Marquette v Doherty

[2002] NSWSC 580

CITATION:	Marquette v Doherty [2002] NSWSC 580
CURRENT JURISDICTION:	Common Law
FILE NUMBER(S):	SC 13152/01
HEARING DATE(S):	18 June 2002
JUDGMENT DATE:	28 June 2002
PARTIES :	Sam Marquette - Plaintiff Peter John Doherty - Defendant
JUDGMENT OF:	Mathews AJ

LOWER COURT JURISDICTION :	Local Court
LOWER COURT FILE NUMBER(S) :	Q2567 209/01
LOWER COURT JUDICIAL OFFICER :	R Clugston

COUNSEL :	Mr R Freeman - Plaintiff Mrs J C Kelly - Defendant
SOLICITORS:	Scarfone & Co - Plaintiff Lloyd Lancaster - Defendant
LEGISLATION CITED:	Local Courts (Civil Claims) Act 1970
CASES CITED:	Walsh v Lonsdale (1882) 21 Ch.D.9 Multicon Engineering Pty Limited v Federal Airports Corporation (2000) 47 NSWLR 631
DECISION:	Appeal upheld, Magistrate's orders quashed. Each party to pay their own costs of the appeal.

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

MATHEWS AJ

28 June 2002

13152/01 Sam MARQUETTE v Peter John DOHERTY

JUDGMENT

1 HER HONOUR: This is an appeal by way of summons from the judgment and orders of a Local Court Magistrate at Sutherland on 10 September 2001. The Magistrate entered verdict and judgment in favour of Mr Doherty, the then plaintiff, which together with interest amounted to $6,351.71. Mr Marquette, the then defendant, was ordered to pay costs in the sum of $4,400.

2 The appeal is brought pursuant to s 69(2) of the Local Courts (Civil Claims) Act (1970) on the grounds that the Magistrate’s findings were erroneous in law.

3 The background facts can be recited briefly. They were not in dispute before the Magistrate. On 8 December Mr Doherty, as lessor, entered into a two year lease with Goodview Homes Pty Limited (“Goodview”) in respect of shop premises on the ground floor of 362 Forest Road, Hurstville (“the 1997 lease”). The rental was $1,607.74 per month plus 80 percent of the outgoings. The least was to expire on 7 December 1999. However it contained a two-year option to renew, and a holding over clause. The holding over clause was in the following terms:

“ 10.08 HOLDING OVER : In the event of the Lessee remaining in occupation of the Demised Premises after the expiration or sooner determination of the Term granted by the Lease (otherwise than pursuant to the exercise of any option for renewal by the Lessee) with the consent of the Lessor (elsewhere in this clause and the Lease referred to as “holding over”) the Lessee shall become a monthly tenant only of the Lessor at a calendar monthly rental equivalent to a calendar monthly proportion of the rent and other amounts (if any) payable by the Lessee under the Lease at the expiration or sooner determination of the Term increased by ten per centum 10%) and otherwise on the terms and conditions mutatis mutandis as those contained or implied in the Lease so far as applicable. Such tenancy shall be determinable by thirty (30) days’ notice in writing by either the Lessor of the Lessee to the other expiring at any time. No holding over shall be construed as creating a tenancy from year to year.”

4 At that time Mr Marquette was a director of Goodview. On 27 November 1997 he and two other directors entered into a deed of guarantee. The deed recited that Mr Doherty had, at the request of the guarantors, agreed to lease the Forest Road premises to Goodview. The guarantors guaranteed the performance of the lessor under the lease in the following terms:

The guarantors:
“1. Hereby unconditionally guarantee to the Lessor the payment of the rent and other monies payable to the Lessor in terms of the Lease and any renewal of the Lease pursuant to any option for renewal contained in the lease and the due and punctual performance and observance by the Lessee of the terms, covenants and obligations on the part of the Lessee under the Lease including without limitation the obligation to indemnify the Lessor in all cases where indemnities are granted by the Lessee to the Lessor under the Lease.”

5 On 17 April 1998 Mr Doherty entered into an agreement with Goodview to lease the residential and office area on the first floor of the Forest Road premises. The agreement was in writing, consisting of an offer by Mr Doherty which Goodview accepted by affixing its common seal. The term was from 24 April 1998 to 7 December 1999. The rent was $628.33 per month plus a percentage of the outgoings on the property. The terms and conditions were said to include the terms and conditions of the 1997 lease except where they were inconsistent with a reference schedule which was attached to the letter.

6 Goodview failed to exercise the option for renewal within the time specified in the 1997 lease.

7 Between October and December 1999 negotiations took place between Mr Doherty and Goodview with a view to their entering into a new lease for the whole of the premises after the expiration of the 1997 lease. The negotiations did not always run smoothly. On 13 November 1999 Mr Doherty wrote to Goodview complaining that he had not been advised whether Goodview intended to enter into a new lease. He said that a “for lease” sign would be erected on the premises and prospective tenants would be shown over them. On 23 November and again on 26 November Mr Doherty wrote to Goodview’s representative, withdrawing his offer of a new lease and requiring vacant possession at the expiration of the lease on 7 December 1999. However the negotiations were subsequently resumed. On 26 November Goodview’s representative wrote to Mr Doherty accepting his offer of a new lease.

8 Goodview remained in possession after 7 December 1999. Negotiations were still continuing as to the terms of the lease. The rental was agreed at $2,500 per month but it appeared that other terms had not been finally agreed.

9 On 30 June 2000 Mr Doherty sold the premises. In the meantime it is common ground that Goodview defaulted in its rental obligations under the lease. Mr Doherty then called upon Mr Marquette, as guarantor of Goodview’s obligations, to make good its breach. It was this claim which came before the Magistrate. The Magistrate entered a verdict in favour of Mr Doherty for the amount claimed.

10 It was Mr Doherty’s case before the Magistrate that after 7 December 1999 Goodview was holding over under the terms of the 1997 lease. Its obligations under that lease therefore continued. These obligations having been guaranteed by Mr Marquette, he was liable to make good its default.

11 Mr Marquette’s case before the Magistrate was that the 1997 lease was terminated by Mr Doherty’s letters of 23 and 26 November 1999 and that Goodview’s occupation of the premises after 7 December 1999 was under a new lease, the principal terms of which had been agreed in correspondence between Mr Doherty and Goodview’s representatives.

12 The central issue before the Magistrate was therefore whether, after 7 December 1999, Goodview was holding over under the terms of the 1997 lease or whether it was in occupation of the premises under a new lease. It was essential to Mr Doherty’s case to show the former. If, as Mr Marquette contended, the 1997 lease came to an end on 7 December 1999, then so did Mr Marquette’s obligations as guarantor of the lessee’s obligations under that lease.

13 One of the problems on this appeal arises from the manner in which the matter was conducted before the Magistrate. It appears to have been assumed by both parties, and also by the Magistrate, that there were only two possibilities in respect of Goodview’s occupation of the premises after 7 December 1999. Either a binding agreement to lease the premises was established by the correspondence between Mr Doherty and Goodview or alternatively, if no such agreement was reached, Goodview must have been holding over under the terms of the 1997 lease. Accordingly, a great deal of argument was addressed to whether the parties had reached a concluded agreement to lease the premises after December 1997. The Magistrate concluded that the parties were not “ad idem” as to the terms of the new lease other than the rental to be paid. His judgment continued:

“It follows that there was no new lease concluded between the plaintiff and Goodview, and that Goodview remained in occupation of the subject premises pursuant to the holding over provisions of the original least.”

14 In my view this was a fallacious conclusion. There was, as a matter of law, a third alternative, namely that Goodview’s occupation of the premises after 7 December 1999 was under a periodic tenancy or a tenancy at will which was created by its occupation of the premises coupled with the payment and acceptance of rent. It by no means followed that because a new agreement had not been concluded between the parties, Goodview’s occupation of the premises had to be pursuant to the holding over provisions in the 1997 lease. Indeed there was a very good reason why its occupation could not be pursuant to those provisions and why Mr Marquette’s obligations under the guarantee could not have continued beyond 7 December 1999. However this matter was never argued before the Magistrate although the argument was clearly available on the material before him.

15 The proposition is a very simple one. Mr Marquette guaranteed the performance of Goodview’s obligations under the 1997 lease. This related only to the ground floor of the Forest Road premises. In April 1998 Goodview also entered into occupation of the first floor of those premises pursuant to an agreement to lease with Mr Doherty. Clearly Mr Marquette’s obligations under the deed of guarantee dated 27 November 1997 did not extend to that agreement. It was a new agreement in relation to separate premises. The fact that it terminated at the same time as the 1997 lease and that it was expressed to be in the same terms as that lease could in no way serve to incorporate the terms of the 1998 agreement into the 1997 lease so as to render Mr Marquette liable for any breach by the lessee of its terms. The rule in Walsh v Lonsdale (1882) 21 Ch. D. 9 has no bearing on the matter in this respect.

16 After 7 December 1999 Goodview continued in occupation of both the ground floor and the first floor of the Forest Road premises at an agreed rent of $2,500 per month. It was not possible for this occupation to have been pursuant to the holding over provisions of the 1997 lease, for that lease related only to the ground floor of the premises. It was irrelevant, in my view, whether Goodview’s occupation after 7 December 1999 was pursuant to a new lease agreement with Mr Doherty or pursuant to a periodic tenancy or a tenancy at will established by the combination of its occupancy with the payment and receipt of rent. The central matter before the Magistrate was whether Goodview’s occupation of the premises after 7 December 1999 was pursuant to the holding over provisions of the 1997 lease. For the reasons just given, that matter should have been resolved against Mr Doherty. However Mr Marquette’s representatives before the Magistrate did not advert to the issue relating to the 1998 agreement, nor to the fact that the premises and the obligations were different after December 1997. Accordingly the matter went off on a false issue, although all the material was before the Magistrate which would have enabled the case to be dealt with on proper issues had they been adverted to by those present.

17 The argument in favour of Mr Marquette can be put in another way: In the deed of guarantee dated 27 November 1997 Mr Marquette guaranteed Goodview’s obligation to pay rent in relation to the ground floor of the Forest Road premises. The guarantee never extended to Goodview’s rental obligations in relation to the first floor. Yet the rent paid by Goodview after 7 December 1999, in a single payment of $2,500 per month, was for both the ground and the first floors. It would be contrary to principle, and would be most unfair to Mr Marquette, if his guarantee of the rent payable in respect of the ground floor was taken to extend to the rent of the first floor without any confirmatory action ever having been taken on his part.

18 For these reasons I consider that Mr Marquette should have succeeded in the proceedings before the Magistrate. The problem is that this argument was not raised before the Magistrate. Certainly the question of whether Goodview was holding over under the terms of the 1997 lease was a central issue before him. But the arguments adduced against it did not include any reference to the problems created by the 1998 lease agreement. Moreover it appears to have been assumed by all parties, including the Magistrate, that unless a new lease had been created, Goodview could only be in occupation under the holding over terms of the 1997 lease. This, as indicated earlier, was wrong in law.

19 In the normal course of events a party will not be allowed to rely on matters that could and should properly have been raised at the trial. The court retains a discretion to allow new matters to be argued, but it is a discretion to be exercised sparingly and only where justice clearly requires it. A party will be precluded from taking a new ground on appeal which was not taken at trial if the new ground could possibly have been met by calling evidence at that hearing or if, had the ground been raised below, the other party might have conducted the case differently. (Multicon Engineering Pty Limited v Federal Airports Corporation (2000) 47 NSWLR 631). That is not the case here. The issue of law which, on my finding, should have resolved this case in favour of Mr Marquette, was clearly raised by the agreed facts before the Magistrate. The rule against allowing a party to an appeal to rely on matters that were not raised at the trial applies with diminished force where the point sought to be raised asserts an error of law on a material issue, particularly where the error of law relates to a point which is unanswerable. To prevent Mr Marquette’s representatives from relying on the issues raised on this appeal but not at the hearing would expose him to a judgment for money which he does not owe. It is not a large amount of money, but the result would be most unjust.

20 In my view the justice of this situation strongly leans in favour of allowing Mr Marquette to raise on appeal the issue relating to the 1998 agreement notwithstanding that it was not raised before the Magistrate. This will result in the appeal succeeding and the Magistrate’s order being quashed. However Mr Marquette should not receive the costs of this appeal.

21 I uphold the appeal and quash the Magistrate’s orders. I order that each party pay their own costs of the appeal.

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Last Modified: 07/01/2002