Hydro-Electric Corporation v; Richard Pitt and Sons Pty Ltd
[1999] TASSC 76
•23 July 1999
[1999] TASSC 76
CITATION: Hydro-Electric Corporation v
Richard Pitt & Sons Pty Ltd [1999] TASSC 76
PARTIES: HYDRO-ELECTRIC CORPORATION
v
RICHARD PITT & SONS PTY LTD
TITLE OF COURT: SUPREME COURT OF TASMANIA
JURISDICTION: ORIGINAL
FILE NO/S: 1077/1997 and 1437/1998 consolidated
DELIVERED ON: 23 July 1999
DELIVERED AT: Burnie
HEARING DATE/S: 29, 30, 31 March, 1, 13, 14, 15 April 1999
JUDGMENT OF: Slicer J
CATCHWORDS:
Landlord and Tenant - Termination of the tenancy - Notice to quit - What notice required - Periodic tenancy - Form and sufficiency of notice.
R M Hosking Properties Pty Ltd v Barnes [1971] SASR 100; Amad v Grant (1946) 74 CLR 327, considered.
Aust Dig Landlord and Tenant [82]
Estoppel - Estoppel in pais - The representation - Inducing detrimental change of position - Inducement - Detriment - Expenditure in expectation of favourable treatment by lessor.
Legione v Hateley (1982 - 1983) 152 CLR 406; Waltons Stores (Interstate) Limited v Maher and Another (1987 - 1988) 164 CLR 387, applied.
Nocton v Lord Ashburton [1914] AC 932, followed.
Aust Dig Estoppel [39 - 40]
Estoppel - Estoppel in pais - The representation - By conduct - Acquiescence - Defendant claimed expenditure on land encouraged by plaintiff's acquiescence.
Discount & Finance Ltd v Gehrig's NSW Wines Ltd (1940) 40 SR(NSW) 598; Cashman v No 7 North Golden Gate Mining Co (1897) 7 QLJ 152, considered.
Aust Dig Estoppel [43]
REPRESENTATION:
Counsel:
Plaintiff: T J Williams and A R McKee
Defendant: P W Tree
Solicitors:
Plaintiff: Gunson, Pickard and Hann
Defendant: Henry, Wherrett and Benjamin
Judgment Number: [1999] TASSC 76
Number of Paragraphs: 38
Serial No 76/1999
File No 1077/1997
1437/1998
HYDRO-ELECTRIC CORPORATION v RICHARD PITT & SONS PTY LTD
REASONS FOR JUDGMENT SLICER J
23 July 1999
The plaintiff claims possession of land and damages arising from a refusal of the defendant to give up possession following the expiration of a lease. The defendant contends insufficiency of notice and entitlement to continue occupancy by virtue of an agreement.
The plaintiff is the owner of an estate in fee simple comprising some 3,185 hectares of land situated at Bronte in the Central Highlands of Tasmania. The land was associated with the construction and operation of a power generation facility conducted in accordance with the Hydro-Electric Corporation Act 1944. Portion of the land had been leased to the father of the present company secretary of the defendant since 1951. In 1961, the defendant was incorporated and the lease assigned to it. In 1981, the plaintiff conducted a review of its landholdings in the area and advised existing leaseholders that it intended to impose new terms and conditions, in particular increased rent, with respect to those properties. Those rents had not been increased since the late 1950's and the increase, although substantial, was justified by reference to current market prices. At that time, the defendant occupied two leases named Scrub Run (2,125 hectares) and Woodwards (732 hectares) at annual rents of $784 and $440 respectively. Following review and negotiations, on 21 October and 4 December 1981, the parties entered into three leases encompassing Scrub Run (2,024 hectares), Woodwards (852 hectares) and a new, but complementary section referred to as Finlays (309 hectares). The leases were in similar form and were for a period of six years, with provision for an extension for a further term of six years as and from 1 June 1987. Absent further agreement, the defendant was required to deliver up the premises on 1 June 1993. On 25 May 1993, the plaintiff agreed to the extension of the leases for a further period of two years, such period being extended by a further 12 months. That agreement was expressed in a letter dated 19 May 1995, the relevant portion of which stated:
"The Commission is prepared to renew your leases for a further term of one year from the 1st June 1995. The terms and conditions of the leases shall be the same general conditions as contained in the original leases."
On 13 - 14 February 1982, there occurred a fire which caused significant damage to the leaseholds. Fencing was destroyed and much of the pasture rendered unfit for grazing. The leases required the defendant to:
"(2) …
(d)TO erect and maintain along the boundaries of the said land good and sufficient stock-proof fences to the satisfaction of the Commission.
(e)AT all times during the said term and so often as occasion shall require to well and sufficiently erect repair uphold cleanse and keep in good repair and condition all boundary and other fences gates drains and ditches on the said land or which shall be erected made or placed thereon at any time during the continuance of this lease.
(f)TO clear and keep cleared from the said land all noxious weeds and vermin which shall or might lessen the utility of the said land for agricultural or pastoral purposes and to use all requisite methods to keep the said land free therefrom.
(g)TO manage the said land in a good and husbandlike manner according to the most improved methods of husbandry in the district so as to keep the whole at all times in good heart and condition and not to allow any part to become impoverished or otherwise.
…
(j)NOT without the written consent of the Commission firest [sic] had and obtained to burn off or light or permit to be lit any fires on the said land and immediately to take all necessary action to bring under control any fire on the said land whether originating within or outside the boundaries of the said land and at all times to comply with and observe the directions or requirements of a responsible officer of the Commission with respect to any burning off or fires on the said land.
(k)TO comply with any notices received by the Lessee from the Tasmanian Fire Service or any Municipal Council with respect to fire hazard reduction and in the event of the Lessee failing to comply with such notice to pay to the said Service or Council any expenses incurred by such Body in the abatement of fire hazards on the said land.
(l)TO pay to the Commission any charges incurred by it in the extinguishment or bringing under control of any fires burning on the said land as a result of the Lessee's failure to comply with sub-clauses (j) or (k) of this clause or if the Commission takes action to extinguish or control fires at the request of the Lessee.
(m)NOT to erect on the said land any buildings structures or erections other than boundary or dividing fences without the previous consent in writing of the Commission and upon the determination of the term hereby granted if required by the Commission to remove any such buildings structures and erections from the said land and restore the same to its former condition making good all damage done by the said removal."
The fire rendered the properties unsuitable for the purpose required by the defendant. Whilst the Commission was not required by the terms of the lease to make recompense to the defendant, it was in the interest of both parties to regenerate the pastures and make good the damage to fences and the like. It is said that the agreement reached between the parties in regard to such rehabilitation entitles the defendant to the continued occupation of the land. The defendant pleads by way of defence and counterclaim that the plaintiff agreed to permit continued occupation of the land until the defendant had recovered the cost of such rehabilitation. The relevant pleadings are:
"20On or about 13 and 14 February 1982, a particularly hot bush fire swept over the leased lands, burning deeply into the ground, thereby destroying approximately 95% of the grazing pasture established thereon and exposing the soils to erosion.
Particulars of Extent of Land Burnt
See map annexed hereto and marked 'A'.
21In consequence of the matters pleaded in para20 hereof, immediately after the fire the land urgently required the resowing of grasses and the application of super-phosphate to effect the stabilisation and protection of the soils, and to facilitate the recommissioning of the leased lands for the grazing of stock as contemplated by the terms of the leases.
22On 5 March 1982 at the Websters property office in Hobart, the plaintiff by its servant, agent or officer John Lynton, and the defendant by its director Richard Pitt orally agreed:-
(a)that the defendant would immediately re-sow the leased land with grass seed and apply super-phosphate;
(b)that the costs of effecting such works would be borne by the plaintiff; or alternatively
(c)that the plaintiff would reduce or not increase the rental of the leased lands for such period sufficient to enable the defendant to recoup the costs of effecting such works.
(hereinafter referred to as 'the agreement').
Particulars of Conversations Comprising the Agreement
The substance of the conversations comprising the agreement were that Mr Linton said to Mr Richard Pitt that he was concerned about the damage done to the leased lands by the fire and said that Mr Pitt should carry out re-sewing with seed and supering immediately at the Hydro-Electric Commissions expense to stop the property eroding and the top soil being lost. Mr Linton also told a Mr Doug Dickinson (who was also present at the meeting) that he should write a letter to the Hydro-Electric Commission with the initial costs of re-seeding and supering to formalise what had been discussed. Mr Linton also said to Mr Pitt that the Hydro would assist with the payment for works and would reimburse Mr Pitt through a reduction of rent or payment of compensation or both. To all of these propositions Mr Pitt and Mr Dickinson assented.
22AIn the premises of paragraph 22(c) hereof, it was an implied term of the agreement that the plaintiff would not require the defendant to quit the leased lands unless and until the defendant had recouped the costs of effecting such works (hereinafter referred to as 'the implied term').
23Pursuant to the agreement, between February 1982 and December 1986, the defendant re-sowed, or alternatively caused the leased lands to be re-sowed with grass seed and applied or alternatively caused the application of, super-phosphate (hereinafter referred to as 'the works').
Particulars of Causing Re-sowing and Application
The grass seed and super-phosphate were respectively sowed and applied by a partnership known as Messrs R B K Pitt & Partners ('the partnership') at the direction of the defendant.
Particulars of Works
See annexure 'B'
24 (a) The cost of the works was $150,000;
Particulars of Cost of Works
See annexure 'B'
(b)the works effected an improvement in value to the leased lands ('the increase in value') full particulars of which shall be provided prior to trial herein.
Particulars of Improvements
See annexure 'B'."
The defence and counterclaim comprise further pleadings of agency, unconscionability and estoppel, but those issues are in turn dependent upon findings as to the existence and exact terms of the agreement or the consequences of conduct.
Following the fire, Mr Richard Pitt, the defendant's secretary, was concerned with the agistment of stock and the rehabilitation of the properties. Either he or Mr Doug Dickinson, the property manager of Webster Ltd (engaged as an agent of the defendant) spoke in general terms with Mr John Linton, the then property management officer of the plaintiff. Mr Linton had visited the scene of the fire and was well aware of the damage caused and the need for rehabilitation. Following that telephone conversation, it is common ground that Mr Pitt and Mr Dickinson met with Mr Linton, probably at the office of Webster Ltd. The question of the cost of rehabilitation was raised by Mr Pitt and Mr Linton agreed that the work was necessary and could be undertaken with the approval of the Commission. It may be that the terms of the lease, cl 2(m) required the formal permission of the Commission in the event that any structures other than "boundary or dividing fences" were to be built, but in all other respects the defendant did not require the permission of the plaintiff to undertake the works. Indeed, on a strict construction of the terms of the leases, the defendant was required to undertake at least part of the work actually performed. However, I find that Mr Linton expressed general approval of the intended actions of the defendant. Mr Pitt further raised the question of future allowance in terms of rental adjustment and/or security of tenure in the event that the defendant committed itself to an expensive exercise. Mr Linton was sympathetic and co-operative and in general terms stated that the Commission would conduct itself in an appropriate manner. However, he did not commit himself, or the Commission (since he held no such authority) to any specific response. There was no agreement, as alleged, reached at the meeting. It was in the mutual interest of the parties that the damage be made good, but it was the defendant which required urgent rehabilitation to enable it to conduct its grazing operations. Mr Pitt was entitled to believe, at the conclusion of the meeting, that Mr Linton, as property management officer, would ensure that the Commission would act in good faith and would make some future accommodation in recognition of his expenditure of capital. But there was no concluded or binding agreement. Even if the version of Mr Pitt is accepted in full, it is impossible to identify the terms of the agreement in any precise or enforceable manner. On his version, it is not certain that the Commission would pay the entire sum expended by him, whether future rental would be reduced by a specified amount, or that his tenure would be for an identified period. At best, Mr Pitt had an expectation that some allowance would be afforded the company's expenditure. This conclusion is supported by subsequent correspondence and the conduct of the parties. Following the meeting, and in accordance with a request by Mr Linton, Mr Dickinson wrote to the Commission on 10 March 1982, in the following terms:
"I wish to confirm our telephone conversation re the lease of the Bronte land to Richard Pitt and Sons of Ouse.
As clients of Webster Limited we and they are concerned that as a result of the unfortunate fire in February 1982 that their leasehold property was totally burnt.
The lessees are concerned about the devastation and lack of production as a result of the fire. They have decided to super and re-seed the areas of open country.
This decision will cost approximately $50,000 which excludes fencing and stock yard rebuilding.
With your approval work will commence this week, weather permitting. It is hoped that their efforts in re-establishing improved pasture will not be taken into account in later years for rental assessment.
Yours faithfully,
DOUG DICKINSON
Property Director."
Mr Linton, in his evidence, stated that the terms of the letter accorded with his recollection of the discussions held at the meeting. Mr Dickinson recalled that there had been a discussion about payment of capital by the defendant and some future rental adjustments. In that respect, his recollection accurately reflects the terms of his letter of 10 March.
On 2 April 1982, the Secretary of the Commission wrote to the defendant in respect of the Finlays block advising:
"I refer to discussions held with our Chief Surveyor, Mr J Linton and confirm that the Commission will not be taking into account, when determining the rental of the second term of three years, pastoral improvement which may result from the accelerated use of seed and superphosphate etc, the use of which has been brought about by the damage caused by the February bush fires.
Yours faithfully,
THE HYDRO-ELECTRIC COMMISSION
(R J Harvey),
SecretaryJWSL/DMC
cc LASMr D Dickinson,
Property Director,WEBSTER LTD HOBART"
That the letter was intended to encompass the three properties is shown by the fact that a copy was forwarded to Mr Dickinson. Between February and December 1982, the defendant expended some $72,000 in the construction of fencing and yarding and the re-sowing of approximately 835 hectares of pasture. The amount of the counterclaim is for recompense of expenditure amounting to some $153,000. The difference is made up by the further expenditure for superphosphate of $29,000 in 1983, $30,000 in 1985 and $22,000 in 1987. That claim permits two conclusions. On the defendant's case the continued expenditure of money would entitle it to ongoing tenure until an undefined period subsequent to the last expenditure. In the alternative, if the claim is one based on an agreement for repayment, then as of March 1982, Mr Linton had committed the Commission to an open ended contract, the amount of which was entirely dependent on the unilateral decision of a leaseholder. Neither conclusion is tenable and militates against any finding that there was a binding agreement reached between the parties.
The evidence supports the conclusion that there was an understanding that the defendant would not be disadvantaged by its expenditure and that any future assessment of rental would reflect that understanding. An analysis of the rental assessments supports that conclusion. The following are the relevant figures:
Scrub Run
(2,125 hectares)Woodwards
(732 hectares)Finlays
(309 hectares)Pre-lease figure $784 Pre-lease figure $440 1981 $4,200 $2,448 $3,585 1982 $6,250 $3,600 $3,585 1983 $7,000 $4,032 $3,585 1984 - 1986 $8,000 $4,600 $3,640 1987 - 1990 $10,000 $5,760 $4,240 1991 - 1993 $12,480 $7,150 $5,330 1994 - 1995 $10,000 $5,760 $4,240
There was a downward adjustment made in 1991 which took into account the decline in commodity prices and the existence of a large wool stockpile. The rentals were assessed by the Valuer General on instructions from the Commission. At the time of the first rental review, the Secretary of the Commission in requesting the Valuer General, by letter dated 9 March 1994, to provide three year assessments, advised:
"The grazing lands were severely damaged by a major bush fire in February 1982 and as a result the lessees accelerated the use of seed and superphosphate to re-establish and improve the pasture.
Please give appropriate consideration to these circumstances when making your assessment."
The defendant was notified of the new assessments in May 1994. In March 1995, Mr Richard Pitt wrote to the Commission advising:
" … that should you consider selling these propertys [sic] at any time we wish to be considered as purchasers."
It is likely that had Mr Pitt believed that the assessments did not reflect the allowance for the defendant's expenditure, he would have made vehement protest at the absence of good faith. The fact that he made no objection and committed further funds for superphosphate in 1985 and 1987 also impacts on the claims of estoppel and unconscionability. Moreover, no approach was made to Mr Linton between 1983 - 1987 in relation to the further expenditure on superphosphate.
At a time subsequent to the March 1995 letter concerning possible purchase between Mr Pitt and Mr Linton, there was a discussion about tenure. Mr Pitt, on a number of occasions, had raised the possibility of purchase of the land, but was met with the response that any sale could only have been effected by auction or tender. Mr Linton conceded in evidence that at one such meeting he might have discussed the question of compensation in the event that the Commission breached its leasehold obligations. It is likely that the matter was mentioned in a wider context, namely, that of insufficient tenure subsequent to the date of expiry of the 12 year period allowed by the leases. But this concession does not warrant the conclusion that he did other than repeat his earlier statement that the defendant would receive fair treatment. In August 1986, the Secretary of the Commission advised the defendant that the 1984 review "did take into account the extraordinary expenditure on seed and fertilizing after the February 1982 fires." That the assessments did, in reality, reflect that expenditure is confirmed by Mr Hamish Kyle, the District Valuer, who conducted those assessments. The method employed by him in the valuations is one based on the carrying capacity of land expressed in terms of a dry sheep equivalent (DSE), a unit which can be converted into comparable figures for cattle or nursing ewes. In making his assessments, he made no allowance for the increased carrying capacity of the land occasioned by the re-sowing and use of superphosphate. The rent calculation per DSE varied, but not the number of units carried on the respective properties. In this way he took into account the capital expenditure. In 1990, he advised a rent reduction in percentage terms to take into account the downturn within the industry. In the calculations for the initial rentals in 1981, he made the following DSE estimates:
Scrub Run Woodwards Finlays 2,000 1,150 850 which, at a rental of $3.50 per DSE, produced the rental figure of:
$7,000 $4,025 $2,975 The accommodation permitted by this methodology is illustrated by a comparison of the assumed units as compared with the actual number of stock converted to units carried on each leasehold:
Scrub Run Woodwards Finlays Feb 1982 1,400 1,000 nil Dec 1982 nil nil nil Jan 1983 1,400 1,200 400 Jan 1984 1,800 1,700 600 Jan 1985 2,000 1,800 600 June 1986 2,200 2,000 600 June 1987 2,400 2,200 700 Jan 1988 2,700 2,400 700 June 1998 2,600 2,300 900
Thus in each relevant period, the rental equivalent discount was significant. The defendant benefited by allowance for a greater carrying capacity than that for which rental was assessed. In 1993, the rentals were reduced by percentage figures of between 19 and 26 per cent on the 1990 rentals in order to reflect reduced returns to wool producers.
In relation to the question of tenure, the plaintiff was entitled to possession in June 1993. On 25 May 1993, the Commission advised the defendant that it "could continue in possession for two years", but that it could:
" … give no guarantee that at the end of the above two year period you will be able to continue leasing the areas concerned."
The defendant accepted the terms and conditions associated with the extension and advised:
"We would hope to have the leases renewed in two years time, or should the Hydro decide to sell the propertys [sic] we would hope to be given first offer of the propertys [sic] if they are not put to public auction.
We should like to advise the commission of the vast development carried out by our company of the land in question after the 1981 fires at Brontie [sic]. Indeed we have spent vast sums of money putting the country to improved pasture by aerial seeding and supering, since then, as well as a number additional super applications since the pasture seeding was done in 1981.
As well as fencing and yard rebuilds which were destroyed in the fires. This has been against a backdrop of plummeting wool prices since 1988.
Hope to hear from you soon.
Yours faithfully,
Richard Pitt, Director"
The letter evidences, not the existence of a concluded agreement, but a request for special treatment in the event that the land was offered for sale. On 19 May 1995, the Commission offered a further renewal of 12 months from 1 June and requested the defendant to:
" … confirm your acceptance to the continuation of the leases on the terms and conditions as stated above."
The defendant did so in respect of each lease. Thereafter, as the Commission prepared for the disposal of the lands, it permitted continued occupancy on "a bi-monthly holding-over period".
In July 1996, the defendant advised the Commission that it was entitled to three months' notice and, having outlined the amount of work performed on the leasehold areas, requested:
"In view of our huge capital input, I write to you as an exemplary tenant, without peer in this region, to request either:-
a) Compensation for our capital works, or
b)Consideration of giving us first right of refusal on the sale of these runs, a fair price being negotiated by independent valuers."
Again, the communication evidences a plea for special treatment in the light of the previous tenancy relationship. It does not evidence a concluded agreement.
The documentation, rental allowance and conduct of the parties subsequent to March 1983, do not warrant the conclusion that there existed either an agency relationship or an agreement for the payment of compensation, or an unspecified continuance of tenancy by way of contract. Those causes of action pleaded, either by way of defence or counterclaim, are not sustained.
Representation estoppel and unconscionability
The defendant pleads by way of counterclaim:
"28 Further or alternatively:-
(a)on or about 5 March 1982 the plaintiff by its servant, agent or officer John Lynton orally represented to the plaintiff that
(i) the defendant had its authority to perform the works; and
Particulars of Authorised Works
The plaintiff authorised the defendant to undertake the re-sewing of grasses and the application of super-phosphate sufficient to effect the stabilisation and protection of the soils, and to facilitate the recommissioning of the leased lands for the grazing of stock.
(ii) the plaintiff would bear the costs of the works; or alternatively
Particulars of Costs to be Borne
All material and labour costs associated with the re-sewing of grasses and application of super-phosphate.
(iii)that the plaintiff would reduce or not increase the rental of the leased lands for such period sufficient to enable the defendant to recoup the costs of effecting such works.
such that the relationship of principal and agent was established between them ('the relationship') from which relationship the plaintiff would not be free to withdraw;
Particulars of Service, Agency or Office of Lynton
Mr Lynton was employed by the plaintiff as its property manager, and as such had actual and apparent authority to negotiate, make representations on behalf of, and bind by contract, arrangement or understanding the plaintiff.
Particulars of Conversations Comprising the Representation
The defendant repeats and relies upon the particulars sub-joined at para22 hereof.
Particulars of Relationship of Principal and Agent
The terms of the agency, other than those implied by operation of law, were as follows:
AThat the defendant had the plaintiff's authority to perform works on the leased lands on behalf of the plaintiff;
BThat the plaintiff would bear the costs of the works so performed, either by direct reimbursement of the defendant or by reducing or not increasing the rental of the leased lands for such a period sufficient to enable the defendant to recoup the costs of effecting such works.
(b) acting in reliance on the relationship, the defendant performed the works;
(c) it is unconscionable for the plaintiff to deny:
(i) the existence of the relationship; or
(ii) its liability to bear the costs of the works performed by it agent; or
(iii)that it may not require the defendant to quit the leased lands without affording the defendant any recoupment of the costs of effecting the works;
(d) in the premises the plaintiff is estopped from denying
(i) that in performing the works, the defendant was its agent; and
(ii) its liability to bear the cost of the work;
(iii)that it may not require the defendant to quit the leased lands without affording the defendant any recoupment of the costs of effecting the works."
The claim is based on the understanding of the defendant that the plaintiff accepted the proposal for rehabilitation and the expectation that it would make recompense for the capital outlay. The defendant's case is based on evidence of the return received from the expenditure as against the outlay. The conduct of the parties is said to give rise to an implied term, the creation of an equitable right to compensation based on detriment occasioned by representation, or unjust enrichment obtained by unconscionable conduct. But a party relying on those causes of action must clearly show a causative link between the representation or conduct and the ensuing benefit or detriment in order to succeed with such a claim. That is not a statement that the standard of proof must be greater than the balance of probabilities. It means that the representation or conduct is of such a nature that it directly causes the consequence alleged. The fact that there is acquiescence in the course taken by another or the encouragement of a commercial decision is not in itself sufficient. Further, a decision taken on the basis of mutual interest (in this case, the repair of the land) by persons or institutions with capacity to make informed judgments ought preclude a remedy based on retrospective evaluation of the costs and benefits to the respective parties. In the circumstances of this case, both parties were concerned to see the rehabilitation of the leasehold property. The defendant was anxious to achieve a return to productive use. The plaintiff was concerned about the long-term viability of its property, but was not required by the terms of the leases to make good the damage caused by the fire. There was mutuality of interest, but the rights and obligations of the respective parties differed. The defendant was well able to make its own assessment of the commercial benefits and risks associated with the level of expenditure required following the damage caused by fire. The plaintiff gave comfort in statements made by one of its officers that it would act fairly and honourably in its future dealings with the defendant over rental and tenure. Those statements did not, in themselves, give rise to an equitable right, and, in any event, were fulfilled.
Much of the evidence relied on by the defendant concerned the carrying capacity of the leasehold properties and the methodology adopted in the assessment of the base rental value, which in turn determined the ultimate rental calculation. That contested evidence, in turn, was dependent upon an evaluation of the improvement to the properties occasioned by the expenditure of the defendant. The differing approaches to this issue, albeit interesting from an agricultural perspective, do not require resolution. The agreement alleged by the defendant is dependent on proof that its expenditure produced an improvement of such a nature that the value of the property has been so enhanced as to warrant recompense. The corollary is that the return obtained has been insufficient to recoup the expenditure and that accordingly longer tenure should be granted. The contradictory premises are untenable. The defendant received an effective lease of some 16 years, four years in excess of that originally granted. The defendant received the benefit of increased productivity resulting from its expenditure without a commercially assessed rental increase. The economic return, as calculated by the respective expert witnesses called on behalf of both parties, was the subject of competing assessments arising from the differing methods employed in the calculation of the base rental, multiplied by the carrying capacity compared with the current state of the properties, rather than the actual capacity of the land. The defendant has not established detriment by reference to actual losses outlayed in reliance upon a representation by the plaintiff. It is true that the value of the property has increased, partly as a result of the defendant's expenditure, but this alone does not establish unjust enrichment.
The relationship between the plaintiff and defendant was that of owner/leaseholder. Whilst the relationship was amicable and both parties had an interest in the state of the land, it did not involve a requirement that each account to the other for the respective benefits received from either ownership or use of the land. The terms of the relationship were as stated in the lease agreement. The representation made by an officer of the plaintiff that it would take into account the expenditure of the defendant in its future dealings did not constitute an inducement for the defendant to act to its detriment in reliance upon the plaintiff's representation (Nocton v Lord Ashburton [1914] AC 932; Dillwyn v Llewellyn (1862) 31 LJR Ch 658). Even accepting that the position of and representation made by one of the plaintiff's officers was influential in the decision of the defendant to incur expenditure, the relationship between the parties was neither "presumptive" (Johnson v Buttress (1936) 56 CLR 113), nor one based on undue influence (Watkins v Combes (1922) 30 CLR 180). The defendant was experienced in the conduct of its operation and, through its secretary and advisers, well understood the economics and vagaries of "high plateau" grazing. Whilst the plaintiff was the "stronger party", it does not follow that the negotiating power was unequal. The corporation derived a benefit from the leasing of land not directly required for the generation of power, and potential leaseholders who conducted grazing operations were well able to assess the market forces which determined the value to the owner of any leasehold. The rent assessments were conducted by an agency independent of the commercial arm of the corporation. Account was taken of the capital expenditure made by the defendant even though the defendant now believes that it could have been more generous. The plaintiff did not take advantage of the fire or the desire of the defendant to improve the land to obtain a beneficial bargain (The Commercial Bank of Australia Ltd v Amadio (1982 - 1983) 151 CLR 447).
The defendant relied upon promissory estoppel as a basis for equitable relief, either by way of continued possession or damages. In order to succeed it must first show that there had been clear and unequivocal representation (Legione v Hateley (1982 - 1983) 152 CLR 406; Foran v Wright (1989) 168 CLR 385). There are a number of additional evidentiary requirements which the defendant must establish before a right (positive or defensive) based on equitable estoppel can be established. Those requirements are as stated by Brennan J in Waltons Stores (Interstate) Limited v Maher and Another (1987 - 1988) 164 CLR 387, when he stated at 428 - 429:
" … it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant's property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff's reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs."
In the circumstances of this case, the evidence favourable to the defendant is capable of supporting the following conclusions:
(1)(a) The defendant expected that it would receive favourable treatment from the plaintiff for its expenditure of capital in 1983. It had no basis for such expectation in relation to its later expenditure.
(b) The expected legal relationship was unspecified but at its highest could never have been one from which the plaintiff could never withdraw. Such a conclusion would warrant a finding that the defendant is entitled to a fee simple estate in the property.
(2)The plaintiff gave comfort to the defendant in relation to its initial decision to expend capital in 1983. That confidence was to the effect that the expenditure would be taken into account in the assessment of future rent and that the plaintiff would look favourably on a grant of extended tenure.
(3)The defendant acted, in part, on the assumption or expectation of the representation. It is not reasonable to infer that following the fire, the defendant would have abandoned its use of the land but continued to make its lease payments. The plaintiff was not obliged to make good the damage to pasture and was entitled to enforce its rights evidenced in the leasehold agreements. The expectation of favourable future treatment may have impacted upon the amount of capital expenditure, but not the decision to render the land suitable for continued grazing.
(4)The plaintiff knew that the defendant was intending to expend capital. The defendant has not shown that it acted solely on the basis of the representation.
(5)The plaintiff's representation could not be said, at the time of its making, to have occasioned detriment since its effect or impact could not be assessed until such time as the defendant was requested to relinquish possession. Even accepting that there was detriment, and no such finding is made, the detriment claimed is simply one based on the claim that the defendant would obtain a better commercial bargain by reason of longer tenure.
(6)The plaintiff has failed to afford longer tenure. Yet, on the defendant's case the plaintiff has taken action to avoid or at least minimise detriment. It made allowances in its assessment of rent and has afforded the defendant additional tenure. The defendant is not entitled to bring into account capital expended after 1983. Even if it was so permitted, the consequence would be that the greater the amount expended, the longer it would be entitled to remain on the properties. The plaintiff would, on the defendant's case, have no power to preclude further spending, unless it was notified and gave assent, and could not as a consequence enforce any stipulations as to time contained in the lease.
The defendant has not established its claim based on unconscionable conduct or promissory estoppel. Implicit in the pleadings of the defendant is the alternate claim that, at least, the plaintiff acquiesced in the expenditure made by the defendant and thus permitted it to act to its detriment. The term acquiescence has different meanings, but in the context of this case can be described as "acquiescence, which prevents a person, who has knowingly permitted another to act, through mistake, to his own detriment and to the advantage of the former, from profiting by the other's mistake". Jordan CJ in Discount & Finance Ltd v Gehrig's NSW Wines Ltd (1940) 40 SR(NSW) 598 at 603 (see also Ramsden v Dyson and Thornton (1866 - 1867) 1 - 2 LR HL 129). That sense of meaning has been explored by Sir Samuel Griffith in Cashman v No 7 North Golden Gate Mining Co (1897) 7 QLJ 152, when he stated at 153.4:
"The term acquiescence is not a term of art. It was used in courts of equity as a term to characterize a defence which may be set up by a person against whom another makes a claim for equitable relief. It is a well-known doctrine of equity that when a person claiming equitable relief has lain by for a long time and so conducted himself that it would be inequitable to permit him to complain of the defendant's actions, the court will refuse to grant the relief. The term also bears another meaning. It may be fairly applied to a man who, seeing an act about to be done to his prejudice, stands by and does not object to it. He may be very properly said to be acquiescing in that act being done. But the difference in point of law in the legal consequences of the two kinds of acquiescence is quite clear. A man who stands by and sees an act about to be done which will be injurious to himself, and makes no objection, cannot complain of that act as a wrong at all. He never has any right of action, because he stands by and allows the act to be done. Acquiescence in the other sense is a defence to an action for specific relief, on the ground that the plaintiff cannot be reinstated in his original position without doing injustice to the defendant, but it is not an answer to a cause of action already accrued."
The plaintiff did not oppose the decision by the defendant to expend money. It stated its approval. It was to the mutual benefit of both parties that the pasture be enhanced. But there was no mistake. The defendant perceived commercial benefit through capital expenditure. It expected some consideration to be afforded for such expenditure and this was provided. But simply because it could have obtained greater return, or because the capital value of the land has been enhanced, provides neither an equitable right nor a defence.
Advantage and detriment
The defendant claims that it has expended the sum of $153,000 between March 1982 and February 1987 on the improvement of the land. For the purpose of calculation only it will be accepted that the original "representation" permitted the expenditure of $81,000 spent between 1983 and 1987. The evidence supports the conclusion that, had there been no fire, the defendant would have expended some moneys to maintain undamaged pastures in a commercially viable condition. On those calculations, the evidence does not justify a finding of detriment. The rent was assessed by reference to an assumed rather than actual carrying capacity. A comparison of the rent actually paid with that permitted by the standard calculation shows no detriment.
Rent Paid
(based on assumed DSE)Increased Rent Payable
(based on actual DSE)Difference
1/1/82 to 31/12/82 $10,283 nil nil 1/1/83 to 31/12/83 $13,435 $10,500 (-$2,935) 1/1/84 to 21/1/84 $15,308 $15,375 $66 1/1/85 to 31/12/85 $16,000 $17,600 $1,600 1/1/86 to 31/12/86 $16,000 $19,200 $3,200 1/1/87 to 31/12/87 $20,000 $26,500 $6,500 1/1/88 to 31/12/88 $20,000 $29,000 $9,000 1/1/89 to 31/12/89 $20,000 $29,000 $9,000 1/1/90 to 31/12/90 $26,000 $37,700 $11,700 1/1/91 to 31/12/91 $26,000 $37,700 $11,700 1/1/92 to 31/12/92 $26,000 $37,700 $11,700 1/1/93 to 31/12/93 $21,000 $30,450 $9,450 1/1/94 to 31/12/94 $21,000 $30,450 $9,450 1/1/95 to 31/12/95 $21,000 $30,450 $9,450 1/1/96 to 31/12/96 $21,000 $30,450 $9,450 1/1/97 to 31/12/97 $21,000 $30,450 $9,450 1/1/98 to 31/12/98 $21,000 $30,450 $9,450
The total rent which could have been claimed exceeded that actually paid by the sum of $118,231. That calculation is to the advantage of the defendant in that it assumes a rent reduction of $2,935 in 1983, a period reached by the initial agreement. The defendant received a benefit to which it was not, in the terms of the leasehold agreements, entitled. The benefit was a reflection of the representation that allowance would be afforded for the initial capital expenditure in 1982 of $72,000.
Both parties called evidence in relation to the enhanced carrying capacity, the results of the application of the superphosphate, the long-term prospects of pasture renewal and the current state of the property. Much of the difference between the competing opinions and analyses of the witnesses can be explained by seasonal changes, varying rainfall, the capacity for regrowth by native species and the effects of overstocking. A further difference concerns whether the properties could be used for grazing throughout the year, or were only suitable for seasonal occupation. The vagaries inherent in assumptions made by the witnesses do not permit a confident resolution of conflicting expert evidence and, in any event, such is not required for the purpose of judgment. There was some difference as to the appropriate rental rate per DSE and where there is difference, the calculations of the District Valuer, Mr Kyle, will be preferred.
The defendant adduced evidence that the current value of the land shows that there has been benefit or unjust enrichment to the plaintiff. It is said that the current values of the leasehold properties are:
Finlays $120,000 Woodwards $225,000 Scrub Run $325,000
and that such shows benefit derived by the plaintiff. The Court accepts neither the valuations nor the approach. The values do not accord with market movements during much of the relevant period. More significantly, the figures do not show that the increased values are derived from the improvements made by the defendant. It is accepted that the proper management of the land has enhanced its value, but such could be said of any pasture lease. Moreover, proper management was required by the terms of the lease and was essential to enable the defendant to make a commercial return on its grazing operations. Many other factors are relevant to an estimate of the sale price of land. The contention that enhanced value shows inequitable conduct is rejected.
Quantum meruit
The defendant contends, in the alternative, that if the term of the agreement lacks precision and does not permit quantification of the amount of compensation payable, that it is entitled to recompense on the basis of either the cost of the works performed, or their value as currently assessed. In part the claim is based upon a finding of contract and in part upon the claim of unjust enrichment. The relevant pleadings claim:
"25 In breach of:
(a) the agreement the plaintiff has:
(i) failed and refused to bear the costs of the works;
(ii)failed to reduce or not increase the rental of the leased lands, whether sufficient to enable the defendant to recoup the costs of effecting such works, or at all;
(b)the implied term, the plaintiff has purported to require the defendant to quit the leased lands without affording the defendant any recoupment of the costs of effecting the works.
26 Further or alternatively:-
(a)on 5 March 1987 the plaintiff by its servant, agent or officer John Lynton requested the defendant to perform the works;
Particulars of Request
The defendant repeats and relies upon those particulars sub-joined to para22 hereof.
(b)between February 1982 and December 1986 the defendant performed the works;
(c) the reasonable cost of the works was $150,000;
(d)alternatively the works have conferred upon the plaintiff an incontrovertible benefit either:
(i) in the sum of $150,000; or
Particulars of Composition of $150,000
The defendant repeats and relies upon the particulars sub-joined to para24(a) hereof.
(ii) to the extent of the increase of value.
Particulars
The defendant repeats and relies upon the particulars sub-joined to para24(b) hereof."
The claim has no basis separate from that alleged in the primary causes of action.
Notice
The terms of the original lease cl 2(p) required the defendant:
"ON the determination hereof peaceably and quietly to deliver up the said land to the Commission in a good and substantial state of repair and condition."
Whilst 4(c) provided:
"THAT upon such determination as aforesaid no compensation for loss or damage in respect of any improvement whatsoever effected by the Lessee shall be payable by the Commission."
The latter clause, in itself, denies the defendant any entitlement in respect of its counterclaim, although the finding of a subsequent variation to the lease might permit success. The extensions of the leases for two years in May 1993, and a further year in May 1995, were expressed to be subject to the same terms and conditions as contained in the original leases. Assuming that the termination clauses and requirement of notice were re-imposed in the renewals, the following clauses have relevance:
"4(d) THAT the Commission will on the written request of the Lessee made three months before the expiration of the term hereby created and if there shall not at the time of such request be any existing breach or non-observance of any of the covenants on the part of the Lessee grant to it a lease of the said land for the further term of six years from the first day of December 1987 paying therefore for the first three years an annual rental as determined by the Commission and thereafter such annual rental for the remaining three years as the Commission may again determine and containing the like covenants and provisos as are herein contained with the exception of the present covenant for renewal.
(e) THAT if the Lessee fails to renew the term hereby created as provided in Clause 4 (d) hereof and with the consent of the Commission continues in possession of the said land after the determination of the tenancy the Lessee shall do so as a quarterly tenant upon all the terms hereof which are applicable to a quarterly tenancy and determinable by either party at any time on three months' notice in writing.
…
(h) ANY Notices required hereunder to be given to the Lessee shall be deemed duly given if the same be in writing signed for and on behalf of the Commission by its duly authorised officer and sent through the post in a prepaid letter addressed to the Lessee's registered office address or at the last known registered office address of the Lessee and any such notice if sent through the post shall be deemed to be received by the Lessee at the time when the letter containing such notice would in the ordinary course of post be delivered."
There is a tension in interpreting these requirements of notice in relation to the extensions. Clause 4(d) permits the lessee to require renewal of the original six year term. Clause 4 (e) operates in the event the lessee does not seek such renewal, and could be said to have no effect at the expiration of the 12 year period. One of the matters pleaded by the defendant is dependent upon the requirement that three months notice be afforded. On 3 May 1996, the Commission permitted continued occupancy on the basis of "a bi-monthly holding-over period", whilst the defendant contended in its letter of 24 July 1996 that it was entitled to three months' notice. On 8 April 1997, the Commission advised the defendant:
"Your current tenure is on the basis of the lease which you are currently in a holding over capacity as a quarterly tenant. In accordance with clause 4(e) of the lease I formally advise you that the Hydro terminates the lease and your current tenure and request that you vacate the property by 12 July 1997."
The Commission, allowing for different interpretations in relation to the requirement for notice, served notices to quit, dated 29 May 1997, in relation to each leasehold in terms which provided:
"2The Hydro-Electric Corporation has served you with a Notice to Quit dated the 8th day of April, 1997 requiring you to quit, yield up possession and deliver up to it the said land and improvements by the 12th day of July, 1997.
3You hold as tenant pursuant to an agreement made by offer contained in a letter to you dated the 19th day of May, 1995 and accepted by you that you would lease the said land for a period of 12 months on the same terms and conditions in a prior lease between yourself and the Hydro-Electric Commission dated the 21st day of October, 1981.
4TAKE NOTICE that in the event that the Notice to Quit dated the 8th April, 1997 is not a valid and effective notice to terminate your tenancy, the Hydro-Electric Corporation as owners of the said land pursuant to Clauses 4(e) and 4(f) of the said terms and conditions require you to quit and yield up possession of the land and improvements at the expiration of three (3) months from the service of this notice."
The defendant has not complied with any of the notices. It contends that whatever form of notice relied on is defective and, that on any approach, the date on which possession was to be delivered up does not coincide with the period required by the relevant holding-over period. It is said that if cl 4(e) (requiring three months' notice) is the relevant term, then the notice afforded by the letter dated 8 April 1997 is sufficient, but that such was not the applicable term. In the event that the tenancy was bi-monthly, then the notice given on 29 May is defective in that the date of delivery up does not coincide with the prescribed tenancy period. It is said that a bi-monthly tenancy cannot be terminated by means of three months' notice and that the failure to afford proper notice entitles the defendant to a continuation of a further 12 months' lease in accordance with the renewal afforded by the letter dated 19 May 1995, and absent such 12 months' notification, that the defendant is entitled to continued occupancy. On any approach, the defendant ought not succeed. It is common ground that the defendant has paid no rental since 26 June 1997. Proceedings were commenced on 3 June 1997, and the question of adequacy of notice not raised until the delivery of a defence. Since that date there have been amended pleadings, all of which contain references to the issue of notice. On any interpretation of the form of holding-over tenancy, it is clear that as of the date of hearing, apart from the issues of contract and equity, that any entitlement to notice and continued occupation has expired. In so far as is necessary, the finding is that the plaintiff was required to give three months' notice by reason of its acceptance of the defendant's claim made on 24 July 1996, that it was entitled to three months' notice. That letter stated:
"As such we are now leasing on a bi-monthly basis, until we are given three months written notice of the termination of our leases (agreement 4F [sic])."
The plaintiff was not required to pay regard to cl 4(e) of the original lease, but it accepted a three months' requirement in its letter of 8 April 1997, and by its continued acceptance of rental payments on a quarterly basis (R M Hosking Properties Pty Ltd v Barnes [1971] SASR 100). In doing so, it varied the terms of tenure and accordingly gave proper notice. A finding that the lease was bi-monthly would not avail the defendant. That argument is dependent upon a conclusion that a lessor is precluded from giving notice for a period longer than the terms of the tenancy. Whilst the law properly requires strict compliance with time requirements prescribed by a lease or statute, vis-à-vis provision of notice, that compliance is protective of a tenant's right of occupancy. Notice which seeks to limit those rights will be deemed invalid. But when a landlord or lessor affords greater time for the delivering up of premises than is required by law, courts ought be reluctant to preclude the owners from exercising their rights simply because they have shown good will or acted generously. There is authority for the proposition that where there exists a periodic tenancy with "a lease period of notice" required to bring the tenancy to an end, that the two periods must coincide. The reasoning adapted by Latham CJ in Amad v Grant (1946) 74 CLR 327, is consistent with that proposition, since unless there is co-incidence then a periodic tenancy, rather than a holding-over is created. His reasoning, stated at 337, was that:
"A periodic tenancy, whether it be yearly, quarterly, monthly or weekly, is not a series of separate tenancies, but is a single tenancy which continues until it is duly determined. Thus, when a new period begins the tenant is entitled … to continue to hold as a tenant for the complete period which has begun ... "
The reasoning was not adopted by Dixon J (in dissent) when he stated at 343:
"It is unnecessary for me to consider the question because, in my opinion, under the general law the notice to quit was valid and sufficiently fulfilled the requirements of the tenancy agreement. The objection taken to its validity is that the date upon which it requires delivery of possession falls within one of the periods in respect of which monthly rent is payable under the tenancy agreement and not upon the seventeenth day of a month. In a yearly, half-yearly or quarterly tenancy, when there are no express conditions governing the termination of the tenancy, the notice to quit must expire at the end of a year, half year or quarter. It is now settled in England that the same rule applies to monthly and weekly tenancies (Lemon v Lardeur), and, as I have said in Grosglik's case, I think that there is no reason why the rule should not be considered as applicable to Victoria. In the present case, however, there is an express condition governing the termination of the tenancy. The tenancy is to continue until one month's notice in writing shall have been given by either party to the other. Nothing is said about the necessity of such a notice expiring upon a specific day of the month or about its following any recurring period. To invalidate the notice to quit that has been given a restriction upon or condition of the power to terminate the tenancy must be imported which is not expressed. An implication must be made in the tenancy agreement requiring the month's notice to expire with a period corresponding to the monthly rent days. I can see no sufficient support for such an implication.
… a provision for a half-year's notice for a yearly, a quarter's notice for a quarterly, a month's notice for a monthly and a week's notice for a weekly tenancy may, prima facie, be interpreted as referring to a notice expiring with a recurrent period of the tenancy. This may also be the prima-facie construction where there is a yearly tenancy and the provision cuts down the length of notice to a quarter and so perhaps similarly with other periodical tenancies."
He did not believe at 344:
" … that a provision for a week's or a month's or six-weeks' notice terminating a tenancy from year to year would be construed as meaning prima facie that the notice must expire with a year. But it is not material how the periodical character of the tenancy appears. It may arise from the reservation of the rent and the fact that it is calculated by the year, the quarter, the month or as the case may be. The tenancy need not be expressly described as yearly, quarterly or monthly. Even where there is a periodical tenancy, it is enough to displace the interpretation requiring the notice to expire within one of its periods if there are expressions showing that the time was unrestricted when the notice might be served : Wembley Corporation v Sherren : Soames v Nicholson. If the notice may be given at any time, its prescribed currency may terminate on any date."
I would prefer the reasoning of Dixon J. But the authority of Amad does not advantage the defendant. It governs cases where there is a yearly tenancy which can be determined by a lease period, such as three months. In such a case, notice given in November in respect of a lease due for removal on 31 December would not operate to bring the lease to an end as of 31 January, since a new yearly tenancy would have come into existence. But a notice of four months given in August would remain valid. In the circumstances of this case, notices were given much earlier than that required. Their effect was to bring the tenancy to an end and create specified further tenancies of one month for which notices to quit were given. The notices were valid.
Remedy
The plaintiff is entitled to a declaration that it has been entitled to vacant possession of the three properties subject to lease as and from 12 July 1997 and is entitled to orders for possession of the lands.
The defendant has paid no rent beyond that due with respect to each property since 30 June 1997, and the plaintiff is entitled to those rents up until the date of judgment. During the course of the hearing, the Court was told that attempts by the plaintiff to deal with the lands had been precluded by the continued occupancy and the nature of the legal proceedings. The defendant did not content itself with relying on a claim for equitable compensation and chose to maintain occupation. It may be that there will be a need for a further assessment of damages. In any event, counsel will be afforded the opportunity to make further submissions in relation to any assessment of damages for trespass or recovery of mesne profits. There will be some arrangement made for the removal of stock and a need for quantification of rent based on the date of delivery of possession.
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