices in the majority confirmed that s 51(xxxi) was not engaged where there was no relevant "acquisition" in circumstances in which no one acquired a benefit or advantage of a proprietary character from the acquisition (see at [42] per French CJ, at [147] per Gummow J, at [169] per Hayne and Bell JJ, at [277] per Crennan J and at [357] per Kiefel J). In particular, all the majority Justices in that case rejected Deane J's suggestion in the Commonwealth v Tasmania (1983) 158 CLR 1 (Tasmanian Dams Case) that the "benefit" that was obtained need not be of a proprietary character for s 51(xxxi) to be engaged. An acquisition of property was not made out by a mere restriction on or extinguishment of a right of property, nor by an adverse impact on the "general economic and commercial position occupied by traders". 33 It is made express in various of the pro forma letters described above that the opportunity for landholders in the Heritage Estates to sell their land under the project is entirely voluntary. That essential point is reinforced by clause 2 of the "Acknowledgements" in the offer to sell document, which expressly states that the project is voluntary and there is no obligation to proceed and the landholder can withdraw at any time prior to settlement. If a landholder decides to take advantage of the opportunity which has been presented, that is entirely a matter of their choice. There is no compulsion or obligation to sell to the Foundation. If an individual landowner elects not to participate in the project, he or she will presumably continue to hold their land subject to the proposed new rezoning. 34 It seems to me that this is sufficient of itself to find that the applicants' case does not involve a serious question to be tried (or, if it does, the question is a very weak one). But there appears to be another serious hurdle in the applicants' way. To the extent that the applicants argue that the relevant "acquisition" relates to the operation of the EPBC Act and the Minister's decision dated 13 March 2009 which prevents the rezoning of the land to permit residential development, three Justices of the High Court held in the Tasmanian Dams Case (at 144-146, 181-182 and 248 per Mason J, Murphy J and Brennan J respectively), that the fact that a Commonwealth Minister has a power of veto of any development of, or activity on, land owned by a State or a person does not amount to a vesting of possession in the Commonwealth. Only Deane J expressed a different view (see at 282-288). The other three members of the Court expressed no view one way or the other on that issue. 35 It may be accepted that an acquisition could be established where a person has effectively been deprived of "the reality of proprietorship" by an indirect acquisition through the operation of an Act, such as the EPBC Act, of "the substance of a proprietary interest (see, for example, Bank of NSW v The Commonwealth (1948) 76 CLR 1 at 349 per Dixon J and Newcrest Mining (WA) Ltd v The Commonwealth (1997) 190 CLR 513 at 633-634 per Gummow J). In Newcrest, the Commonwealth acquired identifiable and measurable advantages in the form of the minerals which were freed from the rights of Newcrest to mine them. 36 Here, while it might be argued that the Commonwealth derives some benefit in terms of protecting the environment and conservation values of Booderee National Park, as well as generally advancing the objects of the EPBC Act, it is difficult to see how any of that involves the vesting of a possessory or proprietary right in the land which is sold to the Foundation, or otherwise results in the Commonwealth acquiring some identifiable and measurable advantage which is sufficient to attract the constitutional guarantee (see also ICM Agriculture at [85] and the Plain Packaging Case at [32]). 37 For the following reasons, I also consider that there is no serious issue to be tried regarding the applicants' causes of action allegedly based on unjust enrichment and false or negligent misstatement. As to the former, I have great difficult in seeing how there can be an arguable case or serious issue to be tried in circumstances where, on the applicants' own valuation evidence, the offer made by the Foundation to those who lodge an offer to sell form and are accepted receive an amount which is either 10 or 11 times greater than the value identified by the applicants' own valuer. 38 There are other difficulties with the unjust enrichment argument. Even if, contrary to the above, there is an arguable issue, the interlocutory relief sought does not address the matter. Further, I do not accept the applicants' argument that there is a serious issue that the "rush" created by the sale process constitutes duress for the purposes of unjust enrichment. And insofar as the applicants rely on "mistake" as an element of this cause of action. I do not consider that there is a serious issue to be tried concerning the alleged misrepresentations on which the mistake case is based. Nor was I taken to any evidence which identifies any mistake arising from the project. 39 As to the applicants' false/negligent misstatement case, it seems to rely upon two alleged misstatements made in the "frequently answered questions" section of one of the Foundation's pro forma letters. The first of those statements relates to the claim that "There are no grounds for compensation". As Mr King accepted in oral argument, if I reject the applicants' s 51(xxxi)/s 519 claim as raising no serious issue, that finding must inevitably doom the separate challenge addressed to that statement. The next statement identified by the applicants as involving a false or negligent misrepresentation focuses on the statement that the invitation to sell at either $5,500 or $5,000 is "a fair and reasonable price for the land". In my view no serious issue is raised because, when allowance is made for the proposed rezoning of the land as would be required to produce an appropriate valuation of the land, the offer to pay those sums is well above what the applicants' own evidence suggests to be the market value of the land post the proposed rezoning. 40 At one point, the applicants also relied upon a third alleged false representation in respect of a statement made in what is described as the "third Offer" that the Commonwealth Minister had "rejected a proposed rezoning" of the land when the applicants say that the true position is that the Minister had exercised his powers under the EPBC Act to give a direction to the Council not to rezone the land, thereby creating a false impression that the rezoning authority was the Minister and distracting attention away from the right of compensation under s 519 of the EPBC Act. This alleged misrepresentation was not pressed when I pointed out to Mr King in oral argument that it was a misdescription by the applicants to refer to the Minister's decision dated 13 March 2009 as a "direction". He accepted that it was not correct to refer to that event as a "direction" under s 519 of the EPBC Act. In any event, I do not consider that there is a serious issue to be tried concerning this statement. 41 For these reasons, therefore, I am not persuaded that there is a serious question to be tried on any of the causes of action raised by the applicants or, if there is, I consider that it is very weak.

Balance of convenience 42 In view of my finding that, if there is a serious question to be tried (although I doubt that there is) it is very weak, it is appropriate to address the balance of convenience. 43 In considering the balancing of convenience, the appropriate approach is for the Court to assess the inconvenience to the respondents of granting the interlocutory relief sought, on the assumption that ultimately the respondents are successful, and comparing that hypothesis against the inconvenience of refusing the applicants that interlocutory relief, on the assumption that the applicants ultimately succeed. In conducting that comparison, the following matters are relevant: the parties' relative hardships under each hypothesis; the impact on the rights and interests of third parties; whether there would be irreparable harm to the applicants if the interlocutory relief is not granted and the applicants ultimately succeed; whether damages are an adequate remedy for the applicants; and any unexplained delay in seeking interlocutory relief. 44 There is another aspect of the matter which may be relevant to an assessment of the balance of convenience. It relates to the public interest, as is reflected in the involvement of several tiers of Government in expanding the Jervis Bay National Park. In such cases, it may be necessary to weigh the protection of the applicants' private interests against the public interest in environmental protection (see Castlemaine Tooheys Limited v The State of South Australia (1996) 161 CLR 148 at 154-156 per Mason A-CJ in the context of interlocutory injunctive relief seeking to restrain the enforcement of a statute). 45 The applicants argue that the grant of the interlocutory injunctive relief sought would cause no prejudice to the respondents as the restraint would operate to prevent the respondents from profiting from the arrangement at the applicants' expense. The applicants' argument proceeds on the basis, however, that the respondents would undertake to the Court that should the applicants succeed or fail in the proceeding, none of the applicants or those they represent will be prejudiced by the non-acceptance of the offers made by relevant landowners, as described in the pro forma letter dated 14 May 2013. The applicants also emphasise that they proffer the usual undertaking as to damages. 46 The applicants say further that damages is not an adequate remedy because, unless restrained, "panic selling" will further set in and the action will become otiose because those who sell will be deprived of their rights to just terms. 47 As to the Commonwealth funding of the project, the Foundation says that the allocated funding can only be used for the Heritage Estates project. Moreover, after 5:00 pm on 30 June 2013 unless extended, the Foundation is obliged to refund any unused funding for the purchase of the Heritage Estates lots to the Australian government if required to do so. The Foundation gave evidence that, as at 30 May 2013, approximately 45 percent of the landowners in the Heritage Estates provided signed offers to sell to the Foundation and that the Foundation continues to receive approximately 14 forms offering to sell per week. 48 The Foundation relies on an affidavit of its chief executive officer, Ms Susanna Bradshaw. Ms Bradshaw gives evidence to the effect that the Foundation's objective is to buy as many lots as possible within Heritage Estates and then transfer those lots to the OEH so that they can be added to the Jervis Bay National Park. The Jervis Bay National Park is managed by the NSW Government under the Jervis Bay National Park Plan of Management. Ms Bradshaw adds that the inclusion of the additional lots to the National Park would provide added security to the habitats of 26 threatened species known to exist in the area. The Foundation submits that, while it would like to see as many lots as possible converted to National Park land, the main impact of preventing the Foundation from processing applications to sell received prior to the deadline on 3 June 2013 would be on individual landowners seeking to take advantage of the opportunity to sell their lots as part of the project. 49 The interests of third parties is an important aspect of the balance of convenience in this matter. All the more so in circumstances where, as matters stand at present, it is uncertain whether or not the Commonwealth will grant an extension of funding beyond 30 June 2013. Although Ms Bradshaw made no reference to the matter in her affidavit, it is evident from the Commonwealth's evidence that the OEH has requested a six month extension of the project period and the Commonwealth Department is yet to make a decision on whether that extension will be granted. Ms Pritchard SC, who appeared for the Commonwealth, informed the Court that the Minister's delegate would make a decision on that OEH request at 2:00 pm today and that the Department had made a favourable recommendation that the extension be granted. Currently, however, there is some degree of uncertainty about the outcome. 50 The uncertainty is compounded by the fact that the respondents have declined to proffer any undertaking to the Court, as requested by the applicants, that should the applicants succeed or fail in their substantive action, none of the applicants or those they represent will be prejudiced by the freezing of the offer to sell opportunity. Accordingly there is a risk that the applicants and those they represent could miss out on what is an existing opportunity should their case ultimately fail. Equally significantly, other landowners in the Heritage Estates who are not represented by the applicants and who have not yet accepted the offer to sell are at a similar risk because they could be denied the opportunity to offer their lots for sale by the deadline time of 5:00 pm next Monday. 51 There is a further aspect which I consider tilts the balance of convenience against the applicants. It relates to their delay in commencing these proceedings and seeking interlocutory relief. As noted above, the first pro forma letter outlining the Heritage Estates Project was distributed in mid-October 2012. There have been various other pro forma letters sent to landholders since that time, including most recently around 14 May 2013. The terms of the offer to sell were published in the Foundation's pro forma letter dated 31 October 2012. In my view, the applicants had ample opportunity to agitate these matters well before 24 May 2013 when the originating application was filed. They have been aware for many months that the deadline for the offer to sell scheme was 5:00 pm on 3 June 2013 i.e. next Monday. One of the affidavits relied on by the applicants, that of Ms Hutton, is dated 2 May 2013, i.e. three weeks before the proceedings were commenced. The applicants waited until just 10 days before that deadline to commence their action. Their amended application for interlocutory relief is being heard today, Friday, 31 May 2013, to ensure fairness to all the parties. No adequate explanation has been provided for this delay. The significance of the delay needs to be assessed against the background of the Foundation now having received offers to sell from 45 percent of the landowners. 52 Finally, it is difficult to see why damages is not a adequate remedy for the applicants, should they succeed in the substantive proceeding. I agree with the Foundation that any statutory claim for compensation under s 519 of the EPBC Act is likely to survive the completion of sales involving the Foundation. It also appears to me that damages would be an adequate remedy for any claim based on unjust enrichment or false or negligent misrepresentation. 53 In circumstances where I consider that, for the reasons given above, the balance of convenience is against the applicants, there is no need in this case to consider the public interest issue referred to above which arises from Castlemaine Tooheys. The other factors of themselves are sufficient to determine the balance of convenience issue against the applicants. Nor do I need to deal with the Commonwealth's argument that the applicants have failed to file a genuine steps statement as required by s 11 of the Civil Dispute Resolution Act 2011 (Cth). Nor do I need to deal with issues raised by the Foundation concerning the alleged inadequacy of the applicants' undertaking as to damages. 54 Accordingly, for all these reasons I would dismiss orders 2, 2A and 2B of the amended interlocutory application dated 29 May 2013 and order the applicants to pay the costs of the first, second and fourth respondents. 55 The substantive proceedings have been allocated to the docket of Foster J. I understand that his Honour is able to conduct a directions hearing in the substantive proceedings at 9:30 am next Tuesday, 4 June 2013. His Honour can then deal with the issue of expedition, as well as other relevant matters, including requirements relating to the conduct of Part IVA proceedings, and the possible need to give notices under s 78B of the Judiciary Act 1903 (Cth). 56 The Court is not lacking in sympathy as to the landholders' position, many of whom it appears had hopes and aspirations, encouraged no doubt by the Council's interest in rezoning the land to residential, to enhance the value of their land if it were so to be rezoned. But sympathy is insufficient. The Court is obliged to apply well-established legal principles to this application. I certify that the preceding fifty-six (56) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Griffiths.