HOHN & ANOR v MAILLER

Court of Appeal (NSW)|2003-03-28|Before: Mason P, Sheller JA, Beazley JA, Burchett AJ

CITATION : HOHN & ANOR v MAILLER [2003] NSWCA 122 HEARING DATE(S) : 28 March 2003 JUDGMENT DATE : 22 May 2003

JUDGMENT OF : Mason P at 1; Sheller JA at 2; Beazley JA at 30 DECISION : 1 Appeal allowed; 2 Set aside orders 1 and 4 of Burchett AJ; 3 In addition to and in lieu of those orders, order as follows:; "1. That there be a verdict and judgment for the plaintiffs on the plaintiffs' Statement of Claim.; 3A. That the defendant pay to the plaintiffs the net proceeds of the harvest and sale of the sorghum crop in the sum of $177,982 together with interest on the sum invested during the proceedings in the sum of $12,013. This order to take effect from the date of payment of those proceeds together with interest thereon out of the trust account of Cole & Butler, Solicitors, to the defendant.; 4. That the defendant pay the plaintiffs' costs of the proceedings."; 4 The respondent to pay the appellants' costs of the appeal but to have a certificate under the Suitors' Fund Act 1951 if so qualified.

LOWER COURT Supreme Court - Equity Division JURISDICTION : LOWER COURT 1365/00 FILE NUMBER(S) : LOWER COURT Burchett AJ JUDICIAL OFFICER :

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40671/01 SC 1365/00

MASON P SHELLER JA BEAZLEY JA

HOHN & ANOR v MAILLER as trustee for THE E C MAILLER PROPERTY TRUST The appellants entered into a three year lease, during which period the property was sold to the respondent. The lease contained a number of clauses relating, amongst other things, to the upkeep, maintenance and use of the property. There was also a clause which provided as follows: 14 RE-ENTRY FOR HARVEST

14.01 If the Lessee shall duly and punctually pay the rent reserved by this Lease at the times herein appointed for payments thereof and shall duly observe and perform the covenants and agreements by and on the part of the Lessee contained in this Lease up to the expiration of the term hereof the Lessee shall have the right if necessary to enter the land after the date of expiration of the term to harvest and remove any growing crops provided that the Lessee conducts such work expeditiously and without undue inconvenience to the Lessor. Shortly before the lease terminated, Mr Hohn sowed a crop of sorghum on the land. HELD (per Sheller JA; Mason P and Beazley JA agreeing)

The Clause could not be read down so as to limit the rights of the lessees under the lease. The language in which the clause was unambiguous, while to construe it other than literally would make it very difficult if not impossible to delineate the circumstances in which it would operate.
The Clause put the lessees in the position that they would have been in had the lease been either periodic or otherwise of uncertain duration or had it been terminated unexpectedly. It therefore gave the lessees the entitlement to emblements, that is the right to go onto the property to reap such crops and vegetables of a kind that mature within a year produced through an individual's labour or industry that yield a present or current profit as might be growing and not yet severed when the term expired. The Plaintiff was thus entitled to the proceeds of the harvest and sale of the sorghum crop. Cases cited: Bulwer v Bulwer (1819) 2 B & Ald 470; 106 ER 437 Official Trustee v Westpac Banking Corporation Ltd (1987) 17 FCR 172 Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 ORDERS

In addition to and in lieu of those orders, order as follows: 1. That there be a verdict and judgment for the plaintiffs on the plaintiffs' Statement of Claim. 3A. That the defendant pay to the plaintiffs the net proceeds of the harvest and sale of the sorghum crop in the sum of $177,982 together with interest on the sum invested during the proceedings in the sum of $12,013. This order to take effect from the date of payment of those proceeds together with interest thereon out of the trust account of Cole & Butler, Solicitors, to the defendant. 4. That the defendant pay the plaintiffs' costs of the proceedings.

The respondent to pay the appellants' costs of the appeal but to have a certificate under the Suitors' Fund Act 1951 if so qualified.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40671/01 SC 1365/00

MASON P SHELLER JA BEAZLEY JA

Thursday, 22 May 2003 HOHN & ANOR v MAILLER as trustee for THE E C MAILLER PROPERTY TRUST Judgment 1 MASON P: I agree with Sheller JA. 2 SHELLER JA:

The appellants, Denis Raymond Hohn and Pauline Elizabeth Hohn, entered into a lease of a property known as 'Gambella' and later 'Avondale', a pastoral, but at the relevant time agricultural, area of land on the flood plain in the Boggabilla district. The lessor was Kevin Percival Mathews. The term of the lease was three years from 11 November 1996 to 10 November 1999. During the term of the lease the lessor sold the property to the respondent, Emma Cornelia Mailler as trustee for the EC Mailler Property Trust. 3 The rent payable by the appellant lessees was $30,000 per annum which was paid in one lump sum of $90,000 on the date of commencement. The lessees' covenants included covenants during the continuance of the lease to keep down, and at the expiry of the lease release the land as clear and clean of such things as, noxious weeds (cl 5.02), to maintain all boundary fences (cl 5.03), sufficiently to repair (cl 5.04), to cultivate and farm the land in a good clean and husbandlike manner (cl 5.06) and to use the land only for the purpose of farming and cultivation and for such other purposes as the lessor might from time to time approve (cl 5.15). The lessor covenanted for quiet possession. 4 The lease contained cl 14 which was hand-printed and provided as follows: "14 RE-ENTRY FOR HARVEST 14.01 If the Lessee shall duly and punctually pay the rent reserved by this Lease at the times herein appointed for payment thereof and shall duly observe and perform the covenants and agreements by and on the part of the Lessee contained in this Lease up to the expiration of the term hereof the Lessee shall have the right if necessary to enter the land after the date of expiration of the term to harvest and remove any growing crops provided that the Lessee conducts such work expeditiously and without undue inconvenience to the Lessor." 5 The construction of cl 14 is the issue in dispute on this appeal. 6 Between 11 and 20 October 1999 shortly before the lease terminated, Mr Hohn sowed a crop of sorghum on the land. Obviously the crop could not have been ready for harvest until long after the lease expired. By 10 November 1999 the crop was 1 foot high. The lessor harvested it in the following February. In reliance on cl 14 Mr and Mrs Hohn claimed that although the term of the lease had expired they had the right to enter the land and harvest and remove the sorghum crop it being a growing crop. On the basis of what was said to be the proper construction of cl 14 the lessor denied that Mr and Mrs Hohn were so entitled. Mr and Mrs Hohn brought proceedings in the Equity Division of the Court claiming to recover the net sale proceeds of the 2,144 tonnes of sorghum which had been harvested. Pursuant to an order of the Court, those proceeds had been paid into a trust account. Mr and Mrs Hohn's further amended statement of claim raised other matters that were in issue between the parties as did the defence and cross-claim of the defendant. The only live issue in this appeal is the entitlement of Mr and Mrs Hohn to the proceeds of sale. 7 The proceedings were heard by Burchett AJ in September and October 2001. On 9 November 2001 his Honour gave judgment for the respondent on the lessees' claim and the appellants on the respondent's cross-claim and ordered that the proceeds of the crop in the solicitor's trust account, together with all accrued interest thereon, be paid to the respondent. The trial Judge ordered Mr and Mrs Hohn to pay 40 per cent of the respondent's costs. Mr and Mrs Hohn appeal from that decision.

Judgment of Burchett AJ 8 The trial Judge said that the background to cl 14 was the common law rule applicable to an agricultural tenancy for a fixed term, by which, subject to any statutory provision, a lessor might become entitled to emblements, being such crops as might be growing and not yet severed when the term expired. His Honour posed the question of whether cl 14 effectively extended the lease, for the limited purpose expressed by it, so as to require the setting aside of the land for the benefit of the former lessees during virtually the whole growing period of the crop. His Honour said that many factors combined to suggest that this could not have been the intention of the parties. "It would affect in a significant way the yielding up of the land by the lessee at the expiration of the lease, and would be something quite different from an alleviation of the common law rule to permit a harvest to be completed which had, for example, been delayed by untoward weather at harvest time, or by conditions that unusually slowed the ripening of the crop." 9 In short, as I read the reasons for judgment, Burchett AJ took the view that cl 14 went no further than to provide such limited alleviation from the common law rule and did not extend to permit a longer period of continued growth before harvest by the lessees. 10 In reaching this conclusion his Honour said that a literal construction of the clause would make it do significantly more than protect the lessees against "an adverse conjunction of the lottery of the weather and the common law rule". But such a construction would "pose serious problems of inconsistency between the various provisions of the lease". Burchett AJ pointed out that the care of the crop in accordance with normal practice and in a good clean and husbandlike manner (cl 5.06) or taking steps to deal with or eradicate pests implied a presence on the land and the carrying out of work on the land. His Honour said: "Clause 14 gives no right to the lessee to go upon the land after the expiration of the term of the lease, except 'if necessary' in order 'to harvest and remove any growing crops'." 11 There was no right to enter and tend a crop prior to harvest. The lease did not contemplate requiring the lessor to perform work on the lessees' crop. The Judge said: "But the parties, who made specific provision in clause 5.02 for the continuous eradication and keeping down of noxious weeds and other growth deleterious to good cultivation, and in clause 5.06 for the use of the most approved methods of farming, cannot have intended that no one, over the period of months required for the growing of a crop, would attend to the essential practices of proper farming, that, in effect, good husbandry would be abandoned for this time." 12 Nor did the trial Judge think that, where a substantial annual rent was provided for, the parties would contemplate the extension of the term, at no additional rental, for a period approaching one-third of a year, during which the tenant would have the benefit of the land for the growing of his crop, thereby excluding the landlord from the use of his own land that had purportedly reverted to him under other provisions of the lease with a reservation or condition and without the tenant having any obligation to comply with the covenants for the preservation of the land as good farming land. 13 The trial Judge found support for his conclusion in other parts of the text of the lease. He said that the cl 14 right was limited by necessity ("if necessary") by purpose ("to harvest and remove any growing crops") and by a proviso ("provided that the lessee conducts such work expeditiously and without undue inconvenience to the lessor"). There was a striking incongruity between the draftsman's care to ensure the harvesting would cause no undue inconvenience and was conducted "expeditiously", suggesting a quite small concession to a "necessary" activity of the lessees, and the generous allowance of months of inconvenience - "if that word is not too euphemistic to be applicable" - caused, not by necessity, but by deliberate choice, during the entire development and ripening period of a crop of untended seedlings. The trial Judge thought that an inconsistency so fundamental pointed plainly to the conclusion that the interpretation contended for might not be right. 14 To his Honour the heading "Re-Entry for Harvest" suggested the clause was intended to confer a quite limited extension. The heading was consistent with the view that the parties had in mind a crop capable of being grown before the expiry of the period of the lease, in accordance with the practices of good husbandry in the district, which, for some reason, did not come to harvest during the term of the lease, but would be ready later. It did not suggest the making available of the land for almost all the growing of a crop, which would be grossly under-described by that heading. 15 His Honour acknowledged the force of the plaintiff's emphasis on the word "any" in the expression "any growing crop", but thought it contemplated that if there were growing crops, within the meaning of the clause, then the clause would apply to any of them. However the word must not be allowed to distort the meaning conveyed by the whole in the particular context. The Judge said: "If too much emphasis were placed on the literal signification of the word 'growing', the court might be misled into thinking that clause 14 would no longer apply once the grain had been 'sprayed out' and was ready for harvest; for then it would no longer be 'growing'." 16 In terms of the cultivation of sorghum we were told that "sprayed out" refers to a process of spraying a herbicide on the crop not long before harvest to kill it off and thereby dry the grain. In his Honour's opinion such an interpretation, though literally precise, would deny the most obvious application of the clause and could not possibly have been intended. He said: "The value of the observation of this difficulty is that it demonstrates how far a literal reading may fall short of the true meaning of the language, which is subtler and more complete than the sum of the dictionary definitions of its component words. Even the apparently limitless scope of the word 'any' has been limited by the process of construction where the context so demanded: in Antaios Compania Naviera S.A. Salen Rederierna A.B. ('The Antaios') [1985] AC 191, the House of Lords narrowed the expression 'any breach' to mean 'any repudiatory breach'." 17 The trial Judge referred to the cases about the competition between a literalist and a purposive construction of contractual documents. Having done so, he said: "17 The background information available to the parties, which, indeed, would be available to any farmer or any intelligent resident within the farming area in question, would include the risk that a crop might develop more slowly than anticipated because of adverse weather conditions, and the risk that harvesting operations might have to be postponed through wetness of the grain or bogginess of the ground, or by reason of some other adventitious circumstance. Bearing this background information in mind, not ignoring the nature of the contract as a lease for a limited term, involving numerous obligations concerned with the continuous care and cultivation of the land, and recognising that clause 14 provided a right of 're-entry for harvest', to be exercised 'if necessary' and 'without undue inconvenience to the Lessor' but carrying with it no other right or obligation with respect to the land, I do not believe 'a commercially sensible construction' (in Lord Steyn's words) would countenance the idea that the clause authorises the sowing of a crop three or four weeks before the expiry of the lease, to grow untended for nearly four months, and then to be harvested by the former lessees. Putting it another way, 'the commercial purpose' of this lease (to take up Lord Wilberforce's question) was to permit the agricultural use of the land for a price during the specified term, and clause 14, in that context, may be seen as an attempt to ensure that this agricultural use did not fail by reason of a particular consequence of the unpredictability of nature. It would be 'very unreasonable', then, and defy 'business commonsense', to use the expressions chosen by Lord Reid and Lord Diplock, to understand clause 14 as having the quite different operation of augmenting the term of the lease (but stripped of all its obligations) in the way for which the Plaintiffs contend. 18 I do not think it is strictly necessary to define the limit of the scope of clause 14, for once a mechanically literal interpretation is put aside, on no sensible construction could the clause extend to cover the present case. However, in my view, the heading "RE-ENTRY FOR HARVEST', the words 'if necessary', and the proviso 'without undue inconvenience to the Lessor', combine to indicate that the clause is limited to cases where some necessity arises to delay a harvest which otherwise would reasonably have been expected to have been gathered in during the term of the lease." 18 This conclusion led the trial Judge to reject Mr and Mrs Hohn's principal claim for damages for an alleged breach of contract being the defendant's refusal to permit them to re-enter and harvest the sorghum crop and the defendant's denial of their entitlement to the proceeds of the sale of that crop being the net amount of $177,982 held in trust together with some interest. His Honour made the following orders: "1. That there be a verdict and judgment for the Defendant on the Plaintiff's Statement of Claim. 2. That, subject to order 3, there be a verdict and judgment for the Cross Defendants on the Cross Claim. 3. That the proceeds of the subject sorghum crop held in the trust account of Cole & Butler, Solicitors with all accrued interest thereon be paid to the Defendant. 4. That the Plaintiffs pay the 40% of the Defendant's costs of the proceedings."

It does not appear that these orders, in particular order 3, were stayed. This explains the terms of order 4 sought in the notice of appeal, namely that the respondent pay to the appellants the sum of $177,982 together with interest on the sum invested during the proceedings in the sum of $12,013.

Appeal 19 Burchett AJ's reasoning started with the proposition that the common law rule applicable to an agricultural tenancy for a fixed term was that, subject to any statutory provision, a lessor might become entitled to emblements, being such crops as might be growing and not yet severed when the term expired. No doubt his Honour was contrasting such a lease with that described by Abbot CJ in Bulwer v Bulwer (1819) 2 B & Ald 470; 106 ER 437 and quoted by Pincus J in Official Trustee v Westpac Banking Corporation Ltd (1987) 17 FCR 172 at 173-4. Abbot CJ said at 471; 438: "The general rule of law applicable to cases of this description is, that where a tenant of land has an uncertain interest which is determined either by the act of God or the act of another, there he shall have emblements: …"

Burchett AJ was pointing to the distinction between a lease for a fixed term and a periodic lease or one of uncertain duration. In the present case but for cl 14, the lessees would not have been entitled to take the growing crops after the termination of the lease. 20 Emblements are crops and vegetables produced through an individual's labour or industry that yield a present or current profit. Although emblements include fructus industriales that consist of crops which do not mature within a year (for example clover) the right to reap does not cover these. It is confined to corn, roots and other things of a vegetable nature. See generally, Halsbury's Laws of Australia (245-1275) crops and (355-2100) emblements. In the case of a lease that is either periodic or otherwise of uncertain duration and subject to contrary agreement a lessee who has planted crops had the right at common law to enter, harvest and remove the crops after the termination of the lease, assuming the termination was not a consequence of the lessee's default. In Official Trustee v Westpac Banking Corporation Ltd Pincus J said at 174 that where the landlord takes possession in consequence of the tenant's default, there can be no right to emblements. The tenant's right to take emblements applied to crops which were reapable annually such as the sorghum in the present case. 21 A tenant for a fixed term of years is not entitled to the right to take emblements, because the tenant knows when the tenancy ends and it is the tenant's own fault if the tenant sows crops which will not come to maturity until after that date. This is in contrast with the case where a tenancy comes to an end unexpectedly, as for instance upon the sudden determination of a tenancy at will or upon the determination of the estate out of which the term has been created, in which the common law right to emblements exists; see Cheshire and Burn's Modern Law of Real Property, 15th ed at 398. If because of the nature of the lease or the circumstances of its termination the tenant had the right at common law after termination to enter upon the land and harvest the crops, it was nowhere suggested that that right was limited to crops which at the termination of the lease were unharvested because of "untoward weather at harvest time or by conditions that unusually slowed the ripening of the crop". The only condition imposed by the common law was that reapable crops were growing when the tenancy ended. This is the language of cl 14 which speaks of the removal of "any growing crops". It is not surprising that the lessees were to conduct the work of removal expeditiously and without undue inconvenience to the lessor or that the right applied "if necessary", that is to say if at termination growing crops remained upon the demised property. Clause 14 reversed what would have been the position of the lessees had the clause not been included in the lease. 22 The appellants submitted that the purpose and effect of cl 14 of the lease was to abrogate the common law rule applicable to fixed terms. The breadth of the language used in the clause, namely the conferral of a right to enter the land "to harvest and remove any growing crops" demonstrated that intention. The clause was plain in its terms; the words of the clause were unambiguous and clear. It was submitted that in those circumstances it was neither the function of nor did the court have power to attempt to define an intention other than that expressed in the plain and unambiguous words of the clause, or to remake or amend the contract for the purposes of avoiding a result which might be viewed as inconvenient or unjust; Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 105-106, 107 and 109-110. In the words of Barwick CJ at 105 "…it is no part of the function of a court by some process of divination as distinct from construction of the language employed to attribute to parties an intention to do something for which their express words do not provide." At 109 Gibbs J said: "If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different." 23 Standing alone cl 14 means that subject to the lessees' meeting the introductory condition up to the expiration of the term they are entitled thereafter, that is to say after the date of expiration, to enter the land, to harvest and remove any growing crops. There is a proviso that the lessees conduct "such work", which must mean the work of harvesting and removing the growing crop, expeditiously and without undue inconvenience to the lessor. 24 The process of reading down cl 14 so that the lessees had a more limited right was based on what was said to be the surprising result that after the termination of the lease the lessees had no obligation, in particular, to cultivate the land in a good clean and husbandlike manner and accordingly to the most approved methods of farming in the district or, having harvested the crop, to leave the land clean and in good heart and condition. Furthermore, while the crop continued to grow before harvest but after the termination of the lease, the lessees had no obligation to keep down deleterious growth. During this period the lessor could not use the land for its own cultivation and if the land was to be protected in the manner described in the lessees' covenants then it would be the lessor which would have to provide that protection at its own expense. These considerations were advanced on behalf of the respondent in support of the limited right that Burchett AJ thought the lessees enjoyed under cl 14. 25 However, unless cl 14 is construed literally it is very difficult, if not impossible, to delineate the circumstances in which it would operate. An example might be where, due to unfavourable weather, a crop expected to be harvested within the term of the lease could not be harvested until several weeks later. The problems of responsibility with respect to the maintenance of the land would exist in that situation. The parties by the terms of the lease accepted that if particular work needed to be done on the land to maintain it and preserve it from deleterious growth then it was the lessor that had to do it. 26 With due respect, I do not agree with the construction placed upon the clause by Burchett AJ.

Costs 27 The appellants seek an order that the respondent pay their costs of the proceedings and of the appeal. The respondent submitted that because of other unsuccessful claims pursued by the appellants at the hearing, the respondent should not have to pay the whole of the appellants' costs of the proceedings below. The appellants succeeded on the respondent's cross-claim and the respondent succeeded on the appellants' claim. That might have indicated that Burchett AJ would make no order as to the costs of the proceedings. But his Honour ordered the appellants to pay 40 per cent of the respondent's costs of the proceedings, an order which suggests a view more unfavourable to the appellants' conduct of the proceedings. 28 Since the appellants now succeed on their claim, that order should be set aside. In the result the respondent failed both on the appellants' claim and on the respondent's cross-claim. It would follow that the respondent should pay the appellants' costs of the proceedings below. No material has been placed before us which would enable this Court in a principled way to reduce the amount of costs that the respondent should so pay to the appellants in respect of the proceedings before Burchett AJ. Accordingly, in my opinion, the respondent should pay the appellants' costs of the hearing before Burchett AJ and of this appeal.

In addition to and in lieu of those orders, order as follows: 1. That there be a verdict and judgment for the plaintiffs on the plaintiffs' Statement of Claim. 3A. That the defendant pay to the plaintiffs the net proceeds of the harvest and sale of the sorghum crop in the sum of $177,982 together with interest on the sum invested during the proceedings in the sum of $12,013. This order to take effect from the date of payment of those proceeds together with interest thereon out of the trust account of Cole & Butler, Solicitors, to the defendant. 4. That the defendant pay the plaintiffs' costs of the proceedings.

The respondent to pay the appellants' costs of the appeal but to have a certificate under the Suitors' Fund Act 1951 if so qualified. 30 BEAZLEY JA: I agree with Sheller JA. **********

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