Solomon v Dr Singh
[2004] NSWADT 264
•11/18/2004
CITATION: Solomon & Ors v Dr Singh & Anor [2004] NSWADT 264 DIVISION: Retail Leases Division PARTIES: APPLICANT
Isaac Solomon, Sarah Cooper and Elizabeth Oxman
RESPONDENT
Dr Raghubir Singh and Dr Suman SoodFILE NUMBER: 035094 HEARING DATES: 25/10/2004 SUBMISSIONS CLOSED: 10/25/2004 DATE OF DECISION:
11/18/2004BEFORE: Higgins S - Judicial Member APPLICATION: Jurisdiction MATTER FOR DECISION: Preliminary matter LEGISLATION CITED: Retail Leases Act 1994 CASES CITED: Electronic Industries Ltd v David Jones Pty Ltd (1954) 91 CLR 288
Tallerman & Co Pty Ltd v Nathan’s Merchandise (Vic) Pty Ltd (1956) 98 CLR 93
Walker v Bowry (1925) 35 CLR 48REPRESENTATION: APPLICANT
S Bell, counsel
RESPONDENT
M Watts, counselORDERS: 1.Dr Singh’s application is dismissed; 2.Matter set down for further directions at 10.30 am on 2 December 2004
1 This is an application by the first respondent, Dr Singh, seeking orders that the substantive application of the applicants, Mr Solomon, Ms Cooper and Ms Oxman, be dismissed. The basis of the application is the fact that the applicants entered into a deed of release with the second respondent, Dr Sood, on or about 9 June 2004.
2 In light of Dr Singh’s application, which would dispose of the proceedings if his application were successful, this application was set down for hearing on 25 October 2004 as a preliminary matter for determination.
3 The applicants are owners of premises known as Shop T12 at the Eagle Vale Market Place shopping centre (“the premises”). Dr Sing and Dr Sood were former directors of Maxicare Family Clinics Pty Limited (“Maxicare”) and SS Medical Pty Limited (“SS Medical”) who were the joint lessee of these premises from 4 May 1998 to about 31 July 2002. Dr Sing and Dr Sood were guarantors for the obligations of Maxicare and SS Medical under the lease.
4 Maxicare and SS Medical became lessees of the premises pursuant to a Deed of transfer. The original lessee being Maxicare, who had executed a lease on or about 5 September 2000 with Woolworths Properties Pty Limited, the then owner of the premises. This original lease was registered (Registered Lease no.0937276) and provided that the lease commenced on 5 September 1995 and was to end on 4 September 2000 (“the registered lease”).
The Registered lease
5 Clause 27 of the registered lease made provision for a guarantee and indemnity.
6 The guarantor was defined in clause 1.1 to mean “the person named in Item 16”. The persons named in Item 16 were Dr Singh, Dr S. Magad, Dr H. Gobran and Dr S. Francis.
7 Clause 27 of the registered lease, so far as is relevant, provides as follows:
- “ 27. GUARANTEE AND INDEMNITY
27.1 The Guarantor agrees to guarantee the following to the Landlord:
- (a) the payment of all monies agreed to be paid by the Tenant to the landlord in this or in any extension or renewal of this lease; and
(b) the timely performance and observance of all obligations of the Tenant contained or implied in this or in any extension or renewal of this lease”.
27.3 The rights of the Landlord under this Clause 27 remain fully enforceable and the liability of the Guarantor under this Clause 27 will not be affected even if one or more of the following occur:
- (a) ...
(b) any release of the Tenant or the Guarantor, whether in whole or in part, or any compromise with the tenant or the guarantor;
(c) any variation, extension or renewal of this lease or any holding over of the Term or other continued occupation of the Premises by the Tenant;
(d) any composition, compromise, release, discharge, arrangement, abandonment, waiver, variation, relinquishment or renewal of any security or right by the Landlord,
(f) any termination or determination of this or any extension or renewal of this lease,
…
- (a) …
(b) in the event that this lease is transferred or assigned by the Landlord to any person, the benefit of this Clause 27 will extend to the transferee or assignee and the benefit of this Clause will continue to ensure concurrently for the benefit of the Landlord irrespective of any transfer or assignment”.
8 On 19 February 1996, Woolworths sold the premises to the applicants.
1998 Deed
9 On or about 4 May 1998 the parties agreed to vary the registered lease agreement by extending the term of that lease for a further 5 years, to September 2005. As mentioned above, at the same time, SS Medical became a joint tenant, with Maxicare, of the premises. Dr Sood also became a guarantor at this time.
10 The 4 May 1998 agreement was evidenced in two documents, a Variation of Lease and a Deed (“1998 Deed”).
11 The 1998 Deed was made between the applicants (as lessors), Maxicare (as transferor), SS Medical and Maxicare (as transferees), Dr Amgad, Dr Gobran and Dr Francis (as outgoing guarantors) and Dr Singh and Dr Sood (as continuing guarantors). This Deed, so far as is relevant, provided as follows:
- “ RECITALS:
A. By lease registered No 0937276 …
…
D. The Outgoing Guarantors have agreed to guarantee the lease to the date hereinafter set forth and the Continuing Guarantors will continue to be bound for the duration of the lease.
THIS DEED WITNESSETH:
….
4. The transfer of the lease by the Transferor to the Transferees shall not prejudice the rights of the Lessors against the Transferor and the Outgoing Guarantors under the terms of the lease PROVIDED HOWEVER that the Transferor and Outgoing Guarantors are released from all of their obligations (if any) referable to the extended portion of the term of the lease from 5 September 2000 until expiry of the extended term.
5. The Continuing Guarantors do acknowledge that they are respectively directors of SS Medical Pty Ltd and Maxicare Medical Clinics Pty Ltd and their guarantee of the lease shall be continuing and shall extend to the expiry of the term of the lease as varied by this deed and by a variation of lease of even date.
…
10. (a) Any covenant in this deed on the part of two or more persons shall be seen to bind them jointly and severally.
(b) The terms the ‘Lessors’, ‘Transferor’, ‘Transferees’, ‘Outgoing Guarantors’ and ‘Continuing Guarantors’ include the successors, assigns and executors (if applicable) of those parties”.
12 The lease was terminated in 2002 upon the appointment of a receiver to take over the affairs of Maxicare and SS Medical.
13 On 26 August 2003, the applicants commenced proceedings, in the Tribunal, against Dr Singh and Dr Sood.
Deed of Release
14 As mentioned above, on or about 9 June 2004, the applicants, and Dr Sood executed a Deed of Release (“the Deed of Release”). That Deed provided as follows:
- “ RECITALS
…
J The Landlord and Dr Sood have reached agreement to settle all matters in dispute on the terms set out in this Deed.
IT IS AGREED:
1. INTERPRETATION
…
- …
- “ Claims ” include all present and future actions, complaints, causes of action, arbitrations, debts, costs, claims, demands, verdicts and judgments is at law or in equity or arising under a statute or under any award, enterprise agreement or any other instrument made or approved under any law.
“Dr Singh” means Raghudir Singh.
“Dr Sood” means Suman Sood.
“Guarantors” means Dr Sood and Dr Singh jointly and severally.
“Landlord” means Isaac Solomon, Sarah Cooper and Elizabeth Oxman.
“Lease” means the lease of the shop by the Lessee and guaranteed by the Guarantors.
“Legal proceedings” means the proceedings instituted in the Administrative Decisions Tribunal of New South Wales numbered 35094 of 2003 or any other legal proceedings instituted by the Landlord against the Guarantors I respect to the Lease.
…
3.1 On the date of this deed, the Landlord forever releases Dr Sood from all Claims in respect to the Lease, Guarantee, and the matters referred to in the recitals hereof.
3.2 …
3.3 The parties agree that it is a condition of this deed that if Dr Sood fails to assist the Landlord in accordance with Clause 3.2 hereof or make an instalment in accordance with Clause 4.1.2 hereof, then the Landlord may immediately terminate this deed and seek to recover from Dr Sood the full amount of loss and damage as claimed against the Guarantors in the Legal Proceedings”.
15 Clause 3.2 of the Deed of Release set out the nature of the assistance that Dr Sood would give to the applicants in the proceedings before the Tribunal. This included appearing, at no cost to the applicants, as a witness in the applicant’s proceedings before the Tribunal.
16 Clause 4 of the Deed of Release provided that Dr Sood was to pay the applicants a sum of $13,350.00 on the date of the Deed and 16 monthly instalments of $100, commencing on 1 September 2004. It would appear that Dr Sood paid the $13,350.00 as required but she has only made one payment of $100.00 on 12 October 2004. On 25 October 2004, Mr Fesel, the applicants solicitor wrote to Dr Sood and advised her that as she had failed to comply with the terms of clause 4 of the Deed of Release and as a result the applicants had terminated the Deed.
Submissions of Dr Singh
17 Mr Watts, who appeared on behalf of Dr Singh, submitted that the terms of the guarantee given by Dr Singh and Dr Sood is that contained in the 1998 Deed and not those contained under the registered lease. That is, the terms of the guarantee were those set out in Recital D and clause 5 together with terms that would normally apply to such a contractual agreement (e.g. guaranteeing the rent). In this regard, he argued that the effect of clause 4 and 5 was that the outgoing guarantors liability did not extend beyond 4 September 2000 and the incoming guarantors liability continued until 4 September 2004.
18 The essence of Mr Watts’ argument was that the Variation of Lease Agreement brought into existence a new lease and the 1998 Deed brought into existence a new agreement of guarantee, which did not include the rights and obligations that had previously been agreed to between the outgoing guarantors and Woolworths under the registered lease.
19 In respect of the Deed of Release, Mr Watts submitted that Clause 3.3 of that document unequivocally released Dr Sood from all claims in respect to the lease. Accordingly, on the basis of the decision in Walker v Bowry (1925) 35 CLR 48, the applicants were prevented from seeking to continue to pursue their claim against Dr Singh.
The applicant’s submissions
20 Mr Bell, who appeared on behalf of the applicants, submitted that in construing the 1998 Deed, regard must also be had to the registered lease and the 1998 Lease Variation. In this regard, I understood Mr Bell to submit that on the proper construction of the 1998 Deed, it was clear that the parties intention was that Dr Singh’s obligations as a guarantor under the terms of the registered lease continued to apply. This meant that Dr Singh was bound by the provisions of clause 27.3, making the principles in Walker v Bowry (supra) in applicable. In the alternative, Mr Bell submitted that Clause 27.3 was a term that was implied into the 1998 Deed.
21 Finally, in the event the Tribunal were to find that Clause 27.3 did not apply, it was submitted that the Deed of Release was conditional and as those conditions had not been satisfied, there had in effect been no release of Dr Sood. In this regard he relied on an affidavit sworn by Christopher Fesel on 25 October 2004.
Reasons and Decision
22 The principles arising from Walker v Bowry (supra) were stated by Starke J at page 58 as follows:
- “…In the case of sureties the principle is that the joint suretyship is the ‘essential condition of the liability’ of each, or, as the Judicial Committee phrase it, ‘part of the consideration of the contract of each’ (reference to cases omitted.
… in releasing the judgment debt, the credit just as surely discharges the ‘joint suretyship’ and also the arrangement that both should be bound to the creditor as if he released all claims upon the guarantee itself. The creditor has broken the essential condition of liability of the other sureties and thereby discharged them”.
23 It is not disputed that clause 27.3(b) of the registered lease has the affect of overcoming the principles in Walker v Bowry (supra). Accordingly, the question is whether the 1998 Deed had the effect of creating a new agreement of guarantee that did not include this particular clause. For the reasons set out below, in my opinion, the terms of the 1998 Deed were such that this clause continued to apply in respect of Dr Singh’s obligations as a guarantor.
24 I will first deal with the 1998 Variation of Lease agreement. Although, in a technical sense, it might be argued that the variation of a contract necessarily replaces the existing contract with a new contract (see Tallerman & Co Pty Ltd v Nathan’s Merchandise (Vic) Pty Ltd (1956) 98 CLR 93 at 127-8 and 135) it is also generally accepted that a variation of a contract leaves the contract on foot while modifying the particulars of its performance (see Electronic Industries Ltd v David Jones Pty Ltd (1954) 91 CLR 288). Ultimately, it is a question of what the parties intended. Where the variation agreement is in writing that intention is elicited from the express words of that agreement, where those words are unambiguous.
25 In this application, from the terms of the Variation of Lease agreement and the 1998 Deed, which were executed on the same day, there can be no question that the parties intended to keep the terms of the 1995 registered lease on foot and vary it to the extended provided for in these documents. The Variation of Lease agreement and the 1998 Deed both expressly provided that the property interest the subject of both agreements was the registered lease. Furthermore, under clause 2 of the 1998 Deed the transferees expressly covenanted with the lessors to observe and perform all the terms and conditions of the transferor under the registered lease.
26 Clause 7 of the 1998 Deed dealt with the agreed extension of the term of the registered lease to 4 September 2005. It provided as follows:
- “By Variation of Lease of even date the Lessor has agreed with the Transferees and the Continuing Guarantors to extend the term of the lease to 4 September 2005 and the covenants by the Transferee and by the Continuing Guarantors shall apply to the lease so varied” (underling added)
27 In my opinion these two clauses make it abundantly clear that the transferees were bound by the covenants as provided in the registered lease. Furthermore, their obligations extended to 4 September 2005.
28 Under the 1998 Deed Dr Singh is described as a “continuing guarantor”. Unlike the transferee, he was already bound by the terms of the registered lease. His obligations were not those of a lessee but of a guarantor. Nevertheless, prior to signing the Deed he had already covenanted with the lessor to guarantee the lessee’s obligations under the registered lease.
29 However, his obligations and those of Dr S. Magad, Dr H. Gobran and Dr S. Francis would have been extinguished on the transfer of the lease from Maxicare to Maxicare and SS Medical, as the new lessees were not the lessee whose obligations they had agreed to guarantee under the registered lease as agreed to in 1995. In my opinion, the intention of clause 4 and 5 were to overcome this difficulty. Both clauses make reference to the “lease” which, as I have already mentioned, is defined in the recitals to be the registered leases. There is no basis to interpret this word differently in this clause or clause 5.
30 Clause 4 of the 1998 Deed relates to the transferor (Maxicare) as well as the “outgoing guarantors” (Dr S. Magad, Dr H. Gobran and Dr S. Francis). In this clause, the transferor and the outgoing guarantors expressly agreed that the transfer of the lease did not prejudice the rights of the lessor against the transferor and the outgoing guarantors under the terms of the registered lease. However, they were released from any obligations under that lease which arose during the extended period of the lease (i.e. from 5 September 2000 to 4 September 2005).
31 Clause 5 of the 1998 Deed expressly provides that Dr Singh agreed that his “guarantee of the lease” was “continuing” and extended through the extended period of the lease. In my opinion, by the use of the phrase “guarantee of the lease” the parties’ intention was that the terms of Dr Singh’s guarantee would remain the same as that contained in the registered lease. The only difference being a change in the identity of the lessee and an extension of his obligations for the extended period of the registered lease.
32 Such an interpretation is supported by the terms of clause 7 of the 1998 Deed. As mentioned above, this clause applies not only to the transferee, but also the continuing guarantors. Under this clause Dr Singh has agreed to the extension of the registered lease for a further 5 year period as well as agreeing that the “covenants” by him under the registered lease would apply to the extended period. This means that cl.27, in particular clause 27(3)(b), of the registered lease continued to apply after 4 May 1998.
33 On the basis of my findings, it is unnecessary to consider the terms of the Deed of Release.
34 As no other arguments were put to the Tribunal in respect of Dr Singh’s obligations under the guarantee, for the reasons set out above, the Tribunal orders:
- a) Dr Singh’s application is dismissed.
- b) The applicants’ application is set down for further directions at 10.30 am on 2 December 2004.
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