KEMDEA Pty Ltd v Bird - [2001] WASCA 24

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE FULL COURT (WA)

CITATION: KEMDEA PTY LTD -v- BIRD & ANOR [2001] WASCA 24

CORAM: PIDGEON J
WALLWORK J
STEYTLER J

HEARD: 12 DECEMBER 2000

DELIVERED : 12 DECEMBER 2000

PUBLISHED : 12 FEBRUARY 2001

FILE NO/S: FUL 110 of 2000

BETWEEN: KEMDEA PTY LTD
Appellant (Plaintiff)
AND
DALE HARRY BIRD
SARAH VERONICA BIRD
Respondents (Defendants)

Catchwords:

Appeal - Landlord and tenant - Lease with guarantee but no option to renew - Lease assigned with guarantors' consent - Assignment of lease granted assignees an option to renew - Assignees exercised option and defaulted - Guarantors not parties to extension - Whether guarantors liable for assignees' default - Turns on own facts

Legislation:

Nil

Result:

Appeal dismissed

Representation:

Counsel:

Appellant (Plaintiff) : Mr G A Rabe
Respondents (Defendants) : Mr F Sammut

Solicitors:

Appellant (Plaintiff) : Stables Scott
Respondents (Defendants) : F Sammut & Co

Case(s) referred to in judgment(s):

Nil

Case(s) also cited:

Baker v Merckel [1960] 1 All ER 668
Falinski v Commonwealth Bank of Australia, unreported; CA of NSW; CA 40475/97; 6 February 1998
Farrow Mortgage Services Pty Ltd v Hogg (1995) 64 SASR 450
Green v Sommerville (1979) 141 CLR 594
O F Gamble Pty Ltd v Whitemore Pty Ltd (1989) 2 WAR 327; (1991) 6 WAR 110

PIDGEON J : I agree with the reasons to be published by Steytler J.
WALLWORK J: I agree with the reasons for judgment of Steytler J. There is nothing I wish to add to those reasons.
STEYTLER J: This is an appeal against the decision of a Judge of the District Court whereby her Honour, O'Brien DCJ, allowed an appeal against the decision of a Magistrate in an action for damages brought by the appellant against the respondents in the Local Court. At the conclusion of argument on the appeal this Court unanimously dismissed the appeal. These are my reasons for joining in that decision.
The appellant owned shops in Mandurah. One of these, Lot 53 Mandurah Terrace, was leased by the appellant to the first‑named respondent in his capacity as trustee for a family trust. The lease, which was stamped on 7 October 1991, was for a term of five years from 1 July 1991 to 30 June 1996. Clause 2.1 of the lease gave to the lessee a right to continue the tenancy for the further term set out in item 5 of the Second Schedule thereto. However that item recorded that the term referred to was "Nil" with the consequence that the lessee was given no option to extend or renew the term of the lease.
Clause 11.12 of the lease provided for a guarantee. Item 11 of the Second Schedule thereto identified the respondents as guarantors. However neither of them signed the lease in that capacity. Instead they executed a separate deed of guarantee. The preamble thereto recites that the appellants had requested the lessor to enter into the lease to which the deed of guarantee is annexed and that the lessor had agreed with them "to enter into the Lease with the Lessee ... subject to and conditionally only upon the Guarantors executing this Guarantee". Clause 5 of the deed of guarantee read as follows:
"This Guarantee shall remain in force during the currency of the term and any renewed or extended term of the Lease and after the expiry of that term renewed term or extended term until all moneys payable by the Lessee and all obligations to be performed by the Lessee have been completely paid or performed respectively."
In 1994 the lessee, by a deed of assignment stamped on 18 May 1994, assigned to a Mr and Mrs Black "the unexpired portion of the term created by the ... Lease" from 19 April 1994. By cl 5 of that

deed, to which the appellant was a party in its capacity as lessor, the parties thereto agreed that nothing therein contained would operate to release the respondents "from liability for the payment of the several rents and the performance of the covenants reserved by the ... Lease". Moreover, by cl 7 of the deed of assignment the respondents agreed that their covenants in the deed of guarantee would be enforceable against them notwithstanding the terms of the deed of assignment.

Clause 9 of the deed of assignment provided, inter alia, as follows:
"It is agreed that the Assignee shall have the option to be exercised by notice in writing to the Landlord not less than three (3) months before the expiration of the original term of the said Lease and provided that at the time of such exercise there shall not have been or be any default by the Assignee in any of their obligations or covenants herein to take a further lease of the premises for a further term of five (5) years from the expiration of the original term of the said Lease ... ."
On 7 August 1996 the Blacks and the appellant executed a further deed, described as an "Extension of Lease". This deed recited that the Blacks had exercised the option, given to them by the deed of assignment, "to take a further lease of the demised premises" for a term of five years at the rental therein set out and provided for that "further lease". Clause 2 thereof provides that:
"The Lessor and the Lessee hereby mutually covenant and agree that they shall respectively perform and observe the several covenants provisos and stipulations in the said recited Lease [being that originally given to the respondents and then assigned to the Blacks] expressed as fully as if the same covenants provisos and stipulations had been herein repeated in full with such modifications only as are necessary to make them applicable to this lease."
In 1997 Mr and Mrs Black breached the "further lease" and the appellant terminated it. The Blacks were then declared bankrupt. As a result of their breach the appellant suffered loss and damage under the lease totalling $17,006.75. The appellant sought to recover this amount from the respondents under the deed of guarantee. The learned Magistrate upheld the appellant's claim and the respondents appealed. Their appeal was upheld by O'Brien DCJ, essentially upon the ground that the "Extension of Lease" amounted, in effect, to a fresh lease which had not been guaranteed by the respondents.
It is unnecessary to recite the first four grounds of appeal against the decision of O'Brien DCJ. It is enough to say of them that it is common cause that the appellant cannot succeed in its appeal on any of these grounds unless it can make good its contention that the guarantee given by the appellants covered the obligations of Mr and Mrs Black under the "Extension of Lease".
That contention is, in my opinion, quite unsustainable.
It is plain, from the provisions of the deed of guarantee to which I have referred, that the respondents guaranteed only the obligations of the lessor under the lease to which the deed of guarantee was annexed. That lease, as I have said, provided that there was to be no option to extend or renew the term thereof, notwithstanding that cl 5 thereof (and it is obvious that a standard form deed of guarantee was used) recites that the guarantee is to remain in force during the currency of the term and any renewed or extended term of the lease.
There is no doubt that the terms of the subsequent deed of assignment expressly kept alive the obligations of the first‑named respondent as lessor under the lease and those of both respondents under the deed of guarantee. However nothing in the deed of assignment extended those obligations, in any way, past the five year term of the original lease. Clause 9 of the deed of assignment merely gave to the assignees, Mr and Mrs Black, an option "to take a further lease of the premises" for a five year term. That clause made no provision for any guarantee by the respondents of the obligations of Mr and Mrs Black under any such "further lease". Indeed it would have been extraordinary if it had done so. Nor, and again this is hardly a matter for surprise, did the so‑called "Extension of Lease", by which the "further lease" was given to the Blacks, provide for any guarantee by the respondents of the "further lease".
That being so, the appellant was left to rely upon the reference, in cl 5 of the deed of guarantee, to the fact that the guarantee was to remain in force during the currency of the term "and any renewed or extended term of the Lease". However that clause relates only to any renewed or extended term of the lease granted to the first‑named respondent as lessor and there was no such renewed or extended term. Indeed, there was, as I have said, not even any provision for the renewal or extension of the term of that lease. There was only the grant of a further, and different, lease, at the expiry of the term of the original lease, to Mr and Mrs Black. The fact that that lease largely repeated the terms and conditions of the original lease and that it was given effect by a document describing itself as an "Extension of Lease" could scarcely alter its character as a further, or new, lease or impose upon the respondents (who were, of course, not parties to the so‑called "Extension of Lease") some obligation which they had not agreed to undertake.
The fifth, and last, ground of appeal is one to the effect that the learned Judge below erred in law in not holding that, by executing the deed of assignment, the respondents acknowledged their continuing status as guarantors under the fresh grant (and any renewal thereof) and the doctrine of estoppel by convention operated to prevent them from resiling from that stance. However it will be apparent from what I have already said that the respondents, by the terms of the deed of assignment, acknowledged their continuing status as guarantors only for the balance of the term of the lease guaranteed by them, being one for a term of 5 years with no option to renew or extend. This is the plain (and unsurprising) effect of cl 7 thereof.
While counsel for the appellant sought to bolster his argument in this respect by resort to words in the preamble to the deed of assignment to the effect that "the Landlord has at the request of the Assignor and the Assignee and the Guarantor agreed to consent to ... [the] assignment subject to the Assignor and the Assignee and the Guarantor entering into this Indenture", that can hardly amount, whether taken on its own or with other provisions of that deed, to a representation that the respondents have agreed to guarantee the obligations of the assignees under any "further lease" which they might take of the demised premises at the expiry of the term of the lease assigned by the first‑named respondent to them. There is no justification at all for reading the provisions of the deed of assignment, or any of them, in this way.
It followed from these reasons, in my opinion, that there was no substance to the appeal and that it should be dismissed.