Sazzi (SA) Pty Ltd v Chang - [2013] SADC 178

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
SAZZI (SA) PTY LTD v CHANG AND ORS
[2013] SADC 178
Judgment of His Honour Judge Slattery
20 December 2013
PROCEDURE - MISCELLANEOUS PROCEDURAL MATTERS - CROSS-CLAIMS: SET-OFF AND COUNTERCLAIM
LANDLORD AND TENANT - TERMINATION OF THE TENANCY - FORFEITURE - NOTICE AND DEMAND BEFORE RE-ENTRY
Lease of restaurant premises – payment by the plaintiff lessee from assets belonging to a prior lessee of the same premises of amounts claimed to be due to the lessors by the prior lessee – whether payment was a premium or was otherwise a breach of s13 or s15 of the Retail and Commercial Leases Act 1995.
Distraint – whether the defendant lessors properly distrained for rent on 20 February 2007 – whether a distraint actually occurred and if so whether the plaintiff is liable to pay the costs of the distraint under its lease – whether the plaintiff agreed to pay the costs of the distrant – whether the defendants have proved on the balance of probabilities the cost of the February distraint.
Plaintiff lessee makes agreement with a third party for assignment of lease – whether plaintiff in default of rent payable under the lease at the time of seeking the consent of lessors for assignment – whether the defendants as lessors expressly or impliedly consented to the assignment and whether the defendant lessors are confined to a claim against a third party for breaches of the lease.
The plaintiff left the leased premises on 12 or 13 May 2007 to commence a new venture elsewhere – whether at that time or subsequently the plaintiff was in default in payment of rent or outgoings under the lease.
The defendants re-entered the premises on 15 June 2007 and then purported to distrain for rent a second time.
Whether the plaintiff was in default in the payment of rent to the defendants at the time of the second distraint – whether it was necessary to make a demand for the payment of rent before re-entry under the lease or pursuant to the requirements of the Landlord and Tenant Act 1936 – whether rent was owed.
Whether the defendants were in a position to distrain after having re-entered the premises – whether the plaintiff has any entitlement to double damages after the second distraint.
Whether the re-entry or the second distraint or both are wrongful and in breach of a lease – whether and if so to what extent the plaintiff is entitled to claim damages in this respect from the defendants.
Competing cross claims as between plaintiff lessee and defendant lessors in respect of monies allegedly due and owing by the plaintiff under the lease – whether equitable set-off is available as between the plaintiff and the defendants.
After re-entry on 15 June 2007, defendants seized plant and equipment left in the premises by the plaintiff for use by the third party under the purported assignment – defendants refused to allow plaintiff to re-enter the premises to collect this plant and equipment – defendants purport to auction the equipment belonging to the plaintiff without observing the identical requirements of the Retail and Commercial Leases Act and the lease – whether the plaintiff is entitled to damages in respect of the seizure and sale of the plant and equipment of the plaintiff.
Whether the plaintiff abandoned the premises or the goods in the premises.
Counterclaim – whether the defendants are entitled to maintain and if so to what extent their counterclaims against the plaintiff.
Held:
1. The amount paid by the plaintiff to the defendants at the time of the creation of the lease between the plaintiff and the defendants was a payment from funds belonging to the prior lessee under a contractual arrangement between the defendants and the prior lessee and was not in law or in fact to be seen as a payment by the plaintiff to the defendants.
2. The payment did not breach s15 of the Retail and Commercial Leases Act and no action lies in the plaintiff for sub-s15(2)(b) of that Act – under s13 Retail and Commercial Leases Act, no detriment was suffered by the plaintiff as a result of that payment.
3. Although the defendants purported to distrain against the plaintiff on 20 February 2007, there is insufficient evidence to determine if the distraint was completed, whether there was a resolution of the action of distraint between the parties and if so on what basis – in the absence of evidence from the defendants about the plaintiff’s contention that there was no basis for the distraint and that no agreement resolving the distraint was reached, the Court is not in a position to make orders in relation to those costs.
4. The defendants did not act to forestall any assignment of the lease premises and any failure of the arrangements between the plaintiff and the third party is the fault of the plaintiff.
5. No assignment at law or under the lease took place and the plaintiff continued to remain liable under the lease for all rent and outgoings in respect of the premises.
6. As at the date of re-entry the plaintiff was in default under the lease for non-payment of rent. Equitable set-off was not available under the terms of the lease.
7. The re-entry was lawful both under the terms of the lease and under the Landlord and Tenant Act 1936 and no further demand was required to be delivered to the plaintiff by the defendants.
8. The plaintiff did not abandon the premises.
9. The defendants failed to comply with the requirements of the lease or of the Retail and Commercial Leases Act in respect of the plaintiff’s plant and equipment left on the premises and the plaintiff is entitled to claim damages equivalent to the value of the goods.
10. On the counterclaim, the defendant is entitled to an order for payment by the plaintiff of unpaid council rates as at June 2007 in respect of the lease premises and the costs payable under a Magistrates Court order together with interest thereon. The defendants failed to prove its case about the amount of costs claimed in respect of 20 February 2007 distraint.
11. The Court is not in a position to make any further order in respect of the defendants’ claim in the absence of pleadings of that claim.
Landlord and Tenant Act 1936 s10, s12(5), s30, s33, s34, s37; Retail and Commercial Leases Act s3, s13, s15, s43, s76; Land and Business (Sale and Conveyancing) Act 1994 (SA) s6; ITAA s36, s25A; ITAA 1997 s15-15; Carter: Contract Law in Australia 4th ed, Butterworth at [1818]; Derham, The Law of Set Off (3rd edition) at paragraph [5.60] et seq.; Meagher, Heydon and Leeming: Meagher, Gummow and Lehane’s Equity Doctrines and Remedies (4th ed. 2002) paragraph [37-045]; Derham, The Law of Set Off (3rd edition Oxford University Press), pp 105, 187; para [5.78], referred to.
Turner v Kostoglou [2003] SASC 105 ; Sandbank Holdings Pty Ltd v Durkan [2010] WASCA 122; Ethnic Earth Pty Ltd v Quoin Technology Pty Ltd (Receiver and Managers appointed) (in liq.) & Ors. (No.3) (2006) 94 SASR 103, applied.
Debonair Nominees Pty Ltd v J&K Berry Pty Ltd (2000) 77 SASR 261; Batiste v Lenin [2002] NSWSC 233; Norman & Anor. v FEA Plantations Limited & Anor (2011) 195 FCR 97; APM wood Products Pty Ltd v Kimberley Homes Pty Ltd (NSWSC Cole J 17 February 1989); Kelly v Alternative Web Pty Ltd [2010] SASC 4; Hemer Pty Ltd v Benny (2011) SASCFC 35, discussed.
Melbourne Glass Pty Ltd v Coby Constructions Pty Ltd (1997) 14 BCL 409 ; Morrison Knudsen Corporation of Australia Limited v Australian National Railways Commission (1996) 22 ACSR 262 ; Daewoo Australia Pty Ltd v Porter Crane Imports Pty Ltd [2000] QSC 50; Eller v Grove Crest Investments Limited [1995] QB 272 ; Fuller v Happy Shopper Markets Limited [2001] 1 WLR 181; Gilbert-Ash (Northern) Limited v Modern Engineering (Bristol) Limited [1974] AC 689 ; Grant v MZMC Limited [1989] 1 NZLR 8 ; Connaught Restaurants Limited v Indoor Leisure Limited [1994] 1 WLR 501; Balog v Crestani (1975) 132 CLR 289; Mannai Investments Co Limited v Eagle Star Life Assurance Co Limited [1997] AC 749, considered.

SAZZI (SA) PTY LTD v CHANG AND ORS
[2013] SADC 178
Introduction

The plaintiff, a corporation sues as the former lessee of land more commonly known as Tenancy 3, 31-39 Gouger Street Adelaide. Later in these reasons I will explain the nature of the premises and the history of the development of the buildings at 31-39 Gouger Street Adelaide. Tenancy 3 is and was at all material times a restaurant premises. The principal of the plaintiff was a Ms Lang.
The defendants are the owners of the premises and therefore lessors under the former lease. The defendants were at all times represented by their authorised agent, JADS Group Pty Ltd. A Mr Wong was the principal of that company. The third defendant died in 2001. I have been informed from the bar table that no probate or letters of administration were granted in respect of the estate of the third defendant and it is agreed that there are no assets the third defendant’s estate that may be attached for the purposes of these proceedings.
The lease agreement was in writing[1] and commenced on 1 October 2006 and was for a period of five years. It was due to conclude on 30 September 2011 and there was a right of renewal for a further five years.
[1] Exhibit P1 tab 2.
The plaintiff occupied tenancy 3 from on or about 1 October 2006 and operated a licensed restaurant there called “Cicconii”. The plaintiff alleges that it fitted out the premises with certain plant and equipment and bought certain furniture into the premises. That matter was not put in contest. Ms Lang and her partner Mr Linke installed the plant and equipment into the premises. Furniture was brought onto the premises and it, together with some selected plant equipment and fixtures appears to have been removed from the premises sometime after 12 or 13 May 2007. Mr Linke appears to have been the person who removed the plant and equipment and furniture. Contrary to the memory of Ms Lang, he thinks that he did this sometime after 13 May 2007.
The plaintiff claims to have entered into an agreement in writing with a Mr Luc dated 27 April 2007 for the sale to Mr Luc of the “lease”[2] and certain of the plant and equipment on the premises. The sale price was $100,000. Although the defendants did not challenge paragraph 7 of the pleadings concerning the sale to Mr Luc, it is not entirely clear on what date any preliminary agreement (preparatory to the preparation of a final agreement) was entered into and signed between Ms Lang for the plaintiff and Mr Luc. I will develop that matter further in these reasons.
[2] It appears to be the plaintiff’s case that Mr Luc did not intend to carry on the restaurant business, but wanted the leased space. This therefore was a change of activity - viz s43 and s44 Retail and Commercial Leases Act.
The plaintiff appears to have ceased trading at the premises on 13 May 2007 and then left there certain plant and equipment. The status of that plant and equipment is a matter in contention between the parties. The defendants asserted that the plant and equipment was abandoned. The plaintiff denies abandonment of the plant and equipment and alleges that it was wrongfully seized. The plaintiff’s case is that it was with the consent of the defendant’s authorised agent, Mr Wong that Mr Luc was given full access to the premises on or about 13 May 2007. This allegation is strongly contested between the parties. The defendants’ case is that no authorisation was ever given to Mr Luc by anyone from the landlord or anyone on behalf of the landlord for Mr Luc to take full access to the premises. It is also the contention of the defendants that Mr Luc did not ever actually take full access to the premises at any time after 13 May 2007 under any arrangement made with Ms Lang.
It is known that on a date that is not clear Ms Lang and Mr Luc produced a form of typed preliminary agreement that bears the date 27 April 2007.[3] This is the version of this document that appears to bear the signature of Ms Lang and Mr Luc. Another version[4] is unsigned.
[3] Exhibit P1 tab 4 page 60-61.
[4] Exhibit D2 page 106-107.
Some payments were actually made by Mr Luc to Ms Lang on or after 27 April 2007: three cheques for $7,500, $7,500 and $10,000 were produced and two cash payments of $5,000 were made. Two of the cheques ($7,500 and $10,000) were dishonoured on presentation as Mr Luc had placed a stop payment order on them with his bank.
On 24 May 2007 a cheque from Mr Luc was endorsed over to the defendants’ agent. The cheque was for a sum of $7,500. The cheque was received by the plaintiff from Mr Luc, it was then endorsed by the plaintiff in favour of the defendants and it was paid upon presentment. The question of the circumstances in which the cheque was paid are the matters in contention between the parties as the plaintiff alleges, and the defendants deny, that this cheque discharged any liability that it had to the defendants under the lease.
The plaintiff alleges that the defendants wrongfully re-entered the premises on 15 June 2007, changed the locks and fixed the notice of re-entry. The plaintiff alleges that by re-entry there was a termination of the lease and that there was also the exercise of a warrant to distrain dated 15 June 2007 after that re-entry. As a result of the production of the warrant to distrain some plant and equipment was seized and retained. The plaintiff’s case is that restraint was wrongful because it was carried out after the lease had terminated. There appears to be no real contest between the parties, on the evidence, that the re-entry occurred first, that the attempted distraint occurred after the re-entry and that, on the law of South Australia, that distraint was wrongful. The plaintiff asserts that contrary to s34 of the Landlord and Tenant Act 1936, the defendants have purported to sell the seized plant and equipment to Luc and to others and had not sold them by public auction nor given full and reasonable notice of their sales. The defendants have put this allegation in issue. The evidence discloses that an auction took place under the auspices of retained agent, Megaw & Hogg. It was properly advertised and was attended as a public auction. In my view, the plaintiff’s allegation in this respect is incorrect and is unsustainable on all the evidence. In the end, the plaintiff did not press this contention.
The plaintiff alleges that the defendants have converted the seized plant and equipment against the plaintiff who maintained ownership and immediate right of possession of the plant and equipment.
There was a late amendment to the pleadings by the insertion of paragraphs 18A-18G inclusive. This amendment caused the adjournment of the first trial in this action in 2012. The allegations, in summary are that there was an insistence by the defendants that the plaintiff pay the sum of $21,232.75 as a condition of entry into the agreement to lease executed between the plaintiff and the defendants. It was said to be ostensibly for monies allegedly owing by the former tenant, one Mr Hung. The plaintiff alleges that this amount was paid by it and this allegation was put in contention. In my opinion this issue is one of the essential matters for resolution in this action and requires very careful scrutiny.
The plaintiff alleges that there were no rental arrears as between the plaintiff and the defendants at the time of leasing on 15 June 2007. The defendants allege that the plaintiff was in arrears of rent at least, as at 1 June 2007. As at 5 June 2007, there was communication between the defendants’ agent and the plaintiff concerning the question of assignment of the lease from the plaintiff to Mr Luc and that, until completion of the assignment, the plaintiff remained liable for outstanding rent and outgoings. There had been previous correspondence to the same effect in May 2007. Attached to a letter of 5 June 2007 was a statement for rent and outgoings for the period between 1 October 2006 to 1 June 2007 which describes in an itemised way an outstanding sum under the lease of $7,001.31.
The plaintiff then pleads unlawful conduct by the defendants. It alleges that in a further breach of s34 of the Landlord and Tenant Act (LTA) the defendants seized the plant and equipment of the plaintiff without notice, failed to conduct an auction through a licenced auctioneer, failed, in breach of s30 LTA, to obtain the best price for the seized plant and equipment and a failure, pursuant to s33 of the same Act to pay over the proceeds of the sale of the seized plant and equipment. A fact not in contention between the parties is that the proceeds of the sale have been paid into a solicitor’s trust account pending the disposition of this matter.
The plaintiff alleges that the non-payment of the refund amount of $21,235.75 constitutes a payment of an illegal premium in breach of s13 and s15 of the Retail and Commercial Leases Act (RCLA). As a result, the plaintiff claims damages and exemplary damages because of the defendants unlawfully terminating the lease and unlawfully seizing and selling the plant and equipment. The reasons given for claiming exemplary damages included that the arrangements entered into between the defendants and Mr Luc, after re-entry, were a significant improvement on the term of the lease between the plaintiff and the defendants and thereby, the defendants obtained an advantage by terminating the lease with the plaintiff and entering into a new lease with Mr Luc at a later time. The response of the defendants is that the lease was properly terminated, the plaintiff was properly put out of the premises and it was a matter then for the defendants to enter into the best lease possible in mitigation of their loss.
On a proper reconciliation of the claims between them, the issues between the parties may be identified as follows:-
1.   The lease agreement and the alleged wrongful termination of the lease;
2.   The alleged wrongful distraint after re-entry;
3.   The alleged sale agreement as between the plaintiff and Mr Luc and the consequences to the plaintiff of that agreement;
4.   The alleged agreement to lease obligations and the wrongful receipt by the defendants of the sum of $21,232.75;
5.   Whether or not the defendants were in breach of any provision of the Retail and Commercial Leases Act;
6.   Whether there was wrongful re-entry;
7.   Whether the defendants are susceptible to a claim by the plaintiff for damages including exemplary damages.
In light of those matters, it is necessary to consider the evidence before the Court.
The Premises
This case concerns premises situated at 31-39 Gouger Street Adelaide, which are situate on the southern side of Gouger Street adjacent to the corner of Gouger Street and Market Street. The premises came to be disposed of as three ground floor tenancies and one large first floor tenancy. The tenancies were numbered 1, 2 and 3. Tenancy 1 was on the eastern end of the building, Tenancy 2 in the middle, and Tenancy 3 on the western side adjacent to Market Street. Tenancy 3 was smaller than Tenancies 1 and 2. From an inspection of the documents[5] it appears that Tenancies 1 and 2 were more or less about the same size but Tenancy 3 was smaller than both of the other tenancies. The evidence is unclear about the lettable area of the first floor. It appears that the first floor of the premises was generally occupied by one tenant. Over the course of time, there appears to have been a number of tenants of the first floor tenancy.
[5] P1 page 56.
It is necessary to recount the history of the tenants in respect of Tenancies 1, 2 and 3. I will deal first with Tenancy 1.

By an agreement to lease,[6] the defendants agreed to lease Tenancy 1 to a company called Montepellier Pty Ltd, a company owned and controlled by Ms Lang for a period of 3 years with rights of renewal of 3 years and 4 years. The date of commencement of the lease was stated to be the 1 June 2005. The total rent was $76,650 in monthly instalments of $6,380. The outgoings were charged at $5,220 per annum for council rates of the Corporation of the City of Adelaide, AGL charges, 20 per cent of State Emergency levy from Revenue SA, and 20 per cent of water rates from SA Water. The lease was not to be registered.
[6] Supplementary tendered book tab 6.
There were special conditions attached in paragraph 19 of the Agreement to Lease, one of those conditions read as follows:-
“The lease shall contribute 25 per cent of the cost of the construction of a grease arrester and its maintenance cost.”
Tenancy 3 was made the subject of an Agreement to Lease with Lai Chi Hung. The Agreement to Lease was for a period of 2 years with rights of renewal, the rental per annum for the initial term was $46,128 payable in 12 calendar monthly instalments of $3,844. Outgoings were to be charged as council rates, 25 per cent of State Emergency Services levy, 25 per cent of water rates, and a 30 per cent of maintenance of air conditioning system, and the tenant was required to obtain its own insurance. The lease was to be registered. In clause 19 of the lease, there was special condition in the following terms:-
“The lessee shall contribute 25 per cent cost of professional fees for the hydraulic designs and the supply and installation of the grease arrestor.”
Mr Hung operated a restaurant from Tenancy 3 called the Green Leaf Restaurant. As and from the date of the Agreement to Lease in respect of Tenancy 3, 13 August 2004[7] the landlord attended to the retainer of engineers, architects and builders to build a grease arrestor system to service Tenancies 1, 2 and 3. This was done after negotiations with the tenants of tenancies 2 and 3. The alternatives were that each tenancy deal separately with the construction of a grease arrestor. The practical solution was that one system services all the tenancies. This is what occurred. There was an obvious mutual benefit in the arrangement finally reached between the parties. I will deal with this matter later in these reasons.
[7] Supplementary tender book tab 4 last page.
The repository (or collection place) for the grease arrestor was in the back south west corner of the site on the ground floor. On the plan[8] the grease arrestor was situate in the area described as ‘waste storage area’ in the south west corner of the map. That area is most closely adjacent to Market Street in the City of Adelaide. Each of the three kitchens in the tenancies were connected by exhaust ducts to the grease trap and grease arrestor.
[8] P1 page 56 (tab 2).
From the information available to me at trial (which it must be emphasised was only a lay description of how all of this worked) the grease arrestor system drew off fats and grease out of the atmosphere of the various kitchens and deposited those substances into a holding vat within the grease arrestor system. This vat was cleaned from time to time. The position appears to be that the capacity of the grease collector was in the order of 4 to 5 thousand litres. The grease arrestor system serviced each of the kitchens in the three tenancies and provided benefit to those kitchens for that purpose.
Tenancy number 2 was the subject of an Agreement to Lease between the defendants and a company called Roadrunner Café Pty Ltd. The date of occupation shown on the face of that Agreement to Lease was 1 April 2005, the rental was $79,200 per annum comprising 12 calendar monthly instalments of $6,600 per annum. The outgoings were to be charged at full council rates and 25 per cent of State Emergency Services levy, 40 per cent of water rates of SA Water, and the tenant was required to obtain its own public liability and other type insurance.
The lease was to be registered and the permitted use was of a licensed restaurant including live entertainment and karaoke. Within clause 19 of the Agreement to Lease, is the following term:-
“… the lessee shall contribute 50 per cent of the costs of the construction of a grease arrestor and its maintenance …”
The evidence given by Mr Wong in relation to the figure of 50 per cent was that this was the first stipulation made by the landlords in relation to the contribution to the grease arrestor from Tenancy 2. On the plan that I have seen[9], it appears that Tenancy 2 is the biggest tenancy and that makes plain why it would pay a larger proportion of outgoings. However, in relation to the contribution to the costs of the construction of the grease arrestor and its maintenance (50%) the explanation given by Mr Wong was that it was implicit that because of the particular configuration of Tenancy 2 that the higher proportion should be paid by the tenant of those premises. Mr Wong explained that Tenancy 2 was to be operated as an open air grill as well as a restaurant. The open air grill was to be placed at the front of the restaurant and the kitchen at the rear of the restaurant. Therefore, there would be greater work for the grease arrestor to do in relation to in the operation of Tenancy 2 and therefore, according to the evidence of Mr Wong, a greater proportion of the relevant cost should be paid by that tenancy.
[9] P1 page 56.
As things developed, the tenant of Tenancy 2 was not required to pay 50 per cent of the costs of construction of the grease arrestor and its maintenance. The evidence of Mr Wong was that the defendant landlords agreed to pay a 25 per cent share of that cost, leaving the tenant in Tenancy 2 to pay 25 per cent of the cost. The landlords looked to the proprietors of Tenancy 1, Tenancy 2 and Tenancy 3 to pay 25 per cent each or 75 per cent of the total costs of construction and maintenance of the grease arrestor.
Montepellier Pty Ltd did not pay the 25 per cent share of the costs of construction of the grease arrestor and its maintenance. There is no evidence as to any interaction between the defendants and Montepellier Pty Ltd in relation to that refusal.
On 31 July 2006[10] a Business Sale Agreement was executed between Montepellier Pty Ltd and Steven B Hall for the sale and purchase of tenancy of the restaurant of tenancy 1. The purchase price was $345,000. The vendor retained all rights of the name Montepellier or Montepellier Seafood and Grill and also excluded a substantial amount of plant and equipment from the sale. There is no evidence as to how the restaurant purchase price was calculated or was agreed by Mr Hall and it is sufficient to say that he was prepared to pay $345,000 for the asset. The date of possession on the contract was 20 September 2006 and settlement date was on the next day, 21 September 2006.
[10] Supplementary tender book tab 8.
The evidence discloses that there was no assignment of the lease as between Montepellier and Mr Hall. It appears that a new lease was entered into between the landlord defendants and Mr Hall. That was the general method of approach of the landlords; the landlords generally did not favour an assignment of the lease but rather preferred for there to be a new lease to be entered into by the incoming tenant.
Again because of the absence of evidence in relation to Tenancy 1, all that is known is that there was settlement upon the contract with Mr Hall and that the purchase price was paid. I was not provided with any financial records of the operation of the Montepellier restaurant by Montepellier Pty Ltd (Ms Lang Lien its director) and it is sufficient to say that the restaurant had only operated for a period of about 12 months at the time that the contract for sale was entered into with Mr Hall. In the absence of any further information, the court is left with the evidence that Mr Hall was prepared to pay $345,000 to buy the Montepellier restaurant site after it had operated for a period of less than 12 months. In those circumstances, tax would have been assessed on the gain made by Montepellier Pty Ltd in relation to this sale.[11]
[11] ITAA s36, s25A, ITAA 1997 s15-15.
After attending to the sale of the Montepellier restaurant, another company owned and controlled by Ms Lang entered into a contract to purchase the Green Leaf Restaurant.[12] Under an agreement dated 8 September 2006, Sazzi (SA) Pty Ltd (the plaintiff), agreed to purchase from Lai Chi Hung (Mr Hung) the business of a licensed restaurant conducted at Shop 3-36 Gouger Street Adelaide for a total purchase price of $100,000 plus stock not to exceed $10,000.
[12] Exhibit P1 tab 1.
The defendants executed an Agreement to Lease with the plaintiff relating to tenancy 3.[13] The Agreement is dated the 14 September 2006, some 6 days after the plaintiff had executed the Agreement for the purchase of the Green Leaf Restaurant. The period of lease was 5 years with a further right of renewal of 5 years and to commence on the 1 October 2006 which was the date of commencement of payment of rent. Rental was $46,168 payable monthly in advance by 12 equal calendar monthly payments. Outgoings were described as follows:-
“Lessee to pay AGL charges, cost of maintenance of air conditioning system already installed by the landlord, approximately $4,107.50 for Council Rates for the Corporation of the City of Adelaide, approximately $325.33 per annum for proportionate State Emergency Levy from Revenue SA, approximately $1,136.44 per annum for proportionate for water rates and usage from SA Water, insure own shop (including fire, contents, plate, glass, and public liability with a maximum per claim amount of 10 million dollars).”
[13] Exhibit D4.
The Agreement to Lease was also subject to a special condition as follows:-
“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.”
Paragraph 20 of the lease also required the first month rent of $4,028.40 to be accompanied with the signed Agreement to Lease and Disclosure Statement on or before 3pm 21 September 2006.
Attached to the document was a Disclosure Statement. Part 3 of that document described outgoings. The first related to council rates which were charged directly by the Adelaide City Council to the lessee. The second made no disclosure of an amount of electricity nor the third for gas and oil. There was an estimate for water and sewerage rates and usage of water and sewerage disposal and sullage (grease arrestor) valued at approximately $150 per year. There were then a number of items which were not applicable or in respect of which there were lessee direct charges. There was then a State Emergency levy of $325.33 approximately per year. Following within Part 3 were two alternatives. They were: “The lessee is liable for the full amount of the outgoings (this box was not ticked); the lessee is liable for the proportion of the outgoings calculated according to the following formula please see Part 3-Outgoings (this box is ticked).” Therefore the breakdown of outgoings is in the categories of outgoings for Schedule 3.
By letter dated 8 September 2006 from JADS Group Pty Ltd, the company of Mr David Wong and the agent of the defendants, to Bail and Robazza, the firm of brokers acting for Lang Lien in the Montepellier sale, the defendants’ agent informed the plaintiff of outgoings in respect of Tenancy 1 for Montepellier Pty Ltd. A reference is made to the letter of Bail and Robazza of 6 September 2006. That document is not in evidence in these proceedings. The JADS Pty Ltd letter then relevantly reads:-
“Appended below is the revised rent and outgoings which are due to the landlord on settlement:
1 Part September 2006 rent - $6380 including GST
2 Grease arrestor contribution - $5500 including GST
3 Proportionate Council Rates - $1357.87
4 Proportionate Water Rates - $1070.59.
The total of these is $14,308.46.”
Montepellier made no payments for the grease arrestor.
In his evidence, Mr Wong said that the grease arrestor was constructed at the request of the tenants moving into Tenancy number 2 and 3. As a result of their request he called in a hydraulic engineer to design the grease arrestor and it was he who suggested it would be cheaper to have one arrestor for all three tenants rather than three separate grease arrestors. He said that there were three potential tenants at first instance, R & S, Hung, and a third party called Chung. There was a discussion between the other tenants and an agreement to pay a percentage towards the costs of the construction of the grease arrestor. Mr Wong gave evidence that he spoke separately with Mr Hung and Mr Wong agreed to pay 25 per cent and for the hiring of the engineers. Mr Wong also gave evidence of the overall cost of the grease arrestor was in the amount of about $45,000 as part of some $1 million paid by the landlords for the improvement of the premises. All of that work was done by Wunda Projects Pty Ltd. The charge for the grease arrestor was in the order of about $8,000 and that was to be divided amongst four people, Tenancies 1,2 and 3 and 25 per cent to the landlord.
That agreement is reflected in Exhibit D2 page 17, a letter from Meinhardt Pty Design addressed to the JADS Group dated the 23 December 2004. It sets out a fee offer in respect of base building work and then restaurants one, two, and three fit out. It is initialled and signed by each of the three restaurant owners. Mr Wong was present when the document was signed. At pages 18-19 of Exhibit D2, there is additional material in relation to the cost of the work. It is under the heading “Additional Hydraulic Services as per Meinhardt Drawings”. The amount is $45,293. A tax invoice dated 25 November 2005[14] makes a claim upon Mr Hung for payment in respect of the grease arrestor and other matters including professional fees for provision of mechanical hydraulic and fire consulting engineering services to Tenancy 3. It is in the amount of $14,924.90. It is marked as paid. Mr Wong gave evidence that the amount was paid via Bail and Robazzo, the brokers for Montepellier. It was paid well after November 2005 and was paid after a long series of contacts between Wong and Hung in relation to its payment. It had been outstanding for some time. In relation to the evidence given by Mr Wong, I accept that evidence and I find that a contract was entered into between the defendants and Mr Hung for payment by him of a proportionate share of the grease arrestor for tenancy 3. There is no evidence that this obligation was imposed on Mr Hung by the defendants.
[14] Exhibit D2 page 31.
By memorandum of lease[15] the plaintiff entered into a lease with the defendants in respect of Tenancy 3 to commence on the 1 October 2006 at an annual rental of $46,128 plus GST. The rent was payable in equal calendar monthly instalments, in advance at the first day of the month. On that day an invoice for payment of rent and any outgoings was delivered by the defendants’ agent to the plaintiff. The obligation to pay rent is contained within Clause 2. It reads as follows:-
[15] Exhibit P1 tab 2 page 28.
“You must pay rent
2.1 You must pay the rent in full (that is with no set off or reduction) in the way set out in Item 7
2.2 You must pay it to us at our address as set out in Item 4 unless otherwise advised in writing”
Charges are dealt with in paragraph 3 of the lease which reads as follows:-
“You must pay charges
3.1 You must pay any permit fees or other government fees relating to the property as set out in the disclosure statement
Also any telephone, gas and electricity charges relating to the property”
Outgoings are dealt with Clause 4. It reads:-
“You must pay outgoings
4.1 You 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 charges
4.2 You must pay Emergency Services Levy relating to this property
4.3 You 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 Act
4.4 You must pay the things mentioned in this Clause no matter who they are billed to.”
The lease is a retail shop lease and land tax was not payable.
Clause 6 prohibits the plaintiff from transferring the lease except with the prior written consent of the landlord and that request for consent must comply with Clause 6.6 and following. Those clauses read as following:-
“6.6 If 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.
6.7 If 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 lease
6.8 In such a case we will only withhold our consent
If the tenant wishes to change the use of the premises
Or if the new tenant is unlikely to meet the financial obligations under their lease
Or if the new tenant’s retailing skills are inferior to yours
Or if you have not complied with the requirements of the Act for such an assignment
6.9 If 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.”
Part 3 of the lease contains the mutual obligations. The first relates to re-entry in Clause 38. That Clause relevantly reads:-
“38.1 At 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 ends
38.2 The events are:
If any rent is unpaid 14 days after it should have been paid (and after we have demanded it be paid)
Power of Attorney
39.1 If this lease ends under clauses 38 … you will appoint us your attorney to do anything necessary to put that into affect
39.2
39.3 You cannot revoke this Power of Attorney
Essential Terms
40.1 You must comply with all of your obligations in this lease fully, correctly and on time without fail. Your strict compliance is essential.
Preservation of Rights
41.1 If this lease ends, especially under clause 38 … that does not affect any right of either party
41.2 Using a right (and especially the right of re-entry) given in this lease does not affect any other right
Refunding of Costs
43.1 You 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 with
Us getting or attempting to get anything you owe use
Us using or attempting to use any of our rights in this lease
Us enforcing, or attempting to enforce any obligation in this lease, or
Us curing or attempting to cure your disobedience of this lease
Abandoned Goods
58.1 If this lease is a retail shop lease which ends and your goods are left on the property
After two days we may remove or destroy or dispose of the goods
If they are perishable foodstuffs or if their value is less than a fair estimate of their costs of removal, storage and sale
58.2 If the goods are not perishable foodstuffs or valueless then we will store them in a safe place for at least 60 days
58.3 Within 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 1995
58.4 You 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 charges
58.5 If the goods are not claimed within 60 days we will, as soon as practicable after that time, sell those goods by public auction.”

At the time of the transfer of the business of Green Leaf Restaurant in respect of Tenancy 3, the defendants’ agents (JADS Group Pty Ltd) Mr Wong sent a letter to Mr Hung dated 19 September 2006. It informed Mr Hung that unless the payment as per the attached statement of outstanding bills of $21,232.75 in relation to his tenancy was settled amicably the settlement of the sale of his business and the settlement of the sale of his lease will not go ahead. There was no assignment of this lease. Attached to that letter was a Schedule in respect of Green Leaf Restaurant outstanding bills. It read as follows:-
Green Leaf Restaurant Outstanding Bills Summary by 19/09/2006

Inv No.

Description

Total Amount

654

Grease Arrestor & Professional Fees

$14,924.80

703

Jan to Mar Water

$256.43

711

Council Rate

$510.22

828

April to June Water

$256.43

838

Land Tax

$637.70

951

July to Sept Water

$328.50

979

Water Water [sic] Audit Fee

$17.50

1033

Emergency Levy

$72.77

1002

Sept’06 Rental

$4,228.40

Total

$21,232.75

This summary assists to explain the claim of the plaintiff. A reference is made to two amounts contained within the summary namely invoice number 654 in respect of the grease arrestor and professional fees in the sum of $14,924.80 and invoice number 838 in respect of land tax for $637.70. The plaintiff’s contention is that neither of these amounts may be claimed under any circumstances because the imposition of a capital cost by a lessor upon a lessee, such as for a grease arrestor and for professional fees is prohibited under the Retail and Commercial Leases Act 1995.[16] The second ground is that land tax is not chargeable by a lessor to a lessee in respect of this having regard to the amount of the annual lease payment. These two payments[17] constitutes the amount of what the plaintiff claims is a set-off in its favour against any claim against it by the defendants. The plaintiff does not, for example, raise any issue concerning any other matter within the summary of Mr Hung’s outstanding bills owed to the defendants in respect of his occupation of tenancy 3. Thus, it appears that the plaintiff does not appear to raise any issue about the indebtedness of Mr Hung to the defendants in respect of other debts as disclosed within the summary. It must also follow, as a matter of logic, that if the amount of those debts was paid from an asset namely cash belonging to Mr Hung, then no issue would be raised by the plaintiff in relation to such payment. There is an obvious inconsistency with the plaintiff’s approach but I will deal with that matter later in these reasons. For the sake of convenience, I will not make a distinction between the two amounts as described above (on invoice 654 and invoice 838) and the balance of the amounts claimed in the summary. I will refer to all of these accounts together in the balance of these reasons under the rubric expression of the grease arrestor fee or merely by a reference to the amount of $21,232.75 without any distinction between the payments or any declension of the various types of payments.
[16] Section 13 Retail and Commercial Leases Act.
[17] $14,924.80 and $637.70 - $15,562.50.
The plaintiff alleged in its opening of this case that before the summary, no bills had been rendered to Mr Hung for these claims. There is no evidence to support that assertion. I am unable to accept this submission. The plaintiff pointed to Exhibit P1 pages 213-214 which was a Statement of Account dated 19 September 2006 addressed to Green Leaf Restaurant, Mr Hung, showing an amount due of $6,307.95. A submission was put by the plaintiff in opening that having regard to paragraph 19 of the Agreement to Lease, the amount owing by Hung was the sum of $6,307.95 and not the sum of $21,232.75. It follows, on this argument, that the difference is an overpayment. There was no evidence on the point and I am not prepared to accept that submission because of its speculative nature.
What is known is by a trust account statement[18] page 0384 dated 22 September 2006, the landlord’s agent informed Green Leaf Restaurant of the outstanding amount of $21,232.75 and that it had been paid out of the Bail and Robazza trust account. In opening, the plaintiff alleged that it funded this payment which, according to the trust account statement was for rent, council rates, water rates, emergency levy and professional fees. It is alleged that the grease trap is not mentioned here but that submission turns on a question of an understanding of the expression “professional fees”. In my view there was insufficient evidence on the point to make good that submission and in the absence of any further evidence I am not prepared to accept the submission. The contemporaneous evidence in written form discloses that Green Leaf Restaurant has been recorded as having paid the sum of $21,232.75 to the agent of the defendants on or about 22 September 2006. In the absence of any relevant and admissible evidence on the topic, in my view the evidence before me records that the payment made was from the resources of Mr Hung.
[18] Exhibit P1 page 215.
By letter of 19 September 2006 from JADS Group Pty Ltd to Bail and Robazza the defendants through their agent informed the plaintiff’s broker that unless the sum of $21,232.75 was settled, the landlord would not be prepared to have the lease either assigned or surrendered to make way for a new lease for Lien Lang. This amount was paid by Mr Hung for reasons that I set out hereunder.
In the life of the lease of the plaintiff with the defendants, the Adelaide City Council Rates were charged directly to the plaintiff and were paid by the plaintiff. No case on liability arises in respect of the payment of them. Also in the course of the life of the lease, water charges were, for reasons unexplained, called excess water usage. These were invoiced by the landlords and were paid.
The plaintiff was required to pay rent monthly in advance. There appears to be a slightly unhappy history about rent payments by the plaintiff. A cheque number 1628 for November 2006 rental dated the 29 November 2006 in the amount of $4,228.40 was dishonoured. There appears to be some confusion in relation to the month for which the payment is made. It is identified as being for November 06 rental but there was an earlier cheque of the 23 October 2006 in respect of invoice 1087 for payment for November rent. On a commercial basis, it is to be anticipated that the cheque of 29 November 2006 may well have been in respect of the December rental. However, on 1 December 2006 there was a further cheque for December rental drawn by the plaintiff in favour of the defendants. It appears that a further tax invoice was rendered by the defendants to the plaintiff for the November rent. That is tax invoice 1143 disclosing the dishonoured cheque number 1628 for November 2006 rental. The customer balance detail[19] discloses that by cheque number 240934 on the 6 December 2006 the plaintiff paid the defendants for the November rent by a bank cheque. On or about the 15 December 2006 by invoice number 1162, the defendants sought payment from the plaintiff of the January rent. On the 6 February 2007, cheque number 1703 drawn by the plaintiff in favour of the defendants for the January rental was dishonoured. On the 15 February 2007 cheque number 1715 drawn by the plaintiff in favour of the defendants for January rentals was also dishonoured. The result is that within six months of the beginning of the tenancy, three cheques given by the plaintiff in favour of the defendants had been dishonoured. There was a further dishonoured cheque on the 1 March 2007 being cheque number 1716 for the March 07 rental.
[19] Exhibit P1 page 165.
I have previously set out the terms of the lease in relation to rental, and a dishonoured cheque for rent would be a ground to terminate the lease. The only evidence given on behalf of the plaintiff in relation to these dishonoured cheques was that she was running a number of businesses and that she was mixing her cash flows. I find this evidence carries little or no weight particularly in light of the terms of the lease between the plaintiff and the defendants. It would be remarkable and a real challenge to credulity that a tenant with this poor history would take such an attitude to the payment of rent of premises where a business is being conducted.
From October 2006, the plaintiff conducted a business at Tenancy 3 called the Cicconii Restaurant. The fit out for that restaurant was done by Ms Lang’s partner, Mr Linke. There is no evidence of the cost of that fit out. All that is known is that some extra plumbing work was done for a bar at the front (Gouger Street end) of Tenancy 3 but that evidence is quite vague. There is no clear evidence on this matter.
What appears to have occurred is that there was almost a contemporaneous settlement in relation to the Montepellier sale to Hall and the Hung sale to the plaintiff. In evidence[20] is the trust account statement of Bail and Robazza in relation to the purchase by Mr Hall of the Montepellier business in Tenancy 1 described as:
“Sale of business at Montepellier Seafood and Grill Adelaide.”
[20] Supplementary tender book tab 10.
The trust account statement shows a credit of $310,000 for the purchase, a payment of an amount to Ray White Real Estate for commissions, and then a number of other payments. The first is for outstanding rent to JADS Group Pty Ltd. The second is a payment of $21,232.75 to the JADS Group Pty Ltd, the third is a payment to Montepellier of $232,763.26, and finally a payment to Lai Chi Hung of $42,192.05.
It is to be recalled that the contract of purchase between the plaintiff and Lai Chi Hung for tenancy 3 was for the sum of $100,000. There is no evidence that this amount was ever paid. Ms Lang gave evidence that an amount of $50,000 was separately paid to Mr Hung. There is no evidence of that payment having been made. I will deal with that matter again later in these reasons.
Ms Lang informed the Court[21] that the $21,232.75 was paid to the agent for the defendants on behalf of Mr Hung. That is, it is to be understood that from the total amount of the funds belonging to Montepellier derived from the sale of the Montepellier business to Mr Hall (total amount received $334,000), the sum of $63,424.80 (total of $21,232.75 and $42,192.05) was paid to or on behalf of Mr Hung. A total of $345,000 was deposited in to the Bail and Robazza trust account to the credit of Montepellier Pty Ltd and from those moneys, the payments as I have indicated have been made. Some of those payments are in respect of the debts of Montepellier Pty Ltd. Others are in respect of debts owed by the plaintiff to Mr Hung and for debts owed by Mr Hung to the defendants.
[21] T61-62.
What is clear is that whatever was paid by Montepellier Pty Ltd on behalf or Mr Hung to the defendants was a deduction or more accurately a set-off from the amount paid by the plaintiff to Mr Hung in respect of the purchase of Tenancy 3. I am satisfied on the evidence that the only amount paid for Tenancy 3 by the plaintiff was the sum of $63,424.80. No explanation was ever given as to the balance and I reject the evidence of the plaintiff that as well as this amount a further $50,000 was paid. The reason is quite straight forward. If the further $50,000 had been paid, then the plaintiff would have overpaid Mr Hung on the contract by an amount of $13,424.80. That is a position which is not supported by the evidence nor does it accord with ordinary common sense. I reject it as a possibility.
In February 2007 an attempt to distrain was made by the plaintiff on tenancy 3 due to the provision by the plaintiff of rent cheques that had been dishonoured. These rent cheques of the plaintiff were delivered in respect of the rent for tenancy 3 for November 2006 and February 2007. Commercial agents were retained for the purpose and costs were incurred. Solicitors, Patel & Co were also retained. The principal of that firm, Mr Girish Patel did the legal work associated with the distraint but no evidence was led from Mr Patel on this topic. The customer balance detail[22] discloses that on the 3 February[23] disbursements for legal charges and warrant charges were incurred by the defendants. The total charges were $750 for legal fees, $660 for professional fees, and $240 for locksmith fees. These were charged to the plaintiff under the terms of the lease.
[22] Exhibit P1 page 165.
[23] The entry discloses 3 August but apparently this is 3 February.
For reasons that I will develop later, in my opinion if proved in evidence these fees were properly chargeable in the event that there was an appropriate ground for distraint. The terms of the lease provide that a distraint may be levied in respect of a rent cheque that is dishonoured. The plaintiff’s rent cheques were dishonoured in February 2007 as well as in November 2006. The plaintiff was thereby in breach of the lease obligation to pay rent. The distraint was attempted in February 2007. Some documentary evidence suggests that the distraint did not proceed because of the settlement achieved between the defendants’ agent and the plaintiff. There is no evidence on this matter sufficient for me to make a finding, except that it is apparent that the distraint did not proceed.
Mr Luc Luong (Mr Luc) conducted a business on the first floor of 31-39 Gouger Street Adelaide. It was called Budda on Gouger Street. There is no evidence as to what this business comprised apart from some form of karaoke bar and, presumably a small restaurant.
In early 2007, Mr Luc became interested in taking over the lease of Tenancy 3 from the plaintiff. There is no clear evidence about what Mr Luc intended to do with the premises. There is some evidence that he intended to make quite substantial physical changes to the upstairs Tenancy and Tenancy 3 so that they could be connected by a staircase but there was no clear evidence on the topic on which I could make any finding.
Ms Lang gave evidence that she entered into a formal agreement with Luc for the purpose in respect of the lease of Tenancy 3. She said that a Roland Ho who owned a premises called ‘Chi-Chi’ bar had approached her asking to purchase her business on a walk in walk out basis for $135,000. There is no evidence of this agreement apart from the oral evidence of Ms Lang. In the absence of any documentation on the topic, I am not prepared to make a finding one way or the other as to the certainty or seriousness of this offer. In the absence of any further evidence on the topic, I am not prepared to accept that any amount was due and payable in respect of any such discussion.
Ms Lang said that she knew Luc from prior family businesses including the Foreshore restaurant. The court was not informed about where the Foreshore restaurant was located but Ms Lang gave evidence that it was a business in which she was previously involved.
Ms Lang gave quite specific evidence that an agreement with Mr Luc was made on or about the 24 April 2007, and Ms Lang alleged that on that date Mr Luc paid $5,000 cash as well as another amount of $5,000 cash on the 27 April. Later, Ms Lang gave evidence that Mr Luc gave two further cheques for $7,500 and a cheque for $10,000 and that he took possession of the premises on the 12 May 2007. She alleged that one of those cheques in the sum of $7,500 was given (endorsed) to Mr Wong to cover unpaid rent and outgoings. A number of these cheques were dishonoured because Luc stopped payment on the cheques by a specific direction to his bank and, apparently, not because of a shortage of funds in the bank account of Mr Luc.
Ms Lang gave very specific evidence of her clear memory of events happening on particular days and dates in 2007. She did not keep any diaries or contemporaneous notes or records to verify these dates or from which she could refresh her memory. Ms Lang was adamant about her memory of these specific dates and events that occurred some six years ago and that she needed no contemporaneous records to refresh her memory. These events were happening at a time when she was involved in several restaurant businesses, including a new start up business, “The Slippery Fish” at Port Noarlunga. In evidence she admitted that on occasions she “mixed up” the accounts for these businesses and this led to dishonour of the cheques. In 2008 she became a bankrupt on a Creditor’s Petition.
It is difficult to understand how her memory of these events is so clear and yet in other parts of her commercial life, where she was under some real financial strain, she could readily admit to making errors of omission, some of which plainly had a deleterious effect on her commercial position.
Unfortunately in this case, questions of the credit worthiness of witnesses do arise. My approach in this case is to place reliance upon contemporaneous records in order to “piece together” the factual matrix of relevant events. That said, there is evidence led before me from Ms Lang and Mr Wong on important issues that is diametrically opposed. It has become necessary to make findings on credit of witnesses but my approach is to first examine the objectively identifiable events from documents and like sources to assist me in forming my conclusions about the witnesses.
Ms Lang said that the agreement between the plaintiff and Mr Luc for the takeover of tenancy 3 was made on the 27 April 2007 notwithstanding the earlier payment on the 24 April of $5,000. Ms Lang alleges that on 27 April 2007 Mr Luc paid $5,000 cash to her being the second payment totalling $10,000. Ms Lang also alleges that she gave Mr Luc the key to the Tenancy 3 premises on the 24 April 2007 when she received the first $5,000 and that Luc kept the key to the premises, so that he could have access.
Ms Lang also alleged that notwithstanding that Luc had a key and had made some payments towards purchase price, she did not tell him that she was changing the access codes every night. He had to call her to find out the alarm code.
Ms Lang alleged that the agreement between herself and Mr Luc initially was for a handover on the 1 May 2007. Ms Lang intended to open her new restaurant, The Slippery Fish, at Port Noarlunga on that date or soon after that date and she wanted a clean break from the tenancy 3 business. In time, the plan was for The Slippery Fish business to open on Mother’s Day, Sunday 13 May 2007 and the last trading day for the Cicconii restaurant was to be the 12 May 2007. At the time that Ms Lang left the premises on the 12 May 2007, there remained on the premises a three door bar fridge, plumbing fittings, some lights, a wall unit behind the bar, a two door fridge, kitchen equipment, another six door fridge, two glass washers, a chest freezer, and counters and benches in the kitchen. The plaintiff had removed a front bar, a cake display, a table and chairs and a pot plant. There was plumbing to the front bar which it had been installed by Mr Linke. In order to remove that front bar it was necessary to disengage the plumbing, both water and sewer.
Ms Lang said that the second $5,000 payment was made by Mr Luc on 27 April and on that day or prior to that day at least, she had a conversation with Mr Wong concerning the sale of the restaurant to Mr Luc. She said that sometime after the 27 April she went to Wong’s office and had a half hour meeting with him. In that discussion she alleges that there were discussions on the keys Ms Lang had given to Mr Luc on the 24 April. She said that soon after the 27 April, and on Saturday 5 May 2007 there was a formal meeting at the office Mr Tennyson Turner at 180 Prospect Road Prospect and present were Mr Luc, Mr Luc’s partner Bao, the landlord Mr Chang, Mr Wong, Mr Turner and a witness. Ms Lang said that at this meeting there was a discussion about the transfer of the licence and there was no disagreement arising in relation to those matters. Mr Wong was translating in mandarin for the landlord. Ms Lang alleges that the meeting went for about 45 minutes, it discussed the lease takeover, the transfer of the licence and a termination date for Tenancy 3. She alleged that Mr Luc announced to the meeting the he would convert the restaurant to a different cuisine and would change the whole set up. There was a discussion about the need to transfer the liquor licence as soon as possible. Ms Lang alleges that the three further cheques from Mr Luc arrived about a week after the Turner meeting. She alleges that on the 12 May she went to Mr Wong’s office in the afternoon and gave Mr Wong a cheque for $7,500 for the April rent plus two weeks in May and anything over should cover rates due. She says that she told Wong that Luc had requested that these cheques be banked two weeks later. In any event the 12 May was the last day of trading for the Cicconii restaurant operated by the plaintiff.

Ms Lang said that Mr Wong gave her a receipt (on the 12 May) post dated the 21 May 2007 on account of the fact that the cheque was not to be banked until later. For the reasons that I give later I do not accept that Mr Wong did post date the receipt.
As far as Ms Lang was concerned, the responsibility for the restaurant belonged to Mr Luc from the 12 May onwards. That is because she opened the The Slippery Fish restaurant on the 13 May and she says that she did not return to the Cicconii restaurant until the 18 June. She alleges that between the 12 May and 18 June she received no demand from the landlord, no accounts rendered, no running account balance, she had no conversations with Mr Wong and knew nothing of what was transpiring at the restaurant.
Mr Wong was the principal witness for the defendants and was interposed. He informed the Court that the JADS Group Pty Ltd commenced in about 2003-2004 and was involved in the management of property. He gave a description of the subject property and its development from an empty site to a site of four tenancies. He said that he was approached by the landlords to upgrade the premises and to convert it from a single story premises into a ground floor and first floor premises. He gave evidence, by reference to exhibit D2[24] that an agreement was made with Mr Hung for tenancy 3.
[24] Page 14.
Mr Wong then informed me of the arrangements for the lease by Montepellier Pty Ltd, the plaintiff’s company for tenancy 1. He said that it was prior to this time that there were discussions and negotiations in relation to the waste disposal system and in particular the grease arrestor. He said that those tenants who wished to occupy tenancies 1, 2 and 3 wanted a grease arrestor and agreed to share the costs of that grease arrestor. As a result, Mr Wong called in a Hydraulic Engineer to design it when, he having made the suggestion that it would be cheaper for one arrestor to service the three tenancies, that all of the tenancies agreed to that proposal. He said the three potential tenants at first instance were a company called R & S, Mr Hung and a third party Mr Chung who took tenancy 2 through a company called Roadrunner Pty Ltd. In respect of tenancy 3, Mr Wong gave evidence, which I accept, that he had a discussion with Mr Hung about the payment for the grease arrestor for tenancy 2. He said that Mr Hung agreed to pay his 25% share for the installation of the grease arrestor as had been specified by the Engineers retained by Mr Wong on behalf of the defendants. He referred to a letter from his Engineer[25] and he identifies Mr Hung’s signature and Mr Chung’s signature on that letter as a form of acceptance. Mr Hung had tenancy 3 and Mr Chung had tenancy 2. He delivered an invoice to Mr Hung of 25 November 2005. He says it was paid via the settlement through the purchase of tenancy 3 by the plaintiff. The conveyancers were Bail & Robazzo and this sum was paid from the monies to be paid to Mr Hung by the plaintiff for the purchase of tenancy 3.
[25] Exhibit D2 page 17.
At this time, the plaintiff had sold her interest in the Montepellier Pty Ltd business at tenancy 1 under a contract for sale and purchase for the sum of about $345,000. The plaintiff through Montepellier Pty Ltd had not made any payment for the grease arrestor despite the fact that tenancy 1 was connected to the grease arrestor Mr Wong alleges that the former tenant of tenancy 1 had agreed to pay a 25% share and that the three tenants had agreed to pay 25% each and the landlord had agreed to pay the last 25% share. Montepellier Pty Ltd had not made this agreement.
An agreement to lease was prepared in respect of tenancy 1.[26] It is dated 5 May 2005. It consists of a number of undertakings including, in clause 19 the following undertaking:-
“The lessee shall contribute 25% of the cost of the construction of the grease arrestor and its maintenance costs.”
[26] Supplementary tender book tab 6.
The plaintiff identified her signature on the document. Despite the execution of the agreement to lease, Montepellier Pty Ltd did not ever pay for the grease arrestor.[27] It was not contractually bound to do so. It was the successor as tenant of the entity that had bound itself to pay for the grease arrestor.
[27] Tender book page 165.
JADS Group Pty Ltd as agent created a customer balance detail transaction document in respect of the plaintiff’s lease of tenancy 3. It is a record in familiar form showing payments made and debits created[28] and discloses between 29 November 2006 and 15 February 2007 there were three dishonoured rent cheques (29 November 2006, 6 February 2007, 15 February 2007) given by the plaintiff to the defendants’ agent.
[28] Tender book page 165.
There was also a further dishonoured cheque on 1 March 2007 in respect of the March 2007 rental ($4,228.40). Rent was payable in advance on the first of the month and Mr Wong gave evidence that all tenancies received invoices for rent. There were some cross examination about the place to which the invoices were dispatched but nothing turned on that matter eventually. Following the delivery of the dishonoured cheques, on February 2007 the landlord purported to distrain for rent. Mr Wong could not recall if distraint actually occurred but was able to recall that this distraint was arranged through an agent.
Mr Wong said that Ms Lang subsequently approached him about the sale of her business Cicconii Restaurant. This was in the background of these dishonoured cheques. His recollection is that the approach was made to him at his office sometime in the first week of May 2007. He said he was unable to recall precisely when the approach occurred but thinks it was sometime in that week. He has no recollection at all of any approach earlier than that time and particularly no memory of any approach on or about 24 April or 27 April 2007.
His recollection was that he was sitting in his office when he had the discussion with Ms Lang. He recalls that in the discussion Ms Lang said to him that she had a purchaser for the Cicconii business, that she had entertained the possibility of other prospective purchasers but that she had been able to settle some form of agreement with Mr Luc who operated the first floor Buddha Bar at the premises. He said that he was given an unsigned copy of an agreement between Mr Luc and Ms Lang. He identified in re-examination the document that he was given.[29] He denied ever having been given a copy of the signed agreement, as was put in cross examination. The copy that was given carries the date 27 April 2007 however, he was quite adamant that when the document was given to him, it was unsigned. He was able to confirm that he had previously exhibited it to an affidavit.[30] The document settled between the plaintiff and Mr Luc[31] was not given to him signed.
[29] Tender book P1 page 106 book 1.
[30] Exhibit P1 page 100 paragraph 2.1.
[31] Tender book P1 page 60-61.
Ms Lang identified to Mr Wong that the purpose of the conversation was to seek the landlord’s consent for the assignment of the lease. Mr Wong identified in the conversation that Cicconii Restaurant was in arrears in relation to rent. He told Ms Lang that all arrears had to be paid prior to there being any possibility of an assignment. He does not recall any mention of keys although Ms Lang gave evidence that there was a discussion about keys and the intention of Ms Lang to hand over the keys to Mr Luc.
Mr Wong also said that he informed Ms Lang that the strict policy of the JADS Group (and the landlords, its principal) was that all arrears of rent had to be finalised prior to the assignment of any lease arrangements. He said that after the meeting with Ms Lang, he received a letter from the plaintiff dated 3 May 2007.[32] He says that he received the letter as a consequence of the conversation that he had with Ms Lang who had raised the question of the transfer sometime in that first week of May.[33]
[32] Tender book page 62.
[33] cf. paragraphs 6.4 and 6.5 tender book P1 at page 33.
Mr Wong gave evidence that having received that letter and having had the conversation, he told Ms Lang of the plaintiff that he would speak to the landlord but he reiterated that all arrears had to be paid before the landlord would ever consider assignment of the lease. There was some prospect that the assignee, Mr Luc would enter into a new lease for the landlords. The landlord’s previous practice was to enter into new leases with tenants.
Mr Wong then said[34] that he did not meet with Ms Lang on 5 May 2007. Ms Lang’s evidence had been that a meeting took place at the offices of Mr Tennyson Turner on Prospect Road, Prospect on that day. In the Court, Mr Wong made reference to his diary and he was able to establish that 5 May 2007 was his daughter’s wedding day. He says that under no circumstances did he go to a meeting on that day. I accept the evidence of Mr Wong. It is intuitively correct because in order for a meeting to occur at Mr Turner’s office, it was necessary for Mr Wong to advise his client and to make arrangements to ensure that his client was at those premises and he was in a position to have explained to the client all of the necessary detail concerning any proposal. I accept Mr Wong’s evidence when he says that he did not attend any meeting with Lang on 5 May 2007. He certainly does recall attending a meeting at the offices of Mr Turner at 180 Prospect Road, Prospect but he cannot recall when. He is certain, having refreshed his memory from his diary that on 5 May 2007 he was completely involved in his daughter’s wedding. I accept that evidence.
[34] T63.
In relation to the meeting that he did attend at Mr Turner’s office, he recalls that Mr Turner was present and he cannot now recall who else was present. He really does not have any clear recall of discussion or the meetings.
Sometime in and about these discussions, there was some correspondence between the plaintiff and Mr Wong on behalf of the defendants. By letter dated 5 June 2007[35] sent from Mr Wong’s office[36] and signed by Mr Wong, Mr Wong addressed the question of the assignment of the lease raised in the letter of 3 May 2007 from the plaintiff and identified that, on the topic of the assignment, there was still lease payments outstanding. These totalled $7,001.31. Of that figure, $1,650.00 was claimed in relation to the distraint that had occurred in February 2007 and in respect of which a demand had been made on 26 April 2007. A second claim made within the letter, apart from rent ($4,873.59) was for outstanding council rates. These were for the quarter ended 31 December 2006 ($20.50), the quarter ended 31 March 2007 ($1,064.45) and the quarter ended 30 June 2007 ($1,026.27).
[35] Exhibit P1 page 64.
[36] JADS Group Pty Ltd.
The letter of 5 June 2007 had also been preceded by a letter dated 7 May 2007.[37] The letter states that subject to the plaintiff paying all outstanding accounts due and owing to the landlord, the landlord would not have any objection to the plaintiff assigning its lease of tenancy 3 to Mr Luc under the same terms and conditions. It then sets out a statement as at 7 May 2007. The rent outstanding was alleged to be $8,047.65. There were then claims for outstanding council rates of $2,111.70 and also the same claim for the bailiff cost, locksmith cost and solicitor’s costs in relation to the distraint that had occurred in February 2007.
[37] Exhibit P1 page 63.
On the question of the distraint issue, Mr Ower opened his case by suggesting that he would call the distraint agent Ms Russell and the solicitor Mr Girish Patel, the two people who were involved with the distraint. Neither were called in evidence. There was some suggestion during the trial that an agreement had been made between the parties, apparently as some form of settlement of the question of what occurred at the time of the distraint, that the cost of the distraint would be paid by the plaintiff. There was no evidence on that matter sufficient to enable me to make any finding about that proposition on the balance of probabilities. I will therefore leave that matter aside. From the outset, Mr Ross-Smith on behalf of the plaintiff informed me that there was a dispute as to entitlement of the defendants to claim for payment of those funds.
Mr Ross-Smith also referred me to a contention put on behalf of the plaintiff that it would put the defendants to strict proof in relation to all of the matters contained in the letter dated 7 May 2007. I was referred to a letter from Mr Lambert solicitor for the defendants[38] wherein Mr Lambert informed the defendants that it would be put to strict proof on the question of the outstanding rent and council rates. Mr Wong said that the letter of 5 June 2007 was sent because the arrears in rent and outgoings persisted and full payment was required before there could be any or any successful assignment of the lease.
[38] Exhibit P1 page 203.
The letter of 5 June 2007[39] refers to a payment of $7,500 made by the plaintiff to the defendants on 25 June 2007. It identifies that the payment was in fact an endorsed cheque from Mr Luc made payable to the plaintiff. Notwithstanding that this cheque was delivered, and that it was met on presentment, it was accounted for on the basis that it was part-payment of the arrears of the plaintiff. Mr Wong could not recall what day it was given to him but he refers to the fact that it was not until the letter of 5 June 2007 that an acknowledgment was given in relation to the payments. Also, if one compares the letter of 5 June 2007[40] with the letter of 7 May 2007 it may be seen that, on the statement of the defendants as at 7 May 2007[41] that rent and outgoings outstanding were $8,047.65. To be added to those were the two amounts for outstanding council rates and the question of the demand for costs ($1,650) on the distraint. Council rates were billed directly to the tenant. There was no explanation given about why the plaintiff had not paid these rates. There is no basis for the plaintiff to refuse payment.
[39] Exhibit P1 page 64.
[40] Exhibit P1 page 64.
[41] Exhibit P1 page 63.
In the letter of 5 June 2007 the outstanding rent and outgoings were acknowledged to be $4,874.59. In that letter there was no separate accounting in relation to the receipt of $7,500. Reference was then made by the parties to a customer balance detail document prepared by the defendants.[42] That shows receipts and balances owing by the plaintiff to the defendants. It discloses the receipt of the cheque of $7,500 on 25 May 2007. It discloses a debit amount of $645.19 as at that date however, some seven days later, on 1 June 2007, the rent for June 2007 becomes payable and the amount due and owing increases to $4,873.59. That is the amount disclosed on the letter of 5 June 2007.[43]
[42] Exhibit P1 page 65.
[43] Exhibit P1 page 64.
Some controversy surrounded the date of the banking of the cheque of $7,500. The evidence of Ms Lang was that the cheque was provided much earlier but that a request was made by her on behalf of the plaintiff to Mr Wong on behalf of the defendants that the cheque be held for a period of 14 days and not presented earlier than that. Inferentially, Ms Lang was aware of some difficulties in relation to the solvency of the drawer of the cheque, Mr Luc. Mr Wong had no memory of such a request or such an event.
I am not prepared to accept the version of event put forward by Ms Lang. It does not withstand close scrutiny. From 3 May 2007, Mr Wong had been pressuring the plaintiff to make payment in respect of its outstanding rent. The history of rent payments and default by the plaintiff disclosed a poor record. There had been the dishonour of cheques presented, there had been late payments and there had been default in payment of both rent and outgoings. It is improbable that in those circumstances, having regard to the nature of the demands made in the letter of 7 May 2007 that Mr Wong would accede to a request for a delay in the presentment of a cheque for payment. I accept the evidence of Mr Wong when he says that the cheque was presented at the landlord’s bank for payment immediately upon receipt from Ms Lang. The date shown on all of the documents is presentment of the cheque at the bank on 25 May 2007. In the view that I have formed, that cheque was delivered on or about that date and there was no delay in the presentment of the cheque at the bank.
Mr Wong was also quite clear in his evidence that at the time at which he acknowledges receipt of the cheque from Mr Luc to the plaintiff endorsed to his client,[44] he did not have any contact with Mr Luc concerning the assignment of the lease. He said that between the letter of 5 June 2007 and 25 June 2007 he did not hear from the party who was seeking the favourable exercise of discretion of the landlord for the assignment of the lease of the plaintiff over tenancy 3. I accept this evidence.
[44] Exhibit P1 page 64-65.
Mr Wong does recall that on or about 5 June 2007 he walked past the property in Gouger Street. He said that he regularly walked around the Gouger Street precinct where he had his own office and where there were many properties in respect of which he was acting as agent. Mr Wong says that when he walked past the tenancy 3 property, he made observations through the windows. He says that he could see that there was no furniture present in the property. There were no chairs, tables and other paraphernalia that would be associated with the operation of a restaurant on those premises. He noticed that there were fridges and other things still present but nothing which would indicate any ongoing business. This was soon after the letter of 5 June 2007[45] had been sent to the plaintiff complaining about the outstanding rent and notification that the assignment would not occur until rent had been paid. The second paragraph of that letter is instructive. It reads as follows:-
“We noted that the assignment of the lease is still outstanding. Until the assignment is completed, you are still liable for the following outstanding obligations and rent…”
[45] Exhibit P1 page 64-65.
An ordinary reading of the content of that letter would suggest that there may have been some implicit agreement in relation to the assignment. All of these letters must be read as a whole. The letter of 5 June 2007 must be read with the letter of 7 May 2007 which indicates that there would be no objection to the assignment as long as all outstanding accounts are paid and settled prior to the assignment occurring. The letter of 5 June 2007, in the second paragraph iterates the fact that the assignment is still outstanding and the obligation to pay rent continues. The letter is sent to 180 Prospect Road Prospect, the office of Mr Turner and the place at which the May meeting occurred. I am satisfied that the May meeting occurred sometime after 5 May 2007, the date of Mr Wong’s daughter’s wedding.
A reference to the fact that an assignment is still outstanding is to be understood as meaning that the lease between the plaintiff and the defendants was still ongoing, the assignment of the lease is incomplete and the obligations of the plaintiff to continue to pay rent are ongoing. There is no significance about what the plaintiff might have thought at the time concerning the obligation of Mr Luc. The position is quite plainly stated. The question of any arrangement between Mr Luc and the plaintiff is a matter as between them and there is no privity in that agreement between the plaintiff and the defendants and Mr Luc. The only privity of obligation exists as between the plaintiff and the defendants.
Following his observations about the contents of the restaurant, Mr Wong says that he arranged for another distraint to occur. This was arranged for 15 June 2007 and the arrangements were made again through the same lawyer, Mr Girish Patel.
On 15 June 2007, the bailiff re-entered the premises. The re-entry occurred sometime in about the middle of the day and the bailiff reported to Mr Patel the solicitor that she had been through the property. Mr Wong then received some advice from Mr Patel about the need to identify that re-entry had occurred. Following the advice of Mr Patel, a notice was placed upon the premises on behalf of the defendants indicating that re-entry had occurred. The relevant documents[46] indicates the tasks undertaken by the agent Mr Russell at the time of the re-entry. Following the advice of the solicitors, a notice was installed on the premises. The notice[47] identifies that the landlord has re-entered the premises.
[46] Exhibit P1 page 66, page 67 and page 68-69.
[47] Exhibit P1 page 70.

Mr Ower conceded that the payment would breach s13 Retail and Commercial Leases Act if there was an obligation within the lease to make or reimburse capital expenditure. But, that does not exclude the possibility of a collateral contract existing between the landlord and the tenant, for the mutual benefit of both of them, for the installation of capital works such as a grease arrestor. There is no evidence of any disclosure statement being given to Mr Hung and if such a statement was given to him (it may be presumed that it did) whether the disclosure statement actually included the obligation upon Mr Hung to reimburse the cost of the grease arrestor. That is because, for the purposes of sub-s13(2), the agreement as described as a collateral agreement is not enforceable unless it is an obligation imposed by or arising under the provision of a permissible obligation. Permissible obligations are set out in sub-s13(1)(a), (b) and (c) of that Act and notice of them must be given in the disclosure statement.
Mr Ower referred to relevant authority[137] of Ethnic Earth v Quoin, a decision of Bleby J in the South Australian Supreme Court. In that case a contract for the sale and purchase of a business was declared void because it breached s6 of the Land and Business (Sale and Conveyancing) Act 1994 (SA). Under that contract, the plaintiff had paid to the defendant the sum of $150,000 and the plaintiff sought the return of the money which comprised the deposit of $100,000 and a non-refundable payment to be forfeited in the event of default in the sum of $50,000.
[137] Ethnic Earth Pty Ltd v Quoin Technology Pty Ltd (Receiver and Managers appointed) (in liq.) & Ors. (No.3) (2006) 94 SASR 103.
When the plaintiff refused to complete the sale, the defendant claimed an entitlement to the full $150,000 and the application was made for the delivery up of that money on various grounds. The order for restitution of the funds was refused. This was because, as a matter of fact, the payments made by the plaintiff to the defendant was not made under a mistake of fact having regard to the policy behind s6 of the Land and Business (Sale and Conveyancing) Act 1994. The payments were also made under legal advice, the parties exercised rights that they had under the contract, the defendant changed its position to its detriment whereas there had been no change of position by the purchaser and having regard to the legislative policy behind s6, there was no right for an order for restitution.
I have already expressed the view that, in my opinion, no detriment has been suffered by the payment by the plaintiff of the sum of $21,232.75 that was in fact paid to the defendants. The plaintiff gave evidence that that sum was paid to the JADS Group on behalf of Mr Hung.[138]
[138] T60-61.
The evidence of Ms Lang was that she made a payment to Mr Hung of $50,000 and then a payment of $42,000 but then she made a deduction of $21,235.75. Ms Lang was not able to say from what she deducted this payment of $21,235.75. It could not have been from the sum of $42,192.05 as the trust account shows that this amount was paid to Mr Hung. I have already made a finding that I do not accept that the amount of $50,000 was paid to Mr Hung. There is no documentary evidence to support that assertion and in the absence of any corroborating evidence, I am not prepared to accept it. I am also not prepared to accept the uncorroborated assertion that the plaintiff in some way remains legally obligated to make a payment to Mr Hung in the sum of $21,235.75. In any event, the time limit for the bringing of any such an action has expired. No evidence before me discloses that Mr Hung has taken any steps to pursue the payment of any amount in excess of the benefit of $63,427.80 received from the plaintiff. I am therefore not prepared to accept an assertion that the plaintiff is at threat of or is susceptible to a claim from Mr Hung in respect of this amount of money.
I am not prepared to accept the evidence given by Ms Lang in cross examination that as well as the amount of $63,427.80 paid to or on behalf of Mr Hung, she also caused a further $50,000 to be paid to Mr Hung. This was a matter volunteered in cross examination by Ms Lang and I have already expressed my views in relation to the credit worthiness of Ms Lang. Unless that evidence was corroborated by other independent evidence, I am not prepared to accept it. It also makes little commercial sense. That would mean that in respect of the liability of $100,000 owed to Mr Hung, the total payments would be in the order of $113,627.80. I am not prepared to accept that evidence for the same reasons.
It follows that I am in a position to find, and I do find, that no detriment has been suffered by the plaintiff from the payment of the $21,232.75 paid to the defendants and consistent with settled principles[139] no restitution on any claim will arise in favour of the plaintiff against the defendants.
[139] Ethnic Earth Pty Ltd v Quoin Technology Pty Ltd (supra).
If I am wrong in that view, and the plaintiff is correct in relation to the operation of s13 and s15 of the Retail and Commercial Leases Act 1995, the entity who was entitled to make a claim to recover from the defendants as lessors is Mr Hung. No entitlement rests in the plaintiff in that respect and no evidence was given of any assignment of the debt claimed between Mr Hung and the plaintiff (if such an assignment were possible).
In my view, even if the transaction between the defendants and Mr Hung breached s13 and s15, the result is the same. The only entity entitled to raise the restitutionary claim would be Mr Hung. He could do that directly with the defendants. He has not done so. He is not a party to these proceedings.
The final argument in relation to set-off was that no set-off should be allowed because of the delay in raising the issue from the date of the transactions. Reference was made to Derham at page 105 wherein the learned author says:-
“A Court of equity will only provide relief by way of set-off if the person claiming relief can show some equitable ground for being protected from his adversary’s demand. Therefore, an equitable set-off may be denied, notwithstanding that the demands or otherwise sufficiently closely connected, if in the circumstances it would be unjust that a set-off should occur. Thus, if the conduct of the parties may be relevant to the question of the availability of equitable relief by way of set-off. The Courts have given little guidance as to the circumstances in which this concept may apply but in one case in Australia an equitable set-off was denied even though the claims were closely connected because the cross claimant had failed to investigate, quantify or press his claim (APM wood Products Pty Ltd v Kimberley Homes Pty Ltd (NSWSC Cole J 17 February 1989), referred to in AWA Limited v Exicom Australia Pty Ltd (1990) 19 NSWLR 705 at 712).”
(Citations otherwise omitted)
The decision of Cole J in APM Wood Products concerned very long standing litigation in respect of issues first raised in a Statement of Claim filed in April 1984. The matter appears to have become lost in interlocutory skirmishing between 1984 and 1989.[140]
[140] The opening sentences of the decision read as follows:
“Rogers CJ of CommD was, in my view, entirely correct when he said: “the litigation in this matter is of the kind that gives the Courts and lawyers a bad name.””
After reciting the very unhappy history of the matter, Cole J then gave consideration to the question of whether or not an equitable set-off should be granted in the particular facts of that matter. His Honour’s decision[141] was as follows:-
“The plaintiff’s claim predates October 1983. Whilst accepting there may be an equitable set-off in respect of an unliquidated claim, it is relevant that nothing was done by the defendant cross claimant between 1983 and mid 1989 to effect rectification to the 105 houses said to be affected. Nothing was done until 1988 to quantify the unliquidated cross claim and remains even now unquantified. There is no indication from the cross claimant that it intends to rectify 105 houses. Nor is there any indication that 105 claims will be made against it. Any claim which the cross claimant may have against the cross defendant arising from the alleged supply of defective trusses will materialise only upon it satisfying a claim made against it either in the form of a claim for compensation for diminution in value, or a satisfied demand for rectification. As I have said there is as at February 1989 one such claim within an estimated cost of rectification of $16,000. The mere fact that the claim and cross claim arise from the same circumstances are material factor but not of itself determinative of whether an equitable set-off arises. In the present instance, in my opinion, the conduct of the cross claimant or rather the lack of it since October 1983… is such as to disentitle it in equity to set up the cross claim by way of set-off. (Because) the action (has) remained an unquantified, un-investigated and un-pressed cross claim having the advantage of preventing the plaintiff from obtaining judgment.”
[141] At BC 8902896 at 12.
In the circumstances, Cole J held that there no set-off was permissible.
In this action, the first time that the equitable set-off claim was raised was 20 April 2012. It did not appear in any pleading prior to the fifth Statement of Claim. That pleading necessitated an adjournment of the trial on the previous occasion. The only evidence in relation to the matter was that Ms Lang said in her evidence that she raised the challenge to the payment after she had made the payment of $21,235.74 to Mr Wong. For the same reasons as I have previously expressed, I am not prepared to accept Ms Lang’s evidence on that matter. Mr Ower submitted (and Mr Ross-Smith did not challenge) that at no point between 15 June 2007 and 20 April 2012 was there ever any suggestion of a right of equitable set-off claimed by the plaintiff concerning the so-called void obligation to pay for the grease arrestor.
In the view that I have formed, it is not necessary for me to finally decide that matter, but if it was necessary to do so, I would refuse the set-off claim for the same reasons that were adumbrated by Cole J in APM.
The demand
I have already expressed some views in relation to the correspondence passing between the parties of 3 May 2007, 7 May 2007 and 5 June 2007 and the act of re-entry on 15 June 2007. The defendants’ contention was that it is sufficient for the tenant to be told by the landlord that the rent remains outstanding. In my opinion, the ordinary objective reader looking at the correspondence would ascertain that the landlord through its agent is informing that the plaintiff that the rent is outstanding, the assignment to Mr Hung is incomplete and that some action needs to be taken by the tenant in relation to the question of the assignment. In my opinion, that is the ordinary meaning of the correspondence and is consistent with the settled common law on the topic.[142]
[142] Balog v Crestani (1975) 132 CLR 289; Mannai Investments Co Limited v Eagle Star Life Assurance Co Limited [1997] AC 749 and in particular at 768 where Lord Steyne emphasised that the appropriate question to be addressed is how a reasonable recipient would have understood the correspondence.
In my opinion, the references by the plaintiff to the Supreme Court of South Australia’s decision in Kelly v Alternative Web Pty Ltd[143] and Hemer Pty Ltd v Benny[144] are not apposite. Those cases did not turn on the questions of demand for payment of rent. In particular, the Hemer decision turned on the question of termination of lease for non-payment of outgoings. Reference is made by Mr Ross-Smith in paragraph [170] of his submissions to the dissenting judgment (on the point) of Doyle CJ in Hemer. His Honour there was comparing s10 of the Landlord and Tenant Act 1936 and other specific legislation interstate which specifically required a particular form of wording to be included with any notice. That is not the case in South Australia.
[143] [2010] SASC 4 at [69].
[144] (2011) SASCFC 35 at [139]-[142], at [167] and [42]-[44].
In my opinion, the settled law of South Australia is that, under the operation of sub-s12(5) of the Landlord and Tenant Act 1936, it is not necessary for a demand to be given prior to there being any re-entry due to non-payment of rent. It would only be if the demand were involved in a non-payment of rent circumstance as well as other matters concerning alleged breaches of the lease that a notice under s10 of the Landlord and Tenant Act 1936 was required to be served. To that extent, I disagree with the submissions of the defendants. I have already made findings concerning the ‘demand’ issue. The monthly invoices sent by to the plaintiff by the defendants are sufficient.
The loss claims
Turning then to the question of loss, the case of the plaintiff was that the plaintiff was entitled to an assessment of damages in its favour. The first basis of claim was under s37 of the LTA in relation to wrongful distraint. I have previously set out the content of that section and identified that the question for consideration is whether rent was due to the person by whom the distress was levied. In my opinion, at the date of the distress by the defendants on 15 June 2007, rent was due and payable by the plaintiff to the defendants and so the plaintiff is not entitled to claim damages for wrongful distraint. In my opinion, there was no right of equitable set-off by virtue of the express words in the lease concerning the obligation on the plaintiff to pay rent and by virtue of the fact that such right did not exist in equity or in law. In my opinion the distraint was wrongful because under the settled law of South Australia[145] the landlord defendants had re-entered the premises before they purported to distrain and therefore, under the Landlord and Tenant Act, distraint was not available.[146] In those circumstances, albeit that there was a wrongful distraint, there is no right to double damages against the wrongful distrainer. That is because of my finding that in truth, rent was due.
[145] Turner v Kostoglou [2003] SASC 105.
[146] Ibid at [33]-[57].
The next claim of loss of the plaintiff was in respect of the loss for termination for breach of the lease. The plaintiff put its claim on several respects but implicitly it was because of the re-entry and termination of the lease that the plaintiff lost its business and lost its opportunity to sell to Mr Luc. The plaintiff contended that the value of the business is reliably established from recent sales. The plaintiff had bought the business from Mr Hung for $100,000. There is no evidence as to the operation of the premises by Mr Hung, there is no evidence of the financial returns of the Green Leaf business that would justify a valuation of the business in the order of $100,000 and no evidence was led by the plaintiff concerning the contract that it settled with Mr Hung. That said, it is known that the plaintiff and Mr Hung entered into a contract to purchase the site for $100,000. I am not satisfied on the evidence that the plaintiff made any payment to Mr Hung over and above the sum of $63,427.80 ($42,192.05 + $21,235.75), and it is not clear to me on the papers how that purchase price may be broken down between plant and equipment, stock and goodwill.
The second matter pointed to by the plaintiff was the sale and purchase of the Montepellier business on 31 July 2006 for the sum of $345,000. The evidence discloses that Mr Hall lasted only some 12 months or less in the Montepellier business after sale.[147]
[147] Exhibit P1 supplementary tender book tab 8.
A significant difficulty arises in relation to the sale because there is no objective way in which the Court could assess that sale. It is impossible to gain a clear understanding of the sophistication (or lack thereof) of Mr Hall concerning the purchase of this business, whether there was any performance data that justified the price, whether there was some particular aspect of the site that had value or whether, in the end, Mr Hall was not commercially astute.
The plaintiff also pointed to the fact that Ms Lang had given evidence that prior to the negotiations with Mr Luc, there was a significant prospect of the sale of the Cicconii business for $135,000 but that sale did not complete. In my opinion, without more objective evidence that is independent of the evidence of Ms Lang, I am not prepared to accept that evidence as proof of any matter upon which an inference may be raised.
Finally, reference was made to the fact that there was a sale to Mr Luc for $100,000 and therefore the business was worth at least $100,000 and that was what was lost.
There is certainly some merit in the submission put by the plaintiff in this respect. It may be assumed, in the absence of any evidence led by the defendants that the transaction between Mr Luc and the plaintiff may reflect the value of the plaintiff’s business. However, there are a number of peculiar aspects of the matter. The first is that Mr Luc never went into possession. The second is that the contracts promulgated by Mr Luc’s solicitors provided a figure for goodwill of the business in an amount of $9,000 i.e. 9% of the purchase price. The balance of the purchase price was taken up in plant and equipment and stock. This particular structure for an arrangement such as this would usually reflect the most advantageous tax position for both vendor and purchaser.[148] Under these arrangements the assets being purchased were substantially plant and equipment, fixtures and fittings. There would be no question of capital gains tax or any other form of tax being paid in respect of a business commenced and sold (or purchased and sold) within 12 months[149] but for the same price at which it was purchased.
[148] However in this case the sale price to Mr Luc matched the purchase price from Mr Hung.
[149] ITAA s36, s25A; ITAA 1997 s15-15.
Based upon the terms of the arrangements being negotiated between Mr Luc and the plaintiff, the goodwill of the business was worth $9,000. The plant and equipment had a value. A substantial portion of the plant and equipment was taken out by the plaintiff. The balance of the plant and equipment was sold at auction by the defendants for the sum of about $18,000. There is therefore significant doubt whether the amount that Mr Luc was prepared to pay for the business reflected its value. However, it cannot be ignored that, presuming that Mr Luc was at arm’s length to the plaintiff, an independent purchaser was prepared to pay $100,000 for the business.
However, there is no explanation by the plaintiff as to why Mr Luc did not complete the settlement. He provided three cheques as well as two amounts of $5,000 in cash. Two of the cheques, for $10,000 and $7,500, were dishonoured but on instructions of Mr Luc. Thus, the total amount physically paid was in the sum of $17,500. I think that it is significant that this was not the case that Mr Luc’s account was not in funds to pay the cheques but rather that the cheques were not met on presentment because Mr Luc had stopped payment on the cheques. At the relevant time, the negotiations between Mr Luc and the plaintiff had not completed as evidenced by the exchanges between the solicitors for Mr Luc and Mr Turner, the representative of Ms Lang and the plaintiff. An inference equally arises that Mr Luc took the opportunity to review the decision made about the purchase of the business in the context of what was to be paid for the business.
The evidence in support of that contention arises by inference from the content of the pleadings in this action when Mr Luc was joined as the fifth defendant wherein the plaintiff sought, in effect, for specific performance of the contract. That claim was not pursued and was settled for the payment of $15,000.[150]
[150] Exhibit D6 exhibit LL8 to the affidavit of Lang Lien sworn 6 February 2008.

If that be the case then the inference arising from the facts is that Mr Luc was not prepared to pay $100,000 for the business and that all he was prepared to pay was the $5,000 cash and the $7,500 that he had previously provided. Therefore, the only evidence in relation to the intentions of Mr Luc appears from the exhibits. Reference is made to page 145 of exhibit D2 which sets out a list of factors given by the solicitors for Mr Luc about why the agreement is not valid. It is not necessary to enter into a discussion of those mattes and to test their validity or otherwise. The important factor here is that Mr Luc through his solicitors was plainly indicating that he did not see himself as bound by any agreement and that it may be understood (implicitly) that he was backing away from the arrangements that he had made. It is also known that the contract as between the plaintiff and Mr Hung was not completed by virtue of the failure of the plaintiff to pay some $37,000 of the purchase price. There is no evidence to indicate why it was that the plaintiff thought itself to be in a position to refuse to honour the terms of that contract.
A further factor in all of these arrangements is that the plaintiff was being advised in respect of legal matters by Mr Tennyson Turner. In my opinion, a large amount of the advice given by Mr Turner to the plaintiff was incorrect. It may well be that the plaintiff did not pursue Mr Luc as the plaintiff might otherwise have done by virtue of the wrong advice from Mr Turner but that is a matter upon which I cannot make any decision. It is sufficient to say that Mr Luc did not see himself as bound by the agreement and that he did not complete the contract, was not immediately called to complete the contract and any proceeding for specific performance of the obligations was later settled for the sum of $15,000 paid by Mr Luc. Therefore, in total, the plaintiff received $32,500 for the business of Cicconii restaurant from Mr Luc.
There has been no tender in evidence of any financial statements of the Cicconii business. I have already recorded that the principal director of the plaintiff Ms Lang was made bankrupt in 2008. The plaintiff company was passing cheques which were dishonoured for lack of funds very early in the course of the very short period of its tenancy of the Cicconii restaurant. I am not satisfied of the explanations given by the plaintiff through Ms Lang about the inability of the company to provide cheques which would be honoured upon presentation.
Notwithstanding the absence of any evidence in the matter, it is still possible for me to use what is commonly described as a “broad axe” approach to the assessment of damages. Notwithstanding the misgivings that I have already expressed about the failure of the plaintiff to prove its case, it is still open to me to make an assessment, as best I can, of the damages which I think the plaintiff may have suffered as a result of the wrongful distraint.
It is appropriate that I express a view on the matter. I have expressed serious misgivings about the contractual position with Mr Luc. I think that the best available objective evidence to use about value (of the business of tenancy 3) is the amount actually paid to Mr Hung by the plaintiff. That payment totalled the sum of $63,427.80. The plaintiff has not satisfied me that it paid the balance of the purchase price to Mr Hung in the sum of $36,572.20 and there is no evidence that Mr Hung has pursued the plaintiff for payment. In evidence, Ms Lang said that the amount remains unpaid. I think that this was the best evidence of the value of the asset at all relevant times. I am not satisfied that the business could be worth more than that amount because all the objectively available evidence is that the business did not generate sufficient cash to pay its debts, especially its rent from its operations.
Taking into account the amount already paid to the plaintiff by Mr Luc ($5,000, $5,000, $7,500 and $15,000) the difference is $30,927.80. In my opinion that amount is the measure of the plaintiff’s loss, on a “broad axe” approach of assessment. If the plaintiff is entitled to damages for wrongful distraint then in my opinion that sum, $30,927.80, is the measure of its loss.
However, bound together with that issue is the question of the termination of the lease for non-payment of rent which I have found was a valid termination. In those circumstances, I have reached a conclusion that the plaintiff is not entitled to claim damages associated with the wrongful distraint in June 2007. The defendants were then in a position to re-enter the premises and they did so on a basis available to them under the lease: non-payment of rent. As a lessee the plaintiff had an entitlement to a relief from the Supreme Court under the LTA. It did not do so apparently on the advice of Mr Tennyson Turner. It settled its action against Mr Luc again apparently on the advice of Mr Tennyson Turner. The lease was therefore forfeited to the defendants on a basis available under its terms and no damages assessment in thus available to or claimable by the plaintiff.
The value of the goods seized
Notwithstanding earlier pronouncements of a challenge to be made by the plaintiff, it appears that ultimately the plaintiff has accepted that the value of the goods seized from the premises was reflected in the value achieved at public auction. The only question is whether or not the goods were to be treated as abandoned goods. Section 76 of the Retail and Commercial Leases Act provides that upon termination of a retail shop lease and where (non-perishable) goods are left on premises that were the subject to the lease, then it is necessary for the lessor to place the goods in a store in a safe place for at least 60 days.[151] The lessor then is required within 7 days after storing the goods to give notice of the storage to the lessee and to publish notice of the storage of the goods in a newspaper circulating generally throughout the State in a prescribed form.[152] Any person who is entitled to possession of the goods may reclaim the goods by paying to the lessor reasonable costs of removal and storage.[153] It would only be at the end of the 60 days period (after notice has been given and received) that the lessor would then be at liberty to sell their goods at public auction. At that time, the lessor would only be entitled to retain the costs of removing, storing and selling the goods, the costs of notices and any other reasonable costs incurred and any amount owing under the lease.[154] There is then a clear obligation to repay the balance to the lessee/owner.[155] It was agreed between the parties that the content of the lease between the plaintiff and the defendants appears to have been “lifted” from the wording of s76 Retail and Commercial Leases Act and so no separate consideration will be given to clause 58.1 of the lease.
[151] Sub-s76(1)(a)(i) and (ii).
[152] Sub-s76(2) and (3).
[153] Sub-s76(4).
[154] Sub-s76(5) and (6).
[155] Sub-s76(6)(b).
Irrespective of the defendants’ position concerning the lease, it is my opinion that the plant and equipment left at the premises by the plaintiff, if abandoned goods, were required to be dealt with under s76 of the Retail and Commercial Leases Act. That has not occurred.
It is also my view that the goods were not abandoned. When the plaintiff became aware that Mr Luc had not taken possession of the premises, the plaintiff took steps to attempt to restore the position. It is not necessary for me to decide whether the plaintiff had left the premises in the hope that Mr Luc would take over control of the premises or whether the plaintiff thought that it had made sufficient arrangements with Mr Luc to ensure that the premises were taken over by him. What is clear is that after learning of the events of 15 June 2007, the plaintiff reacted by approaching the agent of the defendants (allegedly by a meeting on 18 June 2007 – which I have found did not occur as indicated by the plaintiff but certainly at some time there was a discussion) in an attempt to restore the position. The factual background is that Ms Lang of the plaintiff had already commenced a new business called Slippery Fish Restaurant at Port Noarlunga. In those circumstances, the focus of Ms Lang’s attentions was her new business. She may well have overlooked her responsibilities in relation to tenancy 3 and at least implicitly she has made some presumption about the intentions as well as the actions of Mr Luc without any firm or sufficient basis. Be that as it may, I am satisfied that as soon as the plaintiff learned of the predicament concerning the lease, the plaintiff took steps to attempt to retrieve the position. The plaintiff was denied by the defendants and this was of course the right of the defendants. The defendants thereupon set about to sell the plant and equipment. I am not satisfied, on all of the relevant authorities, that the plaintiff abandoned the goods. However, for the sake of convenience I will treat the goods as abandoned goods because the plaintiff’s measure of loss will not change if I adopt that approach.
I also reject the defendants’ arguments concerning the manner of interpretation of s76 of the Retail and Commercial Leases Act. Interpreted in a purposive way, it is my view that the provision sets out a code for use of landlords and tenants in and about the management of abandoned goods. The defendants have failed to comply with the quite specific requirements of s76 Retail and Commercial Leases Act and so the terms of the lease in relation to abandoned goods. In my opinion and subject to other matters raised in the defendants’ cross examination, the plaintiff is entitled to the value of the goods in the premises.
That value, which is the appropriate measure of damages, is reflected in the net amount generated from the sale of those goods. That amount is disclosed in the exhibits[156] in the sum of $18,725.00. The plaintiff is entitled to an order in its favour in this amount and all interest accrued in respect thereof.
[156] Exhibit P1 pages 188-189.
In light of the fact that the defendants wrongfully distrained and have failed to comply with the code for dealing with abandoned goods set out in s76 of the RCLA, I would not permit the defendants to claim for the cost of selling the goods. In my opinion, the requirements of sub-s76(1), (2) and (3) are mandatory. Sub-s76(4) allows an owner to reclaim the goods and pay some costs: it is only after the 60 day period has expired from the giving of notice that the lessor becomes entitled to sell the goods and to have their costs reimbursed from the proceeds of auction (sub-s76(6) RCLA). The defendants have failed to observe the lease and the Act. It should not recover the cost of their own wrongful conduct. It is not an answer in this respect to say that the cost would have been incurred by the plaintiff anyway and the plaintiff is thus enriched to that extent. There is no evidence that this is what the plaintiff would have done and no presumption to that effect arises as a matter of inference. For better or worse, at that time the interests with which Ms Lang was involved were operating 3 restaurants. The inference equally arises that the plant equipment and goods would have been used in those other businesses.
The defendants have raised counterclaims on several bases: the first is in respect of costs order and interest arising from orders in the Magistrates Court of 11 September 2007.[157] The defendants are entitled to a set-off against the amount payable to the plaintiff of this amount of cost and interest thereon.
[157] Fifth Defence, paragraphs 14 and 15.
The second is a claim for council rates assessed in respect of tenancy 3 but unpaid.[158] This assessment is in the sum of $2,140.00. The defendants are entitled to a set-off against the amount payable to the plaintiff of this amount.
[158] Exhibit P1 volume 1, page 143.
The third claim relates to other matters purportedly identified in “Schedule A to the pleadings”. No such Schedule exists. I am not prepared to make any order in favour of the defendants on that matter in light of the state of the evidence and the pleadings. This includes the question of the costs of the 20 February 2007 distraint. In her evidence Ms Lang very clearly put in contention whether the distraint was lawful, whether there actually was a distraint and also whether there was any resolution of the question of those costs. The defendants deliberately failed to call any evidence on those issues despite Mr Ower saying in opening that such evidence would be led for the defendants through the bailiff and the solicitor Mr Patel.
In the absence of that evidence, the available evidence is a series of letters and other correspondence in which assertions about those matters are made. Although inferences may be drawn from the fact that the assertions are made in writing and there is no apparent response, such inferences are not of sufficient weight to enable me to reach any concluded findings on the issue. In light of my earlier comments on the deficiencies in the defendants’ pleadings, I will hear the parties further on the orders that should be made in light of these reasons.
I will also hear the parties generally and in relation to interest and costs.

Inv No.	Description	Total Amount
654	Grease Arrestor & Professional Fees	$14,924.80
703	Jan to Mar Water	$256.43
711	Council Rate	$510.22
828	April to June Water	$256.43
838	Land Tax	$637.70
951	July to Sept Water	$328.50
979	Water Water [sic] Audit Fee	$17.50
1033	Emergency Levy	$72.77
1002	Sept’06 Rental	$4,228.40
Total	$21,232.75