De Santis v Russo

[2000] QSC 65

SUPREME COURT OF QUEENSLAND

CITATION:	McKay & Anor v Blumson [2000] QSC 065
PARTIES:	MARK WILLIAM McKAY and MARK STEVEN GORDON (plaintiffs) v COLIN ERIC BLUMSON (defendant)
FILE NO/S:	No 2351 of 1999
DIVISION:	Trial Division
PROCEEDING:	Damages for Breach of Contract
ORIGINATING COURT:	Supreme Court at Brisbane
DELIVERED ON:	24 March 2000
DELIVERED AT:	Brisbane
HEARING DATE:	4 February 2000
JUDGE:	Williams J
ORDER:	Plaintiffs’ action dismissed with costs to be assessed on the standard basis. Judgment for the defendant on his counter-claim against the plaintiffs and the first and second defendants by counter-claim in the sum of $12, 801.89 with costs to be assessed on the standard basis.
CATCHWORDS:	CONTRACTS  - GENERAL CONTRACTUAL
PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - whether clause in lease concerning apportionment of costs of compliance with local authority’s car-parking by-laws constituted condition of lease that lessor provide car parking - whether lessor’s failure to construct car-parking facilities constituted breach of contract
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - REPUDIATION AND NON- PERFORMANCE - REPUDIATION - APPLICATION TO LEASES – whether lessor’s failure to construct car-parking facilities constituted repudiation of contract by lessor - whether lessor’s action in locking lessee out of premises constituted repudiation of contract by lessor
LANDLORD AND TENANT - FORM AND CONTENTS OF LEASE
LANDLORD AND TENANT - TERMINATION OF THE TENANCY
LANDLORD AND TENANT - RETAIL AND COMMERCIAL TENANCIES LEGISLATION - whether s124 Property Law Act 1974 (Qld) notice requirements complied with - where alleged breaches of two leases joined in one notice - whether 7 days constituted “reasonable time” for compliance
EQUITY - FRAUDULENT AND INNOCENT MISREPRESENTATION - THE REPRESENTATION – GENERALLY - whether clause in lease concerning apportionment of costs of compliance with local authority’s car-parking by-laws constituted representation that lessor would provide car-parking - whether such representation made fraudulently - where allegation of fraudulent misrepresentation made on eve of trial - where lessor experiencing financial difficulties
Property Law Act 1974 (Qld), s124
Ex parte Taylor [1980] Qd R 253, considered
COUNSEL:	Mr M Morissey for the plaintiffs Mr P Freeburn for the respondent
SOLICITORS:	HCF Lawyers for the plaintiffs Bruce S Dulley (Brisbane) acting as Town Agent for Butler McDermott & Egan (Nambour) for the respondent

1. WILLIAMS J: At material times the defendant, Colin Eric Blumson, was the owner of a building situated at 65 Burnett Street, Buderim; it will often be convenient to refer to him as the “lessor”. By registered lease executed 20 January 1995 the first floor of that building (that is a sufficient description for present purposes) was leased to Mark E Mark Holdings Pty Ltd (the first defendant by counter-claim) for a term of 5 years commencing 1 February 1995; it will be convenient to refer to that company as “the lessee”. In about late 1995 the lessor added a verandah to the building at first floor level, and that became the subject of a registered lease executed 29 August 1996 (Blumson being lessor and Mark E Mark Holdings Pty Ltd being lessee) for a term of 4 years from 1 February 1996.

2. It will be necessary later to refer in some more detail to the provisions of those leases. It is sufficient for present purposes to say that the lessee contended that the lessor was in default at all material times of a term of each lease obliging him to construct car parking facilities on land at the rear of the building in question. From at least about June 1996 the lessee was in default in the payment of rent and outgoings pursuant to the leases. That default continued until 3 March 1997.

3. The position as at February 1997 was that the lessee contended that the lessor had not provided car parking facilities in accordance with the obligation imposed by the leases, but nevertheless it was continuing to operate the demised premises as a restaurant and was continuing to pay substantial amounts for rent and outgoings though overall it was in default in that regard. In those circumstances the lessor caused to be delivered to the lessee a notice which he contended complied with the requirements of s 124 of the Property Law Act 1974; the one notice contained alleged defaults under each of the leases. That notice was dated and delivered 19 February 1997 and required the lessee to remedy the specified default within a reasonable time. The leases provided that the time for complying with such a notice should be 7 days (cl 10.7 in each case). The lessee failed to remedy the alleged default and the lessor forfeited the lease by locking the lessee out of the premises on and from 3 March 1997.

4. Subsequently the lessee caused a letter to be written to the lessor dated 15 March 1997 (exhibit 8); in these proceedings the lessee and the plaintiffs contended that that was an acceptance by the lessee of the lessor’s repudiation of each of the leases (evidenced by failing to construct car parks and wrongfully locking out the lessee). The lessor disputes repudiation and/or that the letter had the effect of terminating the lease because of some conduct on his part.

5. As a fall back it is asserted on behalf of the lessee and the plaintiffs that the leases were terminated by a letter dated 1 February 2000 (exhibit 11).

6. By Deed of Assignment dated 25 February 1999 the lessee assigned to Mark William McKay and Steven Gordon, the directors of the company, “its right, title and interest in and to the cause of action arising against the said Colin Eric Blumson” arising “pursuant to a lease”, the cause of action being said to be “for damages for breach of contract in a sum exceeding $350,000”.

7. In consequence of that assignment Mark William McKay and Steven Gordon, as plaintiffs, commenced this action in this Court; they are referred to herein as the plaintiffs. By the statement of claim, as amended at the outset of the trial, the plaintiffs claim against the lessor, who was named as defendant:

   (i)         $175,226.85 for loss of profits;

   (ii)        $190,000.00 for loss of sale opportunity;

(iii)	$150,000.00 for loss of value of improvements to the demised premises;
(iv)	$13,900.00 (or $54,487) for money had and received;
(v)	Alternatively, damages for misrepresentation.

It will be necessary to say more about the statement of claim later.

1. By his defence the lessor disputed that he was contractually bound to the lessee to construct the car parking facility as alleged in the statement of claim. He also alleged that he validly re-entered and forfeited the lease on 3 March 1997, and further made allegations which, if accepted, meant the plaintiffs were not entitled to any damages. He then counter-claimed against the plaintiffs, the lessee, and Alexander George McKay (“A G McKay”) who was named as second defendant to the counter-claim. The plaintiffs and A G McKay had guaranteed performance of the lessee’s obligations pursuant to each of the leases. The counter-claim is for rent from March 1997 until 1 July 1998, when the property was sold and interest thereon. In addition to rent there is a claim for outgoings and repair costs.

2. That, in broad outline, is the background to the action as it went to trial.

3. At the outset of the trial an application was made to amend the statement of claim to include what amounted to an allegation of fraud. Paragraphs 6A and 7B as then inserted alleged that the lessor represented that he would construct car parking but that at all times, including when he made the representation, he had no intention of doing so. After hearing argument I decided to allow the amendment, but indicated that the lateness of the plea was a matter which would be taken into account when that issue was being considered.

4. Gordon had considerable experience prior to October 1994 in operating a restaurant, but this was the first such venture for M W McKay. In about October 1994 the plaintiffs became aware that the then lessee of the subject premises was interested in assigning it’s lease. There was a deal of evidence about attempts made to obtain such an assignment, but that came to nothing. Thereafter an agreement to lease was signed on 25 October 1994. The real estate agent for the lessor signed that document, and I am satisfied that Blumson was only marginally involved in the dealings leading up to it being signed. Thereafter solicitors for the lessor and lessee negotiated the terms of the written lease. In those circumstances the evidence of what occurred during the negotiations in October 1994 is not of material assistance in determining the proper construction of obligations imposed by the lease executed on 20 January 1995. The written lease speaks for itself. However, it is relevant to note that both the lessor and the lessee became aware during that period that the local authority, the Maroochy Shire Council, might require off-street parking if a permit was issued to conduct a restaurant business in the premises. The lessor’s solicitor’s letter of 20 December 1994 (exhibit 4) stated he would comply “with Maroochy Shire Council car parking requirements for the Restaurant seating 40 persons”. Blumson however also believed that because there was a “continuing non-conforming use” no parking requirements would be enforced by the Council.

5. The following provisions of the lease of 20 January 1995 should be noted. The annual rental for the first year was $24,000, and it increased by $1,200 per year for each of the remaining 4 years. I am not satisfied that any portion of the rental was represented as reflecting the cost of providing on-site car parking. The lessee further agreed to pay a percentage of variable outgoings as defined (cl 1.3.1). Another provision of critical importance was cl 2.19, which relevantly read:

   “The Lessee shall at its cost observe perform and fulfil all the requirements of any Statues, Regulations, Ordinances or By-Laws so far as the same may apply to the demised premises arising out of the business conducted by the Lessee upon the demised premises … . Notwithstanding anything to the contrary contained herein, any car parking requirement of Maroochy Shire Council for a forty seat Restaurant is to be fulfilled by the Lessor at its expense provided that the parties expressly acknowledge that should the Lessee increase the seating capacity of the Restaurant beyond forty then any car parking requirement of the Maroochy Shire Council consequent upon such increased seating capacity shall be borne by the Lessee at its expense. Any work so completed by the Lessee shall notwithstanding the fulfilment of the same by the Lessee be and at all times remain the absolute and sole property of the Lessor and upon the termination of this lease by the effluxion of time or otherwise the Lessee shall not be entitled to any compensation whatsoever with respect to any works completed by it under this clause.”

6. The use of the phrase “any car parking requirement” reflected the fact that there might in the long run be no enforced requirement from the local authority that on- site parking be provided. It is also important to note that there was no provision as to parking which the lessee could enforce if it was not an enforced requirement of the local authority. The lessee could not, for example, require the construction of 5 or 10 car parking spaces. Further, and perhaps more importantly, there was no contractual right in the lessee to have the use of any car parking space actually constructed by the lessor. The lease did not extend to the car parking area. Essentially the provision in the lease recognised that the lessee’s proposed use of the demised premises might (possibly would) result in the local authority requiring the lessor, as owner of the land and entire building thereon, to construct car parking facilities on the balance of his land. If that requirement materialised the provision dealt with the apportionment between the lessor and the lessee of the cost of complying with the Council requirement.

7. It was necessary in order for the premises to be used as a restaurant for the lessee to upgrade the kitchen and toilet facilities. Plans were drawn up to achieve that and the necessary application made to the local authority before the lease was formally executed. Blumson signed the application as owner of the premises thereby consenting to the works being carried out. The plaintiffs alleged that he also signed the relevant plan, but I find that he did not. I accept Blumson’s evidence that he was not shown a plan which provided for car parking facilities until after the restaurant was operating; there was no mention of car parking in the application signed by him. The Building Permit (exhibit 10) from the local authority issued on 28 December 1994, before the lease was executed; there is no evidence that Blumson saw it at any material time. That permit contained a clause dealing with car parking (cl 21) which used a different formula to that mentioned in the plan (part of exhibit 9) which was that car parking was to be provided by the building owner on the basis of 1 space per 4 seats in the restaurant and 1 per 2 employees. On the basis of a 40 seat restaurant and 4 employees the plan showed 12 car spaces. There was a schematic diagram showing 12 parking spaces on the land to the rear of the building. A stamp on that plan indicated that it was approved by the local authority. The upgrade of the premises was completed and the restaurant opened for business on 3 March 1995. The Maroochy Shire Council issued a licence for the restaurant in March 1995 and that was renewed throughout the period of the lessee’s occupancy (see exhibits 12 and 13). At the time the licence was first issued (and indeed at the time of each renewal) the lessor had not done anything with respect to the provision of car parking spaces on his land. Without significant work the area to the rear of the premises was too rough and steep to be used for car parking purposes. I am satisfied that at that time Blumson had the erroneous belief that because a restaurant was a “continuing non-conforming use” he was not legally obliged to satisfy local authority car parking guidelines for a restaurant, but he would do so if the Council forced the issue. The evidence does not disclose any direct contact between the Council and the lessor concerning car parking prior to August 1995. Because the appropriate licence for the restaurant existed at all times it cannot be said that it was operating unlawfully.

8. When the restaurant opened patrons were able to park on an adjacent vacant block of land. It appears to have been a parking area for a nearby hotel. Whilst patrons of the restaurant had no legal right to park there, no objection to such use was initially raised and it appears to have been regularly used by them. Because of that the absence of car parking spaces to the rear of the building did not present a problem to the lessee. I am not satisfied that regular complaints were made by the lessee with respect to the non-provision of the car parking shown on the plan. The clause in the lease had been inserted to cover the situation where the Council enforced a car parking requirement; on-site parking was not something the lessee of its own volition required or demanded.

9. Problems between the lessee and the operators of the nearby hotel resulted in patrons of the restaurant being prevented for a relatively brief period in 1995 from parking on the vacant adjacent block. When that occurred I am satisfied that the lessee complained about the absence of on-site car parking. However once parking was resumed on that block the complaints ceased.

10. Undoubtedly because of the realisation that he may be required by the local authority to provide on-site parking, the lessor had made some inquiries about the cost of constructing such car parking around Christmas 1994. He obtained from a relative who was working with an engineering firm a rough quotation on 13 January 1995 (exhibit 20). But he did not take that any further because, as already noted, he had a belief that the Council could not compel on-site parking. That changed when he received the letter from the Council of 8 August 1995 (exhibit 19). That letter noted that a Council inspection had revealed that the car parking layout delineated on the approved building plan had not been completed and required “compliance with same to enable the land use to continue”. Blumson had some discussions with the Council and an architect and apparently decided to provide the car parking facility once his finances permitted. I am satisfied that he made a statement along those lines to the plaintiffs. However, nothing was done immediately probably because of Blumson’s tight financial position. Then came another letter from the Council dated 1 May 1996. It recited that an inspection revealed that Town Planning Scheme requirements for car parking had not been complied with as required by the approved Building Application. The letter noted that after construction of the deck a total of 16 parking spaces were required in accordance with the relevant permits. The letter called for an explanation for non-compliance within 30 days and an indication of “intended remedial action”. If that was not done then the letter made it clear that the lessor was rendering himself liable to prosecution. That was followed by a final Warning Notice from the Council dated 11 June 1996. That threatened legal proceedings without further notice if there was no satisfactory response. The lessor replied by letter dated 30 July 1996 which stated that he was waiting for engineering drawings so that he could provide the necessary parking. He concluded by saying: “I take this responsibility seriously and intend to comply as soon as possible”. But, nothing had in fact been constructed by February 1997, and the Council had taken no further action. I am satisfied that throughout the period in question the lessor was short of funds and that was the reason nothing was done.

11. By mid 1995 the lessee wanted to take advantage of a panoramic view from the rear of the restaurant over the Sunshine Coast. The lessee raised with the lessor the possibility of a deck being built to be used for outdoor dining taking advantage of that view. In the course of discussions about the construction of the deck I am satisfied that there were discussions about car parking to the rear of the allotment. If car parking was provided there it would be immediately below the proposed deck. I am satisfied that in the course of those discussions some mention was made by M W McKay and Gordon that such a car park would detract somewhat from the ambience of the deck. But no such statement could absolve the lessor from the obligation to provide car parking as required by the Maroochy Shire Council. Whilst some passing mention might have been made about using the land as a garden area for functions, I am satisfied that was never seriously discussed. Any statements made by M W McKay and Gordon reflected the fact that whilst parking on the adjacent block was available there was no significant problem for them arising from the fact that there was no on-site parking. The plaintiffs never waived any obligation on the lessor to provide on-site parking if the Council compelled him to do so; indeed it was not within their power to do so.

12. The deck was constructed, and it was used by the lessee for some time prior to the formal lease of it being executed on 29 August 1996. It will be remembered that that lease was for a term of 4 years from 1 February 1996. The rental for the first month was $300 and that increased by $50 per month until the fifth month when the rent was $500. Thereafter, until the end of the first year the rent was $500 per month. The lease provided that the rent for the second year was to be $6,300, for the third year $6,612, and for the fourth year $6,948. The lease included an addendum to cl 2.19 in these terms:

    “The parties acknowledge that the Council have required the Lessor to provide four car parking spaces as a result of the addition of the demised premises to the Lessee’s restaurant leased from the Lessor under Registered Lease No 700650252. The Lessor shall at his expense construct the four car parking spaces as required by the Maroochy Shire Council. This obligation upon the Lessor to complete four car parking spaces does not alter or diminish the Lessee’s responsibility and obligations to comply with Maroochy Shire Council requirements for any additional car parking as provided in c. 2.19 of Registered Lease 700650252.”

    That did not significantly alter the position as between the lessee and lessor pursuant to the earlier lease; it merely adjusted the basis of the apportionment of the cost of construction if the requirement was enforced.

1. In that regard it is of some assistance to note the contents of the letter of 30 April 1996 from the solicitors for the lessee to the solicitors for the lessor:

   “Our clients have the lease of the balcony area which you sent them
   with your letter of 22 February 1996.

   They advise us that the lease should mention that our clients are to be entitled to four car parking spaces. Apparently, it was a condition of the original Council permission that 12 car parks should be provided. On approval of the permit for the deck, four additional car parks were to be provided.

   We understand that none of the car parks had in fact yet been built but our client’s instructions are that reference to the car parks should be made in the present document.”

2. The real significance of that letter is that it contains no complaint about the non- provision of parking by the lessor. It demonstrates that the absence of on-site parking was of no real concern at that time to the lessee. That is confirmed by oral evidence given by M W McKay. In about mid 1996 the lessee listed the restaurant for sale. In evidence M W McKay said:

   “Initially we put it on the market at $250,000, which was quite a large price, and we put it on at that price simply because were weren’t that fussed on selling it because it was a good cash flow. It was running very nicely so it didn’t worry us that it didn’t sell.”

3. At another point in his evidence M W McKay asserted that the absence of car parking was “certainly affecting our lunch time trade”; significantly that was not expanded on in any way.

4. In May 1996 the plaintiffs also acquired a restaurant in central Brisbane. That imposed a significant burden on their financial resources. From about June 1996 they fell into arrears in paying rent under the two leases with respect to the Buderim restaurant. They were in arrears throughout the remainder of 1996, though amounts on account of rent and outgoings were paid from time to time. In a letter dated 18 November 1996 the lessor drew the attention of the plaintiffs to the fact that the lessee was “further behind with monies owing”; he indicated that his own affairs “make it imperative that I collect these monies”. The letter concluded with the observation that “without full and proper reply I will have to take action, which will be done at the last resort.”.

5. In accordance with that letter an amount of $460 was credited on 24 November 1996, but significant default still remained. In consequence on 29 November 1996 the solicitor for the lessor forwarded a letter to the lessee enclosing a Notice to Remedy Breach of Covenant pursuant to s 124 of the Property Law Act. The letter required compliance with the Notice within 7 days; reference was made to clauses 10.4 and 10.7 of the leases. The Notice asserted that $4,095 was outstanding for rent and outgoings, and in addition an amount of $478.40 was claimed as interest on arrears. A schedule was annexed to the Notice detailing payments and the calculation of the amounts owing.

6. An amount of $2,800 was paid on 10 December 1996, but that still left a substantial amount in arrears. Then M W McKay wrote to the lessor a letter dated 17 December 1996; relevantly it said:

   “I have held off sending this letter the past couple of days in order to have something substantial by way of a payment plan which is achievable.

   As you are aware we have struggled like many small businesses on the coast to keep our heads above water the past few months. The economy on the Sunshine Coast has been particularly stagnant and as we are still a very young business (19 mths) which is heavily reliant on a thriving economy; it made it difficult for us to survive. But we have survived and am now seeing a glimmer of light at the end of the tunnel, as the last two weeks have been reasonably good and our forward bookings are encouraging.

   At present we owe you $2,897 for the December rent which is now

   17 days overdue and $1,778.40 in outgoings. …

   We have re-structured the style of our restaurant from a full alacart
   (sic) to a cheaper café style restaurant.

   Its been in place the past week and is being well received but its been costly to promote and instigate. But we feel its been important to make the change in order to meet the needs of a broader spectrum of people.

   We plan to have the rent for this month by Tuesday next week and hopefully a portion of the outgoings if the weekends trading goes well. We feel that over the next month we should be in a position to cover all outgoings and get back to paying the rent on the first of the month.”

7. The December rent was in fact paid on 27 December 1996.

8. It is significant that there was no complaint in that letter about the lessor’s failure to provide on-site car parking. It was not then alleged that the absence of such car parking facilities was having any detrimental effect on the restaurant trade. That letter is not consistent with the oral evidence of each of the plaintiffs that they were “desperate” to get that car parking, and were making continual complaints to the lessor about his failure to meet a contractual obligation as they saw it. The letter of 17 December 1996 is also inconsistent with the oral evidence of the plaintiffs that they lost a sale of the restaurant in about November 1996 because there was no car park associated with it.

9. I do not accept the evidence of the plaintiffs that they told the lessor in January 1997 that they would not pay any rent until he provided the car park. Certainly there is nothing in writing to that effect. In fact on 10 January 1997 the amount of $2,890 was paid by way of rent.

10. Under cover of a solicitor’s letter dated 19 February 1997 a further Notice to Remedy Breach of Covenant was served on the lessee. It referred to $4,423.94 being the amount of arrears for rent and outgoings under both of the leases, $658.99 being interest due in accordance with the terms of those leases, and also required payment of professional costs in the sum of $400. That Notice required compliance within a reasonable time in default of which the lessor was entitled to re-enter or forfeit the lease. No steps were taken by the lessee to remedy that default by 3 March 1997, a period much longer than the 7 days referred to in the leases. Further, during that period no formal demand was made by the lessee that the lessor remedy an alleged breach of contract in not providing on-site car parking. I am not satisfied that M W McKay telephoned Blumson on 20 February 1997 and said no rent would be paid until car parking was provided. It was in those circumstances that the lessor effectively re-entered and forfeited the lease by changing the locks on 3 March 1997. It should also be noted that by that date the rental for March had fallen due. It was not disputed at the trial that the lessee was in arrears of paying rent as at both 19 February and 3 March 1997. The lessee was unable to pay those arrears on either date.

11. The following passage in the cross-examination of the plaintiff Gordon indicates the attitude of the lessee at that time:

“Q	But I’m talking about between 19 February ‘97 and the 3 March when you were locked out did you take any steps to ensure that the rent was paid in that period, the two week period? –
A	No.
Q	And you knew of course that the rent became due or another instalment of rent became due on 1 March ’97? –
A	That’s right. The rent was a give and take situation, we knew Colin’s problems, he knew our problems, right.
Q	Well, it was getting pretty serious, wasn’t it, by the time he got his solicitors involved for the second time to issue a notice claiming indemnity? –
A	But the money would have been paid, Colin was desperate for the money, that’s why it came to that, it was a poker game.
Q	It was a poker game? –
A	Absolutely. He called our bluff.”

1. The lessee and the plaintiffs realised the game of poker was over when the locks were changed on 3 March. According to M W McKay he then spent a “whole week trying to scrape up enough money and I ended up ringing my grandmother and borrowed $5,000 cash from her”. There appears to have been a telephone call from the lessee’s solicitor to the lessor’s solicitor on or about 7 March in the course of which a statement was made to the effect that: “The boys have arrived and they have managed to get $5,000.”. I am not satisfied that there was ever any actual tender of $5,000; in any event that was an inadequate amount to bring the rent up to date at the time of the alleged tender. But more importantly, particularly in the absence of any claim for relief against forfeiture, any tender after the lessor had lawfully re-entered and forfeited the lease was futile.

2. Then the solicitor for the lessee forwarded to the lessor the letter of 15 March 1997 (exhibit 8); it was in these terms:

   “We have received instructions to act on behalf of the above named

   Lessee.

   We advise as follows:

   (i)         That your client has unlawfully locked our client out of the subject premises and that our client holds yours responsible for any loss or damage occasioned by such lockout, including damage to fixtures and fittings.

(ii)	That such fixtures and fittings remain the property of our client and are in fact subject to a registered charge.
(iii)	That our client will be claiming damages from your client brought about by your client’s failure to complete the car parking at the rear of the subject premises. The claim shall include but not be limited to the following:

(a)          Loss of the cost of fit-out;

(b)          Loss of profits past and future;

(c)          Loss of opportunity;

(d)          Reimbursement of rental;

(e)          Interest and costs.

Upon quantification of our client’s losses we will correspond with you further.

Our client denies that it is indebted to your client in any amount.”

1. There was a dispute as to whether or not that letter was an acceptance by the lessee of a wrongful repudiation by the lessor. In consequence on the eve of trial, 1 February 2000, the then solicitors for the lessee and the plaintiffs delivered exhibit 11 to the lessor’s solicitor stating as follows: “We refer to leases Nos 700650252 and 701757786. If it has not been done so to date, we hereby give notice that our client formally terminates each of the above mentioned leases.”

2. The equipment owned by the lessee, and which was the subject of a registered charge, was ultimately removed from the premises in June 1997. The permanent improvements of course remained. Probably something less than half the $150,000 spent on fitting out represented a permanent improvement.

3. The lessor had difficulty finding a new tenant and eventually entered into a contract to sell the property dated 1 July 1998. In terms of that contract the lessor was obliged to construct 16 car parking spaces and he did so at a cost of about $25,000.

4. I am satisfied that there was at least one telephone conversation around early March 1997 between Blumson and A G McKay in the course of which the former drew A G McKay’s attention to the fact that he was a guarantor. It is not necessary to refer further to the dispute between those two persons as to the number of phone calls and what was said therein.

5. In all editions of the statement of claim, including the further amended statement of claim delivered at the outset of the hearing pursuant to leave, there was a claim for loss of profits totalling $175,226.88. The particulars set out purported to show a “net after tax profit” of $1,369.96 per week. Later in the course of the plaintiffs’ case that claim was abandoned. However, it should be noted that under cross- examination of the plaintiffs it emerged that no accounting records existed for the restaurant business, no taxation returns were available in order to test the validity of the claim, and no evidence at all was available to enable any assessment to be made of the impact of the absence of on-site parking on restaurant takings. The fact that the plaintiffs persisted with the loss of profits claim until it became obvious that it could in no way be supported impacts on their credit.

6. The relief claimed by the plaintiffs in the action is not all that clear. Paragraph 13 in the statement of claim as amended at the outset of the trial is in these terms:

   “In consequence of the Defendant’s wrongful re-entry and/or unlawful termination of and/or breach of the conditions of the said two leases (as alleged in paragraph 8), and/or misrepresentation (as alleged in paragraphs 6A and 7B) the company has suffered loss and damage particulars of which are as follows … ”.

7. Thereafter in paragraph (a) particulars of “loss of profits” are set out. That is the claim which, as noted above, was abandoned in the course of the plaintiff’s case. Then (b) gives some particulars of “loss of sale opportunity”. Because of amendments the amount of the claim is unclear; certainly a claim for $190,000 appears to be made. But in final addresses counsel for the plaintiffs limited the claim to $40,000 being the difference between the alleged lost sale price ($190,000) and the cost of fitting out ($150,000). Then follows (c) where particulars of “loss of value of the improvements to the demised premises” are given; the amount there is $150,000. Then comes paragraph (d), which has been rendered almost unintelligible by the various amendments made to it. Though at the end of the statement of claim it is said that $13,900 is sought as monies had and received, the latest particulars in (d) would suggest that the claim was for $54,487, being the total amount of rent paid by the lessee under both of the leases. Final addresses made it clear that it was the latter sum which the plaintiffs claimed.

8. All of that must be translated in my view into claims for damages for breach of contract, damages for fraudulent misrepresentation, and orders consequent upon recission of the contract.

9. The allegation appears to be that there was breach of contract in that (as alleged in paragraph 8) the lessor failed to construct car parking facilities in accordance with the terms of the leases. A real difficulty with that is that the evidence does not establish even a loss of one cent resulting from the failure to provide car parking. That is due in large measure to the fact that no evidence at all was placed before the court as to the takings or profitability of the business. The closest one gets to some evidence that the lessor’s failure to provide the car parks affected the business is the statement in evidence by M W McKay that it was “certainly affecting our lunch time trade”. In the absence of any expansion as to what was meant by that, it is impossible to make a finding that if there was a breach by the lessor of a condition of the leases it was productive of loss to the lessee.

10. But in accordance with the construction of cl 2.19 of the first lease discussed above, it was not a condition of the lease that the lessor provide the lessee with on-site parking. The clause dealt with the apportionment between the lessor and lessee of the cost of the lessor complying with any car parking requirement of the local authority consequent upon the lessee’s use of the premises. The clause did not grant the lessee exclusive or any right to actually use any parking required by the Council to be constructed. If the Council failed to “require” any car parking there was no breach of a condition by the lessor which would constitute repudiation or give the lessee any right to damages.

11. Much the same can be said with respect to the claim for damages for fraudulent misrepresentation. The misrepresentation is said to arise because at all times the lessor had no intention of fulfilling an alleged obligation to provide on-site car parking. The representation is said to be found in cl 2.19 of the first lease and the addendum to cl 2.19 of the deck lease. The evidence does not enable a finding to be made that the lessee suffered any loss of profits as a result of such a misrepresentation. The evidence does not permit of a finding that the inability of the lessee to meet payments of rent when due was caused by (was a consequence of) the failure of the lessor to provide on-site car parking. Further, for the reasons given previously, I do not find that the clauses of the leases relied on by the plaintiffs contain a representation as alleged.

12. But in any event I am not satisfied that the lessee and the plaintiffs have established any such misrepresentation as alleged was made fraudulently. Much of the evidence led on behalf of the lessee and the plaintiffs tends to suggest that they accepted at the time that the lessor was experiencing financial difficulties and that that was at least a significant factor in his failing to provide the car parking. The allegation that the lessor never had the relevant intention and was therefore guilty of fraudulent misrepresentation was first made on the eve of the trial and that in itself strongly indicates that this was an afterthought on the part of the plaintiffs. There is nothing in any of the evidence to suggest that such an allegation was even hinted at during the period the lessee was in occupation or during the course of litigation up till the eve of trial. I am satisfied, as noted above, that for much of the period in question the lessor had a belief that the local authority could not lawfully compel him to provide car parking; that was certainly his belief when the first lease was signed. But at all times he acknowledged that if the Council required car parking he would carry out the necessary construction with the cost thereof apportioned as provided for by the leases. As noted above, I am also satisfied that the reason he did not construct the car parking after August 1995 when he received exhibit 9 was that he did not have the necessary funds.

13. In so far as the statement of claim suggests that the plaintiffs are seeking orders consequent upon recission there are a number of difficulties which must be addressed. Many of the improvements which the lessee placed in the demised premises were the subject of a charge and were eventually removed by the holder of the charge. In those circumstances the plaintiffs cannot recover from the lessor the total value of those improvements. That is what is claimed. The evidence does not permit of the calculation of any loss other than the total value.

14. Each of the plaintiffs in evidence spoke of a lost sale in about November 1996, but no detailed evidence was given relating thereto. There is no evidence on which the court could make a finding that the plaintiffs suffered some loss with respect to a prospective sale falling through.

15. Then finally there is the claim for the recovery of all the rent paid as money had and received. Again I failed to see any basis on which the lessee or the plaintiffs would be entitled to that. The lessee had the use of the premises throughout the period, and according to the allegation in the statement of claim was making a weekly “net after tax profit” of $1,369.96. That use pursuant to the licence granted was not unlawful. In those circumstances one cannot simply say that because the lease was rescinded from 15 March 1997 the rent paid to that date can be recovered in whole or in part.

16. But before the plaintiffs could succeed on any of those claims they must establish that they rescinded the contracts of lease on 15 March 1997. In order to do that they must show the leases still existed immediately before that letter was sent.

17. That then brings me to the question whether or not the lessor lawfully re-entered and forfeited the leases on 3 March 1997. The contention of the lessee and the plaintiffs is that the lessor had no right to do so because the notice of 19 February 1997 was legally ineffective. In submissions counsel for the plaintiffs limited his challenge to the validity of the notice to two grounds:

    (i) Section 124 of the Property Law Act did not permit breaches of two leases to be joined in the one notice;

(ii) The lessee was not given a reasonable time to comply with
the notice.

1. Neither counsel could find any authority dealing with the first point. Both referred to the wording of the section and the terms of the form (Form 7) in support of their competing contentions. The section does refer to “the lease” and requires the lessor in the notice to specify “the particular breach complained of”. Then there is the requirement of giving the lessee notice that it may “remedy the breach”. I do not find any of those expressions of real assistance in deciding the question one way or the other. The Form does require particulars of the lease to be set out: its date, the term, the commencement date, and the covenant allegedly breached. But again such considerations do not compel a decision one way or the other.

2. Normally only one lease would be involved, but that does not mean that in an appropriate case the notice could not validly refer to more than one lease. Here the second or later lease related to a verandah extension to the premises the subject of the earlier lease. After the second lease was granted sums of money were paid by the lessee by way of rent pursuant to each lease. At least after the lessee fell into arrears amounts by way of rent were paid which did not equate the actual monthly rental for either of the leases either taken separately or together. In other words the payment of rental by the lessee became mixed as between the leases and it was virtually impossible for the lessor to do other than use combined figures in calculating the position. It follows that whilst both parties were in a position to know what was the total amount due and owing pursuant to both leases neither could say with any degree of accuracy that a particular amount was due with respect to each of the leases.

3. In those circumstances I can see no reason why the two leases could not be referred to in the one notice pursuant to s 124.

4. Here the notice dated 19 February 1997 (part of exhibit 1) gave all necessary particulars required by the section and the Form to identify each of the leases and then particularised the breach, namely the failure to pay outstanding rent and outgoings in the total sum of $4,423.94. There was a schedule annexed which showed receipts and payment for rent from 1 January 1996 to 17 February 1997.

5. In the circumstances I hold that the lessor was entitled to combine in the one notice breaches of each of the two leases. At the end of the day the critical factor must be whether the lessee has been made aware of what must be done in order to remedy the breach or breaches. (cf Ex parte Taylor (1980) Qd R 253 at 256). I would hold that the notice in question satisfied that test.

6. The next question is, was the period given for compliance reasonable. In accordance with the relevant clause in the leases the notice required the lessee to remedy the breach by paying outstanding rent and outgoings “within 7 days”. So far as the requirement to pay interest and professional costs was concerned that was covered by the general notice that the lessee was to comply “within a reasonable time”.

7. Particularly bearing in mind the terms of cl 10.7 of each lease, that the lessee had been in arrears in payment of rent since mid 1996, the content of the letters of 18 November 1996 and 17 December 1996, the earlier Notice pursuant to s 124 of 29 November 1996, and the admitted inability of the lessee to bring the rent and outgoings up to date as at 3 March 1997 I am satisfied that the lessee was given reasonable time in which to comply with the Notice of 19 February 1997.

8. The lessor had valid grounds for re-entering and forfeiting the lease in February/March 1997 and he complied with the necessary statutory requirements in order to give him the legal right to do so. In the circumstances I find that the lessor lawfully re-entered and forfeited the lease as at 3 March 1997. If the lessee had a valid ground for determining the leases because the lessor was in breach of the condition to provide on-site parking, the fact is that the lease was not so determined before it was validly forfeited by the lessor. In the circumstances it is not necessary to decide whether the letter of 15 March 1997 would have been an effective acceptance of repudiation if the leases had been on foot as at that date.

[58] It follows that the plaintiffs’ action must be dismissed.

1. I turn now to the counter-claim by which the lessor seeks to recover from the lessee monies allegedly due and owing pursuant to the two leases. There is then a further claim against the plaintiffs and A G McKay on the basis that each of those three persons guaranteed performance of the lessee’s obligations.

2. The guarantors by their defence contended that the guarantees were void, of no effect, or unenforceable because of considerations which depended upon an acceptance of the lessee’s principal case. Given the findings made above there is no substance in the contention that the guarantees are unenforceable.

3. The claim against the lessee is for rent pursuant to the leases to 1 July 1998 when the property was sold together with interest to date of judgment, an amount totalling $76,435.21 to 1 August 1999, and also for alleged cost of repairs to the demised premises totalling $8,361.90.

4. One of the particulars claimed under the heading of costs of repairs is the cost of changing locks consequent upon the re-entry of the lessor on 3 March 1997. That is a claim for $130. I am satisfied on the evidence that that amount is recoverable.

5. However, having considered all of the evidence relating to the balance of the claim for cost of repairs I am not satisfied that the lessor has established an entitlement to the amount claimed. Some of the work had not been carried out by the date of sale, and some constituted refurbishment of fair wear and tear. Other items claimed (such as waste removal fees) have not been proven to be recoverable from the lessee.

6. In the circumstances I reject the claim for cost of repairs other than the $130 for changing the locks.

7. I am satisfied on the whole of the evidence that the only reason the demised premises could not be immediately leased following the lessor’s re-entry was the fact that the local authority would require the car parking requirement to be satisfied before giving any new approval or licence associated with the premises in question. That was made clear by the Council officer, Phillips, when he gave evidence at the time of producing documents pursuant to a subpoena. It was also acknowledged by Blumson under cross-examination. It was against that background that Blumson ultimately decided the preferable course was to construct the car parking facilities and sell the property. In those circumstances I hold that it was because of the lessor’s inability to comply with Council requirements that the demised premises did not produce income from March 1997. Given that, I reject the claim for rent between April 1997 and June 1998 and interest thereon. As at 3 March 1997 the rent for March pursuant to the leases had fallen due, and that meant that the amount outstanding to that time for rent pursuant to the leases, outgoings, and interest was $8,106.28. That amount is still outstanding. Pursuant to the leases the lessee was obliged to pay interest on overdue payments at the rate of 18% per annum for each month or part of a month during which the payment was overdue. It follows that the lessor is entitled to interest on $8,106.28 so calculated until March 2000; that interest totals $4,565.61.

8. The lessor is therefore entitled to recover from the lessee the amount of $12,801.89.

9. The lessor is entitled also to judgment against the guarantors for that amount.

[68] My orders will therefore be:

(1) Plaintiffs’ action dismissed with costs to be assessed on the standard

basis.

(2) Judgment for the defendant on his counter-claim against the plaintiffs and the first and second defendants by counter-claim in the sum of $12,801.89 with costs to be assessed on the standard basis.