Poole v Daley, Johnston & Hollands [2001] ACTSC 68 (6 July 2001)

Last Updated: 29 January 2002

LIONEL MARIUS POOLE, WENDY DOROTHY POOLE and GEOFFREY ALLEN POOLE v MIRIAM CLARE DALEY, FAYE ELAINE JOHNSTON and GREGORY CHARLES ACLAND HOLLANDS [2001] ACTSC 68 (6 July 2001)

CATCHWORDS

APPEAL - lease - agreement to lease - interpretation - commencement date - whether a lack of exclusive possession affects the commencement date.

JURISDICTION OF TENANCY TRIBUNAL - procedure - whether jurisdiction affected by lack of referral pursuant to s 12 of Tenancy Tribunal Act 1994.

STAMP DUTY - Contract for Sale containing agreement to grant lease - lease not liable to be stamped until executed.

Tenancy Tribunal Act 1994 (ACT), s 3, s 6, s 7, s 12, s 15, s 58

Real Property Act 1925 (ACT)

Magistrates Court (Civil Jurisdiction) Act 1982 (ACT), s 6

Stamp Duties and Taxes Act 1987 (ACT), s 13A

Butt, Land Law 3^rd Ed [1532]

York House Pty Ltd v Federal Commissioner of Taxation [1930] HCA 7; (1930) 43 CLR 427

Walsh v Lonsdale (1882) 21 Ch D 9

Swain v Ayres (1888) 21 QBD

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

Bradshaw v Pawley [1980] 1 WLR 10

ON APPEAL FROM THE TENANCY TRIBUNAL OF THE AUSTRALIAN CAPITAL TERRITORY

No. SCA 27 of 2000

Judge: Gray J

Supreme Court of the ACT

Date: 6 July 2001

IN THE SUPREME COURT OF THE )

) No. SCA 27 of 2000

AUSTRALIAN CAPITAL TERRITORY )

ON APPEAL FROM THE TENANCY TRIBUNAL OF THE AUSTRALIAN CAPITAL TERRITORY

BETWEEN: LIONEL MARIUS POOLE, WENDY DOROTHY POOLE and GEOFFREY ALLEN POOLE

Appellants

AND: MIRIAM CLARE DALEY, FAYE ELAINE JOHNSTON and GREGORY CHARLES ACLAND HOLLANDS

Respondents

ORDER

Judge: Gray J

Date: 6 July 2001

Place: Canberra

THE COURT ORDERS THAT:

1. The appeal be dismissed with costs.

1. This is an appeal against a decision of the Tenancy Tribunal awarding the respondents $11,712.00 plus interest. The respondents had claimed before the Tribunal that the appellants had held over after the expiration of a 12 month period nominated in a document headed "Lease". The "Lease" was referred and attached to a Contract for Sale of a Crown Lease entered into between the respondents as sellers and the appellants as buyers in respect of warehouse premises at 64 Barrier Street, Fyshwick.

2. The appeal is brought pursuant to s 58 of the Tenancy Tribunal Act 1994 (ACT). That section provides that a party may appeal to the Supreme Court from a decision of the Tenancy Tribunal on a question of law.

3. Proceedings were instituted by the respondents in the Canberra Magistrates Court by special claim on 8 March 1999. The respondents sought $11,712.00, representing rental payments, and interest as provided for in the terms of the Lease. A defence was filed by the appellants and on 18 August 1999 the matter went before Mr Somes sitting as a Magistrate. On that day, Mr Somes found that the Magistrates Court had no jurisdiction because it was a dispute to which the provisions of the Tenancy Tribunal Act 1994 (ACT) (the Act) applied (see s 7). It was common ground that the premises were premises to which the Act applied although the respondents maintained that the dispute concerned a special condition of a contract for sale. However, the Act casts a wide net to bring within its purview disputes about a lease and defines lease in s 3 as:-

"an agreement, whether in writing or not, that provides for the occupation of premises exclusively or otherwise, whether for a fixed term, periodically or at will, and includes a sublease or a licence ..."

As I later say, the Contract for Sale of Crown Lease contains an agreement to grant a lease and that is sufficient to attract the jurisdiction of the Tribunal given the definition to which I have referred.

4. Consequential upon that determination, the parties agreed that for the purpose of proceeding before the Tenancy Tribunal the special claim would be considered as the notice of dispute required under the provisions of the Act. In addition, the defence would be treated as an answer to the notice of dispute.

5. The matter then proceeded in the Tenancy Tribunal on 10 April 2000 constituted by Mr Somes as President of the Tribunal. The hearing was conducted by way of affidavit evidence and cross-examination of the deponents. Affidavits were filed on behalf of the appellants by Faye Elaine Johnston and John Ross Reid and an affidavit was filed on behalf of the respondents by Geoffrey Allen Poole.

6. From that evidence it can be said that in 1996 there were negotiations between the appellants and the respondents with respect to the sale, by the respondents, of a property at Fyshwick, that being Block 11, Section 21 with the address of 64 Barrier Street, Fyshwick. The very general terms of the agreement were that the respondents would sell the property for $465,000.00 and that they would enter into a lease with the appellants to occupy the premises during the period between the exchange of the contract and the settlement of the sale. It was envisaged that the occupation would be for 12 months and that at the expiration of that period, settlement would be effected. A fixed rental was agreed of $45,000.00 to be paid six monthly in advance and was to be non-refundable. Certain work was to be effected on the premises by the appellants which was expected to take six to eight weeks. The precise effect and how these general terms were to be given effect remained unresolved until the actual exchange of contract on 7 June 1996.

7. As a result of these negotiations between the parties, two documents were produced. The first was headed "Contract for Sale" and had attached to it pro forma conditions interleaved with "Special Conditions". The second was headed "Lease" and had attached to it a Schedule and conditions. Exchange of the Contract for Sale occurred on 7 June 1996 and that date appears on the face of the Contract. In negotiations close to the exchange of the Contract, the parties finally agreed to a series of special conditions that varied the formal form of the Contract for Sale. Those special conditions were cobbled together for the purpose of trying to reflect the parties' agreement on the interaction of the general matters to which I have referred. The finished product produced a hybrid of pro forma documentation, standard precedent conditions and handwritten insertions and alterations. It is this lack of coherence that gives rise to the dispute between the parties.

8. There were 12 special conditions; special conditions 5, 6, 7, 10 and 11 state:

"5. On or before completion ^[exchange]* the parties agree to enter into a Lease of the Premises in accordance with the photocopy Schedule and the Lease Terms provided to the Buyer at the time on or before the date on which this Agreement is made ("the Lease").

6. The rental pursuant to the Lease shall be paid as follows:

(a) On the date of this Agreement the sum of $22,500.00 representing rental for the first six months of the term of the Lease.

(b) On the date which is six months from the date of this Agreement the sum of $22,500.00 representing rental in advance for the remaining six months of the term of the Lease.

7. The Buyer acknowledges that the rental payments pursuant to the Lease are non refundable irrespective of whether or when completion takes place.

...

10. Completion of this agreement will take place within 12 months from the date the Sellers solicitor advised the Buyers solicitor of issue of the certificate of occupancy and use for the work referred to in special condition 9 [or occupation by the Buyer whichever is the earlier]*.

11. The Sellers agree that the Buyers may take occupation of the property prior to the issue of the said certificate of occupancy and use upon giving the Sellers 21 days notice." (*in handwriting)

Special conditions 10 - 12 were added in the very closing stages of the negotiations and took their final form at the time of exchange.

9. The Lease referred to in special condition 5 was the printed pro forma lease authorised under the Real Property Act 1925 (ACT) with attachments. On the first page of the Lease there is a box numbered 6 under the heading "Term of Lease". It contained the basic terms of the Lease and is set out below:

"Term in years: 1 year

Commencing: 7 June 1996

Terminating: May 1997

Yearly Rent: $45,000.00"

The commencing date is in handwriting, the other details are typed. Nothing else in the Lease document contradicts that commencement date of 7 June 1996. The Reference Schedule attached to the pro forma refers to two payments - $22,500.00 on a date not filled out and $22,500.00 on November 1996 (no day being inserted). Attached to the printed pro forma were what appears to be standard sublease precedent conditions, covenants and restrictions. The conditions attached to the pro forma express in relatively standard form the usual conditions, covenants and restrictions including, in clause 18, the provision concerning holding over.

10. Settlement of the purchase of the property at 64 Barrier Street, Fyshwick occurred on 9 September 1997. It was the respondents who insisted that the settlement take place on that date as, in reliance on special condition 10, completion was to take place within 12 months from the date of advice of the certificate of occupancy and use.

11. The respondents' claim before the Tenancy Tribunal was for rent for holding over after the expiration of the term of the Lease. In the proceedings before the Tenancy Tribunal, the respondents argued that the term of the Lease began on 7 June 1996. The appellants claimed that the Lease did not commence until they had been advised on 9 September 1996 that the certificate of occupancy had been issued. Although the certificate of occupancy was issued on 2 August 1996 this was not communicated to the appellants until 9 September 1996 and the appellants argued that the term of the Lease commenced from that date.

12. At the outset Mr Arthur, counsel for the appellants, argued that the Tribunal did not have jurisdiction to determine the matter. Mr Arthur pointed out that the matter had not been referred to the Tenancy Tribunal in accordance with the provisions of the Act. Section 12 of the Act provides that a person may refer a dispute concerning a lease to the Registrar. The Act thus provides for certain actions that may be taken by the Registrar and s 15 of the Act requires the Registrar to refer the dispute to the Tribunal in certain circumstances. Mr Arthur points out that the proceedings were not initiated in this manner and therefore the Tribunal had no jurisdiction to hear the matter. The submission is misconceived. The provisions by which disputes come before the Tribunal do not define the Tribunal's jurisdiction. That jurisdiction relates to the disputes referred to in s 6 of the Act as disputes to which the Act applies. The procedure for getting the dispute to the Tribunal is not expressed as exclusive. Mr Arthur could provide no authority for his proposition and all but abandoned the point on the basis that there were stronger points of appeal on which to proceed. In any event, the point has no substance.

13. Neither party was of the view that the Tribunal had not been seized of jurisdiction at the time the proceedings were heard. However, the respondents apparently expressed reservations to the Tribunal, which they repeated before me, on the basis that the matter in dispute derived from a special condition in the Contract for Sale. I agree it does, but the fact that the Contract for Sale provided for an agreement to grant a lease means that the agreement founded an equitable lease (see Butt, Land Law 3^rd Ed [1532]). In my view, such a circumstance falls within the definition of lease in s 3 of the Act as "an agreement, whether in writing or not, that provides for the occupation of premises exclusively or otherwise ...". Special condition 5 in the Contract for Sale (set out in [8] hereof) constituted such an agreement. I add at this point the observation that the handwritten alteration of "completion" to "exchange" in the special condition as being the time for the effect of that condition adds considerable support to the Lease having effect from the date of exchange whether or not the proposed lessor was in occupation. In any event, I am satisfied that the dispute in respect of the agreement to lease was one that fell within the ambit of s 6 of the Act. Whilst the procedure set out in s 12 of the Act was not followed, that did not affect the jurisdiction of the Tribunal to hear and determine the matter once the matter was before it and the matter was one which the Tribunal could entertain.

14. The conclusion that the Contract for Sale provides an agreement to grant a lease disposes of the ground of appeal raised by the appellants that the Tribunal "erred in law in basing its decision on the sublease when that document was ineffectual, not having been executed by all parties to the transaction". The documents constituting what the parties to the Contract for Sale agreed to enter into by way of lease were, in fact, executed by the buyers (appellants) as proposed lessors. The fact that the documents were not executed by the sellers (respondents) as lessees only reinforces my view that the documents set up the equivalent of a lease, and the sellers became lessees in equity (see York House Pty Ltd v Federal Commissioner of Taxation [1930] HCA 7; (1930) 43 CLR 427 at 436 citing Walsh v Lonsdale (1882) 21 Ch D 9; Swain v Ayres (1888) 21 QBD at 289). I note specifically that the Tenancy Tribunal had the powers exercisable by the Magistrates Court under the Magistrates Court (Civil Jurisdiction) Act 1982 (ACT) and s 6 of that Act empowers the Magistrates Court to grant such relief, redress or remedy as the Supreme Court has power to grant. In other words, the Tenancy Tribunal derives an equitable jurisdiction from those provisions and the Tribunal could regard the agreement for a lease as no different in its effect to a lease.

15. The view that I have expressed as to nature of the Lease document also disposes of the appellants' argument that the Tribunal erred in admitting and relying upon an unstamped document constituting the lease of the land (see s 13A, Stamp Duties and Taxes Act 1987 (ACT)). Originally, Mr Arthur, for the appellants, took objection to the Contract for Sale as well, but in argument it was conceded that the Contract for Sale had in fact been stamped (as it must have been for settlement to be effected). As the documents headed "Lease" and including the attached Reference Schedule and conditions performed the function of evidencing the terms of the agreement to grant a lease, those documents incurred no liability for stamp duty unless and until the documents were properly executed as a formal lease. Those documents were attached to the Contract for Sale which contained the agreement to lease in special condition 5 to that Contract and those documents were referred to in that condition as "Schedule and the Lease Terms". As I have observed, the Contract for Sale had been stamped, therefore the point taken by the appellants must fail.

16. The substantive grounds of the appellants' appeal which were pressed are said to rely on a construction of the agreement so as to give effect to what the appellants say was the parties' intention. Not to do so is said to be an error of law on the part of the Tribunal. However, the Tribunal gave effect to the facts as it found them. The Tribunal's finding was:

"The documents clearly indicate that the lease was to commence on the 7^th of June 1996, the rent was paid in accordance with the agreement, the premises were occupied by the respondents and there is no other condition in the lease that prevents the rent becoming due and payable from the 7^th of June 1996, the commencement of the lease."

For the appellants to succeed they must show that the parties agreed to a different commencement date for the lease.

17. The appellants argued that the Tribunal failed to appreciate "the right of exclusive occupation" and the fact that a lease does not come into operation until the lessor is granted exclusive occupation. The appellants claim that because they were not granted unrestricted occupation until they were informed of the certificate of occupancy, the lease did not come into existence until 9 September 1996. They submitted that the term of the lease was from 9 September 1996 to 9 September 1997. However, the term of the lease is clearly set out on the face of the annexed document headed "Lease". Whilst not necessarily accepting that Mr Ahearn, the appellants' solicitor, inserted that date (a finding of the Tribunal that the appellants contest), it is clear that the appellants signed the annexed document with that date on it in the presence of Mr Ahearn. That being so, it does not matter who put the date on the document. At exchange, the appellants were putting forward a document which set the term of the Lease as one year commencing on 7 June 1996. I cannot see how the documents can be construed in any other way.

18. Nor do the extrinsic circumstances concerning the final execution of the Contact for Sale assist the appellants (even if those circumstances are properly admissible, Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 at 348). The most significant circumstance concerning the negotiations preceding the execution of the Contract for Sale were two of the final letters from the appellants' solicitor to the respondents' solicitor dated 6 June 1996 and 7 June 1996. The relevant part of those letters provided:

As to the letter of 6 June 1996:

"My clients are in a position to exchange contracts subject to the following:

1. (subject to point 2 below) the commencement date for the 12 month settlement period and the lease may only begin when the certificate of occupancy and use for the work to be carried out by your client has issued;

2. notwithstanding point 1 above, my clients would like the option to take occupation of the property prior to the issue of the above certificate upon giving 21 days notice to the sellers; &

3. my clients also wish to apply for a change of purpose clause immediately contracts are exchanged and will require a special condition whereby your clients consent to the application and any building work required by the Government and will sign all documents reasonably required to lodge and complete the applicaiton [sic]. Obviously, my clients will be responsible for all costs and expenses associated with the above and will give your clients a general indemnity. The contract will not be conditional upon obtaining the variation."

As to the letter of 7 June 1996:

"The lease will also have to be altered to provide for a commencement date to be the earlier of the following dates:

1. on the date the Buyers enter occupation after giving the Sellers 21 days written notice; or

2. on the day the Sellers solicitor advises the Buyers solicitor that the certificate of occupancy and use for the Work has issued."

19. It may be noted that the change of purpose clause referred to in the letter of 6 June 1996 (above) was given effect. What is fatal to the appellants' construction point is the fact that no alteration was made to the commencement date of the lease as the letter of 7 June 1996 requested. Rather, it was the appellants who proffered "the photocopy Schedule and the Lease Terms" (see special condition 5) which they had executed with a commencement date of 7 June 1996. The appellants made no reference to special conditions 10 and 11 in the Lease Terms as they would have needed to do if they had wanted those special conditions to affect the date that they were putting forward as the commencement date.

20. As a consequence, the question of the occupation of the premises by the appellants only really becomes an issue for the purposes of determining the completion date of the agreement in the manner that special conditions 10 and 11 provided. It was also a relevant fact that, for sometime prior to the execution of the Contract for Sale, the appellants had stored a small amount of furniture in the building and it would appear continued to do so. That fact gives force to making provision in terms of special conditions 10 and 11 for the time to run for the date of completion from the certificate of occupancy and use for the building work rather than the actual occupancy by the appellants. I also note that the appellants relied upon these provisions to not complete the contract until 12 months after they were, in fact, notified of the certificate of occupancy and use despite the respondents' request for an earlier completion.

21. Mr Arthur maintained that the appellants did not have a right to exclusive possession until the issue of the certificate of occupancy and use in respect of the building work. He said that the appellants did not have a lease until they had such a right. Alternatively, I understood him to be putting that the lease had to be construed with a commencement date that took effect from that circumstance.

22. I do not consider that these propositions have any substance having retard to the factual findings made by the Tribunal. The right to exclusive possession does distinguish a lease from a licence but that is not the issue in this case. The right to exclusive possession can not govern or reorder the obligations entered into by the parties as to an agreement to lease the premises where there has been express agreement on the commencement of the term. There is no principle which would prevent the agreement from relating to past periods or to require a construction that it did not do so (cf Bradshaw v Pawley [1980] 1 WLR 10 at 15 per Sir Robert Megarry VC). As well, the lessor paid, in accordance with special condition 6, a rental for the first six months of the term of the Lease. That sum was expressed to be payable "on the date of the Agreement" and the rental monies were released at the time of exchange of the Contract for Sale. The rental must be taken to have been paid for a lease term commencing on 7 June 1996.

23. The Tribunal found that on the facts before it the lease commenced on 7 June 1996. The appellants have not shown any error of law in the Tribunal making that finding. The appeal must be dismissed with costs.

I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Gray.

Associate:

Date: 6 July 2001

Counsel for the Appellants: Mr R Arthur

Solicitor for the Appellants: Ahearn & Co

Counsel for the Respondents: Mr N Adams

Solicitor for the Respondents: Vandenberg Reid

Date of hearing: 4 December 2000

Date of judgment: 6 July 2001