Ian Robert Turner and Lynette Shirley Turner v Leda Commercial Properties Pty Limited ACN 008 613 447
[2002] ACTCA 8
IAN ROBERT TURNER AND LYNETTE SHIRLEY TURNER v LEDA COMMERCIAL PROPERTIES PTY LIMITED ACN 008 613 447
[2002] ACTCA 8 (26 November 2002)
CATCHWORDS
REAL PROPERTY – leases – jurisdiction of Magistrates Court – whether dispute before Tenancy Tribunal, being a dispute in part about terms of payment of rent arrears due under lease, was a dispute about a lease falling within s 6(1) Tenancy Tribunal Act 1994 (ACT) – whether entry of consent judgment against appellants was void ab initio – whether filing of defence by appellants raised for determination a matter constituting a dispute pursuant to s 6(1) Tenancy Tribunal Act 1994 (ACT)
WORDS & PHRASES – “claim”, “dispute”, “in relation to”
Tenancy Tribunal Act 1994 (ACT), ss 3, 5, 6, 7, 8, 12, 13, 60, 61
Magistrates Court (Civil Jurisdiction) Act 1982 (ACT), s 12
Brown v Rezitis (1970) 127 CLR 157, cited
Fountain v Alexander (1982) 150 CLR 615, cited
In the Marriage of Reid and Reid (1982) FLC 91-211, cited
David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353, cited
Re Taylor; Ex parte Century 21 Real Estate Corporation (1995) 130 ALR 723, cited
Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245, followed
Yeoman Credits Ltd v Latter [1961] 1 WLR 828, cited
Total Oil Products (Australia) Pty Ltd v Robinson [1970] 1 NSWLR 701, cited
ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
No. ACTCA 18 of 2002
No. SCA 54 of 2001
Judges: Crispin P, Spender and Cooper JJ
Court of Appeal of the Australian Capital Territory
Date: 26 November 2002
IN THE SUPREME COURT OF THE ) No. ACTCA 18 of 2002
) No. SCA 54 of 2001
AUSTRALIAN CAPITAL TERRITORY )
)
COURT OF APPEAL )
ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
BETWEEN:IAN ROBERT TURNER AND LYNETTE SHIRLEY TURNER
Appellants
AND:LEDA COMMERCIAL PROPERTIES PTY LIMITED ACN 008 613 447
Respondent
ORDER
Judges: Crispin P, Spender and Cooper JJ
Date: 26 November 2002
Place: Canberra
THE COURT ORDERS THAT:
The appeal be dismissed.
The appellants pay the respondent’s costs of and incidental to the appeal, including reserved cost, if any, to be taxed if not agreed.
IN THE SUPREME COURT OF THE ) No. ACTCA 18 of 2002
) No. SCA 54 of 2001
AUSTRALIAN CAPITAL TERRITORY )
)
COURT OF APPEAL )
BETWEEN:IAN ROBERT TURNER AND LYNETTE SHIRLEY TURNER
Appellants
AND:LEDA COMMERCIAL PROPERTIES PTY LIMITED ACN 008 613 447
Respondent
Judges: Crispin P, Spender and Cooper JJ
Date: 26 November 2002
Place: Canberra
REASONS FOR JUDGMENT
THE COURT
Background
The appellants (“the Turners”) are guarantors under a guarantee and indemnity in writing granted by them to the respondent (“Leda”) on or about 1 September 1994 (“the guarantee and indemnity”). The guarantee and indemnity was given in respect of the obligations of Classic Gourmet Sausages Pty Ltd ACN 063 906 883 (“Classic”) under a registered sub-lease in respect of Shop No 71B at the Tuggeranong Hyperdome Shopping Centre (“the sub-lease”).
Under the sub-lease, Classic, as tenant, agreed to perform the obligations binding upon it, including the obligation to pay to Leda, as landlord, the rent, costs, and outlays, payable in respect of the tenancy as and when due during the term of the sub-lease. By early 1998, Classic was in default of its obligations to pay the rent, costs and outlays then due and payable under the sub-lease.
On 19 February 1998, the Turners on behalf of Classic as tenant lodged an application to the Tenancy Tribunal (“the TT”) under the Tenancy Tribunal Act 1994 (ACT) (“the TTA”). By that application, Classic sought interim orders restraining the respondent from re-entering Shop 71B or from taking any action to terminate Classic’s occupation of the shop. A document entitled “Notice of Dispute” dated 3 March 1998 also was filed in the TT. The basis for the claim for relief before the TT as disclosed by that notice was that :
“The landlord has engaged in unconscionable conduct as described in the Tenancy Tribunal (Amendment) Act 1997 – in particular sections 36(1)(d) and (f).”
Leda, on 14 April 1998, filed a Special Claim in the Magistrates Court at Canberra against Classic as first defendant, and the Turners as second and third defendants. As against Classic, the respondent sought $13,587.11 on account of outstanding rent, levies and outgoings, then due and payable under the sub-lease, together with interest and costs. As against the Turners, Leda sought payment of the same sum as money due and payable under the guarantee and indemnity.
On 23 September 1998, Classic and the Turners filed a defence to the proceedings in the Magistrates Court. The defence pleaded, inter alia:
“6. In answer to the whole of the Claim, the Defendants say that they are entitled to set-off, against the sum claimed by the Plaintiff, such sums as are payable to the Defendants by the Plaintiff by way of compensation arising from the conduct of the Plaintiff in refusing to give the First Defendant time in which to pay arrears of rent and re-entering the premises on 6 March 1998 without adequate warning.
7. In further answer to the whole of the Claim, the Defendants say that the Plaintiff has purported to distrain for rent in respect of the Defendants’ fixtures and fittings in the premises and any outstanding rent obligation has been thereby wholly satisfied or, in the alternative, such distrain was wrongful by reason of the re-entry and the Defendants are thereby entitled to damages and to set off against the sum claimed by the Defendants the amount of such damages.”
The proceeding in the TT, initiated by way of Notice of Dispute, was dismissed as being without merit on 17 December 1998. An appeal to the Supreme Court was lodged by the Turners on 14 January 1999. This appeal was dismissed on 19 July 1999.
Pursuant to an agreement between Classic, the Turners and Leda, a consent judgment in favour of Leda was filed in the Magistrates Court proceedings on 19 July 1999. The consent judgment provided that :
“2. The first defendant, second defendant, third defendant and each of them pay to the plaintiff the sum of $16,150.02 inclusive of interest pursuant to the Sublease and costs agreed in the sum of $1,000.”
Classic and the Turners applied in the Magistrates Court on 1 November 1999 to set aside the consent judgment entered on 19 July 1999. That application was dismissed on 29 June 2001. In the interim, Classic had been wound up by the Supreme Court on the basis of its failure to comply with a statutory demand grounded on the consent judgment.
The Turners appealed to the Supreme Court from the decision of Magistrate Fryer dismissing the application to set aside the consent judgment. On 31 May 2002, Gray J ordered that appeal be dismissed. An appeal from this order was filed by the Turners.
The Grounds of Appeal
The Turners’ grounds of appeal may be summarised as follows :
(a) At the time the proceedings were commenced in the Magistrates Court on 14 April 1998, there was a dispute before the TT which was a dispute about a lease falling within paragraphs 6(1)(b) and/or 6(1)(h) of the TTA.
(b) There being a dispute to which the TTA applied, the Magistrates Court had no jurisdiction in proceedings No. CS 98/81481 by the operation of either or both of s 7 of the TTA or s 12 of the Magistrates Court (Civil Jurisdiction) Act 1982 (ACT) (“the MCA”).
(c) There being “no jurisdiction in the Magistrates Court to adjudicate upon the matter of the claims of rent arrears and indemnity, then the entry of the ‘Consent Judgment’, against the appellants and Classic Gourmet Sausages Pty Ltd (In Liq) was void, ab initio, as against the appellants and Classic Gourmet Sausages Pty Ltd (In Liq) even though Classic Gourmet Sausages Pty Ltd (In Liq) was not a party to the proceedings in the Supreme Court or the proceedings in the Magistrates Court.”
Statutory Framework
The TTA provided for the establishment of the TT: s 60. The TT had the functions and powers given to it under the TTA: s 61. Proceedings under the TTA are initiated by referring a dispute about a lease to which the TTA applies to the Registrar of the TT: s 12. The Registrar is empowered to act on a reference in one of the ways provided for in s 13 of the TTA.
So far as is presently relevant, the following terms are defined in s 3 of the TTA:
“party –
(a)in relation to a lease, means –
(i) the owner; or
(ii)the tenant; or
(b)in relation to mediation – means a person referred to in section 16; or
(c)in relation to a hearing before the registrar – means a person referred to in section 23; or
(d)in relation to a hearing before the tribunal – means a person referred to in section 33.
…
tenant means a person who has the right to occupy premises under a lease, and includes –(a) a subtenant; and
(b) any heir, executor, administrator or assign of a tenant; and
(c) a prospective tenant.”
The scope of application of the TTA is dealt with in Part 2 of that Act. The TTA applies to leases to which s 5 applies. The sub-lease in question on this appeal is a lease to which s 5 applies.
The “disputes” to which the TTA applies are set out in s 6, which provides :
“6 Disputes
(1) Subject to section 8, this Act applies to the following disputes:
(a)a dispute caused by an alleged breach of a mediated agreement;
(b)a claim by a party to a lease that another party to the lease has engaged in harsh and oppressive conduct towards the first mentioned party (whether that conduct is unconscionable or not);
(d)a dispute about key money in relation to a lease or to negotiations for the entering into of a lease;
(e)a dispute about a multiple rent review clause or a ratchet clause in relation to a lease;
(f)a claim by a party to a lease that another party to the lease has breached or is breaching the code, other than a claim that relates to key money, a multiple rent review clause or a ratchet clause;
(g)a dispute about a lease, being a dispute prescribed by the code as suitable for resolution under this Act;
(h)any other dispute about a lease or negotiations for the entering into of a lease.”
Section 8 of the TTA deals with the transitional application of the TTA to disputes falling within one or more of the paragraphs of s 6(1) of the TTA.
Section 7 of the TTA provides :
“7 Jurisdiction of Magistrates Court
The Magistrates Court has no jurisdiction in relation to a dispute to which this Act applies”.
The mirror provision of s 7 of the TTA is provided in s 12 of the MCA, which provides :
“12Disputes under Tenancy Tribunal Act 1994
The court has no jurisdiction in relation to a dispute to which the Tenancy Tribunal Act 1994 applies.”
The Judgment Appealed From
In his reasons for judgment dismissing the appeal from the order of Magistrate Fryer, Gray J said :
“33.In the present case, there is no defence denying any indebtedness in the arrears of rent under the lease or as to the liability of the appellants to indemnify Leda in respect of those arrears. Rather, what is put here is that there is a set-off. As far as the set-off is concerned, as to one part, it is based upon a dispute which falls within s 6(1)(b) of the Tenancy Tribunal Act, being a claim by a party to a lease that another party to the lease has engaged in harsh and oppressive conduct towards the first-mentioned party. As to the other part, it concerns distraint for rent as being within s 6(1)(h) of the Tenancy Tribunal Act as arguably being ‘any other dispute about a lease’. Neither of these matters put in issue the question of indebtedness as to the rent arrears or the indemnification of them.
34.Like the Magistrate, I do not see that the claims for arrears of rent and indemnity which are not the subject of contest other than by way of set-off are disputes that fall within the enumerated paragraphs of s 6 of the Tenancy Tribunal Act. The fact that the Magistrates Court does not have the jurisdiction to determine the matters claimed by way of set-off does not of itself mean that it does not have jurisdiction in relation to the claims for arrears of rent and indemnity unless those claims fall within the ‘disputes’ to which s 6 of the Tenancy Tribunal Act refers.
35.There is a distinction that may be drawn between a claim and a dispute. That distinction is clear from the terms of s 6 of the Tenancy Tribunal Act, where two instances of a claim in described aspects are treated as a dispute (see s 6(1)(b) and (f) of the Tenancy Tribunal Act). A claim for arrears of rent or indemnity in respect of those arrears is not of itself a dispute to which s 6 applies. If the claim is disputed by an issue going to the heart of the claim, it may become so as the case of Walwyn Pty Limited v Kabcon Pty Limited [2000] ACTSC 19, 16 February 2000 shows. It is not until that point is reached that the question of jurisdiction arises.”
The Issues on Appeal
The Turners submitted that the words “in relation to” which appear in s 7 and s 12 of the TTA and MCA respectively on their proper construction mean that the Magistrates Court has no jurisdiction to hear and determine a matter having a close connection or real connection with a dispute pending under, or subject to, the TTA: Brown v Rezitis (1970) 127 CLR 157 at 165. Further, they submitted that the words are of wide and general import which connote a relationship between two subject matters which should not be read down unless the content or the context of the section require such a course: Fountain v Alexander (1982) 150 CLR 615 at 629. Where the matter in the Magistrates Court was a matter “on the subject of” a dispute under the TTA, there was no jurisdiction, the Turners submitted, in the Magistrates Court to hear and determine the matter. In support of this submission the Turners relied upon the decision of In the Marriage of Reid and Reid (1982) FLC 91-211 at 77,127 – 77,128.
Sections 7 and 12 of the respective Acts fall to be construed in accordance with the normal cannons of statutory construction giving the words their ordinary meaning in the context in which they appear, having regard to the evident statutory purpose.
Sections 7 and 12 deal with two subjects :
(a) the absence of jurisdiction in the Magistrates Court; and
(b) a dispute to which the TTA applies which is a dispute which falls within one or more of the paragraphs contained in s 6(1) of the TTA and which, in the first instance, is dealt with by the Registrar of the TT.
The phrase “in relation to” where it appears in s 7 and s 12 provides the link and defines the relationship between the two subjects.
The ordinary sense of s 7 and s 12 is that the Magistrates Court does not have jurisdiction to hear and determine disputes the subject matter of which falls within one or more of the paragraphs of s 6(1) of the TTA in order that such disputes shall be resolved in accordance with the procedures provided under the TTA to the exclusion of procedures which otherwise may have applied in the Magistrates Court.
It is not sufficient, as the Turners contended, that a matter in the Magistrates Court has a close or real connection with the subject matter of a dispute under the TTA in order to oust the jurisdiction of the Magistrates Court. To oust the jurisdiction the Magistrates Court, the subject matter of the proceedings must raise for determination in that Court a dispute which properly falls under one or more of the paragraphs in s 6(1) of the TTA and which is referrable to the Registrar under s 13 of the TTA.
A claim by a landlord for rent or other monies payable under a lease from a tenant, and a claim by the landlord under a guarantee and indemnity in respect of a breach by the tenant of its obligation to pay money due as rent or other outgoings under the lease, is not a “dispute” within the meaning of any paragraph of s 6(1) of the TTA. The subject matter of such proceedings is not a matter which satisfies the criteria of any paragraph of s 6(1) of the TTA. A landlord could not, in these circumstances, initiate proceedings against either the tenant or the guarantor or indemnifier for recovery of rent and outgoings due under a lease under any provision of the TTA.
The proceedings against Classic for recovery of rent, outgoings and other money payable under the sub-lease when it fell due and payable constituted a liquidated claim for a debt. The proceedings against the Turners were under collateral contracts of guarantee and indemnity. Such collateral contracts were not subordinate contracts or of lesser importance to the sub-lease but were contracts which impinged upon and were related to the sub-lease in the sense of being additional to that contract: David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 364 – 365; Re Taylor; Ex parte Century 21 Real Estate Corporation (1995) 130 ALR 723 at 728.
In the present case the proceedings filed by Leda in the Magistrates Court could not have been prosecuted under the TTA at the time they were initiated. Such proceedings by Leda of necessity had to be initiated in either the Magistrates Court or the Supreme Court if Leda wished to enforce its contractual rights to be paid in accordance with the terms of the sub-lease or the guarantee and indemnity, as applicable.
Accordingly, the proceedings as initiated were not, by either s 7 of the TTA or s 12 of the MCA, excluded from the jurisdiction of the Magistrates Court.
Did the filing of the defence by Classic and the Turners raise for determination a matter which constituted a dispute under s 6(1) of the TTA, and if so, what effect if any did it have upon the proceedings initiated by Leda ?
The guarantee and indemnity, so far as presently relevant, provided:
“20.01The Guarantor named in the Reference Schedule (if more than one, jointly and severally) hereby guarantees to the Lessor the due payment of all moneys hereby covenanted or agreed to be paid and the due performance, observance and fulfilment by the Lessee of all the covenants, terms, provisions and conditions herein contained or implied and on the part of the Lessee to be performed, observed and fulfilled.
20.02The Guarantor (if more than one, jointly and severally) hereby indemnifies the Lessor and agrees at all times hereafter to keep the Lessor indemnified from and against all damages and all costs, losses and expenses which the Lessor may suffer or incur consequent upon or arising directly or indirectly out of any breach or non-observance by the Lessee of any of the covenants, terms, provisions or conditions in this Lease contained or implied and on the part of the Lessee to be performed, observed or fulfilled and the Guarantor agrees that this indemnity shall continue and the Guarantor shall remain liable to the Lessor under this indemnity notwithstanding that as a consequence of such breach or non-observance the Lessor has exercised any of its rights hereunder including its rights of re-entry and notwithstanding that the Lessee (being a company) may be wound up or cease to exist or (being a natural person) may be declared bankrupt and notwithstanding that the guarantee hereby given may for any reason whatsoever be unenforceable either in whole or in part.
.....
20.06The Guarantor must pay all sums to be paid by the Lessee and indemnify the Lessor even if the Lessor has not made a demand on the Lessee when :
(a)the Lessee fails to pay rent or is otherwise in breach of this Lease; and
(b)the Lessor demands from the Guarantor payment of rent or any other sum owing under this Lease.
20.07The Lessor may treat the Guarantor as a primary debtor and contractor jointly and severally with the Lessee.”
Paragraph 20.01 is, as it purports to be, a contract of guarantee. Such a contract is, subject to any qualifications made in the particular instrument “a collateral contract to answer for the debt, default or miscarriage of another who is or is contemplated to be or to become liable to the person to whom the guarantee is given”: per Mason CJ (with whom Deane, Dawson and Toohey JJ agreed) in Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 at 254.
The rights to Leda against the Turners “depend on the terms of the guarantee and the nature of the obligation, performance of which is guaranteed. If the subject of the guarantee is payment of a debt or a sum of money which has accrued due, the creditor may, on default by the principal debtor, sue the guarantor instead of the principal debtor ... for a liquidated amount.”: Sunbird Plaza at 255.
Subject to the terms of the guarantee, a true guarantee involves a secondary obligation which arises on default of the principal obligor: Re Taylor at 728.
In the instant case, the contractual effect of paragraphs 20.06 and 20.07 is that Leda was entitled to treat the Turners as primary debtors and contractors jointly and severally with Classic. Thus, as between Leda and the Turners, the obligations of the Turners under the guarantee and indemnity were no less extensive than if the rent and money payable under the sub-lease were due directly from them as primary debtors rather than as mere guarantors. Such a liability is not a secondary liability which derives from the liability of Classic. Accordingly, the Turners were not entitled in the proceedings in the Magistrates Court to rely upon any cross-claim or set-off which Classic as tenant may have been entitled to raise itself against the claim of Leda.
Paragraph 20.02 of the guarantee is, as it purports to be, a contract of indemnity. An indemnity is “a promise by the promisor that he will keep the promisee harmless against loss as a result of entering into a transaction with a third party”: Sunbird Plaza at 254. In the present case it involved a primary obligation on the part of the Turners to secure Leda against loss arising from a failure of Classic to perform its obligations under the sub-lease rather than a secondary obligation to make good the particular defaults of Classic as tenant: Yeoman Credits Ltd v Latter [1961] 1 WLR 828 at 830 – 831, 834; Total Oil Products (Australia) Pty Ltd v Robinson [1970] 1 NSWR 701 at 704.
In any dispute between Leda and the Turners, under the contract of indemnity, it was not open to the Turners to rely upon any right of cross-claim or set-off which Classic may have been entitled to against Leda.
Nor was it open to the Turners because of the terms of the guarantee and indemnity to rely upon any dispute which Classic had under the TTA pending before the Registrar of the TT to exonerate them from their obligations under either the contract of guarantee or the contract of indemnity.
In the Magistrates Court proceedings between Leda and the Turners, there was no dispute to which the TTA applied. Thus, those proceedings were, and at all material times remained, within the jurisdiction of that Magistrates Court to hear and determine such issues, if any, as arose between Leda and the Turners under the collateral contracts of guarantee and indemnity.
The defence raised by Classic to the proceedings in the Magistrates Court, may be assumed to raise a dispute to which the TTA applied. That said, s 7 and s 12 of the TTA and MCA respectively operate to remove that dispute from the jurisdiction of the Magistrates Court. To progress that dispute to resolution, Classic was obliged to refer the dispute to the Registrar under s 13 of the TTA. This is what Classic had done. However, there is nothing in the TTA or the MCA which provides that a reference of a dispute to which the TTA applies operates as a stay to proceedings properly initiated in the Magistrates Court, or operates to deprive the Magistrates Court thereafter of jurisdiction to hear and determine a claim properly brought within jurisdiction. The appropriate course open to Classic was to seek a stay of the proceedings against it in the Magistrates Court until determination of the dispute, to which the TTA applied, in accordance with the provisions of that Act. There was no such application.
For the above reasons, it follows that the Magistrates Court had jurisdiction to enter the consent judgment against Classic for rent and other outgoings due and payable by it under the sub-lease, and to enter the consent judgment against the Turners jointly and severally in respect of the same sum as money payable under the contracts of guarantee and indemnity.
The Magistrates Court having the jurisdiction to grant judgment, the Turners fail to make out any ground entitling them to have the consent judgment set aside or to otherwise obtain the relief which they sought in the Magistrates Court, in this Court before Gray J, or on appeal.
In the absence of appealable error the appeal must be dismissed. Costs should follow the event and be paid by the Turners.
The Court orders:
1. The appeal be dismissed.
2.The appellants pay the respondent’s costs of and incidental to the appeal, including reserved costs, if any, to be taxed if not agreed.
I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court.
Associate:
Date: 26 November 2002
Counsel for the Appellants: Mr R Killalea
Solicitor for the Appellants: Darryl Perkins Solicitors
Counsel for the Respondent: Mr C Whitelaw
Solicitor for the Respondent: Mallesons Stephen Jaques
Date of hearing: 5 November 2002
Date of judgment: 26 November 2002
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