Maroubra Pool Café Pty Ltd v Fedele - [2017] NSWSC 1722

Supreme Court

New South Wales

Medium Neutral Citation: Maroubra Pool Café Pty Ltd v Fedele [2017] NSWSC 1722
Hearing dates: 30 – 31 October 2017; 1 – 2 November 2017
Date of orders: 12 December 2017
Decision date: 12 December 2017
Jurisdiction: Equity
Before: Darke J
Decision:
See paragraphs [120] and [121].

Catchwords:
LEASES AND TENANCIES – leases – construction of leases – general principles of construction – whether certain area forms part of demised premises – proper commencement date of lease – whether lessor required to perform certain building works

LEASES AND TENANCIES – leases – termination of leases – termination due to alleged change of control – whether shares in plaintiff company transferred without lessor’s consent – incorrect records of share transfers lodged with ASIC – no share transfers occurred – termination invalid

LEASES AND TENANCIES – leases – obligations of lessor – whether lessor obliged to consent to lessee’s application to modify development consent in relation to trading hours – implied duty to co-operate to allow other party to have benefit of contract – terms of lease support implication of obligation – lessor required to give its consent
TORTS – conversion – title to goods – standing to sue – where plaintiff claimed that defendants had disposed of stored café equipment without its consent – where plaintiff alleged that title to goods acquired by transfer – transfer of title not established
Legislation Cited: Civil Procedure Act 2005 (NSW), s 56
Competition and Consumer Act 2010 (Cth), Sch 2
Conveyancing Act 1919 (NSW), s 129
Environmental Planning and Assessment Act 1979 (NSW), s 96
Uncollected Goods Act 1995 (NSW)
Cases Cited: Bunnings Group Ltd v CHEP Australia Ltd (2011) 82 NSWLR 420; [2011] NSWCA 342
CF & SP Pty Ltd v FAI General Insurance Co Ltd (Supreme Court (NSW), Bryson J, 17 December 1998, unrep)
Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 343 ALR 58; [2017] HCA 12
Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7
Sachs v Miklos [1948] 2 KB 23
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596
Category: Principal judgment
Parties: Maroubra Pool Café Pty Ltd (Plaintiff)
Antonio Fedele (First Defendant)
Maria Fedele (Second Defendant)
Representation:
Counsel:
Mr M Ashhurst SC with Mr P M Barham
Mr C W Robinson (Defendants)
Solicitors:
Borodin Legal (Plaintiff)
Dimarco Lawyers (Defendants)

File Number(s): 2015/378241
Publication restriction: None

Judgment

Introduction

These proceedings concern a lease of certain retail premises on the ground floor of the property at 94 Marine Parade, Maroubra. The plaintiff company is the lessee. It conducts a café business at the property. The café is known as the Maroubra Pool Café. The defendants, Mr and Mrs Fedele, are the lessors. The lease was entered into on 8 May 2014. The lease is for a five year term, with two options to renew for further terms of five years each.
Numerous issues have arisen between the parties. The principal issues are:

whether a certain courtyard area forms part of the premises demised under the lease, and if not, whether the plaintiff is entitled to relief under the Australian Consumer Law (see Competition and Consumer Act 2010 (Cth), Sch 2) to ensure that the plaintiff can enjoy exclusive possession of the courtyard area;

whether the Commencement Date of the five year term of the lease is 1 May 2015 as contended by the plaintiff, or 12 December 2014 as contended by the defendants;

whether a purported termination of the lease by the defendants on 7 March 2016 was valid, and if so, whether the plaintiff should have relief against forfeiture pursuant to s 129 of the Conveyancing Act 1919 (NSW) or the general law;

whether the defendants should be ordered to perform certain building works, namely, the construction of ramps and a floor drain;

whether the defendants are obliged to give their consent as owners of the property to an application to be made by the plaintiff to modify a development consent in respect of the trading hours of the café; and

whether the defendants are liable to the plaintiff in conversion in respect of certain café equipment which had been left or stored in a garage at the property prior to the lease coming into existence.

The plaintiff, by its Second Further Amended Statement of Claim, made various other claims in respect of the lease and the café equipment which were not pressed at the hearing. The case was conducted on the basis that the six issues described above were the matters required to be determined by the Court.
It is convenient to commence by setting out some matters of background pertinent to the property and its use, and the involvement of Mr Louie Ajaka, who is a director of, and sole shareholder in, the plaintiff.

Background

A café business has been operated from the ground floor of the property for many years. It appears that in about 2003 the then existing café business was acquired by Enarkan Pty Ltd. That company then commenced to operate the business at the property. The evidence is unclear as to the terms upon which the company went into and continued its occupation of the property. However, it appears that in July 2006 Enarkan Pty Ltd entered into a lease of the café premises (described as the whole of the ground floor of 94 Marine Parade “including the lock-up shop, garage and courtyard and the first floor unit known as Unit 2/94 Marine Parade”). This lease was for a five year period commencing on 26 March 2006 and terminating on 25 March 2011.
Mr Ajaka managed the café business for Enarkan Pty Ltd but it seems that he was never a shareholder in the company or a director of the company. Enarkan Pty Ltd appears to have been controlled by Ms Helen Ablett who was Mr Ajaka’s de facto partner until about 2008.
In about December 2006 the lease to Enarkan Pty Ltd was surrendered and a lease of the same premises was entered into by At A Café Pty Ltd. That company’s lease was for a term commencing on 26 December 2006 and terminating on 25 March 2011. At A Café Pty Ltd had been incorporated on 14 August 2006. Ms Ablett was appointed as a director of the company, as was Mr Andrew Damianos. It appears that Ms Ablett came to hold 100 ordinary shares in the company, and that Mr Damianos came to hold 25 ordinary shares. Ms Ablett ceased to be a director on 5 January 2008. Mr Damianos ceased to be a director on 20 August 2012. Ms Ablett became a director again on that date, and remained in that position until January 2014. Mr Ajaka was never a director of, or shareholder in, the company. However, it appears that Mr Ajaka managed the operation of the café at the premises for At A Café Pty Ltd.
Although the term of the lease to At A Café Pty Ltd expired in March 2011, the company remained in occupation of the premises until about mid-2012 when the business ceased trading. It was contemplated at that time that the defendants would soon commence an extensive re-development of the property.
Discussions had taken place between the defendants and Mr Ajaka from as early as 2007 about the granting of a new lease following the completion of the re-development. It is not necessary to go into the detail of those discussions, save to note that Mr Ajaka has consistently asserted that Mr and Mrs Fedele agreed in the course of those discussions to grant a new lease of at least 15 years duration. Negotiations concerning the terms of a new lease continued sporadically from about September 2011 until May 2014.
The plaintiff, Maroubra Pool Café Pty Ltd, was incorporated on 12 September 2012. At that time, Mr Ajaka was appointed as the sole director of the company, and he also became the holder of the 1000 ordinary shares which were issued. Mr Ralph Illek, an accountant, was appointed as the secretary of the company. It will be necessary to later refer to certain recordings in the ASIC register of transfers of shares in the company. These apparent transfers were relied upon by the defendants as a basis for their purported termination of the plaintiff’s lease in March 2016.
In October 2012 the defendants lodged a fresh development application with Randwick City Council (No 689/12) for various works including alterations and additions to the café premises. The defendants obtained a development approval in respect of that application on 26 February 2013. The architect engaged by the defendants in respect of the proposed development was Mr Russell Dunn of Dunn Architects. It should be noted that in the course of his engagement, Mr Dunn produced various drawings, including drawings that were referred to in the lease eventually granted to the plaintiff, which depict an area at the rear of the café as a “Café yard”. On 16 September 2013 the defendants obtained a Construction Certificate in respect of the works to be carried out.
On 24 December 2013 Mr Ajaka lodged a caveat in respect of the property, claiming an interest pursuant to an agreement for lease. On 6 February 2014 Mr Ajaka commenced proceedings in this Court seeking to enforce the alleged agreement for lease. This appears to have hastened the negotiations concerning the terms of a new lease. Between February and May 2014 detailed negotiations were undertaken, including in relation to building works to be undertaken by the lessor and lessee, until the lease was executed on 8 May 2014.

The terms of the lease

The front page of the lease describes the property leased as “Part Folio Identifier A/373126 being the whole of the lock-up shop on the ground floor of 94 Marine Parade, Maroubra New South Wales”. A five year term is provided for, together with two options to renew of 5 years each. The lease contains printed terms as set out in Annexure A, and the provisions of Memorandum No U558793 are also incorporated.
Annexure A commences with a reference to the lease of “Part Folio Identifier A/373126 being the whole of the lock-up shop on the ground floor of 94 Marine Parade, Maroubra New South Wales”. Amongst the later provisions of Annexure A is cl 20 which identifies various works to be carried out by the Lessor and the Lessee in respect of the provision of electricity, water and gas to the Demised Premises. Clause 21 provides, relevantly:

21(a)   In this clause:
(i)   Fitout Period means a period commencing on the day on which the Lessor gives the Lessee a licence to access the Demised Premises solely for the purpose of carrying out the Lessee’s Works and expiring 56 days from the commencement of such period or 7 October 2014, whichever shall occur later.
(ii)   Lessee’s Works means, in addition to the works required to be carried by the Lessee in accordance with clause 20, all of the works and installations (other than the Lessor’s Works as specified in this Lease) which are required to make the premises fully operational for the Permitted Use, such works to be carried out generally in accordance with the following Dunn Architects Plans prepared for Construction Certificate:
A.   Ground Floor Plan A4.0B
B.   Ground Floor Ceiling Plan A4.1B
C.   Café Plan A4.2A
D.   Cafe Toilet Plan A 4.3A
E.   Cafe Toilet Sections A 4.4A,
and the fitout, fixtures and fittings of the restaurant generally.

(iii)   Lessor's Works means, in addition to those works already carried out by the Lessor prior to this Lease being executed, the following listed works in paragraphs (a)-(i) below, such works to be carried out generally in accordance with
A.   Ground Floor Plan A4.0B
B.   Ground Floor Ceiling Plan A4.1B
C.   Café Plan A4.2A
D.   Cafe Toilet Plan A 4.3A
E.   Cafe Toilet Sections A 4.4A:

(a)   The works required to be carried by the Lessor in accordance with clause 20;
(b)   Cement rendering the internal perimeter concrete columns in the main dining room of the restaurant;
(c)   Installation of external doors and windows;
(d)   Grind and seal the concrete floor within the restaurant, except the bathrooms;
(e)   Chase the vent pipe in the kitchen area into the masonry wall from the floor up to a point which is as close as practicable to the beam above;
(f)   Installation of a drainage pipe from the existing garage to the grease trap, such drainage to be for the purpose of draining water from a proposed modular coolroom which, subject to the Lessee obtaining all regulatory approvals, the Lessee may install in the garage at the sole cost of the Lessee. The drainage point within the existing garage will be located centrally but approximately two metres from the southern wall;
(g)   Cement rendering the external walls of the restaurant.
(h)   Painting of the restaurant externally.
(i)   In respect of the garage storage area, enclose the opening to the Corso with such fibrous cement or other material as the Lessor may select in their discretion (after the installation by the Lessee of the Lessee's cool room) and installation of a new roof covering.
(For the avoidance of doubt, the parties acknowledge the agreement and intention of the Lessee that the Lessor is not required to install any ceilings other than in the toilets and that a considerable amount of pipework, cabling and other services both servicing the restaurant and the upper premises will be exposed and that if any of these are to be concealed this shall be at the sole cost of the Lessee).
Despite the provisions of this Lease, the Lessee must pay or reimburse the costs of the Lessor incurred in having the work in (f) being the drainage pipe works within 7 days from request by the Lessor.
Despite the provisions of this Lease, the Lessee must pay or reimburse the additional costs of the Lessor incurred in altering the doors to the Lessee's requirements (estimated at approximately $2,600) plus the costs of concrete cutting and any additional track (if required) associated therewith, within 7 days from request by the Lessor.
(b)   The Lessor must endeavour to complete the Lessor's works as expeditiously as reasonably possible.
(c)   The Fitout Period shall commence the day on which the Lessor gives possession of the Demised Premises to the Lessee for the purpose of the Lessee carrying out the Lessee's Works provided that the Fitout Period will not commence before the internal Lessor's Works within the Demised Premises are practically completed and the Demised Premises are lockable. The Lessor must give the Lessee not less than 7 days prior notice of the commencement of the Fitout Period. No rent shall be payable during the Fitout Period.
(d)   During the Fitout Period the Lessee must expeditiously carry out and complete the Lessee's Works. The Lessee must permit the Lessor to have reasonable access to the Demised Premises to carry out any minor Lessor's Works, works relating to the upper premises and for the purpose of any inspections which may be required provided that if such access materially delays the completion of the Lessee's Works, the Lessee shall be entitled to a reasonable extension of the Fitout Period commensurate to the extent to which such access by the Lessor delayed the Lessee’s Works.
…
(g)   The Commencement Date of this Lease shall be the earlier of the day after the expiration of the Fitout Period and the day on which the Lessee commences trading from the Demised Premises, provided that if the Lessor is still to carry out works outside the Demised Premises which may disrupt the operation of the Demised Premises as a restaurant, the Lessee may delay the commencement of the operation of the restaurant until such works have been completed and in such case the Commencement Date of the Lease shall be delayed until the day following the completion of such works by the Lessor. However, if the Lessor has not obtained an occupation certificate in respect of the Lessor's Works relating to the Demised Premises by the Commencement Date as otherwise calculated in accordance with this Lease, then the Commencement Date will be extended to the day following the date on which the Lessor gives the Lessee a copy of such occupation certificate.
…

Clause 23 provides:

The Lessor and the Lessee acknowledge that the external areas of the Land located between the restaurant premises and the garage are Common Parts for the use and enjoyment of all occupants of the Land and the Lessor.

Clause 1 of Memorandum No U558793 contains various definitions which apply unless the contrary intention appears. In cl 1.01.5 “Demised Premises” is defined to mean:

The premises demised by the Lease referred to in Item 1, Item 2 and Item 3 of the Reference Schedule and where the context so permits any part thereof, including such floor coverings, curtains, blinds ceilings, light fittings, air conditioning and other equipment, fittings and fixtures contained therein and provided by the Lessor from time to time to service such premises.

By cl 1.01.6 “Land” is defined to mean the whole of the land referred to in the Certificate of Title referred to in Item 1 of the Reference Schedule.
Clause 1.01.2 defines “Building” to mean “the building of which the Demised Premises form whole or part as the case may be”, and including “any entrances corridors vestibules stairways elevators parking areas and other plant machinery toilets and Common Parts and conveniences”. Clause 1.01.4 defines “Common Parts” to mean “those parts of the Building provided by the Lessor from time to time for common use by the occupants of the Building and including (but without limiting the generality hereof) the entrances lobbies corridors toilets stairways elevators and other common amenities and conveniences thereof”.
By the operation of cll 12.01 and 12.07 of the Memorandum, cl 5.01.1 of the Memorandum provides:

5.01.1   The Lessee shall not during the Term or any holding over transfer demise sub-let or part with or share the possession of or grant any licence affecting or mortgage charge or otherwise deal with or dispose of the Demised Premises or any part thereof or by any act or deed procure the Demised Premises or any part thereof to be transferred demised sub-let unto shared or put into possession of any person or persons without the prior consent in writing of the Lessor. The Lessee shall be entitled to assign the Lease unless:
5.01.1.1   The proposed assignee proposes to change the use to which the Demised Premises are put;
5.01.1.2   The proposed assignee has financial resources or retail skills that are inferior to those of the Lessee;
5.01.1.3   The Lessee does not comply with the procedure set out herein for the obtaining of consent to assignment.

Clause 5.01.2 then sets out a procedure for the Lessee to follow in obtaining the consent of the Lessor to an assignment.

Clause 5.02 of the Memorandum provides:

In the event that the Lessee is a company, then any transfer of shares in the Lessee or other circumstances giving rise to a change in effective control of the Lessee shall be deemed to be an assignment of the Lease and accordingly all of the provisions contained in the Lease relating to assignment of the Lease shall apply.

Clause 10.01 of the Memorandum provides:

The Lessee paying the rent hereby reserved and duly and punctually observing and performing the covenants obligations and provisions in this Lease on the part of the Lessee to be observed and performed shall and may peaceably possess and enjoy the Demised Premises for the term hereby granted without any interruption or disturbance from the Lessor or any other person or persons lawfully claiming by from or under the Lessor.

Clause 10.02 of the Memorandum relevantly provides:

The Lessor reserves the following rights and reservations:
…
10.02.4 the right to grant licenses for the use of the Common Parts;
…
10.02.6 the right to erect structures, including kiosks in the Common Parts.

The Reference Schedule identifies various Items which are referred to in the Memorandum. Items 1, 2 and 3, which are referred to in cll 1.01.5 (and, in the case of Item 1, cl 1.01.6) are described as follows:

Item 1 (Land)   Part Folio Identifier A/373126 being the whole of the lock-up shop and the garage on the ground floor of 94 Marine Parade, Maroubra South Wales [sic]
Item 2 (Whole or Part)      Part
Item 3 (Location)         Maroubra NSW

Item 18, which concerns the permitted use, is in the following terms:

Predominantly combined restaurant and café, subordinate take-away food and beverages and storage.

Item 19 indicated that the lease was a lease to which the Retail Leases Act 1994 (NSW) applied. Accordingly, the provisions of Part 12 of the Memorandum became applicable (see cl 12.01 of the Memorandum).

The Courtyard area

The first issue is whether the courtyard area at the rear of the building forms part of the premises demised under the lease. That raises a question of interpretation of the lease which must be determined in accordance with the well-established principles that apply to the construction of commercial agreements. As stated in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35]:

…The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption "that the parties … intended to produce a commercial result". A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience".

See also Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 343 ALR 58; [2017] HCA 12 at [16].

The plaintiff contends that the parties should be taken to have intended the courtyard area to form part of the demise. The plaintiff submitted that various facts, known to both parties, assist in reaching that conclusion. These facts include the following:

both Enarkan Pty Ltd and At A Café Pty Ltd (each of whom had an association with Mr Ajaka, the sole director of the plaintiff) had exclusive use of the courtyard area as it was prior to the re-development of the property;

in the course of discussions about the use of the property after the re-development, drawings of the ground floor were produced that indicated that apart from areas to be used for rubbish bins for the café and other tenants, the courtyard (referred to as the “Café yard”) was to be used by the café;

drawings of that character were submitted with draft leases in the course of the negotiations, and one of them (Ground Floor Plan A4.0B) was expressly referred to in the lease as executed;

apart from the areas to be used for other tenants’ bins, the courtyard area is designed so that it is only accessible from the café itself; and

the courtyard area is at least partly taken up with the thoroughfare between the café itself and the café storage area in the garage at the rear of the premises.

The plaintiff also placed reliance upon cl 23 of Annexure A to the lease. It submitted that cl 23 should not be read as providing that the entirety of the courtyard areas are Common Parts. The plaintiff submitted that the expression “restaurant premises”, which is not a defined term, should be taken to at least include the “Café yard” area depicted on the drawings. Accordingly, “the external areas of the Land located between the restaurant premises and the garage” should be read as referring to the bin areas.
The defendants submitted that the Demised Premises were as described in Item 1 of the Reference Schedule, where no mention of the courtyard can be found. The defendants further submitted that cl 23 of Annexure A should be read as providing that all of the areas between the café itself and the garage were to be Common Parts, and thus not part of the demise. The defendant contended that Ground Floor Plan A4.0B was not relevant as it only served the purpose of describing the content of the obligations on the Lessor and the Lessee to carry out works. The defendants accept that the plaintiff has the right to use the courtyard area, but they say that it is not entitled to exclusive possession; other tenants and the Lessor also have the right to use it.
The language employed in the lease is unfortunately lacking in precision concerning the subject matter of the demise. In two places the lease is described as being over the whole of the lock-up shop on the ground floor, yet it is common ground that the lease extends to the garage at the rear. In any case, it is necessary to consider the expression Demised Premises, which is defined to mean (unless the contrary intention appears) the premises referred to in Items 1, 2 and 3 of the Reference Schedule.
Item 1 is meant to identify only the “Land”, by reference to a Certificate of Title (see cl 1.01.6 of the Memorandum). Whilst Item 1 refers to a Certificate of Title, it qualifies it by the word “Part”, and then goes on to refer to “the whole of the lock-up shop and the garage on the ground floor”. Item 2, which is evidently meant to specify whether the demise is of the whole or part of the Land, specifies “Part”. Item 3, which is presumably meant to identify the location within the Land of a part to be demised, specifies only the locality within which the property is located.
Despite this untidy particularisation of Items 1 to 3, it is possible to discern an intention that the Demised Premises comprises the whole of the lock-up shop and the garage. The question arises as to what is included within that composite expression “the whole of the lock-up shop and the garage”. It is clear from reading the lease as a whole that the garage was to be used for storage. It must have been contemplated by the parties that use of the premises in accordance with the permitted use would entail consistent and unimpeded use of the pathways that lead from the garage to the café itself and from the café itself along the rear of the building to the street (The Corso), for the taking of deliveries and carrying of items (including food) to be used as part of the operation of the café. In my opinion, and having regard to the proposed layout of the rear area as depicted on Mr Dunn’s drawings, the parties should be taken to have intended that the plaintiff would have exclusive possession of those pathways, which connect areas that are undoubtedly intended for the exclusive use of the café. To do otherwise would be to impute an intention that would involve considerable commercial inconvenience, if not absurdity.
In these circumstances, it seems to me that “the whole of the lock-up shop and the garage” is not confined to the internal areas of the café and the garage. In my opinion it includes at least those external pathway areas. The question remains whether any other areas between the café itself and the garage were intended to form part of the demise.
Clause 23 of Annexure A is relevant to the question of identification of the Demised Premises. The clause is concerned with certain “external areas of the Land” being those located “between the restaurant premises and the garage”. These areas are designated as Common Parts. It is preferable that the reference in cl 23 to “the Land” be read as a reference to the whole of the land referred to in the Certificate of Title mentioned in Item 1 (see cl 1.01.6 of the Memorandum). If it was read as a reference to “the lock-up shop and the garage” (as found in the particulars to Item 1) it would, as submitted by the plaintiff, give rise to an absurd reading of the clause.
The parties employed the expression “the restaurant premises” rather than, for example, the Building. As pointed out by the plaintiff, the expression is not defined in the lease. I am inclined to think that the parties thereby intended to refer to that part of the premises which was to be used for the purposes of the restaurant/café.
Despite the denial of the proposition by Mr Fedele, I accept the unchallenged evidence given by Mr Ajaka concerning the exclusive use of the courtyard area enjoyed by Enarkan Pty Ltd and then by At A Café Pty Ltd prior to the re-development of the premises. I further accept that these facts were known to both parties at the time the lease was executed. So, too, was the proposed layout of the area to the rear of the café itself, as depicted upon Ground Floor Plan A4.0B. That plan described at least part of the area as “Café yard”, and thus an area that forms part of the café. The layout depicted in the plan entails that apart from the areas to be used for other tenants’ bins, the rear area is only accessible from the cafe itself (through its rear door or through the outdoor seating area on The Corso side) or along the pathways which in my view were intended for the exclusive use of the café. In these circumstances, I think that the concept of “the restaurant premises” within cl 23 includes not only the pathways that lead from the garage to the café itself and from the café itself along the rear of the building to the street (The Corso), but also the Café yard area shown in green on the plan.
On that basis, cl 23 operates so that the external areas between those areas and the garage are to be Common Parts for the use and enjoyment of all occupants of the Land and the Lessor. That is, the bin areas and the immediately adjacent pathway around the bin areas are designated as Common Parts. It makes good sense for those areas to be treated that way. On the other hand, it would make little sense for the other areas behind the building (including the small “Café yard” as shown, for example, on photographs 1, 4 and 7 of exhibit D) to be so treated. Those areas are not amenable for use by other tenants or the Lessor. It would be odd if the Lessor was able to exercise rights over those areas such as those conferred by cll 10.02.4 and 10.02.6 of the Memorandum (the granting of licenses and the erection of structures).
It seems to me that reading the lease as a whole, and taking into account the surrounding circumstances referred to above, reasonable business persons would have understood that the Café yard area (shown in green on Plan A4.0B) would also form part of the Demised Premises. That is to say, the Café yard area also falls within the notion of “the whole of the lock-up shop and the garage”. The plaintiff thus enjoys exclusive possession of the two pathways referred to earlier, and the Café yard area, subject of course to the obligations which arise from their status as parts of the Demised Premises.
It is not necessary, in light of that conclusion, to consider the plaintiff’s claim under the Australian Consumer Law. I will not do so, other than to state that I would have concluded, based on the evidence given by Mr Ajaka and by Mr Dunn, coupled with certain concessions made in cross-examination by Mr and Mrs Fedele (at transcript pages 167-168, and pages 186 and 188), that there were discussions in the latter half of 2012 in which it was stated by Mr Ajaka, and either accepted or at least not contradicted (then or subsequently) by either of the defendants, that the café would continue to use the rear yard as well as the garage. That, together with the subsequent submission of draft leases accompanied by plans showing the “Café yard”, was the linchpin of the plaintiff’s contention that the defendants had engaged in misleading or deceptive conduct. I would also have accepted the thrust of Mr Ajaka’s unchallenged evidence concerning his understanding that under the lease the café would continue to have use of the rear yard except for the residential tenants’ bin area.

The Commencement Date

The second issue is whether the Commencement Date of the lease is 1 May 2015 as contended by the plaintiff, or 12 December 2014 as contended by the defendants. The determination of this issue depends upon the operation of cl 21(g) of Annexure A, which provides:

The Commencement Date of this Lease shall be the earlier of the day after the expiration of the Fitout Period and the day on which the Lessee commences trading from the Demised Premises, provided that if the Lessor is still to carry out works outside the Demised Premises which may disrupt the operation of the Demised Premises as a restaurant, the Lessee may delay the commencement of the operation of the restaurant until such works have been completed and in such case the Commencement Date of the Lease shall be delayed until the day following the completion of such works by the Lessor. However, if the Lessor has not obtained an occupation certificate in respect of the Lessor's Works relating to the Demised Premises by the Commencement Date as otherwise calculated in accordance with this Lease, then the Commencement Date will be extended to the day following the date on which the Lessor gives the Lessee a copy of such occupation certificate.

The plaintiff submitted that the proviso to the first sentence operated because the defendants did not complete their construction of certain awnings until 30 April 2015, and this construction precluded the plaintiff from opening the restaurant. The defendants submitted that the proviso did not operate because the works contemplated by the proviso do not extend beyond works required to be performed by the Lessor under the lease, and the construction of the awnings was not work of that character.
The plaintiff did not commence trading at the premises until 7 May 2015. Leaving aside the proviso, the Commencement Date calculated in accordance with the first sentence of cl 21(g) would be the day after the expiration of the Fitout Period. The defendants gave the plaintiff the keys to the premises, and gave seven days’ notice of the commencement of the Fitout Period, on 3 September 2014. The Fitout Period thus commenced on 10 September 2014. Accordingly, by cl 21(a)(i) of Annexure A, the Fitout Period would expire 56 days from 10 September 2014 (5 November 2014) or 7 October 2014, whichever shall occur later. On any view of cl 21(a)(i), the latest date for expiry of the Fitout Period would be 2 December 2014.
However, the defendants did not obtain an Occupation Certificate in respect of their works under the lease until 10 December 2014, and a copy of the certificate was not given to the plaintiff until 11 December 2014. The second sentence of cl 21(g) would thus operate so that the Commencement Date would be the following day, 12 December 2014.
The plaintiff’s argument that the proviso to the first sentence of cl 21(g) operates to provide a later Commencement Date depends upon establishing that the Lessor was “still to carry out works outside the Demised Premises which may disrupt the operation of the Demised Premises as a restaurant” and that the Lessee delayed commencement of operation of the restaurant until such works were completed.
From at least 21 January 2015 the plaintiff was calling upon the defendants to install the outside awnings as shown in the plans drawn by Dunn Architects, and as required by the terms of the defendants’ development consent. The defendants maintained, correctly in my view, that they were not required under the terms of the lease to carry out the works. They nonetheless did so in late April 2015. It may be accepted, based on Mr Ajaka’s evidence, that the works were of a character that would disrupt the operation of the café.
The plaintiff does not contend that erection of the awnings was part of the Lessor’s Works required pursuant to cl 21(a) of Annexure A (or otherwise required pursuant to cl 20 of Annexure A). The plaintiff’s argument that the proviso operates requires that the notion of works still to be carried out by the Lessor outside the Demised Premises can extend to works not required under the terms of the lease.
I do not think that the proviso should be construed in that manner. I agree with the submissions made by the defendants to the effect that the expression “still to carry out works” suggests that the operation of the proviso must be considered at the time the Commencement Date would otherwise be fixed, and can only operate if the Lessor at that time is still obliged under the lease to carry out works outside the Demised Premises. I note that cl 21(c) provides that the Fitout Period will not commence until the Lessor’s Works within the Demised Premises are practically completed.
The plaintiff points to the fact that the proviso does not refer in terms to the Lessor’s Works and it could have easily done so. However, I would regard the reference to works which are still to be carried out, as merely a shorthand reference to Lessor’s Works still to be carried out. To my mind, the word “still” is indicative of works that are required to be carried out but remain outstanding.
In my opinion the Lessor was not, whether on 5 November 2014 or 2 December 2014, “still to carry out works outside the Demised Premises” within the meaning of the proviso. It follows that the proviso to the first sentence of cl 21(g) did not operate. The Commencement Date of the lease was thus 12 December 2014 as extended by the operation of the second sentence of cl 21(g).
I have not overlooked the additional submission made by the plaintiff that the Commencement Date was not set by reference to the Occupation Certificate obtained by the defendants in December 2014 because that Occupation Certificate was “liable to be deemed invalid for non-compliance with the terms of the development approval”. This submission was based upon the content of an email sent to Mr Ajaka on 30 March 2015 by a building certifier, Mr Zaher, in which Mr Zaher stated that he had informed the defendants that “the Occupation Certificate will be deemed invalid if all construction work is not completed in accordance with the development application and the issued construction certificate”. Mr Zaher was not called as a witness. The defendants read in their case an affidavit affirmed by Mr Shanmugananthan, the certifier responsible for the issuing of the Occupation Certificate on 10 December 2014. Mr Shanmugananthan maintained that the Occupation Certificate was properly issued in accordance with applicable planning laws. Mr Shanmugananthan was not required for cross-examination.
In these circumstances I am not prepared to find that the Occupation Certificate was other than properly issued, or find that it was “liable to be deemed invalid”. In my view, the Occupation Certificate is an “occupation certificate in respect of the Lessor’s Works” for the purposes of cl 21(g) of Annexure A. As stated earlier, the clause operated to set 12 December 2014 as the Commencement Date of the lease, this being the day following the date on which the Lessor gave a copy of the Occupation Certificate to the Lessee.

Termination of the lease

The defendants served a Notice of Termination of the lease upon the plaintiff on 7 March 2016. The notice was based on an alleged failure on the part of the plaintiff to comply with a Notice of Breach of Covenant that had been served on 27 January 2016. That notice asserted that the plaintiff had breached the assignment provisions contained in cll 5.01 and 5.02 of the Memorandum. The notice called for the plaintiff to remedy the breach by “reinstating the effective control of the lessee to the party or parties which had effective control of the lessee on the commencement of the lease”. The letter from the defendants’ solicitor which accompanied the notice referred to changes in shareholdings in the plaintiff company on 19 September 2014 and 1 September 2015 whereby Mr Ajaka’s 1000 shares in the company had been transferred to Ms Vicki Varvaritis. It was asserted in the letter that the transfers resulted in a change in effective control of the plaintiff. A period of 21 days was given for the plaintiff to remedy the breach by reinstating effective control of the company to the party or parties who had effective control on the Commencement Date of the lease.

On 2 February 2016 Mr Ajaka sent an email to the defendants’ solicitor stating that insofar as the transfer of shares gave control to a third person it was “inadvertent”, and that a process was underway whereby control would be returned to him. On 7 February 2016 a Form 484 was lodged with ASIC to record a reduction of 1000 in the number of shares held by Ms Varvaritis and an increase of 1000 in the number of shares held by Mr Ajaka.
When the plaintiff company was formed on 12 September 2012, 1000 ordinary shares were allotted to Mr Ajaka. Mr Ajaka was appointed as the only director, and Mr Illek was appointed as the company secretary.
Mr Ajaka transferred all of his shares to Mr Illek on 1 February 2013, but on 5 February 2014 Mr Illek transferred the shares back to Mr Ajaka. Transfer forms in respect of those transfers were executed, and remain in the company register.
On 19 September 2014 Mr Illek prepared a Form 484 which recorded that Ms Varvaritis had become a director of the company, and that 500 of Mr Ajaka’s shares had been transferred to her. The Form 484 was then lodged with ASIC. No transfer form can be found in the company register in respect of the recorded transfer of shares.
On 1 September 2015 Mr Illek prepared another Form 484. This form recorded that Mr Ajaka’s remaining 500 shares had been transferred to Ms Varvaritis (making her the sole shareholder). The Form 484 was then lodged with ASIC. Again, no transfer form can be found in the company register in respect of the recorded transfer of shares.
Evidence was adduced from Mr Ajaka, Ms Varvaritis and Mr Illek to the effect that no share transfers were ever effected between Mr Ajaka and Ms Varvaritis, and that Mr Illek had been acting in error when he prepared and lodged the Form 484 documents in September 2014 and September 2015. It was contended by the plaintiff that the true position was that at all times since February 2014 Mr Ajaka was the sole shareholder in the company. Accordingly, so it was submitted, the plaintiff was never in breach of the lease, and the security deposit it provided should be released as the deposit is only required if the Lessee is in breach (see Item 17 of the Reference Schedule).
The defendants submitted that transfers of shares are admitted on the pleadings, and the defendants are entitled to rely upon the records maintained by ASIC. The defendants submitted that the explanation for the change in shareholding given by the plaintiff was incredible, and in any case a change in control need not be deliberate to constitute a breach of the lease.
I should state at the outset that I do not think there is any substance in the contention that transfers of shares are admitted on the pleadings. The plaintiff’s pleading does refer to inadvertent transfers of shares in September 2014 and September 2015, but it is clear from a reading of that part of the pleading as a whole that the plaintiff asserts that no transfers actually occurred, and the expression inadvertent transfer refers only to the apparent effect of the Form 484 documents.
Mr Ajaka gave evidence that in about July or August 2014 he had discussions with Ms Varvaritis about her lending approximately $300,000 to assist with the carrying out of works at the premises, and about becoming a director of the company. Mr Ajaka stated that these discussions included talk about Ms Varvaritis possibly converting her loan into a shareholding in the company after about 12 months.
Ms Varvaritis gave evidence to similar effect, although she said the discussion occurred in about September 2014. Ms Varvaritis gave evidence that in the period from about September 2014 to May 2015 she, or a family trust of which she is a beneficiary, lent various amounts “to the Pool Café” totalling $340,000. Ms Varvaritis stated that she only expected to become a director of the company, not a shareholder, although that was seen as something that might possibly occur at a later time. She said that she had no recollection of ever signing any share transfers or agreements for transfer of shares.
Mr Illek gave evidence that in September 2014 he was requested by Mr Ajaka to attend to having Ms Varvaritis appointed as a director of the company. Mr Illek also said that at that time he understood that Ms Varvaritis “was coming on as a shareholder in the business as Mr Ajaka had discussed this as being a possibility”, and he thus recorded a transfer of 500 shares to her. Mr Illek said that he never saw any transfer of shares or agreement for the transfer of shares to Ms Varvaritis. Mr Illek further gave evidence that in September 2015 he was questioned about the matter by Mr Ajaka, who maintained that it had not been decided to transfer any of his shares, and it was agreed that he (Mr Illek) would “fix it up”. However, according to Mr Illek he compounded the problem by recording a further transfer of 500 shares to Ms Varvaritis, rather than a reversal of the earlier recording. Mr Illek says that he discovered this second error in January 2016, then told Mr Ajaka about it, and it was agreed that steps would be taken to fix it. Mr Illek said that in February 2016 he assisted Mr Ajaka with the lodgement with ASIC of the Form 484 which recorded Mr Ajaka as the holder of the 1000 issued shares.
Mr Ajaka’s evidence on this matter was not challenged in cross-examination. There was also no substantial challenge to Ms Varvaritis’ evidence. It was not suggested to her that she had in fact agreed with Mr Ajaka at any stage to acquire any of his shares, or that she executed any documents to give effect to such a transaction. Mr Illek was tested about how it could be that the transfer was recorded with ASIC, yet no transfer documents had been seen by him. Mr Illek said that with small private companies rules are often broken, and in his experience it can be “rather casual”. Mr Illek gave evidence to the effect that there had been general discussion about the possibility of Ms Varvaritis becoming a shareholder and “he just assumed at that time it had happened”.
Even allowing that a lower than normal level of formality may have operated in relation to this small private company, it strikes me as extraordinary that Mr Illek would have proceeded to lodge the Form 484 in September 2014 unless he had good reason to believe that it reflected a transaction that had truly occurred. However, in the absence of any real challenge to the evidence of Mr Ajaka and Ms Varvaritis in relation to the matter, and no suggestion having been made to them in cross-examination that any agreement to transfer shares was ever reached (let alone recorded in a transfer form and registered in the company’s records in accordance with articles 109 and 110 of its constitution), I am prepared to conclude that the recorded transfer of 500 shares in September 2014 was indeed an error on the part of Mr Illek. The error was probably brought about by a misunderstanding of what he was told by Mr Ajaka about the role Ms Varvaritis would have in relation to the company beyond becoming a director. That is to say, I am prepared to find that there was no transfer of shares from Mr Ajaka to Ms Varvaritis in September 2014. In the abovementioned circumstances I am also prepared to accept that there was no transfer of shares from Mr Ajaka to Ms Varvaritis in September 2015, and that the recording of another transfer to Ms Varvaritis at that time was a further error on Mr Illek’s part.
It follows from those conclusions that there was no transfer of shares in the Lessee giving rise to a change in effective control of the Lessee within the meaning of cl 5.02 of the Memorandum. There was thus no deemed assignment of the lease, effected without complying with the procedure stipulated under cl 5.01.
Accordingly, even though it was not unreasonable for the defendants, relying upon the ASIC register, to allege breach of cll 5.01 and 5.02, there was actually no foundation for the allegation. The defendants’ purported termination of the lease was thus invalid. The plaintiff’s alternative claim for relief against forfeiture does not arise.

Outstanding building works

The next issue to consider is whether the defendants should be ordered to perform certain building work, namely, the construction of some ramps, and the installation of a drainage pipe from the garage to the grease trap.
The ramps are said to be required pursuant to condition 44 of the defendants’ development approval, and are shown on Ground Floor Plan A4.0B. The plaintiff contends that even though the ramps are not referred to in sub-paragraphs (a) to (i) of cl 21(a)(iii) “the fact that clause 21(a)(iii) specifically refers to works being carried out in accordance with Ground Floor Plan A4.0B is critical to the construction of this clause”.
I understood the plaintiff to submit that cl 21(a)(iii) should be construed so as to impose an obligation on the defendants to construct the ramps shown on the plan, or alternatively a term should be implied which had that effect.
I am unable to accept those submissions. It seems to me that cl 21(a)(iii) is a detailed provision which specifies with some particularity the works required to be undertaken by the defendants. Those are the works listed in sub-paragraphs (a) to (i). Those works (“such works”) are required to be carried out generally in accordance with the listed plans. The plans identify works not falling within sub-paragraphs (a) to (i). However, that fact does not mean that those works (which, to the extent they have not already been carried out, do not fall within “Lessor’s Works”) are also required to be undertaken by the defendants. To read the clause in that way would undermine the evident intention of setting out with some precision in sub-paragraphs (a) to (i) the further works the Lessor is required to carry out.
Further, no term should be implied as suggested by the plaintiff. The implication cannot in my opinion be said to be necessary to give business efficacy to the contract. The plaintiff referred to an implied duty of co-operation, and submitted that the parties were obliged to do all acts necessary on their part to enable the other party to obtain a benefit under the contract (see Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607). However, I do not see how this advances the matter for the plaintiff. In my opinion, use by the Lessee of the Demised Premises following construction of the ramps by the Lessor ought not be seen as a benefit under the contract, properly construed. It is not a situation that is envisaged under the contract.
The situation is different in relation to the drainage pipe. The installation of the pipe falls within the Lessor’s Works (see sub-paragraph (f) of cl 21(a)(iii)). Even though the plaintiff has agreed to bear the defendants’ costs of that installation (see the penultimate paragraph of cl 21(a)(iii)), the defendants’ obligation remains unsatisfied. There does not appear to be any reason why that obligation cannot now be performed. The defendants did not advance any other matter as a reason why an order requiring performance of the obligation should not be made.

Lessor’s consent to s 96 application

The next issue to consider is whether the defendants are obliged to give their consent, as owners of the property, to an application to be made by the plaintiff under s 96 of the Environmental Planning and Assessment Act 1979 (NSW) to modify a development consent in respect of the trading hours of the café.
The relevant consent was given on 26 February 2013 in relation to development application No 689/2012. The application concerned various building works to be undertaken at the property, including alterations and additions to the ground floor café. The application noted that the present use of the site by the café involved hours of operation from 8am to 10pm, and proposed that such use continue. Condition 14 of the consent that later issued provides that the hours of operation of the business are restricted to 8am to 10pm, Monday through to Sunday.
In October 2014 the plaintiff lodged (with the consent of the defendants) a development application (No 792/2014) for outdoor dining at the café. This application sought hours of operation of 7am to 10pm. A development consent was issued in respect of the application in January 2015. The consent itself is not in evidence, but it appears from a Council record that Condition 4 of the consent provides that the hours of operation for outdoor dining are 7am to 9:30pm, Monday to Sunday.
A situation has thus arisen where the hours of operation permitted for indoor dining (8am to 10pm) and outdoor dining (7am to 9:30pm) differ.
Allowing only outdoor dining between 7am and 8am seems anomalous. Moreover, Mr Ajaka gave evidence, which was not challenged, to the effect that numerous other cafes in the Maroubra locality opened at 7am each day.
In these circumstances, the plaintiff wishes to make an application to modify the consent issued in relation to development application No 689/2012 so that indoor dining can commence at 7am each day rather than 8am. The defendants have declined to give their consent to the making of that application.
The plaintiff submitted that the defendants are obliged to give their consent because to do so is necessary to entitle the plaintiff to a benefit under the contract. Reliance is placed upon the principles referred to in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (supra) at 607-8 where Mason J (as his Honour then was) stated:

It is easy to imply a duty to co-operate in the doing of acts which are necessary to the performance by the parties or by one of the parties of fundamental obligations under the contract. It is not quite so easy to make the implication when the acts in question are necessary to entitle the other contracting party to a benefit under the contract but are not essential to the performance of that party’s obligations and are not fundamental to the contract. Then the question arises whether the contract imposes a duty to co-operate on the first party or whether it leaves him at liberty to decide for himself whether the acts shall be done, even if the consequence of his decision is to disentitle the other party to a benefit. In such a case, the correct interpretation of the contract depends, as it seems to me, not so much on the application of the general rule of construction as on the intention of the parties as manifested by the contract itself.

Here, an implication of the second type is propounded by the plaintiff. That is, a duty to co-operate in the doing of acts necessary to entitle the other party to a benefit under the contract.
The relevant benefit under the contract may be described as the right of the Lessee to conduct the café business (the permitted use under the lease) at times suitable to it. It is clear that in order for the Lessee to obtain permission from the Council to alter the trading hours to those regarded by the Lessee as more suitable to it, the Lessee requires the Lessor’s consent to the making of the requisite application.
The question is whether the contract imposes upon the Lessor a duty to co-operate in that respect, or whether it leaves the Lessor at liberty to decide for itself whether to give the consent. This question depends upon the intention of the parties as manifested by the contract itself.
The lease in the present case contains no express restrictions upon the maximum number of trading hours for the café. Indeed, cl 4.03 of the Memorandum imposes an obligation upon the Lessee to keep the café open for business “for not less than the regular customary days and hours for businesses of the like nature”. Of course, that obligation must itself be read together with the other obligations imposed upon the Lessee, including the prohibition upon creating a nuisance, contained in cl 4.02.2 of the Memorandum.
However, the manifest intention of the parties is that the Lessee would keep the café open for at least as long as other comparable businesses. Otherwise, the question of operating hours is essentially left to the Lessee. In the present situation, the plaintiff seeks to obtain permission to allow it to open for indoor dining at 7am, when other local cafes open. There is nothing in the lease to suggest that the Lessor is free to stymie the obtaining of a permission of that character. No such right is reserved, for example, in cl 10.02 of the Memorandum.
As submitted by the plaintiff, the situation is similar to that which was before Bryson J (as his Honour then was) in CF & SP Pty Ltd v FAI General Insurance Co Ltd (Supreme Court (NSW), Bryson J, 17 December 1998, unreported). That case concerned the question whether the landlord of a nightclub was bound to give its consent to an application by the tenant for permission to increase its trading hours and the maximum number of patrons. After referring to Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (supra) his Honour stated:

The lessee relied on the second and less easy implication where the act in question is not essential to the performance of the other party’s obligation and is not fundamental to the contract, but is necessary to entitle the other contracting party (in this case the lessee) to a benefit under the contract. It is necessary to ask whether the terms of the lease leave the lessor at liberty to decide for itself whether consent should be granted or withheld, even if the consequence of the decision is to disentitle the other party to a benefit.
In my opinion there is no indication whatever in the terms of lease or the nature of the rights which it creates that the lessor is to have an opportunity to decide, for its own benefit and in its own interest, whether or not the lessee is to be able to get the approval of any public authority necessary for the lessee to do anything which is within the uses permitted by the lease. Having granted the lease and permitted the uses, the lessor cannot be able to consult and serve its own interests on the extent to which the lessee could make the permitted uses of the premises. As an extreme case this may be tested by asking whether a lessor could demand to be paid a fee for giving its consent, but the same result follows at less extreme and superficially more attractive tests such as whether the lessor can ask itself whether its commercial interests in maintaining good relations with other tenants are well served by having a nightclub open at all hours, or by having a lot of people in it. The lease shows no intention to reserve to the lessor liberty to decide such things, so its duty to co-operate is not qualified.

Bryson J went on to state:

It may be that statements of law in terms of non-derogation from grants express the same underlying legal principle as is the source of an implied obligation referred to by Mason J, but in a narrower context and in an older form of expression. In my view both are applicable to the lessee’s claim and their application produces an answer favourable to the lessee in both cases. All that is asked of the lessor is that it give its consent in writing, and all that it is asked to consent to are applications for approvals of the lessee’s doing things which the lessee may do according to the terms of the lease, and in those circumstances the lessor may not withhold its consents. The position would be different if the subject matter were one with which the lease dealt in terms or one over which the lease gave the lessor an opportunity to grant or withhold consent. It would also be different if the application involved making some alteration to the premises which the terms of the lease do not permit the lessee to make. This case is very simple in what is required of the lessor, and in so far as some consequence adverse to the lessor’s interest can be perceived, the lessor has already committed itself by granting the lease. The lessor does not have an opportunity to decide whether it is reasonable that it should have a nightclub on its premises or whether it should trade for extended hours; the lessor has already committed itself by granting the lease and the lessor is obliged to accept the judgment of the public authority.

The defendants did not direct any submissions to the question whether they were under an implied obligation of the type propounded. The defendants merely pointed to the absence of an express provision requiring them to give their consent.
In my opinion, the defendants are not entitled to withhold their consent, as owners of the property, to the making of the proposed application by the plaintiff to modify development consent No 689/2012 so as to obtain permission to trade for a longer period. The provision of their consent is in my view required as part of an implied duty to co-operate with the plaintiff to enable the plaintiff to seek permission for more extensive trading hours.

Conversion of café equipment

The final issue to consider is whether the defendants are liable to the plaintiff in conversion in respect of certain café equipment which had been left or stored in a garage at the property prior to the lease coming into existence.
It is common ground that various items of equipment that had been used as part of the café business when At A Café Pty Ltd was in occupation were left at the property after that business ceased to trade in about mid-2012. It is also not in dispute that the equipment was left at the property pursuant to a permission given by the defendants, albeit that there is a conflict in the evidence as to the terms of the permission. Finally, it is not in dispute that the equipment that was located in the garage was disposed of by the defendants in December 2013, after they gave notice to Mr Ajaka of their intention to do so.
For the reasons which follow, it is my opinion that the conversion case must be rejected because the plaintiff has failed to establish that it had the requisite title or standing to sue for the alleged conversion.
The essence of actionable conversion is “an intentional act or dealing with goods inconsistent with or repugnant to the rights of the owner, including possession and any right to possession” (see Bunnings Group Ltd v CHEP Australia Ltd (2011) 82 NSWLR 420; [2011] NSWCA 342 at [124]). In its closing submissions the plaintiff contended that in about August 2006, ownership of the equipment was transferred from At A Café Pty Ltd to Mr Ajaka. This transfer was said to have been an oral transfer, effected by Ms Ablett. The plaintiff further contended that shortly after the incorporation of the plaintiff in September 2012, Mr Ajaka transferred ownership of the equipment to the plaintiff. Again, the transfer was said to be an oral transfer.
I am not satisfied on the evidence that either transfer occurred.
Ms Ablett deposed that after August 2006 Mr Ajaka began operating the café on behalf of At A Café Pty Ltd, but before too long she had a conversation with Mr Ajaka to the following effect:

Louie:   It’s not working out with the Bronte and Coogee restaurants. I don’t think it’s in my best interests to be involved. I want to stay with the café.
Helen:      Well if that’s what you want, of course.
Louie:      What if we go in as partners? Run the café together?
Helen:   No, I’d rather not. I just can’t see how I’m going to manage the kids and effectively run the business. It seems the older they get the more work is involved looking after them. I’m kidding myself thinking I can do both. It’s always been your business anyway. Why don’t you just take it. I’ll have nothing more to do with it?
Louie:   Well if that’s what you want, fine. Thank you. I’ll speak to the landlords about changing the ownership on the lease over into my name.
Helen:      Fine.

Mr Ajaka deposed that at about that time he had a conversation with Ms Ablett to the following effect:

Helen: The business is yours. You’ve always ran it. I’ve never really had anything to do with it anyway. You should just take it.
Louie: Fine Helen, I’ll take the café. I’ll let Antonio and Maria know what’s happening.

Mr Ajaka further deposed that “notwithstanding that At A Café officially held the lease and I wasn’t a director or shareholder of At A Café, I controlled the café business”. Mr Ajaka deposed in effect that he continued to own and manage the business notwithstanding that At A Café Pty Ltd held the lease, and referred to himself as the owner of the business in discussions with the defendants, who were nonetheless content for At A Café Pty Ltd to remain as the lessee.
It is clear that At A Café Pty Ltd remained the lessee. There is also evidence that At A Café Pty Ltd continued to operate the business. Banking records adduced in evidence showed that the takings of the business were deposited into an account maintained by the company right up until the business ceased to trade in mid-2012. The evidence does not suggest that a transfer of ownership of business to Mr Ajaka was ever actually effected. No financial records were produced which recorded such a transfer, or showed Mr Ajaka as the owner. No taxation returns were produced which showed how the income of the business was treated. Mr Ajaka gave evidence to the effect that the equipment itself remained insured under a policy held by At A Café Pty Ltd.
There is also evidence that At A Café Pty Ltd was engaged in discussions with the defendants in the period from 2007 to 2009 about obtaining a new lease. These discussions not only involved Mr Ajaka (who described himself as “Manager” on a letter sent by the company to the defendants dated 29 November 2007), but also Mr Damianos, who was a director of, and shareholder in, the company. Mr Damianos remained a director until August 2012.
Whilst I accept that from about 2006 Ms Ablett was personally content to have nothing further to do with the café business, and would have been happy for Mr Ajaka to become the owner of the business (including its equipment), the business was not hers to give. There is no evidence that Ms Ablett was authorised by the company (or had the permission of Mr Damianos) to give the business to Mr Ajaka.
In these circumstances, I am not persuaded that there was a transfer of the café business (and title to any chattels of the business) by At A Café Pty Ltd to Mr Ajaka. Ms Ablett may have been happy to play a passive role in relation to the company and its affairs, and content to leave the management of the business entirely to Mr Ajaka, but that falls short of effecting a transfer of ownership as alleged by the plaintiff. Mr Ajaka’s dealings with the equipment occurred in the course of his role as the manager for At A Café Pty Ltd. To the extent that he had custody or control of the equipment, it was exercised in that capacity. Mr Ajaka was not personally in possession of the equipment.
I have not overlooked that on 4 September 2012 Ms Ablett signed a letter addressed to the defendants’ solicitors in which it was stated that she did not claim any interest in the business operated from the premises, and did not object to a lease being granted to a new entity owned by Mr Ajaka. That letter is consistent with her passive approach, and does not lead me to conclude that At A Café Pty Ltd had in fact transferred its business to Mr Ajaka. I should add that I do not accept the plaintiff’s submission that the letter of 4 September 2012 was arranged by Mr Ajaka to give effect to his intention to transfer the equipment to the plaintiff.
Mr Ajaka deposed that he became a director of the plaintiff on 12 September 2012 and “after the incorporation I gave all of the equipment which was in storage to the new company”. This evidence should be read as an assertion that the gift occurred shortly after the date of incorporation. I note that the plaintiff ultimately submitted that the transfer of ownership took place at about that time. Mr Ajaka further deposed that he did not execute any documentation to effect the transfer, having been told by Mr Illek that there was no need for such.
Mr Ajaka was not directly challenged in cross-examination about this aspect of his evidence. However, in the context of questioning about the period when Mr Illek was the sole director of and shareholder in the plaintiff, Mr Ajaka gave a contradictory answer. He stated that at the time when he transferred his shares to Mr Illek (on 1 February 2013) the company did not own anything. (Mr Ajaka did not resume his position as a director in and shareholder of the plaintiff until February 2014. By that time, the equipment had already been disposed of by the defendants.)
Mr Ajaka had earlier in his cross-examination stated that he had transferred his shares to Mr Illek, who “wanted a shelf company”, because at that stage he (Mr Ajaka) wasn’t using the company and wasn’t going to use it in the near future.
Mr Illek gave evidence in cross-examination that he became the shareholder after Mr Ajaka had said to him “we are not using the company”, and said he was not happy about having to pay the annual fee (presumably to ASIC). Mr Illek gave evidence that he told Mr Ajaka that he (Mr Illek) could probably use the company, which he knew “had no history” and was “clean”.
This evidence tells strongly against Mr Ajaka’s evidence that in about September 2012 after the incorporation of the plaintiff he had made a substantial gift of property (of considerable worth in his view) to the company. I note that Mr Illek gave no evidence to corroborate Mr Ajaka’s evidence that the pair spoke about the transfer of the property. The evidence, referred to by the plaintiff in submissions, that in an email in 2013 Mr Ajaka referred to the equipment as “the Pool Café equipment” provides no firm support for the contention that there had been an earlier transfer of the equipment to the plaintiff company.
In these circumstances, and despite the lack of a direct challenge to Mr Ajaka’s claim that he gave the equipment to the company, I am unable to accept his evidence on that matter. His evidence that the company did not own anything in February 2013 is more likely to be correct. It accords with the tenor of the discussions held at that time concerning the transfer of the shares in the shelf company that Mr Illek understood “had no history”.
I should add that although I consider that Mr Ajaka’s evidence was for the most part reasonably accurate and reliable, I was less impressed with some of his evidence concerning financial arrangements in relation to the business. His evidence concerning the operation of the business, and in particular the takings of the business, in the period immediately prior to its cessation in 2012 was unimpressive. Mr Ajaka appeared to me to be defensive and somewhat evasive when giving that evidence. It caused me to think that Mr Ajaka was capable of giving incorrect evidence on particular matters if he considered that the evidence would assist the plaintiff’s case.
Accordingly, even if (contrary to my earlier finding) Mr Ajaka was the owner of the equipment in September 2012, he did not transfer ownership of the equipment to the plaintiff as contended. The basis advanced by the plaintiff to establish its title to sue in conversion was not in my opinion made out. In December 2013, when the defendants disposed of the equipment that had been stored in the garage, the equipment was not owned by the plaintiff and the plaintiff neither had possession of the goods nor an immediate right to possess the goods.
That conclusion renders it strictly unnecessary to deal with the substance of the alleged conversion. However, in case my conclusion concerning the plaintiff’s title or standing to sue is incorrect, I should state the conclusions I would have made had it been necessary to deal with that matter.
The plaintiff’s claim in conversion was, as pleaded, confined to the equipment that was stored in the garage at the rear of the premises. Had the plaintiff been the owner of the equipment in December 2013 I would have held that the equipment had been converted by the defendants.
First, I would have held that in May 2012, around the time when the café business was about to close, Mr Fedele gave permission to Mr Ajaka to store items of café equipment at the property until the then proposed demolition works commenced. Further, based on the evidence given by Mr Fedele in cross-examination, I would have held that in about July 2012, after the business had closed, Mr Fedele told Mr Ajaka that instead of proceeding with the originally planned rebuilding, he was going to lodge a new development application, and Mr Ajaka could leave the café equipment on the property until the building works commenced. Notwithstanding Mr Ajaka’s evidence to the contrary, I would have accepted Mr Fedele’s denial that he had told Mr Ajaka that the equipment could stay on the property until the new café was built. In any case, it seems to me that the permission granted by the defendants to store equipment at the property was revocable by them.
Secondly, the defendants, by letters sent by their solicitors on 13 August 2013 and 4 October 2013 revoked the permission and demanded that the goods be removed from the garage. Mr Ajaka did not agree to do so, despite further demands made by the defendants’ solicitors on 13 November 2013 and 4 December 2013. It seems, from a letter sent by Mr Ajaka’s solicitor on 11 October 2013, that Mr Ajaka was asserting that it had been agreed that the equipment could remain in the garage until after the building works had been completed.
Thirdly, having regard to Mr Ajaka’s apparent stance and the fact that the terms of a new lease continued to be the subject of negotiations, I would not have concluded that there had been an abandonment of the equipment in the garage, or an implied consent to the disposal of the goods (see Sachs v Miklos [1948] 2 KB 23 at 37).
In those circumstances I would have concluded that the subsequent disposal of the equipment in the garage amounted to a conversion. The defendants’ act in arranging for the goods to be taken away by a scrap metal recycler was an act inconsistent with or repugnant to the rights of the owner. It would have been open to the defendants to avail themselves of the provisions of the Uncollected Goods Act 1995 (NSW), but they did not do so.
Finally, it should be noted that the plaintiff did not serve any evidence of the value of the goods until shortly prior to the hearing. In the absence of the defendants’ consent I would not have been prepared to allow the plaintiff to rely upon that evidence, which was served very late and not in accordance with the orders of the Court. It was suggested by the plaintiff (and not opposed by the defendants) that it may be appropriate for the question of value of the goods to be dealt with subsequently by a referee in the event that conversion of the goods was established. I indicated that the entire question of damages may be a matter that could be referred out if conversion was established. Neither party expressed opposition to that course, and the hearing continued without any evidence of value being adduced.
A considerable body of evidence was nonetheless called by the plaintiff concerning the condition of the equipment. This evidence, which was generally to the effect that the items of equipment were in good working order, was not the subject of substantial challenge in cross-examination. Neither was the evidence given by Mr Ajaka concerning his preparation of inventories of the equipment, and his evidence about the leasing of café equipment. Had it been necessary to deal with issues going to the question of damages, I would have accepted the evidence adduced by the plaintiff on those matters.
It should also be noted that in the course of closing addresses, an application was made to amend the Second Further Amended Statement of Claim to add Mr Ajaka as a plaintiff in respect of the allegations made in paragraphs 68 to 85. Those are the paragraphs that contain the allegations of conversion of the equipment that was stored in the garage. I declined that application, primarily due to its lateness. The application was advanced in circumstances where there was perceived uncertainty concerning the plaintiff’s title to sue for conversion of the equipment. However, that has been an issue since at least 20 January 2016 when the defendants filed their Defence to the initial Statement of Claim. The plaintiff’s assertion that the issue did not arise until certain evidence was given by Mr Ajaka in cross-examination is incorrect. Moreover, allowing the amendment at that stage would have either deprived the defendants of a reasonable opportunity to consider the conversion claim made by Mr Ajaka, or otherwise would have caused the adjournment of the almost completed hearing, and possibly led to the re-calling of Mr Ajaka as a witness. In those circumstances, I considered that it would neither be in the interests of justice, nor in accordance with the overriding purpose referred to in s 56 of the Civil Procedure Act 2005 (NSW), to accede to the application.

Conclusion

The plaintiff has succeeded on some but not all of the issues raised in the proceedings. To the extent that the plaintiff has succeeded on the first, third and fifth issues, it would be appropriate for the Court to give declaratory relief. An appropriate declaration should also be made in relation to the second issue, upon which the defendants were successful. Consequential upon the plaintiff’s success on the third issue, and no other alleged breaches of the lease by the plaintiff being established, an order should be made requiring the defendants to do what is necessary to secure release of the security deposit lodged by the plaintiff in February 2016. An order should also be made to the effect that the defendants perform their obligation under sub-paragraph (f) of cl 21(a)(iii) of the lease. The Second Further Amended Statement of Claim should otherwise be dismissed.
I direct that within 7 days the parties bring in Short Minutes of Orders to give effect to these reasons. The Short Minutes should also deal with costs. If there is no agreement concerning costs, the Court will make directions for the provision of written submissions, with a view to determining any such question on the papers.

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Decision last updated: 12 December 2017

Medium Neutral Citation:	Maroubra Pool Café Pty Ltd v Fedele [2017] NSWSC 1722
Hearing dates:	30 – 31 October 2017; 1 – 2 November 2017
Date of orders:	12 December 2017
Decision date:	12 December 2017
Jurisdiction:	Equity
Before:	Darke J
Decision:	See paragraphs [120] and [121].
Catchwords:	LEASES AND TENANCIES – leases – construction of leases – general principles of construction – whether certain area forms part of demised premises – proper commencement date of lease – whether lessor required to perform certain building works LEASES AND TENANCIES – leases – termination of leases – termination due to alleged change of control – whether shares in plaintiff company transferred without lessor’s consent – incorrect records of share transfers lodged with ASIC – no share transfers occurred – termination invalid LEASES AND TENANCIES – leases – obligations of lessor – whether lessor obliged to consent to lessee’s application to modify development consent in relation to trading hours – implied duty to co-operate to allow other party to have benefit of contract – terms of lease support implication of obligation – lessor required to give its consent TORTS – conversion – title to goods – standing to sue – where plaintiff claimed that defendants had disposed of stored café equipment without its consent – where plaintiff alleged that title to goods acquired by transfer – transfer of title not established
Legislation Cited:	Civil Procedure Act 2005 (NSW), s 56 Competition and Consumer Act 2010 (Cth), Sch 2 Conveyancing Act 1919 (NSW), s 129 Environmental Planning and Assessment Act 1979 (NSW), s 96 Uncollected Goods Act 1995 (NSW)
Cases Cited:	Bunnings Group Ltd v CHEP Australia Ltd (2011) 82 NSWLR 420; [2011] NSWCA 342 CF & SP Pty Ltd v FAI General Insurance Co Ltd (Supreme Court (NSW), Bryson J, 17 December 1998, unrep) Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 343 ALR 58; [2017] HCA 12 Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 Sachs v Miklos [1948] 2 KB 23 Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596
Category:	Principal judgment
Parties:	Maroubra Pool Café Pty Ltd (Plaintiff) Antonio Fedele (First Defendant) Maria Fedele (Second Defendant)
Representation:	Counsel: Mr M Ashhurst SC with Mr P M Barham Mr C W Robinson (Defendants) Solicitors: Borodin Legal (Plaintiff) Dimarco Lawyers (Defendants)
File Number(s):	2015/378241
Publication restriction:	None