Sunlane Nominees Pty Ltd v Mega Realty Holdings Pty Ltd
[2006] WASC 178
•17 AUGUST 2006
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: SUNLANE NOMINEES PTY LTD -v- MEGA REALTY HOLDINGS PTY LTD & ORS [2006] WASC 178
CORAM: MASTER SANDERSON
HEARD: 12 JUNE 2006
DELIVERED : 17 AUGUST 2006
FILE NO/S: CIV 2764 of 2002
BETWEEN: SUNLANE NOMINEES PTY LTD (ACN 073 571 945)
Plaintiff
AND
MEGA REALTY HOLDINGS PTY LTD (ACN 065 429 647)
First DefendantCONRAD TYE
Second DefendantCHENG KEE BEH
Third DefendantGARY EDMUND BONG
Fourth Defendant
Catchwords:
Practice and procedure Application to amend defence and counterclaim Turns on own facts
Legislation:
Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA)
Trade Practices Act 1974 (Cth), s 51AC
Transfer of Land Act 1893 (WA), s 58
Transfer of Land Amendment Act 1996 (WA), s 151
Result:
Amendment allowed in part
Category: B
Representation:
Counsel:
Plaintiff: Mr P Mendelow
First Defendant : Mr A J N Aristei
Second Defendant : Mr A J N Aristei
Third Defendant : Mr A J N Aristei
Fourth Defendant : No appearance
Solicitors:
Plaintiff: Friedman Lurie Singh & D'Angelo
First Defendant : Lynn & Brown
Second Defendant : Lynn & Brown
Third Defendant : Lynn & Brown
Fourth Defendant : No appearance
Case(s) referred to in judgment(s):
Borman v Griffith [1930] 1 Ch 493
Glentham Pty Ltd v Luxer Holdings Pty Ltd [2002] WASC 80
Roper v Johnson (1873) LR 8 CP 167
Case(s) also cited:
Bunbury Foods Pty Ltd v National Bank of Australasia Ltd (1984) 51 ALR 609
Chan v Cresdon Pty Ltd (1989) 168 CLR 242
Jingellic Minerals NL v Abigroup Ltd (1992) 7 WAR 566
Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623
Liverpool City Council v Irwin [1977] AC 239
Monaco & Anor v Arnedo Pty Ltd & Anor, unreported; FCt SCt of WA; Library No 940481; 6 September 1994
State of Queensland v JL Holdings Pty Ltd (1997) 141 ALR 353
Tony Sadler Pty Ltd v McLeod Nominees Pty Ltd (1994) 13 WAR 323
MASTER SANDERSON: This is a pleading summons. The first to third defendants seek leave to file what is described in the application as a "substituted defence and counter‑claim". At the hearing the defendants sought leave to amend their defence in terms of what was described as an "updated minute of proposed substituted defence and counter‑claim". That document is dated and was filed 7 June 2006. The argument which took place was addressed to that minute. Before going to that minute in detail it is necessary to say something about the plaintiff's cause of action and the history of the proceedings.
By writ dated 23 December 2002, the plaintiff as lessor commenced proceedings against the first to fourth defendants claiming damages as a result of repudiation of a lease dated 4 May 2001. The statement of claim was filed and served on 2 December 2003. It is a relatively simple document.
By par 1 of the statement of claim it is alleged that at all material times the plaintiff was the lessor of premises situated at Shop 1, Corner of Princess Road and Balga Avenue, Balga. It is alleged by written lease dated 4 May 2001, the plaintiff agreed to lease the premises to the first defendant. The term of the lease was five years with commencement date being 7 May 2001. A monthly rental was agreed. The first defendant also agreed to pay all outgoings. It is alleged that the second to fourth defendants agreed to guarantee the obligations of the first defendant under the lease. It is further alleged that by notice of termination dated 19 November 2002, the first defendant purported to terminate the lease with effect from 23 December 2002. The plaintiff alleges that the notice of termination delivered by the first defendant amounted to a repudiation of the lease which was accepted by the plaintiff. The plaintiff then seeks damages for breach of contract and an indemnity from the first through to fourth defendants. The statement of claim is with respect straight forward succinct and a perfectly proper pleading of a claim for breach of a lease.
The defence of the first to third defendants was filed and served on 18 December 2003. A reply to the defence was filed and served on 5 March 2004. Accordingly, pleadings have been closed for well over two years. Now the first to third defendants seek to substitute their defence with an entirely new defence to which is added a counterclaim ("the minute"). This new document raises at least 10 new matters which were not raised in the previous defence. It is proper then to look more closely at the terms of the minute.
In the original defence, the defendants admitted pars 1 to 8 of the statement of claim. These paragraphs of the statement of claim plead by pars 1 and 2 the identity of the plaintiff and the first defendant. Paragraph 1 of the minute admits those two paragraphs. Paragraph 3 of the statement of claim refers to the written lease. Paragraph 2 of the minute admits the fact of the written lease but "otherwise denies the contents of paragraph 3 of the Statement of claim, and relies upon the matters raised in paragraph 35 ‑ 55 herein". With respect, the last part of that plea is a nonsense. The plaintiff and the defendants entered into a written lease dated 4 May 2001, which contains certain terms and conditions. A copy of the lease appears as annexure "TJK1" to the affidavit of Timothy Joseph Kavenagh ("Mr Kavenagh) sworn 23 January 2003, in support of an application by the first, second and third defendants for security for costs. The lease contains terms and conditions common to lease agreements for rental premises. It may be the matters raised in pars 35 to 55 would prevent enforcement of the lease (I will deal with these paragraphs further below), but there is no ground for saying that the lease agreement was not entered into. Effectively par 2 of the minute is a withdrawal of an admission. Despite the affidavit of the second defendant sworn 19 December 2005 and filed in support of this application, there is no adequate explanation as to why an admission such as this ought be withdrawn. But even if the explanation for the withdrawal of the admission was adequate, the proposed par 2 is simply not in a proper form. It should not be allowed to stand.
Paragraph 3 of the minute pleads that in addition to the lease the first defendant entered into two other agreements with the plaintiff. The first of these is described as "the Sale of business agreement", the second is described as "the Franchise agreement". In its form this paragraph is unexceptional. It does not involve a withdrawal of an admission. Subject to what I have to say below this paragraph can stand.
Paragraph 4 of the minute refers to pars 4 to 6 of the statement of claim. These three paragraphs in the statement of claim plead specific terms in the lease. Paragraph 4 of the minute again refers to pars 35 to 55 of the minute and on that basis "otherwise denies the contents of paragraph 4 ‑ 6". For the same reason I gave in relation to par 2 of the minute the plea does not make any sense and should not be permitted to stand. What should remain is the admission in relation to pars 4 to 6 of the statement of claim.
Paragraph 5 of the minute deals with par 7 of the statement of claim. Paragraph 7 deals with the indemnity allegedly given by the second to fourth defendants of the first defendant's liability under the lease. The same problem arises with par 5 as arises with pars 2 and 4. The admission should remain and par 5 of the minute in its present form cannot stand.
Paragraph 6 of the minute deals with par 8 of the statement of claim. By par 8 of the statement of claim the plaintiff pleads that pursuant to the lease the first defendant went into possession of the premises on or about 7 May 2001. By par 6 of the minute the first defendant admits that it went into possession, but denies that it did so pursuant to the lease. In my view such a plea is not open. The lease is clear in its terms and material facts would need to be pleaded by the first defendant to justify a claim that possession was not taken pursuant to the lease. In any event this would amount to a withdrawal of an admission and in my view there is no basis for such an admission being withdrawn. Paragraph 6 in its present form cannot stand.
It is only these paragraphs to which I have referred that deal directly with the plaintiff's statement of claim. The rest of the plaintiff's complaints about the minute relate to matters which have been introduced into the defence for the first time. They begin with par 16. By that paragraph the first defendant alleges that if the plaintiff suffered loss and damage (which is denied) then the plaintiff failed to take due care to mitigate the extent of loss and damage it suffered. Particulars are provided. By par 16.1 it is alleged the plaintiff failed to take timely steps to enable the premises to be re‑leased. By par 16.2 it is alleged the plaintiff failed to take "timely" steps to enable the sale of the premises. By par 16.3 it is alleged that the premises was sold for less than its market value. Paragraph 16.4 says that further and better particulars will be provided after discovery and interrogatories.
In its statement of claim the plaintiff claims "damages for breach of the lease". In fact the way that the statement of claim is pleaded, what is in fact claimed are damages for the repudiation of the lease. It would appear that those damages have not been quantified. However, it is reasonable to assume that the plaintiff is claiming the amount of rent payable pursuant to the lease between the date that the first defendant vacated the premises – 23 December 2002 – and the date of termination of the lease – 6 May 2006. In addition the plaintiff is no doubt seeking the outgoings incurred for that period. If that is the basis of the plaintiff's claim (and it is difficult to see how else the claim could be framed), then it may be that the plaintiff had a duty to mitigate its loss by attempting to re‑lease the premises. However there is no doubt that the onus of proof on the issue of mitigation rests with the first defendant. If it fails to show the plaintiff did not take reasonable steps to mitigate its loss then the normal measure of damages will apply. This is a long established principle: see Roper v Johnson (1873) LR 8 CP 167. To that extent the plea in par 16.1 is reasonable. It calls into question the measure of the plaintiff's loss. It is also reasonable to expect that further particulars might be provided after discovery and interrogatories ‑ the steps that the plaintiff took in attempting to re‑lease the premises (if any attempt was made at all) would be a starting point. Thereafter the first defendant may have to plead material facts to support the allegation that the plaintiff did not move to mitigate its loss. But for present purposes par 16.1 can be seen as reasonable. The same cannot be said for pars 16.2 and 16.3. These paragraphs deal with a sale of the premises by the plaintiff. It may be that the premises were sold and the plaintiff may claim that they were sold for an amount less than the price that would have been obtained if the first defendant was a tenant in good standing. But if that is the plaintiff's case it is not pleaded. The very best that can be said about pars 16.2 and 16.3 is that they anticipate a plea by the plaintiff. In the absence of that plea they cannot stand and leave to amend ought not be granted. I would however allow par 16.1 to stand together with what is found in par 16.4.
Paragraph 20 of the minute pleads that there was an implied term in the lease agreement that a valid lease at law would be granted by way of an estate or interest in possession of the premises. With respect the terms of the lease as contained in the written document are express. There is nothing in the lease which deals with that point (it is not alleged by the first defendant otherwise) and there is no basis upon which the term proposed by the first defendant could be implied into the lease agreement. Paragraph 20 cannot stand.
Paragraph 21 of the minute must fail because it alleges a breach of the implied term pleaded in par 20. If par 20 cannot stand, par 21 also must go. There is a further difficulty with par 21. It is alleged that the plaintiff "failed to grant a valid lease at law" because the instrument of lease was not registered under the Transfer of Land Act 1893 (WA). There is nothing in the lease which requires the plaintiff to have it registered. The plea appears to suggest that if a lease is not registered it is not valid at law. With respect that is not the case. For that additional reason par 21 cannot stand.
Paragraph 22 again relies upon breach of the implied term in par 20. Again because of the failure of par 20, par 22 cannot stand. Paragraph 22 pleads that as the lease was not executed (in an approved form) it could not be registered "as a valid lease at law" and presumably is said to have been of no force and effect. Prior to the enactment of s 151 of the Transfer of Land Amendment Act 1996 (WA) s 58 of the Transfer of Land Act 1893 required a registrable lease to be "in the Form in the Eleventh Schedule". Section 151 of the Transfer of Land Amendment Act 1996 amended s 58 of the Transfer of Land Act 1893 by repealing a number of schedules including the eleventh schedule. Informality in the formal requirements of the lease will not deprive a plaintiff of purely legal remedies such as damages at law for breach of covenant: see Borman v Griffith [1930] 1 Ch 493. The operation of s 58 is in any event confined (having regard to the its wording) to an unregistered instrument being ineffectual to pass any estate or interest in land. It does not deprive the plaintiff of other rights under the lease (albeit an equitable lease). Further nothing in the wording of the lease suggests that unless the lease is registered no rights could be exercised pursuant thereto: see Glentham Pty Ltd v Luxer Holdings Pty Ltd [2002] WASC 80 at [72] to [80].
Paragraph 23 pleads that "the execution of the Lease Agreement, in addition to the possession of the Premises by the First Defendant on or about 7 May 2001 and its payment of rent to the Plaintiff on or about that date, gave rise to an implied tenancy at common law, or alternatively an equitable lease". That plea cannot stand. There was an express tenancy created by the lease and no tenancy implied at common law. Nor was there an equitable lease. The plea cannot stand.
By par 24 it is pleaded that the lease constituted "a retail shop lease" within the meaning of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA). Crucial to this plea is particular 24.3. It is alleged that the "floor area designed and available for use for the carrying on of the said Supermarket's business was an aggregate area of 800m²". If the floor area exceeded 1000 square metres then the Act did not apply. In fact in the schedule to the lease the premises are said to be 1326 square metres: see page 37 of the affidavit of Mr Kavenagh. There is nothing in the evidence to suggest otherwise. Paragraph 24 cannot stand. Further, because par 25 is dependant upon the plea in par 24 it too cannot stand.
A complaint is made as to par 30. Paragraph 30 pleads certain facts which are said to have existed as at 27 March 2001. This is the date of the execution of the sale of business agreement referred to in par 3.1 of the minute. It is to be remembered that the statement of claim makes no reference to the sale of business agreement – it is concerned only with the lease. The eight subparagraphs of par 30 plead certain facts in relation to the conduct of the Supa Valu Supermarket which was conducted from the premises. By way of example par 30.3 pleads that the Supa Valu Supermarket was trading at a loss and was unable to pay its business debts from its trading activities. Paragraph 30.8 pleads there was inadequate security at the shopping centre where the premises were located and that there had been numerous "incidents of theft, violence and inadequate security" which had resulted in the police being called to the premises. By par 30A it is pleaded that the plaintiff at the date of execution of the sale of business agreement had knowledge of all the matters pleaded in par 30. For present purposes it can be assumed that the plaintiff did in fact have that knowledge.
The importance of this allegation as to the knowledge of the plaintiff is revealed by reference to par 27 of the minute. That paragraph pleads that it was "an express condition" of the sale agreement that the plaintiff was not in possession of any knowledge which if unrevealed could at a later date prove detrimental or adversely affect the normal trading of the business, or if revealed at the date of the agreement could cause the first defendant to substantially modify the terms or otherwise withdraw from the agreement. Paragraph 31 through to par 34 of the minute plead an allegation of a breach of this term (or warranty as it should properly be described). No objection is taken to these paragraphs and clearly the first defendant's position is arguable.
Objection is taken to par 40 through to par 44 of the minute. These paragraphs all deal with a claim for misleading and deceptive conduct. In essence what is said is that there was misleading and deceptive conduct by silence – that is a failure by the plaintiff to inform the first defendant of the matters referred to in par 30. The plaintiff has criticised these paragraphs essentially on the basis that the duty of disclosure arose consequent upon the terms of the sale of business agreement. On balance I am satisfied that the plea contained in these paragraphs is proper and the paragraphs ought stand. Apart from anything else the first defendant's contract claim is based essentially on the same facts relevant to the Trade Practices Act 1974 (Cth) claim. There is nothing to be gained by attempting to determine at this stage whether or not relief is available under the Trade Practices Act 1974.
Prior to delivery of the minute a complaint was made as to the particulars to par 53. An amendment was made to both that paragraph and to par 54. As a result both paragraphs are now in an acceptable form.
Paragraph 57 pleads unconscionable conduct. It is a vague generalised plea without specifying the enumerated criteria found in s 51AC of the Trade Practices Act 1974. If a plea of unconscionable conduct is to be maintained it needs to be properly pleaded. Paragraph 57 in its present form cannot stand.
Consequent upon these reasons it will be necessary for the defendants to make further amendments to the minute. I will hear the parties as to the precise form of orders which would be appropriate and as to costs.
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