Karthurmary Pty Ltd v Facac Pty Ltd - [2013] SASC 90

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
KARTHURMARY PTY LTD v FACAC PTY LTD
[2013] SASC 90
Reasons for Decision of The Honourable Justice Nicholson
19 June 2013
MAGISTRATES - APPEAL AND REVIEW - SOUTH AUSTRALIA - APPEAL TO SUPREME COURT - GROUNDS - GENERALLY
APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES - POINTS AND OBJECTIONS NOT TAKEN BELOW - WHEN NOT ALLOWED TO BE RAISED ON APPEAL - QUESTIONS NOT RAISED ON PLEADINGS OR IN ARGUMENT - PARTICULAR CASES - OTHER MATTERS
ESTOPPEL - ESTOPPEL BY CONVENTION
EQUITY - GENERAL PRINCIPLES - GENERALLY
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - FORMATION OF CONTRACTUAL RELATIONS - CONTRACT IMPLIED FROM CONDUCT OF PARTIES
This is an appeal from a magistrate’s decision that the first and second appellants (the defendants at trial) are estopped from denying that the respondent (the plaintiff at trial) effectively renewed a lease of commercial premises. A written, otherwise effective, notice of exercise of option to renew under the lease was provided nine days out of time. However, the tenant continued in occupation for many years after the expiration of the original lease and both parties acted as if a new lease was in place.
Appeal dismissed. Held: (1) both parties shared a common assumption that a new lease for the premises existed at the material times; (2) both parties intentionally conducted their relationship on the basis that a new lease existed at the material times; (3) the respondent relied on the assumption that the lease was in place to its detriment; (4) to prevent the appellants from denying a renewal of the lease is the appropriate remedy in the circumstances; a withdrawal by the appellants from the common assumption would be unconscionable in the circumstances.
Quaere: The parties contractually agreed to a new lease on identical terms to the agreed lease; such an agreement is to be inferred from their conduct.
Commercial Tenancy Law 3rd ed, Bradbook Croft and Hay, LexisNexis Butterworths Australia 2009, chapter 14, referred to.
Jones v Dunkel (1959) 101 CLR 298; Hillier v Goodfellow [1988] V ConvR 54-310; Forrest Chase Medical Services Pty Ltd & Anor v Toliver Pty Ltd & Anor Supreme Court of Western Australia, 5 September 1997 unreported (Anderson J), BC9704222; Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; Moratic Pty Ltd v Gordon [2007] NSWSC 5; Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226; Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641; Dabbs v Seaman (1925) 36 CLR 538; Ferrier v Stewart (1912) 15 CLR 32; Commonwealth v Verwayen (1990) 170 CLR 394; Felthouse v Bindley (1862) CBNS 869, 142 ER 1037; Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523; University of Wollongong v Metwally…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2013] SASC 90
Decision Date: 19 June 2013

CaseChat Overview and Summary

In the matter of Karthurmary Pty Ltd v Facac Pty Ltd, the dispute between the parties centred around a lease agreement and the potential renewal of that lease. The case was initially heard in the Magistrates Court of South Australia and subsequently appealed to the Supreme Court. The central legal issues revolved around whether the appellants were estopped from denying the renewal of the lease and whether the magistrate's decision to grant relief to the tenant was legally sound.

The Supreme Court examined the grounds of appeal, specifically focusing on the magistrate's findings of fact and law regarding the equitable estoppel. The court noted that the magistrate had erred in his factual findings by asserting that the parties had assumed a legitimate renewal of the lease, which was contradicted by the appellants' own correspondence. Furthermore, the court held that even if the assumption had been made, it was not influenced by the appellants in a way that would ground an estoppel. Additionally, the court found that the magistrate had erred in granting relief on a basis not pleaded or argued by the respondent, and dismissed the appeal on these grounds.

The court upheld the magistrate's decision to enforce the equitable estoppel, finding that both parties shared a common assumption of a renewed lease, conducted their relationship on that basis, and that the respondent relied on this assumption to their detriment. The court concluded that preventing the appellants from denying the renewal was the appropriate remedy. The appeal was ultimately dismissed, and the orders of the magistrate were upheld, enforcing the equitable estoppel against the appellants.

Orders

Orders of the court

Appeal dismissed. Held: (1) both parties shared a common assumption that a new lease for the premises existed at the material times; (2) both parties intentionally conducted their relationship on the basis that a new lease existed at the material times; (3) the respondent relied on the assumption that the lease was in place to its detriment; (4) to prevent the appellants from denying a renewal of the lease is the appropriate remedy in the circumstances; a withdrawal by the appellants from the common assumption would be unconscionable in the circumstances.

Quaere: The parties contractually agreed to a new lease on identical terms to the agreed lease; such an agreement is to be inferred from their conduct.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

NICHOLSON J

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Established by: NICHOLSON J

That leaves grounds 1 and 6 of the notice of appeal.[76] Ground 1 is in the following terms.[76] Ground 7 related to the distraint claim which does not need to be dealt with on the appeal.1.The … magistrate erred in fact and law at Reasons [78] in holding that the appellants:“ …departed from the assumption of a legitimate renewal and should be estopped from asserting that a valid renewal has not been made.”1.1 He erred in fact because on his own finding of primary fact at Reasons [22], the appellant had on 26 April 2006 through its agents Taplins by letter to the respondent made a “clear assertion that they had not yet received a written extension of Lease.”1.2 Therefore, on his own primary finding of fact, or alternatively on the evidence, the parties did not assume there had been a legitimate renewal of the lease, nor did the appellants “depart” from any such assumption.1.3 He erred in law because even if the respondent assumed at any relevant time that a legitimate renewal had been effected, this assumption was not caused or contributed to by the appellants in any way which could properly have grounded an estoppel, nor was any relevant assumption made by the respondent relied upon by the respondent to its detriment so as to afford a proper basis for the estoppel as found by the … magistrate.Ground 6 is in the following terms.6.The … magistrate erred in law in granting relief to the tenant – as he apparently did in Reasons [72] and [78] – on a basis not pleaded or contended for by the respondent.6.1 The respondent did plead an estoppel, but this was an allegation of estoppel based on a representation on behalf of the appellant in late 2004, prior to the time of expiry of the option to renew.6.2 The … magistrate correctly made no finding or order based on the pleaded estoppel, and should have dismissed the estoppel claim accordingly.6.3 The … magistrate erred in granting relief on the basis of a claim not pleaded or contended for at trial.6.4 In any event, even if it was open to the … magistrate to decide the case on a basis not pleaded or contended for, he erred in fact and law for the reasons set out in this Notice of Appeal.Further consideration of and resolution of the issues During the appeal, counsel for the appellant submitted, at some length, that for FACAC to succeed with an estoppel claim it would need to point to a representation or representations to the effect that it did not need to comply with the 3 July 2005 deadline when giving a notice of exercise of the option to renew. This is one type of representation that might give rise to an estoppel. However, this was not the way in which the trial was conducted (and notwithstanding the form of the pleadings) and it was not the way in which the Magistrate considered and decided the estoppel issue. During submissions on appeal I asked counsel for the appellants whether, in this respect, they had been caused any prejudice either at trial or on the appeal in the sense of having been denied procedural fairness. In particular, I was concerned with whether the appellants had been prejudiced by the way the Magistrate dealt with the matter in his reasons as compared with the pleadings, FACAC’s opening and the way in which the trial had been conducted. When pressed on this issue, counsel for the appellants conceded that this was not a matter of concern. The appellants’ complaint on appeal relates to the basis relied on by the Magistrate for a finding of equitable estoppel and an asserted lack of factual foundation for that finding.[77] Accordingly, appeal ground 6 (at least sub-grounds 6.1, 6.2 and 6.3) falls away. I return to the first ground of appeal.[77] Appeal transcript at 45-47.