New South Wales Supreme Court CITATION : Queanbeyan City Council Crown Reserves Reserve Trust v Marellen Pastoral Co Pty Ltd [2009] NSWSC 1101 HEARING DATE(S) : 9 October 2009 JUDGMENT DATE : 9 October 2009 JURISDICTION : Equity Division JUDGMENT OF : Palmer J EX TEMPORE JUDGMENT DATE : 9 October 2009 DECISION : Judgment for Defendant. CATCHWORDS : CONTRACT - CONSTRUCTION – Meaning of "anniversary" in context of whole clause. CATEGORY : Principal judgment PARTIES : Queanbeyan City Council Crown Reserves Reserve Trust (Plaintiff) Marellen Pastoral Co Pty Ltd (Defendant) FILE NUMBER(S) : SC 1789/09 COUNSEL : S.M. Nixon (Plaintiff) G. Curtin (Defendant) SOLICITORS : Elrington Boardman Allport (Plaintiff) Baker Deane & Nutt (Defendant) 1789/09 Queanbeyan City Council Crown Reserves Reserve Trust v Marellen Pastoral Co Pty Ltd JUDGMENT – Ex tempore 9 October, 2009 1 This case raises a short point of construction of the rent review clause in a lease between the parties. There is no dispute as to the facts. 2 The Plaintiff lessor is the owner of a caravan park at Queanbeyan which is operated by the Defendant as lessee. The lease of the caravan park is for a term of twenty years commencing on 1 March 1999. The rent clause in the lease is as follows: "3.1 The Lessee shall pay to the Lessor during the term hereof rental as follows: a) For the first three (3) years the sum of Thirty Thousand Dollars ($30,000) payable monthly in advance with the first month at the time of signing this lease. b) For years four, five and six, rental shall be reviewed at the anniversary of the commencement date hereof according to the following formula: A = B x x/y where A is the rental to be paid for the ensuing three (3) years. B is the rental paid for the year immediately prior to the review. x is the most recently published quarterly Consumer Price Index Number for Sydney (All Groups) prior to review. y is the Consumer Price Index Number for Sydney (All Groups) published for the quarter 1 year prior to that set out in x. PROVIDED THAT if the Australian Bureau of Statistics shall not have published a figure for the Consumer Price Index (All Groups) Sydney then the provisions of this clause shall cease to apply and in lieu thereof the Lessor shall within thirty-one days from the expiration of each three year period of this Lease give written notice to the Lessee for the rent to be adjusted and in such event for the residue of the term or until such further adjustment shall be made pursuant to the provisions hereof as the case may be the yearly rent shall be at the rate agreed between the parties or failing agreement at the rate determined by the State Valuation Office. Such valuation shall be made on the basis of the Current Market Rental value of the premises at the time of expiration of the previous twelve months of the Lease and such determination shall be final and binding on the parties. The costs of such valuation shall be borne by the parties in equal shares. c) For the remainder of the term rental shall be reviewed each three years in accordance with the formula and procedures set out in Clause 3.1(b)." 3 The Plaintiff says that clause 3.1(b) requires the rent to be reviewed on "the anniversary" of the commencement date, meaning 1 March in each year of the whole term remaining after the first three years. Reliance is placed on the ordinary meaning of the word "anniversary", which denotes an annual occurrence. 4 The Defendant submits that clause 3.1, construed as a whole, requires the rent review to take place only once every three years, the rent being fixed for the following period of three years, or triennium. In my opinion, the Defendant's construction is correct for the following reasons. 5 It is of particular significance that paragraph (a) of clause 3.1 unquestionably fixes rent for a triennium, namely $30,000 for the whole period of three years from the commencement date. Clause 3.1(c) also requires all rent reviews following the first review to be triennial. If clause 3.1(b) is read as requiring annual reviews rather than triennial reviews as the Plaintiff submits, then there is an anomaly, the reason for which is not apparent. 6 Clause 3.1(b) construed in the context of the whole clause can be read in either of two ways. It can be read to mean "rental for year 4, year 5 and year 6 shall be reviewed at the anniversary of the commencement date, namely 1 March in each of those years", the consequence being that there is a rent increase in each year. Paragraph (b) can also be read, having regard to the whole clause, as meaning "for the triennium being years 4, 5 and 6, the rental shall be reviewed at the anniversary of the commencement date, namely 1 March in the year of review", the consequence being that in year 4 there is a rent increase for the triennium commencing in year 4. Then (c) provides that rent reviews thereafter fix rent triennially using the same formula as provided in paragraph (b). 7 The Plaintiff's construction of paragraph (b) as requiring rent reviews annually from year 4 to the end of the twenty year term is inconsistent with the express requirement of paragraph (c) that all reviews after the first shall be triennial. 8 The Defendant's construction of (b) is consistent with the scheme of triennial rentals provided in paragraphs (a) and (c). It is also consistent with the formula in paragraph (b) because the amount to be determined by the rent review, that is "A", is a triennial rent, not an annual rent. It is a rent to be applied for three years. The Defendant's construction is also consistent with the proviso to paragraph (b) which requires that a "Lessor shall within 31 days from the expiration of each three year period of this Lease give written notice to the Lessee for the rent to be adjusted". 9 How does the formula in (b) operate according to the Plaintiff's construction? "B" is the rent for the year immediately preceding the review. For the first review paragraph (a) has not fixed an annual rent. It has fixed a triennial rent of $30,000 payable monthly. To arrive at a figure for "B", one must assume that the monthly instalments are equal and produce a sum of $10,000 for each year of the triennium. If one assumes that X equals 5 and Y equals 4, then "B" multiplied by X divided by Y produces $12,500. "A" then says that $12,500 per year is to be paid for each of the ensuing three years. The Plaintiff says, however, that paragraph (b) means you must perform this exercise each year on the anniversary of the commencement date so that, in effect, you must ignore what "A" requires. 10 According to the Defendant's construction of paragraph (b) in the context of the whole clause, one performs the review exercise once every three years on 1 March taking "B" as the rent for the third year of the triennium as determined according to paragraph (a) for the first review or as determined by paragraph (b) for subsequent reviews. There is no inconsistency involved in the Defendant's construction as there is in the Plaintiff's construction. The Defendant's construction is also consistent with the mechanism specified in the proviso to paragraph (b) which applies if no consumer price index figure is published. 11 For these reasons, I am satisfied that the Defendant's construction of the clause is correct. 12 Consequently, there will be judgment for the Defendant on the Plaintiff's Amended Statement of Claim. The Plaintiff will pay the Defendant's costs of the proceedings. – oOo – DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.