Italo-Australian Club (ACT) Ltd v Italo Financing Pty Ltd
[2018] ACTMC 14
•25 July 2018
MAGISTRATES COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Italo-Australian Club (ACT) Ltd v Italo Financing Pty Ltd |
Citation: | [2018] ACTMC 14 |
Hearing Dates: | 30 November 2017 |
DecisionDate: | 25 July 2018 |
Before: | Magistrate Fryar |
Decision: | See [23] |
Catchwords: | CIVIL LAW – Commercial – Leases Contracts – Construction of Clauses. |
Cases Cited: | Electricity General Corporation v Woodside [2014] HCA 7 Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Cherry v Steele-Park [2017] NSWCA 295 Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 |
Parties: | Italo-Australian Club (ACT) Ltd (Applicant) Italo Financing Pty Ltd (Defendant) |
Representation: | Mr G Blank of Counsel (Applicant) Mr BF Katekar of Counsel (Respondent) |
| Solicitors Mills Oakley (Applicant) Bradley Allen Love (Respondent) | |
File Number: | CL10/2017 |
MAGISTRATE FRYAR
From 1968 the applicant, the Italo-Australian Club (ACT) Ltd, was the Crown Lessee of 78 Franklin Street, Forrest (ACT) (‘the land’). On 13 September 2014 the applicant and the respondent (Italo Financing Pty Ltd) entered into a Deed of Put and Call, that is: the applicant granted a call option to the respondent that required the applicant to sell the land to the respondent; and the respondent granted a put option to the applicant that required the respondent to buy the land from the applicant.
On 30 March 2015 the applicant entered into a contract for sale of the land with the respondent conditional upon a sub-lease (‘the sub-lease’) being granted to the applicant commencing upon the date of completion of the contract for sale. The contract was completed and on 31 March 2015 the respondent sub-let the premises on the land to the applicant for a period of 10 years.
Issue
The ultimate issue in this matter stands on the construction of Clause 38 of the sub-lease, and in particular, sub-clause 38(3). Sub-clause 38(3), inter alia, provided that the respondent would cover the reasonable costs of the applicant’s relocation to either the new premises or the temporary accommodation. Exactly what is meant by that sub-paragraph is the point of contention.
The applicant claims that in accordance with that clause the respondent should not only cover the costs of the removal to the temporary accommodation, but also the rent (less $1 per year) it is paying to Liangis for the temporary accommodation. The respondent says it is only liable for the removal costs. The respondent has abandoned its counter-claim.
Clause 38 is in the following terms:
38. Relocation and Redevelopment
(1)The Landlord (the respondent) agrees that it will build or arrange to be built at no cost to the Tenant (the applicant) a New Premises for the purposes of running a licensed club (‘the New Premises’). The New Premises will have the following characteristics:
(a)have a total GFA of not less than 1500m2;
(b)have a foot print of not less than 750m2;
(c)provide for carparking required to the reasonable satisfaction of the Tenant and relevant authorities; and
(d)be fit for purpose of holding a licensed club.
(2)The Tenant acknowledges and the Landlord agrees that the New Premises does not have to be constructed on the land and could be constructed on an adjacent site or any other place within the near vicinity:
(a)mutually agreeable between the parties; and
(b)on the condition that the Tenant will be given good title or rights of occupation to enable it to operate into(sic) the New Premises into the future.
(3)The Landlord can terminate this Lease and require the Tenant to be relocated to another premises on 3 months’ written notice of the need to relocate (‘Relocation Notice’) if the following conditions are met:
(a)the Premises that the Tenant is required to move into is the New Premises as defined above in Clause 38(1); or
(b)the premises is a temporary accommodation that will service the Tenant’s operational needs while the New Premises is being constructed. Any temporary accommodation will be located somewhere within South Canberra.
(4)The Landlord will cover the reasonable costs of the Tenant’s relocation to either the New Premises or the temporary accommodation contemplated in sub-clause 38(3)(b) above.
(5)The Tenant acknowledges that if suitable temporary accommodation cannot be sourced by the Landlord the Tenant may be required to shut down its business for an extended period of time while the New Premises is being constructed.
(6)The Landlord acknowledges that the Tenant is a licensed club which holds a number of licenses over Poker Machines (the Machines) which are subject to the oversight and regulatory control of the ACT Gaming and Racing Commission (the Commission) and the Gaming Machine Act 2004 (the Gaming Act) and associated regulations and legislative instruments.
(7)The Landlord agrees that it will keep the Tenant briefed of any intention to serve a Relocation Notice on the Tenant in order to give the Tenant time to negotiate and liaise with relevant Authorities and the Commission on how they can abide with the Gaming Act during the relocation while achieving the following:
(a)the relocation of the Machines to the New Premises; or
(b)the temporary storage of the Machines while the Tenant is in temporary accommodation pursuant to subclause 38(3)(b); or
(c)any other form of arrangement that the Commission allows to enable the Tenant to keep its Machines while it relocates.
(8)The Tenant agrees that while the Landlord will do all things reasonable to ensure that the Tenant will be able to transfer its Machines including giving the Tenant a further 3 months (extended Notice) to relocate, the relocation of Machines is not a pre-condition for the Tenant being relocated and in the event that the Tenant must surrender the Machines as a result of the relocation, the Tenant agrees no objection, claim, requisition or complaint will be raised against the Landlord.
Facts
Clause 4(2) of the sub-lease required the applicant to pay the respondent rent of $1.00/year ($0.08/month). The sub-lease also stipulated that the respondent would build/arrange to be built, at no cost to the applicant, a new premises (‘the new premises’) on condition that:
·The new premises was to be fit for the purpose of the applicant running a licensed club (Clause 38(1));
·It was to be located either on the land or another mutually agreed site (Clause 38(2)(a); and
·The applicant was to be given good title or rights of occupation to enable it to continue to operate in the new premises into the future (Clause 38(2)(b)).
The sub-lease allowed the respondent to terminate the sub-lease and require applicant to relocate to another premises on 3 months written notice, provided that the premises the respondent required the applicant to relocate to was:
·The new premises (Clause 38(3)(a)); or
·Temporary accommodation that would service the applicant’s operational needs while the new premises was being constructed (Clause 38(3)(b); and
·Any such temporary accommodation should be somewhere in South Canberra.
On 1 December 2015 the respondent gave the applicant notice to vacate the club premises with 3 months’ notice, stating that the relocation was to be to the Italian Cultural Centre, Forrest in the ACT (adjacent to the Land). However on 21 December 2015 the applicant gave notice that the Italian Cultural Centre was unable to serve the applicant’s operational needs and sought approval from the respondent to relocate to an alternate location at Capital Pacific Golf Course Narrabundah (‘the Narrabundah Site’) under a 2 year lease with a 1 year option to renew. In February 2016 the respondent gave its approval.
On 26 April 2016 the applicant entered into an under-lease with Capdorf Pty Ltd (outgoing sub-lessee for the Narrabundah Site) for the Narrabundah Site. The term of the under-lease was 8 months and 28 days, being the remaining term of Capdorf Pty Ltd’s sub-lease with Liangis Investments Pty Ltd (the owner of the Narrabundah Site). The monthly rent for Narrabundah was $7,500 (excluding GST) payable a month in advance, with payment commencing 1 May 2016. Following expiry of the under-lease on 22 January 2017, the applicant occupied the premises on a month to month basis and on the same terms as the under-lease, including the rental payments.
10. The applicant claims that since 26 April 2016 it has incurred $157,831.44 in expenses related to relocating to the Temporary Accommodation (including rent), expenses that the respondent is liable to pay. At the time of the hearing of this matter the respondent had paid $39,238.41 towards expenses, leaving an outstanding balance of $118,593.03 ($157,831.44 - $39,238.41 - $1.00 (being the rent they were paying per annum)).
Submissions
11. The applicant’s primary submission is that the terms of the sub-lease require the applicant’s rent in the temporary accommodation to be paid by the respondent. The Applicant submits that clause 38(3) should be read as a “demolition type” clause, that is, the landlord putting the tenant somewhere else at no cost to them, and the word “rent” is not required to be specified. They rely on the history between the parties and in particular the difficulty in finding suitable temporary accommodation.
12. The applicant’s secondary submission is that the respondent is estopped from denying the obligation to pay the rent because the applicant claims to have changed its position and acted in reliance on the respondent’s silence by executing the under-lease and incurring that rental liability. In that regard the applicant relies on the letter from the applicant to the respondent dated 21 December 2015 which says, inter alia, ‘we remind you of your obligations to provide alternative accommodation in the short and long term...provide the accommodation at no cost to the client.’
13. The respondent admits the document of 1 December 2015 that they gave to the applicant was a relocation notice and admits the Capital Golf Club is the temporary accommodation so far as the provisions of the sub-lease are concerned. The respondent has now paid the applicant’s costs of relocation to the temporary accommodation, but has not paid and submits is not obliged to pay cost of the club’s rent at the temporary accommodation.
14. The respondent’s main submission is that the phrase ‘costs of relocation to’ is clear in its meaning and there is nothing else in Clause 38 which requires the respondent to pay the applicant’s rent at any temporary accommodation. Relocation means moving, a noun referring to the movement from one place to another.
15. The respondent submits it was asked on more than one occasion, in correspondence, to confirm it was liable for the rent of the temporary accommodation and it did not respond to that, so in fact never made any representation that it was in fact liable for the rent. Accordingly the respondent submits there is no estoppel claim as the parties never entered into an agreement in that regard. In fact, the applicant entered into an agreement with someone else.
Consideration
16. Counsel for the applicant referred to two High Court decisions when referring to the legal principles to be applied in this case, Electricity General Corporation v Woodside [2014] HCA 7 and Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37. Mt Bruce Mining endorsed Woodside and Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337, stating that there is no departure from the law as set out in those cases. The judgment of French CJ, Nettle J and Gordon J at paras [46] – [49] summarised the relevant applicable legal principles. It is helpful to repeat them here.
“The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.
“In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable business person would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured in the contract.
“Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.
“However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding ‘of the genesis of the transaction, the background, the contact [and] the market in which the parties are operating’. It may be necessary in determining the proper construction where there is a constructional choice.”
17. The Court in Woodside relevantly stated:
“Both Verve and Sellers recognised that this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding ‘of the genesis of the transaction, the background, the context [and] the market in which the parties are operating’. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption ‘that the parties… intended to produce a commercial result’. A commercial contract is to be construed so as to avoid it ‘making commercial nonsense or working commercial inconvenience’.
18. Counsel for the respondent referred me to the recent NSW Court of Appeal case of Cherry v Steele-Park [2017] NSWCA 295 which also concerned the construction of certain clauses in a commercial contract. Leeming JA (with whom Gleeson JA agreed) quoted Mason J in Codelfa Construction Pty Ltd v State Rail Authority of NSW where he said at p352 that:
“The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning.”
19. To elaborate on that Leeming JA said (at para 72): “…the ‘plain meaning’ reflects the primacy of the text of a written contract. The starting point and the ending point of the construction of a written commercial contract is the language chosen by the parties to record their bargain. In a familiar passage, Gibbs J referred in Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 to the ‘primary duty’ of a court construing a written contract to ascertain the legal meaning of a document ‘from the words of the instrument in which the contract is embodied’. As I have said, ‘very often, nothing in the context will come close to displacing the ordinary grammatical meaning of the legal text.”
20. These general principles of contract construction apply to commercial leases. So reading the terms of Clause 38 of the sub-lease, in particular sub-clause 38(3), it talks of the reasonable costs of the applicant’s relocation to either the new premises or the temporary accommodation. In my view those words are perfectly clear, they do not evoke any ambiguity. The clause does not use the words relocation at, and there appears to be nothing in the clause that can be construed as relating to rent payment.
21. Indeed if it were meant by the terms of the sub-clause that the club’s rent was to be paid by the respondent it would also mean that the respondent could not charge the applicant rent at the new premises, even at the peppercorn rental of $1 per year. As I mentioned above, in the body of the clause there is no reference to the payment of the rent at the temporary accommodation, an obligation which must have been in the contemplation of the parties at the time the sub-lease was entered into.
22. As for the estoppel argument raised by the applicant, a binding agreement is not made between the parties by virtue of a letter being sent stating the aspirational outcomes desired by one of the parties as obligations of the other, and then claiming because that party did not respond, they must be taken as accepting and agreeing to every statement in the letter. Silence is not a representation. That is simply not how estoppel works. In any event, there is perhaps no evidence that the applicant in fact acted to their detriment by entering the under-lease that required them to pay a commercial rent. It was clear because of the parlous state of the applicant’s financial situation their previous circumstances were untenable. That would have left several options, including moving of their own accord to new premises where a market rent would have been payable. Presumably the solution offered by the respondent, however, was the most commercially palatable to the applicant, and were that not on the cards, the club may have had to move and pay commercial rent in any event. There would have been nothing capricious or unreasonable in that end result.
Finding
23. Having regard to the above, I am of the opinion that on the balance of probabilities the grounds for the application are not made out and it is accordingly dismissed. Unless I am advised within 7 days that the parties wish to be heard in relation to costs, they will of course follow the event.
| I certify that the preceding twenty three [23] numbered paragraphs are a true copy of the Reasons for Decision of her Honour Magistrate Fryar. Associate: Erin Priestly Date: 25 July 2018 |
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