Australian Retail Enterprises Pty Ltd v N D Cowan Nominees Pty Ltd
[2000] VSC 538
•15 December 2000
| SUPREME COURT OF VICTORIA | |
| PRACTICE COURT | Not Restricted |
No. 7942 of 2000
| AUSTRALIAN RETAIL ENTERPRISES PTY. LTD. | Plaintiff |
| v. | |
| N.D. COWAN NOMINEES PTY. LTD. | Defendant |
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JUDGE: | BEACH, J. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 12 DECEMBER 2000 | |
DATE OF JUDGMENT: | 15 DECEMBER 2000 | |
CASE MAY BE CITED AS: | AUSTRALIAN RETAIL ENTERPRISES PTY. LTD. v. N.D. COWAN NOMINEES PTY. LTD. | |
MEDIUM NEUTRAL CITATION: | [2000] VSC 538 | |
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CATCHWORDS: Lessor and Lessee – Breach of terms of lease – Termination of lease – Relief against forfeiture not available to one of two joint lessees.
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr. M.R. Carey | Darrer Muir Fleiter |
| For the Defendant | Mr. J.R. Jones | Nathan Kuperholz |
HIS HONOUR:
By a lease dated 28 August 1995 the owner of a property situated at 4 Hill Road, Coldstream, one Stephen Wilkins, leased the property to the plaintiff Australian Retail Enterprises Pty. Ltd. and to Murray Hey-Hoe for a term of 13 years commencing on 1 July 1994.
Pursuant to the provisions of the lease the property was to be used by the lessees only for the purpose of the establishment of a vineyard and the growing of grape vines.
In 1996 Wilkins sold the property to the defendant N.D. Cowan Nominees Pty. Ltd.
On 24 October 2000 the defendant's solicitors sent a fax to the plaintiff notifying it that in the opinion of the defendant the plaintiff had committed a serious breach of clause 4.1.12 of the lease.
The relevant paragraphs in the fax read:
"Separately, my client notes that, amongst other things, there is a serious breach of clause 4.1.12 of the Lease in that the Land the subject of the Lease is not being cultivated and managed in a proper manner according to its permitted use and in accordance with good viticultural practices and so as to ensure that the Land is maintained in a good and efficient state of improvement and cultivation.
In particular, my client notes that there has been inadequate spraying, no clearance of blackberries, no removal of weeds and a general neglect of the Land. Not only is this a breach of the Lease but it is causing my client’s adjacent land severe loss and prejudice by virtue of the invasion of weeds, blackberries and insects from the subject Land onto my client’s land. All of my client’s rights in relation to that breach separately remain expressly reserved.
Will you please treat this communication with the seriousness and urgency it requires."
Clause 4.1.12 of the lease reads:
"(Cultivation of Land): to cultivate and manage the Land in a proper manner according to its permitted use and in accordance with good viticultural practices and so as to ensure the Land is maintained in a good and efficient state of improvement and cultivation."
On 16 November 2000 the defendant's solicitor served a notice on the plaintiff and Murray Hey-Hoe pursuant to the provisions of s.146 of the Property Law Act 1958. The notice reads:
"This is a formal notice under and pursuant to the Lease as well as in compliance with the notice provisions of the Property Law Act (1958) (as amended).
This notice is given without prejudice to the Lessor’s rights to contend that the Lessor is entitled to terminate the Lease on the grounds that one of the Lessees, Murray Hey-Hoe, has assigned, sub-let or otherwise dealt with his interest in the Lease in breach of clause 8.1 of the Lease and without the consent of the Lessor first having been obtained.
Take notice that:
1. Pursuant to clause 4.1.1 of the Lease, the Lessees are entitled to use the demised Land only for the purpose of establishment of a vineyard and growing of grape vines ("the permitted use").
2. Clause 4.1.12 of the Lease obligates the Lessee to cultivate and manage the demised Land in a proper manner according to the permitted use and in accordance with good viticultural practices and so as to ensure that the demised Land is maintained in a good and efficient state of improvement and cultivation.
3. The Lessee has been and continues to be in breach of clause 4.1.12 of the Lease in that the Lessee has repeatedly failed and refused to cultivate and manage the demised Land in a proper manner according to its permitted use and has managed the demised Land not in accordance with good viticultural practices and has not ensured that the demised Land has been and is maintained in a good and efficient state of improvement and cultivation.
4. Without conceding any obligation on its part so to do, the Lessor has obtained a report of and concerning the said breaches of the Lease by the Lessee from Wine Network Australia Pty. Ltd. trading as WineNet, Consultants to the Wine Industry, and a copy of that Report dated 13 November 2000 is enclosed.
5. Without any obligation on its part so to do, the Lessor has also taken a series of photographs of the demised Land which clearly show the extent to which the Lessee is in breach of the Lease (and that such photographs are available for inspection at my offices by prior appointment).
Take notice therefore that if the Lessee fails to remedy all of the said breaches according to and by way of compliance with clause 4.1.12 of the Lease within 14 days from the date of receipt by the Lessee of this notice, the Lessor will determine the Lease without further notice to the Lessee and will enter upon the demised Land by way of resumption of possession thereof to the exclusion of the Lessee and without prejudice to the Lessor’s rights and remedies arising consequent upon such determination.
This notice is final."
On 1 December 2000 the solicitor for the defendant served a notice of termination of the lease on the plaintiff and Hey-Hoe. The notice reads:
"This is a further formal notice under and pursuant to the Lease.
The Lessor refers to the notice of breach dated 16 November 2000 delivered to the Lessees at their respective addresses specified therein that day.
Take notice that:
1. The Lessees have failed and/or refused to remedy the breaches complained of in the said notice dated 16 November 2000.
2. Without any obligation on its part so to do, the Lessor has obtained a further report from WineNet, Consultants to the Wine Industry, dated 30 November 2000 which confirms that an inspection of the demised Land demonstrates that the breaches of the Lease previously identified in the report from the said WineNet dated 13 November 2000 have substantially and materially not been remedied.
3. Without any obligation on its part so to do, the Lessor has also taken a further series of photographs of the demised Land on and as at 30 November 2000 which clearly show that the breaches of the Lease previously identified in the report from the said WineNet dated 13 November 2000 have substantially and materially not been remedied.
4. THE LESSOR ACCORDINGLY HEREBY DETERMINES THE LEASE AND HEREBY RE-ENTERS UPON THE LAND IN THE NAME OF THE WHOLE AS A CONSEQUENCE WHEREOF THE DEMISE OF THE LAND HAS ABSOLUTELY CEASED AND IS AT AN END AND THE LESSEES ARE NOT ENTITLED BY THEMSELVES AND/OR BY THEIR SERVANTS AND AGENTS AND/OR BY ANYONE CLAIMING UNDER OR THROUGH THE LESSEES TO BE OR REMAIN UPON OR TO ENTER OR TO ATTEMPT TO ENTER THE LAND.
5. This notice is given without prejudice to all of the Lessor’s other rights against the Lessees consequent upon the Lessees’ failure and/or refusal to remedy the said breaches and/or not to observe any of the other covenants, agreements and stipulations contained in the Lease.
6. The Lessor will today put padlocks on the gates and other entry points to the Land and the buildings thereon and will forbid entry to the Land as aforesaid and anyone acting in breach of the said restrictions on entry will be treated as a trespasser and prosecuted according to Law.
7. The Lessor intends applying any amounts prepaid by the Lessees for the period 1 December 2000 to 30 June 2001 on account of the Lessor’s costs, loss, expense and damage which the Lessor has suffered consequent upon the Lessees having failed to remedy the breaches as aforesaid and which breaches the Lessor will now immediately commence to remedy."
That same day the defendant re-entered and took possession of the property. It had excluded the plaintiff, and for that matter Hey-Hoe, from the property as from that date.
I have made reference to Hey-Hoe in my reasons for judgment for a reason which will become attached shortly. However, there is good reason for concluding that Hey-Hoe is no longer in possession of the property and may no longer be involved in the lease.
Since retaking possession of the property the defendant has spent in excess of $10,000 in remedying the breaches of the lease by the plaintiff. According to a director of the defendant Deidre Cowan, at least another $20,000 will need to be spent in order to bring the vineyard on the property up to a standard which complies with the lease.
On 8 December the plaintiff filed this proceeding in the Court. By its writ the plaintiff seeks the following relief:
"A.Injunctions (interlocutory and final) restraining the Defendant from:
(a)acting on or giving further effect to the Defendant’s notice dated 16 November 2000.
(b) refusing to honour and give effect to the Lease between the Plaintiff, Hey-Hoe and the Defendant dated 28 August 1995 as an existing legally binding agreement.
(c) prohibiting or preventing the Plaintiff from gaining access to the property.
B. Damages in lieu of or in addition to injunction.
C. Further or alternatively, damages at common law.
D. Interest pursuant to statute."
I now have before me a summons filed on behalf of the plaintiff whereby the plaintiff seeks the following interlocutory injunction:
"1.Until the hearing and determination of the action or until further order the Defendant be restrained from:
(a)acting on or giving further effect to the Defendant’s notice dated 16 November 2000.
(b)refusing to honour and give effect to the Lease between the Plaintiff, Hey-Hoe and the Defendant dated 28 August 1995 as an existing legally binding agreement.
(c)prohibiting or preventing the Plaintiff from gaining access to the property.
2. Such other orders as the Court sees fit. "
The first point to make concerning paragraph 1 of the plaintiff's summons is that if the defendant lawfully terminated the lease on 1 December, then in my opinion there would be no basis upon which the Court could grant the injunctive relief sought. In such a situation the appropriate relief to be sought by the plaintiff would be relief against forfeiture, another matter I shall return to shortly.
The first question for me to determine therefore is whether the plaintiff's lease was lawfully terminated.
The evidence relied upon by the defendant in that regard is the evidence of its director Deidre Cowan, the reports from WineNet dated 13 November 2000 and 30 November 2000, the letter of 27 November 2000 from the vineyard consultant Peter McGregor concerning the adjacent vineyard and the photographs of the property taken first on 14 November 2000 and then during the period 24 November to 29 November.
As against that, one has the evidence of the plaintiff's director John Hayes Larman and the report from the plaintiff's expert Ian MacRae.
If one had nothing to go on in this case but the testimony of the witnesses to whom I have referred and the experts' reports, one could be forgiven for saying – I do not know whether the property is being managed in a proper manner and in accordance with good viticultural practices. It will only be possible to determine that following the trial of the proceeding at which the witnesses, including the experts, will be called and cross-examined.
But in my opinion that is not the situation in the present case.
In the first place one has the photographs of the property taken first on 14 November, which of course was two days before the defendant's solicitor served the s.146 notice on the plaintiff and Hey-Hoe, and those taken between 24 and 29 November.
Those photographs clearly depict the neglect on the part of the plaintiff insofar as the general appearance of the property is concerned.
There are weeds and blackberries present amongst the vines which one would expect to be harbouring snails.
It is clear that as at the date of all photographs the foliage wires have not been moved into position and that having regard to the growth of the vines, to do so could now make the operation very hard.
The canopy of the vines is dense and one can see fungus on some of the leases, the fungus being pale yellow in colour.
In the second place one has the statement that the defendant's solicitor alleges the plaintiff's director John Hayes Larman made to him when the two spoke together on the phone on 21 November.
In reply to the defendant's solicitor's statement that he had taken a series of photographs of the land on 14 November 2000 which revealed that the remedial work referred to in the fax of 24 October had not been attended to, and that Larman could come and inspect them, the defendant's solicitor alleges that Larman replied that that was correct and that he would ensure that all the remedial work would be attended to before the expiration of the notice.
A point also worthy of note concerning the report of the plaintiff's expert Ian MacRae is that that report was prepared by Mr. MacRrae following his visit to the property on 5 December.
At that time the defendant had re-taken possession of the property and had already commenced implementing practices and procedures to ensure proper management and control of the property and the vines including all necessary pest control and spraying. That that was so is confirmed by Larman who in his affidavit of 8 December 2000 has sworn that when the plaintiff's spraying contractor attended at the vineyard on 2 December he found employees of the defendant's contractor there spraying the canopy of the vines.
Finally in this regard, what Larman has sworn in paragraph 24 of his affidavit really confirms the accuracy of the complaints made by the defendant.
In my opinion it is strongly arguable that the defendant was fully justified in serving the s.146 notice on the plaintiff and on Hey-Hoe on 16 November, that the plaintiff did not comply with it, and that the lease was lawfully terminated when the defendant re-entered the property on 1 December and regained possession of it.
In that situation the application which the plaintiff and Hey-Hoe should have made to the Court was an application for relief against forfeiture.
But they have chosen not to. That they have not can only be consistent with the fact that Hey-Hoe is no longer involved in the property. I say that because if he was surely he and the plaintiff would have brought such an application before the Court in the alternative to their present application, on the basis that if the plaintiff's present application failed they could then pursue the alternative application.
If, of course, Hey-Hoe was not prepared to pursue such an application, then any application by the plaintiff alone for relief against forfeiture was bound to fail.
It is a well recognised principle of law that where there are joint lessees of a property relief against forfeiture cannot be granted on the application of only one of them. The reason for that was stated by Maugham, J. in T.M. Fairclough & Sons Ltd. v. Berliner[1]. Talking of s.146(2) of the English Law of Property Act 1925 which is in almost identical terms to s.146 of the Victorian Act his Honour said at p.66:
"… but it does not in any way lead to the conclusion that if there are two or more joint lessees one of the can apply to the Court for relief; and there seems to me to be a very great objection to a provision which would enable him to apply to the Court, unless the provision also in some way enabled the Court in granting relief to absolve the other joint lessee from future liability. The section is a provision in the nature of an indulgence to be given to a lessee, or to several lessees who have not complied with their contractual obligations. The effect of granting relief under that sub-section is to restore the lease as though it had never been forfeited. That is the result of Dendy v. Evans [1910] 1 K.B. 263.
Accordingly, if I were to accede to the application on behalf of the second defendant, the result would be that the first defendant would continue to be liable under the onerous covenants contained in these leases, including the onerous obligation to pay rent up to the termination of the leases without, it may be, any prospect of being able to recoup himself by the use of the premises. In my opinion, s.146, sub-s. 2, can be applied in the present case only upon the application of the two joint lessees, and, no such application having been made, it seems to me that the Court has no jurisdiction to grant relief."
See also Jacobs v. Chaudhuri[2].
[1](1931) 1 Ch. 60
[2](1968) 1 Q.B. 470
The plaintiff's summons therefore will be dismissed.
I may say in making that order I am conscious of the loss which may well be suffered by the plaintiff insofar as its investment in the property is concerned. But to my way of thinking it has brought the loss on its own head.
Further this is not a case where it could be said that the plaintiff has some special interest in the property or that the property possesses some special or unique characteristic.
Save for the operations carried out on the property by the plaintiff and Hey-Hoe the property is vacant. No one lives on it or makes any other use of it.
If therefore my decision is subsequently held to be erroneous the plaintiff can ultimately be compensated by an appropriate award of damages.
The plaintiff's summons filed in the Court on 8 December is dismissed with costs to be taxed including any reserved costs and paid by the plaintiff.
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