Skydale v Maher
[2000] NSWSC 644
•6 July 2000
CITATION: Skydale v Maher [2000] NSWSC 644 CURRENT JURISDICTION: Common Law FILE NUMBER(S): SC 10557/00 HEARING DATE(S): 26-27 June 2000 JUDGMENT DATE: 6 July 2000 PARTIES :
Skydale Pty Limited
(Plaintiff)
v
Thomas Frederick Maher
(Defendant)JUDGMENT OF: Davies AJ
COUNSEL : P: Mr D M Flaherty
D: Mr C F HodgsonSOLICITORS: P: Grahams
D: RockliffsCATCHWORDS: Possession - whether lease forfeited - whether rent and moneys unpaid - whether demand for payment LEGISLATION CITED: Local Government Act 1993, s 569 DECISION: See paragraph 37
IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISIONDAVIES AJ
6 JULY 2000
10557/00 - SKYDALE PTY LIMITED v Thomas Frederick MAHERJUDGMENT1 HIS HONOUR: Skydale Pty Limited ("Skydale") is the owner and lessor of a motel known as the Lismore City Motor Inn ("the motel"). Thomas Frederick Maher, the trustee of the Lismore City Motor Inn Trust is the lessee of the motel. Skydale claims that, by service of the statement of claim on 17 March 2000, it forfeited the lease for non-payment of moneys. Skydale seeks, inter alia, judgment for possession.
2 Although the lease commenced only recently, 1 July 1999, the case is complicated by the fact that there was a prior lease when Mr Maher was conducting the motel in his capacity as trustee of the Shields Family Trust and even earlier when Gail Shields was trustee of the Shields Family Trust. There was no accounting as of the end of one tenancy and the commencement of another. Claims later made on Mr Maher included moneys said to be outstanding in respect of the earlier tenancies. This defect was carried through to some extent in the statement of claim. Moreover, Mr Maher made payments haphazardly, without keeping records which attributed his payments to specific obligations. Accordingly, it has been difficult to work out what became due and what was paid under the subject lease.
3 As the statement of claim claims that the lease was forfeited on the day of its service, 17 March 2000, for non-payment of rent and other moneys due under the lease, it is the monetary obligations due under the lease as at that date with which we are concerned. The forfeiture clause provided as follows:4 The lease provided for two elements of rent, a minimum rent and a reimbursement rent. The minimum rent of $12,532 per month was described in the first schedule to the lease in these terms:
"9.1 In the event that:-
(a) Any rent or other moneys payable under the Lease shall remain unpaid for fourteen (14) days next after the date appointed for payment thereof (although no formal or legal demand shall have been made therefore); …
…
THEN without prejudice to any action or other remedy which the Lessor has or might or otherwise could have for arrears of rent or breach of covenant or for damages as a result of any such event the Lessor at time or times thereafter shall have the right to re-enter into and upon the demised premises and to repossess and enjoy the same as of its former estate anything herein contained to the contrary notwithstanding and furthermore upon re-entry, the Lessor shall have the right to recover from the Lessee damages as compensation for the loss sustained as a result of the failure of the Lessee to pay rent or other moneys payable under this Lease and observe and carry out other covenants of this Lease for the period commencing from the date on which the right of re-entry is exercised and terminating on the date on which, but for the exercise of the right of re-entry, the term of the Lease will otherwise expire and upon re-entry the Lessor shall be freed and discharged from any action, claim or demand by or obligation to the Lessee under or by virtue of this Lease."
5 Clause 2.1 of the lease provided as follows:
"A. MINIMUM RENT
The Lessee will during the first year pay the minimum rent of One Hundred and Fifty Thousand Three Hundred and Eighty Four Dollars ($150,384.00) by equal installments of Twelve Thousand Five Hundred and Thirty Two Dollars ($12,532.00) per month."
There was a provision for annual adjustments which I need not set out.
"2.1 The Lessee will during the term pay to the Lessor free of all deductions in each year the rent and other payments (if any) specified calculated and payable in the manner provided in the first schedule hereto."6 The lease did not specify whether the rent was payable in advance or at the end of each month. Rent is payable at the end of the period unless the lease provides otherwise, either expressly or by implication. It has not been alleged that there was implication to be drawn from the lease, any oral agreement or that any past practice would justify a finding that the rent was payable in advance. Reliance has been placed upon the fact that, in an affidavit of 25 May 2000, Mr Maher deposed, in paragraph 2, that the amount of rent due for the period 1 July 1999 to 31 March 2000 was nine months at $12,532 per month. However, this statement did not constitute an admission that rent was payable in advance, although that may have been intended.
7 The minimum rent payable by 17 March 2000 was therefore eight months at $12,532 per month, a total of $100,256. It is not in dispute that at least $91,282.35 of this sum was paid by Mr Maher.
8 There is an issue as to whether a payment of $11,300 made to a director of Skydale, Mr William Jooste, on 21 October 1999, was a payment of rent. The bank account of Mr Jooste and his wife was used for Skydale's purposes.
9 The evidence of Mr Maher and of his employees, Mr Victor Lye and Ms Gail Lye, was that, on the morning of 21 October 1999, Mr Jooste rang the motel, spoke to Mr Lye and said that he was going overseas and needed money. Mr Lye was then informed by Ms Lye that Mr Maher's overdraft account was $10,000 - $11,000 in credit. He reminded Mr Jooste of moneys that Mr Maher had spent on repairs of the motel and said:
"Vic: 'Listen Bill if I put $11,000.00 for rent in advance in your account today and you can put the $11,000.00 back towards the repair work in the building then I'll get another $5,000.00 for you to go away'.…
Bill: 'You will have to bank it into my bank first because they wont let me draw unless I get some money in'."
Mr Maher gave evidence that, having been informed of this arrangement, he paid the cheque of $11,300 into Mr Jooste's account.
10 Mr Jooste's evidence was that, on 21 October 1999, he was informed that the motel needed some clear moneys in the motel's credit union account and that Mr Maher could not obtain the moneys as his bank in Lismore was closed that day. Mr Jooste was informed that if he could arrange to put clear moneys into this account, Mr Maher would give him a return cheque. Mr Jooste said that he travelled to Tweed Heads in New South Wales where he obtained a bank cheque from his own bank. He paid this cheque into a branch of the credit union in Tweed Heads to Mr Maher's credit. On the same day, Mr Maher's cheque for $11,300 was paid into Mr Jooste's account. The extra $300 was paid for his troubles.
11 Notwithstanding that on this issue there was only one witness for the plaintiff and three witnesses for the defendant, I am satisfied that Mr Jooste's evidence should be accepted. In general, Mr Jooste gave his evidence in a straightforward, honest way. The witnesses for the defendant, Mr Maher, Mr Lye and Ms Lye, seemed to me to be less reliable. The basic facts of the case support Mr Jooste's version of events. The motel was having financial difficulties. Some cheques had been dishonoured. Mr Maher's overdraft account was not in credit but had a debit of $49,625.52. Relevant statements of account accord with Mr Jooste's version. There were outgoings on the credit union account on that day which could not have been met but for the payment in of the bank cheque for $11,000. Moreover, the additional payment of $300 to Mr Jooste appears to have been a recompense for his troubles and risk. There is no other probable explanation for the cheque of $11,300. Mr Maher's version that the $11,300 was just an overpayment on his part is improbable.
12 Another significant factor is that it is highly improbable that the $11,000 was a reimbursement for repairs to the motel. There is presently a dispute between the parties about such expenditure. Mr Jooste takes the view that repairs are the responsibility of the lessee. The claim made by the defendant concerns many items of expenditure. A letter from Mr Maher of 18 August 1999 mentioned well over $100,000 as having been spent by that stage. There is nothing to suggest that the figure of $11,000 was related to any particular work done on the motel. There is no written record or account or receipt attributing the $11,000 to work carried out on the motel. In any event, if that had been the only point, the two sums could have been offset by arrangement without any cheques passing. It is improbable that Mr Jooste would have paid the $11,000 for that purpose without there being a written record of it. The probable explanation for the payment by Mr Jooste of $11,000 by bank cheque into the motel's credit union account is that the motel needed the funds on that day. The cheque for $11,300 was a return cheque adding $300 for the service.
13 Counsel for Mr Maher has relied upon telephone records which have been placed in evidence. These records show that there were a number of calls on 21 October 1999 between Mr Jooste's mobile phone and the motel's phone. The first call recorded was a call by Mr Jooste. However, Mr Jooste's explanation of the calls recorded on his mobile phone are that he had to make inquiries, first as to where he had to go and then as to bank account numbers and the like. This explanation is as probable as any other explanation for the calls.
14 For these reasons, I am satisfied that Mr Maher's cheque for $11,300 on 21 October 1999 was not a payment of rent.
15 The next issue arises under s 569(1)(a) of the Local Government Act, 1993 which provides, inter alia:16 On 8 February 2000, the Council served the following notice on the motel:
(1) A council may serve on an occupier of land a notice of the amount of any rate or charge unpaid in respect of the land or of the amount of any judgment given against a person for any rate or charge unpaid in respect of the land, if the person liable to pay the rate or charge:
(a) is resident outside New South Wales, …
"In accordance with Section 569(1)(a) of the Local Government Act 1993, you are hereby advised that you are required to pay to Lismore City Council, on a weekly basis, commencing Friday, February 11, 2000, the amount of rental you are required to pay to Skydale Pty Ltd until the amount of $25,896 is paid."
Of the sum of $25,896, less than $10,000 was due in respect of the period commencing 1 July 1999.
17 Details received from the Lismore City Council show that, on 2 March 2000, an amount of $2,901.65 was paid in respect of rates and that, on 6 March 2000, a further sum of $2,900 was paid in respect of rates. It is not in dispute that these sums were paid by Mr Maher. Information received from the Council shows that, from 24 December 1999, a further seven cheques, which were paid by Mr Maher to the Council, were dishonoured. A statement received from the Council shows that, on 10 March 2000, the sum of $2,891.63 was paid by Mr Maher in respect of water rates. Mr Maher has claimed the total of these three sums, $8,693.28, as payment of rent by virtue of the operation of s 569(1)(a) of the Local Government Act.
18 A problem that I have with this claim is that Mr Maher had a liability in respect of rates under his obligation to pay reimbursement rent, an obligation which I shall later describe in more detail. It can be inferred from the correspondence which has passed between the parties that he had a similar obligation under his preceding lease. The only evidence we have as to these particular payments is that they were shown as credits by the Council. There is nothing to show that the sums were paid in accordance with the notice or whether they should be related to the rates arising during the preceding lease. In the circumstances, I am not satisfied that these payments were a deduction from the minimum rent due under the current lease.
19 A like issue arises as to various sums that were paid by Mr Maher for water rates. These sums were paid between 13 August 1999 and 24 November 1999. Again, the only evidence about them is a document emanating from the Council. It has been submitted on behalf of Mr Maher that sums totalling $1,500 should be taken off the rent due under the current lease. However, there is simply no evidence to indicate that these sums were paid in respect of current rent. The arrears and interest due as at 1 July 1999 totalled $3,106.23. It is highly probable that the payments were paid and received in respect of those arrears.
20 The next issue arises with respect to American Express payments. Ms Lye, who was the account's clerk at the motel, gave evidence of the following conversation with Mr Jooste:
"He 'The bank's on my back. I want to refinance but they're not seeing enough cash flow through my account'.
I 'What if we give you all the Amex for rent, they'll dribble in every couple of days. I'll give you photocopies of the charge summary and whatever is on the charge summary will come off Tom's rent'.
He 'That's fine by me, it'll keep my bank happy to see movement through the account.' "21 In his affidavit, Mr Jooste said that he received sums totalling $3,227.21 by way of American Express payments. His bank records were placed in evidence supporting that amount. In his oral evidence, Mr Jooste denied that he had a conversation with Ms Lye in which he had agreed that whatever was stated on the charge summary, as distinct from whatever was paid into his account, would come off the rent.
22 I accept Mr Jooste's evidence. The arrangement which Ms Lye made with American Express was that the sums received from the processing of payments made to the motel by the use of American Express cards would be paid into Mr Jooste's bank account; but of course those amounts were less than the amounts charged to the customers. American Express imposed its own charge upon the retailer, that is the motel. It seems to me to be improbable that Mr Jooste would have agreed to accept, as a contra against the rent, the amounts which the motel had charged to its customers as distinct from the net amounts which the motel would otherwise have received from the transactions. I accept Mr Jooste's evidence in this respect.
23 There is also a difference between the payments which were recorded in Skydale's account and the number of transactions which Ms Lye expected to flow through to payments into that account. In this respect, I accept Mr Jooste's bank statements. In the light of those accounts, it seems to me that there is an onus upon the motel to prove that further payments were made to Mr Jooste. The motel and its financier have the information as to payments which were not recorded in Mr Jooste's bank statements.
24 I turn now to the issue of reimbursement rent. The lease provided, inter alia:25 The obligation was to pay within 21 days of the receipt by the lessee of demand for payment. Clause 10.7 of the lease provided:
"REIMBURSEMENT RENT
In addition to the minimum rent hereinbefore provided the Lessee shall in respect of each year or part of a year of the Lease reimburse and pay to the Lessor as additional rent (hereinafter called the 'reimbursement rent') One hundred per cent (100%) of all rates and taxes (including land tax at the rate payable by the Lessor limited to the amount the Lessor would pay if the demised premises were the only premises owned by the Lessor) charges, assessments, rents, duties and fees of any public municipal governmental or semi-governmental body, authority or department levied, assessed or charged in respect of the property of which the demised premises form part. The Lessee shall pay such reimbursement rent within twenty one (21) days of the receipt by the Lessee from the Lessor of demand for payment of such reimbursement rent of any particular part thereof …"
"All demands requisitions consents elections or notices shall be in writing and may be given to or served upon a party to the Lease by being left at the party's registered office or principal place of business in the State or place in which the demised premises are situated or by being posted in a prepaid certified or registered letter addressed to that party at such office or principal place of business AND any such demand requisition consent election or notice shall be deemed duly served at the expiration of three (3) days after the time of posting AND in proving the giving of the same it shall be sufficient to prove the envelope containing the same was properly addressed stamped and registered and put into a post office box in the Commonwealth of Australia. Any demand requisition consent election or notice may be signed by the Lessor or its Solicitor."26 Mr Jooste gave evidence that it was his practice each month to forward a statement to the motel setting out the amount due and that it was also his practice, when he received the rates or land tax notice, to fax a copy of that to the motel and to post the original or a copy to the motel. Whether or not a statement was sent every month, it was agreed by Mr Lye that, from time to time, he received rent statements from Mr Jooste. I think it is probable that whenever a rates or land tax notice was served on Skydale, Mr Jooste would fax a copy to the motel, for it is clear that he was expecting Mr Maher to attend to those accounts, and that Mr Maher regularly sent cheques to the Council, although many of them were dishonoured. I also accept Mr Jooste's evidence that he usually posted the original of a rate notice to the motel. Mr Maher, in his affidavit, deposed that the Council's rate notice of 31 July 1999 was faxed to him by Mr Jooste on 3 August 1999. This showed $29,126.89 payable for the year by four instalments. The instalments due by 17 March 2000 amounted to $24,940.89.
27 I am satisfied that, by faxing and posting the rates and land tax notices or copies thereof to Mr Maher, Mr Jooste made a demand on him which satisfied the definition of reimbursement rent and also the requirements of the demand as set out in clause 10.7. That is because both parties understood the action to be a demand that the motel should pay the amount due in accordance with the rate or land tax notice. I am satisfied also that the rent statements sent by Mr Jooste to Mr Maher constituted such a demand.
28 The material before the Court shows that Mr Maher made many payments in relation to the rates, some payments being made by cheques which were later dishonoured. He understood that he had been requested to pay the amounts due and he sought to comply so far as his financial circumstances permitted.
29 It is true that the demands included moneys due under both the current lease and the prior tenancies. Nevertheless, the amounts in respect of which payment was sought were made clear. One of the statements is in evidence, Exhibit 1. It contains a detailed breakdown of the amount sought. A demand is not invalid merely because it contains an error or because it demands more than is due.
30 I am satisfied that Skydale made a demand for the payment of the 1999/2000 rates due to the Council. That rate notice showed that the amount of $16,568.89 was due on 31 August 1999, $4,186 was due on 30 November 1999 and $4,186 was due on 29 February 2000. I need not set out the amount of the fourth instalment or the details given with respect to arrears and interest. I consider that it is probable that demand was made for the land tax of $4,571 for the year 2000, notwithstanding Mr Lye's denial that he had ever seen a copy of that Land Tax Assessment or a demand for payment thereof prior to 17 March 2000. It appears the accounts for the water rates went directly to the motel. No demand appears to have been made by Skydale in respect of them.
31 The plaintiff's claim includes sums of interest on unpaid rent and the sums charged by the Council in respect of dishonoured cheques. It appears to me that these are not sums which form part of reimbursement rent or which are otherwise moneys due under the lease.
32 It has been proved that the costs of the preparation of the lease were $1,511 and that Mr Maher was responsible to pay those costs in accordance with clause 10.5 of the lease.
33 Accordingly, I am satisfied that, for the period prior to 17 March 2000, Mr Maher became liable for eight months' minimum rent totalling $100,256, reimbursement rent constituted by rates of $24,940.89, land tax of $4,571 and legal costs of the lease of $1,511.
34 I am satisfied that there was a shortfall of payments of monthly rent at $8,973.65 and that the legal costs were not paid. I am also satisfied that there was a substantial shortfall of the sums due in respect of rates and land tax. Indeed, I am not satisfied that any sums were paid by Mr Maher in respect of those items, as distinct from arrears arising under prior tenancies. However, it is not necessary to make a final ruling on that point at the present time. The matter can no doubt be left for final accounting, if that becomes necessary.
35 I should comment generally that I have not been satisfied of the veracity of the defendant's witnesses. It is clear that Mr Maher has encountered financial difficulties. Many of his cheques were dishonoured and he has adopted stratagems in an endeavour to overcome them. He used the credit card of a maintenance man, Mr Freeborn, and rapidly ran up debts of over $70,000 on that facility during Mr Freeborn's absence. His own credit card facility was cancelled. He now uses Ms Lye's bank account for the payment in of the motel's income. He is in a desperate financial position. His affairs are not in order. Mr Lye and Ms Lye are also involved, to some extent, in Mr Maher's affairs. On the evidence, they are merely Mr Maher's employees. But obviously, Ms Lye, at least, is assisting him to carry on business. I consider that Mr Lye and Ms Lye have reasons for keeping Mr Maher afloat. In general, I thought that the evidence of Mr Maher, Mr Lye and Ms Lye was unsatisfactory.
36 In the circumstances, I am satisfied that Skydale is entitled to an order for possession, subject to the establishment of the matters raised in the cross-claim, that is the defendant's entitlement to a set-off of sums paid on the repair of the motel and his claim for relief against forfeiture.
37 I shall make no formal orders but I will adjourn the matter for determination of the outstanding points.
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