Firth v Halloran [1926] HCA 24; (1926) 38 CLR 261 (27 August 1926)

HIGH COURT OF AUSTRALIA

Firth Defendant, Appellant; and Halloran Plaintiff, Respondent.

H C of A

On appeal from the Supreme Court of New South Wales.

27 August 1926

Knox C.J., Isaacs, Higgins, Gavan Duffy and Rich JJ.

Windeyer K.C. (with him Pitt), for the appellant.

Bavin K.C. and Bowie Wilson, for the respondent,

The following written judgments were delivered:—

Aug. 27

Knox C.J. and

Gavan Duffy J.

We agree with the learned Judges of the Supreme Court in the answer given by them to the first of the questions submitted by the special case and in the reasons which they gave in support of their conclusion.

In our opinion this appeal should be dismissed.

Isaacs J.

I also am of opinion that the appeal should be dismissed.

The argument for the appellant rested on one circumstance, namely, that in the events that had happened Holland had, by virtue of sub-sec. 5 of sec. 57 of the Mining Act 1906, a statutory right to "carry on mining operations on the land" until his application for a lease was granted or refused. That circumstance, it was argued, had one, if not both, of two legal consequences. The first consequence claimed is that in law it ousted the appellant, because it prohibited her from working the land for coal, since to do so would be an interference with the statutory right of Holland. Reference was made in this connection to Croudace v. Zobel[1], where the Privy Council affirmed the right of the authority-holder to interim protection by injunction. The second consequence claimed is that the object of the appellant's lease was frustrated, and therefore the obligation to pay rent was terminated.

As to the first asserted consequence, it would be difficult to imagine a more conclusive authority on the point than Matthey v. Curling[2]. In that case exclusive possession was actually taken by a third party under statutory authority created subsequently to the execution of the lease, the possession being retained for the whole of the unexpired portion of the term. Nevertheless, the tenant was held bound to fulfil his covenant to rebuild. Lord Buckmaster's judgment, which may also be taken as the opinions of Lords Sumner and Wrenbury, sets out all that it is necessary to say with respect to the first position urged[3]. That position cannot be supported, and it is unnecessary to enter into the reasoning upon which the decision referred to is founded.

The second position, namely, frustration, is equally unmaintainable. I do not agree that, because the contractual obligation relied on by the plaintiff is created by an instrument of lease, the doctrine of frustration is necessarily excluded. The nature of the relation of landlord and tenant, the history of the doctrine of frustration, its inherent meaning and the judicial determination of relevant cases would lead me to reject so sweeping a rule. Nor do I think the consequences of terminating the relation of landlord and tenant any more extraordinary than that of terminating any other legal relation which by hypothesis is expressly and impliedly created on a mutual and fundamental basis of existence or continuance which fails at a given point. In a matter resting on covenant it is "the contract ... and not the estate ... which is the determining factor" (Hallen v. Spaeth[4]). But I base my opinion on this branch on the fact that, there being no express limitation of the covenant to pay rent, neither the language of the lease nor the attendant circumstances at the time it was made lead to any such interpretation. Of course, the lessee confidently expected that he would always during the term have the right to mine for coal, if he were so disposed. We may even suppose that he would not have been willing to enter into the bargain had he believed he would be liable to pay rent and yet prevented from mining. But that falls short of establishing an implied condition of the contract that, if the events now relied on occurred, the lease should forthwith cease and all obligations end.

The Mining Act, and acts of administration under it, have undoubtedly intervened so as to restrict temporarily, and, perhaps eventually, entirely, the use by the lessee of the land leased. Again, Matthey v. Curling[5] determines that that does not necessarily amount to frustration, terminating contractual relations. To ascertain whether frustration has occurred so as to effect such a result, all the facts have to be examined. I include in that the terms of the Act under which the interruption occurred. Much may depend on the terms and provisions of the relevant Act as to whether the law intended to interfere with the contractual relations of the parties. There is nothing in the Mining Act which makes the lease unlawful, and certainly nothing which makes the covenant to pay rent unlawful. The Act regards the private land as land containing valuable minerals and, for the general welfare, permits extraction of those minerals. But it treats owners and lessees as having rights of compensation for their respective interests, and those interests are measurable without disregarding their reciprocal obligations. The lessee is compensated in case of a Crown lease for mining purposes. Compensation would depend on the force of various factors, including the cost to the lessee of winning coal. Part of that cost is the rent he pays his landlord. To treat that as immaterial would be unfair to the mining lessee, and also unfair to the landlord, unless the coal were treated as the owner's, free from the lease, which is impossible. The Act does not, therefore, frustrate the objects of the lease: it merely, at most, preserves the bargain intact and converts the interest created by the lease into a pecuniary claim. That is a result which every person in the community possessing property may have to submit to.

There being no suggestion of any other circumstance establishing freedom from interference as the basis on which both parties entered into relation of landlord and tenant, the second ground fails as well as the first.

The appeal should, therefore, be dismissed.

Higgins J.

I have now had an opportunity of reading and considering Part IV. of the Act of 1906 as amended to date. I had not seen the Act before; and the course which the discussion took did not allow me an opportunity to get a consecutive view of the provisions. To my mind it now seems clear that the difficult questions as to frustration of contract, eviction by title paramount, obligations become impossible by Act of Parliament, do not even plausibly arise in this case. The Legislature, having absolute power over titles to land and minerals under land, has simply allowed holders of miners' rights to obtain authority to enter and prospect, and to apply for leases of private land under which there are minerals. There is an exception where bona fide mining operations are being carried on by or with the concurrence of the owner at the time when the application for the authority or for the lease is made: see sec. 70D—a section which I think was not referred to in the argument. The covenant of the lessor for quiet enjoyment is against "any interruption or disturbance by the lessor or any person lawfully claiming any estate or interest ... through or under him them or any of them"; there is no covenant against disturbance by Parliament. It seems to me to be absurd to rely on the authorities as to eviction by title paramount or as to the obligation to pay rent becoming impossible, after the plain statement of the law contained in the recent case of Matthey v. Curling[6]. As Lord Buckmaster said[7], "the lessee remains liable on his covenants in the lease, notwithstanding that he has been deprived of the term by the exercise of legal powers." Here, there has not been even a deprivation of the term. "Eviction by title paramount means an eviction due to the fact that the lessor had no title to grant the term, and the paramount title is the title paramount to the lessor which destroys the effect of the grant, and with it the corresponding liability for payment of rent. Eviction by the lessor himself is with equal reason an answer to the claim upon the covenant"[8]. Here the lessor had the title, and the power of the Legislature to do what it will with people's property is not a "title" at all; and there has been no eviction. The lessor was not in any way responsible for what the Legislature did in the exercise of its constitutional powers, in the absence of express covenant applicable to such an event.

I concur in the opinion that the appeal should be dismissed.

Rich J.

I agree that the appeal should be dismissed.

Appeal dismissed with costs.

Solicitors for the appellant, Allen, Allen & Hemsley.

Solicitors for the respondent, Minter, Simpson & Co.

[1] (1899) A.C. 258.

[2] (1922) 2 A.C. 180.

[3] (1922) 2 A.C., at pp. 226, 227.

[4] (1923) A.C. 684, at p. 690.

[5] (1922) 2 A.C. 180.

[6] (1922) 2 A.C. 180.

[7] (1922) 2 A.C., at p. 229.

[8] (1922) 2 A.C., at p. 227.