Glenda Rae Omancini and Affirm Pty Ltd v De Freitas and Ryan Property Consultants Pty Ltd
[2012] WADC 12
•30 JANUARY 2012
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: GLENDA RAE OMANCINI & AFFIRM PTY LTD -v- DE FREITAS & RYAN PROPERTY CONSULTANTS PTY LTD [2012] WADC 12
CORAM: CURTHOYS DCJ
HEARD: 20 DECEMBER 2011
DELIVERED : 30 JANUARY 2012
FILE NO/S: APP 34 of 2011
BETWEEN: GLENDA RAE OMANCINI & AFFIRM PTY LTD
Appellant
AND
DE FREITAS & RYAN PROPERTY CONSULTANTS PTY LTD
Respondent
ON APPEAL FROM:
Jurisdiction : MAGISTRATES COURT OF WESTERN AUSTRALIA
Coram :MAGISTRATE JONES
File No :FRE 1443 of 2009
Catchwords:
Default notice under s 81 Property Law Act 1969 - Breach of lease
Legislation:
Property Law Act 1969, s 81
Result:
Appeal dismissed
Representation:
Counsel:
Appellant: Ms K J Levy
Respondent: Mr W G Spyker
Solicitors:
Appellant: Fiocco's Lawyers
Respondent: Cornerstone Legal
Case(s) referred to in judgment(s):
Clambake Pty Ltd v Tipperary Projects Pty Ltd [No 8] [2011] WASC 27
Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268
CURTHOYS DCJ: The appellant, as lessor, and the respondent, as lessee, entered into a lease on 4 April 2008.
The appellant issued default notices against the respondent alleging various breaches of the lease.
The appellant issued a statement of general procedure claim in the Magistrates Court of Western Australia. The appellant claimed the legal costs of issuing the default notices ($6,637.51). The appellant also sought $4,361.05 for damages and other expenses incurred as a result of the defendant's alleged breach of cl 5.1 of the lease. The total amount sought by the appellant was $10,998.56 plus interest and costs.
His Honour, Magistrate Jones found against the appellant and ordered that the appellant pay the respondent's costs.
Counsel for each of the parties dealt with the appeal with commendable brevity and I am grateful to both of them for that.
Grounds 1 to 5
Ground 1:
The learned magistrate erred in fact and in law in finding that the two default notices dated 26 September 2008 could not be justified.
Particulars
(a)The two default notices were dated 26 September 2008 and sent to the defendant's solicitors on that date (exhibit 18).
(b)The learned magistrate found that the claimant 'simply went to the premises and demanded to inspect them there and then' and therefore, the issue of the default notices could not be justified.
(c)The un-contradicted evidence is that: the claimant went to the premises on 27 September 2008. The fact and circumstances of the claimant's visit to the premises are unrelated to the 26 September 2008 default notices.
(d)The learned magistrate should have found that the issue of the default notice was upon the express refusal to allow an inspection made by the respondents in the letter from their solicitors dated 26 September 2008 (exhibit 17).
(e)The requirement of reasonable notice is satisfied notwithstanding that the express refusal came only 2 days after the request for an inspection. The claimant was:
(1)entitled to assume that the mere passage of time would not result in a change of position by the defendant;
(2)not required to make a further request in the face of the refusal; and
(3)entitled to accept the express refusal as the defendant's position.
Ground 2:
The learned magistrate erred in fact and in law in finding that the two default notices dated 2 October 2008 could not be justified.
Particulars
(a)The defendant's solicitors advised the claimant that they did not have instructions to accept service of the default notices issued 26 September 2008 (exhibit 23).
(b)On 2 October 2008, the claimant personally served a duplicate of the 26 September default notices on the defendant (exhibit 115).
(c)The 2 October 2008, duplicate default notices relate to the same facts and circumstances as the 26 September 2008 default notices.
(d)The 2 October 2008 duplicate default notice was properly issued for the same reasons as the 26 September 2008 default notices.
Ground 3:
The learned magistrate erred in fact and in law in finding that the default notice relating to the missing alarm system dated 2 October 2008 (exhibit 115) was not required.
Particulars
(a)The default notice was issued upon the claimant observing that the alarm system had been removed.
(b)It is an un‑contradicted fact that the alarm system was removed and the defendant had not advised the claimant of that event on or before the date of the default notice was issued.
(c)The lease does not require the claimant to seek an explanation prior to the issue of a default notice.
(d)Following issue of the default notice, the default was remedied, in so far as the alarm system was re-installed or replaced.
(e)The subsequent remedy of a default, following the issue of a default notice does not mean that the default notice was invalidly or improperly issued. Rather, it means that the default notice was simply complied with by the defendant.
(f)The learned magistrate's words 'no requirement for an issue of a default notice' suggest (without explanation or reasons) that his Honour was applying the incorrect test.
Ground 4:
The learned magistrate erred in fact and in law in finding that the default notices relating to signs dated 2 October 2008 (exhibit 115) were invalid or not require or not permitted.
Particulars
(a)Upon a proper construction of the lease agreement, the claimant was entitled to affix signs to the inside or outside of the premises, if in the opinion of the claimant it was necessary, desirable or convenient (exhibit 4).
(b)The evidence is that the defendant refused entry (exhibit 17).
(c)Based upon that refusal, the claimant was entitled to issue a default notice.
(d)Whether or not the default notice is required is the wrong test. The proper test is whether or not in the facts and circumstances that then existed, a default notice may be issued.
Ground 5:
The learned magistrate erred in fact and in law in finding that there was no basis to issue the default notices dated 18 November 2008 (exhibit 47).
Particulars
(a)The learned magistrate failed to consider, or have regard to the un‑contradicted evidence that:
(1)the claimant requested entry to the premises on 14 November 2008 (exhibit 46); and
(2)the defendant refused to allow her entry unless she was accompanied by her solicitor (exhibit 51).
The default notice costs – grounds 1 to 5
Clause 8 of the lease contains the lessee's obligation to pay costs. The lessee covenants and agrees:
To pay to the lessor all the lessor's costs, fees and expenses … which may be payable, expended, incurred or sustained by the Lessor (including, without limiting the generality of the forgoing, legal costs and disbursements on a full indemnity basis) in respect of or incidental to:-
8.1 any consent, approval, exercise or non exercise of any right or exercise or enforcement or attempted exercise or enforcement of lessor's remedies under the lease or at law.
8.2 any breach of or failure of the Lessee to observe and perform the lessee's Covenants.
8.3 compliance by the Lessor with provisions of s 81 of the Property Law Act 1969 notwithstanding that the lessee may have applied to the court (whether successfully or not) for release pursuant to s 81(2) of the Property Law Act 1969 provided that the lessee was or is in breach of any covenant or agreement in this lease;
8.4 the withdrawal of any caveat claimed in an interest in the leased premises and lodged over the leased premises pursuant to this lease.
(My underlining)
The appellant's default notices were issued under s 81 of the Property Law Act 1969 (WA) which is in the same terms as s 129 of the Conveyancing Act 1919 (NSW).
In essence, the magistrate found that the matters that were relied upon in the default notices issued by the appellant did not constitute breaches of the lease and that, accordingly, the appellant was not entitled to its legal costs of the notices.
Counsel for the appellant dealt with grounds 1 to 5 on the basis that the resolution of those grounds really turn on the same issue, namely, whether a lessor can claim the costs of a default notice irrespective of whether the alleged breaches are made out. The appellant relied upon the decision of the New South Wales Court of Appeal in Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268, in particular at [327].
Macquarie relevantly states [327]:
A s 129 notice is not invalidated if the lessor includes in it specifications of breaches that a court later finds were not committed. In my opinion it would follow from this that an otherwise valid s 129 notice is not invalidated just because the lessor requires the lessee to remedy a breach that has not in fact occurred or to pay an amount in compensation that is more than what is reasonable … .
Macquarie at [327] is authority for the proposition that a notice issued pursuant to s 81 of the Property Law Act (s 129 Conveyancing Act) is not invalidated simply because it includes within it breaches that are not proved at trial. This is simply a matter of common sense. If a default notices alleges five breaches and only four are proved at trial, there is no reason in law or policy why one unproven breach should invalidate the entire notice. However, one cannot draw from [327] a proposition that a notice is valid even if all the breaches alleged in it are not proven. I conclude that a claim for the costs of issuing a default notice is limited to the costs of those breaches which are made out. This conclusion is also consistent with the express proviso to cl 8.3 of the lease which gives rises to an entitlement to costs only if the lessee 'was or is in breach'.
If the result were otherwise, a landlord could claim the costs of invalid notices. Such notices would simply be a convenient mechanism for harassment to such an extent that a lessee who is not in breach might be forced out by the pressure of the costs of default notices and legal proceedings. It would require extraordinarily clear wording in the lease if such conduct was to be permitted. The wording of cl 8 of this lease does not lead to such a conclusion.
Grounds 1 to 5 - other arguments
Grounds 1 and 2
The appellant makes a further argument in relation to Grounds 1 and 2.
Grounds 1 and 2 rely on the same alleged breaches. Ground 1 relates to default notices dated 26 September 2008 and Ground 2 to default notices dated 2 October 2008. They can be dealt with together.
Ground 1 alleges that the respondent's letter of 26 September 2008 effectively amounted to an irrevocable refusal to allow an inspection of the premises and the erection of signs by the appellant.
The letter of 26 September 2008 states:
Our clients instruct that you have contacted them and advised them that you intend to enter the premises and to place signs on the premises advising that the premises are for lease. You have no entitlement to do either of these things. Please take note that if you attempt to access our client's premises, or place any signage on their premises or otherwise interfere with our client's quiet enjoyment of the leased premises prior to the termination of the lease you are in breach of the lease and our client reserves all of their rights.
The letter of 26 September needs to be seen in the light of the surrounding events. Ms Omacini had demanded immediate entry to the premises by telephone on 24 September 2008. Clause 10.1 of the lease requires the lessor to give reasonable notice prior to an inspection. A demand for immediate entry was in breach of cl 10.1 and in breach of the covenant of quiet enjoyment. In its context the letter of 26 September was in essence a requirement that the lesser act in accordance with the terms of the lease. It was not an absolute refusal to permit entry or to prohibit the erection of signs. The letter of 26 September 2008 was not a breach of the lease that justified the issue of default notices. Grounds 1 and 2 are not made out.
Ground 3
The appellant makes a further argument in relation to Ground 3.
Ground 3 relates to an alarm system. The notice of default alleges that the respondent committed a breach by removing an alarm security system and not immediately making good the damage by replacing it. The notice does not specify which clause of the lease was breached. The evidence establishes that that alarm system was broken and had been taken away for repair at the time that the default notice was issued. It was subsequently repaired and replaced. Clause 5.1 of the lease obliges the lessee to keep the leased premises in good and substantial repair and condition. The respondent cannot be said to be in breach of the lease when it was carrying out its obligations under cl 5.1. The evidence does not establish that at the time the default notice was issued the respondent was in default. There was an obligation to repair and the tenant was simply acting pursuant to that obligation. Ground 3 is not made out.
Grounds 4 and 5
No further argument was made by the appellant on these grounds.
It is convenient to deal with the respondent's notice of contention in relation to Grounds 1 to 5 at this point.
Ground 1 - Notice of contention
(a)The appellant failed to tender any evidence at all in support of the contention that she incurred legal costs in the sum of $6,637.51 as a consequence of alleged breaches under the lease and the issue of default notices.
(b)Specifically, exhibit 109 was tendered not as proof of the truth of its contents but simply that the appellant received this invoice from her solicitors and paid it (ts 117).
(c)As such, the claimant has not discharged its burden of proof that the legal costs of $6,637.51 fall under cl 81 or cl 8.2 of the lease.
(d)The evidence in fact established that expenses within this invoice related to matters completely unconnected with the lease. Examples are any work between 6 and 13 November 2008, at which time any alleged defaults had been remedied (ts 71), a telephone call to Mr M Curwood on 17 November 2008 was in relation to a different dispute (ts 37), and an entry on 26 November 2008 appears to relate to Legal Practice Board complaint.
(e)As such, the learned magistrate had no evidence before him which would enable him to assess the fairness and reasonableness of the amount of the legal costs in relation to the work (Clambake Pty Ltd v Tipperary Projects Pty Ltd [No 8] [2011] WASC 27 [13] ‑ [15]).
(f)It is not for the respondent to 'call for the solicitor's file'. Rather, it was for the appellant to discover all relevant material and prove its case.
Exhibit 109, the appellant's solicitors' bill, was tendered but not as proof of the truth of its contents but simply that the appellant received the invoice and paid it (ts 117).
The appellant argued that the quantum of the costs claimed in the solicitor's bill could only be challenged under the Legal Profession Act 2008. This argument confuses the quantum of costs with the entitlement to costs.
The appellant relied upon Clambake Pty Ltd v Tipperary Projects Pty Ltd [No 8]. In that case there was an entitlement to costs under the terms of the lease. Justice Heenan directed an inquiry as to the assessment of the quantum of the costs.
Section 50 of the Supreme Court Act 1971 provides that a judge may refer to a master or a registrar or to a referee for inquiry or report any question arising in a cause or matter.
The inquiry directed by Justice Heenan was the amount which would be proper to allow as to the costs chargeable to Clambake by its solicitors and counsel.
Part of the role of the registrar was to inquire into and report the quantum of costs which Clambake would be liable to pay to its own solicitors and counsel.
Clambake is not authority for the proposition that a taxation under the Legal Profession Act is required to assess whether or not costs are properly payable. The inquiry conducted by the registrar was as to the costs payable upon the default not whether or not those costs were payable.
It was for the appellant to establish that the claimed costs related to specific breaches in the default notice. The appellant failed to do that. Even if grounds 1 to 5 had been made out the respondent would have succeeded on ground 1 of its notice of contention and grounds 1 to 5 would therefore have failed.
Ground 6
The learned magistrate erred in fact in finding that the defendant did return the appropriate number of keys and remotes to the claimant.
Particulars
(a)Failed to have regard to or to consider the whole of the evidence, in particular exhibit 3, 11, 44, 45 and 56.
The magistrate set out his reasons for his finding. The appellant argued that the lessee required that the respondent return all the keys and remotes in its possession. The appellant held those in a number of capacities. It is difficult to see how an obligation in a lease to return keys and remotes could extend to those held by the appellant in its capacity as a building manager the obligation to return keys and remotes in that capacity would depend on the terms of engagement as building manager. Ground 6 is not made.
Ground 7
The learned magistrate erred in fact and in law in finding that the window displays 'had nothing to do with the lease, it was more to do with the termination of the partnership originally'.
Particulars
(a)The window displays were a fixture to the premises, which was owned by the claimant.
(b)Upon a property construction of the lease, the defendant was not permitted to remove the window displays from the premises.
Ground 7 related to window displays. The evidence of Mr Ryan, for the respondent, was that the window displays were returned. Mr Ryan was not cross-examined to dispute that the window displays were returned. Accordingly, even if the window displays were removed at some point, they were returned to the premises and no damage is made out. Ground 7 fails.
Ground 8
The learned magistrate erred in fact and in law in finding that the claim for painting costs must fail.
Particulars
(a)The learned magistrate wrongly found that there was a requirement under the lease that:
(1)a default notice be issued as a condition of the claimant being entitled to claim for painting costs;
(2)the claimant in fact paid for the painting to be rectified.
(b)The learned magistrate should have found that by reason of the poor or incomplete painting which had been performed by an unregistered painter, the claimant suffered loss and damage in an amount equal to or substantially equal to the quoted for sum.
Ground 8 relates to painting costs. The magistrate found that painting was carried out by the respondent in accordance with the terms of the lease relying on the evidence of Mr Firouk El Alami. Its finding was open on the evidence. Ground 8 is not made out.
Ground 9
The learned magistrate erred in fact and in law in finding that the claimant incurred expenses unnecessarily in relation to an inspection of the cabling and electrical matters in the premises.
Particulars
(a)the learned magistrate failed to consider or have any regard to the evidence that the defendant had represented to the claimant that certain electric cabling would be removed from the premises;
(b)the learned magistrate wrongly found that because no defects or were detected that the inspection was not necessary; and
(c)the learned magistrate failed to consider or have any regard to exhibits 7, 42, 45, 57 and 111.
Ground 9 claims that the appellant incurred expenses unnecessarily in relation to the inspection of the cabling and electrical matters on the premises. No defects were identified as a result of that inspection. The claim was put on the basis that the equipment was inspected because Ms Omacini had been told by one of the respondent's directors that he would be removing the electrical cable from the premises. If that statement had been made then it might possibly have led to a claim for misleading or deceptive conduct but it does not constitute a breach of the lease. Ground 9 is not made out.
Ground 10
The learned magistrate erred in fact and in law in failing to consider, at all, the claimant's claim for electrical repairs.
Particulars
(a)the learned magistrate failed to consider or have any regard to exhibits 12, 20, 76, 78 and 99.
The appellant's claim was for $770. Exhibit 99 is a quote from R Boult for $770. Mr R Boult was not called. The appellant failed to establish a link between the quote or any breach of the lease by the respondent. Ground 10 is not made out.
0
1
1