Pripark (SA) Pty Ltd v KYB Pty Ltd (No 2) - [2014] SADC 29

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Minor Civil Review)
PRIPARK (SA) PTY LTD v KYB PTY LTD (No 2)
[2014] SADC 29
Judgment of His Honour Judge Tilmouth
19 February 2014
LANDLORD AND TENANT - RENEWALS AND OPTIONS - RELIEF AGAINST LOSS OF OPTION FOR RENEWAL
In previous proceedings in this action the court found a notice of renewal of a licence agreement was posted by the licensee and received by the licensor, but that it did not come to the attention of its Director, who then gave notice of an intention not to renew the licence. The notice of renewal was not given in strict compliance with notice provisions under the licence. The licensee now seeks orders for relief pursuant to s 68 of the Retail and Commercial Leases Act.
Held:
1. In light of the impasse that developed and the technical nature of the breach, it was appropriate to grant relief in favour of the licensee, in the combined circumstances.
2. The parties should be further heard as to the appropriate terms and conditions (if any) of the grant of such relief.
Retail and Commercial Leases Act 1995 (SA) s 3, s 68(2); NZI Insurance Australia Ltd v Baryzcka (2003) 85 SASR 497; Macerlean v Notfair Pty Ltd [2013] SADC 80; Alexander Terrace v Glenelg Backpackers Resort [2002] SASC 210; Pripark (SA) Pty Ltd v KYB Pty Ltd [2013] SADC 142, referred to.
Allesch v Maunz (2000) 203 CLR 172; Harradine v District Court of South Australia [2012] SASC 96, applied.

PRIPARK (SA) PTY LTD v KYB PTY LTD (No 2)
[2014] SADC 29
The issues

In reasons delivered on 31 October 2013, the court made certain findings as to whether a licence agreement between the parties was validly renewed.[1] Orders were made allowing the review from a decision of a Magistrate who rejected the notion that a notice of renewal was duly served.
[1] Pripark (SA) Pty Ltd v KYB Pty Ltd [2013] SADC 142.
The proceedings now return to the court for further consideration. The issues in contention are whether it is appropriate to grant relief to the appellant (licensee) under s 68(2) of the Retail and Commercial Leases Act 1995 (SA), in effect reinstating the licence and if so on what terms, if any. The parties called and tendered further evidence at this second stage of the proceedings. These reasons make further findings of fact and in part, determine the issue of relief.
Previous findings
The following is a brief recitation of the findings relevant to the above questions made in the earlier judgment. The subject licence is in respect of a car park at 80 Grote Street in Adelaide. It amounts to a ‘retail shop lease’ as defined in s 3 of the Retail and Commercial Leases Act. The central issue was whether a notice of renewal was duly served. The court found a notice was posted and was received by the respondent KYB Pty Ltd (KYB) at 80 Grote Street Adelaide, but that it did not come to the attention of its Director Mr Khuu.[2]
[2] Above, [14].
In so finding I observed at one point that Ms Bartrop the Administrative Manager of the appellant Pripark (SA) Pty Ltd (Pripark), had photocopied the envelope in its pre-paid franked condition. That observation in fact misunderstood the affect of Ms Bartrop’s evidence in that respect. Exhibit ‘HAB 4’ to her affidavit filed on 18 April 2013, annexed:
a true copy of a facsimile envelope that I have passed through the franking machine. It correctly displays the information that appeared on the letter that I sent to KYB although the postage fee has been deliberately omitted.
Nevertheless the fact remains that this material stands as a form of independent evidence supporting her testimony that the letter was posted, quite apart from the fact that she kept a file copy, evidence which it might be repeated was not disputed when given before the Magistrate, or on review.
It was so posted on 2 October 2012. The licence required the right of renewal to be exercised by 29 October 2012. If not renewed the licence expired on 1 May 2013. The arrangements between the parties in the meantime have remained as if the licence remained on foot, because of a stay granted by another Judge of this court, pending resolution of the review proceedings.[3]
[3] Order 13 September 2013, Judge Muscat.
Service of the notice to renew
It was submitted on behalf of the appellant that there should be a further finding that proof of posting and delivery of the letter satisfied the notice requirements of the licence. In order to appreciate this point it is necessary to repeat that portion of the licence providing for the giving of notices:
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.
It was contended that posting a franked letter by way of ordinary prepaid post, amounted to sufficient ‘verifiable means’, within the meaning of this clause. It was the evidence of Mr Pearson, a commercial leasing consultant engaged by KYB to conduct its negotiations preceding the licence, that he requested a change to this clause. The draft was prepared by the licensee. Mr Pearson wanted to reflect changing technology as his concern was to establish a measure of reliability in the notice provisions. For reasons advanced in the preliminary judgment, that worthy intention failed in this instance.
The expression ‘verifiable means’ signifies a means by which to ‘establish the truth or correctness by … demonstration, bear out, make good or support’.[4] That is to say, the intention was to provide for an independent means of demonstrating that notices under the licence were served, without doubt or controversy. So much could be achieved for example, by sending a notice by registered post, in or attached to an email, by receipted hand-delivery and no doubt in numerous other ways. The means employed in this instance were not sufficiently independent or objective to allow for verification. The controversy that has ensued as a consequence self-evidently demonstrates as much. For that reason due compliance with the ‘verifiable means’ requirement of clause 19 of the licence cannot be sustained.
[4] The Concise Oxford Dictionary, Sixth Edition.
On the other hand the submission that the 80 Grote Street address, was an address ‘notified by either party in writing for such purpose’, is made good. It was the sole address put forward by the respondent for notices, and for that matter for any other purpose, including the rendering of invoices. Although the registered office was nominated in clause 19 to apply in the first instance, it was not one in fact ever used for communications between the parties. Since the Grote Street address appeared on the licence itself, it was necessarily an address ‘notified’ by the respondent for that purpose. There was no other formal requirement for address notification purposes within clause 19 itself.
Further fact finding
There was little debate by the parties as to the date upon which the exercise of discretion to grant relief from breach of the notice provision should occur. However the appropriate time should in the circumstances be as of the date of judgment. Should the court reinstate the licence, or impose conditions, it is essential that it should do so in light of the actual commercial situation of the parties at that time, such that it is appropriate relief by reference to circumstances as then exists: Allesch v Maunz,[5] Harradine v District Court of South Australia.[6]
[5] [2000] 203 CLR 172, [23], and see the authorities cited in footnote 32 therein.
[6] [2012] SASC 96, [53]; (2012) 280 LSJS 572.
A second affidavit sworn by Mr Howard the Operations Manager of Pripark, deposes to an email he was supposed to have sent to Mr Khuu on 4 June 2012, in which he indicated an intention to exercise the right of renewal. Somewhat mysteriously, this was not raised before the Magistrate or during the initial hearing in this court. It came to light in a response to a reference by Mr Pearson in an affidavit sworn on 6 December 2013, to a meeting with Mr Howard on 7 November 2012, at which Mr Pearson served the notice of KYB’s intention not to renew the lease.[7] Mr Pearson says Mr Howard read the notice and then looked up and said ‘I sent you an email to renew the lease’.
[7] FDN 14, para 28. The supposed email is Exhibit ‘CH-4’ to Mr Howard’s affidavit of 11 December 2013.
It is most unclear on the evidence whether the exhibited email is a ‘copy and paste’ from the ‘sent’ folder of the email software and therefore appears as a word processing document, or if it purports to be a direct copy printed therefrom. Either way the odd formatting casts considerable doubt upon its provenance. It was the confusing evidence of Mr Howard that due to some unidentified fault with his computer or an Internet Service Provider, that the email was not sent anyway.[8] It is not therefore relied upon by Pripark, however it does cause one to view Mr Howard’s evidence with some caution.
[8] T22.1-26.2, 20 December 2013.
The second issue addressed by the subsequent evidence, was to explain the delay in seeking legal advice between early December 2012 and early February 2013. It was on 7 December 2012 that Mr Pearson made it clear in an email to Mr Howard that KYB considered ‘Pripark have not renewed the licence’.[9] Mr Howard maintained that he constantly tried to contact Mr Khuu and Mr Pearson during that time, and that each repeatedly referred him to the other.[10] He explained that for a period during this time frame, Mr Pearson was interstate.[11] Mr Pearson did not give evidence to the contrary,[12] and Mr Howard was not cross examined to refute it. Nor did Mr Khuu refute either assertion.
[9] Affidavit 5 December 2013, Exhibit ‘WCP-5’.
[10] T7.31-9.18, 20 December 2013.
[11] T15.13-.16, T33.4-.27, 20 December 2013.
[12] See for instance T63.16-.20, 20 December 2013.
Although Mr Howard had his own personal distractions of some moment in September 2012, it is not readily apparent why it took two months before the licensee sought legal advice. The evidence was that Pripark’s solicitor eventually wrote to KYB on 12 February 2013 asserting that the letter of 2 October 2012 ‘constitutes the giving of notice by verifiable means’.[13]
[13] Bartrop affidavit 15 April 2013, Exhibit ‘HAB-6’.
Mr Howard produced a number of text messages in which he attempted to arrange a meeting to deal with the renewal question. One to Mr Pearson of 3 October 2012 seeks to discuss ‘the issues you would like addressed … at your convenience’. In another of 7 January 2013, Mr Howard indicated that Pripark wanted ‘to stay on as site lessee and want to do that amicably … or should I seek legal counsel’. Mr Pearson responded ‘Ur choice. Contact Sam please’. There was another exchange to the same effect on 16 January 2013. As Sam is a reference to Mr Khuu, this rather supports the evidence that Mr Howard was referred from one to the other. These communications however, hardly amount to negotiations – no meetings in which to negotiate were convened.
Rather, the evidence suggests that a stand-off developed between the parties. Not much of substance by way of resolving matters occurred on either side. For his part Mr Howard claimed being repetitively fobbed off by both men.
Mr Pearson deposed to doing nothing, considering it the responsibility of Pripark to take affirmative action. He explained this attitude in this passage of his evidence under cross examination:[14]
[14] T64.21-67.14, 20 December 2013.
QI refer you to Mr Howard's email of 9 November 2012, it is the one over the page a bit, see the dates on one page and the next page has the text.
ASure, this is from Mr Howard to myself.
QThat's correct, yes, and in that paragraph I think it's one, two, three, the fourth paragraph down, Mr Howard mentions 'I've spoken to Heidi and she informed me she sent a letter on 2 October 2012 after attending the car park after a complaint was received by her regarding potential public liability issue'. And then he says 'She also sent a letter to the physical address after reviewing the contract when returning to the office'.
AYes.
QYou never asked for a copy of that letter, did you.
ANo, no.
QThis is a vital issue.
AYes.
QIt’s regarding a renewal of a licence.
AYes.
QYou've just given evidence that your client is very concerned about having to take over control as early as June 2012 and yet when you receive that you don't ask for the letter.
ANo.
QWhy not.
AI was becoming embarrassed for Mr Howard. I didn't think the letter existed any more than I thought the email existed. I thought it was incumbent on him, if it existed, to send me a copy straightaway.
QBut you didn't ask for it.
ANo.
QAnd it's a vital letter but you decided not to ask for it. Would those discussions that you were having with Mr Khuu, you mentioned just a minute ago that they started as far back as 2012.
AYes.
QAnd I gather also from your affidavit that prior to the - I suppose you'd call it the final date of notice to renew, 30 October, but prior to that - I'll get the paragraph in your affidavit here, it's para.21 'About October 2012 or shortly before Mr Khuu and I discussed a number of options'.
AYes.
QSo to discover the existence of a letter which would have prevented all those options that would have been a major inconvenience for Mr Khuu, wouldn't it.
AYes, yes.
QTherefore it was not in your interests to attempt to negotiate that. Mr Khuu was more interested in pushing on ahead, wasn't he.
AYes, yes.
QHe didn't ask Ms Bartrop to a meeting face-to-face, did he.
ANo, Mr Khuu instructed me to deal with Pripark on this matter.
QYes, and did you ask for a meeting with Ms Bartrop.
AI said I was quite prepared to meet her on the same basis that I was prepared to meet Mr Howard.
QDid you say 'I'm in town now, come down to Zuma's' or something like that.
ANo, at the meeting with Mr Howard I said 'Look, if Ms Bartrop wants to meet and I'll give her the same assurance that the decision is commercial, not personal. I’m happy to do so.
QAnd being a commercial decision, you'd want to have all of the facts before you, wouldn't you.
AAlways, yes.
QBut you don't want to look at that letter, do you.
ANo, that's not the case. My view at the time was if the letter existed and they had a receipt for the letter then the lease had been effectively renewed, which is why I invited Mr Howard to provide a receipt of the letter.
QBut you don't ask for that, do you.
AYes, I do, yeah.
QWhere do you say 'Where's the receipt for the letter?'
AIn my email I said 'Did you get a receipt for this?'
…
AIn my email on 13 November I said 'Hi Chad, did you receive any verification of any notices that you've sent'.
QBut at that stage there's still this bit of a confusion over the email and you didn't actually specify the letter, did you.
ANo, not in the email but in conversation with him I said you know, 'Chad, you know, I need something in front of me that shows Mr Khuu that this letter was sent and received'. That wasn't forthcoming. I didn't think it necessary to storm around to his office and demand to see a copy of -
This stance bears the hallmarks of a case of wilful blindness on his part. It is as impossible to understand why Mr Howard did not supply a copy of the letter renewing the licence, as much as it is to understand why Mr Pearson or Mr Khuu did not call for it in order to clarify the situation. The evidence from both sides on this issue is quite puzzling.
A third issue dealt with in the further affidavits, was the financial implications to each party. This car park is Pripark’s most profitable operation. There is no doubt that it would suffer considerable financial detriment should the licence be forfeited. Indeed Mr Howard deposed that without it Pripark ‘would be in a position of financial hardship’.[15] The evidence suggests obtaining another alternative car park operation, is by no means an easy or readily available option in such a competitive market.[16]
[15] Affidavit 12 December 2013, para 15.
[16] Ibid para 15.
For its part there are also financial consequences of some moment to KYB. It has a contingent agreement with Wilson Parking rendering its position more profitable than the Pripark arrangement.[17] To a certain extent KBY’s situation can be redressed by orders for payment or compensation under ss 68(2)(c) & (d) of the Retail and Commercial Leases Act. In relative commercial terms, these considerations if anything are more financially fraught for Pripark than for KYB.
[17] Pearson affidavit 5 December 2013, paras 50-55.
The discretion to grant relief
In the first judgment, a number of factors listed in no particular order of importance, were identified as favouring the grant of relief to Pripark and a number counting against such relief. To repeat them, they were:[18]
[18] At paras [31] and [32] respectively.
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 licence 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.

Pripark clearly desired to renew the lease. Mr Khuu contemplated service of a notice of renewal at 80 Grote Street. The degree of non-compliance was one of form rather than of substance, although it was not one strictly in accordance with the licence requirements. The fact that it did not come to the attention of Mr Khuu is necessarily attributable to a flaw with his incoming mail system, based on the primary facts the court was prepared to make.
Once KYB became aware in early November 2012 that a letter of renewal was supposed to have existed, it remained inert, even off-hand about the issue, leading Mr Howard into a false sense of malaise as to the urgency and significance of the matter. He was clearly pursuing a meeting at which the issue could be discussed. It is the attitude of KYB in permitting Pripark to fall further and further into default and the resultant impasse that perpetuated it, that is the most troubling aspect. It remains the fact that Mr Howard also waited too long before obtaining legal advice, but that was very much bound up in the stand-off that had developed rather than deliberate delay on his part, not to mention the intervening Christmas holiday interruptions.
The decision whether to grant relief is a finely balanced one. The powers available to the court under s 68(2) of the Retail and Commercial Leases Act are very wide indeed: NZI Insurance Australia Ltd v Baryzcka,[19] Macerlean v Notfair Pty Ltd.[20] As Lander J pointed out with respect to the analogous precursor to s 68(2) in Alexander Terrace v Glenelg Backpackers Resort:[21]
[131] Relief under s68(2)(da) of the Act is discretionary. It requires an examination of the circumstances and conduct of the parties and a determination by the Tribunal as to where the justice of the case lies… .
[19] (2003) 85 SASR 497, [22].
[20] [2013] SADC 80, [22].
[21] [2002] SASC 210; BC200203697.
The broad circumstances are that there was an unsuccessful attempt to renew the licence owing to a formal rather than substantive breach of the notice provisions. The delay in taking legal action is explained for the most part by poor relations, and mutual inaction. As mentioned, the financial implications fall, if anything, more severely on Pripark than they do on KYB.
In those combined circumstances and weighing as best one can all of the aforementioned considerations, it is appropriate on balance in the overall interests of justice to grant relief in favour of Pripark. The terms of such relief would appear to entail either relieving Pripark from the obligation to comply with the formal provisions of the licence in respect of renewal pursuant to s 68(2)(e) of the Retail and Commercial Leases Act, and/or reinstating its rights thereunder pursuant to s 68(2)(f).
Further orders
The parties should be heard as to the precise terms of such relief, as the options and potential terms thereof were not addressed by them in any detail. Amongst other things, the parties should be prepared to argue whether upon reinstatement, or orders akin to reinstatement, it is appropriate to restore KYB’s rights to CPI adjustments to the monthly licence fee as a condition of relief and if so, what the mechanisms for payment should be.
There are also outstanding issues of costs to be resolved, including the cost of an adjournment sought at the last minute by Pripark in December 2013, when the matter was adjourned due to a change in its solicitors.