Peregrine Mineral Sands Pty Ltd v Wentworth Shire Council - [2014] NSWCA 429 - NSWCA 2014 case summary — Zoe

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Peregrine Mineral Sands Pty Ltd v Wentworth Shire Council

[2014] NSWCA 429

Court of Appeal (NSW)|2014-05-15|Before: McColl JA, Meagher JA, Ward JA

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At a glance

Source facts

Court

Court of Appeal (NSW)

Decision date

2014-05-15

Before

McColl JA, Meagher JA, Ward JA

Source

Original judgment source is linked above.

Judgment (36 paragraphs)

[1]

Drummond and Rosen Pty Ltd v Easey (No. 2) [2009] NSWCA 331 Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603 Hazell v Hammersmith and Fulham London Borough Council [1992] 2 AC 1 Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115 Maiden v Maiden [1909] HCA 16; (1909) 7 CLR 727 Maralinga Pty Ltd v Major Enterprises Pty Ltd [1973] HCA 23; (1973) 128 CLR 336 Marrickville Metro Shopping Centre v Marrickville Council [2010] NSWCA 145; (2010) 174 LGERA 67 Norfolk v Roberts (1913) 13 DLR 463 Penola and District Ratepayers' and Residents' Association v Wattle Range Council [2011] SASCFC 62; (2011) 110 SASR 110 Pukallus v Cameron [1982] HCA 63; (1982) 180 CLR 447 Raftland Pty Ltd v Federal Commissioner of Taxation [2008] HCA 21; (2008) 238 CLR 516 Ransom & Luck Ltd v Surbiton Borough Council [1949] Ch 180 RHG Mortgage Securities Pty Ltd v Elektra Purchase No 19 Ltd [2009] NSWSC 258 Rocca v Ryde Municipal Council [1962] NSWR 600; (1961) 79 WN (NSW) 299 Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603 Sanpine v Koompahtoo Local Aboriginal Land Council [2005] NSWSC 365 Southend-on-Sea Corporation v Hodgson (Wickford) Ltd [1962] 1 QB 416 Stead v State Government Insurance Commission [1986] HCA 54; (1986) 161 CLR 141 Streetscape Projects (Aust) Pty Ltd v City of Sydney [2013] NSWCA 2; (2013) 92 ACSR 417 The Power Co Ltd v Gore District Council [1997] 1 NZLR 537 Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) [1979] FCA 143; (1979) 42 FLR 213 Watson's Bay & South Shore Ferry Co Ltd v Whitfeld [1919] HCA 69; (1919) 27 CLR 268 Wentworth v Rogers (No 3) (1986) 6 NSWLR 642 Wentworth Shire Council v Bemax Resources Limited and Ors [2013] NSWSC 1047 Windsor and Maidenhead Royal Borough Council v Brandrose Investments Ltd [1981] 1 WLR 1083 Texts Cited: R P Meagher, J D Heydon and M J Leeming, Meagher, Gummow and Lehane's Equity: Doctrines & Remedies, (4th ed 2002, Butterworths LexisNexis) Harry Whitmore and Mark Aronson, Review of Administrative Action (1978, The Law Book Company Ltd) "Distributive justice, ordinary rates and the categorisation of land for rating purposes in New South Wales: An update", Guy J Dwyer, (2014) 19 LGLJ 3 Category: Principal judgment Parties: Peregrine Mineral Sands Pty Ltd (First Appellant) Imperial Mining (Aust) Pty Ltd (Second Appellant) Probo Mining Pty Ltd (Third Appellant) Pooncarie Operations Pty Ltd (Fourth Appellant) Wentworth Shire Council (Respondent) Representation: Counsel: A Galasso SC with RJ Carruthers (Appellants) DAC Robertson with Ms P Blackadder (Respondent) Solicitors: Baker & McKenzie (Appellants) Buckworth Keady Lawyers (Respondent) File Number(s): 2013/00262674 Publication restriction: Nil Decision under appeal Citation: Wentworth Shire Council v Bemax Resources Ltd [2013] NSWSC 1047 Wentworth Shire Council v Bemax Resources Ltd (costs) [2013] NSWSC 1364 Before: Rein J File Number(s): 2012/00299456

[2]

[This Headnote is not to be read as part of the judgment] This judgment relates to an appeal from a decision of a judge of the Equity Division of the Supreme Court regarding a dispute about land rates payable by the appellants to the respondent council (the Council) for a mineral sands mine operated by the appellants within the Council's shire. The proceedings concerned an agreement for land rates executed by Pooncarie Operations Pty Ltd and the Council prior to the Council receiving a land valuation which took into account the mineral content of the land. The agreement relevantly contained a clause stating that the rate would be "adjusted annually in accordance with the Local Government Act". After a valuation was received by the Valuer-General, the Council increased the rates. At first instance, the primary judge found that the clause referred to increases in rates of the nature of adjustments arising out of the percentage rate published in the New South Wales Gazette pursuant to the Local Government Act 1993 (NSW); not amounts determined as rates by the Council from time to time based upon valuations received by the Council. However, the primary judge held that clause impermissibly fettered the Council from undertaking its statutory duty of assessing rates each year in accordance with the Local Government Act. The appellants appeal from the decision arguing that the primary judge erred in finding that the agreement was not authorised by the Local Government Act but was rather inconsistent with it. It is also submitted that his Honour erred insofar as his Honour dealt with ultra vires in terms of the procedure leading to the execution of the agreement, which it is contended was not an issue below and, if the appeal fails, in his Honour's discretion to award the Council its costs. The respondents filed a notice of contention seeking to affirm the decision by arguing that his Honour erred in the construction the agreement, and, to the extent that his Honour so found, in finding that a particular Council email established an intention on the part of the Council that rates of $100,000 per annum were to be adjusted in accordance with ministerial determinations under s 506 of the Local Government Act or constituted clear and convincing proof of such an intention such as to permit rectification of the agreement. The appellants responded that if the notice of contention is upheld, the primary judge erred in failing to order rectification of the agreement. At the hearing of the appeal, the appellants sought leave to add an additional ground of appeal seeking damages for breach of contract. The respondent opposed the amendment. Held unanimously dismissing the appeal (Meagher JA agreeing with Ward JA at [31]): (1) by McColl JA (at [30]) and Ward JA (at [152]) there was no error in his Honour's conclusion that the agreement was incompatible with the Local Government Act because it fettered the council's ability to make rates into the future. Ansett Transport Industries (Operations) Pty Ltd v The Commonwealth [1977] HCA 71; (1977) 139 CLR 54 applied. (2) by McColl JA (at [24]-[25]) and Ward JA (at [175]) the Local Government Act does not authorise an antecedent agreement capping future rates in advance. (3) by Ward JA (at [193]) (McColl JA agreeing at [1]) his Honour did not engage in an uninvited review of the decision making process leading to the execution of the agreement. (4) by Ward JA (at [210]-[211], [215]) (McColl JA agreeing at [1]) his Honour did not err in construction of the clause. (5) (obiter) by Ward JA (at [232]) the rectification claim would have been difficult to make out, because the email does not establish anything more than an intention on the part of the Council to propose an indicative rate. (6) by Ward JA (at [246]) (McColl JA agreeing at [1]) his Honour did not err in the exercise of discretion in relation to costs. (7) (obiter) by Ward JA (at [120]) were it necessary to decide, leave should not have been granted for the proposed amendment, when the hearing below was run on the basis that no claim for damages for breach of contract was sought. An index to these reasons is appended for ease of reference

[3]

Judgment 1McCOLL JA: I have had the advantage of reading Ward JA's reasons in draft. The background and issues appear in her Honour's reasons. I shall repeat them only to the extent necessary. I agree with her Honour's reasons and the order her Honour proposes. I wish only to add some observations about one issue. 2The Council contended at trial that "even if it was, by [cl 3.1(a) of] the Road Agreement on its true construction, agreeing to levy rates of $100K per annum for 20 years, that clause [could not] stand because it impermissibly fetters the Council from undertaking its statutory duty of assessing rates each year in accordance with the requirement of the Act: Wentworth Shire Council v Bemax Resources Limited and Ors [2013] NSWSC 1047 (at [58]) per Rein J. The Council also put the same argument as one going to whether cl 3.1(a) was ultra vires: primary judgment (at [64]). His Honour (at [74]) upheld the Council's submission. 3Peregrine challenges that finding. Ward JA has set out the competing submissions (at [123] - [136]). Peregrine's essential submission was that the Council had power to enter into the Road Agreement for the benefit of its local government area and that the provisions of the Local Government Act 1993 (NSW) ("LGA") dealing with the imposition of rates were not inconsistent with that proposition as they did not preclude levying rates by reference to an antecedent decision. The Council's essential submission is that it could not bind itself to act inconsistently with the explicit provisions or scheme of the LGA dealing with the raising of rates and that, to the extent it has that effect, cl 3.1(a) was invalid and/or ultra vires because it constituted an impermissible fetter of its discretion in that respect. 4Underlying the parties' competing positions is the tension between a principle which would deny governments or public authorities power to enter a valid contract merely because the contract affects the public welfare with the concomitant detrimental effect on public confidence in such contracts and, too, the public interest and the principle that the public interest requires that neither the government nor a public authority disable itself or its officer from performing a statutory duty or from exercising a discretionary power conferred by or under a statute by binding itself or its officer not to perform the duty or to exercise the discretion in a particular way in the future: see Ansett Transport Industries (Operations) Pty Ltd v Commonwealth [1977] HCA 71; (1977) 139 CLR 54 ("Ansett") (at 74 - 75) per Mason J (as his Honour then was); see also Aickin J (at 113 - 114) with whom Barwick CJ agreed. (The principles to which Mason J referred concerning fetters on statutory discretion have been accepted as authoritative despite being uttered in a dissenting judgment.) 5In a series of cases Mason J discussed in Ansett (at 75 - 76) it has been held that contracts entered into by the repository of a statutory power or discretion were invalid if they were "incompatible with the due exercise of their powers or the discharge of their duties" (Birkdale District Electric Supply Co Ltd v Southport Corp [1926] AC 355 (at 364)) or if they constituted "an anticipatory fetter by that person on his future exercise of the statutory power or discretion": Cudgen Rutile (No. 2) Pty Ltd v Chalk [1975] AC 520; Watson's Bay & South Shore Ferry Co Ltd v Whitfeld [1919] HCA 69; (1919) 27 CLR 268. 6Accordingly, Mason J concluded (Ansett (at 77)): "[T]he doctrine that an agreement of the kind in question may constitute an anticipatory fetter on the exercise of a statutory discretion is closely connected with the question whether the agreement is authorised by statute, or is prohibited by, or incompatible with it. If the agreement is authorised, then it is valid, and any breach of the undertaking it contains will be enforceable by damages but only when the effect of statutory approval is to convert the discretion into a duty will it be enforceable specifically." See also Camberwell City Council v Camberwell Shopping Centre Pty Ltd [1994] 1 VR 163 (at 182 ff).

[4]

The statutory scheme 7The case was conducted below (see primary judgment (at [74])) and on appeal on the basis that the only relevant "contract" in issue was cl 3.1(a) of the Roads Agreement. In other words there was no issue as to the power of the Council to enter into the Roads Agreement, only its power to make the agreement that: "3.1 In addition to the Company's Undertakings, the Company will: (a) Pay to Council in respect to the Gingko Mine, land rates of $100,000.00 per annum commencing 1st January, 2006 and adjusted annually in accordance with the Local Government Act." 8It is, accordingly, necessary to determine whether cl 3.1(a) of the Roads Agreement was authorised by the LGA. It will not be if it falls into one of the categories referred to in [5] above. A decision as to whether it does turns on the powers, duties and discretions conferred upon the Council by the LGA both to contract and make rates. 9The version of the LGA relevant to the proceedings was that in force on 28 April 2005 when the Road Agreement was executed. The statutory scheme to which I refer below is that in force at that time, albeit expressed in the present tense. 10A council has a broad charter as set out in s 8(1). However s 8(2) provides that "nothing in the charter or this section gives rise to, or can be taken into account in, any civil cause of action". In Dansar Pty Ltd v Byron Shire Council [2014] NSWCA 364 (at [119]) Meagher JA observed, with apparent approval, to the fact that "[i]n the face of that injunction neither party relied upon these provisions as relevant when determining the existence of a common law duty of care". 11A council is a body corporate: s 220. Pursuant to s 50(1)(e) of the Interpretation Act 1987 (NSW), accordingly, it could "do and suffer all other things that bodies corporate may, by law, do and suffer and that are necessary for, or incidental to, the exercise of its functions". Peregrine relies upon s 50 as demonstrating the Council's wide power to enter into contracts. 12A council has the functions conferred or imposed on it by or under the LGA (s 21), those conferred or imposed on it by or under any other Act or law (s 22) and "may do all such things as are supplemental or incidental to, or consequential on, the exercise of its functions": s 23. 13A council may provide goods, services and facilities, and carry out activities, appropriate to the current and future needs within its local community and of the wider public, subject to this Act, the regulations and any other law: s 24 (emphasis added). 14The provisions of the LGA concerning the setting of ordinary rates that Ward JA has set out in her reasons, and those referred to below, demonstrate the stringent obligations imposed on councils in that respect. 15Chapter 13 is headed "How are councils made accountable for their actions?" The heading is part of the LGA: s 35(1)(a), Interpretation Act. Chapter 13 applies to the functions conferred or imposed on a council by or under the LGA or any other Act or law: s 401. Part 2 of Chapter 13 deals with management plans. A council is required to prepare a management plan annually with respect to, inter alia, its revenue policy for the next year: s 402. That plan is required to include, inter alia, "a statement with respect to each ordinary rate and each special rate proposed to be levied" (s 404(1) - emphasis added), including, with respect to an ordinary or special rate proposed to be levied, the ad valorem amount of the rate: s 404(2). The draft management plan is required to be publicly exhibited and to be the subject of submissions: s 405. It can only be adopted as a final plan after the council has considered submissions so made: s 406. A council must not make a rate or charge until it has given public notice (in accordance with s 405) of its draft management plan for the year for which the rate or charge is to be made and has considered any matters concerning the draft management plan in accordance with s 406: s 532. 16Chapter 15 deals with how councils are financed. In accordance with that Chapter, a council may obtain income from rates, charges, fees, grants, borrowings and investments: s 491. It may make ordinary or special rates: s 492. This case is concerned only with the former. 17A council must make and levy an ordinary rate for each year on all rateable land in its area: s 494(1). Each rate or charge is to be made for a specified year, being the year in which the rate or charge is made or the next year: s 534. A rate or charge is made by resolution of the council: s 535. That power cannot be delegated: s 377. 18The power to vary general income (which includes income from ordinary rates: see s 505) is subject to ministerial direction which may be exercised "for a specified year" (s 506) or during a specified period of two or more years not exceeding seven years: s 508A(1) and (2). A council can not make rates and charges for a year so as to produce general income of an amount that exceeds the notional general income of the council for the previous year as varied by the percentage (if any) applicable to the council under ss 506, 508 (2) or 508A for the year for which the rates and charges are made, except to catching up shortfall in general income (s 511) or in order to catch up income lost due to reductions in valuation (s 511A). 19Any ordinary rate must contain an ad valorem rate and may include other components: s 497. The ad valorem rate "is an amount in the dollar determined for a specified year by the council and expressed to apply in the case of an ordinary rate - to the land value of all rateable land in the council's area within the category or sub-category of the ordinary rate: s 498(1)(a). The ad valorem amount of a rate is to be levied on the land value of rateable land, except as provided by the LGA or any other Act: s 498(2).

[5]

Consideration 20Peregrine relies upon the Council's status as a body corporate to underline the width of its powers to contract. However that power is not unlimited. "Generally speaking, a statutory corporation (unlike a corporation existing at common law or created by charter) does not have legal capacity to do anything except exercise the functions for which it was incorporated (normally to be found expressly stated or necessarily implied in the statute by which it is created), and such things as are necessary for, or incidental to, the exercise of those functions": Aboriginal Community Benefit Fund Pty Ltd v Batemans Bay Local Aboriginal Land Council (1996) 92 LGERA 212 (at 216) per McClelland CJ in Eq. Although his Honour's decision was overturned on appeal in Aboriginal Community Benefit Fund Pty Ltd v Batemans Bay Local Aboriginal Land Council (1997) 41 NSWLR 494 (a decision affirmed in Bateman's Bay Local Aboriginal Land Council v Aboriginal Community Benefit Fund Pty Ltd [1998] HCA 49; (1998) 194 CLR 247), neither decision criticised this aspect of his reasons. 21Further, the use of the words "subject to this Act..." in s 24 of the LGA demonstrates a legislative intention that a council's powers will be broad, but not unlimited: Sanpine v Koompahtoo Local Aboriginal Land Council [2005] NSWSC 365 (at [332]) per Campbell J (as his Honour then was). As his Honour explained (at [332]) it means that, applied to this case, a council does not have power to do away with a mandatory requirement imposed by the LGA. His Honour's decision was affirmed in the High Court: see Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115 (at [41]) per Gleeson CJ, Gummow, Heydon and Crennan JJ. 22As is apparent from the provisions of the LGA to which I have referred, the mandatory requirements of the exercise of the Council's rate-making function, accordingly, are at least that it undertake that exercise annually, that it do so after setting out its proposals for its revenue policy in a draft management plan which is explicit as to proposed ordinary rates, including the proposed ad valorem rate, that that plan is subject to public scrutiny and only adopted after any submissions received have been considered. The requirement that the rates only be made after public submissions and only by the elected council demonstrates the public interest in the proper exercise of the rate-making power. Such public interest is readily comprehensible as the exercise of the rate-making power affects every owner of rateable land in the council's area. 23The mandatory requirements of the rate-making exercise demonstrate the importance of that function to a council's discharge of its duties. As has been observed, "the main financial resource of a council has been, traditionally, rating - in particular, ordinary rating": Department of Local Government, Council Rating and Revenue Raising Manual (NSW Government, September 2005) p 8, cited in "Distributive justice, ordinary rates and the categorisation of land for rating purposes in New South Wales: An update", Guy J Dwyer, (2014) 19 LGLJ 3 (at 3). 24It would, in my view, be inimical to those mandatory requirements to hold that the Council had power to contract in terms of cl 3.1(a) of the Roads Agreement. That clause was an anticipatory fetter on the exercise of the rate-making discretion which, according to the LGA, had to be exercised in the public interest at the end of the prescribed procedures I have described. It purported to operate over 20 years, thus avoiding the Council's obligation to make and levy rates annually, it was not levied on the land value of the land in question (there being no valuation for the Gingko Mine at the relevant times) and it was not included in a draft management plan on which interested parties had the opportunity to make submissions. 25Peregrine relied upon Fox J's statement in Windsor and Maidenhead Royal Borough Council v Brandrose Investments Ltd [1981] 1 WLR 1083 (at 1089) (see Ward JA at [135]). That statement does not assist as it depended upon a valid initial exercise of statutory power. For the reasons I have given the Council could not validly contract in the manner set out in cl 3.1(a). 26Peregrine's reliance on City of Sydney v Streetscape Projects (Aust) Pty Ltd [2011] NSWSC 1214; (2011) 94 IPR 35 (at [196] - [213]) as authority for the ambit of the power of the Council arising from s 220 of the LGA is also misconceived. In that case, Einstein J rejected Streetscape Projects' argument that a licence agreement it made with the City of Sydney to act as its authorised representative for the distribution and sale of Smartpoles (a multi-function pole which was capable of carrying multiple features, such as street lighting) was ultra vires. His Honour first held (at [198]) that s 220 of the LGA as in force following the amendments effected by the Local Government Amendment (Legal Status) Act 2008 was "a definitive exclusion of any application of the concept of ultra vires as it invests in the City the legal capacity and powers of an individual both in and outside the State". This aspect of his Honour's reasons was not considered on appeal: Streetscape Projects (Aust) Pty Ltd v City of Sydney [2013] NSWCA 2; (2013) 92 ACSR 417. As is apparent it is inapposite to the Council as constituted at the time the Roads Agreement was made. 27Secondly, his Honour held (at [199] - [208]) that the City of Sydney's power derived from s 24 of the LGA to produce poles for use within its local area extended to dealing with the intellectual property in those poles on a commercial basis. His Honour rejected Streetscapes Projects' ultra vires argument as meaning that although "the City would be empowered to obtain intellectual property [it] would be unable to deal with such rights in a manner consistent with the objectives upon which [it] was founded ... contrary to the terms of ss 23 and 24 of the Local Government Act". 28That conclusion does not assist Peregrine, having regard to my conclusion that cl 3.1(a) is not consistent with the express provisions and scheme of the LGA concerning the levying of rates. 29For similar reasons, in my view, Marrickville Metro Shopping Centre Pty Ltd v Marrickville Council [2010] NSWCA 145; (2010) 174 LGERA 67 does not assist Peregrine. It might be accepted, as Peregrine contends, that in that case Tobias JA (with whom Basten JA and Handley AJA agreed) held (at [20]) that the "effect of ss 528(1) and 529(3) is that the [LGA] expressly contemplates that the ad valorem rate may be different for different categories or different sub-categories". His Honour also held (at [93]) that "the relevant provisions of the Act expressly permit differential rating between categories and sub-categories and, therefore, discrimination in the imposition of rates between those categories and sub-categories." Accordingly, his Honour's conclusion was that the discrimination he identified was consistent with express provisions of the LGA. 30In contrast as I would conclude, and as the primary judge and Ward JA's analyses also demonstrate, a contract which precludes the Council charging Peregrine rates calculated annually on an ad valorem basis is inconsistent with the express provisions of the LGA establishing the rate charging scheme. 31MEAGHER JA: I agree, for the reasons given by Ward JA, that the appeal should be dismissed with costs. 32WARD JA: The appellants are part of the Cristal (formerly Bemax) group of companies. They are involved in mineral sands mining ventures in the Wentworth Shire in New South Wales. The first three appellants hold the mining lease in respect of a mine in the Wentworth Shire known as the Gingko Mine. Their dispute with the respondent, the Wentworth Shire Council, relates to the issue by the Council of rate notices in an amount in excess of the amount the appellants say it had agreed it would levy in respect of the Gingko Mine. The fourth appellant (Pooncarie) is the entity that entered into the relevant agreement pursuant to which the appellants say the Council so bound itself.

[7]

"Indicative" rate for Gingko Mine 36At some time around 20 February 2002, Bemax sought an indication from the Council as to the rate the Council would charge for the Gingko Mine. The Minutes of the Council's Policy & Financial Committee Meeting on 20 February 2002 record that: Bemax have sought from the Council some indication of what rate the Council will charge for the Gingko mine. In the past, rates on mines were charged according to the production of the mine, but the 1993 Act changed that so that rates are charged on valuation. It is the valuation which recognises the value of production of the mine. The Director Corporate Services has collected some information as follows:- The Valuer General will provide a valuation, based on value of production and royalties, when a Mining Licence has been issued. Bemax at this stage does not have a mining licence but is arranging for one to be forwarded to the Valuer General plus other information. Other Councils apparently work backwards. They figure how much they want from mining companies and then set rate to being in that amount. Some Councils obtain capital contributions as well. A suggested process is:- Establish the amount of money to be paid by Bemax Apply desired rate In 2002 change Council's management Plan to reflect the mining rate. ... There are two ways we can go:- 1. To rate low at first to encourage the Company, and to build up the rate over the life of the mine, or 2. Charge a rate which will remain the same over the life of the mine. In both cases the Council's mining rate will vary from year to year. [my emphasis] [In the second of the two proposed ways to go, the anticipated variation must have been anticipated from incremental or "rate pegging" increases, as will be seen in due course; otherwise the statement that the mining rate would vary from year to year is on its face inconsistent with it remaining the same over the life of the mine.] As a suggestion we could start at a rate of $40-$50,000 p.a. 37A resolution was then passed that the Council advise Bemax that the Council would "provide a rate for the Gingko mine at an indicative amount of $100,000 per annum" (my emphasis).

[8]

Grant of mining lease and communications prior to entry into Road Agreement 38The mining lease for the Gingko Mine was granted on 6 March 2002. Thereafter, steps were taken for the establishment of the mine, which did not become operational until 2006. 39Minutes of a Council meeting on 15 December 2004 record that the Council had received advice from its solicitors as to the compulsory acquisition of land for the purposes of facilitating "road requirements for BeMaX Resources (Gingko Mines)". It resolved to accept the recommendation of the Council's General Manager, then Mr Boyd, for the acquisition of that land. 40Subsequent Council minutes, of 16 February 2005, contained a report from Bemax on the progress of the Gingko Mine and associated development works and a report on the consultation between Bemax and the Council for approval of the haul road, noting that it was to be maintained at cost to Bemax for the duration of the mining operations at the site. 41On 23 March 2005, an officer of the Council (Mr Turner) sent an email to the Council's external solicitors, which was copied to Mr Boyd (the Turner email). That email was then forwarded by Mr Turner to the appellants' representative, Mr Finnis. Much significance is placed on this email in the appellants' rectification case to which I refer in due course. In that email, Mr Turner referred to revised arrangements in relation to the haul road that were said to have been approved by the mayor, as follows: revised arrangements for the 20 year life of the haul road as approved by the mayor. long discussion with simon finis [sic] last night has resulted in: [reference there was made as to the time frame for signing of the three agreements so Bemax could continue with road construction; as to matters relating to the future road repair at end of mine life; as to land acquisition for the haul road; road maintenance and road construction] 42The email then continued: on other matters. rates. council has a motion dated 20/2/2002 that the rate be $100000.00 p. a. but no starting date. agreed that Bemax start paying rates as from 1/1/2006, which is about the time they will start mining. The amount of rates is expected to remain about the same plus increase due to rate pegging etc. [my emphasis] simon [finnis] claims that a deal was done with david [a previous Council officer] that the rates included an amount to offset local road maintenance due to mine activities. ????????????? ... 43Pausing there, the reference in the email to the 2002 Council motion must be to that referred to at [37] above, which in its terms related to Bemax being advised as to an "indicative" rate. 44Council minutes of April 2005 record a report by the General Manager as to the advice from external lawyers that certain resolutions needed to be passed to satisfy the road construction agreement "and details between Council and Bemax". The recommendation made was that Council enter into an agreement with Pooncarie, there described as the operator of the Gingko Mine, on the terms and conditions there set out. Those terms and conditions included: (e) that the land rates payable to Council by the Mining Company in respect to the Gingko Mine, will be $100,000.00 per annum commencing 1st January, 2006 and adjusted annually in accordance with the Local Government Act, 1993. [my emphasis] 45The minutes record that resolution as having been carried.

[9]

Road Agreement 46Pooncarie entered into the Road Acquisition and Construction Agreement with the Council on 28 April 2005 (the Road Agreement). It appears to be accepted that Pooncarie, which was defined in the agreement as "the Company", did so as agent for and on behalf of the remaining appellants, each of whom signed, but was not described as a party to, the agreement. Recital C of the Road Agreement recorded the intention of Pooncarie "and its associated entities" to operate mining activities within the Wentworth Shire; in particular, the Gingko Mine and a prospective mining operation at a not yet operational mine referred to as the Snapper Mine. 47Recital E noted that the Council had agreed to acquire the Acquisition Lands, as defined, and thereafter, in consideration of the agreement, the Company as agent for the Council would, inter alia, design, construct and maintain "the Road" for public use and for the "Company's Usage" and would "generally undertake the obligations as detailed in Schedule 3 to this Agreement", there defined as "the Company's Undertakings". 48The term "Company's Undertakings" was then more expansively defined in clause 1.1 of the Road Agreement, the definitions section, as meaning: the obligations of the Company pursuant to this Agreement, including but not limited to the obligations detailed in Schedule 3 and clause 3, 4 and 5 of the Agreement and the Company's obligations pursuant to the Compensation Agreements [those being tripartite compensation, access licence and release agreements with landholders affected by the Council's acquisition of the Acquisition Lands] 49The undertakings contained in Schedule 3 of the Road Agreement included the undertaking by Pooncarie to design, construct and maintain the haul road (clause 3.3). 50Unless terminated earlier, in accordance with the provisions of the agreement, the term of the Road Agreement was from 30 April 2005 until the last of the cessation of mining operations at the Ginkgo and Snapper Mines and 30 June 2026 (clause 2.1). 51The critical provision for the purposes of the present proceedings is sub-clause 3.1(a) of the Road Agreement. That sub-clause, mirroring the words of condition (e) of the resolution of April 2005 (set out at [44] above), provided that: 3.1 In addition to the Company's Undertakings, the Company [Pooncarie] will; (a) Pay to Council in respect of the Ginkgo Mine, land rates of $100,000.00 per annum commencing 1st January, 2006 and adjusted annually in accordance with the Local Government Act. 52The proper construction of clause 3.1(a) and the Council's power to enter into an agreement containing such a provision are at the centre of the dispute between the parties.

[10]

Rates notices 53In April 2006, the Council issued an invoice for "ex gratia rate charge" in the amount of $100,000. The explanation given from the bar table for the description of this as an "ex gratia" rate charge was that the invoice was issued during the course of the relevant ratings year, which ran on a financial year basis, and that Council could not levy a rate as such at that time since this amount had not been included in the applicable Council management plan. 54The Council issued a "supplementary" rate notice in September 2006 in the sum of $360,190. Minutes of a Council meeting on 20 September 2006 record that Council had received a provisional valuation of the Gingko Mine, prior to the adoption of the management plan for 2006 (a copy of which was not in evidence), with an approximate value of $338,000 and that it had recently received a supplementary valuation listing the value of the property at $6m. The explanation from the Valuer-General's department for the substantial difference in valuation was said to be that the original estimate had been based only on the land value and had not taken into account the mineral content of the land. 55The Council minutes record that the Council resolved to approve a recommendation that the ad valorem rate for the mine, advertised in the 2006 Management Plan be reduced from the basis of a base rate of $190.00 plus an ad valorem rate of $1 per $1 of valuation to a base rate of $190.00 plus $0.06 per $1 of valuation. It was said that this would result in a reduction in rates "from the current advertised amount of $6,000,000 to $360,000". 56An explanation was given by the Council to Bemax for the striking of the rate in the supplemental notice in a letter dated 23 May 2007 from the Director Corporate Services of the Council, Ms Maguire, to Bemax. In that letter, which referred to discussions as to the rating issue, Ms Maguire stated that Council had levied a rate for the Gingko Mine had been in accordance with the provisions of the Act applicable for the 2006/2007 financial year and went on to say: While there was an undertaking given by Pooncarie ... in the [Road Agreement] ... to pay a certain amount in respect of rates for the Gingko mine land, Council does not have the statutory power to make and levy a rate in respect of land within its Local Government area as the rate was not struck in accordance with the provisions of the Local Government Act at the time of the Agreement. At that stage there was no valuation of the land by the Valuer General. 57Reference was made to the receipt in August 2006 of a valuation of the land for $6m and to the requirement to levy a "fair and equitable" rate. 58In the following years, the Council issued rate notices on an annual basis significantly in excess of $100,000, both in respect of the Gingko Mine and, once it became operational, the Snapper Mine. The mining lease for the latter mine was held by Bemax. It is not a party to the present proceedings.

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Proceedings 59Various sets of proceedings were commenced in respect of the dispute as to the rates levied by the Council for the two mines. 60First, the Council brought proceedings (2011/259950) in the Common Law Division of the Supreme Court against Bemax seeking judgment in respect of outstanding rates notices issued to Bemax in respect of the Snapper Mine (the Bemax proceedings). In those proceedings, Bemax alleged that its officers, acting on behalf of the appellants who were referred to as the joint venturers, were led by the Council's conduct to understand that the rates payable by the joint venturers for the Gingko Mine would be $100,000 per annum. It was contended that Bemax was justified in assuming that the rates for the Snapper Mine would be comparable to those for the Gingko Mine. 61Second, the appellants brought proceedings (2012/299456) in the Equity Division of the Supreme Court against the Council seeking declaratory and other relief in relation to the rates payable in respect of the Gingko Mine (the Peregrine Sands proceedings). 62Third, the appellants brought class 3 proceedings (2012/349485) against the Council in the Land and Environment Court pursuant to s 574 of the Local Government Act 1993 (NSW) (the class 3 proceedings). Those proceedings were described by the primary judge (at [117]) as having been defensive in nature, to preclude any reliance by the Council on an argument that the appellants and Bemax should have launched an appeal under that section. 63The class 3 proceedings were transferred to the Equity Division and all three sets of proceedings were heard together by the primary judge. 64His Honour dismissed the claim by Bemax in the Bemax proceedings. There is no appeal from that decision. As to the class 3 proceedings, his Honour noted that the parties were in agreement that neither Bemax nor the appellants were making claims falling within s 574. In light of that concession, his Honour dismissed those proceedings without considering that matter any further. Again, there is no complaint as to this. 65Accordingly, this appeal concerns only the Peregrine Sands proceedings. His Honour there dismissed the appellants' statement of claim and gave judgment for the Council on its cross-claim in respect of the outstanding rates under the notices as issued - in the amount of $1,916,005.75 inclusive of interest up to and including 2 August 2013.

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Peregrine Sands proceedings 66The appellants sought a variety of relief in these proceedings. 67They sought declarations that the Council had engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 52 of the now repealed Trade Practices Act 1974 (Cth) and s 42 of the Fair Trading Act 1987 (NSW) and an order preventing the Council from levying council rates in relation to the Gingko Mine other than in accordance with the terms of the Road Agreement and the representations pleaded in the Statement of Claim (the misrepresentation case). 68They sought a declaration that, upon its proper construction, clause 3.1(a) of the Road Agreement required the Council to adjust the rates charged with respect to the Gingko operation in accordance with "the usual rate pegging adjustments under the Local Government Act and not otherwise" (the construction case). 69In the alternative to the construction case, an order was sought in equity, or pursuant to the respective statutes invoked by the appellants, rectifying or varying clause 3.1(a) of the Road Agreement so that it would read, relevantly, "$100,000 per annum ... adjusted annually in accordance with the usual rate pegging adjustments under the Local Government Act" (my emphasis) (the rectification case). 70A further declaration was sought that the Council was estopped from levying council rates other than in accordance with the terms of the Road Agreement and the pleaded representations (the estoppel case). 71The appellants next sought an order setting aside or declaring invalid the purported rates notices or, alternatively, for damages. Finally, they sought a declaration that, in the circumstances that had occurred, upon their proper construction ss 574 and 712(5) of the Local Government Act had no application to the claims pleaded and did not operate to prevent the relief they sought. 72No claim for damages for breach of the Road Agreement by the Council, in the levying of rates contrary to clause 3.1(a), was expressly made in the pleading. Rather, the appellants' case was that the rate notices had not been validly issued and should be set aside. 73The Council denied any misleading or deceptive conduct. It accepted that clause 3.1 of the Road Agreement provided that Pooncarie would pay land rates of $100,000 per annum commencing on 1 January 2006 in respect of the Gingko Mine but contended that this was an interim rate struck between Pooncarie and the Council in the absence of any land valuation by the Valuer-General and was at all times subject to the provisions of the Local Government Act. 74At [9(c)] of its defence, the Council pleaded that it was at all times its statutory duty, under Ch 15 of the Local Government Act, to levy annual rates on land, including land the subject of the Gingko Mine lease, consisting of either an ad valorem amount based on the land value or a base amount to which an ad valorem amount is added. It pleaded at [9(d)] that the rates levied on the land the subject of the Gingko Mine were fixed and/or adjusted in accordance with the Local Government Act following valuations carried out by the Valuer General in July 2006, November 2008 and October 2011 respectively. 75By their reply, the appellants pleaded that if, which was denied, the Council had a statutory duty to levy rates as it alleged, that statutory duty was inconsistent with ss 52, 82 and 87 of the Trade Practices Act as laws of the Commonwealth and, accordingly, the latter prevailed and the former (Ch 15 of the Local Government Act) was, to the extent of the inconsistency, invalid by virtue of s 109 of the Constitution. As a result of that pleading, the NSW Attorney-General intervened to argue the constitutional point. No issue is now pressed on that point. 76By cross-claim in the proceedings, the Council sought the sum of $1,922,350.18 (excluding interest) for outstanding rates together with interest under the Local Government Act on the rates outstanding at a rate of 10% per annum from 1 September 2012 calculated on a daily basis. 77His Honour handed down judgment in favour of the Council on 2 August 2013 (Wentworth Shire Council v Bemax Resources Ltd [2013] NSWSC 1047).

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Categorisation of land 84Before making an ordinary rate, councils are required to have taken a number of steps. First, the council must categorise the land within its area (see ss 514 to 531 of the Act). Councils must declare each parcel of rateable land to be within one of four categories (farmland, residential, mining or business) and to give notice of the category declared to the person rateable for the particular land (ss 514 and 520). 85The relevant land in this case did not fall within the definition of mining land, even though it was to be used for mining purposes, because the definition of "mining" land in s 517 of the Act was limited to coal-mining or metalliferous mining. Rather, the relevant land was categorised as falling within the business category, which is defined as land not categorised in one of the other three categories (s 518). 86Any person receiving notice of the categorisation of his, her or its land may apply to the council to change the category and, if the council declines to amend the category, may appeal against that determination (ss 525 and 526). Pursuant to s 525(3), councils are required to accept a rateable person's nomination of the category unless the council has reasonable grounds for believing that the land is not within that category. Pursuant to s 525(5), if the council does not accept the nominated category it is obliged to provide reasons for its decision. Section 526 provides for an appeal to the Land and Environment Court against a council's determination within 30 days of that determination. On such an appeal the Court may determine the category. 87Councils are also permitted to determine sub-categories within each category (s 529). The same rights of review and appeal apply in relation to the determination of sub-categories as apply in relation to the declaration of categories (s 531). 88The Gingko Mine was first categorised by the Council (in the supplementary rate notice) as a differential rate category, i.e., a sub-category, being "Mining - Mineral Sands". However, that must have been a sub-category within the business category as it was not a metalliferous mine. By the time of the 2007 rates notice it was categorised as "Business-Mineral Sands Extraction". In 2012, it was re-categorised as "Business - Pooncarie". 89For at least part of the period, the Gingko Mine was the only land in its business sub-category (see the draft management plan for the Council's general rates for 2008/2009). After the Snapper Mine became operational, there were two parcels of land in the Business-Mineral Sands Extraction sub-category (see the management plan at CB 219).

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Requirement to make draft management plan 93The second matter to which councils were required to attend, under the legislation prior to its amendment in 2009, before making and levying a rate in compliance with their obligation so to do under s 494, was the preparation of a management plan. 94Pursuant to s 402, Councils were required each year to prepare a draft management plan with respect to the Council's revenue policy for the next year. Councils were required, pursuant to s 406, to adopt such a plan before the end of each year for the following year. The draft management plan was required (pursuant to s 404) to include: detailed estimates of income and expenditure and, in respect of each ordinary rate (i.e., for each category or sub-category of land), the ad valorem amount, the base amount (if any), the estimated yield, and the percentage of that yield contributed by the base amount. 95In the material before the Court were pages from the Council's draft management plan for 2008/2009 and its management plan for the current 2008/2009 and proposed 2009/2010 years as well as plans for later years. It is clear from the former that the ad valorem rate was specified (column 4) as a fraction of the land value (column 3), arrived at by dividing the totality of the land values in each particular category by the amount of the rate levied against that land (column 5). To that figure was added a base amount (column 6) that was the same as the base amount for all land in the overall category. The management plan also showed the incremental increase in respect of the total notional yield for each sub-category from that of the previous year. 96Councils were required to give public notice of the draft management plan and to exhibit it for not less than 28 days (s 405). Councils were required to take into consideration any submissions made in respect of the draft management plan (s 406(2)). 97Councils were not permitted to make a rate until public notice has been given, in accordance with s 405, of the Council's draft management plan for the year for which the rate was to be made and the Council has considered any matters concerning the draft management plan in accordance with s 406, including any submissions made (s 532).

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Primary Judgment 98His Honour accepted the construction of clause 3.1(a) of the Road Agreement that had been advanced by the appellants, namely that the words "adjusted annually in accordance with the Local Government Act" meant adjustments arising out of the percentage rate published in the New South Wales Gazette pursuant to s 506 of the Local Government Act; not, as the Council had contended, the amounts determined as rates by the Council from time to time based upon valuations received by the Council. 99At [51], his Honour said: The interpretation advanced by the Council seems to reject the relevance of the $100K to the "adjustment". What the Council is free to do, it says, is determine a new amount wholly without regard to the rate that is mentioned in the clause. In my view "adjustment" implies that the rate first mentioned is the starting point for variation and I think that, looked at objectively, the meaning of the words advanced by the joint venturers is more realistic. If the parties intended that the rates were provisional until the valuation was received that is of such significance that it is a matter that would be expected to be articulated in the clause itself. Incidentally no section of the Act identified expressly provides for annual adjustments other than s 506. Whilst I agree that the clause is ambiguous, I do no [sic] think that the construction contended by the Council is consistent with the words actually used. I therefore conclude, and without reference to extrinsic materials, that by the Road Agreement the Council agreed to levy rates at $100K per annum with adjustments in the nature contemplated in s 506 of the Act. [my emphasis] 100His Honour went on (at [52]) to say that, on the assumption that recourse could be had to extrinsic materials because the words in question were ambiguous, he accepted the Council's contention that the Council minutes did not advance matters. 101His Honour noted that the issues of rectification and estoppel did not arise in view of his conclusion as to the proper construction of clause 3.1 but went on to make some observations as to those matters. 102In relation to the rectification case advanced by the Council, his Honour, referring to the principles set out in Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603, said that he regarded the Turner email as establishing an intention on the Council's part that rates of $100,000 were to be adjusted in accordance with ministerial determinations in accordance with s 506 of the Local Government Act, and that this was an intention shared by the appellants ([56]). 103In relation to the estoppel argument, his Honour noted: first, that considerations relevant to the ultra vires/fetter argument were also relevant to estoppel; second, that the ambit of estoppel against government is very limited; and, third, that, although loss of an opportunity to negotiate can be a basis for an award of damages, he did not think that any real detriment had been established, whether that was put as a loss of opportunity to negotiate or otherwise ([57]). 104His Honour next addressed (from [58]) and ultimately accepted (at [118]) the contention by the Council that, even if on its true construction the Road Agreement provided for it to levy rates of $100,000 per annum for 20 years, that clause could not stand because it impermissibly fettered the Council in undertaking its statutory duty of assessing rates each year in accordance with the Local Government Act. 105His Honour concluded (at [74]) that clause 3.1 was not authorised by the Local Government Act and was incompatible with it; and hence that it was a provision beyond the power of the Council to make. Because the appellants had not sought to set aside the Road Agreement, his Honour found it was not necessary to consider what impact the invalidity of one of the clauses of the agreement might otherwise have had. 106His Honour rejected the claims made by the appellants under the Fair Trading Act and Trade Practices Act on the basis that the Council was not a trading corporation and that the Road Agreement was not entered into by the Council in trade or commerce. Further, his Honour was not persuaded that any loss had been demonstrated to have arisen by reason of the appellants' reliance on the representation made by the Council that rates would be limited. As noted earlier, there is no challenge to those findings. 107His Honour concluded, relevantly, at [118] that: (i)Clause 3.1 of the Road Agreement did not permit the Council to make adjustments to the $100K rate per annum other than adjustments resulting from Ministerial direction given to the Council pursuant to s 506, [and] (ii)Clause 3.1 of the Road Agreement was invalid because it was beyond the power of Council to make, ... 108In a second judgment given on 12 September 2013, his Honour made costs orders in respect of the three sets of proceedings. 109As to costs, the Council had contended that since it had been successful in the proceedings, and had obtained judgment for the difference between the rates levied and rates actually paid by the appellants and Bemax, it should have an order that its costs be paid by them on the ordinary basis and an order that they pay interest on costs paid by the Council to its lawyers in accordance with s 100 of the Civil Procedure Act 2005 (NSW). 110The appellants, and Bemax, resisted the costs orders sought by the Council on various bases: (1)that the Council had entered into an agreement which contained a term to which it had agreed but which it had successfully maintained did not bind it; (2)that Council had insisted on expensive, and ultimately unnecessary, discovery and to make the appellants pay for that is not consistent with the policy of the just quick and cheap resolution of the real issues in the proceedings; (3)in relation to the Class 3 proceedings, that the usual rule in rule 3.7(3) of the Land and Environment Court Rules 2007 (NSW) was that there be no order as to costs and there was no good reason to depart from the presumption that each party should bear its own costs; (4)that the first set of proceedings [the Bemax proceedings] was erroneously commenced against the appellants for the Gingko rates and the costs thrown away by reason of the amendment should not be recovered; and (5)that there were other delays by the Council in preparing the case. 111The appellants also queried claims by the Council for pre-trial costs. 112The appellants argued that, other than the construction argument on which the Bemax parties had succeeded and the rectification claim on which his Honour had looked favourably, each of the misleading or deceptive conduct cases and the estoppel case was brought as a shield, more than as a sword, in answer to the ultra vires defence raised by the Council. It was submitted that no encouragement should be given to local councils to adopt an approach of entering into ultra vires agreements, then relying on the fact that they were not fettered by such agreements, giving rise to litigation in which they then recover their costs in full. 113His Honour had some sympathy with a party dealing with a council who learned that council would not honour a clause to which it had agreed but said that if his conclusion was correct (that the Council and the joint venturers ought not to have entered into such an agreement), then the Council was justified in contending the clause was ultra vires. His Honour was not convinced that the use by the Council of a clause, agreed to by the other party to the contract, which it was later realised was ultra vires was a circumstance calling for a mark of disapproval, particularly when the Council had made its position clear well before the proceedings had commenced. 114His Honour addressed the other issues that had been raised and concluded that: costs should follow the event and that the appellants should pay the costs of the proceedings, not including costs incurred before the commencement of proceedings, those costs to be assessed together with costs in the other two proceedings in each case, and that interest on costs paid by the Council to its lawyers was payable in accordance with Drummond and Rosen Pty Ltd v Easey (No 2) [2009] NSWCA 331.

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Appeal 115The numerous grounds on which the appellants challenge his Honour's decision were grouped by the appellants into the following five categories; and I shall deal with them accordingly: (a)error in finding that the agreement as to rates was not authorised by, or was inconsistent with, the Local Government Act (grounds 1-9); (b)error in not holding that s 564(1) of the Local Government Act specifically authorised the agreement as to rates (grounds 10-11); (c)error insofar as his Honour dealt with ultra vires in terms of the procedure leading to the execution of the Road Agreement, which it is contended was not an issue below (grounds 12-13); (d)if the Council's notice of contention is upheld, error in failing to order rectification of clause 3.1(a) of the Road Agreement as contended for by the appellants (ground 13A); and (e)if the foregoing grounds fail, error in the exercise of the discretion as to costs (ground 14). 116As adverted to in (d) above, the Council filed a notice of contention seeking to affirm his Honour's decision on the following grounds: that his Honour erred in the construction of clause 3.1(a) of the Road Agreement (grounds 1 - 3 of the notice of contention), and, to the extent that his Honour so found, that his Honour erred in finding the Turner email established an intention on the part of the Council that rates of $100,000 per annum were to be adjusted in accordance with ministerial determinations in accordance with s 506 of the Local Government Act or constituted the clear and convincing proof of such an intention such as to permit rectification of clause 3.1(a) of the Road Agreement (ground 4 of the notice of contention). 117During the course of argument on the appeal, the appellants sought leave to amend the orders sought in their amended notice of appeal to add the following: 3.(a)(1) Alternatively, declare that upon the proper construction of clause 3.1(a) of the Road Agreement the issuing of the rate notices in 3(a) ("Rate Notices") by the Respondent was in breach of clause 3.1(a) of the Road Agreement and in [4A] a claim for judgment to be given for the appellants against the Council for the sum calculated in Annexure A to the further amended notice of appeal. 118The appellants submit that, had judgment at first instance been in their favour there would not have been a need for any damages based order but that since then they have paid the amount of the judgment debt for unpaid rates inclusive of interest. It is submitted that the real issue in the case is the obligation of the appellants to pay rates to the Council in accordance with clause 3.1(a) and in the circumstances it is an amendment appropriate to be made under s 64 of the Civil Procedure Act. 119The Council does not consent to the proposed amendment. It submits that it does not reflect the way that the case was conducted below, noting that his Honour did not have to consider how the contract might render the rates notices invalid. It further submits that the amendment is not apt to address the issues raised by the Court and that the proposed new prayer for relief involves double counting. 120It is not necessary to consider in any detail those submissions. In light of the conclusions I have reached as to the main grounds of appeal, the additional relief sought would not be available. Had it been necessary to determine, I would not have granted leave for the amendment when the hearing below was run on the basis that no claim for damages for breach of contract was sought; rather, the allegation was that the cross-claim by the Council should be dismissed because the rates notices had not been validly issued. 121I turn then to the five particular groups of appeal grounds.

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The appellants' submissions 123The appellants point to the width of the powers and functions conferred on councils by the Local Government Act, as being the critical context in which the specific provisions of the Act dealing with the making of rates should be construed; to the Council's charter, as set out in s 8 of the Act; and to ss 21 and 22 of the Act which provide that a council has the functions conferred or imposed on it by or under the Act or any other Act or law. Under the charter set out in s 8 of the Act, a council is "to have regard to the long term and cumulative effects of its decisions" and is "to raise funds for local purposes by the fair imposition of rates". 124Reliance is placed on the fact that, when it entered into the Road Agreement, the Council was a body corporate (s 220 of the Local Government Act) and hence had the powers conferred on bodies corporate pursuant to s 50 of the Interpretation Act 1987 (NSW), including a broad power to enter into contracts. Under s 23 of the Local Government Act, the Council has power to "do all such things as are supplemental or incidental to, or consequential on, the exercise of its functions". Reference is also made to s 24 of the Act, which empowers councils, subject to the Act, regulations and any other law, to provide goods, services and facilities, and carry out activities, appropriate to the current and future needs within its local community and of the wider public. 125It is submitted by the appellants that the breadth of the functions so conferred on the Council encompasses the power to enter into an agreement, such as the Road Agreement, for the benefit of the local government area; that benefit being described as the integration of requirements imposed on the mining companies with respect to roads that will in due course become public property with matters such as the rates to be charged for the duration of the mining operation. 126Reference is also made to the statement made in the Second Reading Speech on 27 November 1992 in respect of the superseded Local Government Bill 1992 (NSW) to the effect that one of its main features was that it involved "a fundamental shift from prescriptive to permissive expression of local government law"; there referring to the conferral of broad general powers on councils accompanied by specific constraints on power rather than the opposite. (Hansard, Legislative Assembly, 27 November 1992 at 10387; for the subsequent 1993 bill reference is made to the Second Reading Speech, Hansard, Legislative Assembly 11 March 1993 at 725.) 127It is submitted by the appellants that the power to enter into agreements with a long-term view to the wider interests of its local government area must encompass, subject to any contrary legislative provision, the power for a local council to provide appropriate incentives for business enterprises to establish themselves in a particular local government area for the future benefit of that local government area and that there is no reason why that would preclude a council conferring on a ratepayer commercial certainty as to its future expenditure on rates. 128The appellants submit that the more specific provisions of the Local Government Act in relation to rates are not inconsistent with such a conclusion. In particular, while the appellants acknowledge that s 494 of the Local Government Act obliges the Council to make and levy an ordinary rate for each year on all rateable land in its area, they submit that there is nothing in s 494 to suggest that the levying of rates may not be done by reference to an antecedent decision or agreement. In this regard, they point out that, under the Road Agreement, the rates were not entirely fixed in advance because clause 3.1(a) provided that annual rate pegging adjustments would have to be made. They submit that those adjustments would be made under s 494 and hence that it was incorrect for his Honour to say (as his Honour did at [51]) that no section of the Act expressly provided for annual adjustments other than s 506. 129The appellants submit that s 534 of the Local Government Act, which provides that "[e]ach rate or charge is to be made for a specified year, being the year in which the rate or charge is made or the next year", is no more than a mechanical or machinery provision and does not have the effect that the making of a rate or charge for a particular year or the following year cannot be done in accordance with an antecedent agreement validly entered into by a council under the broad powers provided for elsewhere in the Act, and that s 534 still has work to do in the context of the Road Agreement because, in accordance with the rate pegging arrangements provided for in clause 3.1 (a), the incrementally adjusted rates for the Ginkgo Mine would have to be set every year. 130Similarly, it is submitted that s 525 of the Local Government Act, which deals with the setting of categories or sub-categories of rateable land, is no more than a machinery provision and does not circumscribe a council's power to enter into an agreement concerning rates. 131As to s 402 of the Local Government Act, which as noted above required preparation of a draft management plan with respect to the council's activities for at least the next three years, they submit that the fact that the Council was only required to address its revenue policy for the next year does not mean that the Council was prohibited from taking a longer term view as to its rating policy and considering its revenue policy for more than one year ahead of the draft management plan. 132It is also submitted that there is nothing in the legislation to prevent the revenue policy being developed each year in recognition of the effect of an antecedent agreement such as that contained in clause 3.1(a) of the Road Agreement. 133In essence, what the appellants maintain is that the scheme of the Act contemplates that councils will, and that it was permissible for the Council here to, "retrofit" the making of rates. They argue that the Council must necessarily work backwards when making and levying rates as a function of the valuations of land received from time to time from the Valuer-General, noting the limit placed on the gross amount that a council may collect in rates in each year. In other words, it is said that each year the Council needs to perform the task of adapting the ad valorem rate for rateable land to the Valuer General's definition of land value from time to time. The ad valorem rate, so explained, is a multiplier within the formula used for the calculation of the ordinary rate; no more than a division of the totality of land values within a particular category by the amount of money sought to be taken from that category. The arithmetical exercise so required is what, the appellants say, permits the Council to bind itself to an antecedent rate agreement. 134The appellants point to the "rate pegging" process as the basis on which the Council could comply with the specific requirements of the Local Government Act in relation to the determination of rates yet still honour the terms of the Road Agreement. Hence it is submitted that there is no inconsistency or incompatibility with the legislation. 135The appellants further submit that, even if there be a potential incompatibility between the exercise of the statutory power to levy rates and the statutory power to enter into contracts, the latter may be seen as limiting the discretion to set rates for a particular ratepayer. Reliance is placed in this regard on what was said by Fox J in Windsor and Maidenhead Royal Borough Council v Brandrose Investments Ltd [1981] 1 WLR 1083 at 1089: There is nothing, it seems to me, in principle to prevent the exercise of a statutory power being limited by the previous exercise of another statutory power. As Sir John Pennycuick V.-C. observed in Dowty Boulton Paul Ltd v Wolverhampton Corporation [1971] 1 WLR 204 at 210: "The cases are concerned with attempts to fetter in advance the future exercise of statutory powers otherwise than by the valid exercise of a statutory power. The cases are not concerned with the position which arises after a statutory power has been validly exercised." 136Reference is also made to Ansett Transport Industries (Operations) Pty Ltd v The Commonwealth [1977] HCA 71; (1977) 139 CLR 54 at 77 per Mason J (as his Honour then was) as authority for the proposition that a discretion may be reflected in an agreement, and to authorities in New Zealand, the United Kingdom and Canada said to support such a contention: The Power Co Ltd v Gore District Council [1997] 1 NZLR 537; Birkdale District Electric Supply Company Ltd v Corporation of Southport [1926] AC 355; Norfolk v Roberts (1913) 13 DLR 463.

[22]

The Council's submissions 137The Council's contention, to the contrary, is that the making and levying of rates is governed by the detailed provisions of the Local Government Act; that it cannot contract out of its obligation pursuant to s 494 to do so; and that it cannot, by contract, limit or remove its discretion in relation to the fixing of rates. The Council maintains that the cases to which the appellants pointed as supporting the proposition referred to at [135] above are not properly to be read as so doing. 138The Council submits that the consequence of ss 525 and 526 is that a council cannot promise in advance to fix an ad valorem rate for a particular sub-category, so as to achieve a particular total rate, because this would have a potential, if not certain, impact upon the rates levied on other properties. It points out that any rate-payer in similar circumstances could seek to be included in the same sub-category and obtain the benefit of that particular ad valorem rate. 139Emphasis is placed by the Council on the requirement that it consider any submissions made as to the requisite annual draft management plan. It is submitted that a council could not be said to have fulfilled its obligations, or properly exercised its discretion in relation to the making and levying of rates, if it entered upon the tasks required by ss 402-406 and 532 constrained by an antecedent agreement as to the rates to be levied in respect of a particular parcel of land; i.e., if one element of the rates is predetermined and not able to be altered. 140The Council relies on the general principle of law that a public authority cannot preclude itself from exercising important discretionary powers or performing public duties by incompatible contractual or other undertakings, referring to Ansett Transport Industries, at 74 per Mason J, where his Honour cited Ayr Harbour Trustees v Oswald (1883) 8 AC 623. The Council notes that Ansett Transport Industries was applied in City of Subiaco v Heytesbury Properties Pty Ltd [2001] WASCA 140; (2001) 24 WAR 146 at [44]-[46], and Penola and District Ratepayers' and Residents' Association v Wattle Range Council [2011] SASCFC 62; (2011) 110 SASR 110 at [89]-[92] and [108]-[109]). 141Reference is also made by the Council to what was said by McLelland CJ in Eq in Aboriginal Community Benefit Fund Pty Ltd v Batemans Bay Local Aboriginal Land Council (1996) 92 LGERA 212 at 216: Generally speaking, a statutory corporation (unlike a corporation existing at common law or created by charter) does not have legal capacity to do anything except exercise the functions for which it was incorporated (normally to be found expressly stated or necessarily implied in the statute by which it is created), and such things as are necessary for, or incidental to, the exercise of those functions. ... It is not a matter of qualifying what would otherwise be an unlimited legal capacity by reference to some express or implied obligation or duty in the relevant statute, but rather a matter of ascertaining, on the true construction of the statute, the limits of the functions (or powers) conferred. 142Campbell J (as his Honour then was) in Sanpine v Koompahtoo Local Aboriginal Land Council [2005] NSWSC 365 considered at [332] the position of an Aboriginal land council: Section 41 ALR Act 1983 ... shows a legislative intention that the powers of a LALC like Koompahtoo will be broad, but not unlimited. The limits are to be found in the opening words of section 41, "subject to this Act". If there is a mandatory requirement imposed on a LALC by the ALR Act 1983, that LALC does not have power to do away with it. ... Nor does section 50 Interpretation Act 1987 confer unlimited legal capacity on a statutory corporation like Koompahtoo. Rather, it has such capacity as is "necessary for, or incidental to, the exercise of its functions". Dispensing with a mandatory statutory requirement imposed on a LALC is neither necessary for, nor incidental to, the exercise of the functions of a LALC. (emphasis as per original) 143The Council also notes that "a power is not incidental merely because it is convenient or desirable or profitable" (Hazell v Hammersmith and Fulham London Borough Council [1992] 2 AC 1 at 31E per Templeman LJ).

[23]

Consideration of these grounds of appeal 144It is not disputed that the Council has the broad and general powers conferred on it by ss 21-24 of the Local Government Act and s 50 of the Interpretation Act. 145However, in the present case, the difficulty is that what the Council has done, on his Honour's construction of the clause, in purporting to fix the annual rates at $100,000 subject only to rate pegging increases, is to fetter its future discretion to consider matters that it is required to consider and determine as part of the process of fixing rates in accordance with its statutory obligations: such as to consider submissions that might be made in the future by other rateable land holders as to the provisions of draft management plans that Council would, on this hypothesis, have to have "retro-fitted" in order to comply with the cap on rates fixed under the antecedent Road Agreement. 146It is not to the point, the Council says, that a council can, for example, discriminate against particular land owners by creating a particular sub-category into which only certain land could fall (as was recognised in Marrickville Metro). I agree. Nor is it to the point that it would be arithmetically possible for the Council, each year, to prepare a draft management plan that included the setting of an ad valorem amount that equated to the agreed amount (i.e., $100,000 together with any rate pegging adjustments). 147The fact that it is possible arithmetically or administratively to engage in a "retrofitting" process when setting rates for the next year does not take into account the fact that if another landowner in the area sought to bring itself within the particular category into which the Gingko Mine fell, or submitted that the draft management plan should not be adopted because, say, rates for the Gingko Mine were disproportionately lower than rates levied for other land, the Council would be required properly to consider those submissions. Any such consideration could be no more than perfunctory if the Council had already bound itself to levy rates in accordance with an arrangement such as that provided for by the Road Agreement. 148Moreover, the Council would on that scenario be inhibited in the future from determining the "fair" imposition of rates across all rateable land if the ad valorem rate for the Gingko Mine was required to be retrofitted in the way the appellants maintain it was open to the Council to do. Any landowner in the relevant category would then be entitled to be assessed by reference to the same ad valorem rate. Hence Council's discretion as to the levying of rates on others in the relevant category would be affected. 149In Ansett at 75, Mason J (as his Honour then was) referred to town planning cases where it was held that the relevant authority could not, by contract, fetter in an anticipatory way its future discretion to approve or reject applications after proper consideration in accordance with the prescribed procedure, citing Ransom & Luck Ltd v Surbiton Borough Council [1949] Ch 180 at 195, 198 (see also Southend-on-Sea Corporation v Hodgson (Wickford) Ltd [1962] 1 QB 416; Rocca v Ryde Municipal Council [1962] NSWR 600; (1961) 79 WN (NSW) 299). His Honour noted at 76 that, in such a case, where the contract or undertaking was not one authorised by the relevant legislation or was incompatible with it, the contract or undertaking was invalid or ultra vires. Somewhat inconsistently with their grounds of appeal, the appellants appeared to acknowledge in oral submissions that the fetter principle would apply to agreements which are inconsistent with the legislation. In my opinion such a concession is well-founded. 150Here, subject to the appellants' argument as to s 564 which I consider in (b) below, there is no express statutory power for the making of a contract fixing land rates for a considerable period into the future. Therefore, to the extent that the contract commits the Council in the future to exercise its statutory power in a particular way, it infringes the principle articulated in Ansett. 151It cannot be said that the general power to enter into contracts overcomes this difficulty. In Darkinjung Pty Ltd v Darkinjung Local Aboriginal Land Council [2006] NSWSC 1008, Barrett J (as his Honour then was) said at [72]: In all cases where a corporation owes its existence to a statute, it is open to the corporation to do only those things that the statute contemplates are to be done by it. It is commonplace for a founding and enabling statute to contain express statements with respect to the purposes, objects, functions, powers and duties of the corporation. Those express statements, together with the necessary implications to which they give rise, are the source of the corporation's authority and capacity and the limits upon them. Where the corporation purports to act beyond the field of its authority and capacity thus defined, its acts are void. and at [129]: These cases proceed on the basis of three main principles. First, it is recognised that a grant of incorporation by Parliament carries with it not only rights and privileges but also duties and responsibilities. Second, the duties and responsibilities, as well as existing for the benefit of the section of the population directly affected, are of a public or quasi-public nature. Third, the corporation may not act to abdicate or evade its statutory duties and responsibilities, even if the means by which it purports to do so otherwise appear to lie within the scope of its objects, functions and powers. 152Unless authorised by s 564 (which I consider below), an agreement to fix future rates up to 20 years in advance is not one expressly authorised by the Local Government Act. Insofar as the Road Agreement has fettered the ability of the Council properly to consider matters that might in future be required to be considered in relation to the making of rates, as I consider it did, it is incompatible with the legislation. His Honour did not err in so concluding. 153As to each of the particular grounds raised, in summary I have concluded that: (1) subject to the conclusion as to ground 6, clause 3.1 of the Road Agreement was not authorised by the Local Government Act; (2) again, subject to the conclusion as to ground 6, clause 3.1(a) was inconsistent with the Local Government Act because it purported to fetter the Council's exercise of its statutory duties in the making and levying of rates; (3) an agreement that purports to fetter the Council's exercise of its statutory duties in the making and levying of rates could only be entered into if expressly authorised by the Local Government Act; (4) his Honour did not err in considering the doctrine, analogous to the doctrine of ultra vires, that the repository of a statutory discretionary power is not permitted to fetter or bargain away such a power; (5) the doctrine precluding the fetter by a public body entrusted with statutory powers and duties of those powers and duties (considered in Ransom & Luck Ltd v Surbiton Borough Council [1949] Ch 180 and discussed in Review of Administrative Action, Harry Whitmore & Mark Aronson, as long ago as 1978 - see at 234-235) was relevant when considering the validity of clause 3.1(a); (6) his Honour did not err in concluding that clause 3.1(a) was a fetter of the Council's discretion to determine rates as distinct from a record of the exercise of the relevant discretion to determine rates (for the reasons I set out under category (c) of the grounds of appeal); (7) the Council's entry into the agreement as to rates contained in clause 3.1(a) was ultra vires the Local Government Act in the sense that it went beyond the statutory power of the Council; (8) his Honour did not err in finding that, within the scheme of the Local Government Act, the Council had no discretion to determine rates for the purposes of, and for the period of, clause 3.1(a); and (9) there was a duty for the Council to determine rates payable each year (s 494). 154This first group of appeal grounds is not made out.

[24]

(b) Grounds 10-11 - whether agreement authorised by s 564(1) of the Local Government Act 155In the second group of appeal grounds, it is contended that his Honour erred: (10)in holding that s 564 of the Local Government Act did not authorise the Council to enter into cl 3.1(a) ([60]); (11)in construing s 564 of the Local Government Act by reference to the heading of that section ([60]); 156Section 564 of the Local Government Act, which appears under the heading "Agreement as to periodical payment of rates and charges", provides that: (1) A council may accept payment of rates and charges due and payable by a person in accordance with an agreement made with the person. (2) The council may write off or reduce interest accrued on rates or charges if the person complies with the agreement. 157His Honour (at [60]) considered that this provision was directed to agreements in respect of rates that had already been levied and did not authorise a council to reach agreement in advance as to what the rates should be. 158His Honour considered that the words "may accept payment" and "due and payable" in s 564(1) of the Local Government Act supported the view that agreements contemplated by the section must be in respect of rates that had been levied; i.e., that the levying of the rates must be antecedent to entry into the agreement to accept payment thereof. 159The appellants do not dispute that the 'acceptance' by a council of payment of rates or charges (for the purposes of s 564(1)) must be in respect of rates or charges that are presently due and payable; but they submit that there is nothing in the language of the section that requires the agreement pursuant to which payment is accepted to be one that is made subsequently to the levying of the said rates and those rates becoming due and payable. 160Although it is conceded that s 564(2) operates where there is an agreement in relation to the time for payment of rates that have already been levied, the appellants submit that s 564(1) is not so limited. 161They contend that s 564(1) authorised the Council to enter into an agreement containing clause 3.1(a) of the Road Agreement. In effect, this argument reads the Road Agreement as one where the Council agreed to accept payment in the future of $100,000 (plus percentage annual rate pegging increases) in lieu of whatever might be the amount of rates then due and payable when the Council had issued that year's rate notices; not that the Council was agreeing to levy notices in future at that capped amount. That is not the ordinary construction that would be placed on the words used in clause 3.1(a). 162It is submitted by the appellants that his Honour's construction of s 564(1) has the effect that it would be open to a council to issue a rate notice one day and to reach an agreement the day after to accept a lesser sum in satisfaction of the obligation to pay that amount (subject to s 607 of the Act and regulation 131 of the relevant regulations) but not to enter into an agreement with the ratepayer the day before the rate notice was issued to accept that lesser amount for rates. The appellants contend that there is no reason for such a distinction. Whether or not that is the case, if there is no power to enter into an agreement that fetters the Council's exercise of discretion in relation to rates, then the attempt to do so was invalid. 163The second ground of appeal in this group contends that, in reaching the conclusion that he did, his Honour impermissibly had regard to the heading of s 564, which is not a part of the Act having regard to s 35 of the Interpretation Act. 164Finally, it is submitted by the appellants that, even if the construction placed upon s 564(1) of the Local Government Act is correct, it does not, subject to the conclusion as to ground 6, impliedly prohibit an agreement with respect to future rates. 165The Council submits that s 564(1) of the Local Government Act is clearly directed to authorising a council to enter into agreements to accept payments of rates and charges by instalments or the like. It points to the literal meaning of the words of the provision, which permit the council to "accept" payment of rates and charges which are "due and payable by a person" "in accordance with an agreement made with the person". It submits that the section does not provide for the entry by a council into consensual agreements by which the council agrees to accept a specific amount in respect of rates which are not yet due and payable and will not become so for many years into the future; and that such a construction would give no operation to the words "due and payable by a person". 166The Council points to the following contextual considerations as supporting the conclusion that s 564(1) does not authorise the entry of antecedent agreements as to future rates. 167First, it points to sub-s 564(2), which provides that a council may write off or reduce interest accrued on rates or charges if the person complies with the agreement. It is submitted that this provision clearly indicates that the agreement in question is one that must relate to rates and charges already due and payable, since no interest could have accrued on rates and charges if they were not due and payable. 168Second, it is noted that s 563 provides that a council may discount a rate or charge if it is paid by a nominated date. It is submitted that the express inclusion of power to discount a rate or charge in limited circumstances is inconsistent with the proposition that s 564 permits a council to enter into an agreement to reduce or limit the rates levied upon a particular ratepayer or parcel of rateable land. 169Third, it is noted that s 607 provides that: The regulations may specify circumstances, in addition to those for which provision is made in this Chapter, in which a council may write off rates and charges and interest accrued on unpaid rates and charges. 170The Council submits that the existence of s 607 is inconsistent with an interpretation of s 564 that would permit a council to enter into agreements with respect to the amount of rates as opposed to the time for payment of rates. 171Fourth, it is noted that a Council would not have had power to enter into an agreement of the kind posited in the appellants' submissions other than in circumstances permitted by Regulations 13 and 14 of the Local Government (Rates and Charges) Regulation 1999 (NSW), which were repealed and replaced in September 2005. 172Fifth, it is submitted that the absence in s 564(1) of any procedural requirements for entry into agreements indicates that it is not intended to provide a mechanism by which a council may by-pass the detailed regime for the making and levying of rates laid down in Chapter 15. 173Although the Council agrees that the heading to s 564 is not part of the Act, it submits that the heading is extrinsic material that may be used either to confirm that the meaning of the provision is the ordinary meaning conveyed by the text of the provision or to determine the meaning of the provision if it is ambiguous or obscure. In the Council's submission, the ordinary meaning conveyed by the text of s 564(1) is that determined by his Honour and the heading may be relied upon to confirm that that is the correct meaning. Alternatively, if, contrary to the Council's submission, the words of s 564(1) can bear the meaning for which the appellants contend, then it is submitted that there is an ambiguity which may be resolved by reference to the heading to s 564 in favour of the construction determined by his Honour.

[26]

(c) Grounds 12-13 - ultra vires in terms of the procedure leading to the execution of the Road Agreement 178Under the third group of appeal grounds, the appellants contend that his Honour erred: (12)in finding that the determination of rates alleged to be payable by the appellants as recorded in cl 3.1(a) was invalid and beyond power because it was not carried out within the Local Government Act ([63] and [71]); and (13)in finding that the determination of rates alleged to be payable by the appellants as recorded in cl 3.1(a) was invalid and beyond power because it was not carried out in accordance with the Local Government Act ([63] and [71]) and, his Honour erred in: (a) determining the proceedings by reference to a matter that was not an issue in the proceedings; and further or alternatively; (b) determining the proceedings by reference to a matter without having accorded the appellant procedural fairness with respect to that matter. 179As noted, I consider with these grounds, ground 6 which was that: (6) in construing clause 3.1(a) as fettering the Council's discretion to determine rates as distinct from recording the exercise of the relevant discretion to determine rates ([71]-[75]) 180The appellants contend that the issue before his Honour was whether clause 3.1 (a) of the Road Agreement was a valid and enforceable term of the contract, having regard to the provisions of the Local Government Act. They submit that his Honour's conclusion that clause 3.1(a) was beyond the power of the Council to make has elided the question of construction of clause 3.1(a) with a separate question as to how the sum of $100,000 figure was arrived at before the execution of the Road Agreement. In this regard, reference is made to his Honour's observation (at [62]) that the only evidence before the court as to how the $100,000 was arrived at was to be found in the Council minutes of 20 February 2002; and his Honour's statement (at [71]) that the question was whether the rates specified in clause 3.1 were rates arrived at in accordance with the requirements of the Local Government Act. 181His Honour concluded (at [63]) that the Council resolutions of February 2002, December 2004 and April 2005 did not involve a fixing of rates only for the 2004/2005 year; did not specify a base rate; and did not specify or utilise an ad valorem value, and could not do so, because no valuation for the Gingko Mine had been issued. His Honour said that it followed that the fixing of a rate for a 20 year period at $100,000 per annum was not carried out in accordance with the requirements of the Local Government Act - there referring to ss 534, 497 and 498 - and was outside the power of the Council. 182It is submitted that his Honour thus embarked on an administrative law review of the decision-making process leading to the execution of the Road Agreement and that this issue was not one that was before the Court. 183Further, the appellants submit that there are a number of errors with the reasoning and findings at [63]. 184First, it is said that if his Honour's reasoning was that rates could only be fixed for one or two years ahead then the February 2002 resolution could not validly have fixed rates for the 2004-2005 year in any event. Second, it is submitted that the reference to "ad valorem value" involves a misunderstanding as to the operation of the legislation since the words "ad valorem" as used in the Act must refer to a percentage rate and not to a value as such. Third, it is submitted that the validity of the Council's anterior resolutions that had led to the execution of the Road Agreement was not put in issue by either party. 185The appellants contend that the evidence of the Council resolutions and other communications prior to entry into the agreement had been put forward as relevant to the construction of the contract and the question of rectification, not as to the validity of the resolutions themselves. They say that the other purpose for which this material was referred to was to illustrate in a practical way the manner in which a council could "retrofit" an ad valorem rate in order to achieve an actual amount of rates arrived at independently of the decision as to what ad valorem rate to apply; the appellants' argument being that there was thus no impediment to the Council implementing what had been agreed in clause 3.1(a) of the Road Agreement. 186It is submitted that the failure to give notice that the proceedings were to be determined on this basis, despite the absence of either party raising the matter, was a denial of procedural fairness in the conduct of the proceedings and impugns the decision to the extent that it was made on this basis; there referring to Stead v State Government Insurance Commission [1986] HCA 54; (1986) 161 CLR 141 at 145. 187The Council submits that the submissions by the appellants on these grounds involve a misreading of his Honour's judgment. The Council points out that the appellants had argued before his Honour that clause 3.1(a) "is the very manifestation of the exercise of the discretion. It reflected a resolution of the Council with respect to the issue of rates" (at [28]) and that "execution of the Road Agreement by the Council pursuant to a resolution of the Council was itself the actual performance of alleged duty or discretion (if it existed)" ([29]). In response, the Council had submitted that those submissions were directly contrary to the requirements of s 534 and that "Council was not permitted by Section 534 to make a rate for an indeterminate period into the future or even for a specific period of longer than one year". 188The Council notes that, at [61]-[74], his Honour rejected the appellants' submissions in this regard, both because the resolutions which the appellants relied upon did not purport to constitute resolutions for the making of rates ([63]), as apparent from the fact that they did not comply with the requirements of the Act in relation to the making of rates, and because the Act did not confer upon councils the power or discretion to fix rates for 20 years, and without determining a base rate or ad valorem rate (see [71]).

[27]

Consideration of these grounds 189The submissions made by the appellants both at first instance and on appeal (see [23] and AT 34.43) maintain that clause 3.1(a) of the Road Agreement can be seen as recording or recognising the Council's determination of rates in accordance with the Act i.e., as manifesting the exercise of the discretion or the actual performance of that discretion or an election about revenue, rather than as a fetter of that power. It is submitted that what follows is a matter of implementation of that decision. 190Not only have the appellants maintained that position in their appeal submissions, in this appeal they contend (ground 6) that his Honour erred in not so concluding. 191Necessarily, that submission involves a consideration as to whether clause 3.1(a) should be understood as the manifestation of an exercise of the statutory discretion to fix rates. His Honour concluded that it was not, pointing to the steps that would have been required for there to be a proper exercise of the discretion. 192It is clear that what his Honour was doing was addressing the very submission that the appellants had made. He should not be criticised for so doing. To the extent that his Honour embarked on a process of reviewing the anterior Council process he had been implicitly invited or asked to do so. 193On a fair reading of his Honour's judgment, his Honour did not engage in an uninvited review of the decision making process leading to the execution of the Road Agreement. He certainly did not determine the proceedings on a basis not raised by the parties. 194Moreover, the appellants' submissions do not identify any basis upon which, consistent with the principles outlined in Stead v State Government Insurance Commission, the matters now raised by the appellants could warrant this Court setting the decision aside. In Stead at 145, their Honours observed that "not every departure from the rules of natural justice at a trial will entitle the aggrieved party to a new trial" and gave as an example the situation where "a party was denied the opportunity of making submissions on a question of law, when, in the opinion of the appellate court, the question of law must clearly be answered unfavourably to the aggrieved party". In those circumstances, it would be futile to order a new trial. 195The appellants have been heard on the very question that they put to his Honour. Even if his Honour had erred in considering the evidence as to the anterior decision making process (which in my opinion he did not), nothing turns on this. Grounds 6, 12 and 13 of the notice of appeal are not made out.

[29]

Grounds 1 - 3 of notice of contention (construction issue); ground 4 of notice of contention (rectification issue) 196Since ground 13A is raised only in response to the first three grounds in the Council's notice of contention, I consider those grounds in the Council's notice of contention first. 197The Council seeks to affirm the decision on four grounds, the first three of which go to the proper construction of clause 3.1(a) and the last to the rectification issue, those grounds being that his Honour erred: (1)in finding (at [51]) that by cl 3.1(a) of the Road Agreement, the Council agreed for the life of the Gingko Mine to levy rates at $100,000 per annum adjusted annually by the percentage rate published in the New South Wales Government Gazette pursuant to s 506 of the Local Government Act 1993; (2)in having regard, in construing the Road Agreement, to the Turner email [55]; (3)in failing to find that cl 3.1(a) of the Road Agreement did not purport to limit the rates the Council could fix and levy in respect of the Gingko Mine but, rather, provided that the appellants would commence to pay rates in the amount of $100,000 per annum from 1 January 2006 and that thereafter the amount of rates payable each year would be determined by the Council in accordance with the requirements of the Local Government Act; (4)to the extent that his Honour so found, in finding (at [56]) that the Turner email established an intention on the part of the Council that "rates of $100K [per annum] were to be adjusted in accordance with ministerial determinations in accordance with s 506 of the Local Government Act" or constituted the clear and convincing proof of such an intention necessary to permit rectification of clause 3.1(a) of the Road Agreement. 198The appellants' ground 13A is that, if his Honour erred as contended in grounds 1-3 of the notice of contention, then his Honour erred in not making an order rectifying clause 3.1(a) of the Road Agreement in the terms set out in order 3(b)(a).

[30]

Construction of clause 3.1(a) - Council's notice of contention grounds 1-3 199The Council points to the background against which the Road Agreement was entered into, which included the fact that at that time the road was being constructed and the Council had not yet received a valuation for the Gingko Mine and therefore had not issued any previous rates notices. 200It disavows the construction attributed to it by the appellants - i.e., that the entitlement of the Council to fix rates was entirely at large. Rather, it submits that, insofar as clause 3.1(a) imposed a binding obligation on the Council, the reference to adjustment in accordance with the Local Government Act meant "as fixed in accordance with the Local Government Act" and that the Council was thereby incorporating all of the requirements imposed on it under that Act in relation to the making and levying of rates. 201The Council maintains that the proper construction of the clause is that the undertaking by Pooncarie was to make payments in respect to the Ginkgo Mine, identified as land rates, of $100,000 per annum starting on 1 January 2006 (regardless of whether a valuation had by then been received) and thereafter as fixed in accordance with the Local Government Act. In effect, it reads the clause as providing for an initial payment of $100,000 for the year commencing 1 January 2006 but for the fixing of rates thereafter to be done not by reference to an adjustment to that figure but as if there had been no earlier sum set and the process were to be commenced afresh each year. 202One answer to that is that, if that had been the parties' intention, it would have been a simple matter for the clause to provide for a payment in respect of the 2006 year, and for land rates thereafter to be set in accordance with the procedure under the Act, rather than to be expressed as a per annum amount commencing on a particular date which was thereafter to be adjusted annually. 203The Council acknowledges that the clause is not felicitously drafted but submits that the proposition that rates were thereafter to be levied in accordance with the Local Government Act assumes that a land valuation will have been received by the time rates are next levied. It may well be that this was the assumption of the Council. However, the clause itself does not make reference to adjustment once the land has been valued. 204The Council also submits that clause 3.1(a) does not in its terms impose any obligation on it; rather it makes provision for the payment of the land rates as something additional to the Company's Undertakings. The definition of the Council's Undertakings, to which reference is made in Recital F, does not include specific reference to clause 3. 205It is submitted that there is nothing in clause 3.1(a) that binds the Council not to levy rates in excess of the sum there specified; rather, Pooncarie is not undertaking to pay more than the sum of $100,000 for the 2006 year and thereafter as levied under the Local Government Act. 206The Council argues that it is not necessarily implicit in the contract that payment of the amounts required under clause 3.1(a) is in satisfaction of the obligation to pay rates under the Local Government Act and that this is a second reason why clause 3.1(a) does not impose a limitation on the ability of the Council to levy rates under the Local Government Act. 207The difficulty that I have with the construction for which the Council contends is that, as noted by his Honour, it gives the fixing of $100,000 per annum no real work to do after the first payment made for the period commencing January 2006. It cannot be the case that the sum of $100,000 was a one-off payment simply to be treated as land rates and thereafter ignored, since it is described as a payment of "land rates" per annum to be adjusted on an annual basis. The notion of annual payments of a particular amount commencing on a particular date, as adjusted from time to time, would ordinarily be read as imposing an obligation to pay that particular amount as adjusted. 208If the quantum of land rates payable after the 2006 year was to be determined solely by reference to the process for fixing rates under the Act, then there would be no need for clause 3.1(a) to provide for an annual adjustment of the $100,000, or an undertaking to pay that adjusted amount. The legislation would operate to impose the relevant obligation on the mine operator once rates notices were issued. In this regard, the reference to payment of $100,000 "per annum" in clause 3.1(a) is consistent with it being contemplated that the land rates would be that set amount on an annual basis, subject only to the adjustment for which the clause provided. 209The question then is what is contemplated by the words "adjusted annually in accordance with the Local Government Act". As his Honour noted, under the Act there was provision for the annual adjustment to the amount recoverable by councils as rates (s 506). That incremental or rate pegging adjustment is apt to be what the parties objectively had in mind when referring to an annual adjustment to the specified annual land rates amount. True it is, that the levying of rates was required to be done for each year and hence the adjustment referred to in clause 3.1(a) might have encompassed the process of completely re-setting rates as required under s 494 of the Act. However, that is not so much an "adjustment" of an existing rate as the setting of a new rate. The process to which this annual adjustment would more aptly refer must be that provided for by s 506. 210For those reasons, I am of the view that the appellants' construction of the clause is the correct one and that his Honour did not err in so concluding. 211Insofar as complaint is made that his Honour relied upon the Turner email for the construction of the clause, that does not take into account the fact that his Honour made it clear that he had reached his conclusion as to the proper construction of the clause, without reference to extrinsic materials, having regard to the terms of the clause itself ([51]). His Honour only referred to the Turner email as confirming that view ([55]). 212His Honour considered that the email's relevance was that it made clear what "adjustments" the parties had in mind at the time, referring also to evidence given by one of the witnesses called for Bemax (Mr Shirfan) in that regard. His Honour considered that this was material to which regard could be had given the ambiguity of clause 3.1(a). 213For present purposes, however, nothing turns on whether the email was relevant in that way because his Honour's reliance on the Turner email was only that it confirmed the view he had already reached. Reliance on the email was therefore unnecessary for the purposes of his Honour's decision. Moreover, his Honour's view was, in my opinion, the correct construction of the clause. 214Finally, as to whether the Road Agreement imposed any obligation on the Council binding it not to levy rates above the amount provided for in clause 3.1(a) at all, or simply contained an undertaking by Pooncarie to pay the amount there stipulated, in my opinion the clause must be read as an implicit agreement by the Council that it would levy land rates in accordance with the amount that Pooncarie was undertaking to pay. If not, then there was no purpose for clause 3.1(a) beyond, perhaps, imposing an obligation for the first payment, which was required at a time when it was not open to the Council under the process provided for in the Act to fix rates at that particular amount - since it had not first included such a rate in the 2006 management plan. Clause 3.1(a), however, clearly contemplated what was to occur after the commencement of payment of the sum referred to as land rates in 2006. 215Therefore, I do not accept the second reason advanced for the proposition that clause 3.1(a) on its proper construction did not bind the Council to levy land rates on an annual basis of $100,000 adjusted only for the incremental rate-pegging increase determined in accordance with s 506 of the Act. 216Grounds 1-3 of the Council's notice of contention are not made out.

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The appellants' rectification case - ground 13A; ground 4 of the Council's notice of contention 217The conclusion reached above makes it strictly unnecessary to consider either ground 13A of the notice of appeal, as this was predicated on the Council's notice of contention succeeding, or ground 4 of the Council's notice of contention, which contends that there was not convincing proof necessary to justify the rectification sought. Nevertheless, for completeness I comment as follows on the appellants' argument that their rectification case would have succeeded if the construction of clause 3.1(a) had been as the Council contended. The appellants point to his Honour's indication (at [56]) that, had it been necessary to decide it, he was favourably disposed to the rectification claim. 218The appellants contend that the common intention of the parties to the Road Agreement was that the rates would be set at $100,000 per annum and that any adjustment made to that amount would be in the form of incremental annual changes in accordance with rate pegging. That common intention is said to be evident from contemporaneous communications: in particular, the Turner email and the Council's letter of 23 May 2007. They note that the latter made no reference to an interim amount. The appellants submit that if a "wholesale recasting" of the base amount (i.e., the $100,000) had been the Council's real intention then its letter of 23 May 2007 would be expected to have stated that. 219The three alternative ways in which it is said that his Honour should, had he construed the clause otherwise than he did, have rectified the relevant clause are by inserting the following words before the words "Local Government Act" on the fourth line of clause 3.1(a): (a)"usual rate pegging adjustments under the"; (b)"percentage rate published in the NSW Government Gazette pursuant to s.506 of the"; or (c)"percentage increase in general income permitted pursuant to Ministerial Order under the". 220In Franklins v Metcash at [444], to which his Honour referred at [56], Campbell JA noted that the rationale for rectification in equity is that it is unconscientious for a party to a contract to seek to apply the contract inconsistently with what he or she knows to be the common intention of the parties at the time the written contract was entered into. Reliance is placed by the appellants in this context on what was said in Maralinga Pty Ltd v Major Enterprises Pty Ltd [1973] HCA 23; (1973) 128 CLR 336 at 349-350 and Raftland Pty Ltd v Federal Commissioner of Taxation [2008] HCA 21; (2008) 238 CLR 516 at [176] per Heydon J. 221There needs to be "convincing proof" of the common intention that is said not to have been reflected in the written agreement and this has been referred to as a high standard of proof (see Pukallus v Cameron [1982] HCA 63; (1982) 180 CLR 447 at 452; R P Meagher, J D Heydon & M J Leeming; Meagher, Gummow and Lehane's Equity: Doctrines & Remedies, (4th ed 2002, Butterworths LexisNexis) at [26-050]; RHG Mortgage Securities Pty Ltd v Elektra Purchase No 19 Ltd [2009] NSWSC 258 at [16] and the cases there cited including Ryledar Pty Ltd v Euphoric Ptd Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603 at [122]). 222The high point of the appellants' argument on the rectification claim is the Turner email, to which I will refer shortly. Insofar as reliance is also placed on the 2002 resolution, which preceded it, not only does that not point to any firm intention of the Council at the time, but also it was not a document to which the appellants were privy at that time and therefore cannot speak to the parties' common intention. The appellants nevertheless seek to draw from this confirmation of the absence of any notion of the Council setting rates of an "interim" nature, noting that the ultimate resolution in April 2005 (condition [e]) was to adopt a recommendation that it be a term of the agreement with Pooncarie that the company pay land rates set at that amount. Little can be drawn from the 2002 resolution, in my opinion, given that it was clearly contemplating no more than advice to Bemax as to an indicative amount for the future land rates; nothing turns on whether that indication was interim or otherwise. 223The Turner email, on which the appellants place much weight, refers to the approval by the mayor of revised arrangements for the haul road. It is by no means clear that the reference to the mayor's approval extended to all the matters referred to in the email. The headings used in the email, and particularly the heading above "rates", namely "on other matters" may well point to the contrary. 224The 2002 motion to which it referred was as to advice to Bemax of an indicative rate and the Turner email seems to be addressing the start of payment of rates, rather than the amount per se. The email also contains the statement that the amount of rates is expected to remain "about the same plus increase due to rate pegging etc", which seems to be inconsistent with the amount of rates being at large; since if that were the case it would not be necessary to refer to the rate pegging. 225The appellants point to the statement by the then general manager, Mr Boyd, to the effect that the normal process, if approval by the mayor was required, would be that he would approach the mayor rather than Mr Turner but the thrust of Mr Boyd's evidence was that he did not recall seeking approval from the mayor for the revised haul road arrangements. 226The appellants submit that the Turner email records, and can be taken as an admission by the Council to the effect that, the mayor had agreed with the matters put by Mr Turner and, through Mr Finnis, to the Bemax companies, including that the land rates would be "about the same [as the $100,000pa previously indicated] plus increase due to rate pegging". However, the Turner email is hardly clear in this respect and it is hard to see that it could be an admission binding the Council when it is not clear that there was any consideration or adoption of the arrangement there referred to by a decision-maker capable of reaching agreement on behalf of the Council to such matters. Levying of rates, for example, was required to be done by resolution of the Council and could not be delegated. The mayor's approval alone would not have bound the Council. 227The Council notes that the only evidence before his Honour as to its intention in entering into the Road Agreement was the resolution of the Council of 20 April 2005 recommending entry into an agreement with Pooncarie on terms including condition (e), which is simply repeated in the contract itself. 228It is submitted by the Council that the Turner email does not manifest a clear intention that it was intending to limit the rates to be charged to the appellants for the life of the Gingko Mine to $100,000 per annum plus adjustments by reference to the percentage rate fixed pursuant to s 506 of the Act. Emphasis is placed on the word "etc" as indicating that there was no intention to limit increases to rate pegging and as inconsistent with a firm commitment that the rates would be kept "about the same". 229The appellants also refer to the email from the Council's external solicitors of 27 April 2005 enclosing the first draft of the Road Agreement and stating that the Council was ready to execute it once she and her counterpart had agreed. Significance is placed on the fact that this was copied to Mr Turner. It is difficult, however, to see how that takes matters any further, since there is nothing there to explain what was intended by the wording of the contract there being submitted for consideration and/or execution. 230The appellants call in aid the fact that neither the external solicitor (Ms Keady) nor Mr Turner was called as a witness by the Council. The Council, however, submits that the necessary convincing proof of the relevant intention cannot be established by inference; that the circumstances did not call for any explanation by either of them since the email speaks for itself; and that Mr Turner could not speak for the Council. 231As to the Council's subsequent letter of 23 May 2007, the Council argues that it is not inconsistent with its position, since it simply referred to an undertaking given by Pooncarie not a commitment by the Council, but in any event that the Council's intention as at April 2005 cannot be established by reference to a letter sent on 23 May 2007. I agree. By the same token, the fact that the Council issued the tax invoice of 5 April 2006; the resolution of 20 September 2006; and the supplementary rates notice of 27 September 2006, to which Council points as being consistent with its case, is not of assistance in determining the common intention of the parties as at the time of entry into the Road Agreement. 232On the material before this Court it seems to me that the rectification claim would have been difficult to make out, since I am not persuaded that the Turner email establishes anything more than an intention on the part of the Council to propose an indicative rate. It is not, however, necessary to determine this issue in light of the conclusion that his Honour did not err in the construction of the Road Agreement.

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(e) Ground 14 - Costs 233The final ground of appeal is as to costs in the event that the foregoing grounds are unsuccessful, as they have been. The appellants contend that his Honour erred: (14)in the exercise of the Court's discretion as to costs and in ordering the appellants to pay: (a)the whole of the costs of the proceedings; and (b)interest on costs. 234The appellants accept that the test is whether his Honour's discretion miscarried either by reason of some manifest error or consideration of irrelevant matter, referring to Maiden v Maiden [1909] HCA 16; (1909) 7 CLR 727 at 742 and Wentworth v Rogers (No 3) (1986) 6 NSWLR 642. No such error or irrelevant matter has been identified in the appellants' submissions other than the assertion that the Council had been complicit in the circumstances that gave rise to this litigation and that his Honour's decision cannot have taken this into account. 235The appellants contend that the focus of the litigation was the validity of clause 3.1(a) of the Road Agreement; noting that this was a contractual provision that the Council had propounded and that it had subsequently argued was ultra vires its own powers. 236The appellants point out that the Court may have regard to a party's conduct in the underlying transaction that gave rise to the proceedings in determining a question of the costs of those proceedings, citing Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) [1979] FCA 143; (1979) 42 FLR 213; Commercial Union General Insurance Co Ltd v Patchell Industries Ltd (1993) 7 ANZ Insurance Cases 61 -171. 237The appellants further submit, as they did below, that no encouragement should be given to local councils to adopt an approach of entering into agreements that are ultra vires, then relying upon the fact that they are not fettered by the agreement, giving rise to litigation in which they then recover their costs in full with interest. It is submitted that this is so, a fortiori, where a council does so in order to attract business ventures to its local government area and as part of a deal involving the construction of roads that ultimately benefit the public. It is submitted that such an outcome is not in the interests of justice and hence it was a manifest error to award the Council the full amount of its costs with interest. The submission is that his Honour in reaching such a result must have ignored the relevance of the foregoing considerations. 238The Council submits that the appellants' submissions, as to its alleged complicity in the consequences of the litigation, fail to acknowledge the extent of the litigation and the breadth of the disputes between the parties and that it effectively amounts to a submission that, notwithstanding that it was ultimately successful in the proceedings, the Council should not have defended them. The Council cavils with the description of the issue as to the validity of clause 3.1(a) being the "centrepiece of this litigation" since the appellants sought to build alternative cases founded upon estoppel and misleading or deceptive conduct. 239The Council maintains that the questions of the proper construction of clause 3.1(a), and whether the Council could fetter its discretion by entering into an agreement in terms of clause 3.1(a), were issues that could have been resolved in a very short hearing without significant evidence; and that it was the other issues, in particular the estoppel and misleading or deceptive conduct cases and the allegations of reliance inherent in those cases, that extended the hearing and caused the bulk of the costs incurred in the proceedings. 240It is submitted that there is no analogy between these proceedings and those considered in the Commercial Union General case, since there no costs were awarded because the insurer/appellant had abandoned arguments which had taken up a significant part of the respondent's time and preparation "only very shortly before the hearing" and "in the hope that the appellant may be discouraged from continuing to use policies which include exceptions upon exceptions upon exceptions, and are of such complexity as to define [sic, defy] confident interpretation, not only by customers, but by judges". The Council submits that neither of those reasons is present in this case and that it should not be punished, by being deprived of costs, because it correctly maintained (in the interests of its ratepayers) the position that it was obliged to exercise its discretion with respect to the fixing of rates each year and was not capable of fettering that discretion by contract. 241Reference is made to the fact that the appellants had solicitors acting for them at the time of negotiating the Road Agreement and it is submitted that they were as capable as the Council of determining whether or not clause 3.1 would be enforceable. 242It is submitted that no sanction should be imposed upon the Council for seeking to exercise its public duties in respect of the levying of rates and in particular for maintaining the position that it was not bound by a contract which purported to restrict its discretion. It is submitted that the costs of these proceedings were incurred because the appellants sought to maintain a position which was unsustainable and not because the Council took an unreasonable position in maintaining that it was not bound by clause 3.1 of the Road Agreement or because the Road Agreement was complex or difficult to construe.

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McColl JA Introduction [1] The Statutory Scheme [7] Consideration [20] Meagher JA Judgment [31] Ward JA Background [32] (a) Development consent [33] (b) "Indicative" rate for Gingko Mine [36] (c) Grant of mining lease and communications prior to entry into Road Agreement [38] (d) Road Agreement [46] (e) Rates notices [53] (f) Proceedings [59] Peregrine Sands proceedings [66] (a) Relevant statutory provisions [78] (b) Obligation to make and levy an ordinary rate each year [79] (c) Categorisation of land [84] (d) Ad valorem and base amount components of rates [90] (e) Requirement to make draft management plan [93] Primary Judgment [98] Appeal [115] (a) Grounds 1-9 of notice of appeal - finding as to lack of authorisation by, or inconsistency of the Road Agreement with, the Local Government Act [122] (i) The appellants' submissions [123] (ii) The Council's submissions [137] (iii) Consideration of these grounds of appeal [144] (b) Grounds 10-11 - whether agreement authorised by s 564(1) of the Local Government Act [155] (i) Consideration of these grounds [174] (c) Grounds 12-13 - ultra vires in terms of the procedure leading to the execution of the Road Agreement [178] (i) Consideration of these grounds [189] (d) Ground 13A - failure to order rectification of clause 3.1(a) of the Road Agreement [196] Grounds 1 - 3 of notice of contention (construction issue); ground 4 of notice of contention (rectification issue) (i) Construction of clause 3.1(a) - Council's notice of contention grounds 1-3 [199] (ii) The appellants' rectification case - ground 13A; ground 4 of the Council's notice of contention [217] Ground 14 - Costs [233] (i) Consideration [243] Conclusion [248]