Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12: Lease Obligations

The High Court of Australia has today (29 March 2017) allowed an appeal from the Supreme Court of Victoria regarding an unusual lease agreement in the case of Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12. Essentially, the Court held that the nature of the unusual lease obliged the lessee to pay all rates, taxes, assessments and outgoings in respect of the leased land, and not simply those imposts levied on the lessee in its capacity as the tenant.

Background

The lessor and lessee approached the arrangement with the intention that the lessor would in fact sell the farm land in question to the lessee for the sum of $70,000. However, due to planning restrictions affecting subdivision, the lessor could not sell the land subject to the lease to the lessee.

The parties then agreed to enter into a lease for a term of ninety-years in which the total sum of rental would be a one off payment of $70,000. The parties adopted a standard form printed farm lease and amended the lease accordingly. Clause 13 of the lease specifically outlined their intention for the nature of the lease to be as close to the sale of land as possible. As amended, Clause 4 imposed an obligation on the lessee in these terms:

Supreme Court

The lessor commenced proceedings in 2013 and sought a declaration that the lessee was obligated to pay all rates, taxes, assessments and outgoings in respect of the land. The primary judge made this declaration. However, the Court of Appeal allowed an appeal by the lessee to have the declaration set aside.

High Court Appeal

The High Court looked to the proper construction of clause 4 based on the premise that the intention of the parties was to produce a result that was consistent with the objective of the agreement. Drawing from clause 13, the Court found that the objective of the agreement was to recreate, as accurately as possible in a lease, the conditions which would have existed following a sale of land. Consequently, the Court ruled that it would make no commercial sense for the lessor to remain liable for the payment of rates, taxes, and outgoings given the objective of the agreement. The High Court set aside the Appeal Court’s decision and reinstated the primary judge’s declaration. 

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Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12 and Judgment Summary