Harris v Sydney Glass and Tile Co [1904] HCA 47

Tn an action at common law to recover a balance of rent due under a orenant in an indenture of lease, the defendants pleaded, as a plea on 'quitable grounds, that prior to the execution of the lease it was agreed that the plaintiff should allow the defendants certain deductions from the rent for the ist six months of the term ; that the defendants executed the lease upon the faith of that agreement; that the plaintiff in accordance with the agree- ment allowed the defendants the deductions agreed upon ; that the defendants Paid the plaintiff the remainder of the rent due under the covenant, and the

(1) 63. Every. 'contract, agreement, or is whether urtived at or

E, matter of d_under "alerby witng or by pal, hang na ting to have which might. Inthe est of removing, qualifying, 'altering the operation of any assess. Bat return, exemption, or deduction, (illsaay vay alecting the incidence fe dguetment, or tax, or displacing

be wholly void and inoperative so far as such contract, agreement, or under- standing purports or is intended to have or mighthave the effect aforesaid, but without prejudice to the validity of such contract, agreement or under- taking in any other respect or for any other purpose. v

Sec. 5 of the Land Tax (Leases) Act 1902 is as follows

5. No contract, agreement, or coven- ant made before or aiter the commence- ment of this Act shall affect the incidence of any tax imposed by this Act.

plaintiff accepted it in satisfaction and discharge of the whole of the rent dae 'under the covenant ; and that the plaintiff was suing for the rent agreed tg be allowed off to the defendants, in fraud of the agreement.

At the trial letters which passed between the parties prior to th of the lease were tendered in support of this plea and rejected.

'Held that, whether the alleged agreement was or was not collateral tothe lease, the plea was in effect an allegation of the allowance of cross demands between the parties upon an account stated, and payment of the balance, and afforded substantially a good defence at common law, and that the letten were admissible in evidence in support of it.

The lease contained a covenant by the lessee to pay "'such further sums as rent as shall represent one third of the annual sum payable... from time to time during the said term by the said lessor... as land tax to the Commissioners of Taxation under the Land ani Income Taxx Assessment Act 1895, or any amendment thereof in respect of the land demised." Subse. quently to the execution of the lease, the Land Tax (Leases) Act, 1902, was passed.

Per Grifith C.J., and Barton J. : - The intention of the parties, as disclosed by the lease, was that the stipulation in the covenant should be in substi tion for the statutory provision then in force, and for any statutory provision that might thereafter be made in place of it, and was therefore void under the Lani and Income Assessment Act 1895, and inoperative under the Land Tar (Zease) Act 1902; and furcher, that, even if the parties intended it be cumula- tive, it was void under the Land and Income Tax Assessment Act 1895 and that the original quality of sterility imposed by that upon the stipulation wien it 'was mace still attached to it.

Per O'Connor J. : - The stipulation, being a violation of the provisions of sec. 63 of the Land and Income Assessment Act 1895 was void from its inc tion, and therefore, whatever the effect of the stipulation might have been, ifit had been made after the passing of the Land Tax (Leases) Act 1902, it could not be made effectual for the purpose of making good the claim for rent alleged to have accrued due under it after the commencement of the latter Act.

When a party has obtained a new trial on the ground of the impropet rejection of evidence, if the evidence was relevant to the issue on which it 'was tendered and the ground on which the evidence was originally rejected was erroneous, itis not a ground for allowing an appeal from the order grant- {ng the new trial, that the exact grounds of relevancy were not stated to the Court,

n of the Supreme Court, (1904) 4 S.R., 454, affirmed.

ales. : ba was an action brought by the appellant against the ponents to recover £94 15s. 2d, rent due under a lease

hereby the appellant let certain premises to the respondents for 'Hem of years. 'The reddendum of the lease, which was under "amass follows: " Yielding and paying therefor yearly and very year during the said term . . . the rent or sum of {00 sterling money by several equal payments of £75 each athe first days of April, July, October, and January in each yarnd also yielding and paying therefor yearly and every year

upon demand such further sums as rent as shalll represent one- "third of the annual sum payable from time to time during the "sid term by the said lessor . . . as land tax to the Commis- siners of Taxation under the Land and Income Tax Assessment "de 1895, or any amendment thereof in respect of the land

The lessee covenanted to pay the rent or rents reserved on the ays appointed by and under the lease "without any deduction orabatement whatsoever." 'The respondents' fourth plea was a plea on equitable grounds, | i8to £75 of the amount claimed, to the effect that they had tented the lease on the faith of an agreement made prior to the date of the lease, by which the appellant had agreed to allow

• them 50 per cent, off the rent for the first six months, and had
• 'tuslly allowed that amount and accepted the balance in full _ Stisfction and discharge of the first six months' rent. The effect of the plea is more fully set out in the judgment
• Uklivered by Grigith C.J. There was also a fifth plea, as to £19 15s. 2d., the amount -thined under the covenant to pay as rent one-third of the
• tountof land tax for each year, that that portion of the redden- mwas void under sec, 63 of the Land and Income Tas: Assess- ment Act 1895. At the trial it appeared that the respondents, on 16th November MW, wrote a letter to the appellant setting out the conditions on

pote were willing to accept the offer to lease, and stating a 16

"ona fom a decision of the Supreme Court of New South H.©. or A.

H.C.orA. inter alia, "our lease is to commence from Ist January, 1004 und you agree to allow us 50 per cent. off the rent for the fy Haus six months." 'The solicitor for the appellant replied to this lt Y sroxer Suggesting certain modifications on other points, but not qualify. Giass aso ing this particular proposal, and stating further, "otherwise the NE © terms of your letter are satisfactory." 'The respondents repli assenting to the proposed modifications, and the lease yas

executed, These letters were tendered in evidence in support

the fourth plea, and rejected, under circumstances appearing more

fully in the judgments. Darley C.J., who presided at the trial,

held that the covenant dealing with the additional rent was not

an infringement of sec. 63 of the Land and Income Tur Assess

ment Act 1895, and directed a verdict for the plaintiff, appellant

The defendants, respondents in this appeal, appealed to the

Full Court, who granted a rule absolute for a new trial as to £75,

and ordered that judgment be entered for the defendants as to the

The reasons for the decision appear from the judgment delivered

Dr. Cullen and J. L. Campbell (with them Sheridan) for the appellant. The letters show that the granting of the lease was to be subject to the condition that certain payments were to be made by the respondents, city rates and taxes, and a portion of the land tax. If the agreement to pay the land tax was illegal, then the promise to grant a lease was founded upon a considem- tion partly illegal, and, if the appellant had refused to grant a lease, and the respondents had sought to enforce the promise against the appellant, while repudiating their promise to pay land tax on the ground of illegality, they would have fuiled. 'The alleged parol agreement therefore discloses' no equity in the respondents, and it may be that neither party could have enforeed it, 'The respondents are in this dilemma, either the agreement to Pay the land tax, which was the consideration for the appellants Promise to make the refund, is illegal, and therefore the promise _ is unenforceable, or it is not illegal, and they cannot insist upod the performance of the appellant's promise without performing

to refund the 50 per cent., it will enforce the covenant to

say the further rent. "almost amounts to fraud on the part of the respondents to

ta the covenant to pay the further rent was Hos while

mld grant an unconditional injunction under those eiveum- (He referred to Joliffe v. Baker (1) and cases there fi) Whatever the position might have been under the parol ment alone, that has been superseded by the lease. Under the respondents covenanted to pay rent without any dedue- orabatement whatever. This is inconsistent with the alleged arrangement, and therefore evidence of that agreement is uinisible, All transactions prior to the execution must rank preliminary negotiations affecting the terms of a bargain, and, the contraet under seal, in which the negotiations culminated, is iwonsistent with any of the terms of the parol agreement, evi- 'dace of that agreement is inadmissible, unless it is on a collateral Erskine vy. Adeane (2). Morgan v. Griffith (3), which was don below, was a case of an action on a parol agreement, and 'sno authority for the proposition that such an agreement can be in answer to an action upon a deed.

idence of such a prior agreement may only be given if the Hist-matter is collateral, that is, xefers to something not dealt th in the lease, and not contradictory of it: De Lassalle v.

mlagreement were to accept £100 for a piece of land, on condi- ii of executing a deed stating the consideration money to be 0 7)

t would be different from this case. That is a condition mwhich the execution depends. Here the lease fixes one sum

"If the Court is of opinion that there was a binding H.C or A. 1904,

as rent, and the verbal agreement was that £50 was to be refund)

As to the covenant in the reddendum to pay the further rent, the amount claimed is in respect of 2 years, one of which j governed by the Land and Income Tax Assessment Act 189 the other by the Land Tax (Leases) Act 1902. There is nothing in the covenant which contravenes sec. 63 of the of 1895. It does not alter or affect the incidence of the The mere reference to the tax for the purpose of measuring

qué tax, is not thereby affected in its incidence. The covenant altogether independent of the payment, or the liability to paythe tax. A landlord is entitled to get as much for rent as he can his tenant topay. The mere fact that he charges a proportionately higher rent because he has to pay a tax, does not bring him withia the prohibition. The entire rent might be made up of mts and taxes, but that would not alter the incidence of the ti because, if there were no tax, the landlord would have all the rent in his pocket, instead of having to pay it away in taxes. (He referred to Davies v. Fitton (2); and Colbron v. Travers (3) In Ludlow v. Pike (4), which was relied upon by Owen J, in the Court below, the covenant in the lease did not state that th sum was to be paid as further rent. Channel J., was of the opinion that the decision of Lord St, Leonards in Davies v. Fitton (2) depended upon the fact of there having been a stipulation fo a fixed sum as further rent ; but that is not borne out by the term of the decree in the ease. In Cooper v. Barron (5) the covenant which was held to be an infringement, was a direct covenant 10 pay all taxes. [He referred also to Beadel v. Pitt (6)]

As to the Act of 1902, which relates to the other half of th

4. (1904) LK,
5. 12 €, 81; 31LJ., CP, 6 ras 331LJ.,C.2,, (6) Ly

LR] OF AUSTRALIA. only with certain leases, which include that in question, und see. 5 provides, generally that no contract agreement or coven- dulafect the incidence of any tax imposed by the Act. An gement by which the landlord is re-imbursed cannot be said affect the incidence of the tax.

Wise KC, and Rolin for the respondents. 'The consideration voving from the respondents in the parol agreement was the in of the lease in the terms of the letters. Even if it old turn out that one of the covenants in the lease is or void, that does not affect their right to get the tenefit which was promised to them on condition that they eited the lease in the terms proposed to them, now that they we fulfilled that condition. It is for the jury to say what was the eft of that contract. 'The agreement to give a rebate was n inducement to execute the lease. That agreement has been

ed, The allowance of 50 per cent. was actually made off rent for the first six months. 'That is alleged in the plea. The fact that it is pleaded on equitable grounds does not prevent tle respondents from setting up any legal defence that it may Ttis not a plea of payment, but of an executed agree- The appellant is not entitled now to re-open the matter,

agreement was collateral to the lease. By executing the ae the respondents became entitled to sue upon the agreement, Hit they had paid the full rent, could have recovered back ut 'There is nothing contradictory of the terms of the lease. Tespondents had not paid the rent, or been allowed the » they would have had no answer to an action on the eove- topay rent, except by way of set-off. There would be an fendent debt from the appellant to the respondents, which " Md not have been recoverable against an assignee of the 'sion. The promise was by the lessor personally, and the would have been liable for the full rent to the assignee of 'sion, and would have had to sue the lessor afterwards Me half rent. Evidence may always be given of a promise or the purpose of inducing a lessee to execute a lense :

rent, there is no real difference in its effect. 'The Act H.0. or A.

. Morgan v. Griffith (1); Erskine v. Adeane (2); Martin

Spicer (3). On the same principle evidence can be given, in action on a bill of sale, that a parol agreement had been m between the parties that the bill of sale was not to be availa until certain other securities had been realised: Heselting y, 'Simmons (4). It is inequitable to enforce a bond, when thers an agreement that it should not be enforeed until the happening of a particular event: Major v. Major (5). In a sale of land by. auction, after conveyance (without any covenants), the purchaser js entitled under the conditions of sale, to compensation for error in the particulars of sale on the ground that the prim agreement was independent of, and not superseded by, the deed conveyance: Palmer v. Johnson (6). The whole of the ante cedent course of conduct must be looked at; it is a presumption only that the written agreement, as finally drawn up, contains the whole of the terms: Gillespie Bros. & Co. v. Cheney, Eygar & Co. (7).

Any agreement to pay a portion of an amount which another is liable to pay, alters the burden of the liability. In the ease af ; a tax, it alters the incidence of the tax. The test is whether a amatter of fact, the effect of the covenant is to wholly or partially indemnify the landlord against the payment of the tax. The | covenant in this case amounts to that. The fact that the words "as rent" are used, and that the covenant is placed in the redden- dum, cannot affect the nature of the covenant. Sec. 12 directs that the whole tax shall be paid in the first instance by the land lord, and that he may then recover contribution in certain specified proportions. Therefore any arrangement which hasia- fact altered, or might have the effect of altering, those proportios affects the incidence of the tax and is forbidden by sec. 63. The intention of the parties has nothing to do with the matter; itisa question of fact in each ease whether the effect of the agreement is to alter the incidence. 'The covenant here passes on a part of the liability of the landlord to the lessees, ie., they pay a greatet

() LR. 6 Bx. 70. .B., BAT. (8h, oe reat aaa (3) 34 ch. D., 1. (6) 13 QB.D., 351.

fF the tax than they would pay as contribution H.C. oF A.

"gure Col - The landlord must bear his share of the burden, Haris

most not make any contract with his tenant inorder toalleviate _syosry

'The Act cannot be intended only to prevent direct evasion of theburden; the terms used show that it is the ultimate result or 'tendeney that is to be looked at. The effect of the covenant in case is the same as that dealt with in Cooper v. Barron (1). Cillron v. Travers (2) dealt with a contract of indemnity, which 'ys held void under the Acts relating to the tax in question. Inder our Act every agreement &c. having the tendency to demnify is prohibited. Ludlow v. Pike (3), is in point, the ly difference being that, in that case, the whole amount of the was provided for, instead of one third as here.

_ Dr. Cullen in reply. As to the claim for £75, the evidence 'yas tendered to prove a contract of a preliminary nature, which Tad been superseded by the deed, and was therefore inadmissible :

• Greswolde-Williams v. Barneby (4). The letters could not be 'ised to prove an accord and satisfaction, because they only _ present the alleged contract out of which the original obligation 'arose The plea was bad as a plea uf payment because that cannot beproved by evidence of payment of a less sum than due.

No evidence was excluded that would have proved accord and faction. Receipts were put in to prove that, but the letters ld only prove the antecedent obligation.

_Guirrite C.J. This is an appeal from a decision of the Supreme Court of New South Wales making absolute an order to enter judgment for the defendants as to £19 15s. 2d., and 'manew trial as to £75, the residue of the plaintiff's claim.

__ Thequestions raised as to the two amounts are entirely different. _The action was brought on a covenant in a lease of land demised 'TW the plaintiff to the defendants for a term of fifty years, from

Ast January, 1902, at a rental of £300 a year, together with "such further sums as rent as shall represent one-third of the annual sum payable from time to time during the said term by the said lessor . . as land tax to the Commissioners of Taxa. tion under the Land and Income Tax Assessment Act 1895, or any amendment thereof in respect of the land demised." The action was brought to recover two years' additional rent under the words Ihave just read, and also £75, being half the first year's rent of £150. The question with regard to the £75 arose upon the defendants' fourth plea, pleaded upon equitable grounds 'That plea was to the following eftect : - As to £75 part of the rent claimed by the plaintiff, that before they executed the deed it was agreed between the plaintiff and the defendants that the plaintiff should allow the defendants 50 per cent. off the rent for the first six months of the term of the lease, and that the defendants executed the said deed upon the faith of the said agreement, and not otherwise, and that the plaintiff duly, and in accordance with the terms of the said agreement, allowed the defendants 50 per cent. off the rent so covenanted to be paid, and reserved by and in the said deed, for the first six months of the said term, and that the defendants duly paid the remainder of the said rent due under the said covenant, and the plaintiff accepted the same in satisfaction and discharge of the whole of the said rent, and that the plaintiff is now suing for the said rent as agreed to be allowed _ off to the defendants, being the said £75, in fraud of the agree- ment. At the trial, before the learned Chief Justice, certain letters were tendered in evidence to prove the allegations contained in : that plea, but he rejected the evidence, holding that it was intended to qualify an agreement under seal, and was therefore nadmissible. With respect to the claim for extra rent, amounting to one-third of theamount payable as land tax, the learned Chief Justice directed the jury to find a verdict for the plaintiff. On appeal to the Full Court, Owen J. and G. B. Simpson J. were of the opinion that the evidence tendered in support of the plea as to the £75 was admissible, on the ground that it did not tend to qualify the terms of the agreement under seal, but was evidence of a colla- teral agreement, which came clearly under the authorities Pring J. was of the contrary opinion, But all the learned

te My ot be recovered, and that as to that there must vvendit for the defendants. 'The result of the appeal was, s myonity of the Court being of opinion that the evidence tothe £75 was admissible, that it was directed that there vw iubea new trial as to that sum, and that as to the £19 15s. 'extra rent a verdict should be entered for the defendants. there is no doubt about the general rule as to the inadmis- ilty of written evidence or oral evidence of statements by parties to qualify the terms of a deed. It is stated very aly by James Li, in Leggott v. Barrett (1). He says: [think it is very important, according to my view of the of contracts, both at Common Law and in Equity, that if have made an executory contract which is to be carried atbya deed afterwards executed, the real completed contract nthe parties is to be found in the deed, and that you have right whatever to look at the contract, although it is recited the deed, except for the purpose of construing the deed You have no right to look at the contract either for

purpose of enlarging or diminishing or modifying the con- {net which is to be found in the deed itself." That doctrine was disputed, but reliance was placed by a majority of the Court gun. series of cases, beginning with Morgan v. Griffith (2) and -toling with De Lassalle vy. Guildford (3). 'The latter was a case a lease, which had been duly executed. The lessee alleged that landlord had verbally represented to him that the drains were ol order, which, it was contended, was a collateral agreement the condition of the premises, upon the faith of which the lessee he lease. The Court held that the agreement might be wed, but apparently on the ground that the alleged agreement MSawarranty. The words of A. LZ. Smith M.R., are (4): - why is not the warranty collateral to anything which is to ound in the lease? 'The present contract or warranty by the dant was entirely independent of what was to happen dur- the tenancy. It was what induced the tenancy, and it in no affected the terms of the tenancy during the three years,

yer of the opinion that the amount claimed as extra W. Cor A.

which was all the lease dealt with. The warranty in no contradicts the lease, and without the warranty the lease y would have been executed." Then he refers to other cases, a points out that in one of them, Angell v. Duke (1), the Com

not collateral, but referred to a matter that was dealt with in tthe lease itself. The foundation of his judgment was that the agree. ment alleged was upona subject not dealt with by the lease The agreement as to the £75 does in one sense tend to qualify terms of the lease, in that the result will be that, instead of $3

a year (which is the amount reserved by the lease) being paid ll through the term, rent will be paid at the rate of only £150 per annum for the first six months. In another sense it might b held that it was collateral, that as an inducement to enter into lease, the lessor agreed to make the lessee a refund of half the fist six months' rent, after it was paid. The point is one of great difficulty, but, in the view which we take of the case, it is not necessary to decide whether this objection is valid or not Because, although the plea is called an equitable one, it may allege facts which would afford a good defence to that part of the claim to which it is pleaded, and the defendants were entitled to take advantage of it in any sense in which it can be read. It is not merely a plea setting up the making of the agreement, and alleging that the plaintiff is suing in breach - of it, but it also alleges that the agreement was performed, that there had been a balanee struck, and payment of that: balance. It will be convenient first to consider the plea as if it set up am agreement, having nothing to do with the lease but relating to entirely extrinsic matter, by which the plaintiff had agreed to Pay the defendants £75, or to allow it to them on a settlement of accounts. From that point of view the plea would operate asa plea of payment, or perhaps of accord and satisfaction. For that Proposition the case of Cullander v. Howard (2) is clearly a authority. 'The plea there was that, "after the accruing of a causes of action, &., and before the commencement of the sit, &e., the defendant and the plaintiff accounted together, and am

'aus then stated between them, of and concerning the Hor a. certain other claims, &., and pa the sum of £50 was then found - annus

'on that accounting whe and then was, due and owing from the defendant to the ssigy 'ghintif; which sum of money the defendant then, in considera- Guass axp fon of the premises, promised the plaintiff to pay him on request

'that thereupon the defendant afterwards, and before the com- nt of this suit, &e., paid to the plaintiff, &e,, the sum of ss) in full satisfaction and discharge of such last mentioned sum." this plea there was a special demurrer, and a joinder in ume. The Court in giving judgment for the defendant,

on the plea as an informal plea of mit, and stated the doctrine governing the matter. Wilde {J sid(1): "If the plea in this case amounts to an allega- nof the allowance of cross demands upon an account stated, yayment of the balance, there seems to be no doubt but that "iiets up substantially a good defence to the action. 'This appears "iplavebeen established, and the reason of the doetrine expounded,

"Ti the obligor or feoffor be bound by condition to pay one marks at a certain day, and at the day the parties do

tothe obligor or feoffor, that sum is allowed, and the residue of hundred marks paid, this is a good satisfaction; and yet the was a chose-in-action. and no payment was made thereof, but -lpway of retainer or discharge.' The authority cited for this ge, is a ease to that effect in the Year Book, 11 Ric. That e has been cited and followed in later cases. Indeed it sto be only common sense. When there have been mutual ngs between parties, and a balance has been struck and settled, would be avery strange thing if either party were to be allowed sequently to re-open the matter. In the supposed case, the agree- Mat being clearly a good agreement, and having nothing to do ith the lease subsequently executed, evidence may, of course, be

' suppose that the contract was bad, as for instance under the tute of Frauds: yet the parties, having dealt with one another

H.C. oF As on the basisof its being a good contract, and having paid orstruck

a balance on that basis, neither party could come afterwards and rip the matter up again. The admitted debt having been satisfied, the validity of the contract under which it was paid is not material, when the whole matter has been settled on the basis that the contract was a good one which imposed an obligation on the parties, whether perfect or imperfect. 'The circumstance that the invalidity of the alleged contract depends upon its contra. dieting a deed, whether the deed sued on or another, cannot make a difference in principle. The plea in this case, whether the alleged agreement was valid or invalid, sets up such a defence, and is in effect a plea of payment. Therefore, if it is proved, the action fails.

It is not necessary to refer in detail to the documents tendered in evidence on this point. It is sufficient to say that they afford ample evidence for a jury that such an agreement was made, and that a settlement upon the basis of the agreement took place. - From that point of view the evidence tendered was admissible, and a new trial should be granted.

It was contended that, if the evidence was tendered on an - erroneous ground, we should refuse to grant a new trial. But the position is this: the defendants have obtained an order for a new trial on the ground that certain evidence was rejected whieh was admissible. I express no opinion whether the alleged agree- ment was valid or invalid: in either case the evidence was adinissible, as tending to prove the plea. The snbstantial ground on which it was tendered was that it tended to prove the plea, 'The substantial ground of rejection was that the plea was a bad one, ie., that the alleged agreement, although executed, afforded no defence to the action. The ground on which the evidence was tendered was therefore right, and it was the objection which was illfounded. We do not think that the mere rejection of evidence on an erroneous ground prejudices the right of the party who tenders it to a new trial. So far as the £75 is concerned, the appeal therefore fails, In this judgment we all concur.

Passing to the second question, I will read a judgment, in which my brother Barton and myself concur,

'The second question raised on the appeal divides itself into two

" Ta Assessment Act 1895, and (2) its effect under the

'The lease under consideration is fora term of fifty years at the ral ent of £900 per annum payable quarterly. The reddendum os on - * And also yielding and paying therefor yearly and feoyyearupondemand . .. such further sum as rent as shall one-third part of the annual sum payable from time to 'tine during the said term by the said lessor as land tax to the Commissioners of Taxation under the Land and Income Tax Assesment Act 1895 or any amendment thereof in respect of

Pe 63 of is Land and Income Tax Assessment Act 1895 ides that any contract or agreement, however made, which, ifvalidmighthave the effect of in any way affecting the incidence of 'heland tax shall be wholly void, so far as it is intended to or might yethat effect. 'The land tax under that Act is payable in the fist instance by the owner, but the person who has paid the tax may, under see. 13, recover by way of contribution from any

• llr person who has an interest in the land a sum to be ascer- tained according to rules prescribed by that section, It has alvays, we are told, been taken that this section applies as Intween landlord and tenant, and we see no reason to doubt the 'orreetness of that construction. It is common ground that the incidence" of the tax referred to in sec. 63 means the distri- tation of the total burden of the tax as between the person who yysand the person from whom he is entitled to claim contribu- tin, The test, then, of the validity of a contract or agreement 'ner see. 63 is whether, if valid, it does or might affect the Woportions of their contributions. If so, it is invalid ; if not, it is tutobnoxious to the provisions of that section.

The lease in question must be construed as at the time of its 'te, and with reference to the then existing law, which the

Iaties must be taken to have known; and the alteration in the _hvmade by the Act of 1902 cannot affect this construction. We tire with Pring J. that little, if any, light is thrown on the case 'Wthe English and Irish decisions, If the effect of the stipulation 'M question is to substitute for the distribution of the burden

sges: (1) The effect of the stipulation under the Land and H.C. ov A.

prescribed by the Statute another and different distribution, if the provision is substitutional for, and not cumulative upon, statutory provisions, it clearly would, if valid, affect the incidence of the tax, and is consequently invalid. If, on the other hand, the provision is merely cumulative upon the statutory provision for contribution, it may not have that effect. What then was the intention of the parties, as ascertained from their language' We think that for the purpose of construetion the language of the contract must be regarded irrespective of the provisions of any Statute declaring certain contracts void. We must first ascertain what it is to which the parties have agreed, and then inquire whether that agreement is or is not valid, having regard to the express provisions of the law. Leaving, then, the provisions of

sec. 63 out of consideration for a moment, i.e. assuming that the incidence of the land tax may be altered by contract, does this stipulation, fairly construed, alter it ?

It is contended for the defendants that, wpon the true construe tion of the lease, the intention was that the payment of a sum under the name of rent, equal to one-third of the land tax forthe - time being, was to be in lieu of and to supersede the tenants obligation to contribute the proportion prescribed by sec. 12 of the Act. In favour of this view it is said, applying the doctrine expressum fucit cessure tacitum, that it would be a strange con- struction to hold that, when the law adds to a lease a tacit or implied provision that the tenant shall pay the owner or lessoras his contribution to the land tax a proportion of the tax prescribed by Statute, an express stipulation that he shall pay the same person a fixed contribution equal to one-third of the tax is intended to be cumulative. 3

So far, apart from the provision of the Act. If, however, that provision is called in aid of the construction, it is clear that, if the proportion payable by the tenant under the stipulation in the lease were less than the statutory contribution, the tenant could not set up the stipulation in the lease as an answer to his statt- tory liability. Why? Because the stipulation so construed would under see. 63 be invalid. Why then, if the tenant cannot take advantage of the stipulation in diminution of the statutory contribution, should the owner be entitled to take advantage of it

is construction. p vy, ail, however, that, if the stipulation is construed as

slative upon the statutory pro 'ision, there is no alteration in "nddenee of the tax gud tax, but merely an addition to the qud rent irrespective of that incidence. We proceed to con- this argument.

"jiseontewded that there is no reason why an owner of land not agree to let it gratuitously, ie.,on the terms that the 'shall indemnify him against taxation in respect of it. In

oi tax, which is itself under the Acts proportionate to the sigproved value, the result would be the same as if the rent 'ewfixed at a per centage of that value, and under such a lease tenant would still be bound to pay, in addition, his statutory

enent to the contrary would be inoperative. In the supposed ifthe stipulation were construed as cumulative, full seope said, be given to the Act, and the incidence of the tax mill not be affected. It is true that in the supposed case this m would not be in accordance with the intention of the which was that the landlord should be merely indemnified.

«tintended by the parti And, if it cannot have that effect ean the Court mould it so as to give it an effect admittedly intended by them? The function of the Court is to interpret, tnot to make contracts. The circumstance that the tenant to contribute a third instead of the whole is of course not This argument therefore fails, if the rate of land tax were fixed and permanent, or if tlerent reserved were a sum equal to the land tax payable at the of the lease, the stipulation would, in either case, amount to nore than fixing the rent by reference to a known sum. Nor, 'Nowgh the land tax varies in proportion to the value, would beany objection to making the rent vary in the same pro- But the rate of land tax is not fixed or permanent.

sntof that contribution / 'There would be nomutuality #0. or A.

"The Act of 1895 did not itself impose a tax. 'The tax wast declared by Parliament from time to time. The provisions of 63 must be read in view of the probable contingency that itn vary, a contingency which must have been in the minds of the legislature, as it evidently was in the minds of the parties in thy present case. And the legislature must, therefore, be taken tp have meant that the parties should not be able to provide by agreement that one of them should eseape an additional bundey_ which might be east upon him by a future increase of the To take a concrete case: - Assume that the tenant's contributiog to the tax as ascertained under the Act is - say - one fourth. s) long as the total amount of the land tax, which I will assumeis £30, does not vary, the tenant's contribution remains at £7 10s.anl_ the incidence of this burden is not altered by a covenant to pay an additional rent bearing a fixed proportion to the fixed sum a £30, which, in the case of a stipulation such as that in the present case, will be £10. His total contribution will be £17 10s. of the £30, or 35-sixtieths. Suppose then that the land tax is doubled, and becomes £60. Under the provisions of the Act the tenants contribution, which is still one-fourth, becomes and the land lord must pay the other £45. But if the rent were to vary ia | accordance with the stipulation now in question, the burden of the tenant under that stipulation would be doubled, becoming £20, instead of £10, in addition to the £15, so relieving the landlonl of the incidence of the tax to that extent. It is true that tis 7 arithmetical proportion of his contribution to the whole amount of the taxwould be the same as before, 35-sixtieths, but in effect

the incidence of the land tax upon the landlord as preseribed by law will have been altered in his favour to the extent of the £10. 'The result of the stipulation for additional rent, read as cumu- lative upon, and not substitutional for, that provided by the Act, would therefore be to effect an alteration in the proportional contribution of the tenant, as at the date of the lease. This _ plainly an alteration of the incidence of the tax, and as such falls within the prohibition. It follows that the stipulation relied

upon, whether construed as substitutional or cumulative, wis when made, void, inasmuch as it might have had the effect of

'that incidence. This stra rent for the year 1902. to the effect of the stipulation under the Act of 1902. Fethat Act imposes upon land leased for more than thirty 'vixal tax of one penny in the pound of the unimproved iv, to be paid by the owner and the lessees of the land. The

joners are required to adjust the tax fairly and equitably nn the owners and lessees according to their respective fs in the land as unimproved, and their adjustment is This fixed tax is, by sec. 3, to be in lieu of the land tax ja the Act of 1895. Sec. 5 provides that: "No contract, went or covenant made before or after the commencement ihis Act shall affect the incidence of any tax imposed by this 'The stipulation now in question cannot therefore, however tnd, affect the obligation of the tenant to pay the contribu- ssaljusted by the Commissioners. But, since the lease must ued as of the time when it was made, and seeing that fipulation in question was then void, how can it be rehabili- d! It is true that sec. 63 of the Act of 1895 only invalidated

fs so far as they were intended to or might affect the dence of the tax under that Act. But we do not know

nason of positive law is void when it is made, can be brought idiective operation merely by a subsequent change in the law "Which such a stipulation would not be void if made after the e was effected. he whole matter we are of opinion that the intention of as disclosed by the lease, was that the stipulation in should be in substitution for, and not cumulative upon, tatntory provision then in force, and any statutory provision ight thereafter be made in place of it, and was therefore uler the one Act and inoperative under the other; and i that, even if this was not the intention, the original Iyofsterility, imposed by the law of 1895 upon the stipula- oa it was made, still attaches to it. We think, therefore,

H.C. or A. of the Supreme Court in respect to the admissi

denee should be upheld on the grounds stated by him, that part of the ease I wish to add nothing to what he has

with the validity of the respondent company's covenant to Byas rent such further sum as shall represent in each year one-thinlof

sioners of Taxation. In regard to the amount claimed by th appellant as payable in 1902, sec. 63 of the Land and Ineomp

them was the Statute as searching in its terms as sec. 63 of th Land and Income Tax Assessment Act 1895. That se aims directly at every contract agreement or understanding which has or purports to have, or which might have, the effect of in any way affecting the incidence of any tax payable under the A The "incidence" of the tax must mean the burden of the tax, both as regards the person upon whom it falls in the first instane, the contribution which he is authorized to obtain from others, an the proportion in which the burden of the tax falls upon the original taxpayer and upon the contributor. One illustration will be sufi-

cient to show that" incidence " of the tax cannot be restricted tothe narrow meaning of " payment of the tax directly to the Commis sioners." A direct guarantee by a tenant to repay the landlord the amount of tax paid by him to the Commissioners as provided by the Act would certainly not affect the incidence of the tax in that mat-

row sense, because the landlord would in that case still remainthe taxpayer; yet no one could say that such an agreement would not be contrary to law if the section is to have any practical operation. Effect can be given to the words of the enactment it such a case as this only by holding that any agreement, howevet disguised, will affect the incidence of the tax if it in fact has the effect of altering the ratio in which the Statute has directed that the burden of the tax shall be borne by the landlord and the

{eels Cullen that in this covenant the amount in question raspayableas rent, that the land tax was used only as a measure an and that such a method of fixing rent did not infringe

Bro r the Act. Bat the form of the reddendum is rather

pint the suggestion that the amount of land tax was named

tugasamesare of rent. 'Taking the material words the passage

'ailsas follows - * Yielding and paying therefor yearly

'orsum of £300 by equal quarterly payments of £75 each on the

fint days of" (mentioning the four quarter days) " in each

-' Then follows this provision: "And also yielding and

"ying therefor yearly and every year upon demand such further

'ums rent as shall represent one-third of the annual sum pay-

"hlefrom time to time during the said term by the said lessor Jer hes, &e., as land tax to the Commissioners of Taxation under

'the Lund and Income Tux Assessment Act 1895 or any

'amendment thereof in respect of the land hereby demised." 'There

marked difference between the provisions for payment of this

ilitional sum and for payment of the rent reserved in the warlier part of the reddendum. Although the sum to be paid is bed as rent, the promise to pay in effect differs in no

'ny froma direct guarantee to repay the landlord every year

'tmethind of the land tax payable by him. But, whatever the

ition of the parties may have been, the Act prohibits any

"tgeement which has or might have the effect of in any way

isting the incidence of the tax. Now, what is the effect of this

'grement? It compels the tenant every year to pay a fixed

_ Mportion of the land tax to the landlord. Deseribing the pay-

_ utas rent cannot alter the effect of the payment. Sec.

ich regulates the tenant's contribution, enacts that the tenant's

'tttibution each year shall bear the same proportion to the tax

'iil bythe landlord as the value of the tenant's interest bears to

Hevalue of the landlord's estate ; the tenant's contribution thus

'ming smaller each year of the term. How can it be said

tthe yearly payment of a fixed proportion of the land tax by tenant to the landlord every year of the term has not the staltering the incidence of the proportion in which sec. 12

rspectively. Tet us now tun to the covenant. It was H.C. or A.

has directed that the burden of the tax is to be borne by the tenant and the landlord respectively ? Whether the payment under the covenant is to be in substitution for the statutory contribution, on as Dr. Cullen has contended, in addition to the statutory contribu. tion is immaterial. Tn either case the tenant will in effect bear the burden of a proportion of the tax different from that which the Statute has directed he shall bear. I may add that I entirely concur in the reasoning by which my learned brother the Chief Justice has arrived at the same conclusion. Under the cireum- stances it is in my opinion plain that this agreement has, to use the words of the Statute, "the effect of affecting the incidence of the tax" and that therefore it is void within the meaning of sec. 63. 'The appellant is therefore not entitled to recover the amount claimed in respect of 1902.

Coming now to the amount sued for as payable in 1903, we must consider the terms of the Land Taw (Leases) Act 1902 - This Act applies only to leases where the term is not less than thirty years. In regard to these leases it takes the place of the Land and Income Tax Assessment Act 1895. From tie beginning of 1903 the land tax in respect of such leases is raised and made payable by this special Act alone. By sec. 4 landlord and tenant are both made taxpayers, but in such proportions as may be equitably adjusted by the Commissioners of Taxation in proportion to the value of their respective interests. Sec. 5 enacts that the incidence of the tax so provided for shall not be affected by any agreement. It does not make void any agreement affect- ing the incidence of the tax as sec. 63 of the earlier Act does in regard to agreements contrary to the Act of 1895; it merely declares that the agreement shall not affect the incidence of the tax. If the agreement now under consideration had been made after the passing of this Act it would not be void. It could not relieve the tenant from the obligation to pay his proportion of the tax to the Commissioners, but he would be just as liable under it to repay to the landlord the agreed proportion of the tax as he would be to perform any other agreement. 'The agreement however was made, as we know, before the passing of the Act of 1902, and became, for certain purposes, void on its execution. The question now arises, how can the landlorl

Met under this Act by virtue of an agreement made at a

a8 yo, ryhen the rights of the parties were regulated by the Act of Hamas yand which, as I have pointed out, was void in so far as it See

ion of that Act? For the purpose of answering Grass axp Tite Co.

nis question it becomes necessary to look again at sec. 63 of the

of 1895, It will be observed that that section does not make void the whole agreement contravening its provisions. It uses expression "shall be wholly void and inoperative '9 fur assuch agreement . . . might have the effect afore- that is the "effect of in any way affecting the incidence of

tax." 'The section then goes on, " without prejudice to the ity of such agreement in any other respect or for any other se." The only reasonable interpretation of those words is, ny opinion, this - that such part of the agreement as has the bet of affecting the incidence of the tax becomes wholly void. 'Mhis interpretation is not only reasonable but in accordance with ny grammatical construction. Any other reading of the en acs to the absurdity, pointed out by the Chief Justice, of agreement void and dead under the existing law, but capable of 'ining new life and validity from some future alteration of the lay, which will render lawful that which was unlawful. Having mand to the object of the legislature apparent on the face of see. the Court is bound to avoid an interpretation leading to such an

• thsurd consequence, if any other interpretation is grammatically sible Taking the view of see. 63 that I have explained, I am opinion that the part of the agreement which violated the pro- s of that section was void from its inception, and never had _ tty validity for any purpose, and therefore cannot now be made tfietual for the purpose of making good the appellant's claim mnespect of the amount alleged to be due in 1903. For these sI concur with my learned brothers in holding that: the n of the covenant in question is void in respect of the 'ppellant's claim for both 1902 and 1903, and that the decision of tleSupreme Court on this part of the case must be upheld.

Appeal dismissed with costs. Solicitor, for appellant, M. J. Harris.

Solicitors, for respondents, Sly d: Russell. C. A. W.