Australia Machinery Engineering (AME) Pty Ltd v Moore Group Holdings Pty Ltd
[2017] WADC 124
•15 SEPTEMBER 2017
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS
LOCATION: PERTH
CITATION: AUSTRALIA MACHINERY ENGINEERING (AME) PTY LTD -v- MOORE GROUP HOLDINGS PTY LTD [2017] WADC 124
CORAM: PARRY DCJ
HEARD: 19 JUNE 2017 (FURTHER WRITTEN SUBMISSIONS FILED ON 24, 25 & 31 AUGUST 2017)
DELIVERED : 15 SEPTEMBER 2017
FILE NO/S: CIV 2480 of 2016
BETWEEN: AUSTRALIA MACHINERY ENGINEERING (AME) PTY LTD
First Appellant
HWEE GOH
Second AppellantTIONG LIM
Third AppellantAND
MOORE GROUP HOLDINGS PTY LTD
Respondent
Catchwords:
Appeal from registrar - Summary judgment - Landlord and tenant - Action by landlord against tenant and guarantors for liquidated damages for unpaid rent and unliquidated damages for other breaches of lease - Summary judgment entered for rent claim - Whether tenant and guarantors have an arguable defence to claim for rent - Tenant and guarantors plead by way of defence that landlord in breach of implied term to do all things necessary to enable tenant to have benefit of lease - Tenant and guarantors' counterclaim for damages for breach of implied term and damages, compensation, refusal to enforce lease or variation of lease under Australian Consumer Law for misleading or deceptive conduct and unconscionable conduct - Suspension clause - Lease requires tenant to pay rent to landlord 'without demand, deduction or right of set-off' - Whether suspension clause precludes arguable defence to claim for rent - Whether execution of summary judgment should be stayed until after trial of counterclaim
Legislation:
City of Canning Town Planning Scheme No 40
Corporations Act 2001 (Cth) s 601AD(1)
District Court Rules 2005 r 6(1), r 15, r 15(1), r 15(6)
Planning and Development Act 2005 (WA)
Rules of the Supreme Court 1971 (WA) O 14, O 14 r 1, O 14 r 2, O 14 r 3(1), O 14 r 3(2), O 16
The Australian Consumer Law (Sch 2 to the Competition and Consumer Act 2010 (Cth)) s 18, s 21, s 236, s 237, s 237(1), s 243
Result:
Appeal dismissed
Decision of Registrar Kingsley affirmed
Representation:
Counsel:
First Appellant : Mr C S Williams
Second Appellant : Mr C S Williams
Third Appellant : Mr C S Williams
Respondent: Mr B D Campbell
Solicitors:
First Appellant : Solomon Bros
Second Appellant : Solomon Bros
Third Appellant : Solomon Bros
Respondent: Hale Legal
Case(s) referred to in judgment(s):
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87; [1983] HCA 25
Field Camp Services Pty Ltd v Site Accommodation Pty Ltd [No 2] [2012] WASCA 27
Hausman v Abigroup Contractors Pty Ltd [2009] VSCA 288; (2009) 29 VR 213
Moore Group Holdings Pty Ltd v Australia Machinery Engineering (AME) Pty Ltd [2017] WADC 90
Morgan v Pallister [2004] WASC 188
O'Brien v Bank of Western Australia Ltd [2013] NSWCA 71
Oswal v Commonwealth Bank of Australia [2013] WASCA 58
Palaniappan v Westpac Banking Corporation [2016] WASCA 72
Webster v Lampard (1993) 177 CLR 598; [1993] HCA 57
Westpac Banking Corporation v Palaniappan [2014] WASC 475
PARRY DCJ:
Introduction
Australian Machinery Engineering (AME) Pty Ltd (AME), Ms Hwee Goh and Mr Tiong Lim have appealed, pursuant to r 15(1) of the District Court Rules 2005 (DCR), from a decision of Registrar Kingsley made on 28 February 2017.
In that decision, Registrar Kingsley entered summary judgment in favour of Moore Group Holdings Pty Ltd (Moore Group), which is the plaintiff in the action, against AME, Ms Goh and Mr Lim, who are the defendants in the action, for the liquidated portion of Moore Group's claim in the proceedings. Moore Group's claim for liquidated damages is in respect of rent which AME failed to pay to Moore Group under a lease. Ms Goh and Mr Lim are guarantors of AME's obligations under the lease.
Summary judgment was entered by the registrar pursuant to O 14 of the Rules of the Supreme Court 1971 (WA) (RSC), which applies in this court pursuant to r 6(1) of the DCR.
Registrar Kingsley ordered AME, Ms Goh and Mr Lim to pay Moore Group's costs of the application for summary judgment to be taxed on an indemnity basis pursuant to the lease. The registrar also made orders to enable the quantification of summary judgment. (See Moore Group Holdings Pty Ltd v Australia Machinery Engineering (AME) Pty Ltd [2017] WADC 90.)
An application by Moore Group for summary dismissal of AME's, Ms Goh's and Mr Lim's counterclaim, made pursuant to O 16 of the RSC, was withdrawn by Moore Group at the hearing on the basis of information provided in an affidavit of Ms Goh filed two business days prior to the hearing. Registrar Kingsley dismissed the application for summary dismissal of the counterclaim, but ordered AME, Ms Goh and Mr Lim to pay Moore Group's costs of that application in the cause.
Rule 15(1) of the DCR confers a right of appeal to a judge upon a party who is 'dissatisfied with a decision of a registrar'. Rule 15(6) of the DCR states that 'the appeal is to be by way of a new hearing of the matter that was before the registrar'. In other words, an appeal under r 15 of the DCR involves a hearing de novo, that is, a fresh consideration of the matter that was before the registrar. Relevantly, this appeal involves a fresh consideration of Moore Group's application for summary judgment of its claim for liquidated damages for unpaid rent under O 14 r 1 of the RSC.
As the appeal is by way of a hearing de novo, the parties are not confined to the evidence presented before the registrar. The evidence in the appeal comprises an affidavit of Ms Goh sworn on 23 February 2017 and affidavits of Mr Darryl Robert Moore, a director of Moore Group, sworn on 10 November 2016 and 8 March 2017. (Mr Moore's affidavit sworn on 8 March 2017 was filed by Moore Group pursuant to orders made by Registrar Kingsley for the purpose of quantification of summary judgment and was on AME's, Ms Goh's and Mr Lim's list of documents to be relied on at the hearing of the appeal, and not on Moore Group's list of documents to be relied on at the hearing of the appeal).
By its statement of claim filed on 28 September 2016, in addition to liquidated damages for non‑payment of rent by AME under the lease, Moore Group also seeks unliquidated damages against AME, Ms Goh and Mr Lim for other alleged breaches of the lease.
By their amended defence and counterclaim filed on 28 February 2017, AME, Ms Goh and Mr Lim seek damages against Moore Group for alleged breaches of an implied term of the lease to the effect that Moore Group would do all such things as were necessary on its part to enable AME to have the benefit of the lease; further or alternatively, damages pursuant to s 236 of The Australian Consumer Law (ACL) (Sch 2 to the Competition and Consumer Act 2010 (Cth)) for misleading or deceptive conduct in trade or commerce, contrary to s 18 of the ACL, and for unconscionable conduct in trade or commerce, contrary to s 21 of the ACL; and further or alternatively, orders for compensation, refusing to enforce the lease or varying the lease, pursuant to s 237 and s 243 of the ACL.
These various claims will need to be resolved at the trial of the action and counterclaim.
The parties advised the court that Registrar Kingsley gave brief oral reasons at the conclusion of the hearing in which he indicated that he entered summary judgment in relation to Moore Group's claim for rent on the basis that cl 3.1 of the lease precludes AME, Ms Goh and Mr Lim from relying on any of the claims that they make in their defence and counterclaim in answer to Moore Group's claim for rent due under the lease. Clause 3.1 of the lease (which was referred to by the parties as a 'no set‑off clause' and is commonly known as a 'suspension clause') states in par (a) as follows:
The Tenant shall pay the Rent to the Landlord without demand, deduction or right of set‑off by equal monthly instalments in advance on the first day of each month …
Although the registrar's reasons for decision are not available, given that this is an appeal by way of a hearing de novo, the parties' joint position, with which I agree, is that the appeal could proceed without a statement of reasons for the decision under appeal.
For reasons set out below, I am of the same view as the registrar, namely that cl 3.1 of the lease precludes any of the three principal matters raised in the defence and counterclaim from constituting an arguable defence against the landlord's claim for rent under the lease, or, in terms of O 14 r 3(1) of the RSC, in consequence of cl 3.1 of the lease, I am not satisfied that with respect to Moore Group's claim for rent there is 'an issue or question in dispute which ought to be tried, or that there ought for some other reason to be a trial of that claim or part'. I have therefore determined that summary judgment should be given for Moore Group against AME (subject to the following paragraph) and against Ms Goh and Mr Lim who guaranteed 'the due and punctual payment by the Tenant of the Rent' under cl 22.1 of the lease.
I reserved judgment following the hearing of the appeal. AME's, Ms Goh's and Mr Lim's solicitors subsequently advised the court that AME had been deregistered by the Australian Securities and Investments Commission after the hearing of the appeal.
In written submissions filed at the request of the court, the parties advised their joint position that, pursuant to s 601AD(1) of the Corporations Act 2001 (Cth), AME ceased to exist upon its deregistration and, in consequence, 'no orders concerning it can be made in the appeal'. This joint position was subject to a dispute between the parties as to whether, if the court, on appeal, decides to dismiss Moore Group's application for summary judgment, the orders made by Registrar Kingsley on 28 February 2017 should be set aside insofar as they affect AME, in addition to insofar as they affect Ms Goh and Mr Lim.
As for reasons set out below I have determined that the appeal should be dismissed, it is unnecessary to resolve the dispute as to whether the orders of the registrar affecting AME should be set aside.
Pleadings
It is admitted on the pleadings (statement of claim filed on 28 September 2016 and amended defence and counterclaim filed on 28 February 2017 [5]) that, by a lease dated 4 July 2013 between Moore Group (as landlord) and AME (as tenant), with Ms Goh and Mr Lim as guarantors, Moore Group leased the property located at Nos 101-103 Ewing Street (Lot 275), Welshpool (premises) to AME. It is admitted on the pleadings that AME operated a scrap metal and recycling business at various properties including the premises (statement of claim and amended defence and counterclaim [2]). Furthermore, it is admitted on the pleadings that in or around May 2015, AME ceased paying rent to Moore Group under the lease and has failed to pay rent at any time afterwards (statement of claim and amended defence and counterclaim [9]).
It is also admitted on the pleadings that the lease contained a guarantee and indemnity (statement of claim and amended defence and counterclaim [7]) and specified that Ms Goh and Mr Lim were guarantors of AME's obligations under the lease (statement of claim and amended defence and counterclaim [5]).
By its statement of claim, Moore Group claims the sum of $282,677.01 in unpaid rent and interest pursuant to the lease. By their amended defence and counterclaim, AME, Ms Goh and Mr Lim deny that Moore Group is entitled to this relief or to any relief ([37]).
By their amended defence and counterclaim, AME, Ms Goh and Mr Lim also plead that they 'are entitled to, and hereby do, set‑off [AME's] entitlement to damages against any liability that they have to [Moore Group]' ([36]). They plead that they are entitled to this set‑off by way of defence, because AME has suffered loss and damage by reason of alleged breaches by Moore Group of an implied term of the lease 'to the effect that [Moore Group] would do all such things as were necessary on its part to enable [AME] to have the benefit of the Lease' ([6.3.2], [35]). The defence and counterclaim states that Moore Group breached this implied term by failing to give owner's consent to the lodgement of a development application seeking retrospective development approval from the City of Canning (City) for the use of the premises by AME as a 'salvage yard' from September 2014 until about 25 June 2015 ([29] – [31], [34] – [35]) and by failing to provide drawings of and regarding water main connections and stormwater drainage on the premises so that this information could be provided to consultants to assist AME in obtaining development approval during the period from about July 2015 to about September 2015 ([32] – [35]).
By way of counterclaim, AME, Ms Goh and Mr Lim repeat their defence and plead, further or alternatively, that Ms Goh and Mr Lim caused AME to execute the offer to lease and the lease, and executed the lease as guarantors, 'induced by, and in reliance upon, a belief caused by':
•The conduct of Moore Group's leasing agent, Mr Martin Vogt of Ray White Commercial Perth, 'to the effect that it would be in [AME's, Ms Goh's and Mr Lim's] interest to lease the [premises] for the purposes of them carrying on a business involving warehouse storage, fabrication and metal and tyre recycling' ([27A], [38A]);
•Further or alternatively, Mr Moore stating to Ms Goh and Mr Lim in about June 2013 words 'to the effect that the [premises] had been used by former tenants as a scrap metal yard, as skip bins for waste, sandblasting, fabrication and transport logistics' ([27B], [38A]); and
•Further or alternatively, Moore Group not disclosing to AME, Ms Goh or Mr Lim, after Ms Goh and Mr Lim informed Mr Vogt and Mr Moore of what AME's business involved, 'that a use of the [premises] for the carrying on of the Business would, alternatively may, require a grant of approval by the City of Canning' ([28A], [38A]).
They plead that Mr Vogt, Mr Moore and Moore Group's conduct 'constituted misleading and deceptive conduct by [Moore Group] in contravention of s 18 of the ACL' ([38A.3]).
Further or alternatively, they plead that Moore Group 'engaged, in trade or commerce, in connection with the supply of goods and services to [AME], [in] conduct which in all the circumstances was unconscionable', in contravention of s 21 of the ACL ([39] - [40]).
They also plead that, by contravention s 18 of the ACL and further or alternatively by contravention of s 21 of the ACL, they have suffered loss and damage ([41]).
AME, Ms Goh and Mr Lim claim the following by way of counterclaim from Moore Group:
A.Damages for [Moore Group's] breaches of the Lease.
B.Further or alternatively, damages pursuant to s. 236 of the ACL.
C.Further or alternatively, orders for compensation, refusing to enforce the Lease or varying the Lease, pursuant to ss. 237 and 243 of the ACL.
Application for summary judgment
As indicated earlier, given that the nature of an appeal under r 15 DCR is a hearing de novo, the appeal in this case involves a fresh consideration of Moore Group's application under O 14 r 1 RSC for summary judgment in relation to its claim for liquidated damages for rent due, but unpaid, under the lease. The application for summary judgment was made by chamber summons filed on 17 November 2016.
Rules 1, 2 and 3 of O 14 RSC state as follows:
1.When plaintiff may apply for summary judgment
(1)Where in an action to which this Order applies a statement of claim has been served on a defendant and that defendant has entered an appearance, the plaintiff may, on the ground that that defendant has no defence to a claim included in the writ, or to a particular part of such claim, or has no defence to such a claim or part except as to the amount of any damages claimed, within 21 days after appearance or at any later time by leave of the Court, apply to the Court for judgment against that defendant.
(2)This Order applies to every action begun by writ other than a probate or admiralty action.
2.Application under r. 1, how to make
(1)An application under rule 1 shall be made by summons supported by an affidavit verifying the facts on which the claim or the part of the claim to which the application relates is based, and stating that in the deponent’s belief there is no defence to that claim or part thereof, as the case may be, or no defence except as to the amount of any damages claimed.
(2)Unless the Court otherwise directs, an affidavit for the purposes of this rule may contain statements of information or belief with the sources and grounds thereof.
(3)The summons and a copy of the affidavit in support and of any exhibits therein referred to shall be served on the defendant not less than 7 days before the return day of the summons.
3.Judgment may be given for plaintiff
(1)On the hearing of an application under rule 1 unless the Court dismisses the application, or the defendant satisfies the Court with respect to the claim, or the part of the claim, to which the application relates that there is an issue or question in dispute which ought to be tried, or that there ought for some other reason to be a trial of that claim or part, the Court may give such judgment for the plaintiff against the defendant on that claim or part thereof as may be just, having regard to the nature of the remedy or relief claimed.
(2)The Court may, by order and subject to such conditions, if any, as may be just, stay execution of any judgment given against a defendant under this rule until after the trial of any counterclaim made or raised by the defendant in the action.
As the High Court of Australia held in Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87, 99; [1983] HCA 25 (Mason, Murphy, Wilson, Deane & Dawson JJ):
The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried.
Moore Group's application for summary judgment under O 14 r 1 RSC was made in accordance with O 14 r 2(1) RSC by a summons supported by an affidavit of Mr Moore sworn on 10 November 2016 verifying the facts on which the claim is based and stating that in the deponent's belief there is no defence to the claim. In particular, Mr Moore refers in his affidavit to cl 3.1 of the lease which, as indicated earlier, states in par (a) as follows:
The Tenant shall pay the Rent to the Landlord without demand, deduction or right of set‑off by equal monthly instalments in advance on the first day of each month …
As indicated earlier, by their amended defence and counterclaim, AME, Ms Goh and Mr Lim have admitted the existence of the lease, the existence of the guarantee and indemnity by Ms Goh and Mr Lim (which, under cl 22.1 of the lease includes their guarantee to Moore Group of 'the due and punctual payment by [AME] of the Rent and all other moneys payable by [AME] [under the lease]'), and that, in or around May 2015, AME ceased paying rent to Moore Group under the lease and has failed to pay rent at any time afterwards. In his affidavit, Mr Moore states his belief that cl 3.1 of the lease prohibits the matters raised by AME, Ms Goh and Mr Lim by way of defence to Moore Group's claim for rent and his belief that their 'defence is therefore unsustainable' ([15]).
Under O 14 r 3(1) RSC, the parties opposing the application for summary judgment have an evidentiary burden to show that there is 'an issue or question in dispute which ought to be tried, or that there ought for some other reason to be a trial of that claim or part', although the overall legal burden of persuasion in the appeal remains on Moore Group as the applicant for summary judgment: Morgan v Pallister [2004] WASC 188 [4] (Pullin J). The party opposing an application for summary judgment 'does not have to establish a defence on the balance of probabilities, but must at least show cause why there is an arguable defence': Field Camp Services Pty Ltd v Site Accommodation Pty Ltd [No 2] [2012] WASCA 27 [4] (Martin CJ, Newnes and Murphy JJA).
When determining an application for summary judgment, the court must proceed on the basis that any facts asserted in an affidavit sworn on behalf of the respondent to the application 'would ultimately be accepted if the matter were to proceed to trial in the ordinary course', unless those facts are 'inherently incredible': Webster v Lampard (1993) 177 CLR 598, 604; [1993] HCA 57 (Mason CJ, Deane & Dawson JJ).
The facts asserted in Ms Goh's affidavit in opposition to the application for summary judgment are not inherently incredible and I therefore proceed on the basis that they would ultimately be accepted at trial. The following facts are asserted in Ms Goh's affidavit.
Ms Goh is the sole director of AME. In about May 2012, LG Steel Pty Ltd (LG Steel), a company of which Mr Lim was a director, was operating a business involving warehouse storage, fabrication and metal and tyre recycling at premises in Malaga. Ms Goh and Mr Lim were considering leasing new premises, because the Malaga premises were too small to install a scrap processing machine known as a 'baler'. Ms Goh saw an internet advertisement for leasing the premises and contacted Mr Vogt to arrange for an inspection.
Ms Goh and Mr Lim made Mr Vogt aware of the business that LG Steel carried on. They told Mr Vogt they wanted to lease new premises to carry on that business. Mr Vogt said words to the effect to them that it was 'in our interest' ([9]) to lease the premises.
On or about 6 June 2013, Ms Goh and Mr Lim met with Mr Moore at the Malaga premises where LG Steel was operating its business. At the time, new tyres and skip bins containing scrap metal and bin fabrications were visible at the Malaga premises. Mr Moore saw the business that was being conducted there. Ms Goh and Mr Lim also showed Mr Moore photographs on a laptop computer of the yard premises from which another company, LG Recycling Pty Ltd trading as Aussie Scrap Metals, carried on a business of metal recycling at Picton.
During the discussion on or about 6 June 2013, Mr Moore told Ms Goh and Mr Lim about former tenants who had occupied the premises and said to them words to the effect that 'the [p]remises had been used as a scrap metal yard, as skip bins for waste, sandblasting, fabrication and transport logistics' ([15]).
On or about 11 June 2013, Ms Goh and Mr Lim signed a contract to lease the premises by offer and acceptance. Ms Goh signed the contract on behalf of AME and both she and Mr Lim signed in their personal capacities as guarantors of AME's obligations. Attached to the contract was a single page describing the 'business activity' which Ms Goh intended AME to carry on at the premises. The document states as follows:
Attachment to Offer
Business activity
1.Warehouse, storage
-New steel, new truck tyres, machinery and equipment, ferrous and non ferrous metal (aluminium, copper, brass, etc)
2.Fabrication
-Welding and fabrication of new skip bins and repair used ones for hire and also supply to end users – local and country.
-Welding and fabrication of crusher for mining and quarries and other recycling industries
3.Metal and Tyre Recycling
-We purchased recyclable scrap from various factories by placing skip bins.
-We do not wreck cars, The wrecking yard will do the wrecking and depending on the price they sell us clean radiators, bull bars, catalytic converters and the body shell. The engines and gear boxes, they will sell to the engines traders for export where the price is better than scrap.
[words crossed out by hatching in a hand drawn box with handwritten initials 'DRM' to the right of the box – see below]
As to tyre recycling, we sell new tyres and take back the old tyres for scrap. We will bale them and packed them in sea containers and export to China.
4.Equipment on site – Hand tools, plasma cutter, angle grinders, genset welder, forklifts, Bobcat, excavators, baling and shearing machine, grapple, magnet, hiab crane, Prime movers, rigid trucks, trailers, etc.
LANDLORD ACKNOWLEDGED.
The words 'LANDLORD ACKNOWLEDGED' are in handwriting. Mr Moore signed the document immediately after these words. The handwriting appears, when compared to Mr Moore's initials 'DRM' written next to words under heading 3 Metal and Tyre Recycling which are in a hand drawn box and crossed out by hatching, to be Mr Moore's handwriting. The words that Mr Moore appears to have crossed out and initialled state:
Sometimes we will get complete cars, but we will sell to the wrecking yards and take back the body shell after they wreck them.
Ms Goh wanted this document included as an attachment to the contract 'as I wanted to ensure that the proposed business activity was permitted on the [p]remises' ([13]).
On 4 July 2013, Ms Goh signed the lease of the premises by AME from Moore Group as director of AME and both she and Mr Lim signed in their personal capacities as guarantors of AME's obligations under the lease.
Clause 7.1 of the lease states as follows:
The Tenant shall not use or occupy the Leased Premises or any part thereof other than in connection with the profession[,] trade or business specified in the Schedule.
Item 8 of the Schedule to the lease states as follows under the heading 'Use of Leased Premises':
Leased as a vacant laydown / hardstand area. The Tenant is to satisfy themselves that the usage of the property conforms with Council and Govt regulations / restrictions.
Clause 7.3 of the lease states as follows:
The Tenant shall not use or permit to be used the Leased Premises or any part thereof for any illegal or immoral purpose.
Clause 23.2 of the lease states as follows:
The Tenant acknowledges and declares that in entering into this Lease the Tenant has not relied on any promise[,] representation, warranty or undertaking given by or on behalf of the Landlord with respect to the suitability of the Leased Premises or the finish[,] facilities[,] amenities or services for any business to be carried on. The property is leased on an 'as is' vacant hardstand bare block basis.
As indicated earlier, cl 3.1 of the lease states in par (a) as follows:
The Tenant shall pay the Rent to the Landlord without demand, deduction or right of set‑off by equal monthly instalments in advance on the first day of each month …
Clause 22.1 of the lease contains the following guarantee by the 'Guarantor' (that is, Ms Goh and Mr Lim):
In consideration of the Landlord entering into this Lease at the request of the Guarantor as is testified by the execution by the Guarantor of this Lease the Guarantor hereby guarantees to the Landlord the due and punctual performance and observance by the Tenant of all and singular the covenants[,] obligations and stipulations on the part of the Tenant contained or implied in this Lease including, without limitation, the due and punctual payment by the Tenant of the Rent and all other moneys payable by the Tenant hereunder.
After the lease of the premises commenced, Ms Goh and Mr Lim caused a business to be operated from the premises involving [16]:
warehousing and storing new steel, new truck tyres, machinery and equipment, ferrous and non‑ferrous metals;
fabrication, including:
welding and fabrication of new skip bins and repairs of used skip bins for hire and sale; and
welding and fabricating crushers for mining, quarries and recycling uses; and
metal and tyre recycling, involving:
purchase of recyclable scrap from factories;
purchasing various components of wrecked cars, including radiators, bull bars, catalytic converters and the body shell; and
the sale of new tyres, and the receipt and export of used tyres.
Ms Goh deposes that [17]:
As a result of the exchanges that [Mr Lim] and I had with Mr Vogt and with Mr Moore, I assumed that a business involving these activities could be carried out from the [p]remises. I am informed by [Mr Lim], and do believe, that he also assumed this.
Notwithstanding the terms of cl 7.1, item 8 of the Schedule and cl 7.3 of the lease, Ms Goh and Mr Lim caused the business referred to above to be operated at the premises without having sought or obtained development approval from the City under the applicable local planning scheme.
On 3 September 2014, a baler which was being used at the premises to squash and press car shells into a rectangular bale shape, caught fire, apparently as a result of fuel being left in a sealed fuel tank of a vehicle. The fire spread to a 200 litre drum containing hydraulic oil.
Following the fire, officers of the City inspected the premises.
By letter dated 25 September 2014 to Moore Group, which was also received by Ms Goh, the City's Coordinator Compliance Services stated that the activities which were being carried on at the premises are classified as 'salvage yard' under the applicable local planning scheme, the City of Canning Town Planning Scheme No 40 (Scheme), and that development approval for this land use had not been granted. The City's letter advised that the carrying out of the development at the premises constituted a breach of the provisions of the Scheme and therefore an offence contrary to the Planning and Development Act 2005 (WA). The letter stated that the unauthorised use of the premises had to cease and all materials had to be removed from the premises within 28 days or a retrospective development application for the land use had to be lodged with the City.
Ms Goh sought to cause AME to make an application for retrospection development approval to authorise the use of the premises for AME's business. The lodgement of a development application required owner's consent by Moore Group to be endorsed on the development application form. However, Mr Moore repeatedly refused to give owner's consent and sign the development application form until June 2015.
In emails annexed to Ms Goh's affidavit, Mr Moore said that Moore Group would not sign the development application form until AME paid outstanding rent due under the lease. In about May 2015, a company owned by Ms Goh's and Mr Lim's son sold a truck and the proceeds of sale were used by AME to pay arrears in rent up to April 2015. As indicated earlier in June 2015, Moore Group gave owner's consent to the lodgement of the development application and signed the development application form.
The City required various reports from consultants to support the development application. One matter in respect of which a report was required related to stormwater drainage. Between July 2015 and November 2015, Ms Goh asked Mr Moore on multiple occasions to provide drawings of and relating to water main connections and stormwater drainage on the premises so that she could provide that information to the consultants to prepare a stormwater report. Mr Moore did not provide those drawings. No rent was paid by AME to Moore Group during that period nor at any time until Moore Group terminated the lease in June 2016. However, Mr Moore deposes in his affidavit sworn on 10 November 2016 that, on or about 23 May 2016, he deducted the bond amount of $54,375 from the amount of rent outstanding.
On 15 February 2016, a planning officer of the City emailed Ms Goh stating that if information requested by the City in relation to the development application was not provided by 4 March 2016 'we will refuse the application on the basis of a lack of information'. On 4 March 2016, the same planning officer emailed Ms Goh stating that:
I have still not received the information required to make a decision on the application and therefore I will be recommending the application be refused.
Ms Goh deposes that, after the fire, as 'we were concerned about having to cease trading or face penalties imposed by the [City]' ([37]), AME reduced the amount it purchased 'and thereby was unable to obtain income sufficient to make the rent payments'. She also deposes that the business 'was unable to trade from 3 July 2015' and consequently 'AME was unable to generate an income and efforts to source funding were unsuccessful' ([47]).
Ms Goh also deposes that, between August and September 2015, AME paid $15,000 in rent to Mr Moore. Although, this is inconsistent with her admission in the amended defence and counterclaim that in or around May 2015, AME ceased paying rent under the lease and has failed to pay rent at any time afterwards, nothing turns on this inconsistency.
Is there an arguable defence to the claim for rent?
AME (prior to its deregistration), Ms Goh and Mr Lim contend that there are three arguable defences to Moore Group's claim for liquidated damages for rent and that these three issues or questions in dispute should be determined at the trial of the action.
First, they contend that it is arguable that Moore Group breached the alleged implied term of the lease ('to the effect that [Moore Group] would do all such things as were necessary on its part to enable [AME] to have the benefit of the Lease') by failing to promptly sign the development application form and by failing to promptly provide the requested information regarding stormwater drainage. They contend that AME suffered loss and damage as a result of these breaches of the implied term in that the profits generated by the operation of the business at the premises 'would have been no less than the sum of all moneys that became payable by [AME] to [Moore Group] pursuant to the Lease' (amended defence and counterclaim [35]).
Further or alternatively, they contend that there is an arguable defence, because having been made aware prior to the entry into the lease and guarantee that it was the intention of AME for the premises to be used for the carrying out of the business involving the elements set out in the document attached to the agreement for lease (see [38] above), Moore Group engaged, in trade or commerce, in connection with the supply of goods and services to AME, in conduct which in all the circumstances was unconscionable, in contravention of s 21 of the ACL, by failing to sign the development application form until about 25 June 2015 and by failing to provide information and drawings of and regarding water main connections and stormwater drainage on the premises so that the information could be provided to consultants to assist in obtaining development approval from the City.
Further or alternatively, they contend that Moore Group engaged in misleading or deceptive conduct in trade or commerce, in contravention of s 18 of the ACL, by Mr Vogt's statement prior to the lease that it would be in AME's, Ms Goh's and Mr Lim's interest to lease the premises, by Mr Moore's statement prior to the lease that the premises had been used by the former tenants as a scrap metal yard, as skip bins for waste, sandblasting, fabrication and transport logistics, and by Moore Group's failure to disclose to any of AME, Ms Goh or Mr Lim that a use of the premises for the carrying out of AME's business would, or alternatively may, require a grant of approval by the City. I note that Ms Goh's affidavit does not depose to Moore Group's failure to disclose to any of AME, Ms Goh or Mr Lim that a use of the premises for the carrying out of AME's business would, or alternatively may, require a grant of approval by the City. However, there is no dispute that Moore Group did not in fact disclose this to AME, Ms Goh or Mr Lim prior to the entry into the lease, and nothing turns on Ms Goh's failure to refer to this in her affidavit.
Moore Group contends that the unconscionable conduct and misleading or deceptive conduct claims are by way of counterclaim, rather than defence, and that, as a counterclaim is an independent suit from the claim, an argument raised in the counterclaim cannot constitute an arguable defence to Moore Group's claim for rent. It is unnecessary to determine this rather technical point, because of Moore Group's more substantive contention, namely that the effect of cl 3.1 of the lease is that AME, Ms Goh and Mr Lim 'cannot resist' Moore Group's claim for unpaid rent, because each of the three bases on which they contend that they have an arguable defence to the claim for rent ultimately involves a 'set-off' for the purposes of cl 3.1 of the lease. Like the registrar, I accept this submission.
As indicated earlier, cl 3.1 of the lease is a so-called 'suspension clause'. The law in relation to such clauses in contracts is well settled in this State. In particular, it has been the subject of consideration by the Court of Appeal in Oswal v Commonwealth Bank of Australia [2013] WASCA 58 and Palaniappan v Westpac Banking Corporation [2016] WASCA 72.
In Oswal v Commonwealth Bank of Australia, the Court of Appeal considered the meaning and effect of a suspension clause in a loan agreement in determining an appeal by a guarantor against summary judgment entered in favour of the creditor bank. Clause 6.1(c) of the loan agreement stated as follows:
All payments to be made by the Borrower under this Agreement will be made without set‑off or counter‑claim and free and clear of any withholding or deduction for any Tax, unless prohibited by law. If the Borrower is required to make any deduction or withholding from any payment made to the Bank, the Borrower must [pay] such additional amounts as are required to ensure that the Bank receives a net amount which is equal to the amount the Borrower was obliged to pay.
Pullin JA (Newnes JA agreeing [58]), referring to decisions including the Victorian case of Hausman v Abigroup Contractors Pty Ltd [2009] VSCA 288; (2009) 29 VR 213 [24], held as follows [45] :
… Clauses of this kind are enforceable … The purpose of such a clause is to prevent the holding up of payments while disputed cross-claims are litigated … Clauses of this kind are important to financiers and they frequently appear in contracts used in the banking industry, in international financing agreements and in building contracts.
In Oswal v Commonwealth Bank of Australia, Pullin JA (Newnes JA agreeing [58]) also held as follows [53] – [54]:
Construing cl 6.1(c) requires the application of business commonsense. See Norman v FEA Plantations Ltd [2011] FCAFC 99; (2011) 195 FCR 97 [197] - [199]; Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 [43]. Applying that approach leads to the conclusion that cl 6.1(c) is unambiguous. Garuda promised that all payments made by it under the Loan Agreement would be made 'without set-off'. Mr Oswal guaranteed such payment. Also, by cl 11 of the Facility Guarantee, if the Secured Moneys was not recoverable on the basis of guarantee, then Mr Oswal agreed to pay the Secured Moneys as if any covenant or agreement by Garuda was a covenant or agreement by Mr Oswal. Thus Mr Oswal guaranteed or independently covenanted that the Secured Moneys would be paid 'without set-off'.
The expression 'without set-off' excludes all form of set-off, no matter what jurisprudential basis might exist for the set-off. Thus it excludes statutory set-off and equitable set-off. It excludes all of the four kinds of equitable set-off that the authors of Meagher, Gummow and Lehane's Equity: Doctrines and Remedies (4th ed, 2002) have detected: see [37‑035]. Therefore, the divergence of authority relied upon by the appellant does not affect the outcome of the appeal.
Palaniappan v Westpac Banking Corporation also involved an appeal by a guarantor against entry of summary judgment following non-payment of a debt. Both at first instance (Westpac Banking Corporation v Palaniappan [2014] WASC 475 (Sanderson M)) and on appeal, it was held that the guarantor had no arguable defence, because of a suspension clause in the guarantee. Clause 9 of the guarantee stated, in part, as follows:
As long as any of the guaranteed money remains unpaid, you may not, without our consent:
(a)reduce your liability under this guarantee and indemnity by claiming that you or the customer or any other person has a right of set-off or counterclaim against us; …
Further, cl 13.1 of the guarantee provided that the guarantor was required to pay the guaranteed money 'in full without set‑off, counterclaim or deduction'. Corboy J (Martin CJ agreeing [1]) held [111] that cl 9(a) and cl 13.1 dealt with the same subject matter and were to be read together and as complimentary to one another.
The guarantor pleaded a counterclaim in which he alleged that the bank had acted unconscionably and engaged in unconscionable conduct contrary to s 21 of the ACL by giving instructions to the receivers of the borrower's property, including instructions to accept a purchaser's offer to purchase the borrower's land at below market value. The guarantor further alleged that he had suffered loss and damage as a result of the bank's conduct, as there was a shortfall in the amount owing under the loan following the sale of the land. The guarantor claimed equitable damages and set‑off, an equitable set‑off in any amount due under the counterclaim against any amount due on the bank's claim against him, and a declaration that the guarantee was a void and unenforceable pursuant to s 237 of the ACL.
Corboy J (Martin CJ agreeing [1]) held in relation to suspension clauses as follows [130] and [133] – [135]:
There is no ground of public policy that prevents the parties to a contract agreeing to exclude or suspend a defence of equitable set‑off: Derham on the Law of Set-off, 5.95; Coca-Cola Financial [Corporation v Finsat International Pty Ltd [1998] QB 43]; GE Capital [Australia v Davis [2002] NSWSC 1146; (2002) 180 FLR 250] [95] and following; Oswal [v Commonwealth Bank of Australia [2013] WASC 58] [55] (Pullin JA; Newnes JA agreeing). As Bryson J observed in GE Capital, a suspension clause does not oust the court's jurisdiction: 'there is no limit on the right to resort to the courts if the guarantor first meets the obligation the protection of which is the primary purpose of the guarantee and indemnity, and pays the amount of the debt' [98]. The principle was explained by O'Donovan J and Phillips J, Modern Contract of Guarantee (2015, looseleaf) at [11.550]:
The terms of the guarantee may not completely exclude the guarantor's right to raise any cross-claim or set-off available to the principal debtor. But the guarantee may prevent the guarantor from raising any cross‑claim or set‑off until after the creditor has been paid the guaranteed debt. In such a case the guarantor's cross-claim or set-off will not prevent the creditor from obtaining summary judgment in an action to enforce the guarantee. Hence, a clause excluding a guarantor's set-off or cross-claim does not oust the jurisdiction of the court to determine the set-off or cross‑claim; it merely defines and limits the parties' legal rights within the permissible scope of contractual obligations.
…
A suspension clause in a form such as cl 9 of the Guarantee will not apply where the guarantor alleges a defence that denies the debt or the enforceability of the guarantee (rather than asserting a claim that it would be unconscionable for the creditor to enforce an otherwise valid guarantee). So, for example, a guarantor will not be required to 'pay now and litigate later' where it alleges that the creditor was estopped from asserting that the debt was payable or from making a demand for payment. Nor will a suspension clause apply where the creditor has allegedly engaged in misleading or deceptive conduct by making a demand for payment after representing that a loan facility would be extended and rolled over on the expiry date: O'Brien v Bank of Western Australia Ltd [2013] NSWCA 71.
Relevant to the appellant's proposed ground of appeal, a suspension clause will also not apply where the creditor's dealings with the guarantor might result in the guarantee being discharged or set aside for invalidity - for example, where the creditor has engaged in misleading or unconscionable conduct in connection with the giving of the guarantee. Further, statutory relief for misleading or unconscionable conduct may operate to void or vary a contract retrospectively.
Accordingly, there is a distinction between a defence that alleges that a guarantee should be set aside or varied and a defence that pleads an equitable set-off. The distinction is illustrated in the reasons of Holmes J (as her Honour then was) in Capital Finance Australia Ltd v Airstar Aviation Pty Ltd [2003] QSC 151; [2004] 1 Qd R 122.
Corboy J (Martin CJ agreeing [1]) held as follows [146] – [147]:
However, in my view none of the allegations made by appellant establish an arguable case, or a case that ought to be investigated, that he would be entitled to relief under s 237 and s 243 of the Australian Consumer Law to vary the terms of the Guarantee, including cl 3 and cl 9, or for an order restraining the respondent from enforcing the Guarantee or any of its provisions. The conduct alleged does not concern the making of the contract of guarantee. Rather, the respondent is alleged to have acted unconscionably in giving instructions to the Receivers in respect of the sale of the Estate Land for the purpose of benefitting itself and another party. As such, the allegation merely enlarges the claim that the Receivers acted in breach of their duties in disposing of the Estate Land with the result (on the appellant's case) that the land was sold at an undervalue.
In my view, the allegation of unconscionable conduct stands on no different footing to the allegations of breach of duty when considering the effect of cl 9 and cl 13.1 of the Guarantee. Each set of allegations concerns the exercise of rights under the securities given by Murray Riverside and both the respondent's unconscionable conduct and the Receivers' breach of duty are alleged to have resulted in the Estate Land being sold at an undervalue. As such, the allegations of unconscionable conduct and breach of duty constitute claims that merely offset or reduce the appellant's liability under the Guarantee. The allegations do not give rise to an affirmative defence. Clause 9 and cl 13.1 apply so that the appellant is required to pay the guaranteed money before he can pursue the claim that the respondent engaged in unconscionable conduct in relation to the sale of the Estate Land.
The suspension clause in this case is found in a lease, rather than in a borrowing facility. However, the same principles of construction apply. The purpose of a suspension clause, whether in a loan facility or in a lease, is to prevent the holding up of payments while disputed cross‑claims are litigated. Clauses of this kind are important to landlords, as well as to financiers, because they ensure that the landlord maintains income from rent, even where the tenant or guarantor has another claim against the landlord.
The meaning of the words in cl 3.1 of the lease ('The Tenant shall pay the Rent to the Landlord without demand, deduction or right of set‑off') is clear and unambiguous. As the Court of Appeal (Pullin JA [54], Newnes JA agreeing [58]) held in Oswal v Commonwealth Bank of Australia, the expression 'without … set‑off' 'excludes all form of set‑off, no matter what jurisprudential basis might exist for the set‑off'. Thus, 'it excludes statutory set‑off and equitable set‑off'.
The meaning of the guarantee in cl 22.1 of the lease (Ms Goh and Mr Lim guarantee to Moore Group 'the due and punctual payment by the Tenant of the Rent and all other moneys payable by the Tenant [under the lease]') is also clear and unambiguous. AME is required to pay the outstanding rent it owes under the lease 'without … set‑off' and Ms Goh and Mr Lim have guaranteed AME's obligation.
AME's, Ms Goh's and Mr Lim's first basis upon which they contend that they have an arguable defence to Moore Group's claim for rent, namely alleged breaches of an implied term in the lease, plainly involves a legal set‑off. Although cl 3.1 of the lease does not limit or preclude AME's (prior to deregistration) or Ms Goh's and Mr Lim's right to seek damages for breach of the implied term they allege, it does preclude their claim for damages providing an arguable defence to Moore Group's claim for liquidated damages for rent, or an issue or question in dispute which ought to be tried before they are required to pay Moore Group the outstanding rent under the lease, or some other reason on account of which there ought to be a trial of the claim for rent.
Furthermore, the unconscionable conduct claim in this case, like the unconscionable conduct claim in Palaniappan v Westpac Banking Corporation, relates to alleged unconscionable conduct occurring after the lease and guarantee was made. The alleged unconscionable conduct in this case was the failure to promptly give owner's consent for the lodgement of the development application and the failure to promptly provide information regarding water main connections and stormwater drainage. This occurred after the lease and guarantee were entered into. The unconscionable conduct claim does not concern the making of the lease and guarantee and cannot undermine it.
Thus, the allegation of unconscionable conduct in this case, if established at trial, would merely serve to offset or reduce Ms Goh's and Mr Lim's liability under the guarantee. The effect of cl 3.1 of the lease is that the claim of unconscionable conduct in this case does not give rise to an arguable defence to Moore Group's claim for liquidated damages for rent, or involve an issue or question in dispute which ought to be tried before the outstanding rent is paid, or some other reason on account of which there ought to be a trial of the claim for rent.
Unlike the unconscionable conduct claim, the misleading or deceptive conduct claim concerns alleged conduct by or on behalf of Moore Group prior to the entry into the lease and guarantee. Relying principally on the decision of the New South Wales Court of Appeal in O'Brien v Bank of Western Australia Ltd [2013] NSWCA 71, AME (prior to its deregistration), Ms Goh and Mr Lim submit that they:
… demonstrate an arguable case for relief under the ACL … based upon misleading or deceptive conduct which induced entry into of [sic] the Lease. Moore Group cannot escape the claim for relief under s 243 of the ACL by relying upon a provision of the Lease which would not have been entered into save for Moore Group's contravention of s.18 of the ACL by its misleading or deceptive conduct.
O'Brien v Bank of Western Australia Ltd involved an application by guarantors for leave to appeal against the entry of summary judgment against them. The Court of Appeal (Macfarlan JA, Beazley P agreeing and Ward JA, Beazley P agreeing) held that suspension clauses in the guarantee did not preclude the guarantors from having an arguable defence on the basis of misleading or deceptive conduct on the part of the bank prior to the giving of the guarantee. Macfarlan JA (Beazley P agreeing [1]) held as follows [11] – [12]:
In any event, the clauses could not in my view protect the Bank against the grant of statutory remedies for misleading and deceptive conduct raised, as here, as a defence to a contractual claim (see Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2006] NSWCA 238; 67 NSWLR 9). The same may be said of Clause 8.20 in the first applicant's guarantee and Clause 7.25 in that of the second applicant which precluded waiver of rights under the guarantees 'except in writing signed by the party or parties to be bound'. Whatever arguments there might be for these clauses' inapplicability as a matter of construction, they could not prevail over the statutory remedies.
The Bank submitted that whilst misleading and deceptive conduct remedies could be granted at a final hearing so as to override the contractual provisions relied upon by the Bank, until that occurred, those provisions were operative and required the guarantors to 'pay first'. In my view this argument fails because relief for misleading and deceptive conduct is not necessarily confined to in futuro operation. As, for example, s 12GM(7)(b) of the Australian Securities and Investments Commission Act 2001 (Cth) ('ASIC Act') indicates, orders may be made varying contracts from dates prior to the dates of the orders. It is therefore quite possible that the guarantors' defences, if established, may result in the contractual clauses relied upon by the Bank being inoperative at the present time and as at April 2009. Thus the presence of the clauses in the guarantees does not support the grant of summary judgment to the Bank.
Similarly, Ward JA (Beazley P agreeing [1]) held as follows [112] and [114]:
In Bitannia Pty Ltd v Parkline Constructions Pty Ltd (2006) 67 NSWLR 9; [2006] NSWCA 238, Hodgson JA, at [8] noted that s 52 of the Trade Practices Act (Cth) disclosed a legislative intention that persons should have a remedy to protect them from (or to recover compensation for) damage from the misleading conduct of a corporation and it would not be in accordance with that intention to permit a corporation to obtain judgment on a cause of action one essential element of which had been created by the corporation's misleading conduct. (See also Basten JA at [88] and [96] and Tobias JA at [17]).
…
Accordingly, with respect to the primary judge, I am of the view that it cannot be said that there was no real or arguable defence to the Bank's claim under the Guarantees (or, in Bakota's case, on the indemnity). The suspension/preservation clauses do not preclude raising claims for the grant of relief for misleading and deceptive or unconscionable conduct that may operate retrospectively such that the foundation on which those clauses would operate would not have arisen or would have disappeared by the time demand was made under the Guarantees.
Section 237 of the ACL enables the court to 'make such order or orders as the court thinks appropriate against the person who engaged in the conduct, or a person involved in that conduct', including misleading or deceptive conduct in trade or commerce. Without limiting s 237, s 243 of the ACL enables the court to make orders including an order declaring the whole or any part of the contract to be void or to have been void ab initio or void at all times, an order varying the contract, an order refusing to enforce any or all of the provisions of a contract, and an order directing the respondent to refund money or return property, among other orders.
As indicated earlier, AME, Ms Goh and Mr Lim claim the following by way of counterclaim from Moore Group:
A.Damages for [Moore Group's] breaches of the Lease.
B.Further or alternatively, damages pursuant to s. 236 of the ACL.
C.Further or alternatively, orders for compensation, refusing to enforce the Lease or varying the Lease, pursuant to ss. 237 and 243 of the ACL.
Although AME, Ms Goh and Mr Lim do not claim an order declaring the lease or guarantee to be void, they submit that the variation of the lease that could be granted by the court at trial includes:
the variational [sic] [variation or] partial non‑enforcement [of the lease which] need not be limited to the no set‑off provision [ie cl 3.1], [but] could relate to [the] obligation to pay rent or outgoings … (ts 15)
Mr C S Williams, counsel for AME, Ms Goh and Mr Lim, expressed their submission as follows:
Clause 3.1(a) doesn’t save [Moore Group] because if nothing else the claim for antecedent, misleading or deceptive conduct inducing entry into a lease and the availability of relief under section 243 of the ACL with retrospective effect means that it is not guaranteed that at the end of the trial [Moore Group] will have any right to rely upon clause 3.1(a) in order to resist [AME's, Ms Goh's and Mr Lim's] contention that the damages that they seek ought be set-off under [against] liabilities under the lease (ts 35).
However, by their amended defence and counterclaim, AME, Ms Goh and Mr Lim do not seek to impeach the lease or guarantee, do not contend that the lease or guarantee should be declared void or invalid, and do not deny AME's obligation to pay the outstanding rent under cl 3.1(a) of the lease or the validity or enforceability of Ms Goh's or Mr Lim's obligation to guarantee the due and punctual payment by AME of the rent under cl 22.1 of the lease.
In consequence, although the relief sought in the amended defence and counterclaim includes 'refusing to enforce the Lease or varying the Lease', in substance, in this case, AME, Ms Goh and Mr Lim seek monetary set‑off, in consequence of their claims, including the misleading or deceptive conduct claim, against rent which they admit was unpaid by AME from about May 2015, the payment of which they admit was guaranteed by Ms Goh and Mr Lim to Moore Group.
In contrast to O'Brien v Bank of Western Australia Ltd, this is not a case in which 'the guarantors' defences, if established, may result in the contractual clauses relied upon by the [landlord] being inoperative at the present time' (Macfarlan JA [12]) or in which 'the grant of relief for misleading and deceptive or unconscionable conduct … may operate retrospectively such that the foundation on which [the suspension clause] would operate would not have arisen or would have disappeared by the time demand was made under the [lease and guarantee]' (Ward JA [114]).
In this case, there is no dispute between the parties that the obligation to pay rent under the lease and the obligation to guarantee the due and punctual payment of rent are valid, operative and enforceable. Rather, the questions in dispute, which will be determined at trial, are whether Moore Group breached an implied term of the lease, further or alternatively engaged in unconscionable conduct contrary to s 21 of the ACL, by failing to promptly sign the development application form and to promptly provide the requested information regarding stormwater drainage, and whether it engaged in misleading or deceptive conduct contrary to s 18 of the ACL, and, if so, the extent to which rent payable under the lease should be offset to reflect AME's, Ms Goh's and Mr Lim's loss.
The argument that 'it is not guaranteed that at the end of the trial [Moore Group] will have any right to rely upon clause 3.1(a) in order to resist [AME's, Ms Goh's and Mr Lim's] contention that the damages that they seek ought to be set-off [against] liabilities under the lease' is misconceived. This is because the argument itself acknowledges that AME, Ms Goh and Mr Lim have 'liabilities under the lease'. In particular, they acknowledge by their pleading that AME failed to pay rent under the lease from around May 2015 and that Ms Goh and Mr Lim were guarantors of AME's obligations under the lease. Furthermore, as the argument itself acknowledges, what AME, Ms Goh and Mr Lim seek to do is to 'set-off' 'the damages that they seek' against their 'liabilities under the lease'. This is precisely what the suspension clause in cl 3.1 of the lease precludes.
In my view, adopting Corboy J's words in Palaniappan v Westpac Banking Corporation [147], each of the allegations made in the defence and counterclaim in this case, including the misleading or deceptive conduct claim, 'merely offset or reduce the appellant[s'] liability under the [lease and] [g]uarantee. The allegations do not give rise to an affirmative defence'.
For these reasons, none of the three matters raised by AME, Ms Goh and Mr Lim by way of defence or counterclaim in this case can stand in the way of Moore Group's application for summary judgment for rent due under the lease. Each of their three claims ultimately seeks to offset or reduce their liability under the lease and guarantee and therefore falls within the scope of cl 3.1 of the lease.
I add that cl 3.1 of the lease does not (to quote O'Donovan J and Phillips J in the passage from Modern Contract of Guarantee referred to in Palaniappan v Westpac Banking Corporation [130]) 'oust the jurisdiction of the court' to determine Ms Goh's and Mr Lim's (and, prior to deregistration, AME's) claims in the amended defence and counterclaim; 'it merely defines and limits the parties' legal rights within the permissible scope of contractual obligations'.
It follows that there is no arguable defence to the claim for rent, there is no issue or question in dispute which ought to be tried before the rent is paid and there is no other reason why there ought to be a trial of the claim for rent. Consequently, it is just, having regard to the nature of the remedy or relief claimed by Moore Group, namely 'the sum of $282,677.01 in unpaid rent and interest pursuant to the Lease', to enter summary judgment for the liquidated portion of the claim.
Should the court stay execution of summary judgment?
Order 14 r 3(2) confers a discretion on the court 'subject to such conditions, if any, as may be just, [to] stay execution of any judgment given against a defendant under this rule until after the trial of any counterclaim made or raised by the defendant in the action'.
Although counsel for Moore Group referred to the availability of this discretion, AME, Ms Goh and Mr Lim did not make any submission before the registrar (ts 58) or before me as to why the court should exercise its discretion in the particular circumstances of this case to stay execution of summary judgment against any of them until after the trial of their counterclaim.
In any case, the existence of the suspension clause in cl 3.1 of the lease is a powerful consideration against the exercise of the discretion. Furthermore, there is no evidence before the court to indicate, for example, that Moore Group does not have the resources to pay any damages or other compensation ordered or that Ms Goh or Mr Lim would not have the resources, after they meet the summary judgment, to proceed to trial on the counterclaim (and on the unliquidated portion of Moore Group's claim in the proceedings).
I therefore do not consider that in the circumstances of this case execution of summary judgment should be stayed until after the trial of the counterclaim.
Conclusion
It follows that the appeal from the registrar's decision to enter summary judgment on the liquidated portion of Moore Group's claim for rent should be dismissed and the decision of the registrar should be affirmed.
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