RAYWALL Pty Ltd v CALHO Pty Ltd - [2007] WASC 216

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: RAYWALL PTY LTD -v- CALHO PTY LTD & ORS [2007] WASC 216

CORAM: NEWNES J

HEARD: 3 SEPTEMBER 2007

DELIVERED : 14 SEPTEMBER 2007

FILE NO/S: CIV 1790 of 2007

BETWEEN: RAYWALL PTY LTD
Plaintiff
AND
CALHO PTY LTD
First Defendant
CHARLES HOAR
LORRAINE FRIEDA HOAR
Second Defendants

Catchwords:

Landlord and tenant - Option of renewal of lease - Option to be exercised 'not less than 3 months before the expiration' of the lease 'on 26 September 2007' - Notice of exercise given on 27 June 2007 - Whether within time - Whether three months is a clear period - How period to be calculated - Turns on own facts

Legislation:

Property Law Act 1969 (WA), s 8

Result:

Declaration that option not exercised within time specified by lease

Category: B

Representation:

Counsel:

Plaintiff:     Mr C S Gough
First Defendant             :     Mr R J L McCormack
Second Defendants       :     Mr R J L McCormack

Solicitors:

Plaintiff:     Minter Ellison
First Defendant             :     Cornerstone Legal
Second Defendants       :     Cornerstone Legal

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

Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421

NEWNES J: This application raises a short point but one of great significance for the parties.
In about July 2005, the second defendants, through the first defendant, entered into a contract to purchase a business known as the 'Kojonup Roadhouse and Hillview Motel' in Kojonup, in the south‑west of the State, for the sum of $720,000. The business was carried on from premises owned by the plaintiff. The vendors of the business had taken a lease of the premises from the plaintiff pursuant to a lease (the Lease) which is undated but was stamped on 19 December 2002.
The Lease was assigned to the first defendant for the balance of the Term (as defined) by an assignment of lease, dated 14 October 2005, entered into between the vendors, the plaintiff and the first defendant.
Settlement of the purchase of the business was apparently completed on 17 October 2005, upon which date the defendants entered into possession of the business and commenced to operate it.
Under the Lease, the 'Term' is defined to mean 'the term of this Lease which term shall commence on the Commencement Date and expire on the Expiry Date'.
The 'Commencement Date' is defined to mean 'the date specified in Item 2(b) of the Schedule' and 'Expiry Date' is defined to mean 'the date specified in Item 2(c) of the Schedule'. In Item 2(b) of the schedule, the Commencement Date is expressed to be 27 September 2002. In Item 2(c), the Expiry Date is expressed to be 26 September 2007. Item 2 describes the Lease as being one of five years.
The Lease therefore commenced on 27 September 2002 and expired on 26 September 2007.
The Lease also provides, by cl 5.18, that '[o]n the written request of the Lessee made not more than six (6) months nor less than three (3) months before the expiration of the Term … the Lessor shall grant to the Lessee an extension of the Term for the First Extended Term on similar terms and conditions'. The 'First Extended Term' is defined to mean the period from 27 September 2007 to 26 September 2012.
It is common ground that the first defendant first made a written request for an extension of the Term under cl 5.18 of the Lease on 27 June 2007.
The plaintiff contends that the request was out of time and has refused to grant an extension of the Term of the Lease. In this proceeding it seeks a declaration that any request under cl 5.18 of the Lease was required to be given no later than 26 June 2007, or alternatively, no later than 25 June 2007.
The first defendant contends that it was entitled under cl 5.18 to make the request on 27 June 2007, as it did, and accordingly that it is entitled to an extension of the Term.
The first defendant says that if the term of the Lease is not extended the consequences for it will be calamitous. Among other things, it will lose entirely the substantial goodwill it has built up since it acquired the business as there are no other suitable premises in the area from which it could carry on the business.
It is unnecessary, for present purposes, to go into that aspect of the matter. I understand, however, it is to be more fully canvassed on a further application the defendants intend to bring for relief against forfeiture, in the event that the question of the construction of cl 5.18 of the Lease is determined adversely to them.
The only question before me is whether the request served on 27 June 2007 was within the time specified in cl 5.18 of the Lease.
It was submitted on behalf of the defendants that as the five year term of the Lease commenced on 27 September 2002 and expired at midnight on 26 September 2007, it followed that 26 September 2007 should be included in the Term and therefore in the calculation of the three month period in cl 5.18 of the Lease. It followed that the request had to be made three months before 27 September 2007. Accordingly, the three month period before the expiration of the Term is the period 27 June 2007 to 26 September 2007. The expression 'nor less than three (3) months' in cl 5.18 includes the day that is precisely three months before the expiry of the Term, being 27 June 2007. It followed that the request under cl 5.18 could be made on 27 June 2007.
On behalf of the plaintiff it was submitted that the Lease expired at midnight on 26 September 2007 so that three months prior to the expiration of the Lease was midnight on 26 June 2007. As the request was made on 27 June 2007, it was made less than three months before 26 September 2007.
In my view, the request was not made within the time specified in cl 5.18.
It is clear that in the Lease 'month' means 'calendar month': Property Law Act 1969 (WA) s 8.
The request had to be made 'not less than three (3) months before the expiration of the Term'. The Term expired on 26 September 2007. It follows, in my view, that the latest possible date upon which the request could be made was 26 June 2007.
In Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421, an exploration licence dated 28 November 1968 had been granted to the appellant 'for the term of twelve months from the date hereof'. The appellant was entitled to apply for renewal of the licence upon application made 'not later than one month before the expiry of such licence …'. On 28 October 1969 the appellant applied for renewal of the licence. The respondent contended that the application was too late.
The High Court held that where a lease or licence is expressed to have commenced 'from' a certain time, there is a prima facie rule of construction that the lease or licence commences from the first moment (midnight) of the day specified and lasts during the whole anniversary of the day from which it began. That rule is subject to any different intention revealed in the document.
The court also held that where an instrument prescribes that a period of time must elapse between one event and another, the words 'at least' or 'not less than' should, unless the context or the subject matter reveals a contrary intention, be regarded as indicating that a clear or full period of time must expire between the two events; in that case, a full or clear month must elapse.
It was accepted by all members of the court that the last day of the term of the licence was 28 November 1969. But the court was divided on whether the application was within time.
The majority (McTiernan, Stephen and Mason JJ) concluded that as the licence expired at midnight on 28 November 1969 it did not expire until that day had passed; that is, it expired at midnight between 28 and 29 November. It could not therefore be said that it expired on 28 November. It followed that 28 November was a clear day, to be included in the calculation of the one month period. The one month period therefore commenced on 29 November 1969, so the application made on 28 October was made 'not later than one month before the expiry of [the] licence'.
The minority (Walsh and Gibbs JJ) concluded that although the licence did not expire until midnight on 28 November 1969, its expiry must be regarded as co‑extensive with 28 November 1969 and that day must be excluded in calculating the clear period. A full calendar month before 28 November 1969 therefore ended on 27 November 1969. It followed that the one month period commenced on 28 October 1969 and the application made on 28 October 1969 was therefore too late.
I do not consider that either view provides any assistance to the first defendant in this case. Nor, in my view, is there anything in the Lease to indicate a contrary intention to the general rule that the three month period referred to in cl 5.18 is a clear or full period of three months.
On the most favourable approach, that taken by the majority in Forster v Jododex Australia Pty Ltd, in the present case the three month period before which the request had to be made included 26 September 2007. It therefore commenced on 27 June 2007. Accordingly, the request had to be made on or before 26 June 2007.
On the approach taken by the minority, the clear three month period before which the request had to be made did not include 26 September 2007 but ended on 25 September 2007. The period therefore commenced on 26 June 2007. Accordingly, the request had to be made on or before 25 June 2007.
Moreover, in the present case the Lease does not provide that it is to commence 'from 27 September 2002' but rather that it is to commence 'on 27 September 2002' and that it is to expire 'on 26 September 2007'.
In my view, the reference in the Lease to its expiry 'on 26 September 2007' tends to support the conclusion that its expiration must be regarded as co‑extensive with 26 September 2007 and that day must therefore be excluded in calculating the three month period. The last day upon which the request could be made would then be 25 June 2007.
I do not think that for present purposes it is necessary to reach a final conclusion as to that. I consider that, however it is calculated, it is clear that the request made on 27 June 2007 was made less than three months before the expiration of the Term and therefore was not made within the period specified in cl 5.18 of the Lease. On the construction of cl 5.18 most favourable to the first defendant, the latest date upon which the request could be made was 26 June 2007.
I would make a declaration that the request made on 27 June 2007 was not made within the time specified in cl 5.18. I will hear the parties on whether any further orders should be made at this stage and on costs.