High Court of Australia|1981-12-04|Before: Matthews J, Mason J

American Dairy Queen (QLD) Pty Ltd v Blue Rio Pty Ltd [1981] HCA 65; (1981) 147 CLR 677 (4 December 1981)

AMERICAN DAIRY QUEEN (Q'LD.) PTY. LTD. v. BLUE RIO PTY. LTD. [1981] HCA 65; (1981) 147 CLR 677

Gibbs C.J.(1), Mason(2), Murphy(3), Aickin(4) and Brennan(5) JJ.

GIBBS C.J. I have had the advantage of reading the reasons for judgment

2. I would accordingly allow the appeal and would restore the order made by Matthews J. subject to the variation, which the appellant conceded should be made, that the injunction restraining the respondents "from selling, subleasing or otherwise dealing with or disposing of any interest in the land" should be qualified by the words "in any way inconsistent with the plaintiff's rights as mortgagee in possession of the sub-lease". (at p679)

MASON J. The sole question for determination in this appeal involves the interpretation of Pt XI of The Land Act of 1962 (Q.), as amended, ("the Act") and, specifically, whether a sublessee under those provisions may transfer or mortgage his interest. (at p680)

2. Part XI of the Act deals with "Grants, Reserves and Reservations for Public Purposes". (at p680)

3. Section 334 (1) provides that: "The Governor in Council may from time to time grant in trust, or by Order in Council reserve and set apart, any Crown land which, in the opinion of the Governor in Council, is or may be required for any public purpose." (at p680)

"The Governor in Council may, by Order in Council, place any land reserved and set apart for any public purpose under the control of trustees; and may declare the style or title of such trustees and the trusts of the land." (at p680)

5. By an Order in Council dated 17 December 1964, amended by a further Order in Council dated 11 December 1969, the land the subject of this appeal and known as Reserve R.924 ("the Reserve") was permanently reserved and set aside as a reserve for park and recreation purposes. The Reserve is at Southport and has on it a kiosk and other buildings and is adjacent to a swimming area. The Order in Council placed the Reserve under the control of the Council of the City of the Gold Coast ("the Trustee") as trustee pursuant to s. 335 of the Act. (at p680)

6. On 4 May 1971 the Trustee leased the Reserve to Blue Rio Pty. Ltd. ("Blue Rio"), the first respondent, for a period of thirty years. Blue Rio subleased the Reserve to Selden Pty. Ltd. ("Selden") for a period of twenty years from 15 November 1973. Selden assigned the sublease to the appellant, American Dairy Queen (Q'ld) Pty. Ltd., who in turn assigned to one Franks, each assignment being for valuable consideration. Franks, in order to secure money owing on the assignment from the appellant, gave a mortgage of the sublease back to the appellant. (at p680)

7. Franks became bankrupt and subsequently, on 2 January 1980, the appellant obtained an order for possession of the Reserve as against him in the Supreme Court of Queensland. The appellant went into possession of the Reserve on 2 April 1980. (at p680)

8. By an agreement dated 13 May 1980 the second respondents, Mr. and Mrs. Marsden and Mr. and Mrs. Kelly, purported to purchase the lease of the Reserve from Blue Rio. The appellant then issued a writ seeking relief which would establish that it had an interest in the land which gave it priority. An interim injunction was obtained and the appellant then proceeded to seek relief by way of notice of motion. Matthews J. ordered that the first and second respondents be restrained "from selling, sub-leasing or otherwise dealing with or disposing of any interest in" the Reserve and from interfering with the appellant's possession of the Reserve. (at p681)

9. An appeal by the respondents to the Full Court of the Supreme Court of Queensland was allowed, the order of Matthews J. being set aside. The Full Court held that a sublessee of land sublet under Pt XI of the Act cannot deal with his interest in any way because there is no express provision in the Act entitling him to do so, Pt XI forming a code. It followed that all dealings with the Reserve after the sublease by Blue Rio to Selden, namely the assignments by Selden to the appellant and by the appellant to Franks and the mortgage by Franks back to the appellant, were invalid. The appellant now appeals to this Court against that decision. (at p681)

10. Part XI severely limits the power of trustees to deal with reserves. Section 342 denies to trustees any power to sell or transfer any land under their control except in so far as it authorizes trustees with the approval of the Governor in Council to surrender or transfer land to the Crown. Section 343 denies to trustees any power to lease a reserve that is an environmental park. The same section prohibits trustees of land granted in trust or of a reserve, other than one which is an environmental park, from leasing or agreeing to lease the whole or any part of the land under their control without the approval in writing of the Minister. The limitation on the power of the trustees to lease is accompanied by the vesting in the Minister of an absolute discretion to grant or refuse approval to a lease by trustees or to grant it subject to conditions, the effect of which is to give him a large measure of control. In this respect s. 343 (4) provides:

"The Minister may, in his absolute discretion, refuse to approve the proposal or, if the Minister is satisfied that the proposed lease is -

(a) not detrimental to the public interests;

(b) not inconsistent with the purpose for which the land was granted in

(c) not for an excessive term and complies otherwise with the requirements of section three hundred and forty-four of this Act,

approve the proposal in whole or in part, and in either case subject to such conditions, reservations and modifications as he deems fit." (at p681)

11. A lease under Pt XI which is not indorsed with the Minister's approval has no validity or effect in law and, in the case of a lease of land granted in trust, is not capable of registration under the Real Property legislation (s. 345). Likewise, a transfer, mortgage or sublease of a lease of land granted in trust is not, without the Minister's approval, capable of registration under the Real Property legislation (s. 347 (2)). Although the Minister is not the lessor, he is given power to cancel a lease for breach of covenant or condition or when he is satisfied that it is in the public interest so to do (s. 348). Finally, the Crown may rescind an Order in Council reserving and setting apart land and, in this event, any lease shall be terminated, the lessee being obliged to vacate the land without having any entitlement to compensation (s. 349). (at p682)

12. This brings me to the critical provisions, s. 347 (1) and s. 356, on which the decision of the Full Court was founded. (at p682)

"A lessee shall not transfer, mortgage or sublet a lease to which this Division applies unless the lessee has first obtained the written approval of the Minister and the trustes of the land granted in trust or as the case may be, of the reserve. . . . . " (at p682)

"In Divisions I to IV, both inclusive, of this Part the term 'lessee' means a person who is the lessee from trustees of land granted in trust or of a reserve." (at p682)

15. Under s. 347 (1), unless the lessee of a reserve has the written approval of the Minister and the trustees, he may not transfer, mortgage or sublet the lease. Under s. 356 the meaning of "lessee" is confined to a lessee under a lease from the trustees of a reserve. The Full Court concluded that, since no power is given expressly by Pt XI to the sublessee to transfer, mortgage or sublet, the maxim expressio unius est exclusio alterius applied, with the consequence that the sublessee of a reserve is not permitted to do so. On this basis, the Full Court held that the sublease by Blue Rio to Selden was valid, as the requisite approvals had been obtained, but that the purported dealings with the Reserve after that sublease were invalid. (at p682)

16. It is to be observed that s. 347 (1) does not empower a lessee to transfer, mortgage or sublet a lease with the written approval of the Minister and the trustees. What it does is to prohibit those dealings without the written approval. Instead of authorizing a lessee to transfer, mortgage or sublet, it relies on the lessee's right of disposition at common law and restricts or qualifies it in the manner indicated. With respect to the Full Court there is no foundation here for the application of the maxim expressio unius est exclusio alterius. (at p682)

17. The general rule is that the courts will construe a statute in conformity with the common law and will not attribute to it an intention to alter common law principles unless such an intention is manifested according to the true construction of the statute. See Reg. v. Morris (1867) LR 1 CCR 90, at p 95 ; Potter v. Minahan [1908] HCA 63; (1908) 7 CLR 277, at p 304 ; see also Craies on Statute Law, 7th ed. (1971), pp. 188-189. This rule certainly applies to the principles of the common law governing the creation and disposition of rights of property. Indeed, there is some ground for thinking that the general rule has added force in its application to common law principles respecting property rights. (at p683)

18. At common law periodical tenants have the right to assign, sublet or otherwise dispose of an interest in a lease (Commonwealth Life (Amalgamated) Assurance Ltd. v. Anderson (1945) 46 SR (NSW) 47, at p 51 ; Doe v. Carter [1798] EngR 249; (1798) 8 TR 57, at p 60 [1798] EngR 249; (101 ER 1264, at p 1266) ; Woodfall's Law of Landlord and Tenant, 28th ed. (1978), pp. 785-786). (at p683)

19. The question, then, is whether the Act on its true construction is intended to operate as a comprehensive and exclusive code so as to deny to a sublessee of land let under Pt XI of the Act the right to dispose of his interest in the land. (at p683)

20. It must be said at once that Pt XI does not have the appearance of a code. It does not contain a detailed exposition of the rights and obligations of lessees and sublessees of a reserve, an exposition of the kind that would indicate an intention to formulate a comprehensive and exclusive code thereby displacing existing common law principles regulating property rights. Indeed, as we have already seen, s. 347 proceeds on the footing that the common law right of the lessee to transfer, mortgage or sublet remains on foot. In this respect s. 347 conforms with the other important operative provisions in Pt XI which contain prohibitions and modifications of common law rights and powers. The statutory scheme does not consist of a statement of new rights, powers and obligations; instead it assumes the existence of those arising under the general law and it proceeds to modify them to the extent considered necessary. (at p683)

21. The limited obligations imposed on a lessee by s. 344 (c) of the Act give point to this feature of Pt XI. Section 344 provides:

"The following provisions shall apply to every lease, granted by the trustees thereof, of land granted in trust or reserved for a public purpose, namely: -

(a) The term shall not exceed seventy-five years;

(b) the lease shall not contain any covenant or agreement for renewal of

lease or for purchase of the leased land, and the rent to be reserved shall be the highest annual rent which can reasonably be obtained;

(c) save to the extent exempted by the Minister, the lessee shall -

(i) at all times destroy all noxious plants on, and keep free therefrom,

(ii) hold the land so that the same may be used for the public purpose for which it was granted or reserved without undue interruption or obstruction;

(d) the lease shall contain a covenant that the trustees may terminate the lease upon the failure of the lessee to observe or perform any covenant or condition of the lease which is expressed to be binding upon him." (at p684)

22. Section 344 (b) appears to recognize that the parties may include in the lease any covenants, subject to two immaterial exceptions. But Parliament can scarcely have intended to displace the principles of the common law regulating implied covenants on the part of the lessor and the lessee; for example, the implied covenant for quiet enjoyment and the implied obligation to use the premises in a tenant-like manner (see Woodfall's Law of Landlord and Tenant, 28th ed. (1978), pp. 531-533, 629-630). It could not have been Parliament's intention that leases under Pt XI should expressly set out the usual implied covenants. It follows that s. 344 could not have been intended to completely replace the common law. (at p684)

23. Against the appellant it is argued that the Act contains no requirement for the Minister's consent to a disposition by a sublessee. This, it is suggested, would deprive the Minister of any control if the appellant's case be correct. Section 343 (4) of the Act provides the answer. It enables the Minister "in his absolute discretion" to approve a lease of a reserve "subject to such conditions, reservations and modifications as he deems fit". The wording of the sub-section is clearly intended to confer on the Minister an absolute and unfettered discretion in relation to his power to approve the grant by the trustees of a lease of a reserve. The Minister's power under s. 343 is wide enough to enable him to impose as a condition of his approval of a lease by the trustees that no sublease or other interest in the property leased will be created without his written approval. And the Minister and the trustees can, if they wish, insist on a covenant by the lessee that he will not sublet without obtaining a covenant on the part of the sublessee not to assign, sublet, mortgage or otherwise deal with the property without the written approval of the Minister and the trustees and in accordance with such conditions as they may attach to their approval. (at p684)

24. In that part of the Act which relates to leases of Crown land generally, as opposed to the provisions in Pt XI relating to dealings with grants, reserves and reservations for public purposes, there are specific provisions permitting subletting and sub-letting with the written approval of the Minister: s. 274 (2) (a) and (6) (a). However, as these provisions form part of a far more detailed scheme regulating the creation and disposition of interests in Crown leases not for public purposes, they do not provide a sound basis for making an implication in Pt XI, which deals with a quite distinct subject. (at p685)

25. For these reasons, Pt XI of the Act should not be construed as a code. The express rights and obligations enumerated in Pt XI are not exhaustive of those having application to Crown reserves. The common law rights and obligations of landlord and tenant are therefore not excluded by Pt XI. The right to assign and otherwise deal with his interest is a right of the tenant at common law. It will only be excluded by provisions of the Act that are inconsistent with that right and then only to the extent of that inconsistency, e.g. s. 347 (1). (at p685)

26. In the present case, there was a condition imposed by the Minister in the lease by the Trustee to Blue Rio (a condition which was also imposed in relation to the later dealings with the Reserve), in cl. 2 (g) of the lease agreement, being a covenant:

"Not to further charge assign over or in any way dispose of or part with possession of the demised premises or any part thereof to any person firm or corporation whomsoever or whatsoever or permit any other person or company to have the use thereof without in such case the consent in writing of the sub-Lessor first had and obtained and further without in any such case the consent in writing of the Minister for Lands and Forestry National Parks and Wildlife Service first had and obtained . . . ."

There is no suggestion that the necessary consents were not obtained in any of the dealings. It follows that the sublease by Blue Rio to Selden was valid, as were the assignments of subleases by Selden to the appellant and by the appellant to Franks. (at p685)

27. As to the mortgage back of the sublease by Franks to the appellant, the same principles of common law and of statutory construction are applicable. Section 351 enables the trustees of land granted in trust to mortgage the land for certain purposes when the Governor in Council grants liberty to do so. But this section has no application to a mortgage of a sublease. (at p685)

28. In the result, I would allow the appeal, set aside the judgment of the Full Court of the Supreme Court of Queensland and restore the order made by Matthews J. at first instance, subject to an amendment agreed upon by the parties, namely, that the order restraining the respondent be restricted by adding the phrase "in any way inconsistent with the plaintiff's rights as mortgagee in possession of the sublease". (at p686)

MURPHY J. I agree with Mason J. The appeal should be allowed. (at p686)

AICKIN J. I have had the advantage of reading the reasons for judgment prepared by my brother Mason. I agree with those reasons and the order which he proposes. There is nothing I can usefully add. The appeal should be allowed. (at p686)

BRENNAN J. I would add some observations to the reasons for judgment of my brother Mason which otherwise express my reasons for allowing this appeal. (at p686)

2. A lease is the only interest expressly mentioned in ss. 343 to 349 of The Land Act 1962-1981 (Q.), but the Act recognizes that a lessee may transfer or mortgage his lease or create a sublease. By adopting the terminology of leasehold interests, the Parliament must be taken to have intended that the interests of a lessee, transferee, mortgagee or sublessee are those of a lessee, transferee, mortgagee or sublessee at common law, modified by the relevant provisions of the Act. The incidents of those interests are the incidents of corresponding interests at common law modified by the relevant provisions of the Act. (at p686)

3. Section 347 imposes a limitation upon the power of a lessee to deal with his interest, but there is no provision which affects the power of a sublessee to deal with the sublease. The Full Court appears to have found a lessee's power to deal with the lease in s. 347, but in truth the power of a lessee to deal with his lease and the power of a sublessee to deal with his sublease are incidents of the interests respectively held by them (Keeves v. Dean (1924) 1 KB 685, at pp 691-692 ). Though the paramount provisions of ss. 348, 349 and 350 may modify the rights of a sublessee or of an assignee of a sublessee, there is no relevant limitation imposed by the Act upon a sublessee's power to assign his interest. (at p686)

4. The appeal should be allowed. I agree with the order proposed by the Chief Justice and Mason J. (at p686)

Appeal allowed with costs. Order of the Full Court of the Supreme Court of Queensland set aside, and in lieu thereof order that the appeal to that Court be dismissed with costs.

Order made by Matthews J. on 8 August 1980 restored, but varied by adding, after the words "otherwise dealing with or disposing of" the words "in any way inconsistent with the plaintiff's rights as mortgagee in possession of the sub-lease".

American Dairy Queen (QLD) Pty Ltd v Blue Rio Pty Ltd [1981] HCA 65;

At a glance

Court

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Before

Source

Judgment (54 paragraphs)

American Dairy Queen (QLD) Pty Ltd v Blue Rio Pty Ltd [1981] HCA 65; (1981) 147 CLR 677 (4 December 1981)

Parties

Legislation Cited (1)

Cases Cited (2)