Core Health Club Pty Ltd v Gillmoore Pty Ltd
[2016] VCC 721
•6 June 2016
| IN THE COUNTY COURT OF VICTORIA | Revised Not Restricted Suitable for Publication |
AT MELBOURNE
COMMERCIAL DIVISON
GENERAL LIST
Case No. CI-14-04099
| CORE HEALTH CLUB PTY LTD | Plaintiff |
| v. | |
| GILLMOORE PTY LTD & ORS | Defendants |
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JUDGE: | His Honour Judge Anderson | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 7 July 2015, 25-27 May 2016 | |
DATE OF JUDGMENT: | 6 June 2016 | |
CASE MAY BE CITED AS: | Core Health Club Pty Ltd v. Gillmoore Pty Ltd & Ors | |
MEDIUM NEUTRAL CITATION: | [2016] VCC 721 | |
REASONS FOR JUDGMENT
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Catchwords: Lease – Tenant operating a fitness centre – Rights granted to the tenant to use car parking on adjacent property – Adjacent property owned by a related entity to landlords – Related company not a party to lease – Redevelopment of fitness centre requiring execution of an agreement for lease and a new lease – Whether the car parking clause in the new lease reflected the common intention of the parties – Whether the new lease should be rectified to include the owner of the adjoining property as a party to the lease – Rectification to correct the carparking provision in the new lease.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A. P. Rodbard-Bean of of Counsel | Champions Lawyers |
| For the Defendants | Ms G. A. Costello of of Counsel | Septimus Jones & Lee Lawyers |
HIS HONOUR:
1Adequate car parking is apparently necessary for the sucessful running of a fitness centre business. This proceeding concerns the arrangements made between landlords and the tenant of premises at 311-313 Nepean Highway, Frankston (“the fitness centre premises”).
2From 1999, companies associated with Mr Joseph Russo have been the tenant of the fitness centre premises. The lease of the fitness centre premises from 2003 to 2013 (“the 2003 lease”) included provision for the clients of the fitness centre to use the car parking facilities on the property immediately to the south at 315-321 Nepean Highway (“the restaurant property”).
3In about October 2011, Mr Russo on behalf of the plaintiff, Core Health Club Pty Ltd, executed an agreement for lease (“the 2011 agreement for lease”), a surender of lease and a guarantee, with a proposed lease attached (“the proposed lease”). On about 30 April 2013, Mr Russo executed a new lease of the fitness centre premises (“the new lease”). The proposed lease and the new lease contained clauses that significantly affected the tenant’s rights to use the car parking on the restaurant property.
4Mr Russo said that he was tricked into signing the 2011 agreement for lease and the new lease by representatives of the landlords, the first two defendants Gillmore Pty Ltd (“Gillmoore”) and Southern Beaches Pty Ltd (“Southern Beaches”) (“the landlords”) and the owner of the restaurant property, the third defendant Restaurant Investments Pty Ltd (“Restaurant Investments”).
5Since 1999, Mr Russo had primarliy dealt with Mr Peter Gillon who was the driving force behind each of the defendant companies. In 2013, although Mr Gillon executed the new lease on behalf of the landlords, he was then becoming unwell. He is now very ill and was incapable of giving evidence at the trial.
6Mr Russo entered into the 2011 agreement for lease and the new lease as part of an arrangement to redevelop the fitness centre as a joint venture with Mr Gillon and his companies. Mr Russo expended about $460,000 on the redevelopment in reliance upon the continuation of the car parking provisions contained in the 2003 lease.
7Prior to executing the new lease in 2013, Mr Russo had for about 18 months been dealing with other persons in the defendant companies apart from Mr Gillon. These persons included the General Manager Mr Peter ten Dam and the Property Manager Mr Peter Sprekos, who gave evidence at the trial on behalf of the defendants.
8The plaintiff had on 17 June 2014, lodged a caveat over the title to the restaurant property claiming an interest “as grantee of an easement…. Pursuant to an agreement made on or about 21 October 2011 between the caveator [the plaintiff] and the registered proprietor [Restaurant Investments]”.
9When the third defendant took steps to have the caveat removed, the plaintiff issued this proceeding. By the action, the plaintiff effectively seeks to “rectify” the 2011 agreement for lease and the new lease to correct the “mistake” made by the inclusion of the new car park provisions, or as appropriate relief in response to the defendants’ misleading and deceptive conduct, so that –
a.the provision for car parking reflects what was provided for in the 2003 lease;
b.Restaurant Investments is made a party to the new lease and, as well as the landlords, is to be bound by its terms; and
c.the new lease refers to the restaurant property.
10The defendants contend that:
a.the plaintiff voluntarily executed the 2011 agreement for lease and the new lease containing the more restricted car parking provisions;
b.Restaurant Investments, as the owner of the restaurant property, was not a party to the 2003 lease, the 2011 agreement for lease or the new lease and the landlords were not in a position to bind it to provide car parking on the restaurant property;
c.no representations were made by the representatives of the defendants prior to the plaintiff’s execution of the 2011 agreement for lease or the new lease which would constitute misleading and deceptive conduct or justify rectification;
d.the plaintiff had not expended money on the redevelopment of the fitness centre in reliance upon the continued car parking on the restaurant property as set out in the 2003 lease;
e.no relief should be granted as the plaintiff’s car parking rights were adequately protected by the section 173 agreement with the local municipality recorded on the Certificates of Title of the fitness centre premises and the restaurant property;
f.even if the plaintiff were successful, the relief sought is much broader than the circumstances would require;
g.the 2003 lease had created, at most, a contractual and not a proprietary right, which could not be protected by a caveat.
11The proceeding requires determination of the following matters:
a.the nature of the tenant’s car parking rights on the restaurant property and whether they were proprietary rights or simply contractual rights and whether the rights created were enforceable against the owner of the restaurant property, as it was not a party to the 2003 lease, the 2011 agreement for lease or the new lease;
b.whether the plaintiff through Mr Russo only executed the 2011 agreement for lease and the new lease and/or expended money redeveloping the fitness centre because Mr Russo believed that the 2011 agreement for lease and the new lease contained the same car parking provision on the restaurant property as the 2003 lease, or representations were made as to what the proposed lease attached to the 2011 agreement for lease and the new lease contained, which constituted misleading or deceptive conduct by the defendants;
c.should the 2011 agreement for lease and/or the new lease be rectified, either in the manner sought by the plaintiff, or otherwise;
d.should the plaintiff’s caveat be removed from the title to the restaurant property.
Background facts
12Mr Russo had a background as a builder and later running fitness centres. In late 1999, he heard that the fitness centre at Frankston was in financial trouble. Together with his business partners, Mr Russo spoke with Mr Gillon about the possibility of taking over the fitness centre.
13Mr Russo’s company took over the running of the fitness centre business and reached agreement with Mr Gillon for a lease of the fitness centre premises and plans to upgrade and renovate it. In 1999, the fitness centre was housed in two separate buildings and included a covered pool and some car parking.
14At the end of 1999, Mr Gillon was a director and shareholder of a number of companies forming part of the Gillon Group including:
a.Southern Beaches, the owner of 309 Nepean Highway, Frankston which contained car parking used by the fitness centre business and included in the leased premises;
b.Gillmoore, the owner of the fitness centre premises at 311-313 Nepean Highway; and
c.Restaurant Investments, the owner of the restaurant property at 315-321 Nepean Highway.
15The General Manager of the Gillon Group, Mr ten Dam said that, in relation to the companies in the group, Mr Gillon “oversaw everything. He was the ultimate decision maker…with respect to all matters…the skipper of the ship”.
16In 1999, Cyber Bay Pty Ltd (a company in which Mr Russo had an interest) leased the fitness centre premises including the car parking area on 309 Nepean Highway. In 2001, Mr Russo and Mr Gillon agreed upon a redevelopment of the fitness centre premises. This involved:
a.converting the structures on the property into one building by demolishing the pool and linking the existing buildings;
b.the plans being drawn up by architects engaged by Gillon Group in consultation with Mr Russo and his business partners;
c.the construction work being completed by Wentworth Constructions Pty Ltd (“Wentworth Constructions”), a further company associated with Mr Gillon and under his control;
d.the cost of the project estimated at $1.75m. This was to be funded by Gillon Group and would be reflected in a significantly increased rental (from about $150,000 per annum to over $250,000 per annum).
17Mr Russo said that Mr Gillon was familiar with the operation of fitness centres as, at that time, he operated centres at Brighton and East Bentleigh. On 9 February 2001, Mr Gillon wrote, on Gillon Group letterhead, to Mr Russo’s business partner with proposals for “revamping Frankston”. This letter noted Gillon Group’s belief that “the new centre should ultimately have, with the combined use of the restaurant car park, somewhere between 250 to 300 car parks. This will be expensive but absolutely necessary. As a beginning, 200 car parks should do until you reach 3,500 – 4,000 members”.
18From the beginning of their association, Mr Gillon had referred to the restaurant property as being “owned” by him, and to it as “his restaurant” and “his car park”. In fact the restaurant property was leased to persons who operated the restaurant. There was extensive car parking on the restaurant property, including above ground parking between the restaurant and the fitness centre and an underground car park to the east and north east of the restaurant. The car parks on the properties owned by Restaurant Investments and Southern Beaches are shown on the plan attached to these reasons as Schedule A.
19On about 12 December 2001, an agreement for lease was executed by the landlords and Lambast Pty Ltd, a company of Mr Russo and a new business partner. This agreement for lease, and all subsequent lease documents, were drawn up by Gillon Group’s lawyers, Septimus Jones & Lee. There was a guarantee and a proposed lease attached to the agreement for lease.
20Mr Russo said that it took approximately 12 months to obtain the necessary approvals for the redevelopment from the Frankston City Council (“The Council”). The Council required as a condition of the planning permit dated 21 December 2001 for the “indoor recreation facility” and in order to “vary the car parking requirements of clause 52.06 of the Frankston Planning Scheme”, that “Prior to the commencement of the use approved under this permit the owner must enter into an agreement under section 173 of the Planning and Environment Act with the Responsible Authority to provide [that] 36 car parking spaces located at the lower level of the existing building on no. 315-321 Nepean Highway, Frankston, shall be made available at all times for use by the customers of the Indoor Recreation Facility at 309-311”.
21The permit conditions also noted that, “any future use of no. 319 [315]-321…must take account for the provision/shared use of 36 car parking spaces on that site for the use of the patrons using the Indoor Recreation Facility at 309-313” and required the erection of signs on the restaurant property directing fitness centre patrons to park on the restaurant property.
22The Agreement under section 173 was executed on 6 May 2003 between Frankston City Council, Gillmoore and Restaurant Investments (“the section 173 agreement”). By the section 173 agreement, Restaurant Investments agreed that “(36) car parking spaces will be made available at all times in the lower car park level on…315-321 Nepean Highway, Frankston for the use of staff and patrons of the Indoor Recreation Facility”.
23It was noted that, “The obligations of the owners under this agreement [Gillmoore and Restaurant Investments] will take effect as separate and several covenants which are annexed to and run at law and equity with the subject land”. The Council was entitled to make “application to the Registrar of Titles to make a recording of this Agreement in the Register on the Certificate of Title of the subject land”. On 25 May 2004, the section 173 agreement was registered on the titles to both 311-3 and 315-21 Nepean Highway.
24After the redevelopment works were completed, the parties, on 1 May 2003, executed the 2003 lease. The landlords were Gillmoore and Southern Beaches and the tenant was Trainstation Pty Ltd (“Trainstation”), the new name for Lambast Pty Ltd. Although the proposed lease attached to the Agreement to Lease in December 2001 had not referred to car parking on no. 315-321, this was included in the 2003 lease.
25Clause 18 of the 2003 lease provided as follows:
“18. CAR PARKING
Notwithstanding anything to the contrary in the lease, the Lessor agrees that the Lessee shall have the right to use for the purposes of parking cars and other motor vehicles only at 315 Nepean Highway
18.1all the car parking spaces located in the basement between the hours of 7:00am and 10:30pm everyday; and
18.2not more than 29% of the car parking spaces located on the ground level between the hours of 5:30pm and 10:30pm everyday.
A copy of the Car Parking plan is attached hereto”.
26The car parking plan was attached to the 2003 lease and showed the underground and above ground parking spaces on the restaurant property. The underground car park had 36 spaces, as referred to in the planning permit and the section 173 agreement. The reference to “at 315 Nepean Highway” was handwritten into the printed document by Mr Russo.
27The annual rental of $350,000 per annum referred to in the schedule to the 2003 lease was struck after the completion of the redevelopment and the total cost of the works, including final fit-out, was known and by applying the formulae set out in the agreement to lease. On 19 December 2006, Mr Russo bought out his business partner and the lease was transferred from Trainstation to the new tenant, Dalzon Pty Ltd (“Dalzon”), later Core Health Club Pty Ltd.
28After this time, Mr Russo and Mr Gillon discussed a further redevelopment of the fitness centre. The discussions included the possibility of Mr Russo purchasing the restaurant property, although this proved not to be financially feasible. The fitness centre premises included a small basement car park with 17 spaces. It was likely that any further redevelopment would involve the loss of this car parking and Mr Russo and Mr Gillon considered what replacement parking was available.
29Although Mr Russo was hoping that the Gillon Group might fund the further redevelopment and recoup the cost through an increased rental over an extended period, Mr Russo and Mr Gillon agreed that Mr Russo would contribute 30% of the cost of the redevelopment. As with the earlier project, it was anticipated that the construction work would be carried out by Wentworth Constructions.
30The arrangement for the further development was not reduced to a formal written agreement. The redevelopment was carried out on the basis of matters discussed between Mr Russo and Mr Gillon, and with Mr Craig Selleck who was Mr Gillon’s son-in-law and the “hands-on” person at Wentworth Constructions. For the redevelopment, Mr Russo said that apart from providing funds for a share of the cost, he accepted further responsibilities including negotiating town planning approval through the Council and arranging some of the sub-contractors.
31The general arrangement was recorded in an email from Mr Russo to Mr Gillon on 15 September 2009. In the email, Mr Russo suggested that he “organise town planning and construction plans myself”. He stated that he thought “there will be no major problems with town planning. The Council’s only question was car parking and when I explained the car park downstairs under Foodstar is for the gym and I share the car park above with Foodstar there would be no major problems”. Mr Russo asked Mr Gillon for a “letter of official approval from ‘Gillon Group’ as the owner that you give me permission to proceed with the works”.
32Mr Gillon supplied a handwritten letter dated 19 September 2009 under the names of Gillmoore and Southern Beaches. The letter read in part, “You have permission to apply for a town planning permit for your tenancy, to improve the overall facility. The underground car park is available to use for additional car parking”.
33Mr Russo engaged a traffic consultant, Mr Evan Boloutis, to prepare a “traffic and parking assessment” for the redevelopment. A copy of the report was provided to Mr Gillon. The report noted that, “Both the Core Fitness Centre and Foodstar restaurant share an on site car parking supply of 206 car spaces. It is understood from discussion with both the Managers of the Core Fitness Centre and Foodstar restaurant that parking across both sites is shared by both establishments. Site observations indicate that this is efficient as the peak periods for the two uses do not coincide concurrently”.
34The report concluded, “it is considered that peak parking demands anticipated to be generated during the peak week day evening periods could be adequately accommodated by the existing on-site parking provision (allowing for the loss of the 17 space basement car park) and available on-street parking spaces in the immediate area”. The planning permit for the redevelopment was issued on 7 May 2010.
35On 25 May 2010, Mr Gillon wrote to Mr Russo about the redevelopment in a letter under the heading – “Restaurant Developments Pty Ltd [sic]/Gilmoore [sic]/Southern Beaches”. The letter included the statement that, “There will be also a cost allowed for car parking once we assess how many cars you will need to satisfy the Council. The shared use with the restaurant will continue and you will use the underground car park, but add security cameras and link to your front desk for monitoring”.
36On 29 July 2011, Mr Gillon sent a fax to Mr Russo which set out a summary of the contributions the parties would make towards the redevelopment. The email noted that, “Our previous agreement was for $850,000 to cover all works, $560,000 we pay, $290,000 you pay. Increased rent $67,500 from completion”. In view of an additional $75,000 of work Mr Russo wanted, the figures were revised so that the Gillon Group companies contributed $608,000 and Mr Russo’s company $317,000 with a total rent increase of $73,300 per annum. As requested, Mr Russo signed the document signifying his agreement. Mr Russo said that, at about this time, Mr Gillon agreed to Mr Russo’s request that the lease be extended for a further 10 years.
37In September or October 2011, Mr Russo said that the plaintiff was asked to contribute a further $200,000 in order that Gillon Group could obtain its finance for the project. In October 2011, Mr Russo attended a meeting with Mr ten Dam, Mr Sprekos and Mr Selleck to hand over a cheque for $228,098.30 and to discuss matters relating to the project.
38Before the meeting, Mr Russo executed a number of documents including an agreement for lease, guarantee, surrender of lease and a proposed lease. The agreement for lease is dated 21 October 2011. The circumstances of the execution of the documents is a matter of controversy because the proposed lease contained a provision relating to car parking which was significantly different from the equivalent clause in the 2003 lease.
39Clause 22.2 of the proposed lease read as follows:
“22.2 Car Park
22.2.1The landlord hereby grants a licence to the tenant to use the car park areas situated at 315 Nepean Highway Frankston and referred to in the attached Car Park Plan, during the term of this lease and any further terms as follows:
(a)all car parking spaces located in the basement at 315 Nepean Highway Frankston between the hours of 7.00 am and 10.30pm every day; and
(b)not more than 29% of the car parking spaces located on the ground level between the hours of 5.30pm and 10.30pm every day.
22.2.2 This licence shall terminate upon the termination or expiration of this lease”.
40Mr Russo said that he was assured that the bundle of documents were a continuation of the same terms as the existing 2003 lease and that there were no differences of substance. Mr Russo said that he was asked to sign the documents as he was going into a meeting to discuss financial and building issues relating to the proposed redevelopment. I shall return to discuss this matter in greater detail.
41It had been agreed that Mr Russo, in addition to the sum in excess of $200,000 he had already contributed, would need to pay a further $228,098.30 so that the Gillon Group could obtain finance for its contribution. Mr Russo brought a bank cheque for $208,098.30 to the meeting at the Gillon Group office.
42Mr Russo said that at the meeting, “we discussed the building works briefly and the fact that I’ve got to pay the money now before they’ve got their finance”. Mr Russo said that he handed over the cheque and they “discussed how the works were progressing”. Mr Russo was told that Gillon Group were “going to get their finance now so we can proceed [with] no interruption to the progress of the works”.
43On 9 November 2011, Mr Sprekos forwarded an invoice to Mr Russo for the amount of the $228,098.30 cheque handed over at the meeting. The invoice was expressed to be for “leasehold improvements, first progress payment”.
44In about December 2011, Mr Russo was informed that Wentworth Constructions was experiencing financial difficulties which ultimately led to the company going into liquidation in February 2012. It was then necessary to agree on how the works would continue and how the parties would meet the expected additional costs resulting from the need to engage a replacement contractor. Mr Russo was reluctant to accept any responsibility for the additional costs.
45On 23 April 2012, Mr Sprekos on behalf of the Gillon Group sent a memo to Mr Russo “to clarify the process to all parties regarding the finalisation of works, capex [capital expenditure] spent to date by both parties and funding arrangements regarding the works underway”. By this stage, Mr Russo had spent $486,788 in respect of the redevelopment of the fitness centre.
46Mr Russo responded on 27 April 2012 that, “I agree in principle with the process as outlined but I see no need for me to sign any agreement…I have at all times acted in good faith and always performed to my word. I have taken Peter Gillon’s word on face value. I did not ask him to sign any documents before I started spending my money. I feel I have been misled. I have already completed my financial end of the deal. I will continue to project manage the job as agreed. I am doing everything possible to keep costs down. I will manage the job at all times in accordance to the Gillon Group’s procedures. I will pay anything over the $608,000 that the Gillon Group has agreed to put in. The only significant costs and time overruns over the course of the job has been due to Wentworth and the Gillon Group. Your obligation is to now fund the job so I can finish it and get back to running my business”.
47An occupancy permit was granted on 3 October 2012. As a consequence, the increased rental became due, totalling $508,967.08 per annum payable at $42,419.92 per month.
48In late November 2012, the new lease was finalised by Gillon Group’s solicitors upon instructions from Mr Sprekos. Mr Sprekos sent the new lease and a surrender of lease to Mr Russo. It will be necessary later to examine closely the email exchanges between Mr Sprekos and the solicitors and the evidence of the telephone conversation Mr Sprekos said he had with Mr Russo after he had sent him the documents for signature.
49In the new lease, the car parking clause read as follows:
“22.2 Car Park
The tenant may, at the invitation of the registered proprietor of the property situated at 315 Nepean Highway Frankston, use not more than 29% of the designated car parking spaces in the first floor basement level on that land between the hours of 11.30am and 3.00pm and between the hours of 5.30pm and 10.30pm every day”.
50Mr Russo acknowledged that he had received the new lease by post before Christmas 2012. He did not return the lease to Gillon Group’s solicitors until about 30 April 2013. He said that in the meantime it lay on his desk. He said he did not read the new lease or receive legal advice. Mr Russo did not notice that clause 22.2 in the new lease was not only different from clause 18 in the 2003 lease, but also was different to clause 22.2 of the proposed lease attached to the 2011 agreement for lease.
51In August 2013, Mr Russo said he had a meeting with representatives of the Gillon Group concerning the potential purchase of the restaurant property. Mr ten Dam initiated the meeting to ask if Mr Russo would be interested in purchasing the property. Mr Russo met with Mr ten Dam and Mr Selleck at Gillon Group’s offices.
52Mr Russo was told at the meeting that the Foodstore [restaurant] lease was coming up and Gillon Group wanted to sell the restaurant property. There was a discussion about price. Gillon Group wanted about $3m and Mr Russo said that the bank would only value it at about $2m. He asserted that, because of the plaintiff’s rights over the car parking on the restaurant property, how could Gillon Group “sell it to anyone else but me?”
53Mr Russo said that Mr Selleck then said, “You have no rights over the property”. Mr Russo responded that he did have, to which Mr Selleck replied in what Mr Russo said was a “threatening tone”, “Read your lease. I’ll put a fence up”. The details of this conversation were confirmed in the evidence of Mr ten Dam, who said he recalled “a comment along those lines”. Mr ten Dam agreed that this was not the way he went about business although he was “not quite sure of the intent of that comment”.
54Mr Russo said that no such suggestion had ever been made to him before. He went home and read the lease and compared it with the 2003 lease and the proposed lease attached to the 2011 agreement to lease. Mr Russo said that he was very angry and he phoned Mr ten Dam. Mr Russo said to him that Gillon Group had “taken away my car parking rights” after he had invested $1.5m. Mr Russo said he was worried by the threats to put up a fence and he wanted his rights back. Mr ten Dam said that “something should be done” and he “will have a look at it” and that “Craig shouldn’t have said that we’d put a fence up”.
55On 3 September 2013, Mr Russo sent an email to Mr ten Dam which read, “I have asked for the lease to be amended as per the original lease in regards to the parking at 315 Nepean Highway. Please note the original copy a licence for the use of the car parking areas. Please note I asked Peter Sprekos for this to be amended. If it is not so [amended] I will refer the matter to my solicitors and initiate whatever legal proceedings to get this deliberate act of cheating rectified”.
56Mr Sprekos was asked in cross-examination whether he recalled “a phone call with Mr Russo where he complained of the leases which were signed and he taking the view that they needed to be amended”, to which he responded, “Yeah, I’ve got a vague recollection of a conversation to that effect”.
57Mr Russo said that he had a discussion with Mr Sprekos at about this time. Mr Russo said he told Mr Sprekos that the car parking clause had been changed “without my knowledge or any discussion”. Mr Sprekos told him that “the restaurant site can’t give you a lease”. Mr Russo said he had an agreement and what was in the lease was “worthless”. Mr Russo was told that the matter would be rectified.
58On 25 September 2013, Mr Russo sent an email to Mr ten Dam expressing his interest in purchasing the restaurant property. Mr Russo said he had talked with a potential investment partner about the purchase. The email to Mr ten Dam concluded, “Thank you for also agreeing to restore the wording in the lease to what it was in my previous lease and your acknowledgement of your commitment to providing those car parking spaces. I look forward to this occurring”.
59On 25 November 2013, Mr Russo sent a follow-up email, “How are the amendments to the lease going?” Mr Sprekos responded on 20 December 2013 enclosing a “car park licence agreement” prepared by Gillon Group’s solicitors, for Mr Russo’s consideration.
60The email apparently had input from the solicitors and read as follows:
“Please find attached a draft licence agreement between Restaurant Investments Pty Ltd and Core Health Club regarding Core Health Club’s right to use 30% of the car parking spaces on the ground level of Restaurant Investments Pty Ltd’s land.
Your current lease agreement (with Gillmoore Pty Ltd/Southern Beaches Pty Ltd) allowing you to use those parking spaces, is not actually with the owner of the land (being Restaurant Investments Pty Ltd), so our solicitors have advised that a licence agreement is required setting out your rights to access 30% of the parking spaces in accordance with the key terms set out in the lease agreement (i.e. 30% of car parking spaces during certain hours). The solicitors have added additional provisions to safeguard both parties’ legal interests as the clause in the original lease agreement was not very comprehensive.
We also wish to confirm that the s. 173 Agreement between Restaurant Investments Pty Ltd and Frankston City Council requires all basement car parks located on land owned by Restaurant Investments Pty Ltd to be made available for exclusive use by Core Health Club’s members at all times. The permits issued by Frankston City Council in relation to Restaurant Investment Pty Ltd’s land now correctly show the basement car parks as forming part of the parking requirements for Core Health Club.
Your current lease agreement will also be amended to reflect the basement car parking as provided for in the s. 173 agreement (which overrides the lease anyway).
Please peruse the attached licence agreement, and if you are satisfied I will arrange for 3 copies of the licence agreement, along with amended copies of the lease agreement, to be forwarded to you early in 2014 for your signature”.
61The draft licence agreement was between Restaurant Investments and the plaintiff and included the following provisions:
a.the licence applied only to “the designated car parks on the ground floor level of the premises”;
b.the licensee was obliged to comply with a number of regulations in relation to the use of the car parks including ensuring that “drivers and passengers in any vehicle…comply with all directions and regulations given or made from time to time by the licensor”, and notifying “the licensor of the registration number of the vehicles that will park in the car parks and keep it informed of changes”;
c.the licensor might “at any time during the term of the licence,… terminate the licence” if the business on the restaurant property or the property itself “or any part thereof” were sold;
d.the car parking was “only permitted” between 11:30am to 3:00pm and 5:30pm and 10:30pm every day.
62A proposed deed of variation of lease between the landlords and the plaintiff was sent by Mr Sprekos to Mr Russo on 15 January 2014. The document:
a.recited that “Part of the Premises being the land described in the Certificate of Title Volume 10672 Folio 346 is subject to the provisions of an Agreement AC879701A made under Section 173 of the Planning and Environment Act 1987 pursuant to which 36 car parking spaces are to be made available in the lower level car park at 315-321 Nepean Highway Frankston for the use of staff and patrons of the Indoor Recreation Facility conducted by the Tenant at the Premises at 309-313 Nepean Highway Frankston”;
b.provided that the lease be varied as follows:
“Amendment to Additional Provision 22.2
The wording that appears hereunder shall replace the wording that appears in the Lease.
‘The Tenant may, at the invitation of the registered proprietor of the property situate and known as 315 Nepean Highway Frankston, use not more than 29% of the designated car parking spaces on the ground floor level of that land, between the hours of 11:30am to 3:00pm and between the hours of 5:30pm and 10:30pm every day’.
This variation shall take effect as if the wording set out above had appeared in the Lease from the start date being 10 October 2012.
Amendment to Annexure: Car Park Spaces
The plan attached to this deed as Annexure A shows the car parking spaces at the property situate at and known as 315-321 Nepean Highway Frankston including those referred to in Recital C of this deed and in Additional Provision 22.2 as varied by this deed”.
No plan was attached to the document.
63Mr Sprekos proposed a meeting “to discuss the licence agreement for car parks and amendments so that all is correctly documented”. Mr Russo responded on 21 January 2014, “I am waiting on solicitor but licence is not satisfactory. It is not what was on original lease. Not worth the paper it is written on. The lease had a licence for the term of my lease. NO if or buts or any other bullshit”. Later that day Mr Russo wrote, “I think the only fair way to proceed is if I lose access to the car parks as agreed the rent should be decreased by the same proportion as my membership will go down”. Mr Russo said there was no agreement. Rather, he was referring to what Gillon Group was “intent on doing”.
64On 28 February 2014, Mr Russo wrote a letter (with legal assistance) to Mr Sprekos which included the following passage:
“Neither of the agreements prepared reflect the agreement reached with the Gillon Group of Companies. All that is required is for clause 18 of the original lease to be reinstated instead of what currently appears as clause 22.2. I don’t know who slipped in clause 22.2 without informing me, or why, but it has never been discussed let alone agreed”.
65On 19 March 2014, there was a four page response, apparently drafted by lawyers, jointly signed by Mr ten Dam and Mr Sprekos. The letter did not address the assertion by Mr Russo that clause 22.2 had been “slipped in…without informing me…it has never been discussed let alone agreed”.
66This matter was not referred to in the lengthy correspondence which followed between the solicitors. Ms Costello raised in her cross-examination of Mr Russo what evidence Mr Sprekos would give of a telephone conversation with Mr Russo in late 2012. Mr Sprekos’s evidence was that he told Mr Russo at that time that he was sending the new lease to him and Mr Russo should pay particular regard to changes to clause 22 of the lease. This evidence will be discussed later in more detail.
What was the nature of the tenant’s car-parking rights on the restaurant property
67The parties suggested that this was the first issue which required determination. I consider that the issue does not have particular significance for the purposes of deciding the principal issues in the case. However, the proceeding was brought in response to an application to remove the caveat over the restaurant property and therefore, whether the caveat should remain or be removed, is a matter I must decide.
68The tenant’s car parking rights had the following features:
a.they were created by a lease between the tenant and the landlords;
b.the owner of the land upon which the car parking was to occur, Restaurant Investments, was not a party to the lease;
c.each of the landlords and Restaurant Investments was part of the Gillon Group and each was under the effective control of Mr Peter Gillon;
d.there were two separate car parking rights –
i.the 36 spaces in the underground car park;
ii.a percentage of the spaces on the ground floor during a particular period, or periods;
e.the underground spaces were a condition of the planning permit granted by the Frankston City Council on 21 December 2001. Both the permit and the section 173 agreement, between the Council and the landlords, provided that the 36 underground spaces “shall be made available at all times for use by” the fitness centre;
f.by the 2003 lease, the tenant was entitled to use “all the car parking spaces located in the basement between the hours of 7:00am and 10:30pm everyday”. It is unlikely, in my view, that this clause was intended to do any more than specifically identify the hours during which there was the likelihood of a competing use. I do not consider that the provision necessarily restricted the tenant’s use at other times. The planning permit and section 173 agreement contemplated unrestricted use by the tenant. The provision was in respect of a facility that was open “24/7”, although the peak periods of use were within the specified hours;
g.the 2003 lease gave access to “not more than 29% of the car parking spaces located on the ground level between the hours of 5:30am and 10:30pm every day”. This provision for car parking was not referred to in the planning permit or the section 173 agreement. It was an important provision, as it was apparent from the evidence of Mr Russo that the outdoor spaces on the ground floor were generally the preference of clients of the fitness centre, rather than parking underground.
69The parties agreed that it was a question of construction whether or not an easement or licence was created by a particular instrument. Plaintiff’s counsel, Mr Rodbard-Bean, submitted that:
a.the underground spaces had been “leased” to the tenant by the 2003 lease, as the tenant had been granted “exclusive possession” of the whole of the basement car park (by the section 173 agreement, although not by the 2003 lease);
b.the tenant’s right to use the ground floor spaces was in the nature of an easement, which might be protected by the lodgement of a caveat.
70Ms Costello submitted that the tenant’s car parking rights as specified in the 2003 lease were better characterized as a “licence”. Ms Costello noted references in Mr Russo’s evidence, and in correspondence, where he had referred to the rights as a “licence” and to the fact that they derived from a “deal” or “contract” with Mr Gillon, rather than stating that they constituted proprietary rights.
71The 2003 lease described the “demised premises” as, “The premises situate and known as part 309 to 313 Nepean Highway Frankston being the premises shown in the attached plans”. No plans of the premises were attached. What was attached was the “car parking plan” referred to in clause 18. This was clearly a plan of the restaurant property at 315-321 Nepean Highway and was specifically described as “site plan, basement plan” and showed both the underground car spaces and the ground floor spaces.
72The caveat dated 17 June 2014 lodged on behalf of the plaintiff claimed an “interest as grantee of an easement…pursuant to an agreement made on or about 21 October 2011 between the caveator [the plaintiff] and the registered proprietor which has been partly performed by the caveator for the benefit of Volume 10672 Folio 346”.
73The certificate of title referred to, Volume 10672 Folio 346, is the land upon which the fitness centre is located. Mr Rodbard-Bean referred to this as the “dominant tenament” and to the title over which the caveat was lodged (the restaurant property) as the “servient tenement”, with the right to park cars on the ground floor, as the easement that had been granted.
74Easements, and leases for any term exceeding three years, are registerable proprietary interests and may be protected by a caveat. Contractual rights, without a proprietary interest, cannot be protected by a caveat. Ordinarily, “a licence to occupy land does not give rise to a caveatable interest” (Bradbrook, MacCallum and Moore, Australian Real Property Law, Fourth Edition 2007 at page 183).
75Generally, damages are the appropriate remedy for breach of contract although some contracts may be required to be specifically performed and a breach of a contractual right may be restrained by the grant of injunctive relief.
76In the present case, Restaurant Investments is not a party to the 2003 lease. It is a related entity to both of the landlords; all three companies are part of the Gillon Group. The person with the authority to make decisions in relation to the companies in the Gillon Group was, at least until recently, Mr Peter Gillon. Restaurant Investments, together with Gillmoore, executed the section 173 agreement with the Frankston City Council on 6 May 2003 recording the agreement by Restaurant investments to make available at all times the 36 spaces in the underground car park for the use of the fitness centre on the adjoining property.
77Apart from the section 173 agreement, Restaurant Investments is not a party to any other agreement relating to the car parking arrangements with the tenant on the fitness centre premises. Restaurant Investments is not a party to the 2003 lease, the 2011 agreement to lease or the new lease. It is those facts which persuade me that the car parking rights granted to the tenant by the 2003 lease are not proprietary rights and do not give rise to a caveatable interest.
78Accordingly, I consider that the plaintiff’s caveat dated 17 June 2014 lodged in dealing number AL159838J in the Office of Titles in respect of Certificate of Title Volume 9921 Folio 978 must be removed. Notwithstanding, in my view the tenant’s contractual rights to use car parking spaces on the restaurant property are very significant rights. By reason of Restaurant Investment’s execution of the section 173 agreement in May 2003 and the fact that Mr Gillon controlled the affairs of that company, as well as each of the landlords, Restaurant Investments must be taken to have agreed to the tenant having rights to have the staff and patrons of its fitness centre park on the restaurant property in accordance with the terms set out in the 2003 lease.
79In these circumstances, if those rights are held to be part of the new lease, I consider that so long as the lease continues, the tenant would be entitled to exercise those rights. If the landlords and/or Restaurant Investments interfered, or threatened to interfere, with those rights, it is likely that a court would make appropriate restraining orders. Damages might be said to be an appropriate remedy for an interference with the car parking rights, in the circumstances which currently exist. However, with the ability of the fitness centre to operate being closely tied to the available car parking, it would be more likely for a court to require the performance of the obligations, regardless of the lack of a direct relationship between the tenant and Restaurant Investments.
80Restaurant Investments would clearly have an obligation to refrain from interfering with the contractual relations between the landlords and the tenant or to induce non-performance by the landlords of their contractual obligations to the tenant. I also note that, pursuant to the section 173 agreement:
a.the Council was entitled to record the agreement in the Register at the Office of Titles in respect of both the restaurant property and the fitness centre land pursuant to section 181 of the Planning and Environment Act 1987;
b.Restaurant Investments and Gillmoore covenanted:
i.to “bring this agreement to the attention of all prospective purchasers, lessees, mortgagees, chargees, transferees and assigns”;
ii.that until “a memorandum of this agreement is registered” on the titles to the properties, the “successors in title” of Restaurant Investments and Gillmoore “shall be required to give effect to and do all acts and sign all documents which will require those successors to give effect to this agreement”.
81It would be unlikely that the third defendant has suffered damage as a result of the lodging of the caveat. In any event, no such claim has been brought in this proceeding. It would be unlikely, in any event, that Restaurant Investments could establish that the plaintiff “did not have an honest belief based on reasonable grounds that [it] had a caveatable interest”, or that the plaintiff “deliberately lodged the caveat to infringe the rights of the registered proprietor or interested person” (Bradbrook, MacCallum and Moore at page 186 citing Beca Developments v Idamenco (no. 92) Pty Ltd (1990) 21 NSWLR 459).
Should the new lease be rectified?
82The plaintiff seeks rectification of the 2011 agreement for lease and the new lease on two bases:
a.“due to an error”, the documents “failed to embody” an agreement between the plaintiff and the three defendants in about April/May 2010 to continue the plaintiff’s right to car parking on 315 Nepean Highway as set out in clause 18 of the 2003 lease;
b.the plaintiff had only executed the lease documents with provisions inconsistent with clause 18 of the 2003 lease in reliance upon misleading and deceptive conduct constituted by representations made prior to the execution by the plaintiff of the documents and, in about late November 2012, that the 2011 agreement for lease and the new lease continued the plaintiff’s right to car parking on 315 Nepean Highway in accordance with clause 18 of the 2003 lease.
83The 2010 agreement to redevelop the fitness centre: The agreement in respect of which the plaintiff seeks rectification of the lease documents was an agreement alleged to have been made in about April/May 2010 between the plaintiff and each of the defendants. It is alleged that Gillmoore and Southern Beaches agreed to:
“a. construct alterations to the properties situated at 309-313 Nepean Highway Frankston;
b. thereafter enter into a further lease of the properties…to the plaintiff”.
84The agreement was said to be constituted by:
a.letters dated 19 September 2009 and 25 May 2010 from Mr Gillon to Mr Russo;
b.a series of conversations between Mr Gillon and Mr Russo in about April/May 2010;
c.the context of the letters and conversations, including:
i.the planning permit dated 21 November 2001;
ii.the section 173 agreement;
iii.the 2003 lease;
iv.the continued use by Trainstation and the plaintiff of the car parking on 315 Nepean Highway since about 1 May 2003, in accordance with clause 18 of the 2003 lease;
v.the transfer of the lease from Trainstation to the plaintiff on 19 December 2006.
85All of these matters have been referred to in my summary of the “background facts”. I will briefly outline again the specific matters relied upon:
a.in a handwritten letter dated 19 September, in the names of Gillmoore and Southern Beaches, Mr Gillon gave permission for Mr Russo “to apply for a town planning permit for your tenancy, to improve the overall facility”. Mr Gillon noted that, “The underground car park is available to use for additional car parking”;
b.the letter dated 25 May 2010 was written by Mr Gillon on behalf of the three defendants. Mr Gillon noted that “a cost allowed for car parking” would be included in the project costs and increased future rental, and that, “The shared use with the restaurant will continue and you will use the underground car park”;
c.this and other correspondence between Mr Gillon and Mr Russo over many years was consistent with Mr Russo’s evidence that Mr Gillon understood the importance of providing adequate car parking, if the number of patrons using the fitness centre were to continue to increase. Mr Gillon reiterated on a number of occasions that the Gillon Group would provide substantial car parking for the plaintiff’s staff and patrons in the underground car park and by shared use of the ground floor car spaces on the restaurant property;
d.the 2001 planning permit and the section 173 agreement executed by Restaurant Investments and Gillmore formalised the provision of the underground car park on the restaurant property at 315-321 Nepean Highway for use by the operator of the fitness centre at 311-313;
e.the 2003 lease, by clause 18, set out the rights Trainstation, and from 2006 the plaintiff, were to enjoy in respect of the car parking provided on 315-321 Nepean Highway.
86Mr Russo was asked about “the lack of formal documentation as to the building contract”. Mr Russo responded, “I trusted Peter Gillon that there – we had an agreement, we had a deal, we had an agreement, and he’d always lived up to his agreement in all the times I’d dealt with him in all the other projects…So I had no reason, we got on well, no reason not to trust that he would – he would do it now”.
87When cross-examined, Mr Russo repeated that, “the works commenced with Gillmoore’s approval, the managing director Peter Gillon’s word was let’s get on with it… we had a deal with him, the deal was we would continue on as we were. We’re going to extend – do this works and everything…would continue”.
88It was not in issue in the proceeding that Mr Gillon and Mr Russo had, at this time, negotiated an arrangement whereby the fitness centre on 311-313 Nepean Highway would be significantly redeveloped at a cost met by direct capital expenditure shared by the plaintiff and also by Gillon Group. Gillon Group’s expenditure was to be recouped by increased rental payments to be included in a new lease to operate shortly after it was certified that the redeveloped facility was fit for occupation.
89Pursuant to this arrangement, the plaintiff paid over $450,000 towards the capital expenditure and the rental was increased by about $75,000 to over $500,000 per annum.
90The defendants rely upon the execution by Mr Russo of the 2011 agreement to lease and the other documents bundled with it in about September/October 2011 and the subsequent execution of the new lease by Mr Russo on about 30 April 2013, as evidence that Mr Russo accepted the amended car parking arrangements and no longer relied upon the rights granted by clause 18 of the 2003 lease.
91Circumstances of the execution of the 2011 agreement to lease: In about September/ October 2011, Mr Russo attended a meeting at the offices of the Gillon Group. The purpose of the meeting was to discuss the progress of the redevelopment project and for Mr Russo to hand over a cheque for $228,098.30 as the plaintiff’s further contribution to the cost of the project.
92Mr Russo said that as he was about to enter the meeting, Mr ten Dam drew his attention to some documents which he recalled were set out on a table outside the meeting room. Mr Russo said that he was told by Mr ten Dam, “By the way these should have been signed a while ago. We need these documents signed. It’s just your lease and your existing agreements and we just need to get them signed for the finance…It’s just basically an extension or continuation of your lease and we need to, they just should have been done by now”.
93Mr Russo said, “I read the pages I had to sign, and the agreement for lease, so I thought we were just resigning our lease and that we had to be, we were agreeing to our lease to be signed with the – for the new building works and the new terms”.
94The documents bundled together with the 2011 agreement to lease included a guarantee and indemnity, which Mr Russo recalled signing, two copies of a surrender of lease, both of which Mr Russo signed although he could not recall doing so, and a proposed lease. Mr Russo said that the agreement to lease and attached documents which he signed and the proposed lease “wasn’t presented as two separate documents, it was all just one document”. Mr Russo said that the signing process took “about a minute” and he “then went to the meeting with the cheque”.
95When cross-examined, Mr Russo was told by Ms Costello what evidence Mr ten Dam would give of the circumstances in which the lease documents were signed. During this questioning, Mr ten Dam was in court as an exception to the order for witnesses out of court so that he could provide instructions to Ms Costello, although he later left the court. Ms Costello said that Mr ten Dam would give evidence that:
a.because of his long background in banking, “it isn’t his practice to hand someone a lengthy contract and tell them to just sign here”;
b.“he did not say to you this is a continuation of your existing lease”;
c.“he did not say to you just sign here, this is your lease”;
d.“he didn’t tell you anything about the obligations in the document”;
e.“he did say this should have been signed before and the reason for that is that the works had already commenced and a contract such as this should be documented”;
f.“he would have said to you that it needed to be signed in order to obtain finance”.
96In response, Mr Russo said that he “wasn’t even told I had an agreement to lease to sign. I was told this should have been done a while ago, it has to be done quickly. We need to get finance, we need to get this building working, we need these documents signed. This is…a continuation of the lease I had…if he told me it was a different lease I wouldn’t have signed it. I would have walked away”.
97Mr ten Dam said in evidence that he “vaguely” recalled “presenting an agreement for lease for signing to Mr Russo”. He said, “My recollection of their meeting is vague”. He said that his “role in the meeting of that day was to present the agreement for lease to Mr Russo”. Mr ten Dam said that “obviously the documentation was signed on that day. I witnessed the documentation. Other than that, I can’t precisely recall what happened”.
98Mr ten Dam could not “recall who was at the meeting” or “anything that [he] said or anyone else said”. Mr ten Dam could not recall where at the Gillon Group offices the documents were signed or the later meeting took place. He thought the meeting was about, “I guess building arrangements that needed to be discussed”.
99Mr ten Dam said, “the project had commenced without appropriate documentation in place”, but as to “the terms of the agreement for lease and lease on that day” he knew “very little, other than I was aware that a new rent arrangement had been struck, a building cost had been agreed, new terms [as to] the duration of the lease had been agreed…other than that, nothing else that I can recall”.
100Mr ten Dam said that when he presented the lease documents to Mr Russo for signing, he knew “nothing” about “the car parking term in the documents” and he “did not say anything about the car parking terms” to Mr Russo.
101When asked about Mr Russo’s evidence that Mr ten Dam had said to him, “This is your lease and your agreement to lease and the bank needs them for finance”, Mr ten Dam said that, “It sounds like something I would have said to Mr Russo at the time as there was a need for us to arrange bank finance. And that document was an important part of arranging the finance”.
102I consider, in the circumstances, that Mr Russo’s account of the signing of the lease documents should be accepted. Essentially, the only evidence Mr ten Dam recalled confirmed Mr Russo’s evidence. Although Mr ten Dam said that, at that time, he was not familiar with the terms of the lease documents relating to car parking, that was not a matter to which Mr Russo had referred in his evidence as having been mentioned when he was asked to sign the documents.
103In my view, it is likely that the documents were presented to Mr Russo as documents which needed to be signed so that the Gillon Group could made an application to its bank for finance. This was important to Mr Russo because his company had met all the expense of the project to that time and his main purpose in attending the meeting was to produce the cheque for $228,098.30.
104In these circumstances, I consider it likely, as Mr Russo said in evidence, that Mr ten Dam would have reassured him that the 2011 agreement for lease and other documentation, which had been sprung upon him, was “just basically an extension or continuation of your lease and…they just should have been done by now”.
105The plaintiff’s claim is made on the basis of rectification. The purpose of the remedy of rectification is “to make the instrument conform to the true agreement of the parties where the writing by common mistake fails to express that agreement accurately”. Rectification may be granted where the instrument recording the agreement of the parties “does not reflect their common intention” (Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336, per Mason J).
106In my view, it is appropriate that the new lease be rectified so that the car parking entitlement of the tenant accords with the terms of the 2003 lease. Clause 22.2 does not reflect the parties’ common intention as regards the tenant’s car parking entitlement as contained in clause 18 of the 2003 lease, and as had operated with the previous companies with which Mr Russo had been involved from 1999 through to 2006, and after that when the plaintiff took a transfer of the 2003 lease.
107I do not consider that it is necessary to actually rectify the 2011 agreement for lease as it is now the new lease which governs, and will govern, the relationship between the parties for the duration of the new lease and any extension of its term, by exercise of the option to renew.
108Although Mr Russo took some months to execute the new lease, it is clear that he executed the document without appreciating that the car parking provisions were different from clause 22.2 in the proposed lease attached to the 2011 agreement for lease, and more significantly, were not consistent with clause 18 of the 2003 lease. As I shall discuss in more detail later, I am not satisfied that Mr Sprekos made Mr Russo aware that the new lease contained an amended provision in relation to the tenant’s car parking rights.
109Representations constituting misleading and deceptive conduct: There is an alternative formulation of the plaintiff’s claim for an order rectifying the car parking provisions in the new lease based on the alleged misleading and deceptive conduct of the defendants constituted by representations made to the plaintiff prior to the execution by Mr Russo of the 2011 agreement for lease and other documents at the meeting in about October 2011 at the offices of the Gillon Group and the delivery of the new lease to Mr Russo in November or December 2012.
110The plaintiff relies upon two alleged representations:
a.statements by Mr ten Dam to Mr Russo when he requested Mr Russo to execute the 2011 agreement for lease and the attached documents, such statements being made in the context of the history of the car parking provisions, including the 2001 town planning permit and the section 173 agreement, the terms of the 2003 lease and its transfer in 2006 to the plaintiff and the continuing use by Trainstation and the plaintiff of the car parking spaces on 315-321 Nepean Highway;
b.the failure by the defendants when the new lease was sent to Mr Russo to explain the material changes to clause 22.2 of the new lease as compared with the car parking rights that had previously been agreed and enjoyed.
111By reason of the findings I made when considering the evidence of Mr Russo and Mr ten Dam in relation to the question of whether the 2011 agreement for lease should be rectified, I am satisfied that a representation was made by Mr ten Dam which resulted in Mr Russo being misled and deceived when he executed the 2011 agreement for lease and the attached documents.
112As a consequence of that misleading and deceptive conduct, I consider that Mr Russo later, on about 30 April 2013, executed the new lease. I am not satisfied, for the reasons I will shortly discuss that Mr Sprekos, or any other person on behalf of the defendants, informed Mr Russo that the car parking provisions in the new lease had been amended. Clearly, no explanation was provided of the nature of the changes.
113In Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 Black CJ said at 32:
“Silence is to be assessed as a circumstance like any other. To say this is certainly not to impose any general duty of disclosure; the question is simply whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive or that is likely to mislead of deceive”.
114In Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [2010] HCA 31; (2010) 241 CLR 357 at [14], French CJ and Kiefel J said:
“In commercial dealings between individuals or individual entities, characterisation of conduct will be undertaken by reference to its circumstances and context. Silence may be a circumstance to be considered. The knowledge of the person to whom the conduct is directed may be relevant. Also…relevant may be the existence of common assumptions and practices established between the parties or prevailing in the particular profession, trade or industry in which they carry on business. The judgment which looks to a reasonable expectation of disclosure as an aid to characterising non-disclosure as misleading or deceptive is objective”.
115In this case, I am satisfied that the defendants’ failure to offer an explanation to Mr Russo, although essentially an “omission” or “silence”, did in the circumstances constitute impermissible conduct. I have taken into account the circumstances in which the 2011 agreement for lease and the attached documents were presented to Mr Russo and signed by him and the fact that the version of clause 22.2 in the new lease was substantially different from the version of clause 22.2 in the proposed lease attached to the 2011 agreement for lease and, more importantly, clause 18 of the 2003 lease. In the circumstances, I am satisfied that Mr Russo executed the lease as a result of representations which constituted misleading and deceptive conduct in breach of the provisions of the Australian Consumer Law.
116Did Mr Russo have foreknowledge of the changes to the car parking rights?: Mr Russo said that clause 18 of the 2003 lease “was what was agreed with Peter Gillon”. Mr Gillon “was well aware of the situation and it continued that situation in operation before we got there”. The car parking arrangement was “operating with the previous operator” before 1999.
117The section 173 agreement dated 6 May 2003 between Restaurant Investments, Gillmoore and Frankston City Council provided that “36 car parking spaces will be made available at all times in the lower car park level on…315-321 Nepean Highway, Frankston for the use of staff and patrons of the Indoor Recreation Facility”.
118The 2003 lease dated 1 May 2003 between Gillmoore, Southern Beaches and Trainstation provided as follows:
“18. CAR PARKING
Notwithstanding anything to the contrary in the lease, the Lessor agrees that the Lessee shall have the right to use for the purposes of parking cars and other motor vehicles only at 315 Nepean Highway
18.1all the car parking spaces located in the basement between the hours of 7:00am and 10:30pm everyday; and
18.2not more than 29% of the car parking spaces located on the ground level between the hours of 5:30pm and 10:30pm everyday.
A copy of the Car Parking plan is attached hereto”.
119In relation to the underground car park, the lease granted a “right to use” all the spaces between “7am and 10:30pm”, not “at all times”, as the section 173 agreement provided. Further, the tenant had a “right to use” 29% of the ground floor spaces between 5:30pm and 10:30pm each day.
120The “right of use” in respect of both the underground car park and ground floor spaces must be seen in the context of the evidence of Mr Russo that there were “peak times” each week when the requirements of the fitness centre and the restaurant for car parking would possibly exceed the number of spaces available. It is likely, in my view that these matters were well known to Mr Gillon.
121Mr Russo said that the agreement with Mr Gillon had been that his “customers can park anywhere on the restaurant land at any time” except for what was “specified”. He said, “the restaurant parks in my 30 per cent when its busy Friday night, Saturday night [and] day or Sunday night”.
122In her cross-examination of Mr Russo, Ms Costello suggested that clause 18.1 did not give the tenant “any right to park in the basement outside those hours” specified, (7am and 10:30pm), and in relation to clause 18.2, “doesn’t say you’ve got any right to park [on the ground level] outside the hours of 5:30 and 10:30”. Mr Russo answered in relation to the ground level parking, “it doesn’t exclude me from parking there”.
123I am inclined to prefer the construction of clause 18 offered by Mr Russo. The reality of the situation was that the parties did not need to restrict the restaurant’s use of the underground car park between 10:30pm and 7am because there was never likely to be a clash. Similarly, outside the hours 5:30 to 10:30pm, if the fitness centre used more than 29% of the ground level car spaces, it would not cause a problem to the restaurant’s need for car parking.
124The evidence was that this arrangement for shared car parking on 315-321 Nepean Highway worked satisfactorily before 1999 with the previous fitness centre operator, between 1999 and 2011 before the extensive redevelopment was completed, and since 2011 with precisely the same shared arrangement operating, notwithstanding the versions of clause 22 included in the proposed lease attached to the 2011 agreement for lease and the new lease in 2013.
125Tenancies of the restaurant property: On 15 January 2001, Restaurant Investments leased the restaurant property to Star Y2K Pty Ltd. In September 2001, the lease was transferred to new tenants, Min He, Li Qing Lian and Bing Hui Li. In January 2005, the tenancy was transferred to Nepean Star Group Pty Ltd. That tenant was given a new lease in March 2007. Clause 22.2 of that lease mirrored clause 18 of the 2003 lease and provided as follows:
“22.2 Use of Car Park
The parties agree that the landlord and its invitees shall have the right to use the car park on the land provided that the tenant and its invitees shall have the right to use at least 70% of the car park spaces on the first [ground] floor only between the hours of 11:30am and 3pm and between the hours of 5:30am and 10:30pm everyday”.
126In November 2007, Qiang Zou and Min He took a transfer of the lease from Nepean Star. Those tenants entered into a further lease for 5 years from 8 March 2011. That lease included clause 22.2 in the same terms as the March 2007 lease. A further lease in January 2013, to the same tenants, also contained that clause.
127Notwithstanding the failure to limit the fitness centre tenant to 29% of the ground floor spaces between 1:30am and 3pm each day, the car parking provisions in the leases of the restaurant property do not appear to have caused any difficulties over many years; there being adequate parking for the users of both the fitness centre and the restaurant.
128It was only in a new lease of the restaurant property between the same parties from 8 March 2016 to 9 October 2027, that the car parking provisions were changed to read as follows:
“The parties agree that the landlord may grant to the tenant a licence to use car parks on the land. The licence may provide for certain car parks to be included in the premises during the term and the parties agree to execute any document necessary to effect such inclusion in the premises where applicable”.
129On 6 May 2016, the same parties executed a “car park licence agreement” authorising the tenants/licensees to use “70% of the car parks on the ground level of the land 24 hours per day and 30% of the car parks on the ground level of the land, except during the hours of 11:30am to 3.00pm and 5:30pm and 10:30pm each day”.
130Alleged telephone conversations between Mr Sprekos and Mr Russo: In September 2011, Gillon Group’s solicitor, Mr Derrick Toh was preparing the 2011 agreement for lease documentation. On about 20 September 2011, he sent the documents to Mr Martin Walsh at Gillon Group with a number of queries including,
“5. The new lease is in the form of a LIV copyright lease which is much more Retail Leases compliant. I have added (special conditions) Additional Provisions dealing with the car park licence and sought to incorporate some of the more pertinent clauses of the existing lease. If there is anything else specific you think I should be dealing with, please advise. No just to ensure lease and car park licence match, with regards to lease term”.
131This information was never directly communicated to Mr Russo by the landlords and Mr Russo did not become aware of these changes until after the meeting in August 2013 with Mr ten Dam and Mr Selleck to discuss the possible purchase of the restaurant property by Mr Russo.
132An email from Mr Toh on 21 September 2011 contained further queries. The responding email from Mr Walsh included the query, with Gillon Group’s response in bold type:
“It appears that the carpark that the gym uses is the Southern Beaches land on the north and the gym itself is on part or maybe even all of the Gillmoore land. I suggest a survey plan be carried out to confirm this, but I attach what I think is the layout. The gym building is on Gillmoore land. The car park is on Southern Beaches (shared with restaurant investments)”.
133On 21 November 2012, Mr Sprekos notified Mr Toh by email that the redevelopment of the fitness centre had been completed “and all costs have been reconciled and agreed between the parties” and asked him to update the schedule to the lease “and prepare final lease for signature”. Mr Sprekos copied Mr Russo into this communication.
134On 23 November 2012, Mr Toh wrote to Mr Sprekos as follows:
“I have completed the documents based on your email below.
It appears there is an unresolved discrepancy with the car park clause which is in 22.2 of the lease to Core Health which states that:
22.2.1The landlord grants a licence to the tenant to use the car park areas situated at 315 Nepean Highway Frankston, during the term of this lease and any further terms as follows:
(a)all car parking spaces located in the basement at 315 Nepean Highway Frankston between the hours of 7:00 am and 10:30pm every day; and
(b)not more than 29% of the car parking spaces located on the ground level between the hours of 5:30pm and 10:30pm every day/
22.2.2This licence shall terminate upon the termination or expiration of this lease.
Firstly, the landlord does not have formal rights to grant a licence over the land at 315 Nepean Highway as it is owned by Restaurant Investments Pty Ltd and leased to the Food Star operators.
Secondly, the timing of the car park use does not correspond with the provision of the lease over 315 Nepean Highway to Foodstar, which states that:
The parties agree that the Landlord and its invitees shall have the right to use the car park on the land provided that the Tenant and its invitees shall have the right to use at least 70% of the car park spaces on the first floor only between the hours of 11:30am and 3:00pm and between the hours of 5:30pm and 10:30pm everyday.
I’m not sure what the “first floor” is but I suggest that we either amend additional provision 22.2 of lease to Core Health to match the lease to Foodstar or amend the Foodstar lease to match the Core Health lease and revise the clause so that it is not a grant of a licence but rather, ‘at the invitation of the registered proprietor of 315 Nepean Highway, Frankston’.
You should advise the tenant at Core Health of the changes before we finalise the lease and let me know your preference.
There is also a caveat from Core Health Club which is incorrectly placed over the land at 315 Nepean Highway. This will have to be withdrawn”.
135Rather than advising Mr Russo of the car parking changes “before” the lease was finalised, Mr Sprekos sent an email to Mr Toh on 26 November 2012, which read as follows:
“Please amend the Core Health lease to correctly correlate to the Foodstar lease at 315 Nepean Highway. I think in this regard the Foodstar lease should take priority as Restaurant Investments is the owner of the land.
I will advise the tenant of the amendment regarding parking hours, and that he should be directing gym members to park in the basement level between certain times.
I don’t think there is anything procedural/practical there that will cause any problems for the Core Health Club”.
136Mr Sprekos said that he later received the lease from Mr Toh, although no covering letter was discovered or produced. Mr Sprekos said that he then sent the copies of the lease by post to Mr Russo without providing a covering letter.
137Prior to this, Mr Sprekos said in evidence, he telephoned Mr Russo to let him know that he had received the documents. Mr Sprekos said that he “let him know at that time that we’d made a change to the car park arrangements and matched the restaurant lease, and that he should pay particular attention to it when he received the original documentation for signing”.
138When asked to state “the words you said”, Mr Sprekos said, “it was probably three years ago now so I can’t remember my – my specific wording. But it was just generally bringing it to his attention that the clause had been changed to reflect the hours of use that had been set out in the restaurant lease, and that he needed to have a look at that, and if he had any issues with it, just to give us a call and let us know and we could – could talk about it”.
139In cross-examination, Mr Rodbard-Bean did not directly question Mr Sprekos about the conversation. Mr Rodbard-Bean asked Mr Sprekos why, in the correspondence in 2013 and 2014, no response was made to Mr Russo’s “accusation that someone slipped in clause 22.2”. Mr Sprekos had referred to the “minefield of errors in the legal documentation” and that “it was a case of trying to rectify it in the best way we could”.
140Mr Sprekos was asked how he sent the lease documents for Mr Russo to sign. He said, “I would have just put them into an envelope, because I’d called him to let him know that they were on their way and he needs to keep an eye out for them. I don’t recall putting anything else in there, no covering letter or anything like that, just – they would have just been with tabs of ‘sign here’ of where – where he needed to sign the documents”.
141In the earlier cross-examination of Mr Russo, Ms Costello suggested to Mr Russo that he may have “forgotten a conversation with Mr Sprekos regarding the car parking term in the lease”. Ms Costello said, “Mr Sprekos will give evidence that he telephoned you in late 2013 and drew your attention to the fact that the car parking clause in the lease had changed”. Mr Russo said in response that Mr Sprekos “did not telephone me”. He said he and Mr Sprekos had discussions about “various building issues…but certainly there was no mention, no discussion made about car parking, or change to the lease. There was no discussions at all about any changes to the lease ever”.
142Ms Costello repeated the question to Mr Russo in a number of formulations:
a.Mr Sprekos had “a conversation on the phone with you about the car parking clause in the lease”;
b.Mr Sprekos “did have a telephone conversation with you in which he had a conversation regarding the car parking clause in the lease”;
c.Mr Sprekos “will say that he called you to say that they had to change the lease documents because the agreement for lease was in error, and the car parking clause had changed and that you should pay attention to it”;
d.Mr Sprekos “will say that he had that conversation with you in the context that he had provided you with the documents to sign by post, or someone provided them to you to sign by post”;
e.“I suggest to you Mr Russo that the clause of the lease was discussed with you in that Mr Sprekos told you that you needed to pay attention to that clause because it had changed”.
143Mr Russo denied the suggested conversation on each occasion. Ms Costello said that what she had put to Mr Russo were “the matters I’m instructed that Mr Sprekos said to Mr Russo on the phone…That’s all he said, words to that effect”. Ms Costello said that she had no matters to put to Mr Russo as to what he said in response to what Mr Sprekos had told him.
144Mr Sprekos gave evidence to the “effect” that Ms Costello suggested he would, during the cross-examination of Mr Russo. Mr Sprekos went further in his evidence to suggest that the changes in the car parking clause in the lease was to “match” or “reflect the hours of use that had been set out in the restaurant lease”. Mr Sprekos said that Mr Russo should “have a look at that”, or on another formulation, “should pay particular attention to it when he received the original documentation”.
145These additional matters reflected what had been raised in the email exchanges between Mr Sprekos and Mr Toh in late November 2012. Mr Toh suggested the tenant be advised of two changes made to the lease:
a.to match the hours in the new lease to those in the restaurant lease, and;
b.to amend the clause from the “grant of a licence” to an “invitation of the registered proprietor” of the restaurant property.
146Mr Sprekos later said, in his email to Mr Toh, that he would “advise the tenant of the amendment regarding parking hours, and that he should be directing gym members to park in the basement level between certain times”.
147This was a matter upon which Mr Rodbard-Bean focussed in cross-examination of Mr Sprekos. Mr Sprekos said that in order to perform the analysis suggested by Mr Toh, “I don’t recall looking at the agreement for lease. I recall looking at the old or the original 2003 Core Health Club [Trainstation] lease. Looking at the Restaurant Investments lease with Foodstar and having a look at the hours that were described in each of these documents”.
148Mr Sprekos agreed that he “wanted the Core Health lease to dovetail into the existing Foodstar lease” as this would give “the gym members, or the Core Health Club, more hours to use on that shared agreement between 11:30 and 3:30”.
149This matter is very important because, if Mr Russo had been made aware of the proposed changes to the car parking provisions in the new lease, but notwithstanding went ahead and executed the lease, it would be very difficult to suggest that there was a mistake requiring rectification or there had been reliance upon statements made which suggested no change was being made, or that the landlords has been silent when they should have spoken up.
150Mr Russo said that he was very surprised when at the meeting with Mr Selleck and Mr ten Dam in August/September 2013 to discuss the possible purchase of the restaurant land, Mr Selleck had said “Look at the lease”, suggesting that if he did Mr Russo would find that his car parking rights in the lease were very different than he believed them to be.
151This started him on a train of enquiry. Mr Russo’s email dated 3 September 2013 referred to his wish to have “this deliberate act of cheating rectified”. However, by 25 September 2013, Mr Russo believed Gillon Group had agreed “to restore the wording in the lease to what it was in my previous lease and your acknowledgement of your commitment to providing those car parking spaces”.
152What was offered to Mr Russo by Gillon Group in the form of a licence, which might be terminated in certain circumstances, was unacceptable to him. In his letter to Gillon Group dated 28 February 2014 he pondered, “I don’t know who slipped in clause 22.2 without informing me, or why, but it has never been discussed let alone agreed”. No response was made to this assertion or to the early accusation that there had been a “deliberate act of cheating” that needed to be rectified.
153The defence filed on 7 October 2015, in response to the claim of misleading and deceptive conduct in relation to Mr Russo’s execution of the new lease, pleaded that, “before Mr Russo signed the 2012 lease in 2013, Peter Sprekos informed Mr Russo that the car parking term in the 2012 lease was different to the term in the proposed new lease exhibited to the 2011 agreement for lease”. Although Mr Sprekos said that he had not in fact looked at the proposed lease attached to the 2011 agreement for lease when making comparisons between the car parking clauses, the pleading did give general notice of the matters which would be raised at trial.
154Until the discovery of the email correspondence between Mr Toh and Mr Sprekos in November 2012, the plaintiff and Mr Russo had no knowledge of the advice by the solicitor that Mr Sprekos “should advise the tenant…of the changes before we finalise the lease”. Until Mr Sprekos’s proposed evidence was raised with Mr Russo in cross-examination, there had been no indication of the detail of the conversation by which Mr Sprekos would allege he had forewarned Mr Russo of the changes to the car parking provisions.
155In the circumstances, it is difficult to be satisfied of Mr Sprekos’s recollection of a telephone conversation with Mr Russo, or what the contents of such a telephone conversation might have been. I refer to the following matters:
a.Mr Sprekos did not follow Mr Toh’s advice to “advise [Mr Russo] of the changes before we finalise the lease”;
b.Mr Sprekos said in response to Mr Toh that “I will advise the tenant of the amendment regarding the parking hours”. It seems that Mr Sprekos was not aware that the tenant’s car parking rights had been expressed as a licence in the proposed lease included with the 2011 agreement for lease and that, in the new lease, the licence had been replaced by an “invitation of the registered proprietor” of the restaurant property;
c.although Mr Sprekos looked at documents to seek to understand the issue, he apparently did not compare the terms of the new lease with those of the proposed lease attached to the agreement for lease;
d.Mr Sprekos said, when asked what words he said to Mr Russo, “it was probably three years ago now so I can’t remember my – my specific wording”;
e.Mr Sprekos said that ordinarily his phone conversations with Mr Russo were “short business like “ calls, “very sharp and straight to the point”;
f.he described, at one point, his recollection of what he said as “just bringing it to his attention that the clause had been changed to reflect the hours of use that had been set out in the restaurant lease”;
g.clearly, Mr Russo would have had no knowledge of what was contained in the restaurant lease;
h.the changes between clause 18 of the 2003 lease and clause 22 of the new lease (which Mr Sprekos said he had compared), and the changes between clause 22 in the lease attached to the 2011 agreement to lease and the same clause in the new lease (which was what Mr Toh was referring to but Mr Sprekos did not compare), contained more substantial changes than the inclusion of the hours 11:30am to 3:00pm in respect of the ground floor parking spaces;
i.Mr Sprekos appears to have had little if any understanding, at the time of the alleged conversation with Mr Russo, of the issues relating to the nature of the licence incorporated in the documents in 2011 and the “invitation” by Restaurant Investments in 2012, neither of which were in the 2003 lease;
j.for there to have been no response by Mr Russo in the conversation, for which Mr Sprekos had any recollection, indicates in my view that any explanation given by Mr Sprekos probably did not raise the car parking clause, but was simply telling Mr Russo that the lease documents “were on their way” and he “needs to keep an eye out for them”;
k.it is very unlikely Mr Sprekos told Mr Russo, as Ms Costello said her instructions were, that “they had to change the lease document because the agreement for lease was in error, and the car parking clause had changed, and that you should pay attention to it”;
l.it is unclear to what Mr Sprekos regarded as “just this minefield of errors in the legal documentation” which led to the change of the clause from the proposed lease attached to the 2011 agreement for lease to the new lease, or which Gillon Group apparently conceded required changing to “restore the wording in the lease”, when Mr Russo accused it of a “deliberate act of cheating”;
m.the subsequent submission by Mr Sprekos of the “Car Park Licence agreement” on 20 December 2013, which he said contained “additional provisions to safeguard both parties’ legal interests”, was clear misinformation;
n.the letter dated 19 March 2014, co-signed by Mr Sprekos, in response to Mr Russo’s letter dated 28 February 2014 which said, “I don’t know who slipped in clause 22.2 without informing me, or why, but it has never been discussed let alone agreed”, did not address that allegation which one might have expected if the telephone conversation had occurred;
o.the solicitor, Mr Toh, was not called to give evidence by the defendants. Presumably he had nothing to say which would have assisted their case.
156Mr Russo’s response in cross-examination on this issue was a firm denial. Mr Russo is a businessman who did “hand-shake” deals, with his trust in the individual he dealt with being, mostly, more important than the formal documents. Over many years, this had worked well with Mr Gillon. For example, at Christmas 1999, Mr Russo said he reopened the fitness centre the day after he met Mr Gillon, so that trading could continue without interruption.
157The formal documentation followed some time after the initial discussions between Mr Russo and Mr Gillon. Over many years, Mr Russo and Mr Gillon discussed the car parking issue. Mr Gillon did not personally use emails, and yet there are a number of communications between him and Mr Russo over this period which attest to the significance of the issue to Mr Russo, and Mr Gillon’s understanding of its importance.
158The only unease I had about Mr Russo’s evidence generally was in relation to the conversation Mr Russo described of his negotiation with Mr ten Dam and Mr Selleck about the possible purchase by Mr Russo of the restaurant land. Mr Russo was outlining his negotiating tactics to talk the price down and said, “and the third thing I said was I have a right of use, a town planning easement, a lease that gives me rights over the car parking of that property so I can’t see how you could sell it to anyone else but me for the next 20 years approximately”.
159Mr Russo followed this with evidence that Mr Selleck responded by saying, “I have no rights over the property at all. Read your lease, I’ll put a fence up”. I initially had reservations about Mr Russo’s evidence that he was the only possible purchaser of the property, as it seemed to reflect possible “sharp” business practice. However, when Mr ten Dam gave evidence he said about Mr Selleck’s statement, “Read your lease”, in response to Mr Russo’s, “I do recall a comment along those lines. Yes”. Mr ten Dam also responded that Mr Russo’s belief that restaurant Investments “cannot sell the restaurant land without recognition of [his] car parking rights” was “very, very important to Mr Russo”.
160In the circumstances, I accept Mr Russo’s denial that there was any conversation with Mr Sprekos in about November/December 2012 in which Mr Sprekos alerted him to a change to the car parking provisions in the lease which he needed to examine.
What order should be made rectifying the new lease?
161The plaintiff seeks that the new lease be rectified by making three changes:
a.including Restaurant Investments as a party to the lease and requiring it to execute the document;
b.including the restaurant property in the description of the leased “premises” and the title particulars in the description of “land”;
c.essentially redrafting clause 22.2 so that it reads similarly to clause 18 of the 2003 lease, although with perhaps further precision.
162Restaurant Investment was not a party to the 2003 lease and the restaurant property was not part of the demised premises. I am not satisfied that, even having regard to the terms of the section 173 agreement that it was the common intention of the parties to the agreement to redevelop the fitness centre, that Restaurant Investments should be a party to any new lease, or that the demised premises should include 315-321 Nepean Highway.
163Although the car parking rights in clause 18 of the 2003 lease relate to car spaces on the restaurant property, the reference to “315 Nepean Highway” was only introduced by an amendment handwritten on the document by Mr Russo at the time of execution. Restaurant Investments had never been a party to any lease of 309-313 Nepean Highway even after 2003.
164In the circumstances, rectification of the new lease on the basis of a common mistake would not justify rewriting the document to include a further party or expanding the description of the leased premises to include the adjoining property. Similarly, although the power to grant relief under section 87(2)(b) and (g) of the Competition and Consumer Act 2010 (Cth) or section 243 (b) and (h) of the Australian Consumer Law is in very wide terms, the circumstances necessary to require the changes suggested to include Restaurant Investments as a party and its land as part of the demise, are not present.
165Ordinarily, I would consider that the least changes necessary to reflect the parties’ common intention should be made. The plaintiff’s claim is based on:
a.an agreement to grant “the right to use car park areas situated at 315 Nepean Highway Frankston” in precisely the same terms as clause 18 of the 2003 lease (defined as “the car park rights”); and
b.representations that it “would continue to have the exclusive use of the car park rights”.
166However, by its amended statement of claim, the plaintiff seeks rectification of clause 22.2 of the new lease so that it would read:
“The landlord hereby grants to the tenant the right to use the car park area situated at 315-321 Nepean Highway, Frankston and referred to in the attached Car Park Plan, as follows:
(a)35 car parking spaces located in the lower car park level on 315-321 Nepean Highway, Frankston at all times; and
(b)not more than 29% of the car parking spaces located on the ground level at 315-321 Nepean Highway, Frankston between the hours of 5.30pm and 10.30pm every day”.
167By comparison, clause 18 of the 2003 lease reads:
“Notwithstanding anything to the contrary contained in the lease, the Lessor agrees that the Lessee shall have the right to use for the purposes of parking cars and other motor vehicles only at 315 Nepean Highway.
18.1all the car parking spaced located in the basement between the hours of 7.00am and 10.30pm every day; and
18.2not more than 29% of the car parking spaces located on the ground level between the hours of 5.30pm and 10.30pm every day.
A copy of the Car Parking plan is attached hereto”.
168It might be said that the plaintiff’s proposal, apart from the omission of the time limitation in relation to the underground car park and the inclusion of the number of those spaces, is simply a clearer articulation of what was contained in clause 18 of the 2003 lease. However, it does go further in at least two respects.
169The statement of the number of car spaces would appear to be uncontroversial. The change from the limited hours from 7.00am to 10.30pm each day to “at all times” might bring the lease in accordance with the section 173 agreement, although only in relation to the underground car park as that agreement makes no reference to the ground floor parking.
170In the circumstances, however, I consider that the new lease is more appropriately rectified by simply including as clause 22.2 what had been included in the 2003 lease as clause 18. In my view, this change will adequate reflect the common intention of the parties to the redevelopment agreement that the new lease would continue the car parking entitlements of the tenant under the existing 2003 lease. I do not consider that the 2011 agreement for lease requires rectification as it is effectively superseded by the new lease.
Proposed orders
171Accordingly, the following orders seem appropriate:
1.The lease executed by the plaintiff and the first and second defendants, guaranteed by Joseph Norman Russo and dated 9 October 2012 is rectified so that clause 22.2 reads as follows:
“22.2 CAR PARKING
Notwithstanding anything to the contrary contained in the lease, the Lessor agrees that the Lessee shall have the right to use for the purposes of parking cars and other motor vehicles only at 315 Nepean Highway:
a.all the car parking spaced located in the basement between the hours of 7.00am and 10.30pm everyday; and
b.not more than 29% of the car parking spaces located on the ground level between the hours of 5.30pm and 10.30pm everyday.
A copy of the Car Parking plan is attached hereto”.
2.The first and second defendants must at their own expense prepare and execute the rectified lease and exchange the documents for copies executed by the plaintiff no later than 29 June 2016.
3.The caveat dated 17 June 2014 lodged on behalf of the plaintiff in dealing no AL 159838J in the Office of Titles in respect of Certificate of Title Volume 9921 Folio 978 shall be removed.
172I shall hear further from the parties in relation to the proposed orders and on the issue of the costs of the proceeding.
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Certificate
I certify that the preceding 41 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 6 June 2016.
Dated: 6 June 2016
Carla Cianfaglione
Associate to His Honour Judge Anderson
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