The Commonwealth occupies three distinct portions of the Rialto Building as offices for the Commonwealth Statistician, the Patents Office, and a Post Office, respectively.

In each of the three leases there is a covenant in the following terms:

And the Lessor hereby agrees to pay all rates taxes and other outgoings of every kind for the time being payable in respect to the demised premises.

Under section 130 of the Melbourne and Metropolitan Board of Works Act 1890 of Victoria (Act No. 1197) the Board has no power to levy rates in respect of premises in the occupation of the Crown. It appears that the lessor declines to pay water and sanitary rates on the offices in question, on the ground that, as the Commonwealth is not legally liable to pay rates and taxes, the covenant does not apply to these rates.

The arrears up to 31 December 1908 amount to £334.14.2.

The Board, having failed to obtain payment from the lessor, has written to the Minister for Home Affairs setting out the facts and pointing out its power of bringing the matter to a settlement by cutting off the supply.

The Department of Home Affairs asks to be advised on the matter.

I am of opinion, as decided by this Department in previous cases(l), that, although the Commonwealth is not liable to pay taxes as such, it is not entitled to obtain services from State authorities without paying for them; and that where no arrangement has been made as to payment for the services the fact that the Commonwealth has accepted the services is some evidence of an undertaking to pay a sum equivalent to the rate-or at any rate a sum equal to the value of the services-which latter sum is not likely to be less than the former.

In my opinion the rates in question are within the terms of the lessor's covenant to pay 'rates taxes and other outgoings of every kind for the time being payable in respect to the demised premises'. These charges, whether payable as a rate or not, are an outgoing necessary to enable the Commonwealth to secure from the State the services which ordinarily go with the premises. I therefore think that the lessor is bound under her covenant to pay these rates, and that if the Commonwealth on the demand of the Board pays them it can recover from her.

I suggest that the lessor be written to, to the effect that the Commonwealth is of opinion that payment of these arrears is included in her covenant, and that if she does not pay them the Commonwealth will pay them and look to her for the amount. If she still declines to pay, I think that the amount should be deducted by the Commonwealth from the rent payable to the lessor, and should be paid to the Board.

[Vol. 7, p. 91]

(1) See Opinions Nos 39, 53,86,195.