Coordinator-General Department of Intrastructure and Planning v Elliott as TTE - [2012] QLC 31

LAND COURT OF QUEENSLAND

CITATION:Coordinator-General, Department of Infrastructure and Planning v Christian Winston Elliott as TTE & Tammy Renee Pty Ltd as TTE [2012] QLC 0031
PARTIES:Coordinator-General, Department of Infrastructure and Planning
(Applicant)
v
Christian Winston Elliott as TTE & Tammy Renee Pty Ltd as TTE

(Respondents)

FILE NO:AQL064-11
DIVISION:General Division
PROCEEDING:  Determination of Preliminary Point
DELIVERED ON:                  22 June 2012
DELIVERED AT:                   Brisbane
HEARD AT:Brisbane
HEARD ON:  17 May 2011
MEMBER:Mr WL Cochrane

ORDERS:1. There had been no effective exercise of the option for renewal of the lease.
2.There had been no waiver by the lessor’s of compliance with the terms of the lease.
3.At time of resumption Wright and McWhinney were Holding Over on the basis of a month to month tenancy.

CATCHWORDS: Leases, Extensions, Waiver, Option.
APPEARANCES: Mr EJ Morzone of Counsel, instructed by Clayton Utz for the applicant.
Mr PJ Favell of Counsel, instructed by H Drakos & Co for the respondent.

This is a preliminary determination in a matter which requires assessment of compensation payable consequent upon the resumption of land described as Lot 24 RP 11639, County of Stanley, Parish South Brisbane (Title Reference 16100215) which land is otherwise located at 489 Stanley Street South Brisbane.
The land was resumed pursuant to the powers given to the Coordinator-General, by the Acquisition of Land Act 1967.
The land at the time of resumption was owned by the Christian Winston Elliott as TTE under Instrument Number 708765425 and by Tammy Renee Pty Ltd as TTE under Instrument Number 708765425 as tenants in common and the resumption was for the purposes of the development of the Queensland Children’s Hospital.
The land was resumed by Taking of Land Notice (Number 24) 2008 which was published in the Queensland Government Gazette on 31 October 2008.
At the date of resumption Colin Victor McWhinney and Peter Douglas Wright (hereafter McWhinney and Wright) occupied part of the resumed premises.
The preliminary point for determination is expressed in the Order setting the matter down as follows:
“It be determined as a preliminary point in the application, whether, as at the date of the resumption being 31 October 2008, the lease between the respondents and Colin Victor McWhinney and Peter Douglas Wright over part of Lot 24 on RP 11639 was:
i) a month to month tenancy; or
ii)a lease that expired on 31 May 2011 or some other date and, if so, what date.”
It was uncontentious between the parties that McWhinney and Wright had, previous to the resumption, been the lessees of the premises under a lease for a period of three years which had commenced on 1 June 2005 and contained an option to renew for a further three years.
Page 1 of 30 of the lease provides that the lease expiry date is 31/05/2008 subject to the options set out on page 26.
If one goes to page 26 one there finds Clause 16-Options.
That clause relevantly provides at 16.1 as follows:
“16 OPTION
16.1 Option for further term
If the Tenant:
16.1.1no earlier than six (6) months and no later than three (3) months prior to the expiration of this Lease gives written notice to the Landlord that it wishes to extend this Lease for a further term; and
16.1.2has at all times up to the date of expiration of the term of this Lease complied punctually with its obligations under this Lease.
Then the Landlord will grant to the Tenant an extension of this Lease for a further term on the following conditions.
16.1.3the further term of the lease will be the period referred to in Item 7 of the Reference Data;
16.1.4the rent for each year of the further term will be determined in accordance with cl. 3.2;
16.1.5the terms and conditions will be the same as the terms and conditions of this Lease except for this cl. 16.1 which will be deleted; and
16.1.6the Tenant will pay all costs of the Landlord including the legal costs of the Landlord calculated on a solicitor and own client basis of and incidental to the grant of the further term of this Lease.”
The lease also contains clause 12.2 which provides as follows:
“12.2 Non-Waiver
No delay or omission to exercise any right power or remedy accruing to the Landlord upon any continuing breach or default under this Lease impairs any right, power, or remedy of the Landlord and it will not be construed to be a waiver of or acquaintance in any continuing breach or default or of or in any similar breach or default occurring subsequently; and no waiver of any single breach or default will be deemed a waiver of any earlier or later breach or default. Any waiver, permit, consent, or approval of any kind or character of any breach or default under this Lease or any waiver of any provision or condition of this Lease must be in writing and will be effective only to the extent set out in the written waiver. All remedies either under this Lease or by law or otherwise afforded to the Landlord are cumulative and not alternative.”
Earlier Orders were made in this matter as a consequence of which affidavits were filed sworn by Mr McWhinney and by Mr Dwyer solicitors for the applicant. There are also affidavits sworn by Mr Vass and Mr Elliott filed by the respondent. Each of Mr McWhinney, Mr Elliott and Mr Vass were required for cross-examination.
The Court also heard from Mr Andrew Milton Stove who is a departmental officer who had responsibility for the Children’s Hospital Project relating to compulsory acquisition and compensation matters. Mr Stove was the author of some correspondence which had been exhibited to the affidavit of Mr Elliott.
As Counsel for the applicants submitted in his written outline of submissions:
“4. The issue in contention is whether McWhinney and Wright:
(a)as a result of correspondence forwarded to the landlord in May 2005, effectively renewed that option or, alternatively, negotiated a fresh lease of the premises for a further period of three years such that as at the date of resumption the premises were subject to a three year leasehold interest; or, alternatively
(b)merely held over occupation such that as at the date of resumption they held the premises only on the basis of a month-to-month tenancy.”
It was also uncontentious between the parties that:
“(a)McWhinney and Wright failed to give written notice to the landlord that they wished to extend the lease for a further term within the time stipulated in Clause. 16.1.1;
(b)McWhinney and Wright attempted to renew the option outside the option period by a letter of 5 May 2008, less than three months prior to the expiration of the lease.”[1]
[1] Applicant’s Outline of Submissions paragraph 8 and the respondent’s Outline paragraph 4.
Subsequent to the failure to exercise the option within the time required, a number of events occurred.
Those events are not necessarily agreed between the parties but, because of the view which I take of the effect of those events, even if proven, it is unnecessary for me to resolve the dispute between the parties as to the accuracy or veracity of the contentions and the evidence supporting them.
What is not contentious is that after the failure to exercise the option and subsequent to a discussion with a Mr Vass, a person representing the lessors, McWhinney and Wright prepared a further letter, clearly pre-dated and signed bearing the date of 20 February 2008 which purported to exercise the options set out in the lease.[2] That letter was received by the respondents.
[2] See Exhibit CVM-6 to the affidavit of McWhinney.
The case for Wright and McWhinney was to the effect that Mr Vass had authority to act for the lessors, was attempting to assist them to take whatever steps were necessary to effect the exercise of the option (even out of time) and, in effect, waived any requirement for compliance with the option clause and, it must be said, waived any compliance with the waiver provision set out in clause 12 of the lease.
The question for the Court is whether such waiver occurred and was effective.
The exact circumstances of the creation of the later letter (pre-dated) remain unclear with McWhinney and Wright contending that it was prepared at the behest of Mr Vass and Mr Vass disavowing that assertion and counter claiming that it was McWhinney who made the enquiry about backdating a letter for the purpose of exercising the option.[3]
[3] See paragraph 12 of the Statutory Declaration of Vass, Exhibit 11.
Determination of this matter will require answers to three particular questions namely:
1. What is the effect of the letter “dated” 20 February 2008?
2.What is the effect of the issue of invoices from June 2008 for rent reflecting a 4.2% CPI rise over the rent payable immediately prior to the end of the lease term?
3.Has there been a waiver by the lessor’s in accordance with Clause 12.2 of the lease or at all?
Clearly the letter of 20 February 2008 was misleading and deceptive. It was intended to create the impression that the lessees had exercised the option to renew the lease prior to the expiry of the period within which they were entitled to do so. It is a dishonest document.
I should immediately acknowledge that no one on behalf of the lessees sought to submit to the Court that the letter had been created on the date it bore, namely 20 February 2008. It is sufficient to point out that at some point the lessees had become aware of a failure by them to properly exercise the option to renew the lease and at the time of that happening the nature of their tenancy would after 31 May 2008 revert to that of a tenant at will on a month to month basis.
Mr McWhinney as a Practicing Accountant and a previous property owner is clearly not inexperienced in commercial matters and may be taken to be aware of the need for compliance with the provisions of lease documents.
It should be noted as Mr Morzone sets out in his written submissions that the Coordinator-General (applicant) has no particular interest in asserting one view or the other. It has promoted the McWhinney and Wright version so as to ensure the issue is fully and properly ventitlated and tested before the Court.[4]
[4] Applicant’s Outline of Submissions page 4 paragraph 23.
It is relevant to note, as Mr Elliott in his evidence pointed out, that Mr McWhinney (then in partnership with one Peter Trounce) had previously been the registered proprietor of the subject property who had sold it on to the current respondents.
As Mr Elliot put it in his evidence, explaining that at the time of the exercise of the option, the owners were not particularly open to renewal of the lease if the legality of the apparent lateness of the exercise of the option could be overcome because, as he put it:
“Definitely because they were on a ridiculously low rate which we had agreed to because that was part of the conditions when we purchased the building, because we purchased the building off McWhinney.”[5]
[5] T. 1-61 L50-55.
Mr Elliott also told the Court that upon receipt of the misdated letter of February 2008 his advice to Mr Vass was to the effect that, having received the second letter of alleged exercise of option, they would forward them on to their then solicitors Hopgood and Ganim and they could decide what to do with them.
I am satisfied from the evidence of Mr Elliott as one of the principals of the respondent landowner that they were disinclined to allow any exercise of the option outside the strict terms of the lease because of the apparently advantageous terms which the lessees had been able to extract from the respondents in the course of negotiations for the purchase of the subject property.
An issue then arises with respect to the holding over provisions pursuant to the terms of the lease.
Clause 14.8 provides:
“14.8 Holding Over
If the Tenant with the consent of the Landlord remains in occupation of the Premises after the expiration of the term or further term of this Lease then:
14.8.1the Tenant will be a tenant from month to month of the Landlord of the Premises on the terms of this Lease so far as they are applicable to a monthly tenancy;
14.8.2the monthly tenancy may be determined by either party in the manner prescribed by Div. 4 of Part VIII of the Property Law Act 1974; and
14.8.3the rent payable in respect of the monthly tenancy will be the amount of Rent payable monthly under this Lease immediately prior to the expiration of the term or further term and will be payable in advance.”
That Clause becomes relevant because the lessees now contend that the issuing of an amended rent invoice including an adjustment for CPI movements constitutes a waiver by the lessor of the terms of the lease.
I also note, as an aside, that the lease at Clause 14.1 contains a provision making time to be of the essence. That Clause provides:
“14.1 Time to be of the Essence
Time is essential for all obligations of the Tenant in this Lease. The Tenant indemnifies the Landlord against all losses, costs, and expenses which the Landlord may sustain or incur as a consequence of any failure by the Tenant to perform and observe on the due date any obligations on its part contained or implied in this Lease.”
Leads Plus Pty Ltd v Kowho Intercontinental Pty Ltd (2000) NSW SC 459 (18 May 2000) per Young J was a case which a tenant failed by only (arguably) one day to exercise an option for renewal of a lease and where an application was brought for relief against forfeiture.
In the course of his decision Young J observed:
“As to relief against forfeiture, Mr Cashion SC conceded that whilst there has been some academic writing in the area there is not to his knowledge any reported case where a Court has ever granted relief against forfeiture to a tenant who had failed to exercise an option to renew a lease in due time. However, he put that such an order could be made as a matter of principle and there is an arguable case that it should be made in the instant proceedings.”
The proceedings referred to above were interlocutory and not final.
Elsewhere in the decision the following observations are made:
“15That, however, is not the type of relief against forfeiture that is being considered in the instant case. The type of forfeiture that is being considered here is one where the plaintiff has possession of property and an event has occurred which has caused that property to be forfeited or lost at law. In certain events equity will intervene so that that loss can be reversed.
16The prime instance of this type of relief against forfeiture is where common law regards a covenant as having to be strictly and literally performed, but equity considers that it is enough if it is really and substantially performed according to the true intent and meaning of the parties. Accordingly, although at law a time clause may be what common lawyers call a condition so that a contract will be able to be terminated if the condition is not complied with, equity would prima facie regard a time clause as being merely permissive, though would sometimes require compensation as a term of giving relief. Before the Judicature Act reforms, the person seeking to rely on the equitable rule would have to commence proceedings in a Court of equity for relief against the operation of the common law. After those reforms s 13 of the Conveyancing Act, 1919 would apply with reference to time so that the former equitable doctrine has become part of the general law.
17I use the example of time because there are some situations where, in equity, time is also essential. That is what is often referred to in a situation where time is of the essence of a contract. Where time is essential in equity as well as in law, equity will ordinarily give no relief at all because the true intent and meaning of the parties is that time is essential.
18In the instant case it is conceded by the tenant that time was essential with respect to the exercise of the option. Accordingly, ordinarily the present type of relief against forfeiture would not be available.
19However, in Australia (though not in England) in recent years courts have indicated that they may in some circumstances be prepared to go a little further with the second type of relief against forfeiture. Even if there is a condition which is essential not only in law but essential in equity, and even though equity would not grant specific performance because a time condition which is essential in equity had been breached, the Court, notwithstanding, may still make an order for relief. However, it will do this only in exceptional circumstances: see particularly Legione v Hateley[1983] HCA 11; (1983) 152 CLR 406, 449. As Mason and Deane JJ say at that page, "Whether the exceptional circumstances exist in a given case hinges on the existence of unconscionable conduct".
20There is great doubt that even if this principle does apply it can operate in a situation where what is forfeited is the equitable interest in property that exists under an option to renew a lease prior to the exercise of the option. There is discussion of this in the article by Professor A G Lang, "Forfeiture of Interests in Land" (1984) 100 LQR 427 at 449 and following.
21The view that I have tentatively taken and which is, I think, reinforced by the judgment of Peter Murphy J in Hillier v Goodfellow(1988) V Conv R 54-310, is that equity does have jurisdiction to make such an order but one must find that there is unconscionable conduct before one can exercise that discretion.
22The cases on relief against forfeiture generally have been far more sympathetic to a plaintiff whose misfortune has come about as a result of accident or surprise rather than one that has come about through negligence. Indeed the view that was taken in the 19th century commencing with the attitude of Lord Eldon and which is still much in vogue in England today is, as Sir John Leach MR put it in Harries v Bryant[1827] EngR 836; (1827) 4 Russ 89, 91; [1827] EngR 836; 38 ER 738:
"Ignorance is considered to be wilful, where a person neglects the means of information, which ordinary prudence would suggest; and accident is not unavoidable, which reasonable diligence might have prevented."”
Having considered all of the factors in that case which was, it must be remembered an application for an injunction to prevent immediate forfeiture of the lease, His Honour came to the following view:
“27In all these circumstances, is there a sufficiently arguable case and does the balance of convenience favour the grant of an injunction so far as the relief against forfeiture case is concerned?
28 In my view the answer to these questions is "No". The failure to exercise the option was purely a matter of the tenant failing to act with reasonable diligence in managing its own affairs. It was in no way the fault of the landlord nor is the landlord going to gain a windfall of any great moment as a result of what happened. Even if the facts are found in the plaintiff's favour the chances of the plaintiff being successful at the trial to my mind appear to be merely speculative. Furthermore, to grant an injunction would have the effect of compelling the landlord to have the plaintiff in its premises after the agreed period for lease had come to an end, so that it would be more than merely preserving the status quo.”
The facts in the present case are very similar to those considered by Young J in the Leads Plus decision. The failure to exercise the option in time was in no way contributed to by the lessor. It occurred, presumably, as a result of some oversight or failure by the lessees.
It is clear from the evidence and a careful perusal of the affidavit material which has been produced in this case that there are serious inconsistencies between witnesses for the parties.

It is also passably clear that recollections are confused and inaccurate.
Pages were tendered from what is described as Mr Vass’s day runner notepad. As Counsel for the applicant observes in his supplementary submissions some doubt must be raised about the accuracy of that pad. It is inconsistent and in some respects does not backup what Mr Vass himself has said in oral evidence.
That said, I did not form the view that Mr Vass was deliberately dishonest although it must be acknowledged, as Counsel for the applicant submits, that Mr Vass himself has an interest in the outcome and acts in the owners best interest.
Similarly, the evidence of Mr McWhinney was not entirely consistent either with the evidence given by Mr Stove.
Mr Stove was an independent witness with no particular interest in the outcome of any debate between Mr Vass and Mr McWhinney as to whether the option was exercised.
Exhibit CWE-2 to the affidavit of Elliott reflects a conversation between him and Mr McWhinney in which Mr McWhinney asserted that the 20 February 2008 letter was created only because an original and apparently correct letter exercising the option for renewal had been misplaced by Mr Vass.
Nowhere else in the evidence does it arise that Mr McWhinney contended that an original effective exercise of the option in writing had been misplaced and that he was simply responding to a request from Mr Vass to provide a replacement.
It is regrettable, at very least, that such glaring inconsistencies exist between the various witnesses.
Very importantly there is no evidence before the Court of any document in writing acknowledging waiver by the lessor of compliance with the terms or conditions of the lease, so that the Court could come to the view that the lease had been renewed or extended.
In my view that is a very glaring factual matter.
Indeed, the only written evidence which might be relied upon is the issuing of updated invoices for rent which reflect CPI increases.
As I understand matters to be the applicant relies upon the issue of those invoices as evidencing the extension of the lease.
I do not think that those documents go that far.
The invoices were issued by Mr Elliott one of the two trustee owners of the subject property.
Mr Elliott’s evidence what that he issued those invoices and simply adjusted them for the CPI on the basis that there was a CPI rise every year.[6]
“I felt no reason not to give them a CPI rise for that year even though they were on a month to month tenancy.”
[6] T. 1-66 L.33.
He also said that he did that in ignorance of the provisions of the lease relating to a Holding Over situation.[7]
[7] T. 1-66 L.40.
Earlier in his submissions Counsel for the applicant referred me to the decisions in Traywinds Pty Ltd v Cooper.[8]
[8] (1989) 1 Qd R 223.
I find the Traywinds decision of limited use to me because that was a case where the lessor by its conduct had waived a stipulation as to the time for giving of notice and an extension lease doucment had been prepared in the absence of any point being taken about the late exercise of the option. In that case the lessees had paid rent for three months but then vacated early thereby founding a successful claim by the lessor’s for the loss of future rent.
Counsel for the applicant also drew the Court’s attention to the decision in Gilbert J. McCaul (Australia) Pty Ltd v Pitt Club Limited[9] and Duncan Properties Pty Ltd v Hunter.[10] Those two cases are similarly of little direct application in the current case because the Gilbert J McCall case resulted in a finding by the Court where a lessor had purported to accept the exercise of an option and in the Duncan Properties case the Court found that the purported exercise of an option was a counter-offer which had, in that case, been orally accepted by the respondent’s giving rise to agreement for a lease. Neither case is precisely on point with the present circumstances.
[9] (1959) 59 SR (NSW) 122.
[10] (1991) 1 Qd R 101.
I was also referred to a number of other cases to which I have had regard but at the end of the day none of those, in my view, is directly on point with the present case.
Somewhat unusually this is not really the determination of a preliminary point in which one party or the other necessarily carries an onus.
It is intended to clarify the position with respect to the tenancy enjoyed by McWhinney and Wright in the property at the time it was resumed.
For the reasons set out above I find that:
(a)the effect of the letter “dated” 20 February 2008 does nothing to establish the exercise of the option to renew the lease and is of no force or effect it being effectively a dishonest document.
(b)the effect of the issue of the invoices from June 2008 for a rental reflecting the CPI increase over the previous years rental is explained by the evidence of Mr Elliott and does not constitute nor represent any written confirmation of the extension of the lease nor does it evidence any written confirmation that the lessor’s were waiving a compliance with the requirements of the lease.
(c)there has been no waiver by the lessor’s in accordance with Clause 12.2 of the lease or at all.
(d)at the time of the resumption McWhinney and Wright were Holding Over on the basis of a month to month tenancy, the previous lease having expired on 31 May 2011 because there had been no valid exercise of the option to renew the lease.

Orders

1.There had been no effective exercise of the option for renewal of the lease.
2.There had been no waiver by the lessor’s of compliance with the terms of the lease.
3.At time of resumption Wright and McWhinney were Holding Over on the basis of a month to month tenancy.

HIS HONOUR WL COCHRANE
MEMBER OF THE LAND COURT