Intention in the law

One of the things many people find most difficult to understand when they hear their lawyer talk is what the lawyer means by intention. To most of us intention is a mental thing, "I intend to go swimming at lunchtime" is a statement about me and what I plan to do.

But the law talks about this funny thing called objective intention and that can turn out to be the opposite of what the person intended in his or her own mind or what the person says he or she intended. To see why the law talks about objective intention let’s take the swimming example a bit further. I might say to you ", "I intend to go swimming at lunchtime" but I might be lying- perhaps its an excuse to avoid doing something I don’t want to do. If in fact I have not brought my swimming gear to work and if I go to the library then you might say "Kirsop never intended to go swimming."

It gets much more difficult when the lawyer is trying to look at what a number of people intended. The most common example is in a contract. Lets take the example of the sale of a commercial building. The vendor might say "I intended the margin scheme to apply" because in doing so it saves him GST and so he gets more money in his hand. The purchaser might not like that because if he is in business he can claim the GST back and so he ends up with more money in his hand. So its not very useful to listen to what the parties say they intended. Rather what the lawyers do is to look at what the parties did. Did the contract say the margin scheme was going to apply? Normally if it did say that the margin scheme will apply then that’s the end of it. But sometimes there are arguments. Say (to take a real example) the owner of a building leased a shop and in the lease gave the tenant an option to purchase the building. Say further the lease said that the terms would be those of the standard contract (which is drafted by the Law Society with input from the State government and the Real Estate Institute). That contract says that "normally" the margin scheme doesn’t apply. But when the tenant exercised his option the contract as prepared by the owner’s solicitors states the scheme does apply. The tenant and the lessor are arguing about what was intended. The owner says I always intended the margin scheme should apply and in his own mind he might be right but the lawyer needs to see what is the "objective" intention which is the intention that an outsider would say the people intended.

A very nice example of this is in a recent court case involving a house at Lithgow. More then 90 years ago miners had built houses on land known as the "Pottery Estate" owned by the mining company for which they worked. They paid a very low rental to the mining company,. They then sold their houses and the purchasers bought the house and continued to pay a low rental to the mining company. In 1969 Mr May purchased a 2 bedroom brick house within the Pottery Estate from a Mrs McIntyre. He paid her $1,000 and paid the mining company $85.80 rent in advance for 1969. Over the years the ground rent had increased to $18 a week (Mr May usually paid it monthly in advance but he –and the other people in the Pottery Estate – understood that it was a weekly rent). Mr May carried out various repairs and improvements. Around 1985 Mr May he arranged construction of a new roof at a cost of $5,500. In 1987 he arranged for electrical rewiring at a cost of $2,500.. In May 1995 Mr May arranged for the construction of a new septic system at a cost of $3,200 All these are things home owners not tenants do.

All this changed when a new owner –Ceedive Pty Ltd – purchased the land in 2000. It suddenly increased the rent dramatically, to about the same rent that was being charged for houses in other parts of Lithgow. Mr May and the other people living in the Pottery estate complained and refused to pay the rent. Ceedive tried to evict them.

Mr May and the other residents then claimed they were "Protected Tenants." That term probably needs an explanation to my younger readers. In World War 2 rents were pegged so that landlords could not take advantage of the war time shortage of houses and charge huge rents. After the war houses were in short supply (this was the start of the baby boom and of the big immigration programmes) and in 1948 the state government passed laws continuing the war time regulation of rents. Tenants in such houses were "Protected Tenants". This was meant to be a temporary scheme but it has continued in some places and some circumstances to today.
But Mr May could only be a protected tenant (and so have his rent pegged) if his house was a part of the land –a fixture. And Mr May had in the past acted as if he owned the house. And he certainly thought he did, after all he had bought it.

But the Court of Appeal said that what was important was what the original builder intended. If he intended the house to a fixture then it would remain so (once something is a fixture it always remains a fixture). Here the original owner is dead so the court could only look at what he intended from the circumstances at the time. And the court concluded that anyone looking at what was built (A 2 bedroom brick house on full foundations) would have said the owner intended the house to be a part of the land, and not something that could be taken away. As the court said

A house which is constructed in such a way so as to be removable, whether as a unit, or in sections, may well remain a chattel, even though it is connected temporarily to mains services such as water and electricity. But a house which is constructed in such a way that it cannot be removed at all, save by destruction, cannot have been intended to remain as a chattel."
And so Mr May and the other tenants were protected tenants and so they were only liable to pay a rent fixed at 1948 levels (subject to some adjustments).
And the way the court got to this result was by looking at the ‘objective’ intention of the person who built the house in 1910.

(syndicated law column in local papers for fortnight beginning 21/4/08)