BGC (Australia) Pty Ltd v Minister for Infrastructure and Transport
[2013] FCA 603
•20 June 2013
FEDERAL COURT OF AUSTRALIA
BGC (Australia) Pty Ltd v Minister for Infrastructure & Transport [2013] FCA 603
Citation: BGC (Australia) Pty Ltd v Minister for Infrastructure & Transport [2013] FCA 603 Parties: BGC (AUSTRALIA) PTY LTD ACN 005 736 005 v MINISTER FOR INFRASTRUCTURE & TRANSPORT and PERTH AIRPORT PTY LTD ACN 077 153 130 File number: WAD 155 of 2011 Judge: MCKERRACHER J Date of judgment: 20 June 2013 Catchwords: CONTRACTS – sub-lease on airport land – implied term – whether term implied by law that Perth Airport may install airport infrastructure on sub-leased land where that infrastructure is specified in a final master plan approved under a statutory scheme – whether suggested implied term is necessary and obvious – whether it is consistent with express terms of the sub-lease and express statutory scheme providing for compensation where there is acquisition of property
STATUTORY INTERPRETATION – application for declaratory relief – whether it is within power for the Minister to approve a final master plan for an airport site under the Airports Act 1996 (Cth) where the final master plan includes possible future land use (the construction of High Intensity Approach Lighting for a runway extension) which may adversely conflict with a sub-lessee’s existing rights – whether final master plan is invalid – whether Perth Airport’s refusal to grant sub-lessee building approval where perceived inconsistency with final master plan is invalid – consideration of legislative context and the purpose of master planning scheme – where the statutory scheme expressly provides a constitutional safety net for the acquisition of property on just terms
Legislation: Airports Act 1996 (Cth) ss 70, 71, 81, 83, 91 Cases cited: Byrne v Australian Airlines Ltd (1995) 185 CLR 410
Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10
Gumland Property Holdings Pty Ltd v Duffy Bros Fruit
Market (Campbelltown) Pty Ltd (2008) 234 CLR 237
Hawkins v Clayton (1988) 164 CLR 539
Liverpool City Council v Irwin [1977] AC 239
McCann v Switzerland Insurance AustraliaLtd (2000) 203 CLR 579
Olympic Holdings Pty Ltd v Windslow Corporation Pty Ltd(in liq) (2008) 36 WAR 342
Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17
Scally v Southern Health and Social Services Board [1992] 1 AC 294
Shell UK Ltd v Lostock Garage Ltd [1977] 1 All ER 481
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165
Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522
Zhu v Treasurer of the State of New South Wales (2004) 218 CLR 630Date of hearing: 15 - 16 April 2013 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 72 Counsel for the Applicant: Mr C G Colvin SC and Mr G Flynn Solicitor for the Applicant: Hotchkin Hanly Counsel for the Respondents: Ms G A Archer SC and Ms C H Thompson Solicitor for the Respondents: Australian Government Solicitor Counsel for the Respondents: Mr M H Zilko SC and Mr J C Vaughan Solicitor for the Respondents: Norton Rose Fulbright Australia
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
WAD 155 of 2011
BETWEEN: BGC (AUSTRALIA) PTY LTD ACN 005 736 005
ApplicantAND: MINISTER FOR INFRASTRUCTURE & TRANSPORT
First RespondentPERTH AIRPORT PTY LTD ACN 077 153 130
Second Respondent
JUDGE:
MCKERRACHER J
DATE OF ORDER:
20 JUNE 2013
WHERE MADE:
PERTH
THE COURT ORDERS THAT:
1.The respondents file submissions on relief and costs within 10 days.
2.The applicant file submissions in reply within a further 10 days.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
WAD 155 of 2011
BETWEEN: BGC (AUSTRALIA) PTY LTD ACN 005 736 005
ApplicantAND: MINISTER FOR INFRASTRUCTURE & TRANSPORT
First RespondentPERTH AIRPORT PTY LTD ACN 077 153 130
Second Respondent
JUDGE:
MCKERRACHER J
DATE:
20 JUNE 2013
PLACE:
PERTH
REASONS FOR JUDGMENT
INTRODUCTION
BGC wishes to build a large steel shed on land it sub-leases (the Land) from the second respondent (Perth Airport). Perth Airport will not approve the building as the 2009 Final Master Plan (Master Plan) for the airport shows a possible future need for the construction of special aircraft guidance lighting (known as High Intensity Approach Lighting or HIAL) in that location. BGC contends that the first respondent (the Minister) should not have approved the Master Plan which ‘requires’ actions by Perth Airport which would interfere with BGC’s enjoyment of its sub-lease.
The issues for determination are:
1.Can the Minister approve a master plan which includes possible future land use which may conflict with BGC’s rights under the sub-lease?
2.Is it, in any event, an implied term of the sub-lease that Perth Airport may enter onto BGC’s sub-leased Land to carry out works identified in a master plan?
In this trial of a preliminary issue, BGC seeks declaratory relief designed to enable it to erect the structure.
As may be expected, Perth Airport is obliged under the sub-lease not to unreasonably withhold approvals and it covenants for BGC’s quiet enjoyment of the sub-lease. It is Perth Airport itself under the Master Plan which may, in years to come, carry out works on the Land. It is common ground that there is no express provision of the sub-lease entitling it to enter on the Land to do so.
BGC’s primary argument is that the approval of the Master Plan was beyond power in making provision for an activity which was impermissible under the terms of its existing sub‑lease. It was impermissible because, in contrast to the provisions of the sub-lease, it would require Perth Airport to decline the building approval due to the inconsistency. In approving the Master Plan, it is said that the Minister acted beyond power.
Inherent in this argument is an acceptance by BGC that building the shed would be inconsistent with the Master Plan. All parties proceed on this premise even though such inconsistency is not entirely obvious. It would appear that by some negotiation and accommodation, the shed could have been erected until, if ever, Perth Airport needed to enter the Land to carry out the works. Issues of compensation may have arisen. Perth Airport’s refusal to grant building approval has not been accompanied by any offer of compensation.
BGC has not pursued any merits review of the decision to decline approval, one to which conditions may have attached, but rather has attacked the Master Plan approval itself on the basis that once the plan was approved, Perth Airport had no choice but to reject the building approval.
RELIEF SOUGHT
By its amended application, and on the grounds set out in the substituted statement of claim, BGC claims:
1.A declaration that upon a proper construction of the Airports Act 1996 (Cth), the power of the Minister to approve a final master plan does not extend to approving a plan which requires works to be undertaken which the airport-lessee is unable to undertake by reason of the terms of the sub-lease granted by [Perth Airport] in accordance with the Act.
2.A declaration that in the events which have occurred, the [Master Plan] is invalid to the extent that it provides for HIAL to be constructed on land the subject of [the sub-lease].
3.A declaration that the purported refusal by Perth Airport of consent to the application for building approval by BGC dated 25 January 2011 is invalid.
4.An order requiring Perth Airport to consent to BGC’s application for building approval dated 25 January 2011.
The application goes on to claim damages pursuant to s 236 of the Australian Consumer Law together with interest. This claim is made on the basis of damage allegedly suffered by BGC in consequence of reliance upon an alleged misleading and deceptive representation by Perth Airport. The parties have agreed that this aspect of the claim be severed from the hearing of this preliminary issue going to the statutory point.
BACKGROUND
Perth Airport is an ‘airport site’: s 5(1) of the Airports Act 1996 (Cth) (the Act) and reg 1.03(1)(r) of the Airport Regulations 1997 (the Airport Regulations). It is also a ‘core regulated airport’: s 7(1)(e) of the Act. Perth Airport leases the airport under a lease granted by the Commonwealth of Australia executed on 1 July 1997. This head lease is for a term of 50 years with an option to renew for a further 49 years. Perth Airport is an ‘airport‑lessee company’ for the purposes of s 5(1) of the Act.
The sub-lease comprises 32 hectares of land within the Perth Airport. It is dated and commenced on 5 May 2006 and was preceded by an agreement for sub-lease. The duration of the sub-lease mirrors that of the head lease.
BGC constructed and conducted a brick manufacturing plant (brickworks) on part of the Land as contemplated by the sub-lease.
The Land has a roughly triangular shape. The brickworks are situated at the base of the triangle and cover approximately one quarter of the Land. There are then open areas for storing pallets and suchlike occupying perhaps another third. BGC seeks to construct its shed at the apex of the triangle in approximately the top quarter of the Land.
BGC’s proposed shed has substantial dimensions (approximately 24,000 sqm) and would cost in excess of $4 million to build. Its proposed function is unconnected with the brickworks.
Substantial long term planning is required for airports. Section 70(1) of the Act requires a final master plan for each airport. Two final master plans for Perth Airport have been in force during the sub-lease. They are the 2004 Final Master Plan (in force from 10 August 2004 to 2 November 2009) and the 2009 Final Master Plan (in force from 2 November 2009 onwards).
Each final master plan provides for a planning period of 20 years: s 72(1) of the Act. One aspect considered by the final master plans in the context of development beyond the 20 year planning period was a new runway and runway extensions. The 2004 Final Master Plan recognised that it may not be necessary to construct a new runway or extend existing runways over the next 20 years however in the longer term an extension to runway 06/24, to give a total length of 3000 metres, would increase the existing runway capacity.
The 2009 Final Master Plan provided that the ‘planned means of accommodating future aviation demand in the long term’ included as an option ‘extend[ing] runway 06/24 to the north east to a total length of 3000 metres’. However, it was ‘considered unlikely that any of the runway developments will be required during the 20 year planning period’ of the 2009 Final Master Plan. Aircraft that use runway 06/24 at Perth Airport pass directly over the Land the subject of the sub-lease.
Perth Airport as with others uses HIAL to assist pilots in landing aircraft. Each of the 2004 and 2009 final master plans showed that, on an extension of runway 06/24 to the north east, additional HIAL would be constructed across the Land.
On 25 January 2011 BGC applied for Perth Airport’s approval for the construction of the shed on the Land. As outlined above, it was to be located on the portion of the Land towards the apex of the triangle. This was also situated in a location where the possible HIAL was to be constructed in the event that runway 06/24 was extended.
In refusing BGC’s application to construct the proposed structure on 20 April 2011, Perth Airport’s Planning Manager said:
…the proposed shed in its current location is inconsistent with the [2009 Final Master Plan]. The proposal adversely impacts on the future construction of the extension of Runway 06/24 and the associated landing system specified in the [2009 Final Master Plan] which was approved by the Minister on 2 November 2009.
KEY STATUTORY PROVISIONS
Major decisions taken by Perth Airport and other airport lessees are, understandably, heavily regulated by statute. This is particularly so in the field of long term planning.
Section 70 and s 71 of the Act provide as follows:
70 Final master plans
(1) For each airport, there is to be a final master plan.
(2) The purposes of a final master plan for an airport are:
(a)to establish the strategic direction for efficient and economic development at the airport over the planning period of the plan; and
(b)to provide for the development of additional uses of the airport site; and
(c)to indicate to the public the intended uses of the airport site; and
(d)to reduce potential conflicts between uses of the airport site, and to ensure that uses of the airport site are compatible with the areas surrounding the airport.
71 Contents of draft or final master plan
(1)This section specifies the matters that must be set out in each draft or final master plan for an airport.
Airports other than joint‑user airports
(2)In the case of an airport other than a joint‑user airport, a draft or final master plan must specify:
(a)the airport‑lessee company’s development objectives for the airport; and
(b)the airport‑lessee company’s assessment of the future needs of civil aviation users of the airport, and other users of the airport, for services and facilities relating to the airport; and
(c)the airport‑lessee company’s intentions for land use and related development of the airport site, where the uses and developments embrace airside, landside, surface access and land planning/zoning aspects; and
(d)an Australian Noise Exposure Forecast (in accordance with regulations, if any, made for the purpose of this paragraph) for the areas surrounding the airport; and
(da)flight paths (in accordance with regulations, if any, made for the purpose of this paragraph) at the airport; and
(e)the airport‑lessee company’s plans, developed following consultations with the airlines that use the airport and local government bodies in the vicinity of the airport, for managing aircraft noise intrusion in areas forecast to be subject to exposure above the significant ANEF levels; and
(f)the airport‑lessee company’s assessment of environmental issues that might reasonably be expected to be associated with the implementation of the plan; and
(g)the airport‑lessee company’s plans for dealing with the environmental issues mentioned in paragraph (f) (including plans for ameliorating or preventing environmental impacts); and
(h)if a draft environment strategy for the airport has been approved—the date of that approval; and
(j)such other matters (if any) as are specified in the regulations.
Paragraphs (a) to (h) do not, by implication, limit paragraph (j).
(emphasis added)
…
Matters provided by regulations
(4)The regulations may provide that the objectives, assessments, proposals, forecasts and other matters covered by subsection (2) or (3) may relate to one or more of the following:
(a)the whole of the planning period of the plan;
(b)one or more specified 5‑year periods that are included in the planning period of the plan;
(c)subject to any specified conditions, a specified period that is longer than the planning period of the plan.
(5)The regulations may provide that, in specifying a particular objective, assessment, proposal, forecast or other matter covered by subsection (2) or (3), a draft or final master plan must address such things as are specified in the regulations.
Plan to address consistency with planning schemes
(6)In specifying a particular objective or proposal covered by paragraph (2)(a) or (c) or (3)(a) or (c), a draft or final master plan must address the extent (if any) of consistency with planning schemes in force under a law of the State or Territory in which the airport is located.
(7)Subsection (6) does not, by implication, limit subsection (5).
Company to have regard to Australian Standard
(8)In developing plans referred to in paragraph (2)(e) and (3)(e), an airport‑lessee company must have regard to Australian Standard AS2021—1994 (“Acoustics—Aircraft noise intrusion—Building siting and construction”) as in force or existing at that time.
(9)Subsection (8) does not, by implication, limit the matters to which regard may be had.
By s 79, even before the draft master plan goes to the Minister, advice to that effect is to be given to the relevant state and local government authorities and wide opportunity is to be afforded for publicity and public comment. Section 81 of the Act relevantly provides:
81.Approval by Minister
…
(3)In deciding whether to approve the plan, the Minister must have regard to the following matters:
(aa)the extent to which the plan achieves the purposes of a final master plan (see subsection 70(2));
(a)the extent to which carrying out the plan would meet present and future requirements of civil aviation users of the airport, and other users of the airport, for services and facilities relating to the airport concerned;
(b)the effect that carrying out the plan would be likely to have on the use of land:
(i) within the airport site concerned; and
(ii) in areas surrounding the airport;
(c)the consultations undertaken in preparing the plan (including the outcome of the consultations);
(d)the views of the Civil Aviation Safety Authority and Airservices Australia, in so far as they relate to safety aspects and operational aspects of the plan.
(4)Subsection (3) does not, by implication, limit the matters to which the Minister may have regard.
(5)If the Minister neither approves, nor refuses to approve, the plan before the end of the period of 50 business days after the day on which the Minister received the draft plan, the Minister is taken, at the end of that period, to have approved the plan under subsection (2).
(6)As soon as practicable after deciding whether to approve the plan, the Minister must notify the company in writing of the decision.
(7)If the Minister refuses to approve the plan, the Minister must notify the company in writing of the Minister’s reasons for the refusal.
(8)If the Minister refuses to approve the plan, the Minister may, by written notice given to the company, direct the company to give the Minister, in writing, a fresh draft master plan. The fresh draft master plan must be given to the Minister:
(a)within 180 days after the day on which the direction was given; or
(b)if the Minister, by written notice given to the company, allows a longer period—within that longer period.
(9) A company commits an offence if:
(a)the company is subject to a direction under subsection (8); and
(b)the company engages in conduct; and
(c)the company’s conduct contravenes the direction.
By s 83(2) it is provided that ‘a final master plan is not a legislative instrument’.
Section 91 of the Act is also comprehensive and precludes an airport-lessee company from permitting to be carried out a development (such as the BGC brickworks) or major development unless it is in accordance with a ‘major development plan’. It provides in part:
(1A)The purpose of a major development plan in relation to an airport is to establish the details of a major airport development that:
(a)relates to the airport; and
(b)is consistent with the airport lease for the airport and the final master plan for the airport.
(1)A major development plan, or a draft of such a plan, must set out:
(a)the airport‑lessee company’s objectives for the development; and
(b)the airport‑lessee company’s assessment of the extent to which the future needs of civil aviation users of the airport, and other users of the airport, will be met by the development; and
(c)a detailed outline of the development; and
(ca)whether or not the development is consistent with the airport lease for the airport; and
(d)if a final master plan for the airport is in force—whether or not the development is consistent with the final master plan.
Similarly s 94(5) precludes the Minister from approving a draft major development plan unless it is consistent with a final master plan.
Section 101(2) provides that no building approval can be granted in circumstances where such approval would be inconsistent with a master plan.
THE FACTUAL MATRIX
The primary evidence in relation to the preliminary issue was documentary. It was supplemented by some brief affidavit evidence on which little turned. I will briefly identify it.
BGC relied upon an affidavit of Mr Czerwionka, an architectural draftsman employed by BGC who gave evidence about the plans for the shed and the rejection of the building approval. BGC also relied upon an affidavit of Mr Scarvaci, General Manager. Mr Scarvaci spoke to negotiations with Perth Airport concerning future airport plans prior to entry into the sub-lease. There were numerous meetings with officers of Perth Airport prior to entering into the sub-lease. Mr Scarvaci confirmed that he was told by a representative of Perth Airport in relation to the 1999 Final Master Plan:
We have to show the possible extension of the runway because we need to put any possible means of airport expansion in the Master Plan. However it is very unlikely that this will ever happen because the increase in flights that result from this extension will be small. The construction of the parallel runway will be pursued instead as this greatly increases the airport’s capacity.
Insofar as height restrictions were concerned, Mr Scarvaci was informed by a Perth Airport representative that there were height restrictions imposed by the OLS. ‘OLS’, an abbreviation for Obstacle Limitation Surfaces, refers to maximum heights for buildings under a flight path. Buildings or structures are not permitted to intrude into the OLS. It was explained to Mr Scarvaci that any buildings on the site would have to be designed to fit beneath the OLS. He was told that BGC could build wherever they wanted to but could not penetrate the OLS. He was referred at that meeting to the 1999 Final Master Plan which defined the OLS. At the time of these meetings, the 1999 Final Master Plan was the only plan in existence and that did not refer to the HIAL being erected on the Land. There were other limitations expressed in relation to heights of buildings and lighting constraints.
Also produced were exchanges of correspondence by the solicitors for the various parties in relation to what assurances would or would not be given. Ultimately however, while the possibility of HIAL may not have been brought directly to the attention of BGC prior to entry into the sub-lease, that is not the main issue presently before me. On the other hand, Perth Airport advances the argument that by the time of the execution of the 2006 sub-lease, the 2004 Final Master Plan had been in existence for some time and clearly showed, as the parties have agreed, the penetration of HIAL into the Land.
Perth Airport relied on an affidavit affirmed by the Planning Officer for Perth Airport who gave similar evidence as to the application for approval of the shed. He described the process that was undertaken on receipt of BGC’s application and the rejection of the application due both to the proposed height of the shed and the HIAL requirements under the 2009 Final Master Plan. (The height is no longer an issue in the proceeding as the parties have accepted that BGC can and will, if permitted to do so, lower the height of the building in order to avoid penetration into the OLS.)
THE LEGAL MATRIX
The sub-lease was entered into an environment where, apart from the master plan provisions, there were particular statutory constraints upon activities that each of its participants could pursue.
Specifically, by s 22 of the Act an airport lease is granted subject to all existing leases in relation to the land concerned. Section 32 sets out various constraints on the activities of the airport operator. It must not by s 32 (1)(d) carry on any activities that are inconsistent with the airport lease for the airport and the final master plan for the airport.
BGC supports its argument by reference to the ‘constitutional safety net provision’. Under s 35F if the exercise of its powers results in an acquisition of property the Commonwealth is liable to pay compensation of a reasonable amount in respect of that acquisition. BGC makes the point that where there is an issue about acquisition of property the constitutional safety net provision expresses that it must be on payment of reasonable compensation. Therefore, if it was intended that the master planning process could effect an acquisition of rights, it would be expected that there would be a safety net provision in the legislative scheme. The absence of such a safety net provision, BGC argues, is a relevant matter to be taken into account in construction. It leads to an inference that the Act does not contemplate that such an acquisition should be effected by virtue of provisions concerning the master plan. (BGC does not contend that the statute is unconstitutional in any way although notices under s 78B of the Judiciary Act 1903 (Cth) were served in this proceeding out of an abundance of caution.) I will return to consider this argument below (at [46]) and following.
BGC argues that there is nothing in the heading or the outline to Pt 5 of the Act to suggest that there is some ability for the Master Plan to confer upon Perth Airport some power or authority to do things that would extinguish BGC’S substantive rights that could be enjoyed under a sub-lease.
The key provision is s 71(2)(c) (which is partially repeated for convenience):
71 Contents of draft or final master plan
(2)In the case of an airport other than a joint-user airport, a draft or final master plan must specify:
…
(c)the airport-lessee company’s intentions for land use and related developments of the airport site, where the uses and developments embrace airside, landside, surface access and land planning/zoning aspects; …
BGC argues that the word ‘intentions’ must be read as ‘lawful intentions’. The intentions must be those that the airport-lessee company is lawfully able to carry out having regard to the rights, powers and authorities which it enjoys under statute, regulation or contract. It is not directed to what the airport-lessee company may plan to do in the future in the sense of its dreams or hopes or what it might do unconstrained by the strictures of law and the right which it has conferred on others by sub-leasing parts of its airport to them.
The respondents, however, contend that s 71 in dealing with a long term plan is not constrained in this manner. They argue that the argument for BGC requires that the words ‘present’ and ‘lawful’ both be inserted into the language of s 71(2)(c) as to the intentions, not just ‘lawful’. They submit, persuasively, that inserting such language is entirely inconsistent with the nature of a very long term plan.
The respondents’ position is that this was the known statutory environment under which BGC contracted when executing the sub-lease.
At the heart of the argument for BGC is that on a proper construction of the Act, a master plan has the character of a land use planning instrument. It is the mechanism by which there is expressed a planning scheme for the airport. For that reason it is expressly permitted to override State planning laws, the only obligation being to consult with State planning authorities. The provisions of the Act dealing with the master plan sit within a part of the Act relating directly to land use and planning issues. BGC says a master plan will not be a means of conferring any power on the airport-lessee, in this case Perth Airport, to undertake airport related activities. That power is conferred by the granting of a lease over the whole of the airport to an airport-lessee company, in this case Perth Airport.
BGC asserts that the type of planning process contemplated under the Act may be distinguished from the type of planning process manifested by other statutory schemes which give power to interfere with the rights of third parties in respect of the use and occupation of land. BGC argues that this scheme does not have anything of such character but rather is simply a means of planning and control as to use of the Land. No right or power is conferred on Perth Airport to go on the Land to actually undertake an activity. The power to go on the Land and, in this case, to construct the HIAL is said by BGC to be conferred only by the express power to be able to alter terms of a sub-lease in accordance with interest of the legislation. However, in those circumstances in an appropriate case, there is a requirement for compensation to be paid to a sub-lessee.
CONSIDERATION
The sub-lease and the Minister’s approval of the Master Plan
BGC relies on several uncontentious propositions as to the sub-lease. (These points are relevant both to the attack on the approval and to the proper construction of the sub-lease. There is some overlap.)
·Ordinary contractual principles apply to leases: Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17; Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 234 CLR 237.
·Commercial contracts should be given a businesslike interpretation. Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses and the objects it was intended to secure: McCann v Switzerland Insurance AustraliaLtd (2000) 203 CLR 579 (at [22]) per Gaudron J applied in Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522 (at [15]).
·In construing a commercial instrument it is necessary to construe what a reasonable person would understand by the language in which the parties have expressed their agreement: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 (at [40]).
·An instrument should be construed so as to avoid it making commercial nonsense or giving rise to working commercial inconvenience: Zhu v Treasurer of the State of New South Wales (2004) 218 CLR 530 (at [82]).
·The objectively ascertained purpose and object of the transaction may be taken into account in construing the instrument: Toll (at [40]); Olympic Holdings Pty Ltd v Windslow Corporation Pty Ltd(in liq) (2008) 36 WAR 342 (at [41]).
·It is apparent from express terms of the sub-lease that BGC proposed to carry out site and building work on the Land and that Perth Airport would not obstruct or engage in conduct which may prejudice applications for approvals in respect of those works being commenced and completed as expeditiously as practicable: cll 1.1, 1.5, 1.6 and 7.1. Further, Perth Airport covenanted, if reasonably requested by BGC to do so, to assist BGC to seek the agreement of the Commonwealth to the transfer of the freehold interest in the Land to BGC: cl 1.8.
·There are only two provisions in the sub-lease dealing with express reservations to Perth Airport to enter upon the premises to carry out works. First, there is a reservation ‘for the purpose of supplying services to other sites and premises’ that allows Perth Airport to ‘install, repair and replace pipes and any other conduits along and in the boundaries of the Site required to provide and maintain services’: cl 3. Secondly, there is a reservation for utilities generally and a right of entry for certain specified activities including matters to ensure safety and preservation of property, installation and maintenance of services and to conduct environmental assessments and audits: cl 10.
·There is an express power for Perth Airport to make changes in respect of buildings and other improvements in the precinct surrounding the Land: cl 10.4.
·There is a provision by which Perth Airport covenants to allow BGC quiet enjoyment of the Land ‘without interruption by Perth Airport’. The right of quiet enjoyment is expressed to be subject only to the rights, powers, remedies and reservations available to Perth Airport pursuant to the lease: cl 11.1.
In those circumstances, BGC claims that Perth Airport has no express or implied right to enter upon the Land the subject of the lease to install infrastructure for the benefit of Perth Airport. As will be seen below, I agree with this contention. However the refusal of building approval by Perth Airport was based only on its obligation to decline approval in cases of conflict with the Master Plan. There is no present intention or even any committed long-term intention to enter the Land.
The Act sets out a prescriptive regime for all affected airports in Australia in relation to master plans. There are comprehensive consultative and advertising requirements. There are specific matters that the Minister must consider. The effect on sub-lease obligations is not to be found amongst those criteria. As senior counsel for the Minister observed, the Minister may be unaware of the precise terms of all the sub-leases within Australian airport precincts.
BGC contends that it is evident from the Act as a whole that it has been drafted so as to ensure that where there are powers which may be exercised so as to take away the property rights of third parties, there is an express right to compensation. It argues that the absence of any such right in relation to the master planning process and the building approval process supports a construction which confines the requirements that can be expressed in a master plan to those which can be implemented by Perth Airport without infringing such rights.
In my view, while this is the most attractive of the carefully constructed arguments for BGC, it confronts the difficulty of the comprehensive and prescriptive nature of the master plan legislative provisions. In my respectful view, the construction advanced for BGC does not sufficiently recognise the statutory regime which must prevail over the contractual rights created by the sub-lease. Nor, in my view, is the outcome of compliance with the Act as draconian as BGC suggests. In determining whether to refuse building approval because a proposed building activity is inconsistent with the final master plan, Perth Airport must have regard to the significance of the inconsistency: reg 2.04(3) of the Airports (Building Control) Regulations 1996 (Cth) (Building Control Regulations).
There is a further practical means of ameliorating the impact of a refusal based on inconsistency. This is the power given to Perth Airport to give consent on conditions: reg 2.03 (3)(b) of the Building Control Regulations. Presumably approval might be granted on condition that, in this case, if the HIAL was to be constructed, the shed would be moved or removed. That may then, but not now, raise a question about compensation if variation to the use under the sub-lease was affected.
It is common ground that this legislative regime was in existence well before the sub-lease was entered into and it is common ground that in certain circumstances there may be a merits review conducted in the Administrative Appeals Tribunal (AAT) in relation to a refusal to grant building approval. BGC argues in the present circumstances that such a review was not open because of the mandatory requirement under the Act for Perth Airport to refuse consent where there is inconsistency between the approval and the final master plan. Perth Airport on the other hand argues that the logical place for the blanket rejection of the approval to be challenged was in the AAT where there would be scope to explore a range of matters such as the absence of reasonable conditions which might have been imposed. These considerations do not fall for determination on this strict statutory interpretation argument.
It is almost inevitable that a master plan will refer amongst other things to works which an airport-lessee company does not presently have authority to do. That however does not mean that the plan should not be approved by the Minister.
I consider for these reasons that the Minister did have the power to approve the Master Plan. The approval was not beyond power and the Master Plan is not invalid.
Is there an implied term in the lease?
I will now consider the question of whether there is to be implied into the sub-lease by operation of law as Perth Airport contends, an implied term that it may install airport infrastructure where that is specified in a final master plan. Specifically, the term is that a right is reserved to Perth Airport to install airport infrastructure on the sub-leased land where to do so is specified in the final master plan.
Perth Airport argues that the implied term arises as a matter of law because of the particular factual and legal context in which the sub-lease was executed but most importantly by reason of the legislative scheme created by the Act and Regulations.
Much is made of the argument that a sub-lease on airport land is in a special category. It was understood, or objectively, should have been understood, that the special circumstances attaching to sub-leases of land the subject of the Act and Regulations necessarily affected the rights and obligations of the parties to the sub-lease. Indicative of that is the fact that airport leases are subject to certain key rules see: ss 14(5), 16, 19 and 21 of the Act. Airport leases are also subject to restrictions on acquisition and transfer: Div 4 of Pt 2 of the Act. Restrictions apply to the airport-lessee company; its sole business must be to run the airport. The airport-lessee company has a statutory obligation to use the airport site as an airport: see Div 6 Pt 2 and s 31 of the Act.
Perth Airport points to the fact that the Act provides that regulations may also prohibit certain sub-leases and licences relating to airport sites: ss 34 and 35 of the Act. Regulations may also deal with the terms of sub-leases and licences relating to airport sites: ss 34A, 34C, 35A and 35C of the Act. Terms may also be prohibited or required. The Airport Regulations have been made pursuant to these provisions of the Act. In circumstances where there is an existing sub-lease and regulations are made which impose a requirement that specific kinds of terms be included in sub-leases, there is a 90 day window to ensure that the sub-lease complies with the requirement. The sub-lease is terminated if at the end of the 90 days the sub-lease contravenes the requirement: s 34B(4). Pursuant to s 35F of the Act, there is provision for compensation as the constitutional safety net. The Commonwealth is liable to pay reasonable compensation if:
1.the operation of the provisions would result in the acquisition of property otherwise than on just terms; and
2.the acquisition would be invalid because of s 51(xxxi) of the Constitution.
Substantial provisions in the Act are devoted to the nature and circumstances of creation of a master plan. This is indicative of its importance to the Act.
There are some unusual features of the sub-lease itself which take into account or are informed by the statutory environment. By the recitals to the sub-lease, it is noted that Perth Airport is required to impose the Commonwealth conditions which are set out in cl 17.10. Clause 1.1(g) of the sub-lease provides that Perth Airport does not give any warranty or representation in relation to the sub-leased premises or the approval process for any work BGC wishes to carry out on the Land. Perth Airport’s obligation not to engage in any conduct that may prejudice BGC’s applications for approval is ‘subject to [Perth Airport’s] obligations under the Act’ by clause 1.6(b). That clause provides that BGC acknowledges that in dispensing its statutory obligations, actions by the Perth Airport may unavoidably have adverse consequences for BGC. In relation to its applications for approval and in carrying out works on the Land, BGC is required to observe all laws affecting the use of the Land (cl 8.2) and (by cl 11.2) Perth Airport does not warrant that Land will remain suitable or adequate for the permissible use or for any other purpose.
By reference to these clauses, Perth Airport argues that it may be inferred that Perth Airport’s obligations under the Act take precedence over its obligation and the rights of BGC under the sub-lease. That would support the existence of an implied term as a matter of law that Perth Airport has a right reserved to it to install airport infrastructure on the sub-leased premises only where that is specified in a final master plan for the airport under the Act.
Perth Airport contends that the one contextual factor of particular importance is the requirement for preparation and approval of a final master plan. The statutory purpose of a final master plan – which is given the Commonwealth Executive’s imprimatur by the Minister’s approval – may be rendered nugatory if an airport-lessee company is unable to implement the final master plan on land that has been sub-let. It is necessary to imply the term to give effect to the objects of the Act and fulfil the statutory purpose of an approved final master plan.
It is argued that there is nothing unreasonable about the implied term because it must be considered in the context of and informed by the legislative scheme created by the Act and associated regulations. The sub-lease itself acknowledges in this case the precedence of Perth Airport’s obligations under the Act over BGC’s rights under the sub-lease. It is argued that there is no relevant inconsistency between the implied term contended by for Perth Airport and express terms in the sub-lease reserving rights to Perth Airport. The implied term contended for is in addition to and not in derogation of express terms. It covers different subject matter to that addressed by the expressed terms.
Perth Airport also points to the fact that the sub-lease provides for rent at two different rates. The lesser rate is paid for that portion of the sub-leased premises on which the HIAL might potentially be located. I do not read anything into the different rate of rent which is equally explicable by other factors such as the shape of the Land and the possibility that land towards the apex of the triangle is not regarded as being as useful as that at the base, where the brickworks are located.
The sub-lease does not expressly reserve to Perth Airport or to the Commonwealth a right to install airport infrastructure on the Land. As BGC points out there are other clauses whereby Perth Airport has set out express rights reserved to it to enter on and perform particular kinds of work on the sub-leased premises: see, for example, cll 3, 8.2 and 10. The sub-lease nevertheless expressly refers to the 2004 Final Master Plan in cl 7.1(c) and cl 22.
Against these arguments, however, it is to be noted that before such a term may be implied by law, special considerations arise. In order to establish that all these features (of the terms of the sub-lease and the other legal and factual matrix) require implication by law of the imputed term, quite special considerations must arise. In Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468, Hope JA in the New South Wales Court of Appeal drew the distinction between implication of terms at law which may be implied regardless of the actual intention of the parties and implication of a term which is necessary in the circumstances of the particular case to give business efficacy to the contract. Hope JA (at 486) referred to the discussion by Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 (at 345-346). In drawing that distinction, emphasis was placed on the fact that the business efficacy test requires focus on the unique contract under consideration. Whether a term will be implied by the business efficacy rule will depend upon the express terms of that contract and the relevant surrounding circumstances. However, terms implied by law are terms which prima facie are to be implied in all contracts of a particular class, in this case, all sub-leases for regulated airports in Australia. Hope JA noted (at 487) that the classes of contract where terms will be implied by law might typically include contracts between master and servant, for the sale of goods, for the provision of work and materials and between landlord and tenant. While the categories are not closed, the difficult question is to determine what tests should be applied before such a term should be implied for the first time. Denning MR in Shell UK Ltd v Lostock Garage Ltd [1997] 1 All ER 481 noted (at 487) that the test is not solved by asking what did the parties intend or what they would have unhesitatingly agreed to if asked but, rather, is solved by asking whether the law already defined the obligation or the extent of it. If not, it is necessary to examine what would be reasonable in the general run of such cases: Liverpool City Council v Irwin [1977] AC 239. In Castlemaine Tooheys Hope JA pointed out, however, that the House of Lords in Liverpool City Council had rejected the test of reasonableness as the sole test and had stressed that necessity as well as reasonableness was required (at 489). Hope JA (at 489) said:
The most common ground accepted in this decision is the basis for implication by law was that stated by Bowen LJ in Miller v Hancock, that the term was one which ‘the parties … must have intended by necessary implication, as a basis without which the whole transaction would be futile’. The test so stated seems to be properly reflected in Lord Wilberforce’s one word test – necessity. Perhaps there are some things which should be noticed about the decision. It was not in fact the first decision importing such a term; there had been earlier decisions. Furthermore, the express terms of the contract contain nothing bearing on the matter. The decision also made it clear that although reasonableness was not the sole test, it remained part of the test.
Although Hope JA did not reach a conclusive determination as to the appropriate test, his Honour proceeded (at 490) on the assumption favourable to the plaintiffs that the test should be whether or not the proposed implied term would meet a test of necessity and reasonableness.
The matter came to be considered by the High Court of Australia in Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 where Mason CJ (at 30) in consideration of the argument that an agreement to arbitrate contains an implied term that each party will not disclose information provided in and for the purpose of the arbitration again drew the distinction between implying a term in contract as a matter of law and implying a term in order to give business efficacy to the contract. His Honour referred to Liverpool City Council (particularly Lord Wilberforce (at 254) and the observations of Deane J in Hawkins v Clayton (1988) 164 CLR 539. As Deane J noted in Hawkins (at 572), it is necessary to focus on the nature of the contract to determine what is necessary or required in the circumstances on the footing that ‘such an obligation should be read into the contract as the nature of the contract itself implicitly requires no more, no less’. On that basis the implied term in Esso Australia Resources was rejected. Dawson and McHugh JJ concurred with Mason CJ.
In Byrne v Australian Airlines Ltd (1995) 185 CLR 410 McHugh and Gummow JJ summarised the position (at 450) as being (footnotes omitted):
Many of the terms now said to be implied by law in various categories of case reflect the concern of the courts that, unless such a term be implied, the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, or, perhaps, be seriously undermined. Hence, the reference in the decisions to ‘necessity’.
For example, it is established that the mere relationship of landlord and tenant implies a covenant for quiet enjoyment. The reason for this appears to be that, originally, the common law courts would not recognise the tenant as having any estate in the demised land and would not reinstate the tenant if ejected by the landlord; the remedy in covenant remedied the position of the tenant who otherwise, if ejected, would have been without recourse.
This notion of ‘necessity’ has been crucial in the modern cases in which the courts have implied for the first time a new term as a matter of law.
Their Honours went on to consider Codelfa and Liverpool City Council in rejecting the argument that a provision of an industrial award was an implied term in contracts of employment. Their Honours said (at 452-453) that there was no ‘necessity’ for such a step in the sense in which the terms was implied in cases such as Liverpool City Council and Scally v Southern Health and Social Services Board [1992] 1 AC 294. The contract of employment was not, from the viewpoint of the employee, rendered nugatory if the existing provisions thereof remained, as a matter of contract, to operate concurrently with the regime established by the Award which derived its authority from statute. Their Honours opined that there was nothing to suggest ‘that the contracts of employment were not workable and effective’ before the introduction into awards of certain provisions. It was ‘not a case [in which the provision was] necessary lest the contract be deprived of its substance, seriously undermined or drastically devalued in an important respect’.
In the same decision (at 449), it was made clear that terms which might otherwise be implied as a matter of law may be excluded as a result of inconsistency with the terms of the particular contract under consideration. That observation was also reflected in Castlemaine (at 490-493). The latter consideration (that of inconsistency) clearly requires examination of the particular contractual terms and circumstances: Castlemaine (at 492).
In view of that summary as to the relevant law, I am not persuaded, given the comprehensive nature of negotiations between experienced legal representatives leading to a very detailed sub-lease, that the term for which Perth Airport contends can properly be implied in to the sub-lease. It also seems to me that if BGC had been asked at the time of executing the lease whether Perth Airport could reserve to it the right to install any airport infrastructure on the sub-leased premises where doing so is specified in a final master plan, BGC would not have agreed, at least not without compensation. There are other factors relevant to the statutory matrix which suggest that should it be necessary for Perth Airport to enter the Land to install airport infrastructure, it may do so but only upon payment of reasonable compensation. It does not seem to me that the term for which Perth Airport contends must be implied into the sub-lease. It is not a term which is either necessary or required, having regard to the inherent nature of the contract and the relationship established by its terms. All of the arguments of Perth Airport as to the importance of and the parties’ awareness of the sub-lease being erected in the airport precinct can be accepted but this does not mean that the airport-lessee, Perth Airport, can, without any form of compensation depart from the express terms of the sub-lease it has entered into with BGC. Given that the sub-lease was for such a long period, entry onto the Land by Perth Airport for airport works may well have been conceivable at the time of its execution. But to suggest that this should occur without Perth Airport giving something in return is unreasonable. If that was its intention, it would be expected that the sub-lease would spell out such an unusual arrangement. While the subjective intentions of the parties are not directly relevant, viewed objectively, one would expect to see something such as a sub-lease empowering the sub-lessor to depart from the terms of the sub-lease without compensation.
Further, I am not persuaded that the term for which Perth Airport contended should be implied as a matter of law into the sub-lease for the following additional reasons:
(a)The implied term takes away something essential which is granted by the sub-lease for valuable consideration. The proposed implied term makes no provision for any form of compensation as otherwise recognised in the statutory scheme in circumstances where removal of property given under a sub-lease is granted. It cannot be said, therefore, in my view, that the sub-lease would be unworkable and ineffective without the introduction of that term as an implied term. It is not an instance where provision of such a clause ‘is necessary lest the contract be deprived of its substance, seriously undermined or drastically devalued in an important respect’ (to adopt the terminology of McHugh and Gummow JJ in Byrne).
(b)To imply the term into all airport sub-leases throughout Australia without the term being expressed would not only be inconsistent with terms and objectives of those sub-leases but might well achieve the opposite outcome. Secondly, which is perhaps another way of expressing the same point, the proposed implied term would be, as BGC contends, fundamentally inconsistent with a covenant of quiet enjoyment implied as a matter of law into any sub-lease. Focussing for a moment on the covenant of quiet enjoyment which is a term implied at law serves to illustrate the distinction between such a term which is implied and must be implied in every sub-lease otherwise it would have little value and the term which Perth Airport contends should be implied.
(c)It follows that it cannot be contended that it is obvious that the parties neglected to fully state the terms of the sub-lease.
(d)Although Perth Airport relies heavily on reasonableness for implication of the term, the test for implication of a term at law requires more. In particular, concepts of necessity are to be considered in the manner discussed in Byrne. Although BGC contends that it is irrelevant to consider the terms of the Act, there is nothing in the Act which requires Perth Airport to be able to construct infrastructure on land that it does not control. It has power to require a sub-lease of airport land to be varied to allow for activities (such as that) but in those circumstances compensation must be paid. The proposed implied term would neither be necessary for nor consistent with the statutory regime.
(e)Finally, to the extent the parties may have turned their mind to such a possibility, they have expressly stated the provisions governing the circumstances in which Perth Airport may enter to carry out works and also the obligation on BGC to assist in securing freehold title if requested to do so. Those circumstances involve payment of reasonable compensation.
For those reasons I do not consider that the term contended for by Perth Airport can be implied into the sub-lease as a matter of law.
CONCLUSION
It follows that BGC has failed on its first point but succeeded on the second. I doubt whether declaratory relief is necessary on either point but I will consider submissions to the contrary and on costs. It may be that costs should be reserved until the balance of the proceeding has been determined. The following orders are made:
1.The respondents file submissions on relief and costs within 10 days.
2.The applicant file submissions in reply within a further 10 days.
I certify that the preceding seventy-two (72) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher Associate:
Dated: 20 June 2013
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