Dexbay Pty Ltd v The Crown

[1995] QLC 51

[1995] QLC 51

 

  LAND COURT

BRISBANE

29 JUNE 1995

Re:                Claim for Compensation -
  Land Act 1962 -
  A93-27.

Dexbay Pty Ltd
  v.
  The Crown

J U R I S D I C T I O N

This is a claim for compensation by Dexbay Pty Ltd (Dexbay) which company purports to hold an interest as sub-lessee of land leased under the Land Act 1962 (the Act) and resumed under the provisions of the Act in November 1991. On the matter being called for hearing, objection was taken by the Crown to the hearing of the claim on grounds that the claim was made out as if Dexbay had an interest in the land as sub-lessee of freehold land to which, it is submitted, the resumption provisions of the Land Act cannot apply.
           The claim arose following the issue of a Proclamation published in the Government Gazette of 30 November 1991 under which the Governor in Council, in pursuance of the provisions of s.306 of the Act, notified and declared that on and from that date the following land in the county of Stanley, parish of South Brisbane, was resumed:

"Lot 4 on plan SL11336, Lot 5 on plan SL12877 and Lot 414 on plan SL 11430 sheets 1 and 2, containing an area of about 4.91 hectares and being the whole of the land contained in Special Lease No 06/51507.  "

S.306 provides that the Governor in Council may resume the whole or any part of any holding and that on resumption the lessee is entitled to compensation as prescribed by Division XI of Part X of the Act.  "Holding" is defined as the land held from the Crown by any lessee and "lessee" is defined as the holder of a lease under the Act.
           At the date of resumption Special Lease 06/51507 (the lease) was held by World Expo Park Pty Ltd (WEP) as lessee for a term of 4 years 7 months and 23 days commencing on 8 May 1989 (expiring 31 December 1993).  The lease was granted under the provisions of s.203(a) of the Act for the purpose of "Business and Commercial (Amusement and Entertainment Park and Public Car Park)" subject to conditions, one of which (C.12) reads:

"The terms and conditions of the lease are subject to the provisions of the South Bank Corporation Act 1989. "

WEP, as lessee, duly pursued a claim for compensation under the relevant provisions of the Act.  The claim was heard by the Court and judgment given on 20 May 1994 (A93-26).  The Court held that

"the claimant company's interest in the lease as lessee had no market value at resumption date.  "

Compensation was determined at Nil.
           Under covering letter dated 24 December 1991, Dexbay, by its solicitors Stubbs Barbeler Grant,           served a claim for compensation upon the Crown as constructing authority in the sum of $761,486.  The claim states that the nature of the interest held by Dexbay in the lease is as sub-lessee of part of the land.  No claim is made for land.  The Crown did not admit the claim and the Department of Lands (DOL) advised Dexbay's solicitors by letter dated 15 July 1992 that it had assessed Dexbay's interest in the land as nil and therefore "no monetary payment is payable".
Briefly stated, the source of title - the freehold land - became vested in the Crown under the provisions of the South Bank Corporation Act 1989 (the South Bank Act). The land was then leased to WEP together with land formerly held under Special Lease by the holder of the freehold. The interest of Dexbay, which was drawn up in 1989 as a sublease of a lease of freehold land was not and had not at resumption received the formal approval of the Minister as required by s.274 of the Act, nor had the agreement been registered in the books of the Department. The Department, however, knew of the existence of the agreement and it would appear, on the evidence, took no adverse action against the lessee for that the sublease agreement was not registered.
Under the resumption procedures of the Act (Division XI of Part X) the Governor in Council may resume by Proclamation the whole or any part of a holding with compensation as prescribed by the Division. The Division then goes on to apply the machinery provisions of the Acquisition of Land Act 1967 and, where applicable, to apply the provisions of that Act governing the determination of compensation. This process was followed in the resumption of the lease. Clearly the powers vested in the Governor in Council by this Division of the Act are applicable to land held under the Act as distinguished from the powers vested in the Governor in Council under the Acquisition of Land Act 1967 in which land is defined as -

"Land which is for the time being granted in fee simple by the Crown .... ".

It follows that a Proclamation issued under s.306 of the Act can have no effect upon freehold land or upon any estate or interest in land so granted assuming that a duality of such estates or interests could exist.  This briefly stated is the cause of the objection taken by the Crown for Dexbay has continued to assert that its interest in the land is derived from the interest it had in the land as freehold land.  Some history as to how these interests came about is relevant in deciding the nature of the interest (if any) held by Dexbay on resumption of the lease.
The land leased under SL06/51507 to WEP is as described in the Proclamation resuming it. The lands were part of EXPO. They were subject to the EXPO Act 1984. For my purposes, it is sufficient to say that, at the time of the passing of the South Bank Act, Lots 4 and 5 were held by the Brisbane Exposition and South Bank Redevelopment Authority for an estate in fee simple and were leased to WEP, whilst Lot 414 which was at all material times held under Special Lease under the Land Act (it being a lease of strata above road) was held by the Authority and subleased by it to WEP.
The South Bank Act was assented to on 28 April 1989. The Act is described as an Act "to provide for the establishment of a South Bank Corporation to develop the site of Expo '88 as part of the development of South Brisbane, to finalize the affairs of the Brisbane Exposition and South Bank Redevelopment Authority and for related purposes". The Act established a South Bank Corporation and vested certain lands of the EXPO site in the Corporation and other land in the Crown. Lots 4 and 5 were vested in the Crown (s.3.7) and thereafter (by virtue of s.6 of the Land Act) could only be dealt with as Crown land subject however to the provisions of the South Bank Act which for this purpose may be read in conjunction with s.6(2) of the Land Act. Apart from the vesting provisions, it was provided in s.3.9 of the South Bank Act that all contracts, agreements and undertakings entered into with the Authority existing immediately prior to the commencement of the Act shall be deemed to be contracts, agreements and undertakings entered into with the Crown, and may be enforced by or against the Crown.
           What followed, after discussions taking place between DOL, Premier's Department and WEP, was an agreement entered into between the Crown and WEP dated 5 September 1990 under which WEP agreed to surrender its lease J915669H and the sublease of the Special Lease of Lot 414 in return for the grant of a Special Lease to be issued under s.203(a) of the Act over the whole of the lands comprising the freehold land and the leasehold land with all improvements thereon.  It was agreed that the surrender take effect from 8 May 1989 (the date of the vesting of the land in the Crown) and further that

"It is the expressed intention of the parties that upon issue of the Special Lease over the Demised Premises, the rights and obligations of the parties will be substantially the same as those rights and obligations contained in the Registered Lease and the Registered Sublease.  "

The execution of the agreement was followed by advice given by DOL on 12 September 1990, that a new Special Lease had been recorded.  On 25 October 1990, the lease received the hand of the Governor.  The Proclamation followed in November 1991, the effect of which (in the absence of special provision to the contrary) was to resume the whole of the interests held under the lease.
           Subsequent to the vesting but before the formal grant of the lease, Dexbay and WEP had executed a "Heads of Agreement" for a sublease dated 9 August 1989.  On 25 September 1989 Mr P Goldston, acting for South Bank Corporation, advised WEP that South Bank saw "no problem with signing off as head lessor on the above (Car Park Sublease to Dexbay Pty Ltd) subject to clear advice as to the identity of Dexbay."  In November 1989 WEP and Dexbay executed a sublease over the land using Form 8 of the Real Property Act and for a term commencing on 2 July 1989 terminating on 30 June 1991.  It is quite apparent that at all relevant times the parties could not lawfully deal with the interest of WEP as a leasehold estate governed by the provisions of the Real Property Act.  This, in my opinion, dispenses with any question as to whether the provisions of s.306 of the Act were inapplicable in the circumstances.
           Next follows the question of the nature of the estate or interest held by Dexbay at the date of resumption.  No formal approval of the Minister for Lands was ever obtained to the sublease nor was the agreement ever registered with DOL.  The relationship which continued between WEP and Dexbay as related under cross-examination by Mr GF Maskiell, Managing Director of Dexbay, took this form:

"Anyhow, right up until the proclamation in November, 1991, Dexbay dealt with Mr Blood's company, World Expo Park Pty Ltd, on the basis that the interest that governs their relationship was the Real Property Act lease of which-----?-- Yes.

-----Dexbay had firstly a sublease for a term of two years and then there were negotiations in 1991 to take up some further term as anticipated in the option clause.  Is that right?-- Yes.  I put the negotiations as letters which confirmed our interest in taking up the option of course, as required.

All right.Well, whether that was required or not, that was the basis on which you dealt.  That is, the sublease of the Real Property Act lease, and then negotiation to confirm -however you might want to put it - a further period of that sublease?-- That's correct.

Yes.And is the position that the rent was agreed up until November 1991, but once the resumption proclamation went through, there was no further need for Dexbay to deal with World Expo Park Pty Ltd in relation to rent beyond November 1991 because that was something that you'd have to sort out with the Crown?-- That was - I imagined that was the case.

Yes.So, you never pursued any further negotiations with Mr Blood for a new rental beyond November 1991?-- No, I didn't.  I had received one letter from Vince Pendal, the Chairman, to say that I was in arrears and I was in default, et cetera, which you will recall, but I didn't pursue the matter with World Expo Park.  I understood that they were rapidly heading towards liquidation.  "

Whilst it may be argued in the subject case (and correctly in my opinion) that failure to comply with the provisions of s.274 of the Act constitutes a bar to the creation of a legal estate in the lease in favour of Dexbay, equity may intervene to protect such interests (see Wood v Browne (1984) 2 QdR 593 and American Dairy Queen (Qld) Pty Ltd v Blue Rio Pty Ltd (1981) 147 CLR 677). More so, I would think, in the subject case in view of the involvement of the Crown in regularising the interests of WEP following the vesting and with knowledge of the dealings between WEP and Dexbay. This is evidenced further in a letter from the Department of the Premier to WEP dated 28 February 1990, which in clause 2 said:

"Sub-Lease of Car Park to Dexbay Pty Ltd

There are statutory limitations which prevent the Crown from approving of the proposed sub-lease to Dexbay and for a change in use at this time in the manner proposed.

(a)For the reasons outlined in 1. above, the Crown cannot approve of a changed 'permitted use' of the site until the necessary approvals and determinations have been obtained under the South Bank Corporation Act; and

(b)The lands involved are Crown lands and are not capable of being dealt with under the Real Property Act as proposed.  

Once the special lease has been concluded between the Crown and WEP, application should be made to the Minister for Land Management for approval of the proposed sub-lease to Dexbay.  "

In the circumstances, it seems reasonable to conclude that had approval of the Minister been sought it would have been obtained, with or without modification - a matter which it appears is governed by the South Bank Corporation Act and as confirmed in Condition 12 of the lease for neither the Minister nor WEP could contract out of the provisions of the Act. The agreement provided for a term commencing on 2 July 1989 and terminating on 30 June 1991.
           The option article in the agreement provided as follows:

"Subject to agreement between the landlord and the tenant as to the rental payable during the option period, if the tenant shall be desirous of taking a renewed lease of the demised premises for a further term of two (2) years (commencing upon the expiration of the term hereby granted) and shall not more than six (6) months and not less than three (3) months prior to the expiration of the term hereby granted signify such desire by notice in writing to the landlord and shall not prior to such notice have made and shall not subsequently make any default hereunder (save such as shall be remedied to the landlord's satisfaction) then the landlord will at the expense in all things (including legal costs and stamp duty) of the tenant, grant a new lease to the tenant of the demised premises for a further term of two (2) years at the yearly rental so agreed between the landlord and the tenant and otherwise upon the same terms and conditions contained in this Lease with the exception of this present clause, subject always to the right of termination contained in Article 16 hereof.   "

It was further provided in article 16 that:

"Notwithstanding any other provisions of this sublease the landlord may at any time during the term hereof or any extension or renewal hereof terminate this lease by giving to the tenant three (3) months notice in writing to that effect and upon the expiry of such notice this lease shall be terminated and the landlord shall pay to the tenant an amount of compensation for early termination determined in accordance with the following:-

(a)if the lease is terminated during the first year of the term hereof an amount equivalent to ....

(b)if the lease is terminated during the second year of the term hereof an amount equivalent to ...

(c)if the lease is terminated after the second year of the term hereof no compensation shall be payable ($Nil)."

On 27 March 1991 Dexbay advised WEP that it would like to exercise the option over the car-park area for two years from July 1991 - "We seek a straight two year lease extension without cancellation clauses subject to normal CPI annual adjustments."  WEP advised by letter dated 27 May 1991 that the amendments sought were unacceptable and that "At this time WEP is prepared to agree to the 2 year option strictly in accordance with the sublease without amendment.  We will however forgo any increase in the minimum rental (as we did at the first anniversary of the sale lease) for a further 6 month period, subject to review in December 1991."  This advice met with a reply from Dexbay dated 14 June 1991 agreeing "to continue the two year option without amendment with a fixed current rental until December 1991, whereupon the rental will be subject to review, for the following year."
At the date of resumption (30 November 1991) Dexbay held possession under the terms of the option agreement for a period expiring in December 1991 when the rental for any further period was subject to review. The agreed proviso had put an end to any claim that at the relevant date Dexbay possessed a term certain beyond December for it is well established that in order to create a tenancy there must be certainty as to term, commencement of the term and the rent payable - a reservation as to rent should be certain as to the amount and the time when it is payable - (see Parker v Harris (21) (1692) 1 Salk. 262 [91 ER 230] and Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600).
If one were to go further and ask the question whether, in the absence of the resumption, agreement may have been forthcoming, I would have to conclude that the answer would be in the negative. It is apparent in the documentary evidence before the Court that WEP was in financial trouble as early as 22 October 1990 when it approached the Government with a view "to either negotiate an agreement for early termination of the lease or to remove the application of the South Bank Corporation Act in relation to the use of the WEP site for the remainder" of the lease.
The frustrations caused by the South Bank Corporation Act were discussed by the learned Member in the judgment dealing with the claim by WEP. These frustrations flowed over to the relationship existing between Dexbay and WEP with negotiations on rental review taking place during 1991. The downward progression of the affairs of WEP throughout 1991 is reflected in the judgment of the learned Member. There is also evidence that rates on WEP's property exceeded the rent payable by Dexbay which itself was in arrears of rent at the date of resumption (notice of default apparently had been given) and for the years ending 30 June 1990 and 1991 made substantial operating losses.
           In these circumstances, the security of Dexbay was tantamount to nil.  I find that at the date of resumption Dexbay had no interest in the lease greater than it had for the balance of the term available under the option agreement that is one month with no real prospect of a further term.  I rule accordingly.
           It is noted that no claim is made for the interest held by Dexbay at the date of resumption.  To that I may add that any claim for disturbance is fraught with difficulty for disturbance in this context is measured by the degree of security of the tenure (see Michael v Brisbane City Council (1970) 37 CLLR 5).
           The matter will resume on 17 July 1995 for the hearing of any evidence and/or submissions as to whether compensation is payable consequent upon the resumption.

PRESIDENT OF THE LAND COURT