Ocelota Ltd. Ltd. & Ors. v. Water Administration Ministerial Corporation & Anor. [2000] NSWSC 370 | Case summary | Zoe

NSWNSWSC

Ocelota Ltd. Ltd. & Ors. v. Water Administration Ministerial Corporation & Anor. [2000] NSWSC 370

[2000] NSWSC 370

Supreme Court of NSW|2000-05-09

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Court

Supreme Court of NSW

Decision date

2000-05-09

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Original judgment source is linked above.

Judgment (57 paragraphs)

[1]

INTRODUCTION 1 The second plaintiffs Norman Harris and Myrna Harris, and the other plaintiffs, which are companies associated with Norman and Myrna Harris and their family, between them own a number of farming properties in the Moree area. These properties are known as Moomin, Moomin Plains South, Hemmingford, Wathernoo North, Woodvale, and Krui. 2 Prior to 8 October 1999, the second defendant Colly Farms Limited (which I will call Colly) was the lessee from some of the plaintiffs of about 70 per cent of the total of the properties other than Krui, which I will call the Moomin properties, and about 50 per cent of Krui, under a lease for two years commencing 1 July 1999. The use permitted under the lease was the raising of irrigated and dryland cotton crops. 3 Both the Moomin properties and Krui are supplied with water from the Copeton Dam via Moomin Creek, by means of a joint water supply scheme under the Water Act 1912. There was in force in respect of the Moomin properties an authority No 90SA001270 (which I will call the Moomin Authority), with a water allocation for each "water year" (1 October to 30 September) of 19,440 megalitres for irrigation and 32 megalitres for stock and domestic, and in respect of Krui an authority No 90SA001419 (which I will call the Krui Authority), with a water allocation for each year of 15,552 megalitres for irrigation and 128 megalitres for stock and domestic. 4 Under the lease, Colly had the use and benefit, during the continuance of the lease, of these authorities, to the extent of 18,648 megalitres of the irrigation allocation under the Moomin authority and the full 15,552 megalitres of the irrigation allocation under the Krui authority, subject to reservation by the lessors of the first 200 megalitres under the Moomin authority. 5 The lease provided for an annual rental of $3 million, $1.5 million payable on 1 July and $1.5 million payable on 30 May. Colly paid $1.5 million on 1 July 1999. The lease contained a provision that, in the event that a named person ceased to be employed by Colly, the lessor could terminate the lease with one month's notice. The named person did cease to be employed by Colly, and on 9 September 1999 the lessor gave one month's notice of termination. It is common ground that the lease terminated on 8 October 1999, and that Colly vacated the leased properties on 8 October 1999. No part of the $1.5 million paid on 1 July 1999 has been refunded. 6 As at 22 September 1999, the available water allocations under the authorities were 15,621 megalitres under the Moomin authority and 5,724 megalitres under the Krui authority. On 22 September 1999, Colly applied to the relevant statutory body, the Water Administration Ministerial Corporation (known as the Ministerial Corporation), for approval to transfer these allocations to other authorities held by Colly. On 27 September 1999, the Ministerial Corporation indicated that it would approve this transfer. 7 These proceedings were commenced on 28 September 1999, and an ex parte injunction was granted on that day against the Ministerial Corporation granting approval to that transfer. That injunction was subsequently extended to the hearing. 8 In their statement of claim, the plaintiffs seek final orders preventing the transfer of the water allocation. By its further amended cross-claim, Colly seeks a number of remedies: compensation or damages in the event that it cannot transfer the water allocation; restitution of certain additional rent paid for the year 1 July 1998 to 30 June 1999; restitution of some or all of the $1.5 million rent paid on 1 July 1999; and relief under the Agricultural Tenancies Act. 9 I have now heard all issues in the case, except for issues arising under the Agricultural Tenancies Act, and quantification of any compensation on the basis of unjust enrichment.

[16]

What is crucial to this case is whether "the holder of an entitlement" in s20AH means, where there is more than one holder of an entitlement, any one of the holders of the entitlement, or all of the holders of the entitlement. 20 The water allocations which I referred to early in this judgment are those fixed under Division 4B. They specify the maximum quantity of water that may be taken under the relevant authority in one water year; but limitations in the water supply may mean that less than those quantities are available to be taken. As from 1 October 1998, the Department of Land and Water Conservation introduced a scheme to systematise the limits of the amount of the water allocation that can be drawn at any time. As at 1 October 1998, each authority was treated as having an "account" equal to 150 per cent of its water allocation. Then, as water was drawn, the amount drawn was deducted from both the water allocation and the account. As the water supply was replenished by rain, an amount could be added to the account, up to a maximum of 150 per cent of the allocation. At any time, the holders were entitled only to draw the lesser of the quantities given by the allocation and the account. While the account might be increased during a water year due to rainfall, the allocation could not be increased during a water year; but a new allocation would start at the beginning of the next water year. Thus, at the end of a water year, the balance in the account was carried over to the next water year, and a new allocation began. 21 Accordingly, the effect of the proposed transfers in this case, if they had occurred on 27 September 1999, would have been to reduce the quantity of water in both the allocations and the accounts for the respective authorities, in respect of the remaining three days of the water year 1998 to 1999; and to reduce the account balance for the beginning of the 1999 to 2000 water year. In relation to the authorities to which the allocations were transferred, the transfers would have increased the amount available to be drawn over the remaining three days of the 1998 to1999 water year; and, probably more significantly, assuming no water was drawn in those three days, to increase the account balance for those authorities at the beginning of the 1999 to 2000 water year.

[23]

3.5 Rent Reduction 3.5.1 The Lessor and the Lessee agree (and confirm their agreement in the said Heads of Agreement) that in the event of the Lessee receiving from the Department during any crop growing season in any Lease Year an aggregate of water allocations from the Water Rights and permitted allocated free flows of less than 3.5 megalitres per green hectare of the Developed Land, then the Annual Rent hereby reserved by the Lessor and payable by the Lessee shall be reduced for that Lease Year at the rate of $40.00 for every megalitre per hectare by which the aggregate of any such water allocations and allocated free flows is less than 3.5 megalitres per hectare and pro rata for any part of a megalitre. 3.5.2 In the event of a reduction in the Annual Rent in the circumstances described in Clause 3.5.1, the number of megalitres per hectare by which the water supplied and received by the Lessee is or has been less than 3.5 megalitres per hectare, shall be calculated, on or before 31 May in each Lease Year and the reduction of the total Annual Rent shall be made by the Lessee deducting the amount of that reduction from the second rent instalment in the Lease Year to which the reduction in the Annual Rent applies, on 31 May in that Lease Year. 26 Part 4 deals with the permitted use of the premises. Clause 4.1 is in the following terms: The Lessee will not use or permit to be used the Demised Premises for any purpose other than the growing of irrigated and dryland cotton crops. 27 Part 5 deals with maintenance, repair, and alterations, and cl.5.1 sets out provisions binding the lessee in relation to agricultural land: Clauses 5.1(a), (e) and (f) are in the following terms: Provisions Applying to Agricultural Land The Lessee shall: (a) personally or by persons with proper skills, cultivate and manage the Demised Premises in a proper and husband-like manner and preserve and maintain the Demised Premises in a proper and efficient state of improvement and cultivation. ... (e) comply with any conditions attaching to the Water Rights and pay all metered costs including minimum water charges and all levies for water used by the Lessee on the Developed Land. (f) refrain from any act which would or could result in the forfeiture of the Water Rights and on the expiration or sooner determination of this Lease do all things and sign all documents reasonably within the power of the Lessee to do so or sign and procure its Sub-Lessees to do or sign for the purpose of vesting in the Lessor or its nominees the Water Rights.

[31]

(e) the Lessor shall give the Lessee, free of rental or licence fee or other payment during the Term of this Lease, the free and uninterrupted use and enjoyment of all pumps, motor engines, machinery and other irrigation installations located on the Demised Premises at the commencement of this Lease. 30 Part 11 deals with default and termination; and clause 11.1(b) provides that where the lessee is in default, the lessor may inter alia convert the unexpired portion of the lease into a tenancy from month to month, to which the provisions of clause 12.5 apply. 31 Part 12 is headed "General". Clause 12.5 deals with holding over, and is in the following terms: In the event of the Lessee continuing to occupy the Demised Premises after the expiration or sooner determination of the Term with the consent of the Lessor, then the Lessee shall become a monthly tenant only of the Lessor but (unless otherwise agreed) at an Annual Rent equal to one twelfth of the aggregate of the Annual Rent payable by the Lessee for the last Lease Year of the immediately preceding Term and otherwise on the same covenants conditions and stipulations, mutatis mutandis, as are herein contained or implied accepting any option to renew which shall be deemed expressly excluded. 32 Clause 12.13 deals with crop growing on termination, and is in the following terms: 12.13.1 In the event that on the expiration or earlier determination of this Lease otherwise than by reason of the default of the Lessee, there shall be growing on the Demised Premises a crop or crops, the Lessee, free from undue interference from the Lessor or any person claiming under or through the Lessor, may as a Licensee at will only of that part or those parts of the Demised Premises on which the crop is or the crops are located and to such parts of the Demised Premises as are reasonably necessary to gain access to the crop or crops, care for and harvest that crop or those crops and remove the Lessee's equipment machinery and property, provided that the Lessee, in exercising this right, shall in no way otherwise interfere with the occupation and use of the Demised Premises by the person entitled to occupy and use the same for that time or times.

[33]

12.13.3 Following the final harvest of a crop by the Lessee whether occurring prior to the expiration or earlier determination of this Lease, or whether occurring in accordance with the provisions of 12.13.1 and 12.13.2, the Lessee shall be responsible for the slashing and pulling of any stubble remaining after such harvest. 33 Clause 12.18 deals with abatement of rent, in the following terms: In case the Demised Premises or any part thereof shall, at any time during the Term be destroyed, or damaged by civil commotion or the Queen's enemies, without any neglect or default on the part of the Lessee, so as to render the Demised Premises, wholly or partially unfit for occupation or use, the rent hereby reserved for a fair and just proportion thereof, according to the damage sustained, shall be suspended and cease to be payable so long as the Demised Premises shall remain unfit for occupation or use by reason of such damage, and, in the event of any difference between the Lessor and the Lessee as to the amount of rent or other moneys assessments or rates payable, such difference shall be referred to the arbitration of a single arbitrator willing to act nominated for that purpose by the President for the time being of the New South Wales Law Society pursuant to the provisions of the Commercial Arbitration Act PROVIDED ALWAYS THAT if the Demised Premises shall be destroyed or so damaged as aforesaid that the Demised Premises shall be wholly unfit for occupation or use by the Lessee for the purpose aforesaid then and in such case the Lessor or the Lessee may within one month thereafter by notice in writing to the other of them, terminate this Lease but without prejudice to any rights which might have accrued to either party prior to such determination. 34 Part 14 contains lessor's further warranties and agreements. Clause 14.1.2 is in the following terms: 14.1.2 The Lessor agrees with the Lessee that included in the Lease of the Demised Premises are all the following improvements, buildings and facilities for the use and benefit of the Lessee during the Term of this Lease. At "Woodvale " Three cottages

[39]

OTHER FACTS 36 During the 1998/1999 lease year, that is, the last year of the second lease, the water allocations permitted during the year in respect of the demised premises amounted to 39,861.5 megalitres. Accordingly, pursuant to clause 3.4, Colly became liable for additional rent amounting to $347,812.50. On 21 June 1999, Colly paid to the lessors $139,006.35, being the additional rent less agreed costs payable by the lessors of $208,806.15. It appears however that Colly did not use the whole of the water allocation permitted during the 1998/1999 year because the cropping area was reduced during that year. 37 Each year, one cotton crop is planted and harvested. Planting generally takes place over about 20 days, commencing between about mid-September and mid-October each year. Harvesting takes place over about 30 days, commencing between about 15 March and 15 April in the year following planting. Ideally, a cotton crop requires about seven megalitres of water per hectare; but may be grown using about 3.5 megalitres of irrigation water per hectare, particularly if there is good rainfall. 38 Of the portions of the Moomin properties and Krui retained by the lessors, only the farm known as Moomin Plains South was suitable for the growing of cotton. About 700 hectares of this property was used for cotton growing. 972 megalitres from the Moomin Authority was used for irrigating the cotton crops on this property, with additional water coming from other authorities. During the 1998/1999 cotton growing seasons, some of the lessors carried out irrigated cotton farming on this property: they used some but not all of the 972 megalitre water allocation. Accordingly, part of the water allocation from the Moomin Authority that was the subject of the transfer application made by Colly on 22 September 1999 included water that was available for use by the lessors, that is, the remainder of this 972 megalitre water allocation. 39 When the lessors gave notice terminating the lease, it was their intention to plant cotton on the demised premises, and this subsequently happened. When they took occupation on 8 October 1999, some preparation for planting cotton had been done by Colly, including the use of water to moisten some of the land. Some of the paddocks had been cultivated, some fertilised and some pre-irrigated. The cotton crop planted by the lessors on this property was about to be picked at the time of the hearing. 40 When the lessors retook possession of the demised premises, there was a substantial amount of water in a dam called the Woodvale Storage, at least part of which had been drawn pursuant to the authorities in the previous year, in respect of which the additional rent had been paid, as mentioned earlier. That water has since been used by the lessors. 41 There was evidence from Cliff Brown, a real estate agent of Moree, that between about early September and mid-October 1999, he acted as agent in the sale of approximately twelve to thirteen thousand megalitres of irrigation water in the Gwydir Valley region. Of those sales, 11,000 megalitres were sold by Colly. The majority of those sales were at the rate of $50 per megalitre. Some were also sold for $40 and $45. Mr Brown expressed the opinion that it may have been possible to find purchasers for a further 5,000 megalitres at $50 per megalitre, but if a further 16,000 megalitres had been available it would only be saleable at a substantial discount, selling in the region of $25 to $35 per megalitre. It was possible that some might not have been sold at all. However, in about mid-October 1999 there was heavy rainfall in the region. From that time until about mid-February 2000, Mr Brown did not receive any request to purchase or sell any water parcels.

[47]

CAN THE ALLOCATIONS BE TRANSFERRED? Submissions 46 Each side has provided a written outline of submissions, which I will leave with the papers. I will be brief in stating the submissions of the parties. 47 Mr Meagher SC submitted that the effect of s20F of the Water Act was that all occupiers for the time being of the lands specified in the authority were holders of the authority. Section 20V(2) meant that the reference to "holder" in s20AH(1) must be a reference to "each of the holders", that is, to all of the holders. Plainly, it was the intention of s20X and s20XA to require service of notices on all the holders of an authority; and plainly, where s20AH(1) referred to a transfer "to the holder of another entitlement", it must be referring to a transfer to all the holders of that other entitlement. For those reasons, he submitted, it was only all the holders of the entitlement who could transfer the whole or part of the water allocation for that entitlement under s20AH(1). 48 Mr Meagher further submitted that the terms of the lease were inconsistent with Colly transferring part of the water allocations. He pointed out that the effect of a transfer would be a modification of the conditions of the authority itself: ss20AI(2) and 20AK of the Water Act. Clauses 10.3(b) and (d) indicated that the lessee's entitlement under the lease to use the water rights did not extend to an entitlement to have the water rights modified or amended. Furthermore, clauses 3.3, 5.1, 10.2 and 10.3 made it clear that the entitlement was only to use the water rights on the demised premises themselves. Mr Meagher also submitted that the authorities touch and concern the demised premises, and are therefore part of the demised premises: see Elders Rural Finance Ltd v Westpac Banking Corporation (1989) 6 BPR 13,439 at 13,446-7. A transfer of any part of the water allocation attached to the authorities would be a transfer of part of the lessor's interest in the demised premises, in breach of Part 8 of the lease. 49 Mr Hammerschlag for Colly submitted that the sole issue under the Water Act was the plaintiffs' contention that Colly had no standing to apply to have the allocations transferred, and/or that the Ministerial Corporation did not have power to approve such a transfer. Mr Hammerschlag submitted that s20V(2) made it clear that each of the holders of the authority, that is, any of them, could apply to have the allocation transferred. Any other interpretation would involve practical difficulties. The occupation of part of the land covered by an authority could change from time to time, and may be for short periods only. If all temporary occupiers had to join in every transfer, it would raise considerable practical difficulties. Section 20XA(1) of the Act made it clear that the Ministerial Corporation could itself, without application by anyone, vary an authority by reducing the allocation; so it must be able to do the same thing in response to an application by one of the holders of the authority. This was confirmed by the terms of s20AI of the Act, referring to the Ministerial Corporation requiring inter alia "consents", and taking into consideration matters including "the social and economic effect" that the transfer would have. 50 Turning to the terms of the lease, Mr Hammerschlag submitted that the "demised premises" and "developed land" did not include the water rights. The water allocations which Colly sought to transfer had been paid for by Colly. The intention of lessor and lessee was that the lessee, for the term of the lease, have the whole benefits of the allocations referred to in the definition of "water rights". Clause 10.3 confirmed that Colly was entitled to these water allocations: one of the rights granted by clause 10.3(a) was to make an application to transfer the allocation to other premises; and the reference to "nominees" in clause 10.3(c) confirmed that the water did not have to be used by Colly on the demised premises. The lessor agreed that it was the lessee who should have the full and exclusive entitlement to the water rights during the term of the lease: the lessee was doing no more than exercising these rights which had been sold to and paid for by it. In the lease, "water rights" meant the authorities, not allocations made under them; and what was sought to be transferred was an allocation, not the entitlement itself. Instead of transferring the allocations, the lessee could, in the remaining three days of the water year, have pumped the water out and used it on the demised premises: the effect on the lessor would have been precisely the same.

[49]

Decision 52 Section 20F of the Water Act means that these authorities were held by the lawful occupiers of all the land specified in the authorities; and it is clear that at least some of the plaintiffs were occupiers of some of the Moomin properties and of part of Krui. It is common ground that, by agreement between the lessor and lessee under the subject lease, the lessee was given the benefit, during the term of the lease, of the whole of the irrigation allocation under the Krui authority, and 19/20ths of the irrigation allocation under the Moomin authority; but that does not alter the situation that, under the Act, the holders of the authorities included at least some of the plaintiffs. Furthermore, there is no provision in any of these authorities, inserted pursuant to s20B(2) of the Act, which limits the rights, to the authorities or the allocations thereunder, of any of the holders other than Colly. 53 Under s20AH of the Act, the transfer must be by the "holder". Section 20AH is in Part 2 of the Act, and s5(2) provides that reference in Part 2 to a holder of an authority shall be construed as a reference to any one of those holders. However, s20V(2) provides that a reference in Division 4B (and therefore, pursuant to s20AG, in Division 4C) to the holder of an authority includes a reference to each of the holders of the authority. In my opinion, where s20X and s20XA require service on "the" holder of each entitlement, the definition in s20V(2) makes it clear that the service must be on each of the holders of the entitlement, that is, on all of them. The use of the definite article "the", rather than the indefinite "a", makes it clear that the section 20V(2) definition rather than the s5(2) definition is to apply; and in any event, s20V(2) would probably prevail over s5(2) if there were an inconsistency, because of its more specific application to Divisions 4B and 4C rather than the whole of Part 2. Turning to s20AH itself, if one simply substituted, for "the holder" where it first appears in s20AH(1), the words "each of the holders", the provision could be read as enabling each one of the holders of an entitlement, without the participation of others, to transfer the water allocation for the entitlement. However, in my opinion, the better view is that it is not each holder, considered individually, who may transfer, but rather each of the holders considered collectively who may do so, that is, all of the holders. 54 In the first place, it is to be noted that s20AH does not, as suggested by Mr Hammerschlag, provide for an application for transfer, with the transfer itself to be effected by the Ministerial Corporation: what it provides for is the transfer by the holder, not the Ministerial Corporation. The role of the Ministerial Corporation is only to approve the transfer. The concept of transfer suggests that it is the person or persons entitled to what is transferred who must effect the transfer: that is, in this case, all of the holders. 55 Secondly, the transfer is made to "the holder of another entitlement": substituting the definition in s20V(2), this means that the transfer must be to each of the holders of that other entitlement, and it seems clear that this must mean all of the holders. This is confirmed by s20AI, which contemplates either that the transferee apply for a new entitlement, or that the benefit of the transfer be given effect to by a modification under s20XA of the conditions to which the entitlements of the transferor or transferee are subject; and s20XA refers in turn to s20X(2)(b) and s20AB(1)(a), which deal with the maximum quantity of water which may be taken under the entitlement, but do not contemplate any differentiation between the rights of different holders of the authority. Thus, there seems to be no possibility that the transfer could be to some only of the holders of the recipient authority. In my opinion it would be strange if "the holder" had different meanings in the two places where it appears in s20AH(1); and this confirms that it refers to all of the holders, on both places. 56 Thirdly, it is unlikely that the legislature would have intended to give one holder of an authority the power to transfer away some or all of the water allocation under that authority, to the detriment of other holders; particularly where it is clear that any application under s.20E to amend an authority must be by all the holders. 57 As submitted by Mr Hammerschlag, the Ministerial Corporation can vary the conditions of authorities under s20XA, without the need for any application by the holders. However, there is no suggestion in this case that the Ministerial Corporation has done other than give consideration to approval of a purported transfer pursuant to s20AH. Furthermore, the reference to "consents" in s20AH(4) does not, in my opinion, suggest that the transfer may be by less than all the holders of the authority. There are many other persons whose consent might possibly be considered relevant by the Minister, including owners of land not in occupation. 58 For those reasons, in my opinion s20AH of the Act did not authorise Colly alone to transfer any of the allocation under the relevant authorities. Of course, it would be possible that agreement between the holders of an authority would produce an entitlement of one of those holders to compel the others to join in a transfer. As I understand it, Colly has not contended that it has the benefit of such an agreement in this case. In any event, in my opinion, the terms of the lease in this case would not constitute such an agreement. Indeed, as submitted by Mr Meagher, the terms of the lease are such that it would be a breach of the lease for Colly to transfer water allocations for use on other land, if it was able to do so. 59 As submitted by Mr Hammerschlag, there is a sense in which Colly has, pursuant to clause 3.4 of the lease, paid for water which it has not used. Furthermore, clause 10.3 does indicate that Colly has the benefit of the water rights for the term of the lease. As at 22 September 1999, the water rights included the balance of the allocation remaining for the water year which was about to end, which could be drawn upon to its full extent, because there was a greater amount in the account in respect of each of the authorities. 60 However, in my opinion, that water allocation could, pursuant to the lease, only be used on the demised premises in the course of proper irrigation farming of cotton. 61 As noted earlier, any transfer of allocation would be given effect to by amendment of the authority: see sections 20AI(2), 20AK, and 20XA. Part 10 of the lease gives the lessee the use of the water rights for the term of the lease, but does not authorise the lessee to bring about the amendment of the conditions of those water rights: indeed, clauses 10(b) and 10(d) suggest strongly that the lessee, for its part, is not entitled to bring about a change in the conditions of the water rights. In my opinion, that is confirmed by clauses 5.1(e) and (f). What is plainly contemplated is that the water rights should be retained without alteration of conditions and then, at the termination of the lease, the lessor should have them back unaltered. 62 Accordingly, in my opinion, the lease does not give Colly a right to force the other holders of the authorities to join in a transfer, and it at least implies that there should be no alteration of the conditions of the authority; so that there is nothing in the lease which would overcome indirectly the necessity which I have found for all holders to join in a transfer pursuant to s20AH of the Water Act. 63 It is unnecessary for me to decide whether the authorities were part of the demised premises.

[54]

RECOVERY OF 1999 TO 2000 RENT Submissions 70 Mr Hammerschlag submitted that clause 3.3 of the lease made it clear that the rent was an annual rent, on the basis that 5,300 developed green hectares would be available for the lessee's permitted use throughout the term of the lease. The periodic nature of the payment was confirmed by clause 11.1(b), which provided that where the lessee was in default, the lessor could elect to convert the unexpired portion of the lease into a tenancy from month to month, to which the provisions of clause 12.5 would apply; and clause 12.5, relating to holding over, provided for a monthly tenancy at a rent equal to one-twelfth of the annual rent in respect of the previous lease year. (I note that clause 12.5 refers to "an Annual Rent equal to one-twelfth of the aggregate of the Annual Rent payable by the Lessee for the last Lease Year of the immediately preceding Term"; but "Annual Rent" where it first appears, is plainly falsa demonstratio for monthly rent.) There would be an absurd result if the lease was interpreted in any other way than that, in the event that $1.5 million had been paid at the beginning of a lease year and the lease terminated without fault of the lessee before the expiration of six months of the term, the amount of the $1.5 million referable to the unexpired portion of that six months were not refundable. An absurd interpretation should not be adopted: see Westpac Banking Corporation v Tanzone Pty Ltd, (2000) NSWCA 25. See also Smith v The Mayor, Aldermen & Burgesses of Birmingham (1883) 11 QBD 195. 71 Alternatively, Mr Hammerschlag submitted, a term should be implied to the effect that, when rent is paid in advance, and the lease is terminated without fault by the lessee, there should be refunded to the lessee so much of the pre-paid rent as was referable to any period after the termination of the lease. The conditions necessary to imply a term, as set out in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283, were satisfied. See also Ling v Commonwealth (1994) 51 FCR 88 at 97ff. 72 In any event, Mr Hammerschlag submitted, s144 would apply. He referred me to authority apparently to the contrary, namely Ellis v Rowbotham (1900) 1 QB 740; In re Aspinall (1961) Ch 526; and Amad v Grant (1947) 74 CLR 327 at 338, 346. However, he also referred me to the expression of opinion in Mason & Carter Restitution Law in Australia, paragraph 1147, that it was very difficult to maintain that a legislative provision in the terms of s144 was not intended to apply for the benefit of lessees who had paid rent in advance. It does apply in favour of a landlord in respect of rent payable in arrears. It was a plain injustice if it did not apply the other way. If s144 did not in terms apply, nevertheless the Court should adopt the policy underlying that section: see Carmody v Delehunt (1984) 1 NSWLR 667 at 669. 73 Finally, Mr Hammerschlag submitted that some or all of the $1.5 million was recoverable on the basis of unjust enrichment. He referred me to David Securities Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 particularly at 382-3. He submitted that there was in this case a total failure of consideration: the lease was for the purposes of planting and harvesting cotton, and in respect of the 1999/2000 year that consideration totally failed. He also referred to paragraph 1215 and following of Mason & Carter. 74 Mr Meagher submitted that there was no provision in the lease which expressly or impliedly required repayment of any part of the $1.5 million, in the event of early termination of the lease. As regards the implication of a term, the lease was effective in business terms without the implication of any term: there was no requirement from business efficacy for the implication of a term. In fact, the term sought to be implied was inconsistent with the express terms of clause 3.1, requiring payment of $1.5 million "without any deduction". Further, there was no logic in breaking the lease here into daily units since plainly the days were not of equal value. In fact, no payment of rent related to anything other than the whole year. 75 Mr Meagher submitted that s144 had no application. Where the contract between the parties treated rent as having accrued and being payable in advance, there was no room for application of a provision to the effect that rents be considered as accruing from day to day: that was established by Ellis v Rowbotham. He also referred me to William Hill (Football) Ltd. v. Willen Key & Hardward Ltd. (1964) 108 Solicitors Journal 482, Canas Pty. Co. Ltd. v. K.L. Television Ltd. (1970) 2 QB 433 at 442, and In re a Debtor No.13A-10-1995) (1995) 1 WLR 1127 at 1132. 76 Mr Meagher submitted that the claim for restitution could not succeed. The contract between the parties dealt with recovery, by providing that there was no recovery; so that there was no room for a claim in restitution: see Horton v Jones (1939) 39 SR (NSW) 305 at 319. Further there was no total failure of consideration: see Baltic Shipping Company v Dillon (1993) 176 CLR 344 at 375, Wincup v Hughes (1871) LR 6 CP 78. In fact, the benefit bargained for was the right for possession so long as the term continued, subject to the provisions of the lease including that for early termination. On that approach Colly received the whole of what it bargained for. Plainly, it received at least part of what it bargained for: in addition to possession of the fields on which cotton was planted, Colly had the benefit of clause 12.13.1, enabling it to plant crops and get the benefit of them; clause 14.1.2, entitling it to the use of dwellings; and also the benefit of a sharefarming agreement with interests associated with the plaintiffs, in respect of those parts of the demised premises not used for cotton.

[55]

Decision 77 Despite the view expressed by Mason & Carter, I believe I am bound by authority to hold that s144 of the Conveyancing Act has no direct application to this case. I consider I am bound by Ellis v Rowbotham, and cases following and approving it, to hold that where the lease provides for rent payable in advance, that rent is to be treated as having accrued in full and being payable in full at the date payment is required; so that there is no room for application of a provision providing for rent to be considered as accruing from day to day. However, in my opinion the general approach and policy underlying s144 can be adopted as one factor relevant to whether some kind of apportionment should be given effect to, without applying the statute itself: see Carmody v Delehunt at 669 to 670. 78 Furthermore, there are indications in the lease itself that rent is to be considered as applicable to periods less than a whole year. For example, if the lessor elected pursuant to clause 11.1(b) to convert the lease into a tenancy from month to month, with a monthly rent payable for each month, and if this happened shortly after $1.5 million rent had been paid in advance, it would indeed be absurd if the lessor could simply retain the whole of that $1.5 million. Similarly, clauses 12.13.2 and 12.18 contemplate that rent is applicable to periods of less than one year. 79 I do not read the lease as expressing an intention that the consideration of $1.5 million payable by the lessee at the beginning of each lease year is paid for a bundle of rights, which includes the possibility of early termination without fault of the lessee, pursuant to clause 20.2. In my opinion, the intention as disclosed by the lease is that $3-million is payable for each year's possession of the demised premises, that $1.5 million paid in advance is paid in respect of one-half of one year's occupation, that is for 182½ days or, where as in this case there is a Leap Year, 183 days, and that the consideration to be received by the lessee is severable by reference to the period of occupation; so that there was a total failure of consideration at least in relation to 83 days out of the 183 days in respect of which the $1.5 million was paid. I do not think such an interpretation of this lease is inconsistent with Ellis v. Rowbotham and the other cases referred to, which did not address questions of severability of consideration under the particular leases being dealt with and consequent failure of consideration. On that basis, Colly is entitled to recover $680,327.80 as money paid under a contract discharged without breach, in respect of which there has been a total failure of consideration. There is no defence of change of position raised. 80 If I were wrong in my finding of total failure of consideration, in my opinion a term having the same effect would be implied in this lease. The term I would imply is a term having the effect that, if in any year a first instalment of rent of $1.5 million is paid, and the lease is subsequently terminated before one-half of that year has elapsed, without fault of the lessee, then there should be refunded to the lessee a sum of money which bears the same proportion to $1.5 million as the number of days between the termination of the lease and the expiry of one-half of the year, bears to one-half of the year. Such a term is plainly reasonable and equitable. In my opinion it would be necessary give business efficacy to the contract, and so obvious that it goes without saying. It is capable of clear expression, and it does not contradict any express term of the lease. In particular, the term requiring payment without deduction is not inconsistent with a term requiring a refund in specified circumstances. 81 In my opinion, Ellis v. Rowbotham does not require a different result. Although I have held that this case is authoritative as to the interpretation of s.144, in my opinion it is not conclusive against recovery of a proportionate part of the rent in this case. It is distinguishable, at least on the ground that the termination of the lease in Ellis v. Rowbotham was for breach by the lessee. Further, the law on penalty and forfeiture has developed significantly since that case was decided; and it may well be that now a provision in a lease purporting to entitle a lessor to retain the whole of rent paid in advance for a substantial period, where the lease is terminated for breach of the lessee, is in substance a penalty, so that the lessor would be entitled only to so much as represented its actual damages for breach: see O'Dea v. Allstates Leasing System (WA) Pty. Ltd. (1983) 152 CLR 359. 82 It remains to consider whether Colly has any rights based upon more general grounds of unjust enrichment. There are, in the further amended cross-claim, claims for something over $2 million in respect of the preparations made for the planting of cotton on the demised premises, as improvements under the Agricultural Tenancies Act 1990; and for something over $500,000 in respect of water in storage on the properties, as being tenant's products under the Agricultural Tenancies Act. In my opinion it is not possible to assess a general claim for unjust enrichment without at the same time dealing with those claims. 83 The final matter I should mention is that a claim was put forward that there was a total failure of consideration in respect of the whole of the $1.5 million paid. That was put on the basis that the substance of what was bargained for in respect of each year of the tenancy was the right, or at least the chance, to have the benefit of a cotton harvest obtained in about May of each year. As shown by cases such as Rowland v Divall (1923) 2 KB 500 and Rover International Ltd v Cannon Film Ltd (1989) 1 WLR 912, the circumstance that a contracting party has received some benefit as a result of a contract does not preclude there being a total failure of consideration, where the party has not received any part of that which he contracted to receive. In this case, it is put that what in substance Colly contracted to receive was the opportunity to have a cotton harvest in May of each year. In my opinion, I cannot find in favour of Colly on this basis, at least in the absence of a more general consideration of unjust enrichment, which would involve consideration of the Agricultural Tenancies Act claim. I do not have any evidence as to the value to Colly of the dwellings which were included in the lease, or of the value to Colly of the benefit of the sharefarming agreement. Furthermore, if Colly gets some substantial benefit for the work which it did on the demised premises in the months leading up to the termination, through compensation under the Agricultural Tenancies Act, that too would be relevant to whether there was a total failure of consideration relating to the whole of the period for which the $1.5 million was paid. I do not think it would be appropriate now to reject outright this claim of unjust enrichment, because, in my opinion, the exclusion by agreement of the parties from the hearing of the Agricultural Tenancies Act claim simply made it impossible for that claim to be properly considered. In my opinion, it should be considered along with the Agricultural Tenancies Act claim.