Lord Merrivale.-

This appeal from a judgment of the Supreme Court of New South Wales raises questions as to the construction of a series of documents exchanged between lessors and lessees of business premises in George Street, Sydney, with the intention of ascertaining precisely their respective liabilities for the taxes payable in respect of the premises. The dispute between the parties has given rise to conflicting judicial opinions, expressed in a suit in equity instituted by the lessees and an ejectment action brought by the lessors, in each of which the lessors obtained judgment, and in an appeal of the lessees to the Supreme Court of New South Wales where the lessees were successful. The lessors are appellants against the judgment of the Supreme Court.

The lease of the premises, dated 30th November 1909, but sealed by the respondents pursuant to a resolution of the Board passed on 1st March 1910, demises the premises for 33 years from 1st August 1909. Among the lessees' covenants in the following:

"And also will bear, pay and discharge all rates, taxes, charges and assessments and all outgoings whatsoever whether Parliamentary, municipal, local or otherwise which now or hereafter shall be imposed, charged or assessed upon or in respect of the said premises hereby demised or any part thereof or the rent thereof or payable by the owner or occupier in respect thereof, landlord's property tax or land tax only excepted."

The lease contains the usual proviso empowering the lessors to re-enter in cases of breach of covenant. At the time of execution of the lease by the lessors a memorandum was signed by them and to this as well as to the lease the seal of the defendant company was affixed pursuant to the resolution of 1st March 1910. This memorandum, so far as is material here, is in the words following:

"Memorandum . . . intended to be read as if endorsed on ... lease of even date herewith. . . whereby in order to make quite clear the covenants in such lease as to the incidence of the liability for payment of rates it is mutually agreed :

"The lessors will pay and satisfy the landlord's property tax or land tax or any municipal tax on the unimproved capital value of the land by any competent authority rated, imposed or levied. Provided that if the present rates now assessed by the City Municipal Council of Sydney on the annual rental value and which under the said lease are to be borne and paid by the said lessees should hereafter be assessed by the council in any other form or by any other name whatsoever then the same now are then the same shall still be borne and paid by the said lessees."

A second memorandum was signed by the lessors on 31st March 1910, and sealed on behalf of the defendant company pursuant to a Board Resolution of 20th April 1910, and is also expressed as an agreement to be read as if endorsed upon the lease. It provided for a small increase of the rent reserved in the lease, and witnessed inter alia this agreement of the parties :

"The lessors shall pay the Land Tax at present assessed and any future Land Tax or Municipal Tax on the unimproved capital value."

The present controversy between the parties arose upon the coming into effect of a statute of the Parliament of New South Wales, the Sydney Harbour Bridge Act 1922, whereby Parliament imposed upon the unimproved value of land in Sydney and in certain shares formed under the Local Government Acts in force in the State an annual impost of one-halfpenny in the pound. The appellants had become in 1916 assignees of the reversion of the premises; they called on the respondents to pay the "Bridge Tax,” as it was called, the respondents denied their liability under the lease and memoranda, and the litigation between the parties ensued.

Certain outstanding facts which are relevant to the matters at issue are not in dispute. There was not at the date of the lease and had not been any tax in New South Wales known as landlord's property tax. From 1895 onwards, until 1910