Meddings Pty Ltd & Anor v M & M Binders Pty Ltd & Anor
[2009] VSC 347
•13 August 2009
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 4094 of 2008
| MEDDINGS PTY LTD (ACN 073 882 247) & ANOR | Plaintiffs |
| v | |
| M & M BINDERS PTY LTD (ACN 105 313 906) & ANOR | Defendants |
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JUDGE: | BYRNE J | |
WHERE HELD: | Melbourne | |
DATES OF HEARING: | 12-13 August 2009 | |
DATE OF JUDGMENT | 13 August 2009 | |
CASE MAY BE CITED AS: | Meddings Pty Ltd v M & M Binders Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2009] VSC 347 | |
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Landlord And Tenant – Lease – Non-payment of rent
Real Property – Option to purchase – Whether there was an oral promise to sell the properties from which the business was conducted.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr AJ Ritchie | Velos Lawyers |
| For the Defendants | The second defendant appeared in person | |
HIS HONOUR:
This litigation arises out of the sale of a book binding business on 31 October 2003. The legal documentation for the sale agreement is voluminous and complex because the purchaser purchased shares in companies as well as assets of the business. It is sufficient for my purposes that the sale was entered into at an agreed total price of about $4 million and that the purchaser, the firstnamed defendant, M&M Binders Pty Ltd (“M&M”), went into possession of the business and conducted it for some three years. No difficulties arise at this point.
The business had been conducted by the vendors from premises situate at and known as Units 1 and 2, 371 Ferntree Gully Road, Mt Waverley. These premises were owned, as to Unit 1, by the firstnamed plaintiff, Meddings Pty Ltd, and as to Unit 2, by the secondnamed plaintiff, Michaud Australia Pty Ltd. There was also a third property, Unit 3, which was owned by interests associated with the directors of these two companies.
As part of the purchase M&M took a lease of each of Units 1 and 2 from the respective owners. The term of the lease in each case was three years, plus a three year option. The dispute in this case arose in early 2006 when the secondnamed plaintiff, Frank Todisco, the then director of M&M, raised with directors of the vendors, Kevin Thomas Meddings and Pierre Alex Jean Michaud, the question of purchasing the three units and they refused. Mr Todisco told me that this had been the understanding at the time his company purchased the business in 2003.
This refusal was a source of disappointment to Mr Todisco. He ceased paying rent and outgoings due under the leases and declined to exercise the option. He and M&M vacated the premises in the second week of November 2006 when they were effectively required to leave by the lessors.
The case therefore commenced as a claim by the two lessors for rental, outgoings and other sums due under the leases. This attracted a counterclaim which depended upon pre‑contractual statements attributed to Mr Meddings and Mr Michaud to the effect that their respective companies would sell the three units to M&M, or to some other company to be nominated by Mr Todisco, at the end of the term of the lease for a fair market price.
Evidence was given upon this matter by the three persons involved in negotiating the sale of the business on behalf of the vendors. Mr Meddings and Mr Michaud said that the matter of purchasing the freehold was never raised and that they did not agree to sell at any time prior to the contract for the sale of the business. This was corroborated by Joseph Matthew Lederman, their solicitor in 2002 and 2003. He said that the question of the sale of the land was not raised in his dealings with the solicitors acting for the purchaser in those years. The purchasers maintained that nothing on this topic was raised after the sale until early 2006. At that time, early 2006, Mr Todisco raised the question of purchasing the freehold, including unit 3. He was told that they were not interested in selling but that if he made an offer, they would consider it.
Mr Todisco obtained a valuation of $6 million and offered that sum. It was rejected and no counter‑offer was made. The evidence on behalf of the defendants was that of Mr Todisco. He said the question was raised on many occasions and that he was assured by Mr Meddings and, to a lesser extent, Mr Michaud, that they would support him in conducting the business which he was about to buy and that they would sell the land at the end of the three year term for a reasonable price.
Not surprisingly, given the passage of time which has passed since these events of 2003, Mr Todisco was unable to specify the precise terms of these conversations, their timing or even their location. His brother, Mario, who was also said by Mr Todisco to have been involved in these matters, gave evidence, saying that he was not involved in them at all.
Support was offered for Mr Todisco's evidence from the events of 2006. He said that he paid early the final instalment of about $500,000 which was due in 2006. This, he said, was because he wanted to discharge the debentures over the assets of M&M which had been granted to the vendors to secure payment of the amounts outstanding under the sale agreement. He said that the release of the debentures would enable him to use the business as security to raise the sum needed to be borrowed for the purchase of the land. It later emerged that the security was required for the money payable for the purchase of certain plant and equipment. He then said that it was for money required for both purposes. He produced too a valuation of the land which he obtained in January 2006 which he said was obtained to support his contention that the fair value of the land was $6 million.
It is common ground that in early 2006 Mr Todisco was seeking to purchase the land for $6 million and that he was very upset when the offer was rejected. It does not appear that he responded in writing or orally to this rejection by reminding the landowners of their earlier promise.
Having seen the witnesses and after making allowances for the fact that Mr Todisco was self‑represented, I am not satisfied that the statements which he attributed to Mr Meddings and Mr Michaud were in fact made. I find it incredible that such an important matter, if correct, was not raised in the pre‑contractual negotiations, even between the solicitors. Each side was represented on the documenting of the transaction. I am satisfied that no such statement was made.
It may have been the hope or even the expectation of Mr Todisco that he might purchase the land in due course, but he said nothing and I find that nothing was said on behalf of the vendors to give him that hope or expectation.
This means that the counterclaim must fail. It faces other difficulties which I need only mention. As a case of misleading and deceptive conduct, such promissory representations face their own difficulties. The fact that a promise is not, in due course, fulfilled says nothing of the intention of the promissor at the time of making the promise. In any event, the damages claimed also present their own problems. Many of the suggested expenses were incurred not by M&M but by an associated company. Many of the sums claimed were for the replacement of old machinery and were not related to the cause of action alleged. Others, which concern the cost of relocation, are also not related as alleged.
It was, after all, not necessary for M&M to relocate to Port Melbourne in October 2006. It had another three years available and the possibility of a further term. The reason for the relocation, as I see it, was Mr Todisco's disappointment with Mr Meddings and Mr Michaud. He would have nothing further to do with them.
There was no real resistance to the claim of the plaintiffs. The amounts proved are as follows: Unit 1, outstanding rent in the sum of $89,232 is agreed. Unpaid outgoings are also agreed at $7,673.71. I am satisfied that the changing of the locks was reasonable in the circumstances and that some further clean‑up was required pursuant to clause 5.1 of the lease. The two items under these headings are for $1,191.19 and the agreed sum of $5,000 respectively. The total of these items in respect of Unit 1, and I am not including interest at this stage, is, $103,096.90.
Similar amounts are claimed in respect of Unit 2. The outstanding rental is agreed at $89,232; unpaid outgoings amount to $7,756.66 and the clean‑up, which I find to be required, is agreed to be $5,000. The total of these items, again not including interest, is $101,988.66.
This leaves two matters for further consideration. The question of the interest on the unpaid rental. This is calculated under clause 2.1.10 of the lease in each case. A calculation table has been provided. It has not, strictly speaking, been proved in evidence although I am told that the quantum is accepted so I should accept that to be the case. There seems no reason why the liability to pay interest has not been established. It is not a matter which was the subject of very much debate, if any, and the clause is clear. In the case of both units, I find that interest on unpaid rent is due and payable.
With respect to the claim for Unit 1, the amount of interest is $45,235.35. With respect to the claim for Unit 2, the amount of interest is $45,235.35. This brings the total amount for which the claim is successful to $148,332.25 for Unit 1 and $147,224.01 for Unit 2.
The lessors also seek judgment against Mr Todisco pursuant to guarantees made by him for the obligations of M & M under each lease. This liability is clear under the terms of the guarantees. Accordingly, there should be judgment against him for the same sums.
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