DAIRY LEASE

Hawera Star, Volume XLVI, 3 September 1926, Page 6

DAIRY LEASE

BUTTER-FAT RENTALS

JUDGMENT IN MALONE v. DROUGHT.

Written judgment has* now been fsivon t>v Mr J, S. Bflrtoiij S.M., in the case of Catherine Malone (Mr P. O’Dea) v. J. R. Drought (Mr H. L. Spratt)"; .a claim for £92 7 s,, the balance of rent calculated under the prolusion of the lease at Is 8d per lb of hutterifat taken, off the demised farm up to August 1, 1925. Tile lease, stated the judgment, proyidedi for rent as follows: —Firstly, at a, flat rate of £lls 8s per annum, payable half-yearly; and, secondly, at the rate of one shilling per acre extra rent for every farthing per lb of butterfat dm exctess of a basic rate of Is per lb of -butter-fat paid to the lessee by the dairy company supplied by him from the produce of the demised farm. The farm comprised 57§ acres, and thus, if the rate, paid, to defendant for butter-fat was Is 3d per ,01), the increase over the basic rate of it would be threepence, or twelve farthings, and the rent would thus be increased by 12s per acre, or 57.5 x 12 (in shillings) per annum, and a simple calculation showed that there would be an. increase of £34 10s per annum. This should be considered in the light of all defendant’s objections to the claim. Furthermore, the_ evidence' made it clear that, if the plaintiff established the legal basis of her claim, some adjustments diij the .period of the defendant’s liability would have to be mad©. The instrument of lease made it clear that both lessor and' lessee, on entering into it, contemplated that the farm would be used by the lessee as a dairy farm, and that the daily produce from it would' be sold to either the Hawera Co-operative Dairy Company, or some other similar company. “This,” continued the judgment, “was shown, by the fact that the figures which are to be taken into account for the calculation of the extra,_rent under the second heading are to be the published accounts of suoh company at the end of the period for which the company, published its accounts, and the extra rent is to be paid ‘upon completion of the 'said''returns or thfei publishing of the. said balance-sheet, and payment being made in full to the lessee ■ by the said dairy company for butterfat in respect of milk supplied.’ It is correct, as submitted by counsel for the : defendant, that the lease does not "oblige the lessee to use the farm as a daily farm, and it makes no provision for the case that, would arise if the lessee exercised his right to use the > farm for some totally different purpose. It. is also correct that, by its wording, ' the lease makes the lessee liable for the extra rent) for ‘so long a period a«s tliq lessee shall be a supplier of milk’ at a rate exceeding Is per lb for butterfat.' ■ “It is proved that the present defendant. is not the original lessee; he took an assignment of the lease and went into possession on October 1, 1924, and the transfer of the lease, to him, was duly registered’ on March 3, 1925. It is also proved, that on taking over on the Ist October, 1924, he began to supply the Hawera. Co-opera-tive Dairy Company with milk at the then current rate per lb for butter-fat. He continued to do this for two weeks; that would he for the first two weeks of October, 1Q24. The Hawera Dairy Company carries on its business in two main departments; in one it takes the milk of suppliers for the manufacture of' cheese, and in the other it takes over the cream for the manufacture of butter. In the former case the suppliers take to the factory the ‘whole milk.’ In the latter case they separate 'the milk at their farms, and take .only the cream to the factory. In either case the factory buys on the basis of ' the butter-fat content at so .much per lb; and in either ca,se the company makes a monthly payment to their supplier at an agreed rate per lb., such monthly payment being merely tentative in amount, and in the nature of art advance. When the result of thp whole year’s work is known, the accounts for that period' are made up. and a rate per ib for butter-fat is declared for the year, the transaction for thb year with the suppliers being then closed by the payment of a bonus, or the co 1 lection of a reclamation, to bring .the gross or net amount paid to the suppliers into agreement with, the ' declared price for the year, asi calculated on each supplier’s aggregate supply of butter-fat. The amoup b per lb of .butter-fat for the year is hot necessarily, or commonly, the same for atom suppliers And milk .suppliers. It depends on the respective "results of selling butter and cheese on the. London .market. There is, therefore, a speculative element' in a supplier’s decision to supply cream or milk to his factory. . “After the defendant had supplied milk to the factory for the first two weeks of the month of October, 1924, he decided that the other department of the fActroy offered better chances from a financial point of view, and he then changed over, from being a supplier of milk to being a suppher of cream. This involved the installation of a separator And .undertaking the work of separating at the farm. In February following this decision the defendant-lessee fold the plaintiff-les-sor that he had changed over, from milk 'supply to cream supply, and she made no objection. It was made quite clear bv the evidence that at this time neither party thought that this change in the nature of the supply made any difference to the respective rights and liabilities created by tT3e tease. The published accounts of the Hawera Dairy Company for the year ending June 30, 1925, show that the defendant’s decision to change over from milk to cream did not produce the result anticipated. Whan accounts were complete the bonus declared for milk supplier® brought their price up to Is 8d per lb of butter-fat for the year, whilst suppliers' of cream had to Ne content with Is 5.73 d pea” lb of butter-fat. The defendant now resists all claim for rent other than that which he was required to pAy, and has paid under the first main provision im the lease, viz;., rent at a flat rate of £lls 8s per annum, and h«a by liis counstel raises many grounds of defence. “I am of opinion that the ground iuAy he cleared ot several of them by grouping them, and applying a single principle to them. Having pionted out that, by the lease the defendant, is not bound to use his farm as a dairy farm, which sells its produce on the basis of so much per lb of butter-f Ate, counsel 1 asked the. Court to consider what the position would he in various hypothetical cases which he put. I .need not them all, hut may cite as typical the possibility that the lessee may have used the demised premises as a poultry farm, or may have soldi hi® milk at per quart to a- milk-vendor, or to a casein factory. Counsel argued thAt 'thesb- plain possibilities made the provisions for extra .rent of no effect, making, them bad ’ab init®’ as .being uncertain, and impossible of application. in certain likely and lawful ini stances of use of the lend. I do not take this view of the matter, And think that I am catted upon to .deal with the lease in the tight of the facts to the case as revealed by the evidence

of Actual happenings.. The provision which the plainti relies on is introduced and governed by, the words ‘so long as the lessee . . . shall be a supplier of milk.’ The onus 'lies on the lessor, when .seeking t-o recover this rent, to show’ that that condition has been fulfilled. If it ha® been fulfilled, it as no answer, ( in my opinion, to say that under certain other conditions it would hAve been fulfilled. If the governing condition of .the clause has not been fulfilled, as where the lessee used the farm for raising poultry only, it could be proved for the protection: of .the lessee, and to the .detnimeht of the lessor, that it had not been fulfilled, and again the clause would be tested by the same method of construction As it now applied to it. “There axe two other points raised by the defence that, in my opinion, may be taken together. They are based on criticism of the wording adopted by the draughtsman of the clause, and they nttack it as being ineffective. The first branch of this objection is that the 'whole, clause is introduced by words which make it a mere pro vlso, arid that it is a proviso which places a purely personal obligation on the original lessee, an obligation, that is to say, which does not run with the bind, and which, therefore, is not binding on the present defendant, who is merely an assignee. The second branch of the objection is that the clause carries w’ith it no fixed certain meaning, and that it is impossible for the Court to* gather from it, and the evidence taken at the hearing, any meaning which will enable the Court to pronounce a. judgment for a sum certain. I am of the opinion that the clause as it stands, whatever its intrinsic merits or defects may be, is a part of the whole stipulation in the [ease for the payment of rent.” The judgment proceeds' to construe the lease as if the present' defendant were the original lessee. Dealing with counsel’s more general submission that a reservation of rent would be bad unless it was stated w’itli* certainty, the Magistrate held that the submission was correct. It did not matter that the periods fixed for payment of the flat rate of £lls Bs, and those fixed for the payment of extra rent did not coincide. Approaching textural criticism of the .olause in question, it had been argued that the clause stipulated for. payment of the extra rent only as long as the lessee supplied “milk” to the factory, and that “milk” could not be said to include “cream.” Secondly, it was submitted that the use of the word “average” in the final clause and operative sentence of the whole clause either made it incapable of intelligible construction, or else deferred the lessor’s right of action till the end of the term when the average rental, on the suggested basis, could he calculated for the wdiole term. It was convenient to take the -second of these contentions first. At the hearing and argument it presented a difficulty to liis Worship, but that difficulty had entirely disappeared on a study of the evidence and consideration of the points, it suggested. The extra rent provided for by this clause might, where properly payable, be reasonably called an “average rent.” There remained, then, the question (in his Worship’s opinion, the only substantial question raised for the defence): Was the condition “so long . . . as the lessee shall be a supplier of mi’lk at the rate of Is per lb of butter-fat,” or at some greater rate, fulfilled by the lessee being a supplier of cream at a price based on the butter-fat content, and being more than Is per lb? It was quite clear that for ordinary purposes milk and cream were different things, and that if . a business contract stipulates for one of them it would not be satisfied with delivery of the other. It was equally clear, to make such a distinction in interpreting that contract would he to give effect to the intentions of the parties. The real question for the Court was: Would the real intention of the parties to this lease he found and maintained by holding that by tlie use of the word .jjmilk” they had expressed an agreement that was applicable to a supply to the factory of milk, hut is inapplicable to a supply of cream? The judgment quoted authorities in support of the opinion that the document should be given the "meaning which was the real intention of the parties to the instrument —the basis of tlie calculation of extra rent, as set out in the lease, was the lb of butter-fat. The reference to'milk was simply a reference to the vehicle, of conveyance of the butter-fat- constituent to the factory. The judgment proceeded: “I think I am entitled fo take judicial. notice of certain facts that have been proved before me many times in this court relating to the common practices of the staple industry of this district, viz., the dairying industry. The incidents of the hiring of share-milkers, of giving to storekeepers orders on the dairy factory for payment of store debts out of the monthly cheques for farm produce, and of* assigning to secured creditors the whole of such monthly factory advances, have been proved to mo over and over again, and the use of the term “milk cheques” and “milk supply” is commonly, if loosely, applied to the whole range of these transactions. Could it he suggested that the share-milkers who had contracted to do the ordinary work of such workers on a written promise of ‘one-third of milk cheques, and half pigs and calves,’ were entitled to nothing for the major item during the months in which the home separator was used and cream supplied to the factory? Such a suggestion, shocks common sense. I am of the opinion that the parties to this instrument, being owner and user respectively of a dairy farm in this district, working in the orthodox way by supplying to a co-operative dairy company, and being remunerated by a payment based on the butter-fat content of milk or cream, used‘the words ‘supplier of milk at ... per lb of butterfat’ to mean ‘a supplier of butter-fat in the ordinary way, in this district.’ ” Defendant was liable for the extra relit based on the factory price per lb of butter-fat supplied by the defendant to the Hawera Dairy, Factory from October 12, 1924, to June 30,'1925, this price being Is 8d for the first fortnight, and Is 5.73 d for the rest of the term. The parties had agreed that the amount so described was £47 12s 6d, and judgment was entered for the plaintiff for that sum with costs £6 6s.