Histon Pty. Ltd. v Thurau Pty. Ltd
[2010] VCC 2014
•2 June 2010
| IN THE COUNTY COURT OF VICTORIA | (Not) Restricted |
| AT MELBOURNE CIVIL DIVISION |
Case No. 04083 of 2009
| HISTON PTY. LTD. | Plaintiff |
| v | |
| THURAU PTY. LTD. | Defendant |
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| JUDGE: | ROBERTSON |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 27 May 2010 |
| DATE OF JUDGMENT: | 2 June 2010 |
| CASE MAY BE CITED AS: | Histon Pty. Ltd. v. Thurau Pty. Ltd. |
| MEDIUM NEUTRAL CITATION: | [2010] VCC 2014 |
REASONS FOR JUDGMENT
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Catchwords:
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr. L.W.L. Armstrong | Nevin Lenne & Gross |
| For the Defendant | Mr D.P. Lloyd | Aitken Partners Pty. Ltd. |
| HIS HONOUR: |
1 This is an application made by way of an Originating Motion pursuant to the provisions of s.137 of the Property Law Act 1958 seeking a number of declarations in respect of certain questions arising out of or connected with a lease relating to an apartment (20C) in a ski lodge at Falls Creek.
2 The parties have been able to agree as to the facts, and such agreement is contained in a document titled “Agreed Statement As To Evidence”, a copy of which will be retained on the court file.
3 Pursuant to a lease dated 20 May 1993 from the Alpine Resorts Commission, the respondent to these proceedings, Thurau Pty. Ltd. (“Thurau”) is the lessee of the land on which a building known as the Alpine View Apartments has been constructed. The term of the lease is for 50 years from 1 November 1990 to 31 October 2040.
4 Clause 5.1 of the lease provides that the lessee shall not use or permit the use of the described land for any purpose other than for providing a business undertaking consisting of 27 managed apartments and a licensed restaurant.
5 Clause 13.3.2 of the lease provides that:
“where any Managed Apartment is not being used by the lessee or any members of or sub-lessee of the lessee the lessee shall make that accommodation available to the general public during the Snow Season on reasonable terms and conditions for holiday lettings …”.
6 Clause 13.3.3(a) provides that for the purposes of Clause 12.3.2:
“… occupation of the Managed Apartments by the spouse or any descendant, parent, brother, sister or any descendant of the brother or sister of the Lessee or where the Lessee is a company by a director thereof or a shareholder therein or any descendant, parent, brother or sister of the director or shareholder or any person authorised by the Lessee shall be deemed to be occupation by the Lessee;”
7 Clauses 13.3.2 and 13.3.3 must be clearly read together.
8 The term “lessee” is defined in Clause 1 of the lease as including “The successors permitted assigns and legal personal representatives of the Lessee and where not repugnant to the context includes the members and servants and agents of the Lessee.”
9 Pursuant to a sub-lease dated 29 March 1996, the respondent entered into a sub-lease with a third party sub-lessee, in respect of the subject apartment, 20C.
10 The third party sub-lessee then covenanted that it would use the demised premises as a residential apartment and for no other purpose. The term of the sub-lease was from 29 March 1996 to 31 October 2040.
11 Further, the sub-lessee covenanted that it would, to the extent to which they applied to the demised premises, perform and observe all and every obligation, covenant, proviso and stipulation imposed upon the sub-lessor as lessee under the head-lease and that it would be bound by the indemnities and acknowledgments on the part of the sub-lessor as lessee as fully as if the same covenants, provisos and stipulations, indemnities and acknowledgements had been repeated in the sub-lease in full.
12 It was further agreed (inter alia) that the sub-lessee should have the right in common with the sub-lessor and other lessees’ tenants and occupants in the building to use pathways, entrance halls, stairs and passageways in the building and the rooms, if any, in common.
13 By a Contract of Sale dated 22 February 2006 the original third party sub-lessee disposed of its interest in the subject apartment to the applicant in these present proceedings, Histon Pty. Ltd. (“Histon”) for $265,000.00.
14 By an Assignment dated 12 April 2006 the sub-lease was duly assigned to the applicant with the Falls Creek Alpine Resort Management Board consenting to the transfer of the sub-lease on 11 May 2006.
15 As a matter of completeness, in September 2008 the applicant Histon purchased the sub-leasehold interest in another apartment in the same complex, namely Apartment 15C, for $433,000.00.
16 It has been agreed that during its ownership of Apartment 20C Histon has not at any time made such apartment available for public letting. Indeed during May 2009 Histon attempted to dispose of its interest in Apartment 20C, and it therefore had instructed Thurau not to accept any accommodation bookings for the subject Apartment 20C.
17 In about mid May 2009 Histon by its directors, Mr and Mrs Frawley, arranged for a friend, Ms Margaret Sewell, and her son to occupy the subject apartment rent free, with Ms Sewell paying for water, electricity and other utilities whilst she was in occupation.
18 It has been agreed that Histon did not receive any rental income from Ms Sewell during her occupation of the subject apartment.
19 On 18 May 2009 Histon notified the management company, Falls Creek Management and Reservations (“FCMR”), that it would occupy both the subject apartment and its other apartment, number 15C, during the 2009 ski season.
20 FCMR, in consideration of a fee charged to sub-lessees, at all relevant times managed, and still manages the apartment complex. The management of FCMR was taken over by Mr and Mrs Etherton, both directors of Thurau, at some time prior to 2008.
21 Clause 2.2(b) of the relevant Management Agreement entered into between the sub-lessor and the sub-lessees provides (inter alia)
“To fulfil the obligations of the sub-lessor pursuant to Clause 12.3.2 of the Lease to ensure that when the apartment is not being used by the sub-lessee the apartment shall be made available to the general public during the snow season on reasonable terms and conditions for holiday lettings …”
22 A conflict between the parties appears to have arisen when Thurau/FCMR first ascertained that Ms Sewell was providing remedial massage for reward at the subject apartment. This fact had previously been unknown by Histon, and such use of the subject apartment had not in any way been sanctioned by Histon.
23 Clearly any such use of the subject apartment for a business purpose was in breach of the sub-lease provisions and in particular Clause 2(g) thereof.
24 FCMR, by an invoice dated 10 August 2009 addressed to Histon, claimed in respect of Apartment 20C the sum of $3,850.00 being “Commission on 2009 Rental Income”. It has been agreed, as stated earlier, for the purposes of these present proceedings, that Histon in fact had received no rental income for the period claimed by FCMR.
25 By notice dated 11 August 2009 Thurau served on Histon a “Notice of Default Under Sub-lease”. The notice called on Histon to remedy the default within 30 days from the date of service of the notice upon it, and to pay $330.00 (plus GST) by way of legal costs.
26 The notice referred to the following Particulars of Default:
“(a) You have used or allowed the Apartment to be used for the purpose of providing a massaging service business which is contrary to the permitted use allowed pursuant to Clause 2(g) of the Sub-Lease.
(b) You have failed to abide by, perform and observe all and every obligation, covenant, proviso and stipulation imposed upon you and the Sub Lease in that you failed to make the Apartment available to the general public during the Snow Season for holiday letting by the Manager as required by clause 3(b) of the Sib(sic) Lease and Clause 12.3.2 of the Head Lease.
(c) You have failed to abide by, perform and observe all and every obligation, covenant, proviso and stipulation imposed upon you by the Sub Lease in that you have failed to keep a register of names and addresses of all persons accommodated for one night and upwards in the Apartment as required by Clause 3(b) of the Sub Lease and Clause 12.3.1 of the Head Lease.”
27 Tension was clearly mounting between the parties.
28 By letter dated 21 August 2009, Histon, by its solicitors, responded to the notice advising Thurau that it had advised Ms Sewell to forthwith desist from providing remedial massage at the subject apartment. It has been agreed that prior to being advised of the situation, Histon had been unaware that Ms Sewell was using the subject apartment for the conduct of a remedial massage business.
29 Further, Histon offered to pay the $330.00 costs claimed by Thurau in the Notice of Default.
30 It has been agreed that Ms Sewell finally ceased her occupation of the subject apartment in October 2009.
31 The applicant clearly remedied the breach under the Particulars of Default under paragraph (a) of the notice and within the time specified by the notice.
32 It perhaps should be noted that learned counsel for the respondent, Mr Lloyd, gave the court an express undertaking on behalf of his client to the effect that the respondent had expressly now waived its right to forfeiture under the notice.
33 Notwithstanding this express waiver of forfeiture by the respondent, the parties seek the court’s determination in relation to the remaining issues on the notice.
34 When interpreting clauses in a lease and/or sub-lease of this nature, it seems trite to say that a fair construction is called for according to the apparent intent of the contracting parties.
35 The court now turns to sub-paragraph (b) of the notice which relates to an alleged failure by the plaintiff in not making the subject apartment available for public letting during the 2009 ski season.
36 This situation is primarily governed by the operation of Clause 12.3.2 of the head-lease which provides, as stated earlier, that where any managed apartment is not being used by the lessee or any members of or sub-lessee of the lessee the lessee shall make that accommodation available to the general public during the snow season on reasonable terms and conditions for holiday letting.
37 Again as stated earlier, the provisions of Clause 12.3.2 must be read in conjunction with the provisions of Clause 12.3.3 of the head-lease which provides (inter alia) that:
“Occupation of the Managed Apartments ….. where the Lessee is a company by a director thereof or a shareholder therein or any descendant, parent, brother or sister of the director or shareholder or any person authorised by the Lessee shall be deemed to be occupation by the Lessee”. (The underlining by way of emphasis is the court’s.)
38 This court is well satisfied that at all times material Ms Sewell was a person authorised by Histon to be in occupation of Apartment 20C and that her occupation for the purposes of the lease and the sub-lease shall be deemed to be occupation by the lessee (Histon).
39 In the circumstances the court is satisfied that at all times relevant in respect of sub-paragraph (b) of the notice, the applicant Histon was not in breach of the relevant provisions of the sub-lease.
40 There appears to be no dispute that the subject apartment was, at all times material, a managed apartment with the meaning of that expression as used in the head-lease.
41 It would be an absurd situation in the construction of the lease/sub-lease to suggest that there is some form of prohibition against Histon allowing an authorised person to occupy the subject apartment. If the parties had intended this to be the situation, they would have provided for it in the lease/sub-lease.
42 The head-lease, as correctly submitted by learned counsel, provides in effect the frame work within which the sub-lease falls to be construed.
43 The court turns to sub-paragraph (c) of the notice relating to the alleged breach of the head-lease and sub-lease in that Histon let the subject apartment to a third party without the consent of FCMR.
44 There is no evidence whatsoever on the agreed facts to enable a court to come to the conclusion that Histon let the subject apartment to Ms Sewell without the consent of FCMR, and in breach of the provisions of the head-lease and sub-lease.
45 The court is satisfied that at all times relevant the respondent was aware of Ms Sewell’s occupancy of the subject apartment and it made no complaint in respect of such occupation until such time as it ascertained that Ms Sewell was conducting some form of remedial massage business from the subject apartment in breach of the head-lease and the sub-lease.
46 There is no dispute whatsoever that Histon was at all material times bound by the Management Agreement and that it executed a Deed of Acknowledgement to that effect.
47 The court turns now to sub-paragraph (d) of the notice wherein Thurau alleges that in breach of the head-lease/sub-lease Histon failed to keep a register of names and addresses of all persons accommodated for one night and upwards in the subject apartment, as required by Clause 3(b) of the sub-lease and Clause 12.3.1 of the head-lease.
48 Such an allegation represents a descent into pettiness on the part of the respondent.
49 Clause 12.3.1 of the head-lease requires the respondent to keep upon the demised land an accommodation register.
50 Clause 12.2.1 of the head-lease provides that the lessee (Thurau) enter into a Management Agreement with the Management Company and procure that the Management Company provides and maintains the Management Services as set out in the Schedule.
51 The only schedule to the head-lease and marked “Third Schedule” sets out the nature of those management services, including the maintenance of the Register of Accommodation referred to in Clause 12.3.1.
52 The court is satisfied that at all times material, the onus was on FCMR and not Histon to maintain the Accommodation Register. Histon of course paid FCMR an agreed fee for the provision of those management services as detailed in the Third Schedule.
53 It is accepted that Histon at all material times advised FCMR/Thurau that Ms Sewell would be occupying Apartment 20C.
54 The court is satisfied that Histon was not, at all times relevant, in breach of the provisions of the sub-lease as alleged in paragraph (d) of the Notice of Default.
55 That leaves only the final issue to be determined by the Court relating to the ski-locker room in the basement of the apartment building.
56 The applicant seeks a declaration that the ski-locker facilities were and are, rooms in common use within the meaning of Clause 4(a) of the sub-lease, and it seeks a further declaration that the plaintiff, by persons authorised by it to use Apartment 15C or Apartment 20C, had the right in common with the defendant and other lessees, tenants and occupants in the apartment building to use the ski-locker area.
57 Clause 4(a) provides (inter alia) that the sub-lessee shall have the right in common with the sub-lessor and other lessees, tenants and occupants in the building to use the pathways, entrance halls, stairs and passageways in the building and the rooms in common use.
58 It is an agreed fact that apartment owners were not, and are not, permitted to bring skis or ski-boots into the accommodation areas or the apartments.
59 It has been agreed that since at least 2001 each apartment in the ski lodge has been allocated a ski-locker in the basement of the apartment building in a room known as the Ski Locker Room. The key for each locker in the room matches the key for the relevant apartment door.
60 It has been agreed that the Ski Locker Room is part of the common area of the apartment building.
61 Prior to the 2009 ski season no separate rental was charged for the ski-lockers with the apartment owners only being required to contribute to the costs of the maintenance and the repair of lockers.
62 By an email dated 28 May 2009 FCMR advised owners that it would charge owner occupiers $30.00 per week for ski-locker use and $5.00 per week for use of other facilities, including the sauna and guest bathrooms.
63 The justification advanced by FCMR for the imposition of such charges was expressed in the following terms:
“….. unfortunately these charges have been made necessary by the increase of owner occupiers for this 2009 ski season eroding the income derived from guest booking.”
64 The court would have thought that such a situation represented just one of the many vagaries associated with the running of any business.
65 There can be no doubt that the sub-lease falls to be construed as at the date it was entered into and without regard to the subsequent conduct of the parties.
66 This court has no doubt whatsoever that the ski-locker room located in the basement of the apartment building was and is a room in common use within the meaning of Clause 4(b). The fact that there are keyed lockers within that room is largely irrelevant.
67 The respondent has been unable to refer this court to any provision in the sub-lease or the Management Agreement permitting or allowing FCMR or the respondent to impose any additional rental charges in respect to the individual ski-lockers in the Ski Locker Room.
68 The respondent has no power to in effect unilaterally impose such a rental charge over and above the charges already imposed on the apartment owners in respect of the costs associated with the maintenance and repair of the lockers.
69 The court makes the following declarations:
(1)
That the defendant in accordance with the proper construction of the sub-lease dated 29 March 1996 and assigned to the plaintiff by Deed of Assignment dated 12 April 2006, was not entitled to serve upon the plaintiff a Notice of Default in respect of the matters set out in Item 8(b) of the Notice of Default dated 11 August 2009.
(2)
That the defendant in accordance with the proper construction of the sub-lease was not entitled to serve upon the plaintiff a Notice of Default in respect of the matters set out in Item 8(c) of the Notice of Default.
(3)
That the defendant in accordance with the proper construction of the sub-lease was not entitled to serve upon the plaintiff a Notice of Default in respect of the matters set out in Item 8(d) of the Notice of Default.
(4)
That the defendant by its directors, officers, servants and agents be restrained from giving any effect to or taking any step in furtherance of or reliance upon the Notice of Default dated 11 August 2009 whether pursuant to Clause 6(a) or 7(c)(ii) of the sub-lease or otherwise.
The Court notes the defendant’s undertaking given to the court in this
regard.
(5) That the ski-locker room at Alpine View Apartments was and is a room
in common use within the meaning of Clause 4(a) of the sub-lease.(6) That the plaintiff, by persons authorised by it to use Apartment 15C and/or Apartment 20C has the right in common with the defendant and other lessees, tenants and occupants in the building to use the ski-locker room. (7) That the defendant by its directors, officers, servants and agents be restrained from interfering with the plaintiff’s access to and quiet enjoyment of the ski-locker room. (8) Leave to apply generally is reserved.
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