C&C Investment Properties Pty Ltd v Yichen Sydney Pty Ltd

Case •

[2021] NSWCATCD 69

•

11 June 2021

No judgment structure available for this case.

Civil and Administrative Tribunal


New South Wales

Medium Neutral Citation: C&C Investment Properties Pty Ltd v Yichen Sydney Pty Ltd [2021] NSWCATCD 69
Hearing dates: 7 June 2021
Date of orders: 11 June 2021
Decision date: 11 June 2021
Jurisdiction:Consumer and Commercial Division
Before: G Blake AM SC, Senior Member
Decision:

(1)   The respondents Yichen Sydney Pty Ltd, Yongmei Mao and Yang Chen (also known as Elaine Zheng) are to pay the applicant, C&C Investment Properties Pty Ltd, the sum of $100,423.99 immediately.

Catchwords:

LEASES AND TENANCIES — Retail leases — Whether the lessee is liable for arrears of rent and damages for breach of the term to make good the premises at the determination of the lease - Whether the guarantors are liable to the assignee of the reversion of the lease for arrears of rent and damages

Legislation Cited:

Civil and Administrative Tribunal Rules 2014 (NSW)

Conveyancing Act 1919 (NSW)

Property Law Act 1974 (Qld)

Real Property Act 1900 (NSW)

Retail Leases Act 1994 (NSW)

Cases Cited:

Accordent Pty Ltd & Portellos v Bresimark Nominees Pty Ltd (2008) SASR 286; [2008] SASC 196

Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd [2008] HCA 10; (2008) 82 ALJR 576

P & A Swift Investments (a Firm) v Combined English Stores Group Plc [1989] AC 632

Simmons v Lee [1998] 2 Qd R 671

Texts Cited:

Nil

Category:Principal judgment
Parties: C&C Investment Properties Pty Ltd (Applicant)
Yichen Sydney Pty Ltd (First Respondent)
Yongmei Mao (Second Respondent)
Yang Chen (also known as Elaine Zheng) (Third Respondent)
File Number(s): COM 21/03416
Publication restriction: Nil

REASONS FOR DECISION

Overview

  1. The applicant, C&C Investment Properties Pty Ltd, who is the lessor of the shop premises at Leichhardt (the premises) under a lease (the lease), seeks relief under the Retail Leases Act 1994 (NSW) (RL Act) against the respondents, Yichen Sydney Pty Ltd (Yichen), who was the lessee of the premises, and Yongmei Mao and Yang Chen (who is now known as Elaine Zheng) (Ms Zheng), who are guarantors of the lessee’s obligations under the lease.

  2. I have decided that each of Yichen, Yongmei Mao and Ms Zheng is liable to pay the applicant $100,423.99.

The background

  1. By the lease, which was registered with the dealing no AI104899L, CPL Furfaro Investments Pty Ltd (Furfaro Investments) as the lessor leased the premises which is held under the provisions of the Real Property Act 1900 (NSW) (RP Act) to Yichen as the lessee for the term of 5 years commencing on 28 July 2013 and ending on 27 July 2018. The lease was signed Yongmei Mao and Yang Chen as guarantors.

  2. The lease relevantly provides:

  1. the lessee would pay rent of $75,000.00 a year by monthly instalments of $6,250.00 plus GST to the first review date and thereafter the new yearly rent by monthly instalments plus GST (cl 5.1.1 and item 13 of Annexure A);

  2. the lessee would pay interest on moneys including rent at the rate of 10% when the payment is more than 14 days overdue (cl 5.1.5 and item 13 of Annexure A);

  3. the lessee must use the premises for the purpose of a newsagency (cl 6.1.1 and item 17 of Annexure A);

  4. the lessee must prior to the determination of the lease remove all fittings, plant and equipment, and other articles in the nature of lessee’s stock, and make good any damage. If the lessee does not remove such goods, then the lessor may remove then (additional cl 16 of Annexure A);

  5. the guarantor guarantees to the lessor the performance by the lessee of all the lessee’s obligations (including any obligations to pay rent, outgoings or damages) under the lease, under every extension of it or any renewal of it (cl 13.2 and item 10 of Annexure A).

  1. The lease does not contain any definition of the word “lessor” or any provision that specifies that the word “lessor” is to be interpreted as encompassing any assignee of the lessor.

  2. On 19 December 2017, Furfaro Investments’ lawyers in their letter to Yichen advised that settlement of the sale of the premises to the applicant had taken place and that all rent payable by it should be paid to the applicant.

  3. After the expiry of the term of the lease on 27 July 2018 Yichen remained in occupation of the premises.

  4. Commencing on 28 April 2019, Yichen failed to pay the rent due under the lease.

  5. On 26 December 2019, Yichen was locked out of the premises.

  6. On 27 December 2019, Yichen broke into the premises causing damage and resumed trading, and thereafter was removed from the premises by the police.

  7. Subsequent to 27 December 2019, Yichen failed to remove its stock and equipment and make good the premises.

  8. In January 2020, the applicant removed the lessee’s stock and equipment and made good the premises.

The procedural history

  1. On 21 January 2021, the applicant commenced proceedings COM 21/03416 by filing a retail leases application against the respondents (in which the name of the respondent Yongmei Mao was incorrectly spelt as Yongmei Mai), and in which it sought an order that they pay it $100,423.99.

  2. On 8 March 2021, the Tribunal made procedural directions for the hearing of the proceedings, including a timetable for the parties to provide all documents on which they intended to rely at the hearing.

  3. On 26 April 2021, the Registry served a notice of contested hearing by video conference (the 26 April 2021 notice) on the Yichen and Yongmei Mao by email to their two email addresses.

The hearing

  1. On 8 June 2021, the hearing took place by video conference. Charlie Furfaro (Mr Furfaro) appeared for the applicant. There was no appearance by Yichen and Yongmei Mao. Ms Zheng appeared in person.

  2. At the commencement of the hearing I made an order amending the name of the respondent Yongmei Mai to Yongmei Mao.

  3. The applicant relied on a bundle of documents (Ex A1) which included the lease, various invoices relating to the removal of the lessee’s stock and equipment and the making good of the premises, photographs of the premises, and the statutory declaration of Mr Furfaro dated 19 April 2021.

  4. Yichen and Yongmei Mao did not file any documents in accordance with the procedural directions made on 8 March 2021.

  5. Ms Zheng relied on her letter dated 15 February 2021 to the Tribunal (Ex R1) (the 15 February 2021 letter).

  6. There was no oral evidence.

  7. Mr Furfaro made short oral submissions. Ms Zheng made no oral submissions.

The issues

  1. The following issues arise for decision:

  1. whether the proceedings as against Yichen and Yongmei Mao should be heard in their absence;

  2. whether the applicant is entitled to relief against Yichen;

  3. whether the applicant is entitled to relief against Yongmei Mao and Ms Zheng.

  1. Before considering these issues it is convenient to set out the applicable statutory provisions and legal principles.

Whether the proceedings as against Yichen and Yongmei Mao should be heard in their absence

  1. I am satisfied that the Registry served the 26 April 2021 notice on Yichen and Yongmei Mao.

  2. As the condition in r 35(2)(a) of the Civil and Administrative Tribunal Rules 2014 (NSW) has been satisfied, I have decided to exercise the discretion under this rule to proceed with the hearing as against Yichen and Yongmei Mao in their absence.

The applicable statutory provisions

RL Act

  1. Part 8 is headed “Dispute Resolution”. Division 1 (which is comprised by s 63) is headed “Preliminary”. Section 63 contains the following definitions:

party or former party to a retail shop lease or former retail shop lease includes a person who is a guarantor or covenantor under a lease or former lease.

retail tenancy dispute means any dispute concerning the liabilities or obligations (including any obligation to pay money) of a party or former party to a retail shop lease or former lease …

  1. Division 3 (which is comprised by ss 70 to 76A) is headed “Determination of claims by Civil and Administrative Tribunal”. Section 70 contains definitions including:

retail tenancy claim means any of the following:

(a)   a claim in connection with a liability or obligation with which a retail tenancy dispute is concerned, being:

(i)   a claim for payment of money (whether or not stated to be by way of debt, damages, restitution or refund),”

  1. Section 71 is headed “Lodging of retail tenancy claims with Tribunal” and relevantly provides that a party to a retail shop lease may lodge a retail tenancy claim in respect of the lease with the Tribunal for determination of the claim not more than 3 years after the liability or obligation that is the subject of the claim arose.

  2. Section 72 is headed “Powers of Tribunal relating to retail tenancy claims” and relevantly provides in subs (1)(a) that in proceedings for a retail tenancy claim the Tribunal is empowered to make orders that it considers appropriate including an order that a party to the proceedings pay money to a person specified in the order, whether by way of debt, damages or restitution.

Conveyancing Act

  1. Part 6 of the Conveyancing Act 1919 (NSW) contains provisions dealing with covenants and powers. Division 1A (which is comprised by s 69) is headed “Application of Part” and relevantly provides that Division 1 shall apply to land under the provisions of the RP Act.

  2. Division 1 (ss 70-77) contains general provisions. Section 70 is headed “Benefit of covenants relating to land” and relevantly provides:

70 Benefit of covenants relating to land

(1) A covenant relating to any land of the covenantee shall be deemed to be made with the covenantee and the covenantee’s successors in title and the persons deriving title under the covenantee or them, and shall have effect as if such successors and other persons were expressed.

…

The applicable legal principles

  1. In Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd [2008] HCA 10; (2008) 82 ALJR 576 (Gumland) the High Court held that a covenant by a guarantor to guarantee payment of all monies including rent and damages payable by a lessee under a lease could and did “touch and concern” the land the subject of the relevant lease. Accordingly, such a covenant could be enforced by a transferee of the reversion: Gumland at [93]-[102]. The High Court rejected a submission that such a covenant by a guarantor was merely a “collateral obligation”, not affecting land and not running with land: Gumland at [102].

  2. In Accordent Pty Ltd & Portellos v Bresimark Nominees Pty Ltd (2008) SASR 286; [2008] SASC 196 the Full Court of the Supreme Court of South Australia at [28]-[30] held that there are two bases for the conclusion reached by the High Court in Gumland:

“[28] The first is that a covenant by a tenant to pay rent runs with the land, and if that is so, a covenant by a surety that such a tenant’s covenant will be performed and observed must also be a covenant which touches and concerns the land: Gumland (at [101]). In so deciding the High Court referred with approval to observations to that effect by Lord Templeman in P & A Swift Investments (a Firm) v Combined English Stores Group Plc [1989] AC 632 at 637-638 (three other members of the House agreed with his speech) and by McPherson JA (with whom the other members of the court agreed) in Simmons v Lee [1998] 2 Qd R 671 at 675. As McPherson JA said:

If rent runs with the land, it is not a long step to say that a guarantee of that rent also does so.

…

[30] In Gumland the High Court also held that the guarantors’ covenant satisfied the test outlined by Lord Oliver in Swift Investments for determining whether a covenant touches and concerns land. The other members of the House of Lords in that case agreed with the speech of Lord Oliver, as well as with the speech of Lord Templeman. In Swift Investments Lord Oliver said (at 642):

Formulations of definitive tests are always dangerous, but it seems to me that, without claiming to expound an exhaustive guide, the following provides a satisfactory working test for whether, in any given case, a covenant touches and concerns the land: (1) the covenant benefits only the reversioner for time being, and if separated from the reversion ceases to be of benefit to the covenantee; (2) the covenant affects the nature, quality, mode of user or value of the land of the reversioner; (3) the covenant is not expressed to be personal (that is to say neither being given only to a specific reversioner nor in respect of the obligations only of a specific tenant); (4) the fact that a covenant is to pay a sum of money will not prevent it from touching and concerning the land so long as the three foregoing conditions are satisfied and the covenant is connected with something to be done on, to or in relation to the land.”

  1. In Simmons v Lee [1998] 2 Qd R 671 the Court of Appeal of the Supreme Court of Queensland considered the question of whether the guarantee was intended to be personal to the original lessor simply because it makes no express mention of assignees of the lessor. McPherson JA (with whom the other members of the court agreed) at 677 held that something more than the mere use of a name is needed in order to displace or exclude the word-saving impact of the s 53(1) of the Property Law Act 1974 (Qld) (which is in identical terms to s 70(1) of the Conveyancing Act 1919 (NSW)) stating:

“On any view of s. 53(1), it functions at the very least as a ‘‘word-saving’’ provision by ‘‘deeming’’ a covenant relating to land of the covenantee to be made with the covenantee and his successors in title, andso, in that way, it supplies the expression ‘‘assignee’’ or successors in title after the description of [the lessor] in the guarantee.”

Whether the applicant is entitled to relief against Yichen

  1. I am satisfied that the proceedings as against Yichen involve a retail tenancy claim within s 70 of the RL Act when read with the definitions of party and retail tenancy dispute in s 63 of the RL Act, and accordingly the Tribunal has jurisdiction. The proceedings, as required by s 71 of the RL Act, have been brought within 3 years after the liability or obligation that is the subject of the claim arose.

  2. I have inferred that Yichen held over under the terms of the lease after the expiry of its term on 27 July 2018.

  3. I am also satisfied that the applicant has established that Yichen breached the lease by failing to pay rent which together with interest up to 28 November 2019 amounts to $81,980.99.

  4. I am further satisfied that the applicant has established that Yichen breached the lease by failing to remove its stock and equipment and to make good the premises, and that the applicant incurred costs of $18,443.00 removing this stock and equipment and making good the premises.

  5. Accordingly, I find pursuant to s 72(1)(a) of the RL Act that Yichen is liable to pay the applicant $100,423.99.

Whether the applicant is entitled to relief against Yongmei Mao and Ms Zheng

  1. I am satisfied that the proceedings as against Yongmei Mao and Ms Zheng involve a retail tenancy claim within s 70 of the RL Act when read with the definitions of party and retail tenancy dispute in s 63 of the RL Act, and accordingly the Tribunal has jurisdiction. The proceedings, as required by s 71 of the RL Act, have been brought within 3 years after the liability or obligation that is the subject of the claim arose.

  2. There is no evidence that Furfaro Investments assigned the benefit of the guarantee in the lease to the applicant.

  3. I am also satisfied that the applicant is entitled to enforce the guarantee against Yongmei Mao and Ms Zheng on the following two bases:

  1. directly pursuant to the principle that a guarantee of the obligation of a lessee to pay rent and damages for breach of these lease runs with the land;

  2. indirectly because their covenant as guarantor of the obligations of Furfaro Investments under the lease touch and concerns the land in view of the satisfaction of the test outlined by Lord Oliver in P & A Swift Investments (a Firm) v Combined English Stores Group Plc [1989] AC 632 at 642. As to the first part of the test, Furfaro Investments lost the benefit of the guarantee (other than any accrued rights) when it transferred the premises to the applicant. As to the second part of the test, a guarantee of the tenant’s obligations is likely to enhance the value of the premises: Gumland at [98]. As to the third part of the test, by reason of the operation of ss 69 and 70(1) of the Conveyancing Act which applies to the premises the guarantee on its proper construction was not given only for the benefit of Furfaro Investments, but also for the benefit of its assignees. As to the fourth part of the test, the guarantee is connected with something to be done on, to or in relation to the premises.

  1. Ms Zheng in the 15 February 2021 letter states that she ceased being as director of Yichen on 21 December 2018 and that she was forced to become a director of Yichen and a guarantor under the lease by Yongmei Mao. While I accept these statements of Ms Zheng, as there is no evidence that Furfaro Investments was a party to or had any knowledge of this conduct of Yongmei Mao, these circumstances do not constitute a defence to the claim of the applicant under the guarantee in the lease.

  2. Accordingly, I find that each of Yongmei Mao and Ms Zheng are liable to pay the applicant $100,423.99.

Order

  1. I make the following order:

  1. the respondents Yichen Sydney Pty Ltd, Yongmei Mao and Yang Chen (also known as Elaine Zheng) are to pay the applicant, C&C Investment Properties Pty Ltd, the sum of $100,423.99 immediately.

**********

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.


Registrar

Decision last updated: 03 September 2021

Actions
Download as PDF Download as Word Document
Cases Citing This Decision

0