Peterson v Kelly [1918] HCA 24; (1918) 24 CLR 442 (25 April 1918)

HIGH COURT OF AUSTRALIA

Peterson Defendant, Appellant; and Kelly and Others Plaintiffs, Respondents.

H C of A

On appeal from the Supreme Court of New South Wales.

25 April 1918

Barton, Gavan Duffy and Rich JJ.

Campbell K.C. (with him Mocatta), for the appellant.

Leverrier K.C. (with him Jordan), for the respondents.

Campbell K.C., in reply,

The following judgments were read:—

April 25

Barton J.

The plaintiffs, now respondents, on 16th June 1910 let certain premises within the City of Sydney, and liable to the rates imposed by virtue of the Sydney Corporation Act 1902 and the amending Acts, to one Wessel for a term still current. The lease contained a special provision or covenant that the lessee should pay "all rates taxes," &c., of every nature "now or at any time during the said term charged or imposed upon the said premises or any part thereof except the rate now chargeable on the unimproved capital value of the land comprised in this lease or any other rate or tax that may be hereafter levied in the nature of a land tax or a tax upon the unimproved capital value of the said land."

At the date of the lease there had been imposed on the land two rates. The first was designated the "city rate." It was assessed under sec. 110 of the Sydney Corporation Act (No. 35 of 1902) "according to the fair average annual value" of the property, and was imposed under sec. 120 of the same Act. The second was imposed under sec. 4 of the amending Act No. 27 of 1908, and was therefore levied on the unimproved capital value. Under that section it stood in addition to the rate under the Principal Act. On its imposition the Governor, under sec. 5 of the Act of 1908, proclaimed that the operation of the enactments mentioned in Schedule 3 to the Local Government Act 1906 should be suspended in the City. It is clear that the covenant had reference to this state of things, and that the lessee was exempted by it from the payment of the unimproved capital value rate then chargeable.

In June 1914 Wessel, with the consent of the plaintiffs, transferred the lease to the defendant, who is the present appellant. There is no question that the appellant is in the same position as Wessel under the covenant. The Sydney Corporation (Amendment) (No. 2) Act 1916 (No. 12) was passed on 13th April of that year. It amended the Act of 1908 by inserting after sec. 4 a section numbered 4a. That section empowered the Council to make for any year an unimproved capital value rate not exceeding sixpence in the pound on that value. It prohibited the making of any other unimproved capital value rate under sec. 4 of the Act of 1908, or of any city rate, if the power in sec. 4A were exercised. It also suspended sec. 4 for the year of rating. The Council exercised its power under sec. 4A by levying for 1917 an unimproved capital value rate of three-pence halfpenny in the pound, and of course no other unimproved capital value rate nor any city rate was imposed. The respondents, on the valuation by the Council of the unimproved capital value for the purposes of this 1917 rate, paid £153 2s. 6d., the whole amount of the rate imposed for 1917. They now claim as plaintiffs £87 10s. from the appellant, on the ground that on the construction of the covenant and by the operation of sec. 7 of the Act of 1916 the appellant is liable to pay them that amount.

But for sec. 7 this case would probably not have arisen, for it is clear that unless it renders the appellant liable there is no cause of action.

Now sec. 7 inserts after sec. 11 of the 1908 Act a section numbered 11a, which it is necessary to quote in full. It reads as follows:—"In any year in which the Council makes and levies a rate on the unimproved capital value of land under section 4A of this Act, the method to be adopted in ascertaining the several amounts payable as between lessor and lessee in respect of such rate in cases where the lease was made after the first day of November, one thousand nine hundred and eight, and before the passing of this Act, and in such lease the lessee has covenanted to pay municipal or city rates, shall be as follows:—The amount of such rate on the unimproved capital value in excess of three halfpence and not exceeding fourpence one farthing in the pound shall be considered and taken to be for the purposes of adjustment and interpretation of such covenant the amount of the city rate under the Principal Act."

It may be noted in passing that the judgments of the learned Judges of the Supreme Court deal with sec. 11A as if the words "the passing of this Act" necessarily referred to 13th April 1916. Literally they referred, probably by mistake, to 22nd December 1908. The question is not now very material. The order of the Supreme Court is dated 15th November 1917, and on 12th March 1918 there came into force the Sydney Corporation (Declaratory) Act (No. 6 of 1918), by which sec. 11A of the Act of 1908, inserted in that Act by sec. 7 of the Act of 1916, is amended by substituting for "the passing of this Act" the words "the thirteenth day of April, one thousand nine hundred and sixteen." The Act went on to say: "This amendment shall take effect as from the said day." It is absolutely clear that this enactment is retrospective, and that sec. 11A must be read as if that were the date originally expressed in it.

It should also be mentioned that sec. 12 of the Act of 1908 applies to rates on unimproved capital value under the Act of 1908 certain provisions of the Local Government Act of 1906. The only provision material to the present question is sec. 144 (5), viz., "Nothing in this Act shall ... affect any private agreement with respect to the ultimate liability to pay any specified rates or arrears of rates." As secs. 4A and 11A are virtually made part of the Act of 1908, the sub-section just quoted may well be held to apply, so as to preserve the effect of the covenant. But I do not dwell on that, because I think that the covenant is unaffected by sec. 11A, on which the respondents rely. That section applies only to leases within the specified dates where and so far as the lessee has covenanted to pay municipal or city rates. Here the covenant expressly excepts unimproved capital value rates. It is not an unqualified covenant to pay municipal or city rates, but only a covenant to pay such as are not rates on the unimproved capital value. In my opinion the section cannot be read to include such a case. Here the lessee has expressly protected himself with the consent of the lessor against such rates, and I do not think the section was intended to interfere with or to destroy any such protection. If I had any doubt on that subject, I should be the more inclined to this construction because sec. 11A deals only with "the method to be adopted in ascertaining the several amounts payable as between lessor and lessee." It seems to deal only with cases in which the question is as to the proportions to be assigned to the respective parties where there is an existing but not an allocated liability of both. If the section finds a state of things in which before its enactment one party or the other was free from liability, I do not think it can be read so as to impose a new liability.

If the covenant had protected the lessee from annual value rates instead of from unimproved value rates, no doubt the respondents could rightly have asserted his liability to the rate now in question, and no doubt they would have done so. The present case, however, is just the converse.

I think the appeal should be allowed and the consequent orders made.

Gavan Duffy and Rich JJ.

The memorandum of lease which we are considering in this case is dated 16th June 1910, and provides "that the said lessee shall and will from time to time during the said term hereby created pay and discharge all rates taxes dues duties charges improvements fees assessments outgoings payments and impositions of every nature whatsoever now or at any time during the said term charged or imposed upon the said premises or any part thereof except the rate now chargeable on the unimproved capital value of the land comprised in this lease or any other rate or tax that may be hereafter levied in the nature of a land tax upon the unimproved capital value of the said land."

Sec. 11A of the Sydney Corporation (Amendment) Act 1908 as it now stands runs thus:—"In any year in which the Council makes and levies a rate on the unimproved capital value of land under sec. 4A of this Act, the method to be adopted in ascertaining the several amounts payable as between lessor and lessee in respect of such rate in cases where the lease was made after the first day of November, one thousand nine hundred and eight, and before the thirteenth day of April, one thousand nine hundred and sixteen, and in such lease the lessee has covenanted to pay municipal or city rates, shall be as follows:—The amount of such rate on the unimproved capital value in excess of three halfpence and not exceeding fourpence one farthing in the pound shall be considered and taken to be for the purposes of adjustment and interpretation of such covenant the amount of the city rate under the Principal Act."

The case was argued before us as if sec. 11A imposed on lessees a liability to pay part of the general rate imposed for the year 1917 under the provisions of sec. 4A of the same Act. If that were so, the defendant could not escape his statutory liability by appealing to the exception in his lease which merely limits the contractual obligation of the lessee and does not impose on the lessor a contractual obligation to pay any rate or tax whatever; the burden of the excepted rates and taxes would rest where the Legislature chose to place it. But in our opinion sec. 11A does not impose any such statutory liability on lessees. Where a general rate is made under the provisions of sec. 4A no city rate can be made, and sec. 11A provides for a contingency that must then arise. It enacts that, where a lessee is under an obligation to pay the city rate because of a covenant to pay municipal or city rates, the amount payable as city rate under such covenant shall be the amount of the general rate under sec. 4A which is in excess of three halfpence and not exceeding fourpence one farthing in the pound. The provision in his lease clearly imposes on the defendant the obligation of paving the city rate. There is no longer a city rate to pay, but sec. 11A preserves the obligation and provides a new method of computing the amount payable in fulfilment of such obligation. The sum sued for here (£87 10s.) is calculated in compliance with the provisions of sec. 11A, and the defendant must pay it in fulfilment of his obligation to pay the city rate under the provision in his lease.

Appeal dismissed with costs.

Solicitors for the appellant, Biddulph & Salenger.

Solicitors for the respondents, Murphy & Moloney.