Moss Capital Pty Limited v Queanbeyan-Palerang Regional Council

Background

1. The background facts are uncontroversial and can be summarised as follows.
2. In or about July 2011, Moss Capital entered into the Deed with Cannchar and Cannchar Investments to form an unincorporated joint venture with Cannchar Investments to develop Curtis Estate. Moss Capital was responsible for preparing and funding a development application for the proposed residential subdivision, and in return would receive a share of any profits upon the sale of Curtis Estate.
3. Moss Capital lodged a development application with Council on 19 July 2011 for approval of a concept proposal for development involving a 224 lot subdivision, associated infrastructure and roads, and dedication of approximately 30ha for conservation.
4. The development application was rejected on 29 July 2011 on the basis that it was not accompanied by a Species Impact Statement. Moss Capital accordingly lodged an application for review of Council's decision under s 82B of the Environmental Planning and Assessment Act 1979 (NSW) ('EPA Act'), which was rejected by Council on 26 August 2011 on the basis that it was not received within the time period provided in cl 123H(1) of the Environmental Planning and Assessment Regulation 2000 (NSW).
5. On 24 August 2011, Council resolved to compulsorily acquire the acquired land for the purpose of extending an existing road. Later, in 2014 Council, Cannchar and Moss Capital entered a period of negotiation with Council for a 'land swap' arrangement that could be carried out in lieu of the proposed compulsory acquisition, however agreement was not reached. Accordingly, on 10 July 2015 Council published a Notice of Compulsory Acquisition identifying a strip of Curtis Estate for acquisition, being the acquired land.
6. On 24 November 2015, Moss Capital's solicitors submitted a claim to Council for compensation for disturbance totalling $610,272 in respect of the acquired land under s 55(d) of the Acquisition Act (comprising $591,951.33 in relation to costs incurred in pursuit of the development of Curtis Estate and $18,321 in relation to legal fees incurred in connection with the acquisition). Moss Capital also noted that other heads of claim under s 55 of the Acquisition Act were "to be advised".
7. Solicitors for Cannchar also submitted a separate claim for compensation on 18 December 2015 under s 55 of the Acquisition Act in respect of the acquired land. Cannchar's claim was made under s 55(a) and (f) of the Acquisition Act for market value of the acquired land and the decrease in value of the remaining section of Curtis Estate that was not acquired, totalling $26,005,000. A further claim for disturbance was made under s 55(d) of the Acquisition Act totalling $177,803 and comprising costs incurred in relation to legal and expert advice.
8. On 1 December 2015 solicitors for Council advised Moss Capital that its claim for compensation was rejected. Accordingly on 24 February 2016 Moss Capital commenced these proceedings pursuant to s 67 of the Acquisition Act.

Claimed interest in the acquired land

1. Section 37 of the Acquisition Act creates a right to compensation where land is compulsorily acquired, and relevantly provides: 37 Right to compensation if land compulsorily acquired An owner of an interest in land which is divested, extinguished or diminished by an acquisition notice is entitled to be paid compensation in accordance with this Part by the authority of the State which acquired the land.
2. The key issue for the purposes of the separate question is whether or not Moss Capital has a compensable interest within the meaning of the definition of "interest" contained in s 4(1) of the Acquisition Act, which provides: interest in land means: (a) a legal or equitable estate or interest in the land, or (b) an easement, right, charge, power or privilege over, or in connection with, the land.
3. I will refer to subclause (a) as limb one, and subclause (b) as limb two. Moss Capital submits that it has an interest in the acquired land under both limbs of the definition.
4. In relation to limb one, Moss Capital submits that it has an equitable interest as a result of one of three mechanisms: 1. by operation of the Deed, specifically: 1. by virtue of the sale proceeds clause being cl 12.1 of the Deed; and/or 2. the creation of a caveatable interest by cll 21 and 24.1(b) of the Deed; 1. by virtue of a partnership relationship between the parties to the Deed, which arises because of the express intention of the parties contained in cl 20.1 of the Deed; or 2. by a trust, which arises through: 1. the covenant contained in cl 10.5 of the Deed not to deal with the acquired land without Moss Capital's approval; and/or 2. the default option in cl 17.4.
5. In relation to limb two, Moss Capital submits that it has a right, charge, power or privilege over the acquired land by the operation of the Deed, and the relationship between itself and Cannchar.
6. Before considering each of these grounds, and given these proceedings turn primarily on the construction of the Deed, it is necessary first to have regard to the Deed.

Deed

1. For the purposes of the Deed, Cannchar was defined as the 'Owner', Cannchar Investments as the 'Option Holder', and Moss Capital as the 'Manager'.
2. Clause 1 of the Deed sets out a number of further definitions, some of which are extracted below: ... Development means the Works, Subdivision and other improvements to be erected on the Property as part of the Project in accordance with the Approvals. Development Application means a development application for the development and use of the Property under section 77 of the EP&A Act 1979. ... Joint Venture means the unincorporated joint venture created by this Deed between the Option Holder and Manager to carry out the Project. Land Swaps means any disposal of any part of the Property in exchange for the receipt of unencumbered title to other land as defined by the Real Property Act 1900. ... Manager's Entitlement from the Project Return means the amount payable by the Option Holder to the Manager as detailed in clause 12.1. ... Project Account means the account from which all payments in respect of the Project are to be made and to which the Financing Facility and Sales Proceeds are to be deposited and from the Project Costs are to be paid as referred to clause 11.1. PCG means the Project Control Group constituted by clause 6. ... Project means: (a) the planning design and construction of the Works; (b) the execution of the Works; (c) the sale of the Lots and other parts of the Property; (d) the distribution of the Sale Proceeds; (e) any other thing to be done by the Manager under this deed. ... Project Costs means the costs in carrying out the Project and bringing the Project to Final Completion including, without limitation: (a) the Agreed Land Cost and all Holdings Costs; (b) all application moneys, fees, bonds and other charges payable to any local or municipal council or other statutory body or bodies or under or in connection with the Approvals; (c) all costs and expenses incurred in connection with obtaining the Approvals including lodgement fees and the costs and expenses of the preparation of all necessary plans, drawings and specifications; ... (h) any amounts paid or payable in respect of the preparation of all Plans and Specifications in respect of the Project and the obtaining of all necessary approvals and authorities and all other charges properly payable in respect of the Project and all other charges properly payable in respect of the Property. ... Project Completion means when the Option Holder has sold all Lots in all stages. ... Project Manager means the Manager or the Manager's nominee. ... Resumption means a resumption, appropriation or compulsory acquisition of all or any part of the Property under a statute or otherwise including a restriction or order under which compensation is payable in connection with all or any part of the Property. ... Sale Proceeds means the gross revenue (including deposits and GST) paid by the purchasers on completion of Sale Contracts in respect of the Lots (exclusive of any GST) and/or any consideration received as a result of a Resumption. ... Stage 1 Condition means that stage of the Project as described in clause 5.2. ... Sunset Date means the date which is 12 months from the date of this agreement being the date by which the Stage 1 Condition must be satisfied. ... Works means all works pursuant to the Development Consent including without limitation provision and/or construction of earthworks, roadworks, services, landscaping, construction and other activities associated with the development of the Property to enable the sale of the Lots.

Whether Moss Capital has an equitable interest in the acquired land

1. As noted at [16] above, Moss Capital submits that an equitable interest arises by the operation of the Deed, a partnership arrangement between itself and Cannchar, and/or the existence of a trust. I shall consider the parties' submissions on each of these issues in turn.

Operation of the Deed

1. In relation to the operation of the Deed, Moss Capital submits that an equitable interest arises by virtue of the application of Sale Proceeds provided in cl 12.1 of the Deed and/or the creation of a caveatable interest by cll 21 and 24.1(b) of the Deed.

Sale Proceeds ground

1. Relying on the chapeau to cl 12.1, as well as the definitions of 'Resumption' and 'Sale Proceeds' (which captures "consideration received as a result of a Resumption"), Moss Capital submits that cl 12.1 of the Deed gives it an express contractual right to a proportion of the proceeds upon any resumption of the acquired land.
2. Further, Moss Capital submits that the mechanism set out in cl 12.1 ensures that those proceeds are held in the Project Account, on express trust for the parties to the Deed. Moss Capital submits that the Project Account is a joint account administered by both Cannchar Investments and itself, with this nomination effectively setting up the trustee. The arrangement is further indicative of an express trust, Moss Capital submits, because the chapeau to cl 12.1 requires the trustee to effect a distribution of the Sale Proceeds in a particular way to the identified beneficiaries. Though the beneficiaries are identified disparately, Moss Capital submits that this becomes clear in the 50/50 split in cl 12.1(f) (which was amended by the third variation to the Deed referred to in [22(3)] above).
3. While Moss Capital accepts that this does not automatically establish an equitable interest in the acquired land (as distinct from an interest in the proceeds of any resumption) particularly given that the express trust in terms depends upon the satisfaction of the Stage 1 Condition, Moss Capital later submits that it may be demonstrative of a constructive trust, or a "right" in connection with the land.
4. Council disputes the inference drawn by Moss Capital's construction of cl 12.1 as giving rise to an equitable interest, submitting that cl 12.1 is limited to creating a contractual right to a proportion of the Sale Proceeds generated from the development of the acquired land.
5. Council submits that the words "as a result of a Resumption" in the definition of Sale Proceeds do not make good Moss Capital's claim, rather this simply acknowledges that such proceeds may derive from different scenarios, whether that be from purchasers of individual lots of Curtis Estate or because of a resumption event. Council submits that there is "no principle or authority for the apparent proposition that a contractual arrangement for payment for services out of the proceeds of sale of land creates or constitutes an equitable interest in the land."

Caveatable interest ground

1. Moss Capital submits that it has a caveatable interest in the acquired land by virtue of cll 21 and 24.1(b) of the Deed, which permit Moss Capital to lodge a caveat on any part of Curtis Estate. While accepting that there is generally a question as to whether a caveator has a relevant proprietary interest in land for the purposes of s 74F(1) of the Real Property Act 1900 (NSW), Moss Capital submits that the existence of a right to lodge a caveat can suggest an intention to create an equitable charge to support the caveat. Moss Capital submits, relying on Troncone v Aliperti (1994) 6 BPR 13, 291 ('Troncone') per Mahoney JA (Priestly JA and Meagher JA agreeing), that the grant of an authority to lodge a caveat carries by implication a grant of an estate or interest in land as necessary to enable that authority to be exercised.
2. Apart from these general principles, Moss Capital submits that in any event, an equitable interest arises from the default purchase option contained in cl 17.4 of the Deed. This clause operates as a "put option", requiring Moss Capital to acquire a 50% interest in Curtis Estate if the Stage 1 Condition is not satisfied, and providing that if Moss Capital fails to acquire this interest, it forfeits all costs expended in relation to the Deed and is required to remove its caveat from the property. By linking the costs incurred to the caveatable interest, Moss Capital submits that the Deed in fact provides for Curtis Estate to be used as security for Moss Capital's investment, and therefore creates a charge over Curtis Estate in respect of its costs of achieving Stage 1. Moss Capital submits that this position is further supported by cl 9.1 of the Deed.
3. Council submits that the focus on a caveatable interest is untenable for the purposes of establishing an interest in land. Rather, the relevant enquiry for the purposes of the Real Property Act 1900 is whether there is an existing legal or equitable estate or interest in land to authorise the lodgement of a caveat to protect that interest. Accordingly, Council submits that it is incorrect to suggest that where a caveatable interest is 'created', this necessarily 'creates' an equitable interest, noting in particular the decision of Bryson AJ in Nabeth Taleb v National Australia Bank (2011) 82 NSWLR 489; [2011] NSWSC 1562 ('Taleb') where his Honour found at [60]-[61] that a mere authorisation to lodge a caveat did not necessarily imply an intention to create an equitable interest. The primary step, Council submits, should always be identifying the relevant legal or equitable interest in land.

Sale Proceeds ground

1. The operation of cl 12.1 is clear on its terms and I am satisfied that it does no more than establish a contractual right on the part of Moss Capital to a proportion of the Sale Proceeds.
2. While the definition of Sale Proceeds does on its terms include any compensation received as a result of a compulsory acquisition of Curtis Estate (made clear by the inclusion of "consideration received as a result of a Resumption" in the definition of Sale Proceeds), it is difficult to see how this takes cl 12.1 any further than a contractual right, and I am not satisfied and indeed it has not been solidly advanced by Moss Capital that this gives rise to an equitable right.
3. In relation to Moss Capital's submission that cl 12.1 creates an express trust, it is well established that the creation of a trust requires certainty on three distinct matters, being the intention to impose an equitable obligation by way of trust; the subject matter of the trust; and the objects of the trust (i.e. the beneficiaries), see Kauter v Hilton (1953) 90 CLR 86; [1953] HCA 95; Herdegen v Federal Commissioner of Taxation (Cth) (1988) 84 ALR 271.
4. In the present circumstances there is no express statement of an intention on Cannchar's part to create a trust, nor am I satisfied that such an intention may be imputed from the language of the Deed, the nature of the transaction or the relationship between Cannchar and Moss Capital, see Korda v Australian Executor Trustees (SA) Ltd (2015) 255 CLR 62; [2015] HCA 6 ('Korda') per French CJ at [3] and [5]. Nor is it clear from cl 12.1 who the beneficiaries of the purported trust would be, noting particularly that the clause provides for Cannchar Investments and Moss Capital to together apply and receive the Sale Proceeds, thereby going against the implication that Cannchar Investments is a trustee and Moss Capital a beneficiary. I accept Council's submission that the Project Account is more akin to a joint bank account.
5. I accept that the Deed, at its highest, gives Moss Capital an interest in the Sale Proceeds of Curtis Estate, which would include an interest in any compensation received as a result of a compulsory acquisition of the land. However to establish an interest in the land for the purposes of a compensation claim under the Acquisition Act, Moss Capital is required to have an interest in the land itself, and indeed, one that has been divested, extinguished, and diminished by the acquisition. This is not the same as an interest in the form of a contractual right to receive a share of the proceeds generated from developed land or the proceeds of an acquisition.

Caveatable interest

1. Determining the nature and content of a caveatable interest is a complex task that inevitably depends on the particular circumstances of each case. Section 74F(1) of the Real Property Act 1990 (NSW) enables a person who claims to have a legal or equitable interest in land to lodge a caveat against the title. Relevantly, a registered proprietor cannot by contract confer a right to lodge a caveat where no caveatable interest exists, see Murphy v Wright [1992] NSWCA 168; (1992) 5 BPR 11, 734 per Handley JA (Priestly JA agreeing), citing Tooth & Co Ltd v Barker [1960] NSWR 51; (1960) 77 WN (NSW) 231 at 233, 242-3. However, a caveatable interest need not necessarily be a proprietary interest. While there are of course circumstances where a caveat is lodged to protect a proprietary interest, the right to lodge a caveat does not in itself convey a proprietary interest.
2. Whether clauses of the type relied upon by Moss Capital, being cll 21 and 24.1(b) of the Deed, create a proprietary interest in the land was considered in Bellissimo, where White J stated: [12] There is no doubt that in some cases an agreement that one party has authority to lodge a caveat in respect of the property of the other carries with it by implication an agreement to confer such an interest in the land as will sustain a caveat. That is the application of the principle that whoever grants a thing is deemed to grant that without which the grant itself would be of no effect (Troncone v Aliperti (1994) 6 BPR 13,291; Coleman v Bone (1996) 9 BPR 16,235; Nudd v Official Trustee in Bankruptcy [2002] NSWSC 399; (2002) 11 BPR 20,163 at 20,167, 20,169-20,170). In Troncone v Aliparti, the majority of the Court of Appeal construed an agreement that creditors could lodge caveats on the debtor's property as an implied grant by the debtor of an equitable charge. (See Redglove Projects Pty Ltd v Ngunnawal Local Aboriginal Land Council [2004] NSWSC 880; (2004) 12 BPR 22,319 at [17]-[23].) In Iaconis v Lazar [2007] NSWSC 1103; (2007) 13 BPR 24,937, Young CJ in Eq (as His Honour then was) said (at [23]): "[23] The current commercial enthusiasm for this sort of clause in a contract and for lodging a caveat was given a great boost by the decision of the Court of Appeal in Troncone v Aliperti (1994) 6 BPR 13,291. This decision has often been interpreted by persons seeking charges as meaning that every time there is an agreement that X can lodge a caveat over any property Y may own, that an equitable charge is created. It should be remembered, as McLelland CJ in Eq said in Coleman v Bone (1996) 9 BPR 16,235 at 16 and 239, that the true principle is that 'Where the authority to lodge a caveat is given in connection with an obligation by A to pay money to B, and there is no sufficient indication to the contrary, the implication is that the estate or interest granted is an equitable charge to secure payment to B of that money.'" [13] As Bryson J (as his Honour then was) said in Express Loans & Finance Pty Ltd v Hunter [2004] NSWSC 142; (2004) 11 BPR 21,451 the question is always a matter of construction of the particular document under consideration. There, the defendant signed an authority and agreement authorising the caveator "to lodge a caveat on the above security property if the fees as agreed are not paid on demand and will sign all documents as required by [the plaintiff] to facilitate same". His Honour construed that agreement as an authority for the lodgement of a caveat and nothing else, and not as having created a charge over the land or any other means of enforcement. His Honour recorded the plaintiff's contention that "the agreement would be futile and ineffective if it did no more than it literally provides for". His Honour said (at [13]): "In my mind, this is incorrect. An impediment is placed in the way of a registered proprietor if a caveat is lodged, whether or not the caveat is effective, as its lodgement confronts the registered proprietor with problems and difficulties, whether or not it can be removed." The purpose of the clause, his Honour said, was "to enable the plaintiff to impede and obstruct the defendant's path as registered proprietor, without going any further." … [17] Had it been intended to create a charge, whereby the plaintiff could apply to the court for an order for sale of the property or for the appointment of a receiver, one would expect the nature of that arrangement to be spelled out clearly in an agreement between a solicitor and his client, or between a solicitor and a company associated with the client, and not be left to implication. [18] It is more likely that the parties intended by clause 2(iii), that by the plaintiff's being authorised to lodge a caveat, and by its being agreed that he had a caveatable interest in the property, that the parties intended, and intended only, that the company would not be permitted to deal with the land without the plaintiff's consent. Such a negative covenant does not create an interest in land (Redglove Projects Pty Ltd v Ngunnawal Local Aboriginal Land Council).

Partnership

1. Moss Capital submits that, despite the references to "joint venture" in the Deed, both the Deed and the conduct of the parties suggest a relationship of trust and confidence between them, in that they account to each other, communicate constantly, and trust one another - all of which are consistent with a partnership relationship. As such, Moss Capital submits that its interest in the assets of the partnership constitutes an equitable interest in the land.
2. Moss Capital relies on Gibson Motor Sport Merchandise Pty Ltd v Forbes [2005] FCA 749 ('Gibson Motor Sport') where Crennan J (as her Honour then was) set out the characteristics of a joint venture as distinct from a partnership as follows: [78] Distinctions which can be made between a joint venture and a partnership are not always simple or without controversy. The term 'joint venture' has conventionally and commonly been used to refer to an association for the purposes of a single undertaking rather than for the continuous 'carrying on (of a) business' characterising a partnership (s 5, Partnership Act 1958 (Vic)), yet, numerous single undertakings, to which the term joint venture may reasonably be applied, do not always in truth lie outside the uniform Partnership Acts or partnership principles and the collocation has certainly been used in a general sense to describe undertakings which do not have legal attributes differing from partnerships: see: J D Merralls QC., 'Mining and Petroleum Joint Ventures in Australia: Some Basic Legal Concepts' (1988) 62 ALJ 907; see also, extra‑judicially, Hon. Justice McPherson, 'Joint Ventures' in Equity and Commercial Relationships, ed. Finn, 19 at 30-32, and Hon. Mr Justice J A Dowsett 'Operator of a Joint Venture - Principal or Agent' (1987) AMPLA Yearbook 269, and see generally W D Duncan (ed) Joint Venture Law in Australia (1995) Ch 2. Federation Press in Association with the Centre for Commercial and Property Law, Queensland University of Technology, 1994. [79] While joint venture agreements are generally governed by the principles applicable to contract and property, equity, through the mechanism of a constructive trust, may be called in aid in circumstances of incomplete agreement: Muschinski v Dodds (1985) 160 CLR 583 ('Muschinski') at 618, or called in aid because of a breach of a fiduciary duty: Ravinder Rohini Pty Ltd v Krizaic (1991) 30 FCR 300 ('Ravinder v Krizaic'). Agreed contractual duties of joint venturers are not necessarily or routinely subject to any implied duty to act in good faith: Noranda Australia Ltd v Lachlan Resources N.L. (1988) 14 NSWLR 1; Australian Oil and Gas Corporation Ltd v Bridge Oil Limited (1995) 14 AMPLA Bull 60 at 70, Kelly v C.A. & L. Bell Commodities Corporation Pty Limited (1989) 18 NSWLR 248 at 258. See also the observations of Ormiston J. in Vroon BV v Foster's Brewing Group Ltd [1994] 2 VR 32 at 96-97 ('Vroon'). [80] Recognisable and common characteristics of joint ventures include: 1. Participants hold proprietary interests in the assets of the joint undertaking, often, but not necessarily, as tenants-in-common: see the abovementioned article of Mr Merralls QC. 2. Participants exercise joint control of the undertaking. 3. Participants contribute to the joint undertaking, not necessarily equally; such contributions may be disparate: Canny Gabriel Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 at 327; Television Broadcasters Limited v Ashton's Nominees Pty Ltd (No.1) (1979) 22 SASR 552. 4. Participants in the joint undertaking enjoy rights and assume obligations, which are often several, and calculated by reference to ownership of shares and/or contributions made. 5. Participants have a joint (or community of) interest in the performance of the undertaking's purpose: Cummings v Lewis (1993) 41 FCR 559 at 314/315 (per Cooper J); 6. Participants associate in the undertaking for mutual commercial gain which can be mutual profits.

Consideration

1. For the reasons set out below, I do not consider the relationship between the parties to be a partnership. Further, even if there was a partnership, I accept Council's submission and consider it a complete answer that in circumstances where the partnership is alleged to exist between the members of the joint venture (being Cannchar Investments and Moss Capital), Curtis Estate (and therefore the acquired land) was not an asset of the partnership.
2. I accept that on occasion the characteristics of a joint venture and those of a partnership can overlap, and that the "recognisable and common characteristics of joint ventures" are those set out by Crennan J in Gibson Motor Sport at [78]-[80], and the usual indicia of a partnership are set out by Jagot J in Yacoub v Federal Commissioner of Taxation at [24]. Moreover, whether a partnership exists on the present facts is to be determined by reference to the "true contract and intention of the parties as appearing from all the facts and circumstances relevant to the relationship" (Amadio Pty Ltd v Henderson (1998) 81 FCR 149 at [172]) and "the substance and reality of the transaction…" (Fenston v Johnston (1940) 23 TC 29).
3. In these proceedings, the evidence is that the Deed reflects an undertaking to generate a development, in the sense of a product, from which profits will flow. In the circumstances, I am satisfied that there was no partnership between the parties as at the date of Council's acquisition of the acquired land. My reasons may be shortly stated. 1. First, whilst it is true that the parties' description of the relationship does not deny the potential for the relationship to be characterised as a partnership (as per United Dominions) and there is no doubt that the parties in the joint venture are in the undertaking together, the "substance and reality" of the matter is a one-off undertaking, in effect to generate a product being the development of the Curtis Estate. 2. Second, although the relationship does include mutual interest in the development of Curtis Estate the primary source of the relationship is the contractual agreement. I accept Council's submission that the trust and confidence that Cannchar Investments and Moss Capital may have had in each other arises primarily in the context of their having entered into a joint venture and the parties contractual obligations under cl 20.1(b) of the Deed. 3. Third, while Moss Capital submits that the fact that the parties account to each other is indicative of their status as partners, I find that the relationship between the parties and the manner in which they account to each other and communicate is simply a reflection of the agreed contractual position under the Deed which, again was expressly entered into as a joint venture rather than a "partnership". 4. Fourth, I accept that on one view cl 10.5 evidences a lack of trust and confidence, such that Moss Capital thought it contractually necessary to bind Cannchar and Cannchar Investments from dealing in the land without its approval. 5. Fifth, there is no compelling evidence that the parties have any mutual concern for each other's financial stability apart from that which would usually be the case in any joint venture. In fact, the Deed as a whole appears by cl 9.1 to place the burden of financial liability for the project primarily on Moss Capital, demonstrated by Moss Capital being liable for the costs to satisfy the Stage 1 Condition as well as any shortfall between the Project Costs and debt raised. This is further supported by cl 7.4 which requires Moss Capital to "procure finance for the Project Costs on behalf of and with the assistance of the Option Holder". 6. Sixth, while I accept that the PCG and its duties and powers outlined in cl 6 of the Deed do indicate a level of mutual control and management, I do not consider that this in itself takes the relationship from being a joint venture to being a partnership. Granted the PCG is described as the "executive management vehicle for the Project" and is charged with making "all major decisions and determinations" (cl 6.4 of the Deed), however the remainder of the Deed envisages a clear separation of duties and powers between the parties (see e.g. cll 7 and 8). Most joint venture agreements will include a clause relating to how decisions are to be reached, and in the circumstances I consider that the aim of cl 6 and the PCG is to ensure efficient decision-making, rather than evincing an intention that the parties are participating in the endeavour as partners. 7. Seventh, there is no provision for the sharing of losses from the apparently one-off venture and, importantly, the parties are clearly not jointly and severely liable for the acts or omissions of other parties.

Constructive trust

1. As noted above, Moss Capital submits that it has an equitable interest in the acquired land because the operation of the Deed (in particular cll 10.5 and 17.4) indicates a constructive trust of the type envisaged in Baumgartner v Baumgartner (1987) 164 CLR 137; [1987] HCA 59. Relying on the summary of Campbell J of the elements of a Baumgartner trust in West v Mead [2003] NSWSC 161; (2003) BPR 24,431, Moss Capital submits that: 1. there must be both a joint relationship or an endeavour in which expenditure is shared for the common benefit in the course of and for the purpose of which an asset is acquired; 2. the purpose of the joint relationship or endeavour must have been removed or the joint endeavour prematurely terminated without attributable blame; and 3. there must be an element of unconscionability.
2. Moss Capital accepts the fact that the Deed does not expressly contemplate what would occur in circumstances where the Stage 1 Condition was not met. Rather, Moss Capital submits that the Deed presumes that it will be met, and that upon satisfaction, the costs incurred by Moss Capital would be jointly securitised by Curtis Estate. Moss Capital submits that this intention is enforced by cl 17.4 of the Deed, which requires it to acquire a proportion of Curtis Estate, or to forfeit its costs incurred.
3. Moss Capital submits that the unequivocal nature of the creation of a caveatable interest, the prohibition against dealing, the establishment of the joint account and the obligations of utmost good faith, trust and fidelity as provided for in the Deed all indicate that it would be unconscionable for Cannchar to retain full title to Curtis Estate in circumstances where the joint venture has been frustrated.
4. Moss Capital further submits that is clear that a constructive trust has been established, as the alternative would be that Cannchar would retain the full benefit of Curtis Estate, which had been pledged to the joint endeavour, in circumstances where the joint endeavour had been frustrated. Moss Capital submits that this would clearly be unconscionable.
5. Relevantly, Moss Capital submits that a constructive trust is only imposed if some other remedy is not suitable (relying on John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd; Walker Corp Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19 at 45; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 at 172), and that such a trust arises when the conduct to which it is imposed occurs, rather than when the Court declares it (see Secretary, Department of Social Security v Agnew (2000) 96 FCR 357; [2006] FCA 59; Parsons v McBain (2001) 109 FCR 120; [2001] FCA 376 at 124-5).

Consideration

1. On the facts of the present matter there is no occasion for any remedy based upon constructive trust. The purported constructive trust requires at the least, an element of unconscionability. Contrary to Moss Capital's position, I do not accept that unconscionability, simply expressed as Cannchar being able to retain "full benefit" of Curtis Estate in circumstances where it had been pledged to the joint venture and there had been a joint endeavour to improve it, amounts to unconscionable conduct such as to trigger relief in the form of the declaration of constructive trust.
2. I accept Council's submission that the principles in respect of constructive trusts do not operate as some type of overriding principle to effect what may be a "fair outcome". To the extent that the parties had not expressly contemplated what would occur in circumstances where the Stage 1 Condition was not met does not, by the operation of constructive trust, or in my view otherwise, amount to an equitable interest, let alone an equitable interest in the land as required pursuant to the Acquisition Act. In any case, I am not completely comfortable that the Deed does not provide for the circumstance where the Stage 1 Condition is not satisfied, given cl 17.4 clearly sets out a potential course of action for such circumstances.
3. Apart from the above I am not comfortable, on the evidence presently before the Court, that there is frustration of the Deed and/or that the Deed is not able to be implemented according to its terms despite the acquisition. Relevantly, in oral submissions Mr Galasso clarified that the frustration alleged goes only to the acquired land, stating that, as a result of the acquisition "... the purpose [of the] endeavour has been removed, at least as far as the acquired land is concerned" (transcript 10 August 2017, 28.15).
4. As per Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696 at 729: [F]rustration occurs whenever the law recognises that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract...
5. In circumstances where only a portion of Curtis Estate has been acquired, it has not been made out by Moss Capital that the acquisition makes the development on Curtis Estate "radically different" from that which was originally contemplated, and in the circumstances I am hesitant to draw the conclusion that the purpose of the Deed has been frustrated. I note that the Deed itself does not provide for or describe the specific development envisaged beyond subdivision and general works (e.g. earthworks, roadworks etc.). Accordingly, while the specific development for which concept approval was sought, being a 224 lot subdivision, associated infrastructure and roads, and dedication of approximately 30ha for conservation, may no longer be able to proceed on those terms (although I have not received any evidence or submissions on this point), that is not to say that the general development of Curtis Estate contemplated by the Deed is frustrated.

Whether Moss Capital has a right, charge, power or privilege in the acquired land

1. Moss Capital submits that the 'rights' captured within the scope of the second limb of the definition of "interest" are interpreted to be wider than those caught within the first limb of the definition. Examples of such rights include easements, charges, profits à prendre, profits à rendre, and/or licences coupled with interests.
2. Relying on Dial a Dump Industries Pty Ltd v Roads and Maritime Services [2017] NSWCA 73; (2017) 221 LGERA 73 ('Dial a Dump Industries') at [156], Moss Capital submits that there are two fundamental requirements in establishing such an interest, being: 1. that the power or privilege must be "over or in connection with the land"; and 2. there must be an "owner" of the power or privilege such as to be entitled to compensation.
3. Moss Capital submits that it had a right to charge the land in respect of the costs incurred in pursuing the development of Curtis Estate, which was a right it could protect by caveat. Even if this is found not to be an equitable interest, as I have determined above, Moss Capital submits that it must be construed as a charge, which descends on the contractual grant of the right.
4. Moss Capital submits that the charge is clearly connected with Curtis Estate, and is capable of alienation by way of the costs Moss Capital expended on the development as well as the contractual right under cl 12.1 to money spent in developing the land.
5. In relation to physical rights, Moss Capital submits that the Deed necessarily conferred on Moss Capital permission to undertake activity in realisation of the development of Curtis Estate, which included unfettered access to the site for the purpose of ensuring relevant experts and consultants could have access to it. Moss Capital submits that such a right was a valuable right, connected to the land, which was taken away by the acquisition, and was therefore clearly a right or power falling within the second limb of the definition of "interest".
6. Council also relies on Dial a Dump Industries for the relevant principles, summarising the key principles as follows: 1. a power "over or in connection with the land" involves an ability to control or direct (at [157]); 2. for there to be a power or privilege it must be capable of alienation (at [159]); and 3. an interest in land must be limited to iura in re aliena, i.e. limited to proprietary or quasi-proprietary rights less than a fully-fledged estate (at [139]-[160]).

Consideration

1. Accepting, as I must, that an "interest in land" within the meaning of s 4(1)(b) is not as confined as was historically the case (Hornsby Council v Roads and Traffic Authority (NSW) (1997) 41 NSWLR 151; Dial a Dump Industries at [156]), to constitute an "interest in land" there must be first, a "power or privilege" which must be "over or in connection with the land" and, second, that there must be an "owner" of the power or privilege such as to be entitled to compensation.
2. For the reasons set out below I do not accept Moss Capital's submission that at the date of acquisition it had a right to charge the acquired land in respect of the costs it had expended.
3. In accordance with my findings above, the Deed at most gives Moss Capital a contractual right to develop Curtis Estate (with Cannchar Investments) and, upon development, to share in profits at a later point of time. This is not a proprietary or quasi-proprietary right, nor does Moss Capital have the ability to deal with or otherwise control or direct the use of the land.
4. Although Moss Capital submits "at the very least" it had this ability through the PCG, in which it participated and was entitled to equal decision-making power as the land owner and registered proprietor, I do not accept this submission because, even accepting that the PCG was constituted by nominees "representing each Party equally" (cl 6 of the Deed), this is not sufficient to indicate that Moss Capital itself had the requisite power or privilege vis-à-vis Curtis Estate necessary to satisfy the second requisite element in Dial a Dump Industries. At most, and similar to the facts in Dial a Dump Industries, Moss Capital could determine how certain matters in relation to the joint endeavour were carried out. However, it could not otherwise "control or direct what went on the land" (as per Dial a Dump Industries at [157]) other than in accordance with the PCG. Relevantly, I find that the ability to participate in decision-making does not go beyond a mere contractual project development right.
5. Apart from the above, for there to be a power or privilege within the meaning of limb two of the definition of "interest" in the Acquisition Act, Beazley P in Dial a Dump Industries at [159] held that that the power or privilege must be capable of alienation, stating: I am also of the opinion that for there to be a power or privilege within the meaning of para (b), that power or privilege must be capable of alienation. Otherwise, the concept of ownership as part of the statutory scheme, especially in s 37, would be superfluous insofar as a power or privilege over or in connection with the land was concerned. Dial A Dump had nothing that it could sell or transfer. ...

Conclusion

1. For the reasons above, while it is clear that the Deed did confer upon Moss Capital certain contractual rights, I am not satisfied that Moss Capital has established that it was the owner of any "interest" in land as defined in the Acquisition Act that has been divested, extinguished or diminished by the acquisition.
2. It is clear that the Deed did contemplate the possibility of a compulsory acquisition, and accordingly sets down certain procedures which were to be followed in the event of compulsory acquisition. The difficulty however arises given the lack of clarity in the Deed as to what would occur in relation to the costs expended by Moss Capital if the land were acquired before the Stage 1 Condition was satisfied. While this may seem to be an oversight, on one view it could be indicative of the nature of the joint venture embarked upon by the parties - that being that in return for Cannchar contributing the land to the joint endeavour, Moss Capital bore the risk of the initial stage of the project.
3. The nature of Moss Capital's contractual rights under the Deed is a complex question that may need to be properly determined. However, this is a matter that will fall to be determined between the parties, and is separate from that which is currently before me. The relevant question for my purposes is whether or not Moss Capital has an interest in land for the purpose of the Acquisition Act. The fact that the joint venture related to land does not in itself give Moss Capital an interest in land, and I am not satisfied that the Deed on its terms or through its operation makes good such an interest.
4. The separate question must therefore be answered in the negative and in my opinion that answer is dispositive of the proceedings. I reserve the question of costs.

orders

1. The orders of the Court are: 1. The answer to the separate question: Did the Applicant have an "interest" in the following land: a. Lots 69-88 in Deposited Plan 15764 (inclusive); b. Lots 184-197 in Deposited Plan 15764 (inclusive); and c. Lots 225-229 in Deposited Plan 15764; as at 10 July 2015 for the purpose of section 37 of the Land Acquisition (Just Terms Compensation) Act 1991? is no. 1. Costs are reserved.

---

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 29 September 2017