Aaron Lye v Norma Sweeney

[2009] NSWSC 193

CITATION:	AARON LYE V NORMA SWEENEY [2009] NSWSC 193
HEARING DATE(S):	19 March 2009
JUDGMENT DATE :	26 March 2009
JUDGMENT OF:	Smart AJ
DECISION:	Motion and appeal dismissed with costs.
CATCHWORDS:	Landlord and tenant - no subsisting tenancy - lawfully terminated - consideration of ss 85(1)(d) and 127 of Conveyancing Act 1919 - futile to order re-hearing of strike out application on natural justice grounds as decision of Associate Judge correct.
LEGISLATION CITED:	Conveyancing Act 1919 Real Property Act 1900
CASES CITED:	Batiste & Ors v Lenin [2002] NSWCA 316
FILE NUMBER(S):	SC 5259/2007
COUNSEL:	C. Dibb (P and Appellant) V. R. Gray (D and Respondent)
SOLICITORS:	Johnson & Sendall (P and Appellant) P. J. Webb (D and Respondent)

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IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

SMART AJ

26 March 2009

JUDGMENT

1 Aaron Lye, the plaintiff, by his Notice of Motion of 3 October 2008 filed 17 October 2008 appeals against the whole judgment of Associate Justice Macready delivered 5 September 2008 by which he determined that the lease of the plaintiff had been validly terminated and there was no basis for the claim made in the statement of claim. He dismissed the proceedings by the plaintiff against the second defendant, Norma Sweeney.

2 The background and the facts are set out in the judgment of the As. J. I add that on 29 October 2007 Mr Lye issued a summons against R A Burrows Pty Ltd seeking relief against it similar to that specified in paragraph 5 of the As. J’s judgment. On 4 February 2009 a Deputy Registrar granted the plaintiff leave to file an Amended Summons, the effect of which was to add Ms Norma Sweeney as the second defendant and seek the relief set out in para [5] of the As. J’s judgment. On 8 February 2008 this Court, by consent, granted leave to the plaintiff to discontinue proceedings against R. A. Burrows Pty Ltd. The appeal grounds are that the As. J erred:

“1. … in holding that the Second Defendant had terminated the lease of the plaintiff pursuant to s 85(1)(d) of the Conveyancing Act 1919.
2. … in dealing with the matter before him on the basis that the powers of the lessor had been enlivened by s 85(1)(d) of the Conveyancing Act 1919 without the plaintiff having been given an opportunity to be heard on that issue.”

3 As to the second ground counsel for the parties who appeared before the As. J and me were not agreed as to what occurred before the As. J. The transcript of 6 August 2008 of the hearing throws no light on the point of disagreement.

4 Mr C Dibb for the plaintiff contended that at the hearing before the As. J the defendant had submitted that the tenancy of the plaintiff was a tenancy at will pursuant to s 127 of the Conveyancing Act and the plaintiff agreed. Mr Dibb said that the plaintiff pointed out that there had not been one month’s notice in writing.

5 Mr Dibb said that at the hearing before the As. J neither party referred to s 85 of the Conveyancing Act. Mr Gray agreed.

6 Mr Gray told me that he had contended before the As. J that Mr Lye must establish that he had a reasonably arguable case that he had a valid and enforceable equitable leasehold interest in SP 70637, lots 7, 9, 15 and 23 and that the evidence established positively that Mr Lye had and has no such equitable estate or interest. Submissions to this effect, but in greater detail, appeared on p.3 in the Second Defendant’s Outline Submissions. Mr Gray told me that the As. J put to him that the plaintiff probably had a leasehold interest and that he (Gray) submitted that at its highest on the evidence if there was a leasehold interest it was a tenancy at will under s 127 of the Conveyancing Act. It was contrary to the tenor of the Second Defendant’s Outline Submissions that the plaintiff had a leasehold interest of any kind.

7 Paragraph 24 of the judgment states “The defendant suggested that it was a tenancy at will under s 127 of the Conveyancing Act 1919.” The word “suggested” may be significant. The suggestion has to be read in the light of the Outline Submissions. In view of those there could be no doubt in the plaintiff’s mind as to the primary position of the defendant.

8 At paragraph 29 the As. J said:

“The evidence indicates that the plaintiff initially paid rent to the defendant each month. The evidence shows that the parties paid and accepted the rent on a monthly basis. In the documentation that is available there is no suggestion of a term of years or that the monthly rent was determined by reference to an aliquot (proportionate) part of a year. In the absence of any written agreement or other evidence that the rent was determined as an aliquot part of a year, s 127 is not applicable and the tenancy in question is a common law periodic monthly tenancy. Such a tenancy continues from period to period indefinitely until determined by notice or forfeiture.”

9 He thus rejected that there was a tenancy at will under s 127 of the Conveyancing Act. He had previously rejected the defendant’s contention that the plaintiff had no leasehold interest in the lots in question.

10 After rejecting that there was a tenancy at will under s 127 the As. J sought to determine whether there was another basis for the alleged tenancy. He considered that the tenancy which existed was a common law periodic monthly tenancy. He then considered whether s 85 of the Conveyancing Act applied.

11 The As. J held that s 85(1)(d) of the Conveyancing Act applied to the periodic monthly tenancy and that there was a right of re-entry for breach without prior notice. The As. J held that the defendant did this by peaceably changing the locks when the rent was two months in arrears and accordingly the tenancy was determined. He held that s 129(8) made the giving of prior notice unnecessary where there is non-payment of rent. That provides that s 129 does not affect the law relating to re-entry or forfeiture or relief in case of non-payment of rent. The As. J concluded that the lease of the plaintiff had been validly terminated.

12 The As. J found that as at 21 December 2007 the rent was in arrears by $14,551.50. The affidavit bearing date 27 June 2008 of Norma Sweeney (and filed 28 July 2008), para [7] makes it clear that Ms Sweeney has never received from the plaintiff any rent or other money in respect of any period on or after 21 December 2007 and that the plaintiff has never tendered to her any rent or other money in respect of his occupation of Lots 7, 9, 15 and 23.

13 There is no evidence of any written direction being given on settlement on 21 December 2007 for Mr Lye in future to pay all rent to Ms Norma Sweeney. The amendment of the Summons on 4 February 2008 shows that at least by that date the plaintiff was aware of the transfer to Ms Sweeney of the 4 lots. In paragraph [8] of the Statement of Claim (Pleadings and Particulars) the plaintiff alleges that Ms Sweeney became the registered proprietor of the lots by transfer from R A Burrows Pty Ltd to Ms Norma Sweeney on 21 December 2007.

14 As the As. J found (para [14]) Ms Sweeney had taken possession of the units by changing the locks on the relevant units in January 2008 (about 13 or 14 January), 7 February 2008, 26 February 2008, 26 March 2008, 16 April 2008 and 20 May 2008. He further found that on each occasion after taking possession the locks were changed again and she has been denied possession of the units.

15 While Mr Gray conceded that the As. J devoted part of his judgment to a consideration of s 85 of the Conveyancing Act on which he received no submissions from counsel Mr Gray submitted that the appellant must go further and demonstrate that the judgment under review was relevantly wrong. Mr Gray’s submissions read in part:

“In CSR Ltd v Eddy (2008) 70 NSWLR 725 at 735 para 40 Basten JA quoted Stead v State Government Insurance Commission (1986) 141 CLR 141:
For this reason not every departure from the rules of natural justice at a trial will entitle the aggrieved party to a new trial. By way of illustration, if all that happened at a trial was that a party was denied the opportunity of making submissions on a question of law, when, in the opinion of the appellate court, the question of law must clearly be answered unfavourably to the aggrieved party, it would clearly be futile to order a new trial.

and continued (p. 735 [42])

Where the appeal turns on a question of law, with no need for additional fact-finding, it will rarely be necessary for an appellate court conducting a re-hearing, to remit a matter rather than determine the question for itself.”

16 Mr Gray pointed to the facts found by the As. J namely:

Pre – 21.12.07 Lots 7, 9, 15 and 23 SP 70637 were owned by R.A. Burrows Pty Ltd.

Pre – 04.10.07 Appellant in possession of such Lots under an arrangement requiring payment of rent at $2,873.63 p.c.m.

04.10.07 R.A. Burrows institutes proceedings against the Appellant in Consumer Trader and Tenancy Tribunal claiming arrears of rent.

20.10.07 CTTT dismisses R.A. Burrows’ proceedings as they related to commercial premises and the CTTT had no jurisdiction in respect of commercial premises.

21.12.07 R.A. Burrows sells and transfers Lots 7, 9, 15 and 23 SP 70637 to the Respondent who becomes registered as proprietor of the estate in fee simple under the Real Property Act.

The Appellant has no estate or interest in these lots registered under the Real Property Act and there is no contention that the Respondent was guilty of fraud in becoming registered.
At this date the Appellant is $14,551.50 in arrears of rent to R.A. Burrows, equivalent to about 4 months rent.

Post 21.12.07 After 21 December 2007 the Appellant does not pay any rent to the Respondent.

.01.08 Respondent re-enters Lots 7, 9, 15 and 23 SP 70637.

Thereafter Appellant re-takes possession.

07.02.08 Respondent re-enters Lots.

Thereafter Appellant re-takes possession.

26.02.08 Respondent re-enters Lots.

Thereafter Appellant re-takes possession.

26.03.08 Respondent re-enters Lots.

Thereafter Appellant re-takes possession.

16.04.08 Respondent re-enters Lots.

Thereafter Appellant re-takes possession.

20.05.08 Respondent re-enters Lots.

Thereafter Appellant re-takes possession.

17 This Court on 10 December 2008, by consent, made orders, until further order, for Norma Sweeney to have vacant possession of the 4 lots. As these were interlocutory orders made after the As. J’s judgment and a cross claim is on foot I have treated them as being of no relevance, as did counsel.

18 What is clear is that no rent has been paid or tendered by Mr Lye for the period from September 2007 to May 2008 but he continued in occupation of the 4 lots.

19 Ms Sweeney pointed out that:

(a) The appellant Mr Lye had led no evidence to suggest that he held a tenancy for a term of years (para [22] of judgment).

(b) There was no evidence that any rent paid by Mr Lye to R.A. Burrows Pty Ltd was determined by reference to an aliquot part of a year (para [29]).

(c ) There was no appeal from the As. J’s decision that s 127 was not applicable and the tenancy in question was a common law periodic monthly tenancy (paras [29] and [35]).

(d) There was no evidence of any term of any contract negating the term implied by s 85.

20 As to (a) Mr Lye sought to rely on page 1 of Annexure E to Mr Lye’s affidavit of 27 May 2008. He pointed to the two columns “Rent Review” and the listed percentages of 3% and 2% and “Rent Review Amount” and asked the Court to take notice of what he contended was the common and widely known commercial practice that rents are reviewed annually. I have seen many rent review clauses in leases (and agreements to lease) and my experience is that they vary greatly. No conclusion could safely be drawn from the two columns mentioned that the plaintiff held a tenancy for a term of years, even assuming there was a reference to R.A. Burrows or R.A. Burrows Pty Ltd on the missing second page.

21 Before the As. J Mr Lye relied on s 42(1)(d) of the Real Property Act (para [15] of judgment). The As. J noted (para [20]) that no claim was made that there was any fraud as referred to in s 42(1)(d) of the Real Property Act. The As. J was not required to take the matter further. It will be recalled that he held the view that the periodic monthly lease had been validly determined.

22 A further matter was considered on appeal, namely that Mr Lye’s non-payment and non-tender of rent amounted to repudiating conduct on his part which entitled Ms Sweeney to terminate the tenancy. Counsel for Ms Sweeney relied on the decision of Batiste & Ors v Lenin [2002] NSWCA 316. The principal judgment was delivered by Sheller JA with whom Giles JA and Santow JA agreed. At [51] Sheller JA said:

“The ordinary principles of contract law including that of termination for repudiation apply to leases: The Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 at 29.

23 Sheller JA referred to two further important passages in the judgment of Mason J at 30 and 33. The latter reads:

“What needs to be established in order to constitute a repudiation is that the party evinces an intention no longer to be bound by the contract or that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way.”

24 The sustained non-payment and non-tender of rent constitutes a repudiation.

25 Counsel for Mr Lye submitted that too much weight should not be attached to the non-payment and non-tender of the rent. It was submitted that Ms Sweeney wanted Mr Lye to vacate her lots and not use them in the conduct of the motel business and that she would not have accepted any rent if tendered.

26 Payment or tender of the rent is important. It is the fundamental obligation of a tenant. These were premises used for commercial purposes and the amounts involved by way of rent were substantial.

27 Counsel for Mr Lye stressed that there had been no discovery, no interrogatories, no notice to produce given and no subpoenas issued. He contended that Mr Lye’s case might be strengthened considerably once the usual interlocutory steps had been completed.

28 Mr Lye further submitted that the change of locks in January 2008 by Ms Sweeney may have amounted to a breach of the covenant of quiet enjoyment for which damages would be payable. Counsel did not press a similar submission in relation to subsequent changes of locks. The change of locks by Ms Sweeney in January 2008 does not appear to have stopped Mr Lye’s subsequent use of the 4 lots.

29 In my opinion the judgment of the As. J was correct for the reasons he gave. The evidence of the repudiating conduct on the part of Mr Lye was strong and telling. Mr Lye does not have an arguable case against Ms Sweeney. It would be futile to order a further hearing of the strike out application.

30 I dismiss Mr Lye’s motion appealing against the judgment of 5 September 2008 of Macready As. J with costs.