Century Yuasa Batteries Pty Ltd v Martin
[2002] TASSC 91
•4 November 2002
[2002] TASSC 91
CITATION: Century Yuasa Batteries Pty Ltd v Martin [2002] TASSC 91
PARTIES: CENTURY YUASA BATTERIES PTY LTD
v
MARTIN, Natalie Helen
as trustee of the Davnat Superannuation Fund
TITLE OF COURT: SUPREME COURT OF TASMANIA
JURISDICTION: ORIGINAL
FILE NO/S: 614/2002
DELIVERED ON: 4 November 2002
DELIVERED AT: Hobart
HEARING DATES: 29, 30 October 2002
JUDGMENT OF: Blow J
CATCHWORDS:
Landlord and Tenant - Covenants - For renewal - Right to exercise option - Generally - Estoppel - Landlord's silence as to breaches of lease.
Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd (1959) 59 SR(NSW) 122, considered.
Aust Dig Landlord and Tenant [40]
Landlord and Tenant - Covenants - For renewal - Right to exercise option - Relief against loss of option for renewal - Equitable relief against forfeiture.
Eaton v Lyon (1798) 3 Ves 690, 30 ER 1223; Finch v Underwood (1876) 2 Ch D 310; Parker v Greville (1908) 28 NZLR 164, considered.
Aust Dig Landlord and Tenant [41]
REPRESENTATION:
Counsel:
Plaintiff: D J Porter QC
Defendant: D J D Morris
Solicitors:
Plaintiff: Abetz Curtis & Worsley
Defendant: Simmons Wolfhagen
Judgment Number: [2002] TASSC 91
Number of Paragraphs: 22
Serial No 91/2002
File No 614/2002
CENTURY YUASA BATTERIES PTY LTD
v NATALIE HELEN MARTIN as trustee of the Davnat Superannuation Fund
REASONS FOR JUDGMENT BLOW J
4 November 2002
These are my reasons for granting an interlocutory injunction in this matter on 30 October 2002, restraining the defendant and others from disturbing the plaintiff's possession of a property at 67 Warwick Street, Hobart.
The defendant is the registered proprietor of the land, which has a two-storey building on it. The whole of that property was leased to the plaintiff company for a term of three years from 1 November 1999 to 31 October 2002 inclusive. The lease named "Davnat Superannuation Fund" as the landlord, and was executed by the defendant's husband rather than the defendant, but it is common ground that it was a valid and effective lease of the property to the plaintiff. Apparently the property forms part of the property of the Davnat Unit Trust, all the units in which are held by the defendant and her husband as trustees of the Davnat Superannuation Fund.
The lease contained an option for renewal for a second term of three years. The plaintiff purported to exercise that option by letter dated 23 July 2002. The defendant's solicitors responded, by a letter dated 23 August 2002, asserting that the plaintiff was in breach of three clauses in the lease; that, as a result of the wording of the option clause, those breaches precluded it from validly exercising the option; and that the option had therefore not been exercised. The plaintiff contends that the defendant was and is estopped from asserting that there were any subsisting breaches of the lease at the time of the purported exercise of the option. Alternatively, it contends that the defendant and her husband have so conducted themselves that it is entitled to relief, either pursuant to the Fair Trading Act 1990 or in the exercise of the Court's equitable jurisdiction to grant relief against forfeiture, of such a nature as to put it in the position that it would have been in if there had been no subsisting breaches of the lease when the option was purportedly exercised. Counsel for the defendant, Mr Morris, contended that the plaintiff does not have an arguable case in relation to estoppel, the Fair Trading Act, or relief against forfeiture. In order to obtain an interlocutory injunction, a plaintiff must establish that there is a serious question to be tried, and that the balance of convenience favours the grant of the injunction: Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 at 153 - 156. Mr Morris made submissions to the effect that the plaintiff had not established either of these matters.
The option clause in the lease contained the following:
"17.1 Exercise of Option
Where the Tenant -
(a)wishes to have a lease of the Premises granted to it for the Further Term specified in the cover sheet;
(b)gives the Landlord not more than 6 months nor less than 3 months notice to that effect before the expiration of the Term; and
(c)is not in breach of any provision of this Lease,
the Landlord will grant to the Tenant a further lease of the Premises …".
The plaintiff is apparently a large company. It has a wholly owned subsidiary named Battery World Australia Pty Ltd. That subsidiary has a franchise network through which battery products are sold by retailers and wholesalers. On 28 January 2000 a Mr Apted entered into a franchise agreement with the subsidiary company. Thereafter he occupied most of the relevant premises. The plaintiff retained an upstairs office in the premises until early November 2001, but it seems that Mr Apted had possession of the entire property when the plaintiff purported to exercise the option. The lease contained the following provisions in relation to parting with possession of the premises:
"8.1 Landlord's Consent
The Tenant will not assign, sublet, transfer or part with possession of the Premises or this Lease or any part of or interest in them without the Landlord's prior written consent.
8.2 Requirements
The Landlord will not unreasonably withhold consent if -
(a)there is no unremedied breach of any provision of this Lease;
(b)the new tenant is respectable, responsible, solvent and capable of performing the Tenant's obligations under this Lease;
(c)the new tenant enters into a Deed in favour of the Landlord under which the new tenant agrees to be bound by this Lease and containing a Power of Attorney in favour of the Landlord in the same form as that contained in this Lease; and
(d)where the new tenant is a corporation, other than a corporation related to Century Yuasa Batteries Pty Ltd within the meaning of the Corporations Law or related to a corporation listed on a stock exchange the directors, provide a guarantee to the Landlord."
The plaintiff had parted with possession of the premises without seeking or obtaining the landlord's written consent, in contravention of cl 8.1.
In early 2000 a glass door was installed on the premises, behind a roller door. I do not have any evidence as to whether the glass door was installed by the plaintiff, its subsidiary company, or Mr Apted. It was installed without the prior written consent of the landlord, in contravention of cl 9.3(a) of the lease, which provided as follows:
"9.3 Alterations
The Tenant will not, without the prior written consent of the Landlord which may not be unreasonably withheld -
(a)make any alterations or additions to the Premises."
A "Battery World" sign was erected on the premises, apparently in early 2000. Again, I have no evidence as to who did that. No permission was obtained from the landlord for it to be erected. The defendant contends that its erection amounted to a breach of cl 7.4(b) of the lease, which provided as follows:
"7.4 Consent
The Tenant will not, without the prior written consent of the Landlord -
(a)…
(b)inscribe or affix any Sign on the Premises other than the Tenant's usual signs, unless approved in writing by the Landlord which approval will not be unreasonably withheld."
The plaintiff contends that the sign in question falls within the exception relating to "the Tenant's usual signs", on the basis that it conducted the business of Battery World through a subsidiary company and its franchisees, and that therefore a Battery World sign was one of its usual signs. The plaintiff's argument on this point has some merit. It may be that the clause in question was not breached, but the clauses relating to parting with possession and alterations were certainly both breached.
The plaintiff's contentions as to estoppel, the Fair Trading Act, and relief against forfeiture are all based, at least in part, on allegations concerning the conduct of the defendant and her husband in relation to the possession of the premises by the franchisee, the glass door, and the Battery World sign. Those allegations, and the evidence before me in relation to them, can be summarised as follows:
(a)The plaintiff alleges that, from April 2002 onwards, the rent for the premises was paid by monthly cheques in favour of the Davnat Superannuation Fund drawn by Battery World Australia Pty Ltd, and bearing its name. A photocopy of such a cheque dated 1 August 2002 was exhibited to an affidavit relied on by the plaintiff. The defendant denies that the rent was paid by means of such cheques.
(b)On 7 January 2002 the plaintiff's commercial manager wrote to the defendant's husband about a miscalculation of the monthly rent payable pursuant to the lease. His letter showed that he was sending copies of it to "David Apted, Battery World Hobart" and "Troy McDowell, Battery World Australia". There seems to be no dispute about that letter.
(c)The plaintiff alleges that its commercial manager had numerous telephone discussions with the defendant's husband in relation to the premises during the subsistence of the lease, and that the husband did not raise any objection to the premises being occupied by a Battery World store. None of this has been denied.
(d)The plaintiff alleges that the defendant's husband attended the premises at least three times after November 2001, for the purpose of inspecting the premises and visiting an acquaintance who was managing the franchise, without making any comment or complaint in relation to the glass door or the Battery World sign. None of this has been denied.
(e)On 10 September 2002 the plaintiff's commercial manager wrote a letter to the defendant's husband, who received it by fax the following day. That letter concerned negotiations that were then taking place for a proposed new lease to the trustee of the Apted Family Trust, intended to replace the lease to which these proceedings relate. In that letter, the commercial manager referred to "Mr David Apted operating Battery world Hobart". There is no dispute as to that letter, nor as to there having been such negotiations.
(f)The plaintiff contends that neither the defendant nor her husband, nor anyone on behalf of either of them, ever complained about the glass door or the Battery World sign. This has not been disputed.
Mr Morris submitted that the facts alleged on behalf of the plaintiff could not give rise to an estoppel. He relied on Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd (1959) 59 SR(NSW) 122. That case concerned a tenant's purported exercise of an option for the renewal of a lease. The option clause was worded so as to oblige the landlord to grant a new lease only if the tenant had paid its rent punctually and observed the covenants and agreements on its part contained in the lease. The tenant had frequently failed to pay the rent punctually, but the landlord had not objected to the irregularity in its payments. The Full Court rejected the tenant's contentions in relation to estoppel, saying the following at 129:
"We turn then to the question of estoppel which was argued by counsel for the plaintiff. Here again we are of opinion that the argument cannot be accepted. An estoppel cannot create a contractual right or give rise to a cause of action. It operates only to prevent a person from asserting the existence or non-existence of a fact."
I agree with Mr Porter QC that the reasoning of the Full Court in McCaul could be regarded as inconsistent with the principles enunciated by the High Court in relation to estoppel in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 and Commonwealth v Verwayen (1990) 170 CLR 394. In the light of those two cases, I think it would arguably be open to the trial judge, if all of the plaintiff's allegations as to the conduct of the defendant and her husband were found proven, to conclude that the plaintiff had been led to believe that the defendant would not treat the giving of possession to the franchisee, the erection of the glass door, or the erection of the sign as breaches of the lease; that the plaintiff had acted to its detriment by not seeking alternative premises, not seeking to remedy any such breaches, and purporting to exercise the option without remedying any such breaches; and that the defendant was therefore estopped from treating any of those three matters as breaches of the lease.
Mr Morris relied on cl 16.3 of the lease, which provided as follows:
"16.3 Continuance of Obligations
The Landlord will not be precluded from insisting upon strict compliance by the Tenant with the provisions of this Lease nor from taking action against the Tenant for any breach of any provisions of this Lease by reason of -
(a)the Landlord's failure to take advantage of any default or breach of any provision by the Tenant;
(b)any custom or practice which may have developed between the parties;
(c)a waiver by the Landlord of a particular breach; or
(d)acceptance of rent when there are other outstanding breaches."
Mr Porter QC submitted that it is at least arguable that this clause had no effect in relation to the question of estoppel. I think it is certainly open to argument that the words "insisting upon strict compliance by the Tenant with the provisions of this Lease" referred only to the performance by the tenant of its covenants, and not to its eligibility to exercise the option for renewal. Similarly, I think it is at least arguable that, if the tenant purported to exercise the option when it lacked the right to do so, a letter from the landlord's solicitor pointing out that it lacked that right would not have amounted to "taking action against the Tenant" within the meaning of the clause.
Mr Morris submitted that an estoppel could not arise in the circumstances alleged by the plaintiff because any belief by the plaintiff that the defendant would not treat the alleged contraventions of the lease as breaches could not properly be regarded as reasonable. I reject that submission. I think the contrary proposition is at least arguable in the circumstances. I think it is significant that each of the clauses relied upon by the defendant contains a provision requiring the landlord's consent not to be unreasonably withheld. The trial judge could well conclude that the giving of possession to a subsidiary company's franchisee, and the erection of a glass door and a sign saying "Battery World", if they amounted to breaches of the lease, were such innocuous breaches that a landlord, obliged not to withhold consent unreasonably if consent were sought, could be taken as a result of silence to have decided not to treat them as breaches.
The plaintiff's contentions in relation to the Fair Trading Act can be summarised as follows:
(a)The silence of the defendant and her husband as to the giving of possession to the franchisee, the erection of the glass door and the erection of the Battery World sign involved a contravention of s14(1), in that the defendant thereby, in trade or commerce, engaged in conduct that was misleading and deceptive.
(b)As a result of that conduct, the plaintiff company believed that the defendant would not treat any of the matters about which she and her husband had remained silent as breaches of the lease, expected to be able to exercise its option to renew the lease, did not seek alternative premises, did not seek to remedy any breach of the lease now relied upon by the defendant, and purported to exercise its option without remedying any such breach.
(c)If the relief sought is not granted, the plaintiff is likely to suffer damage through losing possession of the premises to the defendant, who wishes to re-enter following the expiry of the lease on 31 October 2002.
(d)The Court therefore can and should make an order pursuant to s41(5)(b) varying the contract constituted by the lease so as to give the plaintiff a six-year tenancy expiring on 31 October 2005 subject to the terms of the lease.
Mr Morris submitted that it would not be open to the trial judge to regard the silence of the defendant and her husband as misleading or deceptive conduct that contravened s14(1). He emphasised that the landlord had no duty to say anything. However it is clear that silence can be misleading or deceptive, or form part of conduct that is misleading or deceptive, even in a situation when there is no duty of disclosure or duty to speak or communicate: Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 40 - 41; Fraser v NRMA Holdings Ltd (1994) 14 ACSR 656 at 671. It would arguably be open to the trial judge to take the view that silence on the part of the defendant and her husband was misleading and deceptive if they intended to treat the giving of possession to the franchisee, and/or the erection of the glass door, and/or the erection of the Battery World sign as being in breach of the lease, but did not say so.
Clause 16.3 of the lease, which I have set out above, could not be properly relied upon as providing any defence to the claim for relief pursuant to the Fair Trading Act. If the trial judge were to make a finding that the silence of the defendant and her husband amounted to misleading and deceptive conduct that contravened s14(1), it would certainly be open to the trial judge to make an order pursuant to s41(4)(b) that would overcome the loss of the plaintiff's legal right to exercise the option for renewal.
In my view the plaintiff is on much weaker ground in seeking equitable relief against forfeiture than it is in pleading estoppel, and relying upon the Fair Trading Act. In Finch v Underwood (1876) 2 Ch D 310, a tenant who had breached a covenant to repair, and who had purported to exercise an option for renewal that was only exercisable if his covenants had been duly performed, was held not entitled to a renewed lease. At 314, James LJ said, "The case is one of condition precedent; it is not a case of forfeiture, and none of the considerations applicable to forfeiture apply to it". At 315, Mellish LJ said, "The tenant must take the covenant to renew as he finds it; if it contains conditions precedent he must comply with them before he can claim the benefit of it, and if he has not done so a Court of Equity cannot relieve him". Collins J followed that case on that point in Parker v Greville (1908) 28 NZLR 164 at 166. On appeal to the Privy Council, it was not disputed that relief against forfeiture was not available: Greville v Parker [1910] AC 335 at 340. There are dicta in later cases to the same effect: Samuel Properties Ltd v Hayek [1972] 2 All ER 881 at 888 (Whitford J); Evanel Pty Ltd v Stellar Mining N/L [1982] 1 NSWLR 380 at 386 (Wootten J). It may be that relief against forfeiture is now more readily granted in other situations: Shiloh Spinners Ltd v Harding [1973] AC 691; Legione v Hateley (1983) 152 CLR 406 at 447. Mr Porter QC submitted that it was arguable that a right to exercise an option to renew a lease was at least akin to an interest in land; that equity would relieve against the forfeiture of an interest in land; and that equitable relief against forfeiture must therefore be available in situations like the present. Some degree of support for that argument can be found in the old case of Eaton v Lyon (1798) 3 Ves 690, 30 ER 1223, which contains an obiter statement to the effect that such relief is available when a tenant fails to exercise an option within a stipulated time. Given that Finch v Underwood was a decision of the English Court of Appeal, that there appears to be no decision to the contrary, and that I think it would very ambitious to argue that what James and Mellish LJJ said on the relevant point was contrary to principle, I do not think the claim for relief against forfeiture adds any significant weight to the submission that there are serious questions to be tried in this action. However I consider that the issues raised in relation to estoppel and the Fair Trading Act warrant a conclusion that there are serious questions to be tried. I will therefore proceed to the question of the balance of convenience.
Under the lease, the plaintiff was permitted to use the premises for "Retail sale, distribution and warehousing of lead acid and other batteries and ancillary uses" but not for any other purpose. After the dispute as to the exercise of the option arose, the franchisee moved out and the glass door and the Battery World sign were removed. I received uncontradicted evidence that the plaintiff is now using the premises for the storage of lead acid batteries, marketing material, and point of sale material. I have no evidence as to whether it was storing those things there before the departure of the franchisee, or whether they were brought there later. It was the defendant's intention to take possession of the premises on 1 November 2002, following the expiry of the lease. Had she done so, the plaintiff would have lost the use of the premises for storage purposes, and might well have incurred expense making alternative arrangements. It would also have lost the right to use the premises for retail purposes, and thereby lost the chance of profiting from carrying on a business there, and lost the chance of receiving rent from subletting the premises with the consent of the defendant.
The defendant proposed that a company controlled by her would carry on a retail battery business on the premises. There was uncontradicted evidence that stock for the new business had left Melbourne to be in storage in Hobart ready to be delivered to the premises on the morning of 1 November; that a manager and an administrative officer had been employed; that arrangements had been made for the printing of stationery, business cards and brochures; that electricity and telephone connections had been arranged; and that a utility had been purchased for the new business. No evidence was given as to when those arrangements were made. They were first disclosed in an affidavit of the defendant's husband sworn on 28 October. Whenever the arrangements relating to the new business were made, they were made at a time when the defendant had no reason to expect that the plaintiff would vacate the premises willingly. There had been no promise to hand over the keys, or to give her vacant possession, despite many written requests. As at 10 September, the defendant's husband was conducting negotiations with a view to the premises being leased to the franchisee in place of the plaintiff. In a letter of 24 September, the defendant's solicitors told the plaintiff that they were considering an action to obtain a declaration that the exercise of the option was invalid. Whenever the arrangements in relation to the defendant's company were made, the defendant ought to have anticipated, and might well have anticipated, that there would be a legal dispute as to whether the plaintiff should vacate the premises, possibly involving defended court proceedings. Granting an injunction in favour of the plaintiff meant that the premises would not be available for the defendant's company to commence its new business there; that it would either have to find alternative premises or have to abandon its plans; and that it would lose the chance of profiting from any goodwill attaching to the premises, where batteries had been sold for some years.
The defendant's husband said in an affidavit that, in his capacity as a trustee of the Davnat Superannuation Fund, and with the defendant's authority, he had agreed with her company that it could commence to occupy the premises on 1 November. He has been a bankrupt since 22 August 2002, and was therefore prohibited by the Superannuation Industry Supervision Act 1993, s121, from acting as a trustee of the superannuation fund. It was unlawful for him to enter into any agreement with his wife's company. But I do not think his contravention of s121 is of any present significance. The defendant was quite capable of implementing the arrangements in relation to her company without any involvement on his part. I therefore consider his bankruptcy to be insignificant.
Whatever the outcome of the application for an interlocutory injunction, one party had to be denied possession of the premises. The party denied possession of the premises would have had to change its or her plans, and might have been forced to find alternative premises. If the plaintiff had been excluded from the premises, and later succeeded in the action, its damages would not necessarily have been confined to losses incurred in moving to alternative premises and renting them, since it might also have lost the benefit of any goodwill associated with the original premises and the chance of deriving profits from using the premises. If so, damages would not have been an adequate remedy. The defendant is in a somewhat different position, because the denial of the premises to her would result in possible losses of profits not to her but to her company. The damage suffered by her as a result of her exclusion from the premises, if it ever has to be assessed, can be assessed by reference to the rental value of the property, rather than any loss of profits, loss of a chance of profits, or diminution in goodwill. More significantly in my view, I do not think the commitments undertaken by the defendant's company, and the possibility that it will suffer losses as a result of not being able to use the premises, should be given any significant weight. I say that because it was most imprudent in the extreme for that company to undertake any firm commitments when it was unreasonable to assume that the premises would be available on 1 November. For these reasons I decided that the more convenient course was to maintain the status quo, thereby permitting the plaintiff, which had had the right to use the premises for three years, to continue using the premises. The fact that it might have been using the premises for storage purposes only for a short time is not very significant, in my view, because it had been the tenant of the premises since 1999.
Mr Morris submitted that an injunction should be refused because of laches and acquiescence on the plaintiff's part since 23 August 2002, when the defendant's solicitors first asserted that the option had not been validly exercised. I reject those submissions. It was appropriate for the plaintiff to take time to consider its position following receipt of the letter of 23 August. It needed to obtain legal advice. It would have been prudent for all alternatives to have been considered, including the possibility of moving to alternative premises. Arrangements needed to be made with the franchisee. I have evidence that negotiations between the defendant's husband and the franchisee were in progress as at 10 October, but I know little about those negotiations. There is no suggestion that anything was said or done on the part of the plaintiff to suggest that it would vacate the premises on 31 October. In the circumstances I do not think an intention to vacate could reasonably have been inferred from the failure of the plaintiff to confirm that it would be vacating the premises. There was an interval of just under two months between the sending of the letter of 23 August and the filing of the writ and interlocutory application on 22 October. For some of that period, the plaintiff could well have been anticipating that the defendant would institute proceedings, as suggested in her solicitor's letter of 24 September. Given all of those circumstances, I concluded that this was not a proper case for an injunction to be refused because of laches and/or acquiescence.
I came to the conclusion that there were serious questions to be tried, and that the balance of convenience favoured the granting of an injunction to protect the plaintiff's occupation of the premises. Accordingly, the plaintiff having given the usual undertaking as to damages, I ordered that, until judgment or earlier further order, the defendant, the trustees of the Davnat Superannuation Fund, the trustees of the Davnat Unit Trust, and the servants or agents of each of them be restrained from re-entering the premises at 67 Warwick Street, Hobart or otherwise disturbing the plaintiff's possession of those premises.
0
10
0