Bryshan Pty Limited v Aasco Pty Limited

[2010] NSWDC 30

CITATION:	Bryshan Pty Limited v AASCO Pty Limited [2010] NSWDC 30
HEARING DATE(S):	1 March 2010 to 3 March 2010
JUDGMENT DATE:	12 March 2010
JURISDICTION:	District Court - Civil
JUDGMENT OF:	Sidis DCJ
DECISION:	1. Verdict and judgment for the plaintiff against both defendants in the sum of $36,592.96 comprising rent due of $27,746.56 and interest of $8,846.40. 2. The cross-claim is dismissed. 3. The defendants are to pay the costs of the plaintiff’s claim. 4. The cross-claimant is to pay the cross-defendant’s costs of the cross-claim. 5. The exhibits are returned.
CATCHWORDS:	LANDLORD AND TENANT DISPUTE - Claim for unpaid rent - Rights of entry and consequences when rent overdue - Damages for breach of rental payment provisions of lease - Cross claim for conversion - Credit - Inability to identify goods allegedly converted - Inability to quantify loss allegedly suffered
PARTIES:	Bryshan Pty Limited (Plaintiff) AASCO Pty Limited (First Defendant) Michael Butler (Second Defendant)
FILE NUMBER(S):	109/07
COUNSEL:	D Allen (for the First and Second Defendants)
SOLICITORS:	Plaintiff Self Represented Bilbie Dan Solicitors (for the First and Second Defendants)

JUDGMENT
1 This action involves a claim by Bryshan Pty Limited for rent due under leases granted to Aasco Pty Limited of two factory units and a cross-claim for conversion of stock of the defendant stored in one of those units. The evidence proceeded by way of affidavit upon which the deponents were cross-examined.

2 From the affidavit evidence the following factual chronology can be obtained.

1. The factory units were owned by the plaintiff. Those involved in the proceedings were known as units 1 and 2 Enterprise Drive Beresfield.

2. Unit 1 was leased for two years from 1 July 2005 until 30 June 2007 with a one year option. Rent totalling $2,985.80 per month was payable on the last day of each month. The lessee was Aasco Pty Limited, the lessor Bryshan Pty Limited and the lease was guaranteed by a director of Aasco, Michael Butler.

3. Unit 2 was leased for three years from 12 September 2005 to 11 September 2008. Rent was $2,953.51 per month payable on the eleventh day of each month. The lessee was Aasco Pty Limited, the lessor Bryshan Pty Limited and the guarantor Michael Butler.

4. Part of unit 2 was sub-leased by Aasco for two years.

5. The principal of Bryshan was Mr Gary Wooding.

6. The principal of Aasco was Mr Michael Butler.

7. Helen Bortfield was engaged as Bryshan’s office manager in February 2006 on a part-time basis. She had responsibility for property management and rentals. Mr Gary Wooding’s son Bryce Wooding was also involved in the activities of Bryshan.

8. In the latter half of 2006 the rents on the units were paid irregularly by Aasco. Mr Butler became financially strained and took full-time employment elsewhere. The failure to pay rents on due dates led to the disputes that are now before the court.

3 In respect of the unpaid rent, the claim was brought against Aasco and Mr Butler as guarantor. It was conceded by Aasco that it did not pay the rent for unit 1 for November 2006 until mid December 2006. Aasco claimed that the rent for unit 2 for November 2006 was paid on 24 November 2006 by telegraphic transfer. If it was in fact paid on that day it was paid within the 14 day period allowed for in the lease.

4 Aasco produced a copy of the bank record indicating a telegraphic transfer of $2,950 and $3,000.51 took place on 24 November 2006. Bryshan produced a copy of a bank record indicating that this amount arrived in its bank account on 28 November 2006. On 27 November 2006 Bryshan locked Aasco out of units 1 and 2 by changing the locks on the doors. Aasco claimed that this was a repudiation of both leases by wrongfully re-taking possession on that date. It also claimed that Bryshan asserted that it had terminated the leases.

5 There were two reasons why I rejected the proposition that Bryshan repudiated the leases. Clause 12.2 of both leases provided that the landlord had the right to re-enter and take possession if rent or other money due under the lease was 14 days overdue for payment. There was no doubt that the rental on unit 1 by 28 November 2006 was overdue for payment and therefore there was no doubt that Bryshan acted lawfully in respect of unit 1.

6 In respect of unit 2, I accepted the evidence of Ms Bortfield of the efforts made on behalf of Bryshan to contact Mr Butler to clarify the situation in respect of the payment of rent by phone, fax and email. It was not suggested by Mr Butler that he responded to the increasingly frequent efforts at communication by informing anyone at Bryshan that rent for unit 2 had been despatched by telegraphic transfer on 24 November 2006. In any event I accept the banking records that indicated that it was not received by Bryshan until 28 November 2006.

7 I find that Bryshan acted lawfully and in accordance with the provisions of the lease by re-entering and taking possession of unit 2 on 27 November 2006. I accept that the exercise of the right of re-entry terminated the leases. This is because clause 12.2 further provided that if the right of re-entry was exercised the lease was at an end and to the extent that the tenant remained in possession it did so as a monthly tenant.

8 According to Aasco on 8 December 2006, and according to Bryshan on 12 December 2006, rent for unit 1 was paid for November and December 2006 and rent for unit 2 was paid for December 2006. Extra amounts were also paid for interest on the late payments. On 13 December 2006 the locks were restored and Aasco was restored to possession of both units. At that stage therefore, in accordance with the terms of the lease, Aasco re-entered into possession as monthly tenant. To the extent that there was any repudiation, therefore, it was clear that Aasco was not relying upon it.

9 On 2 January 2007 Aasco, by telegraphic transfer, paid $2,953.51 to Bryshan. This was said to have been paid in respect of invoice 56. Invoice 56 related to unit 2. The amount paid was equal to the monthly rent payable for unit 2. It was applied by Bryshan to rent for unit 2. Mr Butler said that this was a mistake and his intention was to pay rent for unit 1 on 2 January 2007. In apparent recognition of this mistake a further sum of $32.29 was paid by telegraphic transfer on 8 January 2007. There was no evidence that Mr Butler communicated with anyone at Bryshan concerning this alleged error. The acknowledgement receipt issued by Aasco’s banker ANZ simply stated as message or reference “invoice 51 balance not 56”. No other rent was paid in January 2007, nor has any rent been paid at any time since.

10 On 18 January 2007 the locks were once more changed on unit 1. It was not until a letter was sent by Aasco’s solicitors on 25 January 2007 that any communication was made with Bryshan concerning the alleged mistake in the rent payment. This letter asserted that Bryshan ought to have been aware of the mistake because unit 2 was unoccupied when the rent was paid on 2 January 2007. This assertion was contrary to the evidence that rent for unit 2 had been paid to 11 January 2007 and Mr Butler’s evidence that he accessed that unit until 11 January 2007.

11 In the absence of evidence of appropriate communication to the contrary I find that Bryshan acted lawfully in applying the payment made on 2 January 2007 to the payment of rent for unit 2 and in the exercise of its right of re-entry of unit 1 on 18 January 2007. The allegations made by Aasco that the acts of re-entry amounted to a repudiation are rejected.

12 Having regard to the provisions of the leases I find the consequences to be as follows.

1. The leases were lawfully terminated by the exercise by Bryshan of its rights under clauses 12.2 on 27 November 2006.

2. Thereafter, as provided in the leases, Aasco, when restored to possession in December 2006, occupied the units as a monthly tenant on the terms set out in the lease document.

3. Bryshan was entitled to damages resulting from the breach and the subsequent termination of the leases in November 2006.

13 The leases provided that Bryshan was entitled to damages to the end of their terms. Bryshan therefore claimed unpaid rent for unit 1 from 1 January 2007 to 30 June 2007 and for unit 2 from 12 February 2007 until 11 September 2008.

14 However Bryshan sold the property in June 2007. Documents filed with the Supreme Court in ancillary proceedings indicated that it remained in possession until 9 July 2007. The claim therefore could extend in respect of unit 1 to 30 June 2007 and in respect of unit 2 to 9 July 2007 only.

15 I therefore allow Bryshan damages for rent up to and including those dates, together with interest as provided in the lease at 10% per annum. The amounts allowed in respect of unit 1 were $8,957.40 and in respect of unit 2 $18,789.16. I rely upon the parties to calculate the interest to be paid on those amounts from the relevant dates.

16 The claim in conversion was brought by Aasco against Bryshan and Mr Gary Wooding as its director. It was alleged that stock and goods used in

Aasco’s business were converted to their use.

17 The basis of the claim was that between 18 January 2007 and 2 February 2007 stock and goods were removed from unit 1. At the hearing it was claimed that the value of these items was $385,562. Aasco attempted, through Mr Butler and a Mr Michael Hall, to prove that Gary Wooding was responsible for removing the items claimed. The response from Bryshan and Mr Wooding was that they knew nothing of the removal of any goods and that the company simply exercised its right to possession of unit 1 until the rent was paid and that when the rent was paid Aasco was permitted to re-enter and recover such property as remained in unit 1.

18 There were a number of reasons why I rejected Aasco’s claim in the conversion. First and most important I did not accept the evidence of Mr Butler and Mr Hall concerning the alleged removal or theft of goods by Bryshan, Mr Wooding or any other party. Secondly I was not satisfied that the evidence identified the goods allegedly converted and thirdly I was not satisfied that the evidence adequately valued those goods.

19 In respect of credit it was agreed that after the locks in unit 1 were changed on 18 January 2007, the keys to the new locks were placed in Bryshan’s safe that was accessible to Bryshan staff only. Mr Butler claimed that he had no key to the double glass doors at the main entry, the side entry door from the car park or the roller door to what appeared to be a loading dock area. He agreed that he retained a key to the roller shutter in front of the double glass doors. He said that he attended the premises between 9 pm and 9.30 pm on 2 February 2007 and was able to see that stock had been removed by looking through the double glass doors. He said he phoned Mr Hall, whom he described in his affidavit as a friend who was also a police officer.

20 He said he and Mr Hall inspected the perimeter of the building and they concluded that there had been no forced entry to the building. On Mr Hall’s advice he then attended Maitland Police Station.

21 He denied that any time on 2 February 2007 he had access to unit 1. This was inconsistent with a number of other pieces of evidence. Firstly the police report indicated that Mr Butler attended at the Maitland Police Station at 10 pm on 2 February 2009 and stated, amongst other things that: About 9.30 pm on Friday 2 February 2007 he had attended the unit and was able to gain access through the front door with a key that he still had. He then noticed that a large amount of property was missing.

22 Further on that occasion Mr Butler was able to identify for police, with some precision, the items that he claimed were missing and that he at that time valued at $244,800. It is noted that this was at 10 pm within 30 minutes of discovering the loss.

23 Secondly the evidence of Mr Hall was that he received a telephone call from Mr Butler at 9.30 am on 2 February 2007 and he said Mr Butler told him that everything had been taken from the warehouse. Later in the afternoon of 2 February Mr Hall said he met with Mr Butler at the premises and they inspected the warehouse together. He confirmed in court that they went inside the warehouse, although he was unable to remember the door that was used. Mr Butler said nothing of this inspection in his affidavit, he taking the position that he was unable to gain access.

24 Thirdly there was evidence from Mr Gary Wooding that Mr Butler at that time retained a key to unit 2. The rent on that unit had been paid and the locks were not changed. Mr Wooding said that it was possible to gain access from unit 2 to unit 1 through a gap in a dividing wall between the units. This was disputed by Mr Butler who said the gap was too small.

25 Having regard to the stark inconsistencies between the evidence of Mr Butler, that contained in the police report and that given by Mr Hall concerning the question of access, I decided that I could not rely upon Mr Butler’s evidence. Therefore on this aspect I preferred the evidence of Mr Wooding and I find that Mr Butler retained the means of access to unit 1.

26 There was a further discrepancy between the evidence of Mr Butler and Mr Hall concerning Mr Hall’s role in Aasco’s business. Mr Butler stated that Aasco contracted with Mr Hall’s cleaning company for cleaning services. This was denied by Mr Hall who said that the cleaning company belonged to his wife. Mr Hall initially denied that he was employed by Aasco. He said that as at February 2007 he was a serving police officer but that he was on sick leave. Presented with Internet material indicating that he was named as a contact person for Aasco he agreed that he held the position of sales manager for the company, although he claimed he was not paid for his services. Mr Butler said that the Internet material was a mistake and that there had been some form of mix-up in respect of the company’s business cards. This evidence was implausible to the point of not being credible. It further supported my conclusion that Mr Butler’s evidence was entirely unreliable.

27 In a further effort to discredit Mr Wooding and to suggest that he was responsible for removing stock from unit 1 Mr Hall gave evidence of having driven past the property on 6 February 2007 and of seeing Mr Wooding in front of unit 1. Mr Butler was informed and he said he went there and discovered that a lock on the roller shutter had been broken and that a piece of wood was nearby. A glass panel in the double door had been shattered. Mr Wooding denied any knowledge of the circumstances in which this glass panel was broken.

28 It was suggested on behalf of Mr Butler that this action was undertaken by Mr Wooding to make it appear that the premises had been broken into. One might expect that this serious development would be reported to and thoroughly investigated by police. There was no reference to it at all in the police report. In the circumstances I rejected any suggestion that Mr Wooding was involved in breaking the lock on the shutter door or shattering the glass panel in the double door.

29 My finding on this aspect is that there was no evidence to suggest that Bryshan, Mr Wooding or anyone associated with them was responsible for any removal of stock from unit 1.

30 In respect of the identification and valuation of the items allegedly missing, Aasco put forward a number of claims concerning the value of what was allegedly lost. I have already noted that the police were informed on 2 February 2007 that their value was $244,800. It was subsequently stated to police to be $293,400. On 5 February 2007 the value had been reduced to something in excess of $50,000 in a letter written by Aasco’s solicitor. In Mr Butler’s affidavit of 24 June 2008 the value was said to be $502,490. At the hearing the amount claimed was $385,562. An insurance claim was met in the sum of $22,000.

31 Aasco’s difficulty was in establishing what stock and equipment was held at the relevant time. This difficulty arose because of the absence of supporting documentation, either because stock control and records of sales were haphazard or because the documents and computer records were said to be no longer available. The affidavit of an accountant, Mr Keith Compton, pointed out the impossibility of arriving at a reasoned calculation at the loss in the circumstances. However the Court is required to do the best it can with the evidence available. Unfortunately like Mr Compton, even on the basis put forward by Aasco, I was unable to reach any firm conclusion concerning the goods and the equipment in unit 1 at the relevant time, or their values.

32 Mr Butler calculated the loss, in the absence of proper financial documents and stock records, on the basis of packing lists that he somehow managed to locate when all other relevant documents were lost. He stated that when an item was sold it was ruled through on the packing list. On this basis he claimed that of the goods allegedly delivered to the premises 46 quad or pit bicycles were sold prior to 2 February 2007. He said the company also recorded its trading through MYOB software on a laptop computer, although sales were not always recorded on this accounting system. He was unable to produce the laptop or the information stored on it. It was not reported stolen and Mr Butler was unable to say what happened to it. He was therefore totally reliant upon my accepting the packing slips as evidence of the stock and its value as at February 2003.

33 The problems with this approach were that a number of those packing lists were not even addressed to Aasco. A document said to be a pro forma dated 9 November 2005 was addressed to McDonald & Associates Pty Limited with Aasco as the shipping address. A packing list dated simply June contained no addressee. A packing list dated 18 August 2005 was addressed to American Supply Company at the Aasco address. There was no explanation of what this entity was. It was therefore not established that any of the equipment listed in those packing sheets was in fact equipment that was delivered to or paid for by Aasco.

34 I have already noted the insurance payout of $22,000. This was said to be because this was the limit of the company’s insurance cover. No evidence was produced to support the claim that the company was under insured. According to Mr Butler’s affidavit an amount of $15,000 was paid for stock, $5,000 for contents and $2,000 for general property. It was simply not credible that stock to the value claimed was under insured to this extent.

35 There was evidence that Aasco negotiated a substantial credit facility with its banker ANZ on 27 February 2007. This evidence was inconsistent with the claim that Aasco at that stage had no financial records and no means of establishing its trading results for the 2006 or 2007 years. It was also inconsistent with the claim that Aasco had ceased trading in February 2007, as sworn in Mr Butler’s affidavit dated 27 August 2009 in proceedings before the Supreme Court seeking re-registration of the company.

36 In summary, the claim for conversion failed for the following reasons.

1. The right of re-entry was lawful. It was specifically provided for in the lease terms upon which Aasco remained in possession as monthly tenant when the locks were changed.

2. There was no evidence of any conduct on the part of Bryshan or Mr Wooding indicating that they in any way interfered with the goods or equipment in unit 1. There was reference in a police report to a witness having seen a pantechnicon at the premises. This was hearsay material of an unidentified witness and indicated no connection with Bryshan or Mr Wooding.

3. Even were I persuaded that there was evidence of conversion there was insufficient evidence to establish the nature and quantity of the goods or equipment allegedly converted, or their values, to arrive at a reasoned judgment of any loss suffered by Aasco.

37 In the circumstances the cross-claim is dismissed.

38 In this matter the orders that I make are as follows.

1. Verdict and judgment for the plaintiff against both defendants in the sum of $36,592.96 comprising rent due of $27,746.56 and interest of $8,846.40.

2. The cross-claim is dismissed.

3. The defendants are to pay the costs of the plaintiff’s claim.

4. The cross-claimant is to pay the cross-defendant’s costs of the cross-claim.

5. The exhibits are returned.

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