ARANDELL Nominees Pty Ltd v JBML Investments Pty Ltd as Trustee for JB and ML Trust

[2012] WADC 121

JURISDICTION     :   DISTRICT COURT OF WESTERN AUSTRALIA

IN CIVIL

LOCATION:   PERTH

CITATION:   ARANDELL NOMINEES PTY LTD -v- JBML INVESTMENTS PTY LTD as Trustee for JB and ML Trust [2012] WADC 121

CORAM:   REGISTRAR KINGSLEY

HEARD:   19 JULY 2012

DELIVERED          :   3 AUGUST 2012

FILE NO/S:   CIV 3150 of 2011

BETWEEN:   ARANDELL NOMINEES PTY LTD

Plaintiff

AND

JBML INVESTMENTS PTY LTD as Trustee for JB and ML Trust
First Defendant

JOHN BROCK
Second Defendant

MICHELLE ANGELA LEE
Third Defendant

Catchwords:

Practice - Strike out application - Agreement to lease repudiated before proceedings commenced - Specific performance not available to plaintiff

Legislation:

Nil

Result:

Application allowed

Representation:

Counsel:

Plaintiff:     Ms B Rosenthal

First Defendant              :     Mr B Hosgood

Second Defendant         :     Mr B Hosgood

Third Defendant            :     Mr B Hosgood

Solicitors:

Plaintiff:     Hotchkin Hanly Lawyers

First Defendant              :     Mackinlay Solicitors

Second Defendant         :     Mackinlay Solicitors

Third Defendant            :     Mackinlay Solicitors

Case(s) referred to in judgment(s):

Bayside Developments Pty Ltd v Copperart Pty Ltd (1994) 11 SR (WA) 316

Chan v Cresdon Pty Ltd (1989) 168 CLR 242

Copperart Pty Ltd v Bayside Developments Pty Ltd (1996) 16 WAR 396

JC Williamson Ltd v Lukey (1931) 45 CLR 282

Penrith Whitewater Stadium Ltd v Lesvor Enterprises Pty Ltd [2007] NSWCA 176

Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17

Ratto v Trifid Pty Ltd [1987] WAR 237

1. REGISTRAR KINGSLEY:  The plaintiff as landlord leased to the first defendant, pursuant to a partly written and partly oral agreement to lease dated on or about 24 December 2010, commercial premises in Claremont for a term of five years.  The second and third defendants were guarantors under the agreement to lease. 

2. The plaintiff pleads that the first defendant repudiated the lease by purporting to terminate the agreement on 29 July 2011, and in breach of the agreement to lease, abandoned trading at the premises in or about August 2011 and commenced de-fitting the premises.  The plaintiff accepted the first defendant's repudiation and terminated the agreement to lease in writing on or about 29 August 2011.  These proceedings were commenced by writ on 3 October 2011.

3. In an amended statement of claim dated 16 March 2012, amongst other things, the plaintiff introduces par 23 to its pleading.  Paragraph 23 pleads that in order to mitigate its loss, the plaintiff leased the ground floor premises on or about 5 September 2011 to about 27 November 2011, and thereafter there were a series of short-term leases both for the ground floor premises and the first floor premises.

4. The defendant has brought an application seeking to strike par 23.

The offer to lease

1. The plaintiff pleads that by a letter dated 21 December 2010 an offer to lease was sent to the first defendant.  The offer to lease identifies the landlord and tenant, and states the commencement date, a description of the premises, the rental payable for the premises, the responsibility for payment of outgoings and annual rent review.  There is sufficient certainty in the terms for me to find there is a valid agreement to lease.

2. The plaintiff pleads that on or about 23 December 2010 in a meeting between the director of the first defendant and the plaintiff's agent, further terms were agreed.  By an email dated 24 December 2010 from the second defendant to the plaintiff's agent, the second defendant accepted the offer to lease and the additional terms on behalf of the first defendant.

3. Subsequently in February 2011 the plaintiff provided the defendants with a lease for execution but the first defendant failed to execute to the agreement.  The first defendant, as the plaintiff pleads, pursuant to the agreement to lease, occupied the premises and paid rental between March 2011 and August 2011.

Section 34 Property Law Act and the agreement to lease

1. As the plaintiff pleads the written offer to lease forwarded to the first defendant in February 2011.  Consequently, the only agreement that can be relied on is the agreement to lease made 21 December 2011. 

2. Section 34(1)(a) of the Property Law Act (PLA) provides that no interest in land is capable of being created or disposed except by writing by signed by the person creating or conveying the interest. By s 35 PLA any interest in land created by parol and not put in writing has the force and effect of an interest at will only. However, s 36 PLA provides that nothing in s 34 or s 35 affects the operation of the law relating to part performance.

3. In Ratto v Trifid Pty Ltd [1987] WAR 237, 258 Brinsden J commented that:

   Section 34 (Property Law Act) of course is not a statute of frauds provision. Its very terms deny the creation of an interest in land unless the provisions of the section are complied with whereas the statutes of frauds does not deny the legality of the contract but simply makes it unenforceable unless the act is complied with …

4. The agreement to lease did not comply with the formalities required under s 34(1)(a) PLA. As the lease was for a term longer than three years it has the force and affect of a tenancy at will only, unless part performance is available to the plaintiff.

Is part performance available

1. The first defendant entered into possession of the premises and paid rental for a period of time.

2. The defendants argue that part performance is an equitable remedy and thus cannot give rise to common law damages (JC Williamson Ltd v Lukey (1931) 45 CLR 282). Part performance, however, can give rise to the equitable remedy of specific performance. Citing JC Williamson and Penrith Whitewater Stadium Ltd v Lesvor Enterprises Pty Ltd [2007] NSWCA 176 defendant's counsel argues that the court cannot decree specific performance if the contract was incapable of specific performance when the plaintiff commenced legal proceedings.

3. In Penrith's case Ipp JA [43] cites Chan v Cresdon Pty Ltd (1989) 168 CLR 242 as to the court's willingness to treat an agreement for lease as a lease in equity in cases where the agreement is specifically enforceable. Ipp JA goes on to say that these remarks do not support the proposition that part performance, of a contract rendered unenforceable by the statutes of frauds, enables an action to be brought for common law damages for breach of that contract. Ipp JA [44] notes that Chan v Cresdon proceeded on the assumption that the notional agreement for lease was specifically enforceable.  In Penrith's case by the time the respondents commenced their action the particular contract was not specifically enforceable.  This was because the appellant had repudiated the contract and the respondent had accepted that repudiation prior to commencement of proceedings.

4. Plaintiff’s counsel cites Copperart Pty Ltd v Bayside Developments Pty Ltd (1996) 16 WAR 396 (Copperart) in support of par 23 of the amended statement of claim.  Copperart similar to the current proceeding in that a claim for rental beyond the repudiation of the lease was allowed.  However, the factual point of difference in Copperart is that the repudiation of the lease was subsequent to the proceedings being commenced (see Bayside Developments Pty Ltd v Copperart Pty Ltd (1994) 11 SR (WA) 316, 325).

5. In Copperart Murray J comments;

   That conduct [of Copperart] constituted a repudiation of the agreement to lease for the simple reason that it evinced an intention on the part of Copperart to be no longer bound by the contract.  It was then open to to Bayside to accept that repudiation and terminate the agreement, pursuing thereafter a claim for damages for the loss of the bargain as it did: Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17, 31-3.

6. A reading of Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 [8] shows the proceedings in that case were issued prior to the acceptance of the repudiation of the lease.

7. In my opinion the authorities indicate that where an agreement to lease is unenforceable, then specific performance is not available.  In this case the agreement to lease is unenforceable as the remedy of specific performance is no longer available to the plaintiff; the repudiation of the agreement to lease having been accepted prior to the commencement of these proceedings.

Section 25(10) Supreme Court Act 1935

1. Section 25(10) of the Supreme Court Act provides that the court has the discretionary power to order damages in addition to or in substitution for specific performance when a court entertains an application for specific performance.  In my opinion that power to award damages can only subsist when at the material time the contract in question is susceptible to specific performance.

2. In my opinion the agreement to lease, having been repudiated prior to the commencement of the proceeding, was not susceptible to specific performance.  Thus, in my opinion the plaintiff cannot claim damages in lieu of specific performance.

Conclusion

1. In my opinion par 23 has no basis at all and should be struck.

2. I will hear counsel on the issue of costs.