we VY Ate CONTRACT - Option ta renew for further fixed term agreement for the removal of sand. gravel and water-worn rack during a period of 15 vears - Purported exercise of aption ~ Pequirement of six months' notice - Whether notice must be given six months before expiration of original term - Whether condition precedent ta exercise of option fulfilled - Waiver - Estoppel. CONTRACT - Estoppel - Representation bv silence ~ Whether duty to speak - Whether representation relied upon. THE COMMONWEALTH OF AUSTRALIA wv. ANTONIO GIORGIO PTY. LIMITED No. ACT G 20 of 1986 Fisher. Gallop and Neaves Jd. 12 August 1986 Canberra ween vr er parece ree ts el aeeie Dame aac) me TN_THE FEDERAL COURT OF AMISTRALTA AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY GENERAL DIVISTON No. ACT G 20 of 1986 Sewer wwe ON_APPEAL FROM THE SIMPREME COURT OF THE AUSTRALIAN CAPTTAL TERRITORY BETWEEN : THE COMMONWEALTH OF AUSTRALIA Appellant AND: ANTONTO GIORGIO PTY. LIMITED Respondent MINUTE OF ORDER BS JUDGES MAKING ORDER : Fisher, Gallop and Neaves JJ, DATE OF ORDER s 12 August 1986 WHERE MADE Canberra THE COURT ORDERS THAT: 1. The judgment of the Supreme Court of the Australian Capital Territory given on1l April 1986 he set aside and in lieu thereof it be ordered that qidament in the action be entered for the defendant. with costs. The respondent pay fhe costs of the appellant of the appeal to this Court. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. i oteeadahceamt oud " [i acnaih spr aetediatehienainainny cammeacitaad we POT ree em TN THE FEDERAL COURT OF AUSTRALIA AUSTRALTAN CAPITAL TERRITORY No. ACT G 20 of 1986 DISTRICT REGISTRY ~wrevw~r ve GENERAL DIVISION ON APPEAL FROM THE SUPREME COURT OF THE AUSTRALIAN CAPTTAL TERRITORY BETWEEN : THE COMMONWEALTH OF ANISTRALIA Appellant AND: ANTONTO GIORGIO Pry. LIMITED Respondent CORAM: Fisher, Gallop and Neaves JJ. DATE: 12 August 1986 . REASONS FOR JUDGMENT The Court: The basic question for determination upon this appeal from a judgment of the Supreme Court of the Australian Capital Territory qiven on 11 April 1986 is whether, by reason of the events to be referred to, there is a subsisting contractual relationship between the Commonwealth of Australia ("the appellant") and Antonio Giorgio Pty. Limited ("the respondent") whereby the respondent has until a date in 1999 the exclusive richt to remove sand. gravel and water-worn rock from certain land in the Australian Capital Territory. ~ opm ee Stee Pinder s) The question arises inthis way. Aan aqreement in writing dated 28 October 1969 was made between the respondent and one Philip Cyrus Retallack who was then the owner in fee simple of certain land in the Australian Capital Territorv being Portions 13 and 13 in the Parish of Urayarra, County of Cowley (now known as Block 31 Coree). In consideration of the payment by the respondent of certain royalties, Mr Retallack granted to the respondent the exclusive right to remove sand, qravel and water-worn rock from part of that land, which included part of the hed of the Murrumbidgee River, during the period of 15 vears computed from 1 November 1969 on the terms and conditions set out in the agreement. In the aqreement the expression "the Licensor" referred to Mr Retallack, his heirs, administrators, transferees, successors and assigns and the expression "the Licensee" referred ta the respondent, tits successors and assiaqns. Clause 11 of the agreement provided: "11. Nothing herein contained shall he deemed ta give the Licensee any exclusive or non-exclusive passession of the land, nor create nor he construed aS conferring upon fhe Licensee any interest in the said land or anv part thereof. nar shall anything in this Aqreement create or be construed as creating the relationship of principal and agent between the Licensee and the Ti1censor." ere a : en > te, pera", * eeWrae Sona soo mer tere on TST tren po wa rae tp cu oe sof a nr iar . * ' .7 eeeeeemtenmen ete ete ee Clauses @ and 18 were in the following terms: "R, The Licensee will at its own expense maintain the said land ina clean and fidy condition at all times fo the satisfaction of the Department of the Tnterior, and take all necessary steps to prevent erosion of the said land, and fo comply with the provisions of the Conservation of the Soil Ordinance 1947 fas amended from time to time) and the Regulations made thereunder, and comply with any directions given to it by officers of the Department of the Interior." "18. The Licensee upon paying the rayalty hereby reserved and abserving the covenants and conditions herein contained shall have the right bv giving six months notice in writing to the Licensor of its intention. to exercise the right to renew this Aqreement for a further term of Fifteen vears upon the same terms and conditions as are herein contained, save and except this present envenant for renewal, and at a current market royalty for similar material." In November 1973 Mr Retallack sold to the appellant the whole of his land including the area the subject of. the agreement dated 28 October 1969. It is admitted an the pleadings that in or about 1974 it was agreed between the appellant and the respondent that, in consideration of the respondent paying to the appellant royalties on the conditions set out in the aqreement dated 28 Actober 1949, the appellant would permit and licence the respondent to remove sand, qravel and water-worn rack from the area the subject of that agreement upon the terms and conditions set forth therein. thor ow rego Yee aie toe rp ie Prior to the sale of the land to the appellant the respondent had removed material pursuant to the aqreement dated 28 October 1969 and had paid royalties to Mr Retallack. After the sale, the respondent continued to remove material from the land and paid royalties to the appellant in respect of material removed up to 31 January 1986. In the proceedings which it commenced in the Supreme Court of the Australian Capital Territory the respondent asserted that, having paid the royalties reserved and having observed the covenants and conditions contained in the agreement dated 28 October 1969, it exercised the right conferred upon it by clause 18 of that agreement to renew the agreement for a further term of 15 years. That right was said to have been exercised by a letter dated & May 1984 addressed by fhe respondent's solicitors to the appellant. The letter reads: "We desire to confirm that we act for the above Company and desire to draw vour attention to the fact that the term of the agreement between our client Company and the former owner Mr Philip Cyrus Retallack is due ta expire on the 30 October 1984. One of the terms of that aqreement with Mr Retallack was that our client Company would have an option for renewal of the agreement for a further term of fifteen (15) years upon the same terms and conditions as were contained in the agreement between the parties dated the 28 Oetober 1969, a eee net a cee oy eae Ce reg te eee ee res » Semmrac ete ey meet ee ne = eee ete We shall be obliged if vou could let us know whether vou are prepared toa aqarant our client Company such option period and if so an what terms and conditions." The respondent further asserted that the appellant had acquiesced in the right of the respondent to exercise the right of renewal, had waived any right that it might have had (which right was denied) ta object to the letter as giving the requisite notice and was estopped from denying its force and effect, Ta those assertions the appellant made the following answers. Tt denied that the respondent had validly exercised the right of renewal, relying both on the form of the notice and on conduct af the respondent alleged to constitute a breach of ifs obligations under clause 8 of the agreement dated 28 October 1969, It denied that there had been any waiver of its rights and that it was estopped from denying the force and effect of the notice. The learned primary judge found that there had been a failure by the respondent, in breach of clause 8 of the agreement, to take the steps necessary to prevent erosion of the land. That finding related to erosion which had occurred at the sides of an access road and on the margins of an area on the uphill side of a bay which had been nema ne ree, oad gms noe wat see. wpe? et r 270° mary Vw Cee eer mae nan wee J TRMITE TT fe ere a Wot ate ey rn she ' geo eens - vo ape ve es woke Ye es 6. excavated froma hill for use as a stackpile area. His Honour found that the erosion had taken place on the area of land in respect of which the right to remove material had heen granted. There was ample evidence to support the finding that erosion had occurred and that finding was not challenged by the respondent on the hearing of the appeal. It was, however, argued for the respondent that the primary judge had misconstrued clause 8 of the agreement. Tt was submitted that, on the proper construction of fhe clause. the requirement that the respondent "take all necessary steps to prevent erosion of the said land" placed no further or other obligation on the respondent than an obligation to comply with any direction qiven by the appropriate Minister under sub-s.4(1) of the Soil Conservation Ordinance 1960 (A.C.T.). Tt was further submitted, and it is common ground, that no such direction was given. Sub-section 4(1) of the Ordinance provides: "(1) Where the Minister is satisfied that a person who occupies, or has an estate or interest in, land has failed to take the action that the Minister considers necessary to prevent or arrest soil erosion on that or other land, the Minister may, by order under his hand, direct the person - (a) fo adopt, or to refrain from adopting or continuing to adopt, with respect to that land, any method of using or dealing with that land specified in the order; (h) to take on that land such other action to prevent or arrest soil erosion on that or other land as is specified in the order: or arr —- ~ (co) to bear the whole or a part of the expense reasonably incurred by another person in taking any action specified in the order, being an action that the other person is, nar could be. required, by order under this section. to take." That Ordinance repealed the Canservation of Soil Ordinance 1947 (A.C.T.) to which reference is made in clause 8 of the agreement. We are unable to accept the respondent's submission. The obvious purpose of the relevant words in clause 8 of the agreement requiring the respondent to take all necessary steps to protect the land from erosion was to give a measure of protection to Mr Retallack aqainst his land being destroyed or damaged by erosion as a result of the exercise by the respondent of the right conferred by the aqreement to remove material from the land. There is nothing in the lanquage used to suggest that Mr Retallack was content to confine the measure of protection to that which might derive from the exercise by the Minister of the powers conferred upon him by sub-s.4(1) of the Ordinance to which reference has been made. Indeed. the express requirement in clause 8 that the respondent comply with the provisions of the Conservation of Soil Ordinance 1947 (A.C.T.) as amended from time to time and the regulations made thereunder indicates quite clearly that the preceding requirement was not intended to have the limited operation ¢ ~ ae VETS = Woes sp ore "ys which the submission of the respondent would ascribe to it. Tf it were to be read as sq circumscribed, the express reference to the Ordinance and the regulations would he otiose. A further reason for concluding that the clause was not intended to he confined as suggested is that, if so construed, it might well have no operation as, in the light of clause 11 of the agreement, it may be doubted whether the respondent was a person who occupied, or had an estate or interest in, land so as to make it amenable to a direction under sub-s.4(1) of the Ordinance. There was evidence before the Supreme Court that, as ayresult of the respondent's operations, erosian had taken place on an island in the river bed bounded in part by a channel subject to intermittent flooding. However, the primary judge expressed himself as not being satisfied that there had been a failure to take the necessary steps to prevent erosion on the island as, in his Honour's view, the agreement envisaged the complete removal of the island by the respondent and had placed no restriction on the method of extraction of material from the site or. in particular, from the island. The appellant contended. and advanced reasons ta support the contention, that his Honour had erred in failing to find that there had been a breach of clause 8 of the agreement in relation to the respondent's activities in removing material from the island. The appellant's contention mav well he correct but, in the light of the ce seem e ear nane we ep ene ee 9. conclusions to which we have come, it is unnecessary to discuss 1t further. The next question that arises is whether. by reason of the respondent's breach of clause 8 of the agreement, it had failed to fulfil a condition precedent to the exercise ef the ridht of renewal conferred by clause 18. Related to this issue is the question whether the appellant is toa he taken, by its conduct, to have waived fulfilment by the respondent of that condition precedent and the further question whether the appellant is estopped from relying on such breach. Having regard to the aqreement as a whole and the intention of the parties to be gathered from its language, we are left in no doubt that, upon the proper construction of clause 18, compliance with clause 8 of the aqreement was a condition precedent to the exercise bv the respondent af the vight to renew. The language of clause 18 is. we think, capable of no other meaning. Counselt for the appellant submitted that the primary judge had erred in finding that the appellant had waived performance of the condition that the respondent take all necessary steps to prevent erosion of the land. He relied upon the decision of the Supreme Court of New South Wales in Gilbert J, McCaul (Aust.) Pty. Ltd. v. Patt Club TET Te oy " Se meme we eg eae vA ae % Dre gree eee tn eee ae Stee . 1a, Ltd, (1959) 59 8.R. (N.S.W.) 122. In that case a tenant had sought specific performance of a clause in a lease conferring an option ta renew. During the currency of the original lease there had been frequent failures to pay rent punctually but the lessor had raised no objection to such irregularity in payment. Dealing with an argument that the condition in the clause of the lease relating to renewal regarding the due and punctual payment of rent was a condition in the lessor's favour and that it had waived performance of it. the Court at pp.123-4 said: "In the present case the lessor irrevocably offered ta qrant a Lease. Its offer prescribed the time and manner for acceptance. Only by performing the conditions prescribed could it be accepted and result in an agreement for a lease, A purported acceptance without performance of the prescribed conditions would not and could not be an acceptance of the offer. It would in reality he a caunter offer by the original offeree requiring acceptance by the original offeror 1f an aqreement were to result. If a conditional affer is made and the offeree without performing the condition purports to accept it, that is to say makes a counter offer and that counter offer is accepted, it is a loose although not uncommon use of language to say that the original offeror has waived performance of the condition which was prescribed by his offer as being the manner of accepting it. In contemplation of law the oriqinal offeror has done no such thing. What he has done is to accept a counter-offer and in the result anagreement is made but it is not an aqreement consisting of the original offer and an acceptance of that offer." The primary judge expressed the opinion that that case ought to be distinguished by reason of the difference in the nature of the breaches which had occurred in that opener oa aos oe yore ST ein aren eee ee ee, ere ens nr ny is] Yoo 11. case and the nature of the hreach relied upon by the appellant in the instant case. His Honour said: "The breaches there referred to were hreaches which commonly occur in the relationship between landlord and tenant. Waiver of them during the currency of the appropriate lease has for long heen construed as not affecting the right of the landlord to rely upon such a breach as a failure to comply with a condition precedent to the qrant of an extension of the lease under an aption clause." After referring to Greville v. Parker £1910] A.C. 335, West County Cleaners (Falmouth), Ltd. v. Saly C1966] 3 All E.R. 210 and Reed v. Sheehan (1982) 39 A.L.R. 257 per Fox J. at pp, 264-5, his Honour continued: "The letter dated 25 June 1969 from the Department of the Interior, Land Administration Branch, to Mr Retallack and clause 8 of the agreement show that the parties were at all relevant times over a period of not less than 15 years mindful of the problems that erosion might cause. The plaintiff Crespondent] and Mr Retallack expected that the Commonwealth could at any time during the aqreement deal with any such problem as was of concern to wt by the intervention of a soil conservation officer acting ina qeneral supervisory capacity. The Commonwealth's position in this regard must have heen at least as strong when it became party to the agreement in November 1973. That 1t took no action over sucha long period when the parties must reasonably have expected that it would do so by its officers had they thought it necessary shows, I think, that there was a waiver by the Commonwealth of its rights concerning the taking of necessary steps by the plaintiff to prevent erosion." crowns mene Kt tree eon i ~ ¢e ow +e wri es me _s a TN ee nn ye ewe nn 13. The letter dated 25 June 1969 to which his Honour referred, and which his Honour was satisfied had come to the notice of the respondent at the time the agreement dated 28 October 1969 was executed, was in the following terms: "I vefer to the application by Mr Newell and yourself concerning extraction of bedding sand from the Murrumbidgee River at Portions 1 and 13 Parish of Urayarra, (Holding 98 Coree). The Department has no objection to your proposal. However, to avoid increasing the turbidity of the tiver, and to prevent any possible soil erosion, it would be appreciated if the operation could be carried out under the general supervision of a $911 conservation officer." Although Gilbert J. McCaul (Aust.) Pty. Ltd. v. Pitt Ciub Ltd. (supra) was a case of an aption for the renewal of a lease, the principle to which that decision gives effect must be the same ina case such as the present where the option is for the renewal of a licence. It may well be, as Fox J. said in Reed v. Sheehan (1982) 39 A.L.R. 257 at pp.264-5, that the language of a clause such as clause 18 of the agreement here in question is not to be construed in its strictest sense sa that the condition is complied with if, at the time when the right of renewal is exercised, the breach has been remedied. However, on the facts of this case, soa to construe clause 18 will not avail the respondent as at no time has it attempted to remedy the breach of the agreement found by the primary judge to have occurred. oe woe a pew nas we POSTE a ee see py eee i Ry oe aia ee metetd +o, anes ced Tt should also be mentioned that. if the letter of 8 May 1984 is properly to be construed as a counter offer, such counter offer was never accepted by the appellant. By letter dated 26 duly 1984 the appellant informed the respondent's solicitors that it was under no obligation to qrant a renewal of the licence but would "consider the grant of a new lease, subject to planning and environmental approval". The respondent subsequently applied for sucha lease but no tease was granted, the respondent being informed by letter dated 14 October 1985 that: "On both technical and planning grounds sand and qravel extraction in the Murrumbidgee River 15 an unacceptable use." By the same letter, the respondent was given one month's notice to vacate the site, The respondent's contention that the appellant was estopped from relying upon the breach of clause 8 as rendering ineffective the notice purporting to renew the agreement is based upon a representation by silence. The primary judge found that the appellant's knowledge that erosion had occurred derived from the recreational activities of Dr Bryan Pratt who, at the time he qave evidence, held the office of Assistant Secretary, Land Management Branch of the A,.C.T. Parks and Conservation eo ere FO eT cor cece sree ge er ee pe see 14, va ' Service in the Department of Territories. Der Pratt's evidence was that over a period of many years he had walked along that part of the Murrumbidgee River corridor which includes the site of the respondent's activities and had observed erosion of the soil in and about the access road since late 1979. His Honour found that. although the appellant was aware of the matters which constituted the breach of condition precedent to the exercise of the option to renew, it did not at any stage direct the respondent's attention to the breach. To found an estoppel, a representation must he clear: it must be such as will be reasonably understood in A particular way by the person to whom it is addressed. The representation, however, need not be express: "Gt may be implied by the words used or be adduced from either failure to speak where there is a duty to speak or from conduct: see Leqione v. Hateley (1983) 152 C.L.R. 406 per Mason and Deane JJ. at pp.435-9. But, a person will not be estopped from departing from an assumption or representation "\imless, as a result of adopting it as the basis of action or inaction, the other party will have placed himself ina position of material disadvantage if departure from the assumption be permitted" (Thompson v. Palmer (1933) 49 C.L.R. 907 per Dixon J. (as he then was) at p.547). The basis of the alleged estoppel is silence on the part of the appellant. But, before silence can amount to a com aces ee 15. representation it musk be shown that there was a duty on the party concerned to speak up. In the present case it must be shown that the appellant was under a duty to bring to the notice of the respondent the continuing breach of clause 8 of the agreement. The respondent seeks to find that duty in the provisions of sub-s.4(1) of the Soil Conservation Ordinance 1960 (A.C.T.) the text of which is set out above. The primary judge was wumable to find. and we respectfully agree with him, any relevant duty in the appellant arising from the provisions of the Ordinance. What sub-s.4(1) of the Ordinance does is to confer power on the relevant Minister to take action where there is a failure to take such steps as he considers necessary to prevent or arrest soll erosion. Any duty which the provision creates in the Minister is a duty owed toa the Crown: it is not a duty owed to the person responsible for the failure ta take appropriate remedial action in relation to the eroded land. But, with due respect to the primary judge, we are unable to agree that such duty arose from the circumstance that the appellant, fallowing its purchase from Mr Retallack, "became effectively the Licensor under the agreement". That circumstance, taken by itself or in combination with the letter dated 25 June 1969 to which reference has already been made, is in our opinion not sufficient to found the necessary duty. c. hw ' ' ' ' '1 tT Ye ac, menace amp wep ae vas ae recon Se wee esg rw " Owe gy Rowe nag cee eee - oe at ase ae seers > Coat 16. Even if, contrary to the view we have expressed, the conclusion is reached that the appellant by its silence represented to fhe respondent that it would not rely, for the purpose of clause 18, upon the breach of clause 8, there is nao evidence that fhe respondent relied upon that representation and, in consequence, placed itself in a position of material disadvantage. There 1s yet another ground upon which the appellant is, in our opinion, entitled to succeed, a ground depending upon the terms of the notice dated 8 May 1984. There is much to be said for the view that the lanquage of the notice was not apt to exercise the right of renewal in that it was cast in the form of a request to the appellant fo inform the respondent whether it was "prepared to grant «eee SUCH option period and if so on what terms and conditions". But, be that as it may, the notice failed to comply with the requirements of clause 18 in that it was given on 8 May 1984, that is to say, less than six months before the expiration of the term af the aqreement on 30 October 1984. For the respondent it was submitted that, on its proper construction, clause 18 required only that the notice of intention to exercise the right of renewal be given prior to the expiration of the period of 15 years during which the agreement was current. It was argued that there was no hal ar wt Pm re ry eg oe ne gee Sa ee 7. requirement that the period of six months' notice should fall completely within the period of the licence and that to read the clause as imposing such a requirement would be to introduce a new term into the agreement without any sufficient warrant for doing so. Counsel relied on Trustees Executars and Agency Co. Ltd. v. Peters (1959) 102 C.L.R. 537. That case, however, turned on its own peculiar facts. Te concerned the exercise of an option to purchase and, as the Court held, the express provision which had been made as to its exercise made no reference and had no specific relation to the continuance of the landlord and tenant relationship which had existed in respect of part of the land. The decision in that case provides no support for the respondent's contention. In our opinion the respondent's submission should be rejected. We think it is abundantly clear from the language of clause 18 that what Mr Retallack and the respondent as parties to the agreement intended was that the licensor should be qiven notice at least six months before the expiration of the period of the licence that the respondent as licensee intended to exercise its right to renew for a further period of 15 vears commencing contemporaneously with the termination of the original period. To construe the clause in the manner contended for by the respondent would, in the event that the notice of intention to renew was given at or close to the end of the roe 18, original period of 15 vears, have the result that the right fo remove material from the land would terminate on 30 Nctober 1984 and aqain become operative from the date six months after the giving of the notice. A construction which permits such 32 hiatus 1s inconsistent with the element of continuity between the original and the further term which 1s implicit in the notion of renewal to which clause 18 is directed: Associated Minerals Ptv. Ltd. v. N.S.W. Rutile Mining Co. Pty. Ltd. (1961) 35 A.L.J.R. 296 at p.298. Such a construction should not be adopted unless the lanquage is compelling. In our opinion, it cannot reasonably be thought that such a result would have heen in the contemplation of the parties when the agreement was negotiated. As the requisite period of notice was not given, there was no effective exercise of the right of renewal. The respondent did not seek relief from the consequences of its failure to serve the notice within time. If such relief had been sought, it is extremely doubtful if, in the circumstances, a court would have had jurisdiction to grant such relief (Samuel Properties (Developments) Ltd. v. Havek (1972) 1 W.L.R. 1296 at pp.1303-1307). An alternative argument was put on behalf of the appellant on the premise that the purported exercise of the Option to renew was effective. The argument asserted that the renewed agreement had been brought to an end pursuant to we Ss settee we ee pe aerineg * " a clause (clause 2A) which. in terms. provided that the Agreement was to become void and of no effect in the event of the Department of the Interior or anv other competent authoritv refusing or rescinding permission to remove sand, qravel and water-worn rack from the land. In wiew of the conclusion to which we have come that the option to renew was not effectively exercised. it is umnecessary to consider this alternative araqument. For the reasons we have qiven the judgment of the Supreme Court should be set aside. In Lieu thereof it should be ordered that there be judgment in the action for the defendant. with costs. The respondent should pay the costs of the appellant of the appeal to this Court. W) reese Le ae eee Sap aaemeniondtineataieee ser pt eacs te - ee ae : TI certify that this and the preceding 18 pages are a true copy of the Reasons for Judament herein of the Associate Dated: 12 August 1986 Counsel for the appellant : Me N.A. Hemmings Q.C. and Mr I.A. Curlewis Solicitor for the appellant : Australian Government Solicitor Mr F.X. Costigan Q.C. and Mr P.G&. Dodson Solicitors for the respondent : Gallens Counsel for the respondent Date of hearing 9 July 1986 Po 5 - rs ae o = . , ' po. eee ree ee ee ee ens eee va