Lauder Pty Ltd v Angor Investments Pty Ltd

[2013] QSC 175

SUPREME COURT OF QUEENSLAND

CITATION:

Lauder Pty Ltd v Angor Investments Pty Ltd & Ors [2013] QSC 175

PARTIES:

LAUDER PTY LTD
ACN 084 277 574
(plaintiff)
v
ANGOR INVESTMENTS PTY LTD
ACN 103 899 798
(first defendant)
GORDON HUTCHISON AND ANNETTE HUTCHISON
(second defendants)

FILE NO/S:

BS 3482 of 2013

DIVISION:

Trial Division

PROCEEDING:

Civil Trial

ORIGINATING COURT:

Supreme Court of Queensland

DELIVERED ON:

16 July 2013

DELIVERED AT:

Brisbane

HEARING DATE:

16 July 2013

JUDGE:

Philip McMurdo J

ORDER:

1.   Judgment for the plaintiff for a recovery of possession of the premises known as Shop 23, Highfield Village Shopping Centre, 66 Highlands Road, Heighfields in the State of Queensland.

2.   The first defendant pay to the plaintiff a total of $29,967.69.

3.   The second defendants pay to the plaintiff a total of $29,967.69.

4.   By 19 July 2013 the plaintiff is to provide by email to the associate of P McMurdo J, copied to the defendants, written submissions not to exceed three pages as to the form of order for costs.

5.   By 25 July 2013 the defendants is to provide by email to the associate of P McMurdo J, copied to the defendants, written submissions not to exceed three pages as to the form of order for costs.

CATCHWORDS:

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – ALTERATION OF WRITTEN INSTRUMENT – where defendants fell into arrears with payment of rent to plaintiff – where defendants provided lease and tax invoice statement altered by the second defendant to plaintiff’s letting agent with payment – where payment accepted by the plaintiff – where defendants argued that original lease was replaced by terms contained in altered lease and tax invoice statement – whether the parties acted towards each other in a way which, objectively viewed, manifested an intention to contract on the terms in the altered document

COUNSEL:

M K Stunden for the plaintiff
The second defendant appeared on behalf of the first defendant by leave

The second defendants appeared on their own behalf

SOLICITORS:

Wonderley & Hall for the plaintiff
The second defendant appeared on behalf of the first defendant by leave

The second defendants appeared on their own behalf

.

HIS HONOUR:   On or about the 5^th of July last year the plaintiff granted a lease to the first defendant of part of a building in Toowoomba.  The lease was for a term of five years commencing on 24 May, 2012.  It contained an option to renew for a further five years.  The lease was registered on 6 August, 2012.  The second defendants, who control the first defendant, executed the lease on the 1^st defendant’s behalf, and executed a guarantee and indemnity for which the lease provided in clauses 21 and 22, on or about the same day. The lessee fell into arrears with the payment of rental by about the end of 2012. From the beginning of this year there were discussions between the parties as to how that default might be remedied, and more generally towards some commercial resolution of the lessee’s predicament. Those discussions reached a point on 13 March, 2013 at which the plaintiff made some offer to the first defendant to permit the first defendant to continue as the lessee. But by then the plaintiff had served on the first defendant a notice under section 124 of the Property Law Act. That notice was served on or about 5 February, 2013.

There is no present dispute as to the facts which I have mentioned thus far, or as to the fact that the first defendant had breached the lease as specified in the notice under section 124. In turn there is no dispute as to the fact that that notice was duly given, and that the first defendant failed within a reasonable time after its service to remedy the breach. The position as at 13 March therefore was that the plaintiff had become entitled to forfeit the lease. But as I mentioned, it made an offer involving some compromise. It is unnecessary to go the detail of that because upon any view its offer was not accepted. Instead, it is necessary to consider the events of 15 March, 2013, because those events provide effectively the entirety of the facts which are relevant for the defendant’s argument. In essence, that argument is that on 15 March, 2013, the parties agreed to a compromise under which the existing lease would be replaced by a new lease, at a different rent for a different duration, with terms markedly different insofar as the lessee’s obligations were concerned, and which was not to be supported by a guarantee from the second defendants or anyone else.

It is a further element of this compromise for which the defendants contend that the amount or amounts then owing, that is to say immediately prior to the compromise, to the plaintiff would cease to be owing upon payment of but $200 by the first defendant.

The plaintiff denies that there was any agreement reached on 15 March or otherwise which would compromise its rights under the lease and the guarantees given by the second defendants.  It argues that there was no conduct on its behalf by which, upon an objective view, it could be said that it had agreed to any compromise, let alone the one for which the defendants contend.  It further argues that the alleged compromise could not be binding upon it because the conduct upon which the defendants rely was that of its letting agent, and it is not established that the agent had authority from the plaintiff to vary the plaintiff’s contractual position. 

The relief claimed by the plaintiff is for recovery of possession of these premises, the plaintiff having terminated or purported to terminate the lease by a notice given on or about 21 March, 2013, within a letter from its solicitors addressed to the first defendant dated 19 March, 2013.  There is no dispute as to the fact of that notice. 

The plaintiff claims also amounts owing up to the termination of the lease which, I should add, was a termination with effect from 24 April, 2013, and it claims damages or mesne profits for the occupation by the first defendant of the premises from then until today’s date.  The various components of these monetary claims were not disputed beyond the defendant’s argument that none of them are recoverable because the parties’ contractual position became that which was defined by documents delivered by the defendants to the plaintiff’s letting agent on 15 March. 

I go then to what did occur on the 15^th of March, and to the content of those documents.  Mr and Mrs Hutchison went to the office of the plaintiff’s letting agent, and met with Ms Eiser, an employee of the agent, who had a responsibility for the letting and management of the shopping centre of which these premises form a part.  They went to that meeting with an envelope that contained two documents.  One was a copy of the lease, but which had been extensively altered by Mr Hutchison in handwriting.  I shall refer to this as the altered lease document.  The other was a copy of a tax invoice statement from the letting agent, namely J.T. Commercial, addressed to Mr Hutchison and the first defendant, which had claimed amounts owing as at 13 March, 2013.  This document also had been substantially altered by Mr Hutchison’s handwriting. 

The defendants’ argument is that these two documents, taken together, constituted an offer capable of immediate acceptance. Mr and Mrs Hutchison also had with them two cheques, which at the meeting they handed to Ms Eiser.  One was in the sum of $1800 and the other was in the sum of $200.  In their evidence, Mr and Mrs Hutchison agreed that they said nothing to Ms Eiser about the content of the documents as altered, or as to the connection, if any, between the content of those documents and the cheques.  There is no dispute that before any compromise as alleged by the defendants, the amount owing to the plaintiff was at least of the order of the sum set out in that tax invoice statement, which in total was $19,403.52. 

There is some difference in the respective versions of Ms Eiser and Mr and Mrs Hutchison as to precisely what occurred with the documents within the envelope.  Ms Eiser’s evidence is that she was told by Mr Hutchison that she should not open the envelope, but should forward it directly to the plaintiff, and more particularly, Mr Stirling.  He is the managing director and secretary of the plaintiff.  And, he lives in Brisbane, whereas this meeting was in Toowoomba.  Mr and Mrs Hutchison dispute that Ms Eiser was told not to open the envelope.  On their evidence the two documents, the altered lease document and the tax invoice statement, emerged from the envelope in part, that is to say, they were at some point a little way or some way out of the envelope. But I don’t understand that they had sufficiently emerged from the envelope as to be then readable by Ms Eiser in their presence.  But, the point is, it seems, that they maintain that there was no impediment to Ms Eiser looking at the documents and immediately communicating their contents to her principal.  The content of these documents must then be discussed.

The altered lease document was a very different thing indeed from the lease which was then registered and binding upon the parties.  The term of the lease was to be changed from one of five years with a five year option to one of ten years with a ten year option.  The rent was to change from a base rent of $61,520 plus GST and

subject to annual increases at a rate of four per cent to one of but $545.40 per annum, with no annual increase.  The provision for outgoings whereby the lessee was to pay, in the not uncommon way, a percentage of the outgoings of the centre, was to be deleted.  The provision for a security amount of three months rent was to be deleted, and against that part of the lease Mr Hutchison had written “will no longer be required, and all amounts paid to date will be refunded to the lessee”.  The provision for the permitted use of the premises, which was effectively for a video hire store, was to be amended by the addition of the words “plus any other use as determined by the lessee”.  The permitted trading hours would be extended. 

Of particular potential importance was the deletion of the operation of the guarantees given by Mr and Mrs Hutchison. Against item 26, which had referred to them as the guarantors,  Mr Hutchison had written “no longer required”.  He had also inserted an extensive term by which there was to be an acknowledgement by the plaintiff that the first defendant had suffered a loss of trading by moving to these premises from another shop which it had occupied in years prior to 2012.  As to that, the defendants’ evidence included contentions of unconscionable conduct on the part of the plaintiff, in the period preceding the grant of the present lease, which had resulted, so it was claimed, in the defendants becoming bound by the 2012 lease and guarantee to their detriment.  But an objection was taken to this evidence upon the basis that it was not relevant to any pleaded issue.  In particular, there is no defence pleaded here which alleges any unconscionable conduct or any consequence which should come from the conduct of the plaintiff prior to the grant of the present lease, or indeed, prior to the events of 15 March.  In the course of discussing that objection with Mr Hutchison, who spoke for all defendants, I was told that it was not intended to claim any specific relief for unconscionable conduct, but, rather, that this evidence was included as part of the background going to the likelihood of an enforceable compromise of the kind for which the defendants contend. 

Returning to the altered lease document, the provision for rent was to be supplemented by these words written by Mr Hutchison against the covenant for the payment of base rent namely “as acceptance of these lease changes the lessor will allow the lessee to pay three years rent in advance of $1800 including GST”.  Now, that sum correlates with the annual base rent, as the defendants proposed, of $545.40.  That sum of $1800 can then be seen to correlate with the amount in one of the cheques and that correlation is part of the defendant’s argument that by the banking of those cheques by Ms Eiser’s firm on the afternoon of 15 March 2013, the plaintiff is to be taken to have accepted the compromise defined by these documents. 

It is unnecessary to discuss any of the many other extensive variations to the lease document which were proposed here.  It is sufficient to say that in no case could those variations have been of benefit to the plaintiff.  But, one other matter should be mentioned about this document.  The defendants saw fit to stamp each and every page with the words “not negotiable, non transferable, without recourse”.  I will endeavour to explain the relevance or otherwise of those words shortly. 

Going to the other document, which is the amended tax invoice statement, it might be mentioned first that the same words, although handwritten here, that is “not negotiable, not transferable, and without recourse”, were placed upon this copy. 

There were other things written on this document, such as the words “acknowledge drawer” against Mr Hutchison’s name and “acknowledge payee” against the letting agent’s name, which suggest some intention to invoke the law relating to bills of exchange.  Again, I will return to that point.  Upon this document, Mr Hutchison had also written, “Acknowledged offer to contract between the disclosed parties and acknowledged statement of the transaction giving rise to the payment.”  In that part of the document where the balance due was shown in the sum of $19,403.52, Mr Hutchinson had written “acknowledge sum payable”.  And under that he had written “plus incidentals $1,596.48 plus interest $1,000” showing a total of $22,000, against which he had written “acknowledged total sum payable”. 

But then underneath that, he had further written “being a sum certain amount of A$200 exactly”.  Now, it is that correlation between that sum of $200 and the sum of the other cheque, $200, which is a further element of the defendants’ argument. 

It seems that at the meeting, the agent was unable to immediately provide any receipt because of some problem with the printer.  The two cheques were deposited to the agent’s account on the afternoon of 15 March.  The fact of the deposit of those cheques became apparent to the defendants at some point by their having access to their own bank records. But their evidence did not extend to any claim that they became aware of the banking of the cheques by that means, before they received an email from Ms Eiser at 3.39 pm on 15 March. 

That was an email from Ms Eiser to Mr Hutchison in which she wrote that she was attaching “a statement that shows those amounts having been receipted”.  She attached a document which then set out some invoices of 1 March 2013 followed by various payments of 5 March, 12 March and these two payments of 15 March 2013.  The attachment showed a “balance due” of $17,403.52.  This was an unambiguous statement to the effect that the two cheques which she had received that day had been applied towards the payment of moneys owing under the 2012 lease and that there was still a balance owing under that lease.  It is a communication which cannot be reconciled with the proposition that the plaintiff was accepting, upon an objective view, the proposal put by the defendants by the two documents in the envelope. 

The next development was the letter of 19 March from the plaintiff’s solicitors, to which I have referred.  Clearly, that is inconsistent with the existence of this compromise agreement for which the defendants contend. 

The defendants’ argument is that there was a contract made on 15 March, by their offer being made in the presentation of these documents together with the two cheques and by the plaintiff’s acceptance by the conduct of the banking of the cheques.  In the course of his submissions, Mr Hutchison also seemed to make something of the fact that the plaintiff had not expressly rejected such an offer, at least until 19 March.  But that is to say that apart from the actions of the agent, if they’re to be taken as actions of the plaintiff, there was no response one way or the other by the plaintiff to the defendants’ proposal. 

I should record that in fact, the plaintiff became aware of the contents of the documents on the afternoon of 15 March; but on Ms Eiser’s evidence, that was not before the cheques were banked.  As to the difference between her evidence and that of the Hutchisons in relation to whether the documents were to remain in the envelope and be sent straight to the plaintiff, I have difficulty in reaching a concluded view upon that matter.  It is not unlikely that it was said to Ms Eiser, but there is also a possibility, perhaps that by some innocent misrecollection she believes that was said to her when really she had simply decided that it was not her responsibility, at least, to open the documents.  I certainly would have no hesitation in accepting her as a truthful witness.  The only question is whether on a matter of detail like that, her recollection is so precise, but I am prepared to resolve the present question upon the premise that the defendants’ evidence is correct in that respect,  that is to say that she was not asked to keep the documents within a sealed envelope.  But upon that premise, as I have noted already, still there is no evidence that the content of these documents was disclosed to her or at all discussed and in particular, the connection between these documents and the cheques was discussed.  Therefore, on the face of things, the cheques were amounts which were going towards what the plaintiff had claimed was outstanding to it. 

Apart from the question of the authority of the agent, to which I will return, the question here is whether the parties acted towards each other on 15 March in a way in which, objectively viewed, they manifested an intention to contract in a way which would compromise the operation of their existing lease and substitute for it the terms as set out in these two documents.  In my conclusion, that is not a view of the conduct of the parties, which is at all open, that is to say on no objective view could it be said that the plaintiff has accepted the proposal contained within these two documents.  The conduct of the plaintiff’s agent in banking the cheques– assuming that to be attributable to the plaintiff for the moment – is equally explicable as an intention to accept the two cheques as part payments of the amount then due. 

Indeed, that is precisely how the plaintiff, through its agent, put the matter in the attachment to Ms Eiser’s email of the afternoon of 15 March.  I have described the very extensive changes made to the lease document.  It is of some relevance, in my view, that the changes proposed represented such a radical departure from the terms of the existing lease.  That is of some relevance in considering whether, upon an objective basis, the plaintiff should be regarded as having accepted what was, upon any view, such an unfavourable outcome.  Also of some relevance here was the fact that there had been earlier payments prior to these ones in the sum of $1800, because the parties had previously discussed and reached some consensus upon this and that it would be in the defendant’s interest to endeavour to remedy existing defaults by making payments of $1800.  Therefore, it can be seen in the attachment to Ms Eiser’s email that there had been earlier payments of $1800 on 5 March and 12 March.  This makes it yet more difficult for the defendants to argue that the banking of another cheque for $1800 could be explained only upon the basis of an intention to accept this proposed compromise. 

A further problem for the defendants is that the purported acceptance of their offer, which was the banking of these cheques, was not communicated and, in particular,

was not communicated prior to Ms Eiser’s email, with its attachment.  It was not argued that the defendants had, by their offer, dispensed with the need for communication of an acceptance.  There is nothing within the documents themselves or within the oral evidence which suggests that this was an offer made upon a basis that a concluded contract would arise from it by the act of banking the cheques.  Therefore, had I been of the view that that act was a sufficient acceptance of the offer of the defendants, it was not communicated before the plaintiff’s position, as represented by Ms Eiser’s email (assuming her conduct to be attributable to it) was communicated to the defendants. 

Returning to the question of the authority of the letting agent, clearly, a letting agent does not have implied authority to agree to effectively a surrender of an existing lease and the grant of a new lease.  There was no suggestion that this agent, by some particular document or set of circumstances, had that authority.  There is simply no evidence that this agent had any authority to so contract on behalf of the plaintiff and, for that reason also, the defendants’ case must be rejected. 

I return to the references in these two documents to terminology which is found within the law relating to bills of exchange.  The apparent strategy of these defendants (who were, it seems, without legal advice, but with perhaps some other assistance) was to endeavour to engineer some legal position by which the law relating to bills of exchange might promote their position.  No doubt, their endeavour to do that was inspired by the belief of someone, perhaps deriving from unrelated litigation, that a person in the predicament of a defaulting debtor could improve its position by endeavouring to, in some way, give documents an effect as bills of exchange.  I have to say that the defendants’ attempt to give these documents some effect as a bill or as bills of exchange is so obscure that it is difficult for me to articulate the basis upon which it should be rejected.  Ultimately, I find the contention, insofar as it is pressed, which is in reliance upon the Bills of Exchange Act, to be nonsensical. Its only relevance would be perhaps to further detract from the defendants’ case that, by these documents, they presented an offer which was capable of immediate acceptance and was so accepted. 

As to the complaints of unconscionability, which preceded the grant of the present lease, as I have discussed, they were ultimately pressed as relevant to the question of whether a concluded compromise was reached.  Such conduct, if it occurred, would not, however, add anything to the defendants’ case that there was such compromise.  In other words, the reasons for my rejection of that case would equally apply.  I’m not persuaded, in any event, that there was such conduct.  The conduct itself was not pleaded and the plaintiff was therefore not in a fair position to meet an allegation of that conduct, raised as it was only within the second round of affidavits from the defendants. 

Once the suggested compromise of the operation of the lease and the guarantee is rejected, there is no other defence which is offered to the present claims.  The plaintiff has established its entitlement to a money judgment in the amounts for which it seeks judgment against each of the defendants, and it is established that it has duly terminated the lease.  Accordingly, as against the first defendant, there will be judgment for the plaintiff for a recovery of possession of the premises known as

shop 23, Highfield Village Shopping Centre, 66 Highlands Road, Highfields in the State of Queensland.  And the first defendant will pay to the plaintiff a total of $29,967.69.  Between the plaintiff and the second defendants, there will be judgment for the plaintiff and the second defendants will pay that sum of $29,967.69.

______________________