Finlay Stonemasonry Pty Ltd v JD & Sons Nominees Pty Ltd

[2011] NTSC 37

 

PARTIES:                                         FINLAY STONEMASONRY PTY LTD

 

                                                         v

 

                                                         JD & SONS NOMINEES PTY LTD FOR THE JENKINS FAMILY TRUST No 2

 

TITLE OF COURT:                           SUPREME COURT OF THE NORTHERN TERRITORY

 

JURISDICTION:                               SUPREME COURT OF THE TERRITORY EXERCISING ORIGINAL JURISDICTION

 

FILE NO:                                          No. 108 of 2010 (21032664)

 

DELIVERED:                                   18 May 2011

 

HEARING DATES:                           2, 3 March 2011

 

JUDGMENT OF:                              BLOKLAND J

 

CATCHWORDS:

 

PLANNING ACT – Plaintiff seeks a declaration that a registered lease is void – Plaintiff claims lease void on grounds of purported sub-division – transaction that purports to sub-divide land in contravention of Part 5 of the Act is void – land may be sub-divided only with consent subject to the relevant provisions of the Planning Scheme – Does the lease effect sub-division – lease falls under s 5(3)(b) exception – lease does not effect sub-division – claim dismissed – application as to costs.

 

Planning Act (NT) ss 2A(1), 2A(2)(a)-(e), 3, 5(1), 5(3), 5(4), 44(b), 46, 47A, 47A(a), 62(1)(a), 63(2)

Licensed Surveyors Act (NT) s 49(3)

The Conveyancing Act (NSW)

Valuation of Land Act 1916 (NSW)

Local Government Act (NSW)

Interpretation Act (NT) s 17(1)

Auctioneers, Real Estate Agents (etc) Act (Qld)

Property Law Act (NSW) [1900] NSWR 570

 

Butt, Land Law, 6th Edition, (2010) Law Book Co.

MacDonald, McCrimmon, Wallace, Weir, Real Property Law in Queensland, 3rd Edition, (2010), Law Book Co.

 

Bradbrook, “The relevance of the cujuis est solum doctrine to the surface land owners claims to natural resources located above and beneath the land”, (1988) 11 Adel LR 462.

Butt, “The Conveyancer” (1978) ALJ 161.

Butt, “Conveyancing and Property” conveyancing practice and the law: leases and subdivisions”, (2002) 76 ALJ 346.

Butt, “How Far Down Do You Own? The Final Word?” (2010) 84 ALJ 746.

 

Hardy v Wardy [2001] NSW SC 180; distinguished

 

Bernstein of Leigh (Baron) v Skyviews and General Ltd [1977] 3 WLR 136;

Bocardo SA v Star Energy Onshore Ltd [2009] 3 WLR 1010; Bocardo SA v Star Energy Onshore Ltd and another [2010] 3 WLR 654 Supreme Court (UK); Byrnes v Jokona [2002] FCA 41; Commissioner for Railways and Others v Valuer-General [1974] AC 328; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 416; Re Lehrer [1961] SR (NSW) 365; Re Trizec Manitoba (1986) 25 DLR (4th) 444; The Centre Pty Ltd v Thomas Magnus Pty Ltd (1969) Qd R 452; Toll (FGCT) P/L v Alpharpharm (2004) 219 CLR 165; referred to

 

 

REPRESENTATION:

 

Counsel:

    Plaintiff:                                      A. Wyvill SC

    Defendant:                                    M. Maurice QC

 

Solicitors:

    Plaintiff:                                      Hunt and Hunt

    Defendant:                                    Cridlands MB

 

Judgment category classification:    B

Judgment ID Number:                       BLO 1104

Number of pages:                             41


IN THE SUPREME COURT

OF THE NORTHERN TERRITORY

OF AUSTRALIA

AT DARWIN

 

Finlay Stonemasonry Pty Ltd v JD Sons Nominees Pty Ltd

[2011] NTSC 37

No. 108 of 2010 (21032664)

 

 

                                                     BETWEEN:

 

                                                     Finlay Stonemasonry Pty Ltd

                                                         Plaintiff

 

                                                     AND:

 

                                                     JD & Sons Nominees Pty Ltd for the

Jenkins Family Trust No. 2

                                                         Defendant

 

CORAM:     BLOKLAND J

 

REASONS FOR JUDGMENT

 

(Delivered 8 May 2011)

 

Introduction

[1]       By originating motion Finlay Stonemasonry Pty Ltd (the Plaintiff) seeks a declaration that a registered lease is void[1].  The parties to the lease are the Plaintiff as owner of an estate in fee simple in Lot 9148 Town of Palmerston and JD & Sons Nominees Pty Ltd for the Jenkins Family Trust No 2 (the Defendant) as tenant.  The Plaintiff claims the lease is void because it is a purported subdivision of the subject land in contravention of Part 5 of the Planning Act (NT).  If that is so, it is argued the lease is rendered void by the operation of s 63(2) Planning Act (NT).[2] 

[2]       There is no question the parties entered into the subject lease[3] intending to be bound by its terms.  The Defendant tenant runs a café in the leased premises known as “Finlay’s Joint”.  It is common ground the lease commenced on 1 July 2008; the initial term expired on 31 December 2010.[4]  The lease provides for three further terms.[5]  When the three further terms are aggregated with the initial term the total is 26 and a half years.  The period of 26 and a half years for these purposes is an aggregate calculated as required by the Planning Act (NT) when determining whether land is to be taken to be subdivided under the Planning Act (NT).[6]  If the lease has effected or purported to effect a subdivision in contravention of the Planning Act (NT), then regardless of the parties having entered the lease with the intention to be bound by its terms, the lease would be void.[7]  As will be discussed, the Plaintiff contends the lease is not “only” for “part of a building”[8] but covers the land beneath therefore effecting subdivision under the Planning Act (NT). 

The Relevant Statutory Framework

[3]       Although the focus of the argument in this case is on s 5 Planning Act (NT), it is helpful to consider the context of the broader statutory regime.  Occasional reference was made to the wider scheme during submissions.  The objects of the Planning Act (NT) are to provide a framework of controls for the orderly use and development of land.[9]  Those objects are to be achieved by a number of stated regulatory aims.  Relevantly these aims include strategic planning of land use, development and sustainable use of resources; planning for transport corridors and public infrastructure; effective controls and guidelines for the appropriate use of land, (having regard to its capabilities and limitations); control of development to provide protection of the natural environment, (including by sustainable use of land and water resources); and minimizing adverse impacts of development on existing amenity and, wherever possible, ensuring that amenity is enhanced as a result of development.[10]

[4]       Part 5, Division 6 Planning Act (NT) regulates subdivisions and consolidations.   Section 61 Planning Act (NT) provides a person must not subdivide land otherwise than in accordance with a registered plan of survey approved under s 49(3) of the Licensed Surveyors Act (NT).[11]  The relevant approvals by the Surveyor General cannot be granted unless consents under s 62 Planning Act (NT) have been given.  As identified previously, a transaction which purports to subdivide land in contravention of Part 5 Planning Act is void.[12] 

[5]       The strict prohibition on subdivision the Northern Territory is stressed further in legislation providing the Surveyor General must not approve a plan for subdivision unless consent has been given by the consent authority.[13]  Clearly, a proposed development may include a subdivision, even if the development relates solely to land being subdivided.  It is the potential or actual issuing of two titles that appears to attract the operation of the Planning Act (NT) in terms of compliance with provisions relevant to consent to development.  Section 46 Planning Act (NT) details the procedural requirements and assessments that are to take place, in furtherance of the objectives of the Planning Act (NT), such as those directed to ensure orderly development, appropriate level of utilities and infrastructure and the assessment of environmental impact and associated factors.  Public notice of a development, prior to its consideration by the consent authority must be given under s 47 Planning Act (NT), unless exempted by s 47A Planning Act (NT).  Subdivisions are not specifically exempted, (as distinguished from consolidations)[14] unless specified by Regulation that the subdivision will not have a significant impact on existing or future amenity.[15]  It is not suggested there is any relevant exempting regulation applying to the lease of Finlay’s Joint. 

[6]       The Court was referred to the Northern Territory Planning Scheme, Part 2.6 “Subdivision of Land” providing: “Land may be subdivided … only with consent and subject to the relevant provisions of Part 5 of this Planning Scheme”.  The Plaintiff’s land is zoned light industry “LI”.  Clause 5.11 provides for “Zone LI – Light Industry”: 

1.   The primary purpose of Zone LI is to provide for light industry uses or development activities that will not by the nature of their operations, detrimentally affect adjoining or nearby land.

2.   Offices are expected to primarily provide a service to the light industry in the zone and be of a size commensurate with the service provided.

3.   Shops are expected to be limited to those that either service the needs of the light industry in the zone or would be inappropriate in a commercial zone.

[7]       The relevant Zoning Table – Zone LI lists “restaurant” as a discretionary use.  During the course of argument the Court was told this point had already been dealt with by a development application.[16]

[8]       Part 5, Clause 11 of the Northern Territory Planning Scheme deals with “subdivision” and the question of minimum lot sizes.  The minimum lot size requirement for Zone LI is 1225 square metres.[17]  On behalf of the Plaintiff it was pointed out the demised premises here are approximately 600 square metres.  Hence, it is submitted, (and would appear to be the case), if there were an application for subdivision it would need to deal with the question of why a subdivision should be permitted for a smaller area.

[9]       On behalf of the Plaintiff the Court was referred to the Northern Territory Planning Scheme.  Clause 11.3.3 of the Northern Territory Planning Scheme deals with “Lot Size and Configuration in Industrial Subdivisions”, the stated purpose being to ensure lots are of an appropriate size and configuration.  The Planning Scheme states an industrial subdivision should provide for a variety of low size lots to accommodate a range of activities and ensure the utility of each lot in terms of building space and accessibility; there should be compatibility with adjacent or commercial and residential areas with appropriate buffers; (for example roads, landscaping or parks); further, it should provide sufficient space to accommodate industrial operatives and buildings envisaged; and safe entry and exits of vehicles.  Although of contextual interest, these factors are not central to the issue to be determined, which requires consideration of the more fundamental question of whether this particular lease effects a subdivision.

[10]     Whether this lease has effected a subdivision depends on the interpretation and application of s 5 Planning Act (NT) to these circumstances and this lease.  Under s 5(1), Planning Act (NT), subject to certain exceptions, “subdivision” means the division of land into parts available for separate occupation or use, by means of, (relevantly):

5(1)(b)        lease, agreement, dealing or instrument purporting to render different parts of the land available for separate disposition or separate occupation.

[11]     Section 3 of the Planning Act (NT) defines “land” as including “land covered by water and buildings constructed on land”.  As an exception to the meaning of “subdivision”, land is not taken to be subdivided by grant of a lease … unless the lease … is for a term of more than 12 years.  As noted, this exception does not apply to the circumstances of this case as the aggregate of all additional terms is more than 12 years.[18]  The primary issue here is whether the following exception is enlivened:[19]

5(3)   Land is not taken to be subdivided for the purposes of this Act

(b)     by reason only of the lease of part of a building.

[12]     “Building” is defined inclusively: “includes a structure of any kind (including a temporary structure) and part of a building or structure”.[20]  It is said if the lease includes the land beneath a subdivision has been effected within the meaning of s 5(1)(b) Planning Act (NT) as the lease divides the land “into parts available for separate occupation or use, by means of … lease purporting to render different parts of the land available for separate disposition or separate occupation”, and no relevant exception operates.  Fundamental to the Plaintiff’s argument is the submission that the s 5(3)(b) Planning Act (NT) exception cannot apply here as the subject lease is not “only” the lease of part of a building but is also a lease of the land beneath the building.  

[13]     The Plaintiff argues the expression “only of the lease of part of a building” in s 5(3)(b) Planning Act (NT) is intended to distinguish a lease of all or part of a building and the land beneath on the one hand, from a lease that is of part of a building only, (without the grant of any interest in the ground beneath) on the other. 

[14]     It was pointed out the most obvious examples of the latter cases are leases of multi storey buildings or multilevel shopping centres.[21]  The Plaintiff’s assertion is possibly one reason the exception is worded as it is.  The purpose may well be to recognise and acknowledge the validity of leases that do not include the land beneath as they are leases of “only” part of a building.[22]  In my own researches on the point I have been unable to locate any reference to the exception in the Legislative Assembly debates relevant to the current Planning Act (NT).  The previous Planning Act (NT) that came into force on 14 April 1993 does not include the exemption.  The Defendant argues the lease, being a lease for the café only is an airspace lease of the café area comprising part of a building and therefore within the s 5(3)(b) Planning Act (NT) exception.  Further, and related to the same point, the Defendant argues the lease cannot be construed to include the soil below the café. 

[15]     I substantially agree with the construction of the relevant parts of the Planning Act (NT) as submitted by Senior Counsel for the Plaintiff, save for the asserted reason for the exception in s 5(3)(b) Planning Act (NT) when taken in the narrow sense suggested.  As will be seen however, I have strong reservations about the argument as it applies to this particular lease and these particular premises.  There is nothing in the lease or the structure of the premises that appears to on its face to contravene or otherwise violate any part of the Planning Act (NT) or the relevant parts of the Northern Territory Planning Scheme save that the lease refers to “land” in terms of the area leased.  I appreciate, as has been argued by Senior Counsel for the Plaintiff that I cannot draw the ultimate conclusions from a consideration of whether these premises are the type of interest targeted by the Planning Act (NT).  The objects of the Planning Act (NT), I accept could be easily undermined or avoided if there is not strict compliance with its provisions.

Evidence Before the Court

[16]     The evidence before the Court was brief.  Although the extent of the area leased is to be determined by construing the terms of the lease, evidence was also led bearing on the nature of the demised premises leased, its uses, dimensions and structural relationship with the adjoining part of the building and the land beneath.  It is not necessary to deal with all of those matters as in essence, the lease must and does speak for itself.

[17]     Although the Panel Form of the lease, (Exhibit 1) next to “Interest Being Leased” includes a hand-written correction and further wording, both parties are agreed, for the purposes of these proceedings, the original text is to be relied on as between these parties.  Consequently, I proceed on the basis that next to “Interest Being Leased” is “That part of the land as hatched on attached plan”.  In fact the area of the plan might be better described as “shaded”, or “shaded grey” however all relevant objective indications are that the shaded area on the plan is what the parties have taken to be the depiction of the leased property.  There is still room for a degree of interpretation on some elements of what is actually included in the lease.  I am proceeding on the basis it is safe to infer the grey shaded portion on the plan annexed to the lease represents the area leased, save of course that does not by itself answer the ultimate question of whether the soil beneath is included.[23]  The text of the lease refers to “Land”.

[18]     Mr Thomas David Finlay’s affidavit affirmed 5 November 2010 was read.[24]  This is particularly informative on the nature and description of the demised premises, although none of this evidence is of itself determinative of the ultimate issue in the case.  Mr Finlay confirms the Plaintiff constructed a rectangular shed on a portion of the land in October/November 2005.  The shed is divided into two sections.  It is a one level, ground level structure with a dividing wall approximately two thirds of the way down the shed with a veranda around the perimeter. 

[19]     One section of the shed is occupied and operated by the Defendant as the café “Finlay’s Joint”; the other section contains what has been described as a bric-a-brac shop, “The Sticky Beak Shop” owned by the Plaintiff.  Nothing really turns on it but the Plaintiff alludes to “skimming through” the first draft of the lease and gives other indications that perhaps not a great deal of thought went into the final terms of the lease.  Mr Finlay said he did not seek legal advice during the drafting process. 

[20]     The plan attached to the lease also illustrates how the leased area relates to the larger building or structure.  The Sticky Beak Shop is to the left and Finlay’s Joint is to the right on the inset parts of the plan attached to the lease.[25]

[21]     The photos tendered as part of the annexure to Mr Finlay’s affidavit assist in clarifying the nature of the structure.[26]  Photo 1 depicts the front view of Finlay’s Joint, taking in its furtherest corner.  Photo 2 shows one side view of Finlay’s Joint with the entrance, the double doors and a window at either side.  The veranda is also shown.  Photo 3 clearly shows the edge of the veranda and edge of the front of Finlay’s Joint with car parking at the front.  I was told this represents the south eastern boundary of the veranda.  Photo 4 shows the two parts of the premises.  The Sticky Beak Shop is built of green cladding which can be seen in the photos.  A number of pots and other objects are outside of The Sticky Beak Shop.  Next to it is Finlay’s Joint which is a brickwork section of the structure.  I note the wall between the premises and the two types of roof, distinguished by the different roof lines.  Similarly, (although perhaps more clearly), photo 5 shows where the two premises meet and the dividing wall between them.[27]  Photo 8 shows a corner of Finlay’s Joint with steps at the rear adjoining The Sticky Beak Shop.  Photos 9, 10 and 11 show where the two parts of the building meet.  The stone wall between the two parts can be seen.  Above that are other materials including what looks like a type of cladding going up to the roof. 

[22]     Plan 3 of Annexure C to Mr Finlay’s affidavit shows the slab plan of the building.  It depicts both Finlay’s Joint on the left with the veranda around it and The Sticky Beak Shop on the right.  The notation “Section 1” confirms the note of 100 millimetres thick slab throughout on a damp proof membrane with 50 minimum sand bed and other specifications.  From cross section 1 it can be observed the slab is approximately one metre above the ground.  Both the balcony and Finlay’s Joint are about one metre above ground level.  It was submitted that this was important as the ground underneath has been filled, compacted, layered with sand and then the slab poured on top. 

[23]     The relevance of this is said to highlight that there is no horizontal boundary; that the Defendant would not be able to say where the horizontal boundary is, as between floor level, below the floor covering but above the slab or beneath the slab; or whether it includes foundations and infill.  The Plaintiff argues that because there is no horizontal boundary and certainty is required, the boundary must include the fill and compacting under the slab.

[24]     “Section 4” of plan 2 depicts the supporting wall under the slab between the edge of the veranda and the supporting wall and the internal part of the premises.  The supporting wall is clearly shown under the slab.

[25]     Mr Finlay gave brief oral evidence.  In answer to a question whether there would have been any benefit to him in terms of access to services, a commercial or practical benefit to him of keeping the slab and the area beneath the slab of the café he said “yes, maybe there would have been if I wanted to put services through there in the future or do something else”.  On whether that was something he had in mind, he said “Well you just don’t know, do you, what you do in the future”.[28] 

[26]     In terms of the structure, Mr Finlay agreed the roof overhangs the veranda; that the veranda is a three sided veranda and it extends past the edge of the slab.  He agreed the stairs that lead up from The Sticky Beak Shop to the restrooms are used by patrons of both Finlay’s Joint and The Sticky Beak Shop.  He agreed there was a toilet in The Sticky Beak Shop that was not for public use.  The toilets are serviced by a septic system; a separate men’s and women’s toilet and, (as he termed it), a handicapped toilet in the middle.  He agreed the grey water pipes go underneath the Finlay’s Joint veranda, indeed underneath the area leased by Finlay’s Joint and are diverted to the septic tank.  He agreed inside Finlay’s Joint the café was divided by internal petitioning, between the kitchen and public area where people eat.  He could not remember but thought the internal partition part of “Denise’s” (effectively the Defendant’s) fit out and could not recall when the fit out took place.  He said he paid for some of the fit out and Denise for other parts of it; he could not recall who paid for the partitions.  He recalled paying for the air conditioning; the range hood and slate floor and that at a later time Denise was to reimburse him for those items.

[27]     The plan for the pipes plumbing and septic were tendered on behalf of the Defendant, showing the pipes running from the toilets used by patrons from both sides of the building.[29]  Further, the Surveyor, Mr Greg Leach who prepared the Lease Survey attached to the Lease describes a number of features that in a sense are obvious, however, given there is some ambiguity about the extent of the “grey area” or “shaded area”, in my view his evidence is of assistance.  I acknowledge the Court must come to its own conclusions but Mr Leach’s evidence is obviously of some assistance in this regard given the precision of the specifications.[30]  According to Mr Leach the lease is of two separate areas, an “Internal Area” having a floor area of 319.1 m2 and an “External Area” comprising 308.3m2.  As the other evidence indicates, the External area has a veranda with a roof over an area for tables and chairs.  Mr Leach confirms the leased area is depicted by grey colouring and does not, (which is evident once the grey shading issue is clear), include five sets of steps adjacent to the veranda and at the end of a ramp parallel to part of the veranda, the ramp; the toilet area, nor the walls that separated the internal and external areas.

[28]     Affidavits of Mr Ray Fogolyan, Building Consultant were read,[31] providing similar and further detail of the property and its provenance.  Mr Fogolyan indicates the building has development approval for use as light industrial, showroom shop and catering business.  He says the building has not been altered and is consistent with its drawings.  He emphasises, through the photos annexed to his affidavit (D5) the raised stone faced plinth on which the café sits and the veranda of the café.

[29]     At the hearing of this matter I received two affidavits de bene esse.[32]  The Plaintiff objected to them being received into evidence on the basis of relevance and impermissible opinion.  I have decided not to admit the evidence that, rather than being solely opinion, is substantially evidence of fact of the existence of many commercial leases in Darwin of shops and other commercial premises that are airspace leases that do not include the land below.  The examples are from a wide variety of leases.  On behalf of the Defendant, they are tendered to show essentially that such leases are not “such an unusual and strange interest”, referencing Bryson J in Hardy v Wardy.[33]  The material is not tendered on the basis of a custom or practice of commercial leasing in the Northern Territory, but rather to diminish the value of the relevance the Plaintiff takes from Bryson J’s “unusual and strange interest” and similar sentiments in Hardy v Wardy. 

[30]     In my view Bryson J was dealing with a different set of circumstances to the point that much of what is said in Hardy v Wardy may be distinguished.  His Honour was there dealing with a whole building, (although it abutted another building), certainly not “part of a building” and the subject lease in Hardy v Wardy contained an option to purchase.  The common intention of the parties in the circumstances of Hardy v Wardy must be differented.  His Honour was dealing with a qualitatively different form of tenure.  If Bryson J was referring to any other context, particularly within the Northern Territory, particularly given the circumstances of this case, then with the greatest of respect, His Honour’s particular turn of phrase cannot be taken to be a correct description of this interest.  The construction of the particular lease is what is relevant here and given in my view much of what is said in Hardy v Wardy is distinguishable, the admission of the material is not directly relevant and would tend to distract from the primary task of construction of the lease and defining the extent of the demised premises.  For those reasons I am not admitting and am disregarding the two affidavits.

[31]     Drawing together primarily the plan, but also Mr Finlay’s evidence with photos; the evidence of Mr Leach, some interim conclusions can be drawn on the extent of the area leased, without at this stage concluding on the ultimate question of whether it extends to the earth beneath.  This is still subject to consideration of the lease as a whole.  Viewing the plan the lease reveals the parts shaded grey, do not include the external walls (the difference in the internal and external measurements must be the width of the wall) and do not include the toilet area.[34]  This is confirmed by Mr Leach.  The text of the lease includes “internal partitions” in the definition of “premises”, but makes no reference to external walls.  The ramps and stairways leading to the veranda are also excluded.  Mr Finlay’s evidence was that the roof extended as a veranda beyond the edge of the concrete to keep the rain off.  The lease clearly only extends to the edge of the concrete, one of the vertical boundaries.  The lease states it includes “ceilings”, Air Conditioning Equipment, Appurtenances, floor coverings, and fixtures and fittings contained that are not those of the Lessee.[35]

[32]     On the available material the plan indicates clearly two areas, an internal area and an external area; it clearly excludes the various other areas already noted, however I accept that is not the end of the matter, express indications within the lease will still override those interim conclusions apparent on the evidence. 

[33]     This lease has circular and overlapping definitions, some internal inconsistencies within the text and apparent inconsistencies between the attached plan and some other parts of the lease.  It is necessary to attempt a construction which reasonably accords with the intention of the parties, objectively assessed.  The sorry state of the lease may well be the result of a history of mixing the lay know-how of the parties with intervening legal advice at earlier times.  While this goes some way to explaining the contradictory nature of the lease, overall it does not assist with the ultimate construction.[36]  Most of the draft lease is similar to the lease ultimately executed, save for a previous clause 14 – that the lessor and lessee shall apply for a Development Permit within three years of the commencement date of the lease for subdivision of the Land; extension of the lease was made conditional on Development Consent Authority approval.[37]  This was drawn to the Court’s attention on behalf of the Plaintiff.  Although interesting it does not assist in determining the ultimate issue.  It represents some thoughts at an earlier time not clearly reflected in the current lease.  It perhaps helps to explain the state of the lease.

Construction of The Lease

[34]     To determine whether the lease included the “land underneath” or was an airspace only lease requires the lease be construed having regard to its express terms, the surrounding circumstances known to the parties, the objective assessment of their common intention and the purpose and object of the lease.  I doubt the parties consciously turned their minds to this question of whether the lease included the earth beneath the café.  The principles of objective interpretation must apply.

[35]     In Pacific Carriers Ltd v BNP Paribas[38] (in the context of determining obligations arising under letters of indemnity), the High Court held:[39]

The case provides a good example of the reason why the meaning of commercial documents is determined objectively:  it was only the documents that spoke to Pacific.  The construction of the letters of indemnity is to be determined by what a reasonable person in the position of Pacific would have understood them to mean.  That requires consideration, not only of the text of the documents, but also the surrounding circumstances known to Pacific and BNP, and the purpose and object of the transaction.

In Codelfa Constructions Pty Ltd v State Rail Authority of NSW, Mason J set out with evident approval the statement by Lord Willberforce in Readen Smith Line Ltd v Hansen-Tangen:

In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.

 

[36]     This approach was confirmed in Toll (FGCT) P/L v Alpharpharm P/L:[40]

This Court, in Pacific Carriers Ltd v BNP Paribas, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined.  It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations.  What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe.  References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement.  The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean.  That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.

[37]     In arguing the lease includes the land or soil underneath Finlay’s Joint, (therefore the lease is not part of a building “only” and the exception under s 5(3)(b) Planning Act (NT) is not enlivened), the Plaintiff contends as the lease does not delineate a horizontal boundary, the lease must be taken to extend to the land beneath Finlay’s Joint.  I find it difficult to accept parties to a lease for a café such as Finlay’s Joint could reasonably be said to intend the lease extends to the earth beneath.  The “Lease Purpose” is expressly stated as “Coffee shop and eatery”.[41]  How the earth beneath the leased area goes any way towards furthering that object has not in my respectful view been seriously identified.  It was suggested on behalf of the Plaintiff there was a possibility in the future of the need for further plumbing if there were further appliances fitted.  The evidence is, the Plaintiff provides all relevant grey water pipes for the toilets for both Finlay’s Joint and The Sticky Beak Shop (jointly used and accessed) which go under part of the leased area of Finlay’s Joint.[42]  As pointed out on behalf of the Plaintiff, there are drains that extend directly into the earth beneath exclusively for the use of Finlay’s Joint such as the drain for the basin and dishwater and grey water,[43] however it is reasonable to expect the leased premises of a café would be serviced in that manner, whatever the extent of the lease.  It is not in my view a determinative point.

[38]     The Plaintiff relies on a series of decisions that in various circumstances and for various purposes have affirmed the need for the definition of horizontal boundaries in determining the extent of the area leased or, to determine subdivision.  Without horizontal boundaries, the Plaintiff argues, the area leased extends “above to the heavens and below to the centre of the earth”, in accordance with the ancient cujus est solum maxim.[44]  While it has been said the maxim correctly indicates that ownership of land is not confined to the land’s surface[45] its accuracy beyond that has been questioned.  Professor Butt has expressed the opinion that a lease may limit the upwards and downwards extent of the land or premises over which it is granted and that “This may be done expressly; or it may be done impliedly, as where a lease is granted of a ground floor flat”.[46]  Citing the Canadian case Re Trizec Manitoba[47] (holding airspace above land and the building was to be assessed separately for realty taxes); Butt concludes airspace above the surface can be leased separately from the surface.  The construction of this lease does not call for implied terms, but rather a reasonable construction objectively assessed.

[39]     The rights of an owner to the airspace above as a result of invoking the maxim has been read down to be commensurate with what is necessary for the ordinary use or enjoyment of the land and the structures upon it.  Although these proceedings concern whether the earth below is included in the lease, the approach to the maxim to the space above is also relevant.  In Bernstein of Leigh (Baron) v Skyviews and General Ltd[48] the defendant company conducted an aerial photography business.  The company took an aerial photograph of Lord Bernstein’s estate.  Lord Bernstein commenced proceedings claiming the defendant was guilty of trespass by wrongfully entering his airspace, reported as being many hundreds of feet above the ground.  Griffiths J thought that to apply the maxim literally would lead to “the absurdity of a trespass at common law being committed by a satellite every time it passed over a suburban garden”.[49]  The operation of the maxim was restricted:

The problem is to balance the rights of an owner to enjoy the use of his land against the rights of the general public to take advantage of all that science now offers in the use of airspace.  This balance is in my judgement best struck in our present society by restricting the rights of an owner in the airspace above his land to such height as is necessary for the ordinary use or enjoyment of his land and the structures upon it, and declaring that above that height he has no greater rights in the airspace than any other member of the public”.[50]

Consequently it was held there was no trespass.[51] 

[40]     In the Privy Council decision Commissioner for Railways and Others v Valuer-General,[52] Lord Wilberforce considered the meaning of “land” in the Valuation of Land Act 1916 (NSW) and said of the maxim:[53]

There are a number of examples of its use in judgments of the nineteenth century, by which time mineral values had drawn attention to downwards extent as well as or more than, extent upwards.  But its use, whether with reference to mineral rights or trespass in the airspace by projections, animals or wires, is imprecise and it is mainly serviceable as dispensing with analysis: (citations omitted) In none of these cases is there an authoritative pronouncement that “land” means the whole of the space from the centre of the earth to the heavens: so sweeping, unscientific and unpractical a doctrine is unlikely to appeal to the common law mind.  At most the maxim is used as a statement, imprecise enough, of the extent of the rights, prima facie of owners of land: Bowen LJ was concerned with these rights when, in a case dealing with rights of support, he said “prima facie the owner of the land has everything under the sky down to the centre of the earth” (citations omitted).

[41]     In Re Lehrer,[54] a case concerned with a subdivision within the meaning of the then s 4 Property Law Act (NSW),[55] Jacobs J noted:

Primarily, the ownership of land carries with it everything above and below the surface, the maxim being cujus est solum eius est usque ad coelum.  This maxim, however is not a presumption of law applicable in all circumstances … but at common law it is the presumption”.

[42]     Jacobs J, in the context of whether a number of leases effected sub divisions within the meaning of the Local Government Act (NSW) 1919 relied on a particular meaning of “land” in that context.  After discussing the maxim, His Honour concluded that the word “land” at common law prima facie includes buildings on the soil, but that “land” was not appropriate to describe the building alone or any part of a building, even if it were the subject of an interest in realty separate from the soil itself.  Jacobs J held that a lease of part of a building, separate from the land on which the building stood, was not a lease of “land” as that term was defined in the then subdivision legislation.  In that context His Honour said:

To describe the air above the soil as land is to give to the word “land” an unnatural sense and should not be done unless one is constrained so to do by statute.

[43]     Lord Wilberforce distinguished Re Lehrer in Commissioner for Railways v Valuer-General (cited above) essentially treating it as particular to its legislation.  Lord Wilberforce noted Re Lehrer concerned an upper floor, (and though possibly falling within the s 21(e) Interpretation Act definition), was not “land” for the purpose of the special definition of subdivision contained in the Local Government Act (NSW).[56]  He said the observations of Jacobs J were to be read as to the meaning of land at common law in the light of the particular problem which was different to the problem in Commissioner for Railways.[57]  I agree, as has been argued by the Plaintiff, the Privy Council acknowledges that at that time, for valuation purposes, in New South Wales, “land” could include a layer defined by horizontal boundaries above or below the surface.  The corollary of that conclusion was there was no necessity for it to extend “usque ad colelum at ad inferos”.

[44]     In Bocardo SA v Star Energy Onshore Ltd[58] the land owner plaintiff sued a petroleum company in trespass that had been drilling for petroleum under the plaintiff’s land.  The wellhead was on neighbouring land.  The drilling pipelines however descended to a depth of 2,800 feet on the plaintiff’s land.  The company had a licence to extract petroleum but did not have the plaintiff’s permission.  The Court of Appeal held the cuius est solum maxim was not part of English law as literal application would lead to absurdities – literally ownership to the centre of the earth.  However, in the circumstances the plaintiff’s ownership extended sufficiently downwards to prevent others from interfering with minerals under the surface.  The significant issue in that case involved the question of damages.  Recently in Bocardo SA v Star Energy UK Onshore Ltd and another[59] the Supreme Court affirmed the Court of Appeal’s decision however Lord Hope considered the current status of the maxim and said:[60]

In my opinion the brocard still has value in English law as encapsulating, in simple language, a proposition of law which has commanded general acceptance.  It is an imperfect guide, as it has ceased to apply to the use of airspace above a height which may interfere with the ordinary user of land: Baron Bernstein of Leigh v Skyviews & General Ltd [1978] QB 479.  The position in Scotland may be different: see Stair Memorial Encyclopaedia, vol 19, Property, para 198. where the question is seen as relating to the extent of ownership rather that the balancing of rights in the airspace.  But I think that the reasons for holding that the brocard has no place in the modern world as regards what goes on below the surface, even in England, are not by any means as compelling as they are in relation to the use of airspace.  In United States v Causby 328 US 256 the United States Supreme Court regarded the airspace as a public highway to which only the public had a just claim.  The same cannot be said of the strata below the surface.  As Aikens LJ said in the Court of Appeal [2010] Ch 100, para 61, it is not helpful to try to make analogies between the rights with regard to the strata beneath the surface.  Although modern technology has found new ways of making use of it in the public interest, there is no question of it having become a public highway.  The test applied in Chance v BP Chemicals Inc 670 NE 2d 985, that some type of physical damage or interference with the use of the land must be shown, would lead to much uncertainty.  It overlooks the point that, at least so far as corporeal elements such as land and the strata beneath it are concerned, the question is essentially one about ownership.  As a general rule anything that can be touched or worked must be taken to belong to someone.

The better view, as the Court of Appeal recognised [2010] Ch 100, para 59, is to hold that the owner of the surface is the owner of the strata beneath it, including the minerals that are to be found there, unless there has been an alienation of it by a conveyance, at common law or by statute to someone else.  That was the view which the Court of Appeal took in Mitchell v Mosely [1914] 1 Ch 438.  Much has happened since then, as the use of technology has penetrated deeper and deeper into the earth’s surface.  But I see no reason why its view should not still be regarded as good law.  There must obviously be some stopping point, as one reaches the point at which physical features such as pressure and temperature render the concept of the strata belonging to anybody so absurd as to be not worth arguing about.  But the wells that are at issue in this case, extending from about 800 feet to 2,800 feet below the surface, are far from being so deep as to reach the point of absurdity.  Indeed the fact that the strata can be worked upon at those depths points to the opposite conclusion.

I would hold therefore that Bocardo’s title extends down to the strata through which the three wells and their casing and tubing pass.

[45]     Although Lord Hope takes a generous view of the legitimacy of the maxim for ownership (and assuming, for argument, to the rights of a lessee) below the surface, it is suggested this must yield to contrary intention, and to relevant rules of construction, including here, the purpose of the lease and the objectively determined intention of the parties.[61]  In my view the maxim must be applied with some caution and in this case must yield to the reasonable construction of the lease.

[46]     To underline the importance of horizontal boundaries in different statutory arrangements the plaintiff relies on authorities dealing with the definition of “land” and the legal effect of horizontal rather the vertical boundaries.  The distinction was acknowledged in Re Lehrer. In The Centre Pty Ltd v Thomas Magnus Pty Ltd,[62]in a discussion of the word “land” as found in the Auctioneers, Real Estate Agents (etc) Act (Qld), the Full Court (Qld) held “land” would not be understood to include a portion of air space which might itself become the subject of a separate title.  Lucas J[63] discussed the subject legislation and referred to what an ordinary person would describe as vacant land, however His Honour said he would not wish to exclude the possibility that a building could be subdivided “horizontally” under the provisions, distinguishing “vertical” subdivisions under other legislation.

[47]     Further reliance was placed on Hardy v Wardy[64] concerning the lease of part of two abutting buildings erected on land, (a large two-storey warehouse and offices on one part of the land and a one storey building on another part), separately occupied.  The lease of one building (leased by the Plaintiff Hardy who conducted an antique, fine art and auctioneers business), included an option to purchase that was defended on the basis the lease was only over the building and not the land beneath.  That argument was rejected by Bryson J as so unusual that the parties could not be taken to have intended a result so “strange, remarkable and impracticable” unless their intention to do so was clearly indicated.[65]  His Honour’s view was that it would be different if the lease were of an upstairs area as that made sense for upstairs areas being leased as premises separate from the land.[66]  It is apparent His Honour was dealing with the question of whether the lease of a whole building being separate from the land on which it stood had been clearly identified.  A horizontal boundary may have clarified the position, but Hardy v Wardy in my respectful view was not at all considering “part of a building”.  It must also be remembered it was a case dealing with a lease that had an option to purchase, raising in my view very different issues about the objective intent of the parties. 

[48]     The Plaintiff submits, in keeping with Hardy v Wardy it would be an unusual and strange tenure to find the lease at Finlay’s Joint did not include the land below and such a tenure should not be readily inferred.  The Plaintiff argues the fact the purpose of the lease before the Court here is the running of a café has no bearing on the result. 

[49]     It is further contended on behalf of the Plaintiff the inclusion of the ground beneath is necessary in this lease to ensure the café is free from other activities which might create and interfere with the enjoyment of the premises above.  The possible interferences suggested, (bearing in mind the Plaintiff landlord’s duties to ensure quiet enjoyment), were that the Plaintiff would have the right to remove filling from under the café and use it as a storeroom or car park which would then affect the tenure above; it was said the Plaintiff could increase underground activity provided it was not unreasonable.  All Mr Finlay has said he may do in the future is “if (he) wanted to put services through there…”  Whilst that is not at all determinative, there is nothing to indicate that the lease of this café, separate from the land beneath would create a problem detrimental to either party’s interest in derogation of their common understanding of the lease.  The Defendant is protected by the duty of the Plaintiff to provide quiet enjoyment.  The purpose of the lease does not require the lessee to have exclusive possession of the soil beneath.  The site overall might be developed further and it is indeed possible the lessor will need the soil underneath to service any further development.  It assists neither party to lease beneath and may be detrimental to the Plaintiff in the longer term.

[50]     If the plaintiff were to carry out any substantive work under Finlay’s Joint it is likely to breach the Lessor’s obligation set out in clause 8.1 of the lease where the Lessor covenants … “the Lessee shall peaceably hold and enjoy the Premises during the term without any interruption by the Lessor …”  This protects the lessee from any such incursions into the earth below the café likely to interfere with the purpose of the lease.  In Byrnes v Jokona,[67] Allsop J held:

Where the demise has been granted for the carrying on by the tenant of a particular business known to both parties, it is that business which forms the framework of the analysis as to whether there has been interference with the possession of the tenant.  It is the ordinary and lawful enjoyment of the demised premises for the known purpose which is to be protected from interference which is substantial.

[51]     To emphasise the points of distinction with Hardy v Wardy,[68] it is clear Bryson J was speaking of the unusual circumstances of that case, namely an apparent lease of a whole building with an option to purchase, without leasing the land on which it stands.  This is the circumstance His Honour thought strange.  At paragraph [29] His Honour says:

Mr Wardy’s counsel also relied on what counsel said was a practice of drawing up leases so as to lease a building and not the land on which the building stands in order to obtain registration of a lease for a period longer than five years without subdivision.  There is a reference in the evidence to some such practice.  I learnt of this with surprise, as although litigation relating to dealings in property including leases is everyday business in the Equity Division I had never encountered any practice in which the law relating to subdivisions was approached in this way.  Although the concept of creating a leasehold interest in a room, an office, an apartment or some other described part of a building is often encountered, it was unknown to me that attempts were ever made to lease a whole building without leasing the land on which it stands.  Without the instruction afforded by counsel’s submissions about registering long leases without subdivision plans I would not have been able to see why anyone ever would attempt to do such a thing.

[52]     Further at paragraph [37] His Honour continues to consider the position, in particular the position of an “entire building”.

Legislation authorising registration of strata plans overtook the economic need to resort to close consideration of the matters addressed in Re Lehrer.  Jacobs J recognised the conceptual possibility of a leasehold or indeed a freehold estate in airspace or an upper floor or upper chamber, and that concept may be extended (although it was not extended by Jacobs J) to the concept of a leasehold or freehold of all the space containing an entire building separate from the freehold of the underlying land.  As a concept, yes: but before it could be understood that parties intended to do something so strange, remarkable and impractical, their intention to do so would have to be indicated clearly.  Whether the law would accept the apparent logic of extending the concept of an entire building seems to me to be open to doubt.  A rule of property law which accepts that there can be an estate in a part of a building which is supported by other parts of the building would be extended to a point where it was distorted if it were applied to the entire building, and the classic authorities cited by Jacobs J spoke of an upper chamber on the one hand and the lower buildings and soil on the other.  Littleton, Coke and Sheppard do not in terms support such an extension, and considerations of practicality are adverse to it.

[53]     In the relevant now often quoted passage, it is clear the “whole building” issue is the problem His Honour is referring to:[69]

Where parts of a building such as an apartment or a shop are leased the grant of a leasehold interest carries with it implied obligations which supplement the express grant and make it effective.  In this connection defendant’s counsel referred me to Wheeldon v Burrows (1879) 12 ChD 31 and Wilcox v Richardson (1997) 43 NSWLR 4.  In concept reasoning of this kind could show that a lease of an entire building separate from the land on which the building stood could create implied obligations for support, and for that matter a conveyance of a freehold interest in a building separate from the land on which it stood might create similar implied obligations.  However this does nothing to make it any easier to see, in the absence of altogether clear expressions of intention, that such an unusual and strange interest was brought into existence.  In this case my view is that the terms of the lease indicate clearly that the parties intended to lease, and to grant an option to purchase the land and the building on the land.

[54]     As can be seen, ultimately His Honour determined the case on the terms of the lease.  That is the process to be adopted here. 

[55]     Although for some purposes horizontal boundaries may provide more precision, I do not interpret the cases as meaning that without defined horizontal boundaries the cuius est solum maxim must apply in the way contended by the Plaintiff.

[56]     “Land” in the terms of this lease “Means all the land, Building and improvements contained in the land described in the Panel Form”.[70]  The Panel Form describes both the whole of the Lot at Vol 694, Folio 376, which must refer to the Plaintiff’s land as owner and importantly the “Interest being Leased”, which is “That part of the Land as hatched on attached plan”.  “Premises”[71] means “that part of the Land delineated on the attached Plan and the Building and including all internal partitions, ceilings, Air Conditioning Equipment, Appurtenances, floor coverings, fixture and fittings (including the fixtures and fittings, if any, set out in Schedule (2) other than those the property of the lessee).  The “Part of the Land” must refer to the part or section of the Plaintiff’s entire parcel of land to be leased.  “Building”, means the building on the Premises.  As will be appreciated these are somewhat overlapping and circular definitions, especially when what is depicted in the plan on one view apparently conflicts with parts of the text of the lease.[72]

[57]     I accept the word “land” is capable of multiple meanings.  It may well often be understood to refer simply to the earth.  But in the context of a lease for commercial premises of this kind, I find it difficult to accept the parties used the word “land” in the sense of “earth” or “soil underneath” when the sole purpose of the lease was for “coffee shop and eatery”.  In Re Lehrer[73] Jacobs J accepted that at common law there could be an estate of a building.  This must naturally include the space created by the building.  As has been noted, this was heavily qualified in the circumstances of that case.  “Land” in this lease includes the Building and improvements contained “in the land described…”[74]  In statutory usage, “land” is capable of including a separate estate in part of a building.[75]  Within the Planning Act (NT) itself, as has been noted, “land” includes “buildings constructed on land”.  This is not to suggest the parties here were consciously adopting an approach based on legal definitions.  This is to underline the argument that “land” is capable of meaning the building and naturally the airspace created by it above the earth (or “land”). 

[58]     “Lease” in this lease refers to the letting of the “premises” (rather than using again the word “Land”), however “Premises” reverts back to using “Land”, expressing it as “that part of the Land delineated on the attached plan … (etc)”.  While there is force in the Plaintiff’s argument the use of the word “land” must be given separate meaning beyond “building etc” so it is not rendered devoid of meaning, this approach to interpretation does not clearly show what is meant by “land” in this particular lease.

[59]     The lease must be construed as a whole document, and while the approach to the interpretation of that part of the lease might be determinative in other cases, in my view it is not so conclusive here.  The plan, as has been pointed out by both counsel is two-dimensional, not three-dimensional.  The parties have not expressly dealt with the question of horizontal boundary but that in itself should not lead to the conclusion that the lease was intended to convey that “land” means “land” below the surface.  It is far more likely given the purpose of the lease and the plan which is integral to the definition of the property leased, the parties did intend, as contended on behalf of the Defendant, the lease of the land in the sense of the airspace of the buildings and improvements attached to the land described.  The use of the word “land” is likely to have been thought to be all inclusive so that out of an abundance of caution, nothing that was meant to be included in the premises was mistakenly omitted.  It is also likely the parties intended, as would be expected, to clearly differentiate the delineated portion of “land” that is the lessee’s from the whole parcel of land that is the lessors.  The “land” the subject of the premises, or more properly the “Interest Being Leased” is part of “the land”, that is the land belonging to the Plaintiff/lessor described on the panel form by its Registration Volume and Folio.  It is more likely in my view that the phrase “Premises means that part of the Land delineated” are words of limitation, to make it clear the lease does not extend to any other parts of the Plaintiff/lessors land.  There was a suggestion the lease plan was of secondary importance to the text of the lease on this question of construction.  The text of the lease itself incorporates the plan, in the definition of “Land” and “Premises”.  The lease must be construed as a whole to make common and reasonable sense of it. 

[60]     One telling feature in my view is the non-inclusion of the walls, that is the external walls and toilets.[76]  It is difficult to conceive the parties intended a lease that extended to the earth below where the vertical boundaries underneath needed to somehow correspond with the internal area, external area, (excluding the external walls) and excluding the toilets.  Senior Counsel for the Defendant has used the phrase “slice and dice” the earth below to describe the resulting tenure.  This tells against the interpretation of the lease contended by the Plaintiff.  There are however some further indicators in the lease that support the Plaintiff’s contention that need to be considered.

[61]     “Appurtenances” in this lease means “all stop–cocks, hydrants, fire hoses, alarm systems or other fire prevention and extinguishing equipment, water closets, lavatories, grease traps, water apparatus (including pipes and drains), wash basins, wash rooms, gas mains and fittings, electrical fittings and apparatus and other services”.  It is clear that a tenant may acquire “ancillary” rights such as rights of access, or rights to toilets or other facilities so there is no derogation from the rights granted in the lease.[77]  Here it is clear both the lessee’s patrons and the lessor’s patrons had a right of access to the toilets.  The particular toilets currently within the lease are clearly retained by the Plaintiff.  While they are included as an “appurtenance” within the lease, in my view that is expressing a right of access which might better be described as an ancillary right to the lease but here are included, perhaps by abundance of caution within the lease.  There is no evidence on whether there are any “stop-cocks, hydrants, fire hoses, alarm systems etc” but the clear indication is the toilets are not part of the lease, but are described as appurtenance to protect access to them for patrons.  Similarly, the waste water from the toilets are the responsibility of the Plaintiff but the pipes go underneath Finlay’s Joint.  There is nothing in the lease to indicate these services would not remain the responsibility of the Plaintiff as would be, in my view reasonably expected. 

[62]     Clause 8.3 of the lease requires the lessor to keep and maintain the building, including the roof and the exterior surfaces of the building, in good order and repair.  This appears to be a standard clause, but does underline the probable exclusion of external walls and the roof.  It also points to the Plaintiff/lessor’s obligations with regard to sewerage, pipes and supply of other services (such as electricity to the building) to keep it in “good working order”.  The lessee is obliged to do all plumbing repairs[78] (excluding capital repairs) that may be necessary to the premises.  In my view this is an indication the lessor retains the obligation in relation to significant plumbing such as sewerage pipes consistent with Clause 8.3. 

[63]     Part of the lease that favours the Plaintiff’s interpretation is the lessee’s obligations under Clause 6.3.2 to keep and maintain the doors, locks, windows and window fittings of the premises as an indication that the external walls, doors and windows are part of the demised premises, (and therefore indicates the external walls could not have been excluded).  That obligation can relate only to those items that are part of the demised premises and it is only then that the lessee becomes subject to those obligations.  If that is a wrong conclusion, on further analysis of Clause 6.3, “The Lessee covenants with the Lessor to keep, repair and maintain the Premises and all appurtenances …”  It would appear appurtenances is superfluous as within this lease “premises” includes “appurtenances”.  The use of the term “Appurtenances” within Clause 6.3 may signify that for Clause 6.3 “doors, windows etc” are to be regarded as “appurtenances” in the true sense for the purpose of repair and maintenance.  Alternatively, to return to the Plan annexed to the lease, (Exhibit 1), in between the walls are short lengths of grey colouring.  They may well, (although it is not conclusive), represent the windows and doors that are leased in exception to the walls.  Alternatively, and more likely, the lessee retains the obligations to repair and maintain the windows and doors if they form part of the “internal partitions”, which are clearly part of the leased property.  At first blush the obligation of the lessee in respect of windows and doors is an indication favouring the Plaintiff but in my view, looking at the lease as a whole cannot reasonably lead to the conclusion the lease is to be construed as extending to the earth below.  The safer conclusion is the lessee’s obligations do not extend to windows and doors that are part of the external wall.

[64]     If the lease extends “below” presumably there would be no need to include “floor coverings” in the definition of “Premises”.  In my view the sensible way to construe “pipes and drains” in the definition of Appurtenances and associated obligations to repair and maintain are to construe that part of the lease as referring to those pipes and drains accessible within the café space.  The “pipes and drains” in “Appurtenances” are referrable to “water apparatus”.  To construe the lease so that the lessee was obliged to maintain drains under the premises of the café would be an odd result.  In my view the lessor’s right to inspect and repair (Clause 6.4) or the lessee’s obligation to secure the premises (Clause 6.5) does not advance the case for either party and are in my view neutral, standard terms. 

[65]     As to how far above the lease extends, there are a number of competing considerations.  To construe this lease sensibly the lease purpose must be kept in mind.  The plan does not assist, given that it is two dimensional.  The “Premises” includes “ceilings” and “Air Conditioning Equipment” which is above the ceiling.  It is hard to see how the roof could be included in the lease and what purpose it would serve other than to house the Air Conditioning Equipment.  The roof extends beyond the slab and therefore if the roof were included, the portion that extends beyond the slab would need to be excluded which tells against the Plaintiff’s position.  The Air Conditioning Equipment is included expressly so the space that contains it is in addition to the ceiling but the lease does not include the roof.

[66]     The Plaintiff submits the most coherent tenure results from a construction of the lease reading “land” as the earth beneath.  Although there are some respectable arguments favouring the Plaintiff’s position, on the whole of the material I am persuaded to the contrary.  To ascertain the corresponding “below the earth” vertical boundary would end in confusion, (even if I am wrong in my conclusion that the external walls are excluded from the lease), there is still the issue of the toilets.  There is nothing in the authorities referred to the Court to indicate there is anything strange or unusual about a commercial lease, even on the ground floor to be a lease of the building and its air space.  It is coherent in these circumstances and no doubt natural to the parties to describe the tenancy in terms of “land” to delineate the space upon which the building (or as I find here, part of the building) is to be described.  Clearly modern usage and language envisages the same.  There is no reason for the parties to agree to lease below.  It benefits neither and may in the longer term be to the Plaintiff’s detriment.  The lease of the space created by the building in my view is not an unusual tenure for leases of this type.  In my view the lease is indeed a lease “only” of part of the building, the other “part” is The Sticky Beak Shop owned by the Plaintiff.

[67]     I have concluded the lease falls under the exception s 5(3)(b) Planning Act (NT) and has not effected subdivision.  The lease of the part of the building is depicted in the plan shaded grey, attached to the lease in accordance with the measurements on that plan.  The leased premises clearly includes the internal walls and space within the building created by those walls, it includes the space in the external area to the end of the concrete.  It does not include the current toilets or drains and other services attached to the toilets that go beneath the premises.  The lease includes all appurtenances listed in the lease, subject to being construed as has been mentioned above.[79] 

[68]     In my view the authorities do not suggest horizontal boundaries must be the subject of express terms of a lease for proper definition of the lease.  If horizontal boundaries must be articulated, in this lease it includes the surface of the concrete slab and the space above it, up to the ceiling but no further, save for the space required above the ceiling for the air conditioning equipment.  The roof in my view is retained by the lessor and provides the horizontal boundary, if one is required for the external area above the concrete.  This in my view accords with purpose of the lease and what would reasonably be expected by way of construction of this lease.  Given the conclusion I have been drawn to, it is inappropriate to consider further the detailed and refined arguments on severance and I decline to offer an opinion on those arguments.  Accordingly the Plaintiff’s claim as set out in the Originating Motion is dismissed.

Order:                  

[69]     The Plaintiff’s claim set out in the Originating Motion is dismissed.  I will hear any application as to costs.

 

__________________________



[1] (Dealing No: 678792). Exhibit 1 in these proceedings.

[2] S 63(2) Planning Act (NT), “A transaction purporting to subdivide or consolidate land in contravention of this Part is void”.

[3] Exhibit 1.

[4] Exhibit 1, Clause 3, referencing the Panel Form.

[5] Exhibit 1, Clause 3.2; 3.3; 3.4.

[6] S 5(3) and 5(4) Planning Act (NT),

[7] S 63(2) Planning Act (NT).

[8] This refers to an exception under s 5(3)(b) Planning Act (NT) and is discussed throughout these reasons, primarily at paras [10] – [15].

[9] S 2A(1) Planning Act (NT).

[10] S 2A(2)(a)-(e) Planning Act (NT).

[11] S 49(3) Licensed Surveyors Act (NT) enables the Surveyor General to approve a plan submitted by a licensed surveyor in relation to title and boundaries if the plan has been certified and the Surveyor General is satisfied s 62 Planning Act (NT) has been complied with as well as any other requirements specified in respect of a particular subdivision.

[12] S 63(2) Planning Act (NT).

[13] S 62(1)(a) read with s 44(b) Planning Act (NT); see also footnote 11 above.

[14] S 47A(a) Planning Act (NT).

[15] S 47A Planning Act (NT).

[16] And see the evidence of Mr Ray Fogolyan discussed below at para [28].

[17] Table to Clause 11.1.1

[18] S 5(4) Planning Act (NT). And see discussion in para [2] above.

[19] S 5(3)(b) Planning Act (NT).

[20] S 3 Planning Act (NT).

[21] Plaintiff’s outline of submissions para 17.  See discussion in Peter Butt, “Conveyancing and Property”. “Conveyancing practice and the law: leases and subdivisions”. (2002) 76 ALJ 346.

[22] For comparable purposes it is noted the Conveyancing Act (NSW) on one view appears to have adopted a similar approach because of the conveyancing practice that emerged after Re Lehrer (1961) 61 SR (NSW) 365 and the subsequent decision in Hardy v Wardy [2001] NSW SC 180: See Butt (above) at 347. The reason for the s 5(1)(b) Planning Act (NT) exception is not clear on the currently available Legislative Assembly (NT) record. The former Planning Act (1993) did not contain s 5 “Meaning of Subdivision”. Section 5(1), (2), (3) and (4) was introduced into the Planning Act (NT) (1999) – the Legislative Assembly records and Second Reading speech and debates for the Planning Bill (1999), commenced on 21 October 1999 and continued and concluded on 23 November 1999.  No reference was made in that debate to the new s 5. There have been two amendments affecting s 5, namely Amendment No. 28, 2008 & Amendment No. 2, 2008 – The Legislative Assembly Debate of 19 February 2008 related to amendment 3 of 2008 makes no mention of s 5.  The ‘Discussion Draft for a proposed Planning Act’ tabled in the Legislative Assembly by the then Minister for Lands, Planning and Environment commencing 10 August 1999 contains no discussion of the reasons for the introduction of s 5.

[23] Transcript of argument 18, 19 & 20, 2/3/2011.

[24] Exhibit P2, subject to certain brief parts ordered to be excluded. Mr Finlay is for all intents and purposes here, the Plaintiff.

[25] I use the “left” and “right” as viewed by a reader opposite to and reading the plans as attached to Exhibit 1.

[26] Annexure ‘B’, P 2.

[27] The same is also shown in photos 6 and 7.

[28] Transcript at page 27-28, 2/3/2011.

[29] Exhibit D3.

[30] Senior Counsel for the Plaintiff has pointed out Mr Leach made calculations for the purpose of pricing the area.  That in my view does not detract from the value of the evidence.

[31] Ex D5; Ex D6; Ex D7.

[32] Brendan Dunn, 18 January 2911, MFI8; Stuart Peter Jackson, 17 January 2011 MFI9.

[33] [2001] NSWSC 180 at [39]. Discussed later in these reasons.

[34] The internal measurement is 15.01 metres, the external measurement is 15.68 metres.

[35] These will be discussed further in these reasons.

[36] I note the lease was in draft for some two years and eight months prior to its execution; see affidavit of Thomas Finlay (Exhibit P2) para [10].  The Defendant occupied the café from December 2005. It would appear that Mr Peter Walker, then a senior commercial solicitor was engaged in the drafting of an earlier version of the lease.

[37] Ex P2, Annexure F.

[38] (2004) 218 CLR 416.

[39] Pacific Carriers Ltd v BNP at [22] 461-462 (footnotes omitted).

[40] (2004) 219 CLR 165 at 179, para [40], (footnotes omitted).

[41] Exhibit 1, page 3.

[42] Transcript, 2/3/2011, page 29.

[43] See plan certified by Steven Pratt (90), (88), exhibit D3.

[44] An abbreviated form of “cujus est solum ejus est usque ad coleum et ad coleum et ad infernos”; alternatively “cuius est solum”, translated slightly differently in different texts. See eg Butt, Land Law, 6th Ed, 2010, at 8; MacDonald, McCrimmon, Wallace, Weir, “Real Property Law in Queensland”, 2010, 4.69. (Law Book Co).

[45] Adrian J Bradbrook, The relevance of the cujuis est solum doctrine to the surface land owners claims to natural resources located above and beneath the land (1988) 11 Adel LR 462.

[46] Butt, Land Law above at 15.11.

[47] (1986) 25 DLR (4th) 444.

[48] [1977] 3 WLR 136 at 141. Discussed in “The Conveyancer”, “The limits of application of the maxim “cuius est solum eius est usque ad coelum”, Peter Butt (1978) 52 ALJ 161.  

[49] Bernstein (above) at 141.

[50] Bernstein (above) at 141.

[51] The Plaintiff also relied on Corbett v Hill (1870) LR 9 Eq 671, in relation to the need for horizontal boundaries and the ownership of above and below.  Corbett v Hill does not assist.  There the horizontal boundary for a “flying freehold” (as termed by Butt, in “Land Laws”), was defined intrinsically to the protruding building itself, the plaintiff could retain the projecting building but this did not carry with it anything above or below.

[52] [1974] AC 328.

[53] Above at 351-352.

[54] [1961] SR (NSW) 365.

[55] [1900] NSWR 570 at 574.

[56] Commissioner for Railways (above) at 353.

[57] At 353.

[58] [2009] 3 WLR 1010.

[59] [2010] 3 WLR 654 Supreme Court (UK).

[60] Paras [26] – [28]. Discussed in Butt, (2010) 84 ALJ 746 – 747. “How Far Down Do You Own? The Final Word?”

[61] McDonald, McCrimmon et al (cited above) at 4.80 suggest the maxim will not be applied literally.

[62] (1969) Qd R 452.

[63] At 465.

[64] (2001) 10 BPR 18, 577; [2001] NSW SC 180 (21 March 2001).

[65] Para 37.

[66] Hardy v Wardy at paras [36] – [39].

[67] [2002] FCA 41 at [61].

[68] Cited above.

[69] At para [39].

[70] Exhibit 1 at page 3.

[71] Exhibit 1, page 3.

[72] All definitions are from clause 1.1 of Exhibit 1.

[73] Above at 573 - 574.

[74] Clause 1.1.

[75] See eg s 17(1) Interpretation Act (NT), “In an Act, “land includes all messuages, tenements, and heriditaments, corporeal and incorporeal, of any tenure or description and whatever may be the estate or interest in the land.”

 

[76] “Internal partitions” are included in “Premises”, clause 1.1.

[77] Butt, Land Law (above) [15 11].

[78] Para 6.3.1 Exhibit 1.

[79] Primarily in paras [55] to [63].