Emhill Pty Ltd v Bonsoc Pty Ltd (No 2) - [2007] VSCA 108

SUPREME COURT OF VICTORIA

COURT OF APPEAL

No 4582 of 2003
No 4583 of 2003

EMHILL PTY LTD & BRIAN ARTHUR COOK
EMHILL PTY LTD & BRIAN ARTHUR COOK	Appellant
V
BONSOC PTY LTD (NO 2)	Respondent

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JUDGES:	WARREN CJ, BUCHANAN and ASHLEY JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	8 August 2006
DATE OF JUDGMENT:	31 May 2007
MEDIUM NEUTRAL CITATION:	[2007] VSCA 108

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PRACTICE AND PROCEDURE – Anshun estoppel.

LEASE – Lease purported to confer rights over land which the lessor did not possess – Whether purported conferral fraudulent – Krakowski v Eurolynx (1995) 183 CLR 563 distinguished – Purported conferral not fraudulent – Whether rescission for innocent misrepresentation available – Redgrave v Hurd (1881) 20 Ch D1 considered – Rescission unavailable.

LEASE – Repudiation of lease by lessor – Whether lessee able to accept repudiation – Lessee in breach of an essential term and so unable to accept repudiation.

LEASE – Option to renew – Retail Tenancies Act 1986 (Vic), s 14 (now repealed) – Seacrest Pty Ltd v Apriaden Pty Ltd (2000) 1 VR 567 considered – Surrender of lease by operation of law not excluded from application in the circumstances.

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APPEARANCES:	Counsel	Solicitors
For the Appellants	Mr B A Cook, a lay advocate for the Emhill Pty Ltd
For the Respondent	Mr S J Waldren	Holding Redlich

WARREN CJ:

Introduction

This is an appeal in two separate matters between the same parties; matter numbers 4582 of 2003 (“the L proceeding”) and 4583 of 2003 (“the Q proceeding”) in the Supreme Court. Pursuant to s 109 of the Magistrates’ Court Act 1989, a judge of the Trial Division heard appeals from the Magistrates’ Court in both the L and Q proceedings. His Honour delivered a separate judgment in each of the two matters.[1] The appeal is from those decisions.
[1]Emhill Pty Ltd & Anor v Bonsoc Pty Ltd [2003] VSC 333 and Emhill & Anor v Bonsoc Pty Ltd (No 2) [2003] VSC 337.

General Background to both L and Q Proceedings
Factual Background

Both the L and Q proceedings share the same background. Bonsoc Pty Ltd (“Bonsoc”) leased to Emhill Pty Ltd (“Emhill”) various subdivided units of 70 Gladstone Street, South Melbourne. Units 1, 2 and 3 were retail properties. Units 4, 5 and 6 were car-parks adjacent to those retail properties. Dixon Krestles & Co Pty Ltd (“Dixon Krestles”) acted as an agent for Bonsoc. Mr Brian Arthur Cook, a director of Emhill, personally guaranteed Emhill’s obligations under the leases.

There are three relevant leases. By lease commencing 1 November 1993, Bonsoc leased unit 1 to Emhill. By lease commencing 1 November 1994, Bonsoc leased unit 2 (including unit 6 annexed thereto) to Emhill. Both leases were due to expire on 31 October 1996 and both leases provided an option to Emhill to renew its tenure for two further terms of two years each. By lease dated 22 January 1996, Bonsoc leased unit 3 to Emhill. This lease was due to expire on 21…

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: [2007] VSCA 108
Decision Date: 31 May 2007

CaseChat Overview and Summary

The case of Emhill Pty Ltd v Bonsoc Pty Ltd (No 2) involved a dispute between Emhill and Bonsoc, focusing on issues arising from a lease agreement. The case was heard in the Supreme Court of Victoria. The primary issue was whether a purported conferral of rights over land, which the lessor did not actually possess, was fraudulent. The court also had to consider whether rescission for innocent misrepresentation was available, and if the lessee could accept the lessor's repudiation of the lease when the lessee was in breach of an essential term.

In addressing the fraudulent nature of the conferral, the court distinguished the case from Krakowski v Eurolynx, holding that the purported conferral was not fraudulent as it did not meet the threshold of fraud. The court considered the principles in Redgrave v Hurd but determined that rescission was not available because the conditions for such a remedy were not met. Regarding the repudiation of the lease, the court found that the lessee, being in breach of an essential term, was unable to accept the lessor's repudiation. The court also examined the applicability of the Retail Tenancies Act 1986 (Vic), section 14 (now repealed), and concluded that a surrender of the lease by operation of law was not excluded in the given circumstances, drawing on the reasoning in Seacrest Pty Ltd v Apriaden Pty Ltd.

The Supreme Court of Victoria ruled in favour of Bonsoc on all points, finding no fraud in the conferral of rights, no availability of rescission for innocent misrepresentation, and that the lessee could not accept the repudiation due to their breach of an essential term. The court also confirmed that the surrender of the lease by operation of law was valid under the circumstances. The final orders reflected these findings, affirming Bonsoc's position in the dispute.

Orders