The Commonwealth v. Oldfield

(1976) 10 ALR 243
(1976) 50 ALJR 535
133 CLR 612
40 LGRA 269

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(Judgment by: Jacobs J) Court:

Judges: Mason J
Gibbs J
Stephen J

Jacobs JMcTiernan J

Judgment date: 8 April 1976

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Judgment by:
Jacobs J

The only subject of this appeal is the true construction of cl 2, sub-cl (d), of a lease of certain lands from the appellant to the respondent dated 27 June 1958. Clause 2, sub-cl (d), is as follows:-

2.

THE Commonwealth covenants with the lessee-

(d)

if any land is withdrawn from this lease pursuant to paragraph (g) of clause 3 of this lease, to pay to the lessee the value at the date of the withdrawal of all fixtures and erections on, and of all improvements on or effected by the lessee or by a prior lessee under this lease or under a prior lease of the land to, the land so withdrawn, except such fixtures, erections and improvements, if any, as are expressly excepted from the purchase by the lessee under paragraph (j) of Clause 1 of this lease and except such fixtures, erections and improvements as are removed by the lessee in pursuance of paragraph (e) of this clause, such value to be ascertained by agreement or in default of agreement by arbitration under the provisions of the laws for the time being in force in the said Territory relating to arbitration;

In determining the true construction of the sub-clause, two other sub-clauses need particular consideration and I shall set these out:-

1.

THE lessee covenants with the Commonwealth-

(j)

to purchase from the Commonwealth for the price or sum of five hundred and seventy seven pounds fifteen shillings (in this lease called the purchase money) such of the fixtures, erections and improvements on the said land as at the commencement of the said term were the property of the Commonwealth excepting boundary fence between points Q-R-S-T-U-V-W-X- Y-Z as shown on the said plan annexed hereto.

2.

THE Commonwealth covenants with the lessee-

(e)

that if any land is withdrawn from this lease pursuant to paragraph (g) of clause 3 of this lease, the lessee may, but it shall not be obligatory on the lessee so to do, within seven days after the withdrawal or within such further time as the Minister may in writing allow, remove from the land so withdrawn any fixtures, erections or improvements thereon.

The questions which arise can be stated as follows:-

(1)

Are timber treatment (viz clearing), pasture improvement and the provision of shade and shelter plantings "improvements" within the meaning of sub-cl 2(d)?

(2)

If so, are they (in particular timber treatment) "improvements on the land"?

The significance of the second question is that certain timber treatment was done before the first leasing by the Commonwealth in 1917. Therefore this treatment cannot be an improvement "effected by the lessee or by a prior lessee under this lease or under a prior lease of the land to" the land. But it may be or may not be an improvement on the land depending on the true construction of the clause.

In my opinion, timber treatment, pasture improvement and the provision of shade and shelter plantings are all "improvements" within the meaning of that word in the clause - and throughout the lease. There may first be noted a consistent line of authority in this country which gives the word a meaning which embraces the effect on pastoral or agricultural land of these activities. Morrison v Federal Commissioner of Land Tax (1914) 17 CLR 498 ; Campbell v Deputy Federal Commissioner of Land Tax (1915) 20 CLR 49 ; Fisher v Deputy Federal Commissioner of Land Tax (1915) 20 CLR 242 ; Keogh v Deputy Federal Commissioner of Land Tax (1915) 20 CLR 258 ; McGeoch v Federal Commissioner of Land Tax (1929) 43 CLR 277 . These are all cases decided on the construction of the Land Tax Assessment Act 1910 (Com), as amended from time to time, and, moreover, in a statutory context where the tax was levied upon the unimproved value of land. That was defined as "the capital sum which the fee simple of the land might be expected to realize ... assuming that the improvements (if any) thereon or appertaining thereto and made or acquired by the owner or his predecessor in title had not been made". "Value of improvements" was defined to mean "the added value which the improvements give to the land ...". Griffith CJ in ; Morrison v Federal Commissioner of Land Tax , supra, at 503 said: "What operations of man are improvements? When I say 'operations of man', I think the term should be limited to what is done by the owner for the time being, that is, after the land has ceased to be Crown land. Any operation of man on land which has the effect of enhancing its value comes within the definition of 'improvement'."

It appears to me that the considerations which led the court in these cases to give the word "improvements" a meaning which would include what is done in improvement of quality of the soil and thereby the usefulness of the land apply as much to the words of this lease as to the words of that statute. In addition there is the conjunction in this lease of the words "fixtures" and "erections" with the word "improvements". If the latter word did not include improvements of the quality of the land itself there would be few, if any, things which the word would denote.

We were pressed with the submission that the cases in this court determined before the decision of the Judicial Committee in Toohey's Ltd v Valuer-General [1925] AC 439 are affected by the latter decision. But ; McGeoch v Federal Commissioner of Land Tax , supra decided otherwise. The same argument was pressed and was refuted in that case as has been pressed in this case. ; Toohey's Ltd v Valuer-General was held to be distinguishable because it was dealing with the quite distinct point that improvement in value of land caused by extrinsic circumstances (the adherence to the site of a licence to conduct a hotel) was not an improvement proper to be valued in determining "the value of improvements on the land or appertaining thereto". There is implicit in the decision the distinction between mere improvement in value and improvement as a physical act with its physical consequences (whether or not those physical consequences are visually recognizable as the consequence of the physical act). What was said by the majority of the court in ; McGeoch v Federal Commissioner of Land Tax in this respect is applicable to the argument presented on behalf of the Commonwealth in this case. We are concerned with the value at the relevant date of the physical consequences which enure to the land of the acts whereby the land attained a quality and usefulness additional to that which it had in its virgin state.

The work done and the physical consequences being improvements, are they "improvements on the land"? Improvements to land result in improvements on that land in the relevant sense. The preposition "on" does not here mean "on the surface of the land" or the like unless the word improvement is limited to physical objects placed or constructed on or in the soil, and for the reasons which I have given I do not think that the word has that meaning. But why then does cl 2(d) refer not only to improvements on the land but also to improvements effected by the lessee or a prior lessee under the lease or a prior lease to the land? I think that the reason appears clearly enough. If the clause had referred only to improvements on the land this could have been taken to include only improvements made by the lessee. Why, it might then be said, should a lessee be able to remove or be paid for anything else? On the other hand, if the clause had referred only to improvements effected to the land by the lessee or a prior lessee under the lease or a prior lease, it would not embrace improvements made before the first granting of a lease. But prior improvements were envisaged (see cl 1(j)). There is not intended a distinction in quality or kind between "improvements on" and "improvements to" the land. All "improvements" within the meaning of that word, once determined, are comprehended. The lessee was entitled to be paid for all improvements, whenever they were done, unless they came within the particular exceptions stated in cl 2(d). These exceptions were fixtures, erections and improvements removed by a lessee in pursuance of cl 2(e) and those expressly excepted from the purchase by the lessee under cl 1(j). Clause 2(e) allows the lessee on certain conditions to remove from the land any fixtures, erections or improvements thereon. I do not read this clause as referring only to a particular kind of improvement, namely, one on or distinctly visible or palpable on the surface of the land as distinct from one to the land. So also in cl 1(j) wherein the lessee agrees to purchase from the Commonwealth for a price stated "such of the fixtures, erections and improvements on the said land as at the commencement of the said term were the property of the Commonwealth excepting boundary fence ... as shown on the said plan annexed hereto". This must include all improvements without distinction between those on the surface of land and those to the land. Otherwise there would be a most curious result. The proposed lessee would purchase all improvements "on" the land but would be compensated under cl 2(d) for all improvements "effected to" the land not only by him or a prior lessee under the lease but also for any "effected to" the land by a lessee under a prior lease. Time and again the lessor would pay under cl 2(d) for improvements prior to the lease which had not been purchased under cl 1(j). They could not be excepted under that sub-clause because on this construction they could never fall within the sub-clause. I cannot conceive that such a result was intended by the parties in the operation of these clauses. I do not think that a qualitative distinction was intended between "improvements on" and "improvements effected to" the land.

I would therefore conclude that the disputed matters were wholly improvements on the land and wholly fell within cl 2(d). I would dismiss the appeal.