PENZAR Pty Ltd v GUMBOOT Industries Pty Ltd - [2014] WASC 357

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: PENZAR PTY LTD -v- GUMBOOT INDUSTRIES PTY LTD [2014] WASC 357

CORAM: MASTER SANDERSON

HEARD: 16 SEPTEMBER 2014

DELIVERED : 2 OCTOBER 2014

FILE NO/S: CIV 2003 of 2014

BETWEEN: PENZAR PTY LTD
Plaintiff
AND
GUMBOOT INDUSTRIES PTY LTD as Trustee for the HARRISON FAMILY TRUST
First Defendant
SCOTT GAVIN HARRISON
SONIA MADELEINE BASARAB
Second Defendants

Catchwords:

Summary judgment - Failure by tenant to exercise provision for renewal of lease - Turns on own facts

Legislation:

Australian Consumer Law, s 18, s 20

Result:

Judgment for the plaintiff

Category: B

Representation:

Counsel:

Plaintiff:     Mr A M Prime
First Defendant              :     Mr S D Hicks
Second Defendants        :     Mr S D Hicks

Solicitors:

Plaintiff:     MDS Legal
First Defendant              :     Lawfield Legal Practice
Second Defendants        :     Lawfield Legal Practice

Case(s) referred to in judgment(s):

Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd [2000] FCA 1376
Blomley v Ryan (1956) 99 CLR 362
General Newspapers Pty Ltd v Telstra Corp (1993) 45 FCR 164
Rhone‑Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477
Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97

MASTER SANDERSON: By summons dated 22 August 2014 the plaintiff applied for summary judgment in this matter. The application was supported by an affidavit of John Douglas Gow sworn 30 July 2014. The defendants did not file any affidavit in answer to the application. The facts which give rise to this claim are very limited and can be summarised in the following way.
By a lease dated 8 May 2010 the plaintiff leased a property known as Cambridge Squash Court to Everview Holdings Pty Ltd. The term of the lease was for five years to expire on 30 June 2014. The lease contained an option to renew for a further five year period. On 5 August 2011 Everview Holdings assigned the lease to the first defendant. The second defendants, as parties to the assignment, guaranteed the first defendant's obligations under the lease.
Clause 6 of the lease contains the option for renewal. A copy of the lease itself is found as attachment JG2 to the affidavit of Mr Gow. Clause 6(4) sets out the conditions for the exercise of the option. It is in the following terms:
The Lessee may only accept this offer and exercise the Option if:
(a)there is no subsisting breach of any lease covenants by the Lessee at the date of serving notice of exercise of the Option and also at the date of expiry of this Lease; and
(b)the Lessee has served on the Lessor notice of exercise of the Option during a period not later than 3 months before the date of expiry of the Term of this Lease.
It is common ground between the parties the first defendant did not exercise the option by giving the required written notice three months prior to the expiry of the lease. But there was an email exchange between Mr Gow, as agent for the plaintiff, and the first‑named second defendant (Mr Harrison), as agent for the first defendant. It is this email exchange which is at the heart of the dispute between the parties. Copies of the emails are attachments JG4 and JG5 to Mr Gow's affidavit.
The first of the emails is from Mr Harrison to Mr Gow. It was sent on 18 March 2014 at 2.04 pm. Relevantly it reads as follows:
I am writing to inform you that we are intending to sell the squash court business. We understand there are procedures to follow for this to happen. The most important we feel is whether you are intending to further the lease and reassign to a potential buyer.
Should this potential buyer want to proceed further with the sale we assume you would want to meet and go over the buyers personal, business and financial position. Is there anything else you wish us to perform to make this a smooth transition?
Mr Gow responded on 19 March 2014 at 12.49 pm. The email was addressed to Mr Harrison. Relevantly it reads:
See attached.
I suggest you read the lease to see your legal requirements. The application form must be completed by a prospective tenant and signed off by you both. I will then check references etc and if suitable applicant [sic] we can proceed with the assignment. The details of costs etc are in the form.
Attached to the email was a document entitled 'Application for Assignment of Lease'. It had been partially completed by Mr Gow. It showed under the heading 'Lease Term Remaining' that the lease was to expire on 30 June 2014 and there was one five year option available pursuant to the lease. The assignor was shown as the first defendant. The rest of the form was left blank. What was anticipated was that details of the proposed assignee would be inserted. The document would then be returned to the plaintiff and if the plaintiff was satisfied the assignee was a suitable tenant the assignment would take place.
After the email exchange of mid‑March there was no further contact between the plaintiff and the defendants and their respective agents until Mr Gow wrote to the first defendant on 29 May 2014. A copy of that letter appears as attachment JG6 to Mr Gow's affidavit. In the first paragraph of the letter Mr Gow notes the option had not been exercised by 1 April 2014 and therefore the lease was to expire on 30 June 2014. Mr Gow noted vacant possession was required by 1 July 2014. The rest of the letter is concerned with the mechanics of the handover of the leased premises. There followed further email exchanges between Mr Gow and Mr Harrison in which Mr Harrison expressed outrage at the termination of the lease. None of this correspondence has any bearing on the outcome of this application.
The plaintiff's position is simple. There was contained in the lease an option for renewal of the lease which had to be exercised in writing at least three months prior to the expiration of the term of the lease. That was not done, the lease has come to an end and the plaintiff is entitled to vacant possession on the terms and conditions contained in the lease.
The defendants raise two matters by way of defence. The first it is said the plaintiff through the agency of Mr Gow in its email of 19 March 2014 engaged in misleading and deceptive conduct contrary to s 18 of the Australian Consumer Law. Further, and in the alternative, it is said the plaintiff engaged in unconscionable conduct contrary to s 20 of the Australian Consumer Law.
The way in which the defendants' position was formulated can be succinctly stated by quoting par 8 of counsel's written submissions. It is in the following terms:
It is submitted that Mr Gow's response of 19 March was misleading and deceptive and unconscionable. It did not discharge his duty to correct the defendant's error nor to advise what else needed to be performed. His response 'read the lease' is insufficient in these circumstances to discharge the duty imposed on him. Mr Gow knew the Defendant was operating under an error, knew the Defendant was relying on Mr Gow to advise what further was required, knew also that by the passage of only a couple of weeks the right to renew would be lost due to the close [sic] of the option period on 31 March, and disclosed none of these things.
For the defendants to make good their case for misleading and deceptive conduct they would in my view have to establish there was misleading conduct due to silence or there was misleading conduct which induced confusion. There was no conduct which on its face was misleading. Mr Gow did not say the option did not have to be exercised in writing or that a new lease would be granted whether or not written notice was given. Moreover the fact that he did refer the defendants to the lease may mean there was not actual silence. But it seems to me that is what is being alleged by the defendants and it is that defence which must be considered.
Silence may amount to misleading or deceptive conduct in a variety of circumstances. The essential question is whether, in all the circumstances constituted by acts, omissions, statements or silence, there has been conduct likely to mislead or deceive: General Newspapers Pty Ltd v Telstra Corp (1993) 45 FCR 164. Of particular relevance in counsel's submission was the obvious confusion on the part of Mr Harrison as to the effect of the lease. Counsel maintained the email of 18 March 2014 made it plain Mr Harrison was labouring under a misapprehension. He clearly thought it was up to the plaintiff whether or not the lease was extended. Counsel submitted the fact that Mr Gow as an experienced real estate agent knew in fact it was the lessee who had to exercise the option created a duty in the plaintiff through Mr Gow to advise the defendants accordingly. To allow the misunderstanding to persist coupled with the duty to advise the defendants of the correct position amounted to the misleading and deceptive conduct.
There have been any number of cases dealing with the circumstances where silence can amount to misleading and deceptive conduct. It is not always easy to distil an overarching principle from these cases. Perhaps the most consistently observed principle is that set out by Lockhart J in Rhone‑Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477. His Honour said (dealing with the old s 52 of the Trade Practices Act 1974 (Cth)):
It is difficult to conceive how mere silence by an alleged contravener could be sufficient to attract the operation of s 52, but when all the relevant circumstances of a case are analysed, silence of the alleged contravener may be the critical matter upon which reliance is placed to establish misleading or deceptive conduct (99).
It is difficult to see how a misunderstanding on the part of Mr Harrison could give rise to some duty to disclose on the part of Mr Gow. But even if it did it seems to me by referring the defendants to the lease Mr Gow did all that was necessary. There was nothing misleading or deceptive in that process. If Mr Harrison had followed the advice proffered and read the lease he would have realised that pursuant to cl 6 it was the lessee who had to exercise the option and to do so in writing. What the defendants are saying is Mr Gow was required to email back the defendants explaining to them precisely what was necessary to exercise the option. Anything else was conduct which was misleading and deceptive. That is a proposition which in my view cannot be accepted.
In his written submissions counsel for the defendants placed reliance upon what was said by Hill J in Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97:
[I]f the circumstances are such that a person is entitled to believe that a relevant matter affecting him or her adversely would, if it existed, be communicated, then the failure to so communicate it may constitute conduct which is misleading or deceptive because the person who ultimately may act to his or her detriment is entitled to infer from the silence that no danger of detriment existed (114).
While that paragraph is consistent with other authorities it does not in my view advance the defendants' case. There must be circumstances which give rise to a duty on the part of the wrongdoer not to remain silent and so mislead or deceive the other party. The actions of the plaintiff in this case simply do not fall within that rubric.
In relation to the alleged unconscionable conduct the defendants relied upon what was said by Fullagar J in Blomley v Ryan (1956) 99 CLR 362. His Honour said:
The circumstances adversely affecting a party, which may induce a court of equity either to refuse its aid or to set a transaction aside, are of great variety and can hardly be satisfactorily classified. Among them are poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary. The common characteristic seems to be that they have the effect of placing one party at a serious disadvantage vis‑a‑vis the other (404 ‑ 406). (emphasis added)
Counsel for the defendants accepted tenants will not, merely because they are tenants, be regarded as being under a special disability: see Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd [2000] FCA 1376 [126]. That being so it is difficult to see here just what disability might be said to affect the defendants. It cannot be enough they had not taken the trouble to read the lease and were not aware of its terms. There is no evidence Mr Harrison was afflicted by any of the conditions referred to by Fullagar J in the quoted paragraph. The first defendant was running a business, paying rent and it would seem the business was actually run by the second defendants. There is no evidence of any disability or infirmity. In my view there can be no suggestion the actions of the plaintiff was unconscionable.
In all the circumstances I am not satisfied the defendants have any defence to the plaintiff's claim. Accordingly there should be judgment for the plaintiff against the defendants. I will hear the parties as to the precise form of orders and as to costs.