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High Court of Australia |
GILBERT v. WESTERN AUSTRALIA [1962] HCA 7; (1962) 107 CLR 494
War Service Land Settlement (W.A.)
High Court of Australia
Dixon C.J.(1), Fullagar, Kitto(1) and Windeyer(1) JJ.
(THE HONOURABLE MR. JUSTICE FULLAGAR died at Melbourne prior to the
delivery
of judgement in this appeal)
CATCHWORDS
War Service Land Settlement (W.A.) - Perpetual leasehold - Right to purchase fee simple at "such price as is fixed under the scheme by the Minister" - Meaning - War Service Land Settlement Agreements Act 1945 (Cth), Second Schedule - War Service Land Settlement Agreement Act, 1945 (W.A.) - War Service Land Settlement Agreement Act, 1951 (W.A.), s.6 - States Grants (War Service Land Settlement) Act 1952 (Cth) - War Service Land Settlement Scheme Act, 1954 (W.A.), s. 7.
HEARING
Perth, 1961, June 16, 19, 20;DECISION
1962, February 12.2. The appellant's lease contained no option of purchase, and when he took up his holding in 1948 there was no provision for conversion of war service settlement leaseholds into freehold. Perpetual leasehold was the only form of tenure that the scheme then provided for. Therefore the appellant's claim cannot be based upon a contract or upon any representation made to him when he took up his holding. He, however, relies mainly upon a statutory right given by s. 7 of the War Service Land Settlement Scheme Act, 1954 (W.A.), which we shall refer to hereafter as "the 1954 Act". To appreciate the way in which each side presented its case it is necessary to go through a complicated history. (at p501)
3. In 1945 the Commonwealth Parliament passed the War Service Land Settlement Agreements Act 1945, authorizing the execution by or on behalf of the Commonwealth of agreements between the Commonwealth and the several States in relation to war service land settlement. This Act contained two Schedules. The first was the form of the agreements authorized to be made by the Commonwealth with the States of New South Wales, Victoria and Queensland. The second was the form of the agreements authorized to be made by the Commonwealth with the States of South Australia, Western Australia and Tasmania. On 9th November 1945 the Commonwealth and the State of Western Australia duly entered into an agreement in the Second Schedule form. We shall refer to it hereafter as "the 1945 Agreement". Parliamentary approval of it was given by the War Service Land Settlement Agreement Act, 1945 of Western Australia (assented to on 15th January 1946). This Act authorized the execution of an agreement in the form set out in the Schedule to it, which was identical with the Second Schedule of the Commonwealth Act, except for an addition to cl. 7. This addition provided for a review of the agreement after five years with a view to its provisions being then varied by permitting conversion of leaseholds to freehold. But we were told that this provision did not appear in the agreement actually executed, which was in the form in the Second Schedule to the Commonwealth Act, not in the form in the Schedule to the State Act. The matter is of slight importance, if any importance. At most it indicates that at that date the State Parliament had in mind the possibility of conversion of holdings to freehold at some future date. This perhaps was because of the ordinary forms of tenure under the Land Act of the State. However, the State Parliament passed another Act, the War Service Land Settlement Agreement (Land Act Application) Act, 1945 (assented to on 30th January 1946) enabling the Governor to grant leases for nine hundred and ninety-nine years "for the purpose of enabling the State duly to carry out its obligations under the agreement". Later it was apparently realized that nine hundred and ninety-nine years fell short of perpetuity: and in 1947 the Act was amended to substitute the words "in perpetuity". (at p502)
4. The 1945 Agreement sets out the general terms of a joint enterprise called "the scheme" of the Commonwealth and State for the settlement on the land of former members of the armed services. It is not necessary to describe its provisions in any detail. The essence of it was that the State should provide and set apart lands for the scheme, either Crown lands or lands resumed by the State with funds provided by the Commonwealth. The Commonwealth was to provide the capital moneys for carrying the scheme into effect and to bear three-fifths of any excess of the total cost of each holding over the rental value of the land and improvements. Statutory authority for this existed in s. 103 of the Re-Establishment and Employment Act 1945 (Cth). The State was to bear the remaining two-fifths. Settlers were to take their lands on perpetual lease, paying a rental calculated at two and one half per cent on the value at the commencement of their tenures of the land and of what were called the "non-structural improvements" owned by the Crown. By contrast structural improvements, such as buildings, fencing yards, windmills and so forth, on the land, were to be bought by the settler from the State, payment being made by instaments, including interest on the unpaid balance. Valuations for the purpose of these provisions were to be made by officers of the State and Commonwealth. Clause 6 (7) of the Agreement provided that in doing so they were to "have regard to the need for the proceeds of the holding (based on conservative estimates over a long term period of prices at yields for products) being sufficient to provide a reasonable living for the settler after meeting such financial commitments as would be incurred by a settler possessing no capital". Before settlers were put upon them, lands set apart or resumed for the purposes of the scheme were to be sub-divided, developed and improved by the State to a stage at which they could be brought into production within a reasonable time. The excess of the total cost of such acquisition, development and improvement of a holding over the valuations of the land and structural improvements constituting it was to be written off - the ultimate burden of the loss falling, as has been pointed out above, as to three-fifths on the Commonwealth, as to two-fifths on the State. This is a summary only of the relevant provisions of the 1945 Agreement. It contained other provisions designed both to regulate the financial obligations of the Commonwealth and State respectively in carrying out the scheme and to ensure that it would be administered in such a way as to be economically stable and satisfactory to settlers taking up land under it. Leases were not transferable by the settler, except with the consent of the Commonwealth and the State and on such conditions as the Commonwealth and the State should agree upon. (at p503)
5. The Agreement is an agreement between governments recording arrangements
of a political and administrative character. As Dixon
J., as he then was, said
of the similar agreement in P. J. Magennis Pty. Ltd. v. The Commonwealth
[1949] HCA 66; (1949) 80 CLR 382
: "If the agreement
is examined it will be found that there
are not a few clauses which depend on, or provide
for, agreed action
by State
and Commonwealth,
and the general tenor of the document suggests rather an
arrangement between two governments
settling
the broad outlines of an
administrative
and financial scheme than a definitive contract enforceable at
law" (1949) 80 CLR,
at p 409
. Whatever was its legal nature as between
Commonwealth and State, it is quite clear that, of itself, it created no
private
rights.
A settler got no rights directly from it.
His rights arose
from the transaction that the State entered into with him. In
the appellant's
case that was as follows: In April
1948 he, being an applicant for land under
the scheme, was offered the subject
farm. On 5th May
1948 a letter signed by
the chairman
of the Land Settlement Board was sent to him. The material parts
of it read
as follows: "I have
pleasure in advising that the Hon.
Minister for
Lands has approved of the allotment of Farm No. A428B to you.
The value and
rental
for the land and non-structural improvements
and the value and
half-yearly payment for the purchase of structural
improvements have
now been
determined and are as shown hereunder:
Value of Land and Non-Structural Improvements
- as at a date of purchase by Crown . . 5,568 pounds
Half-yearly rental for land and non-structural
improvements (as at the date of purchase by the
Crown), payable after the expiration of the
assistance period, in accordance with the
Regulations. . . . . . . . . . . . . 69 12 0
Value of Structural Improvements - as at date
of purchase by Crown and as shown on attached
schedule . . . . . . . . . . . . . . 2,840 pounds
Half-yearly instalments, including interest . . 79 5 0It is explained that in accordance with the conditions of the lease, a valuation shall be made at the end of the assistance period, or on the completion of the planned work, to ascertain the value of the additional Non-Structural Improvements, for the purpose of adjusting the rent, and the price of additional Structural Improvements, for the purpose of determining the half-yearly payments for the purchase of them. If you are prepared to accept this allotment, please complete and return within 14 days the enclosed Acceptance Form and Taxation Declaration Form. Immediately on return of these forms, action towards approving of the application for the lease in perpetuity, and preparing the necessary legal forms, will be taken". (at p504)
6. The appellant went into possession of the farm on 3rd May 1948. The term of his lease runs from that date. The lease itself was not executed by the Governor until 2nd April 1952 and registered eights days later. Notwithstanding all that occurred in the meantime, it purports to be governed by various provisions of the 1945 Act and Agreement. The statement in the Land Board's letter, quoted above, that the value of the land and non-structural improvements was 5,568 pounds, was to become the basis of the appellant's primary claim. His case is that this sum (adjusted to 5,836 pounds) which was taken as the valuation for the purpose of determining his rental for a perpetual leasehold tenure under the provisions of the scheme, as it then stood, became ten years later the maximum price which the Minister could require him to pay to convert his leasehold to freehold according to the rights given him by statute in 1954. But before examining this contention the further history of the scheme must be traced. Correspondence passing between Ministers of State, of the Commonwealth and of Western Australia, was tendered in evidence. But it seems to be largely irrelevant to the issues in the case. When we allude to it, we do so only because, the scheme being in essence an arrangement between governments, these communications are explanatory of the course of events. They do not define the legal rights of the appellant. (at p504)
7. In December 1949 this Court delivered its judgment in Magennis's Case (P. J. Magennis Pty. Ltd. v. The Commonwealth) [1949] HCA 66; (1949) 80 CLR 382 . It is unnecessary to discuss that decision here, beyond saying that the reasoning on which the conclusion of the majority was based seems to have little application to the 1945 Agreement between the Commonwealth and the State of Western Australia, which was in the form in the Second Schedule to the Commonwealth Act and did not contain the provision that was held to make ineffective an agreement in the First Schedule form. Nevertheless, the decision in Magennis's Case [1949] HCA 66; (1949) 80 CLR 382 was thought in some quarters to throw doubts on the validity of the war service land settlement schemes generally: see Milne v. Attorney-General for the State of Tasmania [1956] HCA 48; (1956) 95 CLR 460 . Conferences were therefore held between representatives of the Commonwealth and the States with a view to enabling the war service settlement schemes to be carried on without the legal impediments that had been created by the decision of this Court. On 16th March 1951 the Prime Minister wrote to the Premier of Western Australia stating that, as the State was continuing to settle ex-servicemen on the land, he felt that an arrangement could and should be made between the two governments "by which the Commonwealth Government co-operates in your scheme of settlement by providing financial assistance". He sent with this letter a memorandum setting out the conditions of an arrangement which would be acceptable to the Commonwealth. The proposal was, in essence, that the Commonwealth should provide financial assistance, not as previously for the purposes of the 1945 Agreement and under the Re-Establishment and Employment Act, but by direct grant to the States pursuant to s. 96 of the Constitution - the grants to be for the purposes of war service land settlement, and to be on such conditions as the Commonwealth Minister for the Interior should determine. An arrangement on the conditions thus envisaged was to take the place of the 1945 Agreement. Further correspondence took place concerning details of the proposal. In one letter (dated 19th December 1951) the Prime Minister, having in mind that the decision in Magennis's Case [1949] HCA 66; (1949) 80 CLR 382 was regarded as having struck down Commonwealth participation in the 1945 Agreement, said: "The Commonwealth wished to avoid, for constitutional reasons disclosed by the Magennis Case, any arrangement of a formal character." . . . And "In all the circumstances we feel strongly that the best legal foundation for future action can be provided by means of a grant of financial assistance pursuant to s. 96 of the Constitution supplemented by an informal arrangement (in the form say of an exchange of letters) between governments setting out the conditions to be observed." This proposal was adopted. (at p505)
8. The careful avoidance of a formal document like the 1945 Agreement makes the meaning of the expression "the scheme" when used after 1951 seem, at first sight, indefinite. But in reality the scheme in its new form is to be found in the conditions on which the Commonwealth stated it would grant moneys to the State, which conditions the State accepted. These conditions included statements of the form of the transactions which the State would enter into with settlers. Generally the arrangements which would be made with settlers were to be in the same terms as the 1945 Agreement had provided for; but some alterations were agreed upon or were contemplated. One was that conversion of perpetual leases to freehold might be permitted. To enable effect to be given to the new arrangements, which were made with all the States, the Commonwealth Parliament enacted first the Loan (War Service Land Settlement) Act 1951, assented to on 24th November 1951, authorizing the raising and expenditure of moneys for the purpose of "war and repatriation services" under the heading "Financial assistance to the States in connexion with War Service Land Settlement": and secondly the States Grants (War Service Land Settlement) Act 1952 which came into operation on 10th July 1952. In the meantime, and in contemplation of a new agreement, but before the alternative policy of a grant under s. 96 of the Constitution, and its details, had been settled, the Western Australian Parliament, fearful apparently that its existing legislation was invalid, had passed the War Service Land Settlement Agreement Act, 1951, assented to on 2nd January 1952, with a view to meeting the situation and generally preserving the scheme but modifying it in some respects. The preamble referred to doubts having arisen in connexion with the 1945 legislation and the 1945 Agreement, and stated that it was expedient to resolve those doubts and validate things that had been done. The method adopted was to repeal the 1945 Act and to deem the 1951 Act to have come into operation when the repealed Act had commenced, namely on 15th January 1946. Things done and interests acquired under the repealed Acts were expressly validated. But at the same time provision was made for the conversion of perpetual leaseholds to freehold. That, for present purposes, is the only importance of the 1951 Act. A lessee of perpetual leasehold who wished to purchase the fee simple of his holding became entitled to do so (after ten years and subject to the approval of the Commonwealth and certain other requirements) "on payment of such purchase price for the fee simple as is fixed by the Minister in accordance with the provisions as set out in clause six sub-clause (7) of the War Service Land Settlement Agreement 1945". It seems to have been intended at that stage that the Minister, in fixing the freehold price should have regard to the same considerations as had to be regarded when a valuation was made pursuant to cl. 6 (7) of the 1945 Agreement for determining leasehold values. These considerations, it will be remembered, were of an economic character related to the productivity of the holding and the need to ensure that the settler could make a reasonable living from his holding, he being assumed to possess no capital. How exactly those concepts, which were used in ascertaining a valuation on which a rent in perpetuity would be determined, were to be adapted to fixing a freehold price after ten years is not obvious. However, counsel for the appellant disclaimed the 1951 Act as the source of the right he asserted. And he had necessarily to do so, because before the appellant had sought to avail himself of any right given by the 1951 Act it had been repealed by the 1954 Act. But it was argued that when the 1954 Act, to which we shall presently come, gave an option to purchase, in place of that given by the repealed 1951 Act, it ensured that the purchase price would not be greater than it would have been had the right given by the 1951 Act been exercised. It will be convenient to deal later with this. (at p507)
9. We turn now to events leading up to the 1954 Act, and to its provisions. During 1952, after the passing of the Commonwealth Act enabling grants under s. 96 of the Constitution, further correspondence passed between representatives of the Commonwealth and the State about the conditions on which that assistance should be given. The Commonwealth Minister wrote to the State Minister saying that "whereas the original Commonwealth-State agreement, invalidated by the judgment in the Magennis Case, only made provision for perpetual leasehold tenure, these conditions allow of the freeholding of farms by settlers on conditions to be agreed upon by the Commonwealth and State . . . I suggest we should now agree on the method of determining the option price for the purchase of the freehold of farms allotted under the scheme, so that settlers can be advised of the amount they are required to pay for the fee simple". The policy of allowing conversion of leasehold to freehold was acceptable to the State. The State Parliament had provided for it in the 1951 Act which was afoot at the time of the correspondence. But the two Governments were not at first in agreement as to the terms on which it should be permitted. The suggestion of the Commonwealth was that the option price should be the capital cost to the public funds of acquiring and developing the farm, or a reasonable market valuation, whichever should be the lower. This was not at first agreed to by the State authorities. Their proposal was that the valuation for leasehold purposes and the option price of a holding should be the same amount, and that the provisions of sub-cl. (7) of cl. 6 of the 1945 Agreement, referred to above, should be considered in arriving at the option price, as the 1951 Act provided. But the Commonwealth's attitude, as communicated on 8th June 1953, was that the making of a valuation for rental purposes and the fixing of an option price involved different considerations: that "any profit by quick resale by a settler following the exercise of the option to freehold should not be at public expense". "It is", the Commonwealth letter said, "therefore required that the option price should be actual cost of the holding, which involves no loss to the public purse, or assessed current market value . . . This procedure will protect the public interest so far as possible but still allow the settler to realize any equity which he himself might build up". The general basis of this policy is clear. The rental valuation under the 1945 Agreement was in many cases less than had been the cost to public funds of providing the land. The difference was written off at the expense of the public so long as the land was leasehold. But, if in the future lessees from the Crown were to be enabled to buy from the Crown the fee simple of the land it had provided for them, then they should, it was argued, either pay what had been the cost to public funds or the market value of the land, whichever should be the lower. (at p508)
10. Commonwealth and State views differed also at first on whether or not, in the operation of the scheme in its new form, the cost to the State of any particular holding should be computed for leasehold purposes on a project basis, or whether each individual holding should be costed as if it had been separately acquired. The distinction is illustrated by the facts of the present case. The appellant's farm is one of four holdings formed by the subdivision of Boraning. At the time Boraning was acquired by the Crown for settlement purposes two of the four areas consisted of land already developed and improved, suitable for immediate occupation and needing little further expenditure by the Crown. One of these the appellant got. The other two were of undeveloped land on which much additional expenditure of public money had to be made. The view put forward by the Commonwealth authorities was that in the operation of the scheme after 1951 the acquisition, subdividing and developing any one area for settlement should be regarded as a single project, and the total expenditure involved should be spread over all the holdings provided from that area in arriving at their cost to the Crown. (at p508)
11. The final result of the discussions between the Commonwealth and State authorities, which went on during 1951 and 1952, appears in the final formulation of the conditions on which it was agreed that the Commonwealth would make grants of financial assistance. A statement of these was printed and sent to the State on 31st July 1953. This statement, as it describes itself, was thereafter generally referred to as "the conditions". These conditions were, in terms, framed to operate prospectively. They state the principles on which in the future the scheme should be administered and moneys received by the State applied. They dictate the terms on which the State should grant leases in the future. As before, the leases were to be perpetual leases; but if the Commonwealth and State should agree, future leases might provide for an option to purchase the freehold after a property had been held for ten years as a lease. In such cases the price at which this option might be exercised was to be based upon the cost to the public of making the land available to a settler, or the market value at the date of the leasehold valuation, whichever was the lower (see cll. 5 and 7 of the conditions). And costing was to be on a project basis (cll. 5, 7 (7) and definition of "project"). The policy is obvious: if option prices were to be based on costs, then development costs should be averaged over a project, otherwise the man who had been settled on land already developed might acquire the fee simple of his farm more cheaply than his neighbour, whose block was comparable but had cost more to develop. (at p509)
12. The matters in controversy between the State and Commonwealth authorities had thus been determined. The State was prepared to accept grants on the conditions as promulgated, and, in transactions between itself and settlers, to administer the scheme thereafter on the basis of those conditions. To this end the State Parliament passed the 1954 Act, which came into operation on 28th January 1955. Its purpose, according to the long title, was "to enable the State to carry out and give effect to war service land settlement and to accept appropriations mentioned in the States Grants (War Service Land Settlement) Act 1952 of the Commonwealth Parliament for the purpose of financial assistance in connexion with war service land settlement in such amount and subject to such conditions as the Minister (scil. the Commonwealth Minister) determines under that Act". The conditions so determined were those printed and promulgated in 1953. From then on those conditions were, it seems, regarded by the officials concerned with the administration of the scheme as superseding the 1945 Agreement, the original statutory authority for it having been repealed. The provisions of the conditions thus became really the terms of an agreement which the parties to the 1945 Agreement had substituted for it. So that, so far as the scheme was to be found embodied in any document, it was after 1954 to be found in the 1954 Act and the conditions. The conditions were, as we have said, in strict point of law the conditions on which the Commonwealth made moneys available to the State; and they were to apply prospectively, that is to the scheme as it was to be carried on under the new arrangement. But, since the State in its transactions with settlers had to comply with the requirements of the conditions as to the form and nature of such transactions, the conditions indirectly governed the rights of settlers. And it appears that, in practice, their operation was not regarded as restricted to transactions entered into with new settlers, that is they were not regarded as applicable only to those whose holdings were allotted after 1953. (at p510)
13. The 1954 Act contains provisions designed to give the scheme to be carried out pursuant to the new arrangement continuity with the scheme under the 1945 Agreement, and to make the terms of existing holdings harmonious with those of holdings to be granted in the future. To do this the Act repealed the Act of 1951, which had itself repealed the two Acts of 1945; but it ratified and validated all things done and all rights, titles and interests (except in respect of certain mineral rights) conferred or acquired under all the repealed Acts. Then - having defined "scheme" as meaning "the war service land settlement scheme which prior to the coming into operation of this Act has been carried out and given effect, under the repealed Acts and which after the coming into operation of this Act is to continue to be carried out under this Act" - it authorized the Minister (that is the State Minister) "to carry out and give effect to the scheme" and to accept financial assistance from the Commonwealth on such conditions as the Commonwealth Minister determines under the Commonwealth Act. Then by s. 7 (2) it dealt with the conversion of leaseholds to freehold. As that provision is the central point of this case, it may be set out in full. Omitting some immaterial amendments made in 1960, it is as follows: "Unless the conditions imposed under the Commonwealth Act require otherwise, the lessee of a tenure of perpetual leasehold of land demised by instrument of lease under the scheme, notwithstanding the provisions of the instrument of lease or the provisions of this or another Act, (a) may, after the expiration of a period of ten years from the commencement of the term of the perpetual lease and on payment of such purchase price for the fee simple as is fixed under the scheme by the Minister, but subject to the conditions, if any, imposed under the Commonwealth Act, the provisions, if applicable to the land, of subsection (5) of section eight of this Act relating to mineral rights; mortgages and other encumbrances, if any, affecting the land; the provisions of the regulations where applicable; and compliance with the provisions of the lease instrument, purchase the fee simple in the land; and on completion of the purchase is entitled to surrender the lease instrument and obtain in place of it a Crown grant of the fee simple in the land; and (b) may, but subject to the conditions, if any, imposed under the Commonwealth Act, at any time and from time to time during the period of ten years from the commencement of the term of the lease, pay such amount or amounts, not exceeding in the aggregate ninety per centum of the purchase price for the fee simple, as he things fit on account of that purchase price; and on his making payment of an amount on account of the purchase price, interest on the amount so paid by him ceases to accrue." (at p511)
14. The appellant's argument fastens upon the words, "fixed under the scheme by the Minister", which we have italicized. And it points also to the phrases "subject to the conditions", and "the provisions of the regulations", which we have also italicized. By the Interpretation Act, 1918-1957 (W.A.), s. 4 "regulations" means the regulations made under the Act. The appellant seeks to supplement what he derives from the 1954 Act by a reference to the War Service Land Settlement Scheme Regulations, made by the Governor in Council on 26th January 1955 and published in the Government Gazette (W.A.) of 4th February 1955. Regulation 23 refers to lessees being entitled to purchase the fee simple of their holdings "on payment of such purchase price as is fixed under the scheme by the Minister in accordance with the conditions". The phrase "the scheme" is defined for the Regulations in the same terms as in the Act, but with the addition that it means the scheme which is to be carried out "in compliance with the conditions". The word "conditions" in the Regulations is defined to mean "the conditions determined by the Minister for the Interior of the Commonwealth of Australia in accordance with the States Grants (War Service Land Settlement) Act 1952 of the Parliament of the Commonwealth". (at p511)
15. The appellant's argument is that the Minister must fix the price for conversion of his leasehold to freehold "under the scheme", as the Act requires: that this means in conformity with the scheme: that this means in accordance with the conditions. He then relies especially on cl. 7 (7) of the conditions, and claims that it determines the way in which "under the scheme" the Minister must fix the price. It is as follows: "(7) The option price for the freehold shall be that part of the approved capital costs of the project apportioned to the holding up to the time of the leasehold valuation or a reasonable market valuation at that time of the land and improvements provided by the State, whichever is the lower, less the sale price to the settler of the structural improvements provided by the State." (at p512)
16. Read in its context, this sub-clause simply provides for the way in which the sum payable on the exercise of the option is to be calculated in cases in which, pursuant to cl.7 (2), an option to purchase the fee simple is contained in the lease. It has no direct application to a case such as that of the appellant; for when his lease was granted no option to purchase the freehold was given, nor could such an option have been given under the 1945 Agreement. But it was said that the clause nevertheless prescribes the manner in which option prices generally are to be calculated; and that the Minister in fact purported to act under it. Assuming, for the purpose of examining the argument, that the clause is applicable, we turn therefore to consider its meaning, and then to see what, in fact, the Minister did by way of fixing the price - reserving for the present the question whether the Court can direct or control the Minister in the exercise of his authority to do so. (at p512)
17. Clause 7 (7) does not equate the option price with the leasehold valuation. They are different things. The only purpose of the reference in the clause to the leasehold valuation is to fix the time up to which capital costs incurred for a project are to be taken into the calculation that must be made to ascertain the option price. The leasehold valuation so referred to is a final valuation made according to cl. 5, the relevant part of that clause being sub-cl. (2), which is as follows: "(2) When the planned works involved in any holding forming part of the project have been substantially completed, a valuation of the holding shall be made in consultation by officers appointed by the Commonwealth and State for that purpose." (at p512)
18. In the letter of 5th May 1948 5,568 pounds had, it will be remembered, been stated to be the value of the plaintiff's holding (land and non-structural improvements) at the date of purchase by the Crown. And that figure was then adopted for determining the rent of the appellant's perpetual lease. But this was only an initial valuation. It cannot be regarded as the equivalent of the valuation referred to in cll. 5 (2) and 7 (7) of the conditions, which is the final valuation for leasehold purposes. It was stated at the time (in the letter) that, for the purpose of adjusting the rent, a valuation would be made later, "at the end of the assistance period or on the completion of the planned work". It appears from the records tendered that before the appellant's farm was allotted to him some improvements, non-structural and structural, had been planned. And these were in due course effected. These works, which it is agreed would fall within the description "the planned works" in the conditions, had been "substantially completed", in the sense of those words in cl. 5 (2) of the conditions, on 1st September 1950. So that, if cl. 7 (7) is applicable in fixing the option price in this case, the calculations involved should be made as at the time of the leasehold valuation contemplated by cl. 5. And that valuation should have been made in September 1950. In fact a valuation of the appellant's farm, described as the "final valuation", was made, but not until 1959. It seems to have been made according to the principles stated in cl. 5, except in two respects: first, it was made as at 12th September 1957, instead of September 1950. The reason for this was that the inspection on which it depended was not made until the later date, notwithstanding that the planned works had in fact been completed seven years earlier. Secondly, cl. 5 provides for the project basis of apportioning costs to be used in determining the final leasehold valuation. But, in the case of the appellant's farm and in some other cases, the final valuation was arrived at on a single unit costing. The reason for this was that when the appellant took up the land and agreed to the proposed lease the valuation of his and other farms for leasehold purposes was on the single unit basis, as was then the ordinary practice: and, therefore to have adopted the project basis of costing as an element in arriving at a final value for the purpose of calculating the appellant's rental would have involved a departure from the terms of the scheme when the lease was granted to him. But the option price was quite a different matter. The option was a new right. The price for its exercise was by the 1954 Act to be fixed "under the scheme". That must mean the scheme as it was in 1954, not as it had been in 1948; for the 1945 Agreement had made no provision at all for the conversion of the leasehold to freehold. In 1954 the scheme, as it was being then administered and was thereafter administered, did prescribe a method for determining an option price in cases when under the scheme an option to purchase the freehold had been given. The essence of that method, as set out in cl. 7 (7), is that the option price is the amount of the project costs apportioned to the holding, or the market value of the holding, whichever should be the lower. There had been no costing of the appellant's holding on a project basis. So that what was done, obviously in an attempt to follow the method of cl. 7 (7), was as follows: - The final valuation made in September 1957 showed the appellant's farm to have a total capital value (on a single unit cost basis) of 9,911 pounds. This was arrived at by adding to the original cost, namely 5,568 pounds, the cost and added value (195 pounds + 61 pounds) of certain non-structural improvements and then adding 4,099 pounds (corrected afterwards to 4,087 pounds) for structural improvements. This final valuation was submitted - but not until 26th June 1959 - by the chairman of the Land Settlement Board to the Director of War Service Land Settlement, a Commonwealth officer. With it there was a statement that on 12th September 1957 the "market value of the War Service Land Settlement Interests in the property was 16,848 pounds". In an accompanying letter the chairman said: "to enable the option price to be fixed by the normal method, i.e. the apportioned cost or market value, whichever is the lesser, the usual average has been calculated. In the case of Farm B. (scil. the appellant's farm) cost on an average basis inclusive of structures is 19,752 pounds and market value 16,848 pounds . . . the latter figure is the option price . . . Of course, the sale price of structural improvements will be deducted to give a net price payable for the purchase of the land and non-structural improvements". The Director approved. And on 10th August 1959 the Minister approved. His note of his approval on the minute is what is relied upon as his fixing of the price. Thereupon the appellant was notified, by letter dated 17th August 1959, that a final valuation had been made, and that his rent, which had been 69 pounds 12s. 0d. half-yearly, had been adjusted as from the date of the letter to 72 pounds 16s. 0d. half-yearly, and that the valuation of the structural improvements was 4,099 pounds. The letter went on: "As you are aware legislation has made it possible for lessees under the War Service Land Settlement Scheme to obtain the freehold of their property after the expiration of the period of ten years from the commencement of the term of perpetual lease and on payment of such purchase price for the fee simple as is fixed by the Minister. Subject to your acceptance of the final valuation as advised above, the price so fixed for the freehold on Farm A428B (i.e. the appellant's farm) is 16,848 pounds less the sale price of structural improvements 4,099 pounds = 12,749 pounds. Within 30 days of the expiration of the 10 year period mentioned in the preceding paragraph you have the right to apply to the Minister for a review of the Option Price so fixed in accordance with the conditions of settlement, as agreed between the Commonwealth and the State". (at p514)
19. The last sentence is obviously an allusion to cl. 7 (9) of the conditions. It makes it plain, if anything more were necessary to do so, that the price had been fixed by reference to the conditions, that it was accepted that they governed the Minister's authority. (at p515)
20. It must be understood that payment of the option price did not entitle the lessee to an unencumbered fee simple; for whatever sum was owing to the Crown for structural improvements remained as a secured debt. In this case the amount so owing was corrected from 4,099 pounds to 4,087 pounds. As to that sum there is no dispute: the question turns solely on the sum of 12,761 pounds (that is 16,848 pounds - 4,087 pounds), notified as the option price of a fee simple as fixed by the Minister. The notification to the appellant was not in response to a communication by him that he wished to exercise his statutory option. He had, he said, asked from time to time for his final valuation. But the ministerial determinations of it and of the option price seem to have been the result of the position of his farm and others at Boraning coming up for departmental consideration in 1959. (at p515)
21. When the appellant got the letter informing him of the option price, he at once challenged it. And on 30th March 1950 he, by letter, informed the Crown Solicitor, acting for the Minister, that he would purchase the fee simple for 5,836 pounds and almost immediately thereafter he commenced this action. The statement of claim consists largely of allegations of law; but the effect of it is that the plaintiff seeks a declaration that he is entitled to purchase the fee simple for 5,836 pounds and that the price fixed by the Minister, 12,761 pounds, is excessive and not fixed in accordance with law, and an order directing the Minister to fix the price according to law: or, alternatively, "a declaration as to the date on which the leasehold valuation ought to have been made and as to what was the market valuation on that date". (at p515)
22. It is beyond argument that a court cannot examine the figure reached by the Minister to see whether the court would itself have reached that figure. If the Minister proceeded according to law, the result at which he arrived is not to be reviewed by a court on the ground that the valuations on which he proceeded were mistaken. But, if his power or discretion is controlled in a legal sense by a duty to fix the price "under the scheme", then a court could intervene if it appeared that he had considered some matter foreign to the scheme, or had failed to comply with some requirement that under the scheme was essential to the valid fixation of the price. The well known principles governing mandamus provide an analogy: see R. v. War Pensions Entitlement Appeal Tribunal; Ex parte Bott (1933) 50 CLR, at pp 242, 243 and Swan Hill Corporation v. Bradbury (1937) 56 CLR, at pp 756-758 . (at p515)
23. Before coming to the question whether the Minister proceeded according to law, it is necessary to determine the nature and extent of the power given to him and what is the effect of the critical words "under the scheme". The respondents contest entirely the view that in fixing the price the Minister is constrained by the conditions. Their argument, and it was the view taken by the learned judge who tried the case, is that the Minister has a complete discretion or power to fix the price, that in its exercise he need only have regard to the general purposes of the scheme as a political and administrative concept, and that his decision is in no way controllable or examinable by the court. Further, it was said that throughout the relevant legislation Parliament has distinguished between the "scheme", a general concept, and the "conditions", the terms on which the Commonwealth was to provide the State with funds for carrying out the scheme and which themselves conferred no rights on individuals. We appreciate the force of this view, but it does not give sufficient meaning to the phrase "under the scheme" or recognize sufficiently that at relevant times the conditions embodied the scheme. The words "under the scheme" replace in the 1954 Act the more precise reference to the provisions in cl. 6 (7) of the 1945 Agreement in the corresponding section of the 1951 Act. We think that the purpose and effect of the words is exactly what the Minister and his officers thought it was: that the Minister in fixing the statutory price must do so in accordance with the method which is prescribed by the conditions for the determination of option prices in cases in which contractual options were given pursuant to the scheme. The phrase "under the scheme" may express this in an elliptical and seemingly imprecise fashion. But that does not mean that it is to be ignored. Difficulty in ascertaining its meaning does not make it ineffective in defining the right in relation to which it is used in the statute. It is significant that the departmental officers administering the scheme had no difficulty in interpreting it as a reference to the method of calculation set out in cl. 7 (7). The chairman of the Land Settlement Board, it will be remembered, described this as "the normal method"; and the Minister, following his recommendation, adopted and applied it in this case. Apportioned cost and market value at the time of the leasehold valuation were in fact compared to see which was the lower, and to establish it as the option price, just as the conditions (cl. 7 (7)) require. But what was overlooked was that in this case the leasehold valuation had not been made at the time the conditions (cl. 5 (2)) required. And, as there was a rise in land values between 1950 and 1957, the result was that the price was not really fixed according to cl. 7 (7). It was therefore not fixed according to law - and the appellant is entitled to have a declaration that it was not. We reach this conclusion from the words of the Act and the history of the scheme, and unaided by the Regulations. The reference in reg. 23 to the fixation of the price being "in accordance with the conditions" does not, we think, really add anything to the meaning of the words "under the scheme". We agree with D'Arcy J. that it does not, and could not, either enlarge or diminish the power or duty that the Act confers or imposes on the Minister. But the regulation is valid. The Regulations are law promulgated to the persons concerned, and reg. 23 does no more by its express reference to the conditions than emphasize expressly to subjects what was understood to be implicit in the scheme regarded as an arrangement between governments. (at p517)
24. There is one further point to be considered. As we have said earlier, the appellant argued that the price fixed by the Minister under the 1954 Act could not exceed whatever would have been the price according to the repealed 1951 Act s. 6 (2). And, somewhat surprisingly at first sight, counsel for the respondents conceded this to be so. And by their amended statement of defence (par. 12) the defendants, the respondents, alleged that "the purchase price of 12,761 pounds was fixed by the Minister having regard to the need for the proceeds of the holding (based on conservative estimates over a long period of prices and yields for products) being sufficient to provide a reasonable living for the plaintiff after meeting such financial commitments as would be incurred by the plaintiff on the hypothesis that he possessed no capital and further the defendants say that the purchase price was thereby fixed by the Minister in the exercise of his discretion controlled by the provisions of and under the scheme and otherwise according to law." (at p517)
25. This obviously is lifted from cl. 6 (7) of the 1945 Agreement and cl. 5 of the conditions, prescribing the manner in which the leasehold valuation, that is the value for rental purposes, was to be determined by reference to prospects, productivity and prices. It seems that, although a different attitude was adopted in the statement of defence before amendment, the defendants at some stage decided to support their contention that the Minister's decision was not reviewable by the Court by contending that the option price had to be determined by the same imprecise criteria as the leasehold valuation, and to allege that this had been done. But this contention does not bear examination. In their answer to interrogatories the defendants stated that no consideration was given to the estimated yield of the property or the prices of products that it might be expected to yield. Moreover, as has been seen, the Minister in fact purported to fix the price by the method provided for in cl. 7 (7). And, except in so far as the market value of rural land reflects its productivity and economic potential, the economic considerations that must be weighed in fixing the leasehold valuation are largely inapplicable or irrelevant to the fixation of the option price. And, finally on this point, the appellant's contention that the 1954 Act in some way preserved, as a minimum price, the sum that assessment according to the method of the 1951 Act would have yielded is misconceived. It is based on the so-called proviso to s. 6 (3) of the 1951 Act. This "proviso" seems out of place where it is; and its context thus adds to the obscurity its language creates. It is a clause saving existing rights. But what exactly does it save? In so far as it states that an applicant shall not be liable to pay rental or purchase money in excess of his liability under the repealed Acts, it is dealing with applications that were pending determination and rights that were inchoate at the date of the repeal. That is not this case. In so far as it is dealing with existing accrued rights, it relates to those arising under the terms of the lease - not to the statutory option given by the 1951 Act, for that was abolished by the 1954 Act and the option given by s. 7 of that Act was put in its place. The only way in which economic prospects enter into the determination of the option price is if, that price having been determined during the first ten years of the lease, the lessee asks for its review at the end of ten years pursuant to cl. 7 (9) of the conditions. In such cases, the considerations mentioned in that clause may lead to a review of an option price which was arrived at pursuant to cl. 7 (7); and the Minister, in making such a review, can have regard to reasonable market values. But there is no justification for invoking these provisions here. For here the appellant's main argument is that the Minister did not proceed according to cl. 7 (7): it is not that a result obtained by doing so should be reviewed on economic grounds. Furthermore, it could not avail the appellant to have the option price assessed at market value ten years after May 1948; for he complains of the price, which was market value assessed in September 1957, as too high. (at p518)
26. In conclusion, some observations that were made during the argument and some arguments addressed to the learned trial judge, and rightly ignored by him, lead us to emphasize that we are not concerned with the details of valuation or with such matters as whether some particular improvement or structure should have been allowed or disallowed in the calculation of costs or the estimation of values. Still less are we concerned with questions of who should, according to some notion of general equity, get the benefit of the enhancement in value that the effluxion of time and the expenditure of effort have combined to produce. It is proper to say, however, that nothing appeared which suggested that the appellant, or any other settler who took up land when he did, has any just grievance. The appellant took up a perpetual lease with no right to get a freehold. The law was changed. It now gives him an option to obtain the fee simple of his holding. But he need not do so unless he wishes. (at p519)
27. For the reasons we have given, the price of 12,761 pounds was not fixed by the Minister according to law: the maximum price that the Minister was entitled to fix was the lesser of the two amounts referred to in cl. 7 (7) of the conditions, calculated as at 1st September 1950. The appellant is entitled to declarations to that effect. No further direction to the Minister is, we think, necessary. (at p519)
28. In the result, therefore, the appellant's claim fails so far as it was quantified as 5,836 pounds. The proper sum calculated in the manner we have stated is probably considerably more. But the appellant has nevertheless succeeded in displacing the decision of the Supreme Court and in showing that the amount fixed by the Minister was not determined according to law. The appeal will therefore be allowed and the respondents must pay the costs of the appellant in this Court and in the Supreme Court. (at p519)
ORDER
Appeal allowed with costs.Judgment of the Supreme Court of Western Australia set aside.
In lieu thereof:-(1) Declare that:
(a) the sum of 12,761 pounds which the defendant the Minister
purported to fix pursuant to s. 7 of the War Service
Land Settlement Act, 1954 (W.A.) as the price for which
the plaintiff might purchase his holding was not fixed
according to law;
(b) the maximum sum that the Minister was entitled to
fix as such price was, and is, the lesser of the two
amounts referred to in clause 7 (7) of the conditions
determined by the Minister for the Interior of the
Commonwealth in accordance with the States Grants
War Service Land Settlement Act 1952 of the
Commonwealth
Parliament, such amounts being calculated
as at 1st September 1950.
(2) Order that the defendants pay the costs of the plaintiff in
the Supreme Court.
(3) Order that the value of the subject matter of the action
be fixed in the sum of 6,925 pounds.
(4) Certify for extra counsel and conference and for two extra
days for hearing in the Supreme Court.
(5) Order that all questions as to fixing fees for counsel in
respect of proceedings in the Supreme Court be determined
by a judge of that Court upon application by any party.
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