H a Jacob and Sons v Jacob
[2002] NSWSC 244
•2 April 2002
CITATION: H A Jacob & Sons v Jacob & Anor [2002] NSWSC 244 CURRENT JURISDICTION: Common Law Division FILE NUMBER(S): SC 10761 of 2001 HEARING DATE(S): 28 February 2002 JUDGMENT DATE: 2 April 2002 PARTIES :
H A Jacob & Sons Pty Limited (Plaintiff)
v
Donald Paul Jacob and Elaine Gweneth Jacob (Defendants)
JUDGMENT OF: Master Malpass
LOWER COURT
JURISDICTION :Local Court LOWER COURT
FILE NUMBER(S) :432/00 Local Court Albury LOWER COURT
JUDICIAL OFFICER :H Syme LCM
COUNSEL : Mr J Pappas (Plaintiff)
Mr M Pesman (Defendants)SOLICITORS: D G Skinner & Associates (Plaintiff)
Adams Leyland (Defendants)
CATCHWORDS: Notice of exercise of option to renew - authority and service - jurisdiction of Local Court. LEGISLATION CITED: Conveyancing Act 1919, s 170. CASES CITED: N/A DECISION: See paragraph 24.
IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISIONMaster Malpass
TUESDAY 2 APRIL 2002
JUDGMENT10761 of 2001 H A Jacob & Sons Pty Limited v Donald Paul Jacob and Elaine Gweneth Jacob
1 Master Malpass: The plaintiff in these proceedings was the defendant in proceedings brought by the defendants in the Local Court. It was a claim brought for the recovery of certain monetary sums (including the sum of $4,524 being three months rent from 1 January 2000 to 31 March 2000). The claim was founded on an equitable lease said to arise from the exercise of an option to renew. It was alleged that the exercise was effected by written notice dated 30 October 1996. It seems to be common ground that it was alleged to have been exercised on that day.
2 The claim came before H Syme LCM at Albury. The hearing proceeded over at least two days. Judgment was delivered on 10 February 2001. Judgment was allowed in respect of certain amounts (including amounts for rent).
3 The plaintiff now appeals to this Court against the judgment. The appeal is restricted to an error of law. The many grounds of appeal may be found in the Amended Summons.
4 Although many matters have been agitated during submissions (the detail of these matters may be found in the written submissions filed in the court), it is unnecessary for present purposes to address most of them. It is common ground that the judgment rested on the decisions made concerning the exercise of the option to renew. The learned Magistrate decided inter alia that the defendant had given a valid notice of the exercise of the option and that the option was exercised with the authority of the plaintiff.
5 Before proceeding further, it is convenient to mention briefly certain matters of fact relevant to the decisions.
6 As at 30 October 1996, the plaintiff was a family company (inter alia directors and shareholders were members of the Jacob family). It remains unclear as to who were the actual directors at that time. The company operated five dealerships (Jacob Toyota). For present purposes, the court is concerned with the dealership operated at 400 Griffith Road, Lavington (the property).
7 At the time, the property was owned by the defendants. At the time of its acquisition, the intention was to use it for family business activities. The defendants are husband and wife and she is a lawyer. She prepared the lease which saw the property being leased to the plaintiff. The lease was dated 14 July 1995. It was for a term of 22 months. Clause 4 of the lease contained the option to renew. It contemplated renewal for a period of four years. The lease provided that the tenant could exercise the option only if the tenant served on the landlord a Notice of Exercise of Option not later than 30 October 1996. Clause 14 contains provisions as to service (as provided in s 170 of the Conveyancing Act 1919).
8 The hearing was a hotly contested affair. There were agreed issues and some agreed facts. A number of witnesses were called and many documents were tendered. The learned Magistrate inter alia accepted the evidence of Donald Jacob (one of the defendants). She preferred his evidence to that of another member of the family (Neville Jacob). Whilst these findings were challenged in the appeal, that challenge can be put aside for present purposes.
9 The evidence threw up some curious matters. I shall refer to some of them.
10 The evidence adduced in support of the claim relied on a document which was Exhibit G. It was a copy document in the form of a letter dated 30 October 1996. It had the letterhead Jacob Toyota One Team, One Dream. It was addressed to Don and Elaine Jacob. It contained the following:-
- “As per the terms of our lease, H.A.Jacob and Sons Pty. Ltd hereby exercises its option to renew the lease of 400 Griffith Road, Lavington for the period 1st May 1997 to 30th April 2001.
Thank you for the cordial relationship for the last six years and we look forward to the future years ahead.”
It was signed by Don Jacob Manager Director.
11 The evidence of Donald Jacob was that he prepared this document (he printed off a copy using one of the work computers). His evidence suggests that he also regarded this document as an original. He did not show it to anybody (inter alia he did not serve it on the other defendant). Elaine Jacob did not see it until 1999. He signed it and put it in a file which was then placed with the company records. This file was subsequently handed to Neville Jacob in November 1997. It appears that Donald Jacob didn’t say anything to anyone else in the company about the purported exercise of the option. He may have made a copy or copies of this document for his own purposes at some stage.
12 Also placed in evidence was another document. It was Exhibit 11. It had similarities to Exhibit G. The letterhead was different. It lacked the second paragraph which appeared in exhibit G. It was signed Donald Jacob Manager Director. It was sent to the solicitors for the plaintiff as an enclosure to a letter from M J Maguire & Sons solicitors (then the solicitors for the defendants) dated 30 December 1999. This was a letter written on instructions from Donald Jacob and which purported to enclose a copy of the notice exercising the option. It was written after a Notice of Termination of Lease had been given. Although, Donald Jacob said that the signature on the document was his, he speculated that it might have been a fabrication because it didn’t “look right”.
13 The evidence discloses that no meeting of directors or shareholders was had concerning the exercise of the option or the authority of Donald Jacob to act on behalf of the plaintiff. There was no formal authorisation. What was done did not comply with the requirements of the Articles of Association.
14 Following 30 October 1996, nothing was done about the execution of a fresh lease. There was a family falling out and Donald Jacob left the company in November 1997. For some time, the company continued in occupation and paid rent. In 1999, it ceased paying rent in circumstances where there was issue between the parties concerning the leasing arrangements. Subsequently, this litigation came to pass.
15 I now return to the reasons for decision of the learned Magistrate. At the outset, it may be generally observed that many criticisms may be validly directed towards material contained in the judgment. Again, for present purposes, it is unnecessary to dwell on most of them.
16 It seems to be common ground that the learned Magistrate did not make any determination as to which of the two documents she regarded as exercising the option to renew. In the judgment, she observed:-
- “It is easy to accept that the original letter has indeed been lost, and that for no apparent good reason, Donald Jacob printed two versions of the option letter in 1996.”
Again, it is unnecessary to dwell on the criticisms that were levelled at these findings.
17 Further, it may be generally observed that the reasoning expressed for her decisions is both flawed and deficient. She appears to have misdirected herself and failed to address the right questions. This resulted in decisions that were erroneous at law.
18 In the judgment, she said:-
- “The issues are: 1. Whether the defendant gave valid notice of the exercise of the option for renewal of the lease. The answer to this question is yes. At the time discussions occurred between Mr Donald Jacob and his father, I find that there was agreement for a long term rental of the subject land. I further find that Mr Neville Jacob was also aware of and tacitly approved the plan, even though he may have chosen not to have any thing to do with the transaction. As the transaction did not require the participation in a financial sense of he and his wife, it appears the (sic) Neville Jacob simply decided to ignore the business relating to it.
- 2. Whether the option was exercised with the authority of the defendant company. The answer to this question is Yes (sic). With respect to the suggestion that Mr Donald Jacob was not authorised to renew such a lease by exercise of the option, I find that the authority to do so was given to him at the time of the meetings between himself and his father and brother. At no time, subsequent to those meetings was his authority to exercise the option ever revoked.”
19 In my view, what was said by Donald Jacob as to what he did on 30 October 1996, cannot be regarded as service of the requisite notice by the tenant upon the landlord as contemplated by clause 4. The provisions of the lease required inter alia actual service on the lessors in a manner contemplated by s 170 by 30 October 1996. This did not take place.
20 The learned Magistrate appears to have relied on what appears in Exhibit 3 (Albury Workshop Proposal) and her findings as to discussions had between three directors as being evidence of the authority had by Donald Jacob to exercise the option on behalf of the company. Her consideration of these matters led her to say:-
- “It is perfectly plain from the evidence that at the time of the purchase of the land, the defendant company, by its then directors not only authorised the lease back arrangement, but also authorised the arrangement whereby the company ought adopt a long term position and exercise the option to extend the lease if that was still in the companies (sic) interests by October 1996. It was anticipated at the time of agreeing to enter into the lease that it would still require the use of the property in October 1996. It is the evidence of all witnesses with a knowledge of the issue that by October 1996 the situation remained that it was still in the company’s interests that the option be exercised.”
In my view, her decision on this issue is misconceived.
21 For, inter alia, the reasons so far advanced, the decisions made as to the giving of a valid notice are erroneous as a matter of law. In the circumstances, it is unnecessary to further consider matters that were agitated by the parties.
22 As both the claim and the judgment rest on a valid exercise of the option, the judgment needs to be set aside.
23 Perhaps I should make further observation about one matter. There was a challenge to the jurisdiction of the Local Court. It seems to me by reason of both authority and general principle, that the Local Court has jurisdiction to deal with monetary claims founded on breach of an agreement which operates as an equitable lease.
24 The judgment is set aside. The matter is referred to the Local Court for determination according to law. The defendants are to pay the costs of these proceedings.
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