AURJOE PTY LTD as Trustee for THE JOE ROMANO INVESTMENT TRUST -v- SMITH
[2022] WADC 33
•8 APRIL 2022
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS
LOCATION: PERTH
CITATION: AURJOE PTY LTD as Trustee for THE JOE ROMANO INVESTMENT TRUST -v- SMITH [2022] WADC 33
CORAM: REGISTRAR KINGSLEY
HEARD: 10 MARCH 2022
DELIVERED : 8 APRIL 2022
FILE NO/S: CIV 3852 of 2021
BETWEEN: AURJOE PTY LTD as Trustee for THE JOE ROMANO INVESTMENT TRUST
First Plaintiff
FRANJACK PTY LTD as Trustee for THE FRANK ROMANO INVESTMENT TRUST
Second Plaintiff
AND
ANTHONY CYRIL SMITH
Defendant
Catchwords:
Practice - Application for summary judgment - Turns on own facts
Legislation:
Nil
Result:
Judgment given
Representation:
Counsel:
| First Plaintiff | : | Mr J R Marzec |
| Second Plaintiff | : | Mr J R Marzec |
| Defendant | : | Mr C S Williams |
Solicitors:
| First Plaintiff | : | Zafra Legal |
| Second Plaintiff | : | Zafra Legal |
| Defendant | : | Solomon Brothers |
Case(s) referred to in decision(s):
Ansearch Ltd v Wavtech Pty Ltd [2006] WASC 184
Blythe v The State of Western Australia [2008] WASCA 10
Commonwealth Bank of Australia Ltd v Oswal (in his Personal Capacity and as Trustee of the Burrup Trust) [2012] WASC 128
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109
Webster v Lampard (1993) 177 CLR 598
Westpac Banking Corporation v Anderson [2017] WASC 106
REGISTRAR KINGSLEY:
The plaintiffs' claim is for outstanding rental arrears and outgoings under a commercial lease to which the defendant was guarantor for his company, the tenant.
The lease with VB Enterprises Pty Ltd (the defendant's company) was entered into in January 2003. In November 2009 as a result of a sale of land the plaintiffs became the registered proprietors and the lease was assigned to the plaintiffs.
The plaintiffs plead that around July 2017 VB Enterprises fell into arrears and in June 2018 the plaintiffs served a default notice on VB Enterprises. A demand was also sent to the defendant in his capacity as guarantor. Around 16 July 2018 the plaintiffs, VB Enterprises and the defendant entered into a Deed of Acknowledgement, the essential terms being:
1.The plaintiffs confirmed they would not rely on non‑compliance of the 2018 default notice during the term of the Deed.
2.VB Enterprises would continue on a monthly holding over in accordance with cl 19.06 of the lease.
3.Subject to VB Enterprises complying with all its obligations under the lease and Deed of Acknowledgement, VB Enterprises would be granted a full abatement of rent.
4.Notwithstanding the full abatement of rent, VB Enterprises would continue to be responsible for all the tenant's covenants under the lease, including but not limited to liability for the payment of all operating expenses as and when they are required to be paid.
5.The plaintiffs would commence marketing the premises for rent and will endeavour to find a suitable tenant to take an assignment of the lease as soon as practical.
6.Until the lease was assigned, VB Enterprises would continue to conduct the business from the premises.
In May 2019 the plaintiffs served notice on VB Enterprises and the defendant terminating the lease on the grounds that VB Enterprises had breached clauses of the Deed of Acknowledgement and the lease in that VB Enterprises ceased operating the business and had failed to pay operating expenses.
The plaintiffs' claim is in three parts:
1.An amount of $125,122.84 being the initial arrears due under the lease up to 1 July 2018 and in respect of which the parties executed the Deed of Acknowledgement on 16 July 2018.
2.The second part is $23,500.08 constituting outgoings and interest accrued under the lease between July 2018 and termination on 8 May 2019.
3.The third amount is $195,415.15 being the rent accrued between 16 July 2018 and termination of the lease on 8 May 2019 the abatement of which was rescinded by the defendant's failure to comply with the Deed of Acknowledgement.
The plaintiff has brought a summary judgment application pursuant to O 14 of Rules of the Supreme Court 1971 (WA) (RSC).
The evidence
The evidence before me consists of:
1.Affidavit of Frank Oreste Romano sworn 2 December 2021 (Romano's First Affidavit).
2.Affidavit of Frank Oreste Romano sworn 3 March 2022 (Romano's Second Affidavit).
3.Affidavit of Anthony Cyril Smith sworn 16 February 2022 (Smith's Affidavit).
Legal principles
The legal principles concerning the power to order summary judgment are uncontroversial. Summary judgment should be exercised with great care and judgment should not be granted unless it is clear that there was no real question to be tried: Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87. The onus is on the plaintiff to persuade the court that it is appropriate to award judgment, and once a plaintiff has established the prima facie right to judgment the onus is on the defendant to satisfy the court by judgment should not be given: Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109. The defendant only has to show cause why there is an arguable defence: Westpac Banking Corporation v Anderson [2017] WASC 106.
The court should not dispose of an action summarily where there is conflict of the facts. In determining whether there is an issue in dispute which ought to be tried, the version of facts put forward by the defendant should be accepted assuming they are not inherently incredible: Webster v Lampard (1993) 177 CLR 598. However, the court is not bound to accept uncritically as raising a dispute of fact every statement in an affidavit, however equivocal lacking in precision or inconsistent with contemporary documents: Ansearch Ltd v Wavtech Pty Ltd [2006] WASC 184.
The defendant's submissions
The defendant submits that the crux of the bargain manifested by the Deed of Acknowledgement is that the tenant would be given a full abatement of rent subject to continuing to pay operating expenses and that the plaintiffs would commence marketing the premises and endeavour to find a suitable tenant for the assignment of lease. If a suitable tenant was found the plaintiffs would offer the tenant's fit out in the premises to the incoming tenant, with the proceeds being offset against the arrears owed by the tenant to the plaintiff (cl 3.4 ‑ cl 3.6, Deed of Acknowledgement). The defendant submits that a fit out of commercial premises has greatest value when included in the sale of the business as a going concern.
The defendant submits that a term would readily be implied into the Deed of Acknowledgment obliging the plaintiffs to act reasonably in their efforts to find a suitable tenant to take the assignment of the lease. The defendant submits that the plaintiffs took no steps, or at least no substantive steps, to market the premises or find a suitable tenant to take an assignment of the lease as soon as practical. The defendant submits that the defendant was able to identify two potential incoming tenants to take assignment of the lease and referred those potential tenants to the plaintiffs. Those potential tenants declined to proceed because the asking rent sought by the plaintiffs was uncommercially high.
The defendant submits that this default by the plaintiffs has visited the tenant with damages in the order of at least $100,000, which is the amount the two potential tenants had indicated they were prepared to pay for the fit out.
Thus, the defendant submits the tenant can setoff the claimed damages for the plaintiffs' breach against its liability under the lease and Deed of Acknowledgment. The defendant argues that an equitable setoff exists as the claim for damages goes to the heart of the Deed of Acknowledgement and impeaches the plaintiffs' claim for arrears of rent and operating expenses.
Plaintiffs' submissions
The plaintiffs submit that the defendant does not dispute liability in general but the defendant submits he has a setoff against the plaintiffs' claim. The principal assertion by the defendant is that the plaintiffs failed to market the premises appropriately such that it was unable to find a suitable tenant as soon as practical. The plaintiffs' note the defendant deposes he never saw any indication of any steps being taken in relation to the marketing and that the plaintiffs did not introduce any potential tenants to take an assignment. The plaintiffs submit these are subjective statements that are incorrect with reference to the contemporaneous documentary evidence. This refers to par 6 of Romano's Second Affidavit where he details the form of advertising undertaken to market the premises.
The defendant was critical of this evidence noting that there is no detail of the extent of leasing flyers, email blast, website hosting and social media noted in the invoice dated 13 July 2018. The plaintiffs submit that there is no evidence from the defendant that a suitable tenant was procured but not introduced to him. The available evidence is that despite the best efforts of the plaintiffs a suitable tenant was not located.
In relation to the setoff the plaintiffs submit that the claim of the value of the fit out at $100,000 is based on the willingness of two unidentified potential purchasers who do not give evidence as to how that figure is arrived at to pay that amount. The plaintiffs submit that the extent of the defendant's evidence is hearsay and unsupported by any objective factual basis.
Discussion
The plaintiffs' claim is made up in three parts. The first part, the amount of $120,522.84 is the arrears accrued up to 1 July 2018. At cl 3.1 of the Deed of Acknowledgment the tenant acknowledges that it owes the landlord the outstanding rental arrears of $120,522.84. In my opinion there is no arguable defence on that sum and I gave judgment to the plaintiffs in that amount with execution being stayed until further order.
The balance of the plaintiffs' claim turns on the content of the defendant's claim of setoff. Order 37 r 6(3) RSC provides that an affidavit containing statements of information or belief must set out the sources or grounds of that information or belief (subject to some exceptions which do not apply). Where statements of information and belief are contained in an affidavit the deponent should clearly indicate the source of that information or belief, and that the deponent believes it to be true: Blythe v The State of Western Australia [2008] WASCA 10.
The defendant must satisfy the court there is an issue or question in dispute, the arguable defence, which ought to be tried. But the arguable defence must be raised by evidence. Mere assertion is not sufficient: Commonwealth Bank of Australia Ltd v Oswal (in his Personal Capacity and as Trustee of the Burrup Trust) [2012] WASC 128.
In my opinion the defendant has merely asserted that he identified two potential purchasers. There is no condescending to the source or ground for that information nor any assertion that the defendant believed those statements to be true. There is no identification of the potential purchasers.
In relation to marketing the property Romano in his second affidavit, details, to some extent, the efforts taken to market the property. To this the defendant says that he never saw any indication of steps being taken by the plaintiffs. However, the defendant does not give any detail to this assertion.
The defendant deposed that he introduced two unidentified persons to take on the lease but they declined to do so as the rent sought by the plaintiff was uncommercially high. There is no objective basis for this assertion: the defendant does not depose to what, objectively, was a reasonably commercial rent.
In my opinion the basis for the setoff is framed by mere assertions, and hearsay compounded by a lack of objective fact.
Conclusion
The defendant has not persuaded me that there is any arguable defence to the plaintiffs' claim. I give judgment to the plaintiffs on its claim. I would hear counsel on the form of orders and on costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
SC
Court Officer
8 APRIL 2022
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS
LOCATION: PERTH
CITATION: AURJOE PTY LTD as Trustee for THE JOE ROMANO INVESTMENT TRUST -v- SMITH [2022] WADC 33 (S)
CORAM: REGISTRAR KINGSLEY
HEARD: 10 MARCH 2022
DELIVERED : 23 SEPTEMBER 2022
FILE NO/S: CIV 3852 of 2021
BETWEEN: AURJOE PTY LTD as Trustee for THE JOE ROMANO INVESTMENT TRUST
First Plaintiff
FRANJACK PTY LTD as Trustee for THE FRANK ROMANO INVESTMENT TRUST
Second Plaintiff
AND
ANTHONY CYRIL SMITH
Defendant
Catchwords:
Practice - Prejudgment interest - Turns on own facts
Legislation:
Rules of the Supreme Court 1971 (WA), O 14
Supreme Court Act 1935 (WA), s 32
Result:
Prejudgment interest awarded
Representation:
Counsel:
| First Plaintiff | : | Mr J R Marzec |
| Second Plaintiff | : | Mr J R Marzec |
| Defendant | : | Mr C S Williams |
Solicitors:
| First Plaintiff | : | Zafra Legal |
| Second Plaintiff | : | Zafra Legal |
| Defendant | : | Solomon Brothers |
Case(s) referred to in decision(s):
1110 Hay Pty Ltd as trustee for The Hay Street Trust v Metso Minerals (Australia) Ltd [No 4] [2019] WASC 146
REGISTRAR KINGSLEY:
On 8 April 2022, I gave judgment pursuant to O 14 Rules of the Supreme Court 1971 (WA) to the plaintiffs in the sum of $330,680.20. The issue of interest was adjourned for further consideration.
Both plaintiffs and defendant have filed submissions on the issue of interest: the plaintiffs on 22 April 2022 and the defendant on 28 April 2022.
Overview
Around November 2009, by virtue of a contract for the sale of land between the vendor and the plaintiffs, the plaintiffs became the registered proprietor of land and the benefit of a lease entered into around 1 January 2003, passed to the plaintiffs. The lease was assigned in December 2013 to VB Enterprises the lessee, and the defendant as guarantor.
Around July 2017, VB Enterprises fell into arrears and a default notice was sent to VB Enterprises, and a demand sent to the defendant. Around 16 July 2018, the plaintiffs, VB Enterprises and the defendant entered into a deed of acknowledgement of debt, whereby VB Enterprises acknowledged it owed to the plaintiffs $120,522.84, being outstanding arrears under the lease.
On 8 May 2019, the plaintiffs served written notice on VB Enterprises and the defendant, terminating the lease, stating that VB Enterprises was indebted to the plaintiffs for outstanding rent, operating expenses, as well as the agreed arrears. The total of the plaintiffs' claim $338,633.25. Pursuant to the lease, the plaintiffs claimed interest accruing on the outstanding arrears at a rate of 2% above the overdraft rate charged by the plaintiffs' bank from time to time for commercial loans in excess of $100,000, or alternatively, interest pursuant to s 32 of the Supreme Court Act 1935 (WA) (the Act), such interest to be applied from 8 May 2019. The reference to 8 May 2019 is the date the plaintiffs served written notice of the termination on VB Enterprises and the defendant. The writ was issued on 8 October 2021.
The parties agree that VB Enterprises continued to occupy the premises after expiration of the term, and that pursuant to cl 19.06 of the lease that holding over was on the same covenants, conditions, and stipulations mutatis mutandis as were contained or implied in the lease (except the option to renew). Clause 5.06 of the lease provides that in the event any sum of money shall be owing by VB Enterprises to the plaintiffs, but unpaid in breach of the provisions of the lease for more than seven days, then VB Enterprises shall pay to the plaintiffs on demand, interest, at a rate of interest calculated on a daily basis, on the total monies owing from time to time and computed from and including the due date.
Rate of interest is defined in cl 2.01 of the lease as the rate of 2% above the overdraft rate charged by the landlord's bank from time to time for commercial loans in excess of $100,000.
It is common ground that there is no evidence to support a claim of a rate of interest as defined.
Plaintiffs' submissions
The plaintiffs submit that as interest no longer applied as of right from 8 May 2019, the plaintiffs' entitlement to prejudgment interest at the prescribed statutory rate was enlivened. The plaintiffs' right to interest under the lease arises under cl 5.06 of the lease and cl 19.06, the holding over clause in the lease. The plaintiffs submit that cl 19.06 does not apply as, on 8 May 2019, there was a termination of the deed of acknowledgement and the lease, and the defendant did not continue to occupy the leased premises.
The plaintiffs submit that no prejudgment interest is claimed for the period between 28 June 2018 (when the deed of acknowledgement was executed) and 7 May 2019, because there was an entitlement to interest as of right during that period under cl 19.06 of the lease. The plaintiffs submit there is no provision in the lease that the right to interest survives termination. Therefore, the plaintiffs' entitlement to interest is pursuant to s 32(1) of the Act.
Defendant's submissions
The defendant submits that the plaintiffs are not entitled to interest at all. The defendant submits that the defendant's liabilities arise under the terms of the lease. The deed of acknowledgement did not impose any new obligations upon the defendant to pay money. Upon termination of the lease, the parties to the lease were discharged from future performance, but rights already vested were unaffected by the termination. Thus, the plaintiffs' entitlement to payment of monies owing under the lease and the entitlement to be paid interest on those monies were unaffected by the termination on 8 May 2019.
The defendant submits that because interest is payable as of right pursuant to cl 5.06, s 32 of the Act does not apply to the debt and the claim for payment of interest must fail.
Discussion
Section 32 of the Act provides that:
… the Court may order that there shall be included, in the sum for which judgment is given, interest at such rate as it thinks fit on the whole or any part of the money …
However, s 32 does not apply in relation to any debt upon which interest is payable as of right, whether by virtue of any agreement or otherwise. An award of interest is to compensate a plaintiff for, in commercial matters, being held out of their money. The award of interest is discretionary.
In my opinion, the plaintiffs were not entitled to be paid interest under cl 5.06 of the lease after 8 May 2019. There is no provision in the lease that the right to interest survives termination.
For the period up to 7 May 2019, interest is payable to which s 32(1) of the Act is not applicable. That is because interest is payable up to 7 May 2019 as of right.
However, from 8 May 2019, there is no debt upon which interest is payable as of right. That being the case from 8 May 2019 in my opinion, the plaintiff may claim statutory prejudgment interest on that debt after 8 May 2019. This is because, up to 7 May 2019, there was a debt on which interest is payable as of right - the emphasis being the word 'is'. From 8 May 2019 there is no debt to which interest is payable as of right: 1110 Hay Pty Ltd as trustee for The Hay Street Trust v Metso Minerals (Australia) Ltd [No 4][2019] WASC 146.
Conclusion
In my opinion, the plaintiffs are entitled to interest pursuant to s 32 of the Act at the rate of 6% on the judgment debt from 8 May 2019 to judgment.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
TS
Court Officer
21 SEPTEMBER 2022
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