Royal Botanic Gardens and Domain Trust v South Sydney City Council

[2002] HCA 5

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(Decision by: Gleeson CJ, Gaudron J, McHugh J, Gummow J, Hayne J, Callinan J)

Royal Botanic Gardens and Domain Trust
vSouth Sydney City Council

Court:

Judges:
Gleeson CJ
Gaudron J
McHugh J
Gummow JKirby J

Hayne J
Callinan J

Subject References:
Contract
Interpretation
Ambiguous term of lease
Admissibility of evidence of surrounding cir-cumstances to assist in interpretation of ambiguous contract or term
Term that lessor 'may have regard' to certain matters
Whether lessor limited to consideration of those matters
Public or statutory bodies as parties to lease
Relevance of legislation relating to parties in order to construe term of lease
Contract
Terms and conditions
Implied obligation or duty of good faith and fair dealing

Legislative References:
Registration of Deeds Act 1897 (NSW) - The Act
Sydney Corporation Act 1932 (NSW) - The Act
Fourth Schedule of the Local Government (Areas) Act 1948 - s 25(1)
City of Sydney Act 1988 (NSW) - The Act
Crown Lands Consolidation Act 1913 (NSW) - Section 5(1)
Public Trusts Act 1897 (NSW) - s 3
Domain Leasing Act 1961 (NSW) - The Act
Royal Botanic Gardens and Domain Trust Act 1980 (NSW) - s 5(1)
Real Property Act 1900 (NSW) - The Act
Conveyancing Act 1919 (NSW) - s 23B(1)

Hearing date: 6, 7 September 2001
Judgment date: 14 February 2002

Canberra

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Decision by:
Gleeson CJ
Gaudron J
McHugh J
Gummow J
Hayne J
Callinan J

Appeal

This was an appeal from the New South Wales Court of Appeal which allowed an appeal from a decision of the primary judge in relation to the construction of a lease.

J T Gleeson SC and A S Bell instructed by Minter Ellison for the appellant.

D F Jackson QC and P J Brereton instructed by Pike Pike & Fenwick for the respondent.

[1] This appeal from the New South Wales Court of Appeal ^[1] concerns the construction of a deed (the lease) dated 15 May 1976 between, on the one part, four persons collectively identified as "the trustees of the Domain" and called "the lessors" and, on the other part, the Council of the City of Sydney called "the lessee". The lease was registered under the provisions of the Registration of Deeds Act 1897 (NSW) (the Registration of Deeds Act) on 17 March 1984. By force of subsequent statute, the present appellant, the Royal Botanic Gardens and Domain Trust, stands in the place of the trustees of the Domain and, where appropriate, in these reasons will be called "the lessor", and the respondent, South Sydney City Council, stands in the place of the Council of the City of Sydney and, where appropriate, in these reasons will be called "the lessee".

[2] It will be necessary later in these reasons to say something further respecting the legislative antecedents of the lessor and the lessee. However, it should be noted at the outset that the Domain referred to is part of that area set apart and identified as such from the earliest days of European settlement. The history of the matter is detailed, particularly by Barton ACJ, in Williams v Attorney-General (NSW ). ^[2] His Honour points out that at least since the time of Governor Darling portions of the Domain have been reserved for public purposes including recreation. ^[3]

[3] The lease recites the construction by the Council of the City of Sydney with the consent of the then trustees of the Domain in the strata of the land identified in the Schedule as "the demised land" of a building used for the purpose of accommodating vehicles on payment of a fee or charge and a footway leading thereto. The former is defined as "the parking station" and the latter as "the footway". The strata identified as "the demised land" is leased to the lessee for a term of 50 years commencing some 18 years before the date of the deed, that is to say on 1 May 1958. As will appear, this lapse of time is significant for the issue of construction with which this appeal is concerned.

[4] Clause 1 of the lease, which contains the demise, continues:

YIELDING AND PAYING during and in respect of the first three years of the said term the yearly rent of Two thousand dollars ($2,000.00) AND YIELDING AND PAYING thereof after the first three years of the term and during and in respect of each of the fifteen periods each of three years and the remaining period of two years comprising in all the residue of the said term a yearly rent which shall be determined by the Trustees in respect of each and every such period as is hereinafter in Clause 4(b) provided ...

[5] The litigation turns on the correct construction of cl 4(b), in particular of para (iv). Clause 4(b) provides:

That the yearly rent payable during and in respect of each of the fifteen periods each of three years and the remaining period of two years comprising in all the residue of the said term after the first three years thereof (each of such periods being hereinafter referred to as "the affected periods") may be determined by the Trustees at the commencement of each of the affected periods and the yearly rent so determined shall be payable during and in respect of the then succeeding three years of the term PROVIDED that:

(i)

the Trustees shall notify the Lessee of the yearly rent as so determined as soon as practicable after the commencement of each of the affected periods;

(ii)

any necessary adjustment of rent shall be made between the Trustees and the Lessee on the next day for payment of rent following such notification to the Lessee;

(iii)

the yearly rent determined by the Trustees as aforesaid shall not in any event be less than Two thousand dollars ($2,000.00); and

(iv)

in making any such determination the Trustees may have regard to additional costs and expenses which they may incur in regard to the surface of the Domain above or in the vicinity of the parking station and the footway and which arise out of the construction operation and maintenance of the parking station by the Lessee.

[6] The respondent, as the current lessee, instituted a proceeding in the Equity Division of the Supreme Court of New South Wales seeking declaratory relief respecting the construction of cl 4(b). The relief sought was to the effect that the appellant, as lessor, in determining any amount of yearly rent in excess of the yearly rental payable over the three-year period immediately prior to that in question, was constrained by cl 4(b) only to do so by having regard to any additional costs and expenses which the lessor might incur during the three-year period for which the yearly rent was being determined in respect of the surface of the Domain above or in the vicinity of the parking station and footway and which arise out of the construction, operation and maintenance of the parking station by the lessee. However, the primary judge (Hodgson J) did not accept that construction of the lease. Rather, his Honour granted a declaration that the lease had "an implied term that in making a determination of rent pursuant to clause 4(b), the lessor must act bona fide for the purposes of determining a rent which is no more than a fair and reasonable rent". In his reasons for judgment, Hodgson J identified the operation of para (iv) of cl 4(b) as making:

... it clear that the lessor can take into account the matters referred to there, without thereby raising any question as to whether they are acting fairly and reasonably ...

[7] The relief by Hodgson J did not reflect the constraint which the lessee maintained was imposed by cl 4(b)(iv) and favoured the interests of the lessor. The lessee accordingly appealed to the Court of Appeal (Spigelman CJ, Beazley and Fitzgerald JJA) and was successful. The relief granted by the Court of Appeal included a declaration:

... that clause 4(b)(iv) of the lease dated 15 May 1976 between the Trustees of the Domain as lessor and the Council of the City of Sydney as lessee ("lease") specifies exhaustively the considerations material to a determination by the lessor of the rent payable pursuant to the lease.

[8] In this court, the appellant lessor seeks the setting aside of the orders of the Court of Appeal and in place thereof an order that the appeal from the primary judge be dismissed. In our opinion, the Court of Appeal reached the correct result and the appeal to this court should be dismissed.

[9] In his judgment, Fitzgerald JA referred to well-known passages in the judgment of Mason J in Codelfa Construction Pty Ltd v State Rail Authority (NSW ) ^[4] respecting the admissibility of evidence of surrounding circumstances to assist in the interpretation of a written contract if the language be ambiguous or susceptible of more than one meaning. In the present case, the difficulty concerns the phrase in para (iv) of cl 4(b) "the Trustees may have regard to additional costs and expenses". Does this mean that the trustees, in making a determination, cannot have regard to matters other than those additional costs and expenses? If the trustees may have regard to other matters, what are they? In a context such as cl 4(b), to specify a particular matter to which a party may have regard without expressly stating either that it is the only such matter or, to the contrary, that the specification does not limit the generality of the matters to which regard may be had is likely to result in ambiguity. It does so in the present case. The resolution of the ambiguity requires the application of settled principles of construction.

[10] In Codelfa , Mason J (with whose judgment Stephen J and Wilson J agreed) referred to authorities ^[5] which indicated that, even in respect of agreements under seal, it is appropriate to have regard to more than internal linguistic considerations and to consider the circumstances with reference to which the words in question were used and, from those circumstances, to discern the objective which the parties had in view. In particular, an appreciation of the commercial purpose of a contract: ^[6]

... presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.

Such statements exemplify the point made by Brennan J in his judgment in Codelfa : ^[7]

The meaning of a written contract may be illuminated by evidence of facts to which the writing refers, for the symbols of language convey meaning according to the circumstances in which they are used.

[11] In the Court of Appeal, Fitzgerald JA said that, when, consistently with Codelfa , the lease was read against the background of what he identified as the principal, potentially material, surrounding circumstances, para (iv) specified exhaustively the considerations material to the determination of rent by the lessor. The surrounding circumstances identified by his Honour were:

(a)

the parties to the transaction were two public authorities;

(b)

the primary purpose of the transaction was to provide a public facility, not a profit;

(c)

the lessee was responsible for the substantial cost of construction of the facility;

(d)

the facility was to be constructed under the lessor's land and would not interfere with the continued public enjoyment of that land for its primary object, recreation;

(e)

the parties' concern was to protect the lessor from financial disadvantage from the transaction; and

(f)

the only financial disadvantage to the lessor which the parties identified related to additional expense which it would or might incur immediately or in the future.

[12] That summary should be accepted. In order to show why this is so, it is convenient to return both to the legislative antecedents of the parties and to the dedication of the relevant portion of the Domain to public recreational purposes. The present is a case where both parties to the lease and their successors have been public bodies, moving within legislative regimes with which the common law respecting contracts for leases and leases interacts. Therefore, as in Tepko Pty Ltd v Water Board , ^[8] it is necessary to view the particular circumstances with an appreciation of the legislation.

[13] By statute enacted in 1842, ^[9] a body corporate and politic was instituted by and under the name, style and title of the "Mayor Aldermen Councillors and Citizens of the City of Sydney". Further legislative provision with respect to that corporation was made in 1850, 1879 and 1902. ^[10] The legislation was consolidated by the Sydney Corporation Act 1932 (NSW). That Act was repealed by s 25(1) and the Fourth Schedule of the Local Government (Areas) Act 1948 (NSW), Pt 3 Div 3 of which had contained a number of special provisions respecting the Council of the City of Sydney. It was at that stage of legislative development that the lease was entered into in 1976. The present respondent, South Sydney City Council, owes its existence to the City of Sydney Act 1988 (NSW) (the City of Sydney Act). Section 5 thereof provided for the alteration by proclamation of the boundaries of the City of Sydney by taking from it certain land and attaching that land to the City of South Sydney, a body constituted under s 10. It was accepted on the pleadings that the Domain car parking station was in an area previously within the boundaries of the City of Sydney and that the City of South Sydney succeeded to it.

[14] The City of Sydney Act provided in Sch 3 for savings, transitional and other provisions. Part 3 thereof (cll 7-8) provided for commissioners appointed under the City of Sydney Act 1987 (NSW) to make arrangements for the apportionment of assets between the two councils and for the making of a proclamation to give effect to those arrangements. Paragraphs (a) and (g) of cl 8 provided, respectively:

(a)

all real and personal property (including any estate or interest in, or right to control or manage, real or personal property) that, immediately before [the date of that proclamation], was vested in the City Council vests in the South Sydney Council;

...

(g)

any contract, agreement or undertaking entered into with the City Council and in force immediately before that day becomes a contract, agreement or undertaking entered into with the South Sydney Council ...

By this legislative path, the present respondent stands in the position of the lessee under the lease.

[15] The position respecting the lessor and the subject land is more complicated. Section 5(1) of the Crown Lands Consolidation Act 1913 (NSW) (the Consolidation Act) defined "Crown Lands" as meaning:

... lands vested in His Majesty and not permanently dedicated to any public purpose or granted or lawfully contracted to be granted in fee-simple under the Crown Lands Acts ...

Section 24 authorised the minister by notification in the Gazette to dedicate Crown lands, among other purposes, for public health, recreation, convenience or enjoyment; the section went on to provide:

And upon any such notification being published in the Gazette, such lands shall become and be dedicated accordingly, and may at any time thereafter be granted for such purposes in fee-simple.

Section 26(1) empowered the minister, by notification in the Gazette , to appoint trustees to be charged with the care and management of, among other lands, those lands reserved or dedicated under the Crown Lands Acts. The subsection continued:

... and any grant issued to such trustees may confer such estate in such lands accompanied by such powers and with such conditions as he may think fit, and as may be therein specified ...

By two notifications, both dated and published on 22 December 1916, an area including the portion of the Domain beneath which the car park was later constructed was dedicated for "Public Recreation" and trustees were appointed.

Thereafter, on 29 December 1916, there was published a proclamation by the Governor. This recited the steps just described and vested in the trustees the subject land "to hold the same for the purposes of Public Recreation, with the same powers and subject to the same limitations as are conferred and imposed by the Public Parks Act 1912 [(NSW) (the 1912 Act)] upon Trustees appointed under the provisions of that Act". The proclamation was expressed as made in accordance with the provisions of s 3 of the Public Trusts Act 1897 (NSW) (the 1897 Act). This stated:

Where land has, before or after the day on which this Act takes effect, been set apart, dedicated, or reserved for any public purpose, under any Act, the Governor may by notice in the Gazette, and without any deed, grant, or other assurance, vest the land in the trustees for such estate, and with such powers and subject to such limitations and conditions as he may think fit.

In turn, s 8 of the 1912 Act provided:

Trustees shall, for all purposes of this Act, and of any by-law thereunder, be deemed to hold an estate in fee-simple in the land for which they were appointed, but shall not be capable of alienating, charging, or in any way disposing of such land, or any part thereof:

Provided that trustees may, with the consent of the Minister, lease or grant grazing or other temporary licenses to occupy or use any portion of such land for such purposes, on such terms and subject to such conditions as the Minister approves.

[16] The four individuals identified as trustees of the Domain in the lease and therein called "the Lessors" were those in whom the subject land was vested pursuant to s 3 of the 1897 Act to hold for the purposes of public recreation and with the powers and limitations conferred and imposed by the 1912 Act.

[17] The area of the dedication made in 1916 was specified in the Gazette as having an area of about 178 acres. A further dedication under s 24 of the Consolidation Act was notified on 28 October 1955; the area specified was 170 acres 1 rood and 28 perches, the contraction being attributable to the statement in the notification "(ex Vice-Regal Residence, Conservatorium and Art Gallery)".

[18] The primary judge found that in 1955 the Sydney City Council had proposed the construction of a car parking station in the Domain. There followed negotiations involving that body, the trustees of the Domain and the Department of Agriculture. His Honour found:

In these negotiations, it was contemplated that there would be a fifty year lease, with rent payable by the Sydney City Council at £1,000 per annum, subject to periodic review. It appears that the amount of £1,000.00 was based on an estimate of the additional expense that would be incurred by the Trustees by reason of construction of the car park in respect of maintenance, gardening and other services.

The car parking station and footway were constructed by the prospective lessee, the Sydney City Council, and were opened on 8 April 1958. The Sydney City Council paid rent at the rate of £1000 per annum commencing on 1 May of that year. However, during 1957, the Crown Solicitor had formed the view that there was no power in exercise of which the trustees could grant the lease in question and that special legislation was required. That eventually led to the enactment of the Domain Leasing Act 1961 (NSW) (the Domain Leasing Act). This stated in the long title that it was "[a]n Act to make provision for leasing, and licensing the use, of certain land within the Domain to the Council of the City of Sydney ... to amend the Crown Lands Consolidation Act, 1913, as amended by subsequent Acts; to validate certain matters; and for purposes connected therewith". The reference to validation is important because it deals with the effect of steps taken by the trustees with respect to the car park and footway before the Domain Leasing Act.

[19] The problem as to the power to grant the lease has a bearing upon the context of the transaction. In particular, it indicates the remoteness of the transaction from commercial concepts of market rental, and opportunity costs to the parties. Leasing of land dedicated for use by the public for recreational purposes gave rise to serious legal issues. The issues are reflected in cases such as Randwick Corporation v Rutledge , ^[11] decided in 1959, and Storey v North Sydney Municipal Council , ^[12] decided in 1970.

[20] So far as relevant, s 4 of the Domain Leasing Act stated:

Notwithstanding anything contained in any other Act, it shall be deemed always to have been within the power of the trustees to grant or give such leases, authorities, consents, licenses or rights of occupancy as have been granted or given by them before the commencement of this Act:

(a)

to the Council for or in connection with the construction, operation and maintenance by or on behalf of the Council on parts of the Domain of a car parking station and a moving footway leading thereto;

and all leases, authorities, consents, licenses or rights of occupancy so granted or given and all conditions, including payment of rental, subject to which such leases, authorities, consents, licenses or rights of occupancy were so granted or given, are hereby validated.

[21] Before turning to the state of affairs to which the validating operation of s 4(a) applied, reference should be made to later legislation, the Royal Botanic Gardens and Domain Trust Act 1980 (NSW) (the 1980 Act). Section 5(1) of that Act constituted a corporation with the corporate name "Royal Botanic Gardens and Domain Trust" and thus constituted the present appellant. Schedule 3 of the 1980 Act is headed "Transitional and Other Provisions". Clause 1 thereof defined "former trustees" as meaning "the trustees appointed pursuant to section 37O of the [Consolidation Act] who were, immediately prior to the commencement, trustees of the Trust lands described in Schedule 2, or part thereof". Clause 3(2)(a) vested in the new body property which had been vested in the former trustees and para (e) stated:

... all deeds, contracts, agreements, arrangements and undertakings entered into with the trustees of the Trust lands described in Schedule 2 and in force immediately before the commencement shall be deemed to be deeds, contracts, agreements, arrangements and undertakings entered into with the Trust ...

Part 2 of Sch 2 identified the Domain as among the lands vested in the trust. The trust, for the purposes of any New South Wales statute, is to be deemed a statutory body representing the Crown: s 5(4). The reference in the definition of "former trustees" to s 37O of the Consolidation Act is to a provision included in that statute by the Crown Lands and Other Acts (Reserves) Amendment Act 1974 (NSW). This had repealed various statutes including the 1897 Act and the 1912 Act. Section 37M(1) of the Consolidation Act provided for a definition of " reserve" as including lands in respect of which trustees appointed under the 1897 Act or the 1912 Act held office. Section 37O of the Consolidation Act had provided for the appointment by the minister of trustees of any reserve before it was superseded by the 1980 Act which constituted the present appellant.

[22] The objects of the evident validating purpose of s 4(a) of the Domain Leasing Act included an agreement for lease which had been reached between the relevant parties for the opening of the car parking station and footway on 8 April 1958. For the period commencing 1 May 1958, the council paid rent at the rate of £1000 per annum. This is significant in various respects. First, the term of the lease created by deed made on 15 May 1976 was expressed to have commenced on 1 May 1958 and the instrument repeated an obligation in respect of the first three years of the term to pay a yearly rent in that sum of what was now $2000 with, after the expiration of that first three years, and during and in respect of each of the 15 periods each of three years and the remaining period of two years thereafter, being in all the residue of the term, a yearly rent to be determined as described in cl 4(b). The deed also provided that the yearly rents in question were to be paid in advance on 1 May in each and every year. The obligation of the trustees under cl 4(b)(i) was to notify the lessee of the yearly rent as determined by the trustees in accordance with that provision "as soon as practicable after the commencement of each of the affected periods", that is to say as soon as practicable after the particular first day of May in question.

[23] Further, in addition to taking 1 May 1958 as its commencement date, the 1976 instrument proceeds expressly on the basis that its provisions do not contradict the regime under which the parties had operated in the long intervening period from 1958. Clause 4(l) stipulates:

That this Lease shall for the purpose of determining the rights and obligations of the parties be construed as if it had been executed on the date from which the term is expressed to run.

Further, the preamble recites the empowering provision in para (a) of s 3(1) of the Domain Leasing Act. This provided:

Notwithstanding anything contained in any other Act, the trustees may, with the consent of the Minister for Lands, from time to time grant:

(a)

to the Council such leases, and licenses for the use, of such parts of the Domain as may be necessary for the purposes of or for purposes connected with the operation and maintenance by the Council of the car parking station and the moving footway leading thereto, constructed before the commencement of this Act by or on behalf of the Council on part of the Domain ...

The empowering provision in para (a) of s 3(1) may be compared with the validating provision in s 4, to which reference has been made.

[24] The result of the operation of these two provisions in the Domain Leasing Act was both to validate any agreement for lease arrived at before the commencement of the statute and to authorise what later was done in 1976. In this way, any doubt as to the existence at any period of the necessary power to enter into these dealings was removed.

[25] It follows that the terms of any agreement reached under which payments were made at the rate of £1000 per annum commencing on 1 May 1958 are part of the immediately surrounding circumstances throwing light upon what later was expressed in the 1976 instrument "backdated" to 1 May 1958.

[26] To the content of that earlier agreement we now turn. The negotiations culminated in the following correspondence. By letter dated 17 January 1956, the Under Secretary and Director of the Department of Agriculture, on behalf of the trustees of the Domain, wrote to the town clerk of the Sydney City Council setting out the offer of the trustees respecting the terms and conditions of an agreement with the council for the construction and operation by the council of an underground car parking and servicing station on the site selected within the Domain. The terms and conditions which were then detailed included in cl 5 the statement that the trustees were to grant to the council a lease of the site on which the parking station was erected "excluding the turfed portion immediately above the Station". The proposed cl 5 continued:

The term of the lease shall be 50 years from the date on which the Station commences to operate. The rental shall be £1,000 per annum. If at the end of each three year period of the term of the lease the additional cost of maintenance of the Domain in consequence of the construction of the Station (namely the cost of employing one additional gardener and one person to provide necessary services on weekends and on public holidays and of supplying additional fertilizers) shall have varied from such cost at the commencement of such period, the rental for the succeeding period of three years shall be correspondingly varied by the amount of such variation but shall not in any case be less than £1,000 per annum.

The town clerk responded by letter dated 17 May 1956 suggesting what were said to be minor amendments to the terms of the proposed lease. The minor amendments did not include anything in cl 5. Those proposed amendments were accepted in a letter by the under secretary and director directed to the town clerk dated 8 June 1956. The letter concluded:

On advice of the Council's concurrence, the Crown Solicitor will be asked to prepare a formal agreement.

[27] The result appears to fall within the second category in Masters v Cameron : ^[13]

... a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document.

That formal document, drawn as a deed, was necessary for the creation of the proposed demise. The subject land was not under the provisions of the Real Property Act 1900 (NSW) as the subsequent registration of the lease under the Registration of Deeds Act indicates. ^[14] The deed was made necessary by s 23B(1) of the Conveyancing Act 1919 (NSW) (the Conveyancing Act) to pass an interest at law for such a lengthy term as 50 years. ^[15] In the meantime, the written agreement constituted by the correspondence ^[16] would attract recognition as a lease in equity under the doctrine in Walsh v Lonsdale . ^[17]

[28] The minutes of a meeting of the trustees held on 17 January 1957 state that the Crown Solicitor had been asked to prepare a draft agreement for lease of the site to the city council for a term of 50 years. However, the Crown Solicitor then discerned a difficulty respecting the enjoyment by the trustees of the necessary power. By letter dated 27 August 1957, the under secretary and director, on behalf of the trustees, wrote to the town clerk stating that, with regard to the preparation of the proposed lease, the Crown Solicitor had advised that he was not aware of any power under which the trustees might grant a lease to the council. The letter continued:

In the circumstances the only course seems to be to seek the enactment of special legislation to provide the Trustees with the necessary power and consideration is at present being given to such action.

[29] It is unnecessary to determine whether in truth the trustees under the legislation as it stood in 1957 lacked the necessary power. Nor is it necessary to determine whether, even if that power were absent, the subsequent acts of the parties over many years were such as to generate between them equities upon which the council might have relied in answer to any purported termination by the trustees of the relationship between them. What is of significance is, first, that in this correspondence there appears the genesis of what later became cl 4(b) and, secondly, that cl 4(l) of the lease set out above, in "backdating" the lease, postulates consistency between the lease and the earlier agreement for lease.

[30] Consideration of the antecedent materials and circumstances respecting the dealings between the predecessors of the present parties before entering into the deed in 1976 indicates various relevant matters: the parties to the transaction were two public authorities, in one of which there had been vested land long dedicated for public recreation; the purpose of their transaction was the provision of a further public facility, in the form of the parking station and the footway, but without disturbing the availability of the surface for continued public recreation and without providing for the obtaining by one public authority of commercial profit at the expense of the other; it was the lessee which was responsible for the substantial cost of construction of the new facility and the concern of the parties had been to protect the lessor from financial disadvantage suffered from the transaction, namely additional expense which the lessor would or might incur immediately or in the future.

[31] In the deed itself, various of these considerations are directly reflected. In particular, to the argument that, to deny to the lease a construction which permits the lessor now to determine a yearly rent at a "commercial" or "market" rate would unduly favour the interests of the lessee, the lessee responds by pointing to the capital investment made by its predecessor, and to the onerous obligations respecting the car park which bind the lessee.

[32] The recital, to which reference has been made earlier in these reasons, refers to the construction by the lessee in the subterranean strata of the parking station and footway; other provisions indicate that it is the lessee who bears all costs of operating the car park, maintaining it and refurbishing throughout its life as necessary and that, at the end of the term, the lessee will be obliged either to give up the car park to the lessor with no compensation in respect thereof or to follow the steps indicated in the proviso to cl 4(c). These stated:

PROVIDED HOWEVER that:

(i)

the Lessee may upon the expiration or sooner determination of this lease or within six months [thereafter] and with the previous consent in writing of the Trustees remove from the demised land all moveable improvements which may have been placed on the demised land by the Lessee or at the cost and expense of the Lessee;

(ii)

if the Trustees by notice in writing to the Lessee direct the Lessee so to do the Lessee shall remove any building structure or improvement or any material from the demised land at the expense and cost of the Lessee and the Lessee shall not be entitled to any compensation in respect of such removal ...

If the trustees give the consent indicated in (i) or a direction in (ii), cl 4(c)(iii) will require the lessee to:

... remove the movable improvements or the buildings structures or improvements or materials as the case may be from the demised land within such time as may be specified by the Trustees in such permission or direction and [to] leave the land hereby demised in a clean and tidy condition and free from rubbish and debris and restore the surface thereof for use as parkland for public recreation to the satisfaction in all respects of the Trustees ...

[33] Moreover, the lease may be brought to a premature determination; the lease is (cl 4(m)):

... subject to the power of the Minister to revoke wholly or in part the dedication of the subject land AND if such [dedication] be revoked in whole or part during the currency of this lease the rights and privileges hereby conferred shall as to the land so revoked absolutely cease and determine and neither the Lessee nor any other person shall be entitled to any compensation on account of such revocation ...

[34] The lessee is obliged by cl 2(g) to keep the parking station and the footway and all appurtenances thereto in good and efficient condition and in a thorough state of repair "in all respects to the satisfaction of the Trustees".

[35] The lessee is obliged by cl 2(h) to ensure that the surface of the Domain above the parking station and the footway do not become, in the opinion of the trustees, unsafe for use as parkland for public recreation. Further, it is for the lessee to pay to the proper authorities all charges for services supplied by them to the demised land or the parking station and footway, including charges for gas, electricity, excess water, removal of garbage and the rent of gas and electricity meters: cl 2(p).

[36] It is against that background that para (iv) of cl 4(b) is to be construed. This states that, in making any such determination of the yearly rent payable in respect of the then succeeding three years of the term, the trustees "may have regard to additional costs and expenses" which have a certain character. First, they must be incurred in regard to the surface of the Domain above or in the vicinity of the parking station and the footway; secondly, the additional costs and expenses must arise out of the construction, operation and maintenance of the parking station by the lessee. The word "additional" indicates that para (iv) is concerned with that which has not been taken into account in the immediately prior determination. As the successive determinations were made, each might be expected to include additional costs and expenses identified in para (iv). In the determination for the next succeeding three years, those additional costs and expenses would be measured against what was now said to be "additional". The clause made no provision for the trustees having regard in their determination to any other additional matters. Clause 4(b) read as a whole contained a statement of the totality of the matters to be taken into account in fixing the successive rent determinations. That is the way in which the arrangements between the parties had been agreed some 20 years before the execution of the deed in 1976. There is nothing to suggest that in the intervening period the parties had conducted themselves on any basis other than that the rent was to be computed in this fashion. Moreover, for the purposes of determining the rights and obligations of the parties to the lease, cl 4(b) was to be construed as if it had been executed on 1 May 1958: cl 4(l).

[37] This conclusion is reinforced by the absence from the lease of any mechanism for dispute resolution in relation to periodic rent determinations by the trustees. There are no provisions concerning arbitration, or valuation, of the kind that often appear in rent review clauses in long-term leases. This is consistent with the non-commercial nature of the transaction.

[38] If cl 4(b) be construed to the above effect, no question of uncertainty arises. ^[18] An implied term in the form favoured by the primary judge and urged by the appellant in this court would contradict the express terms of cl 4(b). ^[19]

[39] Two further matters should be noticed. First, reference was made in argument to several decisions of the House of Lords, delivered since Codelfa but without reference to it. Particular reference was made to passages in the speeches of Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society ^[20] and of Lord Bingham of Cornhill and Lord Hoffmann in Bank of Credit and Commerce International SA v Ali , ^[21] in which the principles of contractual construction are discussed. It is unnecessary to determine whether their Lordships there took a broader view of the admissible "background" than was taken in Codelfa or, if so, whether those views should be preferred to those of this court. Until that determination is made by this court, other Australian courts, if they discern any inconsistency with Codelfa , should continue to follow Codelfa . ^[22]

[40] The second matter concerns the debate in various Australian authorities concerning the existence and content of an implied obligation or duty of good faith and fair dealing in contractual performance and the exercise of contractual rights and powers. ^[23] It emerged in argument in this court that both sides accepted the existence of such an obligation in the exercise by the lessor of its rental determination power conferred by cl 4(b). Rather, the dispute between them was directed to the content of that power, in particular the construction of para (iv) of cl 4(b). The result is that, whilst the issues respecting the existence and scope of a "good faith" doctrine are important, this is an inappropriate occasion to consider them.

[41] The Court of Appeal was correct in the declaration made in order 2 of its orders ordered and entered on 31 August 2000. No question for this court arises as to the consequential relief given by the Court of Appeal.

[42] The appeal should be dismissed with costs.