Emaas Pty Ltd v Mobil Oil Australia Ltd [1999] QSC 380

37533 PLAINTIFF: DEFENDANT: SUPREME COURT OF QUEENSLAND Registry: Brisbane Number: 6016 of 1999 EMAAAS PTY LTD (ACN 010 766104) AND MOBIL OIL AUSTRALIA LTD (ACN 004 052 984) REASONS FOR JUDGMENT - BYRNE J Delivered: 22 December 1999 CATCHWORDS: TORRENS SYSTEM - LEASES - lessee issued notices of intention to terminate lease due to road changes - whether notices valid - whether streets had been "significantly altered". Couusel: Solicitors: Hearing dates: CONTRACT - INTERPRETATION - interpretation of commercial lease. Charter Reinsurance Co Ltd v Fagan [1997] AC 313 Nissho Iwai Australia Limited v Malaysian International Shipping Corporation, Berhad (1989) 167 CLR 219 Schuler Ag V Wickman Machine Tool Sales Ltd [1974] AC 235 Torvald Klaveness AlS V Arni Maritime Corporation [1994] 1 WLR 1465 Total Gas Marketing Ltd V A reo British Ltd [1998] 2 Lloyd's LR 209 Mr P H Morrison QC, with him Mr P W Hackett, for the plaintiff Mr A J H Morris QC, with him Mr D Toombs, for the defendant H Drakos & Co for the plaintiff Barwicks Wisewoulds Lawyers for the defendant 20, 21 September, 22 to 26 November 1999 [1] The plaintiff ("Emaaas") is the lessor of premises at 459 Manly Road, Manly West. The defendant ("Mobil") is the lessee. The lease is for 15 years from September -- 1 of 12 -- 2 1996. 1 The lease provides for two, 5 year options to renew. The initial annual rent was $225,000. The rent for subsequent years is subject to an adjustment for movements in a consumer price index. The "permitted use" of the site is as a "Service Station, including ... shop, car wash, motor vehicle servicing and repairs and other associated normal, usual or incidental uses".2 [2] Mobil claims to have determined the lease by a notice given in May informing Emaaas that Mobil "exercises the option of termination contained in clause 6.1 (b) of the lease on the basis that the streets giving access to or regress from the demised c premises have been and are being significantly altered". Another, presumably similar, notice was given recently. The central issue in the litigation is whether by C one or other of those notices Mobil has become entitled to determine the lease. [3] Clause 6.1 provides: 2 "6. COMPULSORY ACQUISITION 6.1 Area reduction or street alteration .... if: (a) as a result of compulsory acquisition by a Government Authority the land area of the Demised Premises is at any time during the Term or any Option Period reduced by more than 10%, or any lesser percentage so as to have in the Lessee's reasonable opinion, a significant detrimental effect on the Permitted Use conducted from the Demised Premises; or (b) the streets giving access to or regress from the Demised Premises are permanently closed or significantly altered, the Lessee may at any time thereafter elect to terminate this Lease by not less than 90 days' prior Notice to the Lessor." The tenn is expressed to begin on the "commencement date", which is defmed in cl 1.1 as the date described as such in Item 6 of the Fonn 7. In the copy of the lease in evidence, the space for the insertion of the "Commencement Date" was left blank. But it is common ground that some, apparently agreed, date in September 1996 is the "commencement date". See cl 7.1 of the lease and the defmition of "permitted use" contained in the Reference Schedule. c c -- 2 of 12 -- 3 [4] Since the commencement of the lease, roadworks have resulted in changes to Manly Road and to other streets that meet Manly Road near the site. Evidence has been adduced concerning these alterations and their impact, or potential to affect, the suitability of the site for the "permitted use". The materiality of much of this evidence turns on the interpretation of the unhappily expressed cl 6.1 (b). The parties prefer that the meaning of the sub-clause be decided before argument is presented on factual contentions. [5] To set the contest concermng the interpretation of the sub-clause in context, features) of the nearby road system, and the changes which have taken place since September 1996, need to be touched upon, however tentatively. [6] When the lease began, three streets led straight to the site: Manly, Greencamp and Whites Roads. Site access was provided to and from the abutting Manly Road through driveways located at the southern and northern sides. Manly Road met Greencamp and Whites Roads at a nearby, single-lane roundabout. Manly and Greencamp Roads were, and remain, relatively high volume, sub-arterial roads. [7] The first stage of the roadworks was completed shortly before last Christmas. This phase included the relocation of Whites Road to intersect with Manly Road opposite Ambelj ack Street - the first street encountered after leaving the northern access point; the upgrading of the intersection of Manly Road, Ambeijack Street and the new Whites Road to a signalized intersection; and the provision of a Those must have been known to the parties when the lease was entered into. -- 3 of 12 -- 4 channellized, right-turn entry to the site from Manly Road north of the roundabout. The second stage was completed a few weeks ago. The roundabout was replaced with a channellized, signalized T-junction, with Manly and Greencamp Roads forming the "head" of the T. This has involved some redirection of Manly Road, the construction of median strips, and the conversion of Manly Road from a street carrying one lane of traffic in each direction to a multiple-lane facility leading to Greencarnp Road. As a result of the relocation of the carriageway, the southern access driveway has been extended. [8] The new entry from Manly Road into the northern driveway improves access for c city-bound traffic. Arguably less advantageous to exploitation of the site as a C service station is the effect of the roadworks upon site visibility to outbound motorists approaching from the west that has resulted from the relocation of Manly Road as it nears Greencamp Road. Problematic also, or so Mobil contends, is a reduction in convenience to motorists who used to leave from the southern driveway, drive through the roundabout, and then travel inbound along Manly Road. In short, changes to the adjacent road system may have impacted on the site in several ways: some but not all of these relate to Manly Road access. [9] Passing from background facts to the cl 6.1 (b) interpretation issues, relevantly all that appears to be cornmon ground is that "regress" is a mistake for "egress". Otherwise, there are several differences between the parties. Emaaas contends, for example, that the "streets giving access" means only Manly Road, which would be a peculiar construction of an expression that presupposes that more than one road affords access, especially as the permanent closure of Greencarnp Road had an obvious, substantial potential to impact adversely on trading at the site. Emaaas also o o -- 4 of 12 -- 5 proposes that "permanently closed or significantly altered" should be read as though "permanently" modifies both "closed" and "altered", which is scarcely the meaning naturally suggested by that choice of words. As it happens, however, those differences are immaterial. For Mobil is content that 6.1(b) be construed on two assumptions favourable to Emaaas: that "the streets giving access ... " means Manly Road in the immediate vicinity of the site; and that the changes in Manly Road resulting from the roadworks are "permanent". This leaves two interpretation points: whether the significance of the changes falls to be assessed exclusively by reference to their impact upon access to the site; and whether before roadworks may be considered to have "altered" Manly Road "significantly", the changes must have notable, deleterious consequences for the exploitation of the site.4 [lO] Emaaas's preferred interprctation of the material contingency is this: "If Manly Road is altered in a way whereby the access it gives to or from" the site "is significantly and permanently detrimentally affected in terms of the use of' the site for the defined "permitted use". So paraphrased, the sub-clause treats Manly Road as "altered" only to the extent to which a change prejudices access to or from the site. Access is, on this view, all that matters. This would mean that a change that only reduced the visibility of the site to passing motorists must be immaterial whatever the severity of its impact on site suitability as a service station. Such an interpretation also involves that an alteration which limits the traffic that can be drawn to the site, such as a conversion of the two-way thoroughfare into a one-way thoroughfare, could only matter to the extent to which it was shown to impede Perhaps in addition to substantial cbanges in a physical sense. -- 5 of 12 -- 6 access despite the evident potential of such a change to prejudice markedly the value to Mobil of its rights to occupy the site. [11] Practicalities aside, the, more important, linguistic considerations are also opposed to the notion that a change to "actual access to and from the site" is, as Emaaas puts it, the only alteration envisaged by c1 6.1 (b). If only access impediments matter, the sub-clause might have been expected to stipulate that the entitlement to detennine the lease would arise "if access to or egress from the site were permanently closed or significantly altered". Instead, the sub-clause directs attention to changes to the c "streets" that give access, whether the change affects site access or not. To accede to Emaaas's favoured interpretation would be to adopt a construction not naturally C suggested by the ordinary meaning of cl 6.1 (b) "read in the light of the" lease "as a whole, thereby giving due weight to the context in which the" sub-clause "appears including the nature and object of the contract".5 And there is no good reason to depart from the text in extracting its meaning in this respect. c [12] Any physical alteration to Manly Road (in the immediate vicinity of the site) triggers Mobil's right to elect to tenninate the lease if the change is significant. So 0 6 the central inquiry concerns the content of "significantly" in the context 6 of c1 6.1(b). Does it just connote big? Or does "significantly" carry with it the idea of Nissho Iwai Australia Limited v Malaysian International Shipping Corporation, Berhad (1989) 167 CLR 219,227, quoting Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500,510; cf Lord Steyn's comment that "in the case of all contracts, loyalty to the contractual text viewed against its relevant contextual background is the fIrst principle of construction": Total Gas Marketing Ltd v A reo British Ltd [1998] 2 Lloyd's L Rep 209, 218. As with very many words, the meaning - signifIcance, if you like - to be attributed to the adverb here could be expected to be influenced by context. -- 6 of 12 -- 7 some "considerable effect" on the site, as well as, or instead of, a "considerable amount,,7 of physical change to nearby Manly Road? [13] According to Mobil, "significantly" is concerned with "major or substantial" alterations to relevant roads, not with their impact on the site. Emaaas, however, contends that if cl 6.1(b) is not concerned exclusively with alterations to access, then the pertinent inquiry is, "significantly" to what or to whom, prompting the response: "it must be something in relation to the site and its use; the essential formulation of that is reflected in the words in clause 6.1(a), namely significant detrimental effect on the use of the Demised Premises for the Permitted Use".8 [14] A peculiarity deriving from the construction Mobil propounds is this: a large 9 change to Manly Road confers a right to terminate this costly, long-term lease even if the alteration could only advantage any service station business on the site. That scarcely seems sensible, which is a reason for hesitating to adopt the interpretation that leads to it; for "the more unreasonable the result the more unlikely it is that the parties can have intended it".9 Another curiosity inheres in Mobil's interpretation. It relates to the considerable length of Manly Road. In September 1996, an evident possibility was that it might be altered in a substantial way but at such a distance as not to affect adversely the suitability of the site as a service station. Mobil's submissions accommodate this unattractive consequence by accepting that the phrase "the streets giving access" is to be read restrictively: the roadworks must The Australian Concise Oxford Dictionary, 1987, p 1045 deftning "signiftcantly". Ex 43, para 37(d), pI!. Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235, 251; see also Lewis Construction (Engineering) Pty Ltd v Southern Electric Authority of Queensland (1976) 50 ALJR 769, 774 I" col B; cf Gollin & Company Ltd v Karenlee Nominees Pty Ltd (1983) 153 CLR 455,464; Airwork (NZ) Ltd v Vertical Flight Management Ltd [1999] I NZLR 641, 650; Investors Compensation Scheme -- 7 of 12 -- 8 take place in the vicinity. Yet this difficulty disappears if an alteration to Manly Road cannot be significant for the purposes of cl 6.1 (b) unless it impacts adversely upon the "permitted use". [15] But cl 6.1(a) detracts from the force of these considerations. That sub-clause also confers a right to determine on 90 days notice. The right accrues if a compulsory acquisition takes more than 10% of the site. And the entitlement arises whether the resumption prejudices the site as a service station or not. If the area change is big enough, that will do.lO However, site suitability is germane where the resumption is c of 10% of the site or less, provided that "in the Lessee's reasonable opinion, a significant detrimental effect on the Permitted Use" results. c [16] Clause 6.1(a) matters for other reasons. First, in it the adjective "significant" means large: nothing more. The sub-clause itself states the thing by reference to which it is to be ascertained whether a resumption has "significant detrimental effect": it must be such an effect "on the Permitted Use". If in sub-clause 6.1(a) "significant" C 10 indicates merely the size of the "effect" upon site suitability for the nominated purpose, why should the use of its correlative adverb in the next sentence imply C something different: viz that the change be not considerable in amount but instead in impact upon site use? Secondly, and more importantly, if "significantly altered" was intended to mean "a significant detrimental effect on the permitted use", what can account for the omission to include in cl 6.1 (b) the concluding words actually expressed in cl6.1(a)? Ltd v West Bromwich Building Society [1998] 1 WLR 896, 913 D-F; and Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, 770F-77IB. A permanent closure of any of the "streets giving access" affords a right to detennine under c1 6.1(b). The permanent closure of the lightly-trafficked Whites Road was by no means certain to reduce appreciably the profitability of a service station on the site. -- 8 of 12 -- 9 [17] Another consideration lends support to Mobil's preferred interpretation. Once Manly Road is "significantly altered", Mobil "may at any time thereafter" elect to terminate the lease. The use of "at any time thereafter" - that is, at any time after the significant alteration occurs - appears to be concerned with something which, as Mr Morris QC put it, is readily and immediately ascertainable, II rather than with a matter dependent on complex traffic and economic analyses of the consequences of roadworks for a service station on the site. [181 The consequences of the rival contentions were canvassed at length. But there are 11 12 limits to the extent to which the ramifications of the variety of interpretations advanced can be allowed to influence a rendering of the text. For one thing, here the commercial practicalities are not especially useful as an indicator of intent. From Mobil's perspective, it would make sense to secure expansive entitlements to determine the lease unilaterally. Its interests would, it seems, have been advanced l2 by securing a right of election that did not depend upon establishing that a change to Manly Road impacted upon the suitability of the site for a service station. Yet Emaaas's interests would probably have been served if Mobil's right to terminate depended upon such a contingency as that stated at the end of cI 6.l(a). Anyhow, after dwelling for long enough on such things, and on the ways in which possibilities that could have been anticipated in 1996 may have eventuated, as cf Total Gas Marketing at 222. Mobil's interpretation would, however, mean that a slight physical change - as, for example, the erection of sound barriers beside the carriageway but within the road reserve impeding site visibility - which resulted in a large, deleterious impact on the site as a service station would not justify a cJ 6.I(b) tennination. -- 9 of 12 -- 10 Lord Mustill has said 13 "there comes a point at which the court should remind itself that the task is to discover what the parties meant from what they have said, and that to force upon the words a meaning which they cannot fairly bear is to substitute for the bargain actually made one which the court believes could better have been made. This is an illegitimate role for a court. Particularly in the field of commerce, where the parties need to know what they must do and what they can insist on not doing, it is essential for them to be confident that they can rely on the court to enforce their contract according to its terms." • [19] Particularly in view of the language of c1 6.1(a), in my opinion, the entitlement to 13 determine the lease arises under c1 6.1 (b) upon the occurrence of a significant - in C the sense of major or substantial- physical change to Manly Road in the vicinity of the site, whether or not such a change considerably detrimentally affects either C Manly Road access or the site's suitability for the defined "permitted use". Charter Reinsurance Co Ltd v Fagan [1997] AC 313, 388, Lords Goff of Chieveley, Griffiths and Browne-Wilkinson agreeing. See also Lewis Construction at 773 2nd col G-774 1st col B; and" Torvald Klaveness AIS v Ami Maritime Corporation [1994] 1 WLR 1465 where, at 1473 G-H, Lord Mustill (with the concurrence of Lords Ackner, Slynn of Hadley and Woolf) said: "no judge will favour an interpretation which produces an obviously absurd result unless the words used drive him to it, since it is unlikely that this is what the parties intended. But were there is no obvious absurdity, and simply assertions by either side that its own interpretation yields the more sensible result, there is room for error." c c -- 10 of 12 -- • • )'( crQ/58( Bureau J JUSTICE State Reporting TRANSCRIPT OF PROCEEDINGS Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bureau. SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION DERRINGTON J No 4309 of 1996 CHRISTOPHER HAYES BY HIS NEXT FRIEND PATRICK HAYES and JASON JOHN FURNER and SUNCORP INSURANCE AND FINANCE BRISBANE .. DATE 20/08/99 JUDGMENT 1 REVISED COPIES ISSUED State Reporting Bureau Datejo / / First Defendant Second Defendant ·111a .~ nor Til· . \V ( . s .,. r .. )" . , n," 1) 1?J7 Jlf.n I:'.,,,. flli\ "'7·1, C::C::11 -- 11 of 12 -- 200899 T1/SA2 M/T 5341/99 (Derrington J) HIS HONOUR: I will read the last page of my judgment. Since there no sufficiently substantial reason why the Public Trustee should n~t be appointed and there are substantial reasons why it should be preferred, the application to the contrary is refused and order will be 10 made in the usual form appointing a trustee of the protected person's estate. I order accordingly. HIS HONOUR: I publish my reasons. 2 JUDGMENT 30 40 50 60 c c -- 12 of 12 --