Antonio Giorgio Pty Limited v the Commonwealth of Australia [1986] ACTSC 17 (11 March 1986)

SUPREME COURT OF THE ACT

ANTONIO GIORGIO PTY. LIMITED v. THE COMMONWEALTH OF AUSTRALIA
S.C. No. 273 of 1986
Interlocutory Injunction

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Kelly J.(1)

CATCHWORDS

Interlocutory Injunction - Whether serious questions of law to be tried - Balance of convenience.

Australian Coarse Grain Pool Pty. Ltd. v. Barley Marketing Board of Queensland (1982) 46 ALR 398.

State of Queensland v. Australian Telecommunications Commission [1985] HCA 25; (1985) 59 ALR 243.

Tableland Peanuts Pty. Ltd. v. Peanut Marketing Board (1984) 52 ALR 651.

Epitoma Pty. Ltd. v. Australasian Meat Industry Employees' Union (1984) 54 ALR 730.

HEARING

CANBERRA
11:3:1986

DECISION

On 12 February 1986 Antonio Giorgio Pty. Limited (the plaintiff) began an action in this Court against the Commonwealth of Australia claiming relief of various kinds, including injunctive relief, in respect of what it claimed was the Commonwealth's wrongful interference with its enjoyment of its rights under an alleged agreement to extract and remove sand, gravel and water-worn rock from Portions 1 and 13 of the Parish of Urayarra, County of Cowley in the Australian Capital Territory. In these proceedings it seeks interlocutory injunctions.

2. It is common ground that by an agreement executed under seal and dated 28 October 1969 (the agreement) one Philip Cyrus Retallack, for himself and his transferees, successors and assigns, granted the plaintiff the right to remove sand, gravel and water-worn rock from Portions 1 and 13 above referred to. Clause 18 of the agreement provided:-

"The Licensee (the plaintiff) upon paying the

royalty hereby reserved and observing the
covenants and conditions herein contained
shall have the right by giving six months
notice in writing to the Licensor (Mr
Retallack) of its intention, to exercise the
right to renew this Agreement for a further
term of Fifteen years upon the same terms and
conditions as are herein contained, save and
except this present covenant for renewal, and
at a current market royalty for similar
material."

Clause 2A provided:-

"In the event of the Department of the
Interior or any other competent authority
refusing or rescinding permission to remove
the said sand gravel and water-worn rock,
this Contract shall become void and of no
effect, and the Licensee shall be entitled to
remove any or all of its improvements
including buildings and other fixtures."

3. The Commonwealth acquired the land in question from Philip Retallack by a written agreement entered into on or about 28 November 1973. That agreement appears to have been completed on or about 7 February 1974 because on 11 February 1974 a transfer of land including at least the said Portion 13 from Mr Retallack to the Commonwealth was lodged for registration. The transfer was duly registered on 12 February 1974 "to the intent that the lands become Crown land". Shortly afterwards, as it would seem, the plaintiff wrote to the Assistant Secretary, Department of the Capital Territory to advise that it had learnt of the sale. The letter went on:-

"In accordance with the previous agreement
with your Department we would be pleased to
receive your advice as to where payments of
Royalties are to be forwarded."

4. There is no material before me, although, of course, I make no definitive finding on the matter, to indicate that, from 1974 to 30 October 1984, the relationship between the plaintiff and the Commonwealth was in any way different from that between the plaintiff and Mr Retallack envisaged by the terms of the agreement and it has not been contended that the Commonwealth did not become the licensor in place of Mr Retallack in the events that happened.

5. On 8 May 1984 the plaintiff's solicitors wrote to the Assistant Secretary, Lands Administration Branch, Department of Territories and Local Government. They said:-

"We desire to confirm that we act for the
above Company and desire to draw your
attention to the fact that the term of the
agreement between our client Company and the
former owner Mr Philip Cyrus Retallack is due
to expire on the 30 October 1984.

One of the terms of that agreement with Mr
Retallack was that our client Company would
have an option for renewal of the agreement
for a further term of fifteen (15) years upon
the same terms and conditions as were
contained in the agreement between the parties
dated the 28 October 1969.

We shall be obliged if you could let us know
whether you are prepared to grant our client
Company such option period and if so on what
terms and conditions."

6. On 23 July 1984 a response to that letter stated that the Department was presently considering the application and would advise of its decisions in respect of it. On 26 July 1984 an officer of the Department wrote to say:-

"The Department notes that your clients'
(sic) company is only eligible to renew the
license by giving 6 months notice of the
intention to renew. As the license expires
on 30 October 1984, your notice should have
reached the licensor by 30 April 1984.

Clearly, the Department has no obligation
under the license to grant your clients'
(sic) company a renewal of the license.
However, the Department will consider the
grant of a new lease, subject to planning and
environmental approval."

7. In subsequent correspondence the plaintiff's solicitors pressed for a decision. On 5 February 1985 an officer of the Department of Territories, as the Department of Territories and Local Government had by then become, wrote to say:-

"As advised on 26 July 1984, this Department
has no obligation to grant your client's
company a renewal of their licence. However
the Department will consider the grant of a
new lease.

This Department will consider your formal
request for a lease when it is submitted."

8. On 8 February 1985 the plaintiff's solicitors replied:-

"We have today been instructed by our client
company to apply for a lease of Portions 1
and 13 Parish of Urayarra on behalf of the
company and we shall be obliged if you would
let us know the full terms and conditions of
the proposed lease as soon as possible."

9. On 14 October 1985 the Departmental decision was given by letter. Its text was as follows:-

"I refer to your letter of 8 February 1985
requesting a lease over Block 31 Coree for
your clients Antonio Giorgio Pty Limited.
The delay in responding to your letter is
regretted. This delay has been occasioned by
a need for technical and planning advice.

The Murrumbidgee River Corridor, which
includes the river and its adjacent
foreground area, is being developed as a
scenic and recreation reserve in the A.C.T.
On both technical and planning grounds sand
and gravel extraction in the Murrumbidgee
River is an unacceptable use.

The Department is unable to accede to your
request for a lease and work to reverse and
stabilise the area of extraction is now
urgently needed. The Department proposes to
put these works in hand and your client is
required to vacate the site.

This letter is to give one months notice to
your clients that their licence agreement is
now formally terminated and they should
vacate the site within one month of the date
of this letter. Your clients are required
within this time to clear the site of all
their plant equipment and structures and to
leave the site in a clean and tidy condition.

I should be glad if you would transmit this
letter to your clients."

10. On 23 October 1985 the plaintiff's solicitors sought on its behalf an extension to three months of the one month's notice given by the Departmental letter of 14 October 1985. Further correspondence ensued. The next letter to which it is necessary to refer was that dated 7 February 1986 from the plaintiff's solicitors to the Assistant Secretary, Business Leases Section of the Department of Territories. It said, inter alia:

"We are instructed by our client on this
morning that your office has overnight
proceeded to deny our client access to the
subject property by locking the gates which
form the entrance to the property. Such
action by your office is causing considerable
financial loss and embarrassment to our
client.

We are instructed to require that unfettered
access be provided to our client and its
customers to the subject site by 4.00 pm on
this day, and for such to be confirmed in
writing to our office, failing which we are
instructed to commence the necessary legal
proceedings to protect the position of our
client."

11. On 27 February 1986 the Department served on the plaintiff's solicitors a notice in the following terms:-

"Sand Mining Operation - Block 31 Coree

I refer to previous correspondence.

Notice is hereby given that permission to
remove sand, gravel and water-worn rock from
the land, being part of Block 31 Coree (also
known as Portions 1 and 13 Parish of Urayarra
County of Cowley), is refused and rescinded.
Any licence agreement that may have existed
between your Company and the Commonwealth
shall be void and of no effect by this
notice.

Additionally, notice is hereby given that
your Company is entitled to remove any or all
of its improvements including buildings and
other fixtures."

12. Since the plaintiff commenced its action, interim injunctions on various terms have been granted from time to time. One is currently in force in favour of the plaintiff and is due to expire at 5 p.m. today.

13. Having regard to the view expressed by Gibbs CJ sitting alone in Australian Coarse Grain Pool Pty. Ltd. v. Barley Marketing Board of Queensland (1982) 46 ALR 398 and in State of Queensland v. Australian Telecommunications Commission [1985] HCA 25; (1985) 59 ALR 243, by Brennan J, also sitting alone, in Tableland Peanuts Pty. Ltd. v. Peanut Marketing Board (1984) 52 ALR 651 and by a Full Court of the Federal Court of Australia in Epitoma Pty. Ltd. v. Australasian Meat Industry Employees' Union (1984) 54 ALR 730, I think this Court, in deciding whether an interlocutory injunction ought to be granted, is bound first to decide whether there is a serious question to be tried and if that question be answered "Yes", then to consider whether the balance of convenience is in favour of the grant or refusal of the injunction.

14. Counsel for the plaintiff, in submitting that a serious question arose for argument, relied upon Trustees Executors and Agency Company Limited v. Peters [1960] HCA 16; (1960) 102 CLR 537. In that case, discussing the exercise of an option for the purchase of land, Kitto J said at pp 545-6:-

"Another ground of defence was that there was
to be discovered in the deed an implication
that even if the respondent should not give a
notice bringing the time for exercising the
option to an end the time should nevertheless
be limited to the period of the lease, or
alternatively to the period during which the
relation of landlord and tenant should
subsist between the respondent (the
defendant) on the one hand and Chislett (by
whom) and Mullins (on behalf of whom the suit
seeking specific performance of the agreement
said to have come into being as a result of
the exercise of the option) on the other. In
my opinion such a limitation of time is not a
necessary or proper implication in the deed.
I do not rely so much upon the fact that the
land to which the option related included
land of which Chislett and Mullins were never
lessees, for it was nevertheless as lessees
of portion of the land included that they got
the option, and it was as lessees of that
portion that they dealt with the respondent
over the matter of the extension. But in the
deed, as in the memorandum of lease, the
parties made express provision as to the
duration of the option, and the provision
they made had no reference or specific
relation of any kind to the continuance of
the lease or of the landlord and tenant
relationship."

At pp.552-3, Menzies J said:-

"It is the law that an option for the renewal
of a lease which is granted without any
express limitation of time for its exercise,
is prima facie to be exercised during the
currency of the lease, or at (least), while
the relationship of landlord and tenant
continues between the parties. The reasons
for this implication are obvious and are of
compelling weight. When parties are
negotiating a lease, it is highly probable
that they are dealing with their relationship
as landlord and tenant and it is highly
improbable that they would intend that after
that relationship had ended, the tenant could
exercise an option to renew a lease that had
already come to an end. To bind the
'landlord' to renew the 'lease' when it had
run out and he was no longer landlord would
require very clear words indeed."

15. The third member of the Court, McTiernan J, concurred with both Kitto and Menzies JJ.

16. The passages I have quoted, as well as what Menzies J said in addition at p 553, are authority, in my view, for the proposition that where a lessor grants an option for the renewal of a lease or a grantor of a profit a prendre grants an option for its renewal without any express limitation of time for its exercise, it is prima facie to be exercised during the currency of the lease or grant, as the case may be, while the relationships of landlord and tenant on the one hand or grantor and grantee on the other continue between the parties but whether a time has been fixed for the exercise of the option is a matter of construction of the instrument in question. It seems to be the case that the right in question in this case is, at least prima facie, a profit a prendre even though in gross. Shuttleworth v. Le Fleming (1865) 19 CB (NS) 687 at pp 709-710; 144 ER 956 at p 965 and Lord Chesterfield v. Harris (1908) 2 Ch 397 at p 421.

17. In my opinion there is a plainly arguable case that, since the letter of 8 May 1984 seeking to exercise the option was written during the existence of the relationship of grantor and grantee between the Commonwealth and the plaintiff, it is a matter of construction of the agreement whether or not the option was exercised in accordance with its terms. I think arguable, too, the question whether the plaintiff's solicitors' letter of 8 May 1984 was effective to exercise the option if the option could be exercised by the plaintiff on that date.

18. The third point which must be argued, and it goes to the question of arguability as well as to balance of convenience, is whether the notice of 27 February 1986 given by the Department of Territories to the plaintiff was effective to bring into operation clause 2A of the agreement.

19. Counsel for the plaintiff contended that the clause could not be deemed to be continued into any agreement which might come about as a result of the exercise of the option since it would constitute a derogation from its grant by the grantor. It seems to me that this is an arguable submission, not only because it may be contended that in its original context the clause was designed to relieve Mr Retallack from the possibility of liability for breach of contract in the event of the refusal or rescission by a competent authority of permission to remove sand, gravel and water-worn rock from the land in question but also because the Commonwealth has always had and still has available to it powers under the Lands Acquisition Act 1955 (Cwth) (the Act) which it may lawfully and promptly exercise to bring to an end any relationship existing between the plaintiff and it without depriving the plaintiff of the value of any of its lawful rights subsisting at the date of acquisition.

20. On all the major questions it seems to me, therefore, that the plaintiff has an arguable case and, although I express no view as to the final outcome of the dispute, I think I am bound to turn to the question of the balance of convenience.

21. The Commonwealth's concern is lest further environmental damage be occasioned to the Murrumbidgee River corridor at the extraction site. I am satisfied that further extraction of sand, gravel and water-worn rock will have an adverse impact upon the environment immediately surrounding the site and that this impact when added to the environmental damage already done in the past by the extraction operation is the subject of legitimate government concern. The Commonwealth has given an estimate through Dr Brian Pratt, Assistant Secretary, Land Management Branch, A.C.T. Parks and Conservation Service in the Department of Territories, that the significant restoration and rehabilitation works necessary for the achievement of the aims of the Commonwealth will cost a minimum of $60,000.

22. The Commonwealth is also concerned lest an island which is located in the river bed and bounded in part by a channel subject to intermittent flooding should be further damaged. As photographs tendered in evidence show, a considerable amount of this island has been mined so that there is left immediately adjacent to the channel to which I have just referred a miniature escarpment not less than 12ft. high. Obviously the face of the escarpment presents an easy source for extraction of the sand, gravel and rock which the plaintiff wishes to win.

"The object of (an) interlocutory injunction
is to protect the plaintiff against injury by
violation of his right for which he could not
be adequately compensated in damages
recoverable in the action if the uncertainty
were resolved in his favour at the trial; but
the plaintiff's need for such protection must
be weighed against the corresponding need of
the defendant to be protected against injury
resulting from his having been prevented from
exercising his own legal rights for which he
could not be adequately compensated under the
plaintiff's undertaking in damages if the
uncertainty were resolved in the defendant's
favour at the trial. The court must weigh
one need against another and determine where
'the balance of convenience' lies."

American Cyanamid Co. v. Ethicon Ltd. [1975] UKHL 1; (1975) AC 396 at p 406 per Lord Diplock with whose speech the other Law Lords concurred.

23. I emphasise that in this case no attempt has yet been made to have the principal action dealt with as, initially, it seemed to me it might, having regard to the facts which seem to be not substantially in dispute and to the probability that the result would turn upon the proper construction of the agreement and the notice of 27 February 1986 in the light of the facts of the case. I assume, therefore, that at least some important matters of fact remain in dispute and that the parties are not yet in a position to attempt to deal with the question of construction which has arisen.

24. I put aside for the moment the question raised by the Commonwealth's concern for the future of the island to which I have referred. The plaintiff claims, reasonably as it seems to me, that its goodwill would be irreparably damaged if it were unable to continue to extract and sell the materials it has extracted and sold for so long. It says that damages would not be an adequate remedy because, if in the event its claim were found to be good and no interlocutory injunction were granted, its customers would have sought supplies elsewhere to its very grave and probably irreparable detriment. I see much force in this argument and therefore consider that the plaintiff has made out an arguable case that his goodwill is seriously threatened. Further, it is arguable that the agreement between the plaintiff and the defendant which the plaintiff seeks to establish is one in respect of which the Court might make a decree for specific performance. Fry on Specific Performance, 3rd Edn. at p.387, citing in support Gervais v. Edwards (1842) 2 Dr. & War. 80 at p 87: 4 I.Eq.R. 555 per Lord St. Leonards LC.

25. Against the plaintiff's situation is to be balanced the defendant's genuine concern for the environment of the extraction site and in particular for the island referred to above. The Commonwealth plainly has an interest in ensuring that unnecessary environmental damage is not caused but this interest does not, in the ordinary way, mean that existing private rights must yield arbitrarily to it, particularly when it may, in my view, without detriment to its position take prompt, effective and lawful action to achieve its end. This is because another factor looms over all. That is the right of the Commonwealth to take action to acquire, as an interest in the land in question, any right which the plaintiff is entitled to exercise over that land. Such a power of acquisition can be exercised by the Commonwealth very promptly. See ss.9 and 10 of the Act. Under s.11 of the Act the interests of the plaintiff would then be converted into a right to compensation under the Act. I was told by counsel for the Commonwealth, without objection by counsel for the plaintiff, that the Commonwealth was indeed considering its power to take action under the Act in respect of the plaintiff's interest.

26. Having regard to the estimated cost of restoring the land after it has been the subject of extraction for so long and the short time which may elapse before the land can, without doubt, be lawfully vested in the Commonwealth, I conclude generally that the balance of convenience lies in granting an interlocutory injunction but that specific provisions should be made for the preservation of the island to meet the Commonwealth's concern that irreparable damage may be done to that particular section of the land if the extraction operation continues.

27. I will hear submissions as to the appropriate form of interlocutory injunction which I intend to mould so that the plaintiff may continue until the hearing to extract sand, gravel and water-worn rock from the land in question at no more than the rate used by it during its course of operations to date provided that it does not extract any further such material from the island. I will expect the Commonwealth to give a suitable undertaking as to damages in respect of what will obviously be the more costly extraction of materials from a site or sites other than that which I have described as the escarpment.

28. During the course of the day the parties should bring in draft short minutes of the orders they seek.