City of Rockingham v PMR Quarries Pty Ltd (Trading as WA Limestone Co)

[2001] WASCA 317

CITY OF ROCKINGHAM -v- PMR QUARRIES PTY LTD (Trading as WA LIMESTONE CO) [2001] WASCA 317

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2001] WASCA 317
Case No:	SJA:1229/2000	Heard:	24 SEPTEMBER 2001
Coram:	HASLUCK J	Delivered:	17/10/01
No of pages:	20	Judgment Part:	1 of 1
Result:	Appeal dismissed
Category:	A
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Parties:	CITY OF ROCKINGHAM PMR QUARRIES PTY LTD
Catchwords:	Local Government Act Rating Land occupied by respondent for quarrying Whether rates can be levied against the respondent as the owner of the land Test for determining whether land is occupied pursuant to lease or licence Test held to be whether the grantee was given rights of exclusive possession Respondent held not to be in exclusive possession of the subject land Respondent held not to be owner for rating purposes
Legislation:	Land Valuation Tribunals Act 1978 Local Government Act 1995 Western Australian Land Authority Act 1992
Case References:	Bradshaw v Medical Board of Western Australia (1990) 3 WAR 322 Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission [2000] HCA 47 Goldsworthy Mining Ltd v Federal Commissioner of Taxation (1973) 128 CLR 199 Lewis v Bell (1985) 1 NSWLR 731 Port Kennedy Resorts Pty Ltd v The City of Rockingham [2000] WASCA 423 Radaich v Smith (1959) 101 CLR 209 Ruhumah Property Co Ltd v Federal Commissioner of Taxation (1928) 41 CLR 148 Temwood Holdings Pty Ltd v Western Australian Planning Commission [2001] WASCA 199 Thomas v Sorrell (1673) Vaugh 330 Wik Peoples v Queensland (1996) 187 CLR 1 Glenwood Lumber Co Ltd v Phillips [1904] AC 405 Radonich v Radonich [1999] WASC 165

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA CITATION : CITY OF ROCKINGHAM -v- PMR QUARRIES PTY LTD (Trading as WA LIMESTONE CO) [2001] WASCA 317 CORAM : HASLUCK J HEARD : 24 SEPTEMBER 2001 DELIVERED : 17 OCTOBER 2001 FILE NO/S : SJA 1229 of 2000 BETWEEN : CITY OF ROCKINGHAM

Appellant

AND

PMR QUARRIES PTY LTD (Trading as WA LIMESTONE CO)
Respondent

Catchwords:

Local Government Act - Rating - Land occupied by respondent for quarrying - Whether rates can be levied against the respondent as the owner of the land - Test for determining whether land is occupied pursuant to lease or licence - Test held to be whether the grantee was given rights of exclusive possession - Respondent held not to be in exclusive possession of the subject land - Respondent held not to be owner for rating purposes

Legislation:

Land Valuation Tribunals Act 1978

Local Government Act 1995
Western Australian Land Authority Act 1992

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Result:

Appeal dismissed

Category: A

Representation:

Counsel:

Appellant : Mr L A Tsaknis
Respondent : Mr A R Beech

Solicitors:

Appellant : Gibson Tovey & Associates
Respondent : Simon Watson

Case(s) referred to in judgment(s):

Bradshaw v Medical Board of Western Australia (1990) 3 WAR 322
Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission [2000] HCA 47
Goldsworthy Mining Ltd v Federal Commissioner of Taxation (1973) 128 CLR 199
Lewis v Bell (1985) 1 NSWLR 731
Port Kennedy Resorts Pty Ltd v The City of Rockingham [2000] WASCA 423
Radaich v Smith (1959) 101 CLR 209
Ruhumah Property Co Ltd v Federal Commissioner of Taxation (1928) 41 CLR 148
Temwood Holdings Pty Ltd v Western Australian Planning Commission [2001] WASCA 199
Thomas v Sorrell (1673) Vaugh 330
Wik Peoples v Queensland (1996) 187 CLR 1

Case(s) also cited:

Glenwood Lumber Co Ltd v Phillips [1904] AC 405
Radonich v Radonich [1999] WASC 165

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1 HASLUCK J: This is an appeal to the Supreme Court from a determination of the Land Valuation Tribunal. The City of Rockingham appeals against a ruling by the Tribunal that a rate notice dated 17 September 1996 issued by the city to the respondent, PMR Quarries Pty Ltd, should be set aside.

2 The principal question raised by the appeal is whether PMR was obliged to pay municipal rates upon the basis that it was the owner of the subject land within the meaning of certain rating provisions of the Local Government Act 1995.

3 The resolution of this issue turns upon a number of subsidiary issues, including the question of whether PMR's occupation of the subject land under and by virtue of an agreement described as a licence agreement amounted to being in possession of the land as a lessee.

4 I note in passing that by s 35(2) of the Land Valuation Tribunals Act 1978 an appeal does not lie from a determination of the Tribunal unless the appeal involves a question of law. By O 65 r 10(1) of the Supreme Court Rules, the appeal shall be in the nature of a rehearing.

5 The effect of these provisions is that if a question of law is involved in the decision of the Tribunal, the whole of the decision, and not merely the question of law, is then open to review: Ruhumah Property Co Ltd v Federal Commissioner of Taxation (1928) 41 CLR 148 at 151; Bradshaw v Medical Board of Western Australia (1990) 3 WAR 322; Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission [2000] HCA 47; Temwood Holdings Pty Ltd v Western Australian Planning Commission [2001] WASCA 199.

6 I am satisfied that an appeal lies to the Supreme Court in the present case in that the matters of statutory interpretation mentioned earlier mean that the appeal involves a question of law.

Background to the Dispute

7 By an agreement dated 19 May 1992, the city purchased from the Western Australian Land Authority (formerly the Industrial Lands Development Authority) the land the subject of this appeal, that is to say, the 98 hectares of land contained in certificate of title volume 1464 folio 465.

8 The recital to the 1992 sale agreement noted that the city had agreed to purchase the subject land on terms which allowed the authority, or

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persons authorised by it, to continue to extract limestone and clean sand from the land under the terms of a quarry licence which was to be granted by the city to the authority.

9 The consideration for the sale was the sum of $200,000 and the grant by the city of a quarry licence to take effect from the possession date (being the day following settlement). The city was to be entitled to the receipt of rents and profits from any part of the land which ceased to be subject to the quarry licence.

10 In the manner contemplated by the sale agreement, the city simultaneously entered into an agreement with the authority providing for the grant of a quarry licence.

11 It appears from the recital to the 1992 quarry licence agreement that the city had agreed to purchase the subject land for rubbish disposal purposes upon the basis that the city would grant to the authority a licence to extract limestone and clean sand from the subject land. The recital noted that the respondent company, trading as WA Limestone Co (1975), had in the past been a monthly "tenant" of the authority and held a current extractive industries licence granted by the city under the Local Government Model By-Laws (Extractive Industries) No 9 in respect of the subject land.

12 By cl 2 of the quarry licence agreement, the city granted to the authority for a period of 14 years the "sole and exclusive licence" to enter upon the licensed area to search for, dig, work and obtain limestone and sand by means of quarrying and to carry away and dispose of the same. The licensed area comprised the whole of the subject land, save for certain designated portions. Provision was also made for the surrendering of certain portions of the land from time to time as the quarrying work proceeded. The quarrying rights granted by the licence were said to be "limited strictly to limestone and sand as defined".

13 By cl 6(1), access was to be via a track off Millar Road, but with the city having the right to vary the authority's access at any time and to determine which internal access tracks could be used. By cl 6(2), the city by its officers, employees, agents and contractors was at liberty to enter all parts of the land (whether being worked by the authority or not) subject to giving notice to the authority and using its best endeavours to minimise any disruption to quarrying operations.

14 Clause 7(1) provided that the authority was to carry out the quarrying work in a proper and efficient manner. Provision was made for

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compliance with the law and the indemnification of the city against loss. By cl 7(6), a right of inspection was conferred upon the city. Provision was made for delivery up of possession upon completion of the agreed term.

15 Clause 11 of the quarry licence agreement allows the authority to "sub-licence the whole or any part of its interest under this licence to WA Limestone Co". Provision was also made for the authority to assign the whole, or sub-licence the whole or any part, of its interest under the licence to some person other than WA Limestone Co subject to the prior approval in writing of the council, which approval was not to be unreasonably withheld.

16 On 11 December 1993, the authority entered into a sub-licence agreement with PMR Quarries in respect of the rights and obligations conferred on the authority under the preceding agreement.

17 By cl 3.1 of the sub-licence agreement, PMR, as "sub-licensee", was granted "the sole and exclusive right to conduct quarrying on the land for the term plus any renewal of the term upon and subject to all of the terms and conditions contained in the head licence except as amended, supplemented or varied by this document." As consideration for the grant, PMR was obliged to pay the authority a prescribed "royalty".

18 Clause 6 of the PMR agreement for sub-licence, provided that the sub-licensee was to have the same rights as those exercised or enjoyed by the sub-licensor under the head agreement.

19 By cl 7, PMR was to abide by all of the terms of the head licence and was not to assign, transfer, mortgage, sub-licence or part with any of its interest under the sub-licence agreement without the prior written consent of the head licensor and of the sub-licensor.

20 The quarrying work proceeded. It seems that as a consequence of a rate notice issued by the city to PMR on 17 September 1996 in respect of the subject land for the year ended 30 June 1997, the city contended that PMR was liable for the payment of rates amounting to $6604.80.

21 Section 6.76 of the Local Government Act 1995 provides that a person may object to the rate record of a local government on the ground that there is an error in the rate record with respect to the identity of the owner, or on the basis that the land, or part of the land, is not rateable land.

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22 By s 6.77, any person who is dissatisfied with the decision of a local government on an objection may give to the local government a notice requiring that it treat the objection as an appeal against the rate record.

23 On 8 March 1999, pursuant to these provisions, PMR objected to the rate record of the city on the grounds that it was not the owner of the subject land and further, or alternatively, the land, or part of the land, was not rateable land in that it was owned by a local government and was not used by the local authority for trading purposes. The appeal was then referred to the Land Valuation Tribunal.

24 The Tribunal held that PMR was not an owner of the subject land within the meaning of the relevant provisions of the Local Government. Accordingly, as indicated earlier, the Tribunal went on to hold that the rate notice issued by the city should be set aside.

25 Against this background I must now turn to the relevant statutory provisions.

Statutory Provisions

26 Section 6.26(1) of the Local Government Act provides that "except as provided in this section all land within a district is rateable land".

27 Section 6.26(2) sets out a list of land which is "not rateable land". The list includes land which is the property of the Crown and is being used or held for a public purpose (s 6.26(2)(a)(i)); land in the district of a local government while it is owned by the local government and is used for the purposes of that local government other than for purposes of a trading undertaking (s 6.26(2)(b)); land used or held exclusively by a religious body as a place of public worship (s 6.26(2)(d)); land used exclusively for charitable purposes (s 6.26(2)(g)); and land which is exempt from rates under any other written law (s 6.26(2)(j)).

28 Liability for rates or service charges is dealt with by later provisions of the Local Government Act.

29 Importantly, for present purposes, s 6.44 provides that "the owner for the time being of land on which a rate or service charge has been imposed" is liable to pay the rate or service charge to the local government.

30 This brings me to the definition of "owner" which is to be found in s 1.4 of the Act. The effect of the interpretation provision of the Act is

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that the term "owner", where used in relation to land, means, inter alia, a person who is in possession as:

"(a) (i) …

(ii) A Crown lessee or a lessee or a tenant under a lease or tenancy agreement of the land which in the hands of the lessor is not rateable land under this Act but which in the hands of the lessee or the tenant is by reason of the lease or tenancy rateable land under this or another Act for the purposes of this Act.

(iii) … "

The Issues

31 It is immediately apparent from the definition of "owner" in the Local Government Act that in the context of the present case various issues arise for determination.

32 PMR contended at the hearing before the Land Valuation Tribunal that it was not a lessee or a tenant under a lease or tenancy agreement of the subject land. It was a mere licensee quarrying the land pursuant to an extractive industries licence granted by the city. The Tribunal made a determination to this effect, with the result that PMR was held to be not liable for the payment of rates. The city challenges the Tribunal's determination in this appeal. I will call this the "principal issue".

33 A further issue raised by PMR's original objection to the rate notice and by its notice of contention in this appeal was whether the other elements of the definition of "owner" were established. PMR submitted, in regard to this further issue, that a person can only be characterised as an owner where there is a lease and this concept should not be extended to include a sub-lease. In addition, land must be not rateable in the hands of the lessor. If the latter element is satisfied, then a further determination must be made as to whether the land in the hands of the lessee is, by reason of the lease or tenancy, rateable land.

34 I will return to the matters comprising the further issue in due course.

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The Principal Issue

35 The Land Valuation Tribunal recognised at par 9 of its written reasons that the initial question for consideration was whether PMR was in possession of the subject land at the relevant time pursuant to the terms of a lease or tenancy.

36 The words "lease" and "licence" are not defined in the Local Government Act and it was therefore necessary to review a number of previously decided cases bearing upon the central issue. Accordingly, I must now proceed to the cases reviewed by the Land Valuation Tribunal and to the submissions presented by counsel for the respective parties at the hearing of this appeal.

37 The doctrine of estates in land recognises that an estate in land is a legal entity separate from the land itself. Leases were originally regarded as a personal transaction which afforded to the tenant a right to sue the landlord for a breach of contract in the event of default. When the action of ejectment was developed, the dispossessed tenant obtained the right to recover the land. Thereafter, it was recognised that the lease gave its holder proprietary rights in the land, rather than simply personal rights pursuant to the contract. The concept of an estate less than freehold, or leasehold estate, became established.

38 This has led to a clear distinction being drawn between a lease and a licence. When an owner of land provides a tenancy, a leasehold estate in the land passes to the tenant. The classic definition of a licence was propounded by Vaughan CJ in Thomas v Sorrell (1673) Vaugh 330, namely: "A dispensation or licence properly passeth no interest nor alters or transfers property in any thing, but only makes an action lawful, which without it had been unlawful."

39 Once a lease has been created, the continuing interest in the land held by the landlord is the leasehold reversion. A further consequence of the doctrine of estates, whereby legal entitlements are separated from the land itself, is that the landlord, as owner and holder of the leasehold reversion, is at liberty to sell the freehold estate during the term of the lease. Likewise, a leasehold interest, being an interest in land, is of its nature transferable. If the right granted is, of its nature, not transferable or is otherwise personal to the grantee, then this suggests that it is not a leasehold interest.

40 The notion that a lease confers upon the tenant an estate or interest in the land seems to have brought with it a recognition that a tenant is

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entitled to exclude all persons from the leased land, including even the landlord. Thus, in distinguishing between a lease and a licence, a crucial test has sometimes been supposed to be whether the occupier has exclusive possession of the land or not. If the occupier was let into exclusive possession, he was said to be a tenant; whereas, if he had not exclusive possession, he was only a licensee. See Taylor J in Radaich v Smith (1959) 101 CLR 209 at 218.

41 The case just mentioned is commonly cited as the major authority for the proposition that the exclusive possession test applies in Australia. In that case, a deed in which the parties were described as licensors and licensee respectively purported to confer on the licensee the sole and exclusive licence and privilege to supply refreshments for certain premises and to carry on the business of a milk bar. The High Court held that the substance and effect of the deed was to grant a right to exclusive possession of the lock-up shop and it thereby created a leasehold interest.

42 Various members of the court accepted that the true test of a supposed lease is whether exclusive possession is conferred upon the putative lessee. They also accepted that the nature of the relationship is determined not by the description given to it by the parties, but by the substance of the rights granted.

43 Taylor J took account of the fact (at 217) that the character of the business in that case was such that it could only be carried on effectively if the appellant had exclusive occupation. Windeyer J noted (at 222) that a reservation to the landlord, either by contract or by statute, of a limited right of entry, as, for example, to view or repair, was not inconsistent with a grant of exclusive possession.

44 The approach reflected in Radaich v Smith (supra) was applied by Mason J in Goldsworthy Mining Ltd v Federal Commissioner of Taxation (1973) 128 CLR 199.

45 In that case, Mason J held that by the terms of a dredging lease, a company became lessee of an area of seabed, notwithstanding clauses which permitted the Crown and any vessel to use part of the demised premises for navigation, anchorage or other purposes incidental to shipping and notwithstanding that provisions in the lease expressly negatived the implication of a covenant for title and a covenant to hold and enjoy the demised premises without interruption by the lessor and those claiming under him. The arrangements between the parties could not properly be said to amount to a mere licence.

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46 Mason J said (at 212) that the question of whether the dredging lease was accurately described as a lease rather than as a licence was to be answered initially by reference to the test: does it confer a right of exclusive possession? In his view, although the various reservations restricted the use to which the joint venturers could put the premises, they were not inconsistent with the existence of a right of exclusive possession. His Honour added: "Indeed, the provisions assume the existence of that right." He said further (at 214) that the absence of a covenant for quiet enjoyment was relevant to the question whether the instrument was a lease or licence, but it was "not necessarily decisive of that question where, as here, other provisions of the instrument continue to make it clear that a right to exclusive possession was intended to be vested in the lessees with the right that such a vesting will confer against third parties."

47 In Lewis v Bell (1985) 1 NSWLR 731, the Court of Appeal in New South Wales applied the reasoning in Radaich and Goldsworthy Mining and held that the test for determining whether the relationship created by a document is one of lessor and lessee is whether the grantee was given the rights to exclusive possession of the premises. When construing such a document, regard should be had to the terms of the grant in context, the nature of the rights granted and the intention of the parties.

48 In that case, the Australian Jockey Club had granted to the defendant certain rights in relation to part of a stables complex. The rights given to the trainer were said to be personal to the trainer and not assignable or transferable. The Court of Appeal held that the subject of the agreement was the use of the premises. The document did not purport to grant exclusive possession and nor could such a right be assumed to exist by implication. This led to a finding that the defendant was not the lessee of the Australian Jockey Club.

49 Mahoney J said (at 735) that if what is granted is not in terms exclusive possession or if the words used in the grant are not words understood to convey the right of exclusive possession, then the transaction is, prima facie, not one of lease. However, in cases in which it is not clear what it is that is being granted, it is necessary to determine what is granted by looking at other aspects of the transaction. Courts have, in practice, looked to two things: the nature of the rights which, in terms, have been granted; and the intention of the parties.

50 He went on to say that where it becomes necessary to infer the grant of exclusive possession because the rights which have in terms been granted can be enjoyed only by one who has been granted exclusive

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possession, such an approach depends upon the process of implication. He said further that such an implication is of the same nature as that involved in, for example, the implication of a term in the construction of transactions generally. The implication will not be made merely because it is reasonable or convenient to do so. It must be necessary that the implication be made in order to give business efficacy to the rights which otherwise have been granted. The implication will not be made if the parties have directed their attention to the subject matter of the suggested implication and have otherwise provided or have stipulated in terms that no such implication is to be made.

51 Mahoney J went on to say (at 737) that the parties may desire that the transaction does not produce the incidents of a lease and they may, to achieve that result, grant or reserve rights which are inconsistent with the grant of exclusive possession. For example, in circumstances in which it would ordinarily be expected that the rights granted would carry, by implication, the right to exclusive possession, the transaction may reserve to the grantor the right to possession or to do such things in relation to the premises as are inconsistent with the grantee having exclusive possession. That may be done in order that the transaction be one of licence rather than of lease. If, upon its proper construction, that be the transaction into which the parties have entered, effect should be given to it according to its terms.

52 During the course of argument, my attention was drawn to the recent decision of the High Court in Wik Peoples v Queensland (1996) 187 CLR 1, in which various members of the High Court looked at the nature of a leasehold estate in land. This case was mentioned also by the Land Valuation Tribunal in the course of its determination with particular reference being made to the reasoning of Toohey J at 115 to 117. His Honour observed at 118 that the decided cases point to exclusive possession as a normal incident of a lease. The authorities do not exclude, however, an inquiry whether exclusive possession is in truth an incident of every arrangement which bears the title of a lease. These observations arguably left open the question of whether the test of exclusive possession should continue to be regarded as decisive.

53 In my view, the Wik case cannot be regarded as a decision overruling or casting significant doubt upon the reasoning in the earlier decisions and the adoption of exclusive possession as the decisive test in the context of commercial transactions. The issue before the High Court in Wik was of a special kind concerning the relationship between principles of common law and native title rights. Further, and in any event, it seems that a

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majority of the High Court, including Toohey J, did not consider that the pastoral leases in question, being the product of specific statutory provisions, did confer exclusive possession of a kind sufficient to extinguish native title rights. Accordingly, I am not persuaded that the case can be viewed as a ruling upon the effect of exclusive possession in the context of a commercial transaction which turns upon the application of common law principles.

54 It follows from this review of the decided cases that the Land Valuation Tribunal was correct in its determination at par 20 of its reasons that the critical test is that of exclusive possession, that is to say, the test for determining whether the relationship created by the relevant documentation is one of lessor and lessee is whether the grantee was given the rights to exclusive possession of the premises. I note in passing that at the hearing before me, counsel for both parties seemed to accept that this was the relevant test.

55 According to counsel for the city, the touchstone for determining whether the sub-licence agreement created a leasehold interest in the subject land held by PMR was whether the agreement in question conferred on PMR a right to exclusive possession during its term. The answer to that question was to be resolved by considering the terms of the sub-licence agreement having regard to the relevant circumstances and, in particular, the nature of the premises.

56 Counsel for the city submitted that by cl 3.1 of the sub-licence agreement the authority granted to PMR the sole and exclusive right to conduct quarrying on the land subject to all terms and conditions contained in the 1992 quarrying licence agreement, save as amended, supplemented or varied by the sub-licence agreement. The effect of this and related provisions was that PMR had control over the licensed area with the extent of its control being manifested by its entitlement to install buildings and machinery and its obligation to conduct rehabilitation and restoration work prior to delivering up possession of the licensed area at the end of the term. Counsel acknowledged that the city had the right to obtain access to the land and to inspect the quarries, but suggested, consistently with the reasoning of Mason J in the Goldsworthy Mining case, that reservations of this kind assumed the existence of an entitlement to exclusive possession. Reservations of this kind would not be necessary unless the putative lessee was free to exclude the landlord. See also to the same effect Port Kennedy Resorts Pty Ltd v The City of Rockingham [2000] WASCA 423.

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57 Counsel for the city also placed some emphasis upon cl 7.3 of the sub-licence agreement, whereby PMR bound itself not to assign, transfer, mortgage, sub-licence or part with "any of its interest under this document" without the prior written consent of the head licensor and of the sub-licensor. Counsel submitted that a provision of this kind evinced an interest in the land consistent with a lease as distinct from a licence which passes no interest in land.

58 I pause at this point to say that there is room for argument about such a proposition in the circumstances of the present case.

59 It is significant that the provisions of the head licence, that is to say, the 1992 quarry licence agreement, whereby the city granted a licence to the authority, speak only of the grant of the sole and exclusive licence to enter upon the licensed area to search for, dig, work and obtain limestone and sand by means of quarrying. There is no explicit reference in the head licence or in the sub-licence to the creation or transmission of an estate or interest in land. The head licence does not contain a covenant by the city of the kind usually found in a lease to provide quiet enjoyment of the subject premises. The city's covenants, as set out in cl 8 of the head agreement, are confined to the issue of renewal.

60 Further, in dealing with the question of a of sub-licence, cl 11 speaks only of the authority being at liberty to sub-licence "the whole or any part of its interest under this licence" to WA Limestone Co, now known as PMR. What is to be assigned or sub-licensed is not described as an estate or interest in the subject land, but simply as the authority's "interest under this licence". Any assignment or sub-licence is subject to the prior approval in writing of the city, which approval is not to be unreasonably withheld.

61 I must now turn to other features of the arrangements made between the parties.

62 The Land Valuation Tribunal held that there was no exclusive possession because the right of others to quarry for minerals or substances other than limestone and sand were not excluded. Certain of the rights granted by the sub-licence agreement appeared to be inconsistent with a right to exclusive possession, such as the city's rights of entry and the entitlement of the city to retake possession of a cell or cells within the licensed area sequentially in areas not quarried. The Tribunal gave weight also to the fact that the consideration payable for the grant of the sub-licence was expressed in terms of a royalty. The Tribunal was not

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satisfied that the necessary requirement of exclusive possession was apparent when the sub-licence agreement was considered in its entirety.

63 The stance of counsel for PMR at the hearing before me was that the Tribunal had correctly applied the relevant principles to the facts of the matter. The language of the instrument suggested that, prima facie, it was not a lease. The payment of what was described as a "royalty" could not easily be equated to the payment of rent, being one of the normal incidents of a lease. Exclusivity of the right to quarry limestone and sand did not amount to nor require exclusive possession of the subject land. So long as a person who entered upon the land with the consent of the city did not interfere with quarrying activities, PMR would have no right to exclude such a person from the licensed area. Further, the provisions concerning assignment did not establish that the subject matter of the assignment was an estate or interest in land as contrasted with a situation in which certain rights were created by contractual arrangements between the parties. For these reasons, counsel for PMR submitted, the Tribunal was correct in holding the PMR was not a lessee or tenant under a lease or tenancy agreement.

Determination

64 The definition of "owner" set out in s 1.4 of the Local Government Act requires that a determination be made initially as to whether PMR is in possession of the subject land as a lessee or tenant under a lease or tenancy agreement. The decided cases show that the test for determining whether the relationship created by a document is one of lessor or lessee is whether the grantee was given the right to exclusive possession of the premises.

65 It was common ground at the hearing before me that PMR is in possession of the land pursuant to an agreement described by the parties as an agreement for sub-licence. The decided cases show that the description given by the parties to their arrangements is not decisive. Nonetheless, as appears from the reasoning of Mahoney J in Lewis v Bell, if what is granted is not in terms exclusive possession or if the words in the grant are not words understood to convey the right of exclusive possession, then the transaction is, prima facie, not one of lease. Thus, prima facie, in the present case, PMR is not in possession as a lessee.

66 It then becomes necessary to determine whether one can infer the grant of exclusive possession from the nature of the rights and obligations created by the operative documents. The process of implication requires

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that some consideration be given not only to the question of whether the normal incidents of a lease are provided for by the relevant documents, but also the question of what is required in order to give business efficacy to the arrangements made by the parties.

67 It is apparent from earlier discussion that the head licence (the 1992 quarrying licence agreement) does not refer explicitly to any estate or interest in the land being created or vested in the authority, although the conferring upon a tenement of an estate or interest in land as opposed to a mere personal privilege is generally regarded as a distinctive feature of a lease. The same observation applies to the terms of the sub-licence agreement. The provisions concerning assignment refer only to the authority's "interest under the licence" (per cl 11 of the 1992 quarrying licence agreement) and to PMR's "interest under this document" (cl 7.3 of sub-licence agreement).

68 Mason J noted in the Goldsworthy Mining case at 214 that the absence of a covenant for quiet enjoyment is relevant to the question of whether the instrument is a lease or a licence. It is significant that the relevant documents in the present case do not contain a provision for quiet enjoyment. The sub-licence agreement grants to PMR by cl 11(c) no more than an entitlement to peaceably occupy and enjoy the land "in common" with the authority as sub-licensor or any other persons claiming by, from or under the sub-licensor. Moreover, there are various provisions whereby the city is entitled to exercise some control over what happens on the land during the period of the licence with a view to achieving its ultimate goal of using the land for rubbish disposal purposes.

69 For example, under the head lease, the city can vary the authority's access to the land and determine the route of access tracks. It can also insist upon a sequential surrender of various "cells" or portions of the licensed area as work proceeds. These requirements form part of the sub-lease and appear to be consistent with the notion that PMR does not have exclusive possession of the land. To my mind, the city's entitlements, which are clearly directed to the achievement of its goal, notwithstanding the presence of a quarrying operation on the land, go beyond reservations of the kind adverted to by Mason J in the Goldsworthy Mining case and by the Full Court in the Port Kennedy Resorts case and should not therefore be regarded as presuming the existence of a right of exclusive possession.

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70 Thus, to this point, there is much that weighs against the notion that PMR is entitled to exclusive possession and can therefore be characterised as the holder of a leasehold estate or interest in the subject land.

71 When one turns to the related question of whether exclusive possession is necessary in order to give business efficacy to the rights conferred upon PMR by the sub-licence, some weight has to be given to the fact that the quarrying rights conferred are limited to limestone and sand. The right of others to quarry for other minerals is not excluded. It is clear from earlier discussion that PMR does not have exclusive control over the way in which the land is managed or made available to third parties, albeit that the quarrying operations of PMR are not to be interfered with.

72 The presence of a take or pay provision for royalty suggests that PMR is being licensed to proceed with a prescribed activity to be undertaken upon the land and, unlike the case of a tenant with an estate or interest in the land, is not at liberty to plan its operations entirely as it pleases. In other words, unlike the case of the lock-up premises to be used as a milk bar, being the factual situation in Radaich v Smith, the nature of the business activity in the present case does not lead to a compelling inference that the parties must have intended that PMR was to have exclusive possession of the subject land. The city and its servants, agents and contractors are at liberty to enter the land, provided they do not interfere with the quarrying operations.

73 When these various matters are considered in combination, they do not rebut, but, rather, reinforce the prima facie conclusion manifested by the language of the relevant documents, that the sub-licence agreement is indeed a licence and should not be characterised as a lease. It does not confer exclusive possession, but simply makes lawful an occupation of the land which might otherwise be unlawful, this being a characteristic of a licence. It follows from this that, in my view, the Tribunal correctly held that PMR is not an owner within the meaning of s 1.4 of the Local Government Act because it does not hold the subject land under a lease and is therefore not liable for the payment of municipal rates. The present appeal will therefore be dismissed.

Further Issues

74 Strictly speaking, the ruling that PMR does not hold the land as a lessee makes it unnecessary for me to deal with the further issues raised by PMR's notice of contention. However, for the sake of completeness,

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and in case I be wrong in the views I have expressed, I will now turn to these further issues.

75 The effect of the notice of contention was to assert that certain other elements of the definition of "owner" had not been established in the circumstances of the present case.

76 PMR's first line of argument was to this effect. Even if it be held that the 1992 quarrying licence agreement be characterised as a lease in that it conferred exclusive possession upon the authority, with the result that the sub-licence agreement, properly characterised, should be regarded as a sub-lease, this did not mean that PMR was in possession of the land under a lease or tenancy agreement as required by the definition of "owner" in s 1.4 of the Local Government Act . A sub-lease is not the same as a lease. The statute was a taxing Act and should be construed strictly. The relevant provision should be not construed so as to impose a rating burden when the party affected was in possession of the land under a sub-lease.

77 I am not prepared to uphold this line of argument, or to dismiss the appeal upon the basis proposed by the respondent. The definition of "owner" refers to being in possession under a "lease or tenancy agreement". To my mind, the term "tenancy agreement" is sufficiently broad to encompass a sub-lease. Accordingly, I find against PMR in regard to this issue.

78 Counsel for PMR then contended that another element of the definition of "owner" was not made out. "Owner" means a person who is in possession as a lessee of the land which in the hands of the lessor is not rateable land. In the present case, counsel submitted, the subject land could not be described as "non-rateable", in the hands of the authority as lessor (on the assumption that the sub-licence is held to be a lease or tenancy agreement), bearing in mind the basic precept reflected in s 6.26(1) that all land within a district is rateable land.

79 In order to address this further issue, I must begin by looking at various provisions of the Western Australian Land Authority Act 1992. I note in passing that the Act has been amended on various occasions. My task is to set out the position as at 17 September 1996 when the relevant rate notice was issued.

80 Section 5 of the Land Authority Act provides for the establishment of a body called the Western Australian Land Authority. By s 5(5), the authority is an agent of the Crown in right of the State and, except as

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provided in s 15 and s 32, enjoys the status, immunities and privileges of the Crown.

81 Section 15 provides that, subject to s 32, nothing in the Act is to be read as conferring on the authority in the performance of its function any immunity from the operation of any written law.

82 Section 32 provides (as at 17 September 1996) that notwithstanding s 15, the authority is not liable to pay any local government rate or charge, land tax, metropolitan region improvement tax, water rate, payroll tax, stamp duty or other rate, tax, duty, fee or charge imposed by or under a written law. (This provision was amended extensively by No 60 of 1998 to provide that the authority was liable to and chargeable with duties, taxes or other imposts in certain circumstances.)

83 The effect of various transitional provisions is that any property which was vested in a former body vests in the authority together with all claims, rights and remedies that the former body then had in respect of the property and the authority becomes liable to pay, bear or discharge all the liabilities of a former body that are properly payable.

84 It follows from these transitional provisions that the Western Australian Land Authority assumes liability for the liabilities of the Industrial Lands Development Authority, being the body that entered into the various agreements mentioned earlier.

85 Counsel for PMR submitted that the presence of a specific statutory immunity from paying rates, as in s 32 of the Western Australian Land Authority Act 1992, does not mean that the land is not rateable land. Land is "not rateable land" if, and only if, it is within one of the categories of land declared by s 6.26(2) of the Local Government Act to be not rateable land.

86 Counsel for PMR recognised that one of the categories of land said to be not rateable land was, pursuant to s 6.26(2)(j), "land which is exempt from rates under any other written law". Nonetheless, on his case, s 6.26(2)(j) should not be construed as applying to a general exemption of a particular body from payment of rates of the kind reflected in s 32 of the Western Australian Land Authority Act.

87 In my view, the effect of s 32 of the Western Australian Land Authority Act is that the authority cannot be compelled to pay rates in respect of land vested in it. This means that rates cannot be levied upon the relevant land in such circumstances. It follows from this, that land

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held or in the hands of the authority is properly described as land which is exempt from rates under a written law, namely, the Western Australian Land Authority Act. It follows that, pursuant to s 6.26(2)(j) of the Local Government Act, the land is not rateable land. Accordingly, that element of the definition of "owner" which speaks of the land being not rateable land in the hands of the lessor is satisfied. I would therefore not dismiss the appeal on this ground.

88 Counsel for PMR submitted finally that a third element of the definition of "owner" has not been satisfied in that the land must be rateable land by reason of the lease or tenancy in question. He submitted that the subject land in the present case cannot be described as rateable land in the hands of PMR by reason of the sub-licence agreement, even if the agreement in question be characterised as a tenancy agreement or sub-lease. The words in the statute require that in the hands of the lessee, the land is, by reason of the lease (or in this case the sub-lease), rateable land.

89 Counsel for PMR submitted that an example of the proper operation of the subparagraph might be found with Crown land. By s 6.26(2)(a)(ii), unoccupied Crown land is not rateable land. A person taking a lease of previously unoccupied Crown land would be within par 1.4(a)(ii), that is to say, the land in the hands of the lessor was not rateable land (it having been unoccupied) but, in the hands of the lessee, it is rateable land by reason of the lease. By reason of the lease, it ceased to be unoccupied and so is no longer within the exception in cl 6.26(2)(a)(ii).

90 In my view, the words "by reason of" are synonymous with "because of". The effect of the provision is that if as a consequence of a leasehold estate or interest being vested in a party who is not exempt, such party being one who is obliged to pay rates because of a document which is held to be a lease, then the presence of the lease is the critical factor. It constitutes the person in possession as an owner of the land pursuant to the definition in the Local Government Act. It follows that the land is rateable land in the hands of the lessee by reason of the lease or tenancy agreement.

91 I therefore consider that this final element of the definition has been satisfied in the circumstances of the present case. I am not prepared to uphold the respondent's line of argument. Accordingly, if I be wrong in my ruling in favour of the respondent upon the principal issue, I would be obliged to allow the appeal. I would not be prepared to dismiss the appeal on the grounds referred to in the notice of contention.

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Summary

92 In summary, then, the appeal herein will be dismissed as a consequence of my ruling in favour of the respondent in regard to what I have called the principal issue. I consider that the Land Valuation Tribunal was correct in finding that PMR did not occupy the subject land as an owner within the definition of "owner" in s 1.4 of the Local Government Act. It follows that PMR is not liable for the payment of rates in respect of the subject land and the decision of the Tribunal to set aside the relevant rate notice is therefore affirmed. I will hear from the parties as to whether any further orders or directions are required.