Avadean Pty Ltd v Mullany
[2017] WADC 50
•7 APRIL 2017
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: AVADEAN PTY LTD -v- MULLANY [2017] WADC 50
CORAM: DAVIS DCJ
HEARD: 23 - 25 AUGUST 2016
DELIVERED : 7 APRIL 2017
FILE NO/S: CIV 3072 of 2011
BETWEEN: AVADEAN PTY LTD
Plaintiff
AND
DARROL DOUGLAS MULLANY
ALISON WENDY MULLANY
Defendants
Catchwords:
Contract - Lease, Assignment of Lease and Guarantee - Whether Lease and Assignment of Lease illegal and void pursuant to Town Planning and Development Act 1928 (WA) - Severance - Effect of illegality or invalidity - Terms of Guarantee and liability of the Defendants - Mistake - Misleading and deceptive conduct - Turns on own facts
Legislation:
Town Planning and Development Act 1928 (repealed) s 20(1)(a)
Result:
Judgment for plaintiff
Defendants' counterclaim dismissed
Representation:
Counsel:
Plaintiff: Mr M F Holler
Defendants: In person
Solicitors:
Plaintiff: MDS Legal
Defendants: Not applicable
Case(s) referred to in judgment(s):
C Convenience Stores Pty Ltd v Wayville Plaza Retirement Pty Ltd [2012] SASC 14; (2012) 114 SASR 299
Canty v Paperlinx Australia Pty Ltd [2014] NSWCA 309
Cellulose Products Pty Ltd v Truda (1970) 92 WN (NSW) 561
Cheetham v Hampson (1791) 4 Term Rep 318, 219, (1791) 100 ER 1041
Citicorp Australia Ltd v Hendry (1985) 4 NSWLR 1
City of Gosnells v Roberts (1994) 12 WAR 437; (1994) 85 LGERA 214; (1994) Aust Torts Reports 81‑313
Commissioner of Taxation v Guy (1996) 67 FCR 68
Covino v Bandag Manufacturing Pty Ltd [1983] 1 NSWLR 237
Dockrill v Cavanagh (1944) 45 SR (NSW) 78
Errichetti Nominees Pty Ltd v Paterson Ground Architects Pty Ltd [2007] WASC 77
Glentham Pty Ltd v City of Perth [1986] WAR 205
Heald v O'Connor [1971] 1 WLR 497, 505 ‑ 506; [1971] 2 All ER 1105
Indrisie v General Credits Ltd [1985] VR 251
Mackinlay v Derry Dew Pty Ltd [2014] WASCA 24; (2014) 46 WAR 247
McFarlane v Daniell (1938) 38 SR (NSW) 337
Moore v Dimond (1929) 43 CLR 105
Palermo Seafoods Pty Ltd v Lunapas Pty Ltd [2014] NSWSC 792
Re Attorney-General; Ex parte Skyring [1996] HCA 4; (1996) 70 ALJR 321
Rosebridge Nominees Pty Ltd v Commonwealth Bank of Australia [2008] WASCA 107
Sleafer v Lambeth Borough Council [1960] 1 QB 43
SST Consulting Services Pty Ltd v Rieson [2006] HCA 31; (2006) 225 CLR 516
Stone James & Co v Investment Holdings Pty Ltd [1987] WAR 363
Svanosio v McNamara (1956) 96 CLR 186
Taylor v Johnson (1983) 151 CLR 422
Tobin v Dodd [2004] WASCA 288
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Total Oil Products (Australia) Pty Ltd v Robinson [1970] 1 NSWR 701
Yeoman Credit Ltd v Latter [1961] 1 WLR 828; [1961] 2 All ER 294
DAVIS DCJ: This case concerns the validity of a lease, an assignment of the lease, and the enforceability of a guarantee and indemnity provided to the landlord, the plaintiff, by the defendants.
In 2002 the plaintiff, Avadean Pty Ltd (Avadean), leased a part of its land in Karnup, Western Australia, to Weston Antonio Greenwoods and Tracey Leigh Manning. The written lease agreement is dated 18 July 2002 (the Lease). The term of the Lease was for five years from 1 July 2002, with three options to extend the Lease for three further five year terms.
In 2005 Avadean consented to an assignment of the Lease to Marapana Wildlife Park Pty Ltd (Marapana). A formal 'Deed of Assignment of Lease and Guarantee' was entered into on 4 February 2005. By that Deed the Lease was assigned to Marapana, with Marapana taking over and assuming liability under the Lease from 1 January 2005. The Deed included a guarantee and indemnity (which has been referred to as 'the Guarantee') provided to Avadean by the defendants, Mr and Mrs Mullany, for all monies owed by Marapana to Avadean.
Marapana did not exercise the first option to extend the Lease. After the expiry of the initial term of the Lease, from and after 1 July 2007 Marapana remained in occupation of the premises, generally observing the terms of the Lease. It was in arrears of rent, however, and in March 2011 Avadean served a Notice of Termination, after which Marapana vacated the premises.
After Marapana was placed into liquidation on 20 July 2011, Avadean commenced these proceedings against Mr and Mrs Mullany pursuant to both the Guarantee and an acknowledgment of debt which they signed on 17 May 2010 (the Acknowledgment). Avadean seeks to recover outstanding rent, outgoings and interest in the sum of $98,573, plus other loss and damage arising from Marapana's failure to leave the premises in good repair and condition.
In their defence, Mr and Mrs Mullany (then represented by solicitors) pleaded that the Lease and Assignment of Lease were illegal and void pursuant s 20(1)(a) of the Town Planning and Development Act 1928 (since repealed) ('the TPD Act'), and accordingly the Guarantee was void and unenforceable. They pleaded that they executed the Assignment of Lease and the Acknowledgment under a mistaken belief that there was a valid and enforceable lease and assignment of lease. They also claimed that the Assignment of Lease and the Acknowledgment are void because Avadean had engaged in misleading or deceptive conduct or made misrepresentations.
In the event that the Lease is found to be void or unenforceable Avadean claimed, in the alternative, that Marapana occupied the premises pursuant to a common law (monthly) tenancy and that under the terms of the Guarantee, Mr and Mrs Mullany are still liable to indemnify Avadean for all claims, costs, expenses and damages arising out of Marapana's use and occupation of the land from any form of tenancy or right of occupation.
Mr and Mrs Mullany counterclaimed for loss and damage allegedly suffered as a consequence of Avadean's acts and misleading and deceptive conduct or misrepresentations. They also counterclaimed for damages for alleged breaches of Avadean's obligations as landlord. They claimed damages also arising from the loss of the right to quiet enjoyment of the property, alternatively in nuisance and negligence.
For the reasons which follow, while I have found that the Lease and Assignment of Lease were illegal and void pursuant s 20(1)(a) of the TPD Act, I am satisfied that the Guarantee and Acknowledgment are enforceable and that Mr and Mrs Mullany are liable to Avadean. There are, however, some parts of Avadean's claim for loss and damage which I have not allowed. I also dismiss Mr and Mrs Mullany's counterclaim.
The evidence
Pre-trial orders were made that the evidence in chief of all witnesses at the trial be given on affidavit, with the deponent of each affidavit to be available for cross–examination at trial, unless the other party agreed to excuse the witness.
I received the following affidavit evidence:
1.Affidavit of Michael Prince, a director of Avadean, sworn 17 December 2013 with Annexures MP1 – MP26 (exhibit 1.1);
2.Affidavit of Patricia Mary Kane, employed as a secretary, bookkeeper and assistant for Avadean, sworn 19 December 2013 (exhibit 1.2);
3.Supplementary affidavit of Michael Prince sworn 26 November 2015 with Annexures MP27 – MP30 (exhibit 1.3);
4.Affidavit of Darrol Douglas Mullany (Mr Mullany) sworn 14 February 2014 with Annexure DM1 – DM16 (exhibit 1.4);
5.Affidavit of Beth Mullany sworn 13 February 2014 (exhibit 1.5);
6.Affidavit of Timothy Brian Mullany sworn 14 February 2014 (exhibit 1.6);
7.Affidavit of Alison Wendy Mullany (Mrs Mullany) sworn 14 February 2014 (exhibit 1.7);
8.Supplementary affidavit of Mr Mullany sworn 4 February 2016 and Annexures DM20 – DM25 (exhibit 1.8);
9.Further affidavit of Mrs Mullany sworn 4 February 2016 (exhibit 1.9); and
10.Further supplementary trial affidavit of Mr Prince sworn 22 August 2016 (exhibit 2).
There were some further stand‑alone documents tendered into evidence or marked for identification.
The first affidavits from Mr and Mrs Mullany, Timothy Mullany and Beth Mullany (exhibits 1.4 ‑ 1.7 inclusive) were prepared by Mr Mullany, as at that stage he and Mrs Mullany were not represented by solicitors. The supplementary affidavits of Mr Mullany (exhibit 1.8) and Mrs Mullany (exhibit 1.9) were prepared by solicitors.
At trial Mr and Mrs Mullany were no longer represented by solicitors and appeared in person.
Mr Prince and Mrs Kane attended court and were cross-examined by Mr Mullany. Mr Mullany was also cross-examined by counsel for Avadean.
At the commencement of the trial, an issue was raised by Mr and Mrs Mullany about the fact that the Assignment of Lease had not been stamped. Counsel for Avadean disputed that there was any requirement to have the Assignment of Lease stamped, referring to amendments to the Stamp Act1921 effective from 1 January 2004 which abolished stamp duty upon leases and assignments of lease. In any event, that document has now been stamped (with nominal duty) and a stamped copy provided by Avadean's solicitors by letter dated 24 November 2016.
The defendants were unrepresented
I have assumed the burden of endeavouring to ascertain the rights of Mr and Mrs Mullany which may be 'obfuscated by their own advocacy'. I have endeavoured to approach their affidavits prepared without legal assistance with some flexibility, careful to ensure that I do not overlook a viable defence: Tobin v Dodd [2004] WASCA 288; Re Attorney‑General; Ex parte Skyring [1996] HCA 4; (1996) 70 ALJR 321.
Factual matters relevant to the plaintiff's claim
I make the following findings from the evidence. There is little dispute about any of these matters.
The land owned by Avadean is situated at and known as Lot 500 on Diagram 72179, the whole of the land comprised in Certificate of Title Volume 1776 Folio 499 (the Land). It is rural property.
Prior to 2002 Avadean had operated a wildlife park business known as Marapana Wildlife World from part of the property.
In mid‑2002 Avadean sold the wildlife park business to Weston Antonio Greenwoods and Tracey Light Manning and, by the Lease, leased that part of the property to Mr Greenwoods and Ms Manning to enable them to operate the business.
The premises defined in the schedule to the Lease is described as 'parcels outlined in red marked "A", "B" and "C" on the attached plan known as Marapana Wildlife World'. The attached plan is not part of the copy of the Lease provided to me in these proceedings. However, I have been provided with an aerial photograph of the premises showing the wildlife park on the south‑western corner of Lot 500.
As I have already stated, the term of the Lease was five years, that is from 1 July 2002 until 30 June 2007, with the option to extend the Lease for three further five year terms. The option as set out in cl 20 was as follows:
20OPTION TO EXTEND THE LEASE
--------------------------------------------------------------------
Option
20.1The Landlord gives the Tenant the option to extend the Lease for any extended term specified in item 4 of the Reference Schedule on and subject to the terms of this clause 20. The option is only exercisable by the Tenant giving notice to the Landlord not earlier than 6 months and not later than 3 months before the end of the initial or then current Term.
Loss of option if Event of Default
20.2If the Tenant gives the notice referred to in clause 20.1, but on or prior to the date the notice is given or at any time between that date and the last day of the Term, an Event of Default has occurred and it has not been remedied or waived, the Tenant ceases to be entitled to an extension of this Lease.
Terms of extension
20.3The extension of this Lease is to be on the same terms as this Lease except that:
(a)the rent applicable at the commencement date of the extended lease is to be the same as the Rent payable under this Lease immediately prior to the end of the initial Term unless the commencement date of the extended lease is also a Review Date or a CPI Adjustment Date, in which case, the Rent is subject to review under clause 2;
(b)the Review Dates and the CPI Adjustment Dates applicable to the extended lease are those specified in items 8 and 9 of the Reference Schedule; and
(c)this clause 20 does not apply and the Tenant has no further option to extend the Lease.
Documentation
20.4The Tenant and the Guarantor are to promptly sign a deed of extension of lease, to be prepared by the Landlord's solicitors at the Tenant's cost, when requested by the Landlord.
Item 4 in the Reference Schedule referred to in cl 20 provided as follows:
Option(s) to extend
this leaseSubject to any necessary approvals, for three (3) periods of five (5) years each.
The facilities and infrastructure at the wildlife park, as set out in Mr Prince's evidence (exhibit 1.3, par 13) and which I accept, were:
(a)a café/learning centre;
(b)two toilets (which based on other evidence I have taken to mean two toilet blocks);
(c)a koala viewing area;
(d)reticulation;
(e)assorted animal pens and fencing;
(f)outdoor picnic area with tables and barbeques; and
(g)playground equipment.
Mr Greenwoods and Ms Manning operated the wildlife park from the premises until they sold the business to Marapana in late 2004. (There is no evidence as to the exact date of the agreement between these parties). Incidentally, Mr and Mrs Mullany's son, Timothy (Tim) Mullany, had worked at the wildlife park from 2001 and was responsible for all of the maintenance on the property (exhibit 1.6, par 1).
Marapana was the vehicle used for the purchase of the wildlife park. Mr Mullany was the sole director of Marapana and Mrs Mullany was the secretary. From the affidavit evidence from each of Mr and Mrs Mullany, Tim Mullany and Beth Mullany, as well as evidence given by Mr Mullany in cross-examination, the wildlife park was to be operated, and did operate, as a family business (although Mr Mullany had other full‑time employment). As Mr Mullany described it in cross–examination (ts 189), Tim managed the animals and outside staff, Beth managed the café and other staff and Mrs Mullany helped manage the park. Mr Mullany would attend in the morning and usually in the afternoon 'just to see what was happening' – what he agreed was a 'periodic involvement'.
The amount paid to Mr Greenwoods and Ms Manning for the purchase of the business was $136,000. The money for that purchase was raised through a business loan obtained from the Westpac Bank by Mr and Mrs Mullany (exhibit 1.8, pars 11 ‑ 13 and Annexures DM20 and DM21).
Avadean had no involvement in either the operation of the wildlife park by Mr Greenwoods and Ms Manning, or the purchase of the wildlife park business by Marapana from Mr Greenwoods and Ms Manning. Mr Prince of Avadean did meet with Mr and Mrs Mullany in early 2005, but only for the purpose of approving the proposed assignment of lease. Mr Prince instructed solicitors to prepare the assignment of lease and those solicitors liaised with the parties in relation to negotiations for and signing that document.
The assignment of the lease took the form of a deed. Entitled 'Deed of Assignment of Lease and Guarantee' and dated 4 February 2005, the Lease was assigned by Mr Greenwoods and Ms Manning to Marapana, with Avadean's consent (the Assignment of Lease). Mr and Mrs Mullany provided the Guarantee. The Deed was executed by all parties and the execution witnessed.
The rent for the premises commenced at $2,186 per month, increasing to $4,333.00 per month by 1 July 2004. After that date, although the Lease provided for both CPI adjustment to the rent on 1 July 2005 and 1 July 2006 and a rent review on 1 July 2007, the rent did not increase.
Invoices were sent to Marapana on a monthly basis for the rent and outgoings which were due.
The option to extend the Lease for a further five year term was not exercised by Marapana. The lease term expired on or about 30 June 2007. From 1 July 2007 Marapana remained in possession. I am satisfied that it did so as a monthly tenant. That was what the Lease provided by cl 14. Mr Mullany in his evidence (exhibit 1.4, pars 4 and 10) referred to Marapana continuing in occupation after the Lease expired as a periodic tenant on a monthly basis, referring to the Lease cl 14. Even if the Lease and Assignment of Lease are illegal, void and unenforceable, Marapana's possession of the premises paying monthly rent constitutes a monthly tenancy at will: Stone James & Co v Investment Holdings Pty Ltd [1987] WAR 363, 382 (Stone James).
Mr Prince deposed to how Marapana began to fall into arrears of payments due to Avadean for its tenancy of the premises from about April 2008. However, from the documents produced by Mr Mullany it is clear that Marapana had fallen into arrears before then. A Notice of Default was issued on 12 March 2007 both to Marapana and Mr and Mrs Mullany as guarantors, seeking payment of outstanding rent, outgoings and rates in the amount of $69,418.10 (Mr Mullany's affidavit exhibit 1.4, Annexure DM1).
I am satisfied that Marapana did not exercise the option to extend under the Lease because it was in default and experiencing financial problems.
The financial problems experienced by Marapana, according to Mr Mullany's own evidence (exhibit 1.4, par 13), were because a large business debt incurred by the vendors, Mr Greenwoods and Ms Manning, had not been disclosed to the Mullanys at the time of the purchase of the wildlife park. The wildlife park had not been making a profit. This was something which Mr Mullany made known to Mrs Patricia Kane, who was employed as the secretary, book-keeper and assistant for Avadean, and who often called Mr Mullany or sent emails to him regarding payment of rent. She heard Mr Mullany complain about the troubles that had been caused to them by Tony Greenwoods. Mr Mullany told her how Mr Greenwoods had lied to him in relation to the business when he (Mr Mullany) had purchased it (exhibit 1.2 pars 9 ‑ 11).
To pay the arrears of rent and outgoings, Mr and Mrs Mullany sold a property they owned in Safety Bay and payment of arrears was made on 2 November 2007. By that time, the debt to Avadean had increased to $95,938.59. A settlement statement for the sale of the Safety Bay property (exhibit 1.4, Annexure DM16) shows that from the proceeds of sale Avadean was to receive $95,938.59 and Mr and Mrs Mullany signed an authority to the settlement agent to make payment of that sum to Avadean.
While Marapana continued to make payments of rent and outgoings, arrears continued to grow. Although under the terms of the Lease cl 12.6 the tenant was to pay interest at the rate of 18%, Avadean initially refrained from charging interest on the outstanding arrears. It is apparent from the Statement dated 2 March 2007 annexed to the Notice of Default (exhibit 1.4, Annexure DM1) that no interest was charged by Avadean on the arrears then outstanding. Subsequent invoices (exhibit 1.1, Annexure MP5), also show that no interest was charged. However, from August 2008 Avadean began charging interest on arrears at the rate provided for under the Lease.
By May 2010 Mr Prince was concerned about the monies outstanding for rent and outgoings, which were 'significant'. When Mr Mullany said he would sell his house for the purpose of being able to stay on the premises, Mr Prince said words to the effect that 'if that is the case we will put it in writing' (exhibit 1.3, par 8).
On 17 May 2010 Mr and Mrs Mullany signed the Acknowledgment (exhibit 1.1, Annexure MP10) which was prepared by Avadean's solicitors. This read as follows:
To:Avadean Pty Ltd c/- Michael Prince
169 Paganoni Road
KARNUPWE, DARROL DOUGLAS MULLANY and ALISON WENDY MULLANY of [address] as guarantors of the obligations of Marapana Wildlife Park Pty Ltd ('the Company') ACN 112 146 022, acknowledge as follows:
1.The Company presently owes Avadean Pty Ltd ('Avadean') the sum of $79,296.36.
2.As guarantors of the Company's obligations, we owe Avadean the sum of $79,296.36.
3.We are the owners of the property known as [address] Karnup ('the Property').
4.We have listed the Property for sale.
5.We agree that from the proceeds of the sale of the Property, Avadean will be paid the sum of $79,296.36 together with any further monies which become payable by the Company to Avadean.
DATED the 17th day of May 2010.
The property at Karnup was not sold (and there has been no claim by Mr and Mrs Mullany that they sold this property and used the proceeds to pay arrears).
Concerned by the increasing arrears, Mr Prince instructed solicitors to send a Notice of Termination of Lease. That was issued and dated 19 March 2011 and addressed to both Marapana as the monthly tenant and Mr and Mrs Mullany as the guarantors.
On 30 March 2011 Mr Mullany wrote by email to Mr Prince to 'update [him] on the move' and asked whether Marapana could keep trading until the end of the school holidays. On that basis trading would cease on 8 May 2011 and Marapana would vacate the premises (including removing animals from the wildlife park) by 22 May 2011. In response, Avadean offered a licence to occupy the premises for 45 days. A formal licence agreement was prepared and signed (exhibit 1.1, Annexure MP16).
Various short extensions to the licence were sought by Mr Mullany. On 7 April 2011 Avadean granted an extension to 8 May 2011 (exhibit 1.1, Annexure MP21).
On 6 May 2011 Mr Mullany wrote an email to Mr Prince asking if he would be 'willing to allow us just to house the dingoes, kangaroos and emus in their current paddocks' and with a proposal to pay an agistment fee of $1,000 per month for three months. Mr Prince responded in the negative, explaining 'I cannot have your animals on the property as [it] would interfere with leasing of the premises'. Mr Prince also asked that Mr Mullany bring the property and premises 'up to standard as per lease' otherwise contractors would be engaged 'at your expense' to clean and repair the premises (exhibit 1.1, Annexure MP21).
When Mr Mullany wrote again to Mr Prince by email on 15 May 2011 seeking an extension of the licence for the remaining animals still on the premises, Mr Prince responded that he was not agreeable to any further continuation of occupation. He also stated that fees would be incurred if 'you are still occupying the property' (exhibit 1.1, Annexure MP22).
Marapana eventually left the premises in late May 2011, although some of its animals remained on the property until late August or September 2011. Most of those animals were collected by the Mullanys at that time but there were still left an alpaca (which subsequently died) and a couple of kangaroos.
On 20 July 2011 Marapana was placed into liquidation, on the order of the Federal Court on the petition of the Deputy Commissioner of Taxation. An affidavit in support of the application for the winding up of Marapana sworn 9 June 2011 (exhibit 7) sets out the fact that as at 22 February 2011 Marapana was indebted to the Deputy Commissioner of Taxation in the sum of $229,359.66.
Section 20 of the Town Planning and Development Act
Both at the time of the Lease in 2002 and the Assignment of Lease in February 2005, Section 20(1)(a) of the TPD Act provided:
Subject to section 68 of the Environmental Protection Act 1986, to this section and to section 20B, a person shall not, without the approval of the Commission, lay out, grant or convey a street, road or way, or either lease or grant a licence to use or occupy land for any term exceeding 10 years including any option to extend or renew the term or period, or lease and grant a licence to use or occupy land for terms in the aggregate exceeding 10 years, including any option to renew or extend the terms or periods, or sell land or grant any option of purchase of land, unless the land is dealt with by way of such lease, licence, sale or option of purchase as a lot or lots, or subdivide any lot, or amalgamate any lot with any other lot whether within the same district or otherwise and the Commission may give its approval under this paragraph subject to conditions which shall be carried out before the approval becomes effective.
The Commission meant the Western Australian Planning Commission established by s 4 of the Western Australian Planning Commission Act 1985: s 2(1).
The purpose of s 20 was to regulate planning, in particular, long-term planning. It was aimed at preventing, in effect, any unauthorised subdivision by the creation of a lease or a licence in part of a 'lot' (as defined in s 2(1) of the TPD Act) for a term in excess of 10 years, without the prior approval of the Commission: Rosebridge Nominees Pty Ltd v Commonwealth Bank of Australia [2008] WASCA 107 [20] (Steytler P, Buss JA agreeing) (Rosebridge).
It is well settled that a transaction falling within s 20(1)(a) of the TPD Act, if entered into without the approval of the Commission, is illegal, void and unenforceable: Stone James v Investment Holdings Pty Ltd (379); Mackinlay v Derry Dew Pty Ltd [2014] WASCA 24; (2014) 46 WAR 247 [41].
The approval of the Commission required by s 20(1)(a) is an approval of the doing of any of the acts stipulated in the subsection, and the approval must be obtained before the act is done: Glentham Pty Ltd v City of Perth [1986] WAR 205, 207 (Burt CJ); 212 (Wallace J); Stone James (379, 382).
The act to which the prohibition in s 20(1)(a) is directed is, relevant to this case, the granting of a lease exceeding 10 years 'including any option': Glentham Pty Ltd v City of Perth. As explained by Pullin JA in Mackinlay v Derry Dew [70]:
… what s 20(1)(a) of the TPD Act does is to make the grant of a lease of a part of a lot for a term (meaning the initial term of a lease plus any options to extend) longer than specified and without requisite approval, illegal.
An option to extend or renew for the purpose of s 20(1)(a) must give the grantee (in this case as expressed in the Lease, the tenant) the right to perform it or not as he chooses. It may be conditional upon the fulfilment of conditions, but if it gives the tenant the right, if he performs the stipulated conditions, to become the tenant for a further term, and the landlord is bound to grant the option, it is an option within the meaning of s 20(1)(a): Rosebridge [15] - [23].
Another way of putting this is that the option must be a unilateral right in the option holder to extend or continue an existing legal relationship: Commissioner of Taxation v Guy (1996) 67 FCR 68, 76.
Conditions may be imposed upon the exercise of the unilateral right, provided the grantor (landlord) is irrevocably bound as soon as the conditions are satisfied: Whitemore Pty Ltd v OF Gamble Pty Ltd (1991) 6 WAR 110, 116 and 117 (applied in Rosebridge [16] ‑ [17]).
In this case, an issue has arisen as to whether the options to extend (or any one of them) can be severed from the Lease and Assignment of Lease. The doctrine of severance may be invoked where proceedings are brought to enforce a contract that is illegal and void if the transaction involves distinct promises or engagements, some of which are legal and some of which are illegal. Whether severance is available depends on the circumstances, including the nature of the illegality. There is not a single set of rules which will decide all cases: Mackinlay v Derry Dew [121] ‑ [151] (Buss JA); McFarlane v Daniell (1938) 38 SR (NSW) 337; SST Consulting Services Pty Ltd v Rieson [2006] HCA 31; (2006) 225 CLR 516 [41] ‑ [48].
If there is no other obstacle to the assignment of the balance of the term of the Lease being severed from the grant of the options, severance would not be inconsistent with the policy embodied in s 20(1)(a) of the TPD Act: Mackinlay v Derry Dew [150].However, where an option to extend or renew is in substance so connected with a lease or assignment of lease so that it cannot be characterised as a distinct and independent grant, the elimination of which would not change in kind the transaction, it is not possible to adjust a lease by severance of the option: Mackinlay v Derry Dew [135] ‑ [146], [152] (Buss JA, Newnes JA agreeing); see also [48] and [71] ‑ [77] (Pullin JA).
Mackinlay v Derry Dew involved a Deed of Assignment of Lease. The original lease did not infringe the prohibition in s 20(1)(a) of the TPD Act, and the making of the Deed would not have infringed s 20(1)(a) if it had merely assigned the lease. However, the Deed included options to renew, which meant the term of the lease in the aggregate exceeded 10 years. It was held that the making of the Deed infringed s 20(1)(a) in that the lessor leased the premises for terms in the aggregate exceeding 10 years, including the options to renew, without the Commission's approval having been obtained for the granting of the options. Severance of the options could not save the transaction, because, as Buss JA explained [152]:
In my opinion, severance is not available in the present case. The options to renew granted under the Deed were in substance so connected with the assignment of the balance of the term of the Lease, in the context of the respondent’s purchase of the Forrestfield Tavern business, as to form an indivisible whole. The options cannot be severed without radically altering the nature of the tenure or prospective tenure which the parties to the Deed agreed should be conferred on the respondent. The grant of the options was not merely ancillary to the assignment of the balance of the term of the Lease and the other provisions of the Deed. The options cannot reasonably be characterised as a distinct and independent grant, the elimination of which would not change in kind the transaction evidenced or recorded in the Deed. The only reasonable conclusion, on an objective assessment of the transaction as a whole, is that the options to renew were, from the respondent’s perspective as the purchaser of the Forrestfield Tavern business, at or close to the heart of the agreed arrangements.
There is no dispute that the total term of the Lease which was assigned in this case, including options, was in excess of 10 years and it was for land which was other than a lot. It was a lease for part of a lot. No approval of the Commission was obtained.
Avadean's submissions
Avadean has submitted that the Lease is not caught by s 20(1)(a) of the TPD Act because of the particular wording of the option to extend.
By cl 20 and item 4 of the Reference Schedule to the Lease there was the option to extend the lease 'Subject to any necessary approvals' for three periods of five years each. Accordingly, Avadean argued that the option to extend the lease term was qualified and pre-conditioned by the requirement to obtain necessary approvals. The 'necessary approvals' included approval by the Commission pursuant to s 20(1)(a) of the TPD Act.
Counsel for Avadean argued that only the second option in the Lease would take the term beyond 10 years and this was subject to approval by the Commission. The option could not be exercised any earlier than six months before the end of the second five‑year term and in fact might never be sought to be exercised. Avadean submitted that the time for approval to be sought would be in the event of and during the exercise of the period of the second option. A construction of s 20(1)(a) requiring an approval by the Commission to the Lease in circumstances where the option itself was subject to the approval of the Commission and may never be exercised, would be 'inimical to the efficient administration of the Commission': Rosebridge [20].
It was also submitted that the option here was not the type of option which s 20(1)(a) of the TPD Act relates because item 4 of the Reference Schedule specified that the 'necessary approvals' were required, and that necessary approval was of the Commission. There was, accordingly, no possibility of this being an option within the meaning of s 20(1)(a) because there was no creation of an existing legal right given to the tenant.
An alternative argument made on behalf of Avadean was that if s 20(1)(a) of the TPD Act was offended, then unlike other cases where the options could not be severed from the lease, this option could be severed. Again, it was submitted that this was because of the express words in item 4 of the Reference Schedule saying 'Subject to any necessary approvals'. Properly construed the Lease should be seen as two separate transactions; one for a five‑year term and the other for additional terms subject to any necessary approvals.
Conclusion on the enforceability of the Lease and Assignment of Lease
I am unable to accept the submissions of Avadean for the following reasons.
As I have already set out in [53] and [54], it was the Lease which required the approval of the Commission and that included the potential extensions of the terms set out in the options under the Lease.
The time to see whether there is a breach of s 20(1)(a) of the TPD Act is not at the time of the option to extend or renew, but at the time of the entry into the lease.
Item 4 of the Reference Schedule does not create the option to extend. Clause 20.1 of the Lease does. On a plain reading of cl 20.1 the option given by Avadean to the tenant is a true option. There are conditions – the option is only exercisable by the tenant giving notice no earlier than six months and no later than three months before the end of the initial term, and also the tenant must not be in default. There is also a requirement that a deed of extension of the lease must be entered into. In my view, that is a true option to extend or renew, within the meaning of s 20(1)(a), as discussed in Rosebridge. It gave Marapana the right, if it performed the stipulated conditions, to a further term, and Avadean was bound to grant the option.
In the Rosebridge case whether or not the tenant had an option to exercise was completely in the hands of the lessor. Here it is not. It is in the hands of the tenant, Marapana.
In my view, item 4 of the Reference Schedule which begins with the words 'Subject to any necessary approvals', does not qualify or change the character of the option which is given in cl 20. The fact that some third party approval may be required does not affect the fact that there has been the grant of an option. As soon as the 'necessary approvals' (whatever they may be) are obtained, the grantor (Avadean) is irrevocably bound and must extend the lease.
The words 'Subject to any necessary approvals' in item 4 of the Reference Schedule are vague. Counsel for Avadean suggested that they must have some work to do. However, these words cannot, as a matter of law, mean subject to the approval of the Commission, as contended by Avadean. This is because s 20(1)(a) of the TPD Act says that a person cannot lease a part of a lot for more than 10 years (including any options) without the approval of the Commission. That approval must be given before the entry into the lease, including all option terms. In other words, the approval of the Commission has to be at the outset, or not at all. The approval of the Commission cannot be to any option to extend or renew.
The clear words of s 20(1)(a) do not require either the tenant or the landlord to come back to the Commission for approval at the time of the exercise of any option. The 'necessary approval' at the time of the exercise of the option as stipulated in item 4 of the Reference Schedule cannot be, nor could it be, approval by the Commission, because that approval must be obtained at the time of the entry into the lease.
So far as counsel for Avadean submitted that the words 'Subject to necessary approvals' must have work to do, having heard all the evidence in this case and having regard to the documents including a Department of Conservation and Land Management licence (exhibit 6), 'Subject to necessary approvals' could be interpreted to mean subject to whatever approvals are required to continue operating the premises as a wildlife park. From what is set out in the evidence of Tim Mullany (exhibit 1.6), the Department of the Environment and Conservation had some involvement in the operation of this park from time to time. He also referred to issues relating to 'our licence conditioning' that 'we' had with the Department of Environment and Conservation (par 8).
As to whether the options can be severed from the rest of the Lease, in my view severance is not possible. This is a situation where, as described in Mackinlay v Derry Dew Pty Ltd [152], the options to extend were in substance so connected with the assignment of the balance of the terms of the Lease to Marapana, as to form an indivisible whole. The assignment from the assignor, Mr Greenwoods and Ms Manning, was of all of their interest in the leased premises 'for the residue now unexpired of the said term including the benefit of any option contained in the Lease and not yet exercised as from the date of assignment' (cl 1 of the Assignment of Lease). The options could not be severed without radically altering what was agreed to by the terms of the Deed. To put it another way, these options were not merely ancillary to the assignment of the Lease to Marapana. The options were at, or close to, the heart of the agreed arrangements for the purchase of the wildlife park. Accordingly, there could not be severance.
I therefore find that the Lease and the Assignment of the Lease infringe the prohibition in s 20(1)(a) of the TPD Act and each are illegal, void and unenforceable.
The nature of Marapana's occupation of the premises
While I have held that the Lease and Assignment of Lease are illegal, void and unenforceable, as I have already found (see [33] above), Marapana's occupation of the premises paying monthly rent constitutes a monthly tenancy.
As to the terms of that monthly tenancy, it is clear that the parties proceeded on the basis of the terms of the Lease. Indeed Mr Mullany relies on them (in particular the landlord's obligations in cl 12) in relation to his and Mrs Mullany's defence and counterclaim, whether or not there is a valid lease.
That is consistent with the law. Where there is an invalid or void lease but a party has gone into possession of the land as a tenant and paid rent, there is an implied common law tenancy, and the terms of any agreement between the parties applicable to that invalid or void lease are treated as incorporated into that tenancy (so far as those terms are applicable to the tenancy): Moore v Dimond (1929) 43 CLR 105, 119 ‑ 120 and 123; Dockrill v Cavanagh (1944) 45 SR (NSW) 78.
The law relating to a guarantor's liability where a contract is illegal
The next question I must determine is whether, because the Lease and the Assignment of Lease are illegal, void and unenforceable, the Guarantee (which is contained in the same document as the Assignment of Lease – the 'Deed of Assignment of Lease and Guarantee') is also void and unenforceable. The answer to this question depends on the terms of the Guarantee and whether it provides an indemnity.
If Mr and Mrs Mullany have provided an indemnity then that will not be void and unenforceable: Heald v O'Connor [1971] 1 WLR 497, 505 ‑ 506; [1971] 2 All ER 1105, 1109 and 1112; C Convenience Stores Pty Ltd v Wayville Plaza Retirement Pty Ltd [2012] SASC 14; (2012) 114 SASR 299 [219] ‑ [223].
This is because of the difference between a guarantee and an indemnity. A guarantee is a contract to answer for the debt, default or miscarriage of another (the principal debtor) who is to be primarily liable. An indemnity is a contract by one party to keep the other harmless against loss and is not dependent on the continuing liability of the principal debtor: Heald v O'Connor; applying YeomanCredit Ltd v Latter [1961] 1 WLR 828, 831; [1961] 2 All ER 294, 296; see also Canty v Paperlinx Australia Pty Ltd [2014] NSWCA 309 [37] ‑ [40]; Total Oil Products (Australia) Pty Ltd v Robinson [1970] 1 NSWR 701, 703.
An indemnity is a distinct and independent promise and imposes a primary obligation that is independent of the continuing obligation of the principal debtor: Canty v Paperlinx Australia Pty Ltd [39].
A contract providing for a person to answer for the debt of another may be drafted in such a way that it expressly contains both a promise to guarantee and a promise to indemnify: Citicorp Australia Ltd v Hendry (1985) 4 NSWLR 1, 20 (Clarke J).
Whether by the Guarantee Mr and Mrs Mullany provided an indemnity will always depend upon the true construction of the actual words used. The description of the document as 'Deed of Assignment of Lease and Guarantee' (and indeed the reference to 'the Guarantee' in pleading, submissions at trial and in these reasons) is simply a label. The question is as to its effect.The essential nature of the agreement must always be considered: YeomanCredit Ltd v Latter ([1961] 1 WLR 828, 833); Canty v Paperlinx Australia Pty Ltd [41] and [42].
The terms of the Guarantee
The terms of the Guarantee are as follows (with Mr and Mrs Mullany being the 'New Guarantors' referred to):
5.
(a)In consideration of the Lessor consenting to the assignment in this deed at the New Guarantor's request the New Guarantor if there is only ones GUARANTEES or if there is more than one JOINTLY AND SEVERALLY GUARANTEES to the Lessor the due performance and observance by the Assignee of all the provisions contained or implied in the Lease and to be performed and or observed on the part of the Assignee including (but not limited to) the due payment of all rentals and other moneys payable under the Lease.
(b)the New Guarantor acknowledges that
(i)no time credit forbearance indulgence or concession which may at any time be granted by the Lessor to the Assignee;
(ii)no variation of the terms covenants agreements and or conditions contained or implied in the Lease;
(iii)no extension or renewal of the term of the Lease;
(iv)no determination of the term of the Lease (whether by effluxion of time re-entry forfeiture surrender or otherwise)
shall prejudice or affect the liability of the New Guarantor under this guarantee.
(c)This guarantee shall be irrevocable and continuing and shall extend to cover all obligations of the Assignee to the Lessor howsoever arising.
(d)The New Guarantor as an independent liability agrees to indemnify and keep indemnified the Lessor against all losses claims costs expenses damages or obligations direct or indirect sustained or incurred by the Lessor arising out of or in respect of any breach or default by the Lessee in payment of the rentals and other moneys payable under the Lease or in duly performing and observing any of the provisions of the Lease to be paid performed and or observed by the Assignee.
(e)In the event that:
(i)the Assignee shall go into compulsory or voluntary liquidation;
(ii)become bankrupt;
(iii) shall enter into any composition arrangement with or assignment for the benefit of the Assignee's creditors;
(iv)shall have appointed under any Act or instrument or by order of any Court a manager or an administrator or a trustee or a receiver or a receiver and manager or liquidator in relation to any part of the Assignee's undertakings or assets or property;
the New Guarantor shall not prove or claim in any such liquation bankruptcy composition arrangement or assignment or in respect of such appointment until the Lessor has received one hundred cents in the dollar in respect of the moneys owing by the Assignee to the Lessor and the New Guarantor shall hold in trust for the Lessor such proof and claim
(f)this guarantee shall continue so long as any moneys are due or will or upon any contingency may subsequently fall due (including any claim for unliquidated damages which may at any time in the future arise) from the Assignee notwithstanding that for any cause including bankruptcy, liquidation or any legal disability they may not be recoverable from the Assignee and the liability of the New Guarantor shall continue notwithstanding the termination of the Lease for any cause or reason
(g)unless expressly released by the Lessee in writing the guarantee and indemnity in this clause extends to all renewals and extensions of the Lease and also any moneys payable by reason of the Assignee's use or occupation of the premises although such moneys are not expressly recoverable pursuant to the Lease and to any moneys becoming payable by the Assignee by reason of the Assignee holding over or continuing in occupation of the premises under any other form of tenancy or right of occupation or as a trespasser or other unauthorised occupier
(h)the New Guarantor further agrees:
(i)any payment made to the Lessor and subsequently stopped or avoided for any reason whatever shall not be deemed to have discharged the New Guarantor's liability either in whole or in part;
(ii)any disclaimer of this Lease shall not extinguish the New Guarantor's liability under this guarantee and such liability shall continue as if such disclaimer had not occurred.
Avadean's submissions on the Guarantee
Counsel for Avadean submitted that the Guarantee is by a Deed and therefore consideration is not an issue. Further, this was not just a guarantee of the Lease and Assignment of Lease; there were additional matters agreed to.
Counsel for Avadean relied on cl 5(g) which referred to the indemnity extending to 'any moneys payable by reason of the Assignee's use or occupation of the premises, although such moneys are not expressly recoverable pursuant to the Lease', and also to 'any moneys becoming payable by the Assignee by reason of the Assignee holding over or continuing in occupation of the premises under any form of tenancy'. It was submitted that the latter words include a situation where there is an implied tenancy at common law arising because the Lease is void.
It was also submitted that these obligations can be severed from the illegal parts of the Deed of Assignment of Lease and Guarantee.
Conclusions on the enforceability of the Guarantee
Applying the law as I have set out in [81] ‑ [86] above and on a true construction of the Guarantee, I accept Avadean's submissions.
The Guarantee provided by Mr and Mrs Mullany was in the form of a deed. It complies with the formalities of a deed pursuant to s 9 of the Property Law Act1969. A deed does not need consideration to support it.
I am satisfied that by the Guarantee Mr and Mrs Mullany did not just promise to answer for the debt, default or miscarriage of Marapana under the Lease. By cl 5(d) and cl 5(g) Mr and Mrs Mullany agreed to indemnify Avadean. Clause 5(d) expressly provided that the indemnity was an independent liability. Mr and Mrs Mullany's obligation was not simply an obligation to make good Marapana's liability to Avadean as tenant (assignee) under the Lease. By cl 5(g) the indemnity was extended to all monies owed by Marapana, by reason of its occupation of the premises 'although such moneys are not expressly recoverable pursuant to the Lease' and by reason of Marapana's 'continuing in occupation of the premises under any other form of tenancy or right of occupation'.
The Guarantee therefore clearly and unambiguously, in its natural and ordinary meaning, contained an agreement by Mr and Mrs Mullany to indemnify Avadean which extended to:
(a)any moneys payable by reason of Marapana's use or occupation of the premises although such moneys are not expressly recoverable pursuant to the Lease; and
(b)any moneys becoming payable by Marapana continuing in occupation of the premises under any other form of tenancy.
The express words of the indemnity thus cover the situation where Marapana was in occupation of the premises as a monthly tenant, with the tenancy implied by common law.
As the indemnity is an independent, primary obligation, it is not discharged because the Lease and Assignment of Lease to Marapana are illegal, void and unenforceable.
This is not a situation, like Citicorp Australia v Hendry where the indemnifier was held not liable because the sum claimed was irrecoverable as a penalty. Avadean's claim here is for outstanding rent, outgoings, interest and loss and damage which are all recoverable by reason of Marapana's occupation of the premises pursuant to a common law monthly tenancy.
Further, because the indemnity is a distinct and independent obligation by Mr and Mrs Mullany, it can be severed from the illegal parts of the Deed, in accordance with the principles of severance as I have discussed at [58] above.
I find that pursuant to the Indemnity (as I shall now refer to it), Mr and Mrs Mullany are liable to Avadean for all rent and other monies owed by reason of Marapana's occupation of the premises as a monthly tenant, and for damages for the failure to leave the premises in good repair and condition.
Another matter raised in relation to the enforceability of the Guarantee and the Acknowledgment – Defence par 4
I turn now to address what is pleaded in par 4 of the defence, which although not specifically mentioned during the trial by Mr and Mrs Mullany, or addressed by either of the parties in their submissions, raises a further issue which I must determine as to the enforceability of the Indemnity and the Acknowledgment.
After pleading the execution of the Lease by Mr Greenwoods and Ms Manning, the period of the Lease and the options to renew and the fact that Mr Greenwoods and Ms Manning operated the wildlife park for nearly three years (pars 4(a) ‑ 4 (c)), it is pleaded that Avadean knew that Mr and Mrs Mullany were not legally represented (par 4(d)) and by reason of all of these matters, Avadean 'by its acts' led Mr and Mrs Mullany to believe that the Lease and Assignment of Lease was lawful (par 4(e)).
It is then pleaded, in par 4(f), that Mr and Mrs Mullany executed the Assignment of Lease under a mistaken belief that the Lease and Assignment of Lease was lawful, paid rent and any arrears of rent by selling their assets and then executed the Acknowledgment under a mistaken belief that they were acknowledging monies owed by Marapana pursuant to a valid and enforceable Lease and Assignment of Lease. Finally it is pleaded (par 5) that by reason of the matters referred to in par 4(f) the Assignment of Lease (which is a reference to the Deed which included the Indemnity) and the Acknowledgment are void and unenforceable.
While these are the pleaded matters, there was no evidence given by Mr Mullany that he and his wife signed the Deed in the mistaken belief that the Lease and Assignment of Lease were valid. I will, however, assume this. Mr Mullany did give evidence that at the time of signing the Acknowledgment he was 'under a mistaken belief' that he and his wife were acknowledging monies owed by Marapana to Avadean pursuant to a valid and enforceable Lease and Agreement to Lease. He added that 'as we were not legally represented I had no idea that the lease was unenforceable and invalid' (exhibit 1.8, par 7).
In my view none of these matters affects the liability of Mr and Mrs Mullany pursuant to the terms of the Indemnity they gave, as I have discussed, or pursuant to the Acknowledgment.
The mistake made here as to the validity of the Lease and Assignment of Lease was not a unilateral mistake, as I understand is pleaded on behalf of Mr and Mrs Mullany. It appears that there was a common mistake by all parties, (including Mr Greenwoods and Ms Manning, and Avadean and its solicitors) that the Lease and the Assignment of Lease were legal and valid.
The fact is that over the years, the parties proceeded in that belief. Marapana enjoyed the balance of the initial term of the Lease. It did not exercise the option to extend the term for the reasons I have set out in [34] ‑ [36] above. The term of the Lease (which the parties then assumed was valid) expired on 30 June 2007 and thereafter Marapana continued in occupation as a monthly tenant.
In these circumstances, I am not satisfied that any mistake about the validity of the Lease or Assignment of Lease (whether classified as a unilateral or common mistake) makes the Indemnity given by Mr and Mrs Mullany or the Acknowledgment void or voidable: Taylorv Johnson (1983) 151 CLR 422, 432 ‑ 433; Svanosio v McNamara (1956) 96 CLR 186; see also the discussion regarding mistake in Errichetti Nominees Pty Ltd v Paterson Ground Architects Pty Ltd [2007] WASC 77 [50] ‑ [68] (Master Newnes, as he then was) and the article 'An Uncommon Mistake' (2004) 15(1) King’s College Law Journal 127 by James Edelman (as he then was).
The fact that Mr and Mrs Mullany were not legally represented cannot, in my view, either of itself or in combination with any of the other matters, affect the legality of the Indemnity or the Acknowledgment which they signed. There is no allegation of fraud or unconscionable conduct by Avadean or its solicitors. It has not been suggested that Mr and Mrs Mullany had no opportunity to seek legal advice, if they wished, before signing either document. There is no evidence that Mr and Mrs Mullany did not understand what they were signing. They were in the position of a person who signs a document which was known to him to contain contractual terms. The fact that Mr and Mrs Mullany may not have read or appreciated the effect of those terms, and in particular that they did not appreciate that they were providing an indemnity, is irrelevant. If they chose not to obtain legal advice, they did so at their own risk and they are nonetheless bound by both the Indemnity and the Acknowledgement: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [57].
Finally, the amount owed by Marapana for which Mr and Mrs Mullany signed the Acknowledgment relates to a period when the (assumed valid) Lease had expired and Marapana was in possession of the premises as a monthly tenant (and had been for almost three years). There could not, therefore, be any 'mistaken belief' that they were acknowledging monies owed by Marapana pursuant to a valid and enforceable Lease and Assignment of Lease.
Mr and Mrs Mullany have failed to prove the matters raised in the defence at par 4. I remain satisfied that both the Indemnity and Acknowledgment are enforceable.
The defendants' claim for false and misleading conduct
I turn now to the allegations made by Mr and Mrs Mullany that Avadean engaged in misleading or deceptive conduct or made misrepresentations in consequence of which the Assignment of Lease (which includes the Indemnity) and Acknowledgement are void.
What is pleaded is as follows (par 6 of the defence):
(a)Subsequent to signing the Assignment of Lease Marapana and Mr and Mrs Mullany requested Avadean to upgrade the facilities and infrastructure in the wildlife park which were in a dilapidated condition.
(b)Avadean represented to Marapana and Mr and Mrs Mullany that it would permit them to upgrade the facilities and infrastructure and defer the payment of rent from time to time.
(c)In response to those representations the defendants (Mr and Mrs Mullany – not Marapana) incurred significant expenses in upgrading the facilities and infrastructure in the wildlife park to 'retain the business's reputation as a tourist attraction and make it viable'.
(d)They incurred these expenses by obtaining loans from financial institutions and did so in the belief they would recover their investment in the long‑term, over the period of the Lease.
(e)Unbeknown to Mr and Mrs Mullany, Avadean was making application to develop a part of or the entire property by either sub‑dividing the land and selling various lots or seeking approvals to conduct sand mining on the property, which development 'would have required the closure of the wildlife park'.
(f)The Lease and Assignment of Lease do not contain any clauses permitting the development of the property.
(g)If Mr and Mrs Mullany had known of Avadean's intentions to develop the property, they would not have entered into the Assignment of Lease and/or incurred any expenses towards upgrading the facilities and infrastructure in the property.
It is said that all of the above matters were misrepresentations by Avadean and that Avadean had engaged in misleading and deceptive conduct, 'by leading [Marapana and Mr and Mrs Mullany] to incur expenses in upgrading the facilities and infrastructure in the wildlife park and concealing its plans to develop the property' (par 6(h)). It is alleged that because of these misrepresentations or misleading and deceptive conduct, the Assignment of Lease and the Acknowledgment are each void and Mr and Mrs Mullany are not indebted to Avadean (par 7).
The matters the subject of par 6 of the Defence can be grouped into three categories:
(a)Requests by Mr and Mrs Mullany to Avadean to upgrade the facilities and infrastructure in the wildlife park and Avadean's response - Defence pars 6(a) and 6(b);
(b)Expenses incurred in upgrading the facilities and infrastructure – Defence pars 6(c) and 6(d);
(c)Avadean's plans to develop its property – Defence pars 6(e) ‑ 6(g).
I will deal with each of these in turn.
Requests to Avadean to upgrade the facilities and infrastructure and Avadean's response - Defence pars 6(a) and 6(b)
From each of the affidavits sworn by Mr Mullany, Mrs Mullany, Tim Mullany and Beth Mullany it is apparent they consider a number of items to be facilities or infrastructure for which the landlord, Avadean, was responsible.
However, the Lease provided that maintenance and repair was the tenant's obligation: cl 9.1. Any structural work made necessary because of damage to the building or the nature of the tenant's business was also to be carried out by the tenant: cl 9.3. Cleaning was to be undertaking by the tenant. This included keeping the premises 'clean, tidy and free from refuse, vermin and pests' and the removal of rubbish: cl 9.8. (These and other clauses relevant to the issues here, including the landlord's obligations, are reproduced in full in the Schedule to these reasons).
Avadean's obligations in cl 11.2 were to take reasonable action to ensure that Services (being defined in cl 22.2 as 'services running through or servicing the premises including air conditioning equipment, power, water, sewerage, gas, telecommunications and fire sprinkler system) and the landlords' plant, machinery and equipment in the building was maintained in good working order, subject to Marapana complying with its obligations under cl 9.1.
Clause 9.4 provided that Marapana was to inform the landlord of damage to the Premises or the defective operation of any of the Services immediately it becomes aware of it. That is consistent with the common law that in order to render a landlord liable on a covenant to repair, the tenant must first notify the landlord that repairs are needed: Sleafer v LambethBorough Council [1960] 1 QB 43; Palermo Seafoods Pty Ltd v Lunapas Pty Ltd [2014] NSWSC 792 [96].
In their evidence the Mullanys claimed there had been a failure by Avadean to attend to the following items:
(a)Fencing to the property;
(b)Water supply;
(c)The toilets;
(d)The boardwalk; and
(e)Electrical issues.
There was also a claim in respect of rubbish removal, but ultimately Mr Mullany conceded that the removal of rubbish was Marapana's responsibility (ts 232). That was in my view, an appropriate concession, particularly having regard to cl 9.8 of the Lease.
Before I address each of the items I have set out in [120], there are some general observations I need to make.
The evidence I have about requests made to Avadean to upgrade the facilities and infrastructure in the wildlife park, or to put it in terms of cl 9.4 of the Lease, to inform the landlord of damage to the premises or the defective operation of any of the Services, is extremely vague. For example, in Mr Mullany's evidence (exhibit 1.4) he stated that he was in personal constant communication with Mr Prince and Mrs Kane about 'issues concerning the property' (par 16). Mr Mullany spoke generally of the fact that after Marapana became a monthly tenant 'we were constantly told after that, that no repairs would be done on the property and if we were not happy we could leave'. However, there are no particulars of any discussions or conversations or exchange of emails or other communication.
Mr and Mrs Mullany have failed to prove their counterclaim.
Conclusion and orders
I will allow the plaintiff's claim against the defendants, adjusted to reflect the matters I have discussed in [221] ‑ [227]. The counterclaim must be dismissed.
I will hear from the parties on the final orders I should make, including the issues of interest and costs.
SCHEDULE
9REPAIR, ALTERATION AND CLEANING
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Maintenance and repair
9.1The Tenant is to:
(a)keep the Premises in good repair and condition;
(b)keep the Tenant's Property and the Landlord's Property in good repair and condition and, where necessary, repair or replace items of the Landlord's Property;
(c)promptly repair any damage to the Building, the Premises or the Landlord's Property caused or contributed to by the Tenant or the Tenant's Employees, Agents, and Visitors, except when the damage is the result of an Insurable Event, but this exception will not apply if the damage is covered by an insurance policy taken out by the Landlord and the insurance money otherwise payable under the policy is not payable by the insurer as a result of an act or omission by the Tenant or the Tenant's Employees, Agents and Visitors;
(d)without limiting clauses 9.1(b) or (c):
(i)promptly replace damaged glass in the Premises, including plate glass and exterior windows, with glass of the same or similar quality to that in place on the Commencement Date; and
(ii)carry out regular maintenance of plant or equipment which is Landlord's Property in the Premises, and if requested by the Landlord, enter into an appropriate service agreement with a service organisation;
(e)maintain any drains, pipes and other conduits on the Premises in a clean and free flowing condition.
No interference with Services
9.2The Tenant is not to modify or interfere with the drainage or water supply facilities serving the premises or any equipment connected to those facilities, without the Landlord's approval in writing.
Structural work
9.3The Tenant is to carry out (subject to clause 9.6 and in accordance with clause 9.8) all building work of a structural nature made necessary by:
(a)damage of the kind referred to in clause 9.1(c) (with the exception stated in that clause);
(b)the nature of the Tenant's Business; or
(c)use of the Premises by the Tenant or any of the Tenant's Employees, Agents and Visitors.
Notice of damage
9.4The Tenant is to inform the Landlord of damage to the Premises or the defective operation of any of the Services immediately the Tenant becomes aware of it.
Alterations of the Premises
9.5The Tenant shall not make any alteration or addition to the Premises, unless the Tenant makes application for approval to do so and the Landlord consents to such application.
Damage to the Premises
9.6The Tenant is not to cause damage to the Premises or the Building or allow them to be damaged.
Building Work
9.7In carrying out its obligations under this clause 9, the Tenant is to:
(a)comply with the requirements of any Authority and all laws and standards;
(b)before carrying out any building work, obtain the Landlord's approval to the plans and specifications for the work; and
(c)carry out building work in a safe and proper manner.
Cleaning
9.8The Tenant is to:
(a)keep the premises clean, tidy and free from refuse, vermin and pests;
(b)remove wet refuse and any abnormal rubbish daily to a place outside the Building and other refuse regularly to an area within the Building designated by the Landlord;
(c)store all refuse before removal in fly and rodent proof receptacles so that it cannot be seen from the Common Areas;
(d)comply with the Landlord's directions in connection with cleaning and reuse disposal; and
(e)keep the Premises free from vermin.
11LANDLORD'S GENERAL RIGHTS AND OBLIGATIONS
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Quiet enjoyment
11.1If the Tenant complies with the Tenant's obligations under this Lease, then the Tenant may hold the Premises during the Term without interruption by the Landlord except as provided in this Lease.
Supply of Services and cleaning of Common Areas
11.2The Landlord is to take reasonable action to ensure that:
(a)the Services and the Landlord's plant, machinery and equipment in the building is maintained in good working order subject to the Tenant complying with its obligations under clause 9.1; and
(b)the Common Areas are kept clean and tidy (without affecting the Tenant's obligations under clause 9.9).
Right to enter
11.3the Landlord may after giving reasonable notice to the Tenant (or in an emergency, without notice) enter the Premises to:
(a)inspect the state of repair and condition of the Premises;
(b)maintain or repair the Building;
(c)maintain, repair or alter the Services;
(d)carry out structural alterations to the Premises which it considers necessary or works required by an Authority; or
(e)remove harmful substances without, in any case, affecting the Tenant's obligations under this Lease.
Works or changes in the Building
11.4The Landlord may, as it sees fit:
(a)alter or add to the Building but no works may be carried out to the Premises (except as provided in clause 11.4) without the Tenant's consent; and
(b)install or temporarily interrupt a Service;
Managing agent
11.5the Landlord may appoint a managing agent to manage the Premises and represent the Landlord in all or nominated matters relating to this Lease. The Landlord may at any time vary or terminate the authority of the managing agent. Communications from the Landlord supersede those from the managing agent if there is any consistency between them.
Inspection by prospective tenants or purchasers
11.6The Landlord may after giving reasonable notice:
(a)enter the Premises to allow prospective tenants or purchasers to inspect the Premises; and
(b)within 3 months before the expiration of the Lease, display inside or outside the Premises a sign with information indicating the availability of the Premises.
Landlord may rectify
11.7The Landlord may do anything which should have been done by the Tenant under this Lease but which has not been done or has not been done properly and the Landlord may enter the Premises for that purpose.
13TENANT'S OBLIGATIONS ON TERMINATION
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Tenant to vacate
13.1The Tenant is to vacate the Premises and remove the Tenant's Property on the termination of this Lease except that when the termination is before the end of the Term, the Tenant is to remove the Tenant's Property within 3 days after the termination.
Abandonment of Tenant's Property
13.2If the Tenant does not remove all the Tenant's Property in accordance with clause 13.1, the Tenant is deemed to have:
(a)abandoned the Tenant's Property remaining on the Premises; and
(b)appointed the Landlord the Tenant's agent for the purpose of removing the abandoned Tenant's Property from the Premises and storing it at the risk and cost of the Tenant or selling it in any manner the Landlord decides, without in either case having any liability to the Tenant.
13.3If the Landlord sells the abandoned Tenant's Property (as agent for the Tenant):
(a)the Landlord may apply the net proceeds firstly in satisfaction of any amount owing to the Landlord by the tenant under this Lease and secondly in payment of the cost of removing and selling the Tenant's Property;
(b)the Landlord is to account to the tenant for any balance of the net proceeds; and
(c)the provisions of this clause do not limit any other rights or remedies of the Landlord under this Lease.
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Condition of the Premises
13.5When the Tenant vacates the Premises, the Tenant is to leave the Premises in good repair and condition and in a good state of decoration taking into account the Tenant's obligations under this Lease.
Reinstatement
13.6If the Tenant makes any alterations or additions to the Premises, without the Landlord's consent and the Landlord so requires, the Tenant is to re‑instate the Premises before the termination of this Lease so that the Premises are returned to the condition they were in before the alteration or addition was made.
22INTERPRETATION
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Definitions
22.2In this Lease:
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Building means the buildings and the other improvements on the Land including the Landlord's Property.
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Landlord's Property means all the plant and equipment, fixtures, fittings, furniture and furnishings including curtains, blinds and lights in or fixed to the Premises that are not the Tenant's Property and in particular the air conditioning unit.
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Premises includes the Landlord's Property.
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Insurable Events means fire, storm and tempest, flood, impact, malicious damage, loss of rent and such other risks as the Landlord nominate.
Land means the land described in Item 13 of the Reference Schedule and any other land which the Landlord develops in conjunction with or in addition to that land as part of the Building or if any part of the Land is excised, resumed or subdivided then that part of the Land which remains after such excision, resumption or subdivision.
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Services means services running through or servicing the Premises including air conditioning equipment, power, water, sewerage, gas, telecommunications and fire sprinkler system.
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