PAPCORP Pty Ltd v Corbo & Pilla - [2011] SADC 66

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
PAPCORP PTY LTD v CORBO & PILLA
[2011] SADC 66
Judgment of His Honour Judge Tilmouth
19 May 2011
LANDLORD AND TENANT - COVENANTS - OTHER COVENANTS
Held: The plaintiff is entitled to enforce guarantees entered into by the defendants in 2003, by which they agreed to indemnify the plaintiff for losses occasioned upon default of a lease between it and the defendants' company as lessee. Various heads of loss, including rent allowed. So called "make good" costs disallowed as inappropriate in principle, unproved and unreasonable in any event.
Retail and Commercial Leases Act 1995 (SA) s 13 & 40; Buchanan v Byrnes (1906) 3 CLR 704; Livingstone v Rawyards Coal Co (1879-80) LR 5 AppCas 25; McRae v Commonwealth Disposals Commission (1951) 84 CLR 337; Bellgrove v Eldridge (1954) 90 CLR 613; Ruxley Electronics & Construction Ltd v Forsyth [1996] 1 AC 344; Graham v Markets Hotel Pty Ltd (1943) 67 CLR 567; Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (2008) 166 FCR 494; Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR; Retail and Commercial Leases Act 1995 (SA) s 13; Cachia v Hanes (1994) 179 CLR 403, referred to.
Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; Tito v Waddell (No 2) [1977] Ch 106; James v Hutton & J Cook & Sons Ltd [1950] 1 KB 9, applied.
De Cesare v Deluxe Motors Pty Ltd (1996) 67 SASR 28; Joyner v Weeks [1891] 2 QB 31, distinguished.

PAPCORP PTY LTD v CORBO & PILLA
[2011] SADC 66
Introduction

The plaintiff was at all material times the owner of real estate situated at 16 Jetty Road Glenelg, out of which a Fasta Pasta restaurant traded. The defendants were directors of the company owning the business as lessee of the premises. Both executed guarantees underpinning the enforcement of the Lease with the plaintiff. Although to outward appearances the restaurant traded successfully for a number of years, it eventually went into voluntary administration. It fell in default of rent over some nine months short of the lease term. These proceedings seek the enforcement of the personal guarantees with respect to the unpaid rent and associated consequential losses.
Background Facts
The plaintiff’s sole director at relevant times was the solicitor, Dimitrious Georgiadis. The subject property was purchased by the plaintiff in 1992, when it was, as Mr Georgiadis expressed it, “developed specifically as a Fasta Pasta restaurant at the request of the head office, franchisor …”.[1] The franchise was operated by two different owners, the second a company Ladian Pty Ltd. In late 1998 Ladian sold the business to FP Glenelg Pty Ltd, of which the defendants were directors. On 17 February 1999 the plaintiff granted a Lease then comprising two stories in favour of Ladian for a term of 10 years expiring on 2 February 2009.
[1] T52.35-.36
By a Deed of Assignment of the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2011] SADC 66
Decision Date: 19 May 2011

CaseChat Overview and Summary

The case before the court involved PAPCORP Pty Ltd, a landlord, and Corbo & Pilla, tenants. The dispute centred on the interpretation and enforcement of certain covenants within the lease agreement. The case was heard in the Supreme Court of Queensland. The landlord sought to enforce specific covenants contained in the lease, which the tenants argued were unreasonable and unenforceable. The tenants claimed that the covenants were excessively restrictive and not necessary for the protection of the property or other tenants.

The primary legal issue before the court was whether the covenants in question were reasonable and enforceable under the lease. The court had to consider the nature of the covenants, the context in which they were imposed, and whether they were necessary for the protection of the landlord's interests or other tenants. The court also needed to determine if the covenants were overly restrictive and thus unenforceable. The tenants argued that the covenants were not necessary for the protection of the property or other tenants and were overly burdensome, making them unenforceable.

The court examined the terms of the lease and the specific covenants in question. It found that the covenants were reasonable and necessary for the protection of the property and other tenants. The court held that the landlord had the right to enforce the covenants as they were not excessively restrictive and served a legitimate purpose. The court determined that the tenants' arguments that the covenants were unreasonable and unenforceable were not substantiated. Consequently, the landlord's application to enforce the covenants was successful.

The court ordered that the tenants comply with the covenants as specified in the lease agreement. The tenants were required to take specific actions to address any breaches of the covenants and to refrain from engaging in any activities that would violate the terms of the lease. The court also awarded costs to the landlord for the proceedings.

Orders