Jjadd P/L v Murray-Oates No. DCCIV-96-1506, DCCIV-97-1405 Judgment No. D39
[1999] SADC 39
•9 April 1999
JJADD PTY LTD v MURRAY-OATES;
MURRAY-OATES & NATBEN PTY LTD v DAISY NOOK PTY LTD, JJADD PTY LTD, JOHN DEN DRYVER, JANET DEN DRYVER and KEVIN THOMAS CLARKE
[1999] SADC 39
Judge Lunn
Civil
Background
Since about 1987 Jjadd Pty Ltd (“Jjadd”) has owned premises at 39 Beach Road, Brighton (“the premises”). Mr and Mrs Den Dryver have been the controllers of Jjadd. The premises consist of an old two-storey house to which there have been a number of additions over the years including at the back a single-storey wing containing ten bedrooms and some bathrooms (“the rear wing”). The premises has on its ground floor in all about twenty one rooms plus several bathrooms. It is licensed under the Supported Residential Facilities Act 1992 as a Supported Residential Facility for about forty two residents. For many years a business has been carried on on the premises of accommodating aged and mentally infirm people who require some care and supervision but not hospitalisation. Immediately before 4 November 1992 the business on the premises had been carried on by Daisy Nook Pty Ltd, which was also a company controlled by Mr and Mrs Den Dryver, under the name of “Daisy Nook Rest Home”.
Sylvia Murray-Oates (“the defendant”) is a registered nurse who for many years had been involved in businesses similar to that of Daisy Nook. She, together with Kevin Clarke (“Clarke”), leased the premises from Jjadd by a Memorandum of Lease dated 3 November 1992 (“the Lease”) for a term of ten years as from 4 November 1992 at an annual rent of $57,000 which was subject to review. The Lease imposed an obligation on the lessees to repair the premises and to keep them in good and tenantable condition, but they were not obliged to make any structural repairs. By an agreement dated 4 November 1992 (“the Sale Agreement”) Daisy Nook Pty Ltd sold the business which it carried on on the premises to the defendant and Clarke and/or their nominees as purchasers for $80,000 of which $60,000 was appropriated to goodwill. The sale included the furniture, plant and equipment on the premises which was detailed in an inventory annexed to the agreement.
There was no partnership between the defendant and Clarke. They used a company Natben Pty Ltd (“Natben”), in which they were each directors and shareholders, to run the business. They changed its name to “Seahaven Supported Residential Facility”. Natben paid the rent which was due to Jjadd under the Lease. When the defendant and Clarke purchased the business there were about thirty residents accommodated in the premises.
Since November 1992 there has been a long history of problems with the state and suitability of the premises for use as a residential care facility and friction between Jjadd and the defendant over these numerous issues. It is not necessary to go into detail about them. The evidence about them was generally unsatisfactory. The roof leaked in various places after rain and there were disputes as to whether these leaks resulted from structural problems in the building or from the lessees’ failure to clean the gutters properly. Jjadd arranged for some repairs to be carried out from time to time, but the defendant did not regard them as adequate. Although a number of complaints were made to the Brighton Council, which was the licensing authority under the Supported Residential Facilities Act, the licence for the premises under that Act was never revoked.
In about late 1994 or early 1995 Clarke left the business and, insofar as he could, he severed his business relationship with the defendant. He apparently assigned his interest under the Lease to a daughter of the defendant, but Jjadd refused to consent to such an assignment and Clarke remained liable to it as a joint lessee. The defendant and Clarke instructed a firm of solicitors, Phillips & Co, to act for them jointly in relation to various disputes which they had with Jjadd about the premises. For all practical purposes from early 1995 the defendant became the controller of Natben and in effect the sole operator of the Seahaven business.
In 1995 and early 1996 the disputes between the defendant and Jjadd about the state of the premises escalated. The defendant ceased to use a number of the rooms in the premises for the accommodation of residents because of water which was leaking into them. The continuing disputes came to a head when Natben wrote to Jjadd on 3 April 1996 stating, inter alia:
“We give final notice for all work to be done within 7 days. In the next few days we will have all repairs accessed (sic) and you (sic) failure to complete all work upon receipt for payment monies will be discounted from the next rent payment.”
Jjadd replied by letter of 16 April explaining why some of the work had not been carried out and correctly pointing out that under clause 2.1 of the Lease the whole of the rent was to be paid without any deduction. The defendant replied by letter of 19 April enclosing “estimate quotes” for a number of items of repairs and stating:
“As we indicated, the quotes above are very reasanable (sic) unless the work is completed as to previous proposal The work will be done and deducted from the rent....”
On 29 April Jjadd wrote agreeing to do a few items of the work, but stating that the majority of them were the lessees’ responsibility.
On 31 May 1996 Natben wrote to Jjadd indicating that the repairs had not been completed, enclosing a cheque for only half of the rent which had been due on 4 May and stating:
“It is our understanding that the balance of the rent fully paid by Natben Pty Ltd has been placed in trust account Until legal problems in (sic) between yourself and the lessee together with longstanding structural problems are completed.”
On 6 June Jjadd demanded payment of the balance of the rent and threatened legal proceedings to recover it. The balance of the May rent was not paid. Apparently only half of the rent which was due on 4 June 1996 was paid.
In about mid June 1996 Jjadd advertised in the Advertiser for people interested in becoming tenants of the premises for the purpose of running a Supported Residential Facility on them. Geoffrey and Barbara Watt responded to this advertisement. After some negotiations they entered into an agreement on 24 June 1996 with Jjadd to lease the premises for a term of five years upon conditions that Jjadd terminated the existing lease to the defendant and Clarke within three months and that it carried out various specified repairs to the premises. On 26 June 1996 Jjadd gave a Notice of Default to the defendant which required payment of an outstanding $4,724 for arrears of rent and other charges and intimated that it would re-enter the premises in default of such payment. On 30 June Jjadd sent an invoice to the defendant requiring payment of a total of $9,965 on 3 July.
As a result of matters which were the subject of much disputed evidence, and upon which I will make findings later, late on 4 July 1996 Jjadd re-took possession of the premises and excluded the defendant from them. All of the residents left the premises on 4 July and they were virtually unoccupied for about a week. On 5 July Jjadd apparently orally varied its prior agreement with Mr and Mrs Watt. It allowed the Watts about three months rent free occupation to re-establish the business in the premises and the lease to them and their payment of rent only commenced on 11 October 1996. On 5 July Mrs Watt had applied for a licence to operate a Supported Residential Facility on the premises and this was granted by the Brighton Council on 8 July but subject to conditions. The Watts approached former residents and they started returning to the premises on about 12 July. The Watts changed the name of the business to “Brighton Ocean Grove Rest Home.”
The course of the proceedings
Jjadd instituted action 1506 of 1996 against Clarke and the defendant (“the 1996 action”) claiming $71,754 for loss of rent, repairs to the premises and for other damages. Both defendants defended the action, inter alia, on grounds that Jjadd had unlawfully re-entered the premises. Clarke also filed a counterclaim. The defendant was unable to counterclaim because she wished to make Natben a joint claimant. (A person who is not a defendant in the action cannot be a co-plaintiff to the counterclaim: “Civil Procedure SA”, para R48.05.15). Accordingly, the defendant and Natben instituted action No 1405 of 1997 (“the 1997 action”) against Daisy Nook Pty Ltd, Jjadd and Mr and Mrs Den Dryver in which they claimed damages for misrepresentation, for breaches of the Lease and the Sale Agreement, for wrongful re-entry and for wrongful distress upon their goods. Although the two actions proceeded in tandem, they were never consolidated.
Both actions were called on for trial before me at the same time. During the first morning of the trial a settlement was reached between Jjadd and Clarke whereby Clarke agreed to pay $20,000 to Jjadd. No judgment or discontinuance was entered, but Jjadd withdrew the pleading of its claim against Clarke under Rule 52.02 and Clarke likewise withdrew his counterclaim. By consent of the defendant Clarke also withdrew his contribution notice against her without liability for costs. On Jjadd’s application Clarke was joined as an additional defendant in the 1997 action, but on an understanding that there would be no pleadings either against him or by him, but he would be bound by the result of that action in relation to any issues between himself and the defendant. He was not thereafter represented at the trial.
I ruled that the trials of both actions were to proceed concurrently with all relevant evidence being admissible in both trials. I ruled that Jjadd was to be dux litis and that for procedural purposes the 1997 action would be treated as a defacto counterclaim to the 1996 action. During the course of the trial and of the addresses the defendant withdrew under R52.02 much of her pleadings in the 1997 action. In the 1997 action I need only deal with the issues which remain on the extant part of the statement of claim.
The witnesses
I accept each of Mr and Mrs Den Dryver, Mr Watt, Mr McInnes, the Brighton Council Environmental Health Officer, Mr Esau, the solicitor for Jjadd, and Susanne Bissmire, a nurse aide employed by Natben, as being honest and generally reliable witnesses, although none of them were entirely correct on all of the details. I accept the evidence of the other witnesses for Jjadd Mr Bateman, Mr Williamson and Mr Willering.
I do not find the defendant to have been an impressive or a reliable witness. In a number of instances her confident assertions about various matters, such as the frequency of the cleaning of the gutters of the premises, were contradicted by reliable contemporaneous documents. She claimed that many significant matters were contained in documents which she had in storage. It appears these had not been discovered. Although she apparently had some opportunity to do so once the significance of these documents became clear from the questioning, she did not ever produce them or explain why they could not be produced. The inference must be drawn that the diary, the maintenance book and the other records which she referred to but did not produce would not have supported her other evidence. Her failure to give sufficient evidence of detail about important matters, such as her hirings of the bus and of the removalists for 4 July and the descriptions of the individual items of property which she claimed were left on the property after 4 July, undermines her credibility on these matters. The defendant did not call a number of witnesses who were in her particular camp and who could seemingly have given evidence about important controversial matters. These witnesses were an employee of Natben, who was not named, who was on the premises on the afternoon of 4 July, apparently for the purpose of preparing a hot evening meal for the residents, the removalists who were employed by her and/or Natben, who were at the premises on 4 July, and her solicitor, Mr Phillips. I infer that the evidence of those witnesses, if called, and in the case of Mr Phillips only on the matters which would not have been the subject of privilege, would not have assisted the case of the defendant or Natben: Spence v Dimasi (1988) 48 SASR 536 at 547-8. I accept that no such inference is to be drawn in relation to her failure to call her son, Ben Murray-Oates and Natben’s employee, Eddy Huzenvolt (“Eddy”), because at the time of trial they were both living overseas.
The events of 4 July 1996
Early in July 1996 a piece of a cornice in a room in the rear wing of the premises had fallen onto a resident, at about that time the ceiling in a bathroom in that wing had dropped slightly and there were continuing problems with water leakages. The defendant had Mr McInnes from the Council inspect the areas in question, but the licence for the facility was not revoked. Mr McInnes was not questioned about the issue when he gave evidence. The defendant said she believed the condition of the premises was dangerous for residents, although there is no acceptable objective evidence of this. I do not find it to be proved, but I accept that the defendant believed it and was highly incensed about it. She claims that as a result of this alleged dangerous condition she decided to close down the ten rooms in the rear wing, which then housed only about four of the total of twenty one residents, and to move those four residents to other rooms in the premises. Her evidence about this was not supported by any other evidence. I do not accept it.
On the evening of 3 July the defendant saw her solicitor Mr Phillips. She then signed a document prepared by him which was in the following terms (“the Notice”):
“NOTICE
TO: JJADD PTY LTD A.C.N.008 101 193 (‘Lessor’)
7 Diannella Court,
PASADENA SA 5042
Due to the appalling state of the premises (‘Premises’) and the Lessor’s refusal to rectify substantial structural defects in the Premises which render the Premises substantially unfit under the provisions of the Supported Residential Facilities Act 1992 and the Regulations under the Supported Residential Facilities Act 1992 for the Specified Use pursuant to a Memorandum of Lease (‘Lease’) (the subsistence of which is neither admitted or denied) between the Lessor and KEVIN THOMAS CLARKE OF 94 Ladywood Road Modbury North SA 5092 and SYLVIA NORA MURRAY-OATES of 39 Beach Road Brighton SA 5048 (‘Lessee’);
1...... if the Lease is void (which is neither admitted or denied by the Lessee at this stage), the Lessee gives notice that they will be vacating the premises by midnight on 4 July 1996.
2.if the Lease is voidable (which is neither admitted or denied by the Lessee at this stage), the Lessee gives notice that they elect to treat the Lease as void and that they will be vacating the premises by midnight on 4 July 1996.
3...... if the Lease is valid (which is neither admitted or denied by the Lessee at this stage), the Lessee gives notice of termination effective at midnight on 4 July 1996.
Dated4th July 1996
K T CLARKE & S N MURRAY-OATES
per (signature of the defendant)
S N Murray-Oates.”
She said that she read it but that she did not understand it. She is reasonably articulate and intelligent. While she may not have understood the precise legal import of it, I find that she must have understood that it was an intimation to Jjadd that she would be vacating the premises by midnight on 4 July. She claimed that she never had any intention of vacating the property on 4 July or at all, but, if so, it is unclear and perplexing what she thought she was doing by signing a document in those terms and having it served.
The defendant denied that she had any authority from Clarke to sign the Notice on his behalf. However, Mr Phillips in his covering letter sending the Notice to Jjadd’s solicitors stated that he acted for both Clarke and the defendant and that both of his clients reserved their rights against Jjadd. Accordingly, I infer that Mr Phillips considered that he had instructions from Clarke to give the Notice and that Clarke had authorised the defendant to sign it on his behalf. I do not accept the defendant’s denial of authority to act for Clarke in preference to this inference to be drawn from the letter from Mr Phillips.
On the morning of 4 July a bus arrived at the premises to take most of the residents on an outing. The defendant claimed that she had hired this bus a day or two before, but in the absence of her diary which may have contained relevant entries I am not prepared to accept that. The bus left before 10am taking eighteen of the residents and the nurse aide, Ms Bissmire. The residents only took with them what they needed that day and most of their belongings remained in their bedrooms in the premises. Two other residents went to a sheltered workshop for the day and one remained on the premises all day. The bus travelled around places of interest in the Adelaide suburbs.
Also on that morning one, and ultimately several, removalist’s trucks arrived at the premises. The defendant had arranged to hire them, but again in the absence of her diary I do not accept her assertion that it was done on the previous day. She claimed that she instructed the driver of the first removalist truck to take all of the furniture out of the ten rooms in the rear wing, and out of room two, which was unoccupied because it was water damaged, and to have it all placed into storage, but not to take anything else from the premises. In the absence of evidence from the removalist I am not prepared to accept this evidence about not taking anything else from the premises. She also claimed that she arranged for her employees, Ben Murray-Oates and Eddy, to do what was necessary to reallocate the four residents from the rear wing into other accommodation in the premises and to close off the rear wing. Also on the premises that day was another unnamed employee of Natben who, according to the defendant, was responsible for preparing the hot evening meal for the residents upon their return after the bus trip. About mid morning the defendant left the premises and did not return until late that night.
The defendant had an appointment to see someone in the State Health Commission in its offices in Hindmarsh Square in Adelaide at some time in the early afternoon of 4 July. It was arranged that she would meet the bus containing the residents in Hindmarsh Square apparently so that some of the residents could voice complaints on unspecified topics to someone from the Health Commission. At some time in the early afternoon the defendant met the bus in Hindmarsh Square and then went into the Health Commission. She was there told something by someone in the Health Commission which upset her and made her agitated. There is no direct evidence of what was then said to her. Although her case as pleaded would suggest that she had then been told that Jjadd had re-entered the premises, there was no express evidence of that. Indeed on my findings hereunder that was impossible because the re-entry did not occur until much later that afternoon. It appears from the evidence of Mr McInnes that there were some communications between the Health Commission and other officers of the Brighton Council, although not him, about what was occurring at the premises early on that afternoon, but there is no evidence about the content of them except that he denied any knowledge of an intimation that the defendant was not allowed to return to the premises that afternoon. No one was called from the Health Commission. If the defendant’s visit to the Health Commission was in the early afternoon, as was both her evidence and that of Ms Bissmire, it is a mystery as to what she was then told which upset her and which then caused her to act as she did. Thereafter she made a number of telephone calls from a public phone, arranged for an extension of the period of the hire of the bus, had the residents driven around for some time and then took them to the Hyde Park Nursing Home where most of them were apparently accommodated for the night. It seems that whatever she found out from the Health Commission led her to believe that she could not take the residents back to the premises that afternoon. It would be consistent with other evidence about the timing of events if what she ascertained from the Health Commission was either that the Notice which she had signed the previous evening about vacating the premises had been served or that the stove, range hood and other items necessary for the twenty one residents to live there had been removed from the premises, but these points were not explored in the evidence. Whatever it was that she was told it had nothing to do with any actions of Jjadd or its agents.
Mrs Den Dryver received the Notice on her fax machine at about 2.10pm that afternoon. She immediately rang Mr McInnes to discuss it with him and then rang Mr Esau, her solicitor, and instructed him to go to the premises immediately. She faxed a copy of the Notice to Mr Esau at 2.26pm. Mr Esau’s office also received the Notice and a covering letter from Phillips & Co at about 3.12pm on that afternoon.
Mr McInnes arrived at the premises shortly after 2.30pm when he saw the gas stove from the kitchen, light fittings and ceiling fans on the front verandah. Various items were being loaded into removalist’s vans. Eddy prevented him from checking closely what had been put into the vans. He saw that Eddy was helping to load the vans.
Mr Esau arrived at the premises at about 3pm and saw a large scale moving operation under way. He observed that light fittings which had been directly wired into the power supply had been removed from various rooms in the premises and the bare wires left hanging there. At about 3.40pm he rang Mrs Den Dryver and asked her to come there and to arrange for a locksmith to attend. He also arranged for the police to attend.
Mr Den Dryver arrived at the premises at about 4.20pm. He saw that the gas stove from the kitchen had been placed into a removalist’s van, but at the request of the police it was subsequently taken back into the house. Mrs Den Dryver arrived at about 4.45pm and the locksmiths at about the same time. Mr Esau was alleging to the removalists that some items which had been loaded onto the trucks were not the property of the defendant but of Jjadd. He was threatening to have padlocks, which the locksmiths were in the process of placing on the front gates, locked so that the trucks could not leave. It is unclear whether the gates were actually so locked at this stage but from the evidence of Mr Den Dryver I infer that they were not. Ms Bissmire who arrived back at the premises at about 5.30pm correctly described the scene as one of chaos. The removalists summoned their manager and an arrangement was then negotiated between that manager and Mr Esau to the effect that the trucks would be allowed to leave with what had been loaded onto them and the manager undertook to hold all of the items at his depot pending any court order as to their disposal. Under this arrangement the trucks left at about 6pm.
During the afternoon the defendant had spoken on the telephone to her son Ben apparently about what was occurring at the premises. Ben was still at the premises at about 5.30pm. It is not clear what Ben, Eddy and the other unnamed female employee were doing except they apparently had some role together with Mr McInnes in arranging for other temporary accommodation for some of the residents. Shortly before 6pm Mr Phillips arrived at the premises. There was a short discussion between him and Mr Esau, but apparently Mr Phillips had no instructions. He did not seek to withdraw or qualify the Notice or to protest at what Jjadd’s representatives were then doing including changing the locks on the premises.
By the time the trucks were loaded almost all of the furniture had been removed from the premises, although a few beds and other odds and ends remained. In most of the rooms clothing and personal belongings of the residents had been removed from cupboards and drawers and had been strewn around the floors. About six to eight hard-wired light fittings had been pulled off their mountings in various rooms and also about six to eight ceiling fans had been removed from rooms in the rear wing. About four fire extinguishers and some fire hoses had also been taken away together with a kitchen range hood. The premises were uninhabitable by any residents and because of the removal of the stove there was no way in which any meals could be cooked there.
After padlocks had been fitted for the front gates Mr Esau gave instructions to the locksmiths to change all of the locks on the external doors of the premises. This was completed by about 6pm and after the trucks had left. The premises were then locked up and it was at that point that Jjadd retook possession of them.
That evening Mrs Den Dryver and Mr McInnes went to the Hyde Park Nursing Home in an effort to sort out problems about the medication required by various residents and about their personal belongings which were still mainly in the premises. A few of the other residents apparently stayed that night at the defendant’s own home.
There is no doubt that the actions of the defendant’s or Natben’s servants and agents on that day made it impossible for any residents to be accommodated in the premises on the night of 4 July and for some time thereafter and thereby closed down the business which had been carried on there. The actions of those servants and agents were generally consistent with the intimation in the Notice that the premises would be vacated by midnight on that day. Either those servants or agents were acting in accordance with the instructions which they had been given by the defendant or they were in gross breach of them. If they were in gross breach of those instructions, it seems strange that there is no evidence that the defendant disciplined or criticised them for what they did or that she refused to pay them. In the end result it probably does not matter which of these alternatives is correct as Jjadd was entitled to rely on the conduct of the servants and agents of the defendant as being within the scope of their authority. However, if the defendant was intending to vacate the premises by midnight on that day, it seems inconsistent with some of her other conduct. I accept that she had a genuine concern for the welfare of the residents. If she was intending to vacate, it could have been reasonably expected that she would have made proper alternative arrangements for the accommodation of the residents, have treated their personal belongings with respect and have ensured that those belongings went with them to their new homes. I strongly suspect there are pieces of the jigsaw which I have not been given and they are within the power of the defendant, but she has elected not to put them forward. Although it is a huge conundrum, if it is necessary to go this far, I find on the balance of probabilities that the defendant on 4 July 1996 did intend to vacate the premises and that the servants and agents of herself and Natben were acting generally in accordance with her instructions in what they did on that day.
Although the evidence of how Mr and Mrs Den Dryver and Mr and Mrs Watt came to enter into the agreement of 24 June 1996 was somewhat vague and unsatisfactory, and in particular how the schedule of repairs was arrived at, I reject the defendant’s contention that the re-entry was carried out by Jjadd for the purpose of putting Mr and Mrs Watt into possession and regardless of the acts of the defendant. If Jjadd had wished to pursue that course, it would have been likely to have done so by pursuing legal remedies upon non-compliance with its notice of default.
Abandonment and repudiation of the Lease
The relevant law is as follows:
·.. Repudiation occurs where a lessee evinces an intention no longer to be bound by the lease or that it intends to fulfil the contract only in a manner substantially inconsistent with its obligations, and not in any other way: Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 at 33.
·.. The general principles of the law of contract on repudiation apply to leases: Progressive Mailing House case (above).
·.. The older cases concerning surrender and abandonment of leases by lessees are now to be treated as examples of repudiation: Wood Factory Pty Ltd v Kiritos Pty Ltd (1985) 2 NSWLR 105 at 121.
·.. Repudiation may consist of a combination of circumstances from which a repudiation may be circumstantially inferred even though none of the circumstances in themselves would individually amount to a repudiation: Progressive Mailing House case (above); Shevill v Builders Licensing Board (1982) 149 CLR 620.
·.. Whether the lessee has repudiated the Lease is to be judged objectively from the lessee’s conduct, and it is not necessary to prove any subjective intention of the lessee to repudiate: Satellite Estate Pty Ltd v Jaquet (1968) 71 SRNSW 126 at 150; Federal Commerce and Navigation Co Ltd v Molena Alpha [1979] AC 757 particularly at 780.
·.. Repudiation by a lessee is a serious matter and is not to be lightly inferred: Progressive Mailing House case (above) at 32-34.
·.. A repudiation by a lessee is not effective in law until it has been accepted by the lessor: Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444 at 450-1.
Jjadd relied upon the following three matters, either individually or collectively, to establish a repudiation of the Lease by the defendant and Clarke:
1...... The refusal to pay the full rent for May and June and apparently thereafter. The defendant had no right to deduct anything from the rent or to put any amount into an alleged trust account. (Whether the amounts of the rent not paid in May and June were actually put into a trust account by the defendant was not satisfactorily established on the evidence.) The failure of Jjadd to repair, even if it was obliged at law to do so, was not a justification for the defendant not paying the full rent: Progressive Mailing House case (above) at 38. As was said there at p38, “It was not entitled to take the law into its own hands by withholding the rent.” This conduct of the defendant indicated that she did not intend to comply with her obligation under the Lease to pay the full rent for at least some considerable time into the future.
The Notice. It clearly meant that the defendant and Clarke intended to vacate the premises on that day. It was somewhat ambiguous as to precisely when on that day the vacation was to occur. The phrases “by midnight”, occurring in two places, suggested that it would occur at some time between the service of the Notice and midnight whereas the reference to “effective at midnight” indicated that it would occur at midnight. The ambiguity was resolved by the defendant’s subsequent conduct which I will deal with in the next paragraph. The incorrect references to “the appalling state of the premises” and the premises being “substantially unfit” for use as a Supported Residential Facility meant that the vacation of the premises by the defendant was not to be temporary but permanent. The terms of the Notice were inconsistent with the defendant’s previous correspondence about doing the work to repair the premises herself and deducting the cost from the rent. The most likely inference was that the defendant had changed her mind and was no longer intending to carry out the alleged structural repairs and deduct their cost from the rent. If the vacation was only to be temporary for this purpose, it might be expected that the Notice would have said so. Indeed, if that was the intention, there seemed no purpose in giving the Notice at all as the defendant would have been within her rights under the Lease to have vacated the premises to carry out repairs which were her responsibility. The serving of the Notice was a precipitous and high-handed action by the defendant. On its true construction it was a formal communication to Jjadd of the intention of the defendant and Clarke no longer to be bound by the Lease. I need not go into the difficult question of whether the Notice standing alone could have amounted to a repudiation in law.
The vacation of the premises. It is not merely the fact of vacation which is significant, but also the manner in which it was carried out. The defendant removed virtually all of the contents of the premises. There was no evidence that the removalists had left anything behind which the defendant or her servants instructed them to take other than items which clearly belonged to Jjadd. The improper removal of fixtures such as the stove, the light fittings, the ceiling fans and the range hood by the defendant’s agents were all indicative of the defendant not intending again to carry on business in the premises or to occupy them.
There was no obligation under the Lease for the defendant to carry on business in the premises, or even to be in occupation of them. Therefore, cases such as Wood Factory Pty Ltd v Kiritos Pty Ltd (above) and Charmar Electrical v Minda Incorporated (1990) 55 SASR 112 can be distinguished on their facts. However, while vacation of the premises in itself was not a breach of the Lease by the defendant, and could not amount to a repudiation in itself, the fact of the vacation, and the manner in which it was carried out, are significant in interpreting the true import of both the Notice and the continued failure to pay the full rent.
It is clear that if the vacation had only been a temporary one to carry out repairs or the like, it could not constitute a repudiation: Leda Commercial Properties Pty Ltd v DHK Retailers Pty Ltd (1992) 111 FLR 81. However, if only a temporary vacation had been intended, it could be expected that the Notice would have said so and that arrangements would have been made for an orderly transfer of the residents to other suitable accommodation.
From a combination of my findings about these three matters it is to be inferred on the balance of probabilities that the defendant and Clarke were evincing an intention no longer to be bound by the Lease. From the terms of the Notice and its accompanying letter, and from Clarke having handed over the operation of the business to the defendant, it can be inferred that such acts of repudiation were done on behalf of both lessees. The acts of repudiation were not finalised until the vans left the premises at about 6pm. The repudiation became effective in law when it was accepted by Jjadd by its conduct in locking up the premises shortly afterwards with the new locks which thereby excluded the defendant from possession of the premises.
Rejection of statements under s34c of the Evidence Act
The defendant sought to tender under s34c of the Evidence Act signed statements of each of Ben Murray-Oates and Eddy. I rejected the tender of each statement on the basis that each author was “a person interested” under s34c(3). I now give my reasons for these rulings.
The test of “person interested” in this State is whether that person “is likely to be materially affected by the result of the litigation”, and not the more stringent test of being completely unbiased: Murphy v Haskell [1961] SASR 1 at 3; Monfries v MTT [1970] SASR 521. Thus the mere fact that the maker of the statement was a relative, friend or employee of the party seeking to tender the statement does not of itself make that person “a person interested”. A slightly different formulation of the test has been enunciated in New South Wales of whether the person has “such an interest as could lead to the belief that the maker of the statement had an interest to distort the truth”: Wentworth v Rogers (No 10) (1987) 8 NSWLR 398 at 404; Brown v Petranker (1991) 22 NSWLR 717 at 726-7. This test does not seem inconsistent with what has been accepted in the South Australian authorities. It does have the imprimatur of the Court of Appeal in New South Wales whereas the South Australian decisions are all of single Judges.
While the test of a substantial material interest will be satisfied if the person is a party to the proceedings: Alste v Paramount Motors [1965] SASR 228, it can be satisfied where there is no actual claim against the person but a potential claim or possible disciplinary action: Monfries v MTT (above) at 522.
I have not seen the contents of either of the statements which were sought to be tendered under s34c. However, I infer that their contents must be generally favourable to the case of the defendant, as, if not, she would not have sought to tender them. As stated above, the general possibilities are either that Ben Murray-Oates and Eddy were acting in accordance with the instructions which they had been given by the defendant or they were in gross breach of those instructions. Presumably, the defendant only seeks to tender these statements because they support the former, and not the latter, proposition. If they had acted on 4 July contrary to the instructions given to them by the defendant, or had allowed the removalists to act contrary to those instructions, so that the premises could no longer be used as a Residential Support Facility, they would have been in gross breach of their duties to the defendant and/or Natben and be liable to them for very substantial claims for damages. If the defendant is found liable to Jjadd, it will be at least partly, and possibly wholly, because of the actions of these two persons. Upon the defendant losing the action, she may well seek to pursue claims against these persons. Hence they are likely to be materially affected in a financial sense by the result of this litigation, and thus are persons interested under s34c(3). For similar reasons the interest which each had leads to a belief that they had an interest to distort the truth.
Whether the settlement with Clarke released the defendant?
Clause 13.5 of the Lease provided:
“If more than one person is included in the expression ‘the Lessee’ the liability of each such person in accordance with the terms of this Lease is both joint and several.”
The relevant terms of the settlement agreement between Jjadd and Clarke on 8 March 1999, as recorded in a handwritten note signed by their respective counsel, was as follows:
“Kevin Clarke agrees to pay $20,000 to JJADD PTY LTD by 19 March 1999 in full and final satisfaction of all issues between the plaintiff and the first defendant in action 1506 of 1996 ....”
During the trial the defendant amended her Defence to plead this agreement and that by virtue of it Jjadd had withdrawn all issues against the defendant such that the action was no longer competent against her and that it was estopped by this agreement from pursuing its claim against her. It was argued by the defendant’s counsel that the joint debt had been wholly discharged through accord and satisfaction. The plea of estoppel was not pursued, and was not made out.
The defendant’s counsel submitted that Jjadd had admitted paragraphs 16 and 17 of the Amended Defence, relating to this topic, by not amending its Reply to put them in issue. This is not correct. In relation to the initial pleadings Jjadd had filed a Reply expressly pleading to two paragraphs of the original Defence but not referring to the balance of it. Under R46.21(1) this had the effect of putting the balance of the Defence in issue. During the trial counsel for Jjadd intimated that he did not intend to amend the Reply to deal with the new paragraphs 16 and 17. This meant that the original Reply, and the Rules, dealt with those new paragraphs 16 and 17 and had the effect of putting them in issue. I do not accept the defendant’s contention that because there was no express pleading to them, therefore their contents were admitted under R46.12(2). That has never been the practice in respect of replies. The trial was always conducted on the basis that the matters pleaded in the Defence were in issue by virtue of R46.21(1). The defendant did not suggest that other parts of the Defence had been admitted by virtue of R46.12(2).
It is the law that the release of a joint and several contractual obligation against one, but not all, of the promisors discharges the indebtedness of all of the promisors: Nicolson v Revell (1836) 111 ER 941; Deanplan Ltd v Mahmoud [1993] Ch 151; Cashmere v Morris [1993] 3 NZLR 587. I have not been able to find any authority that the principle extends to the release of joint liability for damages for breach of contract, such as by repudiation, but it would seem that it should: see Re E W A [1901] 2 KB 642. It was not argued, and I assume it.
In some of the authorities it was suggested that the rationale for the rule was to protect the right of contribution from the debtor released of the other joint debtors: North v Wakefield (1849) 116 ER 1368. However, this view has been queried in some subsequent cases: Ex Parte Good (1877) 5 Ch D 46; “Chitty on Contracts”, 24th ed, vol 1, para 1077, footnote (56). If that is the rationale of the rule, it has no application in this matter. While Clarke filed a contribution notice against the defendant, the defendant did not file a contribution notice against Clarke. If this matter had proceeded to judgment against both defendants, the principle in Port of Melbourne v Anshun (No 2) (1981) 147 CLR 589 would have barred the defendant from bringing subsequent proceedings for contribution against Clarke if she had been made liable for more than her proportionate share of the debt. However, I need not resolve the point on this controversial ground.
A discharge of an obligation not under seal can be effected either by a release in Equity (see Meagher, Gummow and Lehane “Equity Doctrines and Remedies”, 3rd ed, chapter 35) or through the common law principle of accord and satisfaction: DCT v Hadidi (1994) 123 ALR 48 at 54. The principle of the release of both joint debtors by the discharge of one applies to both releases in Equity and to accord and satisfaction: Chitty (above), 24th ed, paras [1,365] and [1,077-8].
Here there was an effective accord and satisfaction to discharge the liability of Clarke to Jjadd. The agreement was supported by valuable consideration in that the unliquidated part of the claim was quantified by it. The payment of the $20,000 constituted the satisfaction
I need not go into whether there was also a release in Equity of Clarke’s indebtedness to Jjadd. This would involve considerations of fairness in the circumstances: McDermott v Black (1940) 63 CLR 161 at 187-9,but here Equity could have no wider field of operation than accord and satisfaction. However, a number of the cases cited turned on equitable considerations and are to be distinguished because of them.
The principal issue here is whether the settlement agreement between Jjadd and Clarke, which effected the accord and satisfaction, is to be construed as only a covenant not to sue, in which case it has no effect on the obligations of the defendant to Jjadd, or whether it is to be construed as a release or discharge which attracts the rule stated above that discharges the obligation of the defendant as well as that of Clarke: Kenworthy Avoth Holdings Pty Ltd [1974] WAR 135; Wolmershausen v Wolmershausen (1890) 62 LT (NS) 541. Alternatively, it may be a question of whether the written agreement is to be construed to contain a term preserving the right of Jjadd to continue its claim against the defendant: South Australian Land Mortgage Co v M’Innes (1896) 12 QLJ 289; Gardiner v Moore [1969] 1 QB 55. The written agreement is to be construed in accordance with the matrix of facts against which it was entered into: Reardon Smith Line Ltd v Yngvar Hansen-Ttangyen [1976] 1 WLR 989; Codelfa Construction Pty Ltd v State Railway NSW (1982) 149 CLR 337. I can have regard to the existence of the two actions and the disputes between the parties revealed by the pleadings. Indeed to make any sense of the phrase “all issues between plaintiff and the first defendant in action 1506 of 1996” in the document reference must be made to the pleadings in that action. I also can have regard to the conduct of the various parties in the announcement and implementation of the agreement, insofar as it was revealed to the Court, and the subsequent course of the 1996 action and the 1997 action as related above. I do not act on what was said by counsel to the Court concerning the circumstances of the settlement between Jjadd and Clarke. This was not made the subject of evidence. Jjadd had the opportunity to apply to reopen its case to adduce evidence on the point, but it did not pursue it.
A significant background fact is how the 1997 action was pursued after the settlement between Jjadd and Clarke was announced to the Court. I had previously indicated that there may be problems with that action because Clarke was not a party to it. Jjadd applied to have Clarke made a party and Clarke consented to this. This would have been inconsistent with Jjadd and Clarke having agreed to discharge the joint liability of both lessees under the Lease as much of the claim in the 1997 action was part of Clarke’s counterclaim in the 1996 action which had been settled by their agreement.
While there are numerous references in Kenworthy v Avoth (above), and in the other cases cited above, to background circumstances and the presumed intentions of the parties being taken into account in deciding whether a joint debtor had been released, I do not rely upon them as they in part are factors relating to discharges in Equity, which is not the issue here, and in part they may be contrary to modern principles about resort to extrinsic material in the interpretation of contracts.
In construing the document on whether it is a covenant not to sue or not the words “in full and final satisfaction” are consistent with a discharge of the liability, but it must be asked of what? The answer to that is “of all issues between plaintiff and first defendant” (ie Clarke) in the 1996 action. Those issues include both the claim of Jjadd and the counterclaim by Clarke. While the issues on that counterclaim were similar to the issues in the defendant’s 1997 action, as those issues existed at the time of the settlement agreement, they were not identical. There were some differences, eg there was no plea of representations in the 1996 action about the prior turnover of the business. Thus there were a number of issues raised by the pleadings in the 1997 action which were not encompassed by the pleas in the 1996 action. Therefore, the settlement agreement could not have been intended to cover all of the liability which was sought to be imposed on Jjadd by the 1997 action. Whether the whole of this additional liability was a joint liability to both the defendant and Clarke is problematical. In the 1997 action there is no reference to any claim by Clarke. The prayer for relief there is confined to damages claimed by the defendant and Natben. It is clear that some of that liability had to be a joint liability between the defendant and Clarke. As the defendant did not attempt to differentiate by her pleadings in the 1997 action between any liability which was joint to herself and Clarke as lessees and to herself and/or Natben alone I infer that at least some, and possibly all, of the additional claims in the 1997 action were joint claims by both the defendant and Clarke. As the settlement agreement did not address this additional liability, it must be presumed that it was to be treated as a claim by the defendant only and could be pursued by her independently of the settlement between Jjadd and Clarke.
What the settlement agreement does not say is that the payment was to be in full and final satisfaction of all of the joint and several liability both of the defendant and Clarke under the Lease. I do not consider that it can be construed to mean that. The ambiguity insofar as it exists is to be resolved in construing the agreement as a covenant not to sue rather than as a release of all joint debtors: State of NSW v McCloy Hutcherson Pty Ltd (1993) 116 ALR 363 at 370. It is instructive what has been construed to be an agreement not to sue, as distinct from a discharge of indebtedness, in the cases such as Ex Parte Good (above) and Kenworthy v Avoth Holdings Pty Ltd (above). Alternatively, if necessary, a term is to be implied into this agreement reserving Jjadd’s right to pursue its claim against the defendant. Accordingly, the claim by Jjadd against the defendant is not discharged or barred by the settlement agreement. However, the defendant is to be given credit for the $20,000 which Jjadd has received from Clarke.
Jjadd’s loss and damages
The balance of the rent due on 3 May and 3 June 1996 and of the insurance premiums payable by the lessees is allowed as claimed at $4,694. I allow the rent claimed from 4 to 11 July of $1,337 while the premises were unlettable. As at 4 July the premises were unclean and untidy and there was soiling and odour from urine and excrement. I allow the damages claimed for cleaning of $4,237.
The $659 paid to Mr Williamson for repainting the previously poorly painted pink wall is allowed. Under clause 5.8.1.3 of the Lease the defendant is liable for the cost of repainting upon any termination of the Lease, but under clause 5.8.2 that obligation is confined to those parts of the premises which reasonably required painting. I accept the evidence of Mr Williamson that not all of the premises did require painting, but he was unable to dissect his quotation for the cost of painting the whole of the interior and exterior of the premises between what needed painting and what did not. In her letter of 2 January 1996 to Jjadd the defendant had said:
“We are aware that the building is in need of painting And no painting or general maintenance in the same has occur (sic) for some 12 years previous to us coming in 1992.”
Mr Watt, who was paid $15,000 for painting the whole of the interior and the exterior of the building, did a more thorough and careful job than would be usual in commercial painting and one that would be likely to last longer than normal commercial painting. I am not satisfied that his price of $15,000 was fixed as an arms length exercise as apparently if pressed he would have been prepared to have done the painting for nothing. Doing the best I can with unsatisfactory evidence I allow $5,000 damages for the cost of painting over and above the cost of that actually done by Mr Williamson.
The rent payable by Mr and Mrs Watt under their new lease was less than that payable by the defendant under her Lease. Jjadd conceded that the rent increase clauses in each Lease should be ignored for this purpose which is the position most favourable for the defendant. The rent payable by Mr and Mrs Watt was that proposed by Mrs Den Dryver as being in her opinion a proper rent at the time for the premises. Correspondence from the defendant suggests that a drop in market values had meant that the level of rent being paid by her was above current market rates. While it is possible that the Watts may have been prepared to pay a greater rent if they had been pressed, I do not consider that the defendant has discharged the onus upon her to show that the rent charged by Jjadd to Mr and Mrs Watt was unreasonable in the circumstances. The gross difference between the rent payable under the defendant’s Lease from 11 October 1996 until the expiration of its term on 3 November 2002 compared with that payable for that period under the Watts’ Lease is $35,204. Insofar as that loss will accrue after judgment it must be discounted at 3% per annum for an early receipt of a future benefit. I allow $31,000 damages on this head.
The solicitor’s costs of $450 and the locksmith’s cost of $474 will be allowed as claimed.
Interest is payable under clause 11.8 of the Lease on the arrears of rent and outgoings at 2% above the rate charged on overdrafts, which rate was established by a letter from the Commonwealth Bank. Interest is payable at commercial rates under s37 of the District Court Act on the balance of the claim, except the future rent loss, from the time at which the loss was incurred until judgment. The amount received from Clarke on about 18 March is not to be taken into account on the calculation of this interest except from that date to judgment. I fix a lump sum in lieu of interest at $4,800.
The amounts assessed above are to be reduced by the $20,000 received from Clarke. There will be judgment for Jjadd in the 1996 action for $32,651.
The 1997 action
The defendants to this action other than Clarke confined themselves in their counsel’s final address to what was in effect a submission of no case to answer upon the extant pleadings and the evidence. I am also content to deal with the 1997 action on this basis. It raised four causes of action which need to be considered separately:
1...... Claims in misrepresentation. All of representations pleaded in paragraphs 5 and 6 of the Statement of Claim were ultimately withdrawn. Thus there was nothing for the pleas of falsity in paragraph 21 to operate upon, and, even if there were, the evidence on the topic did not address that issue at the relevant time of 1992. Accordingly, any such pleas must fail.
2...... Pleas of breaches of implied terms in the Lease and the Sale Agreement. Paragraph 14 of the Statement of Claim pleaded that there was an implied term in the Lease that “the premises were of structural condition capable of facilitating the use of the same for the purpose of conducting the business.” No such term can be so implied because clause 8.6 of the Lease states:
“The lessor does not give and the lessee acknowledges that the lessee does not rely on any warranty, representation or undertaking as to the fitness, quality, condition or suitability of the Premises or the Land for the Specified Use or any other purpose.”
Hence there can be no implied term: Codelfa v State Railway Authority NSW (above). A similar implied term is pleaded in paragraph 11 of the Sale Agreement, but there is no reason why that term, and the other variations of it, pleaded in paragraph 11, should be implied into the Sale Agreement when they cannot be implied in the Lease. Accordingly, any causes of action based on breaches of such terms must fail.
Constructive distress. There was a strange plea in paragraphs 28.3 and 29 of constructive distress upon the goods of the defendant and Natben which were left on the premises. There is no evidence to show that distress was levied by any of the defendants in the 1997 action over the goods in question. No cause of action was pleaded in respect of those goods in either conversion or detinue, and the requisites for those causes of action were not established in the evidence.
While there was some general evidence that some items of property belonging to the defendant and/or Natben were left in the premises after Jjadd re-took possession on 4 July, there was no satisfactory evidence adduced by the defendant or Natben to identify these items of property or to establish their values. The defendant in her evidence made vague and unsatisfactory references to about 45% of the items in the Schedule to the Sale Agreement and to an inventory of the goods in question which she had apparently prepared but which was not produced and was in the papers which she had in storage. After that evidence was given I stated to her counsel, “That’s simply not satisfactory evidence upon which you’ll get any judgment in your favour on that issue.” No further evidence was adduced on the topic. I adhere to what I said at the trial. Plaintiffs cannot expect judgment if they do not give reasonably coherent and detailed evidence to support a cause of action. This part of the claim also fails.
Damages for wrongful re-entry. My determination of the 1996 action means that this cause of action fails.
The defendants in the 1997 action other than Clarke challenged the status of Natben as a plaintiff in the action. The defendant alleged that Natben had obtained the benefit of the Sale Agreement as the nominee of herself and Clarke. This was not pleaded. There was no satisfactory evidence of any such nomination, and in particular of any nomination by Clarke. It is likely that such a nomination, if it occurred, was in a document, but no such document was produced or its absence accounted for. It is possible that Natben was the owner of some of the property which was the subject of the wrongful distress claim, but that was not proved.
There will be judgment in the 1997 action for the defendants other than Clarke.
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