Tran v Guan

Case •

[2022] NSWDC 233

•

23 May 2022

No judgment structure available for this case.

District Court


New South Wales

  • Amendment notes
Medium Neutral Citation: Tran v Guan [2022] NSWDC 233
Hearing dates: 18, 23 March 2021, 11, 12, 13, 14 April; 17 and 18 May 2022
Date of orders: 23 May 2022
Decision date: 23 May 2022
Jurisdiction:Civil
Before: P Taylor SC DCJ
Decision:

1.   Proceedings in respect of the 10 undisputed items dismissed.

2.   Plaintiffs to pay the defendants’ disbursements in maintaining the defence, such disbursements not to include any time-based costs and not to disturb any existing costs orders.

3.   List the matter for further directions.

Catchwords:

LEASES AND TENANCIES – failure to pay rent – termination – whether goods abandoned or forfeited - fixtures

Legislation Cited:

Conveyancing Act 1919, s 129

Uniform Civil Procedure Rules 2005, r 36.16

Cases Cited:

BP Refinery (Westernport) (1977) 180 CLR 266

Cachia v Hanes (1994) 179 CLR 403

Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 377

Collier v Howard (Supreme Court (NSW), McLelland CJ in Eq, 23 April 1996, unrep)

Greek Macedonian Club Limited v Pan Macedonian Greek Brotherhood NSW Limited [2007] NSWSC 92

Palermo Seafoods Pty Ltd v Lunapas Pty Ltd (No 2) [2014] NSWSC 1323

Pioneer Quarries (Sydney) Pty Ltd Permanent Trustee Co of NSW Ltd (1970) 2 BPR 9562

PL Town Hall Pty Ltd v The Trust Company Ltd [2021] NSWSC 391

Preston v Commissioner for Fair Trading [2011] NSWCA 40

Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14, (1985) 157 CLR 17

Rava v Logan Wines & Anor [2007] NSWCA 62

Rural Press Ltd v Australian Competition and Consumer Commission (ACCC) (2002) 193 ALR 399

Shevill v Builders Licensing Board (1982) 149 CLR 620

Texts Cited:

Adrian J Bradbrook and C E Croft, Commercial Tenancy Law (4th ed, 2018, LexisNexis Butterworths).

Category:Principal judgment
Parties: Victor Toan Tran (first plaintiff)
Tamvic Pty Ltd (second plaintiff)
Binghua Guan (first defendant)
Guixing Jian (second defendant)
Walter Yaolong Guan (third defendant)
Perennial Growth Pty Ltd (ACN 166 554 721) (fourth defendant)
Representation:

Counsel:
Mr G Drew (plaintiffs)

Solicitors:
Meridian Lawyers (plaintiffs)
File Number(s): 2020/00301522
Publication restriction: None

Judgment

  1. Victor Tran conducted a dental practice in Villawood in premises leased from Binghua Guan (Mr Guan Sr) and Guixing Jian. The lease was terminated on 19 August 2020 at 7.25pm when Mr Guan Sr and Mrs Jian, through their son, Mr Walter Guan (Mr Guan), took possession of the property because of repeated failures by Mr Tran to meet his rental obligations.

  2. After prolonged negotiations the following day, late on 20 August 2020 Mr Tran was given a licence to occupy the premises until 1pm on 27 August 2020. Late on 27 August 2020, Mr Guan Sr and Mrs Jian again took possession of the premises. Mr Tran commenced proceedings against Mr Guan Sr, Mrs Jian, Mr Guan and Mr Guan’s company, Perennial Growth Pty Ltd, for return of, and damages for detinue and conversion of, dental equipment and goods remaining on the premises after 27 August 2020 which had, prior to 19 August 2020, been owned by Mr Tran (or, as events transpired during the hearing, by his company, Tamvic Pty Ltd, who was then joined to the proceedings).

The hearing

  1. The hearing was originally listed to commence on Thursday, 18 March 2021. By reason of a number of matters, including the health of Mr Guan Sr and Mrs Jian, the presence of travel restrictions as a result of COVID-19, the residence of Mr Guan Sr and Mrs Jian in New Zealand, the circumstance that Mr Guan Sr and Mrs Jian were not at all proficient in English, the appointment of Mr Guan as the tutor of Mr Guan Sr but not Mrs Jian, and the unwillingness of the defendants to retain an interpreter or any legal representation during the hearing, the hearing was prolonged and repeatedly adjourned, and its conclusion was delayed until 18 May 2022. During that period, the parties prepared a Scott Schedule in respect of the equipment and goods the subject of the claim by Mr Tran and Tamvic, and ultimately, orders were made by consent that the hearing be confined to liability in respect of 10 major items of equipment which were not disputed to have been left on the premises. Those items can be listed as:

  1. the main dental chair;

  2. a portable scaler unit;

  3. a suction unit;

  4. a compressor;

  5. an electrosurge unit;

  6. an x-ray unit;

  7. four dentist and assistant stools;

  8. an autoclave;

  9. a model trimmer; and

  10. a lathe.

Issues

  1. There was a substantial difference in the value the plaintiffs, on the one hand, and the defendants, on the other, attributed to the goods remaining on the premises, and to the 10 undisputed items, varying from several hundred thousand dollars to a little under $5,000. But questions of value were not ventilated at this hearing.

  2. Also left to any future hearing was the impact, if any, of the suspension of the dental licence of Mr Tran[1] that occurred shortly after the termination of the lease for reasons not directly connected to the non-payment of rent and termination of the lease.

    1. Affidavit, Victor Tran, 5 November 2020, at [14].

  3. The primary issue in the hearing concerned the ownership of the 10 undisputed items. The defendants assert that the lease provided for the forfeiture of those items on termination whereas the plaintiffs assert that they retained ownership of the 10 undisputed items because they were entitled to a reasonable period after termination to remove their equipment and goods, which was said to have been denied to them by the defendants.

  4. Thus, the major issues in the proceedings were as follows.

  5. First, did the lease, in the circumstances of the termination as it occurred, provide a reasonable period after termination for the plaintiffs to remove their goods before they were deemed to be abandoned and forfeited to the defendants.

  6. Secondly, if the plaintiffs were entitled to a reasonable period to remove their equipment and goods, and relevantly, the 10 undisputed items, were they given or denied that entitlement.

  7. The liability of the defendants for detention of the goods and converting them to their own use was also an issue in this hearing, but largely rested on the determination of ownership. The defendants did not dispute that they treated the 10 undisputed items as their own and refused to allow the plaintiffs access to collect them, when access was sought, for the reason that, at least at that stage, they regarded the items as belonging to Mr Guan Sr and Mrs Jian.

The lease

  1. The lease was the standard form 2007 Law Society of New South Wales Lease of commercial premises.

  2. The parties to the lease were Mr Guan Sr and Mrs Jian as lessor, and Mr Tran as lessee, for a term of three years from 8 March 2012, with an option to renew of two years from 8 March 2015. As things eventuated, the parties renewed the lease for one year and for a further three years, so that the lease and any option expired on 7 March 2019.

  3. Clause 12.4 of the lease provided that if the lessee was allowed to occupy the property after the end of the lease period, as the lessor did in this case after 7 March 2019, then:

“the lessee becomes a monthly lessee and must go on paying the same rent and other money in the same way that the lessee had to do under this lease just before the lease period ended”,

and the monthly tenancy was “on the same terms as this lease” with some immaterial exceptions. Either the lessor or the lessee could end the monthly tenancy by giving “1 month written notice to the other expiring on any date” and “anything that the lessee must do by the end of this lease must be done by the end of the monthly tenancy”. Each party had certain obligations of maintenance. [2] The lessee’s obligations included to “decorate the inside of the property in the last 3 months of the lease period (however it ends)…e.g. by repainting” failing which “the lessor can do it and the lessee must reimburse the lessor for the costs of the work”.

2. Cl 7.

  1. Of particular importance in the hearing was cl 12 of the lease which (absent cl 12.4 already considered) provided as follows:

“CLAUSE 12 FORFEITURE AND END OF LEASE

When does this lease end?

12.1   This lease ends -

12.1.1   on the date stated in item 3 in the schedule; or

12.1.2   if the lessor lawfully enters and takes possession of any part of the property; or

12.1.3   if the lessor lawfully demands possession of the property.

12.2   The lessor can enter and take possession of the property or demand possession of the property if -

12.2.1   the lessee has repudiated this lease; or

12.2.2   rent or any other money due under this lease is 14 days overdue for payment: or

12.2.3 the lessee has failed to comply with a lessor’s notice under section 129 of the Conveyancing Act 1919; or

12.2.4 the lessee has not complied with any term of this lease where a lessor's notice is not required under section 129 of the Conveyancing Act 1919 and the lessor has given at least 14 days written notice of the lessor's intention to end this lease.

12.3   When this lease ends, unless the lessee becomes a lessee of the property under a new lease the lessee must -

12.3.1   return the property to the lessor in the state and condition that this lease requires the lessee to keep it in; and

12.3.2   have removed any goods and anything that the lessee fixed to the property and have made good any damage caused by the removal.

Anything not removed becomes the property of the lessor who can keep it or remove and dispose of it and charge to the lessee the cost of removal, making good and disposal.

…

12.5   Essential terms of this lease include -

12.5.1   the obligation to pay rent not later than 14 days after the due date for payment of each periodic instalment (and this obligation stays essential even if the lessor, from time to time, accepted late payment);

12.5.2   the obligations of the lessee in clause 5.1.2 (dealing with outgoings);

12.5.3   the obligations of the lessee in clause 6.1 (dealing with use);

12.5.4   the obligations of the lessee in clause 7 (dealing with repairs);

12.5.5   the obligations of the lessee in clause 10 (dealing with transfer and sub-lease); and

12.5.6   the obligations of the lessee in clause 15 (dealing with GST).

12.6 If there is a breach of an essential term the lessor can recover damages for losses over the entire period of this lease but must do every reasonable thing to mitigate those losses and try to lease the property to another lessee on reasonable terms.

12.7 The lessor can recover damages even if –

12.7.1 the lessor accepts the lessee’s repudiation of this lease; or

12.7.2 the lessor ends this lease by entering and taking possession of any part of the property or by demanding possession of the property; or

12.7.3 the lessee abandons possession of the property; or

12.7.4 a surrender of this lease occurs.”

  1. In construing the lease, the Court must also bear in mind that the fundamental purpose of construction is "to ascertain the intention of the parties arising from the document as a whole and reading the document with such background information as was known by all the parties to it".[3] And:

“a contract that has been entered in a business context and is elliptical or ambiguous should be not read in a way that is commercially unlikely to be what the parties intended”.[4]

3. Rava v Logan Wines & Anor [2007] NSWCA 62 at [53].

4. Rava at [54].

  1. A capricious and unreasonable construction should be avoided.  So also should meanings that are "unrealistic or unlikely”. [5]   

    5. Rava at [54]-[55].

  2. It can be observed that the lease provides for four circumstances when termination can be effected without notice. Those circumstances are specified in cl 12.2, namely where the lessee repudiates the lease, [6] where rent or other money owing is 14 days’ overdue, [7] where the lessee has not complied with a notice under s 129 of the Conveyancing Act 1919, [8] and where there has been a breach of the lease, not within s 129, coupled with a 14-day notice of intention to terminate. [9] In any of these events, a period of one month’s written notice of termination under cl 12.4.3 is not required to end the monthly tenancy. Rather, by cl 12.1, the lease ends when the lessor enters and takes possession, or lawfully demands possession of the property. The parties agree that this occurred in the present case: the tenant was more than 14 days in arrears of rent, and at 7.25pm on 19 August 2020, Mr Guan Sr and Mrs Jian, by their son, Mr Guan, lawfully entered and took possession of the property.

    6. Cl 12.2.1.

    7. Cl 12.2.2.

    8. Cl 12.2.3.

    9. Cl 12.3.4.

  3. As no new lease was entered, the ending of the lease enlivened cl 12.3. Clause 12.3 required the lessee, when the lease ends, to return the property in the condition the lessee was required under the lease “to keep it in”, and, more relevantly for the present issues, “the lessee must … have removed any goods and anything that the lessee fixed to the property and have made good any damage caused by the removal”. Further, “[a]nything not removed becomes the property of the lessor who can keep it” or the lessor could remove and dispose of it, in which case, they can charge the lessee the cost of removal, disposal and making good.

  4. As cl 12.3 requires the lessee, when the lease ends, not to remove the goods, but to have removed the goods, the literal reading of the clause requires removal to have occurred on or before the time and date of the end of the lease.

  5. Mr Tran resists this construction. He relies on three matters: that there is an implied term that he has a reasonable period after termination to recover his goods; that the common law granted him an implied licence for a reasonable period to remove his goods; and that the literal construction of cl 12 would be wholly unreasonable and uncommercial because a party could lose a large amount of equipment through forfeiture merely by reason of a minor failure to pay rent.

  6. Mr Tran submitted that in the usual case where the lease ends by the effluxion of time, an obligation on the lessee to remove his goods prior to (or on) termination does not create any particular unfairness. In such a case, the lessee would be well aware beforehand of the impending termination. Thus, when a lease ends in accordance with cl 12.1.1, on the specified terminating date of the lease, [10] the lessee has notice by the lease of that event for some years. [11] Similarly, in a month-to-month tenancy under cl 12.4 of the lease, the end of the lease requires one month’s written notice under cl 12.4.3.

    10. In Item 3 in the schedule to the lease.

    11. Plaintiffs’ closing submissions filed 22 April 2022 (PCS), at [34].

  7. Further, Mr Tran submitted that if there is a breach of a s 129 notice under cl 12.2.3, or 14 days’ written notice of an intention to end the lease under cl 12.2.4, and even if the lessee has repudiated the lease under cl 12.2.1, [12] the lessee is aware that the lease is or is likely to end at a particular time, and so is taken to be aware of the obligation to remove goods prior to termination. The lessee is not, in these circumstances, caught out by the termination.

    12. T430/7-14.

  8. However, Mr Tran submitted that termination pursuant to cl 12.2.2 is different because the lessee is unaware of the possibility or likelihood of termination if it is based on unpaid rent. He submitted that:

“under the general law a tenant normally has a right of re-entry for a reasonable time for the purpose of removing goods (including removable fixtures) in circumstances where the tenancy has terminated without sufficient warning to enable the tenant to remove the goods”.[13]

13. PCS at [36].

  1. This submission is based upon the judgment in PL Town Hall Pty Ltd v The Trust Company Ltd,[14] where Slattery J at [54] stated:

“The common law provides for such a right. Under the general law a tenant normally has a right of re-entry for a reasonable time for the purposes of moving goods in circumstances where the tenancy was terminated without sufficient warning to enable the tenant to remove the goods and the landlord does not have a possessory lien over the goods: Haniotis v Dimitriou [1983] 1 VR 498 and Martin v King (1996) 7 BPR 14,681. This right also extends to the removal of fixtures: McMahon’s Transport Pty Limited v Ebbage [1999] 1 Qd R 185 and Kyriacou v Manakis [2006] NSWSC 804. But such rights are subject to modification by agreement between the parties either under the lease or even after termination.”

14. [2021] NSWSC 391.

  1. Some differences between the present case and the PL Town Hall decision may be noted. That decision was in respect of interlocutory relief,[15] and thus the value of the decision as a precedent for final relief is reduced. [16] No final decision was made about the application of this common law right of re-entry or its modification by the lease. The decision is of limited assistance in resolving the construction of the present lease.

    15. PL Town Hall at [11].

    16. Rural Press Ltd v Australian Competition and Consumer Commission (ACCC) (2002) 193 ALR 399 at 439 [147].

  2. Although the lease in the PL Town Hall case did not include a cl 12 in the same terms as the present case, the relevant cl 32 in that lease was similar. [17] It provided:

    17. At [16].

“32.1 When this Lease ends:

(a) the Tenant must:

…

(ii) make sure all the Tenant’s property is removed by the Terminating Date;”

and

“32.2    Anything left at the Premises will become the Landlord's property and the Landlord may keep it or dispose of it. Unless the Landlord gives the Tenant notice to the contrary, the Tenant must leave the shopfront which will become the Landlord’s property for no cost.”

  1. The lessee in PL Town Hall sought and obtained relief against forfeiture but failed to comply with a condition of relief. [18] As in this case it sought to recover goods,[19] but it also sought a declaration that the purported termination was invalid,[20] whereas a valid termination was not in issue in the present case. Further, much of the relevant goods in PL Town Hall were pharmaceutical products which are “a special case”[21] because the goods “cannot be resold by third parties”. [22] And the lessee there proposed to pay for access to the premises in an amount agreed to cover the lessor’s cost of supervision,[23] the premises were vacant,[24] and the landlord offered arrangements for access. [25] None of these features were present here: the items in dispute do have some value to the lessor and are, to some extent at least, being used by the lessor, and the lessee has tendered no proposal to cover the costs of access to the premises, a period which the lessee asserts will be three weeks. There has been no proposal by either party for access.

    18. At [4]-[5].

    19. At [7].

    20. At [22].

    21. At [36].

    22. At [32].

    23. At [35].

    24. At [5].

    25. At [38].

  2. Nevertheless, it may be accepted that under the general law and subject to the provisions of the lease, the tenant normally has a right of re-entry for a reasonable time for the purpose of removing goods in circumstances where the tenancy has been terminated without sufficient warning to enable the tenant to remove the goods. [26]

    26. Adrian J Bradbrook and C E Croft, Commercial Tenancy Law (4th ed, 2018, LexisNexis Butterworths) at 578 [16.36], City West Centre Pty Ltd v Galaxy Media Pty Ltd (1998) 9 BPR 16,313 at 16,315.

  3. Reference was also made to Palermo Seafoods Pty Ltd v Lunapas Pty Ltd (No 2),[27] where Young AJA stated:

“The general law, which is subject to specific contract, is that if there is a tenancy at will, as existed here at the time the landlord took possession, the tenant does not even have a reasonable time to remove his or her fixtures and chattels, see Doe d Nicholl v M'Kaeg (1830) 10 B & C 721; 109 ER 618. However, both that case and the equity case of Spurgin v White (1860) 7 Jur (NS) 15; (1890) 2 Giff 473; 66 ER 198 suggest that the tenant has an implied licence to enter the premises and remove chattels for a reasonable time.”[28]

27. [2014] NSWSC 1323.

28. At [39].

  1. There is, with great respect, some difficulty in reconciling the two statements made in this passage. Nevertheless, I read the passage as accepting, under the later stated principle, that under the general law and subject to the lease, the tenant does have an implied licence for a reasonable time to remove its chattels, a reasonable time being subject to, or informed by, “sufficient warning”. Whether the lease is a “tenancy at will” is presumably a relevant consideration. In Palermo, the landlord was found to have determined the lease “prematurely”[29] unlike here.

    29. Palermo at [52]-[53]. The plaintiffs did not rely on the finding in Palermo Seafoods Pty Ltd v Lunapas Pty Ltd [2014] NSWSC 792 at [68] that cl 12.2.2 was “inapplicable” because it conflicted with cl 12.4 (although the latter clause was not concerned with a rental default).

  2. Still, the question remains: was the tenancy in this case “terminated without sufficient warning” as to enliven the implied licence; did the terms of the lease modify or extinguish the general law licence; and did the circumstance that some of the undisputed items, such as the dental chair, were fixed to the premises and required plumbing and electrical tradespersons and others to detach and remove them, distinguish the undisputed items from conventional goods. Neither PL Town Hall nor Palermo determine these matters.

  3. In Collier v Howard, [30] McLelland J rejected a tenant’s application to regain possession, but stated in respect of chattels, but apparently not fixtures:

“Her right to recover her goods from the plaintiff depends upon the making by her of a formal demand upon him to make those goods available to her or her agent at the entrance to the unit, or some other place designated by her which, as already stated, would not place any appreciable burden on the plaintiff, or to which the plaintiff is prepared to have them taken, and failing which, to permit her to enter the unit and remove them (see Fitzgerald v Kellion Estates (1977) 2 BPR 9181, Thorogood v Robinson (1845) 6 QB 769; 115 ER 290; Deeble v McMullen (1857) 8 Ir C L Rep 355, 362). No such formal demand has yet been made by the defendant.”

30. (Supreme Court (NSW), McLelland CJ in Eq, 23 April 1996, unrep).

  1. This statement indicates additional considerations: was there a formal demand in the form required, and would it place an appreciable burden on the defendants.

Was the lease terminated “without sufficient warning” to Mr Tran

  1. As indicated earlier, Mr Tran did not dispute that termination of the lease pursuant to a cl 12.2.1 repudiation, a cl 12.2.3 failure to comply with a notice of breach, or a cl 12.2.4 breach and 14-day notice of intention to terminate does not require notice of termination by the lessor. It is difficult to see why the breach of the essential term to pay rent within 14 days of the due date [31] is, at least in the circumstances of this case, relevantly different, or not equivalent to repudiation.

    31. Clause 12.5.1.

  2. Usually the breach of an essential term constitutes repudiation of the lease. Not all failures to pay rent would be a breach of an essential term. [32] But here, the payment of rent and outgoings was expressly provided in the lease to be so. [33] Further, Mr Tran had a history of non-payment or underpayment of rent and outgoings since January 2019, notwithstanding service of notices. Mr Tran failed to pay any rent for the previous three months before termination. [34] In this respect, Mr Tran’s conduct was similar to the appellant in Progressive Mailing House Pty Ltd v Tabali Pty Ltd,[35] where there was a repudiation constituted by:

“a refusal to carry out its obligations according to the terms of the unregistered lease and a persistence in carrying them out in a way substantially inconsistent with these terms”.[36]

32. See Shevill v Builders Licensing Board (1982) 149 CLR 620.

33. Cl 12.5.

34. See Amended Defendants’ Chronology, which was, subject to relevance, accepted to be accurate by the plaintiffs.

35. [1985] HCA 14, (1985) 157 CLR 17.

36. (1985) 157 CLR 17 at 37.

  1. Accordingly, I am not satisfied that there is any material difference between termination of the lease under cll 12.2.1 and 12.2.2 in the circumstances of this case. If notice is not required under the first, as Mr Tran accepted, there is no basis to require it under the second. Just as the lessee is taken to be aware that its repudiation of the lease enlivens a power in the landlord to terminate the lease thereby forfeiting the residue of the lease and the unremoved goods under cl 12, they are likewise aware of that same power by the failure to pay rent as required. The “sufficient warning” is sounded by the terms of cl 12 and the tenant’s conduct in non-payment of rent.

  2. Further, the textual form of cl 12 in requiring notice in circumstances outside cl 12.2, namely in cl 12.4.3, and in not requiring a formal notice to terminate under cll 12.2.1, 12.2.3 or 12.2.4, indicates that a notice of termination was also not required in the circumstances of cl 12.2.2. The circumstances in which cll 12.2 and 12.3 operate are each circumstances of which the tenant is well aware and relevantly warned of the potential for the lease to be terminated and for unremoved goods to “[become] the property of the lessor”, whether because the lessor has received a notice of intention to terminate under cl 12.2.4, knew that he had failed to comply with a s 129 notice under cl 12.2.3, had a rental obligation unfulfilled, or had repudiated the lease. That the plaintiffs accept that the words “must…have removed any goods” provide for the landlord to acquire ownership without formal notice under cll 12.2.1, 12.2.3 and 12.2.4 leaves no room for a different requirement such as formal notice when cl 12.2.2 is involved.

Relief against forfeiture

  1. The plaintiffs submit that it cannot have been intended that the lessor could gain ownership of goods of potentially substantial value by a mere “relatively minor rental default”. [37] This is a misdescription of Mr Tran’s non-payment of rent: it was not minor, but prolonged, substantial, and, as will appear below, deliberate.

    37. T535/7-16.

  2. The plaintiffs concede that they exclude from consideration their opportunity to seek relief against forfeiture. Relief against forfeiture was not sought in these proceedings and is not within the jurisdiction of this Court. Yet it was and potentially remains available to Mr Tran, at least in respect of the goods. As long as the landlord’s costs, expenses, interest and rent are paid, there may be no reason why a court should not grant relief, and even though relief is not granted as of right, the cases of its refusal are more the exception. [38]

    38. Pioneer Quarries (Sydney) Pty Ltd Permanent Trustee Co of NSW Ltd (1970) 2 BPR 9562 at 9571-9577, see also Greek Macedonian Club Limited v Pan Macedonian Greek Brotherhood NSW Limited [2007] NSWSC 92 at [72].

  3. In Greek Macedonian Club Limited v Pan Macedonian Greek Brotherhood NSW Limited,[39] Brereton J stated:

“Relief against forfeiture is ordinarily given to a [lessee] whose sole breach is non-payment of rent, where the rent has now been paid, although the matter always remains discretionary [Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of NSW Limited (1970) 2 BPR 9562]. The burden of establishing that a forfeiture for non-payment of rent should not be relieved against, where all arrears of rent have been paid and where no interested third parties have intervened, is a very heavy one which normally involves demonstrating that, by reason of the conduct of the lessee, or otherwise, the grant of relief would be inequitable [Pioneer Quarries; Steiper v Deviot Pty Ltd (1977) 2 BPR 9602; Tutita Pty Ltd v Ryleaco Ltd (1989) NSW ConvR 55-486; Hayes v Gumbola (1986) 4 BPR 9247; Cicinave Pty Ltd v Jasco Pty Ltd (1989) 5 BPR 11,139; Hace Corp Pty Ltd v F Hannan (Properties) Pty Ltd (1995) 7 BPR 14,326, 14,329; Mineaplenty Pty Ltd v Trek 31 Pty Ltd [2006] NSWSC 1203, [67]].”[40]

39. [2007] NSWSC 92.

40. At [72].

  1. Whether the reason why no such relief was sought by Mr Tran was because the lease had become a month-to-month tenancy, or because Mr Tran was unable to operate the dental practice because of the suspension of his licence,[41] or because the continued flagrant non-payment of rent or the broken relationship of the parties may have rendered this case exceptional so that relief might have been refused, or for some other reason, is not clear. But the existence of such a remedy, ordinarily available, in respect of both the residue of the lease and separately the unremoved goods, means that it would be incorrect to approach the question of construction on the basis that the transfer of property to the lessor by forfeiture on termination of the lease will unfairly operate to deprive the lessee of his goods. Questions of fairness could be fully ventilated in proceedings for relief against forfeiture, and thus, in the ordinary course, the terms of a lease rendering unremoved goods to become the property of the lessor on termination without notice would not deprive the lessee of an avenue of recovery.

    41. Affidavit, Victor Tran, 5 November 2020, at [14].

Implied term

  1. The plaintiffs also asserted a term implied as a question of fact under the BP Refinery (Westernport)[42] and Codelfa Construction Pty Ltd v State Rail Authority (NSW) [43] principles.

    42. (1977) 180 CLR 266.

    43. (1982) 149 CLR 377.

  2. I have earlier indicated acceptance of an implied licence as a matter of law, subject to the lease and “sufficient warning”. But there are several reasons why such a term is inconsistent with both cl 12.3 and the structure of cl 12 as a whole. The existing terminology is neither unreasonable nor lacking in business efficacy, at least in the context where relief against forfeiture is available, and obviousness and clear expression of an implied term is not readily perceived when the implied term asserted applies to only one aspect of cl 12.2 and not to the others. That this lease is a standard form lease is not a factor militating against the ordinary meaning of the words, or a matter in favour of an implied term.

  3. For all these reasons, I am of the view that upon termination, the goods on the premises became the property of the lessor.

Tamvic Pty Ltd

  1. The Scott Schedule [44] asserted that five of the undisputed items belonged to Mr Tran and five to Tamvic. That was not conceded. Mr Tran gave evidence that certain of the items used in the business were transferred to Tamvic. He also said, “Most of the items and equipment [for the purposes of the surgery] were purchased by me personally, although some of the more recent items and equipment may have been purchased under Tamvic Pty Ltd”. Of the five items asserted in the Scott Schedule to belong to Tamvic, Mr Tran says the main dental chair was purchased in December 2009, [45] the suction unit in April 2018, and the compressor in June 2016. [46] These items were each apparently purchased by Mr Tran. [47] He made no reference to the electrosurge unit or the lathe.

    44. Exhibit 1.

    45. Affidavit, Victor Tran, 5 November 2020, at [9(a)]; CB 1/1 at 249.

    46. Affidavit, Victor Tran, 5 November 2020, at [9(f)]; CB 1/1 at 250.

    47. Affidavit, Victor Tran, 5 November 2020, at [9(a)], [9(f)]; CB 1/1 at 249-250.

  2. Accordingly, there is no direct evidence of the transfer by Mr Tran of the five items alleged in the Scott Schedule to belong to Tamvic. A depreciation schedule of Tamvic dated 30 June 2019 lists a dental chair and the compressor as part of Tamvic’s property (having a depreciated value of about $28,000 as at the time of termination), [48] but does not specifically refer to the other three items: the suction unit, the electrosurge unit or the lathe. As Mr Tran transferred certain unspecified items, and two of those items, the chair and the compressor, are listed in the depreciation schedule, I am satisfied on the balance of probabilities that those two items were transferred to Tamvic. I am not so satisfied in respect of the other items, that is, the five said in the Scott Schedule to be owned by Mr Tran, or the other three items said there to be owned by Tamvic.

    48. See CB 1/2 at p 604.

  3. Mr Tran affirmed[49] that he has “full custody and possession of [dental items and equipment]” and submitted the same, namely that he:

“had full custody and possession of all equipment for the purposes of operating his dental practice and, insofar as Tamvic may be the legal owner of any items, was (and remains) personally accountable to Tamvic for the maintenance and safekeeping of that equipment”.[50]

That Mr Tran has “full custody and possession” is not sufficient to deprive Tamvic of its ownership interest. Nor is Tamvic’s ownership avoided by the lease of Mr Tran even if Tamvic is, as it must be (since Mr Tran is its controlling mind), aware of the terms of the lease. The provisions of cl 12 would not ordinarily be read as extending to the goods of third parties under the nemo dat principle. But this is subject to two matters.

49. Affidavit, Victor Tran, 3 February 2021, at [4].

50. PCS at [73].

  1. First, things affixed to the land become part of the land that is owned by the lessor. The dental chair is affixed, both by plumbing works and electrical works. There is no evidence of whether the compressor is a fixture. Any entitlement to remove a fixture is governed by the lease, and Tamvic is in no better position than Mr Tran in respect of fixtures. Any right in the lease to remove fixtures belongs to Mr Tran.

  2. Secondly, Mr Tran submits that in respect of Tamvic’s goods, including the dental chair and compressor, he has full custody and possession. This suggests that any rights of Tamvic are postponed in favour of Mr Tran’s rights to possession. There was no evidence that Tamvic, as the owner, had any immediate right to possession, and Mr Tran’s entitlement to “full...possession” might even include for the life of the goods. There seems to be no reason why Mr Tran, who has the right to possession for an indefinite time, cannot abandon his rights to the lessor, at least in the absence of some evidence that his rights with regard to Tamvic’s goods are limited.

  3. Ordinarily, in an arm’s length lease or hire of goods, these matters would be regulated by an agreement, but in this case, no such agreement exists or at least, there is no evidence of it. There was no evidence about Tamvic’s rights against Mr Tran to recover the goods in circumstances similar to the present. I am not prepared to infer that Tamvic had an immediate right to possession without evidence of that, which the plaintiffs have elected not to provide. Nor is there evidence that Tamvic requested or demanded an entitlement to collect its goods. The plaintiffs did not assert a difference between the rights of Mr Tran and Tamvic.

  4. In these circumstances, the dental chair, fixed to the premises by plumbing and electrical works, whether Tamvic or Mr Tran be the owner, is part of the landlord’s property and I am not persuaded that the compressor is different. I am not satisfied that Mr Tran or Tamvic has an entitlement to recover any of the ten undisputed items.

  5. Whether Tamvic has an entitlement which may arise from a proper demand and proof of its current entitlement to possession, which may survive this decision, is not a matter I am called upon to decide.

Credit

  1. Mr Guan and Mr Tran gave evidence. Neither were impressive. Mr Guan was argumentative. Mr Tran gave answers that I could not accept to be honest, such as his excuses that he did not pay the rent because he had changed banks or because his accountant told him not to pay, excuses which were not supported by evidence other than from his own mouth. I would not rely on the oral evidence of either witness, and preferred the contemporaneous documents. In particular, I am persuaded that since March 2019, when he was on a month-to-month tenancy, Mr Tran had decided not to pay rent or other moneys unless he was compelled to do so.

  2. Once the lease was terminated and Mr Tran needed possession, he readily found some funds to pay. That he did not pay the full amount owing, but still owed approximately $3,202.32 in rent, $1,760.20 in water bills, and $230.67 in council rates, on his own account [51] reflects that he wished to pay as little as would be sufficient. The $4,000 paid for a licence from 20 to 27 August 2020 is not a credit against the money owed.

    51. Affidavit, Victor Tran, 19 October 2020, at [50], [55] and [58]; CB 1/1, pp 27-28.

A reasonable period

  1. The second issue – whether the plaintiffs in fact had and failed to avail themselves of a reasonable period to remove the goods – only arises if the plaintiffs are successful on the first issue, namely that the plaintiffs possessed such an entitlement. As I have found against that, strictly the issue does not arise. However, as it was argued at some length, I propose to make some brief comments about it.

  2. At 8:58am on 19 August 2020, Mr Tran received a text in the following form:

“Hi Victor, you can not run your dentist until you are paid rent and arrears in full.

I am officially suspending your lease as today, you can not use the premises illegally.

Locksmith has been booked to change all locks on the premise tomorrow 20/08/2020 9:30am. Cost of locksmith will be added to the total cost you have to pay to re-state the lease.” [52]

52. CB 1/1, p 98.

  1. Strictly, this is not a “demand” for possession of the premises, but rather notice that possession will be taken the next day. In fact, the locksmith attended that evening. Knowing by this notice that the lease was about to be terminated, Mr Tran ignored it, [53] and took no steps to remove his goods and fixtures. This was the latest example of Mr Tran apparently ignoring frequent communications from January 2019, including 13 phone calls in the week prior to termination, all concerned with rental and outgoing arrears. [54]

    53. See affidavit, Victor Tran, 20 October 2020, at [8]-[9]

    54. See schedule attached to first, third and fourth defendants’ closing submissions, 13 May 2022, accepted by the plaintiffs (T449/27-41).

  2. During the morning of 20 August 2020, Mr Tran deposed that he “phone[d] a locksmith to attend the premises and let me into the building”. Later that morning, Mr Guan arrived, and negotiations proceeded until late in the evening, when the parties signed a document in the following form:

“(1) All parties (Landlord & tenant) agree to meeting at Villawood McDonald store at 1pm on 27/8/20 for discussion on the length of time for notice of termination of contract of the lease.

(2) The landlord Walter gives the tennant Victor the key to the office on the payment of $4,000.00 on 30/03/2020.

(3) Mr Walter nor a member directed by Walter to attend the property until the meeting on the 27th August 2020.”

  1. Mr Tran was thus granted a licence to the premises, to be undisturbed by Mr Guan, from 21 August 2020 until 1pm on 27 August 2020. Mr Tran made no attempts to remove his goods or equipment. He argued that there was the prospect or possibility of a new lease. That is so. But the consequences of cl 12.3 were exempted only if Mr Tran “becomes a lessee of the property under a new lease” and that did not occur. This is, as indicated earlier, not to deny the possibility or even likelihood that Mr Tran may have been entitled to relief against forfeiture, an entitlement which may still exist, but that he did have a reasonable period to remove his goods, on 19 August 2020, when he was on notice that termination was imminent, and after termination, for a period on 20 August 2020, when he obtained access, and from 21 August 2020 to 27 August 2020, when he had uninterrupted possession of the premises.

  2. Mr Tran referred to Mr Guan’s text message to his wife at 12:41pm on 25 August 2020. It included:

“Lease had ended. My parents have full possession of the shop/dentist surgery and everything inside the premise, as well as everything outside the shop which is attached and fixed to the wall or the building.

The decision my parents would make based on how you and your husband reacted now towards the amount owing and other conditions were met, it to whether they will start a completely new lease with your husband. The lease, if we are to make, will be different in price, because it will include all equipments and items that my parents now own as well as the price level my parents see fit.

Currently, the $4000 your husband paid on the 19th August 2020, is only to allow your husband to temporarily use the premise and everything inside the premise now owned by my parents until this Thursday 1pm, as well as getting your husband the condition he wanted that before Thursday 1pm, even our family has now full possession of the property, I or anyone under my instructions, will not visit or come inside the property. On the other hand, your husband has only temporarily use until this matter will be finalised on Thursday 1pm meeting. He has no lease since I entered the shop on 19/8/2020 7:25pm. [55]

55. Affidavit, Victor Tran, 19 October 2020, at [35]; CB 1/1, pp 22-23 and CB 1/1 pp 124-126 [part of text message missing].

  1. At this time, for the first time, Mr Guan asserted that the goods on the premises belonged to his parents, Mr Guan Sr and Mrs Jian. Mr Tran thus had about five and a half days before an assertion of ownership of the tenant’s goods and fixtures was made.

  2. At no time did Mr Tran accept Mr Guan’s assertions. On 27 August 2020, when it became apparent that no new lease was forthcoming, Mr Tran commenced to remove his goods before locks were changed sometime later on that date.

  3. Accordingly, Mr Tran had seven and a half days to remove his goods, only two of which were at a time when Mr Guan was asserting ownership rights on behalf of his parents. No tradespeople, electricians or plumbers were requested to commence removal of the dental chair. Apart from some goods carried out late on 27 August 2020, Mr Tran had taken no steps in the period 19 August 2020 to 27 August 2020 to remove any goods or fixtures within the time of termination in order to comply with cl 12, or within a reasonable period of approximately seven days thereafter.

  4. Is seven and a half or five and a half days a reasonable period? Mr Tran gave evidence that three weeks would be necessary to effect removal of the goods. [56] He gave evidence that this period was necessary to arrange the removalist and specialists to uninstall the equipment, transport and install it in new premises. There was alternative evidence of a need for three hours for the dental chair to be disconnected, [57] a period which I find more realistic. I am satisfied that removal of goods could occur within two days in the ordinary course and within one day if urgently sought.

    56. Affidavit, Victor Tran, 23 December 2020, at [16]; CB 1/2, p 350.

    57. CB 6, p 312.

  5. No removal of goods occurred because Mr Tran elected not to remove them. He gave no evidence of why he did not take any steps to remove them. One may suppose it was because he entertained a hope of further occupation or a new lease, or alternatively, because he saw that the prospect of a new lease would be diminished by him removing all his goods. But this is not an answer to the circumstance that he had sufficient time to remove his goods and elected not to do so.

  6. Accordingly, in the circumstances of this case, even if a reasonable period were contemplated by the lease, Mr Tran had such a period and did not avail himself of it. It was not until 6 October 2020, some six weeks after the lease had been terminated, that Mr Tran unequivocally sought an opportunity to remove the goods, alone, rather than coupling that request, as he did on 9 September 2020, with a demand for a further period of occupation. [58]

    58. See Exhibit VT-1 to the affidavit of Victor Tran, 19 October 2020; CB 1/1, p 66.

Other issues

  1. There is, in the circumstances, no utility in dealing further with questions of detinue and conversion. There may remain other issues to be determined in the matter even if this decision creates an estoppel by judgment in respect of any other items proved to have been left on the premises. I will list the matter before the Judicial Registrar for further directions.

Costs

  1. In respect of costs, the defendants have been largely successful and should ordinarily have their costs. However, as they are self-represented, they are only entitled to disbursements, and are not entitled to any time-based costs for appearances by the defendants themselves. [59] I propose to make such an order.

    59. Preston v Commissioner for Fair Trading [2011] NSWCA 40 at [183] applying Cachia v Hanes (1994) 179 CLR 403.

  2. If any of the parties seek an alternative costs order, they should avail themselves of the power in r 36.16 of the Uniform Civil Procedure Rules 2005 to make application within 14 days. An application by email to my associate by 3pm on Monday, 6 June 2022 will be treated as enlivening those rights.

Orders

  1. Proceedings in respect of the 10 undisputed items dismissed.

  2. Plaintiffs to pay the defendants’ disbursements in maintaining the defence, such disbursements not to include any time-based costs and not to disturb any existing costs orders.

  3. List the matter for further directions on Thursday, 9 June 2022 at 9.30am before the Judicial Registrar.

**********

Endnotes

Amendments

27 July 2022 - On the coversheet where the parties are listed: typographical error with the first name of third defendant. Corrected to "Walter".

Decision last updated: 27 July 2022

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