Crawford v Taylor
[2005] TASSC 77
•16 August 2005
[2005] TASSC 77
CITATION: Crawford v Taylor [2005] TASSC 77
PARTIES: CRAWFORD, Stephen Dean
CRAWFORD, Maree Joy
v
TAYLOR, Terence Street
TAYLOR, Florence Ann
TITLE OF COURT: SUPREME COURT OF TASMANIA
JURISDICTION: ORIGINAL
FILE NO/S: LDR 38/2005
DELIVERED ON: 16 August 2005
DELIVERED AT: Launceston
HEARING DATE: 25 July 2005
JUDGMENT OF: Slicer J
CATCHWORDS:
REPRESENTATION:
Counsel:
Applicants/Plaintiffs: Mr R W Pearce
Respondents/Defendants: Mr K J Stanton
Solicitors:
Applicants/Plaintiffs: Douglas & Collins
Respondents/Defendants: Shields Heritage
Judgment Number: [2005] TASSC 77
Number of paragraphs: 15
Serial No 77/2005
File No LDR 38/2005
STEPHEN DEAN CRAWFORD and MAREE JOY CRAWFORD
v TERENCE STREET TAYLOR and FLORENCE ANN TAYLOR
REASONS FOR JUDGMENT SLICER J
16 August 2005
The applicants are plaintiffs in an action which seeks a declaration of validity of an agreement, an order for specific performance of that contract and an injunction restraining the respondents from taking or attempting to retake possession of land. These proceedings involve their application for the grant of an interlocutory injunction pending the hearing of the action. The respondents are the registered proprietors of land on Flinders Island which is the subject of an agreement and these proceedings.
On 13 April 2002 the parties entered into a lease over approximately 220 hectares of farming land. A portion of the land, within the boundaries, was reserved by the owners for their own purpose. That excised portion of the land which comprised the homestead was separately rented to different tenants. The lease document included the terms of a separate but concurrent agreement affording the applicants an option to purchase all of the land including the homestead. The terms of the option were:
"1 The Tenant:
(a)throughout the term of this lease shall be entitled to purchase the real estate described in the Item 1 of the Schedule (and including the house) in accordance with the provisions of this clause;
(b)the Tenant shall exercise the said entitlement by serving upon the Landlord a notice of their intention to purchase the said premises in accordance with the provisions of this covenant.
(c)the purchase shall be upon the following terms and conditions:
(i)the purchase price shall be the sum of three hundred thousand dollars ($300,000.00)
(ii)a deposit of 10% of the purchase price shall be paid upon the exercise of the option to purchase and the Tenant and Landlord shall sign a Contract for Sale of land in accordance with the standard form of Contract as annexed hereto and marked with the letter 'A'."
The value of comparable land, as of the date of the option was in the vicinity of $450 per acre. The applicants agreed to pay the price of $600 per acre. Concurrent with the lease and option agreements the applicants purchased stock on the property for about $100,000.
The lease provided for the circumstances which gave rise to the right of termination which states:
"(1)The landlord may end the lease in the manner set out below in the following circumstances:
(a)if the rent or any part of it or any other moneys owing to the landlord under the lease is or are in arrears for 14 days after the issuing of a tax invoice or if and whenever there shall be a breach or non-performance or non-observance of the covenants and conditions hereincontained and on the part of the tenant to be observed or performed and such breach continues for a period of fourteen (14) days after service of a notice on the tenant requiring it to remedy the same;
(b)if the tenant is a corporation and an order is made or a resolution is passed for its winding up except for reconstruction or amalgamation;
(c)if the tenant is a company and ceases or threatens to cease to carry on business or goes into liquidation, whether voluntary or otherwise, or is wound up or if a liquidator or receiver (in both cases whether provisional or otherwise) is appointed;
(d)if the tenant is a company and is placed under official management under the Corporations Law or enters a composition or scheme of arrangement;
(e)if the interest of the tenant under the lease is taken in execution;
(f)if the tenant or any person claiming through the tenant conducts any business from the leased premises after the tenant has committed an act of bankruptcy.
(2)In the circumstances set out above in this paragraph, the landlord may end the lease by:
(a)notifying the tenant that it is ending the lease; or
(b)re-entering the land, with force if necessary, and ejecting the tenant and all other persons from the land and repossessing the land; or
(c)doing both.
(3)If the landlord ends the lease under this paragraph, the tenant will not be released from liability for any prior breach of the lease and other remedies available to the landlord for recovery of arrears of rent or for breach of the lease will not be prejudiced."
The applicants owned another farming property and initially operated the two as part of a sheep grazing enterprise. At the time of the lease agreement the land was farmed in accordance with a "cell" based method, which is a form of intensive grazing management involving the high rotation of grazing stock between a large number of small paddocks all joined to a central water source. The applicants were aware of the method and Mr Stephen Crawford had worked with or for Mr Terence Taylor for some years before the date of lease. The "cell" based method required smaller areas of land for grazing which in turn required more internal fencing. The original fencing layout had been modified by the respondents so that some 38 separate areas could be used on a rotational basis, a process which required additional but different internal fencing, which in turn required electric power. The applicants did not continue with the "cell" method of grazing but preferred a more traditional operation. Accordingly they did not maintain, in good order or in some cases at all, the modified internal fencing layout. During the term of the lease a generator which had been used to provide power to the internal fencing system had been vandalised. The respondents made an insurance claim for the replacement of that generator and received payment. However, they did not replace the generator with a similar unit but instead provided an existing generator which, had the applicants continued with the soil grazing operation, would have been inadequate to provide sufficient power. The applicants paid the rental due at the required times. Rent of $20,000 was payable annually by two instalments on 1 April and 1 September in each year. The applicants paid a due instalment of rent, in advance, in mid-March 2005. No further payment is due until 1 September 2005.
The first respondent was engaged by the applicants to assist with the maintenance of property which included fence maintenance and assistance with animal husbandry up until March or April 2004. In addition he conducted further work, at his own expense, involving weed control.
On 30 April 2005 the respondents purported to exercise their rights of termination providing a notice in the following terms:
"We the Landlords of the above Property are exercising our rights to terminate the Lease on said Property.
On recent inspection of the Property, we were appalled to note the following:-1Dead sheep everywhere. On the land & also in the dams. ALL dead sheep to be picked up off the paddocks, & taken out of the dams, & disposed of.
2We have had complaints from neighbours regarding the state of the property, & animals.
3Fencing is non existent in comparison to when you took over the Lease (3 years ago), they (fences) are either lying on the ground, or in a tangled mess. There is wire & fencing materials left everywhere. – My brother & I made sure all fences were in top condition when you took over the lease.
4Electric fences to be fully operational. Fences to be the same as when you took over the Lease. This includes gates, wire & posts.
5Some shelterbelts are wrecked. Trees have not been replaced. – These have to be replanted, & fences around them made stock-proof. Also trees that are down, are to be cut off the fences.
6Shearing shed to be cleaned up. Window to be replaced.
7Sheep yards to be repaired, & rubbish removed.
8The Windmill has been rendered unserviceable. Gearbox & pump to be reconditioned.
9Driveway to Property has not been maintained. Needs to be graded & gravelled.
10Guttering on A-frame Barn to be fixed.
11Railing on bridge to be fixed
12Culverts x2 to be cleaned out. (main ditch on S/W corner of Property.)
13One fence on Cattle Yards to be replaced.
14Insurance – As per lease.
Pursuant to terms of the Lease, you are in breach of same.
You have 14 days in which to comply with the obligations to repair, & maintain the Property. The obligations are as listed above.
No further notice will be given.
However, we are prepared to give you until the 30th June 2005, to remove all stock from the Property."
On 17 May 2005 solicitors for the respondents wrote to the applicants referring to the original notice and requiring rectification of the breaches detailed in that letter. Included with or immediately following the letter was a further notice which required rectification of the claimed breaches. The more detailed notice was forwarded to the applicants by the solicitors and dated 18 May. That notice required rectification with respect to some claimed breaches within 14 days, and with respect to other breaches within 28 days. On 25 May 2005, within the time provided for by the notices of 17 and 18 May, the applicants purported to exercise their option to purchase and, in the same letter advising of the exercise of option, denied that they were in breach of the lease agreement.
On 1 June 2005 solicitors for the applicants repeated notification of exercise of option and provided notice in accordance with the terms of the lease, cl 38. Concurrently they provided a contract for the sale of the land and provided verification that the deposit of $30,000 had been forwarded to the respondents' solicitors as stakeholders. The letter requested the respondents to sign the contract. The respondents have declined to so do.
For the purpose of these interlocutory proceedings the Court is concerned only with the terms of the April notice of termination since the option was exercised during the period provided by the May notice during which rectification was required.
It is clear that there is a real and significant issue between the parties. The respondents are the registered proprietors of the land and claim significant breaches of the terms of the lease. If their right of termination is upheld at trial then the exercise of option might prove to be ineffective. The applicants contend that there has been no breach, or at least no significant breach, of the terms of the lease and the right of termination would not be upheld. They claim that the evidence to be led at trial demonstrates that they were not in breach of the lease and that they had validly exercised an option to purchase. Moreover, on their case, any claim on the part of the respondents could be properly met through the remedy of damages which in turn would be subsumed by the purchase of the land in accordance with the option. The claim that any act of possession by the respondents pending trial would cause significant harm in that they would be required to find other property to agist their stock and that presently no such land is readily available on Flinders Island.
The applicants' commencing contention is that the April notice is, in itself, invalid and contrary to the provisions of the Conveyancing and Law of Property Act 1884, s15. That section relevantly provides:
"(1)A right of re-entry or forfeiture under any proviso or stipulation in a lease, for a breach of any covenant or condition in the lease, shall not be enforceable, by action or otherwise, unless and until the lessor serves on the lessee a notice specifying the particular breach complained of and, if the breach is capable of remedy, requiring the lessee to remedy the breach, and in any case requiring the lessee to make compensation in money for the breach, and the lessee fails, within a reasonable time thereafter, to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money, to the satisfaction of the lessor, for the breach.
(2)Where a lessor is proceeding, by action or otherwise, to enforce such a right of re-entry or forfeiture, the lessee may, in the lessor's action, if any, or in any action brought by himself, apply to the Court for relief; and the Court may grant or refuse relief as the Court, having regard to the proceedings and conduct of the parties under the foregoing provisions of this section, and to all the other circumstances, thinks fit; and in case of relief may grant it on such terms, if any, as to costs, expenses, damages, compensation, penalty, or otherwise, including the granting of an injunction to restrain any like breach in the future, as the Court, in the circumstances of each case, thinks fit.
(3)For the purposes of this section a "lease" includes an original or derivative under-lease, also a grant at a fee farm rent, or securing a rent by condition; and a 'lessee' includes an original or derivative under-lessee, and the executors, administrators, and assigns of a lessee, also a grantee under such a grant as aforesaid, his successors and assigns, and a 'lessor' includes an original or derivative under-lessor, and the executors, administrators, and assigns of a lessor, also a grantor as aforesaid, and his successors and assigns.
(4)This section applies, although the proviso or stipulation under which the right of re-entry or forfeiture accrues is inserted in the lease in pursuance of the directions of any Act.
(5)For the purposes of this section a lease limited to continue as long only as the lessee abstains from committing a breach of covenant shall be and take effect as a lease to continue for any longer term for which it could subsist but determinable by a proviso for re-entry on such a breach.
(6)This section does not extend to a covenant or condition against the assigning, under-letting, parting with the possession, or disposing of the land leased, or to a condition for forfeiture on the bankruptcy of the lessee, or on the taking in execution of the lessee's interest, or, in the case of a lease of any premises in respect of which an hotel licence or public-house licence is in force under the Liquor and Accommodation Act 1990, to a covenant not to do or omit any act or thing whereby the licence may be forfeited or the premises delicensed.
(7)This section shall not affect the law relating to re-entry or forfeiture or relief in case of non-payment of rent.
(8)This section applies to leases made either before or after the commencement of this Act, and shall have effect notwithstanding any stipulation to the contrary."
For the purpose of these proceedings it will be accepted that:
(1) The notice is in a form permitted by the legislation.
(2)That the notice, and the evidence provided in support of these interlocutory proceedings are sufficient to establish at least three of the claims made in that notice. The first applicant concedes that the windmill, referred to in point 8 of the notice, is not in working condition and he has no need to return it to operation. The notice point 14 refers to "insurance – as per lease". Clauses 16 and 17 of the lease agreement relevantly provide:
"16(1) The tenant, at its own expense, is to take out and keep current the following insurance policies in relation to the land. The policies must be in the names of the landlord and the tenant and must be with an insurance company approved by the landlord.
(a) A public risk policy that provides for a minimum cover for each accident, claim or event of the amount specified in item 4 of the reference schedule or any reasonable higher amount that the landlord notifies. The cover provided under this policy must not be contributory with any policy taken out by the landlord.
(b) A plate glass policy, if there is any plate glass in any of the buildings or improvements.
(c) A policy to cover loss or damage to any property in the physical and/or legal control of the tenant.
(2)The tenant at its own expense is to take out and keep current a workers' compensation insurance policy in respect of all persons employed by the tenant, whether they are to work on or off the land.
17(1) Before taking possession of the land, the tenant is to deliver a copy of the insurance policies required under the lease to the landlord.
(2)Within seven days of receiving any certificate of renewal or further policy, the tenant is to deliver a copy of it to the landlord.
(3)After the expiration of any policy, the tenant, on request, is to provide satisfactory evidence to the landlord that it has been renewed."
Evidence clearly establishes that the applicants have kept current insurance policies in accordance with cl 16 but have included the respondents as parties to those policies. Whether or not the applicants failed to provide copies of those policies to the respondents or, as the first applicant claims the respondents did not require production, remains a question for trial. The applicants do not concede that fencing is "not existent" but agree that the fences are not the same as they were at the date of the lease. They say that the boundary and primary fencing has been properly maintained but that some of the "internal" fencing required by the cell method has not been kept in working condition. The Court accepts, for the purpose of this determination, that the applicants have consciously not maintained some internal fencing because of their adoption of a more traditional form of grazing practice.
Counsel for the respondents initially raised the issue that since any breach of a term of the lease entitled termination it was for the applicants to show at trial that the proven breach was so disproportionate to the remedy of termination that the Court could then refuse to countenance the termination. On that basis a court would effectively modify the agreement in accordance with equitable principles. From that commencing point the issue of election becomes significant. (See Kumaragamage v Rallis [2001] NSWSC 446; Lang's Commercial Leases in Australia par30/180.) The contention might have significance at trial but, as counsel correctly conceded, it ought have little if any effect on the grant or otherwise of interlocutory injunctive relief.
The respondents contentions are that:
(1)The lease was validly terminated by the document of 30 April. There were conceded breaches of terms of the lease.
(2)The provisions of the Conveyancing and Law of Property Act, s15, have been complied with and it remains for the applicants to establish any bar to forfeiture.
(3)Damages remain as an adequate remedy for the applicants.
(4)The balance of convenience ought favour the respondents. The respondents claim that the applicants' concession that they had failed to maintain or repair the particular internal fencing and had no intention of replacing such fencing or repairing the windmill ought affect any exercise of discretion. (Greville v Parker [1910] AC 335; Belgravia Insurance Co Ltd v Meah [1964] 1 QB 436; Jam Factory Pty Ltd v Sunny Paradise Pty Ltd [1989] VR 584).
However, these are interlocutory proceedings. As Lord Diplock said in his speech in American Cyanamid Co v Ethicon Ltd [1975] AC 396:
"It is no part of the court's function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations. These are matters to be dealt with at the trial. One of the reasons for the introduction of the practice of requiring an undertaking as to damages upon the grant of an interlocutory injunction was that 'it aided the court in doing that which was its great object, viz abstaining from expressing any opinion upon the merits of the case until the hearing': Wakefield v Duke of Buccleugh (1865) 12 LT 628, 629. So unless the material available to the court at the hearing of the application for an interlocutory injunction fails to disclose that the plaintiff has any real prospect of succeeding in his claim for a permanent injunction at the trial, the court should go on to consider whether the balance of convenience lies in favour of granting or refusing the interlocutory relief that is sought.
As to that, the governing principle is that the court should first consider whether, if the plaintiff were to succeed at the trial in establishing his right to a permanent injunction, he would be adequately compensated by an award of damages for the the [sic] loss he would have sustained as a result of the defendant's continuing to do what was sought to be enjoined between the time of the application and the time of the trial. If damages in the measure recoverable at common law would be adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted, however strong the plaintiff's claim appeared to be at that stage. If, on the other hand, damages would not provide an adequate remedy for the plaintiff in the event of his succeeding at the trial, the court should then consider whether, on the contrary hypothesis that the defendant were to succeed at the trial in establishing his right to do that which was sought to be enjoined, he would be adequately compensated under the plaintiff's undertaking as to damages for the loss he would have sustained by being prevented from doing so between the time of the application and the time of the trial. If damages in the measure recoverable under such an undertaking would be an adequate remedy and the plaintiff would be in a financial position to pay them, there would be no reason upon this ground to refuse an interlocutory injunction.
It is where there is doubt as to the adequacy of the respective remedies in damages available to either party or to both, that the question of balance of convenience arises. It would be unwise to attempt even to list all the various matters which may need to be taken into consideration in deciding where the balance lies, let alone to suggest the relative weight to be attached to them. These will vary from case to case.
Where other factors appear to be evenly balanced it is a counsel of prudence to take such measures as are calculated to preserve the status quo. If the defendant is enjoined temporarily from doing something that he has not done before, the only effect of the interlocutory injunction in the event of his succeeding at the trial is to postpone the date at which he is able to embark upon a course of action which he has not previously found it necessary to undertake; whereas to interrupt him in the conduct of an established enterprise would cause much greater inconvenience to him since he would have to start again to establish it in the event of his succeeding at the trial."
That approach was adopted by Gibbs CJ in The Australian Coarse Grain Pool Pty Ltd v The Barley Marketing Board of Queensland (1983) 57 ALJR 425.
Not every breach is a fundamental term entitling re-entry (Shevill v Builders Licensing Board (1981 – 1982) 149 CLR 620).
Here interlocutory relief ought be granted.
(1)The applicants are in possession of the land and have made all required payments to the respondents in accordance with the terms of the lease.
(2) The breaches claimed in the April notice and their effect will require determination at trial.
(3)The breaches of alterations to or non-maintenance of internal fencing reflect a policy of method of agricultural practice rather than neglect of the property. In any event the applicants are entitled to argue that failure to replace the generator with one sufficient to service the internal fencing shows that the respondents knew of the change of agricultural policy and were until April 2005 indifferent to change.
(4)The failure to place the windmill in a working condition is also a reflection of changed policy rather than neglect.
(5)The failure to include the respondents as parties to the insurance agreement especially since insurance was maintained, might at trial be shown to be insufficient to entitle forfeiture.
(6)Other matters such as failure to remove sheep, damage to windbreaks and the like, are matters of contention between the parties.
(7)Loss of use of the property will cause significant harm to the farming operations of the applicants.
(8)Potential harm to the respondents is not equivalent; they retain a right to compensation and the applicants are required to give undertakings as to damages.
(9)The applicants have purported to exercise the option to purchase in unconditional terms. If that exercise is held to be valid then any claim for damages on the part of the respondents would be diminished. If the validity of the option is upheld then any interim removal of the applicants' stock might prove irredeemable.
The interlocutory injunction ought be granted in the terms sought.
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