City of Subiaco v Heytesbury Properties Pty Ltd - [2001] WASCA 140

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE FULL COURT (WA)

CITATION: CITY OF SUBIACO -v- HEYTESBURY PROPERTIES PTY LTD [2001] WASCA 140

CORAM: MALCOLM CJ
IPP J
WALLWORK J

HEARD: 7 & 8 DECEMBER 2000

DELIVERED : 2 MAY 2001

FILE NO/S: FUL 14 of 2000

BETWEEN: CITY OF SUBIACO
Appellant (Defendant)
AND
HEYTESBURY PROPERTIES PTY LTD (ACN 008 747 215)
Respondent (Plaintiff)

FILE NO/S :FUL 15 of 2000

BETWEEN :CITY OF SUBIACO
Appellant (Plaintiff)
AND
HEYTESBURY HOLDINGS PTY LTD (ACN 008 666 966)
First Respondent (First Defendant)
PETER JOHN PATRIKEOS and JANET LEE HOLMES A COURT (as joint administrators of the Estate of the Late MICHAEL ROBERT HAMILTON HOLMES A COURT
Second Respondents (Second Defendants)
JANET LEE HOLMES A COURT
Third Respondent (Third Defendant)

Catchwords:

Leases - Construction - Whether quiet enjoyment clause entitled lessee to carry on a manufacturing business on the leased premises - Whether rent and other charges payable by lessee abated because town planning scheme amendment precluded carrying on a manufacturing business - Whether by making scheme amendment the City was in breach of implied term of leases - Whether damages payable exceeded or equalled rent payable - Whether scheme amendment frustrated the leases and brought leases to an end by operation of law from date of amendment - Whether lessee and City agree that leases would not be treated as frustrated so that the lessee was estopped from relying on frustration or waived its rights to rely on frustration

Legislation:

Town Planning and Development Act 1928 (WA)

Result:

Appeal allowed
Orders made by trial Judge set aside
Claim by respondent against appellant dismissed

Representation:

FUL 14 of 2000

Counsel:

Appellant (Defendant) : Mr M J McCusker QC & Mr J L Sher
Respondent (Plaintiff) : Mr J Gilmour QC & Ms R J Maslen-Stannage

Solicitors:

Appellant (Defendant) : Corrs Chambers Westgarth
Respondent (Plaintiff) : Freehills

FUL 15 of 2000

Counsel:

Appellant (Plaintiff) : Mr M J McCusker QC & Mr J L Sher
First Respondent (First Defendant)
:Mr J Gilmour QC & Ms R J Maslen‑Stannage

Second Respondents (Second Defendants)
:Mr J Gilmour QC & Ms R J Maslen-Stannage

Third Respondent (Third Defendant)
:Mr J Gilmour QC & Ms R J Maslen-Stannage

Solicitors:

Appellant (Plaintiff)  :        Corrs Chambers Westgarth
First Respondent (First Defendant)          :        Freehills
Second Respondents (Second Defendants) :        Freehills
Third Respondent (Third Defendant)       :        Freehills

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

Ansett Transport Industries (Operations) Pty Ltd v Commonwealth (1977) 139 CLR 54
Ayr Harbour Trustees v Oswald (1883) 8 App Cas 623
Bank Line Ltd v Arthur Capel Co [1919] AC 435
Birkdale District Electric Supply Co v Southport Corporation [1926] AC 355
Black Clawson International Ltd v Papierwerke Waldhof‑Aschaffenburg AG (1981) 2 Lloyd's Rep 446
Board of Trade v Temperley Steam Shipping Co (1926) Ll L R 76, affd (1927) 27 Ll L R 230
Brisbane City Council v Group Projects Pty Ltd (1979) 145 CLR 143
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337
Commissioners of Crown Lands v Page [1960] 2 QB 274
Edler v Auerbach [1950] 1 KB 359
Finch v Sayers [1976] 2 NSWLR 540
Hill v Harris [1965] 2 QB 601
Hirji Mulji v Cheong Yue Steamship Co Ltd [1926] AC 497
London & Northern Estates Co v Schlesinger [1916] 1 KB 20
National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675
Ransom & Luck Ltd v Surbiton Borough Council [1949] Ch 180
Rederiaktiebolaget Amphitrite v The King [1921] 3 KB 500
Stringer v Minister of Housing [1970] 1 WLR 1281
Triggs v Staines Urban District Council [1969] 1 Ch 10
Whitehall Court Ltd v Ettlinger [1920] 1 KB 680
William Cory & Son Ltd v London Corporation [1951] 2 KB 476

Case(s) also cited:

Firth v Halloran (1926) 38 CLR 261
Krell v Henry [1903] 2 KB 740
Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17

MALCOLM CJ: This appeal was heard over a period of two days on 7 and 8 December 2000. The hearing of the appeal was greatly assisted by the availability of the transcript and exhibits in electronic form, together with a statement of the issues prepared by the solicitors for the appellant pursuant to orders made by Templeman J dated 12 May 2000. This identified some 31 separate issues raised by the 24 grounds of appeal. On analysis, the number of issues was reduced to four specific issues which have been formulated by Ipp J. The Court was also provided with a detailed chronology of events by reference to the exhibits prepared on behalf of the appellant.
The appellant supplemented its outline of submissions by the statement of issues, to which I have referred, as well as by a detailed chronology of events by reference to the exhibits. The appellant also filed submissions in reply to the respondent's first set of submissions. The respondent filed detailed submissions comprising an outline and a supplementary outline of submissions by leave filed after the hearing on 22 December 2000. This was followed by a response by the appellant dated 21 February 2001 to those submissions. In the meantime, the respondent filed further submissions dated 16 February 2001 to which the appellant replied on 23 February 2001, supported by copies of various exhibits.
I have had the advantage of reading in draft the reasons to be published by Ipp J. I agree with those reasons and his Honour's conclusions. It follows that I would allow the appeal, set aside the orders made by the learned trial Judge, dismiss the claim made by Heytesbury and grant judgment in favour of the appellant. It will be necessary to hear counsel regarding the specific orders to be made.
IPP J:

The issues on appeal

This appeal concerns four 99‑year leases between the City of Subiaco as lessor and Heytesbury Properties Pty Ltd as tenant. Both parties accept that the leases have been brought to an end. The City claims that Heytesbury owes it $1,277,680 in respect of rental and other charges that became owing under the leases before they were terminated. Heytesbury disputes this claim and says that the rental and other charges were abated when Town Planning Scheme Number 2 – Amendment Number 1 ("the Town Planning Amendment") was enacted. Heytesbury says that it is entitled to an abatement because the effect of the Town

Planning Amendment was to preclude it from carrying on a manufacturing business in the leased premises and, under the quiet enjoyment clause of the leases, it was entitled to use the leased premises for that purpose. In the alternative, Heytesbury says that the City committed breaches of certain implied terms of the leases by procuring the enactment of the Town Planning Amendment and, in consequence, it is entitled to damages which exceed or equal the rent and other charges to which the City would otherwise be entitled. In the further alternative, Heytesbury says that that the enactment of the Town Planning Amendment caused the leases to be frustrated and they were brought to an end by operation of law as from the date thereof; hence, no rental or other charges were payable as from that date.

White J upheld Heytesbury's contention that in terms of the leases, properly construed, it was entitled to use the leased premises for the purpose of carrying on a manufacturing business. His Honour also found that the terms alleged by Heytesbury were to be implied in the leases and that by procuring the enactment of the Town Planning Amendment the City breached those terms and was liable to Heytesbury for damages.
White J held that, in any event, "the City cannot, in the circumstances, be entitled to be paid the rent reserved by the [l]eases while its own deliberate conduct has prevented Heytesbury from enjoying the benefit of the [l]eases". The conduct in question was the procurement of the Town Planning Amendment.
Finally, the learned Judge held that, if the enactment of the Town Planning Amendment did not constitute a breach of the leases, then the leases would have been frustrated thereby. Nevertheless, his Honour held that the leases were not so frustrated as Heytesbury and the City had agreed that the leases would be treated as not having been frustrated by the making of the Town Planning Amendment.
The City appeals against these findings. Heytesbury, on the other hand, contends that should the appeal be upheld, the learned Judge wrongly found that the parties agreed to treat the leases as not having been frustrated. Essentially, therefore, this appeal raises the following main issues:
(a)Is the quiet enjoyment clause to be construed to mean that Heytesbury was entitled to carry on a manufacturing business on the leased premises?
(b)Do the four leases contain one or more of the implied terms relied on by Heytesbury and, if so, were those terms breached when the City procured the enactment of the Town Planning Amendment thereby entitling Heytesbury to damages from the City?
(c)Were the leases frustrated by the enactment of the Town Planning Amendment (leaving aside the issue of whether the parties agreed not to be bound by frustration, and issues of waiver and estoppel)?
(d)Did the parties agree that the leases would not be treated as having been so frustrated, or is Heytesbury estopped from relying on frustration, or did it waive its rights to rely thereon?
I have not included in the main issues the question whether the City is precluded from claiming rent on the ground that "its own deliberate conduct has prevented Heytesbury from enjoying the benefit of the leases". That is because the first two main issues that I have identified concern the question whether the City committed a breach of the leases by procuring the enactment of the Town Planning Amendment. If the City did so commit a breach of the leases, the appeal will fail, and if it did not, then its own conduct in procuring the enactment of the Town Planning Amendment cannot disentitle it from claiming the rent.

The leases

The leases were entered into during the period 1930 to 1959. Each of them was in respect of a different piece of land and, initially, was entered into between the City and Humes Ltd. The four pieces of land (together with a fifth, the subject of a lease that is not presently relevant) formed a parcel of land constituting the Subiaco Endowment Land.
Each of the four leases contained a quiet enjoyment clause, of which the following is typical:
"That the lessee duly paying the several rents hereby reserved and performing and observing the covenants by the lessee and stipulations and conditions herein contained implied shall and may peaceably and quietly hold and enjoy the demised premises hereby leased during the term hereby granted without any interruption by the lessor or any person or persons rightfully claiming under or in trust for it."
Each of the four leases contained an undertaking by the lessee not to use the demised premises for residential purposes (subject to a proviso not presently relevant). Further, each of the four leases contained a clause similar to the following, which obliged the lessee:
"[c]ontinuously and actively [to] carry on upon the demised premises the business of manufacturers in some one or more art trade or calling except whilst prevented by strikes of workmen or general cessation of work on the initiative of the workmen fire, storm, tempest or any cause over which the lessee has not any control or through insufficiency or slackness of trade provided that in the last‑mentioned case the lessee itself or [Hume] shall not cease to carry on business for a continuous period of 12 calendar months."
In 1984 each of the leases was varied to provide that the leased premises might be used for any one or more purposes associated with the warehousing, wholesaling or retailing of goods manufactured on the leased premises, manufactured by the lessee or manufactured by a permitted assignee or sub‑tenant of the lessee, provided that such use did not contravene the provisions of whatever City of Subiaco town planning scheme was in force from time to time.
Each of the four leases contained a waiver clause, of which the following is typical:
"These presents shall in no way be deemed to prejudice, abrogate, waive or forego any rights or powers with respect to the said lands and/or the buildings erected thereon and/or the machinery used thereon or therein or the occupier of the said lands which may now or shall hereafter be conferred upon or vested in the lessor under or by virtue of any Act of Parliament, State or Federal, or any Rules, Regulations or By‑laws made thereunder but more particularly the Municipal Corporations Act 1906 and its amendments and the Health Act 1911 and its amendments."

Changes in the permitted use and in the use of the leased premises

From the inception of the leases, Humes, for very many years, carried on a manufacturing business in the leased premises. On 2 August 1988, Heytesbury entered into an agreement with Humes whereby it purchased from Humes the latter's interest and entitlement in respect of the leases. By letter dated 14 December 1988, Heytesbury informed the City that it had acquired Humes' interest in the leases and Humes would cease to be in possession of the leased premises as from 31 December 1989. In that letter, Heytesbury asked the City to waive the obligation imposed by the leases that required the lessee to carry on a manufacturing business continuously on the leased premises. Subsequently, the City refused this request. The letter went on to inform the City:
"After 31 December 1989 Heytesbury Properties proposes to simply retain the property and buildings on a vacant basis pending a redevelopment which will be discussed with Council, and which will be subject to normal Council requirements for a redevelopment, and in particular an approval for a redevelopment under the Scheme."
On 8 March 1989, with the consent of the City, Humes assigned the leases to Heytesbury. Humes continued as a sub‑tenant of Heytesbury until December 1990 and in that period continued to manufacture cement pipes in the demised premises. Heytesbury, itself, did not carry on a manufacturing business in the demised premises and after December 1990 no manufacturing took place therein.
The City was a party to the deed whereby Humes assigned its interests under the leases to Heytesbury. By cl 4 of the deed, Heytesbury covenanted with the City "to duly and punctually observe and perform all the covenants, conditions and stipulations contained and implied in each [l]ease on the part of the lessee of the [l]eased [p]remises to be observed and performed thereunder".
At the time of the deed of assignment, the Subiaco Endowment Land was subject to the City's Town Planning Scheme Number 2 – Jolimont Special Area Scheme (which had come into effect on 10 September 1985). Clause 3.2.1 of this scheme recorded that the City intended to achieve a garden industrial estate in the area and included "light industry" as a permitted use. I infer that the manufacturing business that Humes carried on in the leased premises was a light industry use. I draw this inference as, although no finding was made in this regard, Humes had conducted its manufacturing business over a long period without any suggestion that it was not a permitted use.
By the time the deed of assignment was entered into, it was known that a very large redevelopment of Subiaco, including the Subiaco Endowment Land, was being contemplated. The proposed redevelopment would bring about a profound alteration in the character of the area and, if effected, would result in a vast increase in land values. The possibility must have been appreciated that, if the proposed redevelopment occurred, light industry use would no longer be permitted.
White J found that Heytesbury acquired the leases for the purpose and with the intention of holding and developing the land commercially. I have mentioned that by letter dated 14 December 1988, Heytesbury informed the City that it proposed simply to retain the demised premises "on a vacant basis pending a redevelopment". From at least 1989, Heytesbury hoped to redevelop the land in co‑operation with the City on a large scale and on a long‑term basis. Heytesbury did not intend to manufacture on the leased premises but to use them for the purposes of developing the land. The estate in the land that Heytesbury had acquired was far more important to it than the right to manufacture.
White J found that "Heytesbury had clearly formed the opinion that the viable redevelopment of the demised land for residential purposes was dependent upon Heytesbury obtaining freehold title to that land and this fact was made known to the City from an early period". The demised land was the cornerstone of the contemplated redevelopment of the entire area and the leasehold estate held by Heytesbury was a significant factor that the City would have to take into account in any redevelopment.
Disappointingly for Heytesbury, however, the City did not assist it in acquiring freehold title. From time to time after becoming the lessee, Heytesbury prepared various proposals for the development of the leased premises. These included the use of the land for residential and other purposes. The proposals were not accepted by the City.
The City procured the enactment of the Town Planning Amendment and it became effective on 27 January 1993. The Town Planning Amendment repealed the provision in Town Planning Scheme Number 2 – Jolimont Special Area Scheme that allowed light industry as a permitted use. As from 27 January 1993, the prevailing town planning legislation prohibited the carrying on of a manufacturing business on the leased premises.
On 27 October 1993, Heytesbury applied for development approval for a concrete manufacturing plant on the leased premises. This application was refused. White J found that "Heytesbury made the application for the purpose of obtaining a refusal by the City to support Heytesbury's legal argument that it did not have to pay the rent". In other words, the application was not a genuine application for the purposes of conducting a manufacturing business.
Until at least late 1996, Heytesbury contended that the leases were operative and in force and entitled it to possession of the leased premises, albeit that it also contended that it was not obliged to pay rent. As his Honour found, the City at all times acted on the basis that the leases were valid and enforceable.

Heytesbury disposes of its interests in the leases

On 12 May 1993, Heytesbury's solicitors advised Heytesbury that, arguably, the leases had been frustrated by the Town Planning Amendment and it might be entitled to an abatement of the rent payable thereunder. Nevertheless, presumably because Heytesbury regarded the leases as a valuable asset, it did not seek to surrender them. Indeed, by letter dated 20 December 1993, Heytesbury's solicitors asserted that the City had no legal entitlement to terminate the leases and re-enter the land.
On 20 July 1994 Heytesbury, consistently with its attitude that the leases had not been determined, suggested a rent review.
On 8 March 1996 the solicitors acting for the City wrote to Heytesbury's solicitors claiming the rent owing under the leases and threatening legal action. On 4 April 1996, Heytesbury commenced an action claiming an injunction restraining the City from determining the leases or re‑entering the premises the subject of the leases.
On 23 April 1996, Heytesbury entered into an agreement of sale with the Subiaco Redevelopment Authority ("SRA") whereby it sold to the SRA its interest in the five leases constituting the Subiaco Endowment Land. This agreement assumed that the four leases, the subject of this appeal, were still on foot.
The recital to the agreement of sale stated that Heytesbury was registered as the lessee of the five leases over the Subiaco Endowment Land and went on to record:
"Heytesbury has agreed, subject to the approval of the Minister for Planning and the consent of the City, to sell Heytesbury's leasehold interest in and to the land on the terms and conditions hereinafter contained."
Clause 2 provided:
"In consideration of the payment of the [p]urchase [p]rice by SRA to Heytesbury, and the giving of the release contained in clause 10.2, Heytesbury will sell and SRA will purchase all Heytesbury's right title and interest in and to the Leases …"
The purchase price was recorded as being $2.75 million.

Clause 3.1(b) and cl 3.1(c) provided that the City's consent to the transfer of the leases and the release of Heytesbury from its obligations under the leases were conditions precedent to the sale. Clause 3.2 provided that the SRA would procure the consent of the City and the release of Heytesbury under the leases on or before the settlement date. Clause 3.3 provided that the release of Heytesbury would not prejudice or affect any claim which the City had against Heytesbury prior to the settlement date (this, plainly, bore upon the City's claim for rental). Clause 6.3 provided that "[n]otwithstanding the transfer of the Leases, Heytesbury shall be responsible for all rent, taxes and outgoings which are alleged to be outstanding by the City up to the [s]ettlement [d]ate". Clause 8(b) provided that Heytesbury covenanted with the SRA "so far as possible, to observe and perform all the conditions and covenants contained in the Leases until the [s]ettlement [d]ate". Clause 11 provided that Heytesbury would give the SRA vacant possession of the land on the settlement date.
Also on 23 April 1996, the City, Heytesbury and the SRA entered into a deed whereby, as contemplated by the agreement of sale of that date, Heytesbury assigned its interest in the five leases to the SRA. The deed also assumed that the four leases were still on foot.
The following was recorded in the recital to the deed of assignment:
"Heytesbury is the Lessee named in [the Leases] …
[The City] proposes to transfer the fee simple of the Leased Land to SRA.
With the consent of [the City] Heytesbury has agreed to assign and transfer the Leases to SRA … .
Heytesbury and [the City] have agreed that notwithstanding the transfers referred to in [the recitals] and the consequent merger and extinguishment of the Leases on a transfer of the Leases to the owner of the fee simple in the Leased Land, such rights as Heytesbury and [the City] … presently have against each other and such obligations as Heytesbury and [the City] … presently owe to each other pursuant to the Leases or otherwise shall be preserved."
Clause 2 provided:
"Such rights as [the City] and Heytesbury … may presently have against each other pursuant to the Leases and such obligations as [the City] and Heytesbury … may presently owe to each other pursuant to the Leases are hereby preserved notwithstanding: (a) the execution of this deed … ."
Clause 3 provided:
"Heytesbury as beneficial owner hereby transfers and assigns to SRA the Leased Land and all the right title estate and interest of Heytesbury in and to the same for, in respect of each Lease, the residue unexpired of the term granted by that Lease as at the Assignment Date."
Clause 4.1 provided:
"[The City] hereby consents to the transfer and assignment in clause 3 and hereby releases and discharges Heytesbury … from any liability to comply with the Leases during the period from and after the Assignment Date."
Clause 4.2 provided:
"Heytesbury … acknowledges that the release of Heytesbury … will not prejudice or affect any claim or demand which [the City] may have against Heytesbury … in respect of compliance with the Leases during the period prior to the Assignment Date."

The quiet enjoyment clause

Heytesbury contended that the following was an implied term of the leases:
"The right of the lessee to enjoy the demised premises was a right to enjoy them for the purpose of conducting a manufacturing business."
The City contended that the mere letting of the premises for a particular purpose did not give rise to an implied term that the premises could lawfully be used for that purpose, and relied on Hill v Harris [1965] 2 QB 601, where Diplock LJ said at 614 ‑ 615:
"It has been submitted that, where a lease of property is entered into and it is in the contemplation of both parties that the property shall be used for a certain purpose, there is contract or condition on the part of the landlord, implied by law, that the premises are fit for the purpose, that is to say, that they can lawfully be used for the purpose, and that there will be no let or hindrance to their being so used. That is a proposition in support of which no authority has been cited. Devlin J in Edler v Auerbach [1950] 1 KB 359 said at 373:
'The relevant principle of law was enunciated by Parke B in Hart v Windsor [1843] 12 M&W 68 at 87 and quoted with approval by Scrutton LJ in Bottomley v Bannister [1932] 1 KB 458 at 468 and is as follows:
"There is no contract, still less a condition, implied by law on the demise of real property only, that it is fit for the purpose for which it is let".'
Devlin J went on at 374:
'This principle has often been applied in cases where the premises are physically unfit for the purpose. I think it equally applicable where premises are, so to speak, legally unfit. It is the business of a tenant, if he does not protect himself by an express warranty, to satisfy himself that the premises are fit for the purpose for which he wants to use them, whether that fitness depends upon the state of their structure, the state of the law, or any other relevant circumstance.'
[Counsel for the lessee] has pointed out that that statement of the law by Devlin J has not yet received approval from a higher court. I think that the sooner it does the better, and as far as I am concerned I am prepared to approve it here and now."
Russell LJ also approved the principle enunciated in Edler v Auerbach [1950] 1 KB 359 at 374. Sellers LJ agreed with both Diplock LJ and Russell LJ.
White J appeared to accept what was said in Hill v Harris and that the term contended for by Heytesbury was not to be implied in the leases. Nevertheless, his Honour observed:
"[R]ather than finding that the alleged term was to be implied into the [l]eases, I would be inclined to the view that the alleged term is to be found in the proper construction of the clause for quiet enjoyment. In other words, I would construe that clause as meaning that the lessee was entitled to the quiet enjoyment of the premises for the purpose of conducting a manufacturing business thereon, being the only permitted use under the [l]eases."
On appeal, Heytesbury supported his Honour's construction.
As I have set out, the clause for quiet enjoyment provided that the lessor "shall and may peaceably and quietly hold and enjoy the demised premises hereby leased during the term hereby granted without any interruption by the lessor". The clause contained nothing that expressly related to the use to which the leased premises could be put.
The manufacturing clause obliged the lessee, subject to certain conditions, "continuously and actively [to] carry on upon the demised premises the business of manufacturers". This clause, in its express terms, conferred no rights upon the lessee; it only imposed an obligation.
The 1984 variation to the leases permitted the lessor to use the demised premises for the warehousing, wholesaling or retailing of goods manufactured on the leased premises, manufactured by the lessee or a permitted assignee or sub‑tenant, provided that such conduct did not contravene the provisions of the City's town planning scheme in force from time to time. This clause conferred a right on the lessee, but that right, in effect, was subordinate to the Town Planning Amendment and, in any event, was not a right to manufacture.
In the circumstances, in my opinion, the ordinary meaning of the actual words used in the leases does not give rise to the construction adopted by White J.
Further, no inference can be drawn merely from the provisions to which I have referred (or any of the other provisions of the leases) that the parties intended that the leased premises be fit for the purposes of carrying on a manufacturing business. That is because, as Devlin J stated in Edler v Auerbach (at 374), "[i]t is the business of a tenant, if he does not protect himself by an express warranty, to satisfy himself that the premises are fit for the purpose for which he wants to use them". For the same reason, there is no policy consideration that supports the construction adopted by his Honour.
In any event, in my opinion, that construction flies in the face of the waiver clause (to which I have referred above). The waiver clause provides, in effect, that the leases shall not "prejudice … any rights or powers with respect to the [leased premises] … conferred upon the [City] under or by virtue of any Act of Parliament … ." Were the City to be liable for damages if, in the course of exercising its statutory town planning powers for the public benefit, it vitiated or diminished Heytesbury's right to carry on a manufacturing business on the leased premises, those powers would be prejudiced. I deal with this issue more fully below, but it is sufficient at this stage to express the opinion that the waiver clause precludes construing the quiet enjoyment clause as meaning that, in the event postulated, the City would be so liable. The 1984 variation (that conferred wider rights as to the use of the leased premises, but expressly made them subordinate to the provisions of the City's town planning scheme in force from time to time) reinforces this conclusion.
These matters, on their own, lead me to disagree, with respect, with the learned Judge's conclusion as to the construction of the quiet enjoyment clause. But there is another factor that reinforces the view to which I have come in this respect and that is the rule that is known by the name of "executive necessity".

Executive necessity

This rule was stated by Rowlatt J in Rederiaktiebolaget Amphitrite v The King [1921] 3 KB 500 at 503 as follows:
"[I]t is not competent for the Government to fetter its future executive action which must necessarily be determined by the needs of the community when the question arises. It cannot by contract hamper its freedom of action in matters which concern the welfare of the State."
Earlier, in Ayr Harbour Trustees v Oswald (1883) 8 App Cas 623 the House of Lords had expressed similar views. In Birkdale District Electric Supply Co v SouthportCorporation [1926] AC 355 at 364, it was held that a local authority, entrusted by the legislature with powers and duties for public purposes, cannot divest itself of those powers and duties, and cannot enter into any contract or take any action incompatible with the due exercise of its powers or the discharge of its duties. Mason J in Ansett Transport Industries (Operations) Pty Ltd v Commonwealth (1977) 139 CLR 54 cited Birkdale District Electric Supply Co Ltd v Southport Corporation as authority in saying (at 74):
"There is a general principle of law that a public authority cannot preclude itself from exercising important discretionary powers or performing public duties by incompatible contractual or other undertakings."
Triggs v Staines Urban District Council [1969] 1 Ch 10 is a helpful example of the rule. A local authority reserved property owned by Triggs as proposed public open space but agreed with him that the land should be released from reservation if it did not purchase the land by a certain time. The local authority also agreed that so long as the land was occupied by the existing tenants, it would not purchase the land either voluntarily or compulsorily during a certain period and would not make any claim for betterment. When Triggs died, his executor claimed declarations that the agreement was ultra vires the authority and void ab initio. Cross J agreed, saying (at 18):
"The council could not effectively contract not to exercise its statutory powers or to abdicate its statutory duties."
Hence, Cross J found, following Birkdale District Electric Supply Co Ltd v Corporation of Southport, that the promises made by the local authority were void and unenforceable against it.
The rule of executive necessity is of application in the present case as, at the relevant times, by s 7 of the Town Planning Act, the City had the power, to be exercised in the public good, to make or amend a town planning scheme, and the term contended for by Heytesbury and upheld by White J would impinge on the City's freedom of action in so exercising its powers. That is to say, were the leases to be construed so as to contain a promise by the City that the lessee would have the quiet enjoyment of the leased premises for the purpose of conducting a manufacturing business thereon, the City would have committed a breach of contract by procuring the enactment of the Town Planning Amendment.
White J accepted that it was not open to Heytesbury to restrain the City from enacting the Town Planning Amendment, but held that it was liable for damages for breaching the quiet enjoyment term construed by him (and also for breaching the implied terms to which I refer below). In so doing, White J relied on what was said, obiter, by Mason J in Ansett Transport Industries (Operations) Pty Ltd v Commonwealth (1977) 139 CLR 54. Mason J (at 74 ‑ 76) referred to instances where executive discretion could not properly be fettered, including town planning cases in which it was held that a local or planning authority could not by contract fetter in an anticipatory way its future discretion to approve or reject applications after proper consideration in accordance with the prescribed procedure. Mason J (at 76 - 77) then said:
"The decisions to which I have referred are all cases in which the contract or undertaking held to be invalid was one to which the repository of the power or discretion was a party. The contract or undertaking was therefore an anticipatory fetter by that person on his future exercise of the statutory power or discretion. At the same time because the contract or undertaking was not one authorized by the relevant legislation, or was incompatible with it, the contract or undertaking was invalid or ultra vires.
Different considerations will apply when the contract is one to which the government is a party and the contract relates to the grant of a licence or privilege which under the law depends upon the exercise of a statutory discretion by an officer who is not a party to the contract. In these cases at least it has been suggested that the free and unfettered exercise of the discretion is sufficiently preserved if the validity of the contract is upheld, provided that it is enforceable only by way of action for damages and not by order or injunction. Such an outcome, it is said, would work a reasonable compromise between the desirability of recognizing the binding nature of contracts and the need to preserve the free and unfettered exercise of the discretion. The assumption which underlies this approach is that the contract is one which the government is authorized to make, that it is not expressly or impliedly prohibited by statute or, if you like, incompatible with the statute."
On the strength of these remarks, White J said:
"I am of the opinion that, while the City could not be restrained by injunction from so amending its town planning scheme as to render it impossible for Heytesbury to carry on any permitted business activity upon the demised premises, by doing so, the City was in breach of its contractual obligations under the [l]eases and therefore, liable to Heytesbury in damages. In my opinion, to hold otherwise would result in a gross injustice to Heytesbury which would be bound by the obligations imposed upon the lessee by the [l]eases but unable to enjoy the entitlement of the lessee thereunder to carry on a business.
I do not think that cl 11 (set out above) is to be construed so as to permit the City, by the enactment of a [t]own [p]lanning [s]cheme, lawfully to deprive Heytesbury of its contractual rights under the [l]eases while retaining Heytesbury's obligations thereunder. Such a construction would, I consider, render the other provisions of the [l]eases, such as the entitlement to quiet enjoyment of the demised premises nugatory. In my opinion, this could not have been the intention of the parties at the relevant time.
With respect to his Honour, I am unable to agree with this construction of the quiet enjoyment clause. At the outset, the observations of Mason J as to the validity of the contract being upheld on the basis that it is enforceable only by way of action for damages (and not "by order or injunction") were directed only to the second category of cases that he described. This second category is comprised of cases "when the contract is one to which the government is a party and the contract relates to the grant of a licence or privilege which under the law depends upon the exercise of a statutory discretion by an officer who is not a party to the contract". The present is not such a case. Rather, it is a case that falls squarely into the first category to which Mason J referred, namely, cases in which the contract is one to which the repository of the power or discretion is a party and where the contract is therefore an anticipatory fetter on the future exercise of statutory power and not one authorised by the relevant legislation. Mason J made it plain that his views as to the contract being enforceable by way of an action for damages did not apply to cases in the first category.
Moreover, I do not agree that the other provisions of the leases would be rendered "nugatory" if the quiet enjoyment clause were not to be construed so as to entitle Heytesbury to conduct a manufacturing business on the leased premises. The proposition that the other provisions of the leases would be rendered nugatory lay at the heart of the argument that was rejected in Hill v Harris and the present case is a good example of those other provisions (particularly, the right to possession of the leased premises) continuing to be valuable and of significant importance.
I have pointed out how the right to possession came to be relevant to the proposed redevelopment of the area and that this led to Heytesbury, on 31 December 1989, informing the City that it intended "simply to retain the property and buildings on a vacant basis pending a redevelopment". I have pointed out that Heytesbury never thereafter made any genuine attempt to carry on a manufacturing business on the leased premises. Plainly, Heytesbury perceived its other rights under the leases to be of material value, and this perception seems to have been borne out subsequently, when it sold its interest in the leases.
I also do not agree that, if Heytesbury remained bound by the obligations imposed upon it by the leases "but unable to enjoy the entitlement of the lessee thereunder to carry on a business", a gross injustice would result. Heytesbury became the assignee of the leases in March 1989. At about that time, Heytesbury knew that the Subiaco Endowment Land might be redeveloped otherwise than as a light industrial area. It was obvious that, were that to occur, it might become impossible for the land to be used for manufacturing. But as White J found, "Heytesbury had clearly formed the opinion that the viable redevelopment of the demised land for residential purposes was dependent upon Heytesbury obtaining freehold title to that land and this fact was made known to the City from an early period". The inference is that Heytesbury was prepared to become the lessee, well knowing the risk that manufacturing might become a prohibited use. It did so because of the potential advantages to it should a redevelopment occur. Not only is this a case of the lessee failing to protect itself by an express warranty that the premises were fit for the purpose for which it wanted to use them, it is also a case of the assignee assuming the obligations of a lessee knowing full well that at some future time it might prohibited from carrying on a manufacturing business on the leased premises. One may ask rhetorically: what injustice then arises if, later, the assignee is in fact so prohibited?
It is true that some have expressed the general view that it would be unfair to enable government (local or otherwise) to act inconsistently with contractual obligations it has deliberately undertaken, and, in that event, contracts fettering executive discretion should be upheld to the extent that government should be held liable for damages. The proposition so advanced is: "So long as the remedies of specific performance and injunction … are withheld, the ordinary law adjusts the conflict between public purposes and private interests quite satisfactorily" (see Hogg, The Doctrine of Executive Necessity in the Law of Contract, (1970) 44 ALJ 154 at 159). I do not agree with these views, however, as, in my opinion, the knowledge that exercising statutory powers in the public benefit might render government liable to large sums of damages would be an effective practical fetter on its freedom of action. It is for this reason that I have above expressed the opinion that, were the City to be liable for damages for breach of contract in consequence of actions taken by it when exercising its statutory town planning powers for the public benefit, those powers would be prejudiced. I should say that there is strong persuasive authority that supports this conclusion: see Ransom & Luck Ltd v Surbiton Borough Council [1949] Ch 180 and the other cases to the same effect that are referred to below.

In any event, however, in this case the first inquiry is not whether the City acted in breach of obligations it deliberately undertook. The first inquiry is an entirely different question. It is one of construction, namely, whether the leases are to be construed to mean that the City has undertaken obligations of the kind found by White J. That is, obligations that are not spelled out according to the ordinary meaning of the language used.
In my opinion, any contractual fetter or limitation of any kind upon executive discretion would have to be clearly and expressly stated before a court would construe a contract as qualifying freedom of executive action. That is not the case with the leases presently under consideration.
In Board of Trade v Temperley Steam Shipping Co (1926) Ll L R 76, affd (1927) 27 Ll L R 230 it was held that a charter‑party (that contained an implied term which required the Crown to do nothing which would prevent the owner from keeping the vessel seaworthy) should not be construed so as to bind the Crown in capacities other than that of charterer and, in particular, should not be construed as fettering the discretion of a Crown official in the exercise of a statutory power which was exercisable over all ships requiring repairs, whether chartered by the Crown or not.
In Ransom & Luck Ltd v Surbiton Borough Council, the defendant council was a planning authority that entered into an agreement with the plaintiffs whereby it undertook not to interfere in any way with the development of the plaintiffs' land provided that the development was in accordance with a certain scheme. Thereafter, the council refused the plaintiffs' application for the development and the plaintiffs sued for breach of contract. Lord Greene MR pointed out (at 193), if the argument of counsel for the plaintiffs was correct:
"[T]he section will have empowered the planning authority to bargain away its statutory powers of planning and of altering its plans at any time before a scheme is finally approved. These are the powers which are conferred upon it by the Act in the public interest and yet the agreement on which he relies would, according to his interpretation of it, have the effect of stabilising the quantity or quality of development without any possibility of the planning authority ever being able afterwards to alter it except on the terms of paying damages for breach of contract."
Lord Greene, in emphatic terms, held (at 197) that the legislation should not be construed to mean that a planning authority was empowered by an agreement "in any way to tie its hands for the future" and that no claim for damages could arise.
In Commissioners of Crown Lands v Page [1960] 2 QB 274 at 287, Lord Evershed MR (with whom Ormerod LJ agreed) held that it could not have been intended by the parties that the covenant for quiet enjoyment "would extend to prevent the future exercise by the Crown of powers and duties conferred upon it by statute". Accordingly the covenant for quiet enjoyment was to be construed as qualified to that extent. Devlin LJ said (at 291):
"When the Crown, or any other person, is entrusted, whether by virtue of the prerogative or by statute, with discretionary powers to be exercised for the public good, it does not, when making a private contract in general terms, undertake (and it may be that it could not even with the use of specific language validly undertake) to fetter itself in the use of those powers, and in the exercise of its discretion."
In my opinion, the approach of these authorities should be followed. On that basis there is no warrant for enlarging the ordinary meaning of the language used by the parties by construing the quiet enjoyment clause to mean that the lessee was entitled to conduct a manufacturing business on the leased premises.

The other implied terms relied on by Heytesbury

Heytesbury contended that the following were implied terms of the leases:
…
(c)the lessor would at all times do all things necessary to enable the lessee to have the benefit of the leases;
(d)the lessor would not impair the lessee's rights under the leases;
(e)the lessor would not derogate from the grant contained in the leases and in particular would not take action which would prevent the lessee from using the land for the purposes specified in the lease;
(f)all obligations upon the lessee to pay moneys to the lessor under the leases would be abated during any period when the lessee was denied the right to use the land for the purpose stated in the leases as a result of any act or omission on the part of the lessor."
White J said in regard to these implied terms:
"In my opinion, the terms contended for by Heytesbury are, indeed to be implied in the [l]eases, but subject to the limitation that the City could not, by any action of the part of Heytesbury, be prevented from exercising its statutory duties in the public interest, including the introduction of such amendments to its [t]own [p]lanning [s]cheme as it deemed necessary or desirable. I find therefore that the City was in breach of the implied terms and is liable in damages to Heytesbury."
With respect to his Honour, I am unable to agree that, by procuring the enactment of the Town Planning Amendment, the City breached any of these terms. The rule of executive necessity requires any such implied terms to be qualified so as not to impinge upon the future exercise by the City of statutory powers and duties imposed upon it in its executive capacity. As Devlin LJ said (at 293) in Commissioners of Crown Lands v Page:
"For the purpose of this case it is unnecessary to go further than to say that in making a lease or other contract with its subjects, the Crown does not (at least in the absence of specific words) promise to refrain from exercising its general powers under a statute or under the prerogative, or to exercise them in any particular way. That does not mean that the Crown can escape from any contract which it finds disadvantageous by saying that it never promised to act otherwise than for the public good. The distinction was clearly put by Roche J in Board of Trade v Temperley Steam Shipping Co Ltd [(1927) 26 Ll L R 76 at 78] where he said:
'I think and I hold that in this charter party it is to be implied that the Crown should do nothing in connection with and in relation to and in the carrying out of the contract contained in the charter party to prevent the shipowners from keeping the vessel seaworthy and to prevent them earning their hire. But I am utterly unable to imply in the charter party a term or condition that the Crown should do nothing by virtue of some general legislation or by virtue of some executive action entirely remote from the charter party and done by persons not connected with the performance of the contract directly or indirectly to bring about the results in question.'"
See also Lord Evershed MR (at 287) and Ormerod LJ (at 289).
William Cory & Son Ltd v London Corporation [1951] 2 KB 476 is another helpful example of the application of the rule. In 1936, the London Corporation, acting as a sanitary authority, made a contract with barge and lighter owners for the removal of refuse from a wharf in the City of London to another place, where it was to be dumped. The provisions of the contract as to the coamings and coverings of the barges to be used were more onerous than those imposed by the then current by‑laws. In April 1948, the London Corporation, acting as Port Health Authority, sealed by‑laws one of which, relating to coamings and coverings of barges, was far more onerous on the claimants than the requirements in the contract so entered into. The barge and lighter owners contended that by the contract there was an implied term that the corporation should not impose more onerous burdens on them as to the coamings and coverings than those contained in the contract. Lord Asquith (at 484) pointed out:
"The claimants argue that it is an implied term of every, or almost every, contract between A and B (and certainly of this contract) that A shall not prevent or disable B from performing the contract and vice versa, and that this was just what the corporation did by the act in question. In general, no doubt, it is true that a term is necessarily implied in any contract whose other terms do not repel the implication, that neither party shall prevent the other from performing it, and that a party so preventing the other is guilty of a breach."
It is pertinent to note that the implied terms relied on by Heytesbury are of the same ilk. Lord Asquith went on to say:
"The term sought to be implied in this case is one whereby the corporation – a legislative body charged by statute in imperative language with the duty of making by‑laws relating, inter alia, to the removal of the refuse in the interests of the public health in the Port of London – or, to be precise, to prevent nuisances arising from such refuse – engages not to make any by‑laws for this purpose which should lay on the claimants burdens other and more severe than those provided for in cl 1 of their contract with the corporation, and, therefore, prevent the claimants from fulfilling the contract by complying with cl 1, without more.
I consider that such a term, whether implied or even express, could not be valid."
His Lordship then referred to Birkdale District Electric Supply Co Ltd v Southport Corporation and Ayr Harbour Trustees v Oswald and said (at 486):
"[The Corporation is] charged with the duty of making by‑laws to promote public health, inter alia, by dealing with refuse … In this setting it would seem that the implied term relied on would impose an unwarrantable fetter on the corporation in the exercise of their statutory duties."
See also Triggs v Staines Urban District Council;Board of Trade v Temperley Steam Shipping Co; Ransom & Luck Ltd v Surbiton Borough Council; Stringer v Minister of Housing[1970] 1 WLR 1281.
In the circumstances, I consider that, by procuring the enactment of the Town Planning Amendment, the City did not commit any breach of the implied terms relied upon by Heytesbury. Again, I point out that the waiver clause, on its own, compels the same conclusion.

Were the leases frustrated?

White J said:
"In my opinion, the conflict between the express terms of the [l]eases, requiring that the demised premises be used solely for manufacturing and related purposes, on the one hand and the provisions of [the Town Planning Amendment] which does not permit a manufacturing use in respect of the demised premises (not being an existing non‑conforming use) leads me to the conclusion that Heytesbury was prevented by the enactment of [the Town Planning Amendment] from making any profitable use of the demised premises. Prior to that enactment, Heytesbury was entitled (indeed obliged) to conduct a manufacturing operation on the demised premises and might expect, therefore, to be able to gain some return for its investment in the rents and rates and other charges relating to the demised premises. That entitlement was terminated by the enactment of [the Town Planning Amendment]."
His Honour held, nevertheless, that the leases were not frustrated by the enactment of the Town Planning Amendment. His reasons were as follows:
"[W]ith the approval of the City, Heytesbury sold the leasehold interests it had in the [l]eases and the fifth lease to the [SRA] for $2.75 million. Prima facie, that fact would appear to indicate that neither Heytesbury nor the City in fact regarded the leases as having been frustrated by the enactment of the [Town Planning Amendment]. It seems settled that, when a contract is frustrated, this occurs by operation of law, without either party having any input into the situation. However, as it seems to me, there is no reason why, if an otherwise frustrating event occurs, the parties cannot agree that such event will be treated by them as not frustrating the contract. In the instant case, with the consent and approval of the City, Heytesbury sold and was paid for its interests under the [l]eases and the fifth lease. In my opinion, that is consistent only with an agreement between Heytesbury and the City that the leases and the fifth lease would not be treated as having been frustrated by the making of the [Town Planning Amendment]."
The law relating to frustration of contracts was discussed by Stephen J in Brisbane City Council v Group Projects Pty Ltd (1979) 145 CLR 143 at 162 - 163 in the following terms:
"It is no doubt true, as critics complain, that the various expositions of the true basis of the doctrine of frustration leave imprecise its actual operation when applied to the facts of particular cases. How dramatic must be the impact of an allegedly frustrating event? To what degree or extent must such an event overturn expectations, or affect the foundation upon which the parties have contracted, or, again, how unjust and unreasonable a result must flow or how radically different from that originally undertaken must a contract become (to use the language of some of the various expositions), before it is to be regarded as frustrated? The cases provide little more than single instances of solutions to these questions. These differences of application of the doctrine of frustration were keenly appreciated by both Latham CJ and by Williams J in their consideration of the doctrine in Scanlan's New Neon Ltd v Toohey's Ltd (1943) 67 CLR 169. They are, perhaps, inevitable in questions of degree arising when a broad principle must be applied to infinitely variable factual situations."
In Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 357, Mason J, in effect, adopted these remarks, saying:
"I agree with Stephen J's acceptance [in Brisbane City Council v Group Projects Pty Ltd] of the approach adopted by Lord Reid and Lord Radcliffe in Davis Contractors [1956] AC 696. Lord Reid said that the task of the court is to determine 'on the true construction of the terms which are in the contract read in light of the nature of the contract and of the surrounding circumstances', 'whether the contract which they did make is … wide enough to apply to the new situation: if it is not, then it is at an end' (at 720 – 721). Later he described frustration as 'the termination of the contract by operation of law on the emergence of a fundamentally different situation' (at 723).
Lord Radcliffe (at 729) said: '… frustration occurs whenever the law recognises that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract … . It was not this that I promised to do.'
His Lordship, noting that special importance attaches to an unexpected event, observed 'There must be as well such a change in the significance of the obligation that the thing undertaken would, if performed, be a different thing from that contracted for'."
The cases in which the doctrine of frustration could properly be applied to leases are extremely rare (National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675 at 688 - 689 per Lord Hailsham. One reason for the rarity is that a lease is more than a contract, it conveys an estate in land. Thus, in many instances, frustration of leases will not occur because the tenant will still have that which he or she bargained for, namely, the leasehold estate - particularly when it has considerable value. In that event, the tenant would be "left with something he could use" (per Lord Wilberforce in National Carriers Ltd v Panalpina (Northern) Ltd at 694). Of course, that would not be so when the estate is "unusable and unsaleable" (per Lord Wilberforce at 695).
An example of the tenant being "left with something he could use" is London & Northern Estates Co v Schlesinger [1916] 1 KB 20. By a war‑time order in council, an Austrian subject, who was an "alien enemy", was prohibited from residing within certain specified areas, including the area where the leased premises were situated. Although he could not personally exercise a right of personal occupation, he could sub‑let the premises and therefore there was no frustration.
Another example is Whitehall Court Ltd v Ettlinger [1920] 1 KB 680, where a tenant was forced to give up possession of leased premises by authorities acting under war‑time regulations. As there was a requisition of the premises only for "the time being" and as the tenant still had the leasehold interest in the property (which was a benefit to him), there was no frustration.
In determining whether a frustrating event has occurred, regard may be had to all relevant circumstances. The evidence in question is not admitted so as to construe the contract and the parol evidence rule has no relevance. The purpose of the evidence is simply to show the change in obligations and that the contract cannot be performed in the way contemplated by the parties. Thus, in Brisbane City Council v Group Projects Pty Ltd the economic and other consequences of the relevant event were examined. In Finch v Sayers [1976] 2 NSWLR 540, a case where it was said that a contract of employment had been frustrated, Wootten J took into account the nature of the illness of the employee, the prospects of recovery and other relevant matters. In Bank Line Ltd v Arthur Capel Co [1919] AC 435 at 454, Lord Sumner said, "What happens [after the frustrating event] may assist in showing what the probabilities really were, if they had been reasonably forecasted … ." It has been said that what the parties say and do about the event said to cause the frustration "is only evidence, and not necessarily weighty evidence, of the view to be taken of the event by informed and experienced minds": Hirji Mulji v Cheong Yue Steamship Co Ltd [1926] AC 497 at 509.
In the present case, the leasehold estate conferred by the leases was both useable and saleable. It was useable in the sense that the Subiaco Endowment Land was regarded by Heytesbury as being the key to "the viable redevelopment" of the area and the leasehold estate was an important factor in Heytesbury's plans to participate in that redevelopment. As regards its saleable quality, Heytesbury's own actions in maintaining that the leases were alive and in seeking an injunction restraining the City from determining the leases (after it had been advised that it was arguable that the leases had been frustrated) are a revealing testament to its perceived value. Indeed, the best evidence that the leasehold estate was saleable is the fact that the four leases, together with the fifth lease, were in fact sold for $2.75 million.
A further factor to bear in mind is that, at about the time that the Town Planning Amendment was enacted, Heytesbury had no intention to manufacture on the leased premises and had no wish to do so. It wished to maintain the leases, however, for commercial reasons (relating to the anticipated redevelopment) based on the leasehold estate and the term for which it was held.
In my opinion, in the particular circumstances, the lease cannot be regarded as having been frustrated by the Town Planning Amendment merely because Heytesbury was thereby precluded from manufacturing. By then, the right to carry on a manufacturing business on the leased premises was regarded as very much of lesser importance when compared to the significance and value of the leasehold estate.
In any event, the conduct of the parties for more than three years after the enactment of the Town Planning Amendment in my view is fatal to Heytesbury's contention that the leases were frustrated. I refer in this regard to the persistent contentions of Heytesbury that the leases were fully operative and the actions taken by it to establish that fact, the efforts of the City to enforce its rights under the leases, and the sale by Heytesbury of its rights under the leases. The various provisions of the agreement of 23 April 1996 between Heytesbury and the SRA and the deed of assignment of the same date (to which the City was a party) are consistent only with the exercise by Heytesbury of its rights as lessee and the City's assent to such conduct.

The City contended at trial that Heytesbury was estopped from relying on frustration. White J held, rather, that an agreement by conduct was arrived at between Heytesbury and the City whereby they agreed that the leases would not "be treated as having been frustrated". In my

opinion, the situation is analogous to that in Black Clawson International Ltd v Papierwerke Waldhof‑Aschaffenburg AG (1981) 2 Lloyd's Rep 446. In that case Mustill J, when dealing with an argument that an arbitration agreement had been frustrated, observed (at 457) that the argument appeared to face insuperable obstacles on the ground of "affirmation of the contract". The point was, as Mustill J expressed it:
"Whenever precisely the frustration is said to have occurred, this must have been many years ago, and in the intervening period, the sellers performed many acts which unequivocally recognized the continued existence of the agreement to refer."

He concluded (also at 457):
"Finally, and most important, the sellers' argument is fatally inconsistent with their conduct … . Whatever technical labels one may choose – affirmation, self‑induced frustration, estoppel or some other doctrine – common sense rebels against the notion that the sellers can now be permitted to assert [that the contract was frustrated]."

I would adopt these remarks.

Conclusion

I have come to the conclusion that the quiet enjoyment clause did not entitle Heytesbury to carry on a manufacturing business in the leased premises. It follows that the claim for abatement of rent on the ground that the Town Planning Amendment precluded Heytesbury from carrying on such a business must fail. I have held that, by procuring the enactment of the Town Planning Amendment, the City did not commit any breach of the implied terms relied upon by Heytesbury. Finally, I have held that the enactment of the Town Planning Amendment did not cause the leases to be frustrated, and, even if it did, Heytesbury is not permitted to assert that the leases were frustrated.
Accordingly, I would uphold the appeal, set aside the orders made by the learned Judge, dismiss Heytesbury's claim and grant judgment in favour of the City. I would hear counsel as to the specific orders that should be made.
WALLWORK J: I agree with the reasons for judgment of Ipp J and to the orders which are proposed by his Honour. There is nothing I wish to add.