Canberra Drag Racers Club Incorporated v Australian Capital Territory and Commonwealth of Australia [2000] ACTSC 61 (26 July 2000)

Last Updated: 16 October 2000

Canberra Drag Racers Club Incorporated v Australian Capital Territory and Commonwealth of Australia [2000] SCACT 61 (26 July 2000)

CATCHWORDS

LANDLORD AND TENANT - lease - consideration and interpretation of option to extend clause - whether clause unenforceable for want of certainty.

CONTRACTS - parol evidence rule - whether terms need to be implied for business efficacy.

CONSTITUTIONAL LAW - Australian Capital Territory - management of land consequent upon self-government - declaration of specified area of land in the Territory to be "National Land".

National Land Ordinance 1989

Leases Ordinance 1918

Australian Capital Territory (Self-Government) Act 1988 (Cth)

Australian Capital Territory (Planning and Land Management) Act 1988 (Cth) ss 27, 29

Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 Appl

DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423 Cited

Meehan v Jones [1982] HCA 52; (1982) 149 CLR 571 Refd

Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd [1982] HCA 53; (1982) 149 CLR 600 Refd

Attorney-General (ACT) v Commonwealth [1990] FCA 339; (1990) 26 FCR 82 Cited

No. SC 436 of 1999

Judge: Cooper J

Supreme Court of the ACT

Date: 26 July 2000

IN THE SUPREME COURT OF THE )

) No. SC 436 of 1999

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: CANBERRA DRAG RACERS CLUB INCORPORATED

Plaintiff

AND: AUSTRALIAN CAPITAL TERRITORY

First Defendant

AND: COMMONWEALTH OF AUSTRALIA

Second Defendant

ORDER

Judge: Cooper J

Date: 26 July 2000

Place: Brisbane (Heard in Canberra)

THE COURT ORDERS THAT:

1. The application is dismissed.

2. Judgment be entered for the first and second defendants.

3. The plaintiff pay the first and second defendants' costs of and incidental to the proceedings, including reserved costs, if any, to be taxed if not agreed.

Background

1. The plaintiff is an incorporated club which conducted drag racing at a motor racing track at Pialligo in the Australian Capital Territory ("the ACT"). Originally, it conducted the race track under a licence to use the land for that purpose granted to it in 1978. The plaintiff, during the 1980's, negotiated for a lease of land upon which to conduct its activities. The negotiations involved the de-gazettal of Palona Drive as a public roadway. This occurred in the late 1980's.

2. On 27 October 1988 a written offer of lease was sent by the Assistant Secretary, Lands Branch, ACT Administration, to the plaintiff. The letter of offer included a draft form of lease, to be issued under the Leases Ordinance 1918 in respect of Block 520, District of Majura for a period of ten years commencing on the date of the acceptance of the offer. The letter of offer made no provision for an option to extend for a further term. Although the draft lease included an option to extend clause, it was blank as to the length of any further term.

3. On 6 December 1988 the plaintiff, by its solicitor, accepted the offer of lease with a varied purposes clause. On 7 December 1988 the plaintiff paid $400.00 to the ACT Administration, being the first year's rent for the land. The payment was receipted by the Department of Territories and Local Government on 9 December 1988.

4. On 6 December 1988 four Acts of the Commonwealth legislature received the Royal assent. They were the Australian Capital Territory (Self-Government) Act 1988 (Cth) ("the SG Act"), the Australian Capital Territory (Electoral) Act 1988 (Cth), the Australian Capital Territory (Planning and Land Management) Act 1988 (Cth) ("the PLM Act"), and the A.C.T. Self-Government (Consequential Provisions) Act 1988 (Cth).

5. Section 27 of the PLM Act established a category of land in the ACT called "National Land". National Land is created by declaration of the relevant Commonwealth Minister published in the Commonwealth Gazette: s 27(1). The Minister is not to declare an area to be National Land unless the land is, or is intended to be, used by or on behalf of the Commonwealth: s 27(2). Section 27 of the PLM Act commenced to operate on 31 January 1989. Other provisions of the PLM Act which are relevant to these proceedings did not commence until the commencement date of self-government on 11 May 1989.

6. On 2 March 1989 by notice in the Commonwealth Gazette of that date, the Minister of State for Administrative Services acting for and on behalf of the Minister of State for the Arts and Territories declared, pursuant to s 27(1) of the PLM Act, all the areas of land described in the schedule to the declaration to be National Land, all those areas so described being used, or being intended to be used, by or on behalf of the Commonwealth. Block 520 Majura was one of a number of blocks falling within an area marked on Map 10 attached to the declaration. These blocks, and other specified blocks, covered the Canberra Airport, the Fairbairn RAAF Base and surrounding areas. It is to be inferred, and I find, that the land was to be used, or intended to be used, by or on behalf of the Commonwealth for the purposes and operation of the Canberra Airport and the Fairbairn RAAF Base, both of which are, and were, Commonwealth purposes.

7. On 10 May 1989 the National Land Ordinance 1989 ("the Ordinance") was notified in the Commonwealth Gazette. Section 4 of the Ordinance provided for the management of National Land. National Land was to be managed by the Commonwealth Minister for Administrative Services. Section 5 of the Ordinance dealt with the application of certain pre-self-government laws to National Land. The relevant pre-self-government laws, which included the Leases Ordinance 1918 and the Leases Regulations, were defined in s 3 of the Ordinance. They were to continue to apply to all National Land and to have effect as provided for in the Ordinance: s 5(1), (3) and (6). The Ordinance commenced on 11 May 1989 with the commencement of s 22 of the SG Act.

8. On 11 May 1989 the other provisions of the PLM Act relevant to these proceedings came into operation. By s 28 of the PLM Act, land in the ACT which was not National Land pursuant to s 27 was designated Territory Land for the purposes of the Act. The ACT Executive created by s 36 of the SG Act was made responsible for the management of Territory Land on behalf of the Commonwealth, and empowered on behalf of the Commonwealth to grant, dispose of, acquire, hold and administer estates in Territory Land: s 29(1)(a) and (b) of the PLM Act.

9. The applied provisions as defined in the Ordinance did not have effect with respect to Territory Land: s 5(2). Consequently after 11 May 1989, the Leases Ordinance 1918 and the Leases Regulations did not have effect with respect to Territory Land. Such land was subject to the enactments of the Legislative Assembly, which Assembly was established under s 8 of the SG Act and empowered by s 22 of that Act to make laws for the peace, order and good government of the ACT. By the operation of s 34 of the SG Act, the Leases Ordinance 1918 was to be taken as an enactment of the Assembly under the SG Act and accordingly capable of amendment and repeal by the Assembly. The Leases Ordinance 1918 as an enactment of the Assembly was thereafter to be cited as the Leases Act 1918.

10. Until 1 July 1993 under an agreement between the first and second defendants, the first defendant managed National Land as agent for the second defendant. On or about 1 July 1993, the second defendant terminated the arrangement with the first defendant and thereafter itself managed National Land. The land in issue after 1 July 1993 was managed by the Department of Defence on behalf of the second defendant.

11. On 26 September 1989 the delegate of the Territory Minister for the time being administering the Leases Act 1918 executed a form of lease for and on behalf of the Commonwealth. The lease was also executed by the plaintiff by the affixing of its Common Seal. The lease was in respect of Block 520 District of Majura and was made between the Commonwealth of Australia as lessor and the plaintiff as lessee for a term of ten years to commence from 9 December 1988 ("the Lease").

12. The Lease was entered by the Registrar of Titles in the Register Book Vol 1131 Folio 10 on 31 October 1989.

13. On its face, the Lease purports to have been granted pursuant to the Leases Act 1918.

14. The Lease contained clause 6(e) in the following terms :

"(e) That if at the expiration of this lease the Territory shall have decided not to sub-divide the land and that it is not required for any Territory or National Land purpose and shall have declared the premises to be available for lease AND if the Lessee has duly paid the rent and observed and performed the covenants and stipulations on the part of the Lessee to be observed and performed and giving the Territory not less than three months PREVIOUS notice in writing of his desire to extend the lease the Lessee shall be entitled to a further lease of the premises for a term of ten years and at such rents and subject to such conditions (including reappraisement of rents) as may then be determined by the Territory."

15. On 7 September 1998 the plaintiff, by written notice bearing that date, purported to give the first defendant notice of exercise of the option to extend contained in clause 6(e) of the Lease. The notice required the first defendant to grant a further lease to the plaintiff for a ten year term commencing on 9 December 1998.

16. On 30 November 1998 the Director of Property Services, Department of Defence, wrote to Mr G Develin of the plaintiff as follows :

"As advised at our meeting this morning, a meeting was held last week to discuss the issues surrounding the operations of the Canberra International Dragway and the extent of it's tenure, particularly in relation to the Canberra Airport. Attendees at the meeting were representatives from the National Capital Authority, the Department of Defence, the Civil Aviation Safety Authority (CASA), Air Services Australia (ASA) and the Canberra Airport Group.

The meeting was advised that whilst the dragway's operations were currently not in direct conflict with the operation of the airport, several issues were emerging which would see a change to the current situation. The airport will be introducing a non-precision based landing system and pilot activated lighting system as part of its commercial approach to airport management. This is anticipated to be in place within the next year. In addition to the short term changes, as part of it's commitment to reduce noise affecting residents at Jerrabomberra, the Canberra Airport Group representatives stated that it is intended to extend the east-west runway to the east within the next five years.

It was agreed with the changes proposed to the airport and it's operations that the airport and dragway activities would no longer be compatible. The meeting therefore agreed that the Canberra International Dragway's tenure would need to be set at five more years in its current location and that discussions would take place between the NCA and ACT Government with a view to establishing a new location for the dragway. It is therefore anticipated that any significant new investment during the next five years would be at the new location rather than on the existing site.

The Department of Defence will put a new lease in place to formalise this position. The lease will not provide for any option to renew and will require the dragway to cease operations around 9.30 pm (subject to consideration) as a concession to the safety concerns over the new lighting arrangements.

The Department of Defence will be approaching you formally in the coming week to discuss the particulars of the new leasing arrangement. In the meantime, I trust that this advice is sufficient to allow your events planned in the near future to take place."

17. The plaintiff by its solicitor rejected the offer contained in the letter of 30 November 1998 of a new lease for a term of five years.

18. In default of the grant to it of the further lease as demanded, the plaintiff on 11 June 1999 filed an originating application and statement of claim. An amended statement of claim was filed on 3 December 1999.

The issues

19. The issues raised in the proceedings were :

20. (a) the proper construction of clause 6(e) of the Lease;

(b) whether on the proper construction of clause 6(e) the factual pre-conditions to the exercise of the option had been made out;

(c) whether, on the proper construction of clause 6(e) the clause was unenforceable for want of certainty as to the rent and lease conditions for any extended term;

(d) whether the first defendant in its conduct in respect of the Lease had breached obligations it is alleged were owed by it to the plaintiff under a collateral agreement.

The admissibility of certain evidence

21. The plaintiff sought to rely upon two affidavits in support of its case. One was made by Mr Geoffrey Flynn Develin. The other was made by Mr Anthony Edward Sofoulis. Both deponents are members of the plaintiff and Mr Sofoulis was President of the plaintiff in 1988 when the offer of a lease was made to the plaintiff. Each affidavit was objected to by the defendants as being irrelevant to the issues raised on the pleadings and as being irrelevant to the proper construction of clause 6(e) of the Lease. The affidavits were provisionally admitted into evidence pursuant to s 57 of the Evidence Act 1995 (Cth) subject to relevance being demonstrated on the basis of a finding or findings which the plaintiff would seek to have made in its final submissions.

22. The affidavit of Mr Develin falls into three basic parts :

(a) the identification of documents, copies of which he obtained by applications made under the Freedom of Information Act 1982 (Cth), reciting parts of those documents and expressing opinions as to the meaning and effect of them;

(b) evidence of the cost of improvements to the leased land and expressing the opinion that to make the improvements, or for members to expend substantial sums on their vehicles in order to race at the raceway, would have been financially unreasonable and imprudent if the Lease term was limited to ten years with no reasonable expectation of receiving a further ten year term under clause 6(e) of the Lease;

(c) evidence of meetings Mr Develin attended with the Executive Chairman of the Canberra International Airport in October 1998 and with Mr Ian Priestly of the Civil Aviation Safety Authority in January 1999 and of his request of the Canberra International Airport for a copy of the final Master Plan for the airport.

23. The affidavit of Mr Sofoulis deals with the subjective beliefs of Mr Sofoulis as President of the plaintiff at the time of the negotiations for a lease in 1988, at the time of the receipt of a letter of offer of lease dated 27 October 1988 and at the time he instructed the plaintiff's solicitor to accept the offer of lease.

24. In the present case the plaintiff's right to a further term, if any, is to be found within clause 6(e) of the Lease. The Lease contains the entire agreement made between the second defendant as lessor and the plaintiff as lessee. The rights of the parties are to be determined on the basis of the proper construction of the Lease as the document recording the agreement of the parties. In these circumstances the dealings of the parties prior to execution, the negotiations and any prior oral agreements have been superseded by or merged in the Lease itself upon its execution and evidence of those matters is inadmissible as an aid to construction though admissible in an action for rectification: Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 at 352.

25. In Codelfa Construction, Mason J said in respect of the admission of evidence of surrounding circumstances as an aid to construction of a written contractual term (at 352 - 353) :

"The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.

It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.

Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.

There may perhaps be one situation in which evidence of the actual intention of the parties should be allowed to prevail over their presumed intention. If it transpires that the parties have refused to include in the contract a provision which would give effect to the presumed intention of persons in their position it may be proper to receive evidence of that refusal. After all, the court is interpreting the contract which the parties have made and in that exercise the court takes into account what reasonable men in that situation would have intended to convey by the words chosen. But is it right to carry that exercise to the point of placing on the words of the contract a meaning which the parties have united in rejecting? It is possible that evidence of mutual intention, if amounting to concurrence, is receivable so as to negative an inference sought to be drawn from surrounding circumstances. See Heimann (1938) 38 SR (NSW), at p 695."

26. Subjective background evidence of the beliefs and expectations of Mr Sofoulis as President of the plaintiff at the time of receipt of the offer for lease, and at the time the decision to accept was made, is not admissible as evidence in aid of the construction of the Lease, and in particular clause 6(e): Codelfa Constructions at 352; DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423 at 429. Evidence of Mr Develin falling within the same category which I identified above as category (b) is also inadmissible.

27. Secondary evidence by Mr Develin coming within category (a) as to the contents of written documents already in evidence in the agreed bundle Exhibit 1 is also irrelevant and therefore inadmissible. The relevance of those documents themselves will be determined by the operation of the general principle as stated by Mason J in Codelfa Constructions.

28. The evidence of Mr Develin as to his conversations with the Canberra International Airport and the Civil Aviation Safety Authority may be relevant if the construction of clause 6(e) of the Lease contended for by the plaintiff is found to be the proper construction of the clause.

29. Finally, the evidence of Mr Sofoulis in paragraphs 3 - 7 inclusive of his affidavit is relevant to and admissible for the limited purpose of seeking to make out against the first defendant the collateral contract pleaded in paragraph 6 of the amended statement of claim.

The proper construction of clause 6(e)

30. The plaintiff contended that the clause provided the following preconditions :

(a) the first defendant shall have decided not to subdivide the land;

(b) the land is not required for any Territory purpose;

(c) the land is not required for any National Land purpose;

(d) the first defendant shall have declared the premises available for lease;

(e) the lessee has duly paid the rent and performed the covenants and stipulations on its part to be observed and performed;

(f) the lessee giving not less than three months previous notice in writing of its desire to extend the lease.

31. Those conditions, the plaintiff contended, fell to be satisfied as at 8 December 1998 upon the expiration of the lease.

32. The plaintiff submitted that the Lease had been drawn up by the first defendant as a lease of Territory Land. However, it submitted, that circumstance did not affect the construction of clause 6(e) for which the plaintiff contended.

33. The defendants contended that clause 6(e) required that the first defendant, in addition to the other requirements, decide as a matter of opinion that the land was not required for any Territory purpose or for any National Land purpose. They submitted that it was not sufficient to attempt to show as a matter of objective fact that the land was not required for any such purpose as the plaintiff had attempted to do.

34. The second defendant contended that I should find that the Lease was prepared and executed by the first defendant as agent for the second defendant under an agreement to manage National Land. On this basis, the second defendant submitted that references in the Lease to the ACT enactments and to the PLM Act were to be ignored. Such an approach requires that one ignores the operative words of the grant of the original term.

35. The second defendant also contended as an alternative construction that it was an implied term of the Lease that if the first defendant ceased to act as the second defendant's agent in managing National Land, all references in the Lease to the Territory should be replaced by references to the Commonwealth or another agent appointed for that purpose.

36. Section 29 of the PLM Act gave the power to the first defendant as an incident of self-government to manage lands which, although held in fee simple by the second defendant, were not declared as National Land under s 27 of that Act. The section also empowered the ACT Executive as an incident of self-government to grant on behalf of the Commonwealth, estates or interests not inconsistent with the paramount freehold estate of the Commonwealth and the provisions of the Seat of Government (Administration) Act 1910 (Cth). The power granted under s 29(1)(a) and (b) was subject to s 29(2)(a) and (b) and the other provisions contained in Part V of the PLM Act: see generally Attorney-General (ACT) v Commonwealth [1990] FCA 339; (1990) 26 FCR 82 (FC) at 86.

37. For all practical purposes the first defendant was to manage Territory Land and use and benefit from it as if it were beneficially entitled to the land. The benefits and liabilities which were to go with the management of Territory Land are reflected in the provisions ss 30 and 31 of the PLM Act.

38. National Land, in contradistinction to Territory Land, was not to be managed by the ACT Executive as one of the statutory incidents of self-government. National Land was to continue to be capable of being leased by the responsible Commonwealth Minister of State acting under and in accordance with the provisions of the Leases Ordinance 1918 and the Leases Regulations. By Reg 4, the responsible Commonwealth Minister was required, before the land was leased, to determine that the land was not required by the Commonwealth for immediate possession. Ordinarily, availability for lease was to be notified in the Commonwealth Gazette by calling for applications to lease the land in question: Reg 8. However, there was power to grant a lease in other circumstances without complying with Reg 8: Reg 10.

39. The Lease in issue was drawn up and executed against the new statutory regime which came into operation with self-government. Different statutory regimes were applicable depending upon whether the grant was a grant of lease of Territory land or a grant of lease of National Land. The Lease falls to be construed against the statutory regime operating at the time of its creation because it is part of the objective background against which the parties executed the Lease and to which its terms would inevitably allude. It was part of the objective framework of facts within which the Lease came into existence: Codelfa Constructions at 352.

40. The lease on its face purports to be a "LEASE GRANTED pursuant to the Leases Act 1918 and the Regulations thereunder ...". It also cites in aid as the statutory source of the grant not only the Leases Act 1918 of the Australian Capital Territory but also the "Australian Capital Territory (Planning and Land Management) Act 1988 ss 29, 30 and 31". The Lease was executed by a delegate of the Territory Minister exercising the powers or functions of the Territory Minister under the Leases Act 1918: clause 6(g).

41. In my view, as a matter of construction, the Lease was drawn up as a lease of Territory Land. I come to this view without regard to the extrinsic materials contained in the documents tendered by the plaintiff with the consent of the defendants. However, reference to the extrinsic materials supports such a conclusion. It would appear the Lease was drawn up in ignorance that the land had been declared National Land by the declaration notified in the Commonwealth Gazette dated 2 March 1989 or acting upon a misunderstanding as to whether the land was included in the declaration: see the Report of the Director, Special Leases, Office of Industry and Development to the Australian Property Group, Department of Administrative Services dated 28 May 1990.

42. There is no issue in these proceedings that the Lease was ineffective to create a leasehold estate of National Land. The position of all parties has been to treat the grant as having been effective to create a leasehold estate and to vest that estate in the plaintiff for the term of the Lease.

43. That the Lease was drawn as a lease of Territory Land has significant consequences in terms of the construction to be placed upon clause 6(e) and the role which it was contemplated that the first defendant would have in relation to the management of both the land and the Lease provisions, and in particular, clause 6(e). The powers which the first defendant was to exercise under the Lease were statutory powers sourced in the Leases Act 1918 and ss 29 and 30 of the PLM Act. The powers were therefore, as a matter of construction, to be exercisable throughout the term of the Lease and were not determinable at will on the part of the second defendant. Further, as a matter of construction, the subject matter of the Lease was land which was, and remained at the expiration of the Lease, within the statutory power of the first defendant to manage. Clause 6(e) did not contemplate that the first defendant would do anything other than exercise its statutory powers under s 29 of the PLM Act. The Lease was drawn to reflect and give effect to the relevant statutory provisions which came into effect on 11 May 1989 with self-government in the ACT.

44. The form of the Lease did not contemplate that the first defendant would exercise any statutory powers, or powers under the Lease, as the manager of National Land. Clause 6(e) stands in no different position to the other provisions of the Lease so far as the character of the land, the subject of the Lease, is concerned. Clause 6(e) is a mutual covenant and objectively reflected the common understanding of the second defendant as lessor and the plaintiff as lessee, that the first defendant would not declare the land available for lease if, at the expiration of the Lease, it was National Land or was, in the opinion of the first defendant, land required for any National Land purpose.

45. In coming to a decision at the expiration of the original term, the first defendant was to make decisions which were relevant to the availability of the land for lease for a further ten year term. So understood, if the other preconditions being satisfied, it was for the first defendant to declare that the premises were available for lease for the further term of ten years provided for in the option.

46. Clause 6(e) requires that a declaration be made by the first defendant of the availability of the land for lease for the specified ten year term. The requirement of the land for subdivision or for any Territory or National Land purpose during the term, are matters which logically, and as a matter of construction of clause 6(e), impact upon the decision of the first defendant to make the declaration. It follows in my view that the clause contemplates that the first defendant will make decisions about not simply the matter of subdivision of the land, but also as to the requirement of the land for any Territory or National Land purpose. In the context of clause 6(e), "decided" relates both to the question of subdivision and whether the land was required for any Territory or National Land purpose.

47. The matters which clause 6(e) required the first defendant to consider in relation to the availability of the land for lease and to make a decision about, were :

(a) Whether the land was Territory land at the expiration of the original term;

(b) If the land was Territory land :

(i) whether or not the first defendant had decided not to subdivide the land;

(ii) whether or not the land was required for any Territory purpose;

(iii) whether or not the land was required for any National Land purpose.

48. The first defendant is required to make a decision with respect to the availability of the land for lease for a ten year period. That requires the first defendant to make judgments or form opinions as to the present use by or on behalf of the second defendant of the land, or there being an intention to use the land at some time in the future in such a way. In clause 6(e), the common intention was that in respect of Territory or National Land use it was the opinion of the first defendant which was the necessary precondition to be satisfied as part of a decision-making process which led to the making of the necessary declaration of availability of the land for lease and not the existence of the use or intention as an objective fact.

49. So construed, the clause does not purport to give to the first defendant the power vested in the Minister under s 27(2) to declare land to be National Land. Rather, it requires the first defendant as manager of Territory Land to decide from all the then known and relevant circumstances affecting the land, whether the land is required for National Land purposes. That is, to decide as a matter of judgment and opinion whether the land is, or is intended to be, used by or on behalf of the Commonwealth during any further term of the Lease, notwithstanding that no declaration under s 27(1) of the PLM Act has then been made.

50. The interests of both the lessor and the lessee under clause 6 are sufficiently protected by implying a term that the first defendant, in making such decisions as are provided for in the clause, will act honestly, or perhaps honestly and reasonably: Meehan v Jones [1982] HCA 52; (1982) 149 CLR 571 at 581, 591, 597.

51. For the above reasons, I reject the construction of clause 6(e) contended for by the plaintiff.

52. There is no evidence that the plaintiff was ever aware of the existence of an agreement between the first and second defendants for the management of National Land at the time of the execution of the Lease. Further, it is not necessary to imply the term contended for by the second defendant to give the Lease business efficacy. Finally, on the proper construction of the Lease as a whole, the implied term contended for is inconsistent with the terms of the Lease that the first defendant will exercise the powers and perform the functions provided for in the Lease from its inception up until and at its expiration. In these circumstances the conditions necessary for the implication of a contractual term cannot be made out: Codelfa Constructions at 346 - 347. I therefore reject the alternative construction, based on an implied term as to a determinable agency of the first defendant, contended for by the second defendant.

The satisfaction of the contractual preconditions

53. At the expiration of the Lease the first defendant, by the Minister for Urban Services did address each of the questions posed by clause 6(e) of the Lease. This appears from his letter to the solicitors for the plaintiff dated 8 December 1998. So far as is relevant, the letter stated :

"I refer to your recent enquiry concerning the Canberra International Dragway.

I wish to confirm that :

* There is no intention, on the part of the ACT Government, to seek to subdivide the current site, and

* This land is not required for any Territory purposes.

However, please note that decisions on land tenure in this area are the province of the Commonwealth Government, through the Department of Defence. You should also be aware of the potential implications of the Canberra Airport Master Plan which is currently being developed.

I would be happy for my officers to assist in further discussions if this is helpful to you.

Yours sincerely ..."

54. The Minister did not decide as a matter of judgment and opinion that the land in question was not required for a National Land purpose. Indeed, he draws attention to potential implications of the Canberra Airport Master Plan, then under development, for the land. Having regard to the existence of the declaration of the land as National Land, of which I find he was aware, the Minister acting honestly, or honestly and reasonably, could not have concluded that the land was not required for a National Land purpose.

55. In terms of clause 6(e) of the Lease, the first defendant has done what was required of it under the clause and made the decisions contemplated by clause 6(e). It has declined to take all the decisions and to make the declaration which were necessary under clause 6(e) as preconditions to the effective exercise of the option by the plaintiff. It has done so properly, having regard to the land in question being National Land and thereby being land required for a National Land purpose.

56. The refusal of the first defendant to make the necessary declaration of the availability of the land for lease in the instant case stems not from a lack of power under s 29 of the PLM Act, but from the requirement of the Lease that the first defendant would only make such a declaration if the land was Territory Land and the other necessary preconditions in clause 6(e) were met.

57. It was submitted on behalf of the plaintiff that the offer of a five year term by the Department of Defence on 30 November 1998 was a declaration that the premises were available for lease for the purpose of clause 6(e). I do not agree. The declaration provided for in clause 6(e) was one made by the first defendant after a consideration of, and making decision on, the pre-conditions which went to availability for lease. Further, availability was for a lease for the term provided, namely ten years and not for some lesser term. It was not, in my view intended that any short term availability of the land for lease which coincided with the expiration of the original term would require the granting of a ten year term when it was known that the land was required for a future Territory or National Land purpose which fell to be satisfied well before the expiration of a further ten year term. The offer of a lease by the Department of Defence was an act in the management of National Land by the Department of Defence for the second defendant. It was not and did not purport to be a declaration that the land was available for lease under clause 6(e). Nor was it evidence that the land was not then required for a National Land purpose as that term is understood in s 27 of the PLM Act and clause 6(e) of the Lease.

58. It was submitted by the plaintiff that the second defendant was, as a matter of construction and obligation under clause 6(e), required at the expiration of the original term to again reconsider whether the land was required for a National Land purpose. If the land was not so required, it was contended that the second defendant was obliged to do what was necessary to enable the first defendant to make the decisions which would make the option capable of effective exercise by the plaintiff.

59. In my view, clause 6(e) in terms does not oblige the second defendant to reconsider whether the declaration of the land as National Land should remain in effect or whether it ought, as at 8 December 1998, be revoked. The only action or decision-making contemplated by the clause is that of the first defendant. The plaintiff has not pleaded against the second defendant any implied covenant in the Lease that it would reconsider the status of the land as National Land and the evidence does not disclose the necessary circumstances for such a covenant to be implied: Codelfa Constructions at 346 - 347.

60. The first defendant did not :

(a) decide as a matter of judgment and opinion that the land was not required for any National Land purpose at the termination of the Lease;

(b) declare at the termination of the Lease that the premises were available for lease for the term provided in the option.

61. The failure of the first defendant to take each of these steps meant that the plaintiff was not entitled at its election to a further term of ten years. Further, it meant that the first defendant was not obliged to determine the rent and rent conditions for a further term of ten years.

62. In these circumstances the plaintiff fails to make out an entitlement to the declaratory relief which it seeks against the first and second defendants in its amended statement of claim based on the effective exercise of the option to extend contained in clause 6(e) of the Lease.

The uncertainty

63. It is unnecessary to determine this issue. However, in my view clause 6(e) is not void for uncertainty. The second defendant as lessor, and the plaintiff as lessee, have left the rent and terms of any new lease arising under the renewal of lease clause to be fixed by the first defendant as third party. There is a contract binding upon the second defendant to do all that is reasonably necessary on its part to enable the rent and renewal conditions to be fixed by the first defendant if all other preconditions for the exercise of the option have been met, although performance of the further obligation to renew the Lease is conditional on the rent and other conditions being fixed. In those circumstances the Court will make an appropriate order for specific performance, namely an order that the lessor should do what is reasonably necessary to ensure that the rent and any other conditions are fixed, and if so fixed, should renew the lease: Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd [1982] HCA 53; (1982) 149 CLR 600 at 606.

64. In the present case the conditions which would require the second defendant to take any steps to cause or enable the first defendant to fix the terms of a renewal were not satisfied.

The collateral agreement

65. By its pleading, the plaintiff alleges that it entered the Lease in reliance upon the existence of clause 6(e) in the Lease and that the first defendant would give proper and lawful consideration to the exercise of the powers conferred upon it under the clause: paragraph 5. It was alleged in paragraph 6 that the first defendant "was bound by a contract, collateral to the plaintiff's agreement to lease, to give proper and lawful consideration to the exercise of powers conferred upon it under the clause".

66. As the first defendant did not come into existence until 11 May 1989, no question of a collateral contract can arise before that date.

67. There is no evidence at all that the first defendant made any representation to the plaintiff that if it executed the Lease on 26 September 1989 the first defendant promised or undertook to exercise its powers and functions at the expiration of the Lease in any particular way and that the plaintiff, in reliance on that promise, executed the Lease and bound itself by its terms. Mr Soufoulis' affidavit does not provide such evidence. Absent such evidence there is no basis to conclude that such a collateral agreement binding on the first defendant came into existence.

68. In any event, for the reasons I have earlier given, the first defendant did all that was required of it upon the proper construction of clause 6(e).

Disposition of the proceedings

69. The plaintiff has failed to make out any basis for the relief claimed. The application will be dismissed and judgment will be entered for the first and second defendants. Costs should follow the event.

I certify that the preceding sixty-nine (69) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice R E Cooper.

Associate: Click here for Picture

Date: 26 July 2000

Counsel for the Plaintiff: Mr Foster SC and Mr Walker

Solicitor for the Plaintiff: Rudi Vandenberg

Counsel for the First Defendant: Mr Bonjourno QC and Ms Sloss

Solicitor for the First Defendant: ACT Government Solicitor

Counsel for the Second Defendant: Mr C Erskine

Solicitor for the Second Defendant: Australian Government Solicitor

Dates of hearing: 6 December 1999

8 December 1999

Date of judgment: 26 July 2000