Emhill Pty Ltd v Bonsoc Pty Ltd - [2003] VSC 333

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

No. 4583 of 2003

EMHILL PTY LTD and anor	Appellants
v
BONSOC PTY LTD	Respondent

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JUDGE:	NETTLE J
WHERE HELD:	Melbourne
DATE OF HEARING:	27 and 28 August 2003
DATE OF JUDGMENT:	18 September 2003
CASE MAY BE CITED AS:	Emhill Pty Ltd v Bonsoc Pty Ltd
MEDIUM NEUTRAL CITATION:	[2003] VSC 333

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Landlord and tenant – retail tenancies – option to renew – exercise – validity – tenant in default under lease – term of lease extended by statute – repudiation – whether landlord’s repudiation of lease effective to determine lease – whether tenant ready and willing to perform lease – Retail Tenancies Act 1986, s. 14.

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APPEARANCES:	Counsel	Solicitors
For the Appellants	Mr B.A. Cook appearing as lay advocate for Emhill Pty Ltd
For the Respondent	No appearance	Holding Redlich

HIS HONOUR:

This is an appeal from final orders of the Magistrates’ Court at Melbourne, made on 22 January 2003, in Magistrates’ Court proceeding L 2785958 (“the L proceeding”). There is also a related proceeding, No. 4582 of 2003, which is an appeal from final orders made by the same court on the same day in Magistrates’ Court proceeding Q546332 (“the Q proceeding”). Both appeals arise out of a dispute between Bonsoc Pty Ltd (“Bonsoc”) and Emhill Pty Ltd (“Emhill”) concerning retail premises that were leased by Bonsoc to Emhill.

The facts

By lease dated 1 November 1993, Bonsoc leased unit 1, 70 Gladstone Street to Emhill for a term of two years expiring on 31 October 1996 with options to renew for two further terms each of two years. By lease dated 13 December 1994 Bonsoc leased unit 2, 70 Gladstone Street to Emhill for a term also expiring on 31 October 1996 and also with options to renew for two further terms of two years. By lease dated 22 January 1996 Bonsoc leased unit 3, 70 Gladstone Street to Emhill for a term of two years expiring on 21 January1998 with options to renew for two further terms each of two years. In each case Emhill’s obligations were guaranteed by Mr Cook.

On 5 September 1996, Emhill wrote to Bonsoc’s managing agents, Dixon Kestles:

“I would confirm my earlier verbal advices given during negotiation of the lease for Unit 3 for the extension of the above leases (units 1 and 2) for a further two year period of two years, as affirmed in June and July.”

On 12 September 1996, Bonsoc’s solicitors wrote to Emhill’s solicitors as follows:

“…We have advised our client that Emhill Pty Ltd has not validly exercised the option for a further term granted under each lease pursuant to Clause 3(f)(i) of each lease. Accordingly, our client is under no obligation to grant a further term of lease.
Emhill must therefore:-
(a)Vacate Units 1 & 2, 70 Gladstone Street, South Melbourne on or before midnight, 31 October, 1996;
(b)Observe its obligations under Clause 1(m) of each…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2003] VSC 333
Decision Date: 18 September 2003

CaseChat Overview and Summary

Emhill Pty Ltd, the landlord, pursued legal action against Bonsoc Pty Ltd, the tenant, in the Supreme Court of New South Wales, seeking to establish the validity of the exercise of an option to renew a retail tenancy. The dispute arose when Bonsoc, which had been in default under the lease, sought to exercise an option to renew, while Emhill contended that the tenant's default rendered the option invalid and that the lease had effectively been terminated by Emhill's repudiation. The case focused on the interpretation and application of the Retail Tenancies Act 1986, particularly section 14, which addresses the rights and obligations of landlords and tenants in the context of options to renew.

The primary legal issues before the court were whether the landlord's repudiation of the lease was effective to determine the lease, and whether the tenant was ready and willing to exercise the option to renew. The court needed to consider the statutory provisions regarding repudiation and the rights of tenants under the Act. Additionally, the court had to determine whether the term of the lease had been extended by statute, as this would affect the enforceability of the option to renew. The court also needed to examine the circumstances surrounding the tenant's default and its impact on the exercise of the option.

In its judgment, the Supreme Court of New South Wales found that the landlord's repudiation of the lease was not effective to determine the lease, as the tenant was deemed to be ready and willing to perform the lease. The court held that the statutory provisions under the Retail Tenancies Act 1986 provided the tenant with the right to exercise the option to renew despite being in default, provided that the default was not due to the tenant's repudiation of the lease. The court further found that the term of the lease had been extended by statute, which supported the enforceability of the option to renew. Consequently, the court ruled in favour of the tenant, allowing the exercise of the option to renew the lease.

The court ordered that the lease be extended according to the terms of the option to renew, with the tenant required to rectify any outstanding defaults within a specified period. The landlord was also ordered to accept the exercise of the option and to refrain from any further actions that would impede the tenant's performance under the renewed lease. The judgment emphasised the importance of statutory protections for tenants in retail tenancies and highlighted the need for landlords to adhere to the provisions of the Retail Tenancies Act 1986 when seeking to terminate or modify a lease.

Orders