Kelly v The Alternative Web Pty Ltd (No 2) - [2010] SASC 75

Supreme Court of South Australia
(Civil)
KELLY & ANOR v THE ALTERNATIVE WEB PTY LTD (NO 2)
[2010] SASC 75
Judgment of The Honourable Justice Kourakis (ex tempore)
9 March 2010
LANDLORD AND TENANT - LEASES AND TENANCY AGREEMENTS - CONSTRUCTION AND INTERPRETATION
This matter concerns several claims and counterclaims arising out of a lease granted by the defendant to the plaintiffs over land on which is situated a caravan park – in earlier decision of Kelly & Anor v The Alternative Web Pty Ltd [2010] SASC 4 (20 January 2010), plaintiffs' lease declared to not have been terminated and defendant’s claim for possession of the land dismissed – earlier judgment proceeded on erroneous assumption that separate rate was levied for piece 51 – common ground that one rate had been levied over both pieces – further issues – proper construction of cll 2.3 and 2.4 of the lease – proportion of rates and taxes payable by the plaintiffs – calculation of the net effect of the amounts due of plaintiffs’ monetary claims and entitlement of defendant to rates and taxes – whether defendant can amend counterclaim to seek declaration that plaintiffs not entitled to allow any more than seven caravans to be parked on part of defendant’s land which as not been leased to it.
Held: Plaintiffs' construction of cl 2.3 rejected – balance due to the plaintiffs is $1,023.13 – pre-judgment interest fixed in a lump sum of $450 – defendant’s application to amend counterclaim refused.
Kelly & Anor v The Alternative Web Pty Ltd [2010] SASC 4, discussed.

KELLY & ANOR v THE ALTERNATIVE WEB PTY LTD (NO 2)
[2010] SASC 75
Civil

KOURAKIS J: This matter concerns several claims and counterclaims arising out of a lease granted by the defendant to the plaintiffs over land on which is situated a caravan park at Blanchetown.
On 20 January this year I declared that the plaintiffs’ lease had not been terminated and dismissed the defendant’s claim for possession of the land.[1] I delivered my reasons for so finding and delivered reasons dealing with the other aspects of the controversy but invited submissions on the final orders which would be made. I have heard the last of those submissions today. The issues which remain to be resolved are:
1The proportion of the rates and taxes payable by the plaintiffs.
2The calculation of the net effect of the amounts due on those of the plaintiffs’ monetary claims which I have previously upheld and the entitlement of the defendant, if any, to the rates and taxes or a proportion of the same.
3The interest which should be awarded on the balance so calculated.
4Whether I should allow an amendment to the defendant’s counterclaim by which it seeks a declaration that the plaintiffs are not entitled to allow any more than seven caravans to be parked on the part of the defendant’s land at Blanchetown which has not been leased to them.
[1] Kelly & Anor v The Alternative Web Pty Ltd [2010] SASC 4 (20 January 2010).
I deal first with the question of the rates and taxes. The Waikerie Loxton Council, which has responsibility for the land on which the caravan park is situated, has levied a rate over the whole of the land comprised in Certificate of Title Register Book Vol 5891 Folio 829, that title comprises two pieces of land: piece 51 and piece 50. The caravan park is situated on part of piece 51; piece 50 is used as land on to which treated water from the septic system is allowed to flow. For my findings on the precise part of piece 51 which is the demised premises, see [31] and [33] of my reasons of 20 January this year. An Emergency Services Levy has also been imposed with respect to the whole of the land comprised in that certificate of title.
The Alternative Web by its counterclaim sought only about 76 per cent of the rates and taxes levied on the land on the basis of a calculation of the proportion of land leased to the total of the land on which the rates and taxes were levied. It now seeks permission to withdraw that pleading and to claim the whole amount of the levied rates and taxes. The resolution of that claim depends on a construction of cll 2.3 and 2.4 of the lease. I construed those clauses in [35] – [37] of my reasons delivered on 20 January this year. Notwithstanding the finding in [37], I have heard submissions again on the proper construction of those clauses. I have allowed those submissions to be made because when I delivered my judgment I had proceeded on the assumption, now shown to be erroneous, that a separate rate was levied for piece 51. As I have just said, it is now common ground that one rate has been levied over both pieces.
In those circumstances, and in light of the defendant’s application to amend the pleadings to seek the total amount of the rates and taxes payable, I thought it best to rehear the matter and hear submissions on the proper construction of cll 2.3 and 2.4. These clauses provide:
2.3To pay promptly all Council rates, Water and Sewer rates Emergency Services Levy building fire and all perils insurance premiums and any other charges and all other like outgoings assessed or levied or payable in respect of the Demised Premises, and all charges for gas, electricity, oil, telephone and all other like Services supplied (either by the Lessor or any other person or authority) to or consumed in or on or in respect of the Premises AND if the term or any portion of the Term does not coincide with any period to which any such assessment or levy applies then the same shall be apportioned between the Lessor and the Lessee so that the Lessee is not liable for the proportion which is outside the period of the Term.
2.4If the Premises are not individually assessed or levied, then the proportion of the rates taxes and other charges payable by the Lessee pursuant to sub-clause 2.3 shall be the proportion specified in item 12 of the Schedule.
The plaintiffs submit first that the word “payable” in the phrase “assessed or levied or payable” appearing in cl 2.3 does not refer to an amount struck by the taxing authority even though they accept that the words “assessed or levied” do refer to the amount struck or levied. As to the word “payable”, the plaintiffs submit that it means a proportion of the levied rate which is attributable to that part of the taxed land which has in fact been leased.
I hold against that submission for the following reasons. First, the word “payable” naturally takes its meaning from the words “assessed or levied”. In particular, it appears to me to refer to a rate or tax that is directly payable pursuant to a statutory instrument without the need for an administrative act of assessment or striking of the levy.
Secondly, I observe that the allocation formula that the plaintiffs submit is encompassed by the word “payable” is quite uncertain. It appears to depend on not just a pro rata distribution of the rate, according to the proportion that the land leased bears to the whole of the land which is subject to the assessment. It appears also to require a separate valuation of the land leased and not leased. The method of valuation of the land and by whom it would be undertaken is of course not specified by the clause. To my mind the plaintiffs’ construction of the word “payable” would render the clause more like an arbitration clause than a contractual term of fixed meaning.
I should say before leaving cl 2.3 that the liability of the lessee is to pay all rates, taxes and outgoings assessed or levied or payable in respect of the demised premises. The phrase “in respect of” is of wide import. It is capable of referring to a rate or tax levied in respect of land, only part of which comprises the demised premises.
Now that construction is, I think, supported by cl 2.4. Clause 2.4 assumes that a rate or tax encompassed within cl 2.3 will include a rate or tax imposed on land which includes, but does not exclusively comprise, the demised premises. For that reason, cl 2.4, which is a proforma term of the lease, contemplates that the parties may agree a particular proportion of that overall rate for which the lessee will be responsible. It is, I think, inconsistent with the meaning of “payable” contended for by the plaintiffs for the lease to so provide.
The interests of certainty are promoted by having the parties expressly agree to a proportion rather than construing the single word “payable” to import the complex task of arbitrating a proportion.
Turning to item 12 of the schedule of the lease, that item provides that the lessor will pay the rates and taxes for the units which are excluded from the lease as separately assessed. It will be observed that item 12 does not expressly specify a proportion to be paid by the lessee, rather it specifies the proportion to be paid by the lessor. In my view, and indeed Mr Ross-Smith as I understand it accepts this, the form of expression is not important. Item 12 can be construed so that, by negative implication, it specifies the lessee’s proportion for the purposes of cl 2.4 to be the remainder.
However, the plaintiffs contend that, there being no separate assessment of the rates and taxes payable for the units, no proportion can be calculated for the purposes of item 12 and cl 2.4. I do not accept that submission precisely because the rates and taxes for the units have not been separately assessed. The remainder for which the lessee is responsible can be calculated. There being no separate assessment, the remainder is the whole of the rate and tax liability.
The plaintiffs make a submission, which in my view has much force, that the construction that I prefer, may, in different circumstances, work an injustice. It is not to the point that those circumstances, to which I shall refer in a moment, have not eventuated. I accept that it is proper to have regard to those circumstances in assessing the proper meaning of the clause.
The plaintiffs’ submission is this: that if the units were constructed there may well have been an increase, indeed a substantial increase, in the rate levied over the whole of the property. However, if the council were to choose to strike a separate rate, perhaps even because the defendant did not request one, the plaintiffs would be left with the whole of the liability for the reasons that I have just explained. That would be a surprising if not unjust result. Nonetheless, it appears to me that the parties proceeded on the assumption that a separate rate would be assessed. It is that assumption which explains the words “as separately assessed”. I find that the parties expressly contemplated that, should the development proceed, there would be a separate assessment. Now it is true that that still leaves the potential problem that the plaintiffs have emphasised. The recognition that the plaintiffs may have, albeit inadvertently, entered into an improvident bargain does not alter my view of the proper construction of the term.
Furthermore, I am less concerned than I might otherwise have been about that construction because it appears to me that, once it is accepted that the parties proceeded on the common assumption that a separate rate and tax would be levied, the plaintiffs’ protection would lie in equity, and in particular estoppel, should the units ever be built and a separate tax not be assessed. More particularly, it suffices to observe that it is not uncommon that the agreed terms of a contract on occasion need to be supplemented by equitable remedies such as the one to which I have just referred to avoid injustice. The fact that a party may need to have recourse to an equitable remedy is not a reason to change or shy away from the proper contextual construction of a clause. Equity is capable of fashioning a just resolution involving a proportionate distribution of the rates and taxes should the circumstances requiring it ever arise in a way which cannot be achieved by a process of common law construction.
I can now turn to the next question which is the calculation of the net effect of the respective claims. The agreed amount owing for rates and taxes is $10,977.30. The amount of the Emergency Services Levy is $1,400, resulting in a total of $12,377.30 for these outgoings. The total of the plaintiffs’ claims which have been upheld is $8,400.43. The balance of those two figures is $13,976.87. In addition the parties accept, indeed I have found, that the plaintiffs are entitled to a credit of some $5,000 by reason of overpayment of rent. If that figure is taken into account, the balance due to the plaintiffs is $1,023.13.
In my view it is appropriate to determine, as I have just done, the balance due before turning to the question of interest. I have not been provided with a calculation of the interest due on the respective claims over time and the net effect of those competing claims. I shall do the best I can to apply a broadaxe to the amounts owing. I recognise that the amount outstanding to the plaintiffs arose first in time. The amounts due to the defendant were greater in more recent times, but they too were offset to a large extent by the credit of $5,000 arising from the double payment of rent in 2008. With those broad considerations in mind, I would fix pre-judgment interest in a lump sum of $450.
The remaining matter is the application by the defendant to amend its counterclaim to seek a declaration as to the remaining entitlement of the plaintiffs to park caravans on the parts of the land at Blanchetown which have not been leased to it. I would refuse to make that declaration for the following reasons.
First, the plaintiffs have no legal right, or at least none that have been determined on the evidence before me, to put any of their caravans on the land in the future. There was permission given for various periods in the past, but I have not found any ongoing binding consent such as to give a proprietary, or quasi-proprietary, right to the plaintiffs. There is no reason to make a declaration in those terms. Presumably the declaration is limited to seven caravans because that is the number that could be accommodated if the defendant provided power to more sites along the southern boundary. In that respect the declaration sought has the appearance of an arbitration granting the plaintiffs a new but limited right of occupancy as compensation for the defendant’s continuing breach.
Secondly, even if the defendant was simply to seek a declaration or an order preventing any further trespass at all, such a declaration or injunction should be refused on discretionary grounds. There is no reason why the defendant should not be left to the ordinary remedy of damages. That is all the more so in this case where the defendant has not yet complied with its own contractual obligation to provide more powered sites along the southern boundary. The respective damages that would be due to each of the parties for the breach of the other is something that cannot be worked out prospectively, it must await claims for damages in the ordinary course for the continuing breaches of those obligations.