BBF Toowoomba Pty Ltd v Nebrean Pty Ltd
[2001] QSC 313
•24 August 2001
SUPREME COURT OF QUEENSLAND
File No 7363 of 2001
[2001] QSC 313
BETWEEN:
BBF TOOWOOMBA PTY LTD
Plaintiff
AND:
NEBREAN PTY LTD
Defendant
MOYNIHAN J – REASONS FOR JUDGMENT
DELIVERED ON: | 24 August 2001 |
HEARING DATE/S: | 20 August 2001 |
ORDER: | The application is dismissed. |
CATCHWORDS: | LANDLORD AND TENANT – TERMINATION OF THE TENANCY – SURRENDER – Where the applicant ceased normal trading and gave notice of relocation – where stock was relocated overnight – whether applicant abandoned premises. LANDLORD AND TENANT – TERMINATION OF THE TENANCY – FORFEITURE LANDLORD AND TENANT – COVENANTS – ACTIONS FOR BREACH OF COVENANTS – Where applicant ceased to trade for 8 days – where applicant changed use of premises from predominantly hiring to ex-rental sale – whether applicant breached covenants of lease. |
COUNSEL: | G R Allan for the Applicant D A Skennar for the Respondent |
SOLICITORS: | McInnes Wilson Lawyers for the Applicant Murdochs Solicitors for the Respondent |
This is a tenant’s application under s 124(2) of the Property Law Act 1974 for relief against the forfeiture of a lease of a video shop in a shopping centre in Toowoomba. The applicant seeks declarations that:
· a notice to remedy a breach of covenant is invalid;
· it was not in default under the terms and conditions of the lease;
· the respondent’s re-entry and purported determination of the lease on 3 August 2001 was in breach of the lease.
There are further claims for consequential relief which it is unnecessary to consider for the moment.
The respondent contends that the lease was surrendered and otherwise controverts the applicant’s contentions founding the declarations. I turn to consider the facts noting that the application was dealt with on affidavits without cross-examination.
On 30 April 2001, the applicant advised the shopping centre manager that it did not intend to exercise an option for the renewal of the lease when it came due on 11 November 2001. The applicant said it would make arrangements for the relocation of the video store “closer to the date of expiration”.
On 18 July, the applicant placed a notice in the window of the video store “We are moving. We will open at the corner of James Street and Anzac Avenue on 25 July 2001”. On 24 July, the applicant advised the respondent that it would be vacating the premises on the 25th.
The shop did not open on 25 July and the respondent’s solicitors sent the applicants a facsimile. This asked whether the applicant intended to terminate the lease or to continue to trade. It went on that if the applicant did not intend to terminate the lease it was required to continue to carry on business including trading for the same hours as previously. An urgent response was sought. On 26 July, the respondent’s solicitors faxed the applicant’s solicitor a notice to remedy breach of covenant and sent a notice to the applicant’s registered office.
On Wednesday 1 August, the applicant’s solicitors responded to the fax of 25 July stating that they were seeking instructions and anticipated being in a position to respond by the end of the week. They confirmed that in the interim the applicant would “continue to pay rental as usual and comply in all other respects with their lease”. On 2 August there was an indication given that the applicant intended to use the premises for the sale of its “ex rental” videos.
At 8:15am on 3 August, the respondent’s solicitor and one of its directors went to the premises. It appeared that the stock and signage had been removed although the shop fittings were in place. The respondent’s solicitors immediately faxed the applicant referring to the letter of 25 July and the notice to remedy breach of covenant. They stated that the applicant had failed to operate the store as required by the notice to remedy breach and that the premises had been abandoned. The fax went on to say that because of the applicant’s failure to comply with the notice the respondent had retaken possession of the premises and terminated the lease. The applicant was given 14 days to remove the fittings.
The applicant’s solicitors responded on the same day. They disputed that the lease was terminated, contending their client had not been given a reasonable time to remedy the breach and asserted that the premises had not been abandoned but had been reconfigured to facilitate ex rental video sales early in the following week. At some stage a sign had been placed on the premises that the store would reopen as a “Blockbuster Ex-Rental Sale Store Wednesday 8th August”.
The respondent’s solicitors replied promptly stating that reasonable notice had been given, that the respondent had retaken possession of the premises and changed the locks. The applicant was given 14 days to remove its fittings. The exchange of faxes continued, essentially restating the respective positions (I note that there is evidence that patronage of the shopping centre has been adversely effected by the closure of the video store).
Surrender of a lease by operation of law can occur by agreement either manifest or inferred from a tenant giving up possession and the resumption of possession by the landlord. Alternatively a tenant’s conduct may constitute breach of a fundamental term of the lease or repudiation; Shevill v The Builders Licensing Board (1981-1982) 149 CLR 620, The Progressive Mailing House Proprietary Limited v Tabali Proprietary Limited (1984-1985) 157 CLR 17 (Progressive Mailing), Wood Factory Pty Ltd v Kiritos Pty Ltd (1985) 2 NSWLR 105.
Repudiation is not to be lightly inferred; Progressive Mailing. It was also pointed out in Progressive Mailing that breach of the covenant to pay rent or to repair without more did not constitute breach of a fundamental term or amount to repudiation. It was held however that refusal to pay rent or withholding it under colour of an unfounded claim in conjunction with other breaches established repudiation or breach of a fundamental term.
I am not prepared to conclude, on the basis of the material before me that the applicant abandoned the premises to its landlord, breached a fundamental term or repudiated the lease (it follows that in my view the lease was not surrendered by operation of law). The evidence of the applicant’s intent is at best equivocal for the respondent. In other words, one may be skeptical about the applicant’s intentions - it may have initially intended to abandon the premises then changed its mind and decided to run out the lease.
In addition to the facts already canvassed, particularly the assurance in the fax of 1 August, it should be noted that the applicant was invoiced for the August rent on 26 July 2001 and paid it by direct deposit to the respondent’s bank account on 1 August. It is convenient to mention at this stage that I not am persuaded this constitutes a waiver since the remedy of forfeiture was contingent on non-compliance with the notice given on 26 July; cf. McDrury v Luporini [2000] 1 NZLR 652.
The notice to remedy breach of covenant of 26 July relied on clause 4(b) of the lease. This required the applicant to conduct its business “during all lawful days and hours designated by the landlord from time to time”. The notice required the applicant to remedy its breach by conducting its business in the premises “during all lawful days and hours as previously designated by the landlord”.
The applicant attacks the validity of the notice on the basis that the respondent’s solicitor is described in it as “Agent of Griffiths House Pty Ltd” rather than the respondent. It is not in issue that the solicitor was in fact authorised. The notice was forwarded under cover of a letter referring to “Nebrean Pty Ltd lease to BBF Toowoomba Pty Ltd”. There is no reason to doubt that the applicant appreciated that the notice was given to it by its landlord; cf Ex parte Whelan [1986] 1 Qd R 500. There is no substance in this point.
The applicant contends that it was not in default under the terms and conditions of the lease because the respondent had not designated lawful days and hours in terms of clause 4(b). In the circumstances of the present case it seems to me that the respondent’s letter of 25 July referring to trading for the same hours as the applicant had previously undertaken is a sufficient designation to comply with clause 4(b). In this context it is to be noted that the store prominently displayed signs as to the days and hours during which it traded.
Two further issues arise. First, whether the applicant was given a reasonable time for compliance before reentry and, second, whether an ex rental video store was a permitted use in terms of the lease.
There is little evidence bearing on the first issue. It may be noted however that the stock was cleared out over night and that re-entry was effected eight days after the notice. In the circumstances of this case I am satisfied that the applicant was given reasonable time to comply with the notice and failed to do so. The latter issue turns on whether the proposed use constituted:
“Rental sale and hire of video movies, electronic games and accessories including lollies, pre-packed chips and similar, ice creams, cigarettes, drinks, milk, in-house magazines and advertising and collector cards
”; see item 8 and clause 4(a) of the lease.
The sale of ex rental videos is but one aspect of the use provided for by the lease and does not comply with lease requirements.
The application is dismissed.
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