Ludwig Misner v Australian Capital Territory [2000] ACTSC 87 (6 October 2000)

Last Updated: 17 October 2000

LUDWIG MISNER v AUSTRALIAN CAPITAL TERRITORY [2000] ACTSC 87 (6 October 2000)

CATCHWORDS

REAL PROPERTY - construction of lease - whether right to compensation upon surrender of earlier lease carried over to current lease - whether affected by s 173, Land (Planning and Environment) Act 1991 (ACT).- whether right to compensation under lease property acquired other than on just terms contrary to subs 23(1) of the Australian Capital Territory (Self-Government) Act 1988 (Cth)

EQUITY - suit for rectification of lease - whether common intention established - significance of absence of due care in execution of lease - whether right to rectification assigned to plaintiff with lease.

Land (Planning and Environment) Act 1991 (ACT), s 173, 174

Australian Capital Territory (Planning & Land Management) Act 1988

Real Property Ordinance 1925, ss 77, 78

Real Property Act 1900 (NSW)

Australian Capital Territory (Self-Government) Act 1988 (Cth), s 23

Norman v FCT [1963] HCA 21; (1963) 109 CLR 9

William Brandt's Sons & Co v Dunlop Rubber Co Ltd [1905] AC 454

Free Lanka Insurance Co v Ranasinghe [1964] AC 541

Carr v Finance Corporation of Australia (No 2) [1982] HCA 43; (1982) 42 ALR 29

Joscelyne v Nissen [1970] 2 QB 86

Slee v Wark [1949] HCA 57; (1949) 86 CLR 271

Spry "Equitable Remedies", 5^th ed, at 610-612

Bromley "Rectification in Equity" (1971) 87 LQR 532

Re Butlin's Settlement Trusts [1976] Ch 251

English Scottish & Australian Bank Limited v Phillips [1937] HCA 6; (1937) 57 CLR 302

Dickinson v Burrell (1866) LR 1 Eq 337, 35 LJ Ch 371

Majestic Homes Pty Ltd v Wise [1978] Qd R 225

BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] HCA 40; (1977) 16 ALR 363

Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596

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

Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41

Hawkins v Clayton [1988] HCA 15; (1988) 164 CLR 539

Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234

Napier v Williams [1911] 1 Ch 361

Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387

Measures and McFadyen [1910] HCA 74; (1910) 11 CLR 723

Gugong Pty Ltd v Commonwealth (1977) 13 ALR 449

No. SC 524 of 1998

Judge: Crispin J

Supreme Court of the ACT

Date: 6 October 2000

IN THE SUPREME COURT OF THE )

) No. SC 524 of 1998

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: LUDWIG MISNER

Plaintiff

AND: AUSTRALIAN CAPITAL TERRITORY

Defendant

ORDER

Judge: Crispin J

Date: 6 October 2000

Place: Canberra

THE COURT ORDERS THAT:

1. The Crown lease registered Volume 924 Folio 9 granted on 4 June 1984 over the land comprising Block 80 District of Paddy's River in the Australian Capital Territory be rectified by adding to clause 5 the following additional paragraph:

"(d) Notwithstanding anything contained in subclause 5 (c) should the lessee have had any right to compensation arising under the lease previously granted over the land on 11 January 1971 in respect of the value of fixtures, erections and improvements on the land at the determination of such lease then Commonwealth shall pay to the lessee the value of such fixtures, erections and improvements at the determination of this lease."

2. It be declared that the plaintiff is upon the surrender of the said lease entitled to be paid the value of the building and other improvements that were on such land at the determination of the previous lease referred to in order 1.

3. It be further declared the value so payable should be calculated by reference to the amount which the building and other relevant improvements have added to the value of the land. 1. The plaintiff is the Crown lessee of Block 80 District of Paddy's River in the Australian Capital Territory which is the site of the Cotter Reserve Hotel. He seeks a declaration to the effect that on the true construction of the lease and having regard to certain events that have occurred he is entitled to compensation equal to the value of the building and other improvements upon the surrender of the lease. In the alternative, he seeks rectification of the lease to include a provision effectively preserving a right to such compensation said to have arisen under an earlier lease granted over the land on 11 January 1971.

2. The earlier lease over the site was granted to a company named Cotter Catering Pty Ltd. That company subsequently transferred its interest in the lease to another company, Rodway Pty Ltd, and in 1978 that company in turn transferred its interest to the plaintiff and his former wife, Beverley Misner. The plaintiff later agreed to transfer his interest in the lease to Ms Misner. In 1984 Ms Misner surrendered the earlier lease and accepted the grant of a new lease for the purpose of incorporating some additional land, expanding the purpose clause and extending the term of the lease. In 1987 she transferred her leasehold interest to the plaintiff apparently as an incident of a family law settlement. It is this lease which forms the subject of the plaintiff's present claims.

3. The responsibility for managing Commonwealth land contained within the Australian Capital Territory has been transferred to the Territory by s 29 of the Australian Capital Territory (Planning and Land Management) Act 1988 (Cth). Leases are now taken to have been granted under the Act and any liability for relevant acts and omissions has now been assumed by the Territory by virtue of s 30.

4. Clause 2(b) of the earlier lease provided that the Commonwealth would pay:

" . . at the . . . determination of the tenancy hereby created the value of all fixtures, erections and improvements on the land comprised in the lease at such . . . determination which shall have been affixed erected set up or effected on such land during the tenancy hereby created with the consent in writing of the Commonwealth . . ."

5. Mr Gallagher, who was the First Assistant Secretary in the department responsible for leasing matters when the earlier lease was surrendered and the later lease was granted to Ms Misner, gave expert evidence to the effect that until the mid-1980's the Commonwealth did not in practice give any separate consent to the construction of buildings for the purposes of compensation clauses of this nature but accepted that compensation was payable if building approval had been given for the building in question. It appears that the building approval was treated as constituting the requisite consent. It was the practice for the building section of the appropriate department to forward the building file to the leasing section so that the delegate of the minister might sign the plans in order to record this approval. Indeed, in some instances where the building section failed to forward the file and the plans were not signed by the delegate it was nonetheless accepted that compensation should be payable since the error had occurred within the department. This evidence was not challenged in cross-examination and there was no attempt to refute it.

6. Mr Erskine, who appeared for the defendant, did not contend that compensation would not have been payable upon the surrender of the earlier lease. He submitted, however, that the plaintiff had no right to compensation upon the surrender of the later lease.

7. Clause 5(b) and (c) of the later lease provide that the Commonwealth covenants with the lessee:

"(b) That the Lessee may at any time upon payment of all rent and other moneys due to the Commonwealth under this lease surrender this lease to the Commonwealth but subject to sub-clause (c) of this clause and any law of the Territory to the contrary the Lessee shall not be entitled to receive any compensation from the Commonwealth in respect of such surrender or in respect of any building or other improvement upon the land;

(c) To pay to the Lessee at the expiration or sooner surrender or determination of the lease the value of the building or any other improvement constructed or made by the Lessee upon the premises PROVIDED ALWAYS THAT -

(i) the building or other improvement was constructed or made with the previous consent in writing of the Commonwealth;

(ii) prior to the construction or making of the building or other improvement the building or other improvement was specified in writing by the Commonwealth as a building or improvement in respect of which compensation shall be payable; and

(iii) the building or other improvement shall not be removed by the Lessee."

8. Whilst the term "building" is defined to include any building on the land at the date of the commencement of the lease, the definition of the word "Lessee" is not sufficiently expansive to include any person who had been a lessee of a previous lease over the same land. There was no suggestion that the Cotter Hotel had been "constructed or made" by the plaintiff or by his former wife who was the only other lessee of the later lease. Accordingly, cl 5 does not provide for the payment of compensation for the value of the hotel building upon any surrender of the lease.

9. Section 173 of the Land (Planning and Environment) Act 1991 (ACT) does provide for the payment of compensation for the value of improvements upon the termination, surrender or expiration of a lease but the relevant provisions are subject to "any provisions of the lease that preclude or limit the right of the lessee to payment in respect of improvements on the land comprised in the lease". Accordingly, any such right is subject to the provisions of subclause 5(b) which provides that, subject to subclause 5(c) and any law of the Territory to the contrary, the lessee shall not be entitled to receive any such compensation. As I have mentioned, the provisions of subclause 5(c) are inapplicable and since s 173 is expressed to be subject to any provision of a lease precluding such compensation, it cannot be said to be a "law of the Territory to the contrary". Consequently, in the absence of any order for rectification, the terms of the later lease would not only fail to provide any provision that would entitle the plaintiff to compensation for the value of the improvements, but would effectively exclude the statutory right to compensation that would otherwise be provided by s 173.

10. No issue was raised as to whether any right to compensation that may have arisen upon the surrender of the earlier lease could now be enforced and Mr Erskine submitted that Ms Misner had accepted the benefit of the later lease in substitution for her rights under the earlier lease. In any event, the plaintiff was not a party to the earlier lease at the time it was surrendered and no right to compensation arising under that lease could be enforced against the present defendant.

11. There was evidence that at the time that Ms Misner entered into the new lease in 1984 she thought that the right to compensation for the existing buildings and improvements was "being carried forward into the new lease". Mr Gallagher gave evidence that it was a common practice for a Crown Lease containing an existing right to compensation for improvements to be surrendered in exchange for a new lease incorporating different provisions and said that it was "assumed" that upon such surrender and re-grant any existing right to compensation would be "carried over to the new lease". He explained that otherwise it would have been necessary for the Commonwealth to actually pay the compensation due upon the surrender of the earlier lease. At that time the Department had been operating under a government direction to minimise the call on the budget for the payment of compensation for tenants' rights in relation to improvements. To have failed to have extended rights to compensation for existing improvements would have been contrary to that direction as it would have given rise to an immediate claim for compensation. Mr Gallagher said that the change in the covenants relating to tenants' rights to compensation in the new lease "provided an opportunity to limit compensable rights in respect of future improvements".

12. Mr Gallagher also gave evidence that there had been discussions with Ms Misner in 1986 about the surrender of the later lease and that the Commonwealth had then offered her compensation. This had reflected the Commonwealth's understanding that the earlier right to compensation had been carried over into the new lease. Again, this evidence was not challenged.

13. Accordingly, it is clear that both Ms Misner and the Commonwealth intended that the later lease would contain a provision carrying over the right to compensation that had arisen under the earlier lease. Despite this evidence the defendant maintains that upon the surrender of the lease it will not be obliged to pay any compensation at all. Given the legal constraints on governments in relation to the expenditure of public moneys it may have been considered necessary to decline payment unless and until some lawful obligation was established. However, not surprisingly, Mr Arthur, who appeared for the plaintiff, submitted that his client is entitled to an order for rectification so that the lease will reflect this common intention.

14. The general principle upon which the plaintiff relies is clear. When all parties who executed a document intended that its provisions should accord with an agreement or common intention but due to common mistake it does not do so, rectification will be ordered in the absence of any special circumstances that might render such a course unjust: (see Joscelyne v Nissen [1970] 2 QB 86; Slee v Wark [1949] HCA 57; (1949) 86 CLR 271; and I Spry "The Principles of Equitable Remedies", Specific performance, inj , verification and equitable damages (5^th ed) North Ryde, LBC Information Services, 1997 at 610-612).

15. In the present case, however, whilst not disputing that there was a common intention or understanding, Mr Erskine resisted any order for rectification on three bases.

16. First, he submitted that there was no basis in equity upon which Ms Beverley Misner would have been entitled to rectification. He pointed out that it was not sufficient to show that an agreement did not reflect a common intention of the parties. It was incumbent upon a party seeking rectification to establish that there was in fact a common intention as to what the relevant aspect of the agreement should have been. I accept this submission. The concept of rectification necessarily implies that that the true intention of the parties may be identified with sufficient clarity to be imported into the agreement. In fact, it has been suggested that a common intention is not sufficient and that "some outward expression of accord is required" (see Joscelyne v Nissen (supra) at 98). However, this approach has been criticised and as Spry has observed, there does not appear to be any basis in equitable principle for such a requirement (see Spry, "Equitable Remedies" at 611 and the cases cited therein; see also Bromley "Rectification in Equity" (1971) 87 LQR 532).

17. In the present case, Mr Erskine maintained that the evidence did not reveal any precise agreement between the parties. There had been correspondence between Ms Misner and the Commonwealth over a period of some years but it contained no clear expression of any agreement between them. In 1979, the Commonwealth offered Ms Misner a fresh lease that contained a compensation clause identical to that contained in the earlier lease. Conversely, in 1982, she was offered another lease containing a compensation clause identical to that contained in the later lease. The evidence revealed no explanation for her failure to accept either of these offers. Mr Erskine submitted that the absence of adequate evidence of a concluded agreement was fatal to any claim for rectification.

18. I do not accept this submission. The evidence establishes a common intention that any rights to compensation arising on the surrender of the lease in 1984 would be carried over into the new lease. In these circumstances, the fact that there may have been antecedent negotiations between the parties about other matters such as the inclusion of a further area of land, a change to the purpose clause and/or an extension to the term of the lease offers, in my view, no basis for concluding that the later lease should not be rectified to reflect the common intention of the parties that pre-existing rights to compensation be preserved. As I have mentioned, Mr Gallagher gave evidence that cl 5 was intended to apply only in respect of future improvements and that tenant's rights in respect of the existing improvements were to be extended into the new lease. Whilst Ms Misner has not given evidence explicitly referring to any similar understanding, she did say that she had thought that the right to compensation for the existing buildings and improvements was being carried forward into the new lease. It must be remembered that this transaction was finalised more than sixteen years ago and it would be unrealistic to expect Ms Misner to now recall precisely what she thought that this clause meant even if she had been asked to do so. However, the evidence as to her intention and the intention of the Commonwealth that the right to compensation for existing improvements would be carried forward into the new lease was not challenged and there is no reason to doubt it. I am satisfied that the common intention is sufficiently clear to be imported into the agreement by an order for rectification.

19. Secondly, Mr Erskine submitted that rectification would have been refused on discretionary grounds even at the suit of Ms Misner. He observed that a person executing a lease or otherwise taking an interest in land should exercise due care since such interest an interest is likely to be registered and the rights of third parties may be affected. The absence of care and the delay since the execution of the lease would have militated against the exercise of discretion in her favour.

20. It is true that rectification is an equitable remedy subject to the discretion of the court which must, of course, be exercised according to general equitable principles (see Re Butlin's Settlement Trusts [1976] Ch 251). However, the discretion must commonly be exercised in a somewhat different context from those that attend other equitable remedies such as specific performance because damages or other forms of alternative relief are not normally available if rectification is refused. As a result an unsuccessful plaintiff may suffer significant hardship. Accordingly, it has been said that when the basis of a right to rectification has been established, relief will be refused on discretionary grounds only in exceptional cases. For example, it is not enough to show that the deficiency of the document has been caused by the fault of the plaintiff (see generally Spry at 616-617). Whilst I accept that the considerations to which Mr Erskine adverted may be relevant to the exercise of any such discretion, I am not satisfied that in the circumstances of this case they provide adequate grounds for withholding rectification.

21. Thirdly, Mr Erskine submitted that whatever rights to rectification Ms Misner may have enjoyed, they could not assist the plaintiff. Ms Misner was not a party to the proceedings and there was no evidence that any entitlement which she may have had to seek rectification had been validly assigned to the plaintiff.

22. In answer to this last contention Mr Arthur relied upon ss 77 and 78 of the Real Property Ordinance 1925 as in effect at the date of the surrender of the earlier lease and grant of the later lease in 1984. Section 77 was then in the following terms:

"Upon the registration of any transfer, the estate or interest of the transferor as set out in the transfer, with all rights, powers and privileges thereto belonging or appertaining shall pass to the transferee, and, if the transfer is a transfer of a mortgage, encumbrance or lease, the transferee shall thereupon become subject to and liable for all and every the same requirements and liabilities to which he would have been subject and liable if named in the mortgage, encumbrance or lease originally as mortgagee, encumbrancee or lessee of the land, estate or interest.

Section 78 then provided as follows:

"(1) By virtue of every transfer of a mortgage, encumbrance or lease, the right to sue upon the memorandum of mortgage, encumbrance or lease, and to recover any debt, sum of money, annuity or damages thereunder (notwithstanding that the right may be deemed or held to constitute a chose in action), and all interest in any such debt, sum of money, annuity or damages, shall be transferred so as to vest it at law as well as in equity in the transferee thereof.

(2) Nothing in this section shall prevent the Court from giving effect to any trusts affecting the debt, sum of money, annuity or damages, in case the transferee holds it as a trustee for any other person."

23. Mr Arthur submitted that these provisions were sufficiently wide to encompass the assignment of any right to seek rectification of the lease. Such a right was, he maintained, plainly one "belonging or appertaining" to the lease. Hence the right to rectification passed pursuant to s 77 and the right to sue in order to obtain rectification had been transferred pursuant to s 78. In support of these contentions he relied upon the view of Woodman and Nettle ("Torrens System in New South Wales" North Ryde LBC Information Services 1996 at 52.2) that the object of the comparable provision in New South Wales was to pass to a registered transferee all of the rights of the transferor.

24. On the other hand, Mr Erskine argued that these sections should be interpreted as applying only to rights that "touch and concern" or "run with" the land and not to rights that are purely personal. Any entitlement to seek rectification fell into the latter category and was not capable of being transferred by force of these sections.

25. It is clear that what passed to a transferee by virtue of s 77 was the estate or interest of the transferor "as set forth in the transfer" and the rights, powers and privileges belonging or appertaining to that estate or interest. A right to seek rectification is not, in my view, a right which might fairly be described as belonging or appertaining to the leasehold interest so set forth but rather a right in personam to obtain redress in relation to the lease or agreement to lease.

26. It is true that in English Scottish & Australian Bank Limited v Phillips [1937] HCA 6; (1937) 57 CLR 302 at 322 Dixon, Evatt and McTiernan JJ said of a comparable South Australian provision that:

". . .the plan of the legislation is to enable the proprietor to transfer by registration not only the interest in the land, but all the accompanying personal obligations normally incident thereto."

However, even if one were to assume that the plan of the legislation extended, conversely, to enabling the transfer of all accompanying personal rights "normally incident thereto" it would be difficult to see how a right to seek rectification could fall within the relevant provision. Whilst Mr Arthur would, no doubt, contend that it was an "accompanying" personal right, it could not be said to be "normally incident" to the estate or an interest as set out in the relevant instrument. In the earlier case of Measures and McFadyen [1910] HCA 74; (1910) 11 CLR 723 at 731, Griffith CJ construed the terms of s 52 of the Real Property Act 1900 (NSW), which is a comparable provision to s 78 of the Real Property Ordinance 1925 (ACT) as reflecting an intention to transfer the estate or interest of the transferor in the land with all rights incidental to present and future possession. His Honour observed that he did not think that it was "intended to transfer also mere choses in action in respect of past and completed breaches of covenant". I am not satisfied that the right to rectification can be regarded as falling within these principles and, accordingly, I am unable to be satisfied that Ms Misner's right to seek rectification was assigned to the plaintiff by operation of either of these sections.

27. However, Mr Arthur also submitted the right to rectification had been effectively assigned to the plaintiff with the leasehold interest independently of the operation of these sections. It is clear that a right to rectification is a chose in action capable of assignment: see Dickinson v Burrell (1866) LR 1 Eq 337, 35 LJ Ch 371; and Majestic Homes Pty Ltd v Wise [1978] Qd R 225 per Stable SPJ at 232. Furthermore, all that is required to assign equitable property is a "clear expression of an intention to make an immediate disposition": Norman v FCT [1963] HCA 21; (1963) 109 CLR 9 per Windeyer J at 30. See also William Brandt's Sons & Co v Dunlop Rubber Co Ltd [1905] AC 454 per Lord Macnagten at 462. It is unclear whether rectification is possible in the case of an assignment of a contractual document (and the contract which it embodies or evidences) which does not contain any reference to an assignment of the right of rectification (see Napier v Williams [1911] 1 Ch 361) though I am inclined to agree with the learned authors of "The Laws of Australia" that it is probably a matter of construing the subject matter of a particular assignment (see 7.9 Remedies at 133).

28. In the present case, whilst there was no express assignment as in Majestic Homes Pty Limited v Wise (op cit), Mr Arthur argued that the right to seek rectification was assigned by implication with the assignment of the lease.

29. Such an assignment might be effected by an implied term of the agreement pursuant to which the leasehold interest was assigned to the plaintiff, though it is true that contractual terms will not readily be implied. In BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] HCA 40; (1977) 16 ALR 363 at 376 a majority of the Privy Council held:

" . . . for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it; (3) it must be so obvious that "it goes without saying"; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract."

This statement has been adopted by the High Court in a number of cases (see, for example, Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596 at 605-6; Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 at 347 and 404; Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 at 65-6, 95, 117-8, 121; and Hawkins v Clayton [1988] HCA 15; (1988) 164 CLR 539 at 571-3).

30. The precise ambit of the second of these conditions has been the subject of some debate. It seems clear that it does not require that the term be necessary in the sense that the contract could not be carried out at all without its incorporation (see Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 257-8. As the authors of Cheshire and Fifoot observe, the authorities offer little explicit analysis of the concepts of "business efficacy" or of the contract being otherwise "effective" and the ambit of this condition is perhaps best deduced from cases in which courts have sought to apply it in particular circumstances (see Cheshire & Fifoot's "Law of Contract", 7^th Australian ed, Butterworths, Sydney 1997 at 10.48). In the present case, it is clear that both Ms Misner who is the transferor of the leasehold interest and the plaintiff, who is the transferee, thought that the later lease carried with it a right to compensation for the value of the improvements. Given that understanding it was obviously their common intention that such an entitlement be conveyed. It is also clear that in the absence of such an entitlement the plaintiff stood to receive only a right to use the hotel for the unexpired portion of the lease and not the capital value of the building and other improvements. In all the circumstances, the implication of a term assigning to the plaintiff any right to seek rectification in the event that the lease did not provide for the continuance of such a right of compensation could fairly be described as necessary to give business efficacy to the contract.

31. The third condition has been said to refer to what the parties "would most likely have agreed had they considered the point" or what reasonable parties would have agreed on the term in question (see Codelfa Construction Pty Ltd v State Rail Authority of NSW (supra) at 346, 340, 355 and 374). Given that the assignment occurred in the context of the common understanding to which I have referred it may be assumed that had they considered the likelihood that the later lease did not, in fact, carry over the earlier right to compensation they would have agreed to a term assigning the right to rectification.

32. Such a term would have been reasonable and equitable, capable of clear expression and whilst the terms of the contract have not been proven it seems most unlikely that it would have contradicted any express term. Accordingly, I think that there probably was an implied term that the right to rectification be assigned.

33. Furthermore, even if such a term could not have been implied the plaintiff may well have been entitled to an order rectifying that agreement in order to incorporate such a term. Of course, Ms Misner is not a party to the present proceedings and no such order has been sought.

34. However, it is not necessary for the plaintiff to establish either the existence of a contractual term requiring the assignment or a right to rectification to incorporate such a term. It is sufficient, in my view, for him to establish that the subject matter of the assignment included that right or that there has otherwise been an expressed intention to make an immediate disposition of such right. These are obviously matters dependent upon inference. However, having regard to the common intention of the plaintiff and Ms Misner, the context in which the assignment was made, the importance of the right to compensation and Ms Misner's continuing support for the plaintiff's suit for rectification, I am prepared to infer that the right formed part of the subject matter of the assignment. Alternatively, having regard to her support for the plaintiff's assertion of that right I would be prepared to infer that she had subsequently expressed a clear intention that the right be assigned to the plaintiff.

35. The point may be of little practical importance because even if the plaintiff had been unable to establish any antecedent assignment of the right to rectification it would still be possible for Ms Misner to make such an assignment and for the plaintiff to again seek rectification of the later lease.

36. In any event for the reasons I have given I intend to order that the later lease be rectified by adding to cl 5 the following additional paragraph:

(d) Notwithstanding anything contained in subclause 5 (c) should the lessee have had any right to compensation arising under the lease previously granted over the land on 11 January 1971 in respect of the value of all fixtures, erections and improvements on the land at the determination of such lease then the Commonwealth shall pay to the lessee the value of such fixtures, erections and improvements at the determination of this lease.

37. The plaintiff also relied upon the doctrine of equitable estoppel and, whilst it is strictly unnecessary to consider this aspect of the claim in view of the findings I have made, in deference to the submissions of counsel I should perhaps deal with the issue briefly. The circumstances in which such an estoppel may arise were succinctly stated by Brennan J in Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 at 428-429 where his Honour said:

" . . .it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise."

38. In the present case, no legal relationship existed between the plaintiff and the defendant in 1984 and there is nothing to suggest that the plaintiff assumed or expected that a particular relationship would exist between them. Furthermore, any understanding which Ms Misner may have had as to pre-existing rights to compensation being carried over into the new lease appear to have been the product of her own assumption rather than as a consequence of any inducement by the defendant. I would not have been satisfied that the plaintiff would have been entitled to succeed on this ground.

39. A further issue arises as to the extent of the compensation which the plaintiff would be entitled to receive upon the surrender of the later lease. Mr Erskine submitted that any right to compensation was now governed by s 173 of the Land (Planning and Environment) Act 1991 (ACT). Hence the plaintiff was therefore entitled only to the "market value" of the improvements as defined by s 174, that is, "the amount by which the improvements increase the value of the lease of the land, assuming that the lease, together with the improvements, were offered for sale on the open market on the day immediately before the prescribed day on such reasonable terms and conditions as a bona fide seller might require".

40. Mr Arthur submitted that these sections should not be construed as having a retrospective effect and consequently should not be regarded as having any application to improvements constructed prior to their enactment. On the other hand, Mr Erskine maintained that no question of retrospectivity arises since the right to compensation under s 173 is expressed to apply upon the expiration or surrender of a lease and in this case that will obviously occur well after the enactment of the section.

41. Mr Arthur also submitted that the section should be construed as applying only in the absence of any provision for in the lease dealing with the issue of compensation. In answer to this contention, Mr Erskine again pointed to the language of the relevant provision. Subsection 173(8) provides that the right to compensation under the other subsections of s 173 is "subject to any provisions of the lease that preclude or limit the right of the lessee to payment in respect of improvements on the land comprised in the lease". This provision is clearly intended to limit any rights to compensation that might otherwise have arisen under the section but there is nothing in the words of the section to suggest a converse intention to preserve any provisions of the lease entitling a lessee to compensation on a more generous basis.

42. However, Mr Arthur was on firmer ground in submitting that the section should be interpreted by reference to the common law presumption against imputing to the legislature an intention to interfere retrospectively with rights that have already accrued: Carr v Finance Corporation of Australia (No 2) [1982] HCA 43; (1982) 42 ALR 29 at 36-39. It has been said that the distinction between what is and what is not a "right" must often be one of great fineness but whilst more than a mere hope or expectation is required a right may be recognised even if inchoate or contingent: Free Lanka Insurance Co v Ranasinghe [1964] AC 541. Accordingly, whilst I am satisfied that ss 173 and 174 would otherwise apply to all leases which expire or are surrendered after the enactment of the Act and that the statutory provision for compensation would otherwise prevail subject only to the proviso contained in subs (8), I am not satisfied that these sections were intended to displace any rights that had already accrued to lessees under Crown leases.

43. In the alternative, Mr Arthur argued that the sections should not be interpreted as removing any right to compensation provided by a lease since the Legislative Assembly had no power to make laws with respect to the acquisition of property save on just terms: see subs 23(1) of the Australian Capital Territory (Self-Government) Act 1988 (Cth). Mr Erskine submitted that this provision was of no application since the relevant provisions did not involve the imposition of unjust terms but merely provided a statutory formulation for the assessment of appropriate compensation.

44. In the present case, cl 2(b) of the earlier lease provided for payment of the value of the improvements with such value to be ascertained by agreement or in default of agreement by arbitration. In Googong Pty Ltd v Commonwealth (1977) 13 ALR 449 NSWLR, Waddell J said at 473 that "the value of the structural improvement must always be the amount which it adds to the value of the land". Mr Arthur maintained that the effect of ss 173 and 174 was to cut down the compensation from that representing the amount by which the hotel had added to the value of the land to the amount by which it had added to the value of the lease. He submitted that acquisition of the plaintiff's right to compensation in these circumstances was plainly unjust since the Commonwealth would receive the benefit of the building not only for the remaining period of the lease but for so long as the building should stand. On the other hand, Mr Erskine submitted that it was appropriate to look to the detriment suffered by the lessee as a consequence of relinquishing the lease rather than the benefit that would be gained by the lessor.

45. It seems clear that the limitation on power imposed by paragraph (a) of subs 23 (1) of the Australian Capital Territory (Self Government) Act 1988 precludes the enactment of laws relating to the acquisition of property save on just terms without regard for any consideration as to whether the property should have been initially granted to the existing proprietor. Subclause 2(b) of the earlier lease provided for payment of the value of improvements at "the expiration or sooner determination of the tenancy". It was clearly contemplated that the lessee would be entitled to the value of the building even if the lease simply expired at the end of the term. Having regard to the manner in which this clause is expressed and, in particular, to the condition requiring the Commonwealth's approval of the building prior to construction, I am satisfied that this clause was intended to provide that the Commonwealth would, in effect, "buy" the improvements from the tenant at the expiration of the lease. The formulation contained in s 174 does not represent a statutory quantification of such a right. On the contrary, if it applied to the existing lease it would have the effect of extinguishing that right and replacing it with a different and lesser right to compensation for the value which the building added to the lease. In my view that would not involve an acquisition on just terms.

46. In my view the limitation on power imposed by ss 23(1) strengthens the presumption that in enacting ss 173 and 174 the legislature did not intend to extinguish accrued rights. However, if the sections were to be interpreted as having such an effect then in my opinion they would be ultra vires to the extent to which they purported to authorise the acquisition of such rights save on just terms.

47. It follows that the plaintiff remains entitled to compensation calculated by reference to the amount which the improvements add to the value of the land rather than merely to the value of the lease.

48. In the circumstances I am satisfied that it is appropriate to make declarations reflecting these findings.

49. I will hear counsel as to costs.

I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Crispin.

Associate:

Date: 6 October 2000

Counsel for the plaintiff: Mr Arthur

Solicitor for the plaintiff: A B Vincent t/a Michael Helman

Counsel for the defendant: Mr Erskine

Solicitor for the defendant: ACT Government Solicitor

Date of hearing: 26 July 2000

Date judgement reserved: 26 July 2000

Date of judgment: 6 October 2000