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Inverstanley Holdings Pty Ltd v South East Queensland Water Corporation Ltd

 

[2004] QSC 201

 

SUPREME COURT OF QUEENSLAND

  

CITATION:

Inverstanley Holdings P/L v South East Qld Water Corp Ltd [2004] QSC 201

PARTIES:

INVERSTANLEY HOLDINGS PTY LTD
ACN 009 912 145
(applicant)
v
SOUTH EAST QUEENSLAND WATER CORPORATION LIMITED
(respondent)

FILE NO/S:

S8695 of 2003

DIVISION:

Trial Division

PROCEEDING:

Trial

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

30 June 2004

DELIVERED AT:

Brisbane

HEARING DATE:

5-8, 13 and 28 May 2004

JUDGE:

Muir J

ORDER:

Declare that the respondent has not forfeited any of the leases the subject of the allegations in the points of claim and points of defence filed in these proceedings and is not entitled to forfeit or terminate any of the leases on any one or more of the grounds alleged in the points of defence.

Order that the respondent pay the applicant’s costs of and incidental to the proceedings, including reserved costs, if any, to be assessed on the standard basis.

CATCHWORDS:

LANDLORD AND TENANT – AGREEMENTS FOR LEASE – GENERALLY – whether the applicant lessee breached the lease agreements

LANDLORD AND TENANT - TERMINATION OF THE TENANCY – REPUDIATION – where the applicant lessee opposed conditions imposed by the respondent lessor -  whether the applicant’s conduct amounted to a repudiation of the lease – whether the applicant’s conduct signified an intention not to be bound by the lease

LANDLORD AND TENANT – TERMINATION OF THE TENANCY – FORFEITURE – RELIEF AGAINST FORFEITURE – whether there was valid forfeiture of the leases – if so whether it would be appropriate to give relief against forfeiture

Acts Interpretation Act 1954 s 49

Conveyancing Act 1919 s 129

Fire and Rescue Authority Act 1990 ss 64, 65, 71

Fire Services Act 1990 ss 5, 62, 65

Fire Service Amendment Act 1996 s 8

Property Law Act 1972 s 124

Rural Fires Act 1946 ss 6, 9, 21

Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99

Balls Bros Ltd v Sinclair [1931] 2 Ch 325

Butcher v Port (1985) 3 ANZ Ins Cases 60-638

Commissioner of Railways v Avrom Investments Pty Ltd [1959] 2 All ER 63

Croft v Lumley (1858) 6 HL Cas 672

Dainford Ltd v Smith (1985) 155 CLR 342

Doe d Abdy v Stevens (1832) 3 B & Ad 299

DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423

Edwards Aberayron Mutual Ship Insurance Society (1876) 1 QBD 563

Expert Clothing Service & Sales Ltd v Hillgate House Ltd [1985] 3 WLR 359

Foran v Wight (1989) 168 CLR 385

Hamilton v Warne (1907) 4 CLR 1293

Hayes v Gunbola Pty Ltd (1986) 4 BPR 9247

International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd [1986] 1 Ch 513 (CA)

Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623

Mersey Steel & Iron Co Ltd v Naylor, Benzon & Co (1884) 9 App Cas 434

Mount Eden Land Ltd v Standley Investments Ltd (1996) 74 P & CR 306

Panamena Europea Navigacion (Compania Limitada) v Frederick Leyland & Co Ltd [1947] AC 428

Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17

Roadshow Entertainment Pty Ltd v C E L Home Video Pty Ltd (1997) 42 NSWLR 462

Ross T Smyth & Co Ltd v T D Bailey Son & Co [1940] 3 All ER 60

Rugby School (Governors) v Tannahill [1935] 1 KB 87

Scala House & District Property Co Ltd v Forbes [1974] QB 375

Spettabile Consorzio Veneziano v Northumberland Shipbuilding  Co Ltd (1919) 121 LT 628

Sweet & Maxwell Ltd v Universal News Services Ltd [1964] 2 QB 699

Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd (1992) 27 NSWLR 326 

Treloar v Bigge (1874) LR 9 Exch 151

Vaswani v Italian Motors (Sales & Services) Ltd [1996] 1 WLR 270

Wickman Machine Tool Sales Ltd  v L Schuler AG [1974] AC 235

Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277

Wood Factory Pty Ltd v Kiritos Pty Ltd (1985) 2 NSWLR 105

Wynsix Hotels (Oxford  St) Pty Ltd v Toomey [2004] NSWSC 236

COUNSEL:

H B Fraser QC, with him R Derrington for the applicant

G Gibson QC, with him D A Kelly for the respondent

SOLICITORS:

Thynne & Macartney for the applicant

Clayton Utz Lawyers for the respondent

Introduction

  1. The central questions for determination are: whether the applicant breached the terms of four leases of land entered into between the respondent as lessor and the applicant as lessee; whether in reliance on such breaches the respondent has terminated or forfeited the leases and, if the answer is in the affirmative, whether the applicant ought be relieved from forfeiture. Whether the applicant breached the terms of the leases is dependent, in part, on the validity of written conditions imposed by the lessor on its consent to the applicant’s request of 8 August 2003 for approval to burn off pastures on part of the subject land.
  1. There is also the question of whether the respondent, by intimating in a letter of 22 August that it would grant consent only upon the standard terms specified therein, relieved the applicant from the obligation to obtain consent.
  1. Each of the four leases commenced on 1 January 1993 and has a term of 60 years. The lease covenants and terms are relevantly identical. The bank of Lake Wivenhoe forms part of the boundary of each lease. More precisely, the boundary between each lease and the lake is what is described as the “full supply line” of the lake. Each lease contains the grant of a licence to the applicant to occupy for grazing purposes the land between the full supply line and the actual water’s edge from time to time.
  1. The applicant holds the leases and licences as part of its grazing property “Inverstanley”, an aggregation of some 1762 ha, of which about 1184 ha is freehold and 550.7 ha is leasehold. The property is located at the northern end of the dam, south of the Somerset Dam in the vicinity of the confluence of the Brisbane and Stanley Rivers.
  1. Mr Ross McConnel is a director of the applicant and, I infer, has the effective control of it. The property has been owned and operated by the McConnel family for generations. From 1964 until 1973 (when Inverstanley commenced to carry on the grazing business) the grazing business was carried on by a partnership between Mr McConnel and his parents.
  1. The respondent is an unlisted publicly owned company which owns and operates the Wivenhoe, Somerset and North Pine dams. Those dams supply the bulk of the drinking water for Brisbane and its environs. The Wivenhoe Dam, which is by far the largest of these three dams, is expected to have a useful life in excess of 100 years and to remain the primary drinking water supply for half of Queensland’s population for at least the next 40 years. The respondent, understandably, is anxious to take those measures reasonably within its power to maintain and improve the quality of water in the Wivenhoe Dam.

The events leading to the respondent’s termination notice

  1. On or about 8 August 2003, Mr Heck the respondent’s catchment officer located at its Wivenhoe Dam office received a telephone call from Mr McConnel in the course of which Mr McConnel advised that he wished to “burn several small portions of (his) land located below the full supply level …”. Mr Heck said words to the effect that he would have to send Mr McConnel some paperwork and would need details about the proposed burn before it could be approved. Mr McConnel’s response was to the effect that no approval was required and that he was advising Mr Heck as a neighbour. Mr Heck said that in his understanding approval was needed and he would send a form for Mr McConnel to fill in. There was some discussion about rain and Mr McConnel said “We have had some very light rain. It is just getting heavier now”.
  1. That day Mr Heck faxed to Mr McConnel a one page form headed “SEQ Water Approval Check List for Burning on Leases”. The form set out the contents of clause 1(k) of each memorandum of lease and made provision for information to be inserted. Mr McConnel completed the form and sent it back by fax the same day with a map attached depicting the areas proposed to be burned. Relevantly, the form included the following:

“AREA TO BE BURNED (HA): App. 15 HA.

  LOCATION: ABOVE & BELOW REEDY CK. BRIDGE

  PROPOSED DATE: From 9/8/03

  YEAR OF PREVIOUS BURN: Some in 2002, other 1999

  RECENT RAINFALL; DATE & AMOUNT: 8/8/03  12 mm

  DESTOCKING ARRANGEMENTS AFTER BURNING: NONE

  1. A number of items on the form were left uncompleted. Mr Heck sent the documents to his superior Mr Steele who sent a fax that day to Mr McConnel referring to s 65(1) of the Fire and Rescue Authority Act 1990 and consenting to the request to burn subject to the following conditions:

“▪Permits to burn must be obtained from the local fire warden.

Burning must take place after rain.

Adequate equipment must be held on site until the fire is fully extinguished.

Steps must be taken to ensure that sensitive timbered, forest, scrub or riparian areas and neighbouring lands are adequately protected from damage.

Burnt areas must be de-stocked to allow recovery of the pasture condition.

An application to burn this area will not be approved during the next 3-5 years, depending on conditions.

Burning within 40 metres of the lake water level is not permitted.

The use of fire to control lantana and other woody weeds will only be effective if the initial regrowth is treated with herbicides or well managed native pastures.”

  1. On 12 August, Mr McConnel sent the following fax to the respondent:

“I refer to Mr Steele’s letter of August 8, 2003. The conditions are unreasonable and we do not accept them. We propose to burn forthwith.”

  1. On that day, Mr McConnel carried out burning off operations on licensed land.
  1. On or about 13 August Mr Heck, having been alerted by a ranger to burning off on or in the vicinity of the applicant’s land, carried out an inspection by road and observed that land had been burned over an area “which extended very near the … water’s edge of the lake and that de-stocking had not taken place.” He concluded that “far in excess of 15 ha of land had been burned” and took a number of photographs from various locations. He observed a person in the distance lighting fires.
  1. On 22 August 2003 Mr Steele wrote to Mr McConnel, and also to other lessees of land adjoining the lake, reminding the addressees of the terms of clause 1(k), of the provisions of sections 64 and 65 of the Fire and Rescue Authority Act 1990 and specifying the conditions upon which the respondent would consider approving a request to burn off pasture. The conditions largely mirrored those set out in the letter of 8 August 2003 but there were the significant differences as can be seen from a comparison of the following conditions with those in the 8 August letter:

“▪Burning should take place in spring or early summer after rain.

Unless strategic grazing is to be used as part of a control program for weeds, de-stocking of burnt areas to allow pasture recovery is required.

Annual burn offs are unnecessary, with a three to five year burn sequence being more desirable.

The use of fire to make unpalatable or undesirable pasture species more suited for grazing (wire grasses and pitted blue) is not encouraged, unless it is accompanied by stock management strategies that achieve an increase in more desirable species.

Burning within 100 metres of the lake water level is permitted, however the area is not to be burnt at the same time as the adjacent freehold land.”

  1. Mr McConnel responded to the letter by his letter of 26 August 2003 in which he asserted:

“Again, because your conditions are unreasonable we do not accept them.

  We wish to advise that we will be burning various portions of lease land on this property during spring or early summer when conditions are favourable.”

  1. That letter provoked a response from the respondent’s solicitors dated 27 August 2003 in which they:
  • referred to clauses 3(c)(i) and 3(k) of each lease;
  • alleged that the applicant had burnt 70 ha “of the licensed land”;
  • alleged that the respondent had breached clause 3(c)(i);
  • gave notice that the respondent required the applicant to remedy the breach by de-stocking the burnt areas of the licensed land by no later than close of business on 4 September 2003;
  • advised that in the event of non compliance with the demand the respondent “may exercise its power to terminate the licence” and that in the event of termination the respondent would construct a fence dividing the leased land from the licensed land;
  • alleged breach of the Fire and Rescue Authority Act.
  1. The applicant’s solicitors responded to that letter in a fax of 1 September 2003 in which they sought time to take instructions and respond in detail. In their fax of 3 September 2003 to the applicant’s solicitors, the respondent’s solicitors advised that the respondent was “treating this matter most seriously” and that their client had become aware that burning off by the applicant was continuing. The fax demanded that burning off operations cease. Further communications between the parties’ solicitors ensued.
  1. In a fax of 23 September 2003 to the applicant’s solicitors, the respondent’s solicitors provided particulars of alleged breaches of the lease as well as setting out reasons for the conditions imposed in the letter of approval of 8 August.
  1. The next day, the respondent’s solicitors faxed the applicant’s solicitors informing them that the respondent had the advice of Queen’s Counsel that it was entitled to terminate the leases on which burning had occurred. They further advised that the respondent reserved its right to forfeit the leases and offered, on behalf of the respondent, to participate in a “without prejudice” meeting. On 25 September 2003 the applicant’s solicitors wrote to the respondent’s solicitors rejecting the offer of a “without prejudice” meeting and giving the applicant’s reasons for so doing.

The termination notices

  1. The respondent’s notice of termination of the leases was given by a letter from its solicitors to the applicant dated 26 September 2003. It alleged various breaches of the terms of the leases, accepted the applicant’s repudiatory conduct and notified an election to terminate. It also purported to forfeit the leases in consequence of breaches by the applicant of clause 1(k).
  1. The conduct alleged by the letter to be in breach of the leases was the burning off on the leased land referred to in the respondent’s solicitor’s letter of 23 September 2003. The repudiatory conduct identified in the letter was also conduct associated with the burning off.

Other breaches of lease relied on by the respondent

  1. In order to support its case the respondent relies also on –
  1. the applicant’s failure to apply for or obtain consent for the burning off of any pastures not covered within the 15 ha of licenses land the subject of the applicant’s application for consent;
  1. alleged breaches of clauses 1(f) and 3(c)(i) by burning off which “had the potential to cause detrimental effect to the land … and the water of the …Dam by releasing pollutants into the atmosphere and the water of Wivenhoe Dam”;
  1. an alleged breach of clause 1(n) arising from burning off which caused the applicant to fail “to maintain on the leased land a vegetative cover reasonably suitable to the maintenance of soil erosion”.

Other pleaded allegations of breach were not pursued at the trial.

Relevant provisions of the memorandum of lease

  1. The following covenants and terms are contained in a memorandum of lease which is part of each lease. The same provisions are contained in all the other leases entered into by the respondent in respect of land bordering the lake.

“1.THE LESSEE COVENANTS AND AGREES with the Lessor as follows:-

(a)Not without the previous consent of the Lessor to use the demised land or any part thereof other than for the grazing of stock (with the exception of sheep goats and swine);

(f)Not to carry on nor permit nor suffer to be carried on upon the demised land or any part thereof any illegal improper immoral noisome dangerous noxious or offensive trade business occupation activity or calling nor to do cause permit or suffer upon the demised land anything which may be or become a nuisance annoyance or grievance or cause damage to the Lessor or the owners or occupiers of neighbouring land or which might pollute or contaminate the waters of Wivenhoe Dam:

(i)To destroy and keep down to the reasonable satisfaction of the Lessor and in accordance with such method as the Lessor shall from time to time approve all noxious weeds and plants and undergrowth that may from time to time grow on the demised land;

(j)Except where a herbicide or weedicide is employed for the purposes of and in accordance with the requirements of Clause 1(i), not to cause permit or allow any person (including the Lessee) to use apply distribute or spray in on upon or over the demised land whether by aerial application or by any other means of application any chemical fertilizer insecticide pesticide herbicide or weedicide other than with and in accordance with any terms and conditions attached to, the consent of the Lessor first obtained;

(k)Except where burning off is carried out in accordance with the requirements of the Rural Fires Board as from time to time notified to the Lessee, not be cause permit or allow any burning off of any pasture other than with, and in accordance with any terms and conditions, attaching to, the consent of the Lessor first obtained;

(n)To take all reasonable measures to revegetate any eroded areas other than areas the erosion of which is directly attributable to Wivenhoe project construction works and generally to maintain on the demise land a vegetative cover reasonably suitable for the mitigation of soil erosion;

  1. (c)

         …

       The Lessee is hereby licensed to use the licensed land        for the purposes only of grazing and, where the licensed        land is bounded by the waters of the Wivenhoe Dam, of            providing access to the waters of the dam.  The Lessor                                       undertakes that no other person, excepting any person                                       licensed by the Lessor to go upon the licensed land for                                      the Lessor’s own purposes, shall be licensed to be upon                      the licensed land.  The use of the licensed land pursuant                      to the foregoing, in addition to being limited to the                                      purposes hereinbefore specified, shall be conditional                                    upon the following –

(i)that the Lessee shall not cause permit or suffer upon the licensed land anything which may be or become a nuisance annoyance or grievance or cause damage to the Lessor or the owners or occupiers of neighbouring land or which might pollute or contaminate the waters of the Wivenhoe Dam;

(iii)that the Lessee shall take all reasonable measures to keep the licensed land in clean condition and free from any accumulation or useless property or rubbish thereon;

(iv)that the Lessee shall destroy and keep down to the reasonable satisfaction of the Lessor all noxious weeds and plants and undergrowth that may from time to time grow on the licensed land;”

Does clause 1(k) apply to the licensed land?

  1. It is useful to determine this question at the outset as it is relevant to the validity of some of the conditions of the respondent’s approval to burn and thus to the question of whether breach of those conditions by the applicant was a breach of the lease.
  1. Clause 3(c) of the memorandum, which contains terms applicable to the grant of licence, does not contain a provision similar to clause 1(k). The respondent argues, however, that clause 1(k), by prohibiting burning “of any pasture” extends to the licensed land as well as the demised land. That conclusion is said to flow also from the fact that each of the other covenants in clause 1 are expressly stated to apply to “the demised land and the adopting of a contrary construction” would “produce an outcome that defies commonsense”. Reliance is placed on the following passage from the reasons of Lord Reid in Wickman Machine Tool Sales Ltd v L Schuler AG:[1]

“The fact that a particular construction leads to a very unreasonable result must be a relevant consideration. The more unreasonable the result the more unlikely it is that the parties can have intended it, and if they do intend it the more necessary it is that they shall make that intention abundantly clear.”

  1. To my mind, the construction advanced by the respondent gains little or no support from the normal processes of contractual construction. The lessee’s covenants are contained in clause 1 of the memorandum. Plainly, they are directed to the lessee’s obligations in respect of the demised land. That is as one would expect.
  1. Clause 2 contains the lessor’s covenants. Clause 3(a) deals with assignment by the lessee of the demised land or any part thereof. Clause 3(b) sets out the circumstances in which the lease may be terminated in the event that the lessee ceases to have the use and occupation of “the adjoining land”. Clause 3(c) contains the grant of the licence and sets out terms of the grant. It provides:

“The use of the licensed land pursuant to the foregoing, in addition to being limited to the purposes hereinbefore specified, shall be conditional upon the following…”

It is noteworthy that there is a reference back to earlier provisions for the limited purpose only of defining the purposes for which the licensed land may be used.

  1. The words of clause 3(c) quoted in the preceding paragraph suggest that the terms of the licence are contained in clause 3(c). That conclusion is strongly reinforced by the fact that many of the provisions in the clause have an analogue in clause 1.
  1. It is not surprising that the leases include separate and, in some cases, different terms in respect of the leased and licensed land. The latter is relatively small, fluctuating in size and prone to have its vegetation destroyed by periodic inundation. The nature of the pastures on the licensed land differs from those on the leased land and the proper management of the leased and licensed land is likely to call for different methods of pasture management.
  1. Accordingly, I find that clause 1(k) does not apply to the licensed land. It follows that the applicant was not obliged to obtain the respondent’s consent to burning off on the licensed land and that any failure to comply with conditions imposed by the respondent could not constitute a breach of the lease.

The burned areas

  1. A considerable amount of time and energy was devoted to disputation over the extent to which the leased and licensed land was burnt at relevant times. Mr Heck estimated a total area of 142.5 ha. Mr McConnel’s estimate was 65.5 ha. His calculation is as follows:
“(a) 12-13 August   41 ha
(b) 26 August; 1 September Licence 6  ha
    Lease 18.5 ha
    Total 65.5 ha
  1. It seems to me to be reasonably clear that Mr Heck’s estimate is substantially excessive. I do not doubt that Mr Heck made his estimate carefully but he lacked access to the land at relevant times and also a detailed knowledge of the nature of the vegetation on the land and its topography. As a result he took into account areas which I am persuaded were not burnt. In some cases, the fire failed to penetrate because the land was low lying and damp. In other areas the grass was green and the fire did not take. He was unaware also of the intensity of the fires. Mr McConnel’s re-estimate, which is set out above, probably errs on the side of conservatism, but I accept that, despite this limitation, it is much closer to the true position than Mr Heck’s estimate. I accept Mr McConnel’s evidence that extensive parts of the areas considered by Mr Heck to have been burnt were not in fact burnt.
  1. There is general consensus that the burning off occurred on the following parcels of land on the following dates:

Burning offBy Date

 

DateLeased LandLicensed Land

12/8Adj.L; Adj M

13/8Adj.L

 

26/8A, LAdj. A

01/9Adj. M

 

By Lease

 

LeaseLeased LandLicensed Land                                                                                                 

A26/826/8

L26/812, 13/8

M12/8; 1/9”

The letters identify the subject leases. It will be seen that there was no burning off on lease AE.

Was the burning off conducted in accordance with permits issued by Mr McConnel, obviating the need for consent under clause 1(k)?

  1. It is accepted by the respondent that the burning was carried out in accordance with the requirements of permits issued by Mr McConnel in his capacity as fire warden as delegate for the Commissioner of Fire Service.
  1. The respondent argues, however, that burning, pursuant to such permits, is not burning “in accordance with the requirements of the Rural Fires Board” and that the only burning within the exception in the clause is a burning ordered to be carried out by the relevant authority.
  1. It points out that at the date of the leases it was an offence to light a fire without a fire permit issued by a fire warden.[2]  It contends that on the applicant’s construction of clause 1(k) there were two alternatives to conducting burn offs: the first being pursuant to a fire permit and the other acting without a permit, and thus illegally, but with the consent of the lessor. Such a construction, it is said, is improbable.
  1. The Rural Fires Board was constituted under the Rural Fires Act 1946.[3] Its responsibilities encompassed the administration of the Rural Fires Act 1946 and works for the prevention, suppression and extinguishment of rural fires.[4] Fire wardens were appointed on the recommendation of the Rural Fires Board.[5]
  1. Section 13 of the 1946 Act, with one irrelevant exception, prohibited “burning off” on land subject to the Act, except under the authority of and pursuant to the terms of a permit obtained from a fire warden. Section 21 of that Act relevantly provided:

“The Board may order in writing that any owner or occupier of land … shall burn off or remove, within a specified time, any inflammable material on his land, and may state in such order the conditions under which such burning off or removal must be effected.”

  1. It was not the role of the Rural Fires Board under the 1946 Act to issue permits to burn off.
  1. The Rural Fires Board was renamed the Rural Fires Council under the Fire Services Act 1990 and its function was greatly changed. Under the Fire Services Act 1990, the responsibility for the control and prevention of all rural fires and for fire wardens was transferred from the Rural Fires Board to the Commissioner of Fire Service.[6]
  1. At the time of execution of the leases, the effective “successor” of the Rural Fires Board, insofar as authority in relation to the imposition of conditions relating to burning off are concerned, was the Commissioner of Fire Service. The Fire Service Act 1990 provided[7] that “on and from the appointed day”[8] a reference in any document or writing to a board shall be read as a reference to the Commissioner. The Commissioner was responsible for specifying the requirements to be complied with in conducting burning off.[9]
  1. Under the Fire Service Act 1990, unlike under the Rural Fires Act 1946, applications for permits to light fires were required to be made to the Commissioner and not to a warden.[10] In exercising their powers under the Act in relation to the granting of permits, fire wardens acted as delegates of the Commissioner. The Fire Service Act 1990 contained no direct equivalent of s 21 of the Rural Fires Act 1946. Its closest equivalent is s 69 under which:

“The Commissioner may require any occupier of premises to take measures for the purpose of reducing the risk of a fire occurring on the premises or reducing potential danger to persons, property or the environment in the event of a fire occurring on the premises.”

  1. Subsection (2) of s 29 deals with the manner in which the “requisition” may be given and subsection (3) provides, in a non exhaustive way for matters which may be the subject of such a requisition. There is no reference to burning off in subsection (3) but it is probable that there is power to order burning off.
  1. The Fire Service Act 1990 has been amended from time to time. In 1996, by such an amendment, the functions of the Commissioner were transferred to the “Queensland Fire and Rescue Authority”.[11] Under s 19 of the 1996 amending Act, any reference to the Commissioner in an Act or document in existence immediately before the commencement of the amending Act was deemed to be a reference to the new authority. But that provision can have no literal or direct application because the leases were not in existence when the Fire Service Act 1990 came into force.
  1. Mr McConnel’s evidence, which I accept, in this regard, is that the terms of the leases were under negotiation for many years in the 1970s and early 1980s and that the rent terms were finally negotiated in 1987.
  1. At first glance the words “in accordance with the requirements of” in clause 1(k) are more apt to describe an obligation to observe conditions of an approval than an obligation to obey an order to burn off under s 21 of the Rural Fires Act. The applicant points out that the introductory language of the clause is similar to the heading of s 13 of the Rural Fires Act 1946: “requirements to be complied with by persons lighting certain classes of fires within rural fire districts”.
  1. Section 21, however, does permit the Board to state in a burning off order “the conditions under which such burning off … must be effected”. And the requirements of the Rural Fires Board to which the clause refers are those which are “from time to time notified to the Lessee”. That tends to suggest an order or direction by the Board rather than the imposition of permit conditions. In construing the provision it is necessary to attempt to ascertain the intention of the parties from the words of the lease.[12] It seems to me to be unlikely that the intention of the parties was that the respondent act as a surrogate fire authority and not reserve to itself some control over burning off, except where the Rural Fires Board ordered burning. It seems probable that the author of the clause had in mind s 21 of the 1945 Act when drafting its provisions prior to the repeal of the Act and the execution of each lease. I find therefore that the existence of permits issued by Mr McConnel did not relieve the applicant from the obligation to obtain the respondent’s consent to burning off.

Were the conditions of the 8 August 2003 consent invalid as arbitrary or unreasonable and not of a character contemplated by clause 1(k)?

  1. The applicant contends that the conditions sought to be imposed were not of a character contemplated by the clause in that the clause refers to requirements to be complied with whilst burning off and does not authorise the imposition of:
  1. a condition that the applicant not engage in conduct specifically authorised by the lease (grazing) for an indefinite period after final completion of the burning;
  1. a condition that the lessee will not burn off large areas of the demised land at all. That is not a condition to be complied with whilst burning off; it is a prohibition upon burning off.
  1. In my view the argument that the conditions for burning off are able to be imposed by the applicant are restricted to “requirements to be complied with whilst burning off” takes place imports a limitation not implicit in the clause. I can see no reason for importing any limitation on the respondent’s power to impose a condition beyond the limitation, accepted by the respondent, that the terms not be unreasonable or arbitrary.

Was the 40 metre buffer condition imposed in the letter of 8 August 2003 arbitrary or unreasonable and thus invalid?

  1. In my view, the 40 metre buffer condition was necessarily unreasonable as it prevented burning off on the licensed area. Such a blanket restriction, in the circumstances prevailing at the time of imposition of the condition, was not supported by any provision of clause 3(c) of the lease which contains the terms of the licence. The condition thus purported to deprive the applicant of its contractual rights.
  1. In view of the finding just made, it becomes unnecessary for the purposes of determining the outcome of this trial to further investigate the merits of the 40 metre buffer condition. It is desirable, however, that I make findings of fact in this and in other respects in case the matters goes on appeal. These findings have relevance also to the question of whether the applicant was in breach of relevant leases by burning off leased land without consent.
  1. The particulars given by the respondent as to why the condition was reasonable were that, absent such a condition, ash and the chemical remains of grass fires would find their way into the lake. It emerged in the course of evidence that the respondent’s officers were more concerned by the pollution which might result from a feared concentration of cattle at the lake’s edge. They perceived that until the burnt pastures recovered, cattle would be attracted to unburnt green grass at the water’s edge.
  1. The evidence establishes that even if all of the ash from the burning off of the subject area went into the lake, its deleterious impact on water quality in the lake would be so small that it would be incapable of measurement. Nevertheless, the respondent is resolved to implement water management practices of the highest standards. It is concerned that burning off, in combination with other such activities by landholders bordering the lake, has the potential to impact adversely on the lake’s water quality. Its approach, understandably, is that it should have in place a regime which takes all measures reasonably within its power to preserve and improve water quality.
  1. To put the respondent’s concerns into perspective, it is necessary to understand that the lake receives approximately 644,000 tonnes of sediment a year. Inverstanley’s contribution to that is negligible. The leased land on Inverstanley constitutes approximately .08% of the catchment and about 7.3% of the total of the leased land bordering on the lake. The lake’s shoreline within Inverstanley is about 1.4% of the lake’s total shoreline. There are many areas within the catchment which contribute much higher volumes of sediment per hectare than the leased land. The areas that contribute most of the sediment carried into the lake are in fact well outside the areas bordering the lake. Inverstanley is one of the better managed properties bordering the lake and, unlike some of those properties, it has virtually no evident sheet or gully erosion.
  1. There are other factors which bear on this issue. The time of year in which the burning off occurred was one in which, historically, there was relatively low rainfall. The chances of water run off from the burnt land carrying ash and eroded soils into the lake were thus quite low. Even if unseasonally high rainfall had resulted in surface water flows, the bulk of the run off would have tended to flow into gullies or depressions before entering the lake. In most of these water courses there remained, even immediately after the burning off, grasses and other vegetation which would have been effective in trapping potentially polluting materials released or created by burning off.
  1. Dr Thorogood, a biologist who gave evidence in the applicant’s case, said, and I accept as a general proposition, that the volume of water flowing into the dam other than through natural creeks and watercourses would be “inconsequentially small”. That conclusion is supported by an examination of the terrain of the subject land which in most areas is reasonably flat and interspersed with well grassed watercourses or channels in the vicinity of the lake.
  1. The evidence disclosed that, in any event, the nature of the burning off was such that in substantial parts of the burnt area the subject fires left in their wake low grasses and unburnt stubble which would serve to trap substantial quantities of water borne solids should run off occur in the short period before natural regeneration occurred. Mr Henderson, a rural management consultant who gave evidence on behalf of the applicant, was of the opinion that run-off into the lake during the regeneration period would be minimal (in the event of unseasonally heavy rainfall) due to the “dense paspalum sward” and because the fire stopped “at the couch grass”. I accept that evidence with the qualification that it could not apply, by definition, in the event of unseasonal flooding rains. I find that the consequences of the applicant’s burning activities were the likely result of those activities.
  1. The evidence shows also that regeneration of grasses on the land in the vicinity of the lake tended to be very quick. There was thus a narrow window of opportunity for run off to occur. At the time in question there had been some winter rain and there is no suggestion that the conditions were unfavourable to regrowth after burning.
  1. On balance, the evidence suggests that the existence of an unburnt buffer at the edge of the lake, in the absence of de-stocking, was likely to cause more harm than good. Until shooting of the burnt vegetation provided edible pick, the cattle would have a tendency to feed on the short green grasses at the lake’s edge. This, by increasing the concentration of cattle, would have the potential to disturb the soil, muddy the water and increase the likelihood of erosion and pollution from cattle excrement.
  1. One of Mr McConnel’s objectives in burning off on the licensed and leased lands was to remove “rank grass”: grass which has grown so long that the cattle cannot or do not feed on it.
  1. Rank grass near the lake, if left unburnt, will rot when submerged, releasing nutrients and the elements contained within the vegetation into the water of the lake. The evidence is that the polluting effect of this natural process would be at least as great as that caused by any burning off of the grass, assuming, which is quite improbable, that the great bulk of the burnt material will enter the water.
  1. The 40 metre buffer condition was recommended by Mr Heck to Mr Steele, who adopted it. Mr Heck, it seems, was under the impression that the respondent’s “Guidelines for Management of Leased Buffer Areas Surrounding Wivenhoe Dam”, published in August 2002 made provision for a 100 metre buffer. Using this as a guide he arrived at a 40 metre buffer. The guidelines, however, did not provide for a buffer. They relevantly stated –

Fire Management

The use of intermittent fire as a means of controlling excess pasture growth, balancing pasture species composition or control of woody weed infestation is recognised by SEQWater as an important, low cost tool for pasture and land management. General guidelines for its use are:

  • Unless strategic grazing is to be used as part of a control program for weeks, de-stocking of burnt areas to allow their recovery is required.
  • Annual burn offs are unnecessary, with a three to five year burn sequence is more desirable.
  • The use of fire to make unpalatable or undesirable pasture species more suited for grazing (wire grasses and pitted blue) is not encouraged, unless it is accompanied by stock management strategies that achieve an increase in more desirable species.
  • Burning within 100 metres of the lake water level is permitted, however the area is not to be burnt at the same time as the adjacent freehold land.”
  1. Mr Heck and Mr Steele were roundly criticised in cross-examination and in addresses for the way in which they arrived at the 40 metre buffer condition. But deficiencies in the thought processes of persons responsible for imposing a condition such as that under consideration will not, of themselves, render the condition unreasonable. The test is an objective one.
  1. A 40 metre buffer between burnt areas and fresh water streams or wetlands received support in publications referred to by Dr O’Donohue, a scientist employed by the respondent who has expertise in biology and matters relating to water quality management.
  1. Dr O’Donohue, in cross examination, said that the Queensland Department of Primary Industries had set a minimum 50 metre buffer for fresh water habitats. His opinion was that, given the many variables that had to be taken into account, the 40 metre buffer stipulated by the respondent was reasonable.
  1. Having regard to the matters canvassed above, the imposition of a 40m buffer in respect of the subject licensed land may be thought to impose a very high degree of protection. I doubt, however, that, that of itself, would render the condition unreasonable having regard to the principles relevant to the determination of reasonableness later discussed.

The de-stocking requirement

  1. As in the case of the buffer requirement, Messrs Heck and Steele were criticised for the way in which the de-stocking condition was arrived at and for their failure to take into account relevant considerations. The condition, as appears from the quotation from the guidelines set out above, was taken from the guidelines. Mr Henderson identified a number of difficulties with the de-stocking condition. His principal complaint was that the removal of the cattle from the burnt area would prevent them grazing on fresh shoots once the shoots reached a length suitable for grazing. He said:

“It is well recognised that cattle … cannot graze close to the ground and hence it is around 10 to 14 days before they work over the burnt area.

The fresh shoot is of a very high moisture content and cannot supply adequate dry matter. The cattle then having had a ‘pick’ move back onto the older grass to harvest their daily gut fill and dry matter requirement.

At stocking rates adjusted to a long-term carrying capacity of the land, cattle will graze both the burnt and unburnt pasture in a balance which enables the burnt pasture to continue to grow, particularly when the temperature and daylight hours are increasing.”

  1. His next complaint was that in order to comply with the de-stocking requirement, cattle would have to be moved to other paddocks or temporary fencing would need to be erected. In his opinion, it is not sound management practice for a “mob” in a burnt paddock to be put into another paddock already holding another mob of cattle. Apart from the disruption caused by such a process, consideration would need to be given to the effect of the concentration of cattle in the latter paddock. If the cattle were to be placed in a small holding paddock, the consequence would tend to be over-grazing and degradation of the pasture within the paddock if de-stocking was required for more than a few days.
  1. Mr Henderson considered that electric fencing was the only form of temporary fencing feasible. For that fencing to be cost effective, it would need to follow straight lines and not the extremities of burnt areas, thus isolating considerable unburnt areas. A drawback arising from the erection of temporary fencing would be the requirement for an additional water point at a cost of approximately $20,000 and the need to clear vegetation from along the line of the fence so as to avoid any shorting of its electricity circuit. The cost of such fencing was also a disadvantage.
  1. Mr Thompson, a grazier and natural resource management consultant who was called by the respondent, had a somewhat different approach to that of Mr Henderson. In his view, the requirement to de-stock “following large scale burning” is consistent with pasture management guidelines for native pastures and spear grass in Queensland. Unless burning off could be limited to small areas, planning was required in order, for example, to provide for movement of cattle to appropriate paddocks or to install suitable fencing. In the absence of such preparation, in his opinion, no burning should take place.
  1. Mr Thompson devised a plan[13] which, by the use of three relatively short fences, created additional paddocks into which cattle could be moved away from burnt areas to enable them to recover. Once the grass had recovered, the gates in the fence line could be left open remaking one large paddock. Movement of cattle of the nature under consideration could, according to Mr Thompson, be accomplished by one or two men in half a day. In cross-examination, Mr Thompson conceded that his plan envisaged the fencing off of “the most fertile areas of the farm”, if only for a relatively short period.
  1. He conceded also that, as a general proposition, in making any decision about movement of stock from burnt areas, it was relevant to know the stock numbers in a paddock, the area of the paddock and the percentage of the paddock to be burned. He agreed that relevant considerations were the intensity of a burn, the fertility of the soil and the speed of any regrowth. He accepted the general correctness of the proposition that a rational management judgment could not be made about the removal of all stock from a paddock to be burned in part without such considerations being addressed. He accepted that if new fence lines were to be erected, steps would need to be taken to minimise the possibility of erosion through concentration of cattle movement through fence lines by, for example, having a number of gates.
  1. Mr Thompson’s exercise contemplated the erection of permanent fencing on the leased and licensed land. That is contrary to the requirements of clause 3 (c)(ii) which permits only the erection of temporary fencing on the licensed land. Clause 2(b) prohibits the respondent from requiring the applicant to fence the boundary between the licensed land and the leased land.
  1. Mr Thompson accepted that if management practices employed on the land in the past had avoided erosion, weed infestation and maintained good quality grassing, then there should be reluctance to vary those practices.
  1. A condition of an approval under clause 1(k) will not be unreasonable merely because a body of expert opinion establishes that compliance with the condition requires acts or omissions inconsistent with or contrary to the most desirable course to be followed from the point of view of agricultural management. Nor will unreasonableness be established merely because a condition interferes with a lessee’s normal, preferred or most economically efficient farming practices.
  1. In imposing conditions the respondent is entitled to take into account its own interests, as long as those interests have a proper connection with the demised premises and the terms of the lease.[14] In other words, the condition must be imposed bona fide, for proper purposes, and not for any collateral purpose. The maintenance of the lake’s water quality is an obviously proper purpose.
  1. What is reasonable or unreasonable in any given case calls for a judgment based on all relevant circumstances including, but not restricted to, the nature, likelihood and extent of the detriment apprehended by the prohibited conduct, the degree and duration of interference with the carrying on of grazing activities and the cost burden imposed on the applicants.
  1. The de-stocking condition was imposed by reference only to general principles or considerations. It did not have regard to topography, the applicant’s farming practices, the applicant’s stocking rate, existing fence lines, watering points or even whether there was a realistic prospect of land degradation. Consequently, it failed to address the question of whether the conditions were beneficial even from the point of view of the respondent’s own objectives.
  1. Another difficulty with the de-stocking requirement is that it had the practical effect of preventing the applicant from grazing cattle on large tracts of the licensed land. In most of the locations under consideration the licensed land, at relevant times, extended inland rather more than 150 metre from the water’s edge. Much of it was flat or gently sloping. It tended to have richer soils and be better grassed than much of the leased land. Such interference with the applicant’s rights as licensee was only temporary but was unjustified by the terms of the license. The condition was thus unreasonable. I also doubt that a condition imposed in complete disregard of the nature of the demised land, the improvements on it, the activities permitted and/or required by the lease and the practicality and cost of compliance with the condition can be regarded as properly imposed.

Was there a breach of clause 1(f) of the lease?

  1. That clause required that the applicant not “… do cause permit or suffer upon the demised land anything which may be or become a nuisance annoyance or grievance or cause damage to (the respondent) or the owners or occupiers of neighbouring land or which might pollute or contaminate the waters of Wivenhoe Dam”. The particulars to paragraph 9 of the points of defence allege that burning off –
  1. increased “the availability” of pollutants on the burned area;
  1. made unconsolidated soils and other pollutant particles more readily transportable by water or wind. They were thus likely to have been washed into the dam had a “significant rainfall” event occurred or to have been blown into the air and hence into the dam in the event of a “significant … wind event”.
  1. The argument advanced on behalf of the respondent was that as all experts agree that burning off releases pollutants capable of being transported into the dam by wind or overland runoff, there exists a potential for the water quality in the dam to be adversely affected. “If an activity has the potential to cause such pollution or contamination, it follows that the activity might cause pollution or contamination”. It was pointed out that the clause contains no express or implied requirement that the extent of the pollution or contamination be “measurable”.
  1. The respondent did not advance a case at the hearing that the applicant’s conduct was a “nuisance, annoyance or grievance to the respondent”. Nor did the evidence support such a case.
  1. I do not accept that there can be no pollution or contamination for the purpose of clause 1(f) unless what is done has a measurable impact on the whole of the lake’s waters. In my view, the clause would be apt to catch conduct such as the placing of a carcass of a dead animal in the waters of the lake or emptying kitchen waste into the lake, even though any measurable contamination would tend to be extremely localised and may be quite slight.
  1. The carrying on of the normal grazing activities contemplated by the lease under which cattle graze to the water’s edge is obviously something “which might pollute or contaminate the waters”. Yet such activities cannot be within the scope of clause 1(f). The carrying on of grazing is the purpose for which the land is leased and the licence envisages grazing to the water’s edge as a matter of right. Burning off is a management practice contemplated by clause 1(k) of the lease. It is also a long standing and accepted pasture management technique and, if carried out “in accordance with the requirements of the Rural Fires Board”, may be undertaken on the leased land without consent.
  1. The fact that restrictions on burning off are imposed in clause 1(k) in relation to the demised premises, but are not applied to the licensed area, suggests that the consequences of burning off in accordance with generally accepted pasture management practices does not give rise to pollution or contamination within the meaning of clause 1(f). Nor, as a general proposition, is it apt to describe as “polluting” or “contaminating”, the deposition or potential deposition into the waters of foreign matter which is the by product of normal grazing activities in such low quantities that it had no measurable or detectable effect on water quality. The evidence here establishes that the burning off probably had and was likely to have had a positive effect on pollution overall. For these reasons I find that no breach of clause 1(f) has been established.

Did the burning off breach clause 1(n) by not maintaining on the demised land a vegetative cover reasonably suitable for the mitigation of soil erosion?

  1. The respondent contends that no adequate buffer of unburnt grass which could act as a filter or sediment trap was maintained and that the regeneration of burnt pasture was delayed by failure to de-stock.
  1. I accept that, as a general proposition, burnt areas will have a greater potential for erosion and a reduced capacity to act as a filter or sediment trap than unburnt areas, at least until some regeneration occurs. The extent to which burning will have such consequences depends on the nature and extent of burning, the nature and extent of the vegetation which remains after burning, and the topography of the area.
  1. The respondent’s submissions mistake the nature of the obligation imposed by the clause. The evidence is that not only did regrowth occur quite quickly but that there was no evidence of erosion. The obligation is “generally to maintain … a vegetative cover” which is to be “reasonably suitable for the mitigation of soil erosion”. The requirement is not to do all things possible to prevent soil erosion or never to do an act which, when coupled with unseasonal weather, might lead to greater erosion than would have occurred had the act not been done.
  1. The evidence, which is recounted earlier, shows that nothing was done at relevant times by the applicant which failed to maintain “a vegetative cover reasonably suitable for the mitigation of soil erosion”. The fact that no erosion could be identified in the burnt areas supports that conclusion, as does the evidence that the burning off was done consistently with the applicant’s normal management practices. Those practices have resulted in a well managed farm with a relatively low incidence of soil erosion. I find that no breach of clause 1(n) has been established.

Did the respondent repudiate its obligations and thus dispense with the requirement that the applicant obtain its consent to the burning off on leased land?

  1. The application for consent to burning off was in respect of the licensed land only and the letter of consent applied only to that land. No burning off occurred on leased land until 26 August. By that time, the respondent had sent its letter of 22 August advising that the respondent would consider granting approval to burn only on the conditions set out in the letter. Those conditions did not include a requirement for a 40 metre buffer but prohibited burning within 100 metres of the water’s edge at the same time as burning of the adjacent freehold land. There is no allegation that burning off occurred on any adjacent freehold land at relevant times.
  1. The applicant’s central submission was that the letter from the respondent’s solicitors of 22 August 2003 was a clear intimation by the respondent, in repudiation of its obligations, that it was pointless for the applicant to apply for consent to burn off unless it was prepared to comply with the arbitrary, unreasonable or irrational conditions there expressed.
  1. The applicant’s argument was treated by the respondent as being based on the principle expressed, inter alia, in Foran v Wight[15] that a party wishing to rescind an executory contract in reliance on the other party’s repudiation of it must be ready and willing to perform its essential obligations under the contract at the time of rescission.
  1. The principles to be applied in determining whether conduct amounts to a repudiation of a lease are later discussed. The application of them to the facts under consideration does not establish repudiatory conduct on the respondent’s part. The conduct of which the applicant complains results from a genuine but mistaken belief on the part of the respondent as to the appropriate terms and conditions of a consent under clause 1(k). Additionally, the respondent’s wrongful conduct consisted of imposing, or intimating that it would impose, impermissible conditions of approval. A quite unusual combination of circumstances, not present here, would need to exist before such conduct would be held to be a repudiation by lessor.
  1. No authority was cited in support on behalf of the proposition relied on by the applicant, but I apprehend that it was more directed to an alleged repudiation of the respondent’s obligations under clause 1(k) than to an allegation of a repudiation of the lease itself. The short point appears to be whether the respondent, by intimating that it would grant consent only on conditions it had no power to impose and/or that it would not deal with an application on its merits, thereby relieved the applicant from the obligation to seek consent before burning off.
  1. In my view, the question must be answered in favour of the applicant. It is established that an unreasonable refusal of a consent to an assignment or to make improvements, as the case may be, relieves the tenant from further obligation to obtain the consent.[16] The applicant is assisted also by the principle which prevents a person from taking advantage of the non-fulfilment of a condition the performance of which has been hindered or prevented by himself and the related principle which “exonerates one of two contracting parties from the performance of a contract when the performance of it is prevented and rendered impossible by the wrongful act of the other contracting party”.[17]
  1. The principle under discussion was addressed by Cooke J in Butcher v Port,[18] a case involving the wrongly formed opinion of an insurer’s representative where the holding by the insurer of a particular opinion was a precondition to the insurer’s liability to make payment under a policy of insurance.
  1. His Honour said:[19]

“For present purposes a clause such as this is not materially distinguishable from one making the certificate of a party’s engineer or other appointee a condition precedent to action. The principle that a party cannot insist on a condition if non-fulfilment is his own fault is basic in contract law: see for instance New Zealand Shipping Co. Ltd. v. Société des Ateliers (1919) A.C. 1, 6, per Lord Finlay L.C.

In relation to certificate clauses and the like the principle has the effect of, first, disabling the party from setting up the absence of the stipulated approval and, secondly, leaving the issue to the determination of the Court. In England there is the highest authority for this in the decisions of the House of Lords in Hickman & Co. v. Roberts (1913) A.C. 229 and Panamena Europea Navigacion (Compania Limitada) v. Frederick Leyland & Co. Ltd. (1947) A.C. 428.”

  1. This is not a case in which the court needs to determine applicable conditions. That is entirely a matter for the respondent. If it makes plain, as it has done, that consent will be refused, except on the basis of the imposition of conditions beyond its power, the applicant is excused from the obligation to obtain the consent.
  1. The discussion thus far assumes that the conditions set out in the respondent’s 22 August letter were beyond its power to impose. The conditions which were argued to be unreasonable were:

.….de-stocking of burnt areas to allow pasture recovery

.Burning within 100 metres of the lake water level is permitted, however the area is not to be burnt at the same time as the adjacent freehold land.”

  1. The latter requirement does not appear to be at all relevant to the situation at Inverstanley where, as has been mentioned earlier, at relevant times there were extensive tracts of flat, grassed land within the licensed land. If, which does not appear to be the case, the condition applied only to leased land, the licensed land was well capable of providing an appropriate buffer against possible pollutants arising from burning off on the leased land. If the condition is meant to apply to the licensed land there would not seem to be any sensible point to it and in any event, the respondent has no power to restrict burning off on the licensed land.
  1. I have already addressed the de-stocking condition. In addition, in the case of the 22 September letter the respondent is asserting, in effect, that the conditions in its letter will apply regardless of their suitability to circumstances present on any parcel of demised land the subject of an application to burn. It was thus making plain that applications would not be considered on their merits and that, in consequence, appropriate conditions would not be determined after due consideration by the respondent. The applicant was therefore relieved from the obligation to obtain consent under clause 1(k).

Did the applicant repudiate the Inverstanley leases?

  1. Repudiation of a contract is “a serious matter, not lightly found or inferred”.[20] 
  1. In Woodar Investment Development Ltd v Wimpey Construction UK Ltd,[21]  Lord Keith of Kinkel said:

“There is a tract of authority which vouches the proposition that the assertion by one party to the other of a genuinely held but erroneous view as to the validity or effect of a contract does not constitute repudiation.”

The Australian authorities referred to below indicate that this proposition may need qualification in some circumstances.

  1. The existence or otherwise of repudiatory conduct is to be determined by reference to:

“…objective acts and omissions and not upon uncommunicated intention.  The question is what effect the lessor’s conduct ‘would be reasonably calculated to have upon a reasonable person’… It suffices that, viewed objectively, the conduct of the relevant party has been such as to convey to a reasonable person, in the situation of the other party, repudiation or disavowal either of the contract as a whole or of a fundamental obligation under it.”[22]

  1. A contract may be repudiated also if a party “shows that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way”.[23]
  1. The Australian authorities appear to establish that the insistence by a party of an erroneous construction of the contract will not, necessarily, amount to repudiation. That appears, inter alia, from the reasons of Stephen, Mason & Jacobs JJ in DTR Nominees Pty Ltd v Mona Homes Pty Ltd:[24]

“For the respondents it was submitted that such an intention should be inferred from the appellant's continued adherence to an incorrect interpretation of the contract. It was urged that the appellant, because it was acting on an erroneous view, was not willing to perform the contract according to its terms. No doubt there are cases in which a party, by insisting on an incorrect interpretation of a contract, evinces an intention that he will not perform the contract according to its terms. But there are other cases in which a party, though asserting a wrong view of a contract because he believes it to be correct, is willing to perform the contract according to its tenor. He may be willing to recognize his heresy once the true doctrine is enunciated or he may be willing to accept an authoritative exposition of the correct interpretation. In either event an intention to repudiate the contract could not be attributed to him. As Pearson L.J. observed in Sweet & Maxwell Ltd v Universal News Services Ltd. (1964) 2 QB 699, at p 734:

‘In the last resort, if the parties cannot agree, the true construction will have to be determined by the court. A party should not too readily be found to have refused to perform the agreement by contentious observations in the course of discussions or arguments...’

In this case the appellant acted on its view of the contract without realizing that the respondents were insisting upon a different view until such time as they purported to rescind. It was not a case in which any attempt was made to persuade the appellant of the error of its ways or indeed to give it any opportunity to reconsider its position in the light of an assertion of the correct interpretation. There is therefore no basis on which one can infer that the appellant was persisting in its interpretation willy nilly in the face of a clear enunciation of the true agreement.”

  1. In Progressive Mailing House Pty Ltd v Tabali Pty Ltd,[25] Mason J, with whose reasons Wilson, Deane and Dawson JJ were in general agreement, addressed a similar question in these terms:

“It is not to the point that the appellant acted in accordance with counsel’s advice. This is not a case like DTR Nominees Pty Ltd v Mona Homes Pty Ltd, in which there was a bona fide dispute as to the true construction of a contract expressed in unclear terms. Here there was simply no basis in the provisions of the lease to support the appellant’s refusal to pay rent.”

  1. In his reasons, Wilson J placed some emphasis on the appellant’s persistence in its wrongful conduct after the respondent’s solicitors had “bluntly warned it of the consequences of continuing in the course it had adopted”.
  1. In Dainford Ltd v Smith,[26] Brennan J said:

“Sometimes it is right to find that a party who adopts an erroneous construction of a contract and who intends to act in accordance with that construction in fulfilling the contract is not ready and willing to perform the contract and has evinced an intention to perform the contract only in a manner substantially inconsistent with its terms.  But ‘there are other cases in which a party, though asserting a wrong view of a contract because he believes it to be correct, is willing to perform the contract according to its tenor. He may be willing to recognize his heresy once the true doctrine is enunciated or he may be willing to accept an authoritative exposition of the correct interpretation’ (DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423, at p 432; and see Green v Sommerville (1979) 141 CLR 594, at pp 600-601, 610).  When an erroneous construction of the contract arises from a mistake of law that is common to the parties, it is difficult to infer repudiation from a party's assertion that it intends to perform the contract by doing what both parties erroneously believe to be required to perform it, at least until the mistake is exposed.”

  1. The defaulting party’s good faith is thus relevant to the question whether that party evinced an intention not to be bound by the contract.[27] Although it is not necessarily an answer for a defaulting party that it acted on legal advice, the fact that it did so is relevant to whether its refusal to perform in accordance with the terms of the contract evidenced an intention no longer to be bound by its terms.[28]
  1. On behalf of the applicant it was contended that Progressive Mailing House Pty Ltd v Tabali Pty Ltd,[29] and Wood Factory Pty Ltd v Kiritos[30] were authority for the proposition that it is “more difficult to establish repudiation of a lease than it is to establish repudiation of an ordinary contract”.  The authorities support that proposition.
  1. Mason J, in Progressive Mailing House Pty Ltd v Tabali,[31] after rejecting the submission that abandonment of possession was necessary to constitute a case of repudiation by a lessee, said:

“On the other hand, it should be acknowledged that it would be rare indeed that facts which fell short of abandonment would properly be seen as constituting repudiation by the lessee in the case of a long lease at a rental which was either nominal or but a fraction of the amount which could be obtained in the market place.”

  1. Deane J, in the passage relied on by the applicant,[32] confirmed that, as a general proposition, ordinary principles of contract law are applicable to contractual leases. He added the qualification that:

“… the further one moves away from the case where the rights of the parties are, as a matter of substance, essential defined by executory covenant or contractual promise to the case where the tenant’s rights are, as a matter of substance, more properly to be viewed by reference to their character as an estate … in land with a root of title in the executed demise, the more difficult it will be to establish that the lease has been avoided or terminated pursuant to the operation of the ordinary principles of frustration or fundamental breach.”

  1. The following discussion proceeds on the assumption that, contrary to my findings, the applicant breached clause 1(k) and other provisions of the leases, as the respondent alleges. The relevant sequence of events is set out earlier in these reasons. It was submitted on behalf of the respondent:

“… it is difficult to conceive a clearer case of repudiation arising by reason of the dogged pursuit by one party of a particular course of conduct in circumstances of utter disregard of the other party’s position and contentions. The applicant’s conduct in August and September 2003 was deliberate and in flagrant disregard of the leases and the respondent’s position.”

  1. It was further submitted, by reference to DTR Nominees, that the applicant persisted in its interpretation “willy nilly in the face of a clear enunciation of the true agreement” and that it desisted from further burning only when confronted with the threat of immediate court action. Mr McConnel, it was asserted, conceded in cross-examination that he deliberately failed to inform the respondent of his intention to carry out burning on 26 August 2003 and 1 September 2003 and that he had no intention of abiding by any conditions that the respondent may have seen fit to impose in respect of those burns. The submission does not do justice to Mr McConnel’s evidence.
  1. Mr McConnel’s position was that the conditions imposed, particularly as to de-stocking, were unreasonable and that he was not obliged to observe them. His evidence was thus consistent with the stand taken by him in his letters of 12 and 26 August. Neither those letters nor his conduct, viewed as a whole, manifest an intention on Inverstanley’s part not to be bound by the terms of the lease. The two letters are aggressive in tone and signal an intention on the part of the applicant to proceed with burning parts of the leased land. But, fairly read, they do not display an intention to ignore the terms of the leases and in particular clause 1(k).
  1. The applicant’s conduct must be viewed in light of a number of other matters. It consistently paid the rent due and owing under the leases and observed their other covenants. The leases are for lengthy terms at a rent substantially lower than market rental. That is relevant, as appears from Progressive Mailing House Pty Ltd v Tabali.
  1. Additionally, the respondent, to the knowledge of the applicant, had been quite content to proceed without the imposition of any such conditions in the past and had not complained about Inverstanley’s relevant farming practices. Finally, it could not be said that the applicant’s view as to the validity of the subject conditions was entirely without substance.

Was there a valid forfeiture for breach of clause 1(k)?

  1. As I have found no breach of the lease, this question must be answered in the negative.

Relief against forfeiture

  1. If contrary to the above findings, the respondent has a right of re-entry or forfeiture, it would be appropriate to give relief against forfeiture. The discretion to relieve against forfeiture under s 124(2) of the Act is unfettered and generally the matters which lead to the conclusion that there had been no repudiation of the leases by the applicant support the granting of relief against forfeiture. The most significant considerations are –
  1. the circumstance that the leases are long term leases at less than market rental. Forfeiture would cause the applicant significant loss and substantially erode the value of its grazing business on its remaining land;
  1. it is probable that the applicant will abide by the terms of the leases as construed by the court. Mr McConnel has sworn that the applicant will do so and I accept that evidence;
  1. the applicant has a history of compliance with the terms of the lease and has managed Inverstanley in accordance with sound grazing practices. Those practices have the result that any adverse impacts on the quality of water in the lake from farming on Inverstanley tends to be less than in the case of many other properties adjoining the lake;
  1. the validity of the conditions on which the respondent relies to establish breach were matters genuinely in dispute; and
  1. any actual adverse impact on the quality of water in the lake as a result of the applicant’s wrongful conduct was so small as to be immeasurable. Furthermore the likelihood of any measurable adverse impact was slight.
  1. The respondent submits that the applicant’s conduct in burning off “was serious and … engaged in (in) flagrant disregard of the respondent’s position” and included burning off after the respondent’s solicitors had given written warning. It is true that the applicant’s conduct was lacking in caution but, as I have said, there was a genuine dispute about the lawfulness of the conditions imposed. The adverse impact of the burning on water quality at all relevant times had the likelihood of being somewhere between non existent and minimal, was consistent with sound grazing practices and no different from conduct in which the respondent had acquiesced over the years.
  1. It is not the case that the “circumstances of this case fall far short of those in which the question of relief from forfeiture would be favourably entertained”. On the contrary, there would be an obvious case for the granting of relief.

Conclusions

  1. I have found that:
  1. no breach of any of the leases has been established;
  1. clause 1(k) of the memorandum of lease does not apply to the licensed land and that, in consequence, the applicant was not required to obtain the respondent’s approval of burning off on the licensed land;
  1. no breaches of clauses 1(f) and 1(n) of the memorandum of lease have been established. The respondent, by intimating in its letter of 22 August 2003, that it would grant consent only on conditions it had no power to impose or that any application for consent would not be considered on its merits, relieved the applicant from the obligation to seek consent before burning off;
  1. there was no repudiation of any of the leases by the applicant;
  1. if contrary to my conclusions, the leases had been effectively terminated by the respondent, relief against forfeiture should be ordered.
  1. Subject to any submissions the parties may wish to advance, I propose to declare that the respondent has not and was not entitled to terminate or forfeit the leases referred to in the points of claim filed herein on any of the grounds alleged in the points of claim or points of defence filed herein and to order that the respondent pay the applicant’s costs of and incidental to the proceedings including reserved costs, if any, to be assessed on the standard basis.

Footnotes

[1] [1974] AC 235 at 251.

[2] Fire Service Act 1990, s 62.

[3] s 6(1).

[4] s 6(3).

[5] s 9(1)(b).

[6] ss 15, 17, 25, Part 7 Division 1.

[7] s 5(8)

[8] 1/7/1990, the date of commencement of the relevant provision.

[9] ss 65, 71(2).

[10] Fire Service Act 1990, s 65.

[11] Fire Service Amendment Act 1996, ss 8A-8C.

[12] Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109.

[13] Ex 6.

[14] International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd [1986] 1 Ch 513 (CA) and Mount Eden Land Ltd v Standley Investments Ltd (1996) 74 P & CR 306.

[15] (1989) 168 CLR 385.

[16] Treloar v Bigge (1874) LR 9 Exch 151; Balls Bros Ltd v Sinclair [1931] 2 Ch 325; applied in Commissioner of Railways v Avrom Investments Pty Ltd [1959] 2 All ER 63, [1959] 1 WLR 389, PC.

[17] Panamena Europea Navigacion (Compania Limitada) v Frederick Leyland & Co Ltd [1947] AC 428, per Lord Thankerton at 436. See also Edwards Aberayron Mutual Ship Insurance Society [1876] 1 QBD 563.

[18] (1985) 3 ANZ Insurance Cases 60-638.

[19] At 78,927- 78,928.

[20] Lord Wright in Ross T Smyth & Co. Pty. Ltd v T.D. Bailey Son & Co. [1940] 3 All ER 60 at 71 in a passage referred to with approval in Roadshow Entertainment Pty Ltd v C.E.L. Home Video Pty. Ltd. (1997) 42 NSWLR 462 at 479 and in the authorities cited at that reference.

[21] [1980] 1 WLR 277 at 295.

[22] Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty. Ltd. (1989) 166 CLR 623 at 658.

[23] Shevill v Builders Licensing Board (1982) 149 CLR 620 at 625, 626 per Gibbs CJ, with whose reasons Brennan J agreed.

[24] (1978) 138 CLR 423 at 431, 432.

[25] (1985) 157 CLR 17 at 37.

[26] (1985) 155 CLR 342 at 365-6.

[27]See also Sweet & Maxwell Ltd v Universal News Services Ltd [1964] 2 QB 699; Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd (1992) 27 NSWLR 326 at 355, per Samuels JA; Spettabile Consorzio Veneziano v Northumberland  Shipbuilding Co Ltd (1919) 121 LT 628 at 635 and Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277.

[28] Mersey Steel & Iron Co v Naylor Benzon & Co (1884) 9 App Cas 434 and Vaswani v Italian Motors (Sales & Services) Ltd [1996] 1 WLR 270 at 277.

[29] (1985) 157 CLR 17 at 53 per Deane J and per Mason J at 34.

[30] (1985) 2 NSWLR 105, 131.

[31] At 34.

[32] At 53.

Close

Editorial Notes

  • Published Case Name:

    Inverstanley Holdings P/L v South East Qld Water Corp Ltd

  • Shortened Case Name:

    Inverstanley Holdings Pty Ltd v South East Queensland Water Corporation Ltd

  • MNC:

    [2004] QSC 201

  • Court:

    QSC

  • Judge(s):

    Muir J

  • Date:

    30 Jun 2004

Litigation History

No Litigation History

Appeal Status

No Status