Tip Fast Pty Ltd v Alexandria Landfill Pty Ltd
[2002] NSWSC 299
•21 March 2002
CITATION: Tip Fast Pty Ltd v Alexandria Landfill Pty Ltd [2002] NSWSC 299 CURRENT JURISDICTION: Equity Division FILE NUMBER(S): SC 1916/02 HEARING DATE(S): 20/03/02 JUDGMENT DATE: 21 March 2002 PARTIES :
Tip Fast Pty Ltd (P)
Alexandria Landfill Pty Ltd (D1)
Roads & Traffic Authority of New South Wales (D2)JUDGMENT OF: Young CJ in Eq
COUNSEL : M Condon (P)
R Dubler (D1)
C Pagent (D2)SOLICITORS: O'Brien Connors & Kennett (P)
Deacons (D1)
Corrs Chambers Westgarth (D2)CATCHWORDS: LANDLORD & TENANT [11] & [48]- Lease by two adjoining owners of combined lots by one instrument- Assignment of reversion by one owner- Assignee seeking to re-enter its part- Rent- Whether set-off permitted. LEGISLATION CITED: Conveyancing Act 1919, s 117 CASES CITED: Ashmore Developments Pty Ltd v Eaton [1992] 2 Qd R 1
Australian Broadcasting Corp v Lenah Game Meats Pty Ltd (2001) 76 ALJR 1; 185 ALR 1
Batiste v Lenin [2002] NSWSC 233
Brikom Investments Ltd v Carr [1979] QB 467
De Nicholls v Saunders (1870) LR 5 CP 589
Doe d Roberton v Gardiner (1852) 12 CB 319; 138 ER 927
Hamilton Ice Arena Ltd v Perry Developments Ltd [2002] 1 NZLR 309
London and County (A & D) Ltd v Wilfred Sportsman Ltd [1971] Ch 764
Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of NSW (1970) 2 BPR 9562
Re King [1963] Ch 459DECISION: Orders made.
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
YOUNG CJ in EQ
Thursday 21 March 2002
1916/02 – TIP FAST PTY LTD v ALEXANDRIA LANDFILL PTY LTD
JUDGMENT
1 YOUNG CJ in EQ: This is an application for interlocutory injunction by the tenant of a waste management facility to prevent one of its landlords re-entering the land the subject of these proceedings.
2 The plaintiff is the lessee under registered lease 8285369C for five years from 9 April 2001 to 8 April 2006. The lease is of land at St Peters and subsists over three parcels: Folio Identifier 14/606737, the land in that Folio Identifier I shall call “Blackacre”; Folio Identifier X/421363 “Whiteacre”; and Folio Identifier 11/1013168 “Yellowacre”.
3 As at the date of grant of the lease the Council of the City of Sydney was registered proprietor of Yellowacre and the second defendant, the Roads and Traffic Authority (“RTA”) was the registered proprietor of Blackacre and Whiteacre.
4 The first defendant now claims to own Yellowacre. No title documents are in evidence, but, by letter of 23 January 2002, solicitors purporting to act for the Sydney City Council wrote to the plaintiff’s solicitors informing them that property described as “St Peters Waste Management Facility, Albert and Canal Roads, St Peters” was sold to the first defendant on 23 January 2002 subject to the tenancy. I have been asked to infer that this land is Yellowacre.
5 The first defendant and the plaintiff are competitors in the waste disposal business and, doubtless, that explains the ardour with which this case has been fought.
6 It is necessary to set out some of the terms and conditions of the lease: page 1 containing the schedule sets out as “item C” the designation “Lessor”, “Council of the City of Sydney ... and Roads and Traffic Authority of New South Wales ...”. Clause 1.1 is the definitions clause. It contains a definition of “City Land” equating it with Yellowacre and “RTA Land” indicating Blackacre and Whiteacre, but as far as I can see, these definitions are never actually employed in the lease itself. There is a definition of “Land” which virtually means Blackacre, Whiteacre and Yellowacre and then “Landlord” is described as meaning “the lessor named on the front page of this Lease...”, that means, of course, both the Sydney City Council and the RTA.
7 Clause 1.3 with a heading “Liability” says:
- “When two or more persons are named as a party to this Lease, any agreement, representation or warranty expressed to be given or made by that party pursuant to this Lease will be a joint and several liability of each named person”.
8 That is, of course, a lot of gobbledegook, but it does give some indication as to the proper construction of the lease; a matter I will deal with later.
9 Clause 3.1 notes that “In consideration of payment of the Premium to the Landlord by the Tenant ... , the Landlord leases the Land to the Tenant for the Term on the terms, covenants and conditions contained in this Lease”. Accordingly, it appears there has been one grant of one parcel of land by the conjoint landlord to the tenant.
10 Clause 4.1 contains a covenant by the tenant to pay the gross rent to the landlord without demand and without deduction. The gross rent is set out in another part of the document as being $90,000 in year one with adjustments.
11 Clauses 4.2 and 4.3 indicate that if all payments of rent and other monies payable under the lease are received by the landlord on or before the date for payment then the landlord will accept a reduced rent.
12 Clause 4.4 notes that the reduced rent is to be paid by equal monthly instalments in advance. Clause 4.8(a) requires the tenant to pay the gross rent or the reduced rent, as the case may be, by equal monthly instalments in advance, on the first day of each month.
13 Clauses 11.8 and 11.9 make it clear that the landlord may appoint agents to exercise any of those rights or perform any of its duties under the lease.
14 Clause 14.2 which is headed “Landlord’s right to terminate” says:
- “The Landlord may terminate this Lease by giving the Tenant notice or by re-entry if the Tenant (a) repudiates its obligations under this Lease; or (b) does not comply with an essential term of this Lease or (c) ... ”.
15 The only other provision of the lease to which it is necessary to refer is clause 16 which deals with notices but only in a peripheral way by indicating who may sign a notice and when it is deemed to have been received.
16 It would appear that as between the Sydney City Council and the RTA there was a management agreement, PX6, under which the RTA managed the land on behalf of itself and the City Council. The significance of that will become clear, I take it, during the course of these reasons.
17 On 15 February 2002 the first defendant wrote to the plaintiff’s solicitors a letter, the material parts of which are as follows:
- “The Landlord has made it clear however that so far as it is concerned, the RTA’s prior management role has come to an end and Alexandria Landfill Pty Ltd is concerned only in respect of its lease and that part of the leasehold property of which it is the owner. Any waivers, express or implied, by any prior course of dealing between your client and the RTA or the City Council became ineffective upon the change of ownership.
- Given the notification to your client of the changed circumstances and the inadequacy of the response, the Landlord takes the view that TipFast Pty Ltd is presently in breach of its lease ...
- The breaches (without limiting the Landlord’s rights in respect of other breaches) include: (a) The failure to pay rent in accordance with the lease; ...(b) ... (c) ... (d) ... .
- The obligation to pay rent is an essential Term of the Lease and the indication of an offer to pay rent to another party who has no authority to receive it on behalf of the Landlord is unsatisfactory ...
- Given these breaches, the Landlord therefore gives Notice Terminating the Lease with immediate effect, so far as it relates to the portion of the Land owned by Alexandria Landfill Pty Ltd. The Landlord requires the Tenant to deliver up vacant possession of that part of the Site owned by Alexandria Landfill Pty Ltd on or before 20th March 2002.
- Any material deposited on the Site will be required to be removed and the land returned in a fit and proper state.
- The Landlord also reserves its rights to seek damages.”
18 There was correspondence following that letter and on 22 February 2002 the tenant’s solicitors forwarded a cheque for $1,241.94 “being arrears of rental, which have been calculated by our client as being the amount owing.”
19 On 27 February the landlord returned that cheque noting that it showed no basis for the calculation and noting that the landlord did not waive any of the breaches and that the time specified in the notice for giving vacant possession continued to run.
20 No notice under s 129 of the Conveyancing Act 1919 was ever served on the plaintiff.
21 In accordance with the authorities that I will refer to later this means I need only consider the question as to whether the plaintiff was in arrears of rent on the question of relief against forfeiture and thus when I am considering the question as to whether the plaintiff has a prima facie case.
22 The summons was filed on 15 March 2002 seeking declarations that the defendants were not entitled to terminate the lease and for an interlocutory basis injunction restraining the defendants from taking any steps to terminate the lease or obtaining vacant possession prior to the determination of these proceedings on a final basis. Because of the heavy list yesterday and the complicated questions that arose and also because I thought it may be possible to eliminate some of these technical questions by standing the matter over for a week or so, I granted a temporary injunction and reserved my decision. It is now clear that no opportunity is going to be taken to outflank the technical problems, so that I might just as well deal with the questions now.
23 The first defendant alleges that the rent due is about $99,000. I have not been given any supporting documentation for this claim. However, I would assume that the first defendant’s case is that one year’s rent is $90,000 on the gross rental basis and that the tenant is not entitled to pay only a reduced rent because it has not complied with the conditions under clause 4.3 of the lease. On the other hand, the plaintiff says that it has never been required to pay the gross rent. Indeed it says that from the reduced rent it is entitled to set off against that rent (a) certain claims for flooding; and (b) claims for extra and unexpected expenses in obtaining development approval.
24 In each case the plaintiff’s representative says that a Mr Hensman, an engineer who represented the RTA, said as to (a) in May 2001: “Pump out the water and send the RTA the bill. We will have to take these bills off the rent”. As to (b), Mr Hensman is alleged to have said in September 2001, “Keep a record of all your expenses and we’ll offset it against your rent”. The plaintiff appears to be saying that apart from the rent tendered in February the offsets fully account for the rent due.
25 There are a number of reasons why this simple way of viewing the rental position cannot be accepted. The principal reasons are as follows:
(1) The plaintiff never sent the RTA any bill in connection with either claim on the evidence I have today. The only evidence is that the plaintiff estimates the sum of the invoices it paid in connection with the flooding as $15,000 and that the development approval problem it estimates cost it $6,000. Thus, if there was any agreement to offset, it only operated from the time the amount was notified to or accepted by the RTA which event has not occurred.
(2) The obligation of the tenant is to pay the rent without deduction unless the lease or a statute operates to negative this obligation. In general, vide Foa on Landlord and Tenant 7th ed (Hamish Hamilton Ltd, London, 1947) at p 148. Thus, technically, even if rent is paid in advance that is not a fulfilment of the obligation to pay rent on the due date; the payment in advance being treated as a loan to the landlord (see De Nicholls v Saunders (1870) LR 5 CP 589, 594).
All this, of course, depends on the terms of the lease. However, here, clause 4.1 emphasises that the payment is to be made without deduction. Thus the tenant’s obligation is to pay the whole rent to the landlord (see Appendix). Indeed, if the lease does not otherwise express it, it must pay it on the demised land on the first day of each month.
(4) The reliance by Mr Condon, for the plaintiff, on Lord Roskill’s judgment in Brikom Investments Ltd v Carr [1979] QB 467, 489 really takes the matter little further in view of the scant evidence on the waiver point in the affidavit material. Indeed, it is also difficult to marry what Lord Roskill said with cases such as Re King [1963] Ch 459.(3) It is doubtful how far the fact that as between the RTA and the City Council there was a management agreement can be relied on to enable any waiver by Mr Hensman or collateral agreement to affect the right of the first defendant to sue for arrears of rent under s 117 of the Conveyancing Act 1919.
26 However, the defendant’s view as to what is payable as rent also involves difficulties. It now seems accepted by the courts that the operation of s 117 of the Conveyancing Act is to bar any action on the part of the former owner, the City Council and the assignor of the reversion, to sue for rent and to effect a statutory vesting of that action in the assignees of the reversion. See Re King [1963] Ch 459 per Upjohn and Diplock LJJ (Lord Denning strongly dissenting). The real dispute in the judgments is how far the 1881 and subsequent amendments vary the policy of the original statute of 1540. See also London and County (A & D) Ltd v Wilfred Sportsman Ltd [1971] Ch 764 and Ashmore Developments Pty Ltd v Eaton [1992] 2 Qd R 1. Although that last mentioned case is a decision of an interstate full court which would normally be followed in this State, there is no decision in this State on the point . Lord Denning’s historical analysis in Re King makes compelling reading. He notes that s 117 originated from the problem caused by the dissolution of the monasteries whereby it was necessary to vest in the lords who had taken the monks’ property, the rights to sue the tenants.
27 However, for the moment I will follow Re King. Indeed, if Re King is wrong then, of course, the only amounts that are payable to the first defendant are the instalments for rent on 1 February and 1 March 2002 either at the gross rent or the reduced rent. If Re King is correct then the rights of the Sydney City Council immediately before the assignment have vested in the first defendant by statute. However, the real problem is whether what Lord Roskill said in Brikom affects that right – a matter which will have to be, no doubt, debated at the final hearing.
28 The rent seems to have been payable on the first day of the month so that on any view an instalment was due on 1 February and 1 March 2002 after the assignment and apart from the tender of $1,291.00, where there was no explanation, there has not been a proper tender.
29 Thus although there are very great difficulties in working out exactly what the relationship is and how much rent is owing, both on fact and law, prima facie the tenant is in default with the February and March instalments of rent and the landlord is entitled to re-enter.
30 But, who is the landlord?
31 Mr Condon drew attention to the definition which I have set out and that appears to make the landlord the conjoint entity of the RTA and, by virtue of s 117 of the Conveyancing Act (the rule in Spencer’s case) the first defendant. That means that only that conjoint entity can enforce a vested interest in the landlord under the lease.
32 Now, Mr Dubler for the first defendant says that is absurd and the only way in which one can view the lease is as a multiple instrument by which the RTA leased Blackacre and Whiteacre and the first defendant leased Yellowacre and the first defendant is the landlord qua Yellowacre.
33 This is quite common sensical. Unfortunately it flies in the face of the way in which the lease is constructed. The lease appears to be of one inseverable parcel and envisages that an agent may be appointed to exercise the landlord’s rights under the lease, vide clauses 11.8 and 11.9. The definition section does set out the definition of the two separate parcels of land, but the draft transfer never employs them.
34 It seems to me that the only way one can construe the lease, no matter how much it appears at first sight to be contrary to common sense, is that we have a peculiar instrument in which three parcels of land for two separate ownerships are demised by the one document subject to one total rent for the whole and that the person who is to enforce the lease is that conjoint entity.
35 There are no actual comparable cases on the authorities as to the situation and the reason for that, I would think, is obvious. The question is what happens where, as here, one of the co-owners of the reversion wishes to remove the tenant? Cole on Ejectment (Sweet, London, 1857) at p 44 gives a series of examples where one tenant in common has been permitted to give a notice to terminate the lease in respect of his or her interest. The latest authority is Doe d Roberton v Gardiner (1852) 12 CB 319; 138 ER 927. In that case A was seised in fee of a moiety of Redacre and B was seised for life of the other moiety. A and B then demised the land to C. The Court of Common Pleas held that A could recover her moiety in ejectment by issuing the appropriate court process independently of the other moiety.
36 How one takes possession of an undivided one half interest as tenant in common may well have been clear to those who practised in the 19th century, but not as clear to me in this century. That was the only order that was made.
37 However, by analogy, a person who is the lessor of part of the land in a multiple instrument might be able to enter at common law and retake possession of that part. That is certainly arguable. It is probably not available in the instant case because of the way in which the lease is granted. Particularly clause 14.2 makes specific provision for termination and there is a fair argument that this clause displaces any other right because if this were not so 14.2 would be otiose. The right under clause 14 is vested in the “Landlord”, that is the conjointure of the RTA and the first defendant.
38 So far no notice has been given by that conjointure so there is no right to resume possession on 20 March.
39 There is also a problem as to what the word “notice” means in clause 14. In present day parlance “notice” usually means a warning that someone is about to do something. That does not seem to be the meaning here but one wonders what clause 16 is doing if it is not. The word does not seem to mean “notice to quit” because that is not the way in which one terminates a lease of five years, but it possibly could have that meaning.
40 There must be some doubt as to what is meant by the lease in terminating by notice. And, perhaps, there is no need for me to go further at this stage than to say just that.
41 As I said earlier, the first defendant has not issued a notice under s 129 of the Conveyancing Act. Thus, both for the purposes of ejectment and relief against forfeiture, I can ignore breaches other than non payment of rent: Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of NSW (1970) 2 BPR 9562.
42 It seems to me, therefore, that there are so many doubts about many aspects of this case that the plaintiff has shown an arguable case for an interlocutory injunction. It must be noted that nowadays the court grants such an order to keep the status quo, at least for a reasonably short period, where there are serious questions to be tried so that the court can keep control over the litigation. See Australian Broadcasting Corp v Lenah Game Meats Pty Ltd (2001) 76 ALJR 1; 185 ALR 1.
43 The Court also looks to the balance of convenience and whether damages are an adequate remedy. The balance of convenience, at least in the short term, seems to favour keeping the lessee in possession because it has paid a sizeable premium for a five year lease and has had considerable expense in respect of the land. Whilst the first defendant would, doubtless, wish to rid itself of the competitor, there does not seem to be any other countervailing factor so long as the current rent is paid. It is clear that damages are not an adequate remedy.
44 So far I have not considered the case from the point of view of relief against forfeiture. The law is that ordinarily where relief against forfeiture is sought where the only matter that can be considered is non payment of rent (and, for the reasons I have given, that is the only matter I can consider at this stage), relief against forfeiture is given if the default is made good and the court is satisfied that the rent will be paid promptly in future.
45 Accordingly, from what I have said there must be an arguable case that relief against forfeiture will be given even if the tenant loses on all other matters.
46 Thus, the injunction should be extended for a period and the question that I would now have to determine is what directions should be made to get this suit ready on a final basis and on what terms an injunction should be granted.
[Submissions from counsel]
[Further submissions from counsel][The date of 28 March 2002 before Mr Justice Palmer for the notice of motion for expedition was agreed upon]
47 The injunction I granted yesterday is extended on the following terms:
(a) the plaintiff will take all due steps to have the final hearing expedited;
(b) that it will by 22 March pay $11,201.92 to the second defendant, $7,467.94 to the first defendant; and
Liberty to anyone to apply on two days’ notice. The usual undertaking as to damages is given. Costs are reserved.(c) that it will on the first day of April and on the first day of every succeeding month until the case is finally disposed of or further order of the court pay $4,950 to the second defendant and $3,300 to the first defendant provided that the first day of any month not being a business day the rent may be paid on the next subsequent business day.
48 The notice of motion said to be returnable on 5 April is now returnable on 28 March 2002.
Appendix
49 Note made when revising oral judgment. A full discussion of the principles supporting the statement that rent must be paid without deduction is now provided in the judgment of Bryson J in Batiste v Lenin [2002] NSWSC 233 at [102] et seq. See also Hamilton Ice Arena Ltd v Perry Developments Ltd [2002] 1 NZLR 309.
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