Sazzi (SA) Pty Ltd v Chang - [2015] SASCFC 96

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
SAZZI (SA) PTY LTD v CHANG & ORS
[2015] SASCFC 96
Judgment of The Full Court
(The Honourable Justice Gray, The Honourable Justice Kelly and The Honourable Justice Peek)
3 August 2015
APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES - POINTS AND OBJECTIONS NOT TAKEN BELOW - WHEN NOT ALLOWED TO BE RAISED ON APPEAL - COURSE OF CONDUCT AT TRIAL - GENERALLY
APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES - POINTS AND OBJECTIONS NOT TAKEN BELOW - WHEN NOT ALLOWED TO BE RAISED ON APPEAL - QUESTIONS NOT RAISED ON PLEADINGS OR IN ARGUMENT - GENERALLY
LANDLORD AND TENANT - TERMINATION OF THE TENANCY - FORFEITURE - GENERALLY
The appellant was the tenant of commercial premises being used as a restaurant. The respondents were the landlords. The parties executed a written agreement to lease and a written memorandum of lease. The lease commenced on 1 October 2006. Prior to entering into the lease, the appellant paid funds to the respondents in respect of a debt owing to the respondents by the previous tenant, to whom the appellant was indebted. Soon after the lease commenced, the appellant’s payments for rent and outgoings fell into arrears. On about 13 May 2007, the appellant ceased trading at the premises and opened another business elsewhere. The appellant claimed to have entered into an agreement to sell the business, including some plant and equipment, to a third party. The respondents claimed that they did not authorise any assignment of the lease or for the third party to be in possession of the premises. On 15 June 2007, having previously written to the appellant to request payment of outstanding rent and outgoings, the respondents re-entered the premises, changed the locks, fixed a notice of re-entry and sold the plant and equipment at auction. At trial, no issue was raised that the date of re-entry was 14 days after 1 June 2007. The issue was first raised by a third notice of appeal. No evidence was led at trial to lay a foundation for suggesting that re-entry a day later would have had any impact or substantive effect.
Whether the Judge erred in his assessment of the amount owing as at 1 June 2007. Whether the Judge erred in finding that the respondents were entitled to re-enter the premises on 15 June 2007. Whether the appellant should be permitted to amend the grounds of appeal. Whether the Judge erred in finding that the payment by the appellant to the respondents in respect of the previous tenant’s debt was not in breach of the Retail and Commercial Leases Act 1995 (SA).
Held per Gray J (Kelly and Peek JJ agreeing) (refusing permission to amend the grounds of appeal and dismissing the appeal):
1. The Judge’s findings on the amount owing by the appellant to the respondents were open on the evidence.
2. On the proper construction of the contract, the Judge did not err in finding…

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.

Continue reading Sazzi (SA) Pty Ltd v Chang

Details

AGLC: Sazzi (SA) Pty Ltd v Chang [2015] SASCFC 96
Case: [2015] SASCFC 96
Decision Date: 3 August 2015

CaseChat Overview and Summary

The appellant, Sazzi (SA) Pty Ltd, was the tenant of commercial premises used as a restaurant, and the respondents were the landlords. A dispute arose concerning the termination of the lease and the subsequent re-entry and seizure of the tenant's plant and equipment by the landlords. The tenant claimed damages for the value of the business and the seized goods, while the landlords asserted lawful re-entry due to unpaid rent and outgoings. The matter was heard in the District Court of South Australia.

The primary legal issues before the court were whether the landlords' re-entry onto the premises was lawful, and consequently, whether the seizure and sale of the tenant's plant and equipment constituted conversion. Additionally, the court considered whether a payment made by the tenant prior to the lease commencement constituted a premium or reimbursement of capital expenditure, and whether any cause of action arose under the Retail and Commercial Leases Act. A novel issue arose on appeal concerning the precise date of re-entry and its impact on the legality of the landlords' actions, which had not been raised or litigated at trial.

The Full Court of the Supreme Court of South Australia, comprising Gray, Kelly, and Peek JJ, dismissed the appeal. The court affirmed the trial judge's findings of fact, including that the payment made by the tenant did not constitute a premium or reimbursement of capital expenditure, and that no benefit was conferred on the landlords giving rise to a cause of action under the Retail and Commercial Leases Act. Crucially, the court held that the point regarding the date of re-entry, first raised in the notice of appeal, could not be considered on appeal as it was not an issue raised on the pleadings or in argument at trial, nor was there any evidence led to suggest its substantive impact. The court applied the principle that points not taken at trial are generally not permitted to be raised on appeal, particularly where no foundation was laid for such an argument at the original hearing.

The appeal was dismissed, and permission to amend the grounds of appeal was refused.

Orders

Orders of the court

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Background

Background to the litigation

The Judge concluded that the re-entry by the landlords was lawful and, as a consequence, dismissed the claim for damages for the value of the business. The Judge dismissed the claim that there had been a premium payment. The Judge found that the seizure of the plant and equipment was unlawful and that the tenant was entitled to an award of damages equivalent to the value of the goods.[1][1] Sazzi (SA) Pty Ltd v Chang and Ors [2013] SADC 178.Background On 14 September 2006, the parties executed an agreement to lease the premises. The agreement to lease was entered into in anticipation of the execution of a formal memorandum of lease. The agreement to lease provided that the period of the lease would commence on 1 October 2006 and be for five years, with a right of renewal for a further five years. Rent was agreed in the amount of $46,168.00, payable monthly in advance by 12 equal calendar monthly payments. The tenant also agreed to pay outgoings. The agreement to lease was subject to the following special condition:Special Conditions: This Agreement to Lease is subject to the surrender of lease pertaining to the leased premises currently entered into between the landlord and Lai Chi Hung… and the lessee Lien Lang depositing a bank cheque of $21,232.75 being the payment of outstanding bills due to the landlord for the leased premises. A memorandum of lease was entered into. The lease commenced on 1 October 2006 and was for a period of five years concluding on 30 September 2011. There was a right of renewal for a further period of five years. The tenant occupied the premises from 1 October 2006 and operated a restaurant at the premises. The tenant provided plant and equipment. Furniture was also supplied. On 13 May 2007, the tenant ceased trading at the premises and opened another restaurant business, the Slippery Fish at Port Noarlunga. The tenant claimed to have entered into an agreement in writing for the sale of the business and some of the plant and equipment to a Mr Luc, for $100,000.00. It was intended that Mr Luc would take over the lease. The tenant left some items of plant and equipment at the premises. The tenant claimed that Mr Luc had full access to the premises from 13 May 2007. The landlords claimed that they did not authorise or permit Mr Luc to be in possession of the premises. The landlord would not agree to any assignment of the lease until all outstandings for rent and outgoings were paid. Advice to this effect was given to the tenant both orally and in writing. On 15 June 2007, the landlords re-entered the premises, changed the locks and fixed a notice of re-entry. Following re-entry, the landlords seized the plant and equipment. The landlords arranged for the sale of the plant and equipment at auction. Clause 2 of the memorandum of lease addressed the obligation to pay rent:You must pay rent 2.1You must pay the rent in full (that is with no set off or reduction) in the way set out in Item 72.2You must pay it to us at our address as set out in Item 4 unless otherwise advised in writingClause 3 addressed charges:You must pay charges3.1You must pay any permit fees or other government fees relating to the property as set out in the disclosure statementAlso any telephone, gas and electricity charges relating to the propertyClause 4 addressed outgoings:You must pay outgoings4.1You must pay all rates and taxes relating to the property such as for example local government rates, water and sewer rates, and any excess water charges4.2You must pay Emergency Services Levy relating to this property4.3You must pay any land tax (on a single holding basis) relating to the property however you don’t have to pay land tax if this lease is a retail shop lease as defined in the Act4.4You must pay the things mentioned in this Clause no matter who they are billed to.Clause 6 prohibited the tenant from transferring the lease except with the prior written consent of the landlord:6.6If you want our consent you must apply in writing to us. You must give us full details of your proposal and everybody involved. Also any further detail we ask for.6.7If this lease is a retail shop lease, subject to the Act, we will not unreasonably refused that consent if you want to sign over all of your interest under this lease6.8 In such a case we will only withhold our consentIf the tenant wishes to change the use of the premisesOr if the new tenant is unlikely to meet the financial obligations under their leaseOr if the new tenant’s retailing skills are inferior to yoursOr if you have not complied with the requirements of the Act for such an assignment6.9If you want to sign over your interest under this lease you must request our consent in writing and you must have provided us with information we reasonably require about the financial standing and business experience of the person you intend to sign over your interest to. Also you must give the person to whom you want to sign over your interest a copy of any Disclosure Statement given to you in respect of the lease and updated details of any changes that have occurred since the Disclosure Statement was given to you.”Clause 38, inter alia, addressed re-entry and relevantly provided:38.1At any time after any event mentioned in this Clause happens, we can re-enter the property.Or we can re-enter part of it whilst claiming it all.[This means we can take back the property and exclude you from it]This lease then ends38.2 The events are:If any rent is unpaid 14 days after it should have been paid (and after we have demanded it be paid)Further clauses relevant to re-entry included the following:Essential Terms40.1You must comply with all of your obligations in this lease fully, correctly and on time without fail. Your strict compliance is essential.Preservation of Rights41.1If this lease ends, especially under clause 38 … that does not affect any right of either party41.2Using a right (and especially the right of re-entry) given in this lease does not affect any other rightRefunding of Costs43.1You must immediately refund to us any damages or penalties arising from your disobedience of this lease which we claim from you. You must immediately pay us any out of pocket expenses (including solicitors costs) to do withUs getting or attempting to get anything you owe useUs using or attempting to use any of our rights in this leaseUs enforcing, or attempting to enforce any obligation in this lease, orUs curing or attempting to cure your disobedience of this leaseAbandoned Goods58.1If this lease is a retail shop lease which ends and your goods are left on the propertyAfter two days we may remove or destroy or dispose of the goodsIf they are perishable foodstuffs or if their value is less than a fair estimate of their costs of removal, storage and sale58.2If the goods are not perishable foodstuffs or valueless then we will store them in a safe place for at least 60 days58.3Within 7 days of storing them we will give you notice to your forwarding address and if someone else to our knowledge has an interest in the goods, to that person and we will publish a notice in a newspaper circulating statewide, a notice in the form prescribed by the Retail and Commercial Leases Act 199558.4You or a person who is entitled to the goods may reclaim the goods by paying to us the reasonable costs of removal and storage and any outstanding rent or other charges58.5If the goods are not claimed within 60 days we will, as soon as practicable after that time, sell those goods by public auction.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

GRAY J PEEK J

The Judge, having rejected Ms Lang’s testimony, was entitled to conclude that the payment of $21,232.75 did not constitute the payment of a premium or the reimbursement of a capital expenditure. The monies were an amount paid by Mr Hung. The amount was deducted from the sale price of the business, the subject of the agreement between Mr Hung and the plaintiff. The money was forwarded on behalf of Mr Hung to pay the debt that Mr Hung owed as an earlier tenant of the landlords. These findings of fact were open to the trial Judge. No basis has been established to suggest that the findings were unjustified or inappropriate. Further, no benefit was conferred by the plaintiff on the landlords. No cause of action under the Retail and Commercial Leases Act arose. Conclusion I would dismiss the appeal. KELLY J: I would refuse permission to amend the grounds of appeal. I would dismiss the appeal. I agree with the reasons of Gray J. I would refuse permission to amend the grounds of appeal. I would dismiss the appeal. I agree with the reasons of Gray J.

Ratio Decidendi

Legal Principle Established

Established by: GRAY J, PEEK J

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