Great Southern Pine v Pierre Allard [2011] NSWSC 1563

Supreme Court New South Wales

Medium Neutral Citation: Great Southern Pine v Pierre Allard [2011] NSWSC 1563 Hearing dates: 09/12/2011 Decision date: 09 December 2011 Jurisdiction: Equity Division - Commercial List Before: McDougall J Decision: Declarations: (1) Leases surrendered by operation of law. (2) Plaintiff entitled to have leases removed from Register. (3) Stand over balance of proceedings. Catchwords: LEASES - abandonment or resumption of possession by tenant - inference of surrender by operation of law - where sole permitted use of leased land brought to an end - whether grant of grazing licence over leased land amount to acceptance of surrender. Legislation Cited: Corporations Act 2001 Real Property Act 1900 (NSW) Cases Cited: Andrews v Hogan (1952) 86 CLR 223 Konica Business Machines Australia Pty Limited v Tizine Pty Ltd (1992) 26 NSWLR 687 NRMA Insurance Limited v B & B Shipping and Marine Salvage Co Pty Ltd (1947) 47 SR (NSW) 273 Category: Procedural and other rulings Parties: Great Southern Pine Pty Ltd (ACN 087 353 820) (in liquidation) (Plaintiff) The persons named in Schedule 1 to the summons (being certain members of the "Templegate Forestry Trust Wombat" managed investment scheme ARSN 092 667 439) First to Thirty-First Defendants) Registrar General of New South Wales (Thirty-Second Defendant) Representation: Counsel: N J Kidd (Plaintiff) Solicitors: Middletons (Plaintiff) File Number(s): 2011/334501

Judgment (EX TEMPORE) 1HIS HONOUR: The plaintiff is the proprietor of land near Yass in the State of New South Wales. Much of that land has been leased to various tenants as part of a scheme for the growing, felling and selling of trees known as pinus radiata . The scheme was constituted by a trust deed dated 11 April 1988. From 1 July 1998 the provisions of what was then Chapter 5C of the Corporations Law , dealing with managed investment schemes, came into force. Steps were taken to ensure that a number of projects conducted by the plaintiff, including the one with which I am concerned, would be (and in due course they were) registered as management investment schemes. The responsible entity for purposes of the managed investment schemes was Great Southern Managers Australia Limited (GSMAL). The plaintiff, GSMAL, and the former manager of the scheme (a company now known as Beagle Management Pty Limited) are in liquidation. 2The leases of the pine plantations were effected pursuant to a somewhat complex scheme whereby successive leasehold interests were granted. It is not necessary to go to all the detail of that, but it is necessary to know that the term of the lease commenced on a specified starting date and finished on a specified termination date subject, to earlier or later determination in the event that clear-felling of the leased land did or did not take place. In the former event, if clear-felling took place before the termination date, the lease terminated upon completion of the clear-felling. In the latter event, if clear-felling did not take place by the termination date, the term of the lease was automatically extended until clear-felling did take place. 3By cl 1.4(a), each of the lessees covenanted: "Not to use or permit any other person or persons to use the leased land...for any purpose other than cultivation and harvesting of pinus radiata trees." 4By cl 2.1, each lessee appointed GSMAL: "As manager of the commercial forestry activities...to be carried on upon the leased land." 5Thus, the scheme of the leases was clear. The land could only be used for the forestry or silviculture purpose that was specified. That purpose was to be carried on, on behalf of each lessee, by GSMAL. When that purpose came to an end (because the forests were clear-felled) the leases would come to an end. No doubt reflecting the intricacies of legislation relating to income tax, rent for the whole of the term of the leases, and the fees payable to the manager, were payable in one lump sum at the outset of the lease. 6Unfortunately, the project did not come to fruition. On about 18 January 2003 the trees growing on the plantation were destroyed by fire. About 18 months or two years later, salvage operations recovered what timber was left that was saleable. The land has not been used for forestry or silviculture purposes since then. 7The only actions undertaken by GSMAL as manager since the fire have been actions to recover the proceeds of insurances effected over the various leases (and the trees growing on them) and to distribute the net proceeds of the insurance claim to lessees. 8Further, there is evidence (admittedly on information and belief, but nothing turns on this) that no investor individually has carried out forestry or silviculture activities since January 2003. 9In April 2005, GSMAL wrote to lessees informing them that the scheme would be wound up. It took over four years for that proposal to be effected. It appears to have been wound up, in the absence of any objection by investors, in late 2009 pursuant to s 601 NC of the Corporations Act 2001 (Cth). For obvious reasons, GSMAL as responsible entity had come to the view that the purpose of the scheme could not be accomplished having regard to the events that I have recounted. 10The plaintiff wishes to sell the land. It wishes to do so with vacant possession. The evidence does not disclose that it has entered into a contract to give effect to this intention. However, the plaintiff has taken steps to invite lessees to surrender their leases. The defendants in these proceedings are lessees who, for whatever reason, either have not responded to that invitation or have done so in an ineffectual way. In addition, there is another lessee, a Mr Elias, who has not surrendered his lease but who has not been named as a defendant. 11The plaintiff contends that, in respect of lessees (including Mr Elias) who have not delivered effective surrenders of lease, the lease should be taken to have been surrendered by operation of law. 12The concept of surrender by operation of law was discussed (in the context of land held under the Real Property Act 1900 (NSW)) by the Court of Appeal in Konica Business Machines Australia Pty Limited v Tizine Pty Limited (1992) 26 NSWLR 687. 13In that case, Clarke JA, (with whom Priestley JA agreed) proceeded, as the parties in that case had done, on the basis that (see at 692-693): "...anything which amounts to an agreement on the part of the tenant to abandon and on the part of the landlord to resume possession of the premises, amounts to a surrender by operation of law." 14The quotation was taken from the judgment of Fullagar J in Andrews v Hogan (1952) 86 CLR 223 at 253. 15Clarke JA, having stated that principle, said at 693 that whether the landlord has resumed possession of the premises, or accepted the tenant's abandonment of the premises, is a question of fact. His Honour said that: "...an important consideration is whether the landlord has acted in such a manner as to show that it regards the lease as at an end." 16Thus, in NRMA Insurance Limited v B & B Shipping and Marine Salvage Co Pty Ltd (1947) 47 SR (NSW) 273 at 281, the Full Court said that relinquishment and acceptance were sufficient to bring a tenancy to an end: "...but relinquishment by the tenant and resumption of possession by the landlord must take place in such circumstances as to warrant an inference of an agreement that the lease shall be terminated." 17In Konica , Handley JA (who agreed generally with Clarke JA and with whom Priestley JA also agreed) stated the applicable principles to similar effect at 697. 18In this case, in respect of each of the lessees who has not delivered an effective surrender, there is in my view evidence to raise an inference that each lessee has relinquished possession. 19The leases were put into place for a single purpose: namely, to grow, fell and sell pinus radiata trees pursuant to a managed investment scheme (as it became). That purpose has been frustrated because the trees were destroyed by fire. The monetary equivalent of the trees - the proceeds of the insurance effected by GSMAL - has been recovered and has been distributed to growers (lessees). 20No lessee has the right to use the leased land for any purpose other than one associated with the cultivation of pinus radiata trees. On the evidence, no lessee has sought to do so. It is clear that GSMAL, as responsible entity and in effect the agent of lessees to carry out the management investment scheme, has neither the means nor the will to do so. It has declared that repeatedly, and has caused the managed investment scheme to be wound up. 21In those circumstances, the only permissible use (by the lessees) of the leased land has been carried as far as it can. There is nothing else for which the lessees can use the land. They have been told of this. They have been asked to surrender possession. Some have done so expressly. The defendants, and Mr Elias, have not done so expressly. 22Nonetheless, in the circumstances that I have outlined, I think it is clear that the defendants and Mr Elias should be taken to have abandoned the leased land, or to have relinquished possession of it. That is because they have no right that they can assert (other than their bare rights as lessees) and their bare rights as lessees do not entitle them to make any use of the land other than that use which has been brought to an end. 23The question is whether the plaintiff has accepted the abandonment by resuming possession of the land. In my view, on the evidence, it has. I do not regard the mere intention to enter into a contract for sale as amounting to a resumption of possession, or acceptance of abandonment, but there is evidence that the plaintiff, through an agent, has granted a grazing licence over the whole of the land to a Mr Roy Amos. That grazing licence was for three months commencing on 1 October 2009. It was renewed from month to month until April 2011. Of course, a licence is not a grant of exclusive possession (or of the right to exclusive possession). That is the hallmark of a lease, and the point of differentiation between a lease and a licence. 24Nonetheless, a licence gives (as does the present licence) the licensee the right to use the land. In the present case that is a right "to occupy and use the land during the term" of the licence. The licence specifies that the right given is not exclusive, but any right given to occupy and use land that had been leased, and in respect of which the lease has not formally been brought to an end, is necessarily inconsistent with the right of the lessee to exclusive possession. 25In those circumstances, I conclude, for each of the defendants and Mr Elias, the act of granting and renewing the grazing licence to Mr Amos amounts to a sufficient acceptance of abandonment, or resumption of possession, to lead to the inference in fact that there has been, by each of the defendants and Mr Elias, a surrender by operation of law. 26For those reasons, I conclude that it is appropriate to make a declaration to that effect. The position of Mr Elias needs further consideration, and I will hear counsel before pronouncing orders.

COUNSEL ADDRESSED 27I make the following orders: 1. Declare that each of the leases and sub-leases listed in schedule 2 to the further amended summons filed in court on 9 December, 2011 has been surrendered by operation of law. 2. Stand over to 9.30 am on 10 February 2012 before me the balance of the relief claimed by the said further amended summons. 3. Orders in accordance with paras 1-3 as amended of the form of order initialled by me and dated today's date. 4. Declaration that the plaintiff is entitled to have removed from the folio of the register maintained for purposes of the Real Property Act 1900 (NSW) relating to the land the subject of the leases referred to in the first declaration made today, each of the leases the subject of that declaration.

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