Allen v Belmore Property Co Pty Ltd

[1965] HCA 37

HIGH COURT OF AUSTRALIA

Barwick C.J., Kitto, Taylor, Menzies and Windeyer JJ.

ALLEN v. BELMORE PROPERTY Co. PTY. LTD.

(1965) 114 CLR 454

29 July 1965

Landlord and Tenant (N.S.W.)

Landlord and Tenant (N.S.W.)—Prescribed premises—Control of rents—Rent payable at prescribed date—Covenant to pay rates and taxes—Whether amount payable pursuant to covenant fixed—Right of landlord to recover under covenant—"Rent payable"—Landlord and Tenant (Amendment) Act, 1948-1957 (N.S.W.), ss. 8 (definition of "rent"), 15, 18, 20, 33, 35.

Decisions

July 29.
The following written judgments were delivered: -
BARWICK C.J. The appellants were the lessors entitled to the benefit of the covenants of a building lease executed in 1912 by which land in the City of Sydney was leased to the respondent company for the term of fifty years and which reserved a ground rent of 1,066 pounds per annum. By the lease the respondent covenanted to demolish the then existing buildings on the land, and to erect thereon a building of an agreed kind, expending thereon an agreed minimum sum. The respondent also covenanted, as well as to pay the clear rent of 1,066 pounds per annum, "from time to time and at all times during the term to bear, pay and discharge all rates, taxes, charges, assessments, outgoings and impositions of every kind whatsoever which now are, or at any time hereafter, may be payable in respect of or assessed, charged or imposed upon the land or any erections thereon or additions thereto, or any part thereof, or upon the owner or occupier in respect thereof by authority of Parliament or otherwise". By other covenants it agreed to repair the building to be erected; to paint it once at least in every five years; to insure, and to utilize insurance moneys in the event of fire in rebuilding the destroyed premises, making good any deficiency of such moneys for that purpose; not to use the premises for a number of stated purposes, nor to permit them to be used for Sunday trade; not to allow any noise or nuisance to be created on the premises; and to observe all rules and regulations in force in connexion with the Factories and Shops Act. (at p459)

2. The respondent did carry out the building covenant, and at all material times paid the ground rent as covenanted. However, the premises became prescribed premises within the meaning of the Landlord and Tenant (Amendment) Act, 1948 of the State of New South Wales, (the Act), and s. 15 (1) of the Act applied to them as from its commencement. In 1949 the appellants made an application to a Fair Rents Board set up under the Act for the determination of the fair rent of the premises. The Fair Rents Board of 11th August 1953, in pursuance of this application, made a determination of the fair rent, the determination being effective as on and from that day, and being expressed in the following terms:

"That the fair rent of the premises under this lease shall be the existing rent understood in terms of the definition of rent in s. 8 of the Act". (at p460)

3. Prior to 1st April 1953 land tax had been payable in respect of the subject land by virtue of the Land Tax Assessment Act 1910- 1952 of the Commonwealth, but by reason of s. 63 of that Act, the lessee's covenant to pay rates, taxes and charges, to which I have already referred, could not lawfully extend to include payment of land tax levied under that Act. Thus, as at the prescribed date, no land tax was payable by the respondent under the lease. The Commonwealth Land Tax Assessment Act was repealed as on 1st April 1953 by the Land Tax Abolition Act of that year. (at p460)

4. In 1956 the Land Tax Management Act, 1956 of the State of New South Wales was passed to commence on 31st October 1956. This Act imposed land tax in respect of the subject land, but it did not avoid the lessee's covenant to pay such land tax. (at p460)

5. On 25th June 1958 a new determination of the fair rent of the premises was made to be effective as on and from 1st July 1958 as from which date the parties ceased to be in dispute as to the respondent's liability to pay land tax. (at p460)

6. The respondent, between 31st October 1956 and 1st July 1958, did not pay any part of the land tax levied in respect of the land under the provisions of the Land Tax Management Act, 1956 for that period. The appellants sued the respondent in the Supreme Court of New South Wales, presumably upon the covenant contained in the lease to pay rates, taxes, and charges, and perhaps, having regard to one of the appellants' submissions in this appeal, also upon the determination of the Fair Rents Board made on 11th August 1953, claiming the amount of land tax which had been levied in respect of the land between 31st October 1956 and 1st July 1958. (at p460)

7. After the commencement of the proceedings in the Supreme Court, the parties agreed upon a special case pursuant to s. 55 of the Common Law Procedure Act, 1899-1957 (N.S.W.) in which they set out the facts which I have summarized, and to which they annexed the lease and the determination of the Fair Rents Board given in August 1953. The special case asked whether, in the light of these facts, the respondent was liable to pay to the appellants any amount in respect of the land tax paid or payable by the appellants in respect of the subject land for the period from 31st October 1956 to 30th June 1958. (at p460)

8. The Full Court of the Supreme Court answered this question in the negative, and ordered that judgment be entered in the action for the defendant. The appellants appeal to this Court and seek to reverse this answer, and to obtain judgment for the sum of 7,062 pounds 11s. 5d., being the amount of land tax which accrued due and was paid by the appellants in respect of the subject land between the dates mentioned. (at p461)

9. It is common ground between the parties, and indeed correct, that, by virtue of the covenants of the lease, the respondent would be liable to pay the amount claimed for land tax in relation to the period in question. But it is said for the respondent: first, that s. 15 (1) of the Act originally pegged the rent payable at the sum of 1,066 pounds, the rent payable as at 31st August 1939, plus the amount of the rates and taxes actually levied in that year in respect of the subject land; and that this sum became the fair rent by virtue of s. 15 (1) in the Act as amended up to 1952 (see No. 55 of 1952). This submission means that no amount was included in the fair rent at either 31st August 1939 or 1st March 1949, the prescribed date under the amendment of the Act made in 1951 (see No. 55 of 1951, s. 2) in respect of a liability for land tax and that no amount beyond the amount of the rates and taxes payable at the relevant prescribed date could be recovered under or in respect of the covenant to pay rates, taxes and charges. Secondly, that the determination of the fair rent by the Fair Rents Board on 11th August 1953 fixed the fair rent at a sum equal to 1,066 pounds plus the amount of municipal and water rates actually levied in respect of the subject land in the calendar year 1953 and that no sum beyond the total of the two amounts could be recovered under the covenants of the lease. It was said that the fair rent thus fixed became the fair rent fixed by s. 15 (1) as amended by the amendment to the Act made in 1954 (see s. 2 of No. 46 of 1954). Thirdly, that if the order of the Fair Rents Board purporting to fix a fair rent on 11th August 1953 meant that the rent was fixed at the sum of 1,066 pounds plus the amount which from time to time thereafter would be payable by the lessee under the covenant to pay rates, taxes and charges, it was null and void as being unauthorized by the Act. (at p461)

10. The argument in support of the second and third of these submissions is that the Fair Rents Board was bound to determine the fair rent of the premises at a fixed money sum to cover the whole consideration moving to the lessor for the grant of the lessee's interest in the term, that is to say, a single money sum to cover all the elements mentioned in the definition of "rent" in s. 8 of the Act (ss. 8 and 20). Consequently, so it was said, the Board could not fix a rental which was to be arrived at by the application of a formula; nor could it fix a rental which was variable in amount. In support of these views, the respondent called in aid both the decision and the reasons of this Court in Australian Provincial Assurance Association Ltd. v. Roddy (1956) 95 CLR 478 and of the Supreme Court of N.S.W. in Kelly's Furniture Pty. Ltd. v. Rathborne (1953) 53 SR (NSW) 484; 70 WN 306 (at p462)

11. The basis of the first submission is that the definition of rent in s. 8 must be read with s. 15 (1) so that the amount of the rent payable became by virtue of this section the equivalent of the total of the items set out in the definition and that thereafter nothing could be recovered in respect of these items in excess of the amount calculable in respect of them on the prescribed date. (at p462)

12. The appellants, on the other hand, contend, first, that s. 15 (1) of the Landlord and Tenant (Amendment) Act merely pegged the actual rent payable at the sum of 1,066 pounds, but did so on the covenants of the lease, which were not avoided or varied by s. 15 (1), except that the covenant to pay rent was modified, if necessary, to confine it to the pegged rent. In this connexion, it was submitted in particular that the Act did not in any respect impair the covenant to pay rates and taxes. Secondly, that the Fair Rents Board on 13th August 1953 either determined the fair rent at the pegged rent in the sense of the appellants' first submission or, alternatively, if the Act by s. 15 (1) had pegged the rent in the manner claimed by the respondent, that the Fair Rents Board purported to reinstate the terms of the lease thus in effect fixing the rent at the sum of 1,066 pounds, plus the amount of rates, taxes and charges which should from time to time become due and payable by the lessee under the terms of the covenant in the lease. Thirdly, that if, contrary to the appellants' submission, the fixation of the rent by the Fair Rents Board in this sense was unauthorized by the Act, it was none the less binding on the parties so that the appellants could sue upon it and recover the amount of the land tax in question. (at p462)

13. The problem in the case is principally created by the presence in the Act of a definition of "rent", which is in the following terms in s. 8 of the Act: "'rent' means the actual rent payable under a lease, and includes - (a) the value to the lessor of any covenants, conditions or other provisions of, or relating to, the lease to be performed by the lessee, other than covenants, conditions and provisions usually entered into by a lessee; and (b) any rates or taxes payable by a lessee in respect of any prescribed premises, other than excess water rates." This definition is to be applied subject to any contrary intention being found in the context: s. 8 (1). (at p462)

14. The Supreme Court has adopted the view that s. 20, sub-s. (1) of the Act, requires a Fair Rents Board to determine the fair rent at a sum of money certain which must represent the rent as defined, that is to say, it must be the total of the actual rent payable, the value to the lessor of unusual covenants (presumably as at the date of the determination), and the amount of rates, taxes and charges actually payable by the lessee, in respect of the leased land, at the date of the determination, or at any rate the amount of such rates, taxes and charges payable in respect of the annual period within which the operative date of a determination falls. In the Supreme Court's view, it follows that, when so fixed, that global amount of money becomes both the fair rent and the rent of the premises. (at p463)

15. The Supreme Court has not expressly adverted to the question of what effect on this view s. 15 (1) or a determination of the fair rent under s. 20 (1) has upon the covenants of the lease. It is not clear whether any of the covenants of the lease remain enforceable or whether only such of the covenants as involve the payment of money to the lessor, or on his account, are unenforceable, except to the extent of the recovery of the global sum fixed as the fair rent. There seems to be a suggestion that the covenant to pay rates, taxes and charges is rendered completely unenforceable so long as there is no variation in the value of the unusual covenants or in the amount of rates, taxes and charges included in the global sum for rent. (at p463)

16. It is said that the conclusion of the Supreme Court is supported by the decision and the reasoning of this Court in Australian Provincial Assurance Association Ltd. v. Roddy (1956) 95 CLR 478 (at p463)

17. With respect, in my opinion, the actual decision in that case does not involve or support this conclusion. In that case the parties had provided for a fluctuating rent quantified as a proportion of the profits of the business carried on by the lessee in the leased premises: that is to say, the rent payable according to the covenant for rent in that lease was a fluctuating amount to be determined by applying a formula. This Court decided that the rent payable must be expressed for the purposes of the Act as a money sum certain, and that the Act pegged the rent payable in that case at that sum of money which was the amount of the agreed proportion of the profits referable to the prescribed date and then payable under the covenants of the lease. The Court decided that the rent payable, under the provisions of the Act, could not be a fluctuating sum calculable according to a formula: but must be a sum of money expressed as such. That, in my opinion, was the whole question which the Court was called upon to decide, and did decide. (at p463)

18. However, in affording reasons why the covenanted percentage of the gross takings of the lessee's business could not be regarded as the rent payable within the meaning of s. 15 (1) of the Act, Dixon C.J., McTiernan, Williams and Webb JJ. in a joint judgment said this: "The truth is that s. 15 (1) and (2) look to the rent actually payable by the lessee to the lessor at 1st March 1949. That means the money figure. There is no reason why the money figure should, in order to fit the description, appear on the face of the lease. Indeed the very definition of 'rent' in s. 8 shows that, to the 'actual rent payable under the lease', there must be added the value of certain covenants and the amounts of certain taxes. The value of the covenants doubtless must be estimated but the estimate is expressed in money" (1956) 95 CLR, at p 489 I think it must be conceded that this language may tend to support the view of the respondent, and of the Full Court in this case. But, in my respectful opinion, the expressions of the last two sentences were not only unnecessary to the decision of that case, but, again in my respectful opinion, do not support the decision of the Court, nor the reasoning which immediately precedes it. The earlier portion of the quoted passage dealt with "rent payable", saying in substance that a money sum to be derived by the application of a formula to the circumstances at a particular date, satisfied the expression "rent payable", though the formula by use of which that sum was calculated would not. It seems to me, with all due respect, that the definition of "rent" does not bear on these propositions: whatever view is taken of what is comprised in the "rent", the Act requires that the amount to be paid to the lessor as rent must be a money sum expressed as such and not left for calculation or variation according to a consensual formula. Thus to decide that the rent or the rent payable is to be so expressed does not determine what the sum is to represent, or how the sum is to be determined. (at p464)

19. In my opinion, it is not correct to reason from the conclusions in Australian Provincial Assurance Association Ltd. v. Roddy (1956) 95 CLR 478 that because the rent payable under the Act must be a money sum, the operation of the covenants of the lease, other than the covenant to pay rent, could not be allowed to produce any variation in result when applied from time to time to changing circumstances. A covenant in a lease to deal only with the lessor in business may produce many fluctuations, in result both for the lessee and the lessor during the term. Neither Australian Provincial Assurance Association Ltd. v. Roddy (1956) 95 CLR 478 nor City of Geelong v. Tait (No. 2) (1950) V.L.R. 504, in my opinion, requires the conclusion that the covenant to pay rates, taxes and charges cannot be allowed to produce a different result from time to time according to the amount of the current levies which fall within its terms. If that consequence is to follow, it must be for some reason other than decisions that the rent payable cannot be a formula or a fluctuating or increasing sum of money. (at p465)

20. The questions in this case, in my opinion, are not governed by authority. They raise a fundamental consideration in connexion with the scheme of rent control set up by the Act and they require a close examination of the Act in relation to the employment in its several sections of the definition of "rent" in s. 8. (at p465)

21. It is essential to the submissions of the respondent that the definition of "rent" in s. 8 be applied in terms throughout ss. 15 (1), 20 (1) and s. 35 (1) and (2) of the Act. It would be idle to contend that the scheme of the Act is evidently coherent or that its expression is an example of lucidity or consistency in draftsmanship. But, having endeavoured to discover from its language what is the intention of the legislature in relevant respects, I have reached the conclusion that the definition of rent in s. 8 ought not to be applied throughout the above-mentioned sections, partly because of its express terms and partly because of the context which these sections and the scheme of the Act generally seem to me to provide. (at p465)

22. To explain my reasons for so concluding it is necessary to consider the relationship of the definition of "rent" to a number of provisions in the Act. I first observe that the definition is of "rent": not of "rent payable" or "of actual rent payable" or of "fair rent". None of these expressions, in my opinion, is susceptible of having incorporated in them the definition of "rent" as set out in s. 8; indeed, by the very terms of the definition, the described integers of the concept of rent as defined include "actual rent payable". (at p465)

23. To arrive at a conclusion as to the proper use to be made of the definition of "rent" in the scheme of the Act, I think it necessary to begin with s. 15 (1). This section represents as it were the initial impact of the Act upon the relationship of landlord and tenant theretofore regulated by their agreement and the general law applicable to their relationship. It effects the first modification made by the Act of their consensual rights and is thus likely to afford and, in my opinion, does afford, the key to the scheme of the legislation in presently relevant respects. (at p465)

24. Section 15 (1) provides that the rent payable by the lessee shall not exceed the rent payable in respect of the premises on the prescribed date. Now it is plain to my mind that the expression "rent payable", where secondly occurring in this sub-section, cannot mean the sum of money which is the total of the actual rent payable, the "value" to the lessor of the unusual covenants of the lease and the amount of the rates and taxes payable on that date by the lessee. That global amount of money was not "payable" by the lessee on the prescribed date, which at the outset is a date prior to the commencement of the operation of the section. The rent payable on the prescribed date was either the covenanted rent or a conventional sum substituted for it. These might not be the same sum in all cases, but in most cases I would expect the two to correspond. Hereafter I shall refer to the covenanted rent as comprehending cases where the actual rent payable was a different sum from the rent covenanted to be paid. (at p466)

25. To read the definition of rent into the expression "rent payable" where secondly occurring would, in my opinion, deny the word "payable" its essential meaning and to give it an extraordinary meaning of a most artificial kind. Although the definition of rent does represent an expression of the total consideration (beyond the "usual" covenants) which the lessee furnishes the lessor for the interest in the term in the land which the lease creates, the lessee in no legal sense of the word "pays" that total consideration. Also, to read the definition of rent into the expression "rent payable" would effect not a pegging, but a depreciation, of the covenanted rent. Whereas before the passing of s. 15 (1) the lessor would have obtained his covenanted rent, the performance of the covenants, usual and unusual, of the lease, and relief from the payment of rates, taxes and charges in respect of the land which the lessee has agreed to pay, after the passing of the Act if the definition of "rent" were read into the expression "rent payable", he would only receive the covenanted rent because, by dint of the application of the definition, the covenanted rent would come to represent all the elements listed in the definition. (at p466)

26. Rather than use the definition to reach such an unlikely result, I prefer to construe "rent payable", where secondly used in the sub-section, as a natural reference in its context to the covenanted rent expressed as a sum of money. As this Court has decided, this involves the calculation of the appropriate sum of money where the covenant provides a formula for the determination of the rent: and it also prevents any increase or variation of that sum of money which the covenant to pay rent otherwise might produce. (at p466)

27. There can be no doubt, in my opinion, that the "rent payable" where first referred to in the sub-section must be comparable to the "rent payable" where secondly referred to: they are co-ordinates. Indeed, what I have already said affords strong reason for so deciding. I do not think that the sub-section intends the covenanted rent as on the prescribed date to become the total consideration for the lessee's occupation so that by virtue of s. 15 (1) alone, the covenants of the lease other than the covenant to pay rent are displaced, as well as the covenant to pay rent modified. Indeed, I have some difficulty in comprehending how the covenanted rent or the rent payable could be taken to include the "value" of the lessee's unusual covenants: or for that matter, how any other recurrently payable sum of money could be regarded as comprehending the "value" of those covenants expressed in terms of money. If the unusual covenants were valued and their value in money added to the actual rent payable so as to form part of a global sum, it would seem to me that, their "value" having been converted into the rent, they must cease to be operative, otherwise the lessor is twice "paid": he has their value in the global sum recurrently payable as rent and he can enforce the covenants as well for the future. Such a view seems to me to make nonsense. Whatever else can be discovered in this legislation, I can find no trace in s. 15 (1) of any intention to do more than to peg the covenanted rent payable as on the prescribed date as the actual rent payable. (at p467)

28. Consequently, it seems to me that the expression "rent payable", where firstly occurring in s. 15 (1) is a reference to so much of the rent as defined as is payable in money to the lessor: it is, as expressed, a reference to the "rent payable". (at p467)

29. Sub-section (4) of s. 15 speaks of the rent "fixed" by sub-s. (1). Here the definition, it seems to me, cannot be applied to the word "rent" because the expression "fixed" in sub-s. (4) carries back to s. 15 (1) which, as I have said, in my opinion, deals with the rent payable. To my mind, this conclusion is reinforced by the presence in the Act of s. 15 (4) (a) which makes the rent fixed the fair rent and the rent of the premises. In other words this provision, together with the words "notwithstanding any term or covenant in any lease" in s. 15 (1) effects the substitution of the peggedrent payable for the covenanted rent. Thereafter the lessor can recover the rent "fixed" as the "rent payable" under the covenant in the lease. Whilst he cannot recover or receive more than this amount as rent payable, he can recover more than the covenanted rent payable on the prescribed date where the fair rent, which becomes "the" rent, is greater than the covenanted rent payable on the prescribed date: see Belmore Property Co. (Pty.) Ltd. v. Allen (1950) 80 CLR 191 (at p468)

30. It is clear, however, in my opinion, and it is radical to the scheme of the Act that the definition of rent is to be applied to the word "rent" in s. 20 (3). By this provision a Fair Rents Board may increase the fair rent if it is of opinion that the rent at the prescribed date is insufficient. Here the question of sufficiency or insufficiency of the rent as defined can be determined. The question for the Fair Rents Board is whether the total "remuneration" to the lessor for the demise, the actual rent payable, the "value", in the sense of benefit, of unusual covenants, and the need to pay rates and taxes of which he is relieved because of payment by the lessee, is insufficient in all the circumstances. If the total consideration, the "rent" as defined, is held to be insufficient, the fair rent, i.e. the rent payable by dint of s. 15 (1) may be increased, so as thereby to increase the lessor's total consideration for the lessee's occupation, the covenants of the lease otherwise remaining. But the amount of the increase in the fair rent is not to exceed the amount of the insufficiency in the "rent" as defined; that is to say, the rent payable is only to be increased to a point where the insufficiency in the total consideration for the demise is removed. (at p468)

31. Again, in my opinion, the word "rent" is to receive its defined meaning in par. (j) of s. 21 (1) where the word "rent" firstly appears; and perhaps it might be applied to the word "rent" where it secondly appears in that sub-section though there is no real consequence in applying it if, in fixing or varying the fair rent, the meaning I have attached to s. 15 (1) and (4) is adopted. In s. 21 (2) the word "rent", in my opinion, will receive its defined meaning; that is to say, the sub-section refers to any sum of money beyond and in addition to the elements contained in the definition. (at p468)

32. In s. 18 (1), it seems to me, that the word "rent" must have the significance of rent payable, and that the definition could not be applied to the word rent in that sub-section. (at p468)

33. Section 33 deals with the effect of the determination of the fair rent on a lease. By sub-s. (2) "the rent payable by the lessee shall not exceed the fair rent notwithstanding any term or covenant in any lease in force at the time of the application or at any time thereafter". It seems to me that this provision like s. 15 (1) only modifies the covenant in the lease to pay rent. It confirms the substitution of the money sum which has become the fair rent for the covenanted rent: but otherwise the covenants of the lease are unaffected. (at p468)

34. In s. 35 (1) (a) the prohibition is against letting the premises at a rent exceeding the fair rent. In my opinion, the definition applies here to the word "rent" though its comparison with the fair rent is scarcely logical or correct. But the sub-section means, in my opinion, that the total consideration for the letting must not be greater than the total consideration, including the fair rent, at the time the fair rent was fixed or determined. In other words, the fair rent may not be exceeded by a letting on the same covenants as existed at the prescribed date or at the date of the determination as the case may be nor may the premises be let at the fair rent but upon covenants more onerous than those existing at the prescribed date or the date of the determination of the fair rent as the case may be. (at p469)

35. Section 35 (1) (b) prevents a person demanding, receiving, or paying any sum as rent exceeding the fair rent. Here, what is referred to, in my opinion, is necessarily the rent payable in money. It would not be correct, in my opinion, to apply the definition to the word "rent" in the sub-section. The contrast it makes is between two money sums, one demanded, etc. as rent, and the other fixed or determined as the rent payable. I do not think the same, perhaps illogical, juxtaposition as I have though could be made in sub-s. (1), can be made in the case of this sub-section. (at p469)

36. Sub-section (2) (a) limits the enforcement of any covenants or agreements to pay rent. Here the word "rent", in my opinion, for reasons already expressed, cannot be given the extensive meaning of the definition. The covenant or agreement being dealt with is a covenant or agreement in the lease to pay money, to which the notions in the definition are not only disparate but indeed contradictory. (at p469)

37. Sub-section (2) (b) limits the enforcement of the covenants of the lease to the recovery of the fair rent where the covenants would otherwise directly or indirectly secure the payment of rent or money so that the amount received by the covenantee or promisee would exceed the fair rent. If it is correct to say that the fair rent is the rent payable, it is clear enough that this provision is directed to ensuring that the covenant for rent in the lease, whatever form it may take and by whatever name the money sum payable to the lessor is called, is to be construed as maintaining only an obligation to pay the rent payable according to the provisions of s. 15 (1) or to the terms of a determination of the fair rent as the case may be. The insistence of the sub-section upon the notions of money paid and money received - and received by the person in the position of a lessor - indicates, I think, that the definition of rent is not to be applied to the word "rent" in the sub-section. (at p470)

38. It seems to me that neither the Supreme Court nor the respondent has really applied the definition rigorously to the words "rent payable" in s. 15 (1): for both the judgment of the Court and the submissions made by the respondent seem to leave room for some recovery under the covenant to pay rates, taxes and charges, if some reduction takes place either in the value of the unusual covenants or in the amount of some part of the rates, taxes, or charges from time to time verbally covered by the covenant as compared with their value or amount at the prescribed date or the operative date of a determination as the case may be. But if the definition is applied to the word "rent" wherever occurring in s. 15 (1) and s. 20, the global amount arrived at as on the prescribed date or by a determination is fixed irrespective of what may thereafter occur other than a new determination by a Fair Rents Board. It would appear that no room would be left to recover on any covenant of the lease except the global rent upon the modified covenant to pay rent. (at p470)

39. It seems to me that the scheme of the Act, though not very happily expressed, is that the rent payable as such is pegged as at the prescribed date, and, subject to a determination by a Fair Rents Board, that sum is the fair rent and becomes the covenanted rent. The only covenant of the lease which would be affected by this "fixing" of the rent payable is the covenant to pay rent: the other covenants remain operative. (at p470)

40. When a Fair Rents Board is called upon to determine the fair rent, it must have in mind the total consideration received by the lessor so as to determine whether or not it is insufficient in the circumstances. Having found an insufficiency, the Board can fix the rent payable, having regard to the continuing benefit which the lessor will obtain from unusual covenants and from the payment by the lessee of rates, taxes and charges. The limiting factor upon the extent of the increase in the rent payable which the Board may determine is the insufficiency which the Board had found in the rent as defined, in the total consideration for the demise. If it is thought that there is a likelihood of change in the amount of the rates, taxes or charges covered by the covenant, or that the whole or part of them ought to be borne by the lessor, the Board is well furnished with the necessary powers to do justice between the parties. Apart from fixing a period for the currency of its determintion so as to achieve an early review of the determination, it can fix the rent payable at such a sum as will carry out its view of what the lessor ought to receive in all as "rent" in the defined sense. The determination of the fair rent will reflect the existence and obligation of the covenant to pay rates, taxes and charges, not by adding an amount to the "actual rent" otherwise to be paid, but by reducing the amount of the rent payable which the Board would otherwise fix, if there were no such continuing obligation on the lessee to pay rates, taxes and charges. (at p471)

41. I find nothing in the statute which avoids the covenant to pay rates, taxes, or charges; on the contrary, I think the use of the word "rent" in s. 20 (3) contemplates its continuance. That covenant, in my opinion, remains effective, and, in the present case, would result in the success of the appellant. (at p471)

42. As I have already indicated, there is nothing in the decision of this Court in Australian Provincial Assurance Association Ltd. v. Roddy (1956) 95 CLR 478 or in the Act to prevent a determination by a Fair Rents Board of a sum of money as the fair rent producing a result by which, because of the continuing covenant to pay rates, taxes and charges, the amount the lessee is called upon to disburse as a total of the rent and the rates, taxes and charges varies from time to time according to the current amount of the rates, taxes and charges levied in respect of the land and covered by the lessee's covenant. (at p471)

43. In my opinion, neither the rent payable as fixed by s. 15 (1), nor the fair rent as determined by the Fair Rents Board included, or was bound to include, a sum in commutation of the lessee's obligation under unusual covenants of the lease or of the covenant to pay rates, taxes and charges. (at p471)

44. It follows that, in my opinion, the Fair Rents Board's decision of 11th August 1953 would not be void if it is construed as fixing the fair rent at 1,066 pounds per annum on the footing of the continuance of the lessee's obligations under the covenant to pay rates, taxes and charges. Indeed, in my opinion, it could not make an order which would vacate that covenant. It is therefore unnecessary for me to express any view as to what the somewhat cryptic determination of the Board meant. (at p471)

45. Before leaving the case, I would observe that, in my opinion, there is no substance in the contention that a void determination by a Fair Rents Board can itself found a cause of action for the payment of money by the lessee. In my opinion, nothing in Kelly's Furniture Pty. Ltd. v. Rathborne (1953) 53 SR (NSW) 484; 70 WN 306 lends countenance to that submission. (at p471)

46. Although the special case does not embody an agreement of the kind mentioned in s. 56 (1) of the Common Law Procedure Act 1899- 1957, the order of the Supreme Court included the entry of judgment for the defendant and we were informed by counsel that the parties had agreed that no costs should be ordered against either party in any event. Consequently, in my opinion, the order of the Supreme Court should be wholly set aside and in lieu thereof the question asked in the special case answered affirmatively and judgment entered for the plaintiffs for the sum of 7,062 pounds 11s. 5d. (at p472)

KITTO J. I have had the advantage of considering the judgment of the Chief Justice. I read the Act in the same way as does his Honour, and I cannot usefully add to his discussion of its provisions. (at p472)

2. I agree that the appeal should be allowed. (at p472)

TAYLOR J. The question in this appeal is whether the appellants are, in the circumstances related in the statement of agreed facts entitled to recover from the respondent the sum of 7,062 pounds 11s. 5d. pursuant to a covenant in a lease for a term of fifty years which was executed in 1912 and by which the latter, as lessee, undertook during the term of the lease to "bear pay and discharge all rates taxes charges assessments outgoings and impositions of every kind whatsoever which now are or at any time hereafter may be payable in respect of or assessed charged or imposed upon the said demised premises". The amount in question became payable by the appellants as land tax assessed pursuant to the Land Tax Management Act, 1956 (N.S.W.) in respect of the period extending from 31st October 1956 to 30th June 1958. That Act came into operation on the first-mentioned date and it is common ground that s. 30 of the Land Tax Assessment Act of the Commonwealth operated so as to prevent the terms of the covenant from attracting liability to the respondent for Commonwealth land tax in respect of any earlier period. The Commonwealth vacated this field of taxation in April 1953 and the State of New South Wales entered it in October 1956. Accordingly the respondent's liability under the covenant to pay land tax first arose, if it arose at all, in 1956. (at p472)

2. The ground upon which the respondent denies liability is, to state it generally, that the appellants' claim is an attempt to assert a right to a sum of money in excess of the "fair rent" of the premises as determined by a magistrate, or alternatively, as fixed by s. 15 (1) of the Landlord and Tenant (Amendment) Act. The matter is one of some difficulty and this is occasioned by the complicated and confused language of the Act, but on the whole, I am of the opinion that the Full Court of the Supreme Court was correct in its decision that the respondent is not liable. I agree generally with the reasons expressed by the members of the Court and, accordingly, I am of the opinion that the appeal should be dismissed. (at p473)

3. It was the respondent's contention that the fair rent of the premises was fixed in the first instance by s. 15 (1) of the Landlord and Tenant (Amendment) Act as it stood prior to 1949, that thereafter, on 11th August 1953 it was fixed by a determination of a magistrate at the rent then existing and, ultimately, by s. 15 (1) in the form which it assumed on 10th April 1958. The matter is complicated by the definition of "rent" contained in s. 8 of the Act which provides that: "'rent' means the actual rent payable under a lease, and includes - (a) the value to the lessor of any covenants, conditions or other provisions of, or relating to, the lease to be performed by the lessee, other than covenants, conditions and provisions usually entered into by a lessee; and (b) any rates or taxes payable by a lessee in respect of any prescribed premises, other than excess water rates". This was the provision which the magistrate had in mind when he fixed as the fair rent of the premises "the existing rent understood in terms of the definition of rent in s.8 of the Act". It was contended by the appellants that the magistrate did not intend by his determination to affect the contractual rights of the parties as they were expressed in the deed and there seems little doubt that this was so. But his determination was made before the decision of this Court in Australian Provincial Assurance Association Ltd. v. Roddy (1956) 95 CLR 478 and, apparently, in the belief that he might fix a fair rent which would vary from time to time accordingly as the extent of a lessee's liability under such a covenant as that contained in the lease might in the future increase or diminish. However, that case, as I understand it, decided, in relation to s. 15 (1) of the Act as it then stood, that "the rent payable on 1st March 1949" meant a fixed sum ascertained, in accordance with the Act, as the rent as at the prescribed date. As was said in the joint judgment: "The truth is that s. 15 (1) and (2) look to the rent actually payable by the lessee to the lessor at 1st March 1949. That means the money figure. There is no reason why the money figure should, in order to fit the description, appear on the face of the lease. Indeed the very definition of 'rent' in s. 8 shows that, to the 'actual rent payable under the lease', there must be added the value of certain covenants and the amounts of certain taxes. The value of the covenants doubtless must be estimated but the estimate is expressed in money" (1956) 95 CLR, at p 489 Accordingly, "the existing rent" at the time when the magistrate purported to make his determination was the actual rent payable as at 1st March 1949 plus the value to the appellants at that date of covenants of the character referred to in the definition of "rent". What the latter factor amounted to does not appear but it is abundantly clear that the covenant to pay land tax was as at that date of no value to the appellants. My own view is that the magistrate's determination left the position created by s. 15 (1) unaltered but that if, contrary to that view, he intended that the "fair rent" should either increase or diminish from time to time according to the incidence of rates and taxes, it was not an effective determination. (at p474)

4. However, this is not the end of the matter for what s. 15 (1) speaks of is the "rent payable" by the lessee. The "rent payable" by any lessee of prescribed premises is not to exceed the "rent payable" in respect of those premises at a prescribed date. It is, however, difficult to fit into this section the definition of the word "rent" for the "value" to the lessor of covenants of the character specified is not in any sense "payable" and during the course of the hearing I was inclined to think that, possibly, s. 15 (1) should be understood to direct attention only to rent actually payable as such. But by sub-s. (4) of that section the rent fixed by sub-s. (1) is to be the "fair rent" of the premises and s. 35 (1) provides that: "A person shall not - (a) let premises . . . at a rent exceeding the fair rent thereof; or (b) demand, receive or pay any sum as rent exceeding the fair rent thereof". Moreover, sub-s. (2) of that section provides that: "The legal remedies for the enforcement of any covenant or agreement . . . which, directly or indirectly, would secure to any person the payment of rent or of money in respect of the occupation of premises . . . so that the amount received by the person would exceed the fair rent thereof, shall be limited to the enforcement of payment of the fair rent thereof". Accordingly, it seems to me, that if s. 15 (1) were to be regarded as referring only to rent actually payable as such and the "fair rent" ascertained by reference only to that factor, a lessor would, contrary to the plain intendment of the Act, be entirely deprived of the value to him of covenants of the character specified in the definition of "rent". In this state of affairs it must, I think, be held that s. 15 operates to fix the fair rent having regard not only to the rent actually payable as such at the prescribed date but also to the value of a covenant of the character in question or, perhaps, more precisely, the monetary return which that convenant was producing at the prescribed date. I have shorlty stated my views on the matter notwithstanding my agreement with the Full Court simply because I regard it as important that, at least, some of the difficulties to which the legislation gives rise may appear. (at p475)

MENZIES J. By a lease dated 7th October 1912 the trustees of the estate of James Watson deceased granted the respondent a lease of premises for fifty years from 1st August 1912. The lease was a building lease. The rent reserved was 1,066 pounds per annum payable monthly and the lessee convenanted to pay that rent and "at all times during the said term bear pay and discharge all rates taxes charges assessments outgoings and impositions of every kind whatsoever which now are or at any time hereafter may be payable in respect of or assessed charged or imposed upon the said demised premises or any erections therein or additions thereto or any part thereof or upon the owner or occupier in respect thereof by authority of Parliament or otherwise". State land tax was imposed as from 31st October 1956 and the appellants, the present trustees of the estate of James Watson deceased, sued the respondent for 7,062 pounds 11s. 5d. "being the amount of land tax paid and payable by the plaintiffs in respect of the said premises in respect of the period from 31st October 1956 to 30th June 1958". (at p475)

2. Upon an agreed statement of facts, a question of law was raised which the Full Court of the Supreme Court of New South Wales answered by deciding that the respondent was not liable to the appellants for any amount in respect of the land tax in question. It was not in dispute that, according to the terms of the covenant in the lease, the lessee would be bound to pay; the decision of the Full Court was in substance that the Landlord and Tenant (Amendment) Act, 1948, as amended, had rendered the covenant wholly inoperative. (at p475)

3. Section 35 of the Act prohibits a person from receiving rent exceeding the fair rent and provides that the legal remedies for the enforcement of any covenants to pay rent exceeding the fair rent or "which, directly or indirectly, would secure to any person the payment of rent . . . so that the amount received by the person would exceed the fair rent thereof" shall be limited to the enforcement of payment of the fair rent. It has to be decided whether these provisions - which are in terms confined to covenants to pay rent or to secure the payment of rent - prevent the enforcement of the covenant in relation to the land tax imposed in respect of the premises. (at p476)

4. It was not until 11th August 1953 that there was a determination of the fair rent of the premises pursuant to s. 24 of the Act. Until that date at least, the rent payable was governed by s. 15 of the Act, which provided that "the rent payable by the lessee . . . shall not . . . notwithstanding any term or covenant in any lease . . . exceed the rent payable . . . at" 1st March 1949. Section 15 requires, therefore, a comparison between the rent payable at the specified date and the rent demanded at some date subsequent thereto. (at p476)

5. At this point it is necessary to refer to the definition of rent in s. 8 which, so far as material, is as follows: - "'Rent' means the actual rent payable under a lease, and includes - (a) the value to the lessor of any covenants, conditions or other provisions of, or relating to, the lease to be performed by the lessee, other than covenants, conditions and provisions usually entered into by a lessee; and (b) any rates or taxes payable by a lessee in respect of any prescribed premises, other than excess water rates". (at p476)

6. What seems in the Supreme Court to have been regarded as the real problem was whether the rent fixed by s. 15 included only the types and amounts of rates and taxes actually payable by the lessee on 1st March 1949 so that no new or increased rates or taxes could be enforced against it because of s. 35. It is implied in this way of stating the problem that the comparison which the Act requires is of the separate items making up the rent as defined at the two relevant dates rather than of the rent constituted by the aggregate of those items. I have come to the conclusion, however, that the only comparison required is that of the aggregate which, by definition, is the rent and, provided that the aggregate at the later date does not exceed the aggregate at the base date, the separate elements may go up or down in accordance with the lessee's covenants. So, if the value to the lessor of the covenants referred to in (a) were to fall and the rates or taxes payable by the lessee in accordance with its covenants were to rise commensurately, the rent would remain unaltered and the higher rates or taxes would be payable without any contravention of the Act. (at p476)

7. Despite the difficulties involved, it is necessary, if possible, to bring all that falls within the definition of "rent" into account in making the comparison that s. 15 requires. This follows not only from the main purpose of the Act - which is to peg rents - but from the provision in s. 15 (4) (a) (i) that the rent fixed by the section is not simply the "rent payable" but "the fair rent and the rent of the . . . premises". I have felt myself unable to construe the word "rent" in this provision as meaning less than the rent as defined in s. 8. (at p477)

8. The comparison required by the Act cannot be made unless, as its basis, a sum of money can be arrived at as the amount of rent payable on 1st March 1949. To make such a calculation involves putting a money value upon the lessee's covenants in or relating to the lease so as to include all the elements described in (a) of the definition of "rent" in s. 8. Australian Provincial Assurance Association Ltd. v. Roddy (1956) 95 CLR 478; and Bray v Smith (1963) 80 WN (NSW) 906, at p 909 See also City of Geelong v. Tait (No. 2) (1950) V.L.R. 504. The inclusion of the element described in (b) of the foregoing definition does not require any such difficult procedure as valuing covenants because, in determining the rent at the base date, all that is necessary is the inclusion of the rates and taxes then payable by the lessee and, in determining the rent at any later date, the inclusion of the rates and taxes then payable. When the rent payable at the base date and the rent demanded at the later date have been calculated, all that is required, in accordance with what has already been stated, is a comparison of the two and no comparison of the types and amounts of rates and taxes is necessary. I doubt whether this distinction has been observed in framing the case that the appellants made in the Supreme Court. (at p477)

9. In any event, the central point of the appellants' case was that the words "the rent payable" in s. 15 mean the actual rent payable under the lease without any addition by reason of the items covered by (a) and (b) of the definition. I find myself unable to accept this contention notwithstanding the difficulty that is inherent in treating all that falls within the definition of "rent" as "rent payable" for the purposes of s. 15. In Australian Provincial Assurance Association Ltd. v. Roddy (1956) 95 CLR 478 it was decided that the phrase "the rent payable on 1st March 1949" in s. 15 connoted a sum expressed in a money figure and, as such, was fixed. This conclusion was reached after reference to the definition of "rent", for it was said: "Indeed the very definition of 'rent' in s. 8 shows that, to the 'actual rent payable under the lease', there must be added the value of certain covenants and the amounts of certain taxes. The value of the covenants doubtless must be estimated but the estimate is expressed in money" (1956) 95 CLR, at p 489 (at p478)

10. To recapitulate, therefore, I think that as long as s. 15 applied the rent, and thus the fair rent for the purposes of the Act, was a sum to be calculated by adding to the actual rent payable on 1st March 1949 the value of covenants and the amount of rates and taxes then payable by the lessee. Nothing additional thereto for further rates and taxes in respect of the premises or for either of the other elements could become payable by, or recoverable from, the lessee. At this point I meet a difficulty, for the agreed facts do not disclose the amount of the rent, calculated as aforesaid, payable on 1st March 1949. As I have already indicated, I think the question ought not to have been simply whether the lessee is to pay the amount of State land tax in question, but whether the total amount of the rent payable from 31st October 1956 to 30th June 1958, according to the terms of the lease and including State land tax, did exceed the rent payable on 1st March 1949 calculated in the manner already indicated. It would seem, however, that the case has been conducted upon a different footing - that is, that the real question is whether the rent payable for the purposes of s. 15 is the actual rent rather than the rent calculated in accordance with the definition of "rent". On this basis, the appeal must fail, for the reasons already stated, unless the determination made on 11th August 1953 increased the rent by adding to the rent fixed by s. 15 the amount of the State land tax and so entitling the appellants to succeed on the basis upon which the proceedings have been fought. (at p478)

11. That determination was that "the fair rent of the premises under this lease shall be the existing rent understood in terms of the definition of 'rent' in s. 8 of the Act". This does no more than leave the rent at the amount fixed by s. 15. I cannot read it as increasing the additional element constituted by the rates and taxes then payable by the lessee to fix a new fair rent. According to the Act as I have construed it, the element of the basic rent constituted by rates and taxes depended upon what was payable on 1st March 1949 and the determination left that untouched. (at p478)

12. It is for these reasons that I consider this appeal fails. (at p478)

WINDEYER J. In my opinion this appeal should be allowed. I agree generally in the reasons for that conclusion that the Chief Justice has given. The case is complicated and I think it undesirable that I complicate it further by stating at any length my views upon the effect of provisions of the Landlord and Tenant (Amendment) Act, 1948 (N.S.W.) that seem in part to defy attempts at clear and consistent construction. As I understand it, the evident purpose of Pt II of the Act, which deals with "Fair Rents", is to restrict the amount a landlord may lawfully receive for letting prescribed premises to an amount that is assumed to provide no more than a fair return to him, having regard to the outgoings he has to meet to maintain the premises. Rates and taxes in respect of the demised premises, if payable by the lessee, are thus taken into account in the definition of rent, because the lessee by discharging them relieves the landlord of a liability that would otherwise fall upon him. Having regard to the scheme as a whole, I do not read s. 15 (1) and the definition of rent in s. 8 as meaning that the total monetary liability of the tenant under the lease was pegged at the sum of 1,066 pounds per annum together with the amount that was actually payable for rates and taxes in respect of the premises at 1st March 1949 for the then current year. Rather I think the rent was pegged at the amount described in the lease as rent, namely 1,066 pounds per annum, the lessee remaining liable to pay such amounts as should from time to time be payable as rates and taxes. I do not think that there is anything in the Act that of itself destroys the covenant by the lessee to pay rates and taxes or in any way exonerates the lessee from its obligation to perform any of its covenants. If rates and taxes should go up, then the burden falls upon the lessee: if they should go down, the lessee benefits. As this Court said in Australian Provincial Assurance Association Ltd. v. Roddy (1956) 95 CLR 478, at p 488: "The statue is dealing with rent as the consideration to the lessor for the lessee's enjoyment of his tenancy". Here the tenant has covenanted to pay rates and taxes. If the tenant had not covenanted to pay them the landlord would have to do so in order to ensure to the tenant quiet enjoyment of the premises during the term. If, after 1st March 1949 or other relevant date, a landlord becomes liable in law to pay substantially more in rates and taxes in order to enable his tenant to enjoy his tenancy, then I assume he might expect a Fair Rents Board would authorize an increase in the rent payable to him. But when the tenant has undertaken to discharge the rates and taxes during the term, then the mere performance of that covenant ensures that the consideration to the landlord for the tenant's enjoyment remains unchanged. The return to him for what he has provided has not been exceeded. This I take to be the effect of the magistrate's determination. (at p479)

2. I agree in the order the Chief Justice proposes. (at p480)

Orders

Appeal allowed. Order of the Supreme Court answering the question in the special case in the negative and entering judgment for the defendant set aside and in lieu thereof order that the question in the special case be answered as follows:

"The defendant is liable to pay to the plaintiffs the sum of 7,062 pounds 11s. 5d."

and judgment be entered for the plaintiffs in the action for the sum of 7,062 pounds 11s. 5d.

At the request of the parties there will be no order as to the costs of this appeal or of the proceedings upon the special case before the Supreme Court.