Brandon, Halliday & Ellison (RSL), Re [1992] QSC 198

c r\ IN THE SUPREME COURT OF QUEENSLAND CATCHWORDS: Counsel: Solicitors: O.S. No. 104 OF 1992 In the matter of a lease dated and made 21st September, 1981 DONALD FREDERICK BRANDON, BARDON CHARLES HALLIDAY and JAMES SYDNEY ELLISON as trustees of the Returned Services League of Australia (Queensland Branch) Beenleigh Sub-Branch and CECIL ALEXANDER CLARKE, EDWIN GEORGE CHRISTENSEN and DESMOND ROY SAILER as trustee of the Beenleigh Mt. Warren Park R.S.L. Services and Citizen Memorial Country Club -and- In the matter of a sub-lease dated and made 21st September 1981 between DONALD FREDERICK BRANDON, BARDON CHARLES HALLIDAY and JAMES SYDNEY ELLISON as trustees of the Returned Services League of Australia (Queensland Branch) Beenleigh Sub-Branch and CECIL ALEXANDER CLARKE, EDWIN GEORGE CHRISTENSEN and DESMOND ROY SAILER as trustee of the Beenleigh Mt. Warren Park R.S.L. Services and Citizen Memorial Country Club REASONS FOR JUDGMENT - HELMAN A.J. Delivered the 16th day of June, 1992 Landlord and tenant - Assignment of lease and sub-lease - Consent to assignment - Landlord withholding consent - Property Law Act 1974, as amended, s.121. Mr. F. Redmond ·· for the applicants Mr. J. Crowley Q.C. with him Mr. M. Plunkett for the respondents J.T. Taylor & Co. for the applicants Mahoney and Hesford for the respondents Hearing Dates: 5th, 6th and 7th May, 1992 -- 1 of 34 -- ·--. / IN THE SUPREME COURT OF QUEENSLAND O.S. No. 104 OF 1992 In the matter of a lease dated and made 21st September, 1981 OONALD FREDERICK BRANDON 1 BARDON CHARLES HALLIDAY and JAMES SYDNEY ELLISON as trustees of the Returned Services League of Australia (Queensland Branch) Beenleigh Sub-Branch and CECIL ALEXANDER CLARKE 1 EDWIN GEORGE CHRISTENSEN and DESMOND ROY SAILER as trustee of the Beenleigh Mt. Warren Park R.S.L. Services and Citizen Memorial Country Club -and- In the matter of a sub-lease dated and made 21st September 1981 between DONALD FREDERICK BRANDON 1 BARDON CHARLES HALLIDAY and JAMES SYDNEY ELLISON as trustees of the Returned Services League of Australia (Queensland Branch) Beenleigh Sub-Branch and CECIL ALEXANDER CLARKE 1 EDWIN GEORGE CHRISTENSEN and DESMOND ROY SAILER as trustee of the Beenleigh Mt. Warren Park R.S.L. Services and Citizen Memorial Country Club REASONS FOR JUDGMENT - HELMAN A.J. Delivered the 16th day of June, 1992 This matter arises out of a dispute between the trustees of a club called the Beenleigh Mt. Warren Park R.S.L. Services and Citizens Memorial Country Club and the trustees of the Returned Services League of Australia (Queensland Branch) Beenleigh Sub-Branch about a lease and a sub-lease in which the trustees of the sub-branch are respectively lessors and sub-lessors and the trustees of the club, lessees and sub-lessees. The trustees -- 2 of 34 -- -_-,---- 2 of the club have taken out an originating summons applying for, first, a declaration that on the true construction of the lease and sub-lease and in the events which have happened the refusal of the trustees of the sub-branch to consent to the assignment I.,·· of the lease and sub-lease to a company called Mt. Warren Park Country Club Limited, A.C.N. No. 050 741 725, was unreasonable, and, secondly, a declaration that, notwithstanding that refusal, the trustees of the club are entitled to assign the lease to the company without any consent from the trustees of the sub-branch. I was told at the beginning of the hearing that the applicant Mr. Edwin George Christensen is no longer a trustee of ( the club and that his place has been taken by Mr. Eric McDonald and that the trustees of the sub-branch are now Messrs. Arthur Lawrence Eather, Bardyn Charles Halliday, and Robert Edward Allard. The dispute concerns two parcels of land. The smaller one, on which the club house is erected, contains an area of 1.719 hectares and is described as lot 2 on Registered Plan number 171301 being the whole of the land contained in Certificate of :i Title Volume 6175 Folio 222. The trustees of the sub-branch are I ( the registered proprietors of an estate in fee simple in that land and on September 21, 1981 they entered into a lease, subsequently registered, with the trustees of the club as lessees for a term of thirty years certain beginning on January 1, 1981 and expiring on December 31, 2010. The larger piece of land, the golf course, contains an area of 56.83 hectares and is described as lot 7 on Registered Plan number 164094 being the whole of the land contained -in -- 3 of 34 -- c 3 Certificate of Title Volume 6032 Folio 89. The trustees of the sub-branch · hold that land as lessees from the registered proprietor of an estate in fee simple in the land, the Council of the Shire of Albert, pursuant to a registered lease dated March 20, 1981. That lease provides for a term of thirty years certain, beginning on January 1, 1981 and expiring on December 31, 2010. On September 21, 1981 the trustees of the sub-branch entered into a sub-lease of that land, subsequently registered, with the trustees of the club as sub-lessees for a term of twenty-nine years and 364 days certain beginning on January 1, 1981 and expiring on December 30, 2010. The lease provides that the lessee (in referring to the contents of the documents I shall use the singular, as the documents do) holds the land, subject to Clause 14 (which provides for the termination of the lease at the expiration of either ten or twenty years upon the lessor 1 s giving written notice to the lessee), on condition that the lessee pay to the lessor "such monthlyrental as shall be determined by the Lessor to the Lessee in writing [sic] at least two calendar months in advance by monthly payments to the Lessor .. " The lessee 1 s covenant in Clause 13 of the lease makes it clear that that rental is to be treated as "the initial rental" and that the rent payable under the lease and the sub~lease are to be combined and accounted for according to the provisions in that covenant, which is as follows:- "13. Notwithstanding anything herein contained at the expiration of each financial year or as soon as practicable thereafter the total rental paid orpayable by the Lessee to . the Lessor hereunder and under a certain Sub-Lease (hereinafter referred to as 1 the said Sub-Lease 1 ) granted by the Lessor to the -- 4 of 34 -- 4 Lessee in respect to a certain Golf Course area (which said rental is hereinafter referred to as 'the combined rental') shall be reviewed and adjusted in accordance with this clause. The combined rental shall be the total of the following:- (a) The total rental for the financial year (or part thereof as the case may be) payable by the Lessor to the Council of the Shire of Albert under a certain Lease granted by the said Council to the Lessor in respect to the said Golf Course area. (b) The total instalments of principal and interest properly paid by the Lessor to the Commercial Bank of Australia Limited (hereinafter referred to as ' the said Bank' ) in respect ·to a certain loan of ONE HUNDRED AND FIFTY THOUSAND DOLLARS ($150,000.00) obtained to assist in the construction of a certain Club House being the subject of this Lease. (c) Any other monies properly paid by the Lessor to the said Bank in respect to such loan but excluding any earlier repayments unless the Lessee shall have first agreed thereto in writing. (d) The total instalments of principal and interest properly paid by the Lessor to WARCOLL HOLDINGS PTY. LTD. (hereinafter referred to as 'Warcoll') in respect to a certain loan of ONE HUNDRED AND THIRTY THOUSAND DOLLARS ($130,000.00) obtained to assist in the construction of the said Club House and golf course playing areas but after deducting any rebates which the Lessor may have received from Warcoll for the financial year. (e) Any other monies properly paid to Warcoll in respect to such loan but excluding any earlier repayments unless the Lessee shall have first agreed thereto in writing. (f) The cost of servicing any other loan or loans obtained by the Lessor for the direct benefit of the Lessee. (g) Any other monies properly paid by the Lessor for or on behalf of the Lessee. If the combined rental shall be in excess of the total rental paid by the Lessee to the Lessor hereunder and under the said Sub-Lease (which said total rental so paid is hereinafter referred to as 'the initial rental') in respect to the financial year (or part thereof as the case may be) then the Lessee shall forthwith on demand pay to the Lessor the amount of -- 5 of 34 -- c r I /'. I •"-...../ 5 such excess provided that if the combined rental shall be less than the initial rental then the Lessor shall credit the difference in and towards the future payment of rental hereunder and under the said Sub-Lease or shall on demand refund the difference to the Lessee." Clause 1 (b) contains the following covenant by the lessee:- "(b) Not to sub-let charge assign over or in any way dispose of or part with the possession of the demised land or any part thereof to any person firm or corporation whomsoever or whatsoever without in any such case the consent of the Lessor in writing first had and obtained nor without such consent to attempt to so sub-let charge assign over or in any way dispose of or part with the possession of the demised premises or part thereof and should the Lessor grant any such consent then IT IS HEREBY AGREED that the Lessor shall have the right to reserve such rental as the Lessor may think fit (payable monthly) in addition to the right to a premium for the granting of such consent both such rights requiring acceptance by such assignee under-lessee or sub-tenant (as the case may be) as- a further condition precedent to the granting of its consent to any assignment under-lease or tenancyagreement as aforesaid AND the obligation to pay such premium and to pay the rent then reserved and any future rental shall be expressed in such Deed of Covenant to be executed by the Lessor and the Lessee and the incoming Lessee (either assignee under-lessee or sub-tenant)" Two other covenants, in Clauses 1 ( k) and ( 1) , are also relevant:- "(k) Not to supply nor sell nor permit nor sufferintoxicating liquor to be supplied sold or consumed upon the demised land or any part thereof except in accordance with the License or permit for the time being issued by the Licensing Commission of Queensland. " ( 1) To conduct all activities upon the demised land and not to grant any license to any other person forthe conduct thereof save for a Country Club duly constituted with a set of rules approved by the Lessorunder a name approved by the Lessor which name shallnot be changed or altered without the consent of theLessor and which set of rules shall not be likewise altered changed deleted or rescinded or substitutions made therefor in any respect without the approval ofthe Lessor signified by letter and to control theconduct of activities or proceedings carried on upon the said land to cause the same to be conducted and carried on in an orderly and inoffensive manner and -- 6 of 34 -- c (~ / 6 from time to time as and when required by the Lessor to make rules and regulations for the protection control and management of the demised land and for the exclusion of persons of dissolute, disreputable or otherwise undesirable character therefrom as the Lessor may consider necessary and proper;" The sub-lease provides that the sub-lessee holds the land, subject to Clause 11 (which provides that the sub-lessee may terminate the sub-lease at the expiration of either ten or twenty years from the commencement of the sub-lease), on condition that the sub-lessee pay to the sub-lessor "such calendar monthly rental as shall be determined by the Sub-Lessor and notified in writing by the Sub-Lessor to the Sub-Lessee at least two ( 2) calendar months in advance such rental having regard to the obligations of the Sub-Lessor in respect of interest and redemption of loans raised by the Sub-Lessor for the cost of improvements made upon the sub-demised land and for the repayment by the Sub-Lessor of other borrowings maqe by the Sub-Lessor in and about the premises and the outgoings for which the Sub-Lessor is liable in and about the said premises inclusive of those recoverable from the Sub-Lessee in accordance with the covenants conditions and stipulations expressed or implied in terms of the Head Lease which are applied by the provisions of this Sub-Lease to be and become the obligations of the Sub-Lessee". Clause 10 makes it clear that the provision to which I have just referred is to be treated as "the initial rental" and that the final determination of the rental payable by the sub-lessee to the sub-lessor is to be in accordance with that clause which is as follows:- "1 0. Notwithstanding anything herein contained atthe expiration of each financial year or as soon as practicable thereafter the total rental paid or - ' -- 7 of 34 -- .. / 7 payable by the Sub-Lessee to the Sub-Lessor hereunder (which said rental is hereinafter referred to as 'the combined rental' ) shall be reviewed and adjusted· in accordance with this clause. The combined rental shall be the total of the following:- (a) the total rental for the financial year (or part thereof as the case may be) payable by the Sub-Lessor to the Council of the Shire of Albert under a certain Lease granted by the said Council to the Sub-Lessor in respect of the said Golf Course area. (b) The total instalments of principal and interest properly paid by the Sub-Lessor to the Commercial Bank of Australia Limited (hereinafter referred to as 'the said Bank' ) in respect to a certain loan of ONE HUNDRED AND FIFTY THOUSAND DOLLARS ( $150, 000. 00) obtained to assist in the construction of a certain Club House being the subject of this sub-Lease. (c) Any other monies properly paid by the Sub-Lessor to the said Bank in respect to such loan but excluding any earlier repayments unless the Sub-Lessee shall have first agreed thereto in writing. {d) The total instalments of principal and interest properly paid by the Sub-Lessor to WARCOLL HOLDINGS PTY. LTD. (hereinafter referred to as 'Warcoll' ) in respect to a certain loan of ONE HUNDRED AND THIRTY THOUSAND DOLLARS ($130,000.00) obtained to assist in· the construction of the said Club House and Golf Course playing areas but after deducting any rebates which the Sub-Lessor may have received from Warcoll for the financial year. (e) Any other monies properly paid to Warcoll in respect to such loan but excluding any earlier repayments unless the Sub-Lessee shall have first agreed thereto in writing. (f) The cost of servicing any other loan or loans obtained by the Sub-Lessor for the direct benefit of the Sub- Lessee. (g) Any other monies properly paid by the Sub-Lessor for or on behalf of the Sub-Lessee. If the combined rental shall be in excess of the total rental paid by the Sub-Lessee to the Sub-Lessor hereunder (which said total rental so paid is hereinafter referred to as 'the initial rental') in respect to the financial year (or part thereof as the case may be) then the Sub-Lessee shall forthwith on demand pay to the Sub-Lessor the amount of such excess provided that if the combined rental shall be less than the initial rental then the Sub-Lessor shall credit the difference in and towards the future payment of '... '--, -- 8 of 34 -- C, c c c 8 rental hereunder and under the said Sub-Lease or shall on · demand refund the difference to the Sub-Lessee." By Clause 2 of the sub-lease, the sub-lessee agrees to comply with the terms of the head lease in all respects as though they [sic] were the lessee of the land. The head lease between the Council of the Shire of Albert and the trustees of the sub-branch provides for the payment of a rental of $1.00 per annum, if demanded. Clause 1(b) contains a covenant by the lessee as follows:- "(b) Not to sub-let charge assign over or in any way dispose of or part with the possession of the demised land or any part thereof to any person firm or corporation whomsoever or whatsoever without in any such case the consent of the Lessor in writing first had and obtained nor without such consent to attempt to so sub-let charge assign over or in any way dispose of or part with the possession of the demised land or part thereof BUT such consent shall not be arbitrarily or capriciously withheld in the case of a respectableresponsible and financially sound person or company capable of conducting efficiently the business thenbeing carried on on the demised land and the onus ofthe proof thereof shall lie on the Lessee. The Lessor shall be entitled to require as a condition precedent to the granting of its consent to any assignment under lease or tenancy agreement that the Lessee will first procure from the proposed assignee under-lessee orsub-tenant a covenant to observe perform fulfil and keep all and every the covenants conditions and agreements on the part of the Lessee herein contained in the same manner as if such assignee under-lessee orsub-tenant had been the original lessee hereunder AND ALSO a covenant not to further assign sub-let or part with the possession of the demised land or any partthereof without such consent as aforesaid and in the case of. an assignment to pay such rent as the Lessor shall then require to be reserved in consideration of the granting by the Lessor of its consent as aforesaid AND ALSO the payment of such sum as a premium for the granting of such consent as may be required by theLessor IT BEING HEREBY AGREED that the Lessor shall have the right to reserve such rental as the Lessor may think fit (payable annually) in addition to the right to a premium as aforesaid both such rightsrequiring acceptance by such assignee under-lessee or sub-tenant.(as the case may be) as a further condition precedent to the granting of its consent to any assignment under-lease or tenancy agreement as -- 9 of 34 -- c 0 c c 9 aforesaid AND the obligation to pay such premium and to pay the rent then reserved and any future rental shall be expressed in such Deed of Covenant to be executed by the Lessor and the Lessee and the incoming Lessee (either assignee under-lessee or sub-tenant)" The club was established because there were people who wished to join in some of the activities of the sub-branch but who could not, because they lacked the necessary service background, be members. Membership of the club was open to them. In its constitution, which is dated April 15, 1984, it is provided that it shall be known as the Beenleigh Mt. Warren Park R.S.L. Services and Citizens Memorial Country Club, although a short title, for "administration purposes", of Mt. Warren Park Country Club is provided for in Clause 1. The objects of the club provided for in Clause 2 are as follows:- " (a) To provide and maintain club premises and facilities for members and their guests. (b) To preserve the memory of those who served Australia in any war or wars. (c) To establish and maintain a meeting room and other facilities as decided by the board. (d) To provide sporting and social facilities and otheramenities for the benefit, social comfort and advancement of its members and to promote good fellowship amongst them. (e) To affiliate with any other bodies possessing like aims and objects upon such terms and conditions as may be agreed. (f) To do all such other lawful acts and things as are incidental or conducive to the attainment of any of the objects of the club." Paragraph 7 of the constitution provides for a club board of directors. Sub-paragraphs 7(a), (h), (i) and (j) show that it was intended that the sub-branch have substantial control over the affairs of the club:- "7. Club Board of Directors l -- 10 of 34 -- c c c c (h) 10 (a) The management and control of the club shall be vested in a board of twelve (12) directors, namely a president, an honorary treasurer and if there be no paid secretary manager, an honorary secretary, and other office bearers and members as elected. The immediate past president (ex officio) shall be in addition to the twelve ( 12) board members. Board members including office bearers, shall be elected by ballot after the annual general meeting of the club. Not less than six (6) of the board shall be members of the R.S.L. Beenleigh Sub Branch who are also members of the club, and not more than six ( 6) shall be citizen members as defined in paragraph 10(b). In the event of nominations from financial members of the club being insufficient the R.S.L. Beenleigh Sub Branch shall recommend to the board sufficientfinancial members of the R.S.L. who are also financial members of the club to attain the required proportions. If at any time there are unfilled vacancies by citizen members on the board then thesevacancies may be filled by Beenleigh R.S.L. Sub Branch members until a citizen representative is appointed. If any member of the board shall fail to attend three (3) consecutive meetings of the board without good and sufficient reason, his seat may be declared vacant and shall be filled by selection made by the remainder ofthe board until the next annual general meeting. (i) If any member of the board shall die, resign or become ineligible for any reason, the vacancy so arising shall be filled by selection made by the remainder ofthe board until the next annual general meeting. ( j) In the event of selection under clauses (h) and ( i) the proportion of members specified in clause (a). shall not be altered or modified." Dissolution of the club is provided for in paragraph 23:- "23. Dissolution If a written requisition by at least five percent (5%) of the members of the dissolution of the club shall be received by the board then such requisition shall be determined at a special general meeting held not lessthan one month thereafter at which not less than ten percent (10%) of the members shall be present. If confirmed by a resolution passed by a majority of three-quarters of the members present and voting thereon, the club shall thereupon be dissolved and any property and assets shall be transferred to the trustees of the Beenlei gh Sub Branch of the R. S . L. I -- 11 of 34 -- 11 subject to such encumbrances as shall exist." The club needed financial assistance to keep it solvent, and loans were made by the sub-branch from time to time to a total amount of $130,169.20. Details of those loans are set out in Exhibit 9. The sub-branch claims that approximately $122,000.00 of that amount is still outstanding, together with another $25,500, which the club refuses to acknowledge as a debt. The company is, however, repaying the $122,000 under protest with c\ interest. The sub-branch is a body established under the rules and C: by-laws of the Returned Services League of Australia (Queensland Branch). The State Branch is divided into District Branches, and each District Branch comprises a number of Sub-Branches designated and known by the name of the State Branch followed by the name of the city or town, locality, establishment, organization or group where or in connexion with which they are C '/, , formed. c: The objects of the League are many, but chief among them are objects designed to preserve the memory of those who have served in the Australian Defence Force and to promote their welfare and that of their dependants. The first object of the League is: "To perpetuate the close and kindly ties of friendshipcreated by a mutual service in the Australian Defence Force or in the forces of nations traditionally allied with Australia and the recollections associated with that experience, to maintain a proper standard of dignity and honour among all past and present members of the Defence Forces of the Nation, and to set anexample of public spirit and noble-hearted effort." The League's objects are then not primarily commercial, although in order to carry out its objects, it does conduct -- 12 of 34 -- c () c~ 12 enterprises which have a commercial aspect. I now turn to the history of this dispute. On December 14, 1990 the president of the club sent a letter to the secretary of the sub-branch on the subject of "incorporation":- "At a recent meeting of the Board of the Country Club it was decided that the incorporation of our Club should be considered. Although we have not yet decided to go ahead with incorporation and feel that there is no urgency to incorporate we are considering the matter and wish to ask if your sub-branch has any matters which your members may wish to bring to our attention before we proceed with incorporation. Members of my Board would be very willing to meet with representatives from your sub-branch to discussmatters which would be of interest to both bodies. Incorporation will allow the introduction of poker machines, etc. which must be of financial benefit to all of us." The company was registered from February 14, 1991 under Division I of Part 2.2 of the Corporations Law of Queensland as a public company limited by guarantee. A deed was made on February 15, 1991 between the board members of the club and the company which recited that the C company was formed for the purpose, inter alia, of taking over the funds and other assets and liabilities of the club, and that the company was limited by guarantee by which every member of the company undertook to contribute an amount not exceeding $10.00 in the event of the company' s being wound up. Under the deed it was agreed, inter alia, that the board members of the club should hand over, and the company should take over:- " (a) the full benefit of all pending agreements made by theBoard members in connection with and on behalf of the saidClub business; -- 13 of 34 -- () () c c 13 (b) all Bills of Exchange, Promissory Notes, Cheques and Drafts of the Board members in connection with the business; (c) all the books and other debts in connection with the Club business and the full benefit of all securities for the same; (d) all plant, machinery, stock-in-trade, office furniture and property whatsoever belonging to or to which the Board members and every other member of [the Club] are entitled in connection with the said business." In a letter dated February 19, 1991, the solicitors for the club wrote to the solicitors for the sub-branch advising that "pursuant to a special general meeting of the club", the club was incorporating, and continued:- "we accordingly now formally seek your clients' consent to the transfer of basis [sic] currently in the name of the club to the company now incorporated being Mt. Warren Park Country Club Limited. We enclose for your convenience necessary forms to be executed by your client and returned to our office together with your copy of the head lease and sub-lease so that the assignment may be noted thereon." That letter and the enclosed documents were not received by the solicitors for the sub-branch. Mr. Eric William Pearse, at present the senior vice- president of the sub-branch, was a member of a select committee established by the sub-branch in October or November, 1990, to report to the sub-branch on a number of issues including "incorporation". He said in evidence he did not recall "specifically" seeing the letter of February 19, 1991, and explained the effect of the· circumstance that the sub-branch officials were all volunteers as follows:- " ... the R. S. L. sub-branch is an organization which doesn't necessarily hop up and down as soon as it gets a letter from somebody. Being all volunteers, and the fact that the correspondence has to go through a chain of command, a line of recipients, it could be some time before such a letter was received." (Transcript, -- 14 of 34 -- 14 p.96). Mr. Pearse first became aware of the existence of the company on February 24, 1991 - the day of the club's annual general meeting. With a letter dated February 27, 1991 from the solicitors for the club to the solicitors for the sub-branch, a copy of the company's memorandum of association was enclosed, together with amended "General Consent" forms (Exhibit 8) for signature by the trustees of the sub-branch. No deed of covenant of the sort referred to in clause 1(b) of the head lease and clause 1(b) of the lease has been received by the respondents. On April 11, 1991 the solicitors for the sub-branch wrote ~ to the solicitors for the club asking that agreement be reached concerning loans made by their client to the club. The letter gives $364,154.14 as the sum owed by the club at December 31, 1990. On April 12, 1991 the solicitors for the club again wrote to the solicitors for the sub-branch seeking the return of duly C:' executed general consents "or alternatively your reasons for withholding consent for our client's consideration". On May 1, 1991 the solicitors for the sub-branch replied saying that they were instructed to advise that it was not possible for their client to sign the consent to the transfer of leases as one of the trustees was then out of the State and was not expected to return to Queensland for approximately two weeks. On June 4, 1991 the solicitors for the sub-branch sent to the secretary of the club three notices of breach of covenant under the Property Law Act 1974, as amended. They alleged:- 1 • Arrears of rent of $607.01 under the sub-lease; -- 15 of 34 -- 15 2. Arrears of rent of $607.01 under the lease; and 3. A breach of covenant under the lease in that the club had altered the constitution of the lessee in several material respects without the consent of the lessor. It will be convenient if I mention here that at the beginning of the hearing of this matter Mr. Crowley Q.C. for the respondents announced that the rent had been paid in accordance with any notices issued by the sub-branch and that the respondents were not basing any of their arguments on this application on any allegedly outstanding rent. Later Mr. Crowley added that that concession had been made for the purposes of this application only - it was not a concession at large, as he put it. I should add that the present provisions relating to the rent of the lands could, as Mr. Crowley Q.C. said in the course of submissions at the end of the hearing, arguably be regarded as uncertain. No point was made of that by either side before (: me. Its relevance is rather as a feature of the dispute which has arisen out of a possible transition from what might be called ·c / a domestic relationship between sub-branch and club to a commercial arrangement. On June 5, 1991 the solicitors for the sub-branch wrote to the solicitors for the club and the company as follows:- "We are instructed to advise that our client will not sign the con~ent to transfer the leases as our client regards your client as being in substantial breach of the leases in that they have failed to pay the rentalas notified to them and they have altered the constitution without our client's consent. Notices to Remedy the abovementioned breaches have been forwarded to your client by certified post." -- 16 of 34 -- c: c 16 On June 11, 1991 the solicitors for the club wrote to the solicitors for the sub-branch requesting particulars of the alleged differences between the constitution approved by the lessor and the articles of association of the club. A further request for those particulars was sent the following day. On June 14, 1991 the solicitors for the club wrote to the solicitors for the sub-branch advising that the sum of $607.01 had been left for collection at the office of the sub-branch prior to midday that day. They continued:- "The company agrees to correct any omission or error which occurred when transfering the Constitution to Articles of Association. Please advise as a matter of urgency which specific clauses of the Articles of Association you require changed and our client will attend to same. As this attends to your clients objections to the transfer of the leases we now request that the signed general consent to transfer of leases be delivered to our office within seven (7) days and that your current objection to transfer of the liquor licence be removed forthwith failing which we have instructions to proceed to obtain Declaration that the lease be transferred to our client." On June 20, 1991 the solicitors for the club sent a further letter noting that they had not received the "General Consents to Transfer of Leases", and foreshadowing further action if they were not received by 4.00 p.m. the following day. On July 1, 1991 the solicitors for the sub-branch sent a letter to the solicitors for the club enclosing a copy of a notice to remedy breach of covenant which they had forwarded to the club by certified mail and which alleged arrears of rent of $1,214.02. On July 29, 1991 the solicitors for the sub-branch sent a letter to the solicitors for the club enclosing a schedule which -- 17 of 34 -- 17 set out the variations between the club's constitution and the company's memorandum and articles of association. The letter also records that the solicitors for the sub-branch had been handed a copy of a caveat lodged by the company "pursuant to a claim based upon a Deed of Assignment dated 15th February". They went on to say that their client had no knowledge of any such deed of assignment. That appears to be a reference to the deed made on February 15, 1991 between the board members of the club and the company. The solicitors for the club replied in a letter dated August 7, 1991 asking the solicitors for the sub-branch to advise of C their client's instructions as to which of the variations were objected to and the changes the sub-branch wished to be made. The solicitors for the club said that their client remained willing to co-operate with the sub-branch concerning that matter. On August 8, 1991 a letter in the same terms was sent from the solicitors for the club to the solicitors for the sub-branch. A special meeting of the board of directors of the company was held on September 12, 1991 following a meeting at the premises of the South Eastern District on September 5, 1991. It was resolved by the directors that the board agree "in principle to the changing of the articles to reflect as close as possible, the original constitution provided all requirements of the Aust. Securities Commission are met, and said changes (including the re-instatement of the club's original name) be subject to all members approval at the next A.G.M .. Our solicitor to forward revised articles direct to S.E.D. for perusal." There is no evidence that the foreshadowed changes have been -- 18 of 34 -- 18 made. On September 18,· 1991 the solicitors for the club sent a letter to the District Secretary of the South East District of the League asking that the District Secretary consider proposed amended articles of association, the company's original articles of association, the memorandum of association and the club's constitution. The letter also refers to the fact that the sub- branch had lodged an objection to the transfer of the liquor licence from the club to the company - another matter in contention between the parties. (The sub-branch has reported the club to the Licensing Commission for alleged breaches of the C ~, / relevant laws.) On October 2, 1991 the solicitors for the sub-branch sent a notice to remedy breach of covenant to the lessees of the country club claiming arrears of rent of $1,329.54. A series of letters beginning with a letter dated October 16, 1991 from the solicitors for the club to the solicitors for c·: the sub-branch show that at a meeting of the executive of the sub-branch on October 9, 1991 a dispute arose between some members of the board of the company and the executive.over the purported suspension of the former from the sub-branch. That dispute continued until at least the end of October, 1991. In a letter dated October 24, 1991 the solicitors for the company (who were also the solicitors for the club) wrote to the solicitors for the sub-branch recording that they had recently received instructions from their client concerning the assignment of the lease [sic] and the dispute as to rent between the parties. They said they were instructed to propose mediation -- 19 of 34 -- ' , r c\ c: C '\, / 19 between the parties. A memorandum dated November 4, 1991 sets out a proposal of settlement of the dispute between the parties by representatives of the sub-branch to representatives of the club. It followed a meeting between a South East District select executive committee and the sub-branch select committee on October 19, 1991. It was as follows:- "we the Sub-Branch move out: By this we mean, and notexcluding other proviso's not included herein,- A. We will agree to your Name Change. Mount Warren Park Country Club Limited. B. We will require to retain an office and Telephone in the building. c. We withdraw the necessity of maintaining 6 Beenleigh R.S.L.A. Sub-Branch members on the Club Board. D. A loan agreement will be required to cover the two amounts outstanding [$130169.20 and $25500] together with an Insurance Guarantee. E. A commercial Rental is to be paid. The amount of this rental will be advised to you in the near future. F. G. The transfer of the existing leases [if necessary in view of 'G' see below] would be facilitated, and objections to the transfer of the Licence - providing, You enter into a New Lease on a Commercial Basis. [Say 3x3x4] H. A Lease proposal could be submitted for your perusal in the near future. I. Any such lease would have to be approved by S.E.D. before being ratified. J. Any such lease would include a requirement that a copy of the tenant's Monthly Financial Report be given to the Landlord before the beginning of the following month." I have mentioned before that the question of arrears of rent -- 20 of 34 -- 20 is not an issue on this application. The question of rent payable in the future, however, is of necessity an important issue because of the words of Clause 1(b) of the lease and those of Clause 1(b) of the head lease. The 1992 annual report of the company, Exhibit 6, shows the rent paid to the sub-branch in 1990 was $54,000 and, in 1991 $54,203.48. Two valuers gave evidence as to the matter of the rent. On the evidence before me I conclude that a rental of $120,000 per annum is a fair assessment of a commercial rent of the lands. I accept Mr. Craven's valuation on this matter, in preference to that of Mr. Slater. Mr. Slater's assessment was based on one assumption that I find was false: that substantial work to the club house and associated facilities had been carried out by the club. I accept Mr. Pearse's evidence on that point as correct. The rents paid in 1990 and 1991 were clearly not commercial rents, but were artificially low because of the hitherto close c\ relationship between the sub-branch and the club. As one c: witness, Mr. John Cyril Thompson, put it, when asked whether the rent constituted or represented "any sort of market value": "No, it represents a joint venture between the R.S.L. and the country club to establish a facility for the good of all in the district." (Transcript, p. 18) . The witness went on to agree that the lease contains "domestic provisions, provisions which show that there is an in-house arrangement between sub-branch and club." In a letter dated November 5, 1991 the company's response to the sub-branch's proposal in the memorandum of November 4 was -- 21 of 34 -- c:\ c~ 21 sent to the secretary of the sub-branch:- "Dear Sir, RE: MEETING 4.11.91 The Board of Directors of the Mt. Warren Park Country Club Ltd. are prepared to g~ve consideration to your proposal aspresented by your President Mr. Arthur Eather at the abovementioned meeting. However the Board has been advised by the Secretary, S.E.D.R.S.L.A. that meaningful negotiations should commence as soon as possible on the basis that the Sub-Branch move out of the premises and a proper Landlord/Tenant relationship be established. Thiscannot occur until full details of the following Specific Items are made available: 1) 2) 3) 4) 5) Amount of proposed rental. Whether loans are incorporated in Rental. If loans are not incorporated in Rental - RepaymentTerms and conditions. Details to substantiate how the loan of $25,500 came into existence. Copy of proposed Lease. Please provide these details by Monday 11/11/91 in order that the Board of Directors may convene a Special Board Meeting on 12/11/91." By a letter dated November 11, 1991 the solicitors for the sub-branch advised the solici,tors for the company that if a resolution of the matters in dispute could not be reached by the parties their client was agreeable to putting the matter before mediator. By a letter dated November 12, 1991 the solicitors for the club wrote to the solicitors for the sub-branch asking for the sub-branch's urgent response to the company's letter of November 5, 1991. In a response of the same day the solicitors for the sub- branch said that they understood that the sub-branch and the company were negotiating directly with each other concerning the question of lease and the loan agreements. By a letter dated November 26, 1991 the solicitors for the ---, -- 22 of 34 -- 22 company advised the solicitors for the sub-branch that they then held instructions "to make the appropriate application to have the matter determined by the Court at the earliest possible date". They noted that the sub-branch's refusal to consent to the transfer of the leases had prevented their clients' applying for poker machine licences "which will cause our client considerable losses". By a letter also dated November 26, 1991 the solicitors for the sub-branch wrote to the solicitors for the company saying that although they had indicated that the dispute between the sub-branch and the company should be "dissolved" by mediation, (' mediation or even "the steps taken to obtain a mediation", were premature. That was still the point of view expressed in a letter dated December 4, 1991 from the solicitors for the sub- (' branch to the solicitors for the company in reply to a letter dated December 2, 1991 enclosing a mediation agreement for execution. The solicitors for the sub-branch recorded that they had only just provided the solicitors for the company with a draft copy of their client's proposed lease and their client's proposal with respect to rents and loans. A response came from the company's solicitors in the letter dated December 6, 1991 in which they record that they had been instructed to advise the solicitors for the sub-branch that the sub-branch's proposal had been considered by the company and found to be totally unreasonable. By letter dated December 16, 1991 the solicitors for the sub-branch wrote to the solicitors for the company saying that negotiations between their clients were continuing. -- 23 of 34 -- (~ c: 23 The originating summons in this matter was filed in the court on January 30, 1992. On April 30, 1992 the respondents as trustees of the sub- branch caused a writ of summons to be issued out of this court against the company as defendant claiming possession of the land the subject of the lease and the sub-lease and mesne profits from February 14, 1991 to the date of the writ. On May 1, 1992 the respondents as trustees of the sub-branch caused a writ of summons to be issued out of this court against the applicants as trustees of the club as first defendants and the company as second defendant claiming:- (a) A declaration that the respondents have no power pursuant to the constitution of the club to consent to assignments of the lease and the sub-lease from the applicants to the company and that there has been no resolution of the members of the board of the club permitting the assignments; (b) A declaration that upon the true construction of the constitution of the club and the lease and the sub- lease the purported assignment by the applicants to the company of the lease and the sub-lease is void and of no effect; (c) As against the applicants, forfeiture of the lease and the sub-lease; (d) As against the applicants, damages for breach of covenant; (e) As against the applicants, an order for the removal of caveats upon the land over the lease and the sub- -- 24 of 34 -- \j 24 lease; (f) As against the applicants, the·return of the sums of $122,614.55 and $25,500 being moneys had and received by the applicants as moneys advanced by the respondents to the applicants or on their behalf and repayable upon demand; (g) Such further or other orders as may be necessary to give effect to the relief sought in (a) to (f); and (h) Costs. The central issue on this application is whether it has been established that the respondents have acted unreasonably in, thus far, refusing to consent to the assignment of the lease and the sub-lease from the club to the company. The parties are bound of course not only by the relevant clauses of the lease and the sub-lease but also by the provisions of s.121(1) of the Property Law Act 1974, as amended: "121(1) [Covenant against assigning] In all leases whether made before or after the commencement of this Act, containing a covenant, condition, or agreement against assigning, undertaking, charging or parting with the possession of premises leased on any partthereof, without licence or consent, such covenant, condition, or agreement shall - (a) notwithstanding any express provision to the contrary, be deemed to be subject - (i) to a proviso to the effect that the licence or consent is not to be unreasonably withheld, but this proviso does not preclude the right of the lessor to require payment of a reasonable sum in respect of any legalor other expenses incurred in connection with the licence or consent .. " Clause 1(b) of this lease contains a qualified covenant against assignments which must therefore be read as providing that the lessors' consent may not be unreasonably withheld. -- 25 of 34 -- " ·' 25 Clause 1(b) of the head lease, which by operation of Clause 2 of the sub-lease applies ·to the obligations of the sub-lessors and the sub-lessees, also contains a qualified covenant against assignments which must be read as providing that the sub-lessors 1 ' . consent may not be unreasonably withheld nor may it be arbitrarily or capriciously withheld in the case of a respectable responsible and financially sound person or company capable of conducting efficiently the business then being carried on on the demised land. In a case of this sort, the effect of the words of the lease and the Property Law Act is not to give the lessee a right of action for an arbitrary or unreasonable refusal of consent, but merely to allow him, in a case of arbitrary or unreasonable refusal, to assign without consent, or to apply to the court for a declaration. (Woodfall 1 s Law of Landlord and Tenant, 28th ed., vol. 1., pp.482-3, paragraph 1-1179). The customary declarations asked for are those sought here (ibid., p.483, paragraph 1-1179), C "', .. but since the applicants have already purported to assign their interests in the lease and the sub-lease it might seem that they c: have no need of the declarations sought. The explanation for the pursuit of the relief sought no doubt chiefly lies in s.43 of the Real Property Act 1861, as amended. Because of the refusal of the respondents to consent to the assignments it has not been possible to register the transfers the applicants seek, s.43 applying to any unregistered instrument to prevent its being effectual to pass any estate or interest in any lands under the provisions of the Act. The burden of proving that the landlord has acted -- 26 of 34 -- 26 unreasonably rests on the tenant (Shanly v. Ward (1913) 29 T.L.R. 714; Mills ·v. Cannon Brewing Co. Ltd. [1920] 2 Ch.38; Pimms Ltd. v. Tallow Chandlers Company [1964] 2 Q.B. 547; and International Drilling Fluids Ltd. v. Louisville Investments (Uxbridge) Ltd. [1986] 1 Ch.513). The events that have led up to these proceedings may in my view be summarized in the following way. The club, which is very much the creature of the sub-branch and which bears in its name a reference to the League, in late 1990 decided that the introduction of poker machines would benefit its revenue and to that end decided, in effect, to dissolve itself, without invoking paragraph 23 of its constitution, and to re-appear in the form of a company so facilitating the acquisition of poker machines. The sub-branch was given notice of the matter in the letter of December 14, 1990, which said that the board of the club felt there was no urgency to incorporate. Events did however move quickly, without c=) notification to the sub-branch: the company was incorporated on February 14, 1991 and the deed between the club and the company C ', / was made the following day. Mr. Pearse, and, I infer, other members of the sub-branch, first became aware of the incorporation of the company on the day of the annual general meeting of the club on February 24, 1991. A few days following a letter was received by the sub-branch's solicitors requesting the consents. I do not think it unfair to say that in beginning these negotiations in the way it did the club did not act as openly as one might have expected, bearing in mind its provenance and its -- 27 of 34 -- c: c:: l~ 27 previously close relationship with the sub-branch; the whole affair got off on the wrong foot. That is of course not a decisive matter for the outcome of this application but it is part of the explanation for the fact that the negotiations between the parties have been protracted. It seems clear that following the events of late 1990 and early 1991 the sub-branch proceeded with cautious deliberation. I should add that the relevant office bearers of the sub-branch are volunteers acting in their spare time so that the making of decisions in the sub- branch is understandably slower than it would be in a commercial organization, particularly as it appears that it is necessary, or at least desirable, to consult bodies above the sub-branch in the League. The response of the sub-branch to the request for consent to the assignment of the lease and the sub-lease was initially given in the letter from the solicitors for the sub-branch to the solicitors for the club dated June 5, 1991: the consents would not be given because of arrears of rent and because of discrepancies between the constitution of the club and the memorandum and articles of association of the company. From the correspondence between the solicitors and the minutes of the special meeting of the board of directors of the company held on September 12, 1991 it is clear that discussions continued between the parties after June 5, 1991 concerning the memorandum and articles of association of a company. When he gave evidence before me on March 6 and 7 Mr. Pearse gave details of a small number of matters, including questions about control of the company, which were still of concern to the sub-branch, -- 28 of 34 -- \ 28 none of which appeared to be incapable of resolution. The negotiations between the parties were complicated by the dispute concerning the allegedly wrongful suspension of some members of the board of the company from the sub-branch. That dispute began at an executive meeting on October 9, 1991 and continued at least until late in that month. It no doubt made negotiations between the parties more difficult and has tended to lengthen them. By the time of the proposal in the memorandum of November 4, 1991 the South East District's select executive committee had come directly into this matter apparently approving a new (~' approach to the negotiations. To then the negotiations had been approached on the basis that the company would as nearly as possible take the place of the club as the close associate of the sub-branch; one strong objection to the company in its present form which was mentioned by Mr. Pearse in his evidence was that the company had dropped any reference to the League in its name. t~ The importance attached to the name of the club can be gauged from Clause 1(1) of the lease. On November 4, 1991 what was suggested was a severing of the close ties between the sub-branch and the company, including approval by the sub-branch of the use of the present name of the company. In return for this separation a new rent was to be established "a Commercial Basis". The letter of the solicitors for the sub-branch dated December 16, 1991 shows I conclude either that negotiations were. then still in train between the parties, or at least that their clients were willing to continue them. Mr. Pearse was questioned by Mr. Redmond, for the -- 29 of 34 -- ., 29 applicants, about the new approach to the negotiations:- "So that at least around about November of last year it was considered that an alternative leasing arrangement would be entered into, or could be entered into, by the sub-branch?-- Could be entered into, yes. And the transfer of the existing lease would be facilitated and no objection made to the transfer of the licence provided there be entry into a new lea~e on a commercial basis?-- That is what we have been negotiating on ever since this letter. We have been endeavouring to set this negotiation up between ourselves and the club. So, at this stage it is fair to say that it is the sub-branch's object to obtain a commercial rental for the premises, amongst other things?-- Yes, in accordance with the agreement as shown with our sub- branch - with our SED. But that is the proposal that is currently being acted on by the sub-branch; is that not the situation?-- That is one of the items concerned, yes. So you have communicated these matters to Mr have you not? The trustees have been advised matter?-- Yes, the trustees know all it."(Transcript, p.134) Eather, of this about Mr. Pearse had said earlier that the sub-branch would consider expressions of interest in the purchase of the lands subject to ,/ \_/ the lease and the sub-lease. The attitude of the sub-branch to this matter has evolved since it was first raised in February, 1991. On the evidence it has been prepared to accept two solutions to the dispute: either the company adopt a name incorporating a reference to the League and a memorandum and articles of association as close to identical with the rules of the club as possible thereby maintaining the close association between the club in its new persona and the sub-branch, or, alternatively, the company withdraw from the close association hitherto existing between the club and the sub-branch (as the company appears to wish), retain -- 30 of 34 -- 30 its present name, but occupy the premises "on a Commercial Basis" as an ordinary commercial tenant. It appears that as the attitude of the sub-branch has evolved during the course of these negotiations, and after consultation with the parts of the League organization to which it is responsible, the sub-branch now prefers the second alternative and is prepared to negotiate to achieve it. What the sub-branch is not prepared to accept is a severing of the close relationship but a retention of the present very favourable terms as to rent. In that approach to the matter it appears to me that it has acted, and is acting, reasonably. In the result my conclusion is that, insofar as the c respondents have thus far refused to consent to the assignment of the lease and the sub-lease, it has not been shown that they acted unreasonably. I should add that I do not think it has been established that the respondents have finally refused to consent to the assignment of the lease and the sub-lease. It appears to me that what has happened is that negotiations have been C~' interrupted by these court proceedings and by other acrimonious side issues but that the sub-branch has shown that it is willing to negotiate in good faith to bring this matter to a proper end. That conclusion is sufficient to dispose of this application, but there were four matters raised on the behalf of the respondents about which I think I should add some comments. First, it was argued that the constitution of the club establishes that the board of the club "had no power to incorporate a company" and no power to transfer any property to it. It is not necessary for my determination of the application to decide those matters, but in any event it appears to me that -- 31 of 34 -- ·c 31 the relevance of the first question may be questioned and the second question is a matter to be determined,· and properly so, in the action begun by the respondents on May 1, 1992. Secoddly, Mr. Crowley argued that no resolution had been passed by the sub-branch adopting the Returned Services League of Australia (Queensland Branch) Act 1956-1977, as amended, so that s.3(1) of that Act, the effect of which is to vest real and personal property in sub-branch trustees if such a resolution has been passed, does not apply to the property of the sub-branch. He relied on the evidence of two witnesses, Messrs. Thompson and Halliday, who could not remember the passing of such a resolution. Sub-section 3(2) of the Act provides however that a certificate that a resolution as referred to in sub-section 3 ( 1 ) has been passed by any sub-branch on a particular date adopting the Act signed by persons purporting to be the president and secretary of such sub-branch shall be taken as sufficient evidence that such sub-branch has adopted the Act upon the date named in the certificate. There is in evidence a copy of a certificate to that effect giving August 2, 1977 as the date of / the relevant meeting (see Exhibit 23). There are no minutes of (_/ the meeting of August 2, 1977 in the minute book of the sub- branch (Exhibit 27), but references to it may be found in the minutes of the monthly meetings of July 19, 1977 and August 17, 1977. In the circumstances I am satisfied that the resolution was properly passed. Thirdly, it was submitted that the sub-branch was bound by Rule 87 (g) of the Rules and By-laws of the Returned Services League of Australia (Queensland Branch) to obtain the approval -- 32 of 34 -- <!' • 1;- ' p If l:i . .. 32 of the State Branch. The rule actually provides for the approval of the District Branch: " (g) No Sub-Branch nor its Trustees, including Women's Auxiliaries, shall sell, lease, transfer, convey, alienate, mortgage or otherwise dispose of its property, real or personal or property held in the name of the State Branch other than for a valuation established by a Registered Valuer or Valuers appointed by District Executive without the prior approval of District Branch unless such disposal is provided for by State Rule 6(iii)." . /-·-., No valuation was produced to the sub-branch when the consent of the sub-branch to the assignments was sought, but whether the State Rule 6(iii) referred to in Rule 87(g) applies to this case ( / is not clear. Rule 6 ( iii) in the copy of the Rules and By-laws tendered as Exhibit 10 is an object of the League not apparently relevant to this topic. In any event it is not necessary for me to decide this point, because for other reasons I am satisfied the application should fail, but I think in the circumstances it is completely proper and reasonable for the sub-branch to consult I' C> its District Branch before proceeding with any step in this matter, even if it is not required to have its formal approval. Fourthly, Mr. Crowley argued that by the time the request for consents was made there had been a "de facto assignment" and that the case is analagous to one where the lessee assigns without having applied for consent, in breach of the covenant. He relied on this passage in Andrew G. Lang, Leases and Tenancies in New South Wales, 1976, p.117: "If the lessee assigns without having applied forconsent, in breach of covenant, the lease is liable to forfeiture and the lessor cannot thereafter "be required to consent, and it is in that event irrelevant, whether the lessor's refusal would have been unreasonable, if consent had been sought at the -- 33 of 34 -- 33 relevant time. (Eastern Telegraph Co. v. Dent [1899] 1 Q.B. 835 (C.A.))." See also: Barrow v. Isaacs [1891] 1 Q.B. 417, and Woodfall, loc. cit. That is a narrower point than the one upon which I have reached my decision, but it appears to me to have merit. In the result, then, the application is dismissed. -- 34 of 34 --