Pripark (SA) Pty Ltd v KYB Pty Ltd
[2013] SADC 142
•31 October 2013
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Minor Civil Review)
PRIPARK (SA) PTY LTD v KYB PTY LTD
[2013] SADC 142
Judgment of His Honour Judge Tilmouth
31 October 2013
LANDLORD AND TENANT - RENEWALS AND OPTIONS
A licence agreement provided for a right of renewal subject to giving 'appropriate notice', to be 'served by any verifiable means'. The agreement fell within the ambit of the Retail and Commercial Leases Act 1995 (SA). Evidence was given that a letter of renewal was posted by ordinary prepaid post to the landlord at its address given on the licence. The landlord's Director gave evidence that he never saw it and that it did not come to his attention. The Magistrate accepted that evidence, found the landlord did not receive the notice and that the applicant had not established a basis upon which to grant relief.
Held:
1. The Magistrate erred in failing to consider or make findings with respect to the evidence that the letter was posted.
2. It was not open to reject that evidence as it had not been disputed or questioned.
3. A strong inference arises that the letter was received by the landlord to the point that it has been proven to have been so received.
4. The exercise of discretion to grant relief miscarried because of the above error, and because there was a failure to weigh the various factors for and against the grant of such relief.
5. There was further error in taking into account delay against the tenant, as the reasons for delay were not examined.
6. The application for review is therefore allowed.
Retail and Commercial Leases Act 1995 (SA) s 3, s 68; Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57; Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87, 97; FP Leonard Advertising Pty Ltd v KD Travel Service Pty Ltd (1993) 12 ACSR 136; Macerlean v Notfair Pty Ltd [2013] SADC 80; Anders v NACS Nominees Pty Ltd [2013] SASC 152; NZI Insurance Australia Ltd v Baryzcka (2003) 85 SASR 482; Glenelg Backpackers Resort Pty Ltd v Alexander Terrace Pty Ltd (2003) 228 LSJS 90; Alexander Terrace Pty Ltd v Glenelg Backpackers Resort Pty Ltd [2002] SASC 210; Kuhl v Zurich Financial Services (2011) 243 CLR 361, referred to.
MWJ v The Queen (2005) 80 ALJR 329, applied.
Australian Trade Commission v Solarex Pty Ltd (1987) 78 ALR 439, discussed.
LANDLORD AND TENANT - RENEWALS AND OPTIONS - RELIEF AGAINST LOSS OF OPTION FOR RENEWAL
APPEAL AND NEW TRIAL - APPEAL - PRACTICE AND PROCEDURE - SOUTH AUSTRALIA
1. The review is to be determined according to the principles summarised in Harradine v The District Court of South Australia.
2. In the circumstances the court is in as good a position as the Magistrate to draw inferences from undisputed or objective facts.
3. As there is no power of remission, the court is required to determine the question of discretionary relief for itself.
4. It is appropriate to give the parties the opportunity to call further evidence and to make further submissions in light of the above conclusions.
Retail and Commercial Leases Act 1995 (SA); Magistrates Court Act s 3, s 38(4), 38(6), s 38(7), s 68(1) & (2); District Cout Act (1991) s 42B(1); Norbis v Norbis (1986) 161 CLR 513; Macerlean v Notfair Pty Ltd [2013] SADC 80; Anders v NACS Nominees Pty Ltd [2013] SASC 152; NZI Insurance Australia Ltd v Baryzcka (2002) 85 SASR 497; Glenelg Backpackers Resort Pty Ltd v Alexander Terrace Pty Ltd (2003) 228 LSJS 90; Allesch v Maunz (2000) 203 CLR 172, referred to.
Harradine v The District Courts of South Australia (2012) 280 LSJS 572; Fox v Percy (2003) 214 CLR 118; SS Hontestroom v SS Sagaprack [1927] AC 37; Warren v Coombes (1979) 142 CLR 531; Singer v Berghouse (1994) 181 CLR 201; Alexander Terrace Pty Ltd v Glenelg Backpackers Resort Pty Ltd [2002] SASC 210, applied.
PRIPARK (SA) PTY LTD v KYB PTY LTD
[2013] SADC 142The issues
Pripark Pty Ltd conducts the business of a public car park operator on premises owned by KYB Pty Ltd at 72-80 Grote Street Adelaide in the CBD, pursuant to a licence agreement between the parties entered into on 1 May 2010. As KYB gave notice of its intention not to renew the licence, Pripark brought an application under the Retail and Commercial Leases Act 1995 (SA) for relief and in effect, for orders reinstating the licence. The matter was heard in the Adelaide Magistrates Court, which in reasons delivered on 15 August 2013, held the notice of renewal had not been given in accordance with the licence and declined to reinstate the licence. This proceeding is an application by Pripark for review of that decision.
The licence agreement
The licence agreement was for an initial term of three years, expiring on 1 May 2013. It provided for a right of renewal for a further two terms of five years each. It follows the licence had a potential life span of 13 years to 1 May 2023. In order for renewal to validly occur, notice was required to be given by Pripark of the intention to renew, as will appear shortly. As KYB took the view that such notice was not given, it served its own notice of its intention not to renew.
The original licence fee was $3,600 per month, increasing to $4,000 at the expiry of the first six months, and then increasing to $4,500 over the second year (clause 6.1.2). Thereafter the licence fee was to be reviewed annually to take account of CPI movements (clause 6.1.3).
The issues before the Magistrate centred upon, as they do before this court, two clauses in the licence agreement. The first was clause 1 which reads as follows:
1. GRANT OF LICENCE AND TERM
The Licensor grants to the Licensee a bare non-exclusive licence to use and occupy the car park for a term of three (3) years commencing on 1 May 2010 (“Commencement”) subject to the provisions of this Agreement. The Licensee has a right to renew the Agreement for a further two (2) terms each of five (5) years subject to appropriate notice of its intention to renew and on terms and conditions to be agreed and failing agreement through the use of an independent person to determine rental, other terms will remain as per this Licence agreement.
1.1If the Licensee wishes to exercise the right of renewal in this Clause they must give notice to the lessor no less than six months prior to the end of the lease term.
1.2The commencing rent of the new term will be market rent as agreed between the Licensor and the Licensee or if the agreement cannot be reach[ed] as determined by a valuer as per the Retail and Commercial Leases Act 1995.
The other point of contention arises from the requirements to give notice under the licence contained in clause 19, which provides:
19. NOTICES
Any notice required to be served on the Licensor or the Licensee shall be served by any verifiable means including registered mail, certified mail with signature required or email with receipt required to the relevant party at its registered office at the date of this Agreement or such other address as shall be notified by either party in writing for such purpose. For clarity a notice is not deemed to be served unless the party serving the notice can demonstrate beyond reasonable doubt that the other party has received the notice.
There are some obvious drafting infelicities in these clauses. As to the former, there is nothing to suggest the notice of intention to renew must necessarily be in writing, although it would no doubt be prudent to do so. That view is supported by the qualification that the notice must simply be an ‘appropriate’ one, whatever that might otherwise mean. Nevertheless the right of renewal only accrues once the stipulated conditions of its exercise are satisfied: Laybutt v Amoco Australia Pty Ltd.[1]
[1] (1974) 132 CLR 57, 76
As to the latter, it is by no means clear it was contemplated that a notice of renewal necessarily fell within clause 19, however a notice to renew is plainly a ‘notice required to be served.’. The primary requirement is for service ‘by any verifiable means’. Examples are furnished which obviously were not meant to be exhaustive or prescriptive. Service is not therefore required to be exclusively at the Registered Office; it could be at ‘such other address as shall be notified by either party in writing for such purpose’. It is accepted there was no such notice in this case. Since notices must be ‘served’ at a place, it is implicit that it must be in writing. A further layer of ambiguity is added by the rider to clause 19, ‘it is not deemed to be served unless the party serving the notice can demonstrate beyond a reasonable doubt that the other party has received the notice’. This portion of the clause makes a dichotomy between service on the one hand and receipt on the other. The commercial uncertainty that all the above considerations give rise to is regrettable.
Court proceedings
The matter came before the Magistrates Court at Adelaide, sitting in its Civil (General Claims) Jurisdiction, following Pripark’s application for relief under the Retail and Commercial Leases Act, filed on 18 February 2013. The jurisdiction to try such actions is vested in the Magistrates Court by s 68(1) of the Retail and Commercial Leases Act.
When the matter first came before this court, the order made in the Magistrates Court was stayed by another judge, pending the determination of the review.[2] The right of review to the District Court is furnished by s 38(6) of the Magistrates Court Act 1991 (SA). Section 38(7) thereof supplies powers of affirmation and rescission as well as the capacity to ‘substitute a judgement that… [the court] … considers appropriate’. However there is no power of remission in other than reviews against default or summary judgements, which this case is not: s 38(7)(d)(iii) Magistrates Court Act.
[2]See in this respect Tiger Crane Hire P/L v Lonsdale Properties [2010] SADC 41
Both parties accept that reviews under ss 38(6) and (7) of the Magistrates Court Act are not governed by the administrative and disciplinary sections in Part 6 Subdivisions 1-3 to the District Court Act 1991 (SA), by reason of s 42B(1) thereof which provides:[3]
[3] See Hadeler v Antoniou (2009) 266 LSJS 193, [17]
Subdivision 2 – Administrative appeals
42B – Application of Subdivision and interpretation
(1) This Subdivision applies in relation to the appellate jurisdiction conferred on the Court by another Act (the special Act) subject to the provisions of the special Act.
The application for review therefore stands to be determined according to the principles summarised by Blue J in Harradine v The District Court of South Australia.[4] Both parties were, incidentally, represented by counsel in both the Magistrates and District Courts, they having agreed to such a course as permitted by s38(4)(a)(ii) of the Magistrates Court Act.
[4] (2012) 280 LSJS 572, [53]
There is no dispute that despite the fact that this agreement is a licence with respect to the operation of the public car park, it otherwise falls within the definition of ‘retail shop leases’ as defined by s 3 of the Retail and Commercial Leases Act, as it comes squarley within the definition of ‘business premises at which services are provided to the public.’
Factual background
Ms Bartrop the administrative manager of Pripark, gave evidence before the Magistrate, that on 2 October 2012 she posted a letter to KYB at its 80 Gouger Street address marked ‘private and confidential’, in which she indicated that it wished to renew the licence. This complied with the licence requirement to give at least six months notice of same. The address was that provided by KYB in the licence agreement itself. Otherwise correspondence between the parties was by text or email, except that invoices rendered to Pripark over about two and a half years, also bore the 80 Gouger Street address.
This letter of 2 October also raised issues relating to palettes located in the middle of the car park which she considered needed to be removed for public liability reasons, and a complaint that bins at the back of an adjacent fruit and vegetable shop, were ‘constantly overflowing resulting in rubbish being strewn everywhere’. With respect to the question of renewal, the letter read:[5]
Upon reading the contract it has come to my attention that Pripark SA Pty Ltd is required to give 6 months notice to confirm our intention to continue on with the lease of the car park. Please accept this as confirmation that we would like to exercise our right to remain in the car park for the duration of the lease. If we have not heard from you within 7 days of the date of this letter we will deem that as your acceptance.
[5] Exhibit ‘HAB2’
Ms Bartrop deposed in an affidavit to posting the letter by way of ordinary prepaid post in a letter box on Angus Street Adelaide, outside the Royalty Theatre. She took the precaution of photocopying the envelope in its prepaid franked condition bearing the above address. She also said that it had not been returned undelivered.[6] She was not challenged or cross examined on these assertions.
[6] Exhibit ‘HAB4’
The sole director of KYB Mr Khuu, deposed in an affidavit and in oral evidence taken in the court below, that he did not see or personally receive the letter. He explained that the 80 Gouger Street address is his fresh fruit and vegetable shop ‘Marina Market’. In the usual course of events the mail, including that addressed to KYB, was hand delivered by an Australian Post employee to staff who happen to be at the front counter of the shop at the time of delivery. He confirmed under cross examination that he had in fact been keeping an eye out for a letter of renewal, as he ‘did not want to miss it if it was sent to Grote Street’.[7] He added during the course of his evidence before the Magistrate that he expected a notice of renewal could be sent to that address.[8]
[7] Affidavit paragraph 9
[8] T6.10-14
Mr Khuu conceded to a point, that there were potential weaknesses in the mail collection system, in as much as he was dependent on his employees to ensure incoming mail was either forwarded to his accounts staff or left in the incoming tray to be opened only by him. He added in his affidavit that he had instructed the person then in charge of the shop counter to ‘keep an eye out for any letter from Pripark’,[9] and to bring it to his attention. He further conceded that it was normally other staff who opened incoming mail and that he would check his in-tray on random basis.[10]
[9] Paragraph 9
[10]T7.11-23
The decision at first instance
The Magistrate examined in some detail the evidence and the submissions of counsel on both sides and then reached the following conclusions concerning the purported exercise of the right of renewal:
Conclusion
[33] I accept Mr Khuu as a witness of truth. I find KYB did not receive notice from the applicant prior to 30 October 2012 exercising a right of renewal of the licence. I find that notice was not in fact provided by the due date.
[34] I accept Mr Files’ submission that it is clearly implicit in clause 19 that service of the notice must be to the registered office of the company. Service was not to the registered office of the company. Service was not by registered post, by certified mail with signature or by email with receipt, so there is simply no proof available to the applicant that the notice was received by the respondent.
[35] It is common ground that a notice of intention not to renew the licence was provided on 7 November 2012. This is entirely consistent with the evidence given that no notice of intention to review the licence was received prior to the relevant cut-off period, namely 29 October 2012. I agree with Mr Files’ submission that it is not insignificant that the applicant delayed in obtaining legal advice and responding to the notice until February 2013. It was not until Mr Burtt’s letter to KYB Pty Ltd dated 12 February 2013 that there was any contest raised as to the receipt of the notice.
It is inherent in these reasons that his Honour made a finding that the letter of 2 October 2012 was not received by KYB and correspondingly that the right of renewal had not been exercised in the manner contemplated under the licence agreement. The latter may be accepted. However it is apparent his Honour did not make any findings of fact with respect to the evidence of Ms Bartrop. The questions of service on KYB and receipt by Mr Khuu are not the same, and yet the Magistrate has conflated the two: Fancourt v Mercantile Credits Ltd;[11] FP Leonard Advertising Pty Ltd v KD Travel Service Pty Ltd.[12]
[11] (1983) 154 CLR 87, 97
[12] (1993) 12 ACSR 136, 138
It was a necessary step in the proper analysis of the contentious service issue, to make findings with respect to the evidence that it was posted. The Magistrate’s reasons expose a flaw in the process of reasoning because he appears to have proceeded on the basis that the acceptance of Mr Khuu’s evidence necessarily carried with it a rejection of Ms Bartrop’s evidence, when the evidence of Mr Khuu was not necessarily inconsistent with her having posted the letter. As mentioned earlier, she was not cross examined or challenged on this evidence, so it was not open as a matter of procedural fairness to have rejected or dismissed it. As Gummow, Kirby and Callinan JJ observed in MWJ v The Queen[13] of the operation of the principle in Browne v Dunn:[14]
A corollary of the rule is that Judges should in general abstain from making adverse findings about witnesses in respect of whom there has been non-compliance with it.
A similar point was made by Heydon, Crennan and Bell JJ in Kuhl v Zurich Financial Services.[15]
[13] (2005) 80 ALJR 329
[14] (1893) 6 R (HL) 67, [39]
[15] (2011) 243 CLR 361, [75]
This was not a case of choosing between the evidence of two witnesses or making findings based on credit and demeanour, which require the appellate court to give due deference to the advantage of the Tribunal which heard the evidence: Fox v Percy,[16] SS Hontestroom v SS Sagaporack.[17] That situation places this court in as good a position as the Magistrate to draw appropriate inferences from undisputed or objective facts: Warren v Coombes.[18]
[16] (2003) 214 CLR 118, [23]
[17] [1927] AC 37, 47
[18] (1979) 142 CLR 531, 551
Notice to renew – analysis
Given the unchallenged evidence of Ms Bartrop that the letter was posted, supported as it is by the copy of the franked envelope, there is a very strong inference as a matter of commonsense – and if not a presumption - that it was delivered to the addressee 80 Grote Street and therefore ‘received’ by the respondent. This conclusion is reinforced by the fact that it was not returned undelivered. As Wilcox J observed in Australian Trade Commission v Solarex Pty Ltd:[19]
Whatever criticisms may be made from time to time of Australia Post, it happily remains true that the overwhelming majority of pre-stamped, properly addressed letters reach their destinations within a few days. Founded as it is upon everyday experience, there is no reason to decline to draw an inference of due delivery from evidence of due posting.
[19] (1987) 78 ALR 439 at 446 Beaumont J agreeing
It follows therefore that there was an error in the finding that the notice to renew was not ‘received’ prior to the relevant cut-off period, namely 29 October 2012. The evidence is to the effect that it was received, but that it was not drawn to the attention of Mr Khuu. As pointed out earlier, there is a critical distinction to be made between receipt by the respondent (or service on the respondent for that matter) and receipt by Mr Khuu personally.
In the end result the evidence strongly suggests on the balance of probabilities that the notice of renewal was received by KYB at the
80 Grote Street address. On the other hand there is no proof that it was served on either the registered office (which happens to be an accountant’s office) or a mutually agreed address. Nor, arguably, was it sent by ‘verifiable means’.
The discretion to grant relief
What then should be made of these conclusions? The jurisdiction and powers of the Magistrate’s Court hearing applications of the kind at issue here, are set out in s 68 of the Retail and Commercial Leases Act, which provides as follows:
68—Jurisdiction of the Magistrates Court
(1) An application for an order under this section may be commenced by application to the Magistrates Court by a party (or former party) to a retail shop lease or a collateral agreement.
(2) The Magistrates Court may on application under this section, by order—
(a)restrain an action in breach of this Act, a retail shop lease or a collateral agreement; or
(b)require a person to comply with an obligation under this Act, a retail shop lease or a collateral agreement; or
(c)order a person to make a payment (including a payment of compensation) that is payable under this Act, a retail shop lease or a collateral agreement; or
(d)order the payment of compensation for loss or damage resulting from a breach of this Act, a retail shop lease or a collateral agreement; or
(e)relieve a party to a retail shop lease or a collateral agreement from the obligation to comply with a provision of the lease or agreement; or
(f)reinstate rights under a retail shop lease that have been forfeited or have otherwise terminated; or
(g)require the payment of rent under a retail shop lease into the Magistrates Court until the lease has been performed or an application for compensation has been determined; or
(h)require that rent paid into the Magistrates Court be paid out and applied as directed by the Magistrates Court; or
(i)require a tenant to surrender possession of premises to the lessor; or
(j)do anything else necessary or desirable to resolve a dispute between the parties to the retail shop lease.
At first glance these powers are at least as wide as those available at common law or in equity and if not wider, particularly when it comes to the residual power provided for in s 68(2)(j) to ‘do anything else necessary or desirable to resolve a dispute between the parties to the retail shop lease’: Macerlean v Notfair Pty Ltd;[20] and Anders v NACS Nominees Pty Ltd.[21] Indeed the Full Court acknowledged in NZI Insurance Australia Ltd v Baryzcka[22] that the section confers wide jurisdiction and it held in Glenelg Backpackers Resort Pty Ltd v Alexander Terrace Pty Ltd[23] that it was wide enough to enable the Court to grant relief, even if the party seeking such relief was in breach of the underlying lease.
[20] [2013] SADC 80, [20]-[23]
[21] [2013] SASC 152, [69]
[22] (2002) 85 SASR 482, [23]
[23] (2003) 228 LSJS 90
In this particular instance Pripark sought orders, in effect for relief from the obligation to comply with the strict requirements of service of the notice of renewal under s 69(2)(e), and reinstating its rights of renewal under s 68(2)(f). These options are akin to relief from forfeiture at common law and in equity. On the question of whether any or which of such powers should be exercised, the Magistrate concluded:
[36] I find further that the applicant has not established a basis upon which the Court might exercise any discretion to relieve the applicant from failure to comply with the obligation to give notice as required by the contract. It accordingly follows that I should dismiss the application and order that the applicant is to pay the respondent’s costs of and incidental to the application to be taxed in default of agreement.
The Magistrate was no doubt keenly aware of his discretionary capacity to grant relief, as he referred to it several times in his reasons.[24] In respect of the appellate review of discretionary judgments, the court should ‘show restraint in disturbing the evaluative determinations of primary decision makers’: Singer v Berghouse.[25]
[24] Pripark v KYB AMCCI-13-526, 2 July 2013 at paragraphs [27], [30] and [31]
[25] (1994) 181 CLR 201, 212
The rather perfunctory examination of the discretion to make orders for relief is symptomatic of the fact that his Honour’s thinking was prefigured by the fact that KYB did not receive the notice of renewal. Since it has been determined on review that it was so received, it necessarily follows that the exercise of the discretion miscarried on the basis that it was infected by an erroneous finding of fact: House v The King.[26] There was further error in as much as even on the findings of the Magistrate, the various considerations for and against relief remained to be weighed and balanced against each other, a process the Magistrate failed to undertake. As Lander J pointed out in Alexander Terrace Pty Ltd v Glenelg Backpackers Resort Pty Ltd,[27] discretionary relief under s 68(2) ‘requires an examination of the circumstances and conduct of the parties and a determination as to where the justice of the case lies’.
[26] (1936) 55 CLR 499, 504-505
[27] [2002] SASC 210, [131]
To the extent that the Magistrate took into account as it adversely reflected upon Pripark, the delay in obtaining legal advice and not responding until February 2013, he also fell into error, because there was no evidence and no examination of the reasons of such delay. There was scant evidence taken on the appeal that negotiations between the parties took place in the meantime, but I place no reliance on that at this stage of the reasoning process.
Since there were errors of fact on central issues, it follows that the application for review must be allowed: Norbis v Norbis.[28] Given the absence of the power to remit, the court must now resolve the question of relief for itself: Harradine v District Court of South Australia.[29]
[28] (1986) 161 CLR 513, 518-519
[29] (2012) 280 LSJS 572, [53(5) & (6)]
On the face of matters the considerations favouring the grant of relief in favour of Pripark, appear to include:
·the abject desire to renew the lease on its part;
·the substantial although not strict compliance with the service provisions;
·that the failure to renew was due to inadvertence rather than wilfulness;
·
the fact that Mr Khuu appeared to countenance service of the notice at
80 Grote Street;
·that so doing would be more efficacious than service on the company’s accountant;
·the potential financial detriment to it if the license is not renewed;
·the fact that there is a measure of commercial protection for KYB in the licence fee up-lift provisions in the agreement;
·the fact that Pripark fully complied with its obligations under the licence and correspondingly KYB had no other basis for refusing the exercise of the right of renewal once validly made;
·the fact that on the above findings the letter did not come to the notice of Mr Khuu must necessary mean there was an unidentified flaw in KYB’s incoming mail system.
As against these factors, those leaning against a favourable exercise of the discretion to grant relief, appear to encompass:
·the inadvertence of Pripark in not properly renewing the lease;
·the ease of due compliance;
·that central requirements of the lease were not complied with and their importance in that respect to Mr Khuu on behalf of KYB;
·that reinstatement would preclude KYB from using its premises in any way it considered commercially appropriate;
·that KYB would be so precluded for at least five and possibly ten years, should the licence be reinstated;
·the fact that it neither caused nor contributed to the failure to renew (apart from the flaw in its mailing system);
·the fact that there is no suggestion of misrepresentation or unconscionable conduct on its part.
Before weighing these and any other considerations that might arise, it is appropriate to furnish the parties the opportunity to apply to call such further evidence on the review as they may be advised. Questions might also arise as to the date on which the relevant exercise of discretion is to be exercised: see Allesch v Maunz[30]. As mentioned, no evidence was directed to the reasons for Pripark’s delay in formally responding to the notice of intention not to renew and there was no evidence in the court below as to the extent of the commercial implications to either side on the contingency that relief is or is not granted. To the extent that there was some evidence tendered before the District Court, it was rather indirect and it is of little weight because the court is presently unable to compare the magnitude of the commercial implications to Pripark, as compared with the commercial consequences for KYB.
[30] (2000) 203 CLR 172
Conclusion and orders
For the present the orders of the court are that the application for review is allowed because of the failure to complete or perfect primary findings of fact in relation to the service of the notice of intention to renew, and because of the failure to weigh the various factors touching upon the discretionary grant of relief. The judgement in the Adelaide Magistrates Court is rescinded. The process of review is adjourned to further hear the parties as to the terms of judgment consistent with these reasons, the appropriate forms of relief, to consider applications to adduce further evidence, if any, as well as on the question of costs.
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