Simmons and Parrott v Liristis Holdings Pty Ltd
[2000] NSWSC 21
•7 February 2000
CITATION: Simmons & Parrott v Liristis Holdings Pty Ltd [2000] NSWSC 21 CURRENT JURISDICTION: Supreme Court FILE NUMBER(S): SC 10122/99 HEARING DATE(S): 3 & 4 May 1999 JUDGMENT DATE: 7 February 2000 PARTIES :
John Simmons & Mark Parrott v Liristis Holdings Pty LtdJUDGMENT OF: Smart AJ at 1
COUNSEL : P Newton (Plaintiff)
M J Stevens (Defendant)SOLICITORS: KJohnson & Vaughan (Plaintiff)
John Orford & Associates (Defendant)CATCHWORDS: Landlord & Tenant - Deregistration of lessee - guarantees - absence of notice even to licensee LEGISLATION CITED: Conveyancing Act 1919
Real Property ActCASES CITED: Burnham v Carroll Musgrove Theatres Ltd & Victoria Arcade 1928 28 SR 160 at 170-17
Cole v Kelly [1920] 2 KB at 132
Turner v York Motors (1951) 85 CLRR 55
Dockrill v Cavanagh 62 WN (NSW) 94
Richardson v Langridge (1811) 4 Taunt 128 at 132DECISION: Judgment for plaintiffs
IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISIONSMART AJ
Monday, 7 February 2000
10122/99: SIMMONS & PARROTT v LIRISTIS HOLDINGS PTY LTD
JUDGMENT
1 HIS HONOUR: These proceedings arise out of the occupancy and use of Lot 565, Belgrave Esplanade, Sylvania Waters in which the business of mechanical repairs and car maintenance was conducted. It was called "Belgrave Automotive".
2 On 19 January 1999 Liristis Holdings Pty Ltd, the owner of the premises, entered them changed the locks and purported to exclude all others. On 21 January 1999 on the application of John Simmons and Mark Parrott the vacation judge granted, ex parte, these orders:
"….
2. That the defendant grant full and free access to the plaintiffs of the premises … until further order of the Court.
…
5. The defendant is restrained from spending or otherwise disposing of the amount of $19,933.33
…
7. Until further order of the Court, the defendant … be restrained from disposing of any assets of the plaintiff located at the premises at Lot 565 Belgrave Esplanade, Sylvania Waters.
8. An order restraining the defendant from entering upon or remaining upon the said premises until 14.2.99 or further order of the Court."
3 Those orders were obtained upon the basis that in about June 1997 a lease between the defendant and J & P Simmons Pty Ltd due to expire on 13 February 1999 had been assigned to Mark Parrott. Further investigation has shown that no such assignment took place. On 22 January 1999 it was ordered, by consent, that orders 2 and 8 above be varied to provide for the expiry of the order to be 9 am on Monday 25 January 1999. As at 19 January 1999 Mr Parrott still had some of his equipment on the premises. He was in the process of completing the transfer of the business to new premises at Miranda.
4 The plaintiffs by their summons presently claim, inter alia:
"4. [A declaration] that the plaintiffs paid all rent due and owing under [Lease between the defendant and J & P Simmons Pty Ltd for the period 14 February 1996 to 13 February 1999] and has paid rent up until 14 February 1999.
5. A declaration that no moneys are owing to the defendant in respect of rent for such premises.
6. An order that the defendant repay to the first and second plaintiffs the sum of $13,000 taken by way of bank guarantee from the account of Mark Parrott.
7. That the amount of $6933.33 be repaid to the plaintiff together with interest thereon pursuant to s94 of the Supreme Court Act 1970.
…
10. A declaration that the defendant excluded the plaintiffs from their use and occupation of the premises on 20 January."
The amount referred to in paragraph 7 above represented moneys taken by the defendant from the first plaintiff by procuring moneys under a bank guarantee.
5 The plaintiffs also claimed damages in an amount of $3565 being rent for 25 days (19 January - 13 February 1999 both dates inclusive). I accept that Mr Parrott paid the rent up to 13 February 1999. During argument the plaintiffs asserted that the defendant had been overpaid under the lease by $21,100.65 but no claim was made for that sum in these proceedings.
6 The defendant did not seek leave to file any cross-claim. However, by way of repelling the plaintiffs' claims it sought to establish that the plaintiffs were indebted to the defendant in the sum of $39,487.58, being $31,557.46 for unpaid outgoings (land tax, council rates and water rates) which it asserted the lessee had to pay under the lease and $7930.12 to cover a shortfall in rental payments. It sought to set off the amounts obtained under the guarantees against its claim.
The leasehold history
7 On 4 March 1994 the defendant demised the premises by a written lease to J & P Simmons Pty Ltd starting on 14 February 1994 and ending on 13 February 1996. There was an option to renew for 3 years with a further 3 years. The lessee was to pay an initial annual rental of $41,600 by equal monthly payments in advance of $3466.67 each and thereafter an annual rental of $39,000 payable by equal monthly payments in advance of $3250 together with the CPI increase or 5 per cent whichever is the greater. The lessee agreed to obtain a bank guarantee for $6933.34 being the equivalent of two months rent. Clause 5 of the lease provided that in addition to the rental payable the lessee would pay to the lessor on demand the amount of all rates, taxes, assessments and levies of all kinds assessed in respect of the demised premises.8 The first option was exercised and a fresh lease was executed. Its term started on 14 February 1996 and ended on 13 February1999. It provided for an initial annual rental of $41,600 payable by equal monthly payments of $3466.67 and increases each following year, namely the CPI increase or 5 per cent whichever should be the greater. Clause 4 provided that the lessee would pay to the lessor on demand all rates, taxes, assessments and levies of all kinds. This second lease contained a similar bank guarantee clause in the sum of $6933.34 and similar personal guarantees by Mr and Mrs Simmons.
9 On 14 May 1996 the defendant wrote to Mr Simmons:
"As you are aware of your new lease agreement commenced on February 1996 and as yet outgoing payments need to be organised accordingly. (sic)
We will therefore require to conduct a meeting to discuss these issues."
Mr Simmons did not remember receiving this letter but he probably did.
10 A meeting was held at Mr Liristis' home in mid-1996. The discussions centred around the rental payable on the service station. Mr Liristis wanted more rent and Mr Simmons told him that the business could not stand any more rent. Mr Simmons could not recall Mr Liristis asking for a rental of $1200 per week. Mr Simmons had no recollection of receiving a letter of 15 July 1996 from Mr Liristis stating, inter alia:
"Further to our recent discussions regarding the outgoings, and as per our agreement we are pleased that we both agree and accept the new terms and conditions of a monthly payment of $4333.33 plus outgoings plus 5 per cent or CPI whichever is the greater as per lease and will be reviewed in February 1997."
11 Mr and Mrs Liristis said that at the meeting Mr Simmons stated that he was not making money and declined to produce invoices and receipts. Mr Simmons said that he produced some balance sheets to prove his point. Mr Liristis advised that a figure of $1200 per week should be acceptable but Mr Simmons disagreed and offered $800 per week. Mr Liristis said that he and Mr Simmons agreed on $1000 per week. Mr and Mrs Liristis said that it was agreed that all the other terms and conditions would remain unaltered, including the provision as to the payment of outgoings. Mrs Liristis said that she advised Mr Simmons that $1000 per week worked out at $4333.33 per month.
12 Mr and Mrs Liristis stated that at the meeting Mr Liristis advised Mr Simmons that the amount of the new rent must be calculated as from February 1996 and Mr Simmons agreed. Subsequently, about 7 August 1996 Mr Simmons sent the lessor a cheque for $7799.88 covering the new monthly rent and the difference between what he had paid and that sum as from February 1996.
13 In his evidence Mr Simmons said that at the meeting the only point which was discussed was the amount of the rent. He also said that until recently (February-May 1999) he had not been asked for outgoings.
14 Rent continued to be paid at the higher figure of $4333.33 throughout the remainder of 1996, 1997 and 1998
15 In about June 1997 there was a meeting at the demised premises involving Mr Simmons, Mr Mark Parrott and Mr Liristis. For some years Mr Parrott had worked as a skilled mechanic for Mr Simmons. According to Messrs Simmons and Parrott a conversation to this effect occurred:
"Simmons: Tony I'm going out of the business and I'm going to give the business to Mark. I'm getting too old for the business and I just want to give it away and Mark wants to take it over.
Liristis: I'm not keen to let you out of the lease, John, it runs until February
Simmons: All right, how do you feel about that Mark?Parrott : All right. I'll arrange a bank guarantee and I'll commence paying the rent from now on."
16 Mr Parrott said that he asked Mr Liristis "How much will the guarantee be?" He replied $12,999.99. (Other evidence suggests that this occurred after Mr Parrott had been asked for a bank guarantee for 6 months rent). Mr Parrott said:
"I'll make arrangements with my bank for the guarantee and I'll commence paying the rent in August because the first payment is due on 5 August for the rent. You have already been paid up to 5 July at this stage"
17 Mr Simmons stated that, while there may have been no formal assignment of the lease between the defendant and the plaintiffs, Mr Parrott was to be responsible for the obligations under the lease and that was the purpose of the guarantee given by Mr Parrott.18 Mr Parrott said that he went to the Commonwealth Bank at Riverwood the next day and arranged for a bank guarantee in the sum of $12,999.99 and that guarantee was in place in August 1997. Mr Simmons said that he went with Mr Parrott to the bank. As from July 1997 Mr Parrott has paid the rent continuing up to 13 February 1999. The defendant has accepted Mr Parrott's cheques.
19 In his oral evidence Mr Simmons said that Mr Liristis stated that he was not too keen on the business being taken over by Mark. After some discussion Mr Liristis said "OK with three months rental bond from Mark." Mr Simmons said that he was required by Mr Liristis to increase his rental bond by another month. Mr Liristis stated that Mr Simmons could not assign the lease to Mr Parrott and that the lease would have to remain in the Simmons company name. Mr Liristis agreed that it would be in order for Mr Parrott to pay the rent. Mr Simmons stated in cross-examination that Mr Liristis said that he did not believe Mr Parrott could run a business himself and that he was too inexperienced. Mr Liristis was not keen on the proposed transfer. Mr Simmons said that it was his understanding that his company was not liable for the rental payments after Mr Parrott took over. The source of this misunderstanding is not clear.
20 Mr Liristis said that after Mr Simmons told him of his intention to retire and hand over the business to Mr Parrott, he stated that a mechanic cannot run a workshop as a business. He elaborated on that theme. Mr Liristis was somewhat hard to follow. This problem was compounded by him using a flood of words. He said (T58):
"I expressed my views that I did not like Mark to take over the business but as a condition of my agreement with you … I will consider any prospective buyer you have. I requested a bank guarantee … of six months rental …"
and
" if I am to stay in the contract for the term of the lease, once Mr Parrott proves himself in that period of the lease, then we can renegotiate with Mr Parrott, but … believe I need that assurance you are going to oversee Mr Parrott’s business I don't have a problem as long as all these top conditions are met."
21 Mr Liristis denied that it was agreed at the meeting that Mr Parrott would pay the rent with Mr Simmons staying and supervising. Mr Liristis said
"the only time the rent was discussed was if I agreed to allow Mr Parrott to take over, that the rental money would be paid as per Mr Simmons a month in advance … plus outgoings plus a term on the lease."
He insisted that until he got the documentation from his accountant and solicitor there was no agreement for Mr Parrott to pay the rent.
22 Mr Liristis stated that the rent was always paid on time. An envelope containing a cheque had been and was always placed under the door of his home. He did not open the envelope but handed it to "our manager". He added:
"and they do the banking we don't usually do the banking, we do get probably lots of envelopes, the envelope gets picked up, goes to the accountant and they do the banking."
23 Although Mr Liristis was not cross-examined on this matter I did not accept that he was unaware that Mr Parrott was providing the rent cheques. Mr Liristis impressed me as vigilant, astute, capable and hard. I do not believe that he was unaware of who was paying the rent. His manager and his accountant would have been aware. Inter alia, it is usual to list the drawer on bank deposit slips. Having seen and heard Mr Liristis I do not believe that he did not open the envelopes which came to him containing cheques.
24 Mr Parrott said that the first meeting was very heated and emotional. He confirmed that Mr Liristis stated that he (Parrott) would not know how to run a business and did not have sufficient assets to fall back on to run a business and pay out the expenses. Mr Liristis would not transfer the lease. It was Mr. Parrott's understanding from the meeting that Mr Liristis wanted a bank guarantee and that he, Parrott, would pay the rent. Mr Simmons told Mr Liristis that he would still be there at the business and involved in it but not on a full-time basis. Mr Simmons did help Mr Parrott in the business and still does.
25 Mr Parrott said that Mr Liristis asked him for a six months rent bank guarantee but that was not agreed. Mr Simmons said to Mr Liristis "Why are you asking Mark for six months when you have only got two months from me?" Mr Liristis replied "Because Mark has no experience and you have been in business for thirty years". Eventually it was agreed that Mr Parrott would provide a three months rent bank guarantee and that the bank guarantee of Mr Simmons was to remain. That is what happened.
26 Although application was made by Mr Parrott for the bank guarantee shortly after the meeting the bank guarantee was dated 26 August 1997. The bank sent the original guarantee to Mr Parrott. He did not realise that he was meant to deliver it to the defendant. After a telephone call from Mr Liristis in November 1998 Mr Parrott said that he realised his mistake and delivered the original bank guarantee to the defendant.
27 About a fortnight after the June 1997 meeting Mr Simmons met with Mr Liristis at the latter's service station at Kingsgrove and a discussion was held about Mr Parrott taking over the business. Mr Simmons said that he asked Mr Liristis "is he in agreement with Mr Parrott taking over the business" and that Mr Liristis replied "Yes". Mr Simmons said that Mr Liristis agreed to Mr Parrott paying the rent. Mr Simmons was unable to remember whether Mr Liristis asked him whether he would be willing to guarantee Mr Parrott’s performance of the lease.
28 Mr Simmons said that during the conversations Mr Liristis asked for a bank guarantee from Mr Parrott in the sum of three months rent. He disagreed that Mr Liristis sought a bank guarantee in the sum of six months rent. The upshot of Mr Simmons' evidence was that his company had to remain as lessee and could not assign the lease to Mr Parrott but the defendant (through Mr Liristis) was agreeable to Mr Parrott paying the rent and running the business. Mr Liristis wanted Mr Simmons to supervise the business and remain liable for the rent. Mr Parrott was to provide a bank guarantee in the sum of three months rent.
29 Mr Liristis said that at the meeting he had with Mr Simmons at the defendant's workshop he told him that Mr Parrott could not get a bank guarantee for six months rent and that he replied that Mr Parrott's financial position could not be strong. Mr Simmons assured him that Mr Parrott was a very good worker, had been with him for many years and was a good reliable person. Mr Liristis said that he asked Mr Simmons to "go as guarantor" for Mr Parrott. Mr Simmons declined. Mr Liristis said that he asked for the books of the business and for the assets and liabilities of Mr Parrott. Mr Simmons stated that he could not supply these. Mr Liristis denied that he had any discussion at all about Mr Parrott giving a three months guarantee. He (Liristis) would not accept it.
30 Mr Liristis gave this evidence:
"Q. Have you ever had a discussion with Mr Simmons about him giving a three month guarantee?
A. There was one discussion with Mr Simmons about a possibility of Mr Simmons giving a three month guarantee and Mr Parrott giving three months, which is six months. I agreed on that on the basis that Mr Simmons would personally guarantee the term of the lease. Mr Simmons said no, I therefore said I cannot accept 3 months off you and three months off Mr Parrott, that was the only discussion on the three month guarantee that took place at Kingsgrove service station.
Q. You really wanted, correct me if I am wrong, him to take the three months and three month guarantee and Mr Simmons to promise he would be liable for the whole of the rentals for the term of the lease?
A. Yes to go as personal guarantor and it would give him the oversee of the business as well."
At that stage the lease had about 20 months to run.
31 In his affidavit of 30 April 1999 (para 5) Mr Liristis referred to the words in Mr Simmons’ affidavit of 20 January 1999 that he went with Mark Parrott while he arranged a bank guarantee for the defendant in the sum of $12,999 from the Commonwealth Bank at Riverwood and continued:
“… the sum of $12,999.00 should read $12,999.99 and that amount clearly represents a three month bank guarantee that I requested at the agreed amended rental of $4333.33 per month. The First and Second Plaintiffs never disputed the payment of the Bank Guarantee in this amount, continued to pay monthly rental cheques of $4,333.33 …”.
33 Mr Parrott has stated in his affidavit of 2 March 1999:
32 This statement is hard to reconcile with the other statements of Mr Liristis. In truth, this was the guarantee of three months which Mr Parrott offered and about which he spoke. The defendant accepted such a bank guarantee. There was some misunderstanding of the law on the part of all three men. Absent some special provision Mr Simmons’ company would have remained liable under the covenants of the leaseeven if there had been an assignment
"On 5 January 1998 I telephoned Mr Liristis … and said to him:
'Tony, I've looked at the lease and I can see there is a 5% increase due for the payment which is to be paid for the last twelve month term of the lease.'
He said to me
'5% increase, Mark don't worry about it just pay the same rent you have been paying'."
Despite Mr Liristis' denial I think that this conversation probably took place.
34 Mr Liristis said that he did not contact Mr Parrott from mid-1997 until November 1998. He had been advised that Mr Parrott had taken over the site and that Mr Simmons was no longer there. He telephoned Mr Parrott in November 1998 and asked him what was the situation. Mr Parrott replied "I have taken the site over". Mr Liristis enquired how that could be as Mr Parrott did not have his consent, there had been no bank guarantee and the particulars requested as to the business and Mr Parrott's financial position had not been supplied. Mr Liristis said that he sent a letter the following day to Mr Parrott and received the bank guarantee for three months. In his letter of 30 November 1998 Mr Liristis professed that he was shocked by what a potential purchaser of the business referred by him to Mr Simmons had been told by Mr Parrott. The letter also contained comments by Mr Liristis upon what Mr Parrott had purportedly told the customer.35 Mr Liristis asserted that the defendant had never agreed to or approved of Mr Parrott purchasing the business from Mr Simmons. This was not required. The defendant's power was limited to withholding its consent to any assignment of the lease or transfer, sub-lease, parting with or sharing possession or granting any licence. Such consent was not to be unreasonably withheld. Particular criteria were specified.
36 Mr Liristis erroneously asserted in the letter that Mr Parrott was not entitled to move to new premises and continue to serve the customers of the business he had acquired from Mr Simmons. Mr Liristis also erroneously asserted that Mr Parrott was not entitled to close the workshop down. Neither Mr Simmons’ company nor Mr Parrott were bound to keep the business open and operating. Mr Liristis recorded that the defendant had been advised by others that Mr Parrott would not be renewing the lease but Mr Simmons had never advised the defendant of this. The letter continued "as his lease clearly stipulates that he must advise us no less than three months, this has not been done". Mr Liristis was under a misapprehension. The lease came to an end on 13 February 1999. However, under clause 6 of the standard conditions the lessee had an option, to renew the lease for a further three years if, amongst other things, notice was given not later than three months before the expiration of the lease. Such notice was not given. As at 30 November 1998 Mr Liristis should have realised that the lease would lawfully come to an end on 13 February 1998 and that what happened to the business of Messrs Simmons and Parrott was a matter for them to decide. Mr Simmons stated that he first advised Mr Liristis by letter of 11 November 1998 that he would not be renewing the lease. He had subsequently confirmed this by another letter when it was claimed that the first letter had not been received.
37 Mr Liristis asserted in his letter that Sylvania Waters was a small place with everyone knowing everyone and that he was both the owner of the land and a resident. He claimed to have received complaints about the business and the way in which it was conducted. Mr Liristis drove past the premises daily and according to Mr Simmons lived "just up the road" from the demised premises. Mr Liristis lived in Belgrave Esplanade. In view of Mr Liristis' local knowledge I am unable to believe that he was unaware of Mr Parrott having taken over the conduct of "Belgrave Automotive" from at least late 1997. I do not accept that Mr Liristis was unaware that Mr Parrott was paying the rent. The defendant was concerned about losing the value of a business which he did not own. Mr Liristis' letter emphasised that Mr Parrott had
"no authorisation or approval from our company to purchase trade/run or operate the business and no authorisation to transfer the lease."
38 Mr Liristis said that on Saturday 19 December 1998 he attended at the demised premises. I interpolate that Mr Liristis may be and probably is in error as to the date. It was probably later. Mr Liristis said that the workshop was closed. There was broken glass on the front door and glass and rubbish over the driveway area. There was a sign on the front of the premises:"Belgrave Automotive
now at
U19/20-28 Kareena Rd
Miranda 95316"All the photographs on which Mr Liristis relied were dated "20/01/99" on the back. This may suggest that they may have been taken on 19 or 20 January 1999. Mr Liristis said that all the office equipment, tables, chairs had been taken out of the office area. It used to be pretty clean but he described it as "a total tip". There were tyres and rubbish all over the place. In the workshop all the equipment was packed up. The hoist was still there. All the equipment in the office area was packed up.
39 Mr Liristis said that between 19 December 1998 and 19 January 1999 he visited the premises frequently.
40 On 19 January 1999 Mr Liristis attended at the premises with the locksmith. He saw that most of the equipment had been taken out. The office wall had been removed. There was more rubbish. He could not see any telephone. The locks were changed and Messrs Simmons and Parrott were excluded from the premises.
41 Mr Parrott could not remember the exact day on which he put the sign up. It was about Christmas time. From about mid-December 1998 onwards Mr Parrott was gradually preparing to transfer his equipment to his new premises at Miranda. I accept Mr Parrott's evidence that a lot of his equipment was still in the demised premises on 19 December 1998 and that he continued to repair motor vehicles there up to 24December 1998. Mr Parrott said that no work was done at the Miranda workshop until the equipment was shifted. I accept his evidence that he had a break between Christmas and the New Year, that the hoists were shifted in the first week of January 1999 and that it took a couple of days to shift them and have them in operation again. The rest of the equipment had to be moved before he commenced working on vehicles at the Miranda workshop. There was a great deal of work in shifting and he received much help from many people. It took a lot of time. He also cleaned up the premises to some extent.
42 I find that by 19 January 1999 most of Mr Parrott's belongings and equipment had been transferred to the Miranda workshop and that there was a relatively small amount of his belongings and equipment in the demised premises. About 19 January 1999 the defendant presented the original guarantee of J & P Simmons Pty Ltd for $6933.33 and that of Mr Parrott and his wife (Lisa Marie Parrott) for $12,999.99, without notice to either, to the Commonwealth Bank. Payment was demanded by the defendant and made by the bank. The bank guarantee as to Mr and Mrs Parrott stated
"At the request of the abovenamed customer [the Parrotts] and in consideration of the abovementioned Favouree [the defendant] at the request of the Commonwealth Bank … dispensing with the lodgement by the Customer of the Security Deposit for rental bond - Cnr Belgrave Esplanade & Murrumbidgee Avenue …"
In obtaining such a guarantee Mr Parrott believed he was to pay the rent, that he had to obtain a three months rent guarantee from the bank and that this had been agreed to and accepted by the defendant.43 I thought that Mr Mark Parrott was generally a truthful witness and that he was the most accurate and reliable witness. Mr Simmons seemed uncommonly vague and to suffer from a poor memory. I have scrutinised his evidence. The evidence of Mr Liristis was dictated by his financial interests and his determination to win. In his evidence in chief he engaged in some window dressing designed to show himself in a good light. I had considerable reservations about his truthfulness despite the absence of any real cross-examination. That absence was due to the inexperience of counsel for the plaintiffs. I find that while Mr Liristis did not agree to assign the lease and wished Mr Simmons (his company and personally) to remain liable on the covenants of the lease he agreed to Mr Parrott paying the rent and carrying on the business with Mr Simmons’ assistance. The defendant subsequently accepted payment of the rent from Mr Parrott. Mr Liristis and the defendant became aware that Mr Parrott had taken over the business and was running it.
44 The Company Extract prepared from the data base of the Australian Securities and Investments Commission as at 11 May 1999 reveals:
(a) On 11 May 1998 J & P Simmons Pty Ltd or the members thereof applied for deregistration of a defunct company.
(b) From 2 June 1998 to 22 October 1998 strike-off action was in progress with publication on 22 June 1998 of notice to deregister defunct company.
(c) It was deregistered as a defunct company on 23 October 1998.
The former accountant of J & P Simmons Pty Lt has stated that the company was dissolved on the application of all members of the company and that it was not wound up or placed in liquidation prior to its dissolution.
45 It is a little puzzling how all this could have taken place when the company had ongoing obligations under the lease and under its guarantee arrangements with the bank. Perhaps the bank was not troubled because it held personal guarantees.
46 Clause 5(a) of the standard conditions provides that if the lessee being a company shall go into liquidation except for the purpose of reconstruction or amalgamation the lessor may enter upon the demised premises and determine the estate of the lessee. As the company did not go into liquidation cl 5(a) does not apply. However, as a result of the actions of the members, the company ceased to exist from 23 October 1998. The application of 11 May 1998 for de-registration as a defunct company is not consistent with the lessee’s continuing obligations under the lease. Apparently, Mr Simmons believed that once Mr Parrott started paying the rent he and his company had no further obligations.
47 The defendant was not aware of what had occurred and did not become aware until after its purported re-entry and after the institution of the proceedings. The lease did not provide for re-entry without notice in such circumstances.
48 As earlier mentioned the leases required the lessee to pay to the lessor on demand all rates, taxes, assessments and levies of all kinds. Mr Simmons stated that in 1996 he agreed to a rental other than that contained in the lease because he believed the extra rent would cover the outgoings. On the other hand Mr Parrott stated in his affidavit "I admit that under the lease I am liable to pay the outgoings such rent, the water rates and council rates" (sic). Mr and Mrs Liristis asserted that the lessee (per Mr Simmons) agreed to pay rental of $1000 per week, plus outgoings, plus 5 per cent increase in the following years and that is what is stated in the letter of 15 July 1996.
49 It was not adequately explained why the lessor did not enforce payment of the rates and taxes from 1994 onwards and why it permitted the lease to be renewed in 1996 when these had not been paid. Nor is it apparent why Mr Simmons agreed to the rent rising in mid-1996 as from February 1996 when the fresh lease had been signed for a lower rent unless it was to cover the outgoings. Mr Liristis has a dominating personality, while Mr Simmons does not. The defendant wanted more money. Mr Simmons' explanation that the increase was designed to cover the rates and taxes is feasible. This was never put to Mr Liristis in cross-examination. However, Mr Liristis' letter of 14 May 1996 refers to the need for a meeting to organise "outgoing payments". It does not refer to a desire to increase the rent.
50 The materials revealed that the land tax payable on the demised premises was:
1995 - $ 2650
1996 - $ 26501997 - $ 2905
1998 - $ 3855
$12,060
I have no figures for 1994. I was supplied with the 1999 figure of $4225. That is for the whole year. The 1999 land tax is levied on the land owned as at 31 December 1998. The 1999 assessment was issued on 18 March 1999 but was not payable until 1 July 1999 if paid in full. The lessee would at most only be liable for a proportion of the 1999 land tax, that is for 44 days out of 365 days. It seems that the claim of $14,912 for land tax made in the defendant's written submissions received on 18 June 1999 takes these adjustments into account. There has been no tender of the 1994 assessment but a schedule to the submissions states it was $2650.
51 A facsimile letter from the Sutherland Shire Council of 29 April 1999 reveals that the payment of council rates on the demised premises from 11 April 1999 to and including February 1994 totalled $13,753.60. A facsimile letter from Sydney Water reveals that payment of water rates on the demised premises from April 1994 to early 1996 totalled $2889.86. The total amount for outstanding outgoings was stated to be $31,557.46.
52 The defendant complained that the plaintiffs had permitted a large semi-trailer to be parked on the demised premises without its permission from time to time. Mr Parrott said that only the trailer, not the prime mover, was parked on the premises. Mr Simmons confirmed this. In his affidavit of 18 February 1999 Mr Simmons said that he was present when the truck driver approached Mr Liristis and said "Do you mind if I park my truck on your premises?" and Mr Liristis replied "No, go for your life, I don't mind". I regard this matter as minor and I am not able or prepared to make any finding other than that the trailer was on occasions in the December-January period parked on the premises. It is not a matter which received attention in argument.
53 The defendant further complained that the plaintiffs and Mr Simmons company had not observed the terms of the lease in that they had not kept the premises in good repair and that they had caused structural damage or allowed it to occur. Inter alia, the canopy had been allowed to deteriorate significantly (the paint was peeling), the toilet did not operate and the concrete areas surrounding the building had cracked and become damaged. Glass had been broken and live wires exposed. Mr Liristis stated that he had been unable to obtain quotes to remedy the damage as he had been very heavily committed in running other court proceedings. Mr Liristis stated that eventually he proposed to obtain full quotes and to commence proceedings for the breaches of covenant.
54 The plaintiffs submitted detailed figures asserting that the rent had been overpaid by $21,100.65. This was based on the rentals provided for in the leases. It did not include the increase to $1000 per week or the equivalent monthly increase from $3966.77 to $4333.33 as from February 1996. It did include a 5 per cent increase for the third, fourth and fifth years of the lease based on the lesser rent stipulated in the three year lease.
55 On the other hand the defendant asserted that the plaintiffs owed it $14,826.10. This was based on a rent of $1000 per week or $4333.33 per month. Reliance was placed by the defendant on the agreement made in mid-1996 to pay rental at the higher rate. Mr Simmons explained the increased payment as being to cover the outgoings and there is support for such a stand in the defendant’s letter of 14 May 1996. There did not appear to be any justification for the defendant to increase the rent which had been stipulated in the lease. Unless Mr Simmons is correct there would seem to be no consideration for the increased rent. The parties did not suggest that I should resolve these questions. The parties relied on the matters which they advanced as bearing upon the issues raised for decision and especially the exercise of the Court’s discretion as to the relief it would grant.
The Contractual and Legal Position
56 At the start of these proceedings including obtaining the ex parte orders mentioned earlier the plaintiffs contended that there had been an assignment of the lease from the original lessee to Mr Parrott. . After the hearing had been on foot for some time that submission was abandoned. The defendant had refused to consent to any assignment. It was next submitted that there had been a sub-lease from the original lessee to Mr Parrott but that submission was not pressed. It was submitted that the effect of the arrangement was that the original lessee, with the consent of the defendant-lessor, had granted a licence or sub-licence to Mr Parrott to conduct the automotive business in the premises with Mr Simmons continuing to attend at the premises on a part time basis. Mr Parrott was to pay the rent of the premises and to provide a bank guarantee. Mr Parrott probably did not have exclusive possession of the premises to the end of the lease although he took over and ran the business, paid the rent to the defendants and procured a bank guarantee for three months rent.
57 Consequent upon the details of the de-registration of the company being ascertained the plaintiffs submitted that on that date (23 October 1998) the company J & P Simmons Pty Ltd ceased to be a legal entity, and that the outstanding property of a dissolved company vests in the Australian Securities Commission and that accordingly the lease of 14 February 1996 between the defendant and the company was determined on 234 October 1998.
58 The plaintiffs submitted that following the determination of the lease either a statutory tenancy at will was created under s127 of the Conveyancing Act 1919 or a monthly periodical tenancy was created through the payment of rent.
59 Section 127(1) provides that no tenancy from year to year shall be implied by payment of rent; if there is a tenancy and no agreement as to its duration then such tenancy shall be deemed to be a tenancy determinable at the will of either of the parties by one month’s notice in writing expiring at any time.
60 In Burnham v Carroll Musgrove Theatres Ltd & Victoria Arcade 1928 28 SR 160 at 170-171 Ferguson J with whom Harvey CJ in Eq and Campbell J agreed quoted with approval the judgment of Atkin LJ in Cole v Kelly ([1920] 2 KB at 132). Ferguson J said:
“After quoting a passage from the judgment of Swinfen Eady LJ, stating that ‘where the tenants hold over after the expiration of a term, and the facts do not exclude an implied agreement to hold upon the terms of the old lease, then the law determines that they impliedly hold subject to all the covenants in the lease which are applicable to the new situation,’ Atkin LJ, said
‘I think that that rule applies wherever there has been a holding over, the law being … that a holding over with the consent of the landlord prima facie gives rise to a tenancy at will which by subsequent payment of rent may be converted into a tenancy from year to year: or the parties may by their acts or by agreement convert their tenancy at will into a tenancy of a more fixed duration, as a weekly, or a monthly or a yearly tenancy. But in all those cases, unless there is something to contradict the view that the tenant will continue to hold the terms of the old tenancy, then those terms so far as they are applicable to the new situation, will apply.’Sect 127 of the Conveyancing Act … was intended to prevent the implication of a tenancy from year to year from the payment of rent, and to substitute for such implied tenancy a tenancy determinable by a month’s notice. It was never intended to apply to cases where before the Act no implication of a tenancy from year to year would have arisen.”
61 That decision was affirmed by a majority (Knox CJ, Gavan Duffy and Powers JJ) of the High Court with the reasons of Ferguson J being substantially adopted ([1928] 41 CLR 540). Higgins J, who delivered a separate judgment in which he followed the reasons of Atkin LJ, commented at 565:
“The result was that if a landlord allowed a tenant whose term had expired to pay him any rent, he could not get rid of the tenant without a full six months’ notice expiring with some year of the implied tenancy from year to year. The section undoubtedly reduces the length of that notice from six months … to one month …’
He held that the section did not increase the length of notice where there was a weekly or other short tenancy, to one month.
62 The decision in Burnham was followed in Turner v York Motors (1951) 85 CLR 55. In a helpful passage at 90 Kitto J, with whom Webb J agreed, said::“In my opinion the implication of law from the payment and acceptance of rent is that a periodic tenancy was created (cf Bishop v Howard). If that implied tenancy would have been a tenancy from year to year apart from s.127(1) of the Conveyancing Act, that section would have operated to make it a tenancy at will determinable by one month’s notice expiring at any time. But there was nothing from which a yearly tenancy could be implied at common law. On the contrary, the rent being reserved and paid at a weekly rate, and later at a monthly rate, the implication of the law is that the tenancy was first a weekly and then a monthly tenancy. A letting without any agreement as to a period, followed by entry and payment of rent, does not result in a yearly tenancy unless the rent is reserved by reference to a year or an aliquot part of a year (Richardson v Langridge; Moore v Dimond; Anthony v Stanton; Willshire v Dalton); and in the statement of this rule a rent reserved by reference to an aliquot part of a year means a rent which is a yearly rent though payable at intervals constituting aliquot parts of a year. Halsbury Laws of England, 2nd ed, vol 20, p126, note.”
63 The present case has some unusual features. The lessor was not aware of the lessee being de-registered. It would not accept Mr Parrott as the tenant. It was, however, prepared to accept payment of the monthly rental instalments from him. The lessor was not only prepared to accept the bank guarantee provided by Mr Parrott but sought and received payment under it from the bank upon demand. An assignment of the lease had not taken place. The subsequent regular payments of rent by Mr Parrott for the balance of the term suggest that the lessor’s consent may have been unreasonably withheld especially with the bank guarantees of Mr Simmons and Mr Parrott. This issue was not litigated before me and I express no opinion upon it.
64 Apart from asserting that there was no assignment the defendant did not in its oral and written submissions address the question as to the precise nature of the legal relationship between the defendant and Mr Parrott.
65 In Dockrill v Cavanagh 62 WN (NSW) 94 the Full Court reviewed the law as to leaseholds in England and New South Wales. Jordan CJ in delivering the judgment of the Court said:
“Leases are thus of three types, leases for fixed terms, leases at will, and leases creating periodic tenancies. The first terminates at the expiration of the term. A lease at will is terminable by either party at any time, and no period of notice is necessary unless the conditions of the lease require it.”
66 Higgins J in Burnham at 565 referred with approval to the comment of Chambre J in Richardson v Langridge (1811) 4 Taunt 128 at 132 that “the Courts have a great inclination to make every tenancy a holding from year to year, if they can find any foundation for it”. Section 127 of the Conveyancing Act 1919 was designed to overcome that inclination.
67 In Dockrill Jordan CJ at p98 summed up the position as to leases in New South Wales as to land under old system title and under the Real Property Act. Inter alia, he said:
“…Whenever a lease is intended whatever its period and is not otherwise validly created a lease at will, terminable by a month’s notice, may arise at common law inter partes by the conbined operation of s.127 and the implication of law arising from possession and payment of rent.”
68 The instant case presents some difficulties. While the defendant was not aware that the lessee company of J & P Simmons Pty Ltd had been deregistered as a defunct company it was aware from at least late 1997 that Mr Parrott was in occupation of the premises and running and conducting the business and had taken it over and that Mr Parrott was paying the rent which the defendant accepted. This was reinforced when Mr Parrott spoke to Mr Liristis in January 1998 and he told Mr Parrott not to worry about the 5 per cent CPI increase. Mr Liristis was content to proceed on the basis of Mr Parrott paying the rent as long as he continued to pay it monthly in advance. What galvanised Mr Liristis into action was the intelligence he received that Mr Simmons was not going to renew the lease and that Mr Parrott was going to transfer the business. At that stage he took steps to ensure that Mr Parrott delivered the bank guarantee in the amount of three months rent.
69 Mr Parrott at all times believed that the lease was on foot and that it governed the terms of occupancy of the demised premises., It probably did not occur to Mr Simmons that the de-registration of the company brought the lease to an end. The defendant was unaware of the de-registration of the lessee and was unaware that as a result the lease had come to an end until after the institution of these proceedings. It never intended to grant a lease to Mr Parrott. Notwithstanding the occupation of the premises by Mr Parrott the payment and acceptance of rent and obtaining delivery of the guarantee, it is not possible to infer any type of tenancy between the defendant and Mr Parrott given the landlord’s stated intention and the reluctant resignation of Mr Simmons and Mr Parrott to the fact that the defendant would not assign the lease. Neither Mr Simmons nor Mr Parrott should be in a stronger position because Mr Simmons, somewhat remarkably and probably wrongly caused his company to be de-registered when it had outstanding obligations and liabilities under the lease., Mr Simmons thought that once Mr Parrott paid the rent and the defendant accepted it his company had no further obligations.
70 This is not a case where the acts of the defendant in accepting rental payment from Mr Parrott and procuring the delivery of the bank guarantee and its knowledge that Mr Parrott was in occupation of the site should prevail over its stated intention not to assign the lease and accept Mr Parrott as lessee. The defendant did not know all the facts.
71 The correct position is that Mr Parrott remained a licensee of the premises. He had originally been the licensee of the lessee with the approval of the defendant. As a result of the de-registration of the lessee, the continuing payments accepted by the defendant and his possession of the premises Mr Parrott became the licensee of the defendant. The licence was on the same conditions as the lease. It would be anomalous to hold that Mr Parrott had upgraded his position to lessee.
72 On the materials available to this court it appears that at no stage prior to the institution of these proceedings did the defendant demand that the lessee pay the rates and taxes nor did the defendant ever advise the lessee or Mr Parrott of the amount of these. Indeed the letters from Sutherland Shire Council and Sydney Water specifying the amounts of council rates and water rates respectively on the demised premises bore date 27 April 1999. The majority of the details of the land tax amounts were provided on 4 May 1999. The plaintiffs depended on the defendant supplying the details. This leaves open the question whether the increase in the monthly payments in mid-1996 was designed to cover the payment of outgoings as hinted in the defendant’s letter of 14 May 1996. The evidence does not establish a breach of the covenant to pay rates and taxes on demand as at 19-20 January 1999. Nor has the breach of the other covenants been established. As at 19-20 January 1999 the “rent” or “licence fee” had been paid up to 13 February 1999. I have accepted that the defendant, via Mr Liristis, had told Mr Parrott not to worry about the 5 per cent increase due as from 14 February 1998 and, at least, up to 19-20 January 1999,, that continued to be the position.
73 The defendant was not entitled to call on either bank guarantee as at 19 January 1999. If it was going to seek to enforce the provision entitling it to an increase of 5 per cent in the rent it was bound , having given Messrs Simmons and Parrott to understand that it was not being pressed to give notice of its demand or requirement. There was no entitlement under the lease to $1000 per week for rent or $4333.33 per month for rent or subsequently, for a licence fee in that amount. I have earlier dealt with the other alleged breaches of covenant.
74 The defendant submitted that even if it were to be concluded that it was not entitled to demand and receive payment under the guarantees the court would not order the defendant to pay the moneys so received but would instead reinstate the guarantees. The defendant contended that it should not be placed in the position of having no moneys readily available to cover its claims. The defendant submitted that a court of equity would not grant the relief sought as Mr Parrott had sought and gained the benefit of the occupation of the premises.
75 The guarantee given by the lessee cannot be reinstituted as it has been de-registered. I do not think that either guarantee should be reinstated. The lease has come to an end with the rent being paid in full and the defendant regaining control prior to the end of the term. There are disputes between the parties with the defendant making some doubtful claims. I feel no confidence that the guarantees would not be called upon again incorrectly. There is no evidence as to the attitude of the bank. The better course is to require the defendant to repay the amounts received under the guarantees and to leave the parties to their rights against each other.
76 As to the claim of the plaintiffs for a refund of the amount paid for the period 19 January 1999 to 13 February 1999 this claim should not succeed. By 19 January 1999 Mr Parrott had moved most of his equipment out of the demised premises and set up his business at an alternate site. I reject the submission that Mr Parrott had abandoned the premises. He removed the remainder out by 9am on Monday 25 January 1999 pursuant to an agreed arrangement. From that day the defendant was in sole control of the demised premises. It appears that Mr Parrott suffered no loss other than the costs of these proceedings.
77 It would be incorrect to grant any relief other than the following orders which I make, namely:
(a) that the defendant pay to the plaintiffs the sum of $19,933.32 apportioned as to $6933.33 to the first plaintiff and $12,999.99 as to the second plaintiff with interest from 19 January 1999 pursuant to s94 of the Supreme Court Act;
(b) that the defendant pay the costs of the plaintiffs of these proceedings.
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