Fernandes v Lam

[1999] HCATrans 358

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth  No P4 of 1999

B e t w e e n -

ALCIDES FERNANDES

Applicant

and

TIMOTHY YAT WAH LAM

Respondent

Application for special leave to appeal

GLEESON CJ
KIRBY J

TRANSCRIPT OF PROCEEDINGS

AT PERTH ON THURSDAY, 21 OCTOBER 1999, AT 9.56 AM

Copyright in the High Court of Australia

MR O.D. FEINAUER:   May it please your Honours, I appear for the applicant.  (instructed by Preuss Feinauer & Associates)

GLEESON CJ:   In this matter there is a certificate from the Deputy Registrar to the effect that she holds a letter from the solicitors for the respondent advising that they do not intend to present oral argument at the hearing of this application.  Yes, go ahead, Mr Feinauer.

MR FEINAUER:   Thank you, your Honours.  The appellant admits that this is a case that should have leave to be heard in this honourable Court.  This is a matter which originates, or was first heard, in the Commercial Tribunal, a specialist tribunal set up in Western Australia to inexpensively and speedily resolve matters between tenants.  Accordingly, it is one that I believe should attract the special attention of this Court, as it does invoke questions that affect people who economically usually are not in a strong position, ie commercial tenants.  The matters which are touched upon affect a great number of tenants and are ones that traditionally, especially in common law, have been a matter of some argument.  This appeal though is confined to section 14 of the particular Act.

The interpretation of the Act that has so far been fatal to the applicant’s case has largely focused on a restraint of competition as being a major obstacle and the appellant submits that this is not a proper basis upon which the matter should be considered, but instead one should look at the fact that a landlord, by engaging in control over a shopping centre, creates an environment and in that environment it poses a number of strict rules.  If another tenant within that environment does not act, even if it is not a physical act or one that has the express permission of the landlord, but then proceeds to, by that action, cause loss to another tenant, the landlord, having created this environment and the landlord having created the rules, should therefore be responsible, and that is the dilemma ‑ ‑ ‑

GLEESON CJ:   The landlord here set out to take action to cause to be undone that which the tenant did.

MR FEINAUER:   But there are two material findings of fact in the Commercial Tribunal, which the appellant submits open up the case for the appellant’s argument and that is the finding that the response should have acted quicker and should have acted more speedily, and this can be found at page 31 of the application book, your Honours, where, in the third paragraph next to line 20:

The Tribunal considers as referred to above, that the Respondent should have acted quicker in restraining the Respondent and therefore did not use reasonable steps to prevent it from selling take-away food from its premises.

And, your Honours, at page 29 of the Commercial Tribunal’s decision, the Commercial Tribunal found at paragraph 23 of its decision at line 30 of the application book that:

The loss of income suffered by the Applicant was to a large extent caused by New Francos Pty Ltd –

this is the competing business –

commencing its gourmet deli operation in competition with the Applicant’s business.

So there were two material findings of fact already:  one, that the respondent to this appeal should have done something more quickly; and secondly, that the appellant has suffered loss.  Yes, the conclusion is, well, there is nothing we can do about it, and my respectful submission is that the law does in fact lend itself to actions of this particular kind.

The arguments that the appellant had taken previously is that one is to analyse the ‑ ‑ ‑

GLEESON CJ:   Just before you go any further, are the statutory provisions you relied on those that appear on page 42 in paragraphs (b) and (c)?

MR FEINAUER:   Yes, your Honour.

GLEESON CJ:   All right.  Well, just taking those one by one, what was the action that the landlord took that substantially altered or inhibited the flow of customers to your client’s shop?

MR FEINAUER:   The appellant would argue that action in this sense needs to be read broadly and needs to include also acts of omission.  He took the wrong action in a sense, he failed to act more quickly to restrain the tenant who was in breach of ‑ ‑ ‑

KIRBY J:   That is a difficult argument to run, given that (d) talks of “fails to have” and (e) talks of “fails to adequately”, so that where the Parliament has considered an omission, it has expressly said so.

MR FEINAUER:   I am obliged to your Honour for the observation.  Parliament, I would submit, has considered the point, and if I may respectfully point your Honours to page 10 of the authorities in the statutory materials where, in a point raised by the now premier of the State, Mr Court - may I take your Honours to page 10 and in particular to paragraph (b) in the left-hand column, your Honours.  Mr Court has raised the point:

Paragraph (b) provides that if he takes any action which would substantially alter or inhibit the flow of customers to the retail shop, he is liable.  If there were one greengrocer in the shopping centre and the landlord introduced a second greengrocer, that would alter or inhibit the flow of customers to that retail shop.  Does the landlord become liable under this clause if he does that?

The point was not positively answered, but Mr Court was in the noes as far as the vote for the section is concerned; the majority voted in favour.

KIRBY J:   Yes, but you will understand that ultimately though that is often helpful, we are controlled by the words the Parliament has chosen to express its purpose, and when one looks at it, it takes an action as a ring of a positive action and, particularly when read with three other provisions, “inhibits”, “fails to”, “fails to”, which indicate that where Parliament intended to deal with omissions it said so expressly.  Mr Court cannot govern the language of the Parliament; the Parliament is what governs us.

MR FEINAUER:   Yes, thank you, your Honour.  My submission also draws on an argument that I had previously developed in the original appeal and it is also a matter referred to at page 62 of the application book before your Honours, in the case of Booth v Thomas, where the argument was, as far as I was respectfully submitting at the time, that in that case the word “action” also included acts of omission and “action”, in many ways, also covers the wrong action.

KIRBY J:   But that is an English case and you would have to look at the statutory provisions that were dealt with there.  You said in your written submissions that this legislation is basically common in other parts of Australia.  Is there any decision of an Australian court on analogous questions, which is in your favour?

MR FEINAUER:   Regrettably not, your Honours, and that is part of the problem of why this matter has come before you.  They are such important questions; many tenants are affected by this particular issue and there appears to be, from my research of it, no guiding law as far as the interpretation of this or similar legislation is concerned, subject, of course, to my having not come across a particular case, but I did research the point and I was unable to find another case.

The ultimate wrong is, of course, that in these circumstances now, the tenant who has suffered loss is no longer in occupation, but still owes to the landlord the obligation to pay rental; so he still has an ongoing damages exposure, so to speak, as against this particular tenant.  If one were to take the point, as the appellant does that, the positive finding has been made that a particular conduct was harmful and that indeed loss flowed, then should this Act that was intended to benefit tenants, not come to the aid and at least preclude a landlord from having any recourse against these tenants and allow for incidental orders which could be made under the legislation, and that is the contention before you.  Accordingly, I would respectfully submit, that the construction of section 14(b), even though it refers to a positive word in the sense of “action”, should encompass the wrong action.

KIRBY J:   We understand your submission.  It is a question of construing this particular statute and there is a difficulty in your way, I am afraid, because of the way the section is structured and the particular way by which Parliament has dealt with omissions.

MR FEINAUER:   Yes, thank you.  Your Honours, if I may quickly then turn to section 14(c), the following provision, where one deals with:

causes, or fails to make reasonable efforts to prevent or remove, any disruption to trading within the centre which disruption causes loss of profits to the tenant -

and there one sees an analogy to many of the ingredients to the law applying to the covenants for quiet use and enjoyment of - - -

GLEESON CJ:   What was the disruption to trading here?

MR FEINAUER:   The disruption to trading was the breach by the tenant within this controlled environment that diverted business from my client to the other business.  The disruption in this sense does not arise from normal competition, not usual competition, but if one were to take a shopping centre as a set of pre-designated businesses - and each shopping centre can only ever afford so many users.  There are some shopping centres that only have five or six shops and some of them can only ever support maybe one of a particular type of business.

GLEESON CJ:   I understand that if you have a shopping centre in which there is a liquor store and next to it a chemist shop and the chemist, perhaps in contravention of a covenant, starts to sell beer, that would cause a loss of business to the liquor store, but it is a bit hard to characterise that as a disruption to trading, is it not?

MR FEINAUER:   It is an incident that does change the nature of trading within the centre, and is disruptive in the sense that the flow of trade to the particular designated shops is altered, and that is the disruptive influence.  The scheme of the legislation, I would respectfully submit, your Honours, is that a tenant, prior to taking on a lease, is provided with a statutory disclosure statement and the tenant is then informed of the various tenancies that exist within the landlord’s environment and he then makes an election.  He has a choice.  He can see what businesses are there.  He can say, “Well, I will go into this environment, because there is no other business like me” or, “I will take a risk and accept that another shop may exist”, but in this particular scenario, in this pre-designated environment, another tenant breached the lease, and we have this positive finding that that breach caused loss.  Even though there appeared to be the ingredients, if and in other contexts of yes, a wrongful act, a potentially wrongful act, or somebody should have done something quicker, and loss, in this context the appellant is without remedy and it seems to be an unusually harsh, as far as the appellant’s respectful argument is concerned, interpretation of provisions of an Act that is designed to protect tenants.

Looking at the law relating to the covenant for quiet use and enjoyment, a matter which their Honours, and in particular Justice Anderson, has dealt with, in – I am sorry, no, his Honour has not in fact dealt with this particular point.  But reference was made to the covenant for quiet use and enjoyment and the authorities dating back were more than one hundred years; authorities referred to in the list of authorities the appellant relies on, such as Sanderson v Mayor of Berwick-on-Tweed, but there the law was quite broad, as far as I was concerned and as far as my respectful submission is, in terms of interpreting the covenant for quiet use and enjoyment. 

May I refer your Honours briefly to the discussion also in the case of Ramdane Lamiri v Aidan Nominees, where his Honour then Chief Justice Burt of the Supreme Court analysed the provisions as they related to the common law and, in particular, if I may refer your Honours to page 33 of the authorities in statutory materials.  At the bottom thereof there is reference to Sanderson v Mayor of Berwick-on-Tweed and his Honour states:

Whether the quiet enjoyment of demised land has been interfered with by the landlord in breach of his covenant for quiet enjoyment is in every case a question of fact and when the demised premises are demised as a retail stall within a market “coherent, integrated and complete in itself” then “the question is whether there has been an interruption –

and his Honour there uses the word “disruption” in reference to the point –

or –

disruption –

by the lessor of the enjoyment of the premises in relation to that purpose” – - -

GLEESON CJ:   “Disturbance”, actually, not “disruption”.

MR FEINAUER:   Yes, it is “disturbance” as far as the provisions of the statute are concerned, but again Parliament, if I may refer back to page 10 that I have referred your Honours to previously, is concerned – this is within the authorities and statutory materials – at line 40, it is stated:

We can argue the same about paragraph (c).  If it is not intended to be a reinstatement of the landlord’s present liability to a tenant under common law, is the landlord liable to the tenant if a disruption to the trade of the tenant is caused by activities in the premises leased to another tenant?  In other words, does he become responsible for the activities of someone over whom he does not have control?

The appellant’s respectful argument is that the landlord does have control over that person and that person whom he has control over has breached the lease.  The only remedy, the only recourse, the tenant has is to ask the landlord to act.  The tenant has no other recourse against the infringing tenant.  He cannot stop him from trading, but he can say to the landlord, “You have created this environment, you have placed me within this environment, I have elected to go into this environment being appraised of the relevant facts, but here one of my fellow tenants is in breach of the lease”, and we have the material findings of fact, the Commercial Tribunal saying, the landlord should have acted more quickly and indeed the losses are suffered by the applicant.

The definition within the statute, your Honours, if I may respectfully submit, requires a disruption within the centre generally, but it is satisfied when a loss is caused to this particular tenant and accordingly, I would submit, section 14(c) at least, has been made out in form.  Even if the appellant’s argument, as far as section 14(b) is concerned, is somewhat ambitious in terms of arguing that action should also be construed as including the wrong action or omissions, there is a disruption to trading within the centre and this disruption has caused loss of profits to the tenant; that finding of fact already exists.

There is some debate, in fact, at present in England, as I understand it, and a decision which had not been previously referred to, I have included in my authorities in the statutory materials, this being Southwalk London Burrough Council v Mills, where the court was dealing with the projection of noise from another tenant, and the majority has found that there was no breach of the covenant for quiet use and enjoyment, but ‑ ‑ ‑

KIRBY J:   I think there are real dangers in looking outside this statute. I mean, it is useful in a general way for analogies, but ultimately our duty is to construe the statute and the problem for your argument on the second point is that it is trading within the centre, it appears to be looking globally at the whole centre, and this is what Justice Kennedy said.  That seems, certainly an available, and quite arguably, the preferable construction of the section.  This is your stumbling block.  I really do not think you have got any chance on the first.  You have got more chance on the second, but it is arguable and Justice Kennedy has given the reason why he was not persuaded that this is addressing the particular shop, it is addressing the issue of within the centre.  What is your answer to that?

MR FEINAUER:   If, for instance, I were the landlord and I would dig up a section of the centre and thereby remove the ability of customers to enter the centre, that would be a disruption that would be physically located within a small section of the centre, but the second limb of the section then concentrates on whether that is more disruption and causally has caused a loss of profits to me.  It has to be disruption anywhere within the centre, not throughout the centre.  That would be my argument in respect of that, your Honour.  Anywhere within the centre.  What, if one tenant, for instance, were to emit noise to such a volume that no customer would come to any of the other shops; it may well be a fashion shop that is used to playing loud music.  This may be entirely unappealing, for instance, for a florist shop or a bookshop; the noise may be entirely disruptive.  If that emanates from one of the tenants within the centre, then, as long as the tenant who is aggrieved by that and can show loss comes before the court, that tenant should be able to successfully sue. 

In terms of characterisation, is noise, for instance, different from somebody else breaching their lease in another way?  This is just another breach of a lease.  It may well be that a landlord permits another tenant to have a stereo system, for instance, within the premises, but if the volume is turned up too high, is that not then a disruption within the centre and the appellant would argue there is no difference at all between that analogy and the present case here, where the breach is ‑ ‑ ‑

KIRBY J:   Now, you said in your written submissions that there are similar statutes elsewhere in Australia.  Are the provisions equivalent to (c) in identical terms?

MR FEINAUER:   In terms of identical terms, I believe not.  The most recent legislation in other jurisdictions has slightly different connotations, your Honours.  If I may refer you to the statutory materials and particular at page ‑ ‑ ‑

KIRBY J:   The mere fact that Western Australia statute is a bit different, is not a reason for refusing special leave if we think an error has occurred in the construction, but it is a positive argument for you if you can show that this legislation is relevantly similar or identical throughout the country or in other jurisdictions of Australia.  Is that something you can argue or not?

MR FEINAUER:   I would say that the wording is somewhat different, but I do believe that there are substantial similarities.  If I may refer your Honours to page 3 dealing with the Queensland legislation.  There the words are, in section 43(1)(d):

causes significant disruption to the lessee’s trading in the leased shop or does not take all reasonable steps to prevent or stop significant disruption within the lessor’s control.

It is not quite the same wording, but I believe it is similar.  At page 5, section 34(1)(d) of the New South Wales Act:

fails to take all reasonable steps to prevent or put a stop to anything that causes significant disruption of, or which has a significant adverse effect on, trading of the lessee in the shop and that is attributable to causes within the lessor’s control –

In the case of South Australia ‑ ‑ ‑

GLEESON CJ:   That qualification of things being “within the lessor’s control” is a significant difference, is it not?

MR FEINAUER:   The express wording, I would respectfully submit, does not add, because the shopping centre is a thing within the lessor’s control, to start off with, and that is the special obligation that the section imposes.

GLEESON CJ:   Thank you, Mr Feinauer.

MR FEINAUER:   Thank you, your Honour.

In this matter the Court is of the view that there is no sufficient reason to doubt the correctness of the decision of the Full Court to warrant a grant of special leave to appeal.  The application is refused.

I do not know whether any question of costs arises, Mr Feinauer.  Your opponent is not represented.

KIRBY J:   They seek, in their written submissions, for an award of costs.  Often that happens.  They say they do not want to be there but they ask for costs of preparing their response.

MR FEINAUER:   A special order as to costs at page 92, your Honour.  I believe it is no.

GLEESON CJ:   They just say nil.

KIRBY J:   Is that addressed to special order?  The general order would be “dismissed with costs” because somebody has to pay for the preparation of their summary of argument to meet yours.

GLEESON CJ:   Can you resist an order for costs?

MR FEINAUER:   I will submit the case is such that making no order as to costs should be made simply on the basis that this particular point has been a point of some importance, not only for the appellant but generally, I would submit.  I am, of course, obliged for your Honours’ observation.

GLEESON CJ:   The application is dismissed with costs.

KIRBY J:   They have to prepare their written submissions.  The costs, of course, will not be the costs of appearing before the Court but they are entitled to their costs of preparing their written argument in answer to yours.

MR FEINAUER:   Thank you, your Honours.

AT 10.19 AM THE MATTER WAS CONCLUDED