Olympic Murals v Sydney Ports Corporation
[2000] NSWSC 88
•25 February 2000
CITATION: Olympic Murals v Sydney Ports Corporation [2000] NSWSC 88 CURRENT JURISDICTION: Equity FILE NUMBER(S): SC 4085/99 HEARING DATE(S): 11 November 1999 JUDGMENT DATE: 25 February 2000 PARTIES :
Olympic Murals Pty Limited (Plaintiff)
Sydney Ports Corporation (Defendant)JUDGMENT OF: Windeyer J at 1
COUNSEL : Mr M Tobias, QC with him Mr C.R.C. Newlinds (Plaintiff)
Mr N.H. Hutley, SC with him Ms S. Pritchard (Defendant)SOLICITORS: Hegarty & Elmgreen (Plaintiff)
Allen Allen & Hemsley (Defendant)CATCHWORDS: CONTRACTS - construction and interpretation of contracts - construction of proviso to obligation to surrender a lease - covenant to surrender part of leased premises subject to proviso to grant licence - independent obligation or condition precedent - claim of plaintiff that licence must be granted which is capable of being legally used - HELD the words "may be used" in the proviso do not equate to a guarantee that the licensee can obtain all relevant consents when the lessor is not the consent authority LEGISLATION CITED: Supreme Court Rules Pt 31 r2, r4 CASES CITED: Westacott v Hahn [1918] 1 KB 495 DECISION: See paragraph 9
1IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISIONWINDEYER J
FRIDAY 25 FEBRUARY 2000
4085/99 OLYMPIC MURALS PTY LIMITED v SYDNEY PORTS CORPORATION
JUDGMENT
1 The question for decision involves a determination of whether on its proper construction a clause in a lease between the plaintiff, Olympic Murals Pty Limited (Olympic Murals) and the defendant, Sydney Ports Corporations (SPC), authorised the defendant to require the surrender of part of the leased land at the expiration of a twelve months period of notice during the term of a lease, without the proviso to such right having been complied with either prior to surrender or prior to expiration of the twelve months. It also involves a question of construction of the proviso.
Facts
2 By lease registered number 3142833, dated 3 September 1997, SPC leased to Olympic Murals certain premises which are best described as the outer face of certain bulk silo buildings on land belonging to SPC close to the Anzac Bridge. The lease was for a period commencing on 16 December 1996 and ending on 30 September 2010. The premises the subject of the lease were divided into areas called Areas A, B, C and D. The permitted use of the leased premises under the lease is:
Painting of Murals and erection of Metal Planks, Signs and ancillary structures and lighting for advertising purposes.
A substantial rent is payable under the lease, commencing at $100,000, together with increases in accordance with the Consumer Price Index for the first three years then doubling to $200,000 with yearly reviews to accord with increases in the Consumer Price Index for the balance of the term. The court was told without objection that the lease is a very valuable asset. The lease included the following clause:
12.7 Surrender of Lease Area D
(a) At any time after 16 December 1997, the Lessor may serve a notice on the Lessee requiring the Lessee to surrender its tenancy of Lease Area D.
(b) within 12 months of receipt by the Lessee of the notice referred to in paragraph (a), the Lessee must:
(i) surrender and vacate Lease Area D and yield it up in accordance with clauses 12.3, 12.4 and 12.6; and
(ii) do all acts and sign all documents necessary to give effect to this clause 12.7 (including, without limitation, a partial surrender of lease),
provided that the Lessor shall grant to the Lessee a licence for the remainder of the Term of this Lease and free from any licence fee or other charge, to use the area alongside, but not attached to, the western and southern surfaces of Lease Area D for the purpose of erecting and maintaining, at the Lessee's expense, a scaffold structure approved by the Lessor (acting reasonably), which may be used by the Lessee for the Permitted Use.
(c) The Lessee shall not be entitled to any reduction in the Minimum Rent and shall not be entitled to make any claim for compensation as a result of the Lessor exercising its rights under this clause 12.7 or the surrender and vacation of Lease Area D.
On 17 December 1997 the lessor sent notice to the lessee, pursuant to clause 12.7 requiring the lessee to vacate Area D within twelve months. It has not done so. These proceedings were commenced by summons filed on 23 September 1999. On 15 October, 1999 Simos J ordered pleadings and a statement of claim was filed on 20 October 1999. Under paragraph 7 of that document the plaintiff seeks certain relief by way of declaration and injunction, including the following:
7. The plaintiff claims:
(i) A declaration that on the proper construction of clause 12.7 of the Lease any notice issued by the Defendant pursuant to that clause is of no force or effect unless or until the Defendant grants to the Plaintiff a licence for the remainder of the term of the said Lease free from any licence fee or other charge to use the area alongside but not attached to the western and southern surface of the lease area for the purpose of erecting and maintaining at the Lessee's expense a scaffold structure approved by the Lessor which structure is capable of being legally erected and used by the Plaintiff for the Permitted Use as defined in the Lease.
(ii) A declaration that upon the proper construction of clause 12.7 of the Lease, unless such a licence is granted within 12 months of the date of any notice issued pursuant to that clause then such notice ceases to be of any force or effect.
(iii) A declaration that the notice issued by the Plaintiff on 17 December 1997 is, in the events that have happened, of no force or effect.
3 It is conceded that 7(iii) is consequential upon (i) and (ii) and raises no separate issue. On 11 November 1999 I made an order by consent pursuant to SCR Pt 31 r2, that the issues which arise on the claims in paragraphs 7(i), (ii) and (iii) in the statement of claim be determined separately from and prior to the remaining issues. The defendant has filed a cross-claim seeking an order for possession of Area D. It is agreed that if the defendant succeeds on the separate issues it is entitled to an order for possession.
4 The principal question is whether the obligation of the lessee to surrender leased Area D is conditional upon the grant of the licence referred to in the proviso. In other words, is the grant of such a licence a condition precedent to the obligation to vacate or are the obligations independent of each other and capable of separate enforcement.
5 The scaffold, if erected, would become a "lessee's fixture" under the definition of lessee's fixtures in the lease. Clause 8.4 of the lease provides that the lessor must comply with all legislative requirements in respect of the lessee's fixtures or their use.
6 The declaration which the plaintiff seeks in 7(i) would require the defendant to be in a position at the date of surrender to grant the licence for the erection and maintenance of a structure capable of being erected and used by the plaintiff for the permitted use and allowed to be so erected and used. I consider that claim must fail. It requires the proviso relied upon to be construed as requiring a guarantee that the scaffold can be used for the permitted use which would really amount to a guarantee that all the necessary consents could be obtained. That would require the lessor to know at the date of surrender, over which it had no control, that the structure it was required to approve could be used for the permitted use in circumstances when the lessor was not the consent authority. I do not consider the words "may be used" mean more than that as between lessor and lessee, the lessee can use the scaffold for the permitted use if all necessary consents are obtained. They do not equate with the words "able to be used".
7 I consider the words "shall grant a licence for the remainder of the term" indicate an intention that the licence is to be granted on the date of surrender because that is the date the term for Area D would come to an end and there is no sense in granting a licence for a period, part of which has already passed by. Identifying an obligation by means of a proviso to another obligation normally indicates that the prior obligation was dependent upon a willingness to perform the later obligation. Thus I conclude that on surrender the lessee is entitled to a licence on the terms set out and can see no reason why a simple licence cannot be given. Whether or not that would avail the lessee is another matter. A proviso clause usually acts as a limitation upon the covenant to which the proviso is attached. That does not mean that it cannot be construed as an independent covenant as well. In this case I see no reason why the plaintiff/cross-defendant could not enforce the proviso or at least take action for breach of convenant if it had surrendered without obtaining the licence in exchange for possession, unless it had in some way waived its right. A right by way of proviso can be both a qualification and a covenant: See Westacott v Hahn [1918] 1 KB 495.
8 So far as the claim for a declaration under 7(ii) is concerned, on the strict terms of the pleaded issue, the answer must be to dismiss the claim for a declaration because the plaintiff is not entitled to the declaration sought in 7(i). Leaving aside the technicalities I can see no basis for suggesting that the lessee's obligation under clause 12.7 ceases if the licence is not granted within twelve months. It is the vacation of the premises which triggers the right to a licence not the grant of a licence which triggers the obligation to vacate. It is clear that there have been negotiations between the parties which included suggestion of an exchange of sites, but the erection of any advertising signs on those proposed alternative sites would still have required approval from the appropriate authorities. There is no reason why the defendant should not enforce the obligation to surrender and vacate the lease Area D on breach of the covenant to do so upon its being ready to give the licence required under the proviso to clause 12.7(b).
9 One of the regrettable results of agreeing to determine separate issues at the request of the parties is that it often turns out that the correct questions were not asked. That is the position here. I have however, tried to indicate in these reasons what I conclude to be the proper result. I will determine the separate issues by ordering the plaintiff's claim made in paragraph 7(i), (ii) and (iii) of the statement of claim be dismissed and by directing that decision be recorded. The parties agreed that if that were the result I should make an order for possession on the cross-claim. That would amount to an agreement under Pt31 r 4. Nevertheless in light of my conclusion on the proper construction of clause 12.7 a question of readiness and willingness may arise so I will not make the order on the cross claim without giving the parties the opportunity to make submissions on this.
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