Owendale Pty Ltd v Anthony
Case
•
[1967] HCA 52
•22 December 1966
No judgment structure available for this case.
HIGH COURT OF AUSTRALIA
Windeyer J. Barwick C.J., McTiernan, Kitto, Taylor and Owen JJ.
OWENDALE PTY. LTD. v. ANTHONY
(1967) 117 CLR 539
22 December 1966
Landlord and Tenant
Landlord and Tenant—Lease—Determination—Forfeiture—Covenant to commence erection of building within specified time—Clearing operations commenced—Whether breach—Acceptance of rent after notice of breach—Conduct of lessor and lessee—Waiver—Crown lease—Statutory procedure for determination upon breach of covenant—Effect of conduct upon statutory right to determine—Notice—Requirement that conditions for failure to comply with &hich lease may be determined be fully set out—Reference to terms of lease—Whether sufficient—Signature on notice—Delegation of function by Minister—Delegate designated by office held—City Area Leases Ordinance 1936-1964 (A.C.T.), ss. 6,22.*
Decisions
1966, December 22.
WINDEYER J. delivered the following written judgment:-
The main question in this case is whether the Commonwealth as lessor is entitled to forfeit a lease granted to the plaintiff as lessee of a parcel of vacant land in the City of Canberra for a failure to comply with a covenant in the lease. (at p541)
2. The lease in question was granted on 13th June 1962 for a term of ninety-nine years from that date. The lessee was to erect a residential hotel on the land and to use the land for the purposes of a residential hotel only. (at p541)
3. The lease contains (in cl. 1 (c)) a covenant in the following terms:
"The lessee covenants with the Commonwealth as follows: . . . . . . (c) That the lessee will within one year from the commencement of the said term or within such further time as may be approved in writing by the Commonwealth or the Minister on behalf of the Commonwealth for that purpose commence to erect one building only (with necessary and usual outbuildings and fences) on the said land at a cost not less than the sum of Two hundred and fifty thousand pounds and in accordance with plans and specifications prepared by the lessee and previously submitted to and approved in writing by the Commonwealth or the Minister on behalf of the Commonwealth. (d) That the lessee will within two years from the commencement of the said term or within such further time as may be approved in writing by the Commonwealth or the Minister on behalf of the Commonwealth complete the erection of the said building at a cost not less than the said sum of Two hundred and fifty thousand pounds and in accordance with the said plans and specifications and in accordance with every Statute Ordinance or Regulation applicable thereto." (at p542)
4. The rent payable under the lease was five hundred pounds per annum for the first twenty years of the term and, thereafter, an amount equal to five per cent per annum of the unimproved value of the land as determined from time to time by re-appraisement every twenty years. (at p542)
5. Clause 3 of the lease contains the following among other provisions:
"(a) That if - . . . . . . (ii) a building in accordance with sub-clause (c) of clause 1 of this lease is not commenced within the period specified in the said sub-clause; or
(iii) a building in accordance with sub-clause (c) of clause 1 of this lease is not completed within the period specified in sub-clause (d) of the said clause; or
(iv) after completion of a building as aforesaid the said land is at any time not used for a period of one year for the purpose for which this lease is granted the Commonwealth or the Minister on behalf of the Commonwealth may determine this lease but without prejudice to any claim which the Commonwealth or the Minister on behalf of the Commonwealth may have against the lessee in respect of any breach of the covenants on the part of the lessee to be observed or performed. (b) That acceptance of rent by the Commonwealth or the Minister or a person authorized by the Minister for that purpose during or after any period referred to in paragraph (ii) (iii) or (iv) of sub-clause (a) of this clause shall not prevent or impede the exercise by the Commonwealth or the Minister on behalf of the Commonwealth of the powers conferred upon it by sub-clause (a) of this clause. . . . . . . (d) That in this lease the expression 'Minister' shall mean the Minister of State of the Commonwealth for the time being administering the City Area Leases Ordinance 1936-1957 including any amendments thereof or any Statute or Ordinance substituted therefor or the member of the Executive Council of the Commonwealth for the time being performing the duties of such Minister and shall include the authority or person for the time being authorized by the Minister or by law to exercise the powers and functions of the Minister under the City Area Leases Ordinance 1936-1957 including any amendments thereof or any Statute or Ordinance substituted therefor. (e) That any notice requirement demand consent or other communication to be given to or served upon the lessee by the Commonwealth or the Minister under this lease shall be deemed to have been duly given or served if signed by or on behalf of the Minister and delivered to or sent in a prepaid letter addressed to the lessee at the said land or at the usual or last-known address of the lessee or affixed in a conspicuous position on the said land." (at p543)
6. The lease is expressed to have been granted pursuant to the City Area Leases Ordinance 1936-1957 of the Australian Capital Territory and the Regulations thereunder. (at p543)
7. The plaintiff admittedly did not within a year from the commencement of the term - that is before 13th June 1963 - commence to erect a building upon the land in accordance with its covenant. Therefore the Commonwealth by the Minister concerned - after delaying for a considerable time to give the plaintiff an opportunity to begin building - in 1965 initiated proceedings for the determination of the lease according to the procedure prescribed in that behalf by s. 22 of the City Area Leases Ordinance 1936-1964. And on 7th May 1965 the delegate of the Minister gave formal notice of the determination of the lease. (at p543)
8. As the plaintiff's argument - or some of its argument - depended on the wording of this section I set it out in full here:
"22. (1.) Where by virtue of any provision contained in any lease the Commonwealth may determine the lease, the lease shall not be determined until fourteen days' notice that the Commonwealth intends, in pursuance of the powers contained in the lease, to determine the lease and setting out fully the conditions for failure to comply with which the lease may be determined has been given to the following person: - (a) The lessee; (b) Where the land included in the lease is subject to a mortgage or other encumbrance registered under the Real Property Ordinance - the mortgagee or encumbrancee; (c) Where any person has any interest, registered under that Ordinance, in the lease or the land - that person; and (d) Where a caveat lodged under that Ordinance is in force in respect of the land - the caveator. (2.) Any notice by the last preceding sub-section required to be given to any person shall be in writing signed by the Minister and shall be deemed to have been duly given if - (a) in the case of a lessee - it is delivered to him or sent by registered post addressed to the lessee at his last known place of abode or his address specified in the lease, or if it is posted in a conspicuous place on the land to which it relates; and (b) in the case of any person referred to in paragraphs (b), (c) or (d) of that sub-section - it is delivered to that person or sent by registered post addressed to him at his address as entered in the Register Book kept under the Real Property Ordinance or appointed in the caveat as the place at which notices relating to the caveat may be served, as the case may be. (3.) The lessee may furnish to the Minister any explanation of the reason why he has not complied with the conditions specified in the notice. (4.) If the Minister is satisfied with the explanation, he may waive the non-compliance and may direct that the conditions be complied with within such time as he thinks fit. (5.) If no explanation is furnished, or if the Minister is not satisfied with the explanation furnished, he may - (a) give notice in writing to the lessee to comply with the conditions within such time as he thinks fit; or (b) if he considers the non-compliance to have been wilful and that the lessee has made no real effort to comply with the conditions of his lease, by notice in the Gazette determine the lease. (6.) If a lessee fails to comply with any direction under subsection (4.) or with any notice under paragraph (a) of subsection (5.) of this section, the Minister may, by notice in the Gazette, determine the lease. (7.) Any notification in the Gazette in pursuance of sub-section (5.) or (6.) of this section shall be conclusive evidence of the lease having been determined. (8.) Notice of the determination of the lease shall also be given, in writing signed by the Minister, to the persons referred to in sub-section (1.) of this section in the manner specified in sub-section (2.) thereof." (at p544)
9. On 14th May 1965 the plaintiff commenced the present action seeking a declaration that the Commonwealth is not entitled to determine the lease and an injunction to restrain the defendant John Douglas Anthony from publishing in the Gazette any notice of the determination of the lease. (at p545)
10. The first-named defendant John Douglas Anthony was at all relevant times Minister of State for the Interior and the Minister concerned. (at p545)
11. On 19th May 1965 an interim injunction was granted by the Chief Justice restraining the Minister until the hearing of the action or further order from publishing or causing to be published any notice pursuant to sub-ss. (5) or (6) of s. 22 of the Ordinance of the determination of the lease. (at p545)
12. The action came on for trial before me. No question was raised as to the power to make a declaration or grant an injunction against the Minister and the Commonwealth. The plaintiff's argument was twofold. Briefly stated, its case is that although it had broken its covenant to commence building within a year, the breach had been waived by the lessor, that is to say the lessor had elected to treat the lease as still subsisting notwithstanding the breach; and, secondly, that the preliminary steps toward forfeiture for breach which s. 22 prescribes had not been duly taken; and that, therefore, there was no forfeiture and to publish a notice of the determination of the lease would be contrary to law. (at p545)
13. To reach a conclusion upon these questions it is necessary to consider closely a somewhat lengthy course of events and the correspondence between the parties arising therefrom. I do not propose to rehearse all of it; but I must set out enough of what happened to show the main grounds for the conclusions I have reached from a consideration of the whole of the evidence. (at p545)
14. On 31st March 1960 the Department of the Interior by notice in the Commonwealth Gazette invited applications for a lease of Section 7, City of Canberra, the subject land. (at p545)
15. On 10th June 1960 Astor Hotel Motels Limited, a public company incorporated in New South Wales, of which the plaintiff is a whollyowned subsidiary, applied for a lease of this land "for the purpose of a residential hotel". With the application it sent sketch plans of the building it proposed to erect, which it described as a "hotel motel" asserting that "the erection of multiple storey buildings at high cost to cater for the luxury trade at a luxury tariff is an unhealthy development to be guarded against at this stage of Canberra's growth". The Department however took a different view of the kind of building that was wanted in Canberra; and the company's architects proceeded to prepare new plans, which were submitted to the Department. Negotiations went on, by correspondence and orally, between officers of the Department and the company. On 7th December the company paid to the Department a sum of 9,600 pounds being a deposit of part of the amount payable as a premium for the lease if it were to be granted. (at p546)
16. On 28th February 1961 a formal agreement was signed by the Secretary of the Department, and executed by Astor Hotel Motels Limited under its common seal. This provided for the submission by the company of sketch plans "of the residential hotel building . . . to provide for not less than 100 guest rooms with associated public rooms and lounges, of a standard comparable with a good class city hotel, in a building of not less than four storeys . . .": if the plans, as submitted or modified on the suggestion of the Commonwealth, were approved, a lease would, on payment of 86,417 pounds, be granted and taken "in accordance with the provisions of the City Area Leases Ordinance 1936-1959 and the conditions of application": if the plans were not approved, the 9,600 pounds deposited would be returned. (at p546)
17. Plans were submitted by the company's architects. After some protracted discussion about modifications they were revised, and as revised accepted on 6th September 1961. On 18th September the company sent its cheque for 86,417 pounds to the Department with a letter which said: "The subject lease will be taken by Owendale Pty. Limited which is a wholly owned subsidiary of this company." On 22nd September the Department wrote saying: "It is noted that you desire the lease to issue in the same of Owendale Pty. Limited. The lease will commence as from 20th September 1960." However there were further discussions with the architects about the plans; and, as I have said, the lease was not actually executed until 13th June 1962. The matter still went on somewhat slowly. On 12th June 1963 - that is the day before the erection of the building ought at latest to have been begun to comply with cl. 1 (c) of the lease - Mr. B. J. McDonald, managing director of Astor Hotel Motels Limited wrote to the Department saying that "detailed planning . . . has been proceeding and has reached a relatively advanced design stage" and that his company would "proceed to call tenders immediately we are in possession of final working drawings relating to the structural (sic) and to mechanical and electrical services". On 1st July 1963 the Department acknowledged this letter and said:
"Your attention is invited to the lessee's covenant in cl. 1 (c) of the Crown Lease to commence the erection of an approved building within one year from the commencement of the lease or within such further time as may be approved in writing by the Commonwealth. "The period of one year has now expired and, therefore, it is necessary that the lessee Company seek an extension of time to commence building. The application for such extension should include the expected date of commencement and the length of extension sought." (at p547)
18. Not having received a reply, the Department wrote to Mr. McDonald on 13th August 1963 reminding him of its previous letter. On 12th September he replied giving some expected dates for the construction of the work and saying : ". . . we suggest that consideration be given to the extension of time for the commencement of the work until 1st August 1964". (at p547)
19. A reply to this was dated 22nd October 1963, the relevant parts being as follows :
"This Department views with concern the request for such a long extension particularly having in mind that the lease commenced on 13th June 1962 and in fact was first offered to your Company in September 1960. Also difficulty is being experienced in reconciling the time schedule set out in your letter with your statement that 'it is unlikely that any extension will be required . . . for the completion and construction of the building'. "It has been noted that in certain press, radio and television publicity it was stated recently that your Company is to call tenders for the construction of this hotel 'early in the new year'. Unless March is regarded to be 'early in the new year' this publicity is also difficult to reconcile with your request. "It is desired to point out that the Department takes a serious view of the covenants contained in the lease and in particular the time periods for commencement and completion of the building. The lessee Company is in fact in breach of the lease covenant requiring commencement of a building within one year from the commencement of the term of the lease, and consideration is being given to taking action to determine the lease as provided for under cl. 3 (a) (ii) of the lease agreement. "Your urgent advice as to why such action should not proceed is requested." (at p547)
20. No answer to this was sent immediately ; and the Department wrote on 27th November asking for a reply. On 9th December Mr. McDonald wrote a tendentious letter referring to difficulties in bringing to completion all detailed drawings needed by subcontractors and other matters and saying :
". . .It is our expectation that tenders can be called by March next and it is reasonable to regard this as being early in the New Year. "We are very conscious of the desirability as well as the legal obligation to commence construction of this building at the earliest possible moment and will do so irrespective of the extension which may be granted to us, as soon as the documents become available from our architects and engineers. "Having regard to the large amount of capital already invested by us in this project including a premium of 90,000 pounds paid to the Commonwealth and the sum of 19,000 pounds already incurred in architect's fees, and in view of the above explanations, we will be pleased to have your favourable consideration to this request." (at p548)
21. On 19th March 1964 the Department wrote to Mr. McDonald :
"You expected that tenders could be called by this month but so far as this Department is aware this has not been done. It is noted however that plans have not been lodged for approval and I should be glad of your advice in this regard. "You are aware that the Company is in breach of the lease covenant requiring commencement of an approved building and unless your Company furnishes within seven days satisfactory assurances that building will be commenced in the near future, the Department will have no alternative but to initiate formal action to determine the lease." (at p548)
22. The matter drifted on. The company's architects conferred on some aspects with representatives of the Department. As a result the Department wrote to Mr. McDonald, on 13th April 1964 :
"Your Company's architects have advised that it will be quite some time yet before even plans will have been completed and the Department is most concerned that there should be such further long delay in reaching the stage when building construction will commence. "You will appreciate that the obligation rests solely with the lessee Company to comply with the building covenant which it entered into of its own volition when it agreed as long ago as 1960 to accept a lease of the subject land. "The advices furnished by the Company and its architects do not constitute the 'satisfactory assurances' sought in my letter of 19th March, 1964, and unless the Company does provide within the next seven days firm assurances, acceptable to the Commonwealth, as to when the building will be commenced, determination action will be taken pursuant to the provisions of the City Area Leases Ordinance." (at p548)
23. On 1st July 1964 Mr. McDonald wrote to the Department that the company's engagement of its architects had been terminated and another firm of architects engaged to complete the plans and specifications and saying that:
"They have given us a tentative estimate of completion of drawings and calling of tenders by 31st August for commencement of construction by 30th November." (at p548)
24. This letter crossed in the post a letter from the Department threatening that unless satisfactory assurances were forthcoming of an early commencement of building the Department would have no alternative but to take action to determine the lease. This brought a letter from Mr. McDonald dated 22nd July in which he stated:
". . . I now wish to make application on behalf of Owendale Pty. Ltd., the leaseholder, for an extension of time within which to commence the construction of the above project, until 31st January next." (at p549)
25. This seems to have been the first formal request for an extension. The Assistant Secretary of the Department replied on 30th July acknowledging this letter and stating : "I will again communicate with you at an early date on this matter." (at p549)
26. On 14th August 1964 the Assistant-Secretary wrote again:
"It is considered that a further extension of time to commence building such as you have sought is not warranted, and in view of the failure of the lessee Company to comply with the terms of the lease I am forwarding herewith a copy of the Notice of Intention to Determine the Lease under s. 22 of the City Area Leases Ordinance. "The Notice of Intention has been given to the lessee, Owendale Pty. Ltd." (at p549)27. The notice referred to, dated 14th August, was in the following terms:
"TAKE NOTICE that, after the expiration of fourteen (14) days from the date upon which this notice is given the Commonwealth intends, in accordance with the provisions of s. 22 of the City Area Leases Ordinance 1936-1963 and in pursuance of the powers conferred by sub-cl. (a) of cl. 3 of the lease . . . to determine the said lease for failure on the part of the lessee to comply with the covenant contained in sub-cl. (c) of cl. 1 of the said lease in that the lessee did not, within the period specified in that sub-clause, commence to erect a building on the said land at a cost not less than the sum of two hundred and fifty thousand pounds and in accordance with plans and specifications prepared by the lessee and previously submitted to and approved in writing by the Commonwealth or the Minister on behalf of the Commonwealth." (at p549)
28. It was signed by one Eric Wigley, described as "Delegate of the Minister of State for the Interior". (at p549)
29. On 31st August Mr. McDonald wrote to the Minister forwarding what was described as an explanation pursuant to s. 22 of the Ordinance. This document recited the course of events up till then, and referred to difficulties in obtaining from the architects final plans which would be satisfactory to the Department. It contained a statement that: "The lessee is confident that the steps taken will completely cure any further delays and that tenders can be called in December 1964 as advised, so that the building can be commenced by the successful tenderer as soon as work resumes in the building trade in January next." The document was signed "Owendale Pty. Limited by B.J. McDonald Managing Director". But there seems in this and other letters to have been some confusion between the plaintiff and Astor Hotel Motels. Mr. McDonald seems not to have discriminated between them, as one paragraph asserted that if the lease were terminated "the Company" would incur a loss of 125,000 pounds expected by way of premium rental, rates, and architects' fees paid. This it was said would cause "the company" great hardship and affect its 4,500 shareholders, meaning apparently not the plaintiff but Astor Hotel Motels. (at p550)
30. On 27th October a letter signed personally by the Minister was sent to Mr. McDonald. This, after stating that "the history of this lease has been most unsatisfactory from the Commonwealth's point of view", dealt with and controverted some of the statements in the plaintiff's letter of 31st August. It concluded :
"I cannot of course accept that the Company's failure to comply with the building covenant has been due to circumstances not wholly within its control. As I have pointed out above, it is the lessee's responsibility to comply with the covenant, and there has been ample time for this. Nevertheless, I am prepared to afford the lessee a final opportunity to comply with the terms of the lease, and in the circumstances I have decided to grant an extension of time to 31st January 1965, to enable commencement of the erection of an approved building, as required under the lease conditions. A formal notice to this effect will be served upon the lessee Company by my Department. "In arriving at this decision not to proceed at this stage with the action indicated in the notice served on your Company on 17th August last, I am mindful of your assurance that your Company is in a position to meet the costs of construction. My Department, therefore, will withhold the action of determination, but in advising you of this I must emphasize that failure to comply with the building requirements of the lease within the time as now extended will result in the lease being determined." (at p550)
31. The notice referred to in that letter, dated 29th October 1964, was addressed to the plaintiff and served personally on Mr. McDonald. It was signed by on Eric Stephen Keehn described as "Delegate of the Minister of State of the Interior". Mr. Keehn was at all relevant times a person holding or performing the duties of Assitant Sectretary, Second Division, Lands Branch, Lands &Policy Division, Department of the Interior. (at p551)
32. The notice, so far as it is necessary to set it out here, required the plaintiff
"to comply, not later than the thirty-first day of January, one thousand nine hundred and sixty-five with the covenant contained in sub-cl. (c) of cl. 1 of the lease . . . that the lessee would within the period specified in that sub-clause commence to erect a building . . . AND FURTHER TAKE NOTICE that, if you fail to comply with the requirement contained in this notice the Minister may by notice in the Gazette determine the said lease".It is, of course, obvious that it was impossible then to comply literally with the requirement that by 31st January 1965 the plaintiff should do what cl. 1 (c) required within the period which that sub-clause specified; for it had already long expired. But what was meant seems plain enough. (at p551)
33. On 22nd December 1965 the architects called for tenders for the building; tenders to close on 26th January 1965. But on representations from The Master Builders' Association that this date would, because of the holiday period, be inconvenient the architects, acting for the plaintiff, postponed the closing date. Working drawings and specifications were apparently not lodged with the Department for examination in accordance with the Canberra Building Regulation until 14th January 1965. On 22nd January Mr. Keehn wrote to the architects and also to Mr. McDonald reminding them of the obligation to commence building by 31st January if the determination of the lease was to be avoided. This, on 27th January 1965, produced a letter from Mr. McDonald addressed to Mr. Keehn revealing that the closing date for tenders had been postponed and stating that "It is obviously not feasible for a contractor to commence by 31st instant, as all tenders cannot be expected to be received until the 1st proximo or thereabouts . . . . Under the circumstances, I respectfully ask that no action be taken detrimental to the lease so long as these necessary steps are in progress reasonably and expeditiously". On 10th February the plaintiff was informed that approval (subject to certain qualifications and modifications) of the plans and specifications had been given, as the Building Regulations required. On 12th February a letter went from Mr. Keehn to Mr. McDonald in reply to his of 27th January. It said:
"Your explanation of the circumstances whereby the lessee was unable to comply with the requirement to commence the erection of an approved building on the site by no later than 31st January 1965 has been very carefully considered. It has been approved that instead of determining this lease forthwith, a further opportunity be afforded your Company to comply with the lease by no later than 28th February 1965. A formal note to this effect will be served upon the lessee. "It is desired to emphasize that the particular lease covenant requires the lessee to commence the erection of an approved building by the specified date, and failure to comply will result in determination of the lease." (at p552)
34. A notice dated 11th February was served on the plaintiff. It was in the same terms as that of 29th October, except that the date for compliance was now moved forward to 28th February 1965. (at p552)
35. On 18th February 1965 Mr. McDonald wrote again saying that it had been decided to accept a tender from a building company, Mainline Constructions Ltd., and that the building contract was being prepared. (at p552)
36. In response came a letter from the Department signed by Mr. Wigley, dated 23rd February, reading:
"I refer to your letter of 18th February 1965 concerning your Company's lease of Section 7 City, Canberra. The contents of your letter have been noted, but it is also noted that no reference can be seen therein to any expected date of commencement of the erection of an approved building on the site. "In view of the seriousness with which this Department views the circumstances of this lease your attention is particularly invited to the notice served upon your Company on Monday 15th February 1965, and requiring the lessee to comply not later than the 28th February 1965 with the covenant contained in sub-cl. (c) of cl. 1 of the lease. (at p552)
37. On 25th February Mr. McDonald wrote to the Department:
"Contract documents were prepared and submitted to Mainline Constructions Pty. Ltd. for execution upon which, under its terms, they were given immediate possession of the site and were bound to the completion time. However, we also notified the company of your requirement that work should commence on or before the 28th instant. "We would have assumed that the entering into the contract by both parties and the delivery of the site to the builder would have been sufficient satisfaction of this requirement. However, we understand that the builder has been in touch with you and has been advised that you require a full scale and effective building organization to be in operation by this date. "The builder states that in order to do this he must establish his organization and methods of work, order his materials and assemble his work force, and that this is quite impossible within the few working days available. He says that the implementation to the extent to which you indicate would in fact require about four weeks, although a number of preliminary on site works could and would be undertaken in the meantime. "Under these circumstances he has informed us that it is not within his ability to bind himself as asked unless he is given the normal and proper time for doing so, and if a provision is to be included in the contract, he requires to be allowed until the 31st March next." (at p553)
38. The managing director of Mainline Constructions Ltd. thereafter had a conversation with Mr. Keehn. He said it might not be possible for his company to commence work before 15th April 1965. In the upshot the Department agreed again to withhold for a little longer a determination of the lease if the work were begun. Mr. Keehn wrote to Mr. McDonald on 2nd March 1965 as follows:
"I refer to your letter of 26th February 1965 and to earlier discussions and correspondence concerning your request for an extension of time to 15th April 1965 within which to commence the erection of an approved building on Section 7 City, which is leased to your Company, Owendale Pty. Ltd., for the purposes of an hotel. "A formal notice under the City Area Leases Ordinance is being served upon the lessee Company, requiring compliance not later than 15th April 1965 with the lease covenant concerned. "I am to inform you that no further extension of time will be granted, and in the event of non-compliance with the notice now being served, the lease will be determined forthwith." (at p553)
39. The position then was clear: unless the plaintiff, not later than 15th April, should commence to erect the building the lease would be determined. On 12th April Mr. McDonald got in touch with one Herbert John Clugston, manager of the Astor-Rex Hotel Motel in Canberra which is a subsidiary company of Astor Hotel Motels. Mr. Clugston gave evidence before me. He said that, following instructions from Mr. McDonald, on 13th April, he got in touch with a firm of contractors which had tractors and bulldozers. As a result a man came to the subject land with a bulldozer on the afternoon of Wednesday 14th April. There under instructions from Mr. Clugston he pushed over trees that were growing there. The land was at the time a kind of park and ornamental trees had been planted there in lines. They had grown to some twenty to twenty-five feet in height. According to Mr. Clugston's evidence the work went on for three hours or more on the Wednesday afternoon. Next day the same man came again and continued the work. Friday 16th April was Good Friday. The work of uprooting the trees was suspended until the following Tuesday. It was then resumed. All the trees, except one line which was left standing, were down by 23rd April. Later, by the work of another contractor also engaged by Mr. Clugston, parts of them were burnt and the rest carted away. A burning permit was obtained on 23rd April, but because of wet weather no burning off was done until May. The builder Mainline Constructions Ltd. was not concerned in any of this work. It made its first appearance on the site in May when some sheds, with its name on them, were put on the land, and thereafter some excavation was done, said to have been for or in connexion with the making of foundations. The builder had in fact written to Mr. McDonald in February requesting permission "to take possession of the site and commence work on or before 15th April 1965". Apparently it was not then given this permission ; but a letter from Mr. McDonald dated 23rd April says : "On behalf of Owendale Pty. Ltd. I confirm your authority to proceed with the necessary foundation work on the company site in Canberra to a preliminary extent of 200 pounds. Such work to commence forthwith." The figure 200 pounds was acknowledged later to be a typist's error for 2,000 pounds. (at p554)
40. The officers of the Department of the Interior were apparently not impressed by the pushing over of trees on 14th April as amounting to the commencement of the erection of a building before 15th April. On 7th May Mr. Wigley wrote to Mr. McDonald as follows :
"I refer to my letter of 2nd March 1965 forwarding a notice requiring your Company to comply with the provisions of cl. 1 (c) of Crown Lease Volume 105 Folio 6 by 15th April 1965. "In view of your Company's failure to comply with this notice the lease has been determined and a formal notice of determination was this day served on the Company. "Notification of the determination will shortly appear in the Commonwealth Gazette." (at p554)
41. The notice served on the plaintiff was as follows :
"AUSTRALIAN CAPITAL TERRITORY
THE CITY AREA LEASES ORDINANCE 1936-1964 DETERMINATION OF LEASE
In pursuance of the power conferred by section 22 (6) of the City Area Leases Ordinance 1936-1964 and in accordance with the provisions of clause 3 (a) (ii) of the lease of Section 7 City in the Australian Capital Territory, granted to Owendale Pty. Limited, Volume 105, Folio 6, I, Eric Wigley, delegate of the Minister of State for the Interior hereby determine the lease as from the date hereof for non-compliance with a covenant thereof. Dated this seventh day of May, One thousand nine hundred and sixty-five. E. Wigley
Delegate of the Minister of State for the Interior." (at p554)
42. In addition to the correspondence which I have already mentioned and quoted from, which I may broadly describe as that passing between the plaintiff and the defendants, which was tendered by the plaintiff, certain correspondence was tendered by the defendants. It consisted of two bundles : one, letters passing between Mr. McDonald and the managing director, one Richard Baker of Mainline Constructions from 26th February 1965 to 6th May 1965 ; the other, letters passing between the former architects employed by Astor Hotel Motels and Mr. McDonald, being two letters in January 1962 and the rest running from 24th March 1964 to 23rd June 1964. In the way in which the argument developed the relevance of some of this material became, it seemed to me, doubtful. But the latter bundle of letters Exhibit 2 does shew that differences had arisen between Mr. McDonald on behalf of his companies and the former architects as to certain outstanding fees and as to the instructions given them. These differences led those architects to resign. With the rights and wrongs of that dispute I am of course not in any way concerned. But what is revealing is that in January 1962 the architects were told to do no more work on the project, "to suspend planning". The reasons for this are immaterial. Then in March 1964 they were requested to provide working drawings and specifications as soon as possible. This could throw some light on the validity and veracity of some of the explanations for delay given to the Department, if that were a matter for my consideration. But as I see it the question turns not so much on the actions or inactions of the plaintiff after June 1963 as upon the legal consequences of the acts done on behalf of the defendants. (at p555)
43. Apart from the correspondence and documents and certain admitted facts, the only evidence before me is that of the witness Clugston, which I have already mentioned, and of one Heinz Hendrick. He is an architect employed by the firm which took over as architects for Astor Hotel Motels, or the plaintiff, when the former architects resigned. In July 1964, which was shortly after his firm had been employed. Mr. Hendrick in company with one of the partners of the firm visited Canberra and had discussions with various people about the project and the requirements of the Department and of the National Capital Development Commission in relation to the building. There was another visit later. This was apparently in connexion with obtaining final approval of the working drawings. I do not think that much turns on this evidence. No doubt the visits helped to persuade the Department to allow further time for the commencement of the building. It was made clear to the witness by Mr. Wigley that there was a possibility that the lease would be determined and that if the new architects needed further time Owendale Pty. Limited would have to make a request and state a definite date when work would begin. (at p556)
44. Some further facts should be stated as one side or the other placed reliance upon them. (at p556)
45. First, as going to whether or not building was commenced before 15th April, the builder Mainline Constructions Ltd. did not before that date do several things which a builder is required to do before commencing building. It did not apply under reg. 7 of the Canberra Building Regulations for a builder's licence ; and without such a licence it could not lawfully "undertake or execute any work as a building contractor in connexion with the erection of any building" (reg. 10). It did not apply for a permit to erect a building on the site, which permit reg. 11 required it to have before commencing any building. It did not give the notice of intention to commence work which is required under s. 6 of the Scaffolding and Lifts Act, 1912-1948 (N.S.W.) which is applied in the Australian Capital Territory by the Scaffolding and Lifts Ordinance 1957. (at p556)
46. Secondly, as going to the plaintiff's argument that the defendants had waived the covenant in the lease, the Department from time to time demanded and received from the plaintiff rent under the lease in respect of each quarter up to and including that which ended on 30th June 1965 ; and such rent, except for 318 pounds part thereof, was paid and accepted before 1st May 1965. The Department also from time to time demanded from the plaintiff and received payment of water rates in respect of the subject land up to the end of February 1965 and all such rates had been paid before May 1965. (at p556)
47. The plaintiff's first argument is that the Commonwealth waived its right to forfeit the lease for a breach of the covenant in cl. 1 (c). A waiver in this sense is more properly understood as an election. The essence of the doctrine, in cases between landlord and tenant, is that where a lease contains provisions for forfeiture and a right of re-entry upon breach of a covenant by the lessee, then, upon a breach occurring, the lessor can either take advantage of his right of forfeiture and re-entry or waive this and treat the lease as still subsisting. If, with knowledge of a breach, giving him a right of re-entry, he does an act inconsistent with his avoiding the lease, he is deemed to have elected not to avoid it. Anything which a landlord does or says which is an unequivocal recognition of the continued existence of the lease when he was aware of facts which would have given him a right of re-entry will amount to a waiver of that right. One act which, by the common law, is always regarded as unequivocal, and therefore necessarily a waiver of a right of re-entry on account of a breach of covenant by the lessee, is the lessor's acceptance, with knowledge of the fact of the breach, of rent accrued due after the breach. Apart from any special term in the lease - a question to which I shall come later - or any statutory modification of the common law, acceptance of rent due in respect of a current period is an obvious recognition of a tenancy then subsisting. These general principles are so well established that I need cite only the classic statements in Croft v. Lumley (1858) 6 HLC 672 (10 ER 1459) ; Davenport v. The Queen (1877) 3 App Cas 115 ; and the passage in the judgment of Parker J. in Matthews v. Smallwood (1910) 1 Ch 777, at p 786 , the terms of which, the Privy Council said, have often since been approved : Fuller's Theatre and Vaudeville Co. Ltd. v. Rofe (1923) AC 435, at p 443 . I would also respectfully acknowledge my indebtedness on this aspect to the chapter on election, especially pp. 298-302, in the recently published second edition of Spencer Bower on Estoppel by Representation, the author being Sir Alexander Turner of the Court of Appeal of New Zealand. (at p557)
48. I do not think it is necessary for me to decide, although I was invited to do so, how far it is correct to say, as an abstract and general proposition, that a mere demand for rent necessarily amounts to a waiver. I am inclined to think this is not so, especially if the demand be made as a matter of routine by the landlord's agent or clerk : see Creery v. Summersell and Flowerdew &Co. Ltd. (1949) 1 Ch 751, at pp 761, 762 ; cf. Segal Securities Ltd. v. Thoseby (1963) 1 QB 887 ; and see too Matthews v. North Auckland District Land Board (1934) NZLR 781, at pp 789-793 . (at p557)
49. In the argument for the plaintiff there was a suggestion that, at common law, when a landlord becomes aware of an occurrence giving him a right of re-entry on forfeiture he must at once elect either to avoid the lease or to affirm it. That I think is a mistake. I see no reason why he may not do neither, for a time taking the risk of an inference of waiver or abandonment arising from his failure to assert his right of re-entry. As Bramwell B. said in the often-quoted and always approved passage in his judgment in Croft v. Lumley (1858) 6 HLC 672, at p 705 (10 ER 1459, at p 1472) : "In strictness, therefore, the question in such cases is, has the lessor, having notice of the breach, elected not to avoid the lease ? Or has he elected to avoid it ? Or has he made no election ? "See too Clough v. London and North Western Railway Co. (1871) LR 7 Ex 26 . Of course, a lessor cannot adopt inconsistent attitudes : he cannot say "I accept rent, but nevertheless deny that the lease continues". But I can see no reason why he cannot say "I have now a right to avoid the lease and to re-enter ; but, if within a given time the lessee does some specified thing, I shall waive my rights ; until then I make no election either way". As Parker J. said in Matthews v. Smallwood (1910) 1 Ch 777, at p 786 : "The right to re-enter is a legal right which, apart from release or abandonment or waiver, will exist, and can be exercised, at any time within the period fixed by the Statutes of Limitation." (at p558)
50. The argument for the plaintiff under the head of waiver involved the following propositions. First, the breach of cl. 1 (c) of the lease was not a continuing breach. It had occurred once and for all as soon as 13th June 1963 had passed without the building having been commenced. That proposition is indisputable : see Larking v. Great Western (Nepean) Gravel Ltd. (1940) 64 CLR 221, at pp 237, 238 . If therefore the Commonwealth waived its right to determine the lease because of that breach, the lease continued. That too is indisputable. Any extension of the period of one year stipulated in cl. 1 (c) must, for the purpose of the clause, be approved in writing by the Commonwealth or the Minister before the year expired. That proposition is, I think, disputable, although I appreciate that there are grounds on which it may be supported. However, I think I do not have to examine its correctness, as neither side asserted that any extension of time had at any stage been approved pursuant to the clause. In this attitude I think the parties were correct. It is true that the plaintiff's letter of 12th September 1963 might be regarded as an application for an extension of time ; but if so, the extention sought was refused by the Department's reply of 22nd October 1963 : the plaintiff's letter of 22nd July 1964 was expressed to be an application for an extension ; but it was decisively refused. It is clear from the correspondence that the Commonwealth never purported to extend the time under the lease, or to waive or abandon unconditionally the right to take proceedings to determine the lease because of the lesse's failure to comply with its covenant. Concession of further times to the lessee in parts of the correspondence was, it seems, assumed to be pursuant to s. 22 (5) of the Ordinance. Whether that was a correct view or not, these allowances of further times were far from an unconditional waiver by the lessor of its right to determine the lease. As I read the correspondence, the Commonwealth was asserting throughout that the lessee's initial failure to commence building within the time prescribed by the lease had made the lease liable to be determined, but that the Commonwealth would not enforce this if the building were commenced within the further times successively allowed. The correspondence does not anywhere shew an unequivocal election not to determine the lease. It shews only that the Commonwealth was holding its hand, keeping the question open and giving the plaintiff opportunities to prevent its lease being determined. But, unless the bulldozing of the trees suffices - a matter to which I shall come later - it did not avail itself of these opportunities. (at p559)
51. But, says the plaintiff, however that may be, the Commonwealth demanded and accepted rent after 13th June 1963 (the end of the period in cl. 1 (c)) and after 13th June 1964 (the end of the period in cl. 1 (d)); and that conclusively establishes an election by the Commonwealth amounting to a complete waiver of its right to determine the lease. But I do not think the question is so easily disposed of. True it is, as I have said above, that acceptance of rent accrued in respect of a period after a right of re-entry has arisen does, in a lease governed in its operation solely by commonlaw rules, amount to a waiver of the forfeiture and preclude re-entry. But here the lease is not governed solely by common-law rules. Notwithstanding the terms of the lease the lessor, the Commonwealth, can only determine it after notice in accordance with s. 22 of the Ordinance. And until the lease is actually determined the lessee's possession under it continues. While a lessee is in lawful possession of land under a lease, his liability to pay the rent reserved continues. A lessor's acceptance of rent for that period cannot, in my view, be said to be a waiver of his right to determine the lease. This view accords with the decisions of the Court of Appeal in Elliott v. Boynton (1924) 1 Ch 236 and Oak Property Company Ltd. v. Chapman (1947) 1 KB 886, at pp 898, 899 . It seems to me therefore that in the present case the acceptance by the Commonwealth of rent in respect of the period up to 7th May 1965, being the date of the notice of determination of the lease, could not preclude its determination as from that date. However a question arises at this point, because rent under the lease was payable quarterly in advance; and rent was in fact paid in respect of the period up to 30th June 1965. But I do not regard this as critical in this case, as I do not think that, in the circumstances, the acceptance of rent in advance prevented the Commonwealth from taking steps to determine the lease at any time after 15th April. It may well be that, the Commonwealth asserting that the lease came to an end on 7th May, it should refund whatever amount it received as rent attributable to the period between 7th May and 30th June. That, however, is not a question I have to decide. Furthermore the lease provides, in cl. 3 (b), that the acceptance of rent shall not be an impediment to the Commonwealth or the Minister determining the lease. It was argued for the plaintiff that this provision was nugatory, because according to the rule of the common law a lessor who accepted rent with knowledge could not be heard to say that he did not thereby acknowledge the existence of a tenancy. But I do not think that the existence of this rule prevents parties modifying it in advance by contract. There are no doubt good practical reasons for its modification in leases from the Crown in the Australian Capital Territory; and the terms of cl. 3 (b) of this lease are a standard provision in such leases, the form being prescribed by regulations under the Ordinance. I was pressed with the decision of the Privy Council in R. v. Paulson (1921) 1 AC 271 . There was in that case a provision in a lease that no waiver of any breach should take effect or be binding unless it was expressed in writing. Their Lordships reiterated the general principle that acceptance of rent amounts to a waiver of a right of forfeiture, and held the requirement that to be effective a waiver must be in writing did not "render inapplicable the principle established". The precise ground of the decision is however obscured, and its seemingly absolute character diminished, by the statement that "it may well be that many cases may occur to which the clause as to waiver would be applicable; their Lordships think that it is not applicable in the present case under all its circumstances". That case has, I think, no direct bearing on this case. There was there an act, receipt of rent, which, as a matter of law, constituted a waiver. Its effect as such was not destroyed by the provision that to be effective a waiver must be expressed in writing, a requirement which it seems probable was meant to refer to waivers by words not by conduct. Here, on the other hand, the question is whether, as a matter of law, a receipt of rent must necessarily constitute a waiver by the lessor of his right to terminate the lease when the parties have agreed that it should not. I do not read cl. 3 (b) as meaning that acceptance of rent can never provide evidence of waiver in fact of a right to determine a lease on account of an antecedent breach of a lessee's covenant. I read it as meaning that the mere acceptance of rent does not, as a matter of law, constitute an affirmance of the tenancy and an indisputable waiver of the contractual right to determine it because of the breach. (at p560)
52. For the above reasons I consider that the argument for the plaintiff based upon waiver fails. The next question that presents itself is whether the plaintiff can obtain the relief which it seeks in this action on a different basis. (at p561)
53. As I have said, I construe the correspondence and transactions between the parties as amounting finally to a promise, made by or on behalf of the Commonwealth, that the lease would not be terminated if the plaintiff should, not later than 15th April 1965, commence to erect a building as described in cl. 1 (c) of the lease. A breach by the Commonwealth or the Minister of that promise could, I apprehend, be restrained by injunction. But has there been a breach of it? That depends upon whether the plaintiff by the uprooting of trees on 14th and 15th April 1965 did, within the meaning of the clause, commence to erect such a building in accordance with plans and specifications as stated. (at p561)
54. I do not think that it did. The question is one of fact. Admittedly the removal of trees from the site, or from those parts of the site on which the building would stand, was a necessary preliminary to the erection of the building. No doubt it could be in that sense a part of the building operations. It was in fact something which, according to the specifications, the builder must do as part of its contract. But, even assuming that what was done was more than a mere token or gesture, did the plaintiff thereby "commence to erect" the building in accordance with the plans? The work was not done by the builder. The builder had not then obtained all the necessary permits to start building, and had not started work on the site. Looking at the evidence as a whole, I am not satisfied that the erection of a building as described was commenced before or on 15th April. I therefore hold that the determination of the lease after 15th April was not a breach by the Commonwealth of its promise that it would hold its hand until then and would waive its right to determine the lease if by then the plaintiff had commenced to erect the building. (at p561)
55. I pass now to the arguments advanced for the plaintiff which depend upon allegations that the procedure under s. 22 of the Ordinance necessary for a valid determination of the lease was not followed. (at p561)
56. Section 22 seems to be designed as statutory procedure for relief for a tenant against a forfeiture out of hand of his lease. But most of its provisions seem apt only in a case of a continuing and remediable breach. They are difficult to apply strictly according to their terms in the case of a completed and irremediable breach, such as a breach of cl. 1 (c). There are diffculties too in applying them in the case of a negative covenant by a tenant, as for example not to use the demised premises for some specified purpose or purposes. But the enactment is obviously intended to be for the benefit of tenants. Despite what seem to me to be its obvious defects and the difficulties of its language, effect must as far as possible be given to what appears to be its purpose and intention. In so far as its provisions are not apt or applicable in the present case, then I think they must simply be ignored; and nothing can turn upon what may have been a mistaken attempt to apply them, if the result were not prejudicial to the lessee. (at p562)
57. The plaintiff's arguments based on an alleged failure by the Commonwealth to comply with s. 22 of the Ordinance depend upon a number of objections. Some of them are highly technical. That of course is understandable. The plaintiff may not have shewn alacrity in commencing to build upon the land. It may have been reluctant at one stage to do so. But it has expended much money, one way or another, in connexion with the lease which, being for ninety-nine years, it obviously regards as valuable and does not wish to lose. It naturally therefore looks closely at the procedure to be gone through for the determination of the lease by the Commonwealth. I shall consider seriatim the various points it makes. (at p562)
58. First it is said that the notice of intention to determine the lease, required to be given by s. 22 (1), must be signed personally by the Minister as provided by s. 22 (2); and it was not so signed. The answer which was made on behalf of the defendants is that by s. 6 the Minister may delegate to any person or authority all or any of his powers and functions under the Ordinance (except the power of delegation). To the terms and the validity of the delegation which the Minister made I shall come later. Assuming it to be a valid and effective delegation to Mr. Wigley, who signed the notice of 14th August 1964, it comprehended I think the Minister's power to sign the notice. The plaintiff's argument is that the requirement that the notice be "in writing signed by the Minister" is descriptive of a document to be served, and that the power of delegation does not enable the giving of a notice not of that description. I appreciate the force of the argument; but I am unable to accede to it. (at p562)
59. Secondly, it is said that the purported delegation was ineffective. As published in the Gazette it, so far as relevant, reads as follows:
"In pursuance of the powers conferred on me by section 6 of the City Area Leases Ordinance 1936-1963, I John Douglas Anthony, Minister of State for the Interior, Hereby Delegate to the person for the time being holding or performing the duties of an office specified in the First Schedule to this Instrument all my powers and functions under this Ordinance except the power to make regulations, and the regulations made under this Ordinance . . . Dated this twenty-second day of April 1964. J.D. ANTHONY
Minister of State for the Interior.
The First Schedule
Assistant Secretary,(4,180 pounds), Second Division, Lands Branch,
Lands and Policy Division, Department of the Interior. Chief Clerk, (2,738 pounds-2,882 pounds),
Third Division, Lands Branch, Lands and Policy Division, Department of the Interior." (at p563)
60. These descriptions of the delegates are certainly curious. Apparently the delegation is to persons holding particular offices if they be in receipt of a particular salary. Whether if the salary of the office were increased the delegation would become abortive I do not know. I was told by the Solicitor-General that this description would be understood by any one who was conversant with the classifications of officers of the Commonwealth Public Service. At all events it was not contested that Mr. Wigley and Mr. Keehn were, when they signed relevant documents bearing their signatures, holding offices the holders of which were described in the Gazette notice as persons to whom the Minister had delegated the specified powers and functions. (at p563)
61. The objections made for the plaintiff are, first, that a delegation must be to a named person not to the holder of an office or person performing the duties of an office ; secondly, that the same functions cannot be delegated to more than one person; thirdly, that the instrument of delegation should have expressly excepted from the powers delegated the power to delegate, that being by s. 6 expressly declared incapable of being delegated. As to the first of these matters, there might perhaps have been some room for argument, were it not for the decision of Starke J. in Noble and Bear v. The Commonwealth (1943) 17 ALJ 184 . Since then, delegations to the holders of specified offices have become commonplace in the administrative system of the Commonwealth; and provided that there be an identifiable person the holder of the office, I consider they are a valid exercise of a statutory power to delegate "to any person". Whether it is desirable that Ministers should make wholesale delegations of discretionary powers and functions was questioned. But it is not a matter which can concern me. The Minister remains responsible for the action of his delegate. As to the other points mentioned, I can see no reason why there should not be a delegation to more than one person of duties of the same kind. It is common for ministerial functions, in other aspects of government than Canberra leaseholds, to be exercised by different delegates in different States or parts of the Commonwealth; and I have never heard it suggested that this is not a valid and effective arrangement. As to the third matter, the extent of the delegation is necessarily limited by the extent of the power to delegate, and I can see no reason why the Minister should say expressly delegata potestas non potest delegari. One can assume the delegates know that. (at p564)
"that, after the expiration of fourteen (14) days from the date upon which this notice is given, the Commonwealth intends, in accordance with the provisions of Section 22 of the City Area Leases Ordinance 1936-1963 and in pursuance of the powers conferred by sub-cl. (a) of cl. 3 of the lease of all that piece of land"- there followed a description of the land -
"to determine the said lease for failure on the part of the lessee to comply with the covenant contained in sub-cl. (c) of cl. 1 of the said lease in that the lessee did not, within the period specified in that sub-clause, commence to erect a building on the said land at a cost not less than the sum of two hundred and fifty thousand pounds . . .".It was at this stage that the Commonwealth took the preliminary step towards determining the lease under s. 22 of the Ordinance and up to this point of time the evidence does not satisfy me that it had elected not to do so. It was throughout insisting that the lessee had failed to comply with its building covenant but that it was prepared to hold its hand and allow further time for the plaintiff to commence building operations if satisfactory assurances were given that building would commence in the near future. These assurances, however, had not been forthcoming. (at p605)
8. It certainly did not then occur to the plaintiff that the Commonwealth had elected to waive its right to take steps to terminate the lease since on 31st August it wrote forwarding "an explanation pursuant to s. 22" of the Ordinance detailing "all the material circumstances affecting the failure to comply with the building conditions in the lease" and expressing the hope that the explanation would be accepted. It asked that if that explanation was not accepted an interview be granted to the plaintiff's managing director before any further action was taken under the Ordinance. The explanation which was enclosed with the letter was a lengthy one and ended with the statement that "the Company says that pursuant to s. 5 (b) of the said Ordinance" - plainly a reference to s. 22 (5) (b) - "its non-compliance with the terms of the said lease has not been wilful and says further that it should not be said that the lessee has made no real effort to comply with the conditions thereof". On 27th October a letter signed by the Minister was sent to the plaintiff. After referring to the latter's letter of 31st August and the explanation of its failure to comply with its building covenant and to what the Minister plainly regarded as an unsatisfactory explanation of the delays that had occurred, the letter proceeded :
"I cannot of course accept that the Company's failure to comply with the building covenant has been due to circumstances not wholly within its control. As I have pointed out above, it is the lessee's responsibility to comply with the covenant, and there has been ample time for this. Nevertheless, I am prepared to afford the lessee a final opportunity to comply with the terms of the lease, and in the circumstances I have decided to grant an extension of time to 31st January 1965 to enable commencement of the erection of an approved building, as required under the lease conditions. A formal notice to this effect will be served upon the lessee Company by my Department. "In arriving at this decision not to proceed at this stage with the action indicated in the notice served on your Company on 17th August last, I am mindful of your assurance that your Company is in a position to meet the costs of construction. My Department, therefore, will withhold the action of determination, but in advising you of this I must emphasize that failure to comply with the building requirements of the lease within the time as now extended will result in the lease being determined."The formal notice to which the letter referred was served upon the plaintiff. It was dated 29th October 1964 and required the plaintiff
"to comply, not later than the thirty-first day of January one thousand nine hundred and sixty-five with the covenant contained in sub-cl. (c) of cl. 1 of the lease of"- there followed a description of the land -
"that the lessee would within the period specified in that sub-clause commence to erect a building on the said land at a cost not less than the sum of two hundred and fifty thousand pounds and in accordance with plans and specifications prepared by the lessee and previously submitted to and approved in writing by the Commonwealth or the Minister on behalf of the Commonwealth. And further take notice that, if you fail to comply with the requirement contained in this notice the Minister may by notice in the Gazette determine the said lease".This notice was no doubt given under s. 22 (5) (a). (at p606)
9. On 13th January 1965 the plaintiff's architects wrote informing the Department that on 22nd December 1964 tenders had been called for the erection of the building, the closing date for tenders being 26th January 1965. The letter enclosed a copy of a letter from the Master Builders' Association in which the Association had asked that the closing date be extended by at least one week. On 22nd January 1965 the Department wrote to the plaintiff referring to the architects' letter of 13th January from which "it would appear that the lessee Company might experience some difficulty in complying not later than 31st January 1965, with the" building covenant. It went on to draw the plaintiff's "attention particularly to the final paragraph of the letter addressed to you by the Minister on 27th October 1964, in which he indicated that failure to comply with the requirements of the lease within the time extended to 31st January 1965, will result in the lease being determined". On 27th January the plaintiff wrote that "it is obviously not feasible for a contractor to commence by the 31st instant, as all tenders cannot be expected to be received until the 1st proximo or thereabouts". (at p607)
10. This had the effect of persuading the Commonwealth to grant a further extension of time until 28th February 1965 and a notice dated 11th February was sent to the plaintiff in terms similar to the one I have set out earlier but requiring compliance with cl. 1 (c) of the lease "not later than 28th February 1965". The notice was accompanied by a letter of 12th February stating that:
"Your explanation of the circumstances whereby the lessee was unable to comply with the requirement to commence the erection of an approved building on the site by no later than 31st January 1965 has been very carefully considered. It has been approved that instead of determining this lease forthwith a further opportunity be afforded your Company to comply with the lease by no later than 28th February 1965. A formal notice to this effect will be served upon the lessee. "It is desired to emphasize that the particular lease covenant requires the lessee to commence the erection of an approved building by the specified date, and failure to comply will result in a determination of the lease."On 18th February the plaintiff wrote acknowledging receipt of the Department's letter and saying that tenders had closed at the end of January. It had, it said, decided to accept one which provided for the commencement of the building "as soon as possible" and for completion within sixty-four weeks. It added that the contract documents were being prepared and would be settled as soon as possible and that the Department would be notified as soon as they had been executed. On 23rd February the Department replied remarking that the plaintiff's letter had made no reference "to any expected date of commencement of the erection" of the building. It concluded :
"In view of the seriousness with which this Department views the circumstances of this lease your attention is particularly invited to the notice served upon your Company on Monday 15th February 1965, and requiring the lessee to comply not later than 28th February 1965 with the covenant contained in sub-cl. (c) of cl. 1 of the lease."To this the plaintiff replied in a letter of 25th February in which it said, amongst other things, that the successful tenderer required to be allowed until 31st March to "establish his organization and methods of work, order his materials and assemble his work force". This was followed by an interview between a representative of the Department, the plaintiff's managing director and a representative of the successful tenderer, and on 26th February the plaintiff wrote referring to this interview and stating that it would "very much appreciate the extension of the time for commencement until 15th April as requested by Mr. Baker", the latter being the representative of the tenderer. On 2nd March the Department replied referring to this request for a further extension of time and stating that a formal notice under the Ordinance was being given "requiring compliance not later than 15th April 1965 with the lease covenant concerned", that no further extension of time would be granted, and that "in the event of non-compliance with the notice now being served, the lease will be determined forthwith". The notice to which the letter referred was dated the same day and followed the terms of the earlier notices save that the date for the commencement of the erection of the building was specified to be not later than 15th April 1965. This notice, like the earlier ones, was signed by a departmental officer as "Delegate of the Minister of State for the Interior". The next letter was one from the Department of 7th May in these terms :
"I refer to my letter of 2nd March 1965 forwarding a notice requiring your Company to comply with the provisions of cl. 1 (c) of Crown Lease, Volume 105, Folio 6, by 15th April 1965. "In view of your Company's failure to comply with this notice the lease has been determined and a formal notice of determination was this day served on the Company. "Notification of the determination will shortly appear in the Commonwealth Gazette."The formal notice of determination referred to in the letter was dated 7th May 1965 and was as follows:
"In pursuance of the power conferred by section 22 (6) of the City Area Leases Ordinance 1936-1964 and in accordance with the provisions of clause 3 (a) (ii) of the lease of Section 7 City in the Australian Capital Territory, granted to Owendale Pty. Limited, Volume 105, Folio 6, I, Eric Wigley, delegate of the Minister of State for the Interior hereby determine the lease as from the date hereof for non-compliance with a covenant thereof." (at p609)
11. I do not find in the communications between the parties to which I have referred anything which would cause me to find that the Commonwealth had elected not to determine the lease. My reading of the correspondence leads me to the same conclusion as that reached by Windeyer J. who tried the action and I am content to adopt what he said : "As I read the correspondence, the Commonwealth was asserting throughout that the lessee's initial failure to commence building within the time prescribed by the lease had made the lease liable to be determined, but that the Commonwealth would not enforce this if the building were commenced within the further times successively allowed. The correspondence does not anywhere show an unequivocal election not to determine the lease. It shows only that the Commonwealth was holding its hand, keeping the question open and giving the plaintiff opportunities to prevent its lease being determined" (supra p. 558). One further matter upon which some reliance was placed by the plaintiff on the issue of waiver was that from 13th June 1963 onwards rent which under the lease was payable in advance was paid to and accepted by the Department, the last payment being made prior to 1st May 1965 for the quarter ending in June 1965. But this does not appear to me to affect the position. At all times when the rent was paid and accepted the lease was by virtue of the Ordinance still on foot and under it the lessee was bound to pay and the Commonwealth entitled to receive rent. Further the lease, as I have said, contained a provision that the acceptance of rent should not prevent or impede the exercise by the Commonwealth of the powers conferred upon it to determine the lease. I can see no good reason why the parties to a lease should not validly incorporate such a clause in their agreement and if they do so, that seems to me to be a very relevant fact to be borne in mind when it is claimed by a lessee who has committed a breach of covenant that by accepting rent his lessor has made an election to keep the lease on foot. We were referred, however, to the decision in R. v. Paulson (1921) 1 AC 271 , and it was submitted that it showed that such a provision was ineffectual where the act of waiver relied upon was the acceptance of rent. I am unable to agree that this is so. In that case the lease provided that no waiver of any breach of covenant should take effect unless it was in writing and the lessor had accepted rent with knowledge that the lessee had committed a breach of covenant. After pointing out that the principle was well established that in such circumstances the acceptance by a lessor of rent accruing due after breach and with knowledge of the breach showed that he had made an irrevocable election to treat the lease as still subsisting, their Lordships went on to say that they thought that the existence in the lease of a provision requiring a waiver to be expressed in writing did not render that principle inapplicable. They added, however, "it may well be that many cases may occur to which the clause as to waiver would be applicable ; their Lordships think that it is not applicable in the present case under all its circumstances" (1921) 1 AC, at p 286 . Although it is not clear from the report, it appears to me that the decision proceeded upon the basis that on its true construction the waiver provision there in question had no application to a case of waiver by receipt of rent and applied only to cases where the waiver relied upon was by words alone. If that be so, the decision affords no assistance in the present case. In any event the present case seems to me to differ from Paulson's Case (1921) 1 AC 271 in at least one striking and material respect, namely the existence here of an Ordinance by which, notwithstanding a breach of covenant by the lessee which, apart from the Ordinance, would justify forfeiture, the lease is kept on foot up to the time when the final step is taken of publication in the Gazette of a notice of determination. (at p610)
12. In my opinion, the plaintiff has failed to establish that the Commonwealth at any stage waived its right to terminate the lease. (at p610)
13. The next matter to be considered arises from the fact that on the afternoon of 14th April 1965, the day before the expiry of the final extension of time granted by the Commonwealth, a local contractor employed by the plaintiff, apparently as agent for the successful tenderer, took a bulldozer on to the land and uprooted some of the trees growing there. He continued the work on the following day and again during the following week. For the plaintiff it was contended that it had thus complied with the direction given in the notice of 2nd March 1965. It had, it claimed, commenced to erect the building in that it had, within the time set by that notice, begun to clear the site. I do not agree. I am of opinion that a lessee who has covenanted to "commence to erect a building" does not comply with that covenant if, in order to prepare for its erection, he does no more than cut down or cut back trees or shrubs which are on or near the site on which the building is proposed to be erected. In such case I think that he has not "commenced to erect" a building within the meaning of cl. 1 (c) of the lease or "commenced" a building within the meaning of cl. 3 (a) (ii). All that he has done is to remove obstacles which prevent or impede him from commencing to erect or commencing the building. (at p611)
14. It was next submitted that the notice of intention to determine a lease given for which s. 22 (1) provides must, by sub-s. (2) of that section, be signed by the Minister and that this requirement had not been fulfilled since the signatory was a departmental officer who signed as delegate of the Minister. Section 6 (1) of the Ordinance provides, however, that "Subject to this Ordinance, the Minister may, by notice in the Gazette, delegate to any person . . . all or any of his powers and functions under this Ordinance . . . ". In my opinion, s. 22 (2) makes it a "function" of the Minister to sign notices of determination under that section and he may, by s. 6, lawfully delegate that function to another. It was also argued that to be valid a delegation must be to a named person and not to an unnamed but identifiable person described as being the holder of a specified office. A similar point was raised before, and rejected by Starke J. in Noble and Bear v. The Commonwealth (1943) 17 ALJ 184 , and with respect, I agree with his Honour's decision. (at p611)
15. Finally it was submitted that the notice of the Commonwealth's intention to determine the lease which s. 22 (1) requires to be given was not a valid notice because, so it was said, it did not set out "fully the conditions for failure to comply with which the lease may be determined". It will be seen that what the notice must set out fully are the "conditions", not the "failure to comply". What the notice here set out was that it was intended to determine the lease "for failure on the part of the lessee to comply with the covenant contained in sub-cl. (c) of cl. 1 of the said lease in that the lessee did not, within the period specified in that sub-clause, commence to erect a building on the said land . . . ". This undoubtedly drew the attention of the plaintiff to the covenant in the lease with which, it was said, it had failed to comply and there is no doubt that it was fully aware of its terms. But can it be said that a condition is set out "fully" if its terms are merely incorporated by reference or if its terms - which are not themselves set out - may be ascertained by inference from the particulars of non-compliance alleged in the notice? I am forced to the conclusion that it cannot and that conclusion is, I think, strengthened by the fact that s. 22 (1) requires the notice to be given not only to the lessee but also to the persons described in pars. (a) to (d) of s. 22 (1), some of whom may have no knowledge of the existence of the lease or of its contents. (at p612)
16. For this reason I would allow the appeal. (at p612)
Orders
Appeal allowed with costs.
Order of Windeyer J. set aside and in lieu thereof declare that the lease dated 13th June 1962, between the Commonwealth of Australia and Owendale Pty. Ltd. was subsisting at the date of the commencement of the suit and that the respondent was not then entitled to determine the lease.
Order that the respondent pay the appellant's costs of the action.
Citations
Owendale Pty Ltd v Anthony [1967] HCA 52
Cases Citing This Decision
12
Agricultural and Rural Finance Pty Ltd v Gardiner
[2008] HCA 57