Akbulut v Crafted Central Pty Ltd
[2019] ACTMC 5
•6 March 2019
MAGISTRATES COURT OF THE AUSTRALIAN CAPITAL TERRITORY
| Case Title: | Akbulut v Crafted Central Pty Ltd |
Citation: | [2019] ACTMC 5 |
| Hearing Date(s): | 11 October 2017; 14 June 2018; 22 October 2018 |
| DecisionDate: | 6 March 2019 |
| Before: | Magistrate Morrison |
Decision: | See paragraphs [22], [52] and [58]-[59] |
Catchwords: | CIVIL LAW - Application under Leases (Commercial and Retail) Act 2001 (“Leases Act”) contesting termination – whether Landlord having given notice of termination because of proposed demolition can later give and rely upon notice of termination for breach – whether notice terminates lease or gives notice of intention to do so – construction of s 78 of Leases Act and consideration of Shepherd principle - whether terms of lease breached by Tenant – whether Landlord estopped from relying upon breach. |
Legislation Cited: | Leases (Commercial and Retail Act) 2001 (ACT), ss 19, 78, 122–123, 125 |
Cases Cited: | Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26 |
| Parties: | Mehmet Emin Akbulut (Plaintiff) |
| Representation: | Counsel Solicitors |
File Number: | CL 17 of 2017 |
MAGISTRATE MORRISON:
The present proceedings are brought under s 123 of the Leases (Commercial and Retail) Act 2001 (ACT) (“Leases Act”).
For ease of understanding, I refer to the Respondent, Crafted Central Pty Ltd, as the Landlord and the Applicant, Mr Mehmet Akbulut, as the Tenant. Most of the relevant interactions for the purposes of these proceedings were with Mr Muhammed Akbulut acting on behalf of his father Mehmet. It is not in contest that Mr Muhammed Akbulut was authorised to do so such that his acts are in effect the acts of the Tenant. For ease of reference, I will refer to Mr Muhammed Akbulut as “Mr Akbulut” in these reasons.
The following is not in dispute:
a.The Tenant is a party to the Lease dated 14 August 2014. It is in evidence as annexure ET1 to the Affidavit of Erin Brooke Taylor affirmed 29 November 2017. The Landlord is not named in the Lease but became bound by it as a successor in title to the named Lessor.
b.The parties are bound by the terms of the Lease. The Leases Act applies to the Lease.
c.The Landlord has given two termination notices to the Tenant in relation to the Lease. The first Notice was given on 13 April 2017 and can be conveniently described as the Demolition Notice. The second was given on 7 August 2017 and purports to rely upon a breach of the Lease by the Tenant. I refer to it as the Breach Notice. It is not in dispute that both Notices were received by the Tenant.
The proceedings raise three issues for determination.
Can the Landlord, having given the Demolition Notice, rely upon the later Breach Notice?
The first is whether the Landlord, having given the Demolition Notice, can subsequently give (and rely upon) the Breach Notice.
The Tenant says that it cannot, relying upon the decision of Melbourne Stadiums Ltd v Sautner (2015) 317 ALR 665 (“Sautner”). For its part the Landlord says that the decision in Sautner supports its argument that the later notice can be relied upon.
It is convenient to deal with this issue at the outset.
The decision on this question relies upon a proper analysis of the effect of the Demolition Notice.
The Demolition Notice was given pursuant to cl 24 of the Lease.
Clause 24 opens by saying that “[t]he Owner may terminate the Lease if it desires to demolish … the Building” subject to certain provisos. One of those provisos, cl 24(b), goes on to say:
The Owner will provide the Tenant with at least 6 months notification of termination…
Several observations can be made about the Notice itself. First, it is described in its heading as a “Notice of Termination for Demolition” and expressly says that “the Lessor gives notice to the Lessee terminating the sublease” (emphasis added).
Under the heading “Date of Termination”, however, the Notice uses a different language tense, saying that “[t]he Sublease will terminate in 6 months’ time, on 13 October 2017” (emphasis added).
The relevant provisions of the Leases Act are also significant especially against the background of s 19 which says that if a provision in a lease is inconsistent with the Leases Act, the provision is void to the extent of the inconsistency.
Section 78 of the Leases Act provides that a Lease that provides for termination because of proposed demolition of the building must include provisions to the effect of what is set out in the section. One such provision, s 78(b), is that “the lease cannot be terminated by the lessor because of the proposed demolition unless … the lessor has given the tenant at least 6 months written notice of the lessor’s intention to terminate” (emphasis added).
That aspect of the decision in Sautner which is relevant for present purposes appears at para [91] in the following terms:
In our opinion, which will be elaborated on shortly, we do not consider that the Shepherd principle can be so used to justify termination of the contract under cl 7.2 if termination had already occurred at an earlier time under cl 7.1. We stress the conditionality of that proposition because, in our opinion, no termination in any event occurred under cl 7.1 as we later explain (see [120] et seq below). On that view, no application of the Shepherd principle needs to be considered. But given that the primary judge considered the Shepherd principle and the parties before us made submissions thereon, and in case we are incorrect in our view that there was no termination under cl 7.1, it is appropriate for us to address the Shepherd principle.
The reference to the Shepherd principle is a reference to the decision in Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359 to the effect that a contracting party who, after becoming entitled to refuse performance of contractual obligations, gives a wrong reason for refusal does not thereby deprive themselves of justification which in fact existed, whether they were aware of it or not. The obiter in Sautner explored the limits of the application of that principle, although because of the conclusion reached about termination it was not necessary to do so.
For what is the same reason it is not necessary for me to examine the extended application of the Shepherd principle in this case.
The notice given by the Landlord did not bring about the immediate termination of the Lease.
The terms of the Lease about termination are perhaps somewhat equivocal speaking as they do of providing at least 6 months notification of termination. Any ambiguity is, however, disposed of by the combined application of ss 19 and 78 of the Leases Act – that is, the Lease is to be read as if it contained a provision requiring 6 months’ notice of the Landlord’s intention to terminate.
The notice itself did not purport to immediately terminate the Lease. The use in the notice of the expression “gives notice … terminating the Sublease” suggests an action which is presently occurring or continuing. It is to be contrasted with language of immediate effect, such as ‘hereby terminates’. Any ambiguity or uncertainty which might otherwise have flowed is in any event resolved by the later use in the notice of the expression “the Sublease will terminate on 13 October 2017”.
I am fortified in my conclusion by the decision of Atkinson J in Custodial Limited v Cardinal Financial Services Limited and Ors [2004] QSC 452. His Honour, in the context of a notice of resignation by a trustee, acknowledged the distinction between a notice of resignation on 3 months’ notice, and a notice of intention to resign in 3 months. His Honour referred to it as a distinction without a difference for the purposes of what was to be determined by him – namely the on-going obligations of the trustee in the interim. In Custodial Limited Atkinson J also referred to the decision of Dominion Square Corporation v Aluminium Company of Canada (1942) SCR 73 which concerned whether a notice of intention to terminate a lease took effect when given or when the period of notice had concluded. The majority held that the lease would not be determined until the expiry of the time in the notice.
Having concluded that the effect of the notice of 13 April 2017 was not to bring about the immediate termination of the Lease, the decision in Sautner supports the Landlord’s argument. No question of the Landlord seeking to “reinstate” the Lease arises. The Lease remained on foot and was extant at the time of the giving of the subsequent notice to remedy default on 18 July 2017 and notice of termination on 7 August 2017.
Has the Tenant breached the Lease?
I turn to consider the second issue – that is, whether the evidence establishes that the Tenant breached clause 13 of the lease.
Clause 13 provides that the Tenant “will not during the term of the Lease assign, transfer or sublet the Tenant’s interest in the Premises without first notifying the Owner in writing.” It goes on to say that any assignment, transfer or sublease of the Premises will not be in breach of the relevant provision and that the Owner will consent if certain conditions are met.
The Tenant says that no assignment transfer or subletting took place, as opposed to that notice was given and conditions were complied with.
It is important to note at the outset that cl 13 is not expressed in terms of prohibiting the Tenant from parting with possession of the Premises, although any parting with possession which also constituted an assignment transfer or subletting would be covered by those prohibitions in the clause.
Several breaches of cl 13 are asserted by the Landlord. It is convenient to start with the alleged breach by way of the entry into a purported sublease with the witness Ms Metta Hankam.
It is convenient to refer here to the testimony of Ms Hankam and Mr Akbulut.
Ms Hankam gave her evidence in a straightforward manner. I got the impression that English was not her first language but that presented no difficulties in taking evidence. She pointed out when she did not understand a word or what was being asked of her. She was a business owner and she gave her evidence in a business-like manner.
She said that she responded to a Gumtree ad which said “Salon or barber for rent for 6 months”. She met a person identified as “Moe” at the premises. (It is not in dispute that “Moe” is Mr Akbulut.) After some negotiations a rent of $2500 per month was agreed upon. She was sent documents by email. One of them was the document which describes itself as an “Underlease” and which became Exhibit L1. She said she signed and returned the document on 7 February 2017 and paid a bond and rent as agreed. She says that she received an email from Moe on 6 March 2017 reminding her that the rent was due the following day.
She said that Moe asked her whether somebody in his family could “come in and work there and then he would drop the rent even cheaper” but that she said “no”.
She said that she operated the shop by herself, that nobody else came and used a chair and that nobody from Moe’s family came and used any aspect of the shop. A photograph of the premises depicting what the front of the shop was like at the time Ms Hankam was there became Exhibit L5.
She also said in her evidence in chief that she believed the person she knew as “Moe” was Mehmet Akbulut and that he was the Tenant under the Lease.
Under cross examination, Ms Hankam was asked about how many chairs she used. As I understood her testimony it was that she was the only person in the salon but that she sometimes had more than one customer and so used more than one chair. She gave an example of working on the hair of one customer while another was waiting for a hair colour already applied to develop and a third might be sitting in a chair and waiting for their appointment.
She accepted that her husband had asked for a signed copy of the Lease but that none had been received. She accepted that she had not asked Moe whether he was in fact Mehmet Akbulut. She said that she was given keys to the premises and that she did not know whether Moe also had a set of keys.
It was put to Ms Hankam that Moe had said that “it would be a sharing arrangement of the premises” and she said “no”.
It was not put to Ms Hankam in cross that the advertisement in Gumtree had been expressed in terms of offering chairs for rent.
It was not put to Ms Hankam that there had been any communication with Mr Akbulut in which Mr Akbulut told her that the transaction could not proceed by way of a sublease.
Mr Akbulut also gave evidence.
Relevantly his evidence in chief can be summarised in this way:
a.He is commonly known as Moe.
b.Mehmet Emin Akbulut is his father.
c.His father was the lessee of premises at unit 2 – those premises being next door to unit 1.
d.A café business known as Gozleme Café was operated out of unit 1.
e.The previous tenants of unit 2 complained about the noise and smells emanating from unit 1.
f.The real estate agent (Mr Steven Scifleet) spoke to him about the complaints and arranged a meeting with the two of them and also the then landlord Mr Michael Perrin.
g.At that meeting he (i.e. Mr Akbulut) offered to “take on that lease” so as to “alleviate the problem” – telling the others that he had a hairdressing salon in Belconnen and that he could look to expand into unit 2.
h.The others agreed to that proposal almost immediately. He made a suggestion to Mr Scifleet – “Let’s keep the lease in my dad’s name. He’ll be happy with that and I will run and set up Boys 2 Men”. He said the others responded by saying that “they would be open to that”.
i.He was subsequently asked if he was saying that in the initial discussion it was expressly stated that it would be Boys 2 Men Hair Studio operating and he responded “yes”.
j.He went on to say that the Boys 2 Men Hair Salon business traded from those premises for approximately 2 years, until in August 2016 he had an offer from a Mr Fijani Hassan to buy the business.
k.He met Mr Hassan and they went to the premises. He said the proposal was to sell the fit out and the interest in the lease but not the business name.
l.Mr Hassan signed an offer to buy and wanted what he described as a “trial of the space”.
m.He approached Mr Scifleet about the proposed sale. Mr Scifleet said he would have the landlord’s solicitors prepare the documents required to assign the lease.
n.The sale to Mr Hassan did not proceed because Mr Hassan died.
o.He first became aware that the building was to be demolished in about May 2016.
p.A number of persons were named as being barbers working either in the unit 2 premises or the Belconnen premises. When asked about who was cutting hair at unit 2 the following exchange took place:
In August 2016 who was cutting hair on the floor of unit 2?---Michael.
What's Michael's last name?---Daskalakis.
Daskalakis.
HIS HONOUR: How do you spell that?---D-a-s-k-a-l-a-k-i-s.
MR ROBENS: What was Michael's role with Boys 2 Men?---He was also part owner.
April 2017 when you receive these letters?---Yes.
Who were the hairdressers operating out of unit 2, London Circuit at that time?---Yes. Michael was always at the forefront. We were interchanging at times, but at that time we also had Metta on board.
What's Metta's full name?---Metta Hankam.
When did Metta first become involved in cutting hair in the salon?---I think it was about March 2017, roughly.
How did that come about? Did she approach you or did you approach her?---She approached me. We were looking to rent out two of the chairs and so she gave me a call one day expressing interest.
How did you ‑ ‑ ‑
HIS HONOUR: Looking to rent out - what did you say, two of the chairs?
---Correct, which is common practice in our industry.MR ROBENS: You said you were looking to rent out two of the chairs?---Yes.
How, if any way, did you make that public?---I put an ad on Gumtree.
I believe your evidence was that Metta approached you in response to that?---Yes.
This is March 2017 to your recollection?---Yes. Feb/March.
Where did you first meet with Metta?
MR PATTENDEN: Well, if I could just raise one issue. My friend's seeking to lead evidence which now was not put.
HIS HONOUR: I appreciate that. I recognised that on the way through.
MR ROBENS: Your Honour, I'll put that it was put. My friend is raising a Browne v Dunn point. Just because evidence is inconsistent doesn't mean it wasn't put.
HIS HONOUR: Well, I'd be struggling a bit that - well, perhaps let me ask this question. What did the Gumtree ad say, Mr Akbulut?---Barber chair for rent.
(Transcript 14 June 2018 (88) [20] – (89) [30])
q.When he met Ms Hankam he told her that the rent would be $2,500 per month for two chairs.
r.He found what he described as a “template of an underlease” online which he “sort of tailored to reflect some of the things that we spoke about with Metta”. He identified Exhibit L2 as the document he prepared and sent.
s.He said the document was signed and returned by Ms Hankam but that to the best of his knowledge was never signed by the Tenant.
t.When asked why it was not signed by the Tenant he responded by saying that he got some legal advice that the transaction would be best structured as a non-exclusive licence agreement. An email from the lawyer about that advice became Exhibit T1.
u.He accepted that no licence agreement was ever prepared. He was asked what, if anything was said to Metta about this and his response was:
She asked why I was not going to execute the underlease agreement and I explained to her that there would be a simpler more cost‑effective way to do it by way of this nonexclusive licence agreement, that we could just have a verbal agreement and she would be renting the chairs.
What did she say in response to your proposal?---She was fine with it. She didn't insist fully on the lease to be signed.
(Transcript 14 June 2018 (96) [4] – [11])
v.He was also asked about the owner or agent’s knowledge of the arrangement with Ms Hankam and the following exchange took place:
You've given evidence to the court that there was verbal agreement that Metta could use the salon?---Sure.
Was that at any time passed on to the owner or its agent?---Yes.
How?---I bumped into Steve Scifleet at Grill'd Manuka and he mentioned to me that he'd seen Metta in there.
Had seen Metta in where?---In unit 2.
Yes?---So he asked me about the arrangements there. I said to him that she was renting a chair. So we spoke about the arrangement with Steve Scifleet in Manuka.
So the direct speech, as best you can?---Yes.
You said, "She's renting a chair in the salon"?---Yes.
What was his response?---His response was, yes, that he'd seen her in there. He wasn't sure what the arrangement was. He asked me how it was going. I suggested to him that it was going okay, and that's about the scope of it.
Was there anything raised about that on the landlord's behalf at any other time?---No.
(Transcript 14 June 2018 (97) [19] – [42])
The cross examination of Mr Akbulut was extensive. It is not easy to condense for reasons which will become obvious. I have attempted a fair summary in this way:
a.Mr Akbulut identified Boys 2 Men Hair Studio Pty Ltd as the entity trading as “Boys 2 Men” in 2014 and said that it was a different entity – Boys 2 Men Barbershop Pty Ltd – which operated the barbershop from unit 2. He was the sole director of that company and it had been set up specifically to take on the lease of unit 2. For convenience I refer to Boys 2 Men Hair Studio Pty Ltd as the “Studio Company” and Boys 2 Men Barbershop Pty Ltd as the “Barbershop Company”.
b.He accepted that the testimony just referred to was incorrect when shown an ASIC record showing the Barbershop Company had only been registered on 10 May 2016.
c.When asked whether the right of the Studio company to occupy the premises had been transferred to the Barbershop company in 2016 he replied “Not officially, no”.
d.The following exchange then took place:
Well, not the word "not officially", that's what you did though, didn't you? You assigned or you gave away the interest that the other company had to this new legal entity, didn't you?---Well, in the context of things, the lease was in my father's name. That was known. And Steve Scifleet gave me a lease to operate there.
(Transcript 22 October 2018 (25) [25] – [29])
e.And later on the same subject:
Each company - and with your knowledge in that regard, you'd accept that Boys 2 Men Hair Studios Pty Ltd was the company that you're now telling us commenced operating a business out of the unit 2 from about August 2014. That's correct, isn't it?---Yes.
And that legal entity commenced operating out of there on, you say, the representations you made to Mr Scifleet?---Yes.
Then on or around May now 2016, some 21 months later, another company is created, a legal entity. That's correct, isn't it?---Correct.
And then that company starts operating out of the unit 2 premises, doesn't
it?---Correct.It's a different company?---It is.
It's a different legal entity?---It is.
And you knew that?---Yes.
And you didn't seek any consent from anybody to transfer or assign the lease to that legal entity, did you?---No.
(Transcript 22 October 2018 (26) [4] – [25])
f.And later again on that subject:
Okay. So the rights for the business were transferred to Boys 2 Men Barbershop Pty Ltd?---Correct.
And was that for sale by way of - - - ?---No.
So there was no fee?---No. It was just an understanding between me and my brother-in-law.
And are there any written documents in relation to that transfer?---No.
But you accept that it was a change of legal entity that owned the business?---Yes.
(Transcript 22 October 2018 (27) [8] – [19])
g.And again on that subject:
Now your understanding under the lease, noting that you've requested when the sale is going to go through that there be a consent to assign the lease, was that the landlord, whoever it was, needed to consent to the transfer or assignment of the interest. You knew that, didn't you?---Yes.
And your understanding was, as at May 2016, that the landlord's consent was required to transfer the interest in unit 2 from Boys 2 Men Hair Studios to Boys 2 Men Barbershop Pty Ltd?---No, that was not my impression. Everything was in common knowledge. I was in - okay.
Now, to your knowledge and understanding - you've given evidence your father never operated from unit 2?---No.
To your knowledge your father had no deals with Mr Scifleet in relation to unit 2, did he, to your knowledge?---No.
And to your knowledge - I'll withdraw that. There was no licence agreement or agreement between your father, as the tenant, and Boys 2 Men Barbershop Pty Ltd to occupy or use the premises was there?---No.
(Transcript 22 October 2018 (27) [41] – (28) [12])
h.Both companies – that is the Hair Studio company and the Barbershop company used the name “Boys 2 Men”.
i.Mr Hassan came in and operated from unit 2 for a trial for around 2 months before August 2016.
j.When asked in cross about the advertisement on Gumtree the following exchange took place:
Now sometime in late 2016 you advertised the barbershop again on Gumtree, didn't you?---Yes.
And you advertised it as available for - the barbershop being available for about six - to be used for about six months or thereabouts, didn't you?---I don't recall the contents of the ad, but I [sic] said "barber chairs for rent". That was the ad's intent.
(Transcript 22 October 2018 (41) [24] – [30])
k.He said that rent under the lease had been paid by him personally or by his company Synergy Pty Ltd or by his company Boys 2 Men Barbershop Pty Ltd.
l.Mr Akbulut was asked to confirm that he had said to Ms Hankam that if she allowed a family member to use one of the chairs in the shop he would consider a cheaper rent. Mr Akbulut said that he did not recall that.
m.Mr Akbulut was asked also to confirm that Ms Hankam had said that she was not prepared to share the premises. He said that was not correct.
n.Mr Akbulut went on to say that Ms Hankam did not exclusively operate out of the premises and that the Barbershop Company also traded out of them, for what he described as “very occasional specialised appointments”. He went on to say that he had a record of the appointments but had not provided them to his solicitor. He agreed that the Barbershop Company was not operating out of the premises on a day to day basis at the time that he showed the premises to Ms Hankam and her husband. He said that at that time the company provided occasional services from the premises. He said that had been done about five times between when Mr Fijani died in December 2016 and when Ms Hankam left the premises in October 2017. He said that those haircuts had been done by his brother in law Michael Duscalates and not by him.
o.He was asked again about his advertisement for the premises and said that he did not remember how the ad was worded but that he made it clear to interested parties including Ms Hankam that he was renting only chairs.
p.He accepted that the document he prepared and sent to Ms Hankam purported to sublease the premises to Ms Hankam.
q.He was asked if he agreed that the agreement he entered into with Ms Hankam permitted her to use all four chairs at the premises. He responded by saying:
As per my email to John Chamberlain, it was three out of four chairs. I made that clear to John about my intent, and that was relayed to Mita if she, on a particular day, needed to use all four I wouldn't have stopped her if that's your question.
r.When asked what he did when he received the advice of Mr Chamberlain, Mr Akbulut said this:
Well, what I did was I couldn't execute the sublease. I didn't sign it, based on John's advice, knowing that that would trigger the traditional process of approval. So, I decided not to sign that. I informed Mehta accordingly. She never got an executed copy from me, but she still transferred the money. So, the terms were the same. I received the 2,500 and we proceeded to give her access.
s.When questioned about the timing of the sublease document being sent to Ms Hankam and the advice being received from Mr Chamberlain, Mr Akbulut at first said that the advice was received after the document had been sent. When shown the relevant email exchanges he accepted that he had sent the sublease document after he had received the advice.
t.When asked in re-examination what he had meant when he had said that Mr Scifleet had provided him with some flexibility Mr Akbulut said this:
Could you please explain to the Court what you meant by that statement?---What I meant was Mr Scifleet was aware that I would be setting up the barber shop and that the lease would be in my father's name. So he afforded me that flexibility to set up that business, although the lease wasn't technically in my name or in the name of Boys 2 Men, and was in my father's name as a duplicate to unit 1. That was the first instance of setting that environment of flexibility. There were other occasions where Mr Scifleet - for example, when he became aware of the fact that we had met up in there –
Mr Akbulut was not a persuasive witness. When faced with the ASIC record of the date of registration of the Barbershop Company he accepted that his earlier testimony was incorrect. At other times he prevaricated and was reluctant to make concessions in circumstances where it appeared that they should properly have been made. He changed his testimony about the timing of the preparation of the sublease document and the receipt of the advice from the lawyer about a licence. The change in testimony about the timing of the advice is particularly telling in the context of what is in issue in the proceedings. I was left with the impression that he was tailoring his evidence in a way which he thought best suited his case.
I conclude that Mr Akbulut is not a reliable witness. Where his testimony about his exchanges with Ms Hankam is different from that of Ms Hankam I prefer her evidence.
In particular I accept the testimony of Ms Hankam that she had exclusive possession of the premises and that no agreement existed between her and the Tenant (or any other person) for shared possession.
In their written submissions (para 61) the Tenant’s lawyers concede that the sending of the underlease agreement by Mr Muhammed Akbulut constituted an offer to Ms Hankam and that she accepted the offer, and further that “[t]here is nothing in the written terms that specify that it is only for part of the salon”. The latter is something of an understatement – the document in fact refers to the lease between the Landlord and the Tenant and says that “[t]he underlease will be for the Tenant’s interest in the premises located at Shop 2…”.
The submission appears to concede that the conduct of the parties (by way of the submission of the sublease document, its execution by Ms Hankam, its return to Mr Akbulut, and Ms Hankam’s payment of rent and entry into possession) was effective to bring into existence an agreement between the Tenant and Ms Hankam according to the terms of the document.
I record that as my understanding of the submissions because it is not altogether consistent with my perception of the manner in which the case was conducted by the Tenant. In case I am mistaken about what is conceded I record that, having reached the conclusion which I have about the reliability of the testimony of Ms Hankam and Mr Akbulut, I find that an agreement between the Tenant and Ms Hankam was brought into existence according to the terms of the document signed by Ms Hankam.
The Tenant’s submissions go on to say that the terms of the document do not however create a lease over which the provisions of the Leases Act apply and go on to expand upon that submission with reference to several authorities on the application of the Act.
The submissions made in that area are not to the point. The purported termination of the Lease by the Landlord was for a breach of the Lease and not a breach of the Act. Clause 13 is set out above. There is no express reference in cl 13 to the prohibition on subletting applying only to a sublease within the meaning of the Leases Act. No basis for such a limit to be imposed by the Leases Act or for implying such a limit in the Lease is pressed by the Tenant and none is otherwise readily apparent.
To the extent that the submission is to the effect that cl 13 is to be read down in that manner I reject it.
I am satisfied that the agreement reached between the Tenant and Ms Hankam was for the subletting of the premises and was not limited to a licence to only use or occupy the premises or some part of them. I am satisfied that the agreement was given effect by Ms Hankam entering into possession of the premises in accordance with the agreement reached. It is not in contest that the Landlord’s consent was not sought or obtained.
It follows that I find that the Tenant breached clause 13 of the Lease.
Is Landlord estopped?
That finding does not put an end to the matters in dispute. The Tenant says that if a finding of breach is made “equity should intervene with the landlord being estopped from relying on that breach as a result of the actions of its agents and the directors of the previous landlord”.
There are several difficulties for the Tenant in pressing its argument insofar as the breach of cl 13 constituted by the subletting to Ms Hankam is concerned.
The first is referred to in the submissions of the Landlord. The meeting which Mr Akbulut says took place was a meeting with the former owner and its agent at the premises within 90 days of the café in unit 1 commencing operation in February 2014. Even if conduct during or representations made at that time could otherwise establish promissory estoppel as between the Tenant and the then-owner, that conduct or representations cannot be relied upon as between the present Landlord and the Tenant. In the words of Dixon J in Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641, “Before anyone can be estopped, he must have played such a part in the adoption of the assumption that it would be unfair or unjust if he were left free to ignore it.”
Secondly, on the basis of the evidence of the Tenant the representation said to create the promissory estoppel is unclear. Even if, inferentially, it points to recognition on the part of the then-owner and its agent that the entity to take possession of the premises on creation of the lease would not be the entity shown as the tenant on the lease, that does not equate to a clear representation on the part of the then-owner that no restriction whatsoever was to apply on transfer, assignment or subletting by the Tenant during the term of the Lease. (See Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26).
In addition and to the extent that the Tenant relies upon an exchange with the Landlord’s agent about Ms Hankam’s presence at the premises, it is important to note what that evidence comprises. I have set out above what Mr Akbulut says was his exchange with Mr Scifleet about the presence of Ms Hankam in the premises. He said that he told Mr Scifleet that Ms Hankam was “renting a chair in the salon”. I have found that the Tenant had in fact sublet the premises to her. Even accepting for present purposes that Mr Akbulut’s testimony about the exchange is reliable, and that the inaction by the agent (as opposed to any conduct or representation by him) is otherwise capable of giving rise to a promissory estoppel, that cannot be the result where what the agent was told by Mr Akbulut was not a truthful statement.
In the circumstances there is no basis for the Landlord to be estopped from relying upon its rights under cl 13 in response to the Tenant’s breach of that clause by subletting the premises to Ms Hankam.
The structure of Division 12.5 of the Leases Act is that a tenant given a notice of termination contests the termination by way of application to the Court under s 122. For the purposes of s 123 I am satisfied that the termination should be confirmed. Section 125 deals with what such an order must contain. The premises have been vacated and so sub-paras 125(1)(b) and (c) are irrelevant. I understand that the termination date for the purposes of s 125(1)(a) should be 24 August 2017 but I will hear the parties on that and on costs.
I certify that the preceding fifty-nine [59] paragraphs are a true copy of the Reasons for Decision of his Honour Magistrate P J Morrison.
Associate: Angus Brown
Date: 6 March 2019
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