Hall & Anor v National Mutual Life Nominees Ltd

[1999] HCATrans 19

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S85 of 1998

B e t w e e n -

IAN ROBERT HALL and JOHN BARRIE LOITERTON

Applicants

and

NATIONAL MUTUAL LIFE NOMINEES LIMITED

Respondent

Application for special leave to appeal

GAUDRON J
KIRBY J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 12 FEBRUARY 1999, AT 10.22 AM

Copyright in the High Court of Australia

MR R.J. ELLICOTT, QC:   Your Honours, I appear with  MR W. HAFFENDEN for the applicants.  (instructed by Phillip Anthony Biber)

MR J. BARTOS:   May it please the Court, I appear for the respondent.  (instructed by Middletons Moore & Bevins)

MR ELLICOTT:   Your Honours, this application lies within a fairly small compass.  It raises the question as to the meaning of “rent” and, in particular, in this particular lease, raises the questions as to the meaning of a phrase, “rent under the lease”. 

Now, your Honours, if an Act of Parliament simply imposed the duty or tax on the rent of a lease it would include outgoings.  If, in relation to an oral tenancy, you are asked, “What’s the rent under this tenancy?”, the answer would be that the rent included not only that little item called “rent” but also the outgoings.

GAUDRON J:   Whose outgoings?  I do not quite follow that, I am afraid, Mr Ellicott.

MR ELLICOTT:   I will help your Honour to follow it.

GAUDRON J:   Because, in effect, what you are talking about in this context do not seem to be outgoings at all but a proportion, by reference to something else.

MR ELLICOTT:   What we have here, your Honour, is a clause.  Perhaps if I take your Honours to the clause.  It is at page 29:

The Lessor hereby covenants and agrees to release Ian Robert Hall and John Barrie Loiterton from all obligations and liabilities under this…..Lease totalling $750,000.00 provided that the Lessee is not then in default in its obligations under this Lease.

That is a release of the:

guarantee upon the Lessee having paid to the Lessor rent under this Lease –

and in clause 17:

On satisfactory execution of this Lease by the Lessee and the Covenantors and the provision by the Lessee of the Security Deposit referred to in Clause 16 hereof, the Lessor shall pay to the Lessee the sum of $750,000.00.

Now, in approaching this particular clause, there are two matters to bear in mind.  The first is, we would submit, that the clause being part of a guarantee, has to be construed strictly.  There are other views on that but so far the view is that, even though commercial in character, they should be construed strictly.

The other proposition is that considered alone, the phrase, “rent under this lease” would include outgoings.

KIRBY J:   Even assuming that is so, is not the difficulty you face the one that the Court of Appeal put its finger on and that is to say it does not stand alone, it stands with clauses that talk of “rent and other moneys”, “rent and outgoings” and so on.

MR ELLICOTT:   Your Honour, I understand that and I am trying to confront that proposition.  What I have just put to your Honours is not the way the Court of Appeal dealt with this lease.  They wandered through the lease and got a dichotomy or a dictionary for the meaning of the word “rent”.  You will not find any discussion of the words “under this lease” and you will not find any discussion of the principles that apply as to the meaning of “rent”.

KIRBY J:   But does not “under this lease” simply take you to the lease and then you look at all the times “rent” is mentioned and more often than not it seems to be mentioned in conjunction with other phrases:  “rent and other moneys”, “rent and outgoings”, it seems to pick up a - - -

MR ELLICOTT:   Well, would your Honours go to page 22.

KIRBY J:   I only raise this because, on the face of it, that seems to tie your submission down to a very particular lease with very particular provisions that predict the provisions with juxtaposition between rent and outgoings and rent and other things and that makes it difficult to tender to this Court a nice neat point of general application.

MR ELLICOTT:   No, your Honour, with respect.  What we would be doing would be saying to this Court, the meaning of the word “rent” in modern times includes every amount that is paid for the use and occupation of the property.  So that not only what people will nominally call “rent” but also the outgoings form part of the rent.

KIRBY J:   But that would have been a better submission if the lease had been silent about various of these outgoings such as - - -

MR ELLICOTT:   Under this lease, the rent included outgoings and it is that notion of a gross lease that has to be understood, and the court never got to grips with the nature of this lease.  This is a lease where there was an element called “rent” which was not really the rent, and then added to that were all the outgoings relevant to the property at the base date.  So you had an overall rent which included outgoings.  Then they had to provide for the outgoings which increased to be payable by the lessees.  Now, that did not make the increase in outgoings anything different than rent.  It was still rent.  The rent under the lease that these people were paying was not only the rent that they paid when they started off, but also all the increases.

Now, if I just take 12.2(c):

In the event that the Lessee does not remove and carry away its fixtures…..the Lessee shall pay to the Lessor an occupation fee for the Demised Premises…..until the date of such removal…..such fee to be proportionately equivalent to the rental payable by the Lessee immediately prior to the expiration of this Lease.

Now, that is a clear case of the word “rental” including outgoings.  It is unthinkable that they would have excused the lessee from a proportionate outgoing. 

There is no fixed dichotomy, and the reason for putting into this lease the provisions as to outgoings is only to provide a mechanism through which the lessee will be bound to pay increases in outgoings.  As your Honours will have seen, the lease provides that there are base dates which were around about the date of the commencement of the lease.  It then provides for the increases to be payable by the lessees.

KIRBY J:   If you are right that there is no fixed dichotomy, then that knocks away, does it not, your argument for saying that this presents to this Court a matter of general importance for the meaning of “rent” in all commercial documents?

MR ELLICOTT:   No, your Honour.  It opens the way for the application of principles of law, for instance, what Justice McHugh said in the case that your Honours will have referred to - - -

KIRBY J:   Yes, but as has been pointed out, that was in the context of the Stamp Duties Act where different considerations may apply.

MR ELLICOTT:   It is, but this is in the context of a lease, yes, but so far as the lease is concerned, once there is no fixed dichotomy, then the question arises as to what is the meaning of the words “rent under this lease” and unless there is something to the contrary, that means rent plus outgoings.  That includes outgoings.  That is the legal meaning - - -

KIRBY J:   The suggestion is because by juxtaposition the lease actually referred to outgoings and various other words which you would seek to embrace within the word “rent”, that that indicated to the Court of Appeal that “rent” did not have the large meaning in this lease and it indicates to us that this is not a good vehicle to raise the question of whether rent, on its own, pure, virginal, means what you say it means.  That is the case to bring up and say, “It is just rent and rent nowadays includes outgoings.”  That is the case to present that to us, not this one.

MR ELLICOTT:   Yes, your Honour, and that case would be in this case because, in determining the meaning of the words “rental under this lease”, one has to understand what rental is and rental includes all amounts payable, if that is the true meaning of “rent”, in relation to the use and occupation of the land.  On that basis, of course, this Court would then have to consider the meaning of the word “rent” alone.

GAUDRON J:   It has to be considered in context, does it not, Mr Ellicott?  We would never be considering the meaning of the word “rent” alone.

MR ELLICOTT:   I was not suggesting that, your Honour.  What I was suggesting was that in this particular case you will not get a fixed dichotomy as to the meaning of “rent” going through this lease.  When you come to the phrase “rent under the lease”, unless there is some reason other than that which I have not mentioned – and I have tried to cover the various aspects of it – the Court is going to consider what is the meaning of the word “rent under this lease”, emphasis on “rent” because that is going to beg the question, “What is rent?”  “What is truly rent and what is it that will lead to this?”

Now, the other aspect of this is clause 17 and it is quite clear, I would submit, on the face of this document, that the guarantee is a means of getting back the $750,000 that has been paid to the lessee; paid the lessee at the beginning of the lease $750,000.  They wanted to make sure that in rent they would get back $750,000, and that is the purpose of the guarantee.  Now, the $750,000 therefore is an amount which, from the lessor’s point of view – it is not going to matter whether it is rent or whether it is outgoings – the lessor wants to be sure that it will get back the $750,000.

Now, could I just take your Honours to the case of Commissioner of Stamp Duties v J V (Crows Nest).  I think there are copies with the Court.

KIRBY J:   This is the one where Justice McHugh’s observation are made. 

MR ELLICOTT:   Yes, that is right.  At page 538 of the report - - -

KIRBY J:   I see Justice Samuels agreed with his Honour.

MR ELLICOTT:   7 NSWLR:

In modern times the word “rent” can and often does mean a sum of money which a person has contracted to pay for the use of property for a term. 

And that is a reference to a decision of Lord Diplock in the House of Lords.

The distinction between a payment which is made for the use of property for a term and a payment made by a lessee to a lessor which does not relate to the use of property is often difficult to draw in practice.  In the decided cases the distinction seems more often than not to have turned on the form or manner of the payment than the answer to the question whether in substance the payment was made for the use of the property.  Payments made by the lessee for services and use of furniture were held to be rent –

and they refer to that case.  Over the page, there is a reference to a judgment of Justice Olney, and Justice McHugh says:

The illustrations which Olney J gave in the course of his judgment together with his actual decision indicate that he thought that, if a payment by the lessee was directed to indemnifying a liability of the lessor, it was not a payment for the right to use property.

KIRBY J:   But all of this is in the context, including Justice Olney’s decision and the other decisions referred to, of the stamp duties legislation.

MR ELLICOTT:   I understand that, your Honour.

KIRBY J:   When you are determining what is “rent” for stamp duties legislation, your search is on a different plane to that when you are looking for what parties meant, private parties without any public involvement, in a particular agreement between them.

MR ELLICOTT:   The law of conveyancing would be studded with cases as to the meaning of “rent” where there has been a great division.

KIRBY J:   And that is why, as Justice Gaudron said, in the end you just come back to the particular agreement, and your problem here is a problem which could be very easily solved with the word processor, just take out the other references to other things - - -

MR ELLICOTT:   I am not seeking to do that.  I am seeking to get the Court to look more closely than the Court of Appeal did at what principles apply when a particular clause such as 15.2 is put under the judicial microscope.  Because if you start of with a clause which, but for something else, would mean that it included outgoings, and if you start off with a clause which should be construed strictly, being a guarantee, then there should be good reason for departing from what would be the ordinary legal meaning of the words.  That is how we are putting this and that is how, we would submit, the Court should approach it in considering whether it is a matter for special leave.

The question of rent is a significant question.  It has never been considered by the Court and, in this respect - - -

KIRBY J:   There is a dictum of Justice Brennan somewhere, is there not, I think?

MR ELLICOTT:  In Booker Industries, but it has never been considered as a conceptual matter by the Court.

KIRBY J:   That brings it down to whether this is a suitable vehicle, given that the Court of Appeal felt that here is a lease with lots of other expressions:  outgoings, rates, taxes, and that in this context it did not have the meaning you urged.  It seems a very particular matter, not a matter of broad import.

MR ELLICOTT:   If your Honour pleases.

KIRBY J:   I was only stating my own view, Mr Ellicott.

GAUDRON J:   Yes, Mr Bartos.

MR BARTOS:   Your Honours, our submission is that the special leave should be refused for the following reasons.   The case is not a suitable vehicle for determination of the special leave issues for which the applicants contend.  In truth, those issues do not arise from this case.  Finally, the decision of the Court of Appeal, it is submitted, is not attended by sufficient doubt.  In fact, it is submitted that the decision is plainly correct.

Your Honours, it is submitted that no issue of general public importance arises from this case.  Despite considerable submissions to the contrary, it is plainly a question of construction of a particular commercial document.  Whether or not the modern law of - - -

KIRBY J:   But the word “rent” is used in thousands of commercial documents and, speaking for myself, the issue is whether or not this is an appropriate vehicle to present the general question that Mr Ellicott has urged upon us.

MR BARTOS:   Yes.  Your Honour, whether or not the word “rent” in its modern meaning does or does not include outgoings, one has to then always go back to the document itself.  The modern view of the expression “rent” arises from a law of contract, so how it is used in a particular contractual document, one then has to go to the contract and see how that expression is used in that document.  It does not follow that the word “rent” always included outgoings.  One has to look at the document in question.  That is, for example, clear from the decision on which my learned friend relied ‑ ‑ ‑

KIRBY J:   I do not think you need authority for that, do you, that you have to look at the meaning in the particular document?

MR BARTOS:   No, your Honour, but, for example - - -

KIRBY J:   Tell me this:  why would the interpretation of the word in a Stamp Duties Act be different from in a commercial document, in terms of principle?

MR BARTOS:   In terms of principle, in the Stamp Duties Act there is a reference to “rent” where it does not define exactly what the rental means whereas, the parties, in a particular document, to deal with different issues in a separate manner.  For example, in this particular document there are very lengthy clauses which deal with payment of rental separately from payments in calculation of increases in outgoings and they are separate obligations in this document.  The lease, in my submission, your Honour, consistently makes this distinction between payment of rent and payment of increases in outgoings.

Indeed, clause 15, which is the basis of the liability of the covenantors, makes the distinction itself in clause 15.1, which is on page 28 of the application book, line 23, where it sets out the liability of the covenantors and says:

the Covenantor will be jointly with the Lessee and severally liable to the Lessor for the due and punctual payment of all rent and other moneys reserved –

but clause 15.2, which limits the liability, only refers to “rent”.  There is a clear distinction between the expression “rent” and other moneys payable under the lease which, in my submission, your Honours, includes outgoings in 15.1, but does not include in 15.2.  The point is one has to look at each document.

GAUDRON J:   I think we do not need to hear you further, Mr Bartos.

MR BARTOS:   Thank you.

GAUDRON J:   Mr Ellicott, do you have anything in reply?  Thank you.

This application raises a question as to the construction of the particular provisions of a commercial lease.  Given the context in which those provisions appear we are of the view that the proposed appeal does not enjoy sufficient prospects of success to justify the grant of special leave.  Accordingly, the application is refused.

Is there an application?

MR BARTOS:   Yes, could I apply for costs of the special leave?

GAUDRON J:   You do not resist that, Mr Ellicott?  The application is refused with costs.

KIRBY J:   Mr Ellicott, I was not seeking to stop you.  You, least of all, would I seek to stop in this Court.

MR ELLICOTT:   Oh no, your Honour.  I know when to stop.

AT 10.44 AM THE MATTER WAS CONCLUDED