Council Club Inc v Brisbane City Council

[1995] QCA 163

IN THE COURT OF APPEAL	[1995] QCA 163
SUPREME COURT OF QUEENSLAND

Appeal No. 4 of 1995

Brisbane

Before Davies J.A.
McPherson J.A.
Byrne J.

[Brisbane City Council v. Council Club Inc.]

BETWEEN

THE BRISBANE CITY COUNCIL

(Plaintiff) Respondent

AND

THE COUNCIL CLUB INC.

(Defendant) Appellant

REASONS FOR JUDGMENT - THE COURT

Judgment delivered the 9th day of May 1995

The Council Club Inc., which is the defendant in the action and the appellant in this Court, is a social and recreational club whose members comprise employees or former employees of the plaintiff Council. It is more accurate to say that it is the corporate successor to an association which, under its present name, was not incorporated until 1985, although it is not suggested that anything turns on that consideration.

In about October 1976 the Club was let into possession of the 21st floor of the Brisbane Administration Centre, of which the Council is lessee, following negotiations with the Council for a long term lease of those premises. The Council's decision on the matter was communicated in a letter dated 10 June 1976, which spoke of granting to the Club "a long term special sublease of the whole floor 21 at a nominal rental of $100 per annum plus some percentage of the declared annual net profit of the Club, as determined from time to time".

The letter from the Town Clerk concluded with a reference to drawing up a formal lease; but this has never been done. Instead, the Club has remained in possession of the area in question paying to the Council the rent of $100 annually, in response to invoices rendered by the Council to the Club at the end of each financial year. Neither the term of the long lease, nor the percentage of the annual net profit that was to form part of the rent, has ever been agreed. The case is therefore not one in which it can be said that the Club has a specifically enforceable agreement for a lease. On the contrary, it is accepted by both parties that the Club became tenant from year to year of the premises on payment in advance each year of the annual rent of $100.

For some time past the present Council administration, and to some extent its predecessor, has been concerned about the minimal rent being paid for the large area occupied by the Club. Discussions about terminating the Club's occupation of the 21st floor were initiated in or before 1994, but no agreement was reached between the parties.

Eventually, the Council sent the Club a letter dated 6 June 1994, in which, after referring to those discussions, it advised that the Council's Property Services section would be "recommending to Council the following rental and outgoing charge be made for your occupation of the 21st floor". The amounts in question totalled $29,133 per month, which the letter said would need to be agreed and included in a formal lease to be entered into by the Council with the Club before 1 July 1994.

Apart from a confirmatory "follow-up" letter from the Council on 17 June 1994, nothing more happened until 29 June 1994, when the Club informed the Council of its plan for a proposed "closedown" of the Club's operations, and asked for a waiver of the "advised rental charges of $29,133 per month effective from July 1, 1994", in order to facilitate a closedown if this was required at a meeting of Club members due to take place on 30 June 1994. The letter went on to say that it was expected that any such closedown of Club operations could be completed "in a proper and orderly manner" within, say, three to four months.

In the meantime the Club on 30 June 1994 received from the Council an invoice for $100 for rent for the premises for the ensuing year 1 July 1994 to 30 June 1995. At 8.30 a.m. on the following day the amount of $100 was paid by the Club, which received a receipt from the Council in the form of a cash-register imprint on the invoice. At 11.10 a.m. on the same day, the Club received a letter from Council. It referred to the rent invoice for $100 issued on 30 June, and advised that it was "invalid, and has been withdrawn". On 4 July 1994 the Council delivered another letter enclosing an invoice for the sum of $29,133 representing the amount of the monthly rental previously advised.

In the action from which this appeal comes, the Council has claimed mesne profits at the rate stated in the invoice of 4 July. We are not at present concerned with it because the Club was given leave to defend that claim. The only question on this appeal is whether the primary judge was correct in giving summary judgment against the Club for possession of the premises.

The appeal is said to raise three points. One is whether a written notice to quit dated 4 October 1994 given by the Council in reliance on s.129(1) of the Property Law Act 1974 was effective to determine the Club's tenancy from year to year. The answer to that question depends ultimately on whether the Club's payment of $100 early on the morning of 1 July 1994 had, as it contends, the effect of extending its tenancy of the premises for a further year until 30 June 1995; but the first question is whether s.129(1) applied to the Club's tenancy at all.

Section 129 of the Property Law Act 1974 provides that:

"(1) No tenancy from year to year shall, after the commencement of this Act, be implied by payment of rent; if there is such a tenancy, and no agreement as to its duration, then such a tenancy shall be deemed to be a tenancy determinable at the will of either of the parties by one months notice in writing expiring at any time".

The section is, as its headnote indicates, derived from s.127 of the Conveyancing Act 1919 (N.S.W.). The reform it was designed to achieve was prompted by the common law fondness for tenancies from year to year, which had its source in the provision in the Statute of Frauds 1677 that a lease not in writing and signed by the parties took effect only as a tenancy at will. The inconvenience of a tenancy of that kind was tempered by the rule adopted by the courts that possession of premises coupled with payment of rent raised a presumption of a tenancy from year to year. See Moore v. Dimond (1929) 43 C.L.R. 105, 116; Dockrill v. Cavanagh (1944) 45 S.R. (N.S.W.) 78, 79-82.

It is against this background that s.129 falls to be considered. Tenancies from year to year are subject to some inconvenient incidents of their own. Such a tenancy is determinable only on six months notice expiring at the end of a completed year of the tenancy : Sidebotham v. Holland [1895] 1 Q.B. 378. Apart from the length of notice required, it is not always easy to say precisely when a particular tenancy began or, in consequence, when it is due to end, so as to fix the time at which the notice to quit should be limited to expire. Section 129(1) sets out to solve both difficulties. In the circumstances in which it operates, it converts the tenancy from year to year, which would otherwise be implied at law from payment of rent, into a tenancy at will, making it determinable by either party by written notice of one month expiring at any time.

As previously mentioned, the Club does not dispute that the premises in this case were held on a tenancy from year to year. What is contended is that s.129(1) does not apply to it. Its operation is limited to "states of fact in which a tenancy from year to year would at common law be implied from the payment of rent". Turner v. York Motors Pty. Ltd. (1951) 85 C.L.R. 55, 81, citing Burnham v. Carroll Musgrove Theatres Limited (1928) 41 C.L.R. 540. Here it is the Club's contention that the tenancy arose not by implication from payment of rent, but by inference from circumstances showing that it was the intention of the parties that a tenancy from year to year should be created. Those circumstances are that the Club was formed and the tenancy granted to satisfy what the Council believed at the time was a statutory obligation on its part to provide such a facility for its employees; that throughout the period since October 1977 the rent had been paid on the express basis that each payment was referable to a year; that the Council had supported the Club's application for a liquor licence, which was inconsistent with the notion that the tenancy was determinable on one months notice; that heavy capital expenditure on the premises had, with the Council's knowledge and acquiescence, been undertaken by the Club; and that the Council itself had expressly treated the basis of the Club's occupation as resting on payment annually of $100 by way of rent on 1 July of each year. The thrust of the submission is that the tenancy on which the premises were held by the Club was the product not of any mere implication or presumption of law but of actual agreement by the parties to be inferred from the circumstances so identified.

There are several reasons why the submission should not be accepted. One is the conventional language of judicial decisions in this area. The common law presumption in favour of a tenancy from year to year has been said to arise for the very reason that:

"payment or acknowledgment of rent constitutes evidence of the establishment of the tenancy, and the fact that the rent is paid by reference to a year or aliquot part of a year, affords evidence of a tenancy from year to year."

Moore v. Dimond (1929) 43 C.L.R. 105, 112, per Knox C.J., Rich, Dixon JJ. According to Isaacs J. in the same case (43 C.L.R. 105, 118, 119):

"The implied tenancy from year to year does not rest on the actual intention of the parties to create such a tenancy. It is a 'conclusion of law' ... It rests on a presumption that the law makes from their acts, that they have contracted to create a tenancy from year to year."

It may be accepted that an express agreement to create a tenancy from year to year falls outside the scope of s.129(1). No doubt there is a strong temptation nowadays to regard circumstances from which such a tenancy may be inferred as evidence of an agreement between the parties to create such a tenancy. But as the passages from the judgments in Moore v. Dimond show, the fact that some such intention, or even agreement, is capable of being discovered was not thought to displace the common law presumption arising from the payment of rent. The law, as Jordan C.J. observed in Dockrill v. Cavanagh (1944) 45 S.R. (N.S.W.) 78, 81, "imputed an intention to create a tenancy from year to year unless an intention repugnant appeared". If the intention had been viewed as evidence of actual agreement for such a tenancy, the whole purpose of the common law presumption would have been frustrated. The Statute of Frauds would have operated to convert the ensuing parol lease into a tenancy at will.

There is, however, a stronger reason for regarding the tenancy in this case as one to which s.129(1) applied. It falls within a class which has traditionally been viewed as giving rise to a tenancy from year to year by implication of law. The Club was let into possession in 1976 on the footing that a formal lease was to be executed for a long term in return for a rent of $100 plus an agreed percentage of annual net profit. Neither the duration of the term nor the percentage of profit that was to be paid as rent was ever agreed. In Moore v. Dimond (1929) 43 C.L.R. 105, 114, the joint judgment refers specifically to the case "when the terms of the entry are too vague and uncertain to be ascertainable" as being one to which the common law presumption is attracted upon subsequent payment of a yearly rent. Moore v. Dimond was not itself an example of that kind, but one where final agreement had been reached on the terms of a lease which, however, was never formally executed. The particular case with which we are concerned here, of uncertainty in the terms of the lease, was again adverted to by Dixon J. in Turner v. York Motors Pty. Ltd. (1951) 85 C.L.R. 55, 66, in a passage in his Honour's judgment which leaves no doubt that he regarded the common law presumption as applying to it. Repeating verbatim what had been said in Moore v. Dimond, his Honour remarked that in such a case:

"payment or acknowledgment of rent constitutes evidence of the establishment of a tenancy and the fact that the rent is paid by reference to a year, or aliquot part of a year, affords evidence of a tenancy from year to year".

Earlier in his judgment, his Honour had said (85 C.L.R. 55, 65) that the case where agreement had not actually been reached rested on the same principle; "that is, upon the implication from the receipt of a compensation for the use of the land". He qualified it by adding "but the inference to be drawn from the circumstances may be less certain". By that, however, his Honour was not intending to suggest that in such a case there was a more compelling inference of actual agreement for a tenancy from year to year. On the contrary, it was weaker, because entry provisionally and without any agreement, but pending negotiations for an agreement or a lease, was consistent with a common intention that "notwithstanding payments of compensation for the use of the land described as rent the occupier shall remain nothing but a tenant at will until a formal lease is executed or an agreement is reached" (85 C.L.R. 55, 68).

What told against the existence of such a common intention in Turner v. York Motors Pty. Ltd. was, his Honour considered (85 C.L.R. 55, 67), that there the rent had been payable in advance, and:

"Rent in advance is compensation for the land in respect of an ensuing period and necessarily implies a title to occupy throughout the period for which it was paid in advance. Nothing but an express reservation of the right nevertheless to terminate the tenancy at volition during the currency of a period for which rent in advance has been paid would seem to be enough to justify an inference that a common intention persisted that the tenancy should remain at will only."

In the light of these principles, the result in the present case may be stated as follows. The Club entered into possession of the premises in 1976 pending negotiations for an agreement or lease, which was never concluded. On one view of it, that meant that it was no more than a tenant at will. However, once the Club commenced paying rent in advance at the rate of a $100 per year, it became by implication or presumption of law a tenant from year to year. The fact that, as time wore on, indications may have appeared that the parties acknowledged or even intended that the Club should continue to hold the premises in the character of such a tenant did not rebut that implication or presumption, or introduce a tenancy from year to year arising from agreement. Any tenancy which it may have been the intention of the parties to create was therefore no different from the intention the law imputed to them, which resulted in a tenancy from year to year. In those circumstances, s.129(1) operated to convert that tenancy into a tenancy at will determinable by either party on notice of one month.

Such a notice to quit was given by the Council on 4 October 1994. By that time, however, a further amount of $100 by way of rent had already been paid by the Club on 1 July 1994 and received by the Council, which issued its receipt on the same day. The rental amount was paid in advance and so, in the words of Dixon J. in Turner v. York Motors Pty. Ltd. (1951) 85 C.L.R. 55, 67, it necessarily implied a title to occupy throughout the period for which it was paid in advance, which was until 30 June 1995. On appeal it was contended for the Council that s.129(1) nevertheless enabled it to terminate the tenancy for that additional year by giving notice in accordance with that provision. It is unlikely that s.129(1) was intended to bring about a result like that; but it is not necessary to reach a final conclusion on the point. There is another reason for supposing that the payment made and received on 1 July 1994 did not have the consequence of extending the tenancy for yet another period of a year thereafter. It raises for consideration the second of the two points on the appeal.

At the time the invoice for $100 was received by the Club from the Council, the president of the club was a Mr Peter Ney. It was he who on behalf of the Club had taken part in discussions with the Lord Mayor about vacating the premises. The letters from the Council dated 7 June 1994 and 17 June 1994 were addressed to him. From their contents he can have been left in no doubt that it was not the intention of the Council that the Club would after 30 June be permitted to remain in the premises for a further year on payment of rent in the sum of only $100. Indeed, in his own letter dated 29 June 1994, Mr Ney specifically requested the Council to give consideration to waiving "the advised rental charges of $29,133 per month effective from July 1, 1994".

The learned primary judge found that the evidence clearly showed that the Council's invoice for and its acceptance of the rent "was a mistake, as the Club must well have known, and in fact probably knew, and it appears to have deliberately taken advantage of it". On the application for summary judgment, Mr Ney did not commit his evidence to affidavit. What he had to say was tendered through Mr Warren, another director of the Club, who deposed from information and belief to matters of which Mr Ney told to him. In the absence of direct evidence of what Mr Ney thought when he received the invoice and paid it, his Honour was justified in drawing the inference that he did know that a mistake had been made. The countervailing argument that the Council itself had not gone on affidavit to say expressly that the invoice was a mistake, and consequently was equally vulnerable to an adverse inference, was met by tendering a written statement or statements from the Council employees concerned in the finance section from which the invoice issued. The substance was that Mr Ney had twice telephoned asking for the invoice to be issued, which was found to have been printed on or after 30 June 1994 by means of a manual bypass process available in the electronic system which is used by the Council. It was this invoice that was receipted when payment was received on 1 July 1994.

The statements were admitted only for the limited purpose mentioned. Considered in that light they are capable of displacing any inference adverse to the Council that might otherwise have been drawn about the reason why the invoice was created and delivered to the Chub. It was nevertheless submitted that the question whether or not the Club knew and deliberately took advantage of a mistake by the Council was "ultimately irrelevant". The rent for the ensuing year had been paid and accepted. If the submission for the Club did not wholly assume so bold an appearance as this, it was at least argued that the decisions cited on behalf of the Council were distinguishable; although they considered the effect of mistaken demands for rent, it was contended that none of them was decisive of the point in issue here.

It is well settled that, after communicating an election to forfeit a lease for breach of condition, an unequivocal acknowledgment by the lessor of the continuation of the lease ordinarily has the effect of preventing re- entry for breach of that condition. The matter was considered in Owendale Pty. Ltd. v. Anthony (1967) 117 C.L.R. 539, where it was accepted that such a waiver of the right to re-enter was capable of being excluded by express agreement in advance. Likewise, it has more than once been held that receipt of rent after giving notice to quit is capable of being explained as due to a mistake, with the result that it is not necessarily to be treated as an offer of a new tenancy capable of being accepted by the tenant.

An example strongly in favour of the Council in the present context is Legal & General Assurance Society Ltd. v. General Mutual Agencies Ltd. (1969) 20 P. & C.R. 953, where the demand and payment of rent resulted from a clerical omission to insert a "stop notice" in the computer programme which produced the demand, and where, as the judge held, the error was in fact realised by the tenant before paying the rent.

This and the other decisions referred to in Legal & General Assurance were said to be distinguishable on the ground that there a notice to quit had in fact been given before the mistaken demand for rent was made and paid. In those circumstances, the subsequent payment and receipt of rent was held to operate in favour of the tenant only if the parties were shown to have intended that there should be a new tenancy (Clarke v. Grant [1950] 1 K.B. 101, 105-106), whereas here the payment was made before any notice to quit was given. But although such a distinction is tenable, we do not consider it prevents the application of the same principle to a case like this. No doubt it is true that, properly considered, a yearly or other periodic tenancy is not a succession of distinct new tenancies, but rather a single tenancy progressively enlarging or extending with each rental payment : Amad v. Grant (1947) 74 C.L.R. 327, 336. Even so, it necessarily rests on a tender and receipt of the rent for the ensuing year. A tenant who knows that a mistake has been made is not entitled to "snap" at what is obviously a mistaken demand for rent any more than an offeree is able to accept an offer which he knows is not intended to produce a binding contract. The decisions in Hartog v. Colin and Shields [1939] 3 All E.R. 566 and Taylor v. Johnson (1983) 151 C.L.R. 422, which were referred to on appeal and relied on by the judge below, are a sufficient authority for holding that in the circumstances disclosed here the Club is not entitled to claim the benefit of a mistaken demand for rent which it knew was not intended by the Council to result in extension of the tenancy for a further year.

The final point on appeal was the Club's claim that it was entitled to the benefit of an estoppel in its favour arising from expenditure undertaken by it in improving the Club's premises over the years in reliance on the Council's original assurance that a long term lease would be granted.

Once more we find ourselves in respectful agreement with the learned judge below in saying that, having regard to the period that has already elapsed during which the Club has had the benefit of the premises at a nominal rent, the effect of the estoppel it now seeks to invoke would be out of all proportion to any prejudice it could now claim to have suffered. It was urged that a question of fact like that is one that ought not to have been decided on an application for summary judgment. There are, however, still some cases beyond the reach of even the most generous conception of the powers of equity to intervene in legal relations. As it is, the Club has undertaken to vacate the premises on or before 30 June 1995. It will therefore have ample time within which to exercise any right it may have to remove tenant's fixtures from the premises.

The appeal should be dismissed with costs.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 4 of 1995

Brisbane
[Brisbane City Council v. Council Club Inc.]

BETWEEN

THE BRISBANE CITY COUNCIL

(Plaintiff) Respondent

AND

THE COUNCIL CLUB INC.

(Defendant) Appellant

Davies J.A.
McPherson J.A.

Byrne J.

Judgment delivered 09/05/95

Reasons for judgment by the Court

APPEAL DISMISSED WITH COSTS.

CATCHWORDS	LANDLORD & TENANT - Tenancy from year to year - Tenancy at will - Whether s.129(1) Property Law Act 1974 applies to tenancy - Whether written notice to quit given in reliance on s.129(1) Property Law Act 1974 was effective to determine tenancy - Turner v. York Motors Pty. Ltd. (1951) 85 C.L.R. 55 - Moore v. Dimond (1929) 43 C.L.R. 105 - Whether mistaken demand for rent amounted to acknowledgment of continuation of lease.
Counsel:	A. Morris Q.C., with him R. Clutterbuck, for the appellant
P. Lyons Q.C., with him E. Morzone, for the respondent
Solicitors:	Corney Neumann Turnour for the appellant City Solicitor for the respondent

Hearing Date: 27 March 1995