Antonio Giorgio Pty Limited v the Commonwealth of Australia [1986] ACTSC 21 (11 April 1986)

SUPREME COURT OF THE ACT

ANTONIO GIORGIO PTY. LIMITED v. THE COMMONWEALTH OF AUSTRALIA
S.C. No. 273 of 1986
Agreement for Taking Sand, etc. from River Bed

COURT

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

CATCHWORDS

Agreement for Taking Sand, etc. from River Bed - Grantor's interest in land in question assigned to Commonwealth - Provision that agreement might be voided if Department of Interior or other competent authority gave notice refusing or rescinding permission to take sand etc. - Covenant to prevent erosion - Option to renew on giving six months notice in writing - Erosion permitted - Notice given by Secretary, Department of Territories rescinding permission to take sand, etc. - Notice of intention to renew given within six months of expiry of agreement - Whether notice given by Secretary, Department of Territories valid - Whether notice of exercise of option valid - Whether Commonwealth estopped from terminating agreement on ground that erosion not prevented.

Gilbert J. McCaul (Aust.) Pty. Ltd. v. Pitt Club Ltd. (1959) 59 SR (NSW) 122.

Finch v. Underwood (1876) 2 ChD 310.

Bastin v. Bidwell (1881) 18 ChD 238.

Laybutt v. Amoco Australia Pty. Limited [1974] HCA 49; (1974) 132 CLR 57.

Amalgamated Investment & Property Co. Ltd. (In Liquidation) v. Texas Commerce International Bank Ltd. (1982) 1 QB 84.

Greville v. Parker (1910) AC 335.

West Country Cleaners (Falmouth) Ltd. v. Saly (1966) 3 All ER 210.

Reed v. Sheehan (1982) 39 ALR 257.

Craine v. The Colonial Mutual Fire Insurance Company Limited [1920] HCA 64; (1920) 28 CLR 305.

Legione v. Hateley [1983] HCA 11; (1983) 152 CLR 406.

United Overseas Bank v. Jiwani (1977) 1 All ER 733.

Greenwood v. Martins Bank, Limited (1933) AC 51.

Trustees Executors and Agency Company Limited v. Peters [1960] HCA 16; (1960) 102 CLR 537.

Mahoney v. Lindsay (1981) 55 ALJR 118.

Spencer Bower and Turner, Estoppel by Representation, 3rd Edn., at pp 62-69.

HEARING

CANBERRA
11:4:1986

ORDER

THE COURT DECLARES THAT:

1. There is and has been at all material times a binding
and enforceable contract between the plaintiff as
licensee and the defendant as licensor in the terms of
the agreement referred to in paragraph 1 of the
Statement of Claim herein.

2. The plaintiff has duly exercised the option for the
renewal of the licence contained within the said
contract pursuant to Clause 18 thereof.

THE COURT ORDERS THAT:

1. The defendant specifically perform and carry into
execution the agreement for renewal of the licence to
remove sand, gravel and water-worn rock from the
property referred to in the said contract which
agreement for renewal was created by reason of the due
exercise of the option for renewal referred to in
declaration No.2 herein.

2. The defendant by its servants or agents be restrained
from preventing or interfering with access for the
purposes of the contract by the plaintiff, its servants
and agents to the property described in the said
contract.

3. The defendant by its servants or agents be restrained
from interfering with the exercise by the plaintiff its
servants or agents of the right to exercise each and
all of the rights and obligations pursuant to the said
contract.

4. The plaintiff's claims for damages for loss of profits
and loss of goodwill and for damages for detinue or
conversion and for interest referred to in paragraphs
11 and 12 and subparagraphs (f), (g) and (h) of the
prayer for relief contained in the Statement of Claim
herein be stood over generally.

5. The defendant pay to the plaintiff its costs of the
action including all costs of and incidental to
proceedings for interlocutory relief and injunctions
down to and including this judgment, such costs to be
taxed or agreed.

6. The parties are to be at liberty to apply.

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 agreement to extract and remove sand, gravel and water-worn rock from part of Portions 1 and 13 of the Parish of Urayarra, County of Cowley now known as Block 31 Coree in the Australian Capital Territory (the site). The site includes part of the Murrumbidgee River.

2. 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 (the material) from the site.

3. The clauses of the agreement to which reference need be made are as follows:-

"1. The Licensor hereby grants to the
Licensee and the Licensee hereby accepts the
exclusive right to remove sand, gravel and
water-worn rock from the area hatched red
shown on the plan annexed hereto and marked
with the letter "A" being part of Portions 1
and 13 Parish of Urayarra County of Cowley in
the said Territory (which area is hereinafter
referred to as "the land") within a period of
fifteen years computed from the first day of
November, 1969."

"2.(c) On the first day of December in each
year during the term of this Deed an account
shall be taken of the total amount of
royalties paid during the preceding twelve
(12) months. If on the taking of such
account it appears that the amount of
royalties paid by the Licensee to the
Licensor is less than One thousand dollars
($1,000.00) then the Licensee shall forthwith
(subject to the provisions of sub-clause (a)
hereof) pay to the Licensor the difference
between the amount of royalties paid in the
said period of twelve months and the sum of
One thousand dollars ($1,000.00);

(d) The Licensee shall only be required to
pay the minimum royalty of One thousand
dollars ($1,000.00) referred to in sub-clause
(c) hereof whilst there is a sufficient
quantity of sand gravel or water-worn rock
available on the land."

"2A. 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."

"8. The Licensee will at its own expense
maintain the said land in a clean and tidy
condition at all times to the satisfaction of
the Department of the Interior, and take all
necessary steps to prevent erosion of the
said land, and to comply with the provisions
of the Conservation of the Soil (sic)
Ordinance 1947 (as amended from time to time)
and the Regulations made thereunder, and
comply with any directions given to it by
officers of the Department of the Interior."

"11. Nothing herein contained shall be deemed
to give the Licensee any exclusive or
non-exclusive possession of the land, nor
create nor be construed as conferring upon
the Licensee any interest in the said land or
any part thereof, nor shall anything in this
Agreement create or be construed as creating
the relationship of principal and agent
between the Licensee and the Licensor.

12. The Licensee shall be entitled at all
times to enter the land through Portions 20
and 22 of the said Parish over the route
marked blue on the plan annexed hereto and
marked with the letter "A" together with such
workmen, servants, agents, contractors, plant
and equipment as it may require.

13. The Licensee shall at its own expense
construct a road to the land through Portions
20 and 22 of the said Parish over the route
referred to in Clause 13 (sic - it should
obviously be 12) hereof." (emphasis added)

"18. 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."

4. Before the agreement was made Mr Retallack had discussions with the Land Administration Branch of the Department of the Interior. Following those discussions he received a letter from the Department dated 25 June 1969. It read:-

"I refer to the application by Mr Newell and
yourself concerning extraction of bedding
sand from the Murrumbidgee River at Portions
1 and 13 Parish of Urayarra, (Holding 98
Coree).

The Department has no objection to your
proposal. However, to avoid increasing the
turbidity of the river, and to prevent any
possible soil erosion, it would be
appreciated if the operation could be carried
out under the general supervision of a soil
conservation officer.

In this regard could you or Mr Newell advise
Mr T.P. Taylor, Director, Agriculture Branch
(telephone 462300) of the date operations are
expected to commence so that arrangements can
be made."

5. I am satisfied that a copy of that letter, unidentified, was annexed to the original agreement and that its contents were therefore known to the plaintiff.

6. Pursuant to the agreement the plaintiff removed material from the site until 28 November 1973 when Mr Retallack sold the whole of his land including the site to the Commonwealth.

7. Following the Commonwealth's acquisition of the land the plaintiff continued to remove material from the site and paid royalties to the Commonwealth in accordance with the agreement until 30 October 1984. From 31 October 1984 to 21 February 1986 the plaintiff continued to remove material and paid royalties to the Commonwealth in respect of material removed to 31 January 1986.

8. It is effectively agreed on the pleadings that, in the events that happened, the Commonwealth became the licensor in place of Mr Retallack and bound by the conditions of the agreement.

9. 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."

10. 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."

11. 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."

12. 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."

13. 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."

14. 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."

15. On 27 February 1986 the Department of Territories 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."

It was signed illegibly by a person "for Secretary", the Secretary being unnamed.

16. In giving the notice of 27 February 1986 the Commonwealth was concerned to prevent further environmental damage being done at the site.

17. When the matter came before me on 24 March 1986 it was agreed that the hearing should be treated as the final hearing of the claim for injunctions and that any question that might arise concerning equitable damages in lieu of or in addition to injunctions could await my reasons for judgment on the claim for injunctions.

18. The issues that presently remain to be decided are:-

(a) whether there was a breach by the plaintiff of
clause 8 of the agreement which the Commonwealth
did not waive or in respect of which it is not
estopped from giving such evidence as would
justify its rejection of the plaintiff's purported
exercise of the option granted by clause 18 of the
agreement;

(b) whether, if there was no such breach, the
plaintiff duly exercised the option contained in
the said clause 18; and

(c) whether, in any event, the notice given on 27
February 1986, seemingly under clause 2A of the
agreement, effectively terminated any such licence
as might still be found to be subsisting in
respect of the material to be won from the site.

19. The plaintiff by its statement of claim pleaded in effect that at all material times it had observed the covenants and conditions contained in the agreement. It thereupon effectively took upon itself immediately the burden of proving that it had complied with the condition precedent represented by the words "upon . . . observing the covenants and conditions herein contained" appearing in clause 18 of the agreement instead of waiting, as it might have done, for any alleged breach of the condition to be raised by the defence. Rules of Court, 0.23, r.14. See Kodak (Australasia) Pty. Ltd. v. Retail Traders Mutual Indemnity Insurance Association (1942) 42 SR (NSW) 231 and Body Corporate Strata Plan No.4303 v. Albion Insurance Company Ltd. (1982) VR 699. Alternatively it might set out to show that the Commonwealth is estopped from relying on any breach of the condition precedent or that it has waived its performance.

20. The only alleged breach with which I am concerned is the plaintiff's failure to take all necessary steps to prevent erosion to "the land". During the course of the evidence three areas were identified as having been subject to erosion. The first was along the sides of the access road built, no doubt, pursuant to the provisions of clauses 12 and 13 of the agreement. The second was an area on the uphill side of a bay which had been excavated from a hill for use, apparently, as a stockpile area. The third was an island in the river bed bounded in part by a channel which is subject to intermittent flooding. Approximately 80% of the material extracted from the site is won from the island with the remainder being won from other parts of the site. In his affidavit sworn 24 March 1986 Mr Giorgio deposed that he built the road, which can only be the road referred to in clauses 12 and 13 of the agreement, in 1969-1970. He described the road as the single access route to the worksite. He said that every now and again, at intervals of between 6 to 8 months, he graded the road and cleaned the gutter areas. After rain he used wait until the area dried out before employing a plant operator to regrade the road.

21. Dr Bryan Pratt, Assistant Secretary, Land Management Branch, A.C.T. Parks and Conservation Service, the Department of Territories gave evidence by affidavit and orally. He is responsible for all matters relating to soil conservation, fisheries, wildlife, river and lake management, rural land management, nature reserves and other open lands, horticulture and agriculture in the Australian Capital Territory. His affidavit disclosed that the plaintiff's operation at the site is the last of a number of similar activities previously carried on in the Murrumbidgee River corridor in the Territory. For reasons which he set out and which basically go to support the agreed fact that the Commonwealth was concerned to prevent further environmental damage at the site, he told something of the history of the matter and of the considerations which led to the current Commonwealth concern.

22. In his oral evidence Dr Pratt said that for some 20 years he had walked along that part of the Murrumbidgee River corridor which includes the site not less than 10 and possibly as many as 15 times a year. Asked about the nature of the soil in and about the access road he said that he observed signs of erosion or weathering there caused, he believed, by the removal of vegetation and destabilisation of the soil surface. He at first observed that erosion in late 1979 and sait it was present from approximately late 1979 to the present. He considered that the areas of erosion adjacent to the access road had been substantially in that condition for a long period. Erosion was a dynamic process which would continue. Steps could have been taken to prevent it.

23. Dr Pratt's evidence just referred to was not challenged and I accept it.

24. On 7 December 1984 Hans Finck, a soil conservationist employed in the Department of Territories, inspected the site. He reported, inter alia, that active erosion was present along the access track. Table drains had reached a rock base through washing out and were widening. He considered this condition to be due to lack of sufficient culverts.

25. Reporting on 8 February 1986 following an inspection carried out that day, Mr B. Griffiths, Senior Soil Conservationist, described the condition of the access track to the site as follows:-

"Rill erosion at several places along the
track; in particular at culvert head walls.
Table drain adjacent to track generally on
rock; some minor rill erosion at culvert
entries. Erosion more pronounced on the last
500m of track before the extraction site."

Mr Griffiths' report was admitted subject to objection as to its relevance. I am satisfied that it was relevant as disclosing a condition of erosion of the access track which appears to have continued, no doubt worsening as time went by, after the date of Mr Finck's report. I do not use that report to support in any way a finding that the plaintiff was in breach of the condition precedent referred to in clause 8 of the agreement at any relevant time during the term of the licence granted by Mr Retallack but rather as tending to militate against a finding that such precautions as might have tended to prevent or heal the erosion had been taken. It is a possible view that the words "prevent erosion" in clause 8 of the agreement mean to prevent it completely or, if erosion has taken place, eventually to take appropriate remedial steps to heal it.

26. Consideration of clauses 1, 12 and 13 of the agreement led to the conclusion as a matter of construction that the access road might not pass across the site at all because the road referred to in clause 12 was to be built across Portions 20 and 22 and not over those parts of Portions 1 and 13 included in the site. However, inspection of the original plan annexed to the agreement and of an air photograph, part of Exhibit E, has satisfied me that the access track did in fact traverse a large part of that section of Portion 1 which was included in the site. The photograph to which I have just referred bears the date 10 February 1985.

27. Since the island is the major source of the material presently being extracted from the site it seems to me that its complete removal by the plaintiff was envisaged by the agreement. Clause 2(d) makes it plain, I think, that the parties foresaw that there might come a time when all sand, gravel and water-worn rock had been removed from the site either during the currency of the agreement or during the term of any agreement made as a result of the exercise of the option granted by clause 18. No restriction is placed by the agreement on the method of extraction of material from the site or, in particular, from the island. I am not, in the circumstances, satisfied that there has been any failure to take necessary steps to prevent erosion of the island within the meaning of clause 8.

28. As to the bay where material is stockpiled, I think I should accept that erosion has taken place on its margins during the currency of the agreement. The plaintiff made no attempt to deny it. No evidence was given on its behalf that it had taken any real precautions against erosion or that it had attempted to take remedial measures when erosion had occurred. It would pass belief that no such stockpile bay as appears on the photographs tendered in evidence was in existence adjacent to the access road during the currency of the agreement.

29. I take the words "necessary steps to prevent erosion" used in clause 8 to mean that the plaintiff undertook to take all reasonable precautions to prevent erosion and, should it occur, to remedy it by some appropriate means. That such means are available appears from the evidence given on behalf of the Commonwealth. In the making or maintenance of a road such as the access road it would be an impossible task to prevent erosion completely should rain happen to fall or should a strong wind arise. The amount of erosion might only be small but it could hardly be suggested that the parties understood that in agreeing to be bound by the condition in clause 8 the plaintiff undertook to prevent erosion completely.

30. In the end I am satisfied that there was a failure by the plaintiff in breach of clause 8 of the agreement to take the steps necessary to prevent erosion at the sides of the access road and at the stockpile bay. In my opinion the failure in each case was not of that minimal degree of which the law takes no regard. Either failure was a breach of the condition contained in clause 8. In reaching the conclusion that the plaintiff was in breach I have proceeded on the basis that the plaintiff bears the onus of proof that it has not breached the relevant condition and this it has failed to discharge.

31. It is not suggested that the breach was a fundamental breach of the agreement entitling the Commonwealth to determine it. What is submitted is that the Commonwealth was entitled to refuse to enter into the agreement provided for in clause 18 on due exercise of the option. I proceed for the moment on the assumption that the Commonwealth in fact waived any rights in respect of the breach of the condition which it might have exercised during the term of the agreement. On the analogy of landlord and tenant law, counsel submitted that the proper view to take in the circumstances is that the mere fact that the Commonwealth may have waived any rights it had in respect of the breaches so far as they related to the basic licensing provisions of the agreement was not a relevant consideration in determining whether the option has been duly exercised. Reference was made to Gilbert J. McCaul (Aust.) Pty. Ltd. v. Pitt Club Ltd. (1959) 59 SR (NSW) 122 at p 123, where, in reliance on Finch v. Underwood (1876) 2 ChD 310 and Bastin v. Bidwell (1881) 18 ChD 238, it was held that a submission to the contrary would have been in the teeth of the authorities.

32. In substance the submissions made on this point by counsel for the plaintiff were that the condition in clause 8 of the agreement concerning the prevention of erosion was a condition in the Commonwealth's favour and that it waived performance of it or, if it had not waived performance, it had otherwise estopped itself by its conduct from showing that the condition had not been performed. In making these submissions counsel sought to distinguish Gilbert J. McCaul (Aust.) Pty. Ltd. v. Pitt Club Ltd. (supra). In that case there had been frequent failures to pay rent punctually during the currency of the original term of a lease which contained a clause granting the tenant an option to renew subject, inter alia, to the punctual payment of rent. The solicitors for the tenant gave notice purporting to exercise the option to renew but no renewal of the lease was in fact granted. The tenant sought an order for specific performance and claimed that the lessor had waived performance of the provision regarding punctual payment of rent and was estopped from relying upon the breach of that provision. It was held by the Supreme Court of New South Wales (Owen J, Roper CJ in Eq. and Herron J) that performance of the term as to payment of rent was a condition precedent to the tenant's being able to accept, so as to bind the lessor, the offer of renewal contained in the clause relating to the option.

33. In its judgment the court espoused the view that an option of renewal is no more than an offer to make a contract which if under seal or given for consideration is a contractual offer which cannot be revoked. Counsel submitted that that view differed from the view taken by Gibbs J (as he then was) in Laybutt v. Amoco Australia Pty. Limited [1974] HCA 49; (1974) 132 CLR 57. Gibbs J, at p 76, expressed the view that an option to purchase, at least in the form there considered, was a contract to sell the land in question upon condition that the grantee gives the notice and does the other things stipulated for in the option.

34. It seems to me that no matter which view be accepted (and I accept with respect that put forward by Gibbs J) the burden of proving the performance of the condition precedent remains on the person desirous of exercising the option unless he shows that performance of the condition has been waived or that the grantor of the option is estopped from asserting failure to perform it. In either of those cases it may possibly be said that there has been a variation of the original agreement for option. See Amalgamated Investment & Property Co. Ltd. (In Liquidation) v. Texas Commerce International Bank Ltd. (1982) 1 QB 84 at pp 120-1 per Lord Denning MR.

35. In my opinion Gilbert J. McCaul (Aust.) Pty. Ltd. v. Pitt Club Ltd. (supra) ought to be distinguished. The breaches there referred to were breaches which commonly occur in the relationship between landlord and tenant. Waiver of them during the currency of the appropriate lease has for long been construed as not affecting the right of the landlord to rely upon such a breach as a failure to comply with a condition precedent to the grant of an extension of the lease under an option clause. See Greville v. Parker (1910) AC 335. In that case the Privy Council said at p 340:-

"The lessors were not in fact seeking to
enforce a right of re-entry or forfeiture, by
action or otherwise, under any proviso or
stipulation in a lease for a breach of any
convenant or condition in the lease. They
had brought no action and were apparently
willing to let the term run out by effluxion
of time, and merely set up the failure of the
lessees to perform a condition precedent as
an answer to their claim for specific
performance."

See also Gilbert J. McCaul (Aust.) Pty. Ltd. v. Pitt Club Ltd. (supra) and West Country Cleaners (Falmouth) Ltd. v. Saly (1966) 3 All ER 210 where the lessor, aware during its currency of breaches of the lease, remained silent and was held not to have waived those breaches or to be estopped from relying on them when the lessee sought to exercise an option to renew the lease. Even in such cases a clause granting an option and providing for a condition precedent in respect of the exercise of the option is not strictly construed. See Reed v. Sheehan (1982) 39 ALR 257, at pp 264-5 where Fox J, although in dissent, considered the question in a passage which I respectfully adopt. He said:-

"It is established that option clauses have
to be strictly complied with, so far as
concerns time and manner of exercise, but
this is because they constitute a unilateral
right or power, and it is considered
important that the grantor of the option know
where he stands (United Scientific Holdings
Ltd. v. Burnley Borough Council (1978) AC
904 at 929, 945), but the line of cases which
I will soon discuss clearly enough supports
the conclusion that a condition annexed to an
option that a provision or provisions of the
principal agreement be complied with is not,
or is not as a rule, 'strictly' construed.
To take one of the cases, Australian Can Co.
Pty. Ltd. v. Levin & Co. Pty. Ltd. (1947)
VLR 332, Lowe J, delivering the judgment
of Herring CJ and himself, with which
Fullagar J agreed, said at p.336: 'We agreed
that the plaintiff's right to exercise the
option to purchase is subject to a condition
precedent, but the meaning of the condition
has still to be ascertained. It is to be
observed that the defendant's covenant for
quiet enjoyment is subject to the same
condition precedent and we find it impossible
not to give the same meaning in each case to
the language used. There is a long course of
authority which established that the language
is not to be construed in its strictest
sense, and that the condition is complied
with if at the time the plaintiff seeks to
exercise his right the breach, has been
remedied (Simons v. Associated Furnishers
Ltd. (1931) 1 Ch 379, and the cases there
referred to' (the (underlining is) mine)."

36. The letter dated 25 June 1969 from the Department of the Interior, Land Administration Branch, to Mr Retallack and clause 8 of the agreement show that the parties were at all relevant times over a period of not less than 15 years mindful of the problems that erosion might cause. The plaintiff and Mr Retallack expected that the Commonwealth could at any time during the agreement deal with any such problem as was of concern to it by the intervention of a soil conservation officer acting in a general supervisory capacity. The Commonwealth's position in this regard must have been at least as strong when it became party to the agreement in November 1973. That it took no action over such a long period when the parties must reasonably have expected that it would do so by its officers had they thought it necessary shows, I think, that there was a waiver by the Commonwealth of its rights concerning the taking of necessary steps by the plaintiff to prevent erosion.

37. There can, I think, be no doubt on the evidence that the Commonwealth was aware at least through Dr Pratt of the matters which constituted the breach of the condition precedent but the plaintiff's attention was never directed to those breaches. It claims, therefore, that the Commonwealth's failure to raise the matter with it was a representation by silence that it would not rely upon the condition precedent in respect of the exercise of the option. It was submitted that there was an acceptance of the continuing breach as the conventional basis for all purposes of the relationship between the plaintiff and the Commonwealth.

38. In my opinion the erosion and the length of time over which the erosion occurred establishes, against the background of the relationship between the parties, a difference in kind and degree so much at variance with the breaches referred to in the landlord and tenant cases to which I have referred as to require them to be distinguished from the instant case.

39. In more than 16 years the Commonwealth failed to direct the attention of the plaintiff to any such breach as might then have existed in respect of necessary steps to prevent erosion. Even if one relies only on Dr Pratt's evidence the silence extended for six years until the matter was first raised, as I understand the position, in the defence as first delivered.

40. I think in the circumstances that the Commonwealth elected with full knowledge to approbate the position which obtained and there was therefore a true waiver. See Craine v. The Colonial Mutual Fire Insurance Company Limited [1920] HCA 64; (1920) 28 CLR 305, at pp 325-7 per Isaacs J delivering the judgment of the Court.

41. As to relevant aspects of the doctrine of estoppel I turn first to a statement made by Deane J, when a Judge of the Federal Court of Australia, in Reed v. Sheehan (supra) at p 278. I omit all references used by him save one. He said:

"First, it has long been recognized that a
representation must be clear and unambiguous
before it can found an estoppel in pais.
'Every estoppell, because it concludeth a man
to alleadge the truth, must be certaine to
every intent, and not to be taken by argument
or inference' (Coke's Littleton), 352b. The
requirement that a representation must be
clear and unambiguous before it can found an
estoppel is applicable to any doctrine of
promissory estoppel. Second, estoppel in
pais looks chiefly at the situation of the
person relying on the estoppel. This general
rule is likewise applicable to any doctrine
of promissory estoppel. Third, a person will
not be estopped from departing from an
assumption or a misrepresentation 'unless, as
a result of adopting it as a basis of action
or inaction, the other party will have placed
himself in a position of material
disadvantage' if departure from the
assumption is permitted. Again, this general
rule is applicable to any doctrine of
promissory estoppel."

42. In Legione v. Hateley [1983] HCA 11; (1983) 152 CLR 406 at pp 435-7, Mason and Deane JJ effectively adopted and expanded what Deane J had said in Reed v. Sheehan. At pp 438-9 they said:-

"The requirement that a representation as to
existing fact or future conduct must be clear
if it is to found an estoppel in pais or a
promissory estoppel does not mean that the
representation must be express. Such a clear
representation may properly be seen as
implied by the words used or to be adduced
from either failure to speak where there was
a duty to speak or from conduct. Nor is it
necessary that a representation be clear in
its entirety."

43. As well, the person seeking to have the benefit of an alleged estoppel must be shown to have relied upon it. See Legione v. Hateley (supra) at p 438 where Mason and Deane JJ also said:-

"The evidence is unsatisfactory on the
question whether, if there were a
representation to the suggested effect, Mr
and Mrs Hateley, through their solicitor,
adopted it as a basis of action or inaction
and thereby placed themselves in a position
of material disadvantage if departure from
the representation were permitted. Part of
the reason for this may be a failure by the
pleadings to allege this necessary component
of any promissory estoppel."

See also United Overseas Bank v. Jiwani (1977) 1 All ER 733.

44. The situation to be looked at is that of the person said to be relying on the estoppel rather than that of the person against whom the estoppel is being alleged.

45. Finally there is the rule that a person will not be estopped from departing from an assumption or misrepresentation, even one made by silence, "unless as a result of A adopting it as a basis of action or inaction, the other party will have placed himself in a position of material disadvantage." Reed v. Sheehan (supra) at p 278.

46. I think there was a representation. Whether the true analysis shows that there was an estoppel by convention as to the licensing aspect of the agreement and a promissory estoppel as to the option does not matter since the necessary pre-existing legal relationship between the parties existed. Reed v. Sheehan (supra) at p 277.

47. But the Commonwealth asserts that mere silence could not amount to a representation in the absence of a duty in the Commonwealth to speak up regarding the breach of condition. In reply the plaintiff relies upon the Soil Conservation Ordinance 1960 and says that under that Ordinance the Commonwealth by the appropriate Minister of State had the duty to take steps to prevent the erosion in question. It is true that by s.4 of that Ordinance the Minister responsible for its administration may, being satisfied that erosion is present on land, take action against the person responsible but I do not think any duty placed upon the Minister by that Ordinance is a duty of the same kind as the duty to speak referred to by Mason and Deane JJ in Legione v. Hateley (supra) and by Lord Tomlin in Greenwood v. Martins Bank, Limited (1933) AC 51 where he said, at p 57:-

"Mere silence cannot amount to a
representation, but when there is a duty to
disclose deliberate silence may become
significant and amount to a representation."

48. The nature of the duty just referred to is discussed in Halsbury's Laws of England, 4th Edn., Vol. 16 at para 1618. None of the examples given there support the view submitted by the plaintiff as to the nature of the duty in question. See also Spencer Bower and Turner, Estoppel by Representation, 3rd Edn., particularly at pp.62-69. Something more than mere reliance on the Soil Conservation Ordinance 1960 must be shown.

49. Whatever was the situation in 1969 following the letter of 25 June 1969 referred to above, I think that that letter together with the fact that the Commonwealth became effectively the licensor under the agreement in November 1973 meant that the plaintiff could reasonably look to the Commonwealth from not later than November 1973 for appropriate advice from a soil conservation officer acting in a supervisory capacity as to whether or not it was in breach of the condition to take necessary steps to prevent erosion. The combined circumstances led to a situation where, I think, there was something more than a mere duty under the Soil Conservation Ordinance 1960, something which became in fact the duty to which Lord Tomlin refers in the passage from Greenwood v. Martins Bank, Ltd. quoted above. I therefore think that there was a representation by silence and the Commonwealth had assumed the duty to speak up in respect of any relevant breach of the condition precedent so that the plaintiff might remedy it and therefore would be in a position where, when it came time to exercise its option, it was no longer in breach of the condition precedent.

50. Since the Commonwealth waived the condition precedent for so long it must be taken to be estopped from departing from the misrepresentation constituted by the waiver if the plaintiff has placed itself in a position of material disadvantage. I think it must be taken to have done so and to have relied on the option for it is inconceivable that, being advised of the steps necessary to prevent the erosion complained of, it would not have taken the necessary steps to protect its interests under the agreement.

51. I find therefore that the Commonwealth is estopped from alleging breaches of the condition precedent.

52. I turn to the second issue to be decided.

53. The notice given by the plaintiff's solicitor's letter of 8 May 1984 did not in terms purport to exercise the option and it was given within six months of the agreement's expiry date, 30 October 1984. Both parties rely upon Trustees Executors and Agency Company Limited v. Peters [1960] HCA 16; (1960) 102 CLR 537. Kitto and Menzies JJ discussed the question in passages which I quoted in my reasons for interlocutory judgment in this matter handed down on 11 March 1986. I will not repeat those passages here. I would add, however, in deference to the argument of senior counsel for the Commonwealth, an additional passage from the judgment of Menzies J appearing at pp.553-4:-

"The important point for present purposes is
that in both Shearer v. Wilding (1915) 15
SR (NSW) 283 and Rider v. Ford (1923) 1
Ch 541, cases where there was no express
limitation of the time in which an option to
purchase given in a lease was to be
exercised, a limit was inferred, in the
former during the currency of the lease, and
in the latter during the relationship of
landlord and tenant. In each case, the
implication of a time limit rested upon the
commonsense principle that general words may
be limited by the character of the instrument
in which they appear and that a provision in
a lease is prima facie concerned with the
period of the lease or the period during
which the relationship of landlord and tenant
continues."

54. I think that on its proper construction clause 18 of the agreement required only that during the term of the agreement the plaintiff should give the Commonwealth six months notice in writing of its intention to exercise the right to renew the agreement for a further term of 15 years. No time is fixed by which the notice is to be given and I think the only time which ought to be implied is that of the kind referred to in Peters' case, that is that the notice should be given while the relationship of licensor and licensee existed under the agreement.

55. Any defect which the notice may have had was, I think, cured by its apparent acceptance by the Commonwealth as a notice of intention to exercise the option. See the letter of 26 July 1984 quoted above. That letter indicated clearly enough to the plaintiff that there was no point in its seeking to give a more felicitously expressed notice of intention to exercise the option before the agreement expired. See Mahoney v. Lindsay (1981) 55 ALJR 118.

56. I find therefore that the notice of intention to exercise the option was duly given.

57. The last matter to be determined relates to the notice served on the plaintiff's solicitors on 27 February 1986 by the Department of Territories. As I understand the case put by senior counsel for the Commonwealth, the notice is simply relied upon as terminating any such licence at will as may have continued after the expiration of the agreement. It is not suggested that the Department of Territories was a competent authority as those words used in clause 2A of the agreement are to be understood. Had it been contended at the hearing that the notice had been given under that clause, it would, I think, have been ineffective for there is no evidence of competence to determine the agreement vested in the old Department of the Interior or in any other Department or authority which is to be in some way identified by the clause.

58. It was submitted on behalf of the plaintiff that the continued acceptance of the royalties after the agreement had expired meant that a new agreement for 15 years had been entered into. I can see no basis for such a suggestion. Landlord and tenant law affords no true analogy. For example, even on a holding over, the most which could be implied would be a tenancy from year to year. No authority was cited in favour of the view that the interest created by the agreement, an interest defined with some precision in clause 11 of the agreement, was an interest akin to a lease.

59. Because of the conclusions I have reached it is unnecessary to consider further at this stage the meaning of that clause 11. It may well fall to be considered should any claim for damages be continued.

60. In the result there must be judgment for the plaintiff. I would ask the parties to bring in short minutes of the orders they seek having regard to these reasons.