Ferman Enterprises Pty Ltd v Javid Pty Ltd

[2017] WADC 132

JURISDICTION     :   DISTRICT COURT OF WESTERN AUSTRALIA

IN CHAMBERS

LOCATION:   PERTH

CITATION:   FERMAN ENTERPRISES PTY LTD -v- JAVID PTY LTD [2017] WADC 132

CORAM:   DEPUTY REGISTRAR HEWITT

HEARD:   28 SEPTEMBER 2017

DELIVERED          :   11 OCTOBER 2017

FILE NO/S:   CIV 855 of 2017

BETWEEN:   FERMAN ENTERPRISES PTY LTD

Plaintiff

AND

JAVID PTY LTD
First Defendant

DAVID SCOTT COHEN
Second Defendant

Catchwords:

Practice and procedure - Summary judgment application - Turns on its own facts

Legislation:

Commercial Tenancies (Retail Shops) Act 1985 s 15C(i), s 16(c)
Competition and Consumer Act 2010 (Cth)

Result:

Judgment for the plaintiff in respect of its claim for the period May 2016 to 31 October 2016 in the sum of $78,026 together with interest on that sum at 15% per annum

Representation:

Counsel:

Plaintiff:     Mr I Freeman

First Defendant             :     Mr D O'Haire

Second Defendant         :     Mr D O'Haire

Solicitors:

Plaintiff:     Lavan

First Defendant             :     Forbes Kirby Lawyers

Second Defendant         :     Forbes Kirby Lawyers

Case(s) referred to in judgment(s):

Waltons Stores (Interstate) Ltd v Maher (1998) 164 CLR 387

1. DEPUTY REGISTRAR HEWITT: This action was commenced by a writ filed on 21 March 2017 seeking recovery of rent, outgoings and other payments under the terms of a lease which existed between the plaintiff and the first defendant to which the second defendant was a guarantor.  The tenancy enjoyed by the first defendant arose by virtue of an assignment of lease executed between the first defendant and the previous lessee. 

2. On 12 June 2017 the plaintiff brought an application for summary judgment pursuant to O 14 r 1 of the Rules of the Supreme Court 1971 and that is the application with which I am required to deal.  The many cases dealing with applications of this type establish that judgment should not be entered, in anything but the clearest cases where the court is satisfied there is no issue to be tried.  No issue is taken by the defendant as to the existence of the lease, its terms or the fact that the various payments claimed to be due by the plaintiff were, under the terms of the lease, payable and unpaid.  The issues raised by the defendants are contained in an affidavit which has been filed by the second defendant on behalf of both of the defendants.  There are a number of issues which are raised by the affidavit in opposition and I shall deal with them individually.

3. The first issue which was raised is that the plaintiff behaved in a misleading and deceptive way contrary to the provisions of the Competition and Consumer Act 2010.  In the affidavit in opposition there was a reference to various documents provided by the plaintiff to the defendants.  In the course of address counsel for the defendants advised the court that the documents were not in fact provided to the defendants by the plaintiff but by the assignor and that is the basis upon which I intend to deal with the issues.  The assignment took place on 1 April 2015.  Amongst the documents so provided was a disclosure statement which included a budget for the 2012/2013 outgoings.  Those documents were produced by the plaintiff to the assignee when it negotiated the terms of the original lease of which the first defendant became an assignee.  They related to the position which existed at the time the original lease was negotiated and, by my calculations, at least two to three years out of date.  The disclosure statement refers to the fact that the relevant premises was air-conditioned.  Additionally it provided a budget of outgoings.  Nothing has been put forward to suggest that the budget was in any way inaccurate but it did play a part in the first defendant reaching a decision to accept the assignment of the premises.  Additional to these materials provided by the assignor there were representations of turnover and foot traffic made by the director of the assignor and figures of the performance of similar businesses in the area.  The main complaint raised by the defendants concerns the air-conditioning units and on 19 March 2015 the director of the assignor told the defendant that the relevant air‑conditioners had been serviced and the service had been paid for.  Upon hearing that information the defendants assumed that the air‑conditioners were operative but that proved not to be the case.  At that point the defendants emailed the plaintiff asking for the air-conditioning units to be fixed and it is alleged that seven out of nine units were not working.  In response to that email the landlord invited the defendants to obtain quotes for the repairs to the air conditions and proposed a conference at which the defendants, the plaintiff and the assignor would participate.  The conference never took place and by May 2015 the defendant had a report indicating that all the non-operative air‑conditioning units were damaged or faulty and needed to be replaced.  There followed a series of emails between the defendants and the plaintiff concerning this issue, the defendants taking the view that it was the responsibility of the plaintiff to repair the air-conditioning units and the plaintiff taking the view it was a lessee issue, presumably arising out of a want of maintenance during the term of the lease for which the lessee, in this case the first defendant, was responsible.  There was some toing and froing but on 23 December 2015 the plaintiff, through its solicitor, offered to pay $20,000 to replace the air-conditioning units on condition that the defendants signed a release which barred any proceedings in relation to the quality of the air‑conditioners.

4. It is the fact that there was an obligation on the lessee to maintain the air‑conditioning units in at least as good a condition as they were at the commencement of the lease.  There is no evidence as to the condition of those units at that time and I interpret the position between the plaintiff and the defendants being a genuine dispute over the responsibility to carry out the repair.  In any event, the release was signed although the second defendant alleges that in signing that on release he did not realise he was releasing the landlord for loss of business suffered as a result of the non‑functioning air‑conditioning for eight months and in particular over the last three months.  The air-conditioners in question were evaporative air-conditioners and for at least five of the relevant months the normal temperatures would be such that cooling would not be a requirement and heating not an option given the type of air-conditioners which were installed.  The defendants allege that there unconscionable conduct on behalf of the landlord pressuring the defendants to accede to its demand that the release be signed, although it is to be noted that the defendants accepted the $20,000 and used that money to replace a number of the air-conditioning units.  The defendants complaints include criticism of the lawyer engaged by the plaintiff said to be citing constant and often aggressive correspondence to the second defendant.  Much of the correspondence between the parties is in evidence.  Nothing has been pointed out to me that sounds remotely aggressive.  The defendants complain that because the air-conditioners were not operational during some particularly hot months there were substantial losses of business and the sales fell well short of that which the defendants had budgeted for.  It is to be noted however that under-performance in relation to the budget was a feature of the entire occupation of the leased premises and was not confined to the months in question.  In that regard the deponent states 'my business had already operated at a loss for too long and it was unable to recover'. 

5. An allegation levelled at the landlord is that it behaved unconscionably and in breach of the provisions of 15C(1) of the Commercial Tenancies (Retail Shops) Agreements Act 1985.  On my analysis the defendants were deceived by the assignor into a belief that the air-conditioning units were operative and that is the true source of the problem.  As to the loss, there were an ongoing series of short-falls suffered by the defendants during the entire period of their tenancy.  There was a genuine dispute between the parties as to where the responsibility for the repair of the air-conditioning units should fall which was resolved as I have indicated by the plaintiff paying the sum of $20,000 towards the costs of the repair of the air-conditioners and the defendants accepting that sum and releasing the landlord from any liability.  The terms of the release are straightforward, they are easily comprehended, and it cannot be the responsibility of the plaintiff to give legal advice to the defendants as to the legal effect of the release. 

6. The next issue which is raised is in connection with what I might briefly call a failure to mitigate.  It is alleged by the defendants that there were other parties who were willing to take up occupancy in the premises and pay a rent for that occupation.  It is said by the defendants that despite being notified of the defendants' financial hardship, the plaintiff was not prepared to enter an arrangement with those potential parties.  The difficulty with the argument is that all of the proposals involved the landlord making a significant sacrifice of income received for the occupation of the premises.  It is not the law as I understand it that a landlord is required to sacrifice his entitlements to the benefit of a lessee.  None of the proposals were in fact an assignment but were in fact proposals to enter new leases on less favourable terms then those that already existed.

7. The next aspect invoked by the defendant relies on s 16(c) of the Act which prohibits the parties to a retail shop lease engaging in conduct that is misleading or deceptive.  The conduct identified by the defendants as misleading and deceptive is that which was undertaken by the assignor in regard to the working condition of the air-conditioners, the condition of the premises, traffic flow and the mix of tenants.  An attempt is made to sheet home responsibility for these matters to the plaintiff by categorising the assignor as the agent of the plaintiff.  The role of the plaintiff was simply to approve or not approve of the assignment of the lease from the assignor to the assignee.  The Act provides that such approval is not to be unreasonably withheld.  The role of the plaintiff was therefore minimal.  I simply cannot comprehend how the misrepresentations of the assignor can be laid at the feet of the plaintiff.  There is no basis that I can see which would possibly justify categorising the assignor as the agent of the plaintiff. A similar proposition is advanced relying upon the Competition and Consumer Act 2012.  A further aspect of what is said to be misleading and deceptive conduct concerns the failure of the landlord to respond to requests to repair the air-conditioners.  How that can be characterised as misleading and deceptive conduct escapes me.  There was, as I have already categorised it, a genuine dispute between the parties as to who was responsible for these works.  There was nothing which the plaintiff did which, in my view, could possibly be misleading or deceptive.  A further aspect along the same lines is said to be the silence of the plaintiff to the misrepresentations of the assignor.  There is nothing within any of the materials to indicate that the plaintiff even knew of the misrepresentations and therefore how they can be characterised as deliberate silence is difficult to fathom.  In my view this aspect of the matter has no relevance to the case.  A further aspect pursued by the defendant relates to equitable estoppel and the principles established in Waltons Stores (Interstate) Ltd v Maher (1998) 164 CLR 387. The aspects which are said to be relevant to this aspect of the claim are:

   1.the condition of the air-conditioners;

   2.the foot traffic and turnover;

   3.the condition of the premises; and

   4.the mix of tenants in the group area. 

8. The plaintiff played no role in forming any kind of view in the mind of the defendant as to the condition of the air-conditioners, the disclosure statement merely identified them as present, the defendants relied upon the misrepresentations of the assignor in regard to the condition of the air‑conditioners.  As to foot traffic, the condition of the premises, the mix of tenants in the group area, those are matters in which the plaintiff has no input and were, for the most part, generated by the assignor.

9. A further issue raised concerns the decision of the plaintiff to allow a business called WA Rugs to take up occupancy in the shopping centre in September 2016 which introduced competition to the first defendant's business allegedly in breach of cl 25.2 of the lease.  Two matters deserve comment:

   1.The first defendant surrendered the lease in September 2016 and it is hard to see how the introduction could have impacted significantly on the business.

   2.There is no cl 25.2 in the lease but item 6 in sch 1 refers to the use of the premises for furniture showroom and sales.  I struggle to see how allowing a vendor of rugs into the centre could be a breach of this term.

10. A final complaint relates to a leaking roof.  The repair of the roof was the plaintiff's responsibility and it engaged workmen to attend to the problem.  It is alleged the leakage was never properly fixed and stock worth 'about' $1,000 was damaged.  Whether the stock was rendered valueless or merely reduced in value is not explained.  The allegation is so short of detail that in my view it offers no defence.

11. In summary therefore I have formed the view that there is nothing in the materials which have been advanced by the defendants which discloses an arguable defence or indeed a counterclaim as is suggested in the summary of argument.  As a consequence, in my view, judgment should be entered for the plaintiff against both the defendants for the portion of the claim which is pursued in the summary judgment application.