| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : MIHOPOULOS -v- VULETIC & ANOR [2003] WADC 9 CORAM : WISBEY DCJ HEARD : 2, 3 DECEMBER 2002 DELIVERED : 17 JANUARY 2003 FILE NO/S : CIV 1939 of 2001 BETWEEN : JOHN MIHOPOULOS Plaintiff
AND
VINCENT VULETIC
MARJORIE VULETIC
Defendants
Catchwords: Contracts - Termination of lease - Whether termination unlawfully by lessors, or by mutual agreement of parties - Claim for damages by tenant - Counterclaim by lessors for monies owing under lease
Legislation: Nil
Result: Finding that plaintiff surrendered lease
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Judgment for defendants in the sum of $4,548 Representation:
Counsel:
Plaintiff : Mr D A Lenhoff
Defendants : Mr T B Lyons
Solicitors:
Plaintiff : Lenhoff & Co
Defendants : Gibson Lyons
Case(s) referred to in judgment(s):
Nil
Case(s) also cited:
Nil
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1 WISBEY DCJ: The defendants were at all material times the owners of a property situate and known as 118 Rokeby Road, Subiaco, (the said premises). By instrument of lease undated but stamped 8 January 1996 the defendants leased the said premises to one Mary Collodel for a period of five years commencing 1 May 1994 on terms more particularly set out therein. By deed of assignment dated 12 December 1995 Mary Collodel, with the consent of the defendants, assigned her interest in the lease to the plaintiff; although by agreement the term was extended by a further five years expiring on 30 April 2004.
2 Insofar as it is material to the present controversy, a critical clause in the lease is clause 10.1 which relevantly provides that if the rent, rates and taxes, or variable outgoings contribution, should at any time be unpaid for 14 days after becoming due, whether formally demanded or not, then the lessors (the defendants) had the right at their option to re-enter upon, occupy and resume possession of the said premises. 3 In the statement of claim the plaintiff alleges that the defendants leased the said premises to him for a period of three years commencing December 1995 with an option to renew for a further five years; but upon the defendants pleading that the position was as set out in the opening paragraph hereof, the plaintiff by reply conceded that fact. 4 The plaintiff pleads that he carried on a business "Café Metropolis" from the said premises until 26 November 1996 when the firstnamed defendant entered the said premises, claimed the lease had been terminated, and evicted the plaintiff, refusing to allow him to re-enter the said premises, causing him to suffer loss and damage. 5 The defendants deny the position was as pleaded by the plaintiff, and claim that as the plaintiff was in default in the payment of rent and rates and taxes, they were as at 22 November 1996 entitled to re-enter and take possession of the said premises. They say that by letter dated 19 November 1996 the plaintiff was advised that unless a satisfactory arrangement regarding payment of arrears of rent and rates and taxes was made within seven days, they would re-enter and take possession of the premises, and no arrangement was made within the period aforesaid. They assert that on 22 November 1996 the plaintiff voluntarily handed over the keys of the said premises to the male defendant and vacated the said premises, thus terminating the lease. Alternatively the defendants plead that if the plaintiff did not voluntarily vacate the premises, they exercised their rights pursuant to clause 10.1 of the lease to re-enter and
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take possession. They counterclaim for the sum of $7,923.15 being moneys due as at the date of termination. 6 The plaintiff, a chef by trade, gave evidence that he agreed to purchase the business from Mary Collodel on 22 November 1995 for a total sum, inclusive of rates and taxes, stamp duty and settlement fees, of $22,861.27, having borrowed the purchase moneys from the Commonwealth Bank. He claimed that although Mrs Collodel provided him with a copy of the original lease for perusal, he was never given his own copy. He went into possession of the premises on 12 December 1995, and it appears from his evidence that thereafter his rental payments were spasmodic with occasions when rental cheques were not honoured on presentation, and subsequent arrangements were required to be made. He claimed that accounts for rates, taxes and other outgoings relating to the said premises went direct to the male defendant, and were not presented to him. 7 As at the date of termination of the tenancy he had not discharged any part of the council rates but claimed he had offered to make quarterly payments in discharge thereof as provided for in the rate notice, but the male defendant had insisted upon discharge of the total account. He stated that as at 19 November 1996 he was up to date with rental payments save as to an amount of $900 in respect of that month. 8 On 19 November 1996 the male defendant arrived at the said premises and delivered the letter of default bearing that date. Some days later the male defendant returned and the plaintiff gave him $900 in cash, being the balance of the November rental. The male defendant then presented the council rate notice and discussion took place about payment thereof, the plaintiff offering to pay on a quarterly basis. At that stage Mrs Collodel arrived and was informed by the male defendant that she would be liable to pay the rates if the plaintiff did not. Mrs Collodel became upset and the plaintiff tried to assure her that she was not legally responsible. The male defendant informed the plaintiff that if he did not pay the total amount of the rates he would be evicted, and then stepped inside the said premises, latched the back door, and refused the plaintiff entry. It appears that the plaintiff's employee Jarrod Henry was inside the said premises at the time. The plaintiff, having accepted that he would not be able to gain entry, told the male defendant that he was going to get a trailer to move some of his stock, but when he returned with the trailer was refused entry. At that stage it appears that Mr Mackie, the lessee of the adjoining premises (also owned by the defendants), was in the said premises with the male defendant helping him change the locks.
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9 The plaintiff claimed that he tried unsuccessfully to reason with the male defendant who threatened to get the police.
10 The plaintiff stated that within a matter of days Mr Mackie had taken possession of the said premises and amalgamated it with his adjoining business. 11 The plaintiff claimed in cross-examination that the Metropolis café business was reasonably successful and profitable as at November 1996. He claimed that his takings were of the order of $4,000 to $5,000 per week. The majority of the takings were paid into the Commonwealth Bank, but he had quite a bit of cash on hand. The plaintiff's bank statements (Exhibit D1) do not support this contention. 12 The plaintiff agreed that the male defendant was in the habit of personally collecting the rent which was payable in advance on the first of each month. The January rental cheque was dishonoured and further arrangements were made; the June rental cheque was dishonoured and subsequently replaced by a cash payment; and the September rental cheque was also dishonoured and a replacement cheque issued a week or so later. In respect of the rent due for November he agreed that he gave the male defendant $800 on 11 November, and a further $800 on 19 November; claiming that he provided the balance of $900 on the day he was evicted. 13 The plaintiff stated that he was shown the City of Subiaco rate notice (Exhibit D3) for the first time on 19 November, but later conceded that he was not exactly sure when he had first seen it, and that it might have been around July. He stated that when the male defendant called on 19 November 1996 he was seeking payment of rent and outstanding rates, and it was at that time that he produced the letter of demand which appears at page 63 in Exhibit P1. 14 In respect of the City of Subiaco rates the plaintiff claimed that he was not aware that he only had to pay half the amount on the rate notice, although he seemed uncertain about this. 15 The plaintiff claimed he was ejected on 26 November 1996, selecting that date because it was seven days from the date of the letter of 19 November. He agreed that sometime prior to the tenancy being terminated the business was on the market. 16 The plaintiff was unable to recall when he first saw the land tax assessment for the year ended 30 June 1997, and claimed he was under
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the impression that he was liable for the total sum of $5,780.84, although the rates notice covered both the said premises and the adjoining premises occupied by Mr Mackie. He was unable to produce any documentary evidence of sales income from the business subsequent to 30 September 1996, and claimed he may have left some documentation at the said premises when he was ejected. He would not accept that his occupancy of the said premises came to an end on 19 November 1996, believing that it was in fact 26 November 1996. 17 It was brought to the plaintiff's attention that the final profit and loss statement prepared for the business covered the period 1 July to 22 November 1996, and he agreed that suggested that the business was not operating after 22 November 1996. The profit and loss statement demonstrated that the business income for the aforesaid period was $33,510, whereas the income for the period 12 December 1995 to 30 June 1996 was $88,109.63. That suggested a significant reduction in profitability in the final stages of the business, which the plaintiff was unable to make any useful comment on. His bank statements demonstrated that a number of cheques had not been met on presentation. The plaintiff disagreed that as at November 1996 the business was in a very poor state; or that he had had enough, and was happy to get out of it. He seemed prepared to accept, reluctantly, that he may have ceased occupancy of the said premises on 19 November 1996. 18 The plaintiff agreed that on 19 November 1996, being the date that he was given the default letter, he made a payment of $800 in reduction of the November rent, and denied that he had not paid the outstanding balance of $900. 19 The plaintiff agreed that Mrs Collodel was at the said premises on the day the tenancy came to an end. He denied that on the termination date the male defendant said to him that the business was not going well, and that it was not selling; and that during that discussion he handed the male defendant the keys to the front door saying to him words to the effect of "this is the only way". He denied that the male defendant asked him whether he handed over all the keys, and that he replied that some staff had a front door key, and that he had a backdoor key at his home, and would deliver them later. 20 The plaintiff claimed that on the termination date there was between $700 to $1,000 in the till which the male defendant asked Jarrod Henry to place in a bag saying he would hand it to the plaintiff at a later stage, which he failed to do. Assuming the plaintiff's evidence concerning the
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money in the till to be correct, and that he paid $900 cash on the day of termination, it would necessarily follow that there was an amount of approximately $2,000 cash on hand. That seems unlikely. 21 The plaintiff's explanation as to the manner in which the male defendant locked him out when he was standing at the rear of the said premises, and as to why he did not then go around to the front door in an endeavour to gain access, was unconvincing. He claimed that he did not have to sign any documentation when hiring the trailer; that he returned to the said premises with two unidentified acquaintances who were going to assist him remove his belongings; and that upon his return Mr Mackie and the male defendant had already changed the locks. This too was unconvincing and was unsupported by other evidence. 22 Having been evicted from the premises, the plaintiff did not take any steps to attempt to recover his belongings and money, or to otherwise maintain his rights, until March 1997 when he consulted a solicitor, Mr Muller, who wrote to the defendants on 10 March 1997 (Exhibit P1, p 64). Interestingly that letter is silent as to the alleged conversion by the male defendant of the contents of the till. The plaintiff did claim that he had spoken to other solicitors at an earlier time, but they would not take on his case without payment. There being no response to Mr Muller's letter the plaintiff did nothing further until he instructed solicitors to commence proceedings against the defendants some four years later. This dilatory approach to the issue is difficult to understand if the situation had been as outlined by him. 23 In re-examination the plaintiff asserted with confidence that he was evicted from the said premises a week after receiving the default letter. 24 The male defendant, Vincent Vuletic, a retired investor, confirmed the defendants were the owners of properties at 118 and 120 Rokeby Road, Subiaco, the former being the said premises. Mr Vuletic confirmed that the plaintiff took an assignment of the lease of the said premises as from December 1995, and that he was in the habit of personally collecting the rent, which was payable monthly in advance. He stated that his practise in respect to rates and taxes was that when he received an account from the relevant authority he would provide a photocopy to the plaintiff. In respect of the water rates (Exhibit D2) the relevant charge was $2,630.30 of which the plaintiff was required to pay one half, namely $1,315.15. The Subiaco Council rates totalling $6,052.05, of which the plaintiff was required to pay half, was payable on 6 September 1996 (Exhibit D3).
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25 Mr Vuletic referred to various cheques given by the plaintiff which were not met on presentation, and in respect of which further arrangements had to be made. His rent record contained an entry "23 November 1996 finish 5.00 pm" which he explained recorded the termination date of the plaintiff's tenancy.
26 Mr Vuletic's recollection was that he handed the default letter to the plaintiff on 19 November as a result of a history of difficulty receiving payments due under the lease, and in particular the rental for November. He claimed that he arranged with Mrs Collodel to attend the said premises on 19 November to discuss financial issues with the plaintiff. He arrived at the said premises late in the afternoon, and the plaintiff requested that they have a discussion at the rear of the shop, at which time the plaintiff gave Mr Vuletic $800 cash, stating that he would provide the balance when he sold the business. Shortly thereafter Mrs Collodel arrived, and following further lengthy discussions the plaintiff put his hand in his pocket producing keys to the said premises and handed them to Mr Vuletic stating "I think this is the best way out", before walking off. Mr Vuletic claimed that he was surprised at the plaintiff's actions, and stated that he had not since spoken with the plaintiff. 27 Because the plaintiff had advised that staff had a front door key, Mr Vuletic, assisted by Mr Mackie, took steps to change the lock on the front door. Mr Vuletic emptied the cash register, putting the contents into a bag which he handed to Jarrod Henry with a request that it be given to the plaintiff. His recollection was that there was about $100 in the till. Mr Vuletic stated that when he returned to the said premises the following day, he observed that the backdoor was open. 28 Shortly after the departure of the plaintiff, the said premises was leased to Mr Mackie. Mr Vuletic was very vague as to when the new tenancy began, but it would appear from the evidence that it was shortly after the plaintiff's departure. 29 When cross-examined concerning the fact that until the beginning of the hearing the defendants were claiming that the January rental had not been paid, Mr Vuletic stated that he had not intended to bring a claim against the plaintiff, and that it only came about as a result of the plaintiff instituting these proceedings. 30 It was put to Mr Vuletic that: (a) his entries in the rent book indicated that the locks were changed on 22 November 1996, suggesting that it might
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have been on that date that the tenancy came to an end; but because of the time delay he was not able to make any useful comment in respect thereof. (b) the statement of claim asserted that the plaintiff was evicted by Mr Vuletic on 26 November 1996, and that the defence in its original form admitted that fact. Mr Vuletic, perhaps not surprisingly, was not conversant with the pleadings, but stated that if the defence had admitted that he evicted the plaintiff, it was incorrect. The cross-examination suggested that the defence had been amended about a month or so prior to trial to assert the primary position that the plaintiff had voluntarily vacated the premises. That change in position would normally be of consequence, but having regard to the fact that because of failing eyesight Mr Vuletic's capacity to read documentation and appropriately respond thereto is seriously truncated, I do not consider it is of significance on the issue of credit. I take a similar view in respect of the claim for the January rental, which had in fact been paid as confirmed by the rent book. It also seems that Mr Vuletic's son-in-law may have played a role in instructing solicitors in this matter. (c) he claimed from the plaintiff the sum of $3,026.02 being one half of the non-discounted amount of the City of Subiaco rates notice, namely $6,052.05, whereas he had paid the discounted amount of $5,504.34 so that the plaintiff's liability was in fact only $2,752.17. Mr Vuletic's response was that the plaintiff did not pay the account on the due date and therefore was not entitled to the discount, and although that is clearly wrong legally, his approach to the issue is understandable. 31 Mr Vuletic confirmed his earlier evidence that before Mrs Collodel arrived the plaintiff handed him $800 cash, indicating that he would pay the balance outstanding when he sold the business. He stated that Mrs Collodel was present when the plaintiff handed him the key to the premises, but left shortly thereafter. 32 Mr Vuletic stated that Jarrod Henry and himself counted the money in the till, and although he was unable at the time of giving evidence to say how much it was, his recollection was that it was not more than $100.
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His evidence was that he handed the money to Mr Henry suggesting that he should keep it himself as he was owed wages. 33 Mr Vuletic's rent book suggested that the said premises was re-let to Mr Mackie from the beginning of December 1996, although in the counterclaim the defendants seek rental for December. He denied dealing inappropriately with any of the plaintiff's property, being of the view that the Commonwealth Bank had a charge over it and was entitled to deal with it as it saw fit. He was firm in his view that the plaintiff left the said premises on the day that he was given the default letter. 34 The defendants called Mary Collodel who sold the business to the plaintiff in December 1995. She stated that she thereafter provided the plaintiff with icecream, which she and her husband made. She stated that in November 1996 Mr Vuletic rang her to advise that the plaintiff owed him money, and informed her that because she was the original tenant she was liable. She became very upset and explained to the male defendant that the plaintiff also owed her money and agreed to meet him at the said premises to try and convince the plaintiff to come to some satisfactory financial arrangement. 35 Pursuant to the arrangement she had made with the male defendant, Mrs Collodel attended the said premises at which time the plaintiff and the male defendant were at the rear of the premises engaged in a discussion concerning moneys outstanding. She stated that she pleaded with the plaintiff urging him to do the right thing, pointing out to him that he owed both the defendants and herself money. At that stage she stated that the plaintiff handed keys to the male defendant. As she put it, "I remember keys being transferred, things were settled and that was it". 36 It was put to Mrs Collodel in cross-examination that if the position was as indicated by her, she would not have been satisfied, since she would still have been liable for the rent whilst the premises was vacant. Her response was that she was of the view that if the plaintiff left the premises her liability ended. 37 Although Mrs Collodel could not recall whether the plaintiff handed over a key, or a bunch of keys, she was adamant that a key or keys was handed by him to the male defendant on the basis that the tenancy was to be terminated. 38 Mrs Collodel impressed me as an intelligent lady who gave her evidence in a careful and thoughtful manner. She was clearly independent, with no vested interest in the outcome of these proceedings.
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I have no hesitation in concluding that she was a truthful witness doing her best to recall the events of the day, and the question therefore is whether her recollection, some six years after the events in question, is accurate. Her purpose in attending the meeting was to extinguish her perceived liability, and the handing over of the key, or keys, by the plaintiff to the male defendant, was to her of critical significance. Because of the importance to her of what took place, it is unlikely that her recollection would be inaccurate, and I accept her evidence. 39 I find that the plaintiff's account of how his occupancy of the said premises came to an end improbable for a number of reasons. Firstly, it would have been difficult for the male defendant, a man with failing eyesight and considerably older than the plaintiff, to gain access to the said premises and lock the plaintiff out, particularly as the plaintiff would have had a key, or keys, thereto. Further if the plaintiff had been ejected in the manner alleged, and been deprived of a considerable sum of his own money and other property, some of which was subject to a charge by the bank, it would be most unusual for him to be so casual and dilatory in asserting his rightful claims. 40 Mr Vuletic gave his evidence carefully, and I accept his account of how the tenancy came to an end, particularly as was corroborated by the evidence of Mrs Collodel. That finding results in a rejection of the plaintiff's claim since he has failed to satisfy me that he was wrongfully ejected from the said premises. 41 Though that necessarily disposes of the plaintiff's claim, the position in any event was that as at the date of the termination of the tenancy the plaintiff was in default in the payment of rent and rates and taxes, and had been so for a period in excess of 14 days. By reason of the provision of cl 10.1 of the lease the defendants had the right to re-enter the said premises and resume possession. The plaintiff maintained that having regard to s 12 of the Commercial Tenancy (Retail Shops) Agreement Act 1985 the rates and taxes were not due because subsection 1(b)(i) then relevantly provided that: "The tenant is not required to make any payment of, and the landlord is not entitled to recover, any such expenses (that is expenses of the landlord in operating, repairing, or maintaining a building of which the retail shop the subject of the lease forms a part) in respect of any year or part of a year until at least one month after the landlord has given to the tenant annual
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estimates of the expenditure under each item of expenses in respect of that year." 42 The flaw in that argument is that Council rates and land tax cannot be categorised as expenses in operating, repairing or maintaining a building, being directly referable to the ownership of land rather than the maintenance of any structure thereon. 43 It is necessary then to turn to the counterclaim which seeks payment of rental and outgoings owed by the plaintiff at the date of the termination of the tenancy. In my view the claim must be limited to moneys outstanding as at 30 November 1996 because on the evidence it appears to be the case that the said premises were relet to Mr Mackie as from 1 December 1996. 44 The extract from the defendants' rent book (Exhibit D5) demonstrates that as at the termination of the tenancy there was an amount outstanding of $7,973.18 which included $3,026.03 (Subiaco Council rates); $2,890.42 (land tax); and $50 for changing a lock. In respect to the Council rates the discounted amount paid by the defendants was $5,504.34, and only one half or $2,752.17 related to the said premises, and covered the whole financial year. The proportion relating to the period 1 July 1996 to 30 November 1996 is $1,153.65 with the result that the defendants' claim should be reduced by $1,872.38. Similarly the land tax of $2,890.42 covered the whole financial year and the proportion relating to the period 1 July 1996 to 30 November 1996 is $1,211.60 with the result that the defendants' claim should be reduced by $1,678.82. The evidence relating to the cost of changing the locks was imprecise, and I am not prepared to make any allowance therefor. In the result I reduce the defendants' claim by $3,601.20 so that they are entitled to $4,371.98. 45 Until the institution of proceedings by the plaintiff, the defendants had not taken any steps to seek recovery, and in the circumstances I am only prepared to allow interest at 3 per cent from the 14 September 2001 being the date of the filing of the counterclaim, an amount of $176. 46 The defendants are therefore entitled to judgment on the counterclaim in the sum of $4,548. |