Tableware Pty Ltd v Council of the Shire of Pine Rivers
[2008] QLC 48
•22 February 2008
LAND COURT OF QUEENSLAND
CITATION: Tableware Pty Ltd v Council of the Shire of Pine Rivers [2008] QLC 0048 PARTIES: Tableware Pty Ltd
(claimant/respondent)v. Council of the Shire of Pine Rivers
(respondent/applicant)FILE NO.: A2006/0088 DIVISION: Land Court of Queensland PROCEEDING: Decision on an application DELIVERED ON: 22 February 2008 DELIVERED AT: Brisbane HEARD AT: Brisbane MEMBER Mrs CAC MacDonald ORDER: The application for declarations is refused.
CATCHWORDS: Practice – declaration – power of Land Court to grant – where matter done under Act giving jurisdiction to Court – whether right of claimant to pursue claim for compensation within power
Practice – Land Court Rules 2000 – preliminary point – when appropriate for Court to deal separately with such
Contract – Lease – construction of lease term – legal principles to be applied – objective test – sensible commercial construction preferred to technical one.
Construction of lease – whether lessee entitled to claim compensation if compulsory acquisition of whole of lease area – analysis of subsections of lease condition – overriding effect of Acquisition of Land Act s.12(5) – lessee held entitled to claim
APPEARANCES: Mr R Traves SC for the respondent/applicant
Mr M Gynther for the claimant/respondentSOLICITORS Deacons Lawyers for the respondent/applicant
Garland Waddington Solicitors for the
claimant/respondent
Background
Tableware Pty Ltd (the claimant) has filed an application in this Court for a determination of compensation in the amount of $317,759 plus interest, payable for the compulsory acquisition by the Council of the Shire of Pine Rivers (the respondent) of the claimant's interest in certain land.
The land was resumed under the provisions of the Acquisition of Land Act 1967 (the Act) on 26 September 2003 for road and ancillary purposes and park purposes, and is described as Lot 81 on SP 144027 in the County of Stanley, Parish of Warner, having an area of 3,467 m² and being the whole of the land in Title Reference 50365491. The registered owner of the land at the time of resumption was Trident Property Group Pty Ltd (Trident).
By an unregistered lease executed on 14 June 2003, Trident had leased part of the land to the claimant for a term of four years commencing on 15 May 2003 with two options to renew of three years each. The leased premises were described as "All that part of the land and building erected thereon as hatched on the annexed plan". No appropriately hatched plan was annexed to the copy lease in evidence. Clause 3.01.1 of the lease provided that the demised premises were to be used only as a retail show room selling Mikasa crystalware, tableware and associated products and for any other purpose approved by the lessor.
An affidavit sworn by Mr RD Forbes, Shire Solicitor, Pine Rivers Shire Council established that Trident, as owner of the land at the time of the resumption, sought compensation for the loss of its interest in the land and that that claim was settled by the payment of two sums of money to Trident by the Pine Rivers Shire Council and the execution by those parties of a Release and Discharge on 31 March 2005. The claimant's compensation claim was filed in this Court on 21 April 2006 but compensation has not yet been determined.
A preliminary issue has arisen between the parties. Although no formal application was filed, these proceedings were treated as an application by the respondent, pursuant to r.19(2) of the Land Court Rules 2000, seeking the following relief -
1.A declaration that upon the gazettal of the Taking of Land Notice published in the Government Gazette on 26 September 2003, there was effected from the lessee to the lessor an assignment of the right of the lessee to bring any claim for compensation under the Acquisition of Land Act 1967 and/or the lessee's interest in and right to any compensation paid or payable in respect of such claim.
2.Further or in the alternative, a declaration that such right as the applicant has or may have had to compensation under the Acquisition of Land Act 1967 is limited to and properly assessed on the basis that the lease shall terminate when the lessee is required to vacate the demised premises.
3.Abandoned.
4.Further or in the alternative, a declaration that any claim brought by the applicant is of no value.
5.Such other or further order as to the Court may seem meet.
6.Costs.
This decision deals with those issues only.
Jurisdiction of the Land Court
The power of the Land Court to make declarations is found in ss.33(1) and (5) of the Land Court Act 2000 which provide that –
"33.(1) Any person may bring proceedings in the Land Court for a declaration about -
(a) a matter done, to be done, or that should have been done under this Act or another Act giving jurisdiction to the court; and
(b) the construction of any legislation for the purpose of proceedings in which the court has exclusive jurisdiction;
…(5) The Court has jurisdiction to hear and decide a proceeding for a declaration about a matter mentioned in subsection (1)."
Section 26(1) of the Acquisition of Land Act provides that the Land Court has jurisdiction to hear and determine all matters relating to compensation under that Act. The issues raised by this application relate to the right of the claimant to pursue a claim for compensation under that Act which is a matter relating to the determination of compensation. It is therefore a matter to be done under an Act giving jurisdiction to the Court within the meaning of s.33(1)(a) of the Land Court Act and, it follows, the Court has jurisdiction to hear and decide this application for declarations under s.33(5).
Rule 19(2)(a) of the Land Court Rules provides that a party to a proceeding before the Court may apply for an order about a preliminary point that may wholly or substantially decide a significant issue in the proceeding. This application raises a question as to whether the claimant is entitled to pursue its claim for compensation. This is a significant issue in the proceedings and as such is appropriate to be dealt with as a preliminary issue.
Clause 15.08
There is no contest between the parties that the claimant held a leasehold interest in the land as at the date of resumption. The interest of a lessee is an estate or interest in the land (Claude Neon Ltd v Metropolitan Board of Works (1969) 43 ALJR 69). The effect of s.12(5) is that when land is taken by publication of a gazette resumption notice, the estate or interest of every person entitled to the whole or any part of the land is, on the date of publication, converted into a right to claim compensation under the Act for the value of the interest taken. A lessee has, therefore, a right to claim compensation under the Act. A lessee's claim is separate from and independent of the lessor’s claim to compensation (Rosenbaum v The Minister (1965) 114 CLR 424 at 425, 431, 434, 435).
What is in dispute in this matter is the effect of clause 15.08 in the lease -
"15.08 RESUMPTION
If all the Demised Premises are taken by compulsory acquisition by any government or other person or body having authority so to do this Lease shall terminate when the Lessee is required to vacate the Demised Premises. If by such compulsory acquisition the floor area of the Demised Premises is reduced this Lease may at the option of either party be terminated (as at the date when the Lessee is required to vacate the portion of the Demised Premises so taken) by written notice to the other given not more than thirty (30) days after the date on which the party desiring to terminate receives notice of the acquisition. Except as provided in this paragraph this Lease shall not be terminated or otherwise affected by any compulsory acquisition. In the event of any such compulsory acquisition of any part of the Demised Premises as aforesaid the Lessee shall not claim any compensation from the Lessor and all compensation monies payable by the resuming authority in consequence of such compulsory acquisition shall be paid to the Lessor as full beneficial owner thereof and the Lessee hereby transfers to the Lessor the right title and interest of the Lessee in and to any such compensation monies as aforesaid together with the power for the Lessor as the act of and in the name of the Lessee to do all such things and acts and bring all such actions necessary to receive such compensation monies."
The primary submission of Senior Counsel for the respondent, Mr Traves SC, was that clause 15.08 had the effect that, on publication of the Taking of Land Notice, any claim which the lessee has or had in relation to the compulsory acquisition was assigned to the lessor, whether the whole or part of the demised premises was taken. Consequently, Mr Traves SC said, the lessee has no right to prosecute the claim for compensation. Counsel for the claimant, Mr Gynther, submitted that the assignment contemplated by clause 15.08 operated only where there was a compulsory acquisition of part of the leased premises and not in a case such as this where the whole of the demised premises was resumed.
The matters in contention require the construction of clause 15.08. The principles to be applied in construing a contract have been discussed in many cases. The High Court said, in Toll (FGCT) Pty Ltd v Alphapharm Pty Limited (2004) 219 CLR 165 at 179, that -
"This Court … has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction". (Citations omitted).
As McHugh JA said in Manufacturers Mutual Insurance Ltd v Withers (1988) 5 ANZ Ins Cases 60-853 at 75-343 –
"…few, if any, English words are unambiguous or not susceptible of more than one meaning or have a plain meaning. Until a word, phrase or sentence is understood in the light of the surrounding circumstances, it is rarely possible to know what it means. In my view evidence of surrounding circumstances will generally be admissible if it is known to both parties or sufficiently notorious to be presumed to be within their knowledge. "
To that may he added the observations of Lord Steyn in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] 3 All ER 352 at 372 -
"In determining the meaning of the language of a commercial contract … the law … generally favours a commercially sensible construction. The reason for this approach is that a commercial construction is more likely to give effect to the intention of the parties. Words are therefore interpreted in the way in which a reasonable commercial person would construe them. And the standard of the reasonable commercial person is hostile to technical interpretations and undue emphasis on niceties of language. "
I turn then to consider the evidence concerning the circumstances surrounding this transaction as known to the parties, and the purpose and object of the transaction.
Because there was no appropriately hatched plan annexed to the lease, there was some uncertainty at the hearing as to the extent of the area leased to the claimant. Affidavits by Mr M Bennett and Mr DL Cherry, which were subsequently filed on behalf of the claimant, have established to my satisfaction that the leased area comprised the whole of the hatched area on the plan annexed to Mr Cherry's affidavit sworn on 7 December 2007. The demised premises thus included a showroom, concrete parking area, three grassed areas, a concrete driveway and the area marked "existing garage" (although Mr Bennett said that there was no garage there at any time while Tableware was the lessee). According to a notation on that plan the site area (that is, I infer, the leased area) is 1,437.8 m². The land resumed was the whole of Lot 81 on SP 144027 with an area of 3,567 m². It appears then that the demised premises formed part only of the resumed area although the whole of the demised premises was resumed.
As with all leases, this lease sets out the rights and obligations of the parties to the lease. Thus, for example, in return for the grant of the leasehold interest the lessee was obliged to pay rent and other charges as set out in the agreement, to use the demised premises in the manner prescribed, to maintain and repair the demised premises to the extent agreed and not to make any alterations to the premises other than in accordance with the terms of the agreement. The lessor reserved a right of entry to be exercised for particular purposes, covenanted to allow the lessee quiet enjoyment of the premises and could forfeit the lease on default by the lessee. Clause 15 is headed "General Provisions" and, in addition to 15.08, deals with a number of disparate matters such as the appointment of a managing agent and caretaker, the payment of money, service of notices and an "entire agreement" clause. Apart from the obvious objects of granting a leasehold interest in the land to the claimant and setting out the rights and obligations of the parties, there was no other evidence as to the purpose and object of the lease.
The subject lease is the second lease of the premises between these parties. An identical clause to 15.08 was included in the first lease which ran from 10 April 1997 to 9 March 2002. The notice of intention to resume Lot 81 on SP 144027 was issued on 20 May 2003. The subject lease was executed on 14 June 2003 but the stated date of commencement was 15 May 2003. There was no evidence as to the circumstances surrounding its negotiation and execution nor of any reasons for the inclusion of clause 15.08 in either lease. In particular there is no suggestion that clause 15.08 was included in the second lease because of the pending resumption.
The result is that there is no evidence, other than that set out in the preceding three paragraphs, of any circumstances surrounding the transaction nor the purpose or object of the transaction, which assists in the interpretation of clause 15.08.
Moving to consider the language used in the contract, it is convenient to deal with clause 15.08 in separate parts although it is acknowledged that the clause must be considered as a whole and within the context of the lease as a whole –
Part A
"If all the Demised Premises are taken by compulsory acquisition by any government or other person or body having authority so to do this Lease shall terminate when the Lessee is required to vacate the Demised Premises".
Part B
"If by such compulsory acquisition the floor area of the Demised Premises is reduced this Lease may at the option of either party be terminated (as at the date when the Lessee is required to vacate the portion of the Demised Premises so taken) by written notice to the other given not more than thirty (30) days after the date on which the party desiring to terminate receives notice of the acquisition".
Part C
"Except as provided in this paragraph this Lease shall not be terminated or otherwise affected by any compulsory acquisition".
Part D
"In the event of any such compulsory acquisition of any part of the Demised Premises as aforesaid the Lessee shall not claim any compensation from the Lessor and all compensation monies payable by the resuming authority in consequence of such compulsory acquisition shall be paid to the Lessor as full beneficial owner thereof and the Lessee hereby transfers to the Lessor the right title and interest of the Lessee in and to any such compensation monies as aforesaid together with the power for the Lessor as the act of and in the name of the Lessee to do all such things and acts and bring all such actions necessary to receive such compensation monies."It may be observed that Parts A, B and C of clause 15.08 seek to identify whether and in what circumstances the lease may terminate, in the event of a compulsory acquisition, whereas Part D deals with aspects of the payment of compensation. Part D is the source of the major difference between the parties.
There is no dispute that Part A of clause 15.08 applies when, as was the case in this matter, the whole of the demised premises are resumed. The effect of the part of the sentence which says that "this lease shall terminate when the lessee is required to vacate the Demised Premises" will be considered later in this decision.
Part B deals with the situation where the floor area of the demised premises is reduced by "such compulsory acquisition", and provides that the lease may be terminated by either party by following the specified procedure. The words "such compulsory acquisition" refer, in my opinion, to the type of compulsory acquisition described in Part A, that is a compulsory acquisition by any government or other person or body having authority so to do. It is acknowledged that it is difficult to see how land could be compulsorily acquired other than by an appropriately authorised body but I consider that there is no other meaning that can be attributed to the words "such compulsory acquisition" because it is obvious, given the rest of Part B, that they cannot refer to a compulsory acquisition of the whole of the premises.
Part C applies to all other cases, that is to those which fit neither within Part A (when the whole of the demised premises are taken), nor Part B (when the floor area of the demised premises is reduced). Senior Counsel for the respondent submitted that Part C applies when part of the demised premises other than the floor area is taken e.g. part of the land area not occupied by the building. That may be so. An alternative or additional reading is, I consider, that Part C would apply to those situations where the land that is taken is some or all of the lessor’s land lying outside the demised premises.
Mr Traves SC submitted that the words "any such compulsory acquisition of any part of the Demised Premises as aforesaid" in Part D refer to any compulsory acquisition of the demised premises, whether of the whole or a part because the words "any such" in Part D reflected the plural not the singular and must include the predominant or primary acquisition referred to in Part A. If the parties had intended that the assignment should take effect only when part of the demised premises was resumed it would have been easy to say so.
The claimant says that Part D applies only when part of the demised premises was taken and, therefore, that it was not applicable in the event that has occurred here, where the whole of the demised premises have been resumed.
I do not consider that the words "any such" in Part D reflect the plural nor that they must include the predominant or primary acquisition referred to in Part A. Consistently with my interpretation of the phrase "such compulsory acquisition" used in Part B of the clause, I consider that the words "any such compulsory acquisition" in Part D refer to a compulsory acquisition by any government or other person or body having authority so to do. The word "any" thus refers to each of the types of resuming authority identified in Part A. If the respondent’s interpretation were accepted, the addition of the word "any" to the phrase "such compulsory acquisition" in Part D would mean that the words "such compulsory acquisition" are used in two different ways within the one clause – in Part B to refer to an acquisition by a government body etc and in Part D to refer to the description of the property acquired. I do not consider that a reasonable person would think that the parties would have intended that result.
A further obstacle to accepting the respondent’s submission that the initial phrase in Part D refers to all the types of compulsory acquisition specified in Parts A, B and C is that the phrase expressly refers to "any such compulsory acquisition of any part of the Demised Premises as aforesaid". While it is possible that a reference to any part of a property encompasses a reference to the whole, the ordinary meaning of the word "part" is "a portion or division of a whole, … a piece, fragment, fraction or section" (The Macquarie Dictionary, 2nd ed, 1991). In a context such as this where two of the preceding sections of clause 15.08, Parts A and B, have differentiated between the consequences of a compulsory acquisition of all the demised premises and one where the floor area is reduced, the absence of a reference to a compulsory acquisition of the whole in Part D should not be ignored. Moreover, as pointed out by Counsel for the claimant, there is a similar distinction drawn between the whole and part of the demised premises in other clauses in the lease – see, for example, clauses 3.01.1, 6.01 and 12.06.01. It is preferable in my opinion that the word "part" be interpreted consistently when used in similar contexts.
Mr Traves SC submitted that the words in Part D should not be confined to a resumption of part of the premises because the phrase "any part of the demised premises" did not equate with the compulsory acquisition referred to in Part B, where "the floor area of the Demised Premises is reduced".
The words "any part of the Demised Premises" are wider than but apt to include those cases where "the floor area of the Demised Premises is reduced". Thus I consider that Part D operates in respect of a compulsory acquisition of any part (as distinct from the whole) of the demised premises including the cases where the floor area is reduced. The result is that Part D applies in wider circumstances than the option to terminate under Part B may be exercised. While no explanation was forthcoming for drawing that distinction, there is no reason why the parties could not enter into such an agreement – it is not inherently unlikely – and therefore, I consider that the words should be given their ordinary meaning.
Mr Traves SC also contended against confining the operation of Part D to cases where a part of the leased premises was taken because, he said, there was no commercial sense in distinguishing between the acquisition of a part and the whole of the premises. If the lessor were to be protected from claims for compensation by the lessee and if there were to be an assignment of the proceeds of the compensation, he submitted, there would be more sense in the protection and or the assignment occurring whether the whole or part of the demised premises is taken. Counsel for the claimant submitted that it made no commercial sense for the lessee to assign away its rights to compensation from a full resumption and sought to support his submission by reference to various factual scenarios.
I do not consider that the words used in Part D of clause 15.08 are sufficient to demonstrate an intent that the lessee should have no claim against the lessor, or that there was to be an assignment of the proceeds of compensation, whether the whole or part of the demised premises is compulsorily acquired. Nor can it be assumed, without more, that that was the purpose or intent of this part of the clause. In the absence of any explanation for the inclusion of clause 15.08 I am unable to say that there is more commercial sense in the respondent's interpretation of that clause than in the claimant's. Undoubtedly, from the respondent's point of view there is more commercial sense in its interpretation than in that advanced by Mr Gynther. But no explanation or evidence has been given as to why the claimant would agree to protect the lessor to the extent claimed or assign such valuable rights to the lessor. In those circumstances, I am not persuaded that the words used should be interpreted expansively to include cases where the whole of the demised premises are resumed. I can, therefore, see no reason to interpret clause 15.08 otherwise than in accordance with what I consider is the ordinary meaning which a reasonable person would attribute to the words used.
My conclusion is that Part D of clause 15.08 does not apply in the event that has occurred, that is where there has been a compulsory acquisition of the whole of the demised premises. Accordingly, the declaration sought by the respondent in paragraph 1 of this application is refused.
This conclusion means that it is unnecessary for me to determine the next issue raised by Mr Traves SC, that is whether there has been an assignment of both the right to make a claim for compensation and the compensation monies payable.
The respondent has also sought –
· a declaration that such right as the claimant has to compensation under the Act is limited to and properly assessed on the basis that the lease terminated when the lessee was required to vacate the demised premises;
· in the alternative, a declaration that any claim brought by the claimant is of no value.
As set out above, Part A of clause 15.08 provides that "If all the demised premises are taken by compulsory acquisition … this lease shall terminate when the lessee is required to vacate the Demised Premises."
Mr Traves SC submitted that the plain intention of the parties as expressed in Part A was that the term of the lease be limited with the result that compensation should be assessed not on the basis that the term of the lease had been cut short by the compulsory acquisition, but on the basis that the lease would continue only until the time when the lessee was required to vacate the demised premises.
On the face of it, I do not consider that the parties intended Part A to affect the assessment of the quantum of compensation in the event of a compulsory acquisition of the whole of the demised premises. Rather, I consider that the only purpose of Part A, along with Parts B and C, was to identify the point in time at which the lease might terminate should there be a compulsory acquisition. Parts A, B and C do not refer to compensation whereas Part D does.
In any event, even if it were thought that Part A does affect the calculation of compensation as submitted by Mr Traves SC, there are only limited circumstances in which Part A could operate, because of the terms of s.12(5) of the Act. My reasoning is best explained by reference to three possible factual scenarios.
The first is the situation which occurred here, where the lessee was allowed to remain in possession after the date of acquisition[1]. Although the lessee remained in possession this was not a case where s.18(3) of the Act applied.[2] If Part A were applied to these facts, the lease would have terminated on the date that the claimant was required to give up possession of the premises. In my opinion, that interpretation cannot be sustained.
[1]Exhibits MMS9 and MMS 17 to the affidavit of MM Shannon sworn on 9 October 2006 show that the lessee was permitted to remain in possession until 31 January 2004. It appears that rent was paid during that period to the respondent constructing authority (Exhibits MMS12 and MMS 13 to the affidavit of MM Shannon sworn on 9 October 2006).
[2] Section 18(3) provides that -
"(3) Compensation shall not be claimable by or payable to a person who is lessee, tenant or licensee of any land taken if the constructing authority upon written application allows the person's estate or interest to continue uninterrupted."
Section 12(5) provides that -
"(5)On and from the date of the publication of the gazette resumption notice the land thereby taken shall be vested or become unallocated State land as provided by the foregoing provisions of this section absolutely freed and discharged from all trusts, obligations, mortgages, charges, rates, contracts, claims, estates, or interest of what kind soever, or if an easement only is taken, such easement shall be vested in the constructing authority or, where the gazette resumption notice prescribes, in the corporation requiring the easement, and the estate and interest of every person entitled to the whole or any part of the land shall thereby be converted into a right to claim compensation under this Act and every person whose estate and interest in the land is injuriously affected by the easement shall have a right to claim compensation under this Act."
The gazette resumption notice in this case provided that the land was taken for an estate in fee simple. The effect of ss.12(5) is that on the date of publication of the gazette resumption notice Trident's fee simple in the land vested in the respondent freed from all estates or interests including the claimant's leasehold estate. The result is that the lease terminated on the date of acquisition and both the lessee's and the lessor's estate were converted into rights to claim compensation under s.12(5) of the Act. On those facts, there is no room for the operation of Part A as a terminating mechanism and therefore the suggested effect on the calculation of compensation cannot apply.
Similarly, if different facts were assumed and the lessee had been required to vacate the premises on the date of resumption, I do not consider that Part A could have the effect contended for because the lease would also terminate by virtue of the operation of s.12(5). It is the vesting of the fee simple in the constructing authority, freed and discharged from the lease, which causes the lease to terminate. At that same point in time the constructing authority could have required the lessee to give up possession because the lease had ended. Part A cannot operate to terminate the lease because the lease has terminated by operation of s.12(5). I do not consider that the parties, by agreement, can override the effects of s.12(5) particularly where the resuming authority is not a party to the agreement.
This means that Part A could only operate in very limited circumstances, namely if the lessee were required to give up possession prior to the date of resumption, although the existence of a power to require the lessee to give up possession prior to a resumption is not apparent on the material before me. In the face of the clear words in s.12(5), however, I consider that no other interpretation is possible.
The result is that the subject lease terminated by the operation of s.12(5) of the Act and the claimant's rights to compensation are to be assessed on that basis. The declarations sought by the respondent in paragraphs 2 and 4 of the application are, therefore, refused. I will hear the parties as to costs.
ORDER
The application for declarations is refused.
CAC MacDonald
MEMBER OF THE LAND COURT
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