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HSH Hotels (Australia) Ltd v State of Queensland

 

[2011] QCA 329

Reported at [2012] 2 Qd R 252

 

SUPREME COURT OF QUEENSLAND

PARTIES:

FILE NO/S:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:

DELIVERED ON:

18 November 2011

DELIVERED AT:

Brisbane 

HEARING DATE:

29 July 2011

JUDGES:

Fraser JA and McMurdo and Boddice JJ

Separate reasons for judgment of each member of the Court, each concurring as to the order made

ORDER:

Appeal dismissed with costs

CATCHWORDS:

LANDLORD AND TENANT – RENT – PROVISIONS AS TO RENT IN AGREEMENT FOR LEASE OR LEASE – RENT REVIEW CLAUSES – OTHER MATTERS – where the rent review clause in a lease and sub-lease between the appellant and respondent referred to “the Valuer General’s unimproved capital value” – where the land valuation legislation in effect at the time the lease commenced was replaced by a new scheme – where the appellant sought a declaration in the trial division that the reference to “unimproved capital value” in the rental provision was to the value determined by reference to the definition of “unimproved value” in the legislative scheme in the form it was in when the lease commenced – where the primary judge dismissed the application and held that the rental provision fixed the rent by reference to a procedure for the determination of value which might vary with legislation over time – whether the primary judge erred in the construction of the rental provision

Acts Interpretation Act 1954 (Qld), s 14A, s 14H, s 14J

Land Valuation Act 2010 (Qld), s 5, s 6, s 7, s 19, s 23, s 24, s 26, s 205, s 209, s 267, s 297

Lands Legislation Amendment Act 1992 (Qld), s 17

Valuation of Land Act 1944 (Qld) (repealed), s 3, s 6, s 11, s 12, s 13

Valuation of Land Amendment Act 2008 (Qld), s 5

BBC Hardware Ltd v Payce Properties Pty Ltd (2000) 50 NSWLR 66; [2000] NSWCA 262, cited

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

Commissioner of Land Tax v Nathan (1913) 16 CLR 654; [1913] HCA 28, considered

HSH Hotels (Australia) Ltd v State of Queensland [2011] QSC 29, affirmed

MFI Properties Ltd v BICC Group Pension Trust Ltd [1986] 1 All ER 974, cited

Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; [2004] HCA 35, cited

PT Limited and Another v Department of Natural Resources and Mines (2007) 162 LGERA 106, cited

Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45; [2002] HCA 5, cited

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52, cited

COUNSEL:

B Walker SC, with K A Barlow SC, for the appellant

M Hinson SC for the respondent

SOLICITORS:

Clayton Utz for the appellant

Crown Law for the respondent

[1]  FRASER JA: The appellant is the lessee and the sub-lessee under a lease and sub-lease granted by the respondent over land on which the appellant operates the Stamford Plaza Brisbane Hotel.  Each instrument was made on 25 February 1991 for a term of 75 years from 1 August 1990.  The issue in this appeal concerns the method for fixing the rental payable by the appellant from the 16th year to the end of the term of the lease and the sub-lease.

[2] The relevant terms of the two instruments are materially identical.  Consistently with the way in which the parties conducted the proceedings in the trial division, the parties agreed that the Court’s decision in relation to the lease would also govern the position under the sub-lease.  In what follows I will therefore refer only to the lease.

[3] Clause 2.01 stipulates for an annual rental to be paid by equal monthly instalments in advance.  Clauses 2.01.1 and 2.01.2 fix the annual rental for the first and second years of the term as 4 per cent of a figure calculated by multiplying $8,000,000 by the quotient of a specified Consumer Price Index number for the quarter ending immediately prior to the commencement of the lease (or, for the second year of the lease, for the quarter ending immediately prior to the commencement of that year) divided by the Consumer Price Index number for the quarter ending 31 December 1986.

[4] The provision of the lease which is in issue is cl 2.01.6.  I will set out that provision together with the three preceding provisions:

“2.01.3The rental for the third year of the term shall be a sum equal to 4% of the Valuer General’s unimproved capital value of the land referred to in clause 1.05 hereof at the time when the rental for such year is due and payable.

2.01.4The rental for the fourth, fifth and sixth year of the term shall in each year be a sum equal to 6% of the Valuer General’s unimproved capital value of the said land at the respective dates that the annual rental becomes due and payable.

2.01.5The rental for the seventh, eight, ninth, tenth, eleventh, twelfth, thirteenth, fourteenth and fifteenth year of the term shall in each year be a sum equal to 9.16% of the Valuer General’s unimproved capital value of the said land at the respective dates that the annual rental becomes due and payable.

2.01.6Thereafter the rental for each year of the balance of the term shall be a sum equal to 7.5% of the Valuer General’s unimproved capital value of the said land at the respective dates that the annual rental becomes due and payable.”

[5] The appellant applied in the trial division for a declaration that the reference in cl 2.01.6 to “unimproved capital value” was to the value determined by reference to, and in accordance with, the definition of “unimproved value” in the Valuation of Land Act 1944 (Qld) (“the 1944 Act”) in the form it was in when the lease commenced.  The primary judge dismissed the application.  His Honour held that cl 2.01.6 instead fixed the rent by reference to “a procedure for the determination of a specified value, which, with amendments to the legislation, might vary over time”,[1] and that s 297 of the Land Valuation Act 2010 (Qld) (“the 2010 Act”) had the effect that rent was now to be assessed under cl 2.01.6 of the lease by reference to a valuation made under the 2010 Act.[2] 

Legislative background

[6] The parties’ submissions referred to relevant provisions of the 1944 Act when the lease was granted and to subsequent amendments to that Act up to the commencement of the 2010 Act.  The following analysis of those provisions in [7] to [12] of my reasons is taken from the primary judge’s reasons. 

[7]  When the lease was granted, s 12 of the 1944 Act defined “unimproved value” as follows:

“(1)For the purposes of this Act, ‘Unimproved value’ of land means—

(a)In relation to unimproved land, the capital sum which the fee-simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona fide seller would require; and

(b) In relation to improved land, the capital sum which the fee-simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona fide seller would require, assuming that, at the time as at which the value is required to be ascertained for the purposes of this Act, the improvements did not exist:

Provided that the unimproved value shall in no case be less than the sum that would be obtained by deducting the value of improvements from the improved value at the time as at which the value is required to be ascertained for the purposes of this Act:

Provided further that the restrictions and limitations in any deed of grant or certificate of title in respect of any racecourse shall be disregarded in ascertaining the unimproved value of the land of the racecourse concerned.

(1A)Notwithstanding anything contained in this section, in determining the unimproved value of any land it shall be assumed that—

(a)the land may be used, or may continue to be used, for any purpose for which it was being used, or for which it could be used, at the date to which the valuation relates; and

(b)such improvements may be continued or made on the land as may be required in order to enable the land to continue to be so used,

but nothing in this subsection prevents regard being had, in determining that value, to any other purpose for which the land may be used on the assumption that any improvements referred to in subsection (1) of this section had not been made.”

Subsection (2) defined the expressions “[i]mproved value”, “[t]he value of improvements” and “[i]mprovements”.

[8] Immediately before the 2010 Act commenced, the 1944 Act defined “unimproved value” as follows:

3Meaning of unimproved value

(1)For the purposes of this Act—

unimproved value of land means

(a)in relation to unimproved land—the capital sum which the fee simple of the land might be expected to realise if negotiated as a bona fide sale; and

(b)in relation to improved land—the capital sum that the fee simple of the land might be expected to realise if negotiated as a bona fide sale, assuming the improvements did not exist.

(2)However, the unimproved value of improved land can not be less than the sum that would be obtained by deducting the value of improvements from the improved value on the date of valuation.

(2A)The assumption mentioned in subsection (1)(b) is limited to the instant in time when the valuation is to be made on the date of valuation.

(2B)For subsections (1) and (2), the unimproved value of land includes any increase in the value of the land that has happened in connection with—

(a)a local planning instrument; or

(b)a development approval or other approval or authority under an Act, other than a hotel licence, relating to the land or an improvement of the land; or

(c)the making or use of an improvement  to the land.

(2C)Nothing in subsection (1)(b) requires an assumption, in relation to improved land, that the improvements have never been made.”

[9]  Until 1992, s 6 of the 1944 Act provided for the appointment of a person as the “Valuer-General”.  That section was then replaced by a provision that a reference in any Act or document to the Valuer-General was a reference to the chief executive and the 1944 Act was amended to make provision for the determination of the unimproved value of land by the chief executive.

[10]  There was no challenge to the primary judge’s analysis of the effect of the amendments to the 1944 Act up to the time when it was repealed by the 2010 Act:[3]

“On behalf of the applicant, it was submitted that by the time it was repealed, there had been significant changes to that part of the 1944 Act dealing with unimproved value. Principally, they are to be identified in what had become s 3(2A)-(2C). It will be apparent that at least s 3(2B) and (2C) have the potential to have a significant effect on the determination of the unimproved value of land. For the respondent, it was accepted that there might be such changes to the legislative regime for determining statutory valuations that the latter could then fall outside the scope of cl 2.01.6. It will be apparent that these amendments may have a significant effect on the determination of unimproved value, if such a determination were to be done in accordance with the statutory provision requiring an assumption that improvements on the land did not exist (i.e., in accordance with s 12(l)(b), and later s 3(l)(b)). However, when the lease came into existence, the 1944 Act included (as a proviso to s 12(1)), a provision which required that the unimproved value was not to be less than a sum obtained by deducting the value of improvements from the improved value of the land at the relevant date; and a further provision (s 12(2)(b)), the effect of which was that the value of improvements should not exceed their replacement cost at that date. The application of these provisions is likely to have had the consequence that, at least in some cases, the unimproved value of land might reflect matters dealt with specifically by the amendments to the 1944 Act, identified earlier in these reasons. I am therefore of the opinion that those amendments do not take the statutory process outside the scope of cl 2.01.6.”

[11] Section 205 of the 2010 Act established the Office of Valuer-General and made provision for the appointment of a person to that office.  Section 5 of the 2010 Act requires the valuer-general to decide the value of land, as provided for under the 2010 Act, and for the purposes mentioned in s 6 (namely, establishing the value of land for liability to pay land tax, the making and levying of rates, and the calculation of rent under the Land Act 1994 (Qld) for a Land Act tenure).  Section 5(2) provides that a decision about the value of land, as provided for under the Act, is a valuation of the land.  Section 7(a) provides that the value of land, for non-rural land, is its “site value”.

[12] The 2010 Act defines “site value” by reference to the provisions of Ch 2, Pt 2, Div 3.  Section 19 provides (subject to some qualifications) that the site value of improved land is its expected realisation under a bona fide sale, assuming all “non-site improvements” for the land had not been made.  Non-site improvements are those other than site improvements, which are in turn identified by reference to a number of improvements that do not generally extend to buildings and other structures on land.[4]  The 2010 Act also makes provision for the unimproved value of land, which, in the case of improved land, is its expected realisation under a bona fide sale, assuming that all site improvements and non-site improvements had not been made.[5]

[13]  The primary judge recorded that the significance of the reference in the 2010 Act to “unimproved value” was not the subject of submissions.  In that respect, I note that s 209 of the 2010 Act authorises the valuer-general, for a fee prescribed under a regulation, to assess the value of land, including by making an assessment of the unimproved value of land.  But paragraph 2 of the definition of “valuation” in the schedule of the 2010 Act provides that the term does not include an assessment under s 209.  It therefore seems to follow that any such assessment of unimproved value is not “a valuation under this Act” within the meaning of 297(2).

[14] Section 297 provides:

297Leases referring to the term unimproved value

(1)This section applies to a reference in a lease made before the commencement to the term unimproved value under the repealed Act.

(2)From the commencement, the reference is taken to be a reference to a valuation under this Act.”

[15]  Paragraph 1 of the definition of “valuation” provides that “[g]enerally, valuation has the meaning given under section 5(2).”  It follows from that definition, read with s 5, s 6 and s 7, that the valuer-general’s determination of the site value of non-rural land is a “valuation under this Act” for the purposes of s 297(2).

Construction of the lease

[16]  The appellant unsuccessfully argued in the trial division that cl 2.01.6 should be construed as referring to the methodology for valuation of the land provided in the 1944 Act at the time when the lease commenced.  The appellant repeated that argument on appeal.  The appellant submitted that where, as in this clause, rent reviews are to be determined by reference to a percentage of the value of the leased property from time to time, one would ordinarily expect the clause to provide a certain method for valuing the property in a consistent fashion over the period of the lease.  I accept that submission and the appellant’s further submissions that, in the absence of clear words to the contrary, a long term commercial lease should be construed in a commercially rational manner and that, if the text is reasonably capable of bearing more than one meaning, the court is entitled to have regard to the context and commercial purpose of the clause when choosing one meaning in preference to another.

[17]  As the appellant also submitted, the normal purpose of a rent review clause in a long lease is to keep the rent roughly in line with rents of similar properties.[6]  Relying upon that proposition, the appellant argued that the commercial purpose of the lease would be defeated if the expression in the clause “the Valuer General’s unimproved capital value of the said land” comprehended a valuation made in accordance with a very different methodology stipulated in subsequent legislation.  The appellant submitted that cl 2.01.6 and the three immediately preceding subclauses manifested an intention that, although the numerator in the rental calculation varied between 4 per cent, 6 per cent, 9.16 per cent and 7.5 per cent, the denominator (“the Valuer General’s unimproved capital value of the said land”) was to remain constant.  It was submitted that it would be very odd if that denominator might change, not by reference to the parties’ agreement, but by reference to a political decision concerning future legislation.

[18]  The appellant’s arguments are persuasively answered by the primary judge’s reasoning: the parties presumably appreciated that the legislative regime for the determination of the unimproved value of land under the 1944 Act might change over time, and, faced with the choice of fixing rent by reference to the legislation as it then stood or fixing rent by reference to a procedure for the determination of a specified value which might vary over time with amendments to the applicable legislation, the language of the clause indicates that the parties opted for the latter method.[7] 

[19]  Although that strikes me as being the natural and literal meaning, the different meaning propounded by the appellant is arguably open.  Treating the clause as ambiguous, its meaning must be determined by what a reasonable person would have understood the language of the clause to mean, taking into consideration any relevant surrounding circumstances known to the parties (or which are notorious and presumed to be known to the parties) and the object of the transaction.[8]  Having regard to the context provided by the 1944 Act in the form it was in when the lease was made, and particularly the reference in the definition of “unimproved value” to “the capital sum which the fee-simple of the land might be expected to realise”, the expression “unimproved capital value” in cl 2.01.6 of the lease must refer to the term “unimproved value” in the 1944 Act.  So much was common ground in the trial division and in this appeal, but it was in issue whether the clause also comprehended reference to the same term in the 1944 Act as subsequently amended by legislation which altered the definition of that term.

[20]  As the respondent submitted, had it been intended to apply the 1944 Act in the form it was in when the lease was made for the purpose of determining the “unimproved capital value” for the third and subsequent years, that could easily have been effected by incorporating the definition of “unimproved value” in s 12 in the rental provision.  Instead, the provision referred to “the Valuer General’s unimproved capital value … at the respective dates that the annual rental becomes due and payable.”  Those words refer to future valuations by the named official.  Reasonable contracting parties in these parties’ positions must have known that such future valuations must necessarily be produced in accordance with the methodology prescribed in the applicable legislation in force at the specified dates.  So much is consistent with the definition in cl 1.09 of the lease of “[s]tatutes and [r]egulations”, which comprehended reference to statutes and other legislation “amending, consolidating or replacing the same”, although that clause has no direct application to the interpretation of cl 2.01.6. 

[21]  The appellant submitted that the potential significance of subsequent amendments to the statutory definition of “unimproved value” made it unlikely that cl 2.01.6 was intended to adopt valuations made in accordance with amended legislation.  With that in mind, the appellant submitted that a choice to adopt a procedure for the determination of a specified value, which, with amendments to the legislation, might vary from time to time, would have been made clear by a provision in the following form:

“Thereafter the rental for each year of the balance of the term shall be a sum equal to 7.5% of the current unimproved value of the said land, as determined by the Valuer General pursuant to the Valuation of Land Act 1944 or any Act amending or in substitution for the same, or such other value as is undertaken from time to time for the purposes of that Act, at the respective dates that the annual rental becomes due and payable.” (citations omitted)

[22]  The most significant difference between the appellant’s draft and cl 2.01.6 is that the former expressly refers to the authorising legislation and any amendment of or substitution for that legislation.  As I have mentioned, however, reasonable contracting parties must have appreciated that the valuer-general would be required to use the methodology prescribed by the applicable legislation in force at the time of any future valuation.

[23]  The appellant pointed out that, although the reversion was initially in the Public Trustee of Queensland, there was always the potential for a transfer of the reversion to a party unconnected with the State, but it is not easy to see how that consideration bears upon the proper construction of the lease.  The valuation provisions in the 1944 Act did not apply of their own force to the calculation of rent under the lease, but they were applied for that purpose by the parties’ agreement in cl 2.01 of the lease.  Such an agreement might equally be made by a private party as by a government party.  The character of the lessor does not influence the construction issue in this appeal. 

[24]  The appellant submitted that the provision in the lease for arbitral determination favoured the construction propounded by it.  The arbitration clause, cl 13.01, was in a familiar form, providing for referral to arbitration of “any claim, dispute or question” which “shall arise between the lessor and the lessee concerning any clause or anything contained in this lease or the meaning or construction of any matter or thing in any way connected with this lease or the rights, duties or liabilities of either the lessor or the lessee in under or in connection with this lease”.  The appellant submitted that this arbitration clause authorised an arbitration, not merely to determine whether a particular valuation answered the description in cl 2.01.6, but also to test whether or not the Valuer General had correctly ascertained the unimproved capital value of the land in accordance with the applicable statutory methodology.  Even if that were so, it would not favour the appellant’s construction over the construction preferred by the primary judge.  There is also nothing in the arbitration clause which suggests that an arbitrator might go behind a “Valuer General’s unimproved capital value” which met the description of cl 2.01.6.

[25]  Furthermore, cl 15.02, which obliges the lessor, on request by the lessee, to execute objections and other documents “as may be requisite to lodge an appeal against the Valuer General’s Unimproved Capital Value of the lands at any time during the lease”, is consistent with the view that rental is to be fixed with reference to future valuations by the Valuer General (or such valuations as varied on appeal), which must necessarily be made in accordance with the applicable legislation in force at the time of the valuation.

[26]  The appellant submitted that the uncommerciality of the respondent’s construction was demonstrated by considering what would occur if the concept of “unimproved value” were removed from the legislation or if the Office of ValuerGeneral and any similar or substitute office were abolished.  On the appellant’s construction the “unimproved capital value” of the land would continue to be determined in accordance with the methodology prescribed in the 1944 Act when the lease was made, and in the event of dispute the issue could be referred to arbitration and the arbitrator could determine a value accordingly.  The appellant submitted that on the respondent’s construction, the method for determination of the rental would be frustrated[9] because there would be no “Valuer General’s unimproved capital value”.

[27]  There is no evidence of any contemplation when the lease was granted that the legislature might in fact abandon the established scheme for valuations of land by an officer of the State for revenue purposes, or that the legislature might do so without enacting a transitional provision designed to avoid the consequences postulated by the appellant.  It is true, however, that there was always the prospect of legislative amendment, and the appellant’s construction therefore does have the potential advantage identified by the appellant.  On the other hand, an apparent disadvantage of the appellant’s construction is that it would allow disputes for each of the last 73 years of the lease term about the application of the methodology prescribed in the 1944 Act.  On the primary judge’s construction, the rental would be practically fixed by the independent officer’s valuation.  There is no evidence or objective standard by which a court could assess the relative weights of these considerations, but the commercial advantage upon which the appellant relies is plainly not sufficient to justify disregard of the language of the clause.

[28]  I would affirm the primary judge’s construction of the lease.  The appeal should be dismissed on that ground.

Construction of s 297 of the 2010 Act

[29]  That conclusion makes it strictly unnecessary to consider the appellant’s challenge to the primary judge’s conclusion that s 297 of the 2010 Act had the effect that rent was now to be assessed under cl 2.01.6 of the lease by reference to a valuation made under the 2010 Act.  However, in deference to the parties’ submissions on this issue, I will explain why I would affirm the primary judge’s conclusion.

[30]  Section 297 is set out in [14] of these reasons.  The appellant submitted that s 297 is not applicable because the effect of s 14J of the Acts Interpretation Act 1954 (Qld)[10] is that the expression “the repealed Act” in s 297 refers only to the 1944 Act in the form it was in immediately before the commencement of the 2010 Act.  The respondent submitted that the application of s 14J is displaced by the context.  The primary judge did not find it necessary to resolve this issue because his Honour accepted the respondent’s submission that cl 2.01.6 of the lease referred to “unimproved value” under the 1944 Act as it was amended from time to time up until its repeal.[11]  For the same reason, it is not necessary to resolve the issue in this appeal.

[31]  The appellant also submitted that s 297 was not applicable because the lease referred to “the Valuer General’s unimproved capital value” rather than to the term “unimproved value” under the 1944 Act.  As to the word “capital” in cl 2.01.6, when the lease was granted and at all times up to the commencement of the 2010 Act, the 1944 Act defined “unimproved value” by reference to “the capital sum which the fee simple of the land might be expected to realise”.  With that in mind, the reference in the clause to “unimproved capital value” should be seen as a reference to “unimproved value” under the 1944 Act.  The presence in the clause of the preceding words “the Valuer General’s”, which are not present in s 297, could not reasonably be thought to take the clause outside s 297, particularly when the legislative history mentioned in [9] of these reasons is taken into account.  The discussion in [20] of these reasons explains why I would not attribute significance to the absence of express reference in cl 2.01.6 to the 1944 Act, as amended from time to time, as the source of the officer’s power to ascertain the unimproved value of the land.

[32]  The appellant submitted that a narrow construction of s 297 should be adopted because that provision might interfere substantially with contracting parties’ rights and with the conditions of grant of legal estates.  The primary judge regarded that as a relevant consideration,[12] but as his Honour pointed out, it is clear that s 297 intended some interference with contractual arrangements.  The primary judge considered whether s 297(1) should be narrowly construed as applying only where a lease includes the precise expression “unimproved value” and an express reference to the 1944 Act, but ultimately rejected that construction.  His Honour referred to the explanatory notes for the Land Valuation Bill 2010 (Qld), which in due course became the 2010 Act, and in particular the reference in the note to cl 297 to decisions of the New South Wales Supreme Court that there was no longer an “unimproved value” for land when the statutory provision for such valuations had been replaced by provisions for a “land value”.  The explanatory note continued:

There are a number of leases in Queensland that calculate rent, or other charges, by reference to the unimproved value of the land the subject of the lease. This clause is designed to ensure that valuations under the lease will continue to be made under Queensland valuation legislation.”

The primary judge considered that this note and the language of s 297 identified its purpose, and that s 14A of the Acts Interpretation Act required the adoption of the interpretation which best achieved that purpose. 

[33]  The appellant submitted that it was unnecessary to refer to the note because s 297 unambiguously applied only to leases which used the term “unimproved value” and cl 2.01.6 of the lease instead used the expression “Valuer General’s unimproved capital value”.  That submission does not reflect the statutory language.  Section 297(1) applies where there is a “reference” in a lease to unimproved value under the repealed Act”.  It is not a criterion of the application of s 297(2) that those particular words be expressed in the lease.  That seems a most unlikely intention to attribute to the legislature.  The explanatory note also supports the primary judge’s construction for the reasons given by his Honour, but I would prefer that construction even without reference to the note. 

[34] I would affirm the primary judge’s conclusion that s 297 of the 2010 Act has the effect that rent is now to be assessed under cl 2.01.6 of the lease by reference to a valuation made under that Act.

Orders

[35]  I would dismiss the appeal with costs.

[36]  McMURDO J:  The ultimate question is one of the proper interpretation of a clause, within both a lease and a sublease, by which the rental to be paid by the appellant is to be fixed.  The relevant clause in each case is as follows:

“2.01.6Thereafter the rental for each year of the balance of the term shall be a sum equal to 7.5% of the Valuer General’s unimproved capital value of the said land at the respective dates that the annual rental becomes due and payable.”

[37]  That reference to the Valuer General was clearly a reference to the person appointed as such under the Valuation of Land Act 1944 (Qld) (“the 1944 Act”).  And the “unimproved capital value” was clearly a reference to the valuation of the unimproved value of the subject land which, as with other land, was required to be valued by the Valuer General under that Act.[13]

[38]  The appellant’s argument is that the effect of the relevant clause is as if it said:

“2.01.6Thereafter the rental for each year of the balance of the term shall be a sum equal to 7.5% of the Valuer General’s unimproved capital value of the said land at the respective dates that the annual rental becomes due and payable”,

and there was a definition within the lease of “unimproved value” in the terms of s 12 of the 1944 Act as it was at the commencement of the lease.[14]

[39]  Upon that interpretation, the parties agreed that the unimproved value of the land should be derived by the method which the Valuer General was then required to apply, but they did not agree to be bound by the value as in fact determined by the Valuer General. 

[40]  That interpretation cannot be accepted.  The clause unambiguously refers to a value which has been determined by the Valuer General and it is that person’s valuation which the parties agreed to accept.  That is why they included cl 15.02 of the lease (and sublease), which required the lessor, on request by the lessee, to lodge an appeal against the Valuer General’s unimproved capital value of the lands at any time during the lease and by which the lessor authorised the lessee to appear on its behalf in any such appeal.  The Valuer General’s unimproved capital value meant the value as in fact determined by the Valuer General, rather than a value determined by the method which the Valuer General was to employ.  The appellant argues that its interpretation would provide certainty against the prospect of some relevant change to the 1944 Act.  But the words, in my view, are unambiguous and cannot be disregarded.

[41]  Although these were long leases, the parties made no provision for the contingency that by a change in the relevant legislation, the Valuer General would no longer value the land.  That contingency eventuated when in 1992, the office of the Valuer General was replaced by that of the Chief Executive.[15]  The operation of the clause was preserved by the amending legislation providing that a reference in any Act or document to the Valuer General should be read as a reference to the Chief Executive.[16]  But that contingency did not eventuate by the amendment to the definition of “unimproved value” in the 1944 Act.  The Chief Executive remained bound to determine the unimproved value of the land[17] and the valuation which was made, year by year, was one by which the parties had agreed to be bound. 

[42]  The respective definitions of “unimproved value” in the 1944 Act, as at the grant of these leases and the repeal of the 1944 Act, are set out by Fraser JA at [7] and [8].  As the primary judge discussed,[18] the addition of s 3(2B) and (2C) had the potential to significantly affect the determination of the unimproved value of improved land.  These amendments, which were made in 2008,[19] were in response to the decision of the Land Appeal Court in PT Ltd  v Department of Natural Resources and Mines.[20]  The legislative intention was to have the unimproved value of improved land determined according to the High Court’s judgment in Commissioner of Land Tax v Nathan.[21]  In the context of a similar statute, the High Court there held that although the unimproved value was to be determined by an assumption that the improvements did not exist at that point in time, still the valuer was to have regard to “past improvements” and “the effect they or their use have had in bringing the land up to its present value”.[22]  Accordingly, at least in some cases, these were substantial amendments to the method of valuation of the unimproved value of improved land.  Nevertheless, under the 1944 Act what still had to be determined was the capital sum which the fee simple of the land might be expected to realise upon a bona fide sale, assuming that at the point of time at which the value was to be determined, the improvements did not exist.  The amendments extended the scope of the matters to be considered by the valuer, but what was required to be valued was unchanged. 

[43]  Upon the appellant’s argument, the parties agreed to confine the relevant valuation to one which was conducted according to the then definition of “unimproved value” in the 1944 Act.  That submission would be more persuasive if this was not a valuation to be undertaken by the Valuer General.  But because it was clearly the Valuer General’s determination which the parties agreed to accept, it is difficult to see that they intended that any change to what had to be considered by the valuer would frustrate the operation of their agreement.  Clause 2.01.6 does not provide for an adjustment to the rental, such that if it does not operate, still there would be an agreed rental.  Absent the operation of the clause, there would be no agreed rental.  The more likely intent was that the parties did not agree to confine the operation of the clause in this way.  They agreed to be bound by the Valuer General’s unimproved value, notwithstanding any legislative change to the content of what had to be considered by the Valuer General. 

[44]  The only relief sought by the appellant was a declaration that the relevant clause should be interpreted according to its argument.  It follows that the appellant’s proceedings were rightly dismissed.  It was and is unnecessary to consider whether the effect of the lease, according to the appellant’s argument, would have been overtaken by s 297 of the Land Valuation Act 2010 (Qld) (“the 2010 Act”).  But the effect of s 297 was fully argued and it is relevant in determining the way in which the annual rental is now to be fixed. 

[45]  Section 297 applies “to a reference in a lease made before the commencement to the term unimproved value under the repealed Act”.  The appellant submitted that “the repealed Act” was a reference to the 1944 Act as it existed immediately before its repeal.  Subject to one point, that would follow from s 14J of the Acts Interpretation Act 1954 (Qld).  That point is the respondent’s submission that “the repealed Act” should be read as “the repealed Valuation Act”, which is defined in the 2010 Act as “the Valuation of Land Act 1944 repealed under section 267”.  It was by s 267 that the 1944 Act was repealed and, as is common ground, that was a repeal of the 1944 Act in all its iterations, because of the effect of s 14H of the Acts Interpretation Act 1954 (Qld).  Therefore, the respondent argued, the reference in s 297 to “the repealed Act” includes a reference to the 1944 Act as it was when the lease and sublease were granted.  The respondent’s argument has apparent force but it is unnecessary to determine the question.  Because the appellant’s argument as to the interpretation of cl 2.01.6 fails, the reference in the clause to an “unimproved capital value” was a reference to the term “unimproved value” as it was used, although variously defined, in the 1944 Act at all times until its repeal. 

[46]  The appellant’s further submission was that in these instruments there was no reference to the term “unimproved value”; rather, the reference was to “the Valuer General’s unimproved capital value”.  That submission should not be accepted.  An instrument might refer to the term “unimproved value” under the 1944 Act without using those exact words.  As I have discussed, upon the proper interpretation of this clause, the expression “the Valuer General’s unimproved capital value” referred to the unimproved value required to be assessed under the 1944 Act.  The result is that by s 297(2), those words are now taken to be a reference to a valuation under the 2010 Act. 

[47]  I agree with the orders proposed by Fraser JA.

[48]  BODDICE J: I have had the advantage of reading the reasons for judgment of Fraser JA and McMurdo J. 

[49]  I agree generally with those reasons.  To the extent those reasons differ as to whether cl 2.01.6 is ambiguous, I agree, for the reasons given by McMurdo J, that cl 2.01.6 is unambiguous.

[50]  I agree with the orders proposed by Fraser JA.

Footnotes

[1] HSH Hotels (Australia) Ltd v State of Queensland [2011] QSC 29 at [25].

[2] [2011] QSC 29 at [40].

[3] [2011] QSC 29 at [28].

[4] See the 2010 Act, s 23 and s 24.

[5] See the 2010 Act, s 26.

[6] See MFI Properties Ltd v BICC Group Pension Trust Ltd [1986] 1 All ER 974 at 975 h – j, 976 f – h and BBC Hardware Ltd v Payce Properties Pty Ltd (2000) 50 NSWLR 66 at 72 [26].

[7] [2011] QSC 29 at [25].

[8] Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352 per Mason J; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 461-462 [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179 [40]; Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45 at 62 - 63 [39] per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ.

[9] The appellant disclaimed any argument that the legislative changes which have been made have frustrated the lease.

[10] “14J(1) If an Act refers to another law as repealed or expired, the reference is to the other law as in force immediately before it was repealed or expired.

Example

   The ‘repealed ABC Act 1950’ is a reference to the ABC Act 1950 as in force immediately before it was repealed.”

[11] [2011] QSC 29 at [34].

[12] His Honour cited Gifford v Strang Patrick Stevedoring Pty Ltd (2003) 214 CLR 269 at [36] per McHugh J.

[13] Section 11 of the 1944 Act.

[14] Appellant’s outline of submissions, paragraph 14.

[15] By the Lands Legislation Amendment Act 1992 (Qld).

[16] Section 6 of the Valuation of Land Act 1944 (Qld) inserted by s 17 of the Lands Legislation Amendment Act 1992 (Qld).

[17] By s 13 of the 1944 Act.

[18] In the passage set out by Fraser JA at [10].

[19] By the Valuation of Land Amendment Act 2008 (Qld), s 5.

[20] (2007) 162 LGERA 106.

[21] (1913) 16 CLR 654.

[22] (1913) 16 CLR 654 at 662.

Close

Editorial Notes

  • Published Case Name:

    HSH Hotels (Australia) Ltd v State of Queensland

  • Shortened Case Name:

    HSH Hotels (Australia) Ltd v State of Queensland

  • Reported Citation:

    [2012] 2 Qd R 252

  • MNC:

    [2011] QCA 329

  • Court:

    QCA

  • Judge(s):

    Fraser JA, McMurdo J, Boddice J

  • Date:

    18 Nov 2011

Litigation History

Event Citation or File Date Notes
Primary Judgment [2011] QSC 29 11 Mar 2011 P Lyons J.
Appeal Determined (QCA) [2011] QCA 329 [2012] 2 Qd R 252 18 Nov 2011 Appeal dismissed: Fraser JA and McMurdo and Boddice JJ.

Appeal Status

{solid} Appeal Determined (QCA)