Hydra Pty Ltd v Holmes and Holmes No. Scciv-01-1225

HYDRA PTY LTD v HOLMES & HOLMES
[2002] SASC 14
Full Court: Doyle CJ, Martin and Besanko JJ

DOYLE CJ I would dismiss the appeal against the decision of the District Court. I agree with the reasons given by Besanko J. There is nothing that I wish to add to those reasons.
MARTIN J I agree that the appeal should be dismissed for the reasons given by Besanko J.
BESANKO J This is an appeal from a decision of a District Court Judge dismissing the plaintiff’s claim for declarations against the first and second defendants.
Introduction
The plaintiff (“Hydra”) is a company which operates a private water supply scheme at Craigmore and One Tree Hill in the State of South Australia. The first and second defendants, Mr and Mrs Holmes, are the owners of an allotment at Craigmore. The owners of the allotment were participants in the scheme and users of water under the scheme at the time it was established. Under an agreement called a Memorandum of Lease, Hydra as lessee has certain rights over part of the allotment. Although I do not think the Memorandum of Lease confers a leasehold interest on Hydra, it is convenient, subject to one exception, to continue to use the terminology of the Lease. The one exception is that I will refer to that part of the allotment which is the subject of the Lease as “the leased area” rather than “the demised premises”.
Although Mr and Mrs Holmes have withdrawn from the scheme, their allotment remains subject to the Lease.
In the action, Hydra sought declarations as to its rights under the Lease. By the end of the trial, Hydra’s claim for relief had been narrowed down to the following two declarations.
“A declaration that the plaintiff is entitled pursuant to Registered Lease number 8091944 to use the land the subject thereof at any time without notice to access the bore on the land of the seventh and eighth defendants.
A declaration that pursuant to clause 14 of the Lease the plaintiff is entitled to construct a gate or gates to provide direct access to the leased land from Kelly Road.”
With respect to the first declaration sought, it became clear at trial that Hydra was seeking access to a pump as well as a bore on the land of the seventh and eighth defendants, Mr and Mrs Rowe. There is no prejudice to Mr and Mrs Holmes in treating the reference in the declaration to the bore as including a reference to the pump.
Mr and Mrs Holmes lodged a counter claim whereby they in turn claimed certain declarations against Hydra. The Judge dismissed their counter claim. There is no cross appeal against that decision.
Hydra’s action sought declaratory relief against six other defendants. Prior to trial it settled its claim against the seventh and eighth defendants, Mr and Mrs Rowe.
At the commencement of the trial, Hydra, through its counsel, indicated that it was not proceeding at that stage against the third, fourth, fifth and sixth defendants. The orders made by the Judge suggest that Hydra’s action against those defendants was, in effect, adjourned.
The Facts
The Judge made detailed findings of fact. On the appeal, only one finding of fact was challenged by Hydra. That finding concerned whether Hydra now requires access over the land of Mr and Mrs Holmes in order to gain access to the bore and pump. For reasons which I will give, a finding as to what is now required as distinct from what was required at the time the scheme was established is irrelevant.
In the 1980’s a company called Yelki Pty Ltd (“Yelki”) owned certain land at Craigmore and One Tree Hill. It subdivided that land thereby creating a number of allotments.
It is convenient at this point to describe the location of some of the allotments in relation to various public roads in the area, and in relation to one another.
Allotment 9 is owned by Mr and Mrs Rowe. The northern boundary of allotment 9 abuts Yorktown Road. The western boundary abuts Kelly Road and the eastern boundary abuts an ETSA easement. The southern boundary of allotment 9 is the northern boundary of allotment 7. There is a fence along the southern boundary of allotment 9.
Allotment 7 is owned by Mr and Mrs Holmes. The western boundary of allotment 7 abuts Kelly Road, and, because of the unusual configuration of the allotment to the south (allotment 5), part of allotment 5. The eastern boundary of allotment 7 abuts the ETSA easement referred to earlier.
The previous owners, and the owners at the time allotment 7 was created and the water supply scheme was established, were Mr and Mrs Lambert. Mr Holmes gave evidence at trial as to the circumstances surrounding his purchase of allotment 7. He said that he was not aware of the “lease factor basically until probably the day of settlement”. Although the Judge made certain comments about Mr Holmes’ knowledge of the Lease at the time he and his wife purchased allotment 7, as I read his reasons, they played no part in his decision. Nor did they assume any significance on the appeal. Mr and Mrs Holmes did not suggest either before this Court or below that they were not bound by the obligations contained in the Lease, although they did argue that the Lease did not in fact confer a leasehold interest on Hydra.
Allotment 6 is owned by Mr and Mrs Trimboli. The Court was told that Mr Trimboli has recently died. Allotment 6 is immediately to the east of the ETSA easement which abuts the eastern boundaries of allotments 9 and 7 respectively.
Yelki decided to establish a private water supply scheme to supply water to a number of allotments created by the subdivision including allotments 9, 7 and 6. The water to be supplied was water suitable for stock drinking and some level of garden supply.
There was no clear evidence as to whether all aspects of the scheme as it was actually implemented were contemplated by the parties right from the outset. The Judge made a finding which seems to support the conclusion that they were, although the matter is not entirely clear. As will become apparent, I do not think that it assists Hydra even assuming all aspects of the scheme as implemented were contemplated by the parties right from the outset.
The scheme as implemented has a number of features. There is a bore and pump in the south eastern corner of allotment 9. Water is obtained from this bore and, by means of the pump, pumped through pipes up an incline in an easterly direction to an elevated tank on allotment 6. By means of gravity the water is then distributed through underground pipes to the various allotments which are part of the scheme. One such pipe is on allotment 7. It runs approximately east-west and is adjacent to the northern boundary of the allotment. The Judge described the piping as class A black poly pipe 75 millimetres in diameter with a wall thickness of between 5 and 10 millimetres. The piping is of a type which is normally used for high pressure water systems.
At the time the scheme was established there was an above ground water meter on each allotment which recorded the quantity of water used by the owner of each allotment.
Quite apart from the initial work required to put the various pieces of equipment in place, it is clear that from time to time the pipes, bore, pump, tank and other equipment would need to be inspected, repaired and replaced. There was some evidence before the Judge that the valve on the pipe coming out of the bore needed to be opened up and closed down “every now, and again”. It may be readily inferred that there is a need to access the equipment from time to time, and at any time.
There were two key features of the legal structure established to implement and regulate the scheme. First, Yelki established a company, Hydra, to manage the scheme. Each allotment owner was to hold a share in Hydra. If a person sold an allotment it was envisaged that the vendor would transfer the share to the new owner. It seems that it was also contemplated that an owner might withdraw from the scheme, and in order to do so, the owner was required to give two months notice in writing surrendering the share in the company.
Hydra had a management committee consisting of two directors, a chairperson, a maintenance manager and a secretary/treasurer. That committee conducted the day to day business of the company.
Hydra charged each allotment owner a set amount by way of a base property rate, and a quarterly water rate which was based on the quantity of water used. Hydra had the right to charge each allotment owner an amount for major repairs. Each allotment owner was required to take every precaution to protect the property of Hydra.
Secondly, each allotment owner was required to give certain rights over the owner’s allotment to Hydra to accommodate the equipment used in the scheme. The document signed by each allotment owner was called a Memorandum of Lease. It is the proper construction of the provisions of this document which is the central issue in this appeal.
The rights given to Hydra are over certain parts of each of the various allotments. Those parts are called “the demised premises” in the Lease. As I have said, I will refer to the relevant parts as the leased areas.
A plan showing the leased areas over allotments 9, 7, 6 and other allotments was put before the Judge. He described the leased areas in the following way:-
“Hydra’s shareholders have all leased part of their land to Hydra. The land that is the subject of each of these leases differs from each other. Many of the allotment holders have leased a strip of land about four metres wide to a depth of no more than one metre, which strips are adjacent to and along the boundary of the allotments. There are exceptions to this. There does not appear to be any strip of leased land on allotments 3, 4, 5, 10 and 13. Allotment 8 appears to have two strips of leased land, one on each of two of its four boundaries.
Mr and Mrs Rowe’s position is different to all the others. Theirs is allotment 9. There is no strip of leased land on their allotment but there is a nearly rectangular piece of leased land of approximately 30 metres long by about 9.5 metres wide in the south eastern corner of their land. This leased land is adjacent to part of the strip of leased land of approximately 4.5 metres in width which runs east/west along the northern boundary of allotment 7 which is owned by Mr and Mrs Holmes. To the east of the leased land on Mr and Mrs Holmes’ allotment and the leased land on Mr and Mrs Rowe’s allotment there is leased land on Mr Trimboli’s allotment to where the tank is erected. Mr Trimboli’s is allotment 6. There is a pipeline of black water pipe from the tank on the leased land on Mr Trimboli’s allotment which travels underground within the leased land on Mr Trimboli’s allotment and within the leased land along the northern boundary of Mr and Mrs Holmes’ allotment.”
The leased area for allotment 7 extends below ground to a depth of one metre. The equipment on the leased area for allotment 7 is black water pipe which is buried underground, and which carries water from the tank on allotment 6 to those allotments west of allotment 6.
The various leases were registered, but there was a delay in doing so. The reasons for the delay were not explained. The Judge said:
“Some difficulties arose regarding the signing of the various leases but it is not necessary to detail those problems. They were not finally resolved until early 1996. Before they were resolved one lease was altered by deleting certain clauses. The last lease was not lodged at the Lands Titles Office until May 1996.”
Neither party sought to make anything of the delay, and I proceed on the basis that nothing turns on the delay.
In May 1990, a planning authorisation was obtained by Hydra for a development described as “99 year lease for a private water supply”. The Judge found that that planning authorisation entitled Hydra “to establish rights over parts of the various allotments enabling it to run pipes across the various allotments so that water could be supplied to each of them.”
None of the Leases, other than that involving Hydra and Mr and Mrs Holmes, were put before the Judge.
The Lease involving Hydra and Mr and Mrs Holmes is for a period of 99 years commencing on 1 June 1990 at a clear annual rent of $1 (if demanded by the lessor). The previous owners of allotment 7, Mr and Mrs Lambert, are named as the lessor and Hydra is named as the lessee. I have already described the area defined as the demised premises or to use my terminology, the leased area. The whole of the allotment is defined as “the said land”. Clause 5 deals with the permitted use of the leased area. It provides:-
“The Lessee shall not use the demised premises or cause, permit or suffer the same to be used otherwise than for the purposes of the provisions of pipes for the supply of water and such other uses as the Lessor may consent in writing.”
Clause 8 deals with the rights and obligations of Hydra to carry out works in the nature of repairs, maintenance, alterations, renewal or removal of pipes or wires laid by Hydra upon or under the leased area. It provides:-
“Whenever it may be necessary to repair, maintain, alter, renew or remove any pipes or wires laid by the Lessee upon or under the demised premises, the Lessee shall where the circumstances permit and except in the case of emergency, give at least seven days notice in writing to the Lessor and will carry out such works in a proper and workmanlike manner with due and proper expedition and shall do as little damage as possible to the said land and shall make good or compensate for any damage so caused.”
Clause 14 also deals with works which may be carried out by Hydra. It provides:-
“The Lessee shall have full power to make all excavations, formations, cuttings, drains and any and all other works as the Lessee may think incidental to or necessary for the purpose of constructing, completing, using, maintaining and repairing such pipes on or under the demised premises and enter at any time or times thereon with servants, contractors or other persons to carry on the said works.”
Clause 15 deals with access to the leased area over the said land. It provides:-
“The Lessor covenants with the Lessee that the Lessee, the Lessee’s servants, officers, agents and contractors shall have the right and liberty at all reasonable times upon giving to the Lessor reasonable notice (except in the case of emergency when no notice shall be required) of reasonable access, ingress and egress to and from the demised premises on foot only but including the right to carry, push or convey trolleys or other means of carriage over, across and along the said land at a convenient place or places indicated by the Lessor with or without motor or other vehicles, plant, equipment and apparatus doing as little damage as possible to the said land.”
Clause 17 deals with the rights reserved to the owners of the allotment. It provides:-
“The Lessor hereby reserves full and free right and liberty at times hereafter for themselves, their executors, administrators, assigns, servants and agents to use and cultivate the demised premises for the growing of grass, trees and shrubs and other plants and for such purpose to enter upon the demised premises and to plant, cultivate and harvest any such trees, grass, shrubs or plants PROVIDED THAT the Lessor shall not plant any tree or shrub or other plant which will grow so as to interfere with the use of the demised premises by the Lessee or to damage any pipes or wires laid thereunder by the Lessee.”
I briefly mention other clauses in the Lease. First, there are clauses in the Lease which would usually be seen in a document conferring a leasehold interest[1] such as clause 10 (obligation on Hydra to yield up premises at the end of the term in good and substantial repair), clause 11 (Hydra to allow Mr and Mrs Holmes on to the demised premises to inspect the state and the condition thereof) and clause 13 (Hydra’s right to quiet possession as long as it complies with its obligations). Secondly, there are clauses which are suggestive of the fact that a right of possession is being conferred on Hydra such as clause 2 (obligations on Hydra continue through any period of holding over), clause 4 (obligation on Hydra not to sublet without consent) and clause 12 (Hydra occupies, uses and keeps the land at its risk and Mr and Mrs Holmes are not liable for any loss or damage to the fixtures fittings or personal property of Hydra).
[1] Chester v Buckingham Travel Ltd [1981] 1 All ER 386; Commercial Tenancy Law in Australia Bradbrook and Croft para. [9.03]
On the other hand, there are clauses in the Lease that would not usually be seen in an agreement creating a leasehold interest[2]. Clause 16 provides that the lessor is to pay all rates, taxes and other assessments, and clause 18 provides that for a breach of the lease by Hydra, the lessor may sue for damages or unpaid rent, but they may not determine the lease.
[2] ibid
Finally, there are clauses which are consistent with either a leasehold interest or a licence being conferred, such as clause 6 (obligation on Hydra to comply with requirements of public health and safety) and clause 7 (obligation on Hydra not to use land so as to create a nuisance or annoyance).
During argument on the appeal, a question arose as to whether the court would be assisted in resolving the issues raised by the appeal by examining the Leases over allotments 9 (Mr and Mrs Rowe) and 7 (Mr and Mrs Trimboli) respectively. Although those Leases were not placed before the Judge, neither party objected to us looking at the Leases for the purposes of determining the appeal. Mr and Mrs Holmes went further and invited the Court to look at the Leases. In circumstances where neither party objects, I think the court should consider the Leases to the extent that they may assist in arriving at the correct conclusion.
The Lease between Hydra and Mr and Mrs Rowe is in similar terms to the subject Lease. The only differences are that there is an addition to clause 8 (“motors, switch gear meters or valves” after “wires”), an addition to clause 14 (“wires, motors, switch gears, meters or valves” after “pipes”), and an addition to clause 17 (“motors, switch gear, meters or valves” after “wires”). A number of things may be noted about what I will call the Rowe Lease. First, clause 15 of the Rowe Lease, like clause 15 of the subject Lease, gives rights of access to the leased area on allotment 9 over other parts of the allotment. Secondly, there is no reference in the Rowe Lease to the bore on allotment 9. Thirdly, clause 5 of the Rowe Lease is in the same terms as it is in the subject Lease.
The Lease between Hydra and Mr and Mrs Trimboli is also in similar terms to the subject Lease. The only differences are that there is an addition to clause 8 (“or tank” after “wires”), an addition to clause 14 (“wires or tank” after “pipes”) and an addition to clause 17 (“or tank” after “wires”). Clauses 5 and 15 of the Trimboli Lease are in the same terms as clause 5 and 15 of the subject Lease.
Issues on Appeal
Most of Hydra’s argument on appeal was devoted to the first declaration, namely, that Hydra was entitled to use the leased area at any time without notice to access the pump and bore on the land of Mr and Mrs Rowe. The argument centred on the uses permitted by clause 5 of the lease. It is common ground that at no time have the owners of allotment 7 given a consent in writing for any other use of the leased area.
Hydra submitted that it was entitled to the first declaration irrespective of whether or not the Lease conferred a leasehold interest upon it. Hydra submitted that the phrase in clause 5, “for the purposes of the provisions of pipes for the supply of water” encompassed two uses, namely, a use for the purpose of the provision of pipes, and a use for the purpose of the supply of water.
In order to support this construction of clause 5, Hydra pointed to the commercial purpose or object of the scheme. Hydra argued that it was clear that from time to time the pump would require repairs and, it may be added, adjustment. It was argued that if access to the pump and bore over allotment 7 could not be obtained for this purpose then the whole scheme would fail.

Before the Judge, it was also argued that the agreement conferred a leasehold interest on Hydra and that that interest supported the making of the first declaration. That argument was barely pressed on appeal, although I do not think it was abandoned. The construction of clause 5 must be considered in the context of the Lease as a whole, and to this extent, the arguments overlap.
As to the second declaration, Hydra argued that the relevant right is given by clause 14 of the Lease. As I understand Hydra’s argument, it was that a gate to provide direct access to the leased area from Kelly Road is necessary to enable the rights in clause 14 to be exercised effectively.
The Judge’s Reasons
The Judge rejected the construction of clause 5 advanced by Hydra. He considered that as a matter of construction the phrase in clause 5, “for the purposes of the provisions of pipes for the supply of water” encompassed one not two uses. According to the Judge, this interpretation was “more consistent with the grammatical reading of clause 5 and with the remainder of the clause”.
Importantly, he found that such “a construction was consistent with the words of clause 5 and with the circumstances and setting in which the lease was originally entered into”. It seems that what the Judge had in mind when he referred to the circumstances and setting in which the Lease was originally entered into was that it was only ever contemplated that the leased area for allotment 7 would be used to accommodate pipes and not whatever more general uses might fall within the description, “for the supply of water”.
The Judge said that even if the construction advanced by Hydra was open, it would not advance its case for the declarations it sought.
He said that even if a permitted use of the relevant area was “for the purpose for the supply of water” this would not entitle Hydra to use the area to access the bore and pump on Mr and Mrs Rowe’s land. He said that purpose was being and could only be achieved by a pipeline on the leased area.
The Judge went on to consider various other provisions in the Lease and how they affected the proper interpretation of clause 5. He concluded that they supported the construction he placed on clause 5.
The Judge concluded that the Lease did not confer a leasehold interest on Hydra. He considered that it did not create in Hydra an interest in the land otherwise than for the particular purpose identified in clause 5. The agreement was not a lease but rather “it creates a right by way of licence or easement over a portion of the Holmes’ property for use by Hydra for the sole purpose of the provision of pipes to carry water”.
As to the second declaration sought, the Judge said the case was presented and argued on the basis that Hydra could construct a gate at the western end of the leased area and that it was entitled pursuant to the Lease to use any such gate to access the bore on the land of Mr and Mrs Rowe. The Judge held that clause 14 did not entitle Hydra to construct a permanent gate for such a purpose. He said that Hydra may be entitled to construct a temporary gate at the western end of the leased area so that it might obtain access to the leased area for the purpose of replacing the pipes.
On the appeal, Hydra took a different tack and argued that it was entitled to construct a gate at the western end of the leased area irrespective of whether it was entitled to use the leased area to gain access to the bore and pump on Mr and Mrs Rowe’s land.
The First Declaration
I think that it is common ground that there is an error in the use of the word “provisions” in clause 5 and that it should read “provision”.
Hydra argues that the Court should construe the phrase “for the purposes of provision of pipes for the supply of water” as if it in fact read “for the purpose of the provision of pipes and for the purpose of the supply of water”. It argues that the Court should have regard to the commercial purpose or object of the scheme which, of course, is and was the supply of water to various allotments. It argues that without access to the bore and pump on Mr and Mrs Rowe’s land that purpose or object could not be achieved.
Hydra argued that insofar as the Court was minded to look at the Rowe Lease and the Trimboli Lease, the provisions of those Leases support its argument. Clause 5 of the Rowe Lease and of the Trimboli Lease is in identical terms to clause 5 of the subject Lease. There is a bore and pump on Mr and Mrs Rowe’s land and an elevated tank on Mr and Mrs Trimboli’s land. Those uses would not be authorised if a narrow reading of clause 5 was adopted.
I do not accept these arguments.
First, I think that subject to what I have said about the word “provisions”, the meaning of clause 5 is clear. The authorised uses are the provision of pipes for the supply of water and any other use to which Mr and Mrs Holmes consent in writing. I do not think there is any ambiguity of meaning in clause 5, and in my opinion the argument of Hydra effectively asks the Court to re-write the clause.
In construing a contract, a Court may sometimes have regard to extrinsic evidence such as what have been referred to as “surrounding circumstances”. These surrounding circumstances may reveal quite clearly the commercial purpose or object of the contract. As I do not think that the Lease confers a leasehold interest on Hydra, there is no need to consider whether the principles which apply in the case of a contract also apply in the case of agreements which include a demise.[3]
[3] See Shevill v Builders’ Licensing Board (1982) 149 CLR 620; Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17
As I understand the authorities, before regard may be had to surrounding circumstances, there must be at least some ambiguity in the language used. In Wickman Tools v Schuler A.G.[4], Lord Wilberforce said,
“There are of course exceptions, I attempt no exhaustive list of them. In the case of ancient documents, contemporaneous or subsequent action may be adduced in order to explain words whose contemporary meaning may have become obscure. And evidence may be admitted of surrounding circumstances or in order to explain technical expressions or to identify the subject matter of an agreement: or (an overlapping exception), to resolve a latent ambiguity. But ambiguity in this context is not to be equated with difficulty of construction, even difficulty to a point where judicial opinion as to meaning has differed. This is, I venture to think, elementary law. On this test there is certainly no ambiguity here”.
[4] [1974] A.C. 235 at 261
In Codelfa Construction Pty Ltd v State Rail Authority of NSW[5] Mason J said,
“The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.
It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.”
[5] (1982) 149 CLR 337 at 352; See also IOOF Aust. Trustees v Seas Sapfor (2000) 78 SASR 151 per Doyle CJ at 159-165
I recognise that it is often not difficult to find ambiguity or that words are susceptible of more than one meaning. Furthermore, the ambiguity may involve a contest between a primary meaning and a secondary or loose meaning.[6] Nevertheless, I see no ambiguity in the words of clause 5 and I would not have regard to surrounding circumstances for the purposes of the construction of that clause.
[6] Reardon Smith Line v Hansen-Tangen [1976] 1 WLR 989 per Lord Wilberforce at 995-997
In case I am wrong about the question of whether there is ambiguity in the language used, I will go on to consider the argument which relies on the commercial purpose or object of the Lease. In order for that argument to succeed Hydra would need to show that at the time the Lease was entered into both parties realised that the right to use the leased area to gain access to the bore and pump on Mr and Mrs Rowe’s land was essential to the proper operation of the scheme. In other words, the scheme would be rendered futile or would be frustrated if no such right existed. I put to one side the question of whether it is enough to show partial frustration of the commercial purpose or object.
More specifically, Hydra needed to establish three things to make good the argument. First, that the scheme as implemented was the scheme contemplated from the outset, and in particular, that there would be a bore and pump on the land of Mr and Mrs Rowe. I think it is appropriate to proceed on the basis that this is so although there was no direct evidence on the point. The Judge may have made a finding to this effect, and it is not difficult to infer that the parties would have known where the water was going to come from before entering into the scheme. Secondly, Hydra needed to show that the parties realised that there was no other means of access to the bore and pump. Thirdly, Hydra needed to show that for this reason clause 5 should be read so as to include a right of access to the pump and bore over allotment 7. In my opinion, Hydra failed to show that the parties realised that there was no other means of access to the bore and pump, and in fact such evidence as was adduced at trial suggested there was alternative access. I should say that I do not think that the Judge’s finding that as a result of a settlement between Hydra and Mr and Mrs Rowe, and an arrangement reached with Mr Trimboli, Hydra did not require access to the bore and pump over the leased area bears upon the matter. These are events which occurred well after the Lease was entered into. The relevant circumstances are those existing at the time the Lease was entered into.
There was not a great deal of evidence about whether there was alternative access at the time the Lease was entered into. What there was suggested that there was alternative access. I say this because it seems that to an extent the trial was conducted on the basis that all of the Leases are in similar terms. Clause 15 of the subject Lease gives Hydra a right of access (subject to certain conditions) to and from the leased area over the said land. On the assumption that the Leases are in similar terms there is alternative access to the leased area on Mr and Mrs Rowe’s land over their land (ie allotment 9).
On the appeal the Court received the Rowe Lease and the Trimboli Lease. Clause 15 of the Rowe Lease is in identical terms to clause 15 of the subject Lease. There is access to and from the leased area on Mr and Mrs Rowe’s land over other parts of that land.
In my opinion, even if regard is had to the commercial purpose or object of the Lease, Hydra cannot establish that the parties would have realised at the outset that that purpose or object would be frustrated if its construction of clause 5 is not adopted. It cannot be said that the circumstances in which the Lease was entered into indicate that the parties must have intended that Mr and Mrs Holmes’ land could be used as a means of access to the bore and pump on Mr and Mrs Rowe’s land.
In relation to the argument that because clause 5 is in identical terms in the subject Lease and the Rowe and Trimboli Leases it must therefore permit more than pipes because there is a pump and a bore on Mr and Mrs Rowe’s land and a tank on Mr and Mrs Trimboli’s land, although at first blush attractive, I do not think it can override the plain meaning of clause 5. In any event, the Court does not know for example, whether the use of a bore and pump was one to which Mr and Mrs Rowe consented in writing. Furthermore, there may be different considerations applicable to the construction of these other Leases because of the differences in the other clauses.
Even if Hydra was able to overcome all of these difficulties there would still be a question as to what activities fall within the use, “for the purpose of the supply of water”. A broad interpretation of this phrase will encompass a number of activities which I doubt were ever contemplated by the parties. For example, it is difficult to see why it would not include access to the tank over allotment 7, and indeed to any other items of plant and equipment which are part of the scheme. A narrow interpretation may well exclude the right referred to in the first declaration. It is unnecessary to address this question further.
Before finally ruling on the proper construction of clause 5, it is necessary to consider whether any of the other clauses bear upon its proper interpretation, and to consider the effect of the Lease as a whole.
It does not seem to me that any of the other clauses of the Lease suggest that Hydra’s interpretation of clause 5 is the preferable one.
As far as the effect of the Lease as a whole is concerned, I do not think that it confers a leasehold interest on Hydra. The fact that the Lease refers to the parties as lessor and lessee and the area as the demised premises is far from decisive. It is the nature of the rights given not the labels applied which is decisive. The key features of a demise of a leasehold interest are that the agreement is for a definite term and that it confers a legal right of exclusive possession on the party said to be the lessee[7].
[7] Radaich v Smith (1959) 101 CLR 209; Lewis v Bell [1985], 1 NSWLR 731
The fact that there are specific provisions for entry by the person said to be the landlord or other parties is not in itself inconsistent with a legal right of exclusive possession in the person said to be the tenant.[8] Rights in a landlord to come onto the premises to inspect them or to carry out repairs are common. Nevertheless, subject to such reservations, during the term of the lease a tenant can exclude his landlord as well as third parties from the leased area or premises.
[8] Glenwood Lumber Company Ltd v Phillips [1904] AC 405; ICI Alkali v Commissioner of Taxation [1977] VR 393
Nor is the fact that there are restrictions on the purposes for which the tenant may use the leased area or premises in itself inconsistent with a legal right of exclusive possession in that person.[9] The purposes for which a tenant may use the leased area may be quite narrow and yet he may still be a tenant.
[9] Glenwood Lumber Company Ltd v Phillips [1904] A.C. 405 at 408
In my opinion, it is difficult to see how Hydra was given exclusive possession of the leased area. It is true that there are certain things Mr and Mrs Holmes cannot do on the leased area, but I do not think the effect of the lease is to give Hydra the right to exclude Mr and Mrs Holmes and third parties from the leased area subject to specific rights of Mr and Mrs Holmes to be on the leased area. In other words, the tenor of the lease is not to give Hydra exclusive possession of the leased area subject to rights, even very extensive rights, in Mr and Mrs Holmes to go onto the leased area. Hydra has a right to keep pipes on the leased area and to go onto the leased area for certain purposes. I do not think that it was given exclusive possession. In reaching the conclusion that the lease does not confer a leasehold interest on Hydra I am primarily influenced by the very restricted use Hydra is permitted to make of the leased area (clause 5), the very broad and extensive use of the leased area reserved to Mr and Mrs Holmes (clause 17) and the fact that the Lease specifically gives Hydra a right to enter onto the leased area when it becomes necessary to carry out certain works (clause 14). As to this last point, the granting of such a right would not be necessary if Hydra had exclusive possession of the leased area. In reaching my conclusion I have not overlooked the fact that the parties have used terminology appropriate for the creation of a leasehold interest, and that the Lease contains some clauses usually found in a document creating a leasehold interest. I do not think these matters are sufficient to support a conclusion contrary to that which I have reached.
I do not think the Lease has the effect of giving Hydra an easement. There is no dominant tenement[10]. I think the Lease gives Hydra rights in the nature of a licence, perhaps coupled with an interest to lay and keep pipes on the leased area.
[10] Rangeley v Midland Railway Co (1868) LR 3 Ch. App 306; Municipal District of Concord v Coles (1905) 3 CLR 96; Mitcham City Council v Clothier (1994) 83 LGERA 431
Before leaving the first declaration, I note that there was no argument about the utility or form of the first declaration. While there is no difficulty with a declaration of a permitted use which can be determined objectively eg use of land as a right of way, (either a general right of way or one restricted to particular persons or a particular means of travelling), shop, house or factory, there may be difficulties with a declaration that a person can pass up and down a particular area with a particular purpose or object in mind. It may be that those difficulties are inherent in an agreement of this nature. On the one hand, Hydra is entitled to pass up and down the leased area for the purpose of carrying out certain works (clauses 8 and 14) and, in my opinion, although it is not expressly mentioned in the Lease for the purpose of inspecting the pipes. On the other hand, subject to any argument about the agreement creating a leasehold interest, Hydra does not argue that it has a general right of way, that is, a right to pass up and down the leased area for any purpose whatsoever.
Nor was there any argument that even if Hydra was entitled to a right of the nature claimed, it was a right qualified by a notice requirement, or one that could only be exercised at particular times (subject to a case of emergency).
In view of my conclusion it is unnecessary to consider these matters any further.
The Second Declaration
I agree with the Judge’s conclusion that this declaration should be refused. There is no express right to construct gates. Should the words, “other works as the Lessee may think incidental to or necessary for” the purposes identified in clause 14 be read as including a right to construct permanent gates? In my opinion, the answer to this question is no. First, clause 15 envisages that Hydra may have to pass over other parts of allotment 7 to gain access to the leased area. In other words, it may not have direct access to the leased area. Secondly, the very limited use to which the leased area may be put by Hydra does not suggest to me that a permanent gate is incidental to, or necessary for, the purposes identified in clause 14.
Conclusion
In my opinion the appeal should be dismissed.

JUDGMENT CITATIONS

LISTED IN ORDER OF APPEARANCE IN JUDGMENT

1.Chester v Buckingham Travel Ltd [1981] 1 All ER 386; Commercial Tenancy Law in Australia Bradbrook and Croft para. [9.03]

2.ibid
3.See Shevill v Builders’ Licensing Board (1982) 149 CLR 620; Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17
4.[1974] A.C. 235 at 261
5.(1982) 149 CLR 337 at 352; See also IOOF Aust. Trustees v Seas Sapfor (2000) 78 SASR 151 per Doyle CJ at 159-165
6.Reardon Smith Line v Hansen-Tangen [1976] 1 WLR 989 per Lord Wilberforce at 995-997
7.Radaich v Smith (1959) 101 CLR 209; Lewis v Bell [1985], 1 NSWLR 731
8.Glenwood Lumber Company Ltd v Phillips [1904] AC 405; ICI Alkali v Commissioner of Taxation [1977] VR 393
9.Glenwood Lumber Company Ltd v Phillips [1904] A.C. 405 at 408
10.Rangeley v Midland Railway Co (1868) LR 3 Ch. App 306; Municipal District of Concord v Coles (1905) 3 CLR 96; Mitcham City Council v Clothier (1994) 83 LGERA 431

[2002] SASC 14

19 February 2002