Bagata Pty Ltd v Sunstorm Pty Ltd

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SUPREME COURT OF QUEENSLAND

CITATION:

Bagata Pty Ltd and Anor v Sunstorm Pty Ltd [2023] QSC 104

PARTIES:

BAGATA PTY LTD ACN 010 431 820

(first applicant)

AND
RUNNER PTY LTD ACN 053 149 698
as trustee for the RUNNER UNIT TRUST

(second applicant)

v

SUNSTORM PTY LTD ACN 010 887 591

(respondent)

FILE NO:

14424 of 2022

DIVISION:

Trial Division

PROCEEDING:

Decision on a separate question

ORIGINATING COURT:

Supreme Court of Queensland at Brisbane

DELIVERED ON:

16 May 2023

DELIVERED AT:

Brisbane

HEARING DATE:

14 April 2023, Written Submissions 21 April 2023

JUDGE:

Applegarth J

ORDER:

The separate question is answered “No”

CATCHWORDS:

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS – where the Landlord and Tenant entered into a lease of premises - where the Landlord and Tenant came into dispute over the Landlord’s storage of certain property on the premises and whether the Tenant’s activities were within the Permitted Use under the lease - where the dispute was referred to an Expert under a dispute resolution clause - where the Landlord challenges the validity of the Expert’s Determination on the basis of manifest error - where the Landlord contends that the Expert was in manifest error in concluding that the Tenant was entitled to vacant possession of the leased premises and that the Tenant’s activities were within the Permitted Use under the Lease - whether the Expert Determination is unenforceable by reason of manifest error

LANDLORD AND TENANT – LEASES AND TENANCY AGREEMENTS – CONSTRUCTION AND INTERPRETATION – OTHER MATTERS – where the Landlord’s chattels remained on the premises after the commencement of the lease – where the Expert concluded that the lease required the Landlord to deliver vacant possession – where the Landlord contends that the Expert erred because of an alleged oral agreement with the Tenant that the property could remain - where the Landlord contends that the Expert erred in construing the lease because vacant possession was not expressly required by the lease – whether the Expert was in manifest error in concluding that the Tenant was entitled to vacant possession at the commencement of the lease

Canaipa Developments Pty Ltd v TLC Jones Pty Ltd [2021] QSC 237, cited

Craigmoor Pty Ltd v Harvest Investment Co (No 2) Pty Ltd [2020] QSC 131, cited
Cumberland Consolidated Holdings Ltd v Ireland [1946] 1 KB 264, cited
Drane v Aqualyng Holdings [2017] QSC 233, cited
Flowgroup plc (In Liquidation) v Co-Operative Energy Ltd [2021] EWHC 344 (Comm), cited
Funtastic Ltd v Madman Film and Media Pty Ltd [2016] VSC 708, cited
Equuscorp Pty Ltd v Glengallan InvestmentsPty Ltd (2004) 218 CLR 471; [2004] HCA 55, cited
Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133, cited
Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited (2015) 256 CLR 104; [2015] HCA 37, cited
Natoli v Walker (1994) 217 ALR 201, cited

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Details
Case
[2023] QSC 104
Decision Date

CaseChat Overview and Summary

Bagata Pty Ltd, the Landlord, sought to challenge the validity of a determination made by an Expert under a dispute resolution clause in a lease with Sunstorm Pty Ltd, the Tenant. The primary dispute between the parties involved the Tenant's activities on the leased premises and whether they were within the permitted use as outlined in the lease. The Landlord argued that the Expert erred in concluding that the Tenant was entitled to vacant possession of the premises and that the Tenant's activities were within the permitted use. The Landlord further contended that the Expert's determination was flawed because it considered extrinsic evidence and failed to acknowledge an alleged oral agreement that allowed certain property to remain on the premises.

The court had to decide whether the Expert's determination was valid and binding, considering the principles of contract interpretation and the specific requirements of the lease. The court examined the Expert's reasoning and the evidence presented, focusing on whether the Expert had made a manifest error in interpreting the lease and in considering extrinsic evidence. The court also evaluated whether the Expert's determination was supported by the terms of the lease and whether there was any error in the Expert's conclusion regarding the Tenant's entitlement to vacant possession.

In its decision, the court found that the Expert's reasoning was adequate and did not involve manifest error. The court held that the Expert correctly interpreted the lease and was entitled to consider extrinsic evidence to determine the Tenant's entitlement to vacant possession. The court noted that the lease did not explicitly require vacant possession, and the Expert's conclusion was supported by the objective interpretation of the lease terms. The court further determined that the alleged oral agreement was not proven and did not constitute a manifest error in the Expert's determination.

As a result, the court ruled that the Expert's determination was valid and binding. The court answered the separate question in the negative, meaning that the Landlord had not established that the Expert's determination was unenforceable due to manifest error. The court dismissed relevant parts of the Landlord's application and ordered the Landlord to pay the Tenant's costs associated with the hearing.

Orders

Orders of the court

The separate question is answered “No”

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Unsurprisingly, given the absence of any term in the Lease that entitled the Landlord to not remove the contentious chattels by the Commencement Date, the Landlord advanced a second reason as to why it was not required to give vacant possession. This is the argument that there was an oral agreement prior to the execution of the Lease that the contentious property could remain on the premises. For the reasons that I have given, the Expert’s finding that the alleged oral agreement was not proven by the Landlord, did not involve an error, let alone a manifest error. Was there a manifest error in taking extrinsic evidence into account in construing the Lease? The principles governing the interpretation of a commercial contract are not in dispute. The Expert stated them. They include the statement of general principle by French CJ, Nettle and Gordon JJ in Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited:[45]“[46] The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.[47] In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.[48] Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.[49] However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”. It may be necessary in determining the proper construction where there is a constructional choice. …[50] Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties’ statements and actions reflecting their actual intentions and expectations.[51] Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption “that the parties ... intended to produce a commercial result”. Put another way, a commercial contract should be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”.”[45](2015) 256 CLR 104; [2015] HCA 37 at [46]-[51] (emphasis added).

Decision

Reasons for decision

In my view, the Expert’s reasons are more than adequate and constituted “a written statement of reasons” for each of the determinations that he made. They dealt in appropriate detail with the evidence, the arguments and relevant principles, and exposed the Expert’s reasons for the determinations that he made. Conclusion The Landlord has not established that the Expert Determination in respect of the referred disputes is unenforceable by reason of manifest error. The separate question should be answered, “No”. In the absence of manifest error, the Expert Determination is conclusive and binding as between the applicants and the respondent. Because there is no basis to set aside the Expert Determination, no occasion arises to grant the applicants the consequential relief that they seek. I will hear the parties as to other miscellaneous declarations that are sought in the Originating Application and the prayer for relief in the amended statement of claim. At this stage, the orders will be that the separate question be answered, “No”. Having answered the question, it seems appropriate to dismiss at least paragraphs 1, 2, 3 and 4 of the Originating Application pursuant to rules 484 and 485. It also seems appropriate to order the applicants to pay the respondent’s costs of and incidental to the hearing and determination of the separate question. However, I will hear the parties as to the appropriate form of order, including any order as to costs.

Ratio Decidendi

Legal Principle Established

The Expert was correct to conclude that the Tenant’s activities were within the Permitted Use. The Expert’s consideration of the Landlord’s allegation of unlawful use of the premises Having concluded that the Tenant’s manufacturing activities were within the Permitted Use, the Expert addressed assertions made by the Landlord that the Tenant’s use of the premises was not lawful. It is apparent that the Expert did so in the hope of assisting the parties to resolve their differences and avoid further disputes during the remainder of a long lease. The Expert’s intent is apparent from [220] of the Expert Determination. Those observations were made after the Expert had determined the relevant disputes. The Expert pointed to the opinion of a senior town planner, Mr Hanly, that the use was lawful. The Expert noted that the Landlord had previously used the premises itself for manufacturing activities. Mr Hanly’s opinion was supported by a Pre-Lodgement Advice dated 1 September 2022 from the Brisbane City Council. The Expert’s parting observation encouraged the parties to work together and observed that Mr Hanly’s opinion (supported by the BCC) as to Permitted Use was “not only critical to the Tenant’s ongoing business, but it is also potentially very valuable to the Landlord, both in respect of the lawfulness of any of its previous manufacturing activities that were undertaken by it at the Premises, together with any future valuation of the Premises”. In other parts of the Expert Determination the Expert made clear that the lawfulness of the use, including compliance with clause 23.2(a), was not an issue before him. His response to the Landlord’s allegation of unlawful use was intended to assist the parties. This is apparent from [189] of the Expert Determination. The Expert in [190] further clarified that the issue that he was required to determine was whether the Tenant’s proposed manufacturing activities were within the Permitted Use, not whether the intended use was lawful. In this proceeding the Landlord submits that any determination of the lawfulness of the Tenant’s use of the premises was outside the scope of the Expert’s jurisdiction. The Tenant does not suggest that the Expert was required to determine the issue of lawfulness or did so. The Expert Determination did not purport to determine that issue. The Expert made clear that it was not an issue before him to decide. The final Determination and Disposition part of the document, whereby the Expert determined and declared a number of matters, did not include any declaration as to the lawfulness of the Tenant’s use of the premises. Therefore, the Expert’s opinion about lawfulness was not the subject of a determination by the Expert. There is no need to formally declare that matter, as the Landlord’s Supplementary Submissions suggest I do, since there is no dispute between the parties on that point.The adequacy of the reasons Clause 39.3 of the Lease required the Expert to provide the parties with “a written statement of reasons for the determination”. The Landlord submits that the Expert failed to provide such a statement of reasons because of the alleged errors in reasoning that it has complained about and which I have addressed. I have not found the Expert’s reasoning to be erroneous.