#6830 - Sabemo Pvt Ltd V. North Sydney Municipal Council - Restitution of Unjust Enrichment BCL

Sabemo Pvt Ltd v. North Sydney Municipal Council

Facts

The defendant Council owned land which it desired to have redeveloped – this was for the purpose of the redevelopment of the North Sydney Civic Centre. It invited the submission of redevelopment proposals and formally accepted the plaintiff's scheme. The acceptance of the scheme did not create any contract but the plaintiff, as the chosen developer, thereafter did a considerable amount of work in regard to the preparation of plans, and negotiation with relevant authorities and with the defendant. The plaintiff and the defendant undertook lengthy negotiations regarding the lease of the land by the defendant to the plaintiff with a lease back of portion of the buildings to be erected. There were a number of matters outstanding, in regard to the lease, when the defendant decided to abandon the scheme. During the course of the work undertaken by the plaintiff it had been specifically agreed between the plaintiff and the defendant that the cost of working out one alternative should be borne equally between the plaintiff and the defendant. Except in that respect there had been no agreement by the defendant to pay the plaintiff anything for its trouble.

Following the abandonment by the defendant of the scheme the plaintiff sued the defendant to recover the expenditure undertaken by it in regard to the project.

Work done by the plaintiff: The model and mock-up for scheme 2 were themselves elaborately done. Furthermore the plaintiff had prepared in respect of stage 1 of that scheme not only sketch plans but detailed working drawings. These were tendered in evidence. There is a question with which I shall need to deal in the event that I find liability established of the reasonableness or otherwise of the plaintiff in proceeding as far as working drawings when development consent had not been obtained.

The plaintiff was asked to comment on a number of matters listed in various paragraphs of a letter that proceeded for some six pages. Amongst other things detailed questions were asked about the lift service that would be provided.

Request by the defendant: I have referred to the above letter at some length to indicate that the plaintiff, in carrying out at least some of the detailed work which it did, was doing so, not only with the defendant's knowledge, but at its request. Thus the defendant, before the interim development order was made on 21st July, 1972, required the plaintiff to plan the development in a very detailed way.

The abandonment was a decision made by the defendant: Plainly the project went off because of the defendant's decision that it be dropped. It was put to me by counsel for the defendant that it may not have eventuated anyway because of the substantial disagreement which there was in relation to the abovementioned matters with the result that it is impossible to say positively that it went off only because of the defendant's decision.

Holding

Remedy not under Unjust Enrichment

I do not use what his Lordship wrote as necessarily reflecting the law concerning unjust enrichment. It may not have developed so far as he suggests, at least in this country. In any event this is not a case of unjust enrichment.

Rule laid down

In other words in all such cases, applying the principles enunciated by the members of the Court of Appeal inJennings & Chapman case((71))and inBrewer's case((72))there could be no recovery because the correct view of the situation was that both parties, until a contractual relationship came into existence, were taking a risk and loss up to that time should lie where it fell. That submission seems to me to go back to actual intention. It is, of course, a very important matter to be taken into account in determining the ultimate question of whether or not there should be recovery. But I cannot regard as correct a submission which brings about such an inflexible situation as would result if it were accepted. In other words the acceptance of the submission would mean that no matter what the circumstances, there could be no recovery if the parties did not originally contemplate a payment to the plaintiff for the work which was done.

In a judgment of this kind it would be most unwise, and in any event impossible, to fix the limitations which should circumscribe the extent of the right to recover. It is enough for me to say that I think that there is one circumstance here which leads to the conclusion that the plaintiff is entitled to succeed. That circumstance is the fact that the defendant deliberately decided to drop the proposal. It may have had good reasons for doing so, but they had nothing to do with the plaintiff, which in good faith over a period exceeding three years had worked assiduously towards the day when it would take a building lease of the land and erect thereon the Civic Centre which the defendant during that long period had so earnestly desired.

I realize that in looking at the matter in this way I am imputing a degree of fault to the defendant. To some this may seem to be, at least in English law,somewhat strange. It has long been the law that parties are free to negotiate such contract as they may choose to enter into. Until such contract comes about they are in negotiation only. Each is at liberty, no matter how capricious his reason, to break off the negotiations at any time. If that occurs that is the end of the matter and, generally speaking, neither party will be under any liability to the other. But the concept that there can be fault in such a situation was adopted both by Somervell and RomerL.JJ. inBrewer's case((74))the latter, so it seems to me, basing his judgment upon it. DenningL.J. did not in fact find fault in that case, but it would seem that he thought it could sometimes exist in negotiating situations, as distinct from contractual ones, although there had not in fact been fault in the case with which he was immediately concerned.

To my mind the defendant's decision to drop the proposal is the determining factor. If the transaction had gone off because the parties were unable to agree, then I think it would be correct, harking back to the expressions used by the judges inJennings & Chapman case((75))and inBrewer's case((76)), to say that each party had taken a risk, in incurring the expenditure which it did, that the transaction might go off because of a bona fide failure to reach agreement on some point of substance in such a complex transaction. But I do not think it right to say that that risk should be so borne when one party has taken it upon itself to change its mind about the entirety of the proposal.

As I have said, substantial and continuing work had been done over a period of three years or more. It seems to me to be unthinkable that the plaintiff would have been prepared to do what it did if it thought that the defendant might change its mind about proceeding with the proposal. It is true that the defendant is a Council whose members are elected from time to time and that therefore, it might not be expected necessarily to be as consistent in its approach to problems as a different sort of undertaking. But for more than three years its consistent policy had been to proceed with a scheme which would give it adequate accommodation for its various activities free from any obligation to pay rent therefor and with the knowledge that in due course of time when the lease expired all would revert to it. It seems to me that in those circumstances the...