Construction Technologies Australia Pty Ltd v Doueihi (No 4)

The plaintiff, Construction Technologies Australia Pty Ltd (“CTA”), leases an industrial property (the “Property”) in Seven Hills, New South Wales from the defendants. CTA wishes to make a development application (the “Second s 96 Application”) to Blacktown City Council (the “Council”) in relation to the Property.

Faced with the defendants’ refusal to consent to the Second s 96 Application being made, CTA filed a notice of motion on 27 July 2016 (the “Motion”) for an order that the Court sign the Second s 96 Application on behalf of the defendants. CTA says it is entitled to that relief pursuant to final orders made in these proceedings by White J (as his Honour then was). The defendants deny that those orders compel them to give their consent.

CTA operates an adhesive manufacturing facility on the Property. CTA admits that it is operating its facility for hours which exceed those permitted by the current planning approval for the Property. The Second s 96 Application seeks Council approval of the extended operating hours for the Property to cure this irregularity.

CTA’s lease of the Property (the “Lease”) is the outcome of the decision of White J in Construction Technologies Australia Pty Ltd v Doueihi (2014) 17 BPR 33,457; [2014] NSWSC 1717 (the “Decision”). The Decision was upheld by the Court of Appeal in Doueihi v Construction Technologies Australia Pty Ltd (2016) 92 NSWLR 247; [2016] NSWCA 105.

In the Decision, his Honour held that CTA had the benefit of an equitable estoppel that the Lease existed between CTA and the defendants. To give effect to that equity, his Honour made notations and orders (the “Orders”) which included:

The terms of the Lease were a result of agreement between the parties consequential upon the Orders and the determination of one further issue by White J. The expert contemplated by Order 6 was not required. CTA eventually obtained regulatory approval from the Council pursuant to the undertaking noted in paragraph 1 of the Orders (the “Undertaking”).

Significantly for present purposes, it is common ground that CTA’s operating hours (which are the subject of the Second s 96 Application) were not an issue addressed in any of the hearings before White J, or in the Decision, and that they were not the subject of the regulatory approvals referred to in the preceding paragraph. Furthermore, the evidence adduced on the Motion does not permit the Court to make any finding as to whether or not CTA was operating extended hours at any time up to the execution of the Lease or when CTA obtained the regulatory approvals referred to in the preceding paragraph.

The defendants have declined to give their consent to the Second s 96 Application. The only question CTA posed for the Court’s determination by the Motion is whether, in the events which have happened and on the proper construction of the Orders, the Second s 96 Application falls within the Undertaking so that Order 2 compels the defendants to provide their consent to the Second s 96 Application or, in default, authorises a registrar to execute the consent.

The Court answers that question “No”. That conclusion is primarily based on the use of the word “promptly” in the Undertaking and the context in which the Orders were made. The Motion will be dismissed and, subject to hearing the parties, CTA will be ordered to pay the defendants’ costs of the Motion.

At the hearing of the Motion, Ms K Rees of Senior Counsel appeared with Mr R A Jedrzejczyk of Counsel for CTA. Mr J Lockhart of Senior Counsel appeared for the defendants.

Although the ultimate question may be determined relatively shortly, it is necessary to set out at least some of the tortured litigious history in which the present dispute is the latest skirmish.

On 3 April 2009 the Council approved the defendants’ development application in relation to the Property for the “Construction of an industrial factory/warehouse building with associated offices, ancillary showroom, basement car park and landscaping” (the “2009 Development Consent”). The 2009 Development Consent included:

The first day of the hearing before White J was 3 February 2014. In the course of her opening, Ms Rees SC took his Honour through a folder of photographs of the Property. The transcript of her opening (T8:9–13) records her as saying:

A few pages later the transcript records his Honour saying to the defendants’ then counsel (T13:33–38):

The parties accept that the words attributed to Ms Rees SC in the transcript are the only occasion on which CTA’s operating hours were mentioned in the course of the hearing before White J. While it was not suggested during the course of the hearing that Ms Rees SC’ reference to 24-hour operation had been the subject of disagreement pursuant to White J’s invitation recorded in the preceding paragraph, it was also common ground between the parties that CTA’s facility did not operate on a 24-hour basis.

On 4 December 2014, his Honour delivered the Decision. His Honour’s fundamental conclusion was:

The circumstances which inform the existence of the Undertaking and Order 2 are set out in the Decision (emphasis added):

Finally, it is necessary to set out his Honour’s conclusion (emphasis added):

The Orders were made by White J on 18 December 2014. There was a dispute between the parties as to the terms of the Undertaking and Order 2. In particular, the defendants sought to limit the Orders to refer to “existing activities which had been taking place on the CTA premises since 18 May 2010”. So much is apparent from the “mark-up” version of the proposed orders propounded by the defendants:

In the present dispute, CTA relied on the argument which took place before White J in relation to the form of the Orders and his ultimate rejection of the narrower form of orders proposed by the defendants. For this reason it is necessary to set out some of the transcript of argument before his Honour on that occasion, when Ms Rees of Senior Counsel appeared for CTA and Mr W G Muddle of Senior Counsel appeared for the defendants (T3:4–T5:27) (emphasis added):

After the making of the Orders on 18 December 2014, CTA filed an application under s 96 of the Environmental Planning and Assessment Act 1979 (NSW) to modify the 2009 Development Consent (the “First s 96 Application”). The First s 96 Application was prepared by Mr Chris Young, the town planner retained by CTA, and included in his introduction (emphasis added):

The First s 96 Application concluded with the statement that “the proposed modification is substantially the same development for which consent was originally granted”.

The First s 96 Application was itself the product of further controversy between the parties on 9 March 2015. The nature of that controversy was recorded by White J in his judgment in Construction Technologies Australia Pty Ltd v Doueihi (No 3) [2015] NSWSC 1850 (“CTA No 3”) (emphasis added):

The final form of the First s 96 Application was prepared after the hearing before his Honour on 9 March 2015. It was submitted to the defendants’ solicitors on 31 March 2015 and it was signed by the defendants on 12 May 2015. What followed is set out by White J in CTA No 3. It is unnecessary for me to repeat it in any detail in these reasons.

On the same day it was signed by the defendants, their solicitors lodged a detailed objection to the First s 96 Application with the Council. In that objection they wrote that “The Owners instruct us that CTA has operated double shifts on the Property in breach of the hours of operation provided by the Consent”. This appears to be the first reference in the evidence to a concern about CTA’s hours of operation.

The parties were also negotiating the terms of the Lease. White J resolved one outstanding difference about the Lease on 3 September 2015 and directed that it be executed. That was done on 7 September 2015. The defendants’ appeal from the Decision was heard on 14 September 2015.

The Lease includes:

The defendants now allege that CTA is in breach of their obligations under clause 7.4(1) of the Lease due to CTA’s admitted non-compliance with the 2009 Development Consent.

While the matters referred to in paragraph [26] above were happening, there was yet another dispute between the parties. The First s 96 Application had not been determined by 1 July 2015. This constituted a deemed refusal by the Council. The deemed refusal gave rise to further argument between the parties, which was resolved by CTA No 3, where his Honour said on 4 December 2015 (emphasis added):

The primary question which his Honour had to resolve in CTA No 3 was whether CTA was required to lodge an appeal against the deemed refusal of the First s 96 Application in order to comply with the Undertaking. His Honour declined to give such a direction. His Honour also resolved a complaint by CTA that the defendants had misrepresented to the Council the effect of the Orders. His Honour resolved that dispute in favour of the defendants:

On 9 December 2015 (five days after his Honour’s judgment in CTA No 3), the Council refused the First s 96 Application.

CTA appealed the Council’s refusal to the Land and Environment Court.

On 7 April 2016, the defendants wrote to CTA purporting to notify a number of alleged breaches of the Lease, including an allegation that CTA had been “accessing and operating from the [Property] outside the approved hours of operation.”

On 20 April 2016, CTA’s solicitors responded to the defendants’ letter. That response included (emphasis added):

Three comments need to be made about the letter of 20 April 2016. First, the conclusion in paragraph 10 is the genesis of the Motion. Second, it is important to note that in response to an objection taken by Mr Lockhart SC, the italicised words in paragraph 2 of the letter were not admitted into evidence as proof of the fact asserted in that sentence. There was no evidence before the Court that would permit a finding to be made as to when CTA first began operating for extended hours. Third, it appears that the suggestion in paragraph 9 of the letter that the defendants’ first complaint about operating hours was the letter of 7 April 2016 was not entirely correct insofar as a complaint was made in the defendant’s letter of objection to Council dated 12 May 2015 (see paragraph [25] above), although it was not made to CTA directly.

On 12 May 2016, the Court of Appeal dismissed the defendants’ appeal from the Decision: Doueihi v Construction Technologies Pty Ltd (2016) 92 NSWLR 247; [2016] NSWSC 105.

As foreshadowed in the letter of 20 April 2016, CTA’s town planning consultant, Mr Young, prepared the Second s 96 Application including a statement of environment effects dated 20 June 2016 in support of extending the hours of operation on part of the Property:

On 10 June 2016, CTA’s solicitors sent the defendants’ solicitors a copy of the Second s 96 Application “for your clients’ signatures”.

On 15 July 2016, the Land and Environment Court gave effect to an agreement between the parties as to the terms upon which the First s 96 Application should be resolved. The agreed consent conditions provided for the same hours of operation as the 2009 Development Consent (Monday to Friday 7.00am to 6.00pm; Saturday 9.00am to 2.00pm).

On 22 July 2016, the defendants’ solicitors wrote to CTA’s solicitors setting out why the defendants did not consider that the Orders obliged them to consent to the Second s 96 Application.

The Motion was filed in Court on 27 July 2016.

On 1 September 2016 in a letter to the Council, CTA’s solicitors wrote:

With no disrespect to the careful and thorough way in which Mr Rees SC presented CTA’s submissions, her essential arguments may be reduced to five propositions:

Ms Rees SC accepted there had to be some limit on the extent of the obligations created by the Undertaking and Order 2. She accepted, for example, that it would not extend to an application by CTA to extend the use of the Property to the operation of a brothel. She submitted that the limit of the obligations created by the Undertaking and Order 2 was supplied by them being confined to the permitted use of the Property under the Lease.

Mr Lockhart SC submitted that the parties’ rights and obligations in relation to the Second s 96 Application were to be determined solely by reference to their rights and obligations under the Lease. There was, he submitted, no obligation under the Lease for his client to consent to the Second s 96 Application being submitted to the Council.

So far as the construction of the Orders was concerned, he submitted that common sense, the context and, in particular, the word “promptly” in the Undertaking made it clear that what CTA was now attempting to do did not fall within the Orders on their proper construction. He developed that argument in five propositions:

As will be apparent, the parties’ arguments were addressed to the construction of the Orders in and of themselves. Nevertheless, I have approached the task of construction mindful of the general principles which relate to the interpretation of court orders. These are usefully summarised in Perry Herzfeld, Thomas Prince and Stephen Tully, Interpretation and Use of Legal Sources — The Laws of Australia (2013, Thomson Reuters) (omitting citations):

The Court accepts the defendants’ submission that the keys to the proper interpretation of the orders are the use of the word “promptly” and the context. The necessary context is the Orders themselves and the Decision to which they are intended to give effect. It is unnecessary to look further afield.

For the reasons which follow, in my view the Orders were temporally limited by the use of the word “promptly” — “The plaintiff (CTA) undertakes to the Court at CTA’s cost promptly to do all things necessary on its part to obtain all necessary regulatory approvals for CTA’s occupation and use of the CTA premises and its manufacturing facility at those premises”. This required CTA to obtain those approvals that were necessary for it lawfully to use and occupy the Property pursuant to the Lease that was to be executed in accordance with the Orders. In the absence of the Orders being varied or an alternative basis being identified which would compel the defendants to consent to the Second s 96 Application (see paragraphs [68] – [70] below), their refusal to do so does not enliven an entitlement in CTA to have a registrar execute the document in lieu of the defendants.

This construction of the Orders has three further consequences.

First, it means that the matters in relation to which approval was to be sought were not confined to matters specifically debated before White J or otherwise referred to in the course of the hearing. The approvals which fell within the Undertaking were for whatever was required to ensure CTA could lawfully do what it was entitled to do under the Lease at the time of the Lease formally coming into existence at law by its execution.

Second, whether or not something had been the object of complaint by the defendants (or anyone else) is irrelevant. So much follows from the clear intent of the Orders that CTA’s occupation and use of the Property had to be lawful by reference to whatever regulatory approvals applied. For example, conduct that did not comply with the terms of a development consent would, prima facie, be unlawful whether or not the defendants had complained about it or even consented to it (assuming that the development consent did not contemplate any non-compliance being cured by the property owner’s consent to that conduct).

Third, the execution of the Lease and the resolution of the First s 96 Application in my opinion exhausts the operation of the Undertaking and Order 2. This does not preclude an application to vary the Orders or some other legal basis being identified that would compel the defendants to consent to the Second s 96 Application.

In my view, the key to the proper construction of the Undertaking is to understand that the use of the word “promptly” in the Undertaking begs the question of “promptly after what?”. There are two possible answers to the question: promptly after whenever a regulatory approval becomes necessary; or, promptly after the Orders were made. By reason of the policy, contextual and other matters to which I refer below, I consider that it must mean “promptly after the Orders were made”.

It also follows as a matter of plain English that the “necessary regulatory approvals” were those necessary for CTA’s lawful occupation and actual or contemplated use of the Property at the time the approvals were sought in connection with the Lease to be executed or that had been executed. That time was promptly after the Orders were made.

Turning first to the matter of policy, where there is some ambiguity or lack of clarity, a court’s final orders should, in my opinion, generally be interpreted by reference to the public interest in the finality of litigation: interest reipublicae ut sit finis litium. In invoking that principle, I do so respectfully mindful of the recent observation of the Court of Appeal in Nadinic v Drinkwater [2017] NSWCA 114 at [37] that “few legal propositions are universally true” (per Leeming JA; Beazley P and Sackville AJA agreeing). Nevertheless, given that the overriding purpose of our court processes is the just, cheap and quick resolution of the true issues in dispute, maintaining the principle of the finality of litigation must be a cardinal consideration. Where the language of the orders permits, a construction which finally quells the dispute and ends the parties’ recourse to the Court should be preferred. One manifestation of this policy in equity is a reluctance to grant relief which will require the supervision of the Court. This is not to derogate from the power of the Court to make express provision about when matters can return to it or where established principle requires it (see, for example, the principles in relation to contracts the subject of orders for specific performance referred to in paragraph [70] below).

In this case the principle of finality is to be applied so that if a party is to be required to do something more than once, orders should be construed to have that result only where it is expressly stated or where it is clearly necessarily implied. Neither of these reasons is present here, with the possibility of implication excluded by the other considerations set out in this part of my reasons. Applying the principle of finality also has the desirable practical consequence of minimising the likelihood (which has eventuated here) of the passage of time resulting in the inefficient outcome that someone other than the trial judge has to deal with the working out of the Orders.

In the present case, White J sought to quell the litigation by ordering the defendants to execute the Lease to which he had found CTA was entitled. For that relief to be available, it was necessary that CTA be lawfully entitled to do what the Lease allowed it to do. If it was so entitled because all the then necessary approvals had been granted, the relationship of the parties would be governed by the Lease. If the approvals were not forthcoming, then the relief to which CTA was entitled would have to be revisited, a consequence for which his Honour made express provision in Order 9. In terms of the principles governing the grant of equitable relief, a completely different discretionary landscape would have confronted the Court if it transpired that what the parties had contemplated would be done under the Lease to which they were bound in equity could not be done lawfully.

There are also four matters of context which inform the conclusions I have expressed in the preceding paragraphs.

First, the fundamental purpose of the litigation was formally to determine and regularise the rights of the parties. Given the conclusions which his Honour reached, that was to be done by bringing the Lease into existence. By this I mean converting what was a lease in equity which had its existence through the equitable estoppel into a lease at law by compelling the execution of a lease in the terms specified in the Orders. It would be inconsistent with this fundamental purpose to give “promptly” an ambulatory operation. It must mean promptly after the Orders were made and be tied to the execution of the Lease.

Second, paragraphs [99] to [104] of the Decision make it clear that his Honour was not concerned to resolve the particular matters that were said to constitute unclean hands (or illegal conduct) on the part of CTA. The point of his Honour’s analysis in this part of the Decision was that CTA was entitled to the benefit of a lease of the Property for the purposes specified in that lease if they could be undertaken lawfully. It follows that the regulatory approvals were those necessary to give efficacy to CTA’s entitlement to the Lease — those which would make its use and occupation of the Property lawful under the Lease to be executed pursuant to the Orders.

Third, Order 8 (that “CTA remove its existing caveat on the land upon execution of the Lease in accordance with paragraph 4 and have liberty to lodge a fresh caveat claiming its interest as lessee”) supports the attribution of significant importance to the point of execution of the Lease in the scheme created by the Orders.

Fourth, in my view, Order 9 also demonstrates that the respective obligations to seek and consent to approvals was not intended to be continuous or iterative. It is not necessary in these reasons to delve into the authorities concerning what exactly is meant by “reserve further consideration” (see, for example, Australian Hardboards Ltd v Hudson Investment Group Ltd (2007) 70 NSWLR 201; [2007] NSWCA 104 at [50]–[76] per Campbell JA, Tobias JA agreeing and, although he dissented in the result, Young CJ in Eq said (at [92]) that he had “little difficulty” with Campbell JA’s “survey of the procedural law”). The point is that his Honour identified the reservation of further consideration as to whether further orders may be required (implicitly, to give effect to the Decision) “if the plaintiff does not comply with its undertaking noted in order 1, or regulatory approvals are not obtained”. Those limitations bespeak an intention on the part of the Court to create a process that would culminate in the execution of the Lease which could be lawfully enjoyed by CTA. The Lease would then govern the relationship between the parties because that was what the Court had found had been CTA’s expectation. Further recourse to the Court would only be required if CTA did not comply with the Undertaking or its compliance was unsuccessful because the regulatory approvals could not be obtained. In those circumstances the questions of whether or not the Court’s order for the execution of the Lease should be vacated and some other relief considered would have had to have been dealt with.

There are two other matters I have taken into account.

First, in approaching my task I have carefully considered what White J had to say about the construction of the Orders in his decisions that are set out above after the Orders were made. I do not consider that the conclusion I have reached as to the proper construction of the Orders is in any way inconsistent with views expressed by his Honour. In my respectful opinion those views are to be accorded considerable weight because his Honour was the trial judge and the author of the Orders.

Second, the construction which I have favoured avoids an inconvenient and incongruous result. The rights of the parties have been regularised at law by the execution of the Lease and the resolution of the First s 96 Application. Understandably, neither party suggested that the Second s 96 Application would inevitably succeed or fail. However, if it was unsuccessful, then the consistent application of the construction of the Orders advanced by CTA would mean that the reservation of further consideration under Order 9 would be engaged because a “necessary regulatory approval” had not been obtained. Final relief having been perfected by the execution of the Lease and the resolution of the First s 96 Application, I do not think the Orders should be construed so as to open up too readily the prospect of that relief having to be undone or varied long after the final relief was granted.

On the proper construction of the Orders, and in the events which have happened, they do not compel the defendants to consent to the Second s 96 Application. There is, therefore, no basis to engage the default option of a registrar signing it on behalf of the defendants to signify their consent to Second s 96 Application being made to the Council. It follows that the Motion will be dismissed.

Given the litigious history between the parties, it is important to note in reaching this conclusion, that the Motion was argued solely by reference to the terms of the Undertaking and Order 2. CTA did not seek a variation to the Orders and it expressly did not rely on the liberty and reservation of further consideration set out in Order 9.

Nor was any other legal basis which could arguably result in the defendants being compelled to consent to the Second s 96 Application relied upon. For example, there was some reference in CTA’s written submissions, ultimately not developed, that the defendants’ failure to consent constituted a derogation from the rights granted to CTA under the Lease. There was also no engagement with the defendants’ submission that there was no express or implied obligation in the Lease that would require them to consent. The extent to which the law relating to good faith might be applicable was similarly not explored.

Finally, and putting the matter as neutrally as possible, I should also record that it is clear from the evidence that the defendants are being vigilant in identifying conduct which might permit the lawful termination of the Lease. That is their right. However, I respectfully agree with White J’s characterisation (see paragraphs [17] and [20] above) that the Orders are for specific performance. The consequences of this were not argued before me, and I express no concluded view on this or any of the possibilities identified in the preceding two paragraphs. But whatever may happen next between the parties in relation to the Second s 96 Application or the Lease may still require the supervision of the Court in accordance with the principles set out in cases such as JAG Investments Pty Ltd v Strati [1981] 2 NSWLR 600 and, more recently, Despot v Registrar General of New South Wales [2016] NSWCA 5.

The Court will hear the parties as to costs.