Hemer Pty Ltd v Benni

Case [2011] SASCFC 35

SUPREME COURT OF SOUTH AUSTRALIA

(Full Court)

HEMER PTY LTD v BENNI & ORS

[2011] SASCFC 35

Judgment of The Full Court

(The Honourable Chief Justice Doyle, The Honourable Justice Gray and The Honourable Justice Sulan)

29 April 2011

LANDLORD AND TENANT - COVENANTS - ACTIONS FOR BREACH OF COVENANT - GENERALLY

A ninety nine year lease was entered into in 1962 and subsequently registered – the parcel of land subject to the lease was divided into two parcels – as a result of the division there were two lessors and a lessee – the second covenant of the lease stipulated: ‘(2) If demanded by the lessor rates and taxes proportional to the land herein leased are to be the responsibility of the lessee’ – lessors demanded from the lessee payment in respect of rates and taxes charged on or against their land equal to the proportion that the leased area bore to the area of the whole allotment – lessee refused to pay on the basis that the rates and taxes should be payable under the lease on the proportion that the unimproved value of the leased area bears to the unimproved value of the whole allotment – whether the rates and taxes under the second covenant were to be payable based on a proportion of area or site value – whether trial Judge erred in finding that rates and taxes were payable by the lessee under the second covenant based on a proportion of area.

Held (Gray J with Sulan J concurring; Doyle CJ dissenting): that rates and taxes are payable under the second covenant based on the site value of the leased land, as determined from time to time by the Valuer-General.

LANDLORD AND TENANT - TERMINATION OF THE TENANCY - FORFEITURE - RELIEF AGAINST FORFEITURE - RELIEF UNDER STATUTE - NOTICE BEFORE RE-ENTRY

Lessors sent to the lessee letters demanding payment for rates and taxes under the second covenant of the lease – whether the letters satisfied the requirements of notice under s 10 of the Landlord and Tenant Act 1936 (SA) – whether trial Judge erred in finding that the letters satisfied the requirements of s 10 of the Landlord and Tenant Act 1936 (SA).

Held (Gray J with Sulan J concurring; Doyle CJ dissenting): appeal allowed - that the letters did not satisfy the requirements of s 10 of the Landlord and Tenant Act 1936 (SA) – it would be contrary to the scheme of the legislation to permit re-entry without reasonable notice from the lessor to the lessee of the lessor's intention - there was no valid re-entry.

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - REPUDIATION AND NON-PERFORMANCE - ELECTION AND RESCISSION

Two lessors separately wrote to the lessee demanding payment under the second covenant – after a period of time elapsed the lessors again wrote separately to the lessee demanding payment under the second covenant – one lessor wrote a third time demanding payment…

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Hemer Pty Ltd v Benni [2011] SASCFC 35
Case
[2011] SASCFC 35
Decision Date

CaseChat Overview and Summary

The appeal concerned a 99-year lease entered into in 1962, which was subsequently registered. The parcel of land subject to the lease was divided, resulting in multiple lessors and a single lessee, Hemer Pty Ltd. The dispute centred on the interpretation of the second covenant of the lease, which stipulated that the lessee was responsible for "rates and taxes proportional to the land herein leased" if demanded by the lessor. The lessors demanded payment based on the proportion of the leased area to the whole allotment, while the lessee argued it should be based on the proportion of the unimproved value of the leased area to the unimproved value of the whole allotment. The appeal also addressed whether the lessors' demands and subsequent actions constituted a valid re-entry and forfeiture of the lease, and whether relief against forfeiture should be granted.

The court was required to determine several legal issues. Firstly, whether the rates and taxes payable under the second covenant were to be calculated based on a proportion of the land's area or its site value. Secondly, whether the lessors' demands satisfied the notice requirements under section 10 of the *Landlord and Tenant Act 1936* (SA) before re-entry. Thirdly, whether the lessors' actions, including instituting proceedings in the Magistrates Court, amounted to an election to enforce the lease rather than forfeit it. Finally, the court had to consider whether the trial judge erred in refusing to grant relief against forfeiture.

The majority of the Full Court, comprising Gray and Sulan JJ, held that rates and taxes under the second covenant were payable based on the site value of the leased land, as determined by the Valuer-General. They further found that the letters demanding payment did not satisfy the requirements of section 10 of the *Landlord and Tenant Act 1936* (SA), meaning there was no valid re-entry and thus no forfeiture. Consequently, as there was no valid forfeiture, the court determined there was no need to grant relief against forfeiture. Doyle CJ dissented on the interpretation of the covenant and the validity of the re-entry, but concurred with the majority on the issue of election.

The appeal was allowed, and the trial judge's order dismissing the proceedings was set aside. The court refused to make orders sought by the lessors that would have been contingent on forfeiture being effective. Instead, the court made an order for relief against forfeiture, indicating that submissions would be heard on the terms of that order. The court also granted liberty to Hemer to serve notice on the Registrar-General regarding applications to reverse an entry on a certificate of title and indicated that further submissions would be heard on this matter. The parties were to be heard on the costs of the proceedings and the appeal, with the court noting that Hemer's success on its alternative claim for relief against forfeiture would be reflected in the costs order.

Orders

Orders of the court

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Background

Background to the litigation

The issues raised by Hemer on appeal are these. Were the amounts demanded by each of the respondents under the relevant lease calculated in the manner provided for by the lease? Did the respondents give a notice complying with the requirements of s 10 of the Landlord and Tenant Act 1936 (SA) (the LTA) before re-entering? Did the respondents act in such a way as to give rise to a binding election to maintain and enforce each lease, rather than forfeit them by re-entry? Were the purported re-entries valid and effective? Did the Judge err in refusing to grant relief against forfeiture?Summary of the facts By and large the facts are not disputed. In the following summary I will focus on events that are now common ground. There were some conversations between the parties that were the subject of dispute. There is no challenge to the Judge’s findings about them. By and large I have not found it necessary to consider matters other than those that are common ground. Mr Turner and Mr Chapman each owned land abutting Sunnyside Road Glen Osmond, a suburb of Adelaide. The twists and turns in Sunnyside Road are such that their respective frontages to Sunnyside Road were not adjacent. The roughly northern boundary of Mr Turner’s land abutted the roughly southern boundary of Mr Chapman’s land. Mr Turner’s land sloped fairly steeply from Sunnyside Road down towards Mr Chapman’s land. The leased land was on the lower side of Mr Turner’s land. It was an area running along the southern boundary of Mr Turner’s land. In effect, it provided a buffer (on Mr Turner’s land) between his land and Mr Chapman’s land. The lease between Mr Turner and Mr Chapman was entered into in 1962. It was in the form of a Memorandum of Lease in registrable form. It was short. It was in due course registered. The lease was for a term of 99 years. The annual rental is one shilling (10 cents) “payable on demand”. There are only two covenants in the lease. They are as follows:THE LESSEE HEREBY AGREES THAT:(1)The said land hereby leased shall be used wholly and solely for the purpose of a garden and for no other purpose whatsoever.(2)If demanded by the lessor rates and taxes proportional to the land herein leased are to be the responsibility of the lessee. At the time of the grant of the lease Mr Turner’s land, including the leased land, was unimproved. The vegetation comprised mainly grasses and olive trees. The case proceeded on the basis that in the lease “garden” included leaving the land in the state in which it was. There has been no suggestion that anything in the nature of a formal garden was called for. In September 2006 Hemer purchased Mr Chapman’s land. Mr Horbelt has been treated as representing Hemer, and I will do the same. A house had been built on Mr Chapman’s land. By this time Mr Turner’s land had been divided into two allotments. Ms Benni and Mr Ridge had been owners of one allotment since 30 August 2000. In the proceedings Ms Benni has been treated as representing the two owners of this allotment, and I will do so also. Ms Collins purchased the other allotment in September 2007. When Hemer acquired the land no buildings had been erected on Ms Benni’s allotment or Ms Collins’ allotment. Since then Ms Benni has erected a house on her allotment. It is unclear to me how Mr Turner’s land came to be divided as it was, the lease to Mr Chapman being in respect of part of each of the allotments created by the division. The case appears to have proceeded before the Judge on the basis that nothing turns on this. Ms Benni and Mr Chapman were treated as bound by the lease, and Hemer was treated as entitled to enforce the lease as against each of them.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

However, the Court exercises a wide discretion in relation to costs. The order that the Judge made was that there be no order in respect of the costs of the unsuccessful application by Ms Collins and Ms Benni. The effect of that is that the order that Hemer pay the costs of action does not embrace the costs of the application for costs on an indemnity basis. Bearing in mind the breadth of the discretion that the Court exercises on the question of costs, I consider that permission should not be granted to enable Hemer to argue that instead of neither getting nor paying costs of the application, it should get its costs at application. A grant of permission would give rise to nothing more than an argument about fine tuning the exercise of a discretion in relation to what would not be a large amount. I would refuse permission to appeal.Conclusion For these reasons I would allow the appeal and set aside the order made on 6 August 2010 dismissing the proceedings brought by Hemer. I would refuse to make the orders sought in paras 1-6 and 11 of the Summons. These orders would be made only if the forfeiture of the leases was ineffective. I would make an order for relief against forfeiture of each of the leases. It will be necessary to hear submissions on the terms of the order. I would grant liberty to Hemer to serve notice on the Registrar-General of the applications made in paras 9-10 of the summons, and would hear further submissions from the parties and from the Registrar-General (if the Registrar-General wishes to put submissions) on the question of whether the Court can and should order the Registrar-General to reverse the entry made on the Certificate of Title of Ms Collins and Ms Benni. I would hear the parties on the question of costs of the proceedings, if Hemer wishes to argue that it should not pay the costs of trial as between party and party. I would hear the parties on the question of the costs of the appeal. Hemer has succeeded only on its alternative claim for relief against forfeiture, and that must be reflected in the order for costs. GRAY J: This appeal concerns the forfeiture of a 99 year lease over land in suburban Adelaide. The lessee of the land, Hemer Pty Ltd, is the plaintiff and appellant. At trial, Hemer sought declarations, inter alia, concerning the interpretation of a covenant of the lease relating to the payment of rates and taxes. Hemer also sought relief against forfeiture. The trial Judge refused to make any declarations or grant any other relief. Introduction In 1962 a lease was granted over an area of land adjoining Sunnyside Road, Glen Osmond. For convenience, I shall refer to this as the leased land. The lease was for 99 years at an annual rental, if demanded, of one shilling per year. The lease contained two covenants: first, that the land should be used as a garden and second, that, if demanded, “rates and taxes proportional to the land … leased” were to be the responsibility of the lessee. The lease was duly registered.

Ratio Decidendi

Legal Principle Established

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