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Shepperd v The Council of the Municipality of Ryde

(1952) 85 CLR 1, High Court of Australia

Overview

Plaintiff (Shepperd) purchased house from the Defendant (Council).  During pre-contractual discussions Shepperd was told, by reference to plans and brochures, that the land opposite the house would become parks.  Shepperd made it clear to the Council that this was important. 

A year after contractual completion the Council decided instead to sub-divide the land.  Shepperd sought an sought an injunction to stop them using the land from anything other than a park.

The Supreme Court of NSW dismissed Shepperd's claim, finding there was no contract to carry out the work to create the parks and neither was there an actionable estoppel or fale representation of existing fact.

Shepperd appealed and the High Court found there was a prima facie case of a collatoral contract by the council that the area opposite his house would be used for a park or parks. Appeal allowed.

Subdivision

 

Facts

The Plaintiff purchased house from defendant.  During pre-contractual discussions P was told (by reference to plans/brochures) that the land opposite the house would become a park.  P made clear to D how important this was to them.  A year after contractual completion D decided instead to sub-divide the land.  P sought an injunction to stop them using the land from anything other than a park.

 

Claims

Shepperd made three arguments in support of his claim:

1. Reference to the plan in the main contract meant that it could be implied into the main contract that there woudl be no departure from the plan with respect to the proposed park.

2. Producing the pamphlet and plan during pre-contractual discussions gave rise to a collatoral promise that if Shepperd purchased the property the Council would not use the land other than for parks.

3. The pamphlet and plan constituted a representation that the areas shown as parks had been reserved as parks and this was a representation of existing fact. This representation was acted upon by the plaintiff with the result that the Council was estopped from denying the areas were reserved as parks.

On appeal the High Court was ruling only on the refusal by the Supreme Court of an interlocutory injunction, which required Sheppard to make a prima facie case supporting the existence of the rights claimed.

 

Decision (High Court)

Justices DIxon, McTiernan, Fullagar and Kitto

The majority held that Sheppard had made out a prima-face case on two of the grounds claimed.

Collatoral promise

The assurances in the council plan and brochure gave rise to a collateral contract between the parties. It was their intention that P should rely on these documents and he had done so. The reluctance of the courts to find a collateral contract where a statement in question could have been included in the main contract was displaced here because it was not unnatural for the parties to treat the contract as devoted only to the purchase of the land.

[para 10] ... It is, we think, a reasonable construction of the Council's action in putting forward the project as the basis upon which the intending purchaser could proceed, if it is treated as amounting to or involving an undertaking or promise by the Council to him that they would adhere to and maintain the project, if he would become a purchaser of a lot which he might select and they might allocate to him. The reluctance of courts to hold that collateral warranties or promises are given or made in consideration of the making of a contract is traditional. But a chief reason for this is that too often the collateral warranty put forward is one that you would expect to find its place naturally in the principal contract. In a case like the present it is, we think, otherwise. Doubtless the main contract might have included a clause by which the Council undertook not to depart from the housing scheme. But it seems to be not unnatural that the parties should treat the contract as devoted to the purchase of the lot which the individual purchaser acquired, the existence and stability of the project of which the transaction was an outcome being presupposed as something antecedent upon which the purchaser might implicitly rely. It is the common intention that he would so rely upon it and on that basis proceed to contract to buy the particular lot allocated to him. It is because of this that the assurance which is embodied in the plan, when it is read in the light of the pamphlet, obtains its effect as a collateral promise. ...

Implied term in main contract

The majority also considered that there was a prima facie case for implying a term into the main contract regarding the use of the land as parkland.

The majority noted the significance, in this case, of the fact that the plan involved here was for a housing scheme by a public authority that was 'formulated for the very purpose of providing amenities and advantages to be enjoyed by the inhabitants of the area and thus forming the foundation of the transaction' (para 13).

When determining whether a term could be implied in the main contract the Court observed that the 'cardinal question is the meaning and effect of the description, in the contract, of the allotment of land sold as part of the vendor's Housing Project No. 4 and being allotment No. 85.' (para 15). They continued:

[para 15] ... If this is only an identification of the block of land, it can raise no implication. By an identification of the land we mean a description for ascertaining precisely where it lies on the earth's surface and what are its dimensions and where are its boundaries. If on the other hand it means to describe the land as possessing attributes or incidents which flow from the project, there may be room for implication. It is to be observed that the expression is "part of the vendor's Housing Project" and not "being allotment 85 on the plan of the vendor's Housing Project". The housing project consists of the scheme or design considered as a planned work or, perhaps, conception. The reference to the project makes it both legitimate and necessary to resort to evidence to ascertain what is the project and what are its constituent parts or features. Moreover it is not until this has been ascertained that the contract should be finally interpreted. The evidence before us as to the nature and identity of Ryde Council Housing Scheme No. 4 is restricted to the plan and the pamphlet on group housing. The latter probably is inadmissible for the purpose of construing the contract. But it may be that for a proper understanding of the scheme further information than the plan is necessary. Be that as it may, once the plan is scrutinized, enough appears to show that the project is a planned development of a housing area according to an entire design with parks reserved as an amenity for the common advantage of the purchasers. For the protection of the purchasers against the destruction of the amenities or diversion of the advantages nothing will suffice short of an obligation to use the land only as parks or else to exercise the statutory powers conferred by s. 348 (1) to provide such parks. Without some such implication the purchaser, unless a collateral contract existed, would have nothing to depend on but the will of the Council for the amenities forming an integral part of the scheme. If "business efficacy" is a test an implication is needed to give it. On the whole we think that there is a prima-facie case for making some such implication. ...

As a result of these findings the majority considered that an interlocutory injunction should be granted and allowed the appeal.

Justice Webb

Justice Webb agreed the appeal should be allowed. His Honour considered the representations regarding the use of the land as parkland were representations of existing fact and not merely representations of future intention.