Church of England Property Trust Diocese of Sydney v Metropolitan Mutual Permanent Building and Investment Association Limited

The Church of England Property Trust, Diocese of Sydney (the appellant) brought an action against Metropolitan Mutual Permanent Building and Investment Association Limited (the respondent) seeking to recover water, sewerage, and drainage rates that the appellant had paid. The dispute arose from a covenant in a lease, which expired on 1 August 1931, whereby the respondent covenanted to pay all taxes, rates, assessments, and impositions assessed or imposed in respect of the demised premises during the term of the lease. The rates in question were levied by the Metropolitan Water, Sewerage and Drainage Board in May 1931 for the year commencing 1 July 1931, but no rate notice was served on any party before the lease expired. The High Court of Australia heard the appeal from the Supreme Court of New South Wales.

The primary legal issue before the High Court was whether the rates levied by the Board in May 1931, for a period extending beyond the lease's expiry, were "assessed or imposed" within the meaning of the respondent's covenant during the term of the lease, and consequently, whether the respondent was liable to pay them despite the absence of a rate notice served before the lease ended. A secondary issue, considered by Evatt J., was whether the respondent's liability was limited to the portion of the rates attributable to the period of the lease.

A majority of the High Court (Gavan Duffy C.J., Rich, Starke, Dixon, and McTiernan JJ.) held that the rates were indeed assessed or imposed in respect of the demised premises within the meaning of the covenant. Their Honours reasoned that the levying of the rate by the Board's resolution and its publication in the Gazette meant that the Board became entitled to receive the apportioned sum for each parcel of land, and these sums were payable in advance from 1 July. While acknowledging that a rate notice was necessary to enforce personal liability or create a charge on the land, they concluded that the notice operated to formalise a liability for a rate that was already "levied and already payable." Therefore, as the rates were payable before the lease expired, the covenant bound the tenant to pay them. Evatt J., while agreeing that the appeal should be allowed, expressed a reservation as to whether the covenant intended to make the lessee liable for rates pertaining to a period extending beyond the lease term, suggesting that the liability might be limited to the portion referable to the remaining period of the lease.

The High Court allowed the appeal, setting aside the judgment of the Supreme Court and ordering that judgment be entered for the appellant on the demurrer, with costs.