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  4. Southport Memorial Club Inc v Returned and Services League of Australia (Queensland) Southport Sub-Branch Inc - [2023] QCA 146

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Southport Memorial Club Inc v Returned and Services League of Australia (Queensland) Southport Sub-Branch Inc[2023] QCA 146

Reported at (2023) 16 QR 90

Southport Memorial Club Inc v Returned and Services League of Australia (Queensland) Southport Sub-Branch Inc[2023] QCA 146

Reported at (2023) 16 QR 90

SUPREME COURT OF QUEENSLAND

CITATION:

Southport Memorial Club Inc v Returned and Services League of Australia (Queensland) Southport Sub-Branch Inc [2023] QCA 146

PARTIES:

SOUTHPORT MEMORIAL CLUB INC

(appellant)

v

RETURNED AND SERVICES LEAGUE OF AUSTRALIA (QUEENSLAND) SOUTHPORT SUB-BRANCH INC

(respondent)

FILE NO/S:

Appeal No 3147 of 2022

DC No 2236 of 2020

DIVISION:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:

District Court at Brisbane – [2022] QDC 20 (Barlow KC DCJ)

DELIVERED ON:

21 July 2023

DELIVERED AT:

Brisbane

HEARING DATE:

25 July 2022

JUDGES:

McMurdo and Bond and Dalton JJA

ORDERS:

  1. The appeal is dismissed.
  2. The appellant must pay the respondent’s costs of the appeal, to be assessed on the standard basis.

CATCHWORDS:

LANDLORD AND TENANT – COVENANTS – RUNNING WITH LAND OR REVERSION – COVENANTS WHICH DO NOT RUN – where the appellant leased a parcel of land from the respondent – where, under the lease, the appellant covenanted that the respondent could continue to conduct various ceremonies at the demised premises, display memorabilia at the demised premises, and use (free of charge) offices and function rooms at the demised premises – where the respondent sold the land to an unrelated third party – where the appellant subsequently informed the respondent that it was required to vacate the demised premises – where the respondent sought a declaration that it retained entitlement to the benefit of the covenants under the lease – whether the covenants should be regarded as touching and concerning the land or personal covenants – whether the benefit of the clause remained with the respondent following the transfer of title to the parcel of land

Land Title Act 1994 (Qld), s 62

Bank of Queensland Limited v Y & L Promising Pty Ltd [2022] QCA 217, applied

Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 234 CLR 237; [2008] HCA 10, cited

Manchester Brewery Co v Coombs [1901] 2 Ch 608; [1900] UKLawRpCh 66, cited

P & A Swift Investments v Combined English Stores Group Plc [1989] AC 632; [1988] UKHL 3, cited

Simmons v Lee [1998] 2 Qd R 671; [1998] QCA 1, cited

COUNSEL:

P J Dunning KC, with R T Clutterbuck, for the appellant

P D Tucker and M J Steele for the respondent

SOLICITORS:

Turnbull Mylne Solicitors for the appellant

Porter Davies Lawyers for the respondent
  1. [1]
    McMURDO JA:  I agree with Bond JA.
  2. [2]
    BOND JA:  The respondent (the RSL) is a sub-branch of the Returned and Services League of Australia.  The function of that organisation is so well-known in Australia as almost not to require elaboration.  Nevertheless, it may be noted that the RSL’s constitution records that its objects include providing for the sick or needy among those who have served in the Australian Defence Forces and their dependants, and preserving the memory and records of the fallen, including by establishing and preserving commemoration days in their honour.
  1. [3]
    The appellant (the Club) operates a licensed club but is not affiliated with the parent body of the RSL.  It has an arrangement with that body which permits it to use the RSL acronym in its own name and in the name of the licensed club which it operates.
  2. [4]
    Prior to December 2019, the RSL was the registered proprietor of a parcel of land in Queensland.  The land was subject to a registered lease in favour of the Club.  The use permitted under the lease was the conduct of a licensed club.  The lease was due to expire in August 2024.
  3. [5]
    Under cl 29 of the lease the Club covenanted with the RSL that the RSL could continue to conduct various RSL ceremonies at the demised premises; to display memorabilia at the demised premises; and to provide free of charge the use of certain offices and function rooms for specified RSL purposes.  Pursuant to that promise the Club permitted the RSL to occupy two offices within the demised premises; displayed memorabilia within the demised premises; and made function rooms available.
  4. [6]
    In December 2019, the RSL sold the land which was the subject of the registered lease to an unrelated third party (the new owner), and on 6 January 2020 the new owner became the registered proprietor of the land.  The transfer was subject to the registered lease.
  5. [7]
    In March 2020, the Club informed the RSL that it required the RSL to vacate the demised premises by 30 April 2020.  In making that decision the Club said that, among other things, it considered that by selling the property the RSL had extinguished its right to continue its occupancy.  Subsequently, the Club changed the locks of the doors to the offices that the RSL had occupied and moved the RSL’s furniture, equipment and records, together with some memorabilia, into a storage facility.
  6. [8]
    Before the primary judge, the RSL sought a declaration that it remained entitled to the benefits of the covenants expressed in cl 29 of the lease and sought damages for the Club’s breach of those covenants.  The RSL successfully argued that the rights created by the covenants in cl 29 were personal to it as covenantee, had not vested in the new owner and continued to bind the Club as covenantor for the term of the lease.  The RSL claimed and the judge assessed damages against the Club in the sum of $192,820, comprised of two elements: $182,000 for rent for different premises and $10,820 for storage costs.
  7. [9]
    By the present appeal, the Club seeks to overturn that outcome.  For reasons which follow the appeal should be dismissed with costs.

The terms of the lease

  1. [10]
    The lease was in writing and comprised of –
    1. (a)
      a form 7; and
    2. (b)
      an attached schedule containing a Reference Schedule and the relevant covenants and conditions of the lease.
  2. [11]
    The operative terms of the demise as expressed in the form 7 were that “the Lessor leases the premises described in item 5 to the Lessee for the term stated in item 6 subject to the covenants and conditions contained in the attached schedule.”
  3. [12]
    Item 1 of form 7 identified the RSL as the Lessor and item 2 identified the Club as the Lessee.  Item 5 provided that the premises being leased were the whole of the land of which the RSL was the registered proprietor.  Item 6 provided that the term was a 5-year term commencing on 1 September 2009 and expiring on 31 August 2014.  It contained two 5-year options.[1]
  4. [13]
    Clause 1.1 of the lease provided that “unless the contrary intention appears” in the lease the following definitions apply.  Amongst the definitions there set out were:
    1. (a)
      “Lessor means the party named in Item 1 of the Form 7 and includes in the case of a corporation its successors in title and assigns …”; and
    2. (b)
      “Lessee means the party named in Item 3 of the Form 7 and includes in the case of a corporation its successors in title and permitted assigns …”
  5. [14]
    Amongst other terms, the Club covenanted with the RSL that –
    1. (a)
      “the Lessee” would pay rent (cll 2 and 5);
    2. (b)
      “the Lessee” would pay certain outgoings and charges (cl 4);
    3. (c)
      “the Lessee” would maintain certain insurances in connection with the demised premises (cl 6);
    4. (d)
      “the Lessee” would use the demised premises only for the permitted purpose of a licensed club (cl 8);
    5. (e)
      “the Lessee” would keep the demised premises in good and tenantable repair (cl 11);
    6. (f)
      “the Lessee” would take all relevant steps to ensure the maintenance of licences and approvals which are necessary to permit it to conduct the business of a licensed club on the demised premises (cl 13); and
    7. (g)
      “the Lessee” would (unless the Reference Schedule provided to the contrary, which in this case it had)[2]provide a Security Deposit or a Bank Guarantee to “the Lessor” as security for the due and punctual performance by “the Lessee” of its obligations under the lease (cl 26).
  6. [15]
    Amongst other terms, the RSL covenanted with the Club that –
    1. (a)
      “the Lessee” could occupy of the premises during the term of the lease without interference by “the Lessor” (cl 15.1);
    2. (b)
      “the Lessee” would take all reasonable steps to keep defined “Services” (water, electricity, air conditioning, toilets and the like) available to the demised premises during usual business hours and to keep relevant plant and equipment in working order (cl 15.2); and
    3. (c)
      “the Lessee” could enter the demised premises only at reasonable times on reasonable notice to see if “the Lessee” was complying with the lease or to do anything which “the Lessor” must or may do under the lease (cl 15.5).
  7. [16]
    The question of assignment or transfer by “the Lessee” was regulated by cl 12.  The Lessee was not permitted to assign the lease without the Lessor’s approval, acting reasonably.  The process for seeking and obtaining that approval and the constraints on the Lessor refusing its approval were specifically regulated.  Amongst other provisions, it was a specific precondition to a transfer taking effect that the Lessee would ensure that the proposed new lessee signed a deed of covenant in favour of the Lessor.
  8. [17]
    The question of assignment or transfer by the lessor was dealt with by:
  1. (a)
    Clause 15.7:
  1. “Change of lessor
  1. If the Lessor deals with its interest in the Building so that another person becomes lessor, the Lessor is released from its obligations under this Lease arising after it ceases to be lessor.”
  1. (b)
    Clause 25:
  1. “Sale of the Lot
  1. Covenant
  1. If:
  1. (1)
    the Lessor shall sell the lot described in Item 2 of the Form 7 or otherwise dispose of the reversion of this Lease prior to the exercise of the option; and
  1. (2)
    at the date of the sale or other disposition of the reversion of this Lease, this Lease is unregistered,
  1. the Lessor shall procure from such purchaser or disponee a covenant in favour of the Lessee that such purchaser or disponee shall observe and be bound by the provisions of this Lease including this clause [25] and the execution and delivery to the Lessee of such a covenant shall be accepted by the Lessee in full satisfaction and discharge of the Lessor’s personal obligation to the Lessee to grant such option.”
  1. (c)
    Clause 26.7, which, as mentioned, regulated the potential provision by the lessee of a Security Deposit or a Bank Guarantee to the lessor as security for the due and punctual performance by the lessee of its obligations under the lease and which then provided:
  1. “Assignment by the Lessor
  1. The Lessor will be at liberty:
  1. (1)
    in the case of the Security Deposit, to pay the Security Deposit (less any sums appropriated by the Lessor in accordance with clause 26 and not reinstated); and
  1. (2)
    in the case of the Bank Guarantee, provide the Bank Guarantee (to the extent that it has not been called upon by the Lessor),
  1. to any assignee or transferee of the Lessor’s interest in the Premises and thereupon the Lessor shall be discharged from all liability to the Lessee or any other person with respect to the Security.”
  1. [18]
    Clause 29 was expressed in the following terms:
  1. “Traditions & Functions
  1. The Lessee acknowledges that the Lessor will continue to carry on its traditions & functions of a sub-branch of the Returned and Services League of Australia at the Premises during the Term with the concurrence support & assistance of the Lessee and in particular:
  1. (1)
    the Lessee will allow & assist the Lessor in the conduct of ceremonies and gatherings of returned and serving members of the armed forces each calendar year in remembrance of–
  1. (i)
    Kapyong Day on 24 April;
  1. (ii)
    Anzac Day on 25 April;
  1. (iii)
    VP Day on 15 August;
  1. (iv)
    Vietnam Remembrance Day on 18 August;
  1. (v)
    Remembrance on 11 November, and
  1. (vi)
    on such other days that shall become of similar significance.
  1. (2)
    on Anzac Day, the Lessee will provide a Gunfire Breakfast and drinks at breakfast free of charge to the returned and serving members of the armed forces who attend at the Premises;
  1. (3)
    on the other days of remembrance, food and beverages will be supplied to attendees by the Lessee at reasonable bar prices;
  1. (4)
    on each day that the Lessee’s business trades, the Lessee will–
  1. (i)
    raise the flags at opening time;
  1. (ii)
    at 6.pm, play the Ode over the announcing system and tv network in the Premises and then lower the Flags and store them;
  1. (5)
    the Lessee will allow the Lessor to appropriately display in the premises the memorabilia of the Lessor;
  1. (6)
    the Lessee provide free of charge –
  1. (i)
    offices for the Lessor’s Secretary and pension personnel; and
  1. (ii)
    the use of function rooms, when not they are not being used by the Lessee for its other customers, for meetings of any ex-service organizations.”

Some basic propositions of land law

  1. [19]
    It is necessary to recapitulate some basic propositions of land law.
  2. [20]
    In Manchester Brewery Co v Coombs,[3] Farwell J adopted this statement:

“… there are three relations at common law, which may exist between the lessor and the lessee and their respective assignees; first, privity of contract, which is created by the contract itself, and subsists for ever between the lessor and lessee; secondly, privity of estate, which subsists between the lessee, or his assignee in possession of the estate, and the assignee of the reversioner; and, thirdly, privity of contract and estate, which both exist where the term and reversion remain in the original covenantors.”

  1. [21]
    Thus, where A leases land to B, there is both privity of contract and privity of estate between them.  Privity of contract refers to the exclusive legal relationship between them as parties to a contract and the doctrine of privity of contract provides that a person not a party to a contract may not sue upon it so as directly to enforce its obligations.[4]  Privity of estate between them refers to the relationship of landlord and tenant exists between them, or, in other words, the relationship of tenure between them.[5]
  2. [22]
    Where A legally transfers to C the freehold subject to the lease, there is no longer privity of estate between A and B.  Privity of estate then exists between C and B.  And, absent statutory intervention or novation to C or assignment to C of the contractual rights as between A and B, there will no privity of contract as between C and B.
  3. [23]
    Covenants in a lease which “touch and concern” the land are regarded to “run with the land” and can be enforced by C against B despite the lack of privity of contract between C and B.[6]  As McPherson JA (with whom Thomas and Dowsett JJ agreed) noted in Simmons v Lee:[7]

“The effect of assigning the freehold or fee simple reversion on a lease is, of course, that the lessee remains bound to the assignor by privity of contract but becomes liable to the assignee by privity of estate. The assignee becomes entitled to enforce in his favour the benefit of the lessee’s covenants in the lease, provided that they “touch and concern” the land. That was the effect of the Grantees of Reversions Act 1540; 32 Hen. 8, c. 34, which is now embodied in s. 117 of the Property Law Act 1974.”

  1. [24]
    However, the lease between A and B might include personal covenants which would not be regarded as touching and concerning the land.[8]  After A legally transfers to C the freehold subject to B’s lease then, again, absent statutory intervention, novation or assignment, because privity of contract exists between A and B but not between C and B, only A and B will be able to sue on such personal covenants.  Of course, a question of construction might arise as to whether the promise was intended to continue once A had legally transferred the freehold to C.
  2. [25]
    In Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd,[9] the High Court held that the tests stated by the House of Lords in Swift Investments v Combined English Stores Group Plc[10] as to whether a covenant touches and concerns the land so as to entitle a transferee of the reversion to the benefit of the covenant are to be regarded as part of the law of Australia.  The High Court was referring to the following observations by Lord Oliver of Aylmerton (with whom Lords Keith of Kinkell, Roskill, Templeman and Ackner agreed):[11]

“Formulations of definitive tests are always dangerous, but it seems to me that, without claiming to expound an exhaustive guide, the following provides a satisfactory working test for whether, in any given case, a covenant touches and concerns the land:

  1. (1)
    the covenant benefits only the reversioner for time being, and if separated from the reversion ceases to be of benefit to the covenantee;
  1. (2)
    the covenant affects the nature, quality, mode of user or value of the land of the reversioner;
  1. (3)
    the covenant is not expressed to be personal (that is to say neither being given only to a specific reversioner nor in respect of the obligations only of a specific tenant);
  1. (4)
    the fact that a covenant is to pay a sum of money will not prevent it from touching and concerning the land so long as the three foregoing conditions are satisfied and the covenant is connected with something to be done on, to or in relation to the land.”
  1. [26]
    Against the background of those propositions, I turn to consider the grounds of appeal advanced by the Club.

Appeal grounds 1 and 2

  1. [27]
    The effect of appeal ground 1 was to contend that the primary judge erred by not concluding that on the proper construction of cl 29 the lessor for the time being of the land was the party contractually entitled to such rights as were created by cl 29, and once the RSL transferred title to the land it ceased to be the lessor and ceased to have any such rights.
  2. [28]
    The effect of appeal ground 2 was to contend that the primary judge erred by not concluding that the rights created by cl 29 were not personal to the RSL, and instead touched and concerned the land and were transferred with it.
  3. [29]
    The two grounds are related and may be dealt with together.
  4. [30]
    It is true that the term “the Lessor” was defined in cl 1.1 to include the RSL’s successors in title and assigns.  It is also true that the obligations expressed in cl 29 are expressed to “the Lessor”.  But the definition in cl 1.1 only applied “unless the contrary intention appears”.  The problem for the Club is that cl 29 makes the contrary intention absolutely plain.
  5. [31]
    First, the chapeau to cl 29 refers specifically to the RSL personally and not to any successors in title or assigns by stating an acknowledgment which can only apply to the RSL personally.  It is only the RSL personally which can continue to carry on “its” traditions and functions as a sub-branch of the Returned and Services League of Australia.
  6. [32]
    Second, the obligations in cl 29(1) to (4) are manifestations of the “concurrence, support & assistance” referred to in the chapeau.  They are promises by “the Lessee” in relation to the RSL’s personal traditions and functions.
  7. [33]
    Third, it may be accepted that the obligations in cl 29(5) and cl 29(6)(i) are literally capable of being read as obligations which are not personal.  One might accept that other corporations might have memorabilia.  And one might accept that other corporations could have a “Secretary” and “pension personnel”.  But in the context of the chapeau and the nature of the RSL, such a literal interpretation would be obviously wrong.  The memorabilia concerned are the memorabilia of the RSL, which is an organisation with special connection to returned and serving members of the armed forces and which has traditions and functions relating to the activities of those persons in various military conflicts.  The Secretary and pension personnel are to be taken as officers of an organisation which has a particular interest in providing for members of the armed forces and their dependants.
  8. [34]
    Fourth, the obligation in cl 29(6)(ii) is to provide free of charge the use of function rooms for meetings of any ex-service organisations.  Again, in the context of the chapeau and the nature of the RSL, that is an obligation which only makes sense as one personally owed to the RSL because of its particular traditions and functions.
  9. [35]
    The result is that the evident intention of cl 29 was to express obligations owed to the RSL personally and not merely to the corporation who occupied the position of the lessor for the time being.  And there is no reason in the lease to think that the lease contemplated that the personal obligation would be extinguished if the RSL transferred the freehold.  Indeed the contrary is the case.  Clause 29 is expressed in language intended to be operative for the term of the lease.  And cl 15.7 of the lease expressly addressed the general position and only expressed a release in favour of the RSL, not in favour of the Club.
  10. [36]
    For the following reasons, these observations as to the personal nature of the obligations owed to the RSL under cl 29 also lead to the resolution in the negative of the question whether the cl 29 covenants should be regarded as touching and concerning the land:
    1. (a)
      As to Lord Oliver’s first test, the cl 29 covenants do not benefit the reversioner for the time being.  They benefit the RSL personally qua the RSL’s particular character.  They do not cease to benefit the RSL as covenantee if they are separated from the reversion.  To the contrary, they will continue to benefit the RSL for the remainder of the term of the registered lease.
    2. (b)
      As to Lord Oliver’s second test, the covenant does not affect the nature, quality, mode of user or value of the land of the reversioner.  The reversioner (namely the new owner) is subject to obligations owed to the Club as its registered lessee.  It matters not a jot to the new owner that the Club might continue to be subject to the cl 29 obligations owed to the RSL.  As the primary judge found:[12]

“Nor does the clause affect the nature, quality, mode of user or value of the land of the reversioner. It does not prevent the Club from using the land for the purpose provided for in the lease. There is no evidence that it affects the value of the land, nor does it affect the interest of the reversioner in any other way.”

  1. (c)
    As to Lord Oliver’s third test, on its proper construction, cl 29 is expressed to be personal.
  1. [37]
    It follows that appeal grounds 1 and 2 must fail.

Appeal ground 3

  1. [38]
    The effect of appeal ground 3 was to contend that the primary judge had erred by not finding that by operation of s 62 of the Land Title Act 1994 (Qld) the rights which the respondent had held under cl 29 had vested in the new owner.
  2. [39]
    The Club argued that even if the promises which it made to the RSL in cl 29 of the lease should be regarded as personal covenants which did not touch and concern the land and did not run with the land, the RSL’s rights under those covenants vested in the new owner.  In other words, the Club contended there had been a statutory interference with the result which would obtain merely by the operation of the doctrine of privity of contract.
  3. [40]
    Section 62 is in the following terms:

“62 Effect of registration of transfer

  1. (1)
    On registration of an instrument of transfer for a lot or an interest in a lot, all the rights, powers, privileges and liabilities of the transferor in relation to the lot vest in the transferee.
  1. (2)
    Without limiting subsection (1), the registered transferee of a registered mortgage is bound by and liable under the mortgage to the same extent as the original mortgagee.
  1. (3)
    Without limiting subsection (1), the registered transferee of a registered lease is bound by and liable under the lease to the same extent as the original lessee.
  1. (4)
    In this section—
  1. rights, in relation to a mortgage or lease, includes the right to sue on the terms of the mortgage or lease and to recover a debt or enforce a liability under the mortgage or lease.”
  1. [41]
    In the present case, one must start by appreciating that the RSL transferred the lot itself to the new owner.  It did so subject to the registered lease.  There was no evidence of a novation as between the RSL, the Club and the new owner of the contractual rights under the lease.  Nor was there evidence that the RSL had assigned to the new owner any of the contractual rights under the lease.  It was the instrument of transfer of the estate in fee simple to the new owner which was the instrument of transfer which was registered and to which s 62(1) must be taken to refer.
  2. [42]
    If the RSL’s rights under cl 29 of the lease could properly be categorised as “powers, privileges and liabilities of the transferor in relation to the lot”, then the Club’s argument would have to be accepted.  The critical consideration therefore is the identification of the degree or character of connection required to characterise a right, power, privilege or liability of a transferor as one “in relation to the lot” for the purpose of the provision.
  3. [43]
    That question was recently considered in Bank of Queensland Limited v Y & L Promising Pty Ltd in the context of determining whether an accrued personal liability which a landowner had to a registered lessee could be regarded to have vested in a new owner consequent upon registration of the instrument by which the landowner transferred the land to the new owner.  Cooper J (with whom Morrison JA and Williams J agreed) made the following points:[13]
    1. (a)
      A consideration of the text of s 62(1) reveals the provision is concerned with the effect of transfers of land, or interests in land, within the context of the Torrens system of land registration.[14]
    2. (b)
      By its terms s 62(1) operates when an instrument of transfer is registered to vest certain rights, powers, privileges, and liabilities held by the transferor in the transferee.  The description of the rights, powers, privileges, and liabilities so vested as being “in relation to the lot” makes it clear that, for vesting to occur under the provision, there must be some connection between the rights, powers, privileges and liabilities and the transferor’s interest in the lot.[15]
    3. (c)
      The relevant enquiry before the Court for the purpose of construing s 62(1) involved identifying the degree or character of connection required to characterise a liability as one “in relation to the lot” for the purposes of the provision.[16]
    4. (d)
      The first relevant enquiry concerned whether a consideration of the history and understanding of the legislative predecessors to s 62 revealed a judicially settled meaning as to the degree or character of the connection required to characterise a liability as one “in relation to the lot” for the purposes of the provision.  The second relevant enquiry, if such a settled meaning could be discerned, was whether there was some judicially cognisable indication that some different meaning was legislatively intended when s 62 was enacted.[17]
    5. (e)
      As to the first enquiry, an analysis of the High Court decisions of Measures v McFadyen[18] and Premier Mines Pty Ltd v French[19] confirms that personal obligations or liabilities of the transferor of an interest in land can be vested in the transferee by operation of s 62 or similar provisions, but that will only occur when the personal obligation or liability is intimately connected with the rights of property arising out of the transfer or normally incident to the interest in land which is transferred.[20]  An accrued personal liability of a transferor of land for damages consequent upon a completed breach of a lease covenant could not be so regarded.[21]
    6. (f)
      As to the second enquiry, nothing in the Queensland Law Reform Commission report which led to the introduction of s 62 suggested that, in enacting s 62, the legislature intended to depart from the previously understood construction of the legislative predecessors of s 62.[22]
    7. (g)
      On the proper construction of s 62(1), an accrued personal liability of a transferor of land for damages consequent upon a completed breach of a lease covenant is not a liability “in relation to the lot”.
  4. [44]
    Although Cooper J’s textual and contextual analysis was carried out in relation to the liabilities of a transferor and not rights of a transferor, there is no reason that it should not apply to rights.  Thus, one can advance the general proposition that the degree or character of connection required to characterise a right or liability of a transferor as one “in relation to the lot” for the purpose of s 62(1) is that it must be intimately connected with the rights of property arising out of the transfer or normally incident to the interest in land which is transferred.
  5. [45]
    Because the interest in land which was transferred was the fee simple itself, the RSL’s rights under cl 29 of the lease do not have that type of connection and cannot be so characterised.  Rights which touch and concern the land could be regarded as normally incident to the transfer of a fee simple interest in land.  But, for reasons already expressed, the transferor’s rights under cl 29 were personal rights owed by the registered lessee to the transferor personally and because of the particular identity of the transferor.  They did not touch and concern the land.  And it is the personal nature of those rights which suggests they cannot be regarded as intimately connected with the fee simple interest in land which was the subject of the transfer.
  6. [46]
    The Club argued for a different outcome by reference to Karacominakis v Big Country Developments Pty Ltd[23] and Bonafair Holdings Pty Ltd v Hungry Jack’s Pty Ltd.[24]  The Club argued that those cases tended to support the proposition that where there is a transfer of a lease, the statute effectively operates to deem privity of contract to exist between the original lessor and the transferee of the lease.  The Club suggested that “by parity of reasoning” the same position obtained between the assignee of the lessor (i.e. the new owner) and the original lessee (i.e. the Club).  But there is no parity of reasoning.  The argument involves a false equivalence.  If RSL had continued as registered proprietor and the Club had assigned its lease (and if the RSL had not dealt with privity of contract by obtaining the deed of covenant referred to in cl 12) the instrument of transfer for the purposes of s 62(1) would have been the instrument of transfer of the lease; the property interest transferred would have been the leasehold interest and the requisite analysis would have assumed an entirely different complexion.  It is not necessary to express a view on the circumstances hypothesised.
  7. [47]
    Section 62(1) did not operate to vest in the new owner the RSL’s rights under cl 29 of the lease.  Appeal ground 3 must fail.

Appeal ground 4

  1. [48]
    The effect of appeal ground 4 was to contend that the primary judge erred in failing to find that the RSL had only proved damage to the extent of storage fees totalling $10,820.  The Club challenged the assessment made by the primary judge of $182,000 for rent for different premises.  Even if the other grounds of appeal failed, the Club contended that the amount awarded for damages for breach of cl 29 should be reduced to $10,820.
  2. [49]
    In support of this ground the Club argued that the primary judge failed to apply the correct legal test to measure damages, and that it was not open to him to make the findings which he did make in order to justify awarding the RSL $182,000 for rent for different premises.

The reasoning of the primary judge

  1. [50]
    The case which the primary judge accepted was as follows:
    1. (a)
      Before the Club ejected the RSL from the demised premises, the RSL had two offices for its exclusive use, a number of places where its memorabilia took up substantial space being displayed, and was entitled to use the Club’s function rooms, when they were not being used by the Club for its customers, for meetings of any ex-service organisations.[25]
    2. (b)
      As a consequence of being ejected the RSL was obliged to find other premises from which to carry out its traditions and functions – in particular, to provide services to its members.[26]
    3. (c)
      The RSL came to a temporary arrangement to use the boardroom at the Southport Bowls Club from October 2020, for which it paid $660 a month.  It then came to an arrangement with that club to rent the entire top floor of its building for $5,000 a month (having initially paid $2,000 a month from October to December 2021).  It was in the process of renovating that floor and, during that process, it continued to use and pay for the boardroom as well as paying the rent for the top floor.  It anticipated being in that position until May 2022, after which it would rent just the top floor.[27]
    1. (d)
      Thus the first component of the claim was for damages equivalent to the rent that it had paid to the Southport Bowls Club and would pay up to the end of the lease (August 2024): a total of $182,000.[28]
  2. [51]
    Before the primary judge the Club advanced two arguments against such an award.
  3. [52]
    First, the Club contended that it had offered to pay for suitable alternative accommodation and the RSL had unreasonably refused that offer.  The RSL should be regarded as causing its own loss.  As to this:
    1. (a)
      The primary judge accepted that the Club had offered accommodation at commercial offices adjacent to the Club for which the Club would pay $60,000 per annum.[29]
    2. (b)
      But the primary judge found that the offer of $60,000 was only for the first year and any further funding was subject to the proviso that “future donations” would go through the Club’s normal processes for application for charitable grants.  The Club intended that, provided it had funds available, after going through the application and donations process it would make an ongoing donation to RSL to pay future rent.[30]
    3. (c)
      The primary judge accepted the evidence of the relevant RSL officer that although the office space offered was ideal, the RSL refused it because the Club had told the RSL that the RSL would have to make a grant application to get the money to pay the rent.  The RSL saw the offer as an offer of accommodation for one year, albeit with the possibility of that period being extended from year to year.  The primary judge inferred that the RSL considered the offer to be unsatisfactorily impermanent.[31]
    4. (d)
      The primary judge found that the RSL was justified in refusing the Club’s offer, given that it was for one year only and for future years it depended on the RSL applying for a yearly grant and the Club being able and agreeing to provide the rent.  The primary judge found that the insecurity of the Club’s offer justified the RSL refusing it.  Therefore, that refusal did not cause the RSL’s loss.[32]
  4. [53]
    Second, the Club argued that the dimensions of the top floor rented by the RSL were such that the premises which the RSL would occupy from May 2022 were at least four times the size of the two offices which the RSL had occupied within the demised premises.  The Club argued that the amount of any rental component should be reduced by three quarters to account for the difference in area.  The primary judge rejected that argument in the following terms (emphasis added):[33]

“I disagree with that proposition. It may be fortuitous that RSL was able to locate far larger premises for the same amount of rent per annum as the Club had offered to fund for one year and possibly longer. However, RSL did not simply need to replace the office space that it had occupied. It also needs room to display its memorabilia appropriately and to replace its entitlement to use the Club’s function rooms from time to time for meetings of ex-service organisations. In the interim two years, it has suffered considerable inconvenience in being able only to occupy one room at the bowls club, particularly as it needs to provide confidential services to its members, which necessitates other officers or volunteers sometimes having to vacate the room for a period. It also will incur (but does not claim) the cost of renovating the upper floor to suit its purposes.

I find that it has acted appropriately in finding and negotiating the rent for its premises at the bowls club. It was obliged to find that accommodation (both temporary and more permanent) because the Club decided no longer to provide it the office space and other space to which it was entitled under clause 29 of the lease. I find that the amount claimed for rent to the end of the lease period is reasonable and appropriate to award as damages for breach of clause 29.”

The Club’s argument that the primary judge applied the wrong test

  1. [54]
    It is axiomatic that where a party sustains a loss by reason of a breach of contract, that party is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.[34]
  2. [55]
    The RSL had to be awarded such money as, so far as money could do it, would have put the RSL in the position in which it would have been had cl 29 been performed, namely, sufficient money to put itself in the position of having –
    1. (a)
      equivalent office space;
    2. (b)
      equivalent memorabilia display space; and
    3. (c)
      equivalent function room availability,

as it would have had within the demised premises if the Club had performed cl 29 for the remaining term of the lease.

  1. [56]
    There is no part of the logic of the claim which the primary judge accepted which suggests that he failed to apply the appropriate test to assess damages.  Indeed, the highlighted part of the quotation at [53] above confirms that the primary judge applied the right test.
  2. [57]
    The Club’s argument that the primary judge applied the wrong test to measure damages must be rejected.

The Club’s argument that the evidence did not support the amount awarded

  1. [58]
    The Club’s argument focussed on the undisputed proposition that the top floor which the RSL would occupy from May 2022 was at least four times the size of the two offices which the RSL had occupied within the demised premises.  But the primary judge was plainly right to regard that proposition as a false comparator because it paid no regard to the need to obtain memorabilia space and function room availability.
  2. [59]
    The primary judge accepted that the arrangement which the RSL made with the Southport Bowls Club was caused by the Club’s breach of cl 29 and that the arrangement provided sufficient office space, memorabilia display availability and function room availability to put the RSL in the position in which it would have been had the Club performed cl 29.[35]
  3. [60]
    If the Club wanted to contend that less space and a lesser rental would have still been sufficient to achieve that outcome, then it was for the Club to advance that proposition.  Such a proposition would have been a failure to mitigate proposition.  The onus would have been on the Club to show that the RSL had failed to mitigate its damage.[36]
  4. [61]
    The Club was unable to identify any evidence which was capable of being regarded as discharging that onus.  The primary judge was right not to regard the mere fact of the disparity between the area of the office space provided pre-breach and the area obtained by the RSL post-breach as proving the RSL had acted unreasonably.  And the only other relevant evidence was that an alternative course, proposed by the Club, and which would have been satisfactory, would have cost $60,000 per year.  That tended to support the reasonableness of the RSL’s conduct, not demonstrate its unreasonableness.
  5. [62]
    The Club’s argument that the evidence did not support the amount of damages awarded must be rejected.
  6. [63]
    It follows that appeal ground 4 must fail.

Conclusion

  1. [64]
    As all appeal grounds must fail, I would make the following orders:
    1. (a)
      The appeal is dismissed.
    2. (b)
      The appellant must pay the respondent’s costs of the appeal, to be assessed on the standard basis.
  2. [65]
    DALTON JA:  I agree with the orders proposed by Bond JA and with his reasons.

Footnotes

[1]  By the time the RSL transferred the land to the new owner, those options had been exercised, giving rise to the expiry date of 31 August 2024.

[2]  Clause 26 would apply unless item 8 of the Reference Schedule had not been completed or stated “nil” or “not applicable”.  Item 8 provided “n/a”.

[3]  [1901] 2 Ch 608 at 614.

[4]Hobart International Airport Pty Ltd v Clarence City Council [2022] HCA 5 at [119] per Edelman and Steward JJ.

[5]  Megarry & Wade, The Law of Real Property (Sweet & Maxwell, 9th ed) at 19-0004.

[6]Simmons v Lee [1998] 2 Qd R 671 at 674; Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 234 CLR 237 at 269 to 273; Lend Lease Development Pty Ltd v Commissioner of State Revenue (2013) 93 ATR 94 at [284] per Tate JA, with whom Warren CJ and Kyrou AJA agreed.  (Note Lend Lease was overturned in the High Court in Commissioner of State Revenue (Vic) v Lend Lease Development Pty Ltd (2014) 254 CLR 142, but on grounds which did not affect the propositions cited).

[7]Simmons v Lee [1998] 2 Qd R 671 at 674.

[8]P & A Swift Investments v Combined English Stores Group Plc [1989] AC 632 at 642; Simmons v Lee [1998] 2 Qd R 671 at 677; Lend Lease Development Pty Ltd v Commissioner of State Revenue (2013) 93 ATR 94 at [284] per Tate JA, with whom Warren CJ and Kyrou AJA agreed.

[9]Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 234 CLR 237 at 272 to 273 per Gleeson CJ, Kirby, Heydon, Crennan and Kiefel JJ.

[10]P & A Swift Investments v Combined English Stores Group Plc [1989] AC 632.

[11]P & A Swift Investments v Combined English Stores Group Plc [1989] AC 632 at 642, formatting altered to distinguish better between the four tests.

[12]Returned & Services League of Australia (Queensland Branch) Southport Sub-Branch Inc v The Southport RSL Memorial Club Inc [2022] QDC 20 at [23].

[13]  [2022] QCA 217.

[14]  [2022] QCA 217 at [39].

[15]  [2022] QCA 217 at [42].

[16]  [2022] QCA 217 at [45].

[17]  [2022] QCA 217 at [48].

[18]  (1910) 11 CLR 723.

[19]  (2007) 235 CLR 81.

[20]  [2022] QCA 217 at [60].

[21]  [2022] QCA 217 at [62].

[22]  [2022] QCA 217 at [71].

[23]  [2000] NSWCA 313.

[24]  [2016] NSWCA 276.

[25]  [2022] QDC 20 at [59].

[26]  [2022] QDC 20 at [59].

[27]  [2022] QDC 20 at [58].

[28]  [2022] QDC 20 at [58].

[29]  [2022] QDC 20 at [64].

[30]  [2022] QDC 20 at [65].

[31]  [2022] QDC 20 at [66].

[32]  [2022] QDC 20 at [67].

[33]  [2022] QDC 20 at [69] to [70].

[34]Robsinson v Harman (1848) 1 Exch 850 at 855, approved in Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64 per Mason CJ and Dawson J at 80, Brennan J at 99, Deane J at 117, Toohey J at 134, Gaudron J at 148-9 and McHugh J at 161.

[35]  [2022] QDC 20 at [69] and [70].

[36]TC Industrial Plant Pty Ltd v Robert's Queensland Pty Ltd (1963) 180 CLR 130 at 138; Arsalan v Rixon; Nguyen v Cassim (2021) 96 ALJR 1 at 9.

Close

Editorial Notes

  • Published Case Name:

    Southport Memorial Club Inc v Returned and Services League of Australia (Queensland) Southport Sub-Branch Inc

  • Shortened Case Name:

    Southport Memorial Club Inc v Returned and Services League of Australia (Queensland) Southport Sub-Branch Inc

  • Reported Citation:

    (2023) 16 QR 90

  • MNC:

    [2023] QCA 146

  • Court:

    QCA

  • Judge(s):

    McMurdo, Bond, Dalton JJA

  • Date:

    21 Jul 2023

  • Selected for Reporting:

    Editor's Note

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2022] QDC 2016 Feb 2022Proceedings concerning entitlement to benefit of covenants in lease said to have been breached; damages awarded in sum of $192,820: Barlow KC DCJ.
Appeal Determined (QCA)[2023] QCA 146 (2023) 16 QR 9021 Jul 2023Appeal dismissed: Bond JA (McMurdo and Dalton JJA agreeing).
Special Leave Refused (HCA)[2023] HCASL 19607 Dec 2023Special leave refused: Gageler CJ, Gordon, Edelman, Steward, Gleeson, Jagot and Beech-Jones JJ.

Appeal Status

Appeal Determined - Special Leave Refused (HCA)

Cases Cited

Case NameFull CitationFrequency
Arsalan v Rixon; Nguyen v Cassim (2021) 96 ALJR 1
1 citation
Jump To
Cite 1 - (2021) 96 ALJR 1
Bank of Queensland Limited v Y & L Promising Pty Ltd(2022) 12 QR 326; [2022] QCA 217
9 citations
Jump To
Cite 1 - [2022] QCA 217
Cite 2 - [2022] QCA 217
Cite 3 - [2022] QCA 217
Cite 4 - [2022] QCA 217
Cite 5 - [2022] QCA 217
Cite 6 - [2022] QCA 217
Cite 7 - [2022] QCA 217
Cite 8 - [2022] QCA 217
Cite 9 - [2022] QCA 217
Bonafair Holdings Pty Ltd v Hungry Jacks Pty Ltd [2016] NSWCA 276
1 citation
Jump To
Cite 1 - [2016] NSWCA 276
Commissioner of State Revenue (Vic) v Lend Lease Development Pty Ltd (2014) 254 CLR 142
1 citation
Jump To
Cite 1 - (2014) 254 CLR 142
Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64
1 citation
Jump To
Cite 1 - (1991) 174 CLR 64
Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 234 CLR 237
3 citations
Jump To
Cite 1 - (2008) 234 CLR 237
Cite 2 - (2008) 234 CLR 237
Cite 3 - (2008) 234 CLR 237
Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd [2008] HCA 10
1 citation
Jump To
Cite 1 - [2008] HCA 10
Hobart International Airport Pty Ltd v Clarence City Council [2022] HCA 5
1 citation
Jump To
Cite 1 - [2022] HCA 5
Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313
1 citation
Jump To
Cite 1 - [2000] NSWCA 313
Lee v Simmons [1998] QCA 1
1 citation
Jump To
Cite 1 - [1998] QCA 1
Lend Lease Development Pty Ltd v Commissioner of State Revenue (2013) 93 ATR 94
2 citations
Jump To
Cite 1 - (2013) 93 ATR 94
Cite 2 - (2013) 93 ATR 94
Manchester Brewery Co v Coombs [1900] UKLawRpCh 66
1 citation
Jump To
Cite 1 - [1900] UKLawRpCh 66
Manchester Brewery Co. v Coombs [1901] 2 Ch 608
2 citations
Jump To
Cite 1 - [1901] 2 Ch 608
Cite 2 - [1901] 2 Ch 608
Measures v McFadyen (1910) 11 CLR 723
1 citation
Jump To
Cite 1 - (1910) 11 CLR 723
P & A Swift Investments v Combined English Stores Group Plc [1988] UKHL 3
1 citation
Jump To
Cite 1 - [1988] UKHL 3
Queensland Premier Mines Pty Ltd v French (2007) 235 CLR 81
1 citation
Jump To
Cite 1 - (2007) 235 CLR 81
Returned and Services League of Australia (Queensland Branch) Southport Sub-Branch Inc v Southport RSL Memorial Club Inc [2022] QDC 20
12 citations
Jump To
Cite 1 - [2022] QDC 20
Cite 2 - [2022] QDC 20
Cite 3 - [2022] QDC 20
Cite 4 - [2022] QDC 20
Cite 5 - [2022] QDC 20
Cite 6 - [2022] QDC 20
Cite 7 - [2022] QDC 20
Cite 8 - [2022] QDC 20
Cite 9 - [2022] QDC 20
Cite 10 - [2022] QDC 20
Cite 11 - [2022] QDC 20
Cite 12 - [2022] QDC 20
Robinson v Harman (1848) 1 Ex Ch 850
1 citation
Jump To
Cite 1 - (1848) 1 Ex Ch 850
Simmons v Lee [1998] 2 Qd R 671
4 citations
Jump To
Cite 1 - [1998] 2 Qd R 671
Cite 2 - [1998] 2 Qd R 671
Cite 3 - [1998] 2 Qd R 671
Cite 4 - [1998] 2 Qd R 671
Swift (P. & A.) Investments v Combined English Stores Group Plc. [1989] AC 632
4 citations
Jump To
Cite 1 - [1989] AC 632
Cite 2 - [1989] AC 632
Cite 3 - [1989] AC 632
Cite 4 - [1989] AC 632
TC Industrial Plant Pty Ltd v Robert's Queensland Pty Ltd (1963) 180 CLR 130
1 citation
Jump To
Cite 1 - (1963) 180 CLR 130

Cases Citing

Case NameFull CitationFrequency
AJH Property No. 2 Pty Ltd v Wild Earth Australia Pty Ltd [2024] QCAT 2182 citations
Consolidated Pastoral Company Pty Ltd v Bellevue Station Pty Ltd [2023] QSC 202 2 citations
Eleven 17 Ocean Street Pty Ltd v Evangelista Pty Ltd(2023) 16 QR 110; [2023] QCA 1704 citations
1

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