Leisure Resort Holdings Pty Ltd v Leisure Resort Group Pty Ltd, Carlyle, Wall, Porter

[1996] QCA 518

IN THE COURT OF APPEAL	[1996] QCA 518
SUPREME COURT OF QUEENSLAND
Brisbane	Appeal No. 3884 of 1996
[Leisure Resort Holdings P/L v. Leisure Resort Group P/L & Ors]
BETWEEN:

LEISURE RESORT HOLDINGS PTY LTD

(Plaintiff)	Appellant
- and -

LEISURE RESORT GROUP PTY LTD

(First Defendant)	First Respondent
- and -

GLEN CARLYLE

(Second Defendant)	Second Respondent
- and -

CAROL WALL

(Third Defendant)

- and -

JAMES PORTER and ANN PORTER

(Fourth Defendant)	Third Respondent
- and -

CHRISTOPHER WILLIAM BLYTH and LYNETTE BLYTH

(Fifth Defendant)	Fourth Respondent
- and -

VALERIE MURIEL JOHNSON

(Sixth Defendant)	Fifth Respondent
- and -

MICROSPRAY INTERNATIONAL PTY LTD

(Seventh Defendant)	Sixth Respondent
- and -

ROBYN ANNE BYRNE

(Eighth Defendant)	Seventh Respondent
- and -

JULIE PORTER

(Ninth Defendant)	Eighth Respondent
- and -

LIONEL HENRY TRUDGIAN

(Tenth Defendant)	Ninth Respondent
Fitzgerald P. Dowsett J. White J.

Judgment delivered 13 December 1996

Judgment of the Court

1.          APPEAL DISMISSED

2.          CROSS APPEAL DISMISSED

CATCHWORDS:	CIVIL LAW - leasing - construction of variable rental formula - mistake as to contractual obligations to pay - apportionment of costs.
Counsel:	Mr M. R. Bland for the appellant Mr K. S. Howe for the respondents
Solicitors:	McCullough Robertson for the appellant Wright & Co for the respondents
Hearing date:	28 November 1996

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Brisbane	Appeal No. 3884 of 1996
Before Fitzgerald P.

Dowsett J.

White J.

[Leisure Resort Holdings P/L v. Leisure Resort Group P/L & Ors]

BETWEEN:

LEISURE RESORT HOLDINGS PTY LTD

(Plaintiff)	Appellant
- and -

LEISURE RESORT GROUP PTY LTD

(First Defendant)	First Respondent
- and -

GLEN CARLYLE

(Second Defendant)	Second Respondent
- and -

CAROL WALL

(Third Defendant)

- and -

JAMES PORTER and ANN PORTER

(Fourth Defendant)	Third Respondent
- and -

CHRISTOPHER WILLIAM BLYTH and LYNETTE BLYTH

(Fifth Defendant)	Fourth Respondent
- and -

VALERIE MURIEL JOHNSON

(Sixth Defendant)	Fifth Respondent
- and -

MICROSPRAY INTERNATIONAL PTY LTD

(Seventh Defendant)	Sixth Respondent
- and -

ROBYN ANNE BYRNE

(Eighth Defendant)	Seventh Respondent
- and -

JULIE PORTER

(Ninth Defendant)	Eighth Respondent
- and -

LIONEL HENRY TRUDGIAN

(Tenth Defendant) Ninth Respondent

REASONS FOR JUDGMENT - THE COURT

Judgment delivered 13 December 1996

At all material times, the appellant was the lessee of a number of home units in a building at

Alexandra Headlands. The various respondents were the owners and lessors of those units. The

leases were in identical form and were for 12 years from 1 April, 1984. By cl.2.02 of the leases,

the appellant covenanted:

"To pay rent of the amount set forth in paragraph 1 of the said first schedule per annum (hereinafter called ‘the base rent') ... PROVIDED THAT such base rent shall be calculated each year (but at no time decreased) as and from each anniversary of the commencement date in accordance with the formula and subject to the provisions set forth in paragraph 6 of the said first schedule."

Clause 6.12 provided that:

"(c) ‘Base rent' means the annual rent as adjusted from time to time in accordance

with the provisions of clause 2.02 hereof ....

Relevant provisions of the First Schedule were:

1.          RENT: FIVE THOUSAND ONE HUNDRED AND EIGHTY DOLLARS ($5,180)

2.          ...

3.          ...

4.          ...

5.          ..

6.          Calculation of Rent:

(I) The base rent shall be calculated each year (but at no time decreased) as and from each anniversary of the commencement date in accordance with the following formula

( E x 100

A. = B. x F C

D

Where A = the base rent for the year for which the rent is being calculated.
Where B = the base rent for the first year of the term hereby granted namely the
amount set forth in paragraph 1 of the First Schedule

... "

The other variables were also defined.

It seems that prior to September, 1994 annual rent adjustments had been calculated upon

the basis that the variable "B" was the base rent for the year preceding the year in question. The

following findings of the learned trial Judge succinctly describe how the appellant became aware of

this:

"Russell James Cassidy and his wife are the directors of the plaintiff. They have been so since 1st October 1992. Mr Cassidy swears in his affidavit, and I accept, that when he ‘took over' the rent for the 1992-1993 (year) had been calculated by his predecessor. In September, 1993 he had to calculate the rent for the 1993- 1994 year. He obtained the relevant statistics, and then made his calculations using as a precedent his predecessor's workings.

When he came to do the same exercise in September, 1994 he discovered that the earlier calculations had been based on a value for ‘B' which was in fact the rental payable in the year preceding the year for which the calculation was to be made ... and the present dispute between the parties arose."

The appellant now asserts that the variable "B" should have been the base rent for the first

year of the term, that therefore it has, for many years, paid rent calculated other than in accordance

with the prescribed formula and that it is entitled to recover the overpayments as moneys paid

pursuant to a mistake of fact or law.

The first question (which arises out of the cross-appeal) is the value to be attributed to the

variable "B" in the formula. As appears above, that variable is defined as:

"the base rent for the first year of the term hereby granted namely the amount set

forth in paragraph 1 of the First Schedule."

The amount set forth in paragraph 1 is $5,180. His Honour held that the variable "B" should
have been that figure. It is difficult to see any argument to the contrary. The respondents, however,

submit that, "the wording of clause 2.02 itself contemplates a fresh calculation each year." They

submit that this means that "B" should be the rent for the year prior to the year for which the

calculation is to be done. We confess difficulty in understanding this submission. The argument

depends upon dividing the expression "the base rent for the first year of the term", so that the term,

"base rent", can be construed independently of the words which follow it, namely, "for the first year

of the term". Such an exercise is indefensible. Some attempt was made to allege an ambiguity

which should be resolved by reference to commercial considerations. We adopt the reference by the

learned trial Judge to the decision of Gibbs J (as his Honour then was) in Australian Broadcasting

Commission v. Australasian Performing Rights Association Ltd (1973) 129 CLR 99 at p.109 where

his Honour said:

"It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the document has to be construed, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render the more harmonious one with one another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient, or unjust, ‘even though the construction adopted is not the most obvious, or the most grammatically accurate'...".

On this point, we can identify no ambiguity or even difficulty in construction. It may be that

the respondents now believe that cl.6 of the First Schedule did not reflect the original mutual

intentions of the parties, but if so, their remedy lay in a suit for rectification. Although the respondents

applied at trial to amend the defence to raise a prayer for such relief, the application was refused.

That refusal is not the subject of this appeal. We see no reason for giving a meaning to the variable

"B" which is clearly at odds with the plain meaning of the words used by the parties in their
agreement. The learned trial Judge was correct in his view of this matter.

A further issue arises out of a previous dispute between the parties as to the calculation of

rent for the year commencing on 1 April, 1989. The parties agreed to resolve that dispute by

referring the question to a valuer, Mr Cameron. He fixed the rent at $6,874 for each unit, and

appropriate amounts were subsequently paid by the appellant and accepted by the respondents or

their predecessors in title. His Honour found that:

"Although in making this ‘determination' (Mr Cameron) had some regard for the terms of the lease, it is clear that he did not regard the formula to be binding upon him in coming to his conclusion."

His Honour concluded that Mr Cameron had not acted as an arbitrator as contemplated by the

leases, nor had he performed a valuation exercise in accordance with cl.6(iii) of the leases. Rather,

the parties had simply referred the matter to Mr Cameron for resolution and had agreed to accept

his decision. The learned trial Judge found that the parties had agreed to pay the rental as fixed by

Mr Cameron for that year. There appears to be no challenge to that finding. Clause 2.02 provided

that the base rent be calculated for each year "but at no time decreased". Paragraph 6 of the First

Schedule also provided that the base rent was to be calculated for each year, "but at no time

decreased". Not surprisingly, Mr Cameron's figure appears not to have been that which would have

been derived from the application of the prescribed formula. It seems likely that his figure was

higher than that which would have been so derived. We infer this from the fact that at the trial, the

respondents (lessors) submitted that the figure for the 1990-1991 year should be not less than the

rent fixed by Mr Cameron for the preceding year. The appellant (lessee), on the other hand,

submitted that the rent for any year was not to be reduced below the rent for the preceding year

"calculated in accordance with the formula". This would necessitate a re-calculation of the 1989-90

figure solely for the purpose of calculating the rent for subsequent years.

The parties had agreed that the rent was to be at no time decreased. They subsequently agreed that for 1989-90, the rent was to be fixed in a way not prescribed by the leases. It is therefore a question of construction whether the provisoes operated to maintain the actual (agreed)

1989-90 figure as the minimum for 1990-91 or whether some other figure was to be used. The

parties clearly intended and agreed that the rent not be reduced from year to year. That they had

varied the rent-fixing process for one year did not mean that they had agreed to vary that express

agreement. Their agreement can only be given effect if the rent for 1990-91 and subsequent years

does not fall below that for 1989-90.

In the event, the application of the formula did not result in any increase in rental in any of the

years after 1989-1990, at least until 1994. (Record pp. 124-127) His Honour held:

"Although my mind has vacillated on this point, it seems to me that the better view of the provisions of the lease is that the stipulation that rentals should not be reduced was critical, and that in the circumstances of this case it was not open to the plaintiff to pay a rental less than that agreed to be paid in the 1989-1990 year thereafter. In effect, after 1989-1990 "B" becomes $6,874."

The last sentence contains an error. It should refer to the variable "A". The learned trial

Judge said as much at a supplementary hearing on 12 April 1996. Subject to that correction, we

agree with his Honour's conclusion.

In their cross appeal, the respondents challenge the finding that the payments by the

appellant were made pursuant to a mistake as to the appellant's obligation to pay. Mr Cassidy gave

evidence to this effect, but only as to the period following his appointment in 1992. The learned trial

Judge inferred from the fact that the earlier payments had been made by the appellant that it must

have mistakenly believed that it was obliged to make them. This view is to some extent supported

by the series of letters from the appellant to various respondents concerning an increase proposed in

1992. (Record pp. 115-123) Each letter refers to "my accountant's rental adjustment calculations"

which are attached. The appellant was there asserting that its accountant had calculated the

adjustment in accordance with the leases and inviting the respondents to proceed upon that basis. In

a letter dated 11 September, 1994 (Record pp.124-127), the appellant raised the alleged error for

the first time. As far as we are aware, there was no suggestion in the evidence that this "discovery"
was actually an assertion of something which had been previously known to the appellant.

The respondents urge that erroneous payment is not a sufficient basis for inferring that the

payment was made pursuant to a mistake. They submit that support for this proposition is to be

found in the decision of the High Court in David Securities Pty Ltd v. Commonwealth Bank of

Australia (1991-92) 175 CLR 353, especially at pp.380-382 and 403. It is appropriate to outline

briefly the circumstances of that decision. The appellants claimed to have suffered significant loss by

reason of their entry into foreign currency borrowing arrangements at the inducement of the

respondent, having paid money to it under a mistake of law, pursuant to a clause in their agreement

which was inconsistent with s.261 of the Income Tax Assessment Act 1936. The Court held that:

"The fact that the payment has been caused by a mistake is sufficient to give rise to a prima facie obligation on the part of the respondent to make restitution." (per Mason CJ, Deane, Toohey, Gaudron and McHugh JJ at p.379)

Their Honours then considered the question of what they described as "defences" available

to the recipient of such a payment, namely payment for good consideration and change of position in

reliance upon the receipt of the payment. We do not understand either defence to be relevant in the

present case. As to the passage at p.403 in the judgment of Dawson J, his Honour there said:

"Those who honour their contractual obligations may or may not do so because they believe them to be binding. They may do so simply because they have contracted to do so and not because they have turned their minds to any question of law. A payment made in those circumstances is made voluntarily and even if it turns out that there was no legal obligation to make the payment, it does not seem to me that it can be said that the payment was made under a mistake of law. Indeed, it cannot necessarily be said that, if the payer had turned his mind to the question of law, he would not have made the payment. Some contractual obligations are commonly performed in the knowledge that they are not binding and not every question of law can be answered so clearly or definitely as to warrant the resistance of an honest claim for payment."

We do not understand his Honour to be suggesting any binding limitation upon the capacity

to draw inferences from facts in such cases. No doubt, in some circumstances, mere erroneous

payment will not be attributable, on balance of probability, to operative mistake. In the present

case, we do not see any difficulty in drawing such an inference. Indeed, we consider it to have been
the appropriate inference in the circumstances.

One other matter is argued on behalf of the respondents. The learned trial Judge ordered

that they pay 60% of the appellant's costs of and incidental to the action to be taxed and made no

other order as to the costs of the proceedings. The net outcome of the action was that the appellant

was ordered to pay various amounts to the respondents. This was because the appellant had not

paid rent since August 1995. In determining the question of costs, his Honour said:

"I think it is fair to say that the major part of the dispute revolved around the proper

construction of the lease and on that issue the (appellant) has succeeded."

The appellant was certainly successful in establishing the value of the variable "B", although it

was unsuccessful, as it has been before us, in its argument concerning the "no reduction" provisoes.

The appellant was also successful on the issue of its reliance upon a mistake. The respondents

attempted to establish an estoppel but were unsuccessful. They abandoned an appeal against that

determination. They succeeded on a Limitations Act defence, although his Honour noted that the

matter occupied little time. Some time was spent on the question of the circumstances surrounding

Mr Cameron's involvement in fixing the 1989-90 rent, and his Honour considered that the

respondents had "the better of the argument" on that matter. The respondents do not make specific

challenges to the appropriateness of his Honour's apportionment. They rather assert that having been

successful in the action (in that the appellant was ordered to pay money to them), they ought at least

have what they describe as "the general costs of the action". They rely upon the decisions in

Colburt v. Beard [1992] 2 Qd R 67 and Thiess v. TCN Channel 9 Pty Ltd (No. 5) [1994] 1 Qd R

155.

In Colburt v. Beard the Full Court considered an appeal from a decision of a District Court

Judge in an action in which the plaintiff had sued the defendants, alleging nuisance, trespass and

negligence. She succeeded on the issue of trespass and recovered judgment, but failed on the issue

of nuisance. The issue of negligence was not addressed in the judgment. A counterclaim by the defendant was unsuccessful. The trial Judge ordered that the defendant pay the plaintiff's costs of

and incidental to the action, including both the claim and the counterclaim. The appeal was against

the order for costs.

Rule 363 of the District Court Rules provides:

"Except where herein otherwise provided, the costs of any action or proceedings shall be paid by or apportioned between the parties in such manner as the judge directs, and in default of a special direction shall abide the event ...".

The Full Court decided that the requirement that costs "abide the event" does not necessarily

mean that costs are to follow the outcome in the action. Rather, it is appropriate that the costs of

particular issues be awarded in favour of the successful party. (per Thomas J at pp. 70-71; per

Ryan J at pp. 74-75)

In Reid, Hewitt & Co v. Joseph [1918] AC 717, Lord Finlay LC said:

"The expression ‘costs shall follow the event' had a definite meaning and imported that the costs of the several issues went to the parties who succeeded upon them respectively, while the general costs went to him who on the whole succeeded in the action."

We take the expression "general costs" to include costs not readily attributable to any

particular issue. In Colburt v. Beard, the Full Court favoured an order based on success on the

issues. Similar problems arose in Thiess (supra), but there, the Full court apportioned the costs on

the basis of its assessment of the outcome. The learned trial Judge followed that course in the

present case. The respondent's complaint is really very little more than that having recovered a net

judgment, they ought to have had some of the costs of the proceedings, even if only the "general

costs of the action". No order was made for such general costs in either Colburt v. Beard or in

Thiess. They were presumably subsumed in the orders made.

The order for costs was made in the exercise of a discretion and appears to be consistent

with a proper exercise of that discretion. Generally, an appeal against such an order can only be

successful if an error in principle is shown or if there has been reliance upon an irrelevant consideration or failure to take account of a relevant consideration. The respondents do not

demonstrate any such miscarriage of the discretion. In the circumstances, the appeal and the cross-

appeal should be dismissed. There should be no order as to costs.