FEDERAL COURT OF AUSTRALIA

Canberra Drag Racers Club Incorporated v Australian Capital Territory

[2001] FCA 332

LANDLORD AND TENANT – lease - option for renewal – appellant granted 10 year lease in ACT by Commonwealth – option for renewal of 10 years upon satisfaction of pre-conditions that land not required for a “National Land” purpose and land “available for lease” - appellant refused offer of 5 year renewal – whether pre-conditions fulfilled – they were not - whether ACT independent body and/or agent of Commonwealth – it was both - whether ACT acted “honestly and reasonably” – it did - whether renewal clause void for uncertainty – it was not - Administrative Appeals Tribunal (Cth) was an independent arbitrator under

s 3AAA Leases Ordinance 1918 (ACT).

LANDLORD AND TENANT – Leases Ordinance 1918 (ACT) – whether Ordinance, with respect to “Territory Land” as opposed to “National Land”, pursuant to s 34 Australian Capital Territory (Self-Government) Act 1988 (Cth), as enactment of ACT Assembly, from date of ACT Self-Government should be cited as Leases Act 1918 (ACT) – it should.

CONTRACTS – lease – implied term – application of test of “business efficacy” – term not implied in this case.

Australian Capital Territory (Self-Government) Act 1988 (Cth), ss 2(2), 34, 36, Sch 5

Australian Capital Territory (Planning and Land Management) Act 1988 (Cth), ss 27, 28, 29

Leases Ordinance 1918 (ACT), ss 2, 3AAA

National Land Ordinance 1989 (ACT), ss 5, 6(1)

Leases Regulations

Meeham v Jones (1982) 149 CLR 571 cited

Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 followed

Cudgen Rutile (No. 2) Pty Ltd v Chalk [1975] AC 520 followed

Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 applied

Attorney-General (ACT) v Commonwealth (1990) 26 FCR 82 applied

Hawthorn Football Club Ltd v Harding [1988] VR 49 considered

Brooks v Wyatt (1992) 112 FLR 12 considered

CANBERRA DRAG RACERS INCORPORATED v AUSTRALIAN CAPITAL TERRITORY AND ANOR

A57 OF 2000

O’LOUGHLIN, HIGGINS and MATHEWS JJ

CANBERRA

2 APRIL 2001

ON APPEAL FROM A JUDGE OF THE SUPREME COURT OF AUSTRALIAN CAPITAL TERRITORY

THE COURT ORDERS THAT:

1.      The appeal be dismissed with costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

ON APPEAL FROM A JUDGE OF THE SUPREME COURT OF AUSTRALIAN CAPITAL TERRITORY

REASONS FOR JUDGMENT

o’loughlin and MATHEWS JJ

1                     These proceedings have come before the Court as an appeal from the decision of a judge of the Supreme Court of the Australian Capital Territory (“the ACT”). The appellant, Canberra Drag Racers Club Incorporated, had claimed unsuccessfully before his Honour that it had, in its capacity as a lessee, lawfully exercised its ten-year right of renewal of a lease.

2                     The appellant was, at all times that are material to these proceedings, an incorporated club that conducted drag racing at a motor racing track on Block 520, District of Majura (“the subject land”). The subject land is situated at Pialligo in the ACT just east of the Canberra Airport and the RAAF’s Fairbairn base. The appellant commenced its racing activities in 1978 when it was initially granted a licence by the Commonwealth to use the land for that purpose. However, in the late 1980’s, but prior to the ACT’s self-government, it had commenced negotiations with officers of the Commonwealth to obtain a lease of the land. (The ACT achieved self-government on 11 May 1989). On 27 October 1988, a written offer to lease the land was sent by the Assistant Secretary, Lands Branch, ACT Administration – then a Commonwealth officer – to the appellant. The letter of offer included a draft form of lease that was proposed to be issued under the Leases Ordinance 1918 (ACT). The term of the proposed lease was to be ten years, commencing on the date of the appellant’s acceptance of the offer.

3                     The draft lease, which named the Commonwealth as lessor but which left the name of the intended lessee blank, contained a provision whereby, under certain circumstances, the intended lessee would have an option to extend the term of the lease. As presented in its draft form, the option was in the following terms:

“That if at the expiration of this lease the Commonwealth shall have decided not to sub-divide the land and that it is not required for any Commonwealth purpose and shall have declared the premises to be available for lease AND if the Lessee has duly paid the rent and observed and performed the covenants and stipulations on the part of the Lessee to be observed and performed and giving the Commonwealth not less than three months PREVIOUS notice in writing of his desire to extend the lease the Lessee shall be entitled to a further lease of the premises for a term of years and at such rents and subject to such conditions (including reappraisement of rents) as may then be determined by the Commonwealth;”

4                     By letter dated 6 December 1988, the appellant’s solicitor wrote to the Assistant Secretary, Lands Branch, ACT Administration, advising that his client “accepts the offer of lease …”. A cheque for $400, in payment of the annual land rent for the first year of the lease, was enclosed and the author of the letter concluded:

“I would be pleased if you could contact me as soon as the lease has been prepared and is available for my client’s execution.”

The payment of the $400 was receipted by the Commonwealth Department of Territories and Local Government on 9 December 1988.

5                     In due course a lease was executed by the ACT on behalf of the Commonwealth, but for reasons that are set out later, the appellant was unsuccessful in its endeavours to obtain a renewal of the lease. It was its failure to obtain the renewal that led to the institution of these proceedings. It has sued both the ACT and the Commonwealth.

6                     On 6 December 1988, three days prior to the payment by the appellant of the $400, four Acts of the Commonwealth legislature received the Royal Assent. They were:

·        the Australian Capital Territory (Self-Government) Act 1988 (Cth) (“the SG Act”);

·        the Australian Capital Territory (Electoral) Act 1988 (Cth);

·        the Australian Capital Territory (Planning and Management) Act 1988 (Cth) (“the PALM Act”); and

·        the Australian Capital Territory Self-Government (Consequential Provisions) Act 1988 (Cth).

7                     The provisions of s 27 of the PALM Act are of particular significance to these proceedings. It established a category of land in the ACT that was, and is to be known as, “National Land”; such land is created by the declaration of the relevant Commonwealth Minister of State and its details are published in the Commonwealth Government Gazette. However, s 27 contains a provision whereby the Minister is not to declare any land to be “National Land” unless the land is, or is intended to be, used by or on behalf of the Commonwealth. It has already been noted that self-government for the ACT did not commence until 11 May 1989; however, s 27 of the PALM Act came into operation on 31 January 1989.

8                     On Thursday, 2 March 1989, a notice appeared in the Commonwealth Government Gazette of that day pursuant to which the relevant Minister declared the land that was identified in the schedules to the notice “to be National Land, all those areas of land so described being used, or being intended to be used, by or on behalf of the Commonwealth”. That notice will, from time to time hereafter, be referred to as “the 1989 declaration”. The land that is the subject of these proceedings was included in that declaration and it remained subject to that declaration throughout the ten-year term of the appellant’s lease. The learned trial judge found that the subject land “was to be used, by or on behalf of the Commonwealth for the purposes and operation of the Canberra Airport and the Fairbairn RAAF Base, both of which are, and were, Commonwealth purposes”. That finding has been challenged in this appeal – one of the items of relief that is sought by the appellant being a declaration:

“… that there was no lawful or proper basis upon which it could be concluded by either [the ACT or the Commonwealth] that the land was required for a National Land Purpose.”

9                     The next relevant fact that needs to be recorded occurred on 10 May 1989, the day before self-government. On that day the Commonwealth Government Gazette recorded that the National Land Ordinance 1989 (ACT) would come into operation on the following day, 11 May 1989. The Ordinance stated that the Commonwealth Minister for Administrative Services would be responsible for the management of “National Land”. It also provided that certain laws that were in operation prior to self-government would continue to apply to “National Land”; they included the Leases Ordinance 1918 and the Leases Regulations.

10                  With the advent of self-government, s 28 of the PALM Act came into operation. It provided that all land in the ACT that was not “National Land” was to be designated “Territory Land” ; the Executive of the ACT, which had been created by s 36 of the SG Act, was made responsible for the management of “Territory Land” on behalf of the Commonwealth. The Executive was also empowered, again on behalf of the Commonwealth, to grant, dispose of, acquire, hold and administer estates in “Territory Land”: s 29 of the PALM Act.

11                  The pre-self government provisions that were applied to “National Land” by the National Land Ordinance 1989 did not likewise apply to “Territory Land”. Consequently, after 11 May 1989, the Leases Ordinance 1918 and the Leases Regulations did not have effect with respect to “Territory Land”. However, by the operation of s 34 of the SG Act, the Leases Ordinance 1918 was to be taken to be an enactment of the Legislative Assembly and, accordingly, capable of amendment and repeal by the Assembly. The Leases Ordinance 1918, as an enactment of the ACT’s Assembly, was thereafter to be cited as the Leases Act 1918.

12                  Initially, there was an agreement in force, between the Commonwealth and the ACT under which the ACT managed all “National Land” as agent for the Commonwealth (“the agency agreement”). This was a transitional arrangement so that officers of the newly established Lands Branch of the ACT (most of whom were former Commonwealth employees who had earlier performed identical duties) could administer “National Land” on behalf of the Commonwealth until the Commonwealth had established its own workforce. The arrangements continued until 1 July 1993 or thereabouts, at which point of time the Commonwealth terminated the agreement. Thereafter, through the medium of the Department of Defence, the Commonwealth undertook the management of “National Land”. However, it was while this agency agreement between the Commonwealth and the ACT was still in force, that a formal lease in respect of the subject land was executed in favour of the appellant. The lease, which was dated 26 September 1989 named the Commonwealth as the lessor and it was for a term of ten years from 9 December 1988. It was not however executed by the Commonwealth. Consistently with the agency agreement, it was executed under seal by a delegate of the Territory Minister “for and on behalf of the Commonwealth …”.

13                  The lease contained an option to renew in favour of the lessee, the terms of which were as follows:

“6(e) That if at the expiration of this lease the Territory shall have decided not to sub-divide the land and that it is not required for any Territory or National Land purpose and shall have declared the premises to be available for lease AND if the Lessee has duly paid the rent and observed and performed the covenants and stipulations on the part of the Lessee to be observed and performed and giving the Territory not less that three months PREVIOUS notice in writing of his desire to extend the lease the Lessee shall be entitled to a further lease of the premises for a term of ten years and at such rents and subject to such conditions (including reappraisement of rents) as may then be determined by the Territory.”

14                  In comparing the terms of clause 6(e) of the executed lease with the equivalent clause in the draft lease, three material differences may be noted:

·        in the first place, the draft clause nominated the Commonwealth as the party who had to decide questions about subdivision and land use. In the executed lease, that power was transferred to the ACT;

·        secondly, the expression used in the draft lease related to land that was “not required for any Commonwealth purpose”. That was changed in the executed lease to refer to land that was “not required for any Territory or National Land purpose;

·        finally, the period of the renewal, which was not stated in the draft, was identified as ten years.

15                  There were other material differences between the draft lease and the finished product that were brought about by the introduction of the ACT as the Commonwealth’s agent. Thus, for example, the draft contained a covenant that the applicant, as lessee, would pay the rent to the Commonwealth; in the executed lease, the appellant covenanted with the Commonwealth to pay the rent to the ACT. Other like changes were made so as to conform with the ACT’s role as the agent for the Commonwealth.

the proper construction of clAUSE 6(e)

16                  In our opinion the first matter that must be resolved is the proper construction of clause 6(e). Until that has been established, it is not possible to give proper regard to the competing arguments that have been advanced with respect to the rights and obligations of the ACT and the Commonwealth. In our opinion clause 6(e) contemplates the ACT – as distinct from the Commonwealth – making a decision, not only on the question of subdivision, but also with respect to any requirement for a Territory or National Land use. This means that the clause is to be read in the following manner:

“That if an the expiration of this lease the Territory shall have decided–

(i) not to sub-divide the land; and

(ii) that it is not required for any Territory or National Land purpose

and shall have declared the premises to be available for lease …”

17                  Furthermore, the structure and the grammar of clause 6(e) emphasises the role of the ACT because they make it clear that the “Territory” purpose and the “National Land” purpose are not, of themselves, conditions precedent: it is the decisions that are made by the ACT with respect to the “Territory” purpose and the “National Land” purpose that are the conditions precedent.

the notice of renewal

18                  On 7 September 1998, the appellant executed a document under seal entitled: “Notice of Exercise of Option.” The Notice was addressed to the ACT and stated that:

“… the Lessee desires to extend the Lease of the premises for a further term of 10 years commencing on 9 December 1998 and, subject to the covenants of the Territory contained in covenant 6(e) of the Lease, HEREBY REQUIRES the aforesaid Territory to GRANT THE FURTHER LEASE as aforesaid to the Lessee”.

19                  The ACT Minister for Urban Services replied to the appellant’s solicitor by letter dated 8 December 1998. In the letter the Minister stated the ACT’s position concerning the land, saying:

“I wish to confirm that:

·        there is no intention, on the part of the ACT Government, to seek to subdivide the current site, and

·        this land is not required for any Territory purposes.

However, please note that decisions on land tenure in this area are the province of the Commonwealth Government, through the Department of Defence. You should also be aware of the potential implications of the Canberra Airport Master Plan which is currently being developed.”

20                  An earlier response to the appellant’s “Notice of Exercise of Option” had come – not from the ACT – but in the form of a letter dated 30 November 1998 from the Commonwealth Department of Defence. Although lengthy, it is desirable to set out the contents of this letter in full:

“As advised at our meeting this morning, a meeting was held last week to discuss the issues surrounding the operations of the Canberra International Dragway and the extent of its tenure, particularly in relation to the Canberra Airport. Attendees at the meeting were representatives from the National Capital Authority, the Department of Defence, the Civil Aviation Safety Authority (CASA), Air Services Australia (ASA) and the Canberra Airport Group.

The meeting was advised that whilst the dragway’s operations were currently not in direct conflict with the operation of the airport, several issues were emerging which would see a change to the current situation. The airport will be introducing a non-precision based landing system and pilot activated lighting system as part of its commercial approach to airport management. This is anticipated to be in place within the next year. In addition to the short term changes, as part of its commitment to reduce noise affecting residents at Jerrabomberra, the Canberra Airport Group representatives stated that it is intended to extend the east-west runway to the east within the next five years.

It was agreed with the changes proposed to the airport and its operations that the airport and dragway activities would no longer be compatible. The meeting therefore agreed that the Canberra International Dragway’s tenure would need to be set at five more years in its current location and that discussions would take place between the NCA and ACT Government with a view to establishing a new location for the dragway. It is therefore anticipated that any significant new investment during the next five years would be at the new location rather than on the existing site.

The Department of Defence will put a new lease in place to formalise the position. The base will not provide for any option to renew and will require the dragway to cease operations around10.30 pm (subject to consideration) as a concession to the safety concerns over the new lighting arrangements.

The Department of Defence will be approaching you formally in the coming week to discuss the particulars of the new leasing arrangement. In the meantime, I trust that this advice is sufficient to allow your events planned in the near future to take place.”

21                  The appellant would not, however, accept the proposal for a five year lease. In a letter dated 8 December 1998, the solicitor for the appellant wrote the Department of Defence asserting:

“… my client is of the opinion that the advised introduction of a non-precision based landing system and pilot activated lighting system and the prospective extension of the East-West runway by the Canberra Airport Group does not constitute a National Land purpose.

A National Land purpose requires land to be ‘used or intended to be used by or on behalf of the Commonwealth’. I remind you that the land now comprising the Canberra Airport is owned and used by a private company, not the Commonwealth.”

22                  The appellant argued that it had lawfully exercised its right of renewal. It contended that clause 6(e) required the presence of the following preconditions:

·        that the ACT, acting honestly and reasonably shall have decided not to subdivide the land; (if the ACT had any right to make such a decision, it had purported to so decide; hence the first of the appellant’s preconditions had been satisfied);

·        that either – as a fact – the land was not required for a Territory purpose or, alternatively the ACT, acting honestly and reasonably, shall have decided that the land was not required for any Territory purpose; (this precondition was satisfied when regard is had to the contents of letter of 8 December 1998 from the ACT Minister);

·        that either – as a fact – the land was not required for a National Land purpose or, alternatively the ACT, acting honestly and reasonably, shall have decided that the land was not required for any National Land purpose; as to this, the appellant primarily argued that it was sufficient for it to establish, as an objective fact, that the land was not required for any such purpose; it will be necessary to return to this particular proposition at a later stage in these reasons;

·        that the ACT, acting honestly and reasonably, shall have declared the land to be available for lease; as an objective fact, the ACT never did make any such declaration and arguably that might be the end of the matter; however, we will return to this precondition;

·        that the appellant, as lessee, had duly paid its rent and had observed and performed the covenants in the lease that were, on its part, to be observed and performed; that precondition had been satisfied; neither the ACT nor the Commonwealth sought to argue a contrary cause;

·        that the appellant, as lessee, had given not less that three months notice in writing of its desire to extend the lease; that precondition had been satisfied; neither the ACT nor the Commonwealth sought to argue a contrary cause.

23                  Thus, of the six preconditions that had to be satisfied at the time of the expiration of the lease, four had clearly been satisfied – the ACT did not wish to subdivide the land and it did not require the land for a Territory purpose whilst the appellant was not in default under the terms of its lease and it had given the necessary three months notice. What then of the remaining two? Was the land required for any “National Land” purpose? And what was the ACT required to do, by way of inquiry or investigation, before it made or declined to make a declaration that the land was available for lease?

the terms of the lease

24                  Before attempting to answer these questions, it is first necessary to address the terms of the lease. The operative section of the lease was in the following terms:

“Lease granted pursuant to the Leases Act 1918 and the Regulations thereunder …”

That was plainly wrong. At the time of the grant of the lease the land was “National Land” and, as such, it was not subject to the provisions of the Leases Act or the Regulations thereunder. Perhaps the drafter of the lease thought the land was “Territory Land”: perhaps the drafter was oblivious to the different treatment of “National Land” and Territory Land”; it does not really matter. At the time of the grant of the lease the land was “National Land” and it could only be dealt with as “National Land”. A mistake on the part of the person or persons who were involved in the preparation of the lease cannot change the statutory character of the land.

25                  As the learned trial judge pointed out the lease was drawn up and executed against the new statutory regime that came into operation with self-government. Different statutory regimes were applicable depending upon whether the land that was the subject of a lease was “National Land” or “Territory Land”. The lease and its terms are to be construed against the statutory regime that operated at the time of its execution. In that context, the references to Leases Act 1918 and the suggested implication that the parties might have thought that they were dealing with “Territory Land” must be ignored.

26                  The ACT, in its amended Notice of Contention, submitted, correctly in our opinion, that the learned trial judge had erred in holding [par 43] that, as a matter of construction, the subject matter of the lease was land that remained, at the expiration of the lease, within the statutory power of the ACT to manage. We do not, however, agree with its further contention to the effect that, upon the expiration of the term of the lease, the ACT was not empowered to make any decision with respect to the matters that were contemplated by clause 6(e) of the lease. That submission ignores the plain language of the clause. The termination of the agency agreement on 1 July 1993 might have meant that the ACT no longer had a general role of management of Commonwealth land, but it could not interfere with the specific arrangement between the Commonwealth and the ACT that was evidenced by the terms of the lease and to which the appellant was a party. His Honour was of the opinion [par 43] that, as the lease was mistakenly drawn as a lease of “Territory Land”, it had “significant consequences in terms of the construction to be placed upon clause 6(e) and the role which it was contemplated that the [ACT] would have in relation to the management of both the land and lease provisions, and in particular, clause 6(e)”. We do not agree that this created “significant consequences” and we cannot agree with his Honour when he went on to add:

“The powers which the [ACT] was to exercise under the lease were statutory powers sourced in the Leases Act 1918 and s 29 and s 30 of the [PALM Act] …[T]he subject matter of the lease was land which was, and remained at the expiration of the lease, within the statutory power of the [ACT] to manage.”

The land that is the subject of these proceedings, being at all material times by force of law, “National Land”, was not the subject of the Leases Act 1918 and no agreement by or between a lessor and a lessee could alter that fact. As for ss 29 and 30 of the PALM Act, those sections are limited in their operation to “Territory Land”; hence, they can have no application to the subject land.

the role of the act

27                  We turn next to consider the role of the ACT in the operation of the lease. Undoubtedly, its primary role was that of agent of the Commonwealth. But the parties, including the appellant had seen fit to give the ACT a special status. There were separate rights and obligations reserved to the ACT so that, in effect, there was a tri-partite arrangement involving the appellant, the ACT and the Commonwealth; for example, without the consent of the appellant, the termination by the Commonwealth in July 1993 of its agreement with the ACT with respect to the subject of land management, had no effect on the rights and obligations of the ACT as contained in clause 6(e). Those rights and obligations were not sourced in, but were independent of, its role as the agent of the Commonwealth. The Commonwealth could inform its lessee that it was no longer to pay its rent to the ACT because the Commonwealth had terminated the ACT’s agency; however, it could not take away the ACT’s rights and obligations under clause 6(e) because those rights and obligations had, by express agreement between the Commonwealth and its lessee, been reserved to the ACT.

28                  The ACT would not accept that it was a “third party” for the purposes of the lease; it argued that when the lease was executed, the ACT was expressly identified as acting as the appointed agent “on behalf of the Commonwealth”. But clause 6(e) is in a different category. For example, the ACT, in its own right, was required to address whether it had a need for the subject land for a “Territory” purpose. In addressing that task it could not be said that the ACT was a mere agent of the Commonwealth.

national land purpose

29                  It is reasonably apparent that the subject land is not presently being “used” by the Commonwealth in terms of s 27 of PALM Act but the question was whether the land was intended to be used by or on behalf of the Commonwealth. The learned trial judge addressed this subject, finding, as we have earlier noted, that the land was intended for use for the Airport and the RAAF Base.

30                  In its endeavour to counter this finding, the appellant relied on documentary evidence that pointed to uncertainty about the future use of the subject land; it was submitted that, throughout the term of the lease, debate had ensued from time to time about its future. Questions had been asked whether there was any continuing reason for the land to remain “National Land”; there was also evidence that pointed to the proposal to extend the airport in the direction of the subject land as being little more than an expectation. Other evidence claimed that the dragway would not constitute a hazard to the airport activities. Be that as it may, we cannot accept the appellant’s submission that there was some form of obligation on the ACT to investigate whether the subject land was, as a matter of fact, intended to be used for a “National Land” purpose. Such a proposition would require the ACT to conduct an inquiry into the Commonwealth’s plans in relation to the land. As the ACT rightly submitted, such a proposition would be unworkable: to whom would the ACT direct its inquiry and by reference to what criteria would the ACT reach its decision? Would the ACT be obliged to accept such answers as the Commonwealth may care to give or would it be entitled to make its own independent inquiries? None of these matters were addressed in the lease and there could not be any justification for attempting to imply some form of code of conduct for such an inquiry.

31                  It next was submitted on behalf of the appellant that the existence of the 1989 declaration did not entitle the ACT to assume that the subject land was required for a “National Land” purpose. This argument, to be successful, required the further contention that there was an implied obligation on the Commonwealth within the terms of the lease, to re-examine the 1989 declaration in case it might find that the land was no longer so required. In rejecting this argument his Honour held that the only action or decision-making that was contemplated by clause 6(e) was that of the ACT. His Honour was quite obviously correct. As the ACT argued in an alternative submission, if the subject land was, when the time came for it to exercise its powers under clause 6(e), truly “National Land”, the ACT could not ignore that fact, nor could it ignore the existence of the 1989 declaration that established that fact.

32                  As the ACT knew that the land had been the subject of the 1989 declaration and that it was intended for use for a National purpose, nothing short of the clearest direction from the Commonwealth that the intended use would not arise within the renewal period of the lease would have permitted the ACT to make this declaration. In the knowledge that the Commonwealth had, on an earlier occasion in 1989, declared that the land was “National Land” and was being used or was intended to be used by or on behalf of the Commonwealth, it is understandable that his Honour should find that it was not open to the ACT to form an opinion that the land was not required for any “National Land” purpose.

acting honestly and reasonably

33                  The appellant argued that the ACT, in performing its obligations under clause 6(e) of the lease, was obliged to consider and decide, honestly and reasonably, whether the subject land was required for any “National Land” purpose during the currency of the term of the renewal. Whether this is so is not free from doubt. However, we do not consider that there is any cause for the appellant to complain about the manner in which his Honour treated this subject; he said:

“[50] The interests of both the lessor and the lessee under clause 6 are sufficiently protected by implying a term that the [ACT], in making such decisions as are provided for in the clause, will act honestly, or perhaps honestly and reasonably.”

34                  His Honour referred to the decision in Meehan v Jones (1982) 149 CLR 571 in support of that proposition. That case was concerned with a contract which stated that it had been executed subject to certain conditions; one of those conditions was to effect that the purchaser should be able to enter into “a satisfactory agreement or arrangement” with a named third party for the supply of a “satisfactory quantity of crude oil”; another of the conditions was that the contract was subject to the purchaser receiving approval for finance “on satisfactory terms and conditions in an amount sufficient to complete the purchase …” It was held that it was for the purchaser to determine whether he had achieved the requisite degree of satisfaction about supply and finance. However, the purchaser could not act in an arbitrary or capricious manner. Gibbs CJ was satisfied that there was an obligation on the purchaser to act only “honestly” (581) whilst Mason J (as he then was and with whom Wilson J agreed) expressed a reservation, saying:

“In this case it is not necessary to decide whether the purchaser, in deciding whether finance is on satisfactory terms, is bound to act honestly or whether he is also bound to act reasonably. The cases already mentioned appear to support the first rather than the second alternative. And there is some ground for thinking that the parties contemplated that the question was to be left to the honest judgment of the purchaser rather than to the judgment of a court as to whether the purchaser acted reasonably in the circumstances.” (590-591)

35                  Although the ACT Minister did not assert positively in the letter of 8 December 1998 to the appellant’s solicitor:

·        that it was not appropriate to decide that the land was not required for a “National Land” purpose; and

·        that the Minister declined to declare that the subject land was available for lease;

it was nevertheless clear from the reference to the Commonwealth in the Minister’s letter and from the earlier letter of 30 November 1998 from the Department of Defence to the appellant, that the ACT Minister had adopted the stand that had been taken by the Commonwealth. The fact remains that a declaration had been made as long ago as 2 March 1989 that the land was “National Land” and that it was then being used or that it was then intended to be used by or on behalf of the Commonwealth. The learned trial judge found that the ACT Minister was aware of the existence of the 1989 declaration. He went on to find that “the Minister acting honestly, or honestly and reasonably, could not have concluded that the land was not required for a “National Land” purpose. In other words, it was evident from a reading of the whole of the correspondence that because of a “National Land” purpose, it was only possible to offer the appellant a five-year lease; it was not possible to offer it a ten-year lease.

available for lease

36                  There remains only the last of the pre-conditions: should the ACT have declared that the subject land was available for lease? It would not be permissible for the ACT, without just cause, to refuse to declare that the subject land was available for lease. However, if, as we think, it was not possible for the ACT to decide that the subject land was not required for a “National Land” purpose, it follows, as a matter of logic, that it would not have been possible for the ACT, acting honestly and reasonably, to have declared that the subject land was available for lease.

uncertainty

37                  It was faintly suggested by the Commonwealth that clause 6(e) was void on the ground of uncertainty. We do not agree. It must be borne in mind that the parties to the lease were the Commonwealth as lessor, the appellant as lessee with the ACT having a dual role as the Commonwealth’s agent and as a third party. There is nothing uncertain in reposing in a third party (even though it might otherwise be the agent of one of the parties), the task of determining the future rent and the terms and conditions of any renewal period of a lease. That subject was discussed in the joint judgment of Gibbs CJ and Murphy and Wilson JJ in Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 at 604 where their Honours said:

“It is established by authority, both ancient and modern, that the courts will not lend their aid to the enforcement of an incomplete agreement, being no more than an agreement of the parties to agree at some time in the future. Consequently, if the lease provided for a renewal ‘at a rental to be agreed’ there would clearly be no enforceable agreement. On the other hand, it is also well established that the parties to a contract may leave terms – even essential terms – to be determined by a third person: see the cases cited in Godecke v Kirwan (1973) 129 CLR 629 at 645. In the present case, the lease itself provides the entire mechanism for determining the rental for the renewed term. There is no further agreement required of the parties. It is true that if they do agree upon that rental, then there is no occasion to resort to the independent mechanism that the lease provides. But, there being no such agreement, all that is required is that the President name a person to fix a figure being not less than the minimum rental operative during the original term.” (604-605)

38                  Support for this general proposition may also be found in the remarks of Lord Wilberforce in Cudgen Rutile (No 2) Pty Ltd v Chalk [1975] AC 520 at 536. In tendering the advice of the Board his Lordship said:

“Their Lordships consider that, in modern times, the courts are readier to find an obligation which can be enforced, even though apparent certainty may be lacking as regards some term such as the price, provided that some means or standard by which that term can be fixed can be found (cf Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503; Sweet & Maxwell Ltd v Universal News Services Ltd [1964] 2 QB 699 and Godecke v Kirwan (1973) 47 ALJR 543).

Further, if the contract is one made with a public body, with a duty to act and decide according to a recognisable principle, the court may be willing to find an obligation which requires that body to reach a decision, in accordance with that principle, as to a matter left to the decision in the contract itself, and so find an enforceable contract where one might not be found as between private parties: cf Placer Development Ltd v Commonwealth of Australia (1969) 121 CLR 353 in which the High Court was divided as to whether that was such a case.”

39                  In our opinion, these passages put to rest any suggestion that clause 6(e) might be void for uncertainty.

conclusion

40                  In our respectful opinion, his Honour came to the correct conclusion. The short answer must be that the ACT was not in a position, acting honestly and reasonably (if that be the test) to decide that the land was not required for a “National Land” purpose whilst and for so long as the 1989 declaration remained in force. Because it could not properly come to that decision, it could not therefore declare that the subject land was available for lease. The appeal must be dismissed with costs.

Associate:

Dated: 2 April 2001

REASONS FOR JUDGMENT

HIGGINS J

41                  This is an appeal from a decision of Cooper J handed down in the Supreme Court of the ACT on 26 July 2000.

42                  The factual background was not disputed.

43                  On 26 September 1989, the appellant was granted a lease of land in the Australian Capital Territory (“the land”) by the Commonwealth of Australia commencing on 9 December 1988 for a period of ten years expiring on 8 December 1998 (“the Lease”).

44                  The Lease contained an option clause 6(e), in the following terms:

“That if at the expiration of this lease the Territory shall have decided not to sub-divide the land and that it is not required for any Territory or National Land purpose and shall have declared the premises to be available for lease AND if the Lessee has duly paid the rent and observed and performed the covenants and stipulations on the part of the Lessee to be observed and performed and giving the Territory not less than three months PREVIOUS notice in writing of his desire to extend the lease the Lessee shall be entitled to a further lease of the premises for a term of ten years and at such rents and subject to such conditions (including reappraisement of rents) as may then be determined by the Territory.”

45                  The appellant gave notice of its desire to extend the Lease, as required by clause 6(e), on 7 September 1998. It is not suggested by the respondents that this notice did not comply with clause 6(e).

46                  Due to the proximity of the dragway to Canberra Airport and, hence, RAAF Fairbairn, the Defence Department expressed an interest in the extension of the Lease. It proposed that it should be extended for five years only. That proposal was unacceptable to the appellant.

47                  At the expiration of the Lease, the Minister for Urban Services, a Territory Minister, on 8 December 1998, wrote to the solicitors for the appellant. In it he stated:

“I wish to confirm that:

·        there is no intention, on the part of the ACT Government, to seek to subdivide the current site, and

·        this land is not required for any Territory purposes.

However, please note that decisions on land tenure in this area are the province of the Commonwealth Government, through the Department of Defence. You should also be aware of the potential implications of the Canberra Airport Master Plan which is currently being developed.”

48                  It was contended by the appellant that, on its true construction, clause 6(e) required the Territory to give consideration in a proper and lawful way to the exercise of the “powers” conferred upon it under the clause.

49                  The appellant, by its amended statement of claim, complained that the Territory had failed (or declined) to consider:

·        “whether the land was required for a National Land purpose;

·        whether the land was “available for lease”;

AND

·        had failed to determine the terms of a new lease.”

50                  Further, the appellant alleged, the circumstances were such, at the expiration of the Lease, that the requirement of clause 6(e) had been met. Thus it was entitled to have the Territory draw and present a new lease from 9 December 1998 expiring 8 December 2008, for execution by it and the second respondent (the Commonwealth).

51                  The Territory drew attention to the fact that, on 2 March 1989, the land was declared to be “National Land” upon the ground that it was “being used, or intended to be used by or on behalf of the Commonwealth.”

52                  It remained subject to that declaration throughout the term of the Lease. Thus, the Territory contends, it had no power to make any of the decisions required under clause 6(e) so as to activate the option.

53                  The Commonwealth admitted that, on 11 May 1989, it had appointed the Territory as its agent to manage National Land in the Territory on its behalf. That included the land. However, on 1 July 1993, that agency was terminated. The Commonwealth thereafter assumed the management role itself, through the Department of Defence.

54                  The Commonwealth alleged that by the time the Lease expired, it had decided that the land continued to be required for National Land purposes inconsistent with renewal of the lease for a further ten year term, identified as preventing:

“… an unacceptable level of risk in relation to air safety with the introduction of changes to the operating conditions at Canberra International Airport.”

55                  The Commonwealth also contended that clause 6(e) “constitutes an incomplete agreement which is not valid or enforceable”.

The decision of Cooper J

56                  His Honour rejected a submission that clause 6(e) should be interpreted otherwise than in accordance with its terms. The belief entertained by members of the appellant that the land would be made available for the second period of ten years if the appellant wanted it, was thus irrelevant (see Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337, 352-3, per Mason J).

57                  There was no challenge to this conclusion. It is, in any event, plainly correct.

58                  The Commonwealth submission that the references in clause 6(e) to “the Territory” should be read as “the Commonwealth” was next considered.

59                  The basis for that submission was that, being “National Land” by virtue of s 27 of the Australian Capital Territory (Planning and Land Management) Act 1988 (Cth) (“the PALM Act”), it should be an implied term of the Lease that, if the Territory ceased to be the manager of the land, the references to the declaratory powers of the Territory under clause 6(e) should be read as a reference to “the Commonwealth”.

60                  His Honour agreed that the Lease was to be construed against the applicable statutory framework. It was apparent that, though the land was National Land, the Lease had been drawn as if it was Territory land. However, nothing turned on that. The incorrect reference to the power to grant the Lease on behalf of the Commonwealth did not alter the fact that, though the land had been gazetted as National Land, it had, until 1 July 1993, been under the management of the Territory.

61                  Thus, the references in the Lease to ss 29, 30 and 31 of the PALM Act were inappropriate. Further, the “Leases Act 1918” was cited incorrectly.

62                  The correct citation, used by his Honour, was “Leases Ordinance 1918 (ACT)”. That latter Ordinance, by virtue of the National Land Ordinance 1989 (ACT), was deemed not to be an enactment of the ACT Legislative Assembly unlike most other Ordinances which had been made before Self-Government day (see s 34 and Schedule 5, Australian Capital Territory (Self-Government) Act 1988 (Cth)) (“ACT (Self-Government) Act”). Self-Government day was 11 May 1989 (see s 2(2) ACT (Self-Government) Act and Gazette 1989, No. S164).

63                  The National Land Ordinance 1989 continued (subject to specified modifications) the operation of the Leases Ordinance 1918 and the Regulations made thereunder in relation to National Land.

64                  The Leases Ordinance 1918 empowers “the Minister”, that is the relevant Commonwealth Minister, to grant leases of National Land not then leased, but s 2 empowers the Minister to delegate that power.

65                  Section 3AAA applies to an offer of “the grant of a lease upon the expiration of, or in substitution for, [the lessee’s] existing lease”. The lessee within one month thereafter may accept the offer or apply to vary any term of the offered lease. The Administrative Appeals Tribunal (Cth) is empowered to review any decision of the Minister adverse to the lessee (see ss 3AAA(7)).

66                  Thus, the determination of terms and conditions of the new lease, as referred to in clause 6(e) of the Lease, is given statutory recognition. A lessee could call in aid a statutory process that would enable the conditions of the new lease to be objectively determined.

67                  The Lease, it is true, was signed by a “Delegate of the Territory Minister”. Strictly speaking, he was, if authorised at all, a delegate of the Commonwealth Minister.

68                  However, in my view, it was open for the Commonwealth Minister to have authorised the Territory Minister, or his or her delegate, to execute leases of National Land, either generally or in relation to particular areas.

69                  Each party accepted the validity of the Lease. The Commonwealth did not contend that it was not bound by its terms.

70                  The Leases Regulations do not relevantly affect or limit the original Lease or the effect of clause 6(e).

71                  Thus, whether or not the Lease was offered by the Territory Minister on behalf of the Commonwealth in the belief that it was in respect of Territory land, it bound the Commonwealth in accordance with its terms.

72                  Those terms reflect the statutory powers that would be vested in the Territory if the land had been Territory land. However, that does not, in my view, confer the power of management over the land in the Territory throughout the term of the Lease. It was within the power of the Commonwealth to have terminated, as it did, the Territory’s power of management over the land whether the Lease had by then expired or not.

73                  In that respect, I differ from his Honour and agree with the contention to that effect put by the Territory.

74                  Nevertheless, I do not agree in consequence on the Territory ceasing to be the duly appointed manager of the land, the terms of clause 6(e) became transmuted in meaning. The mere fact, if it be so, that neither the Commonwealth nor the Territory foresaw the change of management and provide for it in the Lease is not to the point. The test for implying a term is clearly expounded by Mason J in Codelfa Constructions Pty Ltd v State Rail Authority of NSW (supra) at 346-7.

75                  The essence of that test is that a term not expressed, to be included as an implied term, must be one that is necessary to give “business efficacy” to the contract or, at least, be so obvious “that it goes without saying”.

76                  The continuation of a role for the Territory under the Lease, notwithstanding the expiry or possible expiry of its role as manager of the land, is not unreasonable. The Territory Minister had offered the Lease to the applicant. Some of the matters to be considered under clause 6(e) were matters in which the Territory had an interest. That interest would have been enlarged had the land been declared to be Territory land. However, it was not unreasonable for the matters referred to in clause 6(e) to be decided by the Territory. Undoubtedly, the Commonwealth contemplated that the Territory would consult it upon those matters for decision which concerned the Commonwealth.

77                  In any event, even if it had been contemplated that the Territory might, during the term of the Lease, cease to be the manager of the land, there is no reason to suppose that the Commonwealth would be unduly prejudiced. The Territory would not be expected to act other than honestly and reasonably in deciding whether or not to fulfil the terms of the option clause.

78                  Thus, though for different reasons, I agree with his Honour’s conclusion that, at the conclusion of the Lease, it was for the Territory, not the Commonwealth to decide upon the matters referred to in clause 6(e).

79                  Next, his Honour proceeded to consider the proper construction of clause 6(e), on that assumption.

80                  It was accepted that the powers conferred upon the relevant Territory Minister by clause 6(e) were to be exercised honestly and reasonably (see Meeham v Jones (1982) 149 CLR 571 at 581, 591, 597).

81                  His Honour concluded that the relevant Territory Minister, on behalf of the first respondent, had considered each of the matters referred to as a pre-condition to the activation of the option for a further lease of ten years.

82                  The Territory Minister concluded that the pre-conditions were satisfied insofar as:

·        The Territory had decided not to subdivide the land; and

·        The land was not required for any Territory land purpose.

83                  BUT the Territory Minister could not declare that he was satisfied that the land was not required for any National Land purpose and, hence, “available for lease.”

84                  The term “available for lease”, his Honour construed, contrary to the appellant’s submissions, as meaning available for the term of ten years contemplated by clause 6(e).

85                  Thus, the preparedness of the Department of Defence, on behalf of the Commonwealth, to offer a lease (presumably under the Leases Ordinance 1918) for five years did not require the Territory Minister to conclude that the land was available for lease. Nor did it require the Territory Minister to conclude that there was no “National Land purpose” for which the land was then required.

86                  The appellant had further contended that there was a duty upon the Commonwealth to reconsider the declaration of the land as “National Land”.

87                  That contention was also rejected. It did not need to be implied into or by clause 6(e) to give that clause business efficacy. Nor was it self-evident.

88                  In any event, it is not obvious what relevance there was in such a submission. Given the location of the land it was always possible that it might have been required for Defence purposes, even if only in the long term. The leasing of the land was not inconsistent with its status as National Land.

89                  His Honour also rejected the contention advanced by the Commonwealth that clause 6(e) was void for uncertainty, citing Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 at 606.

90                  Had the option clause been activated as an offer on behalf of the Commonwealth of a lease for ten years on terms to be fixed by the Territory, in his Honour’s view it would have had sufficient certainty, the terms being fixed, relevantly, by a third party, not by the lessor.

91                  Even if the clause was to be construed as an offer of a ten year lease emanating from the Commonwealth on terms otherwise to be fixed by it, s 3AAA of the Leases Ordinance 1918 would make any decision by the Commonwealth fixing those terms amenable to review by the Commonwealth Administrative Appeals Tribunal (AAT). The AAT is obviously an independent third party.

92                  On either basis the option clause did not lack certainty.

93                  However, his Honour was not satisfied that the pre-conditions for the activation of the offer of a new lease had been fulfilled.

94                  The failure of the Territory to declare that those conditions had been fulfilled was not affected by any lack of good faith or conscientious attention to the relevant issues. It was reasonable for the Territory to have concluded that the Commonwealth had in contemplation a National Land purpose requiring that the land cease being used as a dragway before the expiration of the proposed new ten year lease.

95                  Thus, even if there had been some collateral agreement or representation made by the Territory that it would exercise its powers under clause 6(e) (which his Honour concluded there was not), the Territory had not breached any such agreement nor acted contrary to such a representation. It was, therefore, irrelevant whether the Territory was legally obliged to exercise the responsibility cast on it by clause 6(e) or had a choice whether to do so or not.

96                  His Honour concluded therefore that the appellant had failed to demonstrate that the pre-conditions for the activation of the option had been satisfied. Its claim was dismissed accordingly.

97                  From this decision, the appellant appeals to this Court.

Submissions on Appeal

98                  On the hearing of the appeal, the appellant submitted:

·        That, as at 8 December 1998, there were no air safety reasons to support a conclusion that the Lease could not, effectively, be renewed;

·        The possibility of extension of Canberra Airport, which could raise air safety concerns, was no more than a possibility, insufficient to enable it to be concluded that there was a current “National Land purpose”;

·        The decision not to make the necessary declarations was based on a mistaken view that the Territory lacked the legal power to do so;

·        Clause 6(e), whether or not the power to determine the necessary pre-conditions was vested in the Territory or Commonwealth, was not void for uncertainty;

·        The fact that the area was gazetted as “National Land” did not mean that the land was subject to a National Land purpose so as to prevent a declaration under clause 6(e) that the land was not required for such a purpose; and

·        That the cessation of use of the land as a dragway was not a “National Land purpose” and, hence, there ought to have been a declaration that the land was not required for a National Land purpose as evidenced by the offer of a five year lease.

99                  The Territory, in response, submitted that it lacked the power to make the declarations and determinations required by clause 6(e).

100               Next, it submitted that the declaration that the land was “National Land” coupled with the Commonwealth’s statement as to its intentions or requirements in respect of the land was binding on the Territory to the extent that it could not declare the land to be “not required” for a National Land purpose nor could it declare the land “available for lease.”

101               In the result, it submitted, the pre-conditions for the exercise of the option had not been fulfilled.

102               As to the offer of a five year lease which the appellant contended evidenced the availability of the land for lease, the Territory contended that “availability” was for the full term of the proposed lease. Thus the offer of a five year lease did not relevantly evidence “availability.” Such a declaration was not and could not be made even if the Territory had the power to do so.

103               The Commonwealth adopted these submissions. It further contended that the interest of the Commonwealth in the regulation of air navigation and as lessor of the Canberra Airport gave it a clear “National Land purpose” in regulating activity on the subject land.

104               It further submitted that the continuance of the declaration that the land was “National Land” was evidence supporting that latter conclusion.

105               In any event, the Commonwealth submitted, the evidence adduced made it apparent that the Commonwealth wished to have control of the land after five years and before ten years had elapsed in the interests of air navigation safety, particularly if the runway facilities on the Airport were extended.

106               The Commonwealth conceded that it would not be every private use of the subject land which might cause air navigation concern (for example, a vegetable garden). It rejected the proposition, advanced by the appellant, that the reservation of land as “National Land” implied that the Commonwealth intended to use the land for a purpose of its own.

107               Further, alternatively to its submission that “the Territory” in clause 6(e) should be read as if it was “the Commonwealth”, the Commonwealth submitted that clause 6(e) was void for uncertainty as “the Territory” was not an “independent third party”. It was the agent of the Commonwealth and, hence, not “independent.”

The existence of a National Land Purpose

108               There are two aspects of this issue which need to be considered:

·        The declaration that the land was “National Land”; and

·        The evidence of air navigation and airport expansion considerations.

109               As to the first of these, it is evident that the mere fact that land is declared under s 27 of the PALM Act to be National Land would not prevent it being leased to a commercial or other lessee. Indeed, Canberra Airport itself is so leased.

110               The declaration merely gives notice that the land “is, or is intended to be, used by or on behalf of the Commonwealth (s 27).”

111               Such a phrase does not imply that the Commonwealth had or intended to make use of the land by direct occupation or use of it.

112               So much is clear from the decision of this Court in Attorney-General (ACT) v Commonwealth (1990) 26 FCR 82.

113               It is also clear from that decision that “use by the Commonwealth” may be constituted by the use of the land by a commercial, privately-owned entity bound by agreement to accept some Commonwealth control over that use.

114               It is apparent that, given the agreement for the use and management of the Canberra Airport by the Canberra Airport Group, the land upon which the Airport is situated is in that sense, “used by the Commonwealth”.

115               It is not unreasonable to expect that a buffer zone around the Airport would be an area over which stringent planning controls would be exerted to allow for the safe operation of the Airport, even absent the use of part of it for Defence purposes.

116               The appellant did not seek to challenge the declaration of the land as National Land. In any event the reason for asserting an intended use by the Commonwealth is apparently valid. The issue is whether the “intended” use for the purposes of the operation of the Airport is consistent or not with the grant of a renewed lease. This is, whether the land, given the proposed use of it by the appellant, in the context of the proposed development of the Airport, could validly be regarded as not “available for lease.”

Available for lease – Required for National Land Purposes

117               It is evident that the land was not, as at 8 September 1998, required to be further restricted in usage so as to be unavailable for use as a dragway.

118               However, the Commonwealth’s responsible officers had formed the view, apparently in good faith, that future expansion of Airport facilities might well occur between the sixth and the final year of the proposed lease so as to render use of the land as a dragway inappropriate.

119               Thus, the Commonwealth was not willing to declare that no “National Land” use would be made of the land during that time. That is, it could not and did not form the view that it would not be necessary during the period of the renewed lease to prevent the use of the land as a dragway, in the interests of air safety.

120               It was the Territory’s responsibility, if it chose to accept it, to make or not that declaration. Nevertheless, there was no reason for the Territory to reject the view that circumstances were likely to arise in the second half of the proposed lease which would cause the use of the land as a dragway to be inconsistent with the continuing safe operation of Canberra Airport.

121               Thus, the Territory could not reasonably have concluded that the Commonwealth had no relevant interest in using or restricting the user of the land in the latter half of the proposed lease.

122               The term “available for lease” is critical to resolution of this issue. Clause 6(e) provides for the offer of a lease of ten year’s duration. That is the lease which must be issued if the land is “available” for it.

123               Clause 6(e) contemplates that the land might be unavailable either because it is to be subdivided or because it is required to be used inconsistently with a renewed lease by reason of Territory or Commonwealth land use intentions within the ten year period.

124               It follows from the foregoing that whether or not it was the Territory or Commonwealth which had the task of deciding whether there was or not a National Land purpose inconsistent with a proposed ten year lease from 8 September 1998 and, hence, whether the land was “available” for such a lease, neither could honestly and reasonably have asserted that there was no such requirement.

125               On that basis, those two pre-conditions for the exercise of the option (or one if they be regarded as linked) were not fulfilled as at 8 September 1998.

The role of the Territory under clause 6(e)

126               Under s 6(1) of the National Land Ordinance 1989, it was open to “the Minister on behalf of the Commonwealth” to enter into an arrangement with the Territory “to exercise specified functions under the continued Ordinances on behalf of the Commonwealth”.

127               The “applied provisions” include the provisions of the Leases Ordinance 1918 (see s 5 National Land Ordinance 1989), as modified by the Schedule thereto.

128               Thus, the Commonwealth was empowered to have left responsibility with the Territory for determining the matters referred to in clause 6(e), irrespective of whether other aspects of the management of the land were re-vested in the Commonwealth.

129               If the Territory had determined that the pre-conditions for the issue of a renewed lease had been fulfilled so that the appellant was entitled to accept an offer of a ten year lease, the Territory was then empowered to determine the terms of it as agent for the Commonwealth. That empowerment was also consistent with the terms of the National Land Ordinance 1989.

130               If the appellant had no objection to the proffered terms, the lease would bind both parties. Execution of it might be ordered by way of specific performance.

Void for uncertainty?

131               What then if the Territory, whether at the request of the Commonwealth or of its own volition, offered terms unacceptable to the appellant? It might have offered a lease, for example, which did not permit use of the land as a dragway.

132               The answer to that question may be given only after the consideration of the submission that clause 6(e) was void for uncertainty.

133               It is not an uncommon feature of an option for renewal of a lease that the rent and, possibly, some other terms, be fixed by a nominated third party, in the absence of concurrence. Although it is not strictly necessary to consider the question, it is, because of its importance, useful to offer some reassurance to lessees obtaining the benefit of such clauses.

134               The parties each placed reliance on Cudgen Rutile (No. 2) Pty Ltd v Chalk [1975] AC 520. In that case, the appellants claimed a right to mining leases. They had been granted a right to apply for them by the terms of the authority to prospect which they had been granted. Their Lordships commenced by accepting that the Crown could not dispose of Crown land, by lease or otherwise, without statutory authority. Thus, the Crown could not, absent statutory authority, bind itself to exercise a statutory discretion in a particular way. The alleged agreement was inconsistent with the role of and duties imposed on the Mining Warden.

135               There was, alternatively, an argument that the alleged agreement had, in any event, left many essential terms to be agreed. Their Lordships agreed with that submission.

136               The appellant thus relied on the statement appearing in their Lordships advice at 536:

“… if the contract is one made with a public body, with a duty to act and decide according to a recognisable principle, the court may be willing to find an obligation which requires that body to reach a decision, in accordance with that principle, as to a matter left to its decision in the contract itself, and so find an enforceable contract where one might not be found as between private parties.”

137               The respondent however, relied upon their Lordships statement at 537:

“But in the present case, the area of discretion left to be exercised by the Minister, related as it was to important considerations of public interest, was greater than could be filled in by the court … The Minister could not by anticipation fetter his statutory duty to decide upon a number of essential terms … Since these terms remained to be fixed by him in his discretion, there could be no binding contract, at least until he did so – this leads to a conclusion in terms of an “illusory” contract.”

138               Of course, in the present case, there were no relevant statutory fetters upon the statutory power of the Commonwealth, whether through the agency of the Territory or otherwise, to determine to grant a lease containing an option such as that conferred by clause 6(e).

139               However, it was contended by both the Territory and the Commonwealth that, in truth, the terms of any renewed lease, particularly the rent, were to be fixed simply at the whim of the lessor, whether the lease was drawn by the Territory itself or on instruction from the Commonwealth. Thus the offer was in truth, of an “illusory” agreement.

140               There was a similar issue raised in Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (supra). There, however, there was provision made for the appointment of an arbitrator to fix the disputed term. The arbitrator was to be nominated by the President for the time being of the Queensland Law Society Inc. Booker refused to honour the option. It contended the option agreement was incomplete.

141               That contention was rejected. At 604-5, Gibbs CJ, Murphy and Wilson JJ stated that it is:

“… well-established that the parties to a contract may leave terms – even essential terms – to be determined by a third person … In the present case, the lease itself provides the entire mechanism for determining the rental for the renewed term. There is no further agreement required of the parties. It is true that if they do agree upon that rental, then there is no occasion to resort to the independent mechanism that the lease provides. But, there being no such agreement, all that is required is that the President name a person to fix a figure not being less than the minimum rental operative during the original term. No formality is required to effect the necessary appointment. Either party may request the President to facilitate the fulfilment of the agreement. It may be assumed that if he declines to do so, or if the person nominated declines to carry out the task assigned to him, then the renewal cannot be effected, and that Wilson’s exercise of the option will have been fruitless. Nevertheless, in the circumstances as they stand at present, there is a valid agreement for the renewal of the lease subject to the fixation of a rental for the new term. The fixation of that rental is a condition precedent to the performance of the agreement.”

142               It was further held that each party had an implied obligation to do all that was reasonable to procure the appointment of the arbitrator.

143               Brennan J would have adopted a narrower view. That is, that the rent to be fixed be regarded as an objectively reasonable rent. That fact was to be ascertained by the President or nominee. Thus, in default of the President or nominee doing so, the court could fix the rent by reference to objectively ascertainable criteria.

144               The broader view of the majority would grant validity to an agreement to fix by arbitration terms not objectively ascertainable but fixed in the independent discretion of the appointed arbitrator.

145               A similar case is Hawthorn Football Club Ltd v Harding [1988] VR 49. In that case, Tadgell J held that an agreement that the terms upon which the defendant should play football for the plaintiff (other than the lump sum to be paid to the defendant’s former Club and the years for which he would play football exclusively for East Fremantle and then the plaintiff), if not agreed between them, be fixed by arbitration, was good. A very wide area of the agreement had been left to be fixed by arbitration.

146               In Brooks v Wyatt (1992) 112 FLR 12, Kearney J held that an option to purchase land was good, though for a price to be agreed, where the price, in default of such agreement was to be fixed by a valuer. However, no valuer was appointed by the option clause. It contemplated that the parties would agree upon a valuer to be appointed.

147               It was held that, even if the agreement might have failed had the parties not agreed upon a valuer, once they had done so, the defendant could not resile from the agreement. In any event, Kearney J was of the view that there was a subsidiary implied obligation to do what was necessary to facilitate a valuation. In his Honour’s view, the appointment of a valuer might be ordered by the court even absent cooperation from the defendant (see 27).

148               In the present case, as it happens, the parties to the Lease agreed that the Territory might not only declare that the pre-conditions for the exercise of the option had been fulfilled but then, if the Commonwealth and appellant had not agreed upon all the terms of a new lease also fix those terms.

149               The Territory is a body politic separate from the Commonwealth. It has a separate statutory right, through its Executive, to make decisions independently of the Commonwealth by virtue of the ACT (Self-Government) Act. It is open, as Attorney-General (ACT) v Commonwealth (supra) makes clear, to the Commonwealth to confer powers of administration in relation to National Land upon the Territory. The Territory, though an agent of the Commonwealth, may exercise its own discretion just as it does in relation to Territory Land. It must do so according to law. That includes the National Land Ordinance 1989 and the PALM Act. It would therefore act as a relevantly independent arbiter in performing the function of determining the terms and conditions of the lease to be offered on behalf of the Commonwealth.

150               Even if the Territory was to be regarded as bound by the instructions of the Commonwealth, and so not independent of it, s 3AAA of the Leases Ordinance 1918, in its application to National Land, would give the appellant a right to have the terms not agreed fixed by the Administrative Appeals Tribunal (Cth), an unarguably independent arbiter. The option clause does not fail for uncertainty.

Conclusion

151               Whether as an independent body or as duly instructed agent of the Commonwealth, it is clear that the fact was and the Territory could not and did not otherwise declare that:

·        The land was not, during the period of ten years from 8 September 1998, required for a National Land purpose; or that

·        The land was available for a ten year lease from 8 September 1998 for the purpose of use as a dragway.

152               It follows that the conditions for the exercise of the option did not exist as at the expiration of the prior lease to the appellant in respect of the land. The Commonwealth is, therefore, not obliged to offer the lease contemplated by clause 6(e).

153               The appeal should be dismissed with costs.

I certify that the preceding paragraphs numbered forty-one to one hundred and fifty-three (41-153) are a true copy of the Reasons for Judgment herein of the Honourable Justice Higgins.

Associate:

Dated: 2 April 2001