Sullivan v Thurley

[1987] TASSC 19

TASSC A6/1987

CITATION:               Sullivan & Anor v Thurley [1987] TASSC 19; A6/1987

PARTIES:  SULLIVAN & ANOR
  v
  THURLEY

TITLE OF COURT:  SUPREME COURT OF TASMANIA
JURISDICTION:  ORIGINAL
FILE NO/S:  408/1986
DELIVERED ON:  9 March 1987
DELIVERED AT:  
HEARING DATE:  
JUDGMENT OF:  Wright J

CATCHWORDS:

REPRESENTATION:

Counsel:
             Plaintiffs:  
             Defendant:  
Solicitors:
             Plaintiffs:  
             Defendant:  

Judgment Number:  TASSC A6/1987
Number of paragraphs:  34

Serial No A6/1987
  File No 408/1986

SULLIVAN & ANOR v THURLEY

REASONS FOR JUDGMENT  WRIGHT J

9 March 1987

1. On 1 June 1985 the plaintiffs Thomas and Edna Sullivan as vendors, entered into an Agreement for Sale (“the Agreement”) with the defendant Peter Edward Thurley in respect of the rear portion of their property situated at 11 Ray Street, Launceston for a price of $10,000. The defendant’s purpose was to acquire an area of land suitable for displaying and storing used motor vehicles. At the time of signing the Agreement he was a dealer in four wheel drive vehicles although he has since sold his interest in that business to his former partner, Mr Keith Brient.

1. 11 Ray Street consists of a rectangular block of land with a frontage on Ray Street and a rear boundary on Rooms Avenue. There is a substantial residence erected upon the Ray Street end of the block and this is occupied by the plaintiffs. The rear portion of the block appears from the plans appended to the Agreement and other documents to constitute about one third to one half of the total area.

1. The Agreement provides for the payment of a deposit of $1,000 to the vendors’ solicitors as stakeholders. In fact this amount was paid to the plaintiff Thomas Sullivan and is, presumably, still held by him. However nothing turns upon this.

1. Clause 3 of the Agreement provides as follows:

“The contract shall be completed within fourteen (14) days of the approval of the subdivision of the property and issue of a separate Title to the same.”

1. For reasons which will become apparent the Agreement has not been completed, subdivision of the property has not been approved and a separate Title has not issued.

1. Clauses 14 to 16 of the Agreement are in the following terms:

“14     This Agreement is subject to the issue of a separate Title to the property within twelve (12) months of the date hereof with regard to which the parties undertake to use every reasonable endeavour to obtain the same within that time.

15       Notwithstanding the provisions of Clause 14 hereof the Vendor will allow the Purchaser to take possession of the property from the 15th day of April 1985 until settlement at the rent of $10.00 per week until completion.

16 In the event that the sale of the property is not completed in accordance with Clause 14 hereof the Vendor will enter into a lease of the property to the Purchaser at $15.00 per week for five (5) years with an option to take a further lease at the expiration of that lease for five (5) years at a reviewed rent (either by agreement or arbitration) and on such other terms as are agreed or if agreement cannot be reached then as determined by arbitration under the Arbitration Act 1892.”

1. The plaintiffs on 29 October 1986 instituted proceedings against the defendant claiming to eject him from possession of the land in question. The defendant had entered into possession on or about 15 April 1985 pursuant to the provisions of par15 of the Agreement. The plaintiffs allege that, as Launceston Council permission to subdivide the plaintiff’s land has not been given, and indeed, has been refused, the Agreement has not and cannot be completed as envisaged in cl 14 and cl 15 of the Agreement.

1. The plaintiffs also contend that they are prevented from giving or are no longer obliged to give a lease of the property as provided in cl 16 of the Agreement for two independent reasons.

1. Firstly they say, cl 16 is void for uncertainty in that it is ambiguous as to its true meaning.

1. Secondly they say that to implement cl 16 would be to subdivide 11 Ray Street and as Council permission for subdivision has not been forthcoming the parties would be acting illegally to proceed with a 5 year lease.

1. Accordingly they seek declarations:

(a)       that the defendant’s rights pursuant to the Agreement have been determined, and

(b)that the defendant is not lawfully entitled to remain in possession of the rear portion of Ray Street.

1. They also seek an injunction and removal of a caveat lodged by the defendant on the plaintiff’s title. There were other claims made but these were not pursued at the trial.

1. It was formally agreed between the parties at the trial of the action that on 13 October 1986 the plaintiffs served “what purported to be a Notice to Quit the said land” on the defendant requiring him to deliver up possession of the said land to the plaintiffs forthwith.

1. It was argued that on 13 October last and since, the defendant was and has been a mere tenant at will whose right of possession may be summarily terminated by such a Notice.

1. During the trial evidence was given as to the expenditure of money upon the land by the defendant since 15 April 1985. There can be little doubt that the defendant spent considerably in excess of $4,000 upon the rear portion of 11 Ray Street and a similar part of an adjoining block with a view to making them suitable for his purposes. This evidence was introduced by the defendant as being relevant to a claim of proprietary estoppel but for reasons which I indicated before the conclusion of the trial I think the estoppel claim is misconceived and has not been established. In spending money on the property and preparing it for use as a car storage yard the defendant was relying on the Agreement rather than any representations made by or on behalf of the plaintiffs. In such circumstances although the defendant has outlayed money in anticipation that the Agreement will be performed, he was under no obligation to do so pursuant to the terms of the Agreement and was not led into doing so by any conduct of the plaintiffs. I am therefore of the view that the defendant is unable to recoup his expenditure on the basis of estoppel.

1. The defendant denied each of the plaintiffs’ claims and argued that clause 16 was and is binding upon the parties. It was also argued that Council approval of the proposed lease was not required.

1. Section 462 of the Local Government Act 1962 provides that “subdivide” used in respect of a block of land includes division of the surface of the block:

“(a)     Physically

(i)by walls, fences, hedges, or ditches for the purpose of separate occupation of the parts; or

(ii)       ...; or

(b)       legally by creating estates or interests giving separate rights of occupation.”

1. It was submitted by Mr Elliott of counsel for the plaintiffs that the creation of a leasehold interest in the defendant‘s favour over the rear portion of 11 Ray Street would amount to a subdivision in the legal sense mentioned above. He was not seriously challenged as to this and I am of opinion that his submission is correct.

1. However, Mr Hill of counsel for the defendant submitted that his client had complied with s470(1) of the Local Government Act 1962, in that he had given the Commissioner and the Launceston Council 2 months’ notice in writing of his proposed subdivision including a sketch plan showing the details required by s469(2) of the Act. Mr Hill argued that, having done this, his client was then free to subdivide without further restriction. Assuming for the purposes of discussion that the facts relied upon by Mr Hill have been established, it seems to me that the foregoing argument ignores the effect of the combined requirements of s471A and s469 of the Act. In my view s471A although couched in terms which may at first sight appear permissive rather than mandatory, imposes a positive requirement on a potential subdivider who has the benefit of s470 to proceed in accordance with s464 or s469 or not at all. For this reason I reject Mr Hill’s submission and, as a result, take the view that the Council has power to control proposed subdivisions to which s470 applies.

1. An application was made to the Council for subdivisional approval on behalf of the plaintiff and his adjoining neighbour on 27 June 1985. The application was made on what appears to be a standard form application which was accompanied by a plan of the proposed subdivision prepared by a firm of Launceston surveyors. Neither the application nor the plan indicates whether approval is sought for subdivision which would result in alienation of the fee simple of part of each property or whether the proposed subdivision is of a more limited kind. There is no space in the application form which provides for information of this kind. Perhaps, the Council does not regard information of this kind as significant and, in light of the broad definition of “subdivide” in the Local Government Act this may well be a reasonable and appropriate view. At all events, evidence was given by Mr Timothy Domeney, the Development Manager employed by the Council that use of the rear of 11 Ray Street as a car yard would be contrary to the Launceston Town Planning Scheme and also that the relevant subdivision application had been considered and refused by the Services Committee exercising delegated authority of the Council. The grounds of the refusal were that the water supply and drainage to the area in question were inadequate. According to Mr Domeney the refusal “had nothing to do” with the zoning restrictions. It was not suggested at any stage of the trial that the Council’s decision to refuse subdivisional approval was invalid or had been rescinded, reviewed or varied.

1. There can be no doubt that cl 14 of the Agreement was not fulfilled within the specified period and the parties’ agreement to sell and purchase the vendors’ fee simple interest in the rear portion of the block can have no further operation. In these circumstances clause 16 comes into play. As I have already said, it was argued by Mr Elliott that this clause is void for uncertainty. In my opinion the fact that cl 16 contemplates further agreement of the parties in respect of the terms of the proposed lease, is not necessarily a fatal flaw in the Agreement as it makes provision that “if agreement cannot be reached” (between the parties) “then as determined by arbitration under the Arbitration Act 1892”.

1. The Arbitration Act 1892 contains machinery for the appointment of an arbitrator and cl 16 of the Agreement amounts, in my view, to a “submission” to arbitration within the meaning of the Act. Consequently I am of the opinion that the clause is not deficient in failing to represent a concluded agreement between the parties. (Axelson v O‘Brien (1949) 80 CLR 219; Thorby v Goldberg (1969) 112 CLR 597: and Godecke v Kirwan (1973) 129 CLR 629.)

1. However Mr Elliott’s primary argument was that as a matter of interpretation it could not be said whether the words, “and on such other terms as are agreed or if agreement cannot be reached then as determined by arbitration under the Arbitration Act, 1892”, applied in respect of the initial term of 5 years or the second term of 5 years, by which I mean that term which may arise if the option were to be exercised.

1. Whilst the point is not devoid of merit I have come to the firm conclusion that the phrase quoted above was intended by the parties to apply in respect of the initial term of 5 years and was not intended solely as a formula for resolving the terms of lease which should apply to the second term in the event of the option being exercised. It would be a strange conclusion to reach that the parties and their solicitors, whilst being aware of the necessity to provide a formula for resolution of differences as to the future terms, overlooked the necessity to provide such a formula for resolution of essential components of the lease in respect of the term in immediate contemplation.

1. The penultimate question therefore appears to be whether or not the defendant, relying upon the interpretation I have given to cl 16 of the Agreement can require the plaintiffs to enter into a 5 year lease over the rear of 11 Ray Street. As I have already said, the execution of such a lease would amount to a subdivision of 11 Ray Street and the application to the Council to permit such a subdivision has been rejected. It has not been suggested that by proceeding with the lease in such circumstances the parties would be acting otherwise than unlawfully. I think it is an inescapable conclusion that in the events which have occurred, clause 16 cannot be enforced, by or against either party. To do so would be to promote and condone unlawful conduct.

1. I turn finally to the consequences which flow from this. For present purposes although the defendant’s former partner is apparently in actual occupation of the rear portion of the property his status appears to be only that of the defendant’s sub–tenant. It was not suggested that Mr Brient had any entitlement to possession which derived from some independent transaction between himself and the plaintiffs or that the plaintiffs had accepted an assignment of the tenancy to him or had been notified of such an assignment. Accordingly whatever rights he has can only be those which are derived through the defendant as a party to the Agreement.

1. It was submitted that by going into possession pending completion of the purchase or lease the defendant became a tenant at will only. Mr Elliott cited a number of authorities in support of this proposition, notably Wheeler v Mercer [1957] AC 416; Kater v Kater [1961] SR (NSW) 145 and Sanders v Cooper [1974] WAR 129. However, it seems to me that, whilst it may be said that a purchaser who enters into possession of land pending the completion of the purchase is generally a tenant at will, this is not a view which may be taken when the agreement for sale specifically provides (as in cl 15 of the Agreement now in question) that possession may be taken by the purchaser at a specified weekly rental. I take the view that a provision of this kind creates a weekly tenancy rather than a tenancy at will (Francis Jackson Developments Ltd. v Stemp [1943] All ER 601 per Lord Greene MR at 603).

1. A weekly tenancy may only be determined by a notice to quit expiring at the end of a complete period of tenancy and such notice must also be equal to the length of the period of the tenancy, (see Queen‘s Club Garden Estates Ltd v Bignell 117 at 125). There is no basis upon which it can be claimed that the words of limitation “until settlement in clause 15 can be construed as having any overriding effect upon this rule because on the view I have taken the time for settlement has long passed and the plaintiffs appear to have continued to accept rent at least up until the commencement of these proceedings. The rental, which was originally $10 per week, was increased by mutual agreement of the parties to $15 per week in June or July 1985 and has remained at that level since. Whilst the plaintiffs must be able to effectively terminate a tenancy which is continuing contrary to the Council’s refusal of permission to subdivide I can see no reason in precedent or principle for concluding that the tenancy can be determined other than by mutual agreement of the parties or an appropriate and valid notice to quit, issued by the plaintiffs.

1. Paragraph 13 of the Statement of Claim alleges as follows:

“On the 13th day of October 1986 the Plaintiffs served a Notice to Quit the said land on the Defendant requiring him to deliver up possession of the said land to the Plaintiffs forthwith.”

1. Paragraph 9 of the Defence responds to this allegation as follows:

”Save and except that the Defendant admits that on the 13th day of October, 1986 he was served with a document titled and purporting to be a Notice to Quit and purporting to require him to deliver up possession of the said land the Defendant denies each and every allegation contained in paragraph 13 of the Plaintiffs’ Statement of Claim.”

1. No doubt this was intended as a plea putting in issue the validity of the plaintiffs’ notice to quit. Neither the actual notice nor a copy thereof was put in evidence but as I have already said there was formal agreement at the trial that on 13 October 1986 the plaintiffs served “what purported to be a Notice to Quit the said land” requiring the defendant to deliver up possession forthwith. On the basis of what I have already said it is plain that a notice requiring the defendant to surrender possession “forthwith” must be invalid and on this somewhat narrow point the case will be resolved. In my view the plaintiffs have not validly determined the weekly tenancy created in the defendant‘s favour by clause 15 of the Agreement. Unless and until this deficiency is rectified it seems to me that the plaintiffs are not entitled to any of the relief which they seek.

1. The terms of the caveat placed upon the plaintiffs’ title by the defendant were not disclosed in the evidence and no submissions were directed to this aspect of the plaintiffs’ claim. Whilst s133 of the Land Titles Act 1980 permits a person with any estate or interest in land to lodge a caveat forbidding registration of a dealing affecting such land, estate or interest, I would interpret this as giving a caveator with a limited interest a right to caveat only in respect of that interest. If the caveat now on the title goes beyond this and claims an interest for the defendant greater than his interest as a weekly tenant it will require withdrawal or amendment (if such a course is possible). As the caveator claims an interest in part only of the land it may be that the form of the caveat will require scrutiny to see if it adequately identifies the land in respect of which the interest is claimed (Hazelwood & Anor v BP Australia Ltd TASSC A5/1987 Cox J).

1. As matters currently stand however I think that the plaintiffs have failed to make out a prima facie case for the removal of the caveat or for the payment of compensation as claimed in pars (i) and (ii) of the Statement of Claim.

1. Accordingly there must be judgment for the defendant in the present proceedings.