Binkenbar Nominees Pty Ltd v Lomax - [2015] SADC 163

District Court of South Australia
(Civil)
BINKENBAR NOMINEES PTY LTD v LOMAX & ANOR
[2015] SADC 163
Judgment of His Honour Judge Slattery (ex tempore)
6 November 2015
GUARANTEE AND INDEMNITY
LANDLORD AND TENANT - AGREEMENTS FOR LEASE
Lease of commercial premises commenced in June 2001. In 2012 the landlord and the tenant Ironstone Pty Ltd fell into dispute about rent outgoings and repairs under the terms of the lease. The defendants were directors shareholders of Ironstone Pty Ltd. In 2001 the defendants gave a guarantee of the tenant’s obligations. In 2012 the tenant was in substantial arrears in rent.
On 20 September 2013 the landlord, the tenant and the defendants entered into a settlement agreement under which the landlord agreed to provide a new lease to the tenant, to undertake some repairs and to contribute to the cost of other works. The tenant agreed to enter into a new lease, to make lump sum payments in discharge of its obligations under the previous lease, to undertake repairs and to contribute equally with the landlord to the cost of other works.
The settlement agreement prescribed the terms of the new lease: its commencement; duration; renewal; rent; outgoings. The defendants undertook in the settlement agreement to execute a more fulsome guarantee of the obligations of the tenant under the terms of a short form guarantee as set out in the settlement agreement. The settlement agreement stipulated that the date of commencement of the new lease was 1 April 2013.
The settlement agreement recorded that as at 20 September 2013 the tenant was already in default in payment of rent, although it had continuously remained in possession of the premises.
After 20 September 2013 the landlord fulfilled its obligations of repair under the settlement agreement but did not tender a form of a new lease or another form of guarantee.
The tenant remained in possession and paid rent at a rate as prescribed in the settlement agreement but did not pay all of the amounts due under the settlement agreement including past rent and all rent payable from 1April 2013. The tenant also failed to undertake the repair works required. Following its default the tenant sought and was granted indulgences by extension of time to fulfil its obligations. On 27 August 2014 the tenant was placed into liquidation. The liquidators immediately gave notice of disclaimer of the lease as onerous.
Whether and to what extent the settlement agreement constituted a fresh lease and recorded a form of enforceable guarantee against the defendant.
Held:
1. The execution by all parties of the settlement agreement was, in the circumstances sufficient to constitute a lease between the landlord and the defendants of the whole of the obligations of the tenant.
2. The failure of the landlord to tender a fresh form of lease to the tenant or a fresh guarantee to the defendants was not, in the circumstances, sufficient to entitle the defendants to attempt to avoid any of their obligations under the guarantee as set out in the settlement agreement.
3. The written lease arrangements under the settlement agreement was not registered. The tenant was for the duration of the period from 1 April 2013 a tenant at will. Neither party terminated the arrangements before liquidation of the tenant.
4. The plaintiff is entitled to judgment against the defendants in the amount of $136,893 plus prejudgment interest in the sum of $6,000.
Land Law Professor Peter Butt at paras 15.14; 14.42; Australian Real Property Law (Bradbrook & Ors; 5th Edition Law Book Company) para 14.35, referred to.
Walsh v Lonsdale (1882) LR 21 ChD9 (CA); RM Hosking Properties Pty Ltd v Barnes & Ors (1971) SASR 100; Australian Real Property Law (Bradbrook & Ors; 5th Edition Law Book Company) para 14.35, considered.

BINKENBAR NOMINEES PTY LTD v LOMAX & ANOR
[2015] SADC 163
JUDGE SLATTERY

In this “Fast Track” action, the defendants are sued as guarantors of the obligations of a company Ironstone Australia Pty Ltd which is now in liquidation.
The claim against the defendants arises out of an alleged written guarantee and indemnity dated 20 September 2013. It is alleged that the defendants personally guaranteed payments to the plaintiff by Ironstone of a settlement sum payable by that company under a settlement agreement.
The issues arising in this action for determination include the existence and the efficacy of the guarantee, the quantum of the plaintiff’s claim and the liability of the defendants. The plaintiff alleges that the whole of the obligations of the defendants are to be derived from a settlement agreement executed on 20 September 2013. The plaintiff contends that this agreement is sufficient to record and govern the obligations of Ironstone Pty Ltd as a tenant of the plaintiff and the defendants’ obligations as the guarantors of the obligations of Ironstone Pty Ltd both as tenant and under the settlement agreement.
The plaintiff is entitled to an order in its favour for judgment in the amount of $136893 plus interests and costs.
The plaintiff is the registered proprietor of real property more commonly known as 161-163 Unley Road, Unley. The property comprises commercial premises and a car park at the rear of the premises along Frederick Street, Unley. Prior to 2013, Ironstone was the lessee of that property. The evidence before me discloses that Ironstone had been the lessee of that property for many years under a lease between the parties dated 26 June 2001. The evidence was that this lease had been operating for some 13 or 14 years until it was concluded by a fresh agreement between the parties.
At a time which is not precisely clear on the evidence, the previous lease arrangements between the plaintiff and Ironstone came to an end or were brought to an end. Following the end of the formal lease arrangements between the plaintiff and Ironstone, there was a holding-over period under which Ironstone held the property on a monthly tenancy in accordance with the usual holding-over arrangements. The documentary evidence before me records that under the prior lease arrangements between the plaintiff and Ironstone, the defendant as directors of Ironstone had given personal guarantees to the plaintiff of the obligations of Ironstone under that lease. Once the June 2001 lease was terminated so also did any guarantee given by the defendants of the obligations of Ironstone under it come to an end.
The evidence tendered before me makes clear that at some time prior to September 2013, the plaintiff, Ironstone and the defendants in this proceeding fell into dispute concerning the lease of the Unley Road property. Those disputes seem to have focused on three main areas.
The first was the amount of rent payable by Ironstone. There is indirect evidence that the trading of Ironstone from these premises was decreasing or was of a decreasing value compared to the rent payable for those commercial premises. No doubt Ironstone, like every other small business in Australia, suffered from the global financial downturn that occurred in 2007 to 2008 and the effects and consequences of which are still being felt throughout the world. The levels of rents set in ‘better times’ are not often justifiable in economic downturns.
A second area of dispute concerned repairs to the premises at 161-163 Unley Road, Unley (the premises). I do not have any evidence before me about those matters except that there is a clear indication that the parties had fallen into dispute about who was to repair premises and what repairs were be carried out.
Thirdly, there appears to have been a dispute about the repairs to the surrounds of the premises. The parties appear to have fallen into dispute about who was to carry out the repairs and what repairs were to be carried out.
On 20 May 2013, the plaintiff’s agent Mr Chris Marchant of Ray White Commercial obtained a written quotation for work to be done that was provided by a firm Kennedy Property Services. The quote from Kennedy Property Services is to be found at pp.1-2 of Exhibit P1. The quotation sets out the details about the work to be done on building repairs. A quote is given for the repair and reinstatement of a southern rear wall. This is the wall along the Frederick Street frontage. A second quote is given for air conditioning. Other quotes are then set out for electrical/lighting, ceiling repairs, carpet repairs and the external Unley Road frontage. It is implicit that this quotation obtained by Mr Marchant, as agent for the plaintiff, became the subject of disputes between the parties; the facts before me disclose that the parties were in dispute about the matters which were the subject of that quotation.
Following the procuring of that quotation, the parties entered into negotiations. Those negotiations culminated in a tripartite agreement of 20 September 2013 between the plaintiff, Ironstone and the defendants Roy Leslie Lomax and Valerie Lomax. All of the parties bound themselves to the terms of this agreement.
Clause 9 of the agreement suggests it is an entire agreement, however, it is clear from the evidence that was led before me today, which was unchallenged, there were some collateral agreements surrounding this settlement agreement. None of those collateral agreements was in any sense inconsistent with the terms of the settlement agreement.
The recitals to the settlement agreement disclose the holding-over tenancy of Ironstone under the agreement to lease dated 26 June 2001. It also records that under that lease, Mr and Mrs Lomax were directors of Ironstone and guarantors pursuant to that agreement.
The recitals refer to the disputes between the parties concerning rent, outgoings and repair obligations. It records that Ironstone alleges it has sustained loss and damage as a result of the disputes and that the plaintiff alleges that it is owed substantial sums for unpaid rent and outgoings.
The settlement agreement then records there were denials on either side and that the parties themselves had arranged for Kennedy Property Services to make their assessment which became the quote of 20 May 2013. Importantly, recital G records that Ironstone wishes to remain the tenant and that the parties have agreed to settle their dispute on a commercial basis on the terms set out in the agreement.
Clause 1 of the agreement confirms the parties’ own agreement to the accuracy of the content of the recitals in every material particular. Clause 2 of the agreement records that the plaintiff has agreed to accept the sum of $155,000 inclusive of interest, costs and GST on account of rent and outgoings as at 31 March 2013. The evidence of Mr Ng before me today indicates that the claim of the plaintiff was well in excess of this figure but that amount was the compromise settlement sum to which the plaintiff agreed. That evidence was not challenged.
Clause 2 of the agreement records that Ironstone agrees to pay that settlement sum over four months in four equal instalments of $38750 and the first instalment is to be paid on 30 September 2013. The parties also agree that upon payment of the settlement sum and under the terms of the agreement that ends with the final payment of the fourth instalment, then each of the parties would discharge and release the other from any claims arising prior to the execution of the settlement agreement. This would therefore finally discharge the liabilities of each party under the 2001 lease.
Clause 2.4 records that in the event of default the whole of the settlement sum which remained unpaid (deriving from the obligations of the lease of 26 June 2001) becomes immediately due and payable. The claim made in this action is in relation to the amount of rent and outgoings payable up to the amount of $155000 plus outgoings and other unpaid rent following the date of the settlement.
Clause 3 of the settlement agreement records that the plaintiff will agree to a new lease with Ironstone. The commencement date for the new lease was 1 April 2013. This settlement agreement is dated 20 September 2013 and it therefore had retrospective effect under the parties’ agreement. The period of the new lease was to be three years with an option to renew for a further three years. There was then a right of a further renewal. The starting rent was $120000 per annum plus outgoings plus GST. Rent plus GST, therefore, became payable at the rate of $11000 per month. Rent was to be increased annually by 4% with a market review at the end of each three-year period.
Clause 3.4 of the agreement records the fact that there were already arrears as between 1 April 2013 and 20 September 2013 and that clause required that the arrears were to be paid within seven days. Clause 3.5 records that Mr and Mrs Lomax would continue to personally guarantee the obligations of Ironstone and agree to execute any such further guarantees and indemnities as part of any formal lease documentation as required.
The evidence does not disclose that any further lease document was executed. It follows that there was no further guarantee and indemnity executed by Mr and Mrs Lomax associated with any such lease document.
On the evidence before me, nothing turns on that because, separately within the settlement agreement there is a form of guarantee in the name of Mr and Mrs Lomax in the following terms:
5. GUARANTEE
5.1 In consideration of Binkenbar entering into this Agreement at the request of the persons who have signed this Agreement as guarantors, Mr and Mrs Lomax guarantee the payment by Ironstone of the Settlement Sum and any other money payable by Ironstone pursuant to this Agreement and the observance and performance of the obligations of Ironstone as specified in or implied by this Agreement and the observance and performance by Ironstone of the covenants, terms and conditions which are to be embodied in the formal lease document to be prepared by Binkenbar’s solicitors and agree to indemnify Binkenbar in respect of any failure by Ironstone to pay rent or other money or to observe, or perform any of the stated obligations. This guarantee shall bind Mr and Mrs Lomax jointly and severally.
Mr and Mrs Lomax separately executed the settlement agreement. They were parties to the agreement.
On the topic of the lease contemplated under clause 3.5, Mr Ng informed me in evidence that the lessor’s solicitor, Mr Alan Yates, had prepared a form of lease for execution by Ironstone but that document had not been tendered to Ironstone for execution. He said that the reason was that the plaintiff had formed the view that there was some doubt about the longevity of the existence of Ironstone.
The evidence in relation to what Mr and Mrs Lomax did about the failure by the lessor to tender the further lease is scant. The matter holds some importance because in the second defence Mr and Mrs Lomax, as guarantors, deny that Ironstone defaulted on the observance and performance of its obligations under the agreement and then plead that any observance by Ironstone of its obligations under the settlement agreement was conditional on the plaintiff’s observance of its obligations under that agreement.
Mr and Mrs Lomax then allege a default by the plaintiff because it failed to agree to a new lease pursuant to clause 3 of the agreement and it failed to perform the repairs pursuant to clause 4 of the agreement. On that basis it is suggested that Ironstone was not liable to the plaintiff pursuant to the agreement and therefore, there was no basis to invoke a claim under a guarantee.
Under an amended defence filed on 13 October 2015, with the permission of the court, the defendants also plead in the alternative that in respect of any rent or outgoings incurred following 1 April 2013, the defendants were liable only pursuant to a new lease which had never been agreed or, alternatively, if there was any liability in the defendants, it was to be offset or reduced to the extent of the repairs to be carried out by the plaintiff in respect of its default as referred to in para.5.1 of the pleadings.
Para.5.1 of the pleadings refers to the failure by the plaintiff to agree to a new lease and a failure to perform repairs.
In my view, none of the defences of the defendants can be made out and the arguments within the defence are circular and cannot be maintained for the reasons which I have set out hereunder.
Clause 4 of the settlement agreement has six sub-paragraphs. The first sub-paragraph required the plaintiff to repair the southern rear wall at its cost in terms of the Kennedy quote. The unchallenged evidence is that this work was done. The cost of that work is set out at pp.28-29 of Exhibit P1.
The second obligation of repair is upon Ironstone. It was responsible for the electrical/lighting issues raised in the Kennedy quote. That work has not been undertaken after 1 April 2013.
The next three obligations are that the plaintiff and Ironstone agree to pay half each of the cost of a number of items under the Kennedy quote. They are: the ceiling and carpentry repairs; the external Unley Road frontage repairs quote; and for the plaintiff to contribute $10000 towards the cost of new air-conditioning as proposed by Ironstone under a quote for $25685 for supply and installation given by Eco Smart dated 27 August 2013.
No evidence was given by Mr and Mrs Lomax on these topics. The unchallenged evidence of Mr Ng was that no time line was agreed for the carrying out of this work and no suggestion was ever made that the obligations of Ironstone and Mr and Mrs Lomax under the agreement should be set aside because the work was not done.
The plaintiff’s evidence was that there were no complaints from the defendants or from Ironstone after 20 September 2013 concerning the premises. Mr Ng’s evidence was that he had orally made an agreement with Mr Lomax that Mr and Mrs Lomax would carry out the work required, and insofar as there was an obligation on the plaintiff to pay half of the cost of that work, it would be paid. There was a limit in relation to that cost because it was to be carried out in accordance with the Kennedy quote.
Mr Ng’s evidence, which I accept, is that he did not stipulate any particular time period for that work to be done but left it in the hands of Mr and Mrs Lomax. His position was that they were the occupants of the premises and they were conducting their commercial business from those premises. He did not want to interfere with their occupancy by artificially constructing some time period within which the work was to be done. I accept the evidence of Mr Ng. It makes complete commercial commonsense. It was not challenged.
The last obligation within clause 4 is that Ironstone was to be responsible for all ongoing repairs and maintenance of any new air-conditioning system. Nothing turns on that matter.
Clause 5 of the agreement is a form of guarantee. Under the clause, Mr and Mrs Lomax agree that in consideration of the plaintiff entering the agreement at the request of the persons who have signed the agreement as guarantors (namely Mr and Mrs Lomax) then they would guarantee the payment by Ironstone of the settlement sum and any other money payable by Ironstone pursuant to this agreement, the observance and performance of the obligations of Ironstone as specified in or implied by the agreement and the observance and performance by Ironstone of the covenants, terms and conditions which are to be embodied in the formal lease documents to be prepared by the plaintiff’s solicitors.
There was also an agreement to indemnify the plaintiff in respect of any failure by Ironstone to pay rent or other money or to observe or perform any of the stated obligations. The guarantee bound Mr and Mrs Lomax jointly and severally.

The obligation of the defendants under the guarantee is linked to the obligation of Ironstone in relation to the settlement sum and any other money payable by Ironstone under the agreement, including the performance of the agreement as well as the obligations of Ironstone under any new lease agreement. As I have already observed, there was no new lease agreement tendered to Ironstone.
On 27 August 2014, Messrs Austin Robert Meerten Taylor and George Divitkos were jointly appointed as liquidators of Ironstone. One of the matters that occupied argument before me was the obligation of Ironstone as the occupier of the Unley Road premises. The argument of the plaintiff was that the obligations created under clause 3 of the settlement agreement constitute a form of a lease and proof of that assertion is that the terms therein set out were the terms under which Ironstone continued to occupy the premises. Under clause 3.5 the defendants agreed to continue to personally guarantee the obligations of Ironstone and to agree to executing any other guarantees.
A second argument is that if, as at 20 September 2013, Ironstone was a tenant in a holding-over arrangement under the terms of the lease of 26 June 2001, then, absent a further formal lease document, it would continue to be a lessee under those holding-over arrangements.
The difficulty with that argument is that there is no evidence before me of the rent payable under the previous executed lease. Therefore, the plaintiff’s argument stands or falls on whether or not clause 3 of the settlement agreement could be, and should be, recognised as a form of a lease. That argument requires a review of the relevant common law authorities on what may constitute a lease or an agreement to lease. That, in turn, requires a consideration of the principles enunciated in Walsh v Lonsdale (1882) LR 21 Ch D9 (CA).
These principles are well-known and understood. They are summarised by the learned authors of Australian Real Property Law (Bradbrook and Others; 5th Edition Law Book Company) at para.14.35 as follows:-
‘A contract for a lease enforceable under the rule in Walsh v Lonsdale (1882) LR 21 Ch D9 (CA) is usually referred to as an agreement for a lease. The rule would not apply unless the agreement is specifically enforceable at equity and constitutes a binding contract under normal common law principles. Thus, the parties must have reached final agreement on the essential details of the lease; the property to be leased, the rent payable, the names of the parties and the commencement and maximum duration of the term. The other terms of the agreement do not have to be specified in detail and, where necessary, will be implied by the courts.
The major difficulty confronting the court is to determine whether the contract is intended to be final. Before the contract will be enforced as an agreement for a lease, the court must be of the opinion that the execution of the future lease contemplated by the contract will merely formally embody the terms of the contract already agreed upon. If the court forms the opinion that certain essential features of the agreement are still open to be negotiated prior to the signing of the lease, the contract for a lease will be held to be unenforceable at both law and equity’.
Similar sentiments are expressed by Professor Peter Butt in his text ‘Land Law’. I refer, in particular, to the passages at paras.15.14 and 15.42. In particular, at para.15.42, Professor Butt says as follows:-
‘It is sometimes said that under the doctrine in Walsh v Lonsdale there is no difference between a lease and an agreement for a lease but this is an oversimplification. There are differences stemming from the most basic fact that a lease which complies with the requirement for a legal lease creates a legal interest in land, whereas an agreement for a lease creates only an equitable interest. A court of equity treats the agreement between the parties as the equivalent of a lease at law but the tenant does not actually have a lease at law in the sense of having a legal interest in the land.
In particular, an equitable lease suffers from the insecurity common to equitable interests generally, namely, defeat at the hands of the bona fide purchaser of a legal interest in the land without notice of the equitable lease. Further, because the doctrine in Walsh v Lonsdale depends on the availability of a decree of specific performance, it can be invoked only in a court having equitable jurisdiction, but a court, having equitable jurisdiction, may decline to do so, for specific performance is a discretionary remedy.’
I refer also to the text Bradbrook & Ors ‘Commercial Leases in Australia’ at p.18 et seq. and in particular paras.1.19, 1.100 and 1.110.
No evidence was put to me to indicate that this court would decline to make an order for specific performance of any obligation under clause 3 of the settlement agreement. On the evidence that I have received, none exists.
I am satisfied that clause 3 of the settlement agreement constitutes an enforceable form of lease. The essential details are recorded there: the property to be leased; the rent payable, (including the rent review provisions and outgoings); the commencement date and the maximum term of the lease.
I am also satisfied that these terms and their arrangement is intended to be final. On the facts of this matter, that is a quite obvious conclusion. By the September agreement, the terms governing the occupation of the premises by Ironstone were backdated to April 2013. This was in confirmation of the basis upon which Ironstone had been occupying the premises and constituted the terms that governed the parties’ obligations for that period. The agreement would continue to so operate.
I am also satisfied that all of the essential features of the lease arrangement had been negotiated and the parties fully understood what was required of them under these arrangements. I am therefore of the view that the agreement was enforceable as a lease both at law and in equity.
But that is not the end of that discussion.
I also refer to the decision of Walters J in RM Hosking Properties Pty Ltd v Barnes & Ors (1971) SASR 100. In that case the owner of land had leased the land to a tenant for a period of two years at a weekly rental payable in advance. The lease was not registered under the Real Property Act. Before the two years expired, the owner agreed to sell the land. Settlement was effected and the transfer registered.
At the time of the sale the purchaser was aware of the unregistered interest. Notice was given to the tenant to vacate the premises. The court held that the purchaser, despite having knowledge of the unregistered lease, was not prevented from giving notice to deliver up possession. The notice of the unregistered interest did not prevent the purchaser being a bona fide purchaser for value.
Relevantly to the case at bar, at p.101, Walters J held as follows:-
‘The lease was in the form prescribed by s.116 of the Act, which provides that “When any land is intended to be leased for a life or lives or for any term of years exceeding one year, the registered proprietor shall ... execute a lease in the form of the schedule to the Act”. The lease was therefore in the form of an instrument as defined in s.3 of the Act and was capable of being registered under the Act but it was never so registered and at no time did the defendants register on the title to the land a caveat protecting their interests under the lease.
In my view, the mere execution of the instrument was not sufficient to pass any estate or interest in the land; the passing of such estate or interest was dependent upon registration of the instrument. The provisions of s.67 of the Act make it plain that no instrument is effectual to pass any land (and I include estate or interest in land, as those words are used in the definition of “land” in s.3) unless the instrument is registered in the manner prescribed by the Act; in other words, no estate or interest can be created under the Act except by registration, as it seems to me the benefit of the act would be lost if anything but registration on the register book were relied upon, and so therefore if a person does not register the instrument and take the benefit of the simplicity of the provisions of the statute, he must of necessity forgo the recognition of the rights which would otherwise enure for his benefit.’
I have concluded that the terms set out within clauses 3.1 to 3.5 of the settlement agreement are sufficient to constitute a lease in accordance with the Walsh v Lonsdale principles. I am also satisfied that Ironstone, the lessee, is a party to the agreement. I am satisfied that the document executed by the parties is an expression of an intention to create legal relations consistent with authority. I am finally satisfied that the lease, being enforceable as a lease, was granted for a period of in excess of one year.
Consistent with the decision of Walters J in RM Hosking v Barnes, the mere execution of the settlement agreement was not sufficient to pass any estate or interest in the land to Ironstone. Under these arrangements Ironstone remained only a tenant at will and that position pertained until such time as the company went into liquidation.
As a tenant at will, Ironstone or the plaintiff had a right by one month’s notice to terminate the lease. Neither of them did so. In my opinion, that is a complete answer to the issues raised in the original defence of the defendants. It also is an answer to paras.7 and 8 of the defendants’ second defence because there was a new lease, it was not registered, it was therefore a lease where the lessee was in the same position as if there was a tenancy at will arrangement and there was therefore no possibility of an offset.
The unchallenged evidence was that for some time after 20 September 2013 the lessee and the lessor observed the terms and conditions of the settlement agreement. There was occupation of the premises, payment of rent at the rate specified in the agreement and the payment of a limited amount of outgoings. The lessee Ironstone and/or the defendants paid some amounts due under the settlement agreement. These amounts are referrable to the claim of the plaintiff against the defendant arising under the June 2001 lease that, notionally at least, appears to have ended by agreement on 31 March 2013. And the defendants did not call for the provision of the form of a new lease as had been prepared by the solicitor Mr Yates. In the end, it is apparent that the lessee became incapable of observing the terms of the settlement agreement and the lease terms prescribed in that agreement. There was no commercial utility in the plaintiff as lessor putting any new form of lease to the lessee with the accompanying guarantee. If that had occurred the potential liability of the guarantors would have been greater because the guarantee provisions would likely not have been affected by the liquidation of the lessee. I do not need to consider that matter further.
It follows that a failure to provide a lease document could never be a ground of set-off. If there is such a claim resulting in damages, it is very difficult, if not impossible, to ascertain what damages or what loss has been or could have been incurred.
Following the execution of the settlement document there was then correspondence between solicitors. That correspondence is to be found at pp.8-19 inclusive of Exhibit P1. In the letter of 26 September 2013 from Mr Geyer to Mr Guthrie, solicitor for Ironstone, there is a confirmation of the terms of the settlement, a confirmation of the amount of rent payable, a reference to outgoings and other matters. These are all the usual hallmarks of a lease arrangement and there is no complaint of any failure to tender a new lease and guarantee document for execution.
These exchanges disclose that for a period, Ironstone attempted to comply with the whole of the terms of the settlement agreement. Later, in a letter of 28 February 2014, Ironstone sought an indulgence from the plaintiff to make a later payment of the instalments due under the settlement agreement. The instalment payments were to satisfy the outstanding obligations of Ironstone as lessee under the June 2001 lease.
The response of the plaintiff was to allow the indulgence on some particular terms. This was after there was confirmation of the breach of the settlement terms and a specific notification to Ironstone of the forbearance of the plaintiff from immediately enforcing its strict rights in reliance upon the promise of Ironstone to observe the obligations upon it under the settlement agreement.
That offer was accepted but soon afterwards Ironstone went into liquidation. By letters of 22 August 2014 the liquidators immediately disclaimed the lease as onerous. A calculation was then made by the plaintiff of the amounts then due and owing. That amount is the amount of this claim, namely $136983. A notice was given to the guarantors of an intention to issue proceedings and annexure A to that notice disclosed the calculation of the plaintiff’s claim.
In light of the foregoing, I am in a position where I am satisfied that, in relation to the earlier lease, the parties entered into a binding settlement agreement on 20 September 2013. That settlement agreement included a new lease obligation between the plaintiff and Ironstone, backdated to 1 April 2013. Actually and implicitly, by no later than that date, or perhaps more accurately on 31 March 2013 the earlier lease agreement of June 2001 was at an end by the accord and satisfaction of the settlement agreement. From that time, the obligations upon Ironstone as occupier of the premises under a new lease were those terms set out in the settlement agreement. That agreement was binding on Ironstone. It was also binding upon the defendants as guarantors.
I have already considered the terms of that agreement and I accept that, of the obligations required to be carried out by the plaintiff, those obligations have been completed. The obligations of Ironstone were not completed and the obligations that required a half-payment by the plaintiff were never undertaken and, having regard to the collateral agreement made between the plaintiff and Ironstone, which was not challenged, no obligation has ever arisen upon the plaintiff to make any payment in respect of such work. The obligation to make payment arose when the work was done. No work was done and no obligation to make a payment ever arose.
I also find that notwithstanding the content of clause 3 of the settlement agreement, no further lease was put to Ironstone for execution. Despite that, Ironstone remained liable under the terms of the lease arrangements set out in the settlement agreement consistent with the principles in Walsh v Lonsdale. Applying the decision in RM Hosking Properties v Barnes to these facts, because that lease was for a period of greater than one year, no interest in the land was obtained by Ironstone and Ironstone was, at best, a tenant at will. Ironstone or the plaintiff could have given one month’s notice at any time of an intention to terminate the arrangement. Neither party ever gave such notice and therefore the arrangements under which Ironstone occupied the premises continued in accordance with the terms of the settlement agreement.
I am also satisfied that under the terms of clause 5 of the settlement agreement, Mr and Mrs Lomax became liable under their guarantee to make payments of money due by Ironstone under the agreement.
There was no other lease agreement in existence and therefore the only obligations that could be guaranteed by Mr and Mrs Lomax are those obligations under the terms of this agreement. Those obligations included the lease obligation to Ironstone under clause 3 of the agreement. Mr and Mrs Lomax therefore are liable under the terms of their guarantee for any liabilities arising on Ironstone’s failure to observe clause 3.
The quantum of the plaintiff’s claim is set out in Exhibit P2. Mr Chong, chartered accountant, was called by the plaintiff to give evidence in relation to the quantum claim. He did that by reference to the content of Exhibit P1 and at pp.28-61 of Exhibit P1 is the relevant documentary material upon which the plaintiff relies in the calculation of its claim. The calculations made by Mr Chong then form Exhibit P2.
The third page of Exhibit P2 discloses the calculation of the settlement sum unpaid. It discloses that certain payments have been made by Ironstone up to and including 28 April 2014. It also discloses the page references in the tendered material Exhibit P1 showing the receipts of those moneys. I have reviewed each of those pages and I am satisfied of their accuracy.
I am satisfied that in total $112,500 was paid in partial satisfaction of the obligation to pay the sum of $155,000 under the settlement agreements. The balance outstanding is $42500. Mr Chong then separately made a calculation of outgoings. The relevant outgoings amounts included in this calculation were insurance, SA Water, council rates and emergency levy. No challenge was made to the inclusion of any of these items within outgoings. I find that they are both reasonable and, objectively would have been reasonably contemplated by the parties. I think that the failure to challenge those matters is important and correct because they are the usual outgoings that implicitly fall within the expression ‘Outgoings’ in any lease arrangement. If it was necessary to decide, it would be my view that insofar as any of those claims were to be excluded, then they would need to be excluded by a formal agreement between the parties. There is no evidence of such an agreement.
Mr Chong has disclosed on the fourth page of Exhibit P2 his calculation of the amount of outgoings still remaining unpaid. He has disclosed the amounts claimed, the tender book references in Exhibit P1 for those amounts and his method of calculation. He gave evidence before me and indicated that he made reductions in respect of amounts claimed. These calculations were made as at 30 June 2013, 30 June 2014 and 31 August 2014. There was no challenge to the methodology of Mr Chong or of his calculations.
Mr Chong explained that the reductions he made were to exclude claims for insurance and other like expenses which would not ordinarily be claimed by a lessor under the aegis of ‘Outgoings’. As an example, as at 30 June 2013 the total amount of outgoings payable was $5798.03. Mr Chong reduced that figure to $4603.23 for the reasons that I have set out above. The plaintiff has limited its claim to that amount. There is no challenge to that calculation and there is no suggestion that the sum claimed is an over calculation. Reductions for the same reason were made as at 30 June 2014 and 31 August 2014. The calculation at 31 August 2014 is also made on a pro rata basis, according to the period of occupancy. There was no challenge to the calculation or the methodology. I accept both the calculation and its method.
The total outgoings calculated by Mr Chong as being unpaid under the terms of the agreement was in the amount of $26393.67. The final calculation made by Mr Chong was in respect of outstanding rental. He refers to the agreement of Ironstone in the settlement agreement to pay $11,000 per month, inclusive of GST.
The total amount payable for unpaid rent between January 2014 and August 2014 was $88000. Mr Chong identified payment of $20000 and in his calculations he disclosed the tender book references evidencing receipt of payment by the plaintiff. His calculation of outstanding rent was $68,000. There was no challenge to the method of calculation or the quantum of this calculation.
The addition of the outstanding sums, namely $42500, $26393 and $68000 in total, amounts to $136893. That is the plaintiff’s claim and in my opinion, the plaintiff is entitled to a judgment in its favour in that amount. I allow pre judgment interest in the amount of $6,000 and I make an order that the plaintiff’s costs are to be agreed or taxed.