Ayling v Hardman

[1985] HCA 18

HIGH COURT OF AUSTRALIA

Mason, Wilson, Brennan, Deane and Dawson JJ.

RICHARD DOUGLAS AYLING &ORS. v. KEITH HARDMAN

15 March 1985

Decision

MASON, WILSON, BRENNAN, DEANE and DAWSON JJ. This appeal arises out of an action in which the respondent and his son sought (a) a declaration that the appellants were not entitled to enter or park motor vehicles on a small parcel of land owned by the respondent which was adjacent to and at the rear of premises occupied by the appellants as a doctor's surgery and previously owned by the respondent and (b) an injunction restraining the appellants from entering and parking vehicles on that land. The appellants, who are medical practitioners, asserted by way of defence to the action that they had the benefit of a licence granted by the respondent to park their cars on the land in question.

2. The appellants claim that, by an oral agreement made in August 1973 by the respondent's son, acting on behalf of the respondent as owner of the premises, and Dr Ayling, one of the appellants, and his wife, it was agreed:

(1) that Mrs Ayling or Dr Ayling would become the tenant of the surgery premises rent free for six months with an option to purchase the premises;

(2) that Mrs Ayling, Dr Ayling and any doctor practising at the surgery premises from time to time would be permitted to park a motor vehicle free of charge on the land at the rear of the surgery premises;

(3) that in the event of a proposed shopping complex being constructed on that land, the respondent would provide one car parking space free of charge in the complex to Mrs Ayling and to each doctor practising at the surgery premises from time to time; and

(4) that the car parking arrangements would continue to operate after the initial rent free period of six months.

The oral agreement on which the appellants rely arose in the course of negotiations consisting of conversations and letters from the respondent's solicitors to Dr Ayling, which preceded the execution of a written lease of the surgery premises from the respondent to Mrs Ayling.

3. The appellants entered into possession of these premises and parked their cars on the land behind on and from 22 October 1973, although the written lease was not executed until 1 September 1974. The lease provided that the tenant should be entitled to occupation of the premises rent free from 22 October 1973 until the end of April 1974 and for the tenancy to commence as from 1 May 1974 and to continue for five years. A fixed annual rent was payable monthly and the tenant was required to pay municipal rates. The lease gave the tenant the option of renewing the lease for a further period of five years on the terms and conditions set out in the lease, except that the rent should be an amount mutually agreed upon and failing agreement as might be determined by arbitration. The terms and conditions were such as to ensure that each renewal included the option to renew. Clause 10 gave an option to purchase the freehold of the surgery premises at any time during the lease, the purchase price to be calculated on the then valuation of the property, the valuation to be assessed by a valuer of mutual choice and, failing agreement, by arbitration.

4. The lease contained a covenant on the part of the respondent in these terms:

"That upon completion of the shopping complex by the Landlord behind the said surgeries to provide one car parking space free of charge for the Tenant and each doctor currently working on the said premises." (cl.7(d)).

This clause reflected one of the terms of the appellants' occupation of the surgery premises as stated in a letter dated 23 August 1973 from the respondent's solicitors to Dr Ayling. Neither the lease nor this letter made provision for the parking of cars before the erection of the shopping complex or in the event that a shopping complex was not erected. However, a handwritten note made by the respondent's son and handed to Dr Ayling in August 1973, which set out some of the terms of the proposed lease and particulars of a medical practice then carried on in the surgery premises, contained the provision "Car parking provided for doctors &access to rear door for ambulance if required."

5. The primary judge made a finding -

"... that at all relevant times negotiations were conducted on the basis that the shopping complex would be constructed and that none of those involved contemplated a situation in which there was not such a complex in the reasonably near future."

In fact, the shopping complex was never constructed. The respondent decided not to proceed with it and sold the adjoining land to G.J. Coles &Co. Ltd. which used a large portion of it, if not all of it, as a car park for its own customers. On 15 November 1976 Mrs Ayling exercised the option to purchase the leased premises.

6. The primary judge accepted the version of the negotiations given by Dr Ayling and Mrs Ayling in their oral evidence, preferring that to the evidence of the respondent and his son. His Honour held that the respondent granted an irrevocable contractual licence as claimed by the appellants. In reaching this conclusion his Honour found that the respondent's son had told Dr Ayling that in the event of an exercise of the option to purchase the surgery "the arrangements would still be the same in respect to car parking" and informed Mrs Ayling that in the same event "there'll always be car parking for you and the doctors and then when the complex is built there will be car parking for you within the complex." According to his Honour, the licence formed part of a tripartite agreement of which the basic elements were:

(a) an agreement for a lease of the property;

(b) an option to purchase that property;

(c) the conferring of car parking rights for use in association with the proprietary rights granted by (a) and (b).

7. On appeal to the Full Court of the Supreme Court, Cox J. (with whom Neasey and Nettlefold JJ. agreed) considered that the compelling inference open on the facts found by the primary judge was that the licence was temporary in nature and was not one which subsisted beyond the duration of the lease for so long as any doctor should practise in the surgery. One important factor leading to this conclusion was that the purchase price payable on exercise of the option to purchase was the valuation of the leased premises only, without regard being had to the existence of a valuable licence to park cars on the land at the rear. If the licence was intended to continue beyond the exercise of the option it would be reasonable to expect its value to have been reflected in the calculation of the purchase price.

8. The crux of the Full Court's view of the case is expressed in this passage taken from the judgment of Cox J.:

"... the circumstances lead to a clear inference in my view that the lease agreement was intended to specify all relevant provisions bearing upon the option to purchase thereby given and had any extension of car parking rights (whether on the complex area or elsewhere) been contemplated the parties would have made provision for it and determined a means of ascertaining a fair price for that right. It is to be noted that the son's statements about the availability of car parking in the event of a purchase do not include any reference to parking being free. In my respectful view the proper inference is that these statements did not give rise to a contractual licence in respect of the disputed land which was to operate after the tenancy. No rights to free car parking on the disputed land were expressed in the lease agreement and such rights thereto which may have existed by virtue of oral promises could not be inferred to have extended beyond the term of the lease."

9. The appellants submit that the Full Court failed to give effect to the findings of fact made by the primary judge and the oral evidence which he accepted, on which the findings of fact were based. In particular, the appellants point to the following passage in the evidence of Mrs Ayling relating to a conversation with the respondent's son to which the primary judge referred:

"Was there any discussion concerning what would happen to the free parking at the rear of the surgery in the event of your renewing the lease or exercising an option to purchase the surgery? ... Yes I asked - when he said there would be car parking for me as well I said 'well does that mean that this free car parking is just for the 6 months or the whole lease or can we still park there after we've bought the surgery, if we buy the surgery?' He said 'well there'll always be car parking for you and the doctors and then when the complex is built there will be car parking for you within the complex'."

The answer given by the respondent's son was not responsive to Mrs Ayling's question. The initial problem is that the first part of the answer appears to be representational rather than promissory in character and to suggest that any permission was temporary in nature because this part of the answer refers to the period before the building of the shopping complex, as the last part of the answer indicates. The second problem is that the answer makes no reference to payment, yet it does not state that the licence will be free of charge or that it is to continue beyond the duration of the lease. This suggests that the last part of the answer was not intended to amount to a contractual commitment to the continuation of a licence beyond the duration of the lease.

10. This assessment of the critical oral evidence on which the appellants rely demonstrates that it cannot sustain the findings made by the primary judge and that it was not an obstacle to the inference drawn by the Full Court that the licence did not continue beyond the duration of the lease - an inference which their Honours rightly regarded as compelling, in the light of the circumstances and the probabilities.

11. This conclusion is sufficient to dispose of the appeal and makes it unnecessary for us to examine other aspects of the case which present major difficulties for the appellants. But we should make the comment that the arrangement with respect to the parking of cars seems to have been an important element in the negotiations for the lease, that it was intended to be incorporated as a term of the lease (cl.7(d)) and, as it happened, that clause did not sufficiently express the arrangement made by the parties respecting parking prior to the erection of the shopping complex. On this view of the case rectification would be the appropriate remedy. In saying this we do not suggest that the evidence would support rectification of the lease by way of inclusion of a licence to park cars beyond the duration of a lease and any renewal of it, because, as we have said, the evidence does not justify a licence in these terms. Of course, had rectification been sought, Mrs Ayling, the sole lessee, would have been the appropriate plaintiff. The appellants would not have had standing to seek that relief.

12. Accordingly, the Full Court was correct in allowing the appeal, setting aside the judgment at first instance in favour of the appellants, substituting judgment for the respondent and making the declaration sought by the respondent.

13. For these reasons we dismiss the appeal and order that the appellants pay the respondent's costs of the appeal.

Orders

Appeal dismissed with costs.