Finlay Stonemasonry Pty Ltd v JD & Sons Nominees Pty Ltd as Trustee for the Jenkins Family Trust No 2 [2011] NTCA 7

 

PARTIES:                                         FINLAY STONEMASONRY PTY LTD

 

                                                         v

 

                                                         JD & SONS NOMINEES PTY LTD AS TRUSTEE FOR THE JENKINS FAMILY TRUST NO 2

 

TITLE OF COURT:                           COURT OF APPEAL OF THE NORTHERN TERRITORY

 

JURISDICTION:                               CIVIL APPEAL FROM THE SUPREME COURT EXERCISING TERRITORY JURISDICTION

 

FILE NO:                                          AP 6 OF 2011 (21032664)

 

DELIVERED:                                   27 OCTOBER 2011

 

HEARING DATES:                           27 OCTOBER 2011

 

JUDGMENT OF:                              RILEY CJ, SOUTHWOOD & KELLY JJ

 

APPEAL FROM:                               BLOKLAND J

 

REPRESENTATION:

 

Counsel:

    Appellant:                                     A Wyvill QC

    Respondent:                                  M Maurice QC

 

Solicitors:

    Appellant:                                     Hunt & Hunt

    Respondent:                                  CridlandsMB


 

 

Judgment category classification:    C

Judgment ID Number:                       KEL11025

Number of pages:                             8


IN THE COURT OF APPEAL

OF THE NORTHERN TERRITORY

OF AUSTRALIA

AT DARWIN

 

Finlay Stonemasonry Pty Ltd v JD & Sons Nominees Pty Ltd as Trustee for the Jenkins Family Trust No 2 [2011] NTCA 7

No. AP 6 of 2011 (21032664)

 

 

                                                     BETWEEN:

 

                                                     FINLAY STONEMASONRY PTY LTD

                                                         Appellant

 

                                                     AND:

 

                                                     JD & SONS NOMINEES PTY LTD AS TRUSTEE FOR THE JENKINS FAMILY TRUST NO 2

                                                         Respondent

 

CORAM:     RILEY CJ, SOUTHWOOD & KELLY JJ

 

REASONS FOR JUDGMENT

 

(Delivered ex tempore 27 October 2011)

 

RILEY CJ:

[1]       I agree with Kelly J that the appeal should be dismissed.

SOUTHWOOD J:

[2]       I also agree with Kelly J that the appeal should be dismissed.

KELLY J:

[3]       Finlay Stonemasonry Pty Ltd (“Finlay”) and JD & Sons Nominees Pty Ltd as trustee for the Jenkins Family Trust No 2 (“Jenkins”) entered into a lease whereby Finlay leased to Jenkins part of Lot 9148 Town of Palmerston (“the Land”) (“the Lease).  The Lease, which was registered on 8 August 2008, commenced on 1 July 2008; the initial term expired on 31 December 2010.  The Lease provides for three further terms.  When the three further terms are added to the initial term the total potential term of the Lease is 26 ½ years.

[4]       The “interest being leased” is described in the Lease (on the panel form) as “that part of the Land as hatched on attached plan”, which delineates an area within a building on the Land.  Jenkins has occupied the leased premises since 1 July 2008 and runs a cafe from the leased premises known as Finlay’s Joint. 

[5]       When the parties entered into the Lease they intended to be bound by its terms.  However, Finlay no longer wishes to be bound by the Lease and applied for a declaration that the Lease is void as an illegal subdivision under the Planning Act (“the Act”).  Finlay was unsuccessful at first instance and now appeals to this Court.

Relevant statutory provisions

[6]       Section 61 of the Act provides that 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).  Section 62 of the Act provides that the Surveyor-General must not approve such a plan of survey unless satisfied (inter alia) that consent has been given to the subdivision under the Planning Act.  Section 63(2) of the Act provides that a transaction purporting to subdivide land in contravention of these provisions of the Act is void. 

[7]       What constitutes a subdivision for the purposes of the Act, is set out in s 5.  The base definition is that, “subdivision means the division of land into parts available for separate occupation for use by a number of means including lease”.[1]

[8]       Subsection 5(3) provides that land is not to be taken to be subdivided for the purposes of the Act by the grant of a lease unless the lease is for a term of more than 12 years.  A lease is taken to be a lease for a term of more than 12 years if the aggregate of the initial term and any options to renew amounts to more than 12 years.[2] 

[9]       Subsection 5(3) further provides that land is not to be taken to be subdivided for the purpose of the Act by reason only of the lease of part of a building.[3]

[10]     The Lease is for an initial term of 2 ½ years.  It contains three options for further terms of 5 years, 10 years and 10 years making an aggregate of 26 ½ years.  No planning consent under the Act has been given for the subdivision of the Land and no plan of survey has been approved by the Surveyor-General for the purposes of s 61.

[11]     The effect of all this is that the Lease will be void unless it is a lease of part of a building.

[12]     Jenkins contends that the Lease is a lease of part of a building.  Finlay contends that it is not and that on its true construction the leased premises includes the land under the building, taking it outside the exception in ss 5(3).

Principles of construction

[13]     In construing the Lease, the Court must give effect to the common intention of the parties, objectively ascertained by reference to the words used by the parties in the Lease.[4]  The common intention is to be ascertained by reference to what a reasonable person would understand by the language used by the parties.[5]  In carrying out this exercise, the Court may give consideration to the background, purpose and object of the Lease and the surrounding circumstances, the context and the market in which the parties are operating. [6]

Construction of the Lease

[14]     The interest being leased is described in the panel form which forms part of the Lease as “that part of the land as hatched on the attached plan”.  What is hatched (or shaded) on the attached plan is part of the building on the Land consisting of an internal area of 319.1 square metres and an external area of 308.3 square metres.  These are shown as separated by a carefully drawn unshaded area which consists of the walls and the toilets.  The roof of the Building extends beyond the shaded area which stops at the edge of the verandah.  So far this seems unambiguously to be a lease of part of the Building.

[15]      Counsel for Finlay, however, says that when read in conjunction with the definitions in clause 1 of the Lease, the words used may be seen to indicate that “the Building” is on the leased land, and that, therefore, the leased land includes the land underneath. 

[16]     There is no dispute between the parties about the horizontal extent of the leased premises: it is that part of the Land, wholly under the roof of the Building, shown on the plan attached to the Lease – and consists of part only of that Building (about ⅓ to ½ of it).  “The Building”, as a whole, cannot be on the leased premises.  The definitions in the Lease are full of redundancies and ambiguities.  One cannot use these definitions as a basis for inferring that the mutual intention of the parties was for the Lease to extend over the Land under that part of the Building being leased by Jenkins.  The most that can be said, from the appellant’s point of view, is that the use of the defined term “Premises”, combined with the definition of “Building” in clause 1, has introduced an ambiguity into what was intended by the parties to be included in the Lease.  (If “Premises” was intended to mean “leased premises” as appears to be the case, then it is probable that the draftsman made an error in the definition of “Building”: it should have been defined as “the building on the Land” not “the building on the Premises”, but there is no need to make any determination about this on this appeal.)

[17]     That leads back to the relevant enquiry, namely what a reasonable person would have understood to be the common intention of the parties given the known background, purpose and object of the Lease and the surrounding circumstances.

[18]     I have no doubt whatsoever, that a reasonable person would infer that the common intention of the parties was for Jenkins to lease part of the Building from Finlay.  The “Lease Purpose” (ie the use for which the purpose for which premises are leased) is “coffee shop and eatery”.[7]  The learned trial Judge pointed out that there had been no serious attempt to identify how this purpose might be advanced by a lease of the earth beneath the demised premises[8] – not including the earth underneath the walls which do not form part of the demised premises.  Mr Wyvill QC for Finlay has suggested that it would be advantageous for Jenkins to have the right to alter the drainage under the building with Finlay’s consent, such consent not to be unreasonably withheld.  However, this cannot be used to reason backwards from the conclusion.  It cannot be maintained that such a right is necessary for commercial viability of the tenancy for the purpose of coffee shop and eatery; it is a neutral matter when it comes to the construction of the Lease.

[19]     Counsel for the respondent pointed out in his written submissions that, if the appellant is correct, and the leased area includes the roof and air space above and the land below the area denoted on the plan, the result would be bizarre. Jenkins would have exclusive possession of that part of the roof over the café and the verandah, but not that part over the walls, toilet or the parts of the roof extending beyond the verandah.  A reasonable person would not infer that Finlay intended to lease to Jenkins bits and pieces of the roof, let alone bits and pieces of the air space above the roof.  At least as it applies to air space, I agree with that submission.

[20]     Moreover, there was a finding by the trial Judge that the pipes from Finlay’s toilets pass under the slab of the demised premises.[9]   A reasonable person would not infer that Finlay intended to grant to Jenkins a legal right of exclusive possession over that part of the sewerage pipes leading from Finlay’s toilets to Finlay’s septic tank which pass under the shop leased by Jenkins.[10] 

[21]     The purpose for which the leased premises were leased, the exclusion of the external walls and the toilet, and the location of the sewerage pipes all point inexorably to the conclusion that the common intention of the parties was to include in the Lease those parts of the building necessary to enable the respondent to carry on the business of a coffee shop and eatery – that is those parts of the building shaded in the plan attached to the Lease and not the ground underneath and air space above.  In my view the learned trial Judge was correct to find that the Lease was a lease of part of a building and hence not void by reason of s 5(3) of the Act.  I would dismiss the appeal.

RILEY CJ:

[22]     The order of the Court is that the appeal be dismissed.



[1]           Section 5(1).

 

[2]           Section 5(4).

 

[3]           In submissions, counsel for the appellant constantly referred to this as a lease “only …. of part of a building”, which was a subtle shift of emphasis from the actual wording of s 5(3) of the Act.  In that subsection the word “only” refers to “reason” not, as the appellant would have it, to “part of a building”.  However, nothing in this affects the reasoning or the result.

[4]        Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; 218 CLR 451 per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ at [22].

[5]        Wilson v Anderson (2002) 76 ALJR 1306 at 1308-1309; 190 ALR 313 at 316-317 per Gleeson CJ at [8].

[6]        Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; 218 CLR 451 per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ at [22]; Wilson v Anderson per Gleeson CJ at [9].

 

[7]           Lease clause 1.

 

[8]           Reasons for Decision at [37].

 

[9]           Reasons for Decision at [26] and [27].

 

[10]          This is quite apart from issues of trespass which would arise on the flushing of Finlay’s toilet.  “Trespass may be committed not only by an entry in person but equally by propelling an object or a third person onto the plaintiff’s land.”  Fleming’s The Law of Torts (10th Edition) p 51.