Hollowood Pty Ltd v Castleford Pty Ltd - [2020] SASC 80

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
HOLLOWOOD PTY LTD & ORS v CASTLEFORD PTY LTD & ORS
[2020] SASC 80
Judgment of The Honourable Auxiliary Justice David
14 May 2020
MAGISTRATES - APPEAL AND REVIEW - SOUTH AUSTRALIA - APPEAL TO SUPREME COURT
LANDLORD AND TENANT - RENT - PROVISIONS AS TO RENT IN AGREEMENT FOR LEASE OR LEASE
LANDLORD AND TENANT - RENT - VARIATION OTHERWISE THAN UNDER TERMS OF LEASE
LANDLORD AND TENANT - TERMINATION OF THE TENANCY - REPUDIATION
Appeal against the decisions and rulings of a Magistrate.
The appellants are various entities who are registered proprietors of Shop 4 of Roxby Downs Shopping Centre. They executed a lease with the first respondent. Following the first respondent vacating the tenancy, a dispute arose over (allegedly unpaid) rent, culminating in the appellants bringing an action in the Magistrates Court against the respondents for that amount plus contractual interest and legal costs.
The original claim was set to commence trial on 15 November 2019. However, the matter was settled between parties. The agreement reached included a term that the respondents pay the appellants $25,000 in full satisfaction of the filed claim (inclusive of interest and costs). This sum was to be paid with a lump sum of $10,000 by 31 January 2018, and thereafter the remaining balance was to be paid in monthly instalments over the period from February to December 2018. Time was of the essence, and any default would give the appellants the right to enter a consent judgment for the full amount, less any credit for payments made up to the date of default. The parties agreed a deed reflecting these terms would be duly executed. A deed was executed, but never signed by the respondents.
The respondents did not make the first $10,000 payment. The appellants filed an application seeking consent judgment on 9 February 2018 (the first application). However, the second respondent had paid $18,733.74 to the appellants’ property agent, Savills. The second respondent had spoken to Savills via telephone in December 2017, during which it was agreed payment of the rental arrears to Savills on behalf of the appellants would finalise the matter. Nevertheless, the appellants proceeded with the first application, arguing the respondents repudiated the agreement. The respondents filed an application on 21 August 2019 (the second application), which sought to dismiss the first application on the basis the respondents had complied with their obligations. The appellants then filed an amended version of the first application on 15 October 2018 (the third application).
The Magistrate dismissed the appellants’ applications – the first and third applications – finding that:
• The respondents had not breached an essential term of the lease;
• The respondents’ asserting a variation to the deed such that no further payment was required amounted to an anticipatory breach giving rise to a right by the appellants to elect to affirm or terminate the contract;
• The respondents recanted the anticipatory breach; and
• That by pursuing the first application with knowledge that the payment to Savills occurred, the appellants affirmed the deed.
The appellants raised seven grounds of appeal, set out as follows:
1. The Magistrate erred in materially basing her decision in law and fact on the affidavit of Dr Melville-Smith, sworn on 13 August 2018, as it was not before her as evidence;
2. The Magistrate erred in finding that the respondents recanted from their repudiation of the settlement agreement and that the appellants had elected not to proceed on the anticipatory breach;
3. The Magistrate erred in finding that the unexecuted settlement deed formed the basis of the agreement between the parties and remained in force, rather than the oral settlement agreement reached on 15 November 2017;
4. The Magistrate erred in finding that the respondents had complied with the terms of the deed;
5. The Magistrate erred in finding that the appellants elected to affirm the deed;
6. The Magistrate erred in not awarding costs to the appellants flowing from their acceptance of the respondents’ repudiation; and
7. The Magistrate erred in awarding costs to the respondent.
Held, per David AJ, dismissing the appeal, and upholding the findings of the Magistrate:
1. The objective facts were not disputed and could be proved without the assistance of Dr Melville-Smith’s affidavit;
2. The respondents made an anticipatory breach in seeking to assert a lesser sum was to be paid, which they recanted when they paid the balance of monies owing;
3. The deed was the written embodiment of the settlement agreement, and the outcome would be the same irrespective of which was relied upon;
4. The use of the term ‘deed’ in relation to whether the appellants’ elected to affirm is merely a question of terminology, and immaterial to the outcome of the dispute; and
5. As the respondents’ repudiation was recanted prior to the time for performance, and the appellants did not terminate the contract, the Magistrates order as to costs was correct.

HOLLOWOOD PTY LTD & ORS v CASTLEFORD PTY LTD & ORS
[2020] SASC 80
Magistrates Appeal: Civil

DAVID AJ: This is an appeal against various decisions and rulings of a Magistrate arising from a settlement agreement between the parties. The appellants argue that the agreement was repudiated by the respondents, and that damages should flow from that repudiation. The respondents argue that if there was such a repudiation (which is denied in the notice of contention) it had been recanted, and there was no entitlement to damages.
Background
The appellants are various entities who are the registered proprietors of Shop 4 of the Roxby Downs Shopping Centre. They executed a lease with the first respondent (guaranteed by the second and third respondents) on 28 November 2002. That lease was twice extended, and after 14 November 2011, operated as a monthly tenancy until the first respondent decided to vacate the tenancy.
Following the first respondent vacating the tenancy, a dispute arose over rent, that was allegedly unpaid. This culminated in the appellants bringing an action against the respondents in the Magistrates Court on 19 January 2017 for $21,197.92 plus contractual interest and legal costs on an indemnity basis.
The original claim was set to commence for trial on 15 November 2017. However, the trial never eventuated as the matter settled between the parties on that date. The agreement the parties reached included a term that the respondents pay the appellants the sum of $25,000 in full satisfaction of the claim filed on 19 January 2017, inclusive of interest and costs (the settlement sum). The settlement sum was to be effected by the payment of a lump sum of $10,000, by 31 January 2018, and thereafter the balance of $15,000 was to be paid in monthly instalments over the period from February 2018 to December 2018. The respondents’ solicitor had stated that time was of the essence and that a default of any payment would give the appellants the right to enter a consent judgment for the full amount of the claim, less any credit for any payments made by the date of the default. The parties agreed that a deed reflecting the terms of their agreement would be duly executed.
Various email exchanges occurred between the parties’ solicitors in November 2017 regarding the draft terms and execution of the deed. The deed was finally executed on behalf of the appellants on 30 November 2017 but was never signed by the respondents. Relevantly, clauses 2, 3, 6 and 8 of the deed provided:
2.The Defendants will pay to the Plaintiffs the settlement sum of $25,000.00, inclusive of legal costs, interest and any applicable GST (“Settlement Sum”).
3.The Settlement Sum is payable in the following manner:
a.     The first $10,000.00 installment is due and payable on or before 31 January 2018;
b.    The remaining $15,000.00 to be paid by way of 11 equal instalments, each due and payable on or before the last day in each consecutive calendar month from February 2018 to December 2018 inclusive
…
d.    Installments are each to be paid by way of cheque made out to Beger & Co Lawyers Trust Account and delivered to 213 Payneham Road St Peters in the State of South Australia, or by electronic transfer to the following bank account …
[bank details of the appellants’ solicitors’ trust account]
…
6.Time is of the essence in relation to any payment required by clause 3 hereof and in the event of default in relation to any such payment which default continues for 7 days, the Defendants hereby consent to the Plaintiff signing judgment for the full amount claimed in the action.
…
8.Should judgment be entered pursuant to clause 6 hereof, any amounts paid under clause 3 are to be treated as payments towards the judgment sum.
The settlement between the parties soon derailed. The respondents did not make the first payment of $10,000 to the appellants’ solicitors’ trust account by 31 January 2018. The appellants filed an application on 9 February 2018 in the Magistrates Court seeking consent judgment be entered for the appellants for $24,392.02 plus costs on an indemnity basis (the first application). The second respondent had in fact made a payment in the amount of $18,733.74, but to an account held by the appellants’ property agent, Savills. In an affidavit filed on 21 February 2018, the second respondent’s solicitor, Mr Partridge, deposed that there had been a variation to the agreement, in that the payment of $18,733.74 to Savills’ bank account would satisfy the entire matter between the parties. More particularly, he deposed:[1]
3.I am instructed by the Second Defendant (who is also Director of the First Defendant) that he spoke by telephone with Savills in December 2017 during which conversation it was agreed that the Defendants make payment of the rental arrears to Savills on behalf of the Plaintiffs to finalise the matter.
4.I am further instructed by the Second Defendant that he has only dealt with Savills and not the Plaintiffs or any of them throughout this matter, believing that Savills acted at all material times as a duly authorised Agent with Authority to bind the Plaintiffs.
5.I am further instructed by the Second Defendant that he made payment to the Plaintiffs’ agent Savills of $18,733.74 on 21 December 2017 in satisfaction of the agreement with Savills.
…
7.I note that the Plaintiffs’ said Application and the Affidavits filed in support thereof do not take into account the agreement with Savills in December 2017.
8.I further note that the Plaintiffs’ said Application and the Affidavits filed in support thereof do not take into account the payment of 21 December 2017 which on the Defendants’ position finalises the matter and on the Plaintiffs’ position should be offset against any amount owing to the Plaintiffs.
[1] Affidavit of Samuel Bruce Partridge affirmed on 21 February 2017.
Backtracking momentarily, on 20 February 2018, Mr Partridge had emailed the appellants’ solicitor, Mr Jakobsen, stating:[2]
Our client Mr Melville-Smith is adamant that prior to Christmas ’17 he spoke with Theo Kaldis (of Savills) and came to an arrangement where the rental arrears be paid …
Are you able to speak with Mr Kaldis and/or your client and confirm? It may require your amending the affidavit evidence in support of your application; or withdrawal of the application if it was agreed that the payment of arrears would be accepted in full satisfaction of the ‘settlement agreement’.
[2] Affidavit of Theo Kaldis sworn 19 June 2018, annexure TK-1.
Mr Jakobsen replied stating that neither the appellants, nor Mr Kaldis (the property manager for the appellants), had received any communication from Dr Melville-Smith.
On 11 March 2018, Mr Partridge again wrote to Mr Jakobsen asserting that there had been an agreement reached in December 2017 for the appellants to accept $18,733.74 in full satisfaction of the matter.[3] Mr Jakobsen replied on 16 March 2018, stating that whilst $18,722.74 was received by Savills on behalf of the appellants it was not in settlement of the matter, and that it was clear that the respondents had repudiated the agreement. Mr Jakobsen confirmed that the appellants would proceed with the first application.
[3] Affidavit of Theo Kaldis sworn 19 June 2018, annexure TK-4.
The first application was listed for argument on 6 July 2018, but an oral application was made by the respondents that it be adjourned. This oral application was granted and the question of costs was reserved.
The respondents filed an application on 21 August 2018 (the second application), which sought to dismiss the first application on the basis that by virtue of the payment to Savills made on 21 December 2017 the respondents had complied with their obligations in the agreement. More particularly, the respondents sought the following orders:
1.That the Plaintiffs claim filed on 19 January 2017 be dismissed;
2.That a declaration be made that the Defendants be released and discharged from all legal claims in relation to the Plaintiffs’ claim filed on 19 January 2017;
3.That the Plaintiffs’ application for consent judgment be entered filed on 9 February 2018 be dismissed;
4.That the Plaintiffs’ application for costs on a solicitor and own client (‘indemnity’) basis be dismissed; and
5.That a judgment be made awarding costs of and incidental to defending the Plaintiffs’ application filed on 9 February 2018 on a solicitor and own client (‘indemnity’) basis.
It was an agreed fact that on 14 August 2018, the respondents paid the balance of the $25,000 payable under the deed, namely $6,266.26, into the trust account of Beger & Co.
It is therefore to be noted that by 14 August 2018, all the monies required by the appellants pursuant to the agreement and the deed had been paid well ahead of time. Pursuant to the agreement of the deed, the final payment was not required until December 2018.
On 15 October 2018, the appellants filed another application (the third application) which was in fact an amended version of the first application. The third application was in response to the second application, and the assertions that the respondents had complied with all of the terms of the agreement, and that the agreement remained on foot. In the third application, the appellants alleged that in failing to pay the settlement monies in the method as agreed, the respondents had breached the settlement reached between the parties on 15 November 2017 and, as a consequence, the appellants were entitled to damages for the breach. It was also alleged that the respondents had repudiated the settlement agreement on 20 February 2018, 21 February 2018, and 11 March 2018, because Dr Melville‑Smith’s asserted variation of the agreement — namely that the payment of $18,733.84 would satisfy the entire matter between the parties — constituted an anticipatory breach of the agreement. The appellants stated that they had accepted that repudiation on 16 March 2018, and were entitled to damages flowing from the breach.
The Magistrate’s reasons
In her reasons, after setting out the background to the matter and the three applications of the parties, the Magistrate articulated four issues for determination:
(1)Was there an actual breach of the contract by the defendants, and if yes, was it a breach of an essential term?
(2)Was there an anticipatory breach of the contract by the asserted variation to the Deed?
(3)Did the defendants recant on the anticipatory breach before the time for performance under the contract?
(4)Did the plaintiffs terminate the contract before the defendants recanted on the breach?
In relation to the first issue, the Magistrate considered that nothing turned on the fact that the respondents had not provided an executed copy of the deed to the appellants. She accepted that the respondents had not made the first payment of $10,000 to the Beger & Co trust account on or before 31 January 2018 (as required by clause 3(a) of the deed), but did not consider this to be a breach of an essential term. That is, not “a breach giving rise to a right to the [appellants] to rely on the default clause (clause 6) or terminate the contract”.
Turning to the second issue, the Magistrate noted that in paragraph [8] of Mr Partridge’s affidavit dated 21 February 2018, reproduced above,[4] he deposed that the payment made on 21 December 2017 “finalises the matter”. The Magistrate said:
In my view Mr Partridge’s affidavit was a clear declaration of intent by the defendants that they did not consider themselves bound to complete their obligations pursuant to the Deed. The defendants made the assertion of a variation in the face of the first application, and then allowed that application to remain on foot and be set down for hearing. The defendants effectively maintained the assertion of a variation into early August 2018 [the date of the second application].
The defendants’ assertion that there had been a variation to the Deed, and that as at February 2018 no further payment was required, constituted conduct giving rise to an anticipatory breach. … The defendants submitted that because they had always paid ahead of time, as required by the Deed, they were never in default. The absence of any default does not mean that there was no breach. This was not a minor variation being asserted. In that vein, the breach was fundamental and one that gave rise to a right by the plaintiffs to make an election to affirm or terminate the contract.
[Footnotes omitted]
[4] At [6].
In relation to the third issue, the Magistrate found that the respondents recanted on the anticipatory breach in August 2018. As mentioned earlier in these reasons, the respondents asserted in February 2018 that the agreement/deed had been varied, but later in August 2018 filed the second application on the basis that they were complying with their obligations set out in clause 3 of the deed. As also mentioned earlier, the balance of the payment due under the deed was paid on 14 August 2018, even though it was due at a much later date. In this regard, the Magistrate said:
The affidavit of Mr Melville-Smith of 13 August 2018, together with the payment of 14 August 2018, amounted to a clear statement that the defendants recanted on the anticipatory breach. The settlement payments were made ahead of the time at which they fell due, thus the recantation occurred prior to the time for the defendants’ performance pursuant to the contract.
As to the fourth issue, it was the position of the appellants that they had elected to repudiate the deed, or, put differently, elected to terminate the deed, prior to the respondents recanting on the anticipatory breach. The respondents contended that the appellants, in the face of the anticipatory breach, had made an election to affirm the deed by seeking to enforce its terms by filing the first and third applications.
The Magistrate noted that the appellants had filed the first application prior to the anticipatory breach. The appellants did not know at the time that a payment had been made to Savills, or that the respondents asserted such payment by way of variation to the deed. It was only in February and March 2018, through the affidavits and emails of Mr Partridge referred to above, that the appellants learned of the asserted variation. The Magistrate found that there had been an election by the appellants to affirm the deed prior to the respondents recanting on the anticipatory breach, stating:
[b]y pursuing the first application seeking to enforce clause 6, with the knowledge that the payment to Savills had occurred but that the [respondents] asserted the variation (and hence no further payments would be made), the [appellants] elected to affirm the Deed.

As such, the Magistrate dismissed the appellants’ first and third applications, and in relation to the respondents’ second application, declared that the respondents had complied with their obligations pursuant to the deed.
Against the background of these findings, the Magistrate turned to the assessment of damages. She noted that whilst ordinarily damages for an anticipatory breach would put the appellants in the position they would have been had the bargain been performed, in this instance, the appellants would have been paid $25,000, and they had in fact been paid $25,000. Thus, the Magistrate found that the only damages that could flow from the anticipatory breach were costs incurred by the appellants in seeking to affirm the agreement in the face of the breach. In this regard, she made the following orders:
4.The defendants are to pay the plaintiffs’ costs of the preparation and filing of the application filed on 9 February 2018, on a party/party basis.
5.The defendants are to pay plaintiffs’ costs of preparation and attendance at the argument on 6 July 2018, on a solicitor/client basis.
6.The plaintiffs are to pay the defendants’ costs of the applications of 21 August 2018 and 15 October 2018, including the argument of 26 February 2019, on a party/party basis.
Appeal
There are seven grounds of appeal, which I set out:
1.The Magistrate erred in materially basing her decision in law and fact on the affidavit of Dr Melville-Smith, sworn on 13 August 2018, as it was not before her as evidence;
2.The Magistrate erred in finding that the respondents recanted from their repudiation of the settlement agreement and that the appellants had elected not to proceed on the anticipatory breach;
3.The Magistrate erred in finding that the unexecuted settlement deed formed the basis of the agreement between the parties and remained in force, rather than the oral settlement agreement reached on 15 November 2017;
4.The Magistrate erred in finding that the respondents had complied with the terms of the deed;
5.The Magistrate erred in finding that the appellants elected to affirm the deed;
6.The Magistrate erred in not awarding costs to the appellants flowing from their acceptance of the respondents’ repudiation; and
7.The Magistrate erred in awarding costs to the respondents.
I deal with each in turn.
Ground 1
There was no dispute between the parties on appeal that the Magistrate erred in having regard to the affidavit of Dr Melville-Smith sworn on 13 August 2018, to which references are made in her reasons. It was agreed that she should not have had regard to that affidavit as it had been excluded at trial.
However, in his affidavit, Dr Melville-Smith deposed to the objective uncontroversial facts that $18,733.74 had been paid to the Savills account on 21 December 2017, and that the remaining amount owing will be transferred to the appellants’ solicitors trust account, which in fact occurred on 14 August 2018. Those objective facts were themselves not disputed and could be proved without the assistance of Dr Melville-Smith’s affidavit.
I dismiss this ground of appeal.
Ground 2
The appellants argue that the Magistrate erred in finding that there was an election by the appellants not to proceed on the anticipatory breach. She relied upon the filing of the first application on 9 February 2018 as the basis for saying that the appellants were affirming the agreement and therefore electing not to proceed on the anticipatory breach. The appellants argue that to do so is wrong because at that stage the appellants did not know of the details amounting to the anticipatory breach, namely that $18,733.74 had been paid to Savills commercial agents, presumably in full settlement of the agreement.
In my view, this submission is misconceived because her Honour found in her reasons that it was the continued prosecution of the application by the appellants, once knowledge of the misdirect of payment had been obtained, that made out an election not to proceed on the anticipatory breach. Her Honour said:
The plaintiffs filed the first application prior to the anticipatory breach. At the time of filing they did not know that a payment had been made to Savills, or that the defendants asserted that such payment was by way of variation to the Deed. However, in February and March 2018, through the affidavit and emails of Mr Partridge, the plaintiffs learned of the asserted variation which constituted an anticipatory breach. At a directions hearing on 4 May 2018 the first application was set down for argument on 6 July 2018.
The first application does not seek to terminate the Agreement or the Deed, but rather, it seeks to affirm it. The first application seeks consent judgment pursuant to clause 6 of the Deed, thus it follows that rather than terminating the Agreement and seeking damages, the plaintiffs were seeking enforcement of a clause of the Deed. Further, the defendants were not in breach of any essential term of the Deed, nor were they in default in relation to the payments due. The payments were never behind, and for the most part, were ahead.
I find that there was an election made by the plaintiffs prior to the defendants’ recantation of the anticipatory breach. By pursuing the first application seeking to enforce clause 6, with the knowledge that the payment to Savills had occurred but that the defendants asserted the variation (and hence no further payments would be made), the plaintiffs elected to affirm the Deed.
The Magistrate found that the respondents had recanted on the anticipatory breach which she said took place in August 2018 when they paid the balance of $6,266.26 which was owing on the deed. In fact, this brought the respondents payments ahead of the payment schedule. It is argued by the appellants that they elected to repudiate the contract prior to the respondents recanting on the anticipatory breach. However, I find as the first application was not to terminate the deed, but to affirm it, the decision of the Magistrate that there was an election made by the appellants at that time to affirm the deed, and not repudiate it, was correct. Hence, the election to repudiate the contract and claim damages was made after the recantation.
I agree with the Magistrate that there was an anticipatory breach made by the respondents in seeking to settle the matter by asserting a lesser sum was to be paid, and after said anticipatory breach, they recanted on 14 August 2018 when they paid the balance of monies owing.
I dismiss this ground of appeal.
Grounds 3 and 4
The appellants submit that the Magistrate erred in finding that the deed was binding and that subsequent findings, namely, that the respondents had complied with the deed, and that the appellants elected to affirm the deed could not be open on the facts as the deed was unexecuted. The appellants argue that it was the settlement agreement that was binding on the parties. The deed was simply the distillation of the oral agreement into written form. The Magistrate proceeded on this very basis, namely, ‘that the Deed is the written embodiment of the agreement and is prima facie enforceable’. Counsel for the appellants acknowledged that the outcome would be the same irrespective of whether there was reliance on the deed or the settlement agreement.
I dismiss both grounds.
Ground 5
I take this ground of appeal to be arguing about the use of the term ‘deed’, and not as one could interpret it as restating the argument that the Magistrate was incorrect to find the appellants election to affirm. On either view, the question is merely one of terminology and immaterial to the outcome of the dispute.
I dismiss this ground of appeal.
Grounds 6 and 7
As the Magistrate was correct in finding that the respondents repudiation was recanted prior to the time for performance, and that the appellants did not terminate the contract, her Honour was also correct in awarding costs as she did.
Conclusion
I dismiss the appeal and uphold the findings of the Magistrate.