AXA Trustees Limited v Ergun
[2000] NSWSC 872
•31 August 2000
CITATION: AXA Trustees Limited v Ergun [2000] NSWSC 872 CURRENT JURISDICTION: Common Law FILE NUMBER(S): SC 11163/2000 HEARING DATE(S): 23 August 2000 JUDGMENT DATE: 31 August 2000 PARTIES :
Mehmet Ergun
AXA Trustees Limited
(Plaintiff)
(Defendant)JUDGMENT OF: Master Harrison
COUNSEL : Mr E Finnane
Mr D K L Raphael
(Plaintiff)
(Defendant)SOLICITORS: Peter Cornelius & Partners
Penhall & Co
(Plaintiff)
(Defendant)CATCHWORDS: Summary judgment - Possession LEGISLATION CITED: Supreme Court Rules - Part 13 r 2 CASES CITED: Air Services Australia v Zarb (NSWSC unreported, 26 August 1998)
Dey v Victorian Railway Commissioners (1948-49) 78 CLR 62
General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125
Webster & Anor v Lampard (1993) 177 CLR 598
Kurt Keller v BMW Australia (1984) 1 NSWLR 371
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Commonwealth of Australia v Verwayen (1989-90) 170 CLR 394DECISION: See para 27
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THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISIONMASTER HARRISON
THURSDAY, 31 AUGUST 2000
11163/2000 - AXA TRUSTEES LIMITED v
JUDGMENT (Summary judgment - Possession)
MEHMET ERGUN
1 MASTER: By notice of motion filed 23 June 2000 the plaintiff seeks that the defendant’s defence, or part of the defence, be struck out pursuant to Part 13 r 2 of the Supreme Court Rules (SCR). The plaintiff did not rely on any affidavit evidence. The defendant relied on his affidavit sworn 12 July 2000.2 By statement of claim filed 15 May 2000 the plaintiff (as lessor) seeks possession from the lessee (as lessee) of the property known as Shop 5.5, Food Court, Level 7, MMI Centre, 2 Market Street, Sydney (the premises), being part of the land in Folio Identifier 31789759. It is common ground that the plaintiff and the defendant entered into a lease for a term of 5 years commencing on 1 April 1995 and terminating on 31 March 2000. The lease has expired.
3 On 12 July 2000 the defendant put the plaintiff on notice that he wishes to amend his defence to plead:
4 The relevant parts of Pt 13 r 2 (SCR) says:
“As to paragraph 6 of the Statement of Claim, the Defendant does not admit that what purported to be a Notice to Vacate is:-
a. A valid Notice to Vacate;
b. Has the effect of a Notice to Quit.
c. Was given and served in accordance with the
requirements of the Lease.”The law in relation to summary judgment
It is my view that the plaintiff is entitled to have his case heard on its merits, and the plaintiff was not caught by surprise. Leave to file an amended defence incorporating the amendment foreshadowed above is granted.
“2(1) Where, on application by the plaintiff in relation to any claim for relief or any part of any claim for relief of the plaintiff -
(a) there is evidence of the facts on which the claim or part is based; and
(b) there is evidence given by the plaintiff or by some responsible person that, in the belief of the person giving the evidence, the defendant has no defence to the claim or part, or no defence except as to the amount of any damages claimed,
the Court may, by order, on terms, give such judgment for the plaintiff on that claim or part as the nature of the case requires.
5 In a recent decision Air Services Australia v Zarb (NSWSC unreported, 26 August 1998) Rolfe AJA found it useful to remind himself of the highly demanding test imposed on a party seeking summary judgment. His Honour referred to Dey v Victorian Railway Commissioners (1948-49) 78 CLR 62; General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 and Webster & Anor v Lampard (1993) 177 CLR 598. I have reproduced some of the passages quoted in Zarb.
6 In General Steel Barwick CJ, who heard the application alone stated:
7 Barwick CJ also said:
“Although I can agree with Latham CJ in the same case when he said that the defendant should be saved from the vexation of the continuance of useless and futile proceedings, in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff’s claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed.”
8 In Webster Mason CJ, Deane and Dawson JJ reinforced the rigorous testing stating, at 602:
“It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of cause of action - if that be the ground on which the Court is invited, as in this case, to exercise its powers of summary dismissal - is clearly demonstrated. The test to be applied has been variously expressed; ‘so obviously untenable that it cannot possibly succeed’; ‘manifestly groundless’; ‘so manifestly faulty that it does not admit of argument’; ‘discloses a case which the Court is satisfied cannot succeed’; ‘under no possibility can there be a good cause of action’; be manifest that to allow them’ (the pleadings) ‘to stand would involve useless expense.”
9 According to Rolfe AJA in Zarb:
“The power to order summary judgment must be exercised with ‘exceptional caution’ and ‘should never be exercised unless it is clear that there is no real question to be tried.”’
“The demanding nature of the test is in no way lessened in circumstances where there are the potential for difficult factual and legal issues to arise. Rather, as the decision in Webster made clear, it is heightened: see also Wickstead & Ors v Browne (1992) 30 NSWLR 1 and Esanda Finance Corporation Limited v Peat Marwick Hungerfords (1997) 188 CLR 241.”
10 The defence as currently pleaded raises four main issues: firstly, an overpayment of rent caused by an ambiguity in the lease document (paras 4 to 9 of the defence); secondly, a purported estoppel (paras 10-13 of the defence); thirdly, the operation of ss 8, 16 and 44 of the Retail Leases Act 1994 (the Act) (paras 13 and 14 of the defence); and fourthly, waiver (para 15 of the defence). I shall deal with each in turn.
(i) Overpayment
12 Para 18(3) of the Act provides that a retail shop lease is void to the extent that it:
11 Clause 2.2 of the lease (Ex.1) provides that the annual rent shall be increased on each review date by an amount of eight per cent (8%) of the Annual Rent payable upon the day immediately prior to the relevant review date, whereas the reference schedule refers to periodic rent review calculated annually at the rate of the CPI increase. These amounts are not necessarily the same; the CPI increase may be lower than 8%. There is an ambiguity.
13 It is arguable that part of the lease is void as there are two methods of calculating interest, one rate is higher than the other. This argument is weak. However, it was agreed by both parties’ counsel that an overpayment of rent is not a defence to a claim for possession, but it may give rise to a claim for repayment of a debt. The defendant also relies on overpayment in the context of an estoppel as an act of detriment. Whether this part of the defence survives is dependent upon the estoppel point being held to be arguable.
“(b) provides for a method of calculating a change to the base rent but reserves or has the effect of reserving to one party a discretion as to whether or not the base rent is to be changed in accordance with that method on a particular occasion, or
( c) provides for base rent to change on a particular occasion in accordance with whichever of 2 or more methods of calculating the change would result in the higher or highest rent.”
14 For the purposes of this application, the defendant’s case has been taken at its highest and the defendant’s account of the three conversations is accepted. Mr Stollznow was employed as a Centre Manager by the plaintiff. In late July 1999 Mr Zachary Stollznow said:
(ii) Estoppel
“Stollznow: ‘You should have been paying rent increases of 8% for the last 3 years under the lease.’
Defendant: ‘I didn’t know that. I don’t have a copy of the lease.’
Stollznow: ‘Don’t worry. Alex Hughes will forget about the $13,000 arrears if you start paying $560.70 per week from 1st April 1999.’
Defendant: ‘All right. Thank you.’”
On 2nd September 1999 there was a further conversation between the Defendant and Mr Zachary Stollznow to the following effect:
“Defendant: ‘Can you organise for me to get another lease? As you know I’ve had two 5 year leases here. I am paying the extra money you asked for.’
Stollznow: ‘There won’t be a problem. You are a good tenant.’
Defendant: ‘I don’t write very well. I can get a solicitor to write to you about the lease.’
Stollznow: ‘Don’t worry, I will contact Mr Alex Hughes, the Centre Manager, and make the appropriate arrangements for a new lease.’
Defendant: ‘All right.’”
During September there was a conversation between the Defendant and Mr Alex Hughes to the following effect:
“Hughes: ‘It’s Alex Hughes from Centre Management. Do you want to leave when your lease runs out or do you want a new lease?’
Defendant: ‘Of course I want a new lease. I told Mr Zachary.’
Hughes: ‘You are eligible for a new lease. I will attend to it for you and contact you when the lease is ready. It will be a bit closer to the end of your present lease.’
Defendant: ‘Thank you.’”
15 The defendant submitted that these representations establish there is an arguable estoppel, namely that agreement was reached whereby the plaintiff and the defendant entered into a new lease for 5 years on the same terms as the prior one. As previously stated, according to the defendant, he had acted to his detriment by making overpayments in rent under the preceding lease. According to the defendant, he believed that he had a new lease, and its formal execution was a mere formality. The plaintiff submitted that the terms of the agreement were not clear and unambiguous, and even if they were, the parties were free to withdraw at any time.
16 In Kurt Keller v BMW Australia (1984) 1 NSWLR 371 Powell J stated:
17 Mr Stollznow undertook to make arrangements for a new lease to be prepared. Mr Hughes stated that the defendant was eligible for a new lease and that he would attend to it for the defendant and contact him when the lease was ready. After that, whenever the plaintiff saw Mr Stollznow he would say “I’m still waiting for my new lease” and he would reply “I’ll look into it”. In my view, at best, the plaintiff offered to attend to the preparation of a new lease. Both parties anticipated that a lease document had to be prepared. There is no conversation where the duration of the lease or the actual rent payments are stipulated with certainty.
“It is, I think, now established that, in order that one may seek to raise and rely upon the doctrine of ‘equitable estoppel’ (or ‘promissory estoppel’) one must be able to point to, either, a statement which constitutes, or, conduct from which a reasonable man would infer, a clear and unequivocal representation by the person having the particular legal power, or discretion, either, that, in the future, he would not exercise that power or discretion at all, or, that, for a time, the power would be suspended”
18 In relation to whether the plaintiff was free to withdraw at any time, the plaintiff referred to Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, where Brennan J stated:
19 There was no conversation that would lead the defendant to believe that the plaintiff is already bound and its freedom had been withdrawn. In any event it is not clear that the defendant acted to his detriment because, on one interpretation of the lease, he was paying the correct amount. Further, as was stated in Commonwealth of Australia v Verwayen (1989-90) 170 CLR 394:
“Parties who are negotiating a contract may proceed in the expectation that the terms will be agreed and a contract made but, so long as both parties recognize that either party is at liberty to withdraw from the negotiations at any time before the contract is made, it cannot be unconscionable for one party to do so. Of course, the freedom to withdraw may be fettered or extinguished by agreement but, in the absence of agreement, either party ordinarily retains his freedom to withdraw. It is only if a party induces the other party to believe that he, the former party, is already bound and his freedom to withdraw has gone that it could be unconscionable for him subsequently to assert that he is legally free to withdraw.”
“A central element of the doctrine of estoppel is that there must be proportionality between the remedy and the detriment which is its purpose to avoid. It is wholly inequitable and unjust to insist on a disproportionate making good of the relevant assumption - per Mason J at 413.”
(iii) Operation of ss 8, 16 and 44 of Retail Leases Act 1994
To require the plaintiff to enter a 5 year lease on the basis of these representations (if it was considered that they did indeed form an agreement) would be a disproportionate making good of the assumption. While it is appreciated that the defendant only has to show that his case is not hopeless, it is my view that the defendant’s assertion that there was an estoppel is unsustainable and hopeless because there was no agreement that there was a new lease in operation, and the plaintiff did not say anything that would lead the defendant to believe that its freedom had been withdrawn, and there would be a disproportionate making good of the assumption.
20 Ss 8 and 16 of the Act also do not assist the plaintiff’s case. S 16(4) specifically says that s 16 does not apply to a lease that results from a renewal of an earlier lease pursuant to an option. S 8 does not apply to the holding over of an existing lease. The defendant conceded that the Clause 16.1(c) of the Lease provides that after the expiry of the Lease the tenancy shall be determinable by either the plaintiff or the defendant by one month’s notice in writing to the other expiring on any day of the month.
21 In relation to s 44 the defendant’s counsel does not have instructions as to whether such notice was given as required by s 44(3). He seeks leave to amend his pleading in paragraph 14, provided such a notice was given. I allow this amendment on the condition stipulated above. As currently pleaded, this paragraph of the defence should be struck out.
22 Paragraph 15 of the defence states:
(iv) Waiver
“In the alternative the defendant claims that the advance payment of rental pleaded in Clause 7 hereof and the rental paid from and after 1 April 2000 constituted an acceptance of rent by the plaintiff from the defendant and a waiver of the plaintiff'’ purported notice of termination dated 13 April 2000.
23 The plaintiff submitted that under clause 14.7 of the lease it was entitled to accept payments and by doing so did not mean that it had waived its rights. Clause 14 appears under the heading “General” in the lease, but not where it may have been expected, namely under the heading “When the lease is at an end”.
24 Clause 14.7 stated:
“(d) Demand and/or acceptance by the Lessor of annual rent or of any monthly instalment of either thereof and/or of any other amount payable pursuant to this lease after the occurrence of an event of default or breach or default by the Lessee:
(i) shall be without prejudice to the exercise by the Lessor of any right, power and/or remedy conferred upon the Lessor by clause 13.2 hereof and/or clause 13.3 hereof and/or any other right, power, privilege or remedy of the Lessor under this lease and/or otherwise; and
(ii) shall not operate as an election by the Lessor either to exercise or not to exercise any of such rights, powers, privileges or remedies.”
25 In my view the meaning of this clause is uncertain, to say the least. Whether this clause is applicable to a “holding over lease” is an arguable issue. Paragraph 15 of the defence should remain on foot and not be struck out.
26 Costs are discretionary. As the plaintiff was unsuccessful in having the defence struck out, it should pay the costs of the motion. However, the defendant has been granted leave to amend his defence to add an additional claim and replead para 14, and he should be required to pay the costs thrown away by these amendments. Para 15 was allowed to stand unamended. In my view the appropriate orders for costs are that the costs of the motion are costs in the cause, and the defendant is to pay the costs thrown away by the amendments to the defence.
27 The orders I make are:
(1) Paragraphs 4 to 14 of the defence are struck out.(2) Leave is granted to the defendant to file an amended defence. Such is to be filed within 7 days.
(3) The matter is to be returned to the Possession List.
(4) Costs of the motion are costs in the cause.
(5) The defendant is to pay the costs thrown away by the amendments to the defence.**********
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