Owendale Pty Ltd v Anthony [1967] HCA 52;

Owendale Pty Ltd v Anthony [1967] HCA 52; - HCA 1967 case summary — Zoe

[13]

"(a) That if -

. . . . . .

(ii) a building in accordance with sub-clause (c) of clause 1

of this lease is not commenced within the period

specified in the said sub-clause; or

(iii) a building in accordance with sub-clause (c) of clause 1

of this lease is not completed within the period specified

in sub-clause (d) of the said clause; or

(iv) after completion of a building as aforesaid the said

land is at any time not used for a period of one year

for the purpose for which this lease is granted the

Commonwealth or the Minister on behalf of the

Commonwealth may determine this lease but without

prejudice to any claim which the Commonwealth or

the Minister on behalf of the Commonwealth may

have against the lessee in respect of any breach of

the covenants on the part of the lessee to be observed

or performed.

(b) That acceptance of rent by the Commonwealth or the

Minister or a person authorized by the Minister for that purpose

during or after any period referred to in paragraph (ii) (iii) or

(iv) of sub-clause (a) of this clause shall not prevent or impede

the exercise by the Commonwealth or the Minister on behalf

of the Commonwealth of the powers conferred upon it by

sub-clause (a) of this clause.

. . . . . .

(d) That in this lease the expression 'Minister' shall mean

the Minister of State of the Commonwealth for the time being

administering the City Area Leases Ordinance 1936-1957

including any amendments thereof or any Statute or Ordinance

substituted therefor or the member of the Executive Council

of the Commonwealth for the time being performing the duties

of such Minister and shall include the authority or person for

the time being authorized by the Minister or by law to exercise

the powers and functions of the Minister under the City Area

Leases Ordinance 1936-1957 including any amendments thereof

or any Statute or Ordinance substituted therefor.

(e) That any notice requirement demand consent or other

communication to be given to or served upon the lessee by the

Commonwealth or the Minister under this lease shall be deemed

to have been duly given or served if signed by or on behalf

of the Minister and delivered to or sent in a prepaid

letter addressed to the lessee at the said land or at the usual

or last-known address of the lessee or affixed in a conspicuous

position on the said land." (at p543)

[17]

"22. (1.) Where by virtue of any provision contained in any

lease the Commonwealth may determine the lease, the

lease shall not be determined until fourteen days' notice that

the Commonwealth intends, in pursuance of the powers

contained

in the lease, to determine the lease and setting out

fully the conditions for failure to comply with which the lease

may be determined has been given to the following person: -

(a) The lessee;

(b) Where the land included in the lease is subject to a

mortgage or other encumbrance registered under the

Real Property Ordinance - the mortgagee or

encumbrancee;

(c) Where any person has any interest, registered under that

Ordinance, in the lease or the land - that person; and

(d) Where a caveat lodged under that Ordinance is in force

in respect of the land - the caveator.

(2.) Any notice by the last preceding sub-section required to

be given to any person shall be in writing signed by the Minister

and shall be deemed to have been duly given if -

(a) in the case of a lessee - it is delivered to him or sent by

registered post addressed to the lessee at his last known

place of abode or his address specified in the lease, or

if it is posted in a conspicuous place on the land to which

it relates; and

(b) in the case of any person referred to in paragraphs (b), (c)

or (d) of that sub-section - it is delivered to that person

or sent by registered post addressed to him at his address

as entered in the Register Book kept under the Real

Property Ordinance or appointed in the caveat as the

place at which notices relating to the caveat may be

served, as the case may be.

(3.) The lessee may furnish to the Minister any explanation

of the reason why he has not complied with the conditions

specified in the notice.

(4.) If the Minister is satisfied with the explanation, he may

waive the non-compliance and may direct that the conditions

be complied with within such time as he thinks fit.

(5.) If no explanation is furnished, or if the Minister is not

satisfied with the explanation furnished, he may -

(a) give notice in writing to the lessee to comply with the

conditions within such time as he thinks fit; or

(b) if he considers the non-compliance to have been wilful

and that the lessee has made no real effort to comply

with the conditions of his lease, by notice in the Gazette

determine the lease.

(6.) If a lessee fails to comply with any direction under

subsection

(4.) or with any notice under paragraph (a) of

subsection

(5.) of this section, the Minister may, by notice in the

Gazette, determine the lease.

(7.) Any notification in the Gazette in pursuance of sub-section

(5.) or (6.) of this section shall be conclusive evidence of the

lease having been determined.

(8.) Notice of the determination of the lease shall also be

given, in writing signed by the Minister, to the persons referred

to in sub-section (1.) of this section in the manner specified

in sub-section (2.) thereof." (at p544)

[64]

39. The position then was clear: unless the plaintiff, not later than 15th April, should commence to erect the building the lease would be determined. On 12th April Mr. McDonald got in touch with one Herbert John Clugston, manager of the Astor-Rex Hotel Motel in Canberra which is a subsidiary company of Astor Hotel Motels. Mr. Clugston gave evidence before me. He said that, following instructions from Mr. McDonald, on 13th April, he got in touch with a firm of contractors which had tractors and bulldozers. As a result a man came to the subject land with a bulldozer on the afternoon of Wednesday 14th April. There under instructions from Mr. Clugston he pushed over trees that were growing there. The land was at the time a kind of park and ornamental trees had been planted there in lines. They had grown to some twenty to twenty-five feet in height. According to Mr. Clugston's evidence the work went on for three hours or more on the Wednesday afternoon. Next day the same man came again and continued the work. Friday 16th April was Good Friday. The work of uprooting the trees was suspended until the following Tuesday. It was then resumed. All the trees, except one line which was left standing, were down by 23rd April. Later, by the work of another contractor also engaged by Mr. Clugston, parts of them were burnt and the rest carted away. A burning permit was obtained on 23rd April, but because of wet weather no burning off was done until May. The builder Mainline Constructions Ltd. was not concerned in any of this work. It made its first appearance on the site in May when some sheds, with its name on them, were put on the land, and thereafter some excavation was done, said to have been for or in connexion with the making of foundations. The builder had in fact written to Mr. McDonald in February requesting permission "to take possession of the site and commence work on or before 15th April 1965". Apparently it was not then given this permission ; but a letter from Mr. McDonald dated 23rd April says : "On behalf of Owendale Pty. Ltd. I confirm your authority to proceed with the necessary foundation work on the company site in Canberra to a preliminary extent of 200 pounds. Such work to commence forthwith." The figure 200 pounds was acknowledged later to be a typist's error for 2,000 pounds. (at p554)

[74]

47. The plaintiff's first argument is that the Commonwealth waived its right to forfeit the lease for a breach of the covenant in cl. 1 (c). A waiver in this sense is more properly understood as an election. The essence of the doctrine, in cases between landlord and tenant, is that where a lease contains provisions for forfeiture and a right of re-entry upon breach of a covenant by the lessee, then, upon a breach occurring, the lessor can either take advantage of his right of forfeiture and re-entry or waive this and treat the lease as still subsisting. If, with knowledge of a breach, giving him a right of re-entry, he does an act inconsistent with his avoiding the lease, he is deemed to have elected not to avoid it. Anything which a landlord does or says which is an unequivocal recognition of the continued existence of the lease when he was aware of facts which would have given him a right of re-entry will amount to a waiver of that right. One act which, by the common law, is always regarded as unequivocal, and therefore necessarily a waiver of a right of re-entry on account of a breach of covenant by the lessee, is the lessor's acceptance, with knowledge of the fact of the breach, of rent accrued due after the breach. Apart from any special term in the lease - a question to which I shall come later - or any statutory modification of the common law, acceptance of rent due in respect of a current period is an obvious recognition of a tenancy then subsisting. These general principles are so well established that I need cite only the classic statements in Croft v. Lumley [1858] EngR 626; (1858) 6 HLC 672 (10 ER 1459) ; Davenport v. The Queen (1877) 3 App Cas 115 ; and the passage in the judgment of Parker J. in Matthews v. Smallwood (1910) 1 Ch 777, at p 786 , the terms of which, the Privy Council said, have often since been approved : Fuller's Theatre and Vaudeville Co. Ltd. v. Rofe (1923) AC 435, at p 443 . I would also respectfully acknowledge my indebtedness on this aspect to the chapter on election, especially pp. 298-302, in the recently published second edition of Spencer Bower on Estoppel by Representation, the author being Sir Alexander Turner of the Court of Appeal of New Zealand. (at p557)

[77]

50. The argument for the plaintiff under the head of waiver involved the following propositions. First, the breach of cl. 1 (c) of the lease was not a continuing breach. It had occurred once and for all as soon as 13th June 1963 had passed without the building having been commenced. That proposition is indisputable : see Larking v. Great Western (Nepean) Gravel Ltd. [1940] HCA 37; (1940) 64 CLR 221, at pp 237, 238 . If therefore the Commonwealth waived its right to determine the lease because of that breach, the lease continued. That too is indisputable. Any extension of the period of one year stipulated in cl. 1 (c) must, for the purpose of the clause, be approved in writing by the Commonwealth or the Minister before the year expired. That proposition is, I think, disputable, although I appreciate that there are grounds on which it may be supported. However, I think I do not have to examine its correctness, as neither side asserted that any extension of time had at any stage been approved pursuant to the clause. In this attitude I think the parties were correct. It is true that the plaintiff's letter of 12th September 1963 might be regarded as an application for an extension of time ; but if so, the extention sought was refused by the Department's reply of 22nd October 1963 : the plaintiff's letter of 22nd July 1964 was expressed to be an application for an extension ; but it was decisively refused. It is clear from the correspondence that the Commonwealth never purported to extend the time under the lease, or to waive or abandon unconditionally the right to take proceedings to determine the lease because of the lesse's failure to comply with its covenant. Concession of further times to the lessee in parts of the correspondence was, it seems, assumed to be pursuant to s. 22 (5) of the Ordinance. Whether that was a correct view or not, these allowances of further times were far from an unconditional waiver by the lessor of its right to determine the lease. As I read the correspondence, the Commonwealth was asserting throughout that the lessee's initial failure to commence building within the time prescribed by the lease had made the lease liable to be determined, but that the Commonwealth would not enforce this if the building were commenced within the further times successively allowed. The correspondence does not anywhere shew an unequivocal election not to determine the lease. It shews only that the Commonwealth was holding its hand, keeping the question open and giving the plaintiff opportunities to prevent its lease being determined. But, unless the bulldozing of the trees suffices - a matter to which I shall come later - it did not avail itself of these opportunities. (at p559)

[78]

51. But, says the plaintiff, however that may be, the Commonwealth demanded and accepted rent after 13th June 1963 (the end of the period in cl. 1 (c)) and after 13th June 1964 (the end of the period in cl. 1 (d)); and that conclusively establishes an election by the Commonwealth amounting to a complete waiver of its right to determine the lease. But I do not think the question is so easily disposed of. True it is, as I have said above, that acceptance of rent accrued in respect of a period after a right of re-entry has arisen does, in a lease governed in its operation solely by commonlaw rules, amount to a waiver of the forfeiture and preclude re-entry. But here the lease is not governed solely by common-law rules. Notwithstanding the terms of the lease the lessor, the Commonwealth, can only determine it after notice in accordance with s. 22 of the Ordinance. And until the lease is actually determined the lessee's possession under it continues. While a lessee is in lawful possession of land under a lease, his liability to pay the rent reserved continues. A lessor's acceptance of rent for that period cannot, in my view, be said to be a waiver of his right to determine the lease. This view accords with the decisions of the Court of Appeal in Elliott v. Boynton (1924) 1 Ch 236 and Oak Property Company Ltd. v. Chapman (1947) 1 KB 886, at pp 898, 899 . It seems to me therefore that in the present case the acceptance by the Commonwealth of rent in respect of the period up to 7th May 1965, being the date of the notice of determination of the lease, could not preclude its determination as from that date. However a question arises at this point, because rent under the lease was payable quarterly in advance; and rent was in fact paid in respect of the period up to 30th June 1965. But I do not regard this as critical in this case, as I do not think that, in the circumstances, the acceptance of rent in advance prevented the Commonwealth from taking steps to determine the lease at any time after 15th April. It may well be that, the Commonwealth asserting that the lease came to an end on 7th May, it should refund whatever amount it received as rent attributable to the period between 7th May and 30th June. That, however, is not a question I have to decide. Furthermore the lease provides, in cl. 3 (b), that the acceptance of rent shall not be an impediment to the Commonwealth or the Minister determining the lease. It was argued for the plaintiff that this provision was nugatory, because according to the rule of the common law a lessor who accepted rent with knowledge could not be heard to say that he did not thereby acknowledge the existence of a tenancy. But I do not think that the existence of this rule prevents parties modifying it in advance by contract. There are no doubt good practical reasons for its modification in leases from the Crown in the Australian Capital Territory; and the terms of cl. 3 (b) of this lease are a standard provision in such leases, the form being prescribed by regulations under the Ordinance. I was pressed with the decision of the Privy Council in R. v. Paulson (1921) 1 AC 271 . There was in that case a provision in a lease that no waiver of any breach should take effect or be binding unless it was expressed in writing. Their Lordships reiterated the general principle that acceptance of rent amounts to a waiver of a right of forfeiture, and held the requirement that to be effective a waiver must be in writing did not "render inapplicable the principle established". The precise ground of the decision is however obscured, and its seemingly absolute character diminished, by the statement that "it may well be that many cases may occur to which the clause as to waiver would be applicable; their Lordships think that it is not applicable in the present case under all its circumstances". That case has, I think, no direct bearing on this case. There was there an act, receipt of rent, which, as a matter of law, constituted a waiver. Its effect as such was not destroyed by the provision that to be effective a waiver must be expressed in writing, a requirement which it seems probable was meant to refer to waivers by words not by conduct. Here, on the other hand, the question is whether, as a matter of law, a receipt of rent must necessarily constitute a waiver by the lessor of his right to terminate the lease when the parties have agreed that it should not. I do not read cl. 3 (b) as meaning that acceptance of rent can never provide evidence of waiver in fact of a right to determine a lease on account of an antecedent breach of a lessee's covenant. I read it as meaning that the mere acceptance of rent does not, as a matter of law, constitute an affirmance of the tenancy and an indisputable waiver of the contractual right to determine it because of the breach. (at p560)

[91]

62. The next argument was that a notice under s. 22 (1) must "set out fully the conditions for failure to comply with which the lease may be determined". Now the notice in this case, dated 14th August 1964, referred to a failure by the lessee to comply with the covenant in cl. 1 (c) "in that the lessee did not, within the period specified in that sub-clause, commence to erect a building . . .". This it is said did not fully set out what was required because it did not state what the period specified in the sub-clause was. Had the notice been addressed to anyone except the plaintiff it might perhaps be said that it was not sufficiently informative. But having regard to the contemporaneous correspondence it is of course obvious that it fully conveyed to the plaintiff what condition it was alleged was not complied with. The question however is whether although the plaintiff well knew what it meant, and acknowledged that it did, it can say that it was defective as not in accordance with the statutory requirement. In my view this notice conforms with the statute. It may well be that the requirement is only that the notice should list, with sufficient particularity for identification, every condition which it is said has been broken, not state each of them verbatim and in full. But if it be necessary to do more, then I think sufficient was done in this case. Doubtless in the case of a continuing breach more particularity may sometimes be required than in the case of a "once for all" breach, for a lessee who can still set his error right may wish to know what he should do in an effort to save the lease. And in every case enough must be told to the lessee to enable him, if he wishes, "to furnish to the Minister any explanation of the reason why he has not complied with the conditions specified in the notice" s. 22 (3). In the present case the plaintiff was fully informed by the notice it got; and I do not think that it has now made out a case for an injunction because in August 1964 the notice it got, although quite clear to it, is said to have been elliptical because referential. I may add that I do not read s. 22 (1) as requiring a notice, e.g. to a caveator or mortgagor, to be necessarily a duplicate of the notice given to a lessee, and I do not think much is gained by saying that this notice fully informative to the plaintiff might not have sufficed for somebody else. (at p565)

[98]

69. R. M. Hope Q.C. (with him R. J. Bainton), for the appellant. Section 22 (5) (a) of the City Area Leases Ordinance 1936-1957 does not apply to a past or non-continuing breach. If it does apply, the Minister on receipt of an explanation may consider whether the lessee has made a real effort to comply with the conditions. If he extends time under s. 22 (5) (a), he thereby waives the duty to comply with the time fixed by the lease. There can be but one notice under s. 22 (5) (a) in respect of a breach. The subsequent notices given by the Commonwealth were not authorized by the Act but acknowledged the continued existence of the lease: thus there was an election not to determine it for the particular breach. The Commonwealth waived the lessee's non-compliance with cl. 1 (c) before 14th August 1964 and therefore did not have the right to determine the lease on that day. The waiver was produced by a number of factors. First, the Commonwealth continued to accept rent. It was entitled to accept rent only for a reasonable time after the breach before giving notice. Secondly, by its conduct in repeatedly inviting the lessee to apply for extensions of time the Commonwealth indicated an intention not to determine it. It was a condition precedent to the giving of notice that the right to determine the lease should have arisen. Where premises are prescribed under the Landlord and Tenant (Amendment) Act the acceptance of rent in the knowledge that the tenancy can be terminated only by the statutory procedure is not inconsistent with having elected to not determine it: Campbell v. Payne and Fitzgerald (1953) 53 SR (NSW) 537, at pp 541,548 ; Gordon v. Duggan (1959) 76 WN (NSW) 271 ; Oak Property Co. Ltd. v. Chapman (1947) 1 KB 886, at pp 898-900 ; Carter v. Green (1950) 2 KB 76, at pp 82-85 ; Penton v. Barnett (1898) 1 QB 276 . The Commonwealth can require the building to be erected within a reasonable time. Only the period of twelve months has been waived: R. v. Paulson (1921) 1 AC 271 . Clause 3 (b) of the lease prevents conduct which otherwise might amount to waiver from being so. The actual intention of the Commonwealth - if it had one - is irrelevant. The notice under s. 22 (1) did not set out the particulars of the breaches relied upon: thus it did not "set out fully the condition" breached. The function of signing a notice under s. 22 (2) cannot be delegated: the phrase "signed by the Minister" is descriptive of the notice. Cf. notices under s. 22 (5). The power to delegate under s. 6 is not exercised by a purported delegation to the holder of an office. Noble and Bear v. The Commonwealth (1943) 17 ALJ 184 was wrongly decided. The clearing of the land was part of the building operations, non obstante that the clearance contractor was not the builder or under contract to the builder. (at p567)

[101]

72. It is sufficient if he is directed to documents to which he has access. Alternatively, the statute requires all the conditions to which the notice relates to be referred to. The Minister may delegate power to sign a notice to the holder of an office. It is a normal form of delegation and s. 6 discloses no contrary intention. Moreover, the power was delegated to a person identified by the duties he performs. Signing a notice is a "function" of the Minister for the purpose of s. 6. The lessee failed to commence to erect a building before 15th April 1965. "Erect" means direct upwards or lift up: Shorter Oxford Dictionary. Something must be done in relation to the structure of what is to be the building. Preparatory work on the site is not sufficient to answer the description of work to be commenced. It is not necessary to look at the contractual arrangements, but if it were it could not be said that the appellant commenced to erect a building at a cost of not less than 250,000 pounds. There was no waiver of the Commonwealth's rights. At common law the rules as to waiver do not require a lessor to elect immediately upon occurrence of a breach of covenant giving rise to a right of re-entry or upon his obtaining knowledge of the occurrence: Clough v. London and North Western Railway Co. (1871) LR 7 Ex 26, at pp 34, 35 ; Scarf v. Jardine (1882) 7 App Cas 345 ; Marsden v. Sambell (1880) 43 LT 120 ; Croft v. Lumley [1858] EngR 626; (1858) 6 HLC 672 (10 ER 1459) . The relationship of landlord and tenant continues until re-entry takes place: Elliott v. Boynton (5). There is no affirmation if the landlord merely states that he will elect to affirm in the future if the lessee should do something. But the acceptance of rent at common law constitutes an unequivocal election. Clause 3 (b) alters the common law position of the parties. It is valid. The parties to a lease may by contract alter the common-law rights of the parties relating to re-entry. R. v. Paulson (1921) 1 AC 271 does not deny the effect of a term of this kind upon acts which in law would amount to waiver. (He also referred to Craine v. Colonial Mutual Fire Insurance Co. Ltd. [1920] HCA 64; (1920) 28 CLR 305, at p 325 ; Suisse Atlantique Societe d'Armement Maritime S.A. v. N. V. Rotterdamsche Kolen Centrale (1967) AC 361 .) The effect of the correspondence between the Commonwealth and the lessee is that the Commonwealth asserted that cl. 1 (c) had been breached which had rendered the lease liable to determination; that it was giving consideration to determining the lease but that it would not do so if satisfactory assurances were given. An alternative view is that the Commonwealth informed the lessee of its rights but stated that it would not determine the lease if satisfactory assurances were given. The lessor throughout the period of correspondence sought information that was not given. No act after the s. 22 procedure was set in motion on 14th August 1964 constituted an election to affirm the existence of the lease. The lease was maintained by s. 22 until the final publication in the Gazette so that the acceptance of rent could not amount to waiver. (He also referred to Jardine v. A. G. (Newfoundland) (1932) AC 275 .) (at p569)

[153]

12. The view I take of the correspondence, the substance of which I have set forth herein, is that it began with two letters, those dated 13th July and 13th August 1963 respectively, written by the Department of the Interior with full knowledge that Owendale had not complied with the covenant in cl. 1 (c), and the purpose of the letters was to seek to rectify the lease by approving of an extension of time in accordance with the provision of the subclause enabling a contractual extension of time to be made. These letters involved an affirmance of the lease ; each letter clearly is an admission that cl. 1 (c) continued in force and that the building covenants remained in force. The prevailing drift of the Department's letters which followed Owendale's reply to the letters (suggesting a date of which the Commonwealth might approve) down to 14th August 1964 was an insistence by the Department on the covenants. The course pursued by the Department seems to me to be consistent only with an acknowledgment of the continuance of the tenancy. I think that the letters initiating the correspondence show that the Commonwealth was ready to waive its right of forfeiture for the breach of the covenant. It seems to me, in view of the assertions of the Commonwealth's rights and Owendale's obligations under the provisions of the lease found in the Department's letters, that Owendale's claim that the Commonwealth waived its right of forfeiture is substantial. In my opinion the claim should be upheld. If this is correct, the Commonwealth on 14th August 1964 when at last it decided to take advantage of the breach of the covenant, was not in a position to do so ; and, the notice under s. 22 (1) of the City Area Leases Ordinance was not effective. Furthermore, it was essential to the validity of each notice which the Minister gave to Owendale to comply with the covenant in question (whether the notice was an attempt to exercise the power under sub-ss. (4) or (5) (a)) that the notice of 14th August 1964, purporting to be under sub-s. (1), was effectual for the purposes of s. 22. Accordingly, even if it be assumed that Owendale did not comply with the requirement of the notice which the Minister gave on 2nd March 1965 to comply with the covenant not later than 15th April 1965, the lease could not be validly determined for failure to comply with such requirement. (at p579)

[162]

3. Since the lease was granted expressly under the Ordinance the provision in cl. 3 (a) (ii) as to determination of the lease if a building should not be commenced within the period specified in cl. 1 (c) must be read, I think, together with s. 22 of the Ordinance, with the result that no right of forfeiture arose upon the expiration of that period, or could arise otherwise than upon one of the events provided for in sub-s. (5) (b) and sub-s. (6). The provision here relied upon is sub-s. (6) and the event is the appellant's failure to comply with a notice under sub-s. (5) (a). Until that failure occurred there was no right of forfeiture to be waived. The event in fact occurred three times, for three notices under sub-s. (5) (a) were given, the second and third being by way of extensions of time pursuant to requests made by the appellant. If we were considering a lease to which s. 22 had no application the correct view might well be that each of the three notices recognized the continuance of the lease after the lessee's failure to comply with cl. 1 (c) of the lease and therefore was inconsistent with an election to make that failure a cause of forfeiture. But the whole tenor of s. 22 is to put aside the notions which govern the forfeiture of leases at common law, and to provide a code the central purpose of which is to enable a lessee who has failed to fulfil a condition of his lease to be given all the opportunity to make good his default that the Minister may think proper after considering any explanation that is offered and the circumstances of the failure. The context not only contains nothing to exclude, but actually invites the application of s. 6 of the Interpretation Ordinance 1937-1959 and s. 33 (1) of the Acts Interpretation Act 1901-1964 (Cth) by which a power is made prima facie exercisable from time to time as occasion may require. I see no reason to doubt that when a lessee has failed to comply with a notice under sub-s. (5) (a) the Minister is authorized to give under the same provision another notice fixing a later time than that formerly fixed, so that the power under sub-s. (6) to determine the lease for non-compliance with a notice under sub-s. (5) (a) having arisen once in respect of the first notice may arise a second time in respect of the second notice, and so on in respect of every notice which the Minister may see fit to give. If this be so it is in accordance with the purpose disclosed by the section as a whole that the Minister engages, if he does engage, in negotiations or discussions or correspondence with the lessee after a notice under sub-s. (5) (a) has expired ; and even an acceptance of rent in respect of a period subsequent to that time, though no doubt constituting a binding election not to determine the lease for non-compliance with that notice, leaves unaffected the Minister's right to give another notice and to determine the lease in the event of its not being complied with. (at p583)

[171]

"22. (1.) Where by virtue of any provision contained in

any lease the Commonwealth may determine the lease, the

lease shall not be determined until fourteen days' notice that

the Commonwealth intends, in pursuance of the powers

contained

in the lease, to determine the lease and setting out

fully the conditions for failure to comply with which the lease

may be determined has been given to the following persons: -

(a) The lessee;

(b) Where the land included in the lease is subject to a

mortgage or other encumbrance registered under the

Real Property Ordinance - the mortgagee or

encumbrancee;

(c) Where any person has any interest, registered under that

Ordinance, in the lease or the land - that person; and

(d) Where a caveat lodged under that Ordinance is in force

in respect of the land - the caveator.

(2.) Any notice by the last preceding sub-section required

to be given to any person shall be in writing signed by the

Minister and shall be deemed to have been duly given if -

(a) in the case of a lessee - it is delivered to him or sent by

registered post addressed to the lessee at his last known

place of abode or his address specified in the lease, or if

it is posted in a conspicuous place on the land to which

it relates; and

(b) in the case of any person referred to in paragraphs (b),

(c) or (d) of that sub-section - it is delivered to that

person or sent by registered post addressed to him at

his address as entered in the Register Book kept under

the Real Property Ordinance or appointed in the

caveat as the place at which notices relating to the

caveat may be served, as the case may be.

(3.) The lessee may furnish to the Minister any explanation

of the reason why he has not complied with the conditions

specified in the notice.

(4.) If the Minister is satisfied with the explanation, he may

waive the non-compliance and may direct that the conditions

be complied with within such time as he thinks fit.

(5.) If no explanation is furnished, or if the Minister is not

satisfied with the explanation furnished, he may -

(a) give notice in writing to the lessee to comply with the

conditions within such time as he thinks fit; or

(b) if he considers the non-compliance to have been wilful

and that the lessee has made no real effort to comply

with the conditions of his lease, by notice in the Gazette

determine the lease.

(6.) If a lessee fails to comply with any direction under

sub-section (4.) or with any notice under paragraph (a) of

sub-section (5.) of this section, the Minister may, by notice in

the Gazette, determine the lease.

(7.) Any notification in the Gazette in pursuance of

sub-section

(5.) or (6.) of this section shall be conclusive evidence

of the lease having been determined.

(8.) Notice of the determination of the lease shall also be

given, in writing signed by the Minister, to the persons referred

to in sub-section (1.) of this section in the manner specified

in sub-section (2.) thereof." (at p586)

[179]

5. Cases were cited to us - and, indeed, there is a multitude of such cases - to support the proposition that acceptance by a lessor of rent due after a right of re-entry has arisen for breach of a lessee's covenant conclusively establishes that the lessor has elected to keep the lease on foot and has waived the breach and abandoned his right to re-enter. And the same result, it is said, will follow even if the lessor receives the rent conditionally and without prejudice to his right to insist upon a prior forfeiture (Davenport v. The Queen (1877) 3 App Cas 115 ). Croft v. Lumley [1858] EngR 626; (1858) 6 HLC 672 (10 ER 1459) , is perhaps the most frequently cited case on the subject and it is interesting to see how the subject was dealt with when the questions propounded in the case were submitted for the opinion of the nine judges who attended. All but one of the judges were of the opinion that the lessor had affirmed the continuing existence of the lease when he accepted from the lessee moneys tendered as rent which had accrued due after the forfeiture but accepted by the lessor, not as rent, but as compensation for the lessee's use and occupation. The opinion of Lord Bramwell reveals, I think, the ratio of this decision. He said: "Barnes placed the money on the table repeating he paid it as rent; Martelli took it up repeating he took it as compensation for the occupation of the premises merely; did he thereby elect to treat the lease as existing, or preclude himself from treating it as void? Now, this question supposes there was a breach of covenant giving a right of re-entry; and it supposes, therefore, that if the lessor elected not to treat the lease as void, rent was due to him; if he did elect to treat it as void, that a compensation was due to him and not rent" (1858) 6 HLC, at p 706 (10 ER, at p 1472) . Baron Martin said much the same thing: "Mr. Martelli appears to me to have laboured under a misapprehension both of fact and of law; he seems to have thought that upon a condition being broken, and the tenant continuing in possession, this state of things arose, that the landlord had a right of re-entry from the time of the condition broken, and that the tenant continuing in possession was liable to pay a compensation as for use and occupation, the measure of the amount being the rate of rent reserved by the lease. But I apprehend this is not so. Upon the breach of condition the landlord would acquire a right of re-entry. If he brought an ejectment, his title would accrue at and from the time of the breach, and he would be entitled to maintain, not an action for use and occupation, but one for mesne profits for the time intervening between the accruing of his title and his obtaining possession. So also, if he entered without an ejectment, I apprehend his claim for compensation in respect of the wrongful occupation of his land from the time of the breach until the actual entry would be in the nature of a demand for a mesne profit, and not for use or occupation, which generally speaking, is founded on a contract, express or implied; but, however this may be, I think it is clear that the reserved rent is not the measure of compensation" (1858) 6 HLC, at p 721 (10 ER, at p 1478) . The lease contained a proviso for re-entry for breach of certain covenants which seems to have been in what, at that time, was the usual form. If the propositions enunciated in these passages be universally correct the reason of the decision becomes clear. But it had earlier been said that a lessor might after re-entry for breach of a covenant sue for rent accrued due up to the date of the re-entry (Hartshorne v. Watson [1838] EngR 349; (1838) 4 Bing (NC) 178 (132 er 756) and Selby v. Browne (1845) 7 QB 620 (115 ER 623) ) and when the point arose directly for decision these views were adopted by the Court of Appeal in Elliott v. Boynton (1924) 1 Ch 236 , in confirmation of the judgment at first instance of Sargant J. (1923) 1 Ch 422 . (at p588)

[183]

9. In these circumstances I am of the opinion that the Commonwealth did not lose its right to determine the lease merely by reason of its acceptance of rent which accrued due after the admitted breach of cl. 1 (c). But the question remains whether such rent was paid and accepted in such circumstances as to enable it to be said that the Commonwealth unequivocally waived its right to determine the lease, or, whether any other event intervened which had this result. These related inquiries were, in effect, answered in the negative by Windeyer J. who examined the correspondence which passed between the parties, or representatives of the parties, between 12th June 1963 and 29th October 1964 when the notice under s. 22 (1) of the Ordinance was given. The correspondence commences with a letter, dated 12th June 1963, from the managing director of Astor Hotel Motels Limited (of which the appellant was a wholly-owned subsidiary) informing the Secretary of the Lands and Survey Branch of the Department of the Interior that detailed planning for the construction of a new hotel on the subject land had been proceeding and had reached a "relatively advanced design stage" and that "subject to clarification of some planning points" the architects were "prepared to bring the planning to the advanced stage necessary to prepare contract documents and call tenders". The letter then proceeded to advise that the company would "proceed to call tenders immediately we are in possession of final working drawings relating to the structural and to mechanical and electrical services". A reply of 1st July 1963 invited attention to the lessee's convenant in cl. 1 (c) of the lease "to commence the erection of an approved building within one year from the commencement of the lease or within such further time as may be approved in writing by the Commonwealth" and pointed out that the period of one year had then expired, that "it is necessary that the lessee Company seek an extension of time to commence building" and that such application should include "the expected date of commencement and length of extension sought". No reply had been received to this letter by 13th August 1963 when the Assistant Secretary again wrote intimating that early advice as to the expected date of commencement and the length of extension required would be appreciated. Nothing more happened until 12th September 1963 when the managing director of Astor Hotel Motels Limited wrote giving a "time schedule" which showed that a period of eleven months would elapse before the work of erection could be commenced and it was suggested that consideration be given to the extension of time for the commencement of the work until 1st August 1964. On 22nd October the Assistant Secretary wrote expressing concern at "the request for such a long extension particularly having in mind that the lease commenced on 13th June 1962 and in fact was first offered to your Company in September 1960". It was pointed out that the Department took a serious view of the covenants contained in the lease and in particular the time periods for the commencement and completion of the building. "The lessee Company", it was said, "is in fact in breach of the lease covenant requiring commencement of a building within one year from the commencement of the term of the lease, and consideration is being given to taking action to determine the lease as provided for under cl. 3 (a) (ii) of the lease agreement." No reply had been received to this letter by 27th November 1963 when the Assistant Secretary wrote again drawing attention to his previous letter and adding a reminder that the lessee company was in fact in breach of its covenant and that his previous letter had "asked for urgent advice as to why action should not proceed towards determining the lease, as provided for under cl. 3 (a) (ii) of the lease agreement". This letter elicited a reply on 9th December 1963 which spoke generally of the difficulties in planning a building of the character which the lessee desired to erect and asking that favourable consideration should be given to the request for an extension, and intimating that it was the company's expectation that tenders could be called by March next. Nothing more occurred until 19th March 1964 when the Assistant Secretary wrote pointing out that the lessee had expected that tenders could be called by this month but that so far as the Department was aware this had not been done nor had plans been lodged for approval. The letter intimated that unless satisfactory assurances were given within seven days that the building would be commenced in the near future the Department would have no alternative but to initiate formal action to determine the lease. A letter dated 24th March 1964 was written in reply to this letter stating that the company had been considerably embarrassed by the delay in obtaining final plans and working drawings but that their architects would be despatching an application for development approval during the week to the National Capital Development Commission. Following this letter there was an interview between the Assistant Secretary and the company's architects and on 13th April the Assistant Secretary wrote a letter pointing out that the company's architects had advised that "it will be quite some time yet before even plans will have been completed" and intimating that "the Department is most concerned that there should be such further long delay in reaching the stage when building construction will commence". This letter again drew attention to the lessee's breach of covenant and intimated that "the advices furnished by the Company and its architects do not constitute the 'satisfactory assurances' sought in my letter of 19th March 1964, and unless the Company does provide within the next seven days firm assurances, acceptable to the Commonwealth, as to when the building will be commenced, determination action will be taken pursuant to the provisions of the City Area Leases Ordinance". A letter from the managing director dated 21st April 1964 indicated that his company was anxious to proceed with the matter and he suggested a personal interview in Canberra. Subsequently on 3rd July 1964 the Assistant Secretary referred to the interview which had then taken place "when you undertook to furnish early advice of your Company's intentions regarding commencement of building". The letter added that no further advice had since been received, nor had any application been made with supporting reasons for an extension of time within which to commence building, and intimated that unless satisfactory assurances were forthcoming in the immediate future regarding the commencement of building the Department would have no alternative but to take action pursuant to the City Area Leases Ordinance to determine the lease. On 22nd July 1964 the managing director by letter made an application on behalf of the lessee for an extension of time within which to commence construction of the building until 31st January 1965. Reference was made to a change of architects and it was said that it would be quite reasonable to believe that the lessee would be in a position to commence construction with the successful tenderer immediately after the builder's holiday in January. The receipt of this letter was acknowledged by the Assistant Secretary's letter of 30th July 1964 and on 14th August the Assistant Secretary wrote considering that a further extension of time to commence building such as had been sought was not warranted and that in view of the failure of the lessee company to comply with the terms of the lease he was forwarding a copy of a notice of intention to determine the lease under s.22 (1) of the City Area Leases Ordinance. Such a notice was despatched on the same day. This notice was in the following form :

[185]

Following this the company on 31st August 1964 purported to furnish an explanation of the reason why the covenant had not been complied with. This explanation was given pursuant to sub-s. (3) of s. 22 of the Ordinance. It is unnecessary to traverse this explanation because on 27th October the Minister wrote indicating, plainly enough, that he was not satisfied with the explanation but that nevertheless he was prepared to afford the lessee a final opportunity to comply with the terms of the lease and added that "in the circumstances I have decided to grant an extension of time to 31st January 1965, to enable commencement of the erection of an approved building, as required under the lease conditions" and added that "a formal notice to this effect will be served upon the lessee Company by my Department". "My Department, therefore", it was said, "will withhold the action of determination, but in advising you of this I must emphasize that failure to comply with the building requirements of the lease within the time as now extended will result in the lease being determined." As indicated in the letter, a notice pursuant to sub-s. (5) of s. 22 was duly served on 29th October 1964. This notice purported to require the lessee to comply not later than 31st January 1965 with the covenant contained in sub-cl. (c) of cl. 1 of the lease and indicating that if the lessee failed to comply with the requirement contained in the notice the Miniter might by notice in the Gazette determine the lease. I should point out that the time allowed for commencement of the erection of an appropriate building was not actually an extension of time granted under the covenant ; the intimation conveyed by the Minister's letter was, in substance, no more than an intimation that, pursuant to s. 22 (5) of the Ordinance, he would, by notice, specify a time within which the erection of the building should be commenced and that if the lessee failed to commence the erection within this time the lease might be determined pursuant to sub-s. (6). After this notice two further notices were given in the same terms. The first of these two notices was given shortly after 11th February 1965 requiring commencement of the erection of the building by 28th February 1965 and the second was given on 2nd March 1965 requiring commencement of the erection of the building not later than 15th April 1965. Subsequently the Minister, on 7th May 1965, purported to determine the lease pursuant to sub-s. (6) of s. 22 of the Ordinance. (at p594)

[186]

10. I do not find in this history of events any evidence which could lead to the conclusion that the Commonwealth abandoned, or waived, its right to determine the lease pursuant to cl. 3 (a) (ii). It shows plainly that the Commonwealth asserted the existence of a right to determine the lease, that, although such a right existed, it was prepared to stay its hand if firm assurances were forthcoming that the erection of an appropriate building would be commenced within what, in the circumstances of the case, it thought to be a reasonable time, that no such assurances were forthcoming, and that there was much delay in answering letters written on behalf of the Commonwealth. I point out that the Commonwealth's letter of 1st July 1963 remained unanswered until 12th September 1963 and that its letter of 22nd October remained unanswered until 9th December 1963 when, in response to that letter and following the reminder of 27th November 1963, which intimated that unless satisfactory assurances were given within seven days that the building would be commenced in the near future, the company deigned to reply. Following the reply the Commonwealth allowed the matter to stand over until March 1964 when it wrote the letter of 19th March 1964. It seems to me that the delay in the exercise by the Commonwealth of its right to determine the lease was almost wholly caused by the failure of the lessee to answer with any reasonable degree of promptitude, communications addressed to it for the purpose of ascertaining when it would be in a position to proceed with the erection of an appropriate building and by its failure, and apparent reluctance, to give any firm assurances in this regard and that it was well aware that the Commonwealth's forbearance during the period in question was not indicative of any abandonment of its right to determine the lease for the existing breach; on the contrary, it was about as plain as it could be that it was merely holding its hand in order to afford an opportunity for the lessee to give some satisfactory assurances. All in all there were, in my opinion, no additional circumstances, that is to say in addition to the mere payment of rent, from which an abandonment of the Commonwealth's right of determination prior to the service of the notice under s. 22 (1) of the Ordinance could be inferred. (at p595)

[189]

13. The next submission is that there was a compliance with the requirement contained in the last of these notices, that is to say, that the lessee commenced to erect a building on the land in accordance with plans and specifications prepared by the lessee and previously submitted to and approved in writing by the Commonwealth or the Minister on behalf of the Commonwealth by 15th April 1965. Perhaps, however, the relevant inquiry, if it makes any difference, is whether in the language of cl. 3 (a) (ii) of the lease, "a building in accordance with sub-clause (c) of clause 1" of the lease was "commenced within" the specified period. It will be observed that the expression "commence to erect", is the phrase used in cl. 1 (c) of the lease whereas in cl. 3 (a) (ii), which expresses the relevant condition for forfeiture, the phrase is "if . . . a building . . . is not commenced". During the hearing of the appeal the proposition that the Commonwealth became entitled to determine the lease was supported by the further proposition that it could not be said that the lessee had commenced to erect a building until after the site had been cleared, the necessary excavations made for sub-surface building and excavations had been made for foundations and the actual work of construction of the structure begun. But all such work would be provided for in a contract for the erection of a building and it seems to me that the disparity between the language of cl. 1 (c) and cl. 3 (a) (ii) provides some indication that it was not intended that any narrow significance should be given to the word "erect" in the former clause. Again, since by cl. 1 (d) the lessee covenanted that it would within two years from the commencement of the term "complete the erection" of the building it was not of much consequence to the Commonwealth whether the expression "commence to erect" in the earlier clause was understood to mean the commencement of the actual construction of the structure or the commencement of the work for the erection of the structure. (at p596)

[191]

15. In the meantime, on 12th February 1965, that is to say, two days after approval was given to the plans for the proposed building, the Commonwealth notified the lessee that a second notice pursuant to s. 22 (5) of the Ordinance would be served and, accordingly, the second notice, bearing date 11th February, was subsequently served. In effect, it required the lessee to commence the erection of the building not later than 28th February 1965. At this stage it was clear beyond doubt to the Commonwealth that a considerable amount of excavation work was involved and that it would be quite impossible within the specified time to commence the work involved in the actual construction of the building. No doubt the Commonwealth took the view, as I do, that all that the relevant clause - and, of course, the direction contained in the notice - called for was the commencement of the work for the erection of the building and in my opinion the direction in the notice must, in the circumstances, be so understood. However, subsequently, a third notice in the same terms was served following representations by the lessee and 15th April 1965 was fixed as the deadline. But apparently the builders were unable to commence on 14th April 1965 as provided in their contract. It appears, however, from the evidence of Mr. Clugston, who was the manager of Astor-Rex Hotel Motel, which was operated by a subsidiary of Astor Hotel Motels Limited, received instructions from the managing director of the latter company on 12th April 1965 and that, in accordance with those instructions, he communicated with a Mr. Edminster, a representative of a local construction company. Following this communication this company, on 14th April 1965, commenced with the aid of heavy equipment to prepare the site by levelling trees. This work proceeded all day and was continued on the following day. The 16th April 1965 was Good Friday and on the following Tuesday work was resumed and it continued until the 23rd. It seems that immediately after the completion of this work the builders entered upon the land and, having erected a number of sheds, commenced the work of excavation and this work proceeded continuously until 7th May 1965 when the notice of determination pursuant to s. 22 (6) of the Ordinance was given. The service of this notice provoked the lessee's letter of 7th May 1965, in which it was said:

[196]

OWEN J. The question for decision in this case is whether or not the Commonwealth is entitled to determine a ninety-nine year lease of land in the City of Canberra granted by it to the plaintiff on 13th June 1962. By the lease the plaintiff covenanted that it would "within one year from the commencement of the said term or within such further time as may be approved in writing by the Commonwealth or the Minister on behalf of the Commonwealth for that purpose commence to erect one building only . . . on the said land at a cost not less than the sum of two hundred and fifty thousand pounds and in accordance with plans and specifications prepared by the lessee and previously submitted to and approved in writing by the Commonwealth or the Minister on behalf of the Commonwealth". The plaintiff covenanted further that it would complete the erection of the building within two years from the commencement of the lease or within such further time as might be approved in writing by the Commonwealth or the Minister on its behalf. "The Minister" was defined to mean "the Minister of State of the Commonwealth for the time being administering the City Area Leases Ordinance 1936-1957" and to include "the authority or person for the time being authorized by the Minister or by law to exercise the powers and functions of the Minister" under that Ordinance. At all material times the Minister administering the Ordinance was the Minister for the Interior. The rent was payable in advance by quarterly payments on 1st July, 1st October, 1st January and 1st April in each year. Clause 3 (a) of the lease provided, inter alia, that the Commonwealth or the Minister on its behalf might determine the lease if the building required to be erected by the plaintiff should not be commenced or completed within the covenanted periods and, by cl. 3 (b) it was provided that the acceptance of rent by the Commonwealth or the Minister during or after any of the periods referred to in the building covenants should "not prevent or impede the exercise by the Commonwealth or the Minister on behalf of the Commonwealth of the powers conferred upon it" to determine the lease. (at p599)

[197]

2. The lease was expressed to have been granted pursuant to the City Area Leases Ordinance of the Australian Capital Territory and the Regulations made thereunder and it is convenient at this stage to refer to s. 22 of that Ordinance. It provides, by sub-s. (1), that "where by virtue of any provision contained in any lease the Commonwealth may determine the lease, the lease shall not be determined until fourteen days' notice that the Commonwealth intends, in pursuance of the powers contained in the lease, to determine the lease". By the same sub-section the notice must "set out fully the conditions for failure to comply with which the lease may be determined" and must be given to (a) the lessee; (b) the mortgagee or encumbrancee if the land included in the lease is subject to a mortgage or other encumbrance registered under the Real Property Ordinance; (c) any person who has any interest, registered under that Ordinance, in the lease or the land; and (d) any caveator who has lodged a caveat in respect of the land leased. By sub-s. (2) the notice is to be in writing "signed by the Minister". A lessee upon whom it is served may furnish to the Minister any explanation of the reason why he has not complied with the conditions specified in it (sub-s. (3)) and, if the Minister is satisfied with the explanation, "he may waive the non-compliance and may direct that the conditions be complied with within such time as he thinks fit" (sub-s. (4)). By sub-s. (5), if no explanation is furnished or if the Minister is not satisfied with the explanation that is furnished, he may (a) "give notice in writing to the lessee to comply with the conditions within such time as he thinks fit"; or (b) "if he considers the non-compliance to have been wilful and that the lessee has made no real effort to comply with the conditions of his lease, by notice in the Gazette determine the lease". If the lessee fails to comply with any direction given under sub-s. (4) or with any notice given under sub-s. (5), the Minister may, by notice in the Gazette, determine the lease (sub-s. (6)). (at p600)

[201]

6. Before considering the facts it is, I think, desirable to point out some of the difficulties which appear to me to arise in seeking to apply to a case such as the present the common-law rules relating to the waiver by a lessor of his right to forfeit a lease for breach of covenant by the lessee. Where there has been a breach giving rise to a right of re-entry, the lessor may exercise his right to re-enter and thus put an end to the lease. If, however, with knowledge of the breach he, by some unequivocal act, evidences an election not to terminate it but to treat it as still being on foot he cannot thereafter exercise his right of forfeiture. He cannot on the one hand insist that the lease is still subsisting and on the other insist that the relationship between himself and the lessee is not that of lessor and lessee. These are well-recognized principles of the common law. But where, as here, a statute or its equivalent steps in and provides that a lease shall not be determined unless and until a specified procedure is followed, difficulties arise in the application of those principles. It is plain that if the Commonwealth, as lessor, sets s. 22 of the Ordinance in motion, it cannot be said to have thereby waived its right to determine the lease, a right which can only be exercised by taking the steps for which the Ordinance provides. On the contrary, by taking those steps, the lessor is pursuing the only course which is open to it to bring the lease to an end and, since the lease continues to run until the last of those steps is taken, it is entitled and bound to treat the relationship of lessor and lessee as subsisting until that event occurs. No doubt it may refrain from invoking s. 22 or, having invoked it, it may, under s. 22 (4) or (5) give the lessee an opportunity of making good his default. But if the section is invoked it is not until the lessee has failed to comply with a direction given under s. 22 (4) or with a notice given under s. 22 (5) or has failed to furnish an explanation or furnished one with which the Minister is not satisfied that the right to determine the lease arises and, as it seems to me, it is at that stage that the Minister is required by the Ordinance to decide whether or not he will exercise that right. The argument before us proceeded, however, upon the basis that the Commonwealth might, at any time during the period from 13th June 1963 onwards, have waived its right to determine the lease and I propose therefor to examine the communications that passed between the Department of the Interior and the plaintiff during that period in order to see whether the facts justify the conclusion for which the latter contends, namely that the Commonwealth had during that period acted in such a way as to evidence, by some unequivocal act, that it had elected not to exercise the right of forfeiture which the lease, when read with the Ordinance, gave it. (at p602)

[202]

7. The evidence shows that on 12th June 1963, that is to say when the period of one year from the commencement of the lease had almost expired, the plaintiff wrote to the Department of the Interior stating that the detailed planning of the proposed building had reached a relatively advanced stage and that it would call for tenders for the work as soon as final working drawings were completed. On 1st July the Department replied, drawing attention to the fact that cl. 1 (c) of the lease required the lessee to commence the erection of an approved building within one year from the commencement of the lease or within such further time as might be approved in writing by the Commonwealth. The period of one year, the letter said, had expired and it was therefore "necessary that the lessee Company seek an extension of time to commence building". The application for such an extension "should include the expected date of commencement and the length of extension sought". No immediate reply to this letter was received and by letter of 13th August the Department reminded the plaintiff of its earlier letter and said that "your early advice as to the expected date of commencement and the length of extension required would be appreciated". On 12th September the plaintiff replied that it was estimated that it would take eleven months before the work would commence and suggested "that consideration be given to the extension of time for the commencement of the work until 1st August 1964". By letter of 22nd October the Department said that this request was viewed with concern. It pointed out that the plaintiff was in breach of its covenant and said that consideration was being given to taking action to determine the lease. It added "your urgent advice as to why such action should not proceed is required". No reply was received and on 27th November a further letter was sent by the Department referring to the terms of its letter of 22nd October and asking that it be provided as soon as possible with "the urgent advice" to which that letter had referred. On 9th December the plaintiff wrote giving various explanations of the delays that had occurred and stating that it expected that tenders would be called "by March next". The letter went on to ask that favourable consideration be given to its earlier request for an extension of time for commencing the building until 1st August 1964. On 19th March 1964 the Department wrote referring to the plaintiff's letter of 9th December 1963 and its stated expectation that tenders would be called by March 1964. It went on to say that as far as was known tenders had not been called and that the plans of the building had not been lodged for approval and added that unless within seven days the plaintiff furnished "satisfactory assurances that building will be commenced in the near future, the Department will have no alternative but to initiate formal action to terminate the lease". To this the plaintiff replied on 24th March that there had been delay in obtaining final plans and drawings from the architects who were "despatching an application for development approval this week" and that it was hoped that "you will accept that we are doing everything within our power to proceed with this development". Two days later the plaintiff's architects wrote to the Department that they were making every effort to complete the drawings and specifications and asking for an opportunity "to discuss this project with you" within the next few days. There followed a letter from the Department, dated 13th April, in which it was pointed out that "your Company's architects have advised that it will be quite some time yet before even plans will have been completed". It added that "the advices furnished by the Company and its architects do not constitute the 'satisfactory assurances'" sought in the letter of 19th March and that "unless the Company does provide within the next seven days firm assurances, acceptable to the Commonwealth, as to when the building will be commenced, determination action will be taken pursuant to the provisions of the City Area Leases Ordinance". On 21st April the plaintiff wrote saying that its architects had, a few days before, forwarded sketch plans to the National Capital Development Commission for its approval and that it did not appear that "there will be the delay implied" in the letter from the Department of 13th April. The next letter is one of 1st July 1964 from the plaintiff stating that the retainer of its architects had been terminated and that another firm of architects had been appointed who had prepared "a tentative estimate of completion of drawings and calling of tenders by 31st August for commencement of construction by 30th November". On 3rd July and before receipt of the plaintiff's letter of 1st July, the Department wrote referring to the earlier correspondence and in particular to its letter of 13th April "and your subsequent interview with me on 24th April, when you undertook to furnish early advice of your Company's intentions regarding commencement of building". The letter went on to say that no further advice had since been received nor had "any application been made (with supporting reasons) for an extension of time within which to commence building. The lessee Company remains, therefore, in breach of a covenant of the lease, which breach renders the lease liable to determination". It added that information had been received that the company's architects had resigned and that "unless satisfactory assurances are forthcoming from your Company in the immediate future regarding commencement of building, the Department will have no alternative but to take action pursuant to the City Area Leases Ordinance to determine the lease". It appears that on 8th July, following this letter, discussions took place between representatives of the plaintiff's new architects and of the Department, in the course of which the representative of the Department pointed out that the company had failed to comply with its covenant to commence building, that an application for an extension of time would be necessary and that if such an application was made it would be considered. He said also that a definite date for the commencement of the building would have to be given in any such application. This was followed, on 22nd July, by a letter from the plaintiff making application for an extension of time for the commencement of building until 31st January 1965 and giving a number of explanations for the delays that had occurred. It enclosed a letter which it had received from its architects in which they had said that they anticipated that it would be possible to call for tenders "early in December of this year . . . . Tenders to be lodged by about 18th December 1964". On 14th August the Department replied that it considered that the suggested extension of time was not warranted and that in view of the failure of the plaintiff to comply with the terms of the lease, a "Notice of Intention to Determine the Lease under Section 22 of the City Area Leases Ordinance" was enclosed. The notice in question was dated the same day and was plainly given pursuant to s. 22 (1). It notified the plaintiff

[221]

11. I do not find in the communications between the parties to which I have referred anything which would cause me to find that the Commonwealth had elected not to determine the lease. My reading of the correspondence leads me to the same conclusion as that reached by Windeyer J. who tried the action and I am content to adopt what he said : "As I read the correspondence, the Commonwealth was asserting throughout that the lessee's initial failure to commence building within the time prescribed by the lease had made the lease liable to be determined, but that the Commonwealth would not enforce this if the building were commenced within the further times successively allowed. The correspondence does not anywhere show an unequivocal election not to determine the lease. It shows only that the Commonwealth was holding its hand, keeping the question open and giving the plaintiff opportunities to prevent its lease being determined" (supra p. 558). One further matter upon which some reliance was placed by the plaintiff on the issue of waiver was that from 13th June 1963 onwards rent which under the lease was payable in advance was paid to and accepted by the Department, the last payment being made prior to 1st May 1965 for the quarter ending in June 1965. But this does not appear to me to affect the position. At all times when the rent was paid and accepted the lease was by virtue of the Ordinance still on foot and under it the lessee was bound to pay and the Commonwealth entitled to receive rent. Further the lease, as I have said, contained a provision that the acceptance of rent should not prevent or impede the exercise by the Commonwealth of the powers conferred upon it to determine the lease. I can see no good reason why the parties to a lease should not validly incorporate such a clause in their agreement and if they do so, that seems to me to be a very relevant fact to be borne in mind when it is claimed by a lessee who has committed a breach of covenant that by accepting rent his lessor has made an election to keep the lease on foot. We were referred, however, to the decision in R. v. Paulson (1921) 1 AC 271 , and it was submitted that it showed that such a provision was ineffectual where the act of waiver relied upon was the acceptance of rent. I am unable to agree that this is so. In that case the lease provided that no waiver of any breach of covenant should take effect unless it was in writing and the lessor had accepted rent with knowledge that the lessee had committed a breach of covenant. After pointing out that the principle was well established that in such circumstances the acceptance by a lessor of rent accruing due after breach and with knowledge of the breach showed that he had made an irrevocable election to treat the lease as still subsisting, their Lordships went on to say that they thought that the existence in the lease of a provision requiring a waiver to be expressed in writing did not render that principle inapplicable. They added, however, "it may well be that many cases may occur to which the clause as to waiver would be applicable ; their Lordships think that it is not applicable in the present case under all its circumstances" (1921) 1 AC, at p 286 . Although it is not clear from the report, it appears to me that the decision proceeded upon the basis that on its true construction the waiver provision there in question had no application to a case of waiver by receipt of rent and applied only to cases where the waiver relied upon was by words alone. If that be so, the decision affords no assistance in the present case. In any event the present case seems to me to differ from Paulson's Case (1921) 1 AC 271 in at least one striking and material respect, namely the existence here of an Ordinance by which, notwithstanding a breach of covenant by the lessee which, apart from the Ordinance, would justify forfeiture, the lease is kept on foot up to the time when the final step is taken of publication in the Gazette of a notice of determination. (at p610)

At a glance

Court

Decision date

Before

Source

Judgment (228 paragraphs)

Owendale Pty Ltd v Anthony [1967] HCA 52; (1967) 117 CLR 539 (24 August 1967)

Parties

Legislation Cited (5)

Cases Cited (3)