Trend Ceramics Pty Ltd (as Trustee for the Trend Superannuation Fund) v Hub Group of Companies Pty Ltd [No 2] - [2015] WADC 73

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: TREND CERAMICS PTY LTD (as Trustee for the TREND SUPERANNUATION FUND) -v- HUB GROUP OF COMPANIES PTY LTD [No 2] [2015] WADC 73

CORAM: PRINCIPAL REGISTRAR MELVILLE

HEARD: 5 MARCH 2015

DELIVERED : 19 JUNE 2015

FILE NO/S: CIV 2005 of 2014

BETWEEN: TREND CERAMICS PTY LTD (as Trustee for the TREND SUPERANNUATION FUND)
Plaintiff
AND
HUB GROUP OF COMPANIES PTY LTD
First Defendant
PASQUALE FORGIONE
Second Defendant

Catchwords:

Breach of leave - Calculation of damages - Admissibility of hearsay evidence in affidavits

Legislation:

Evidence Act 1906
Rules of the Supreme Court 1971

Result:

Interlocutory judgment for the plaintiff
Damages to be amended

Representation:

Counsel:

Plaintiff:     Ms J Henderson
First Defendant            :     Mr A Metaxas
Second Defendant        :     Mr A Metaxas

Solicitors:

Plaintiff:     Borrello Legal
First Defendant            :     Metaxas & Hager
Second Defendant        :     Metaxas & Hager

Case(s) referred to in judgment(s):

Blythe v The State of Western Australia [2008] WASCA 10
Spotlight Pty Ltd v NCON Australia Ltd [2012] VSCA 232

PRINCIPAL REGISTRAR MELVILLE: Trend Ceramics Pty Ltd (Trend Ceramics) seeks an order that the defendants pay the sum of $186,175.18, or alternatively damages to be assessed, together with interest on the amount ordered to be paid either at the rate of 15% per annum or 6% per annum pursuant to s 32 of the Supreme Court Act 1935. Additionally Trend Ceramics seeks a full indemnity in respect to costs or, alternatively, costs to be taxed.
To summarise the contents of the statement of claim, Trend Ceramics says it is entitled to these orders because the first defendant has failed to pay rent, rates, taxes and variable outgoings pursuant to the terms of the lease of property owned by Trend Ceramics to Hub Group Companies Pty Ltd (Hub Group) as required by the terms of a lease dated 22 May 2009 which was extended for a period of two years commencing 15 May 2012. Trend Ceramics says the second defendant (Mr Forgione) is liable for Hub Group's default by reason of the fact he guaranteed claimant of more monies payable by Hub Group under the lease.
Trend Ceramics is entitled to bring an application for summary judgment pursuant to O 14 of the Rules of the Supreme Court 1971. By O 14(2) the application is to be supported by an affidavit verifying the facts upon which the claim to which the application relates is based and stating that in the deponent's belief there is no defence to that claim. Order 14(2) goes on to provide that unless the court otherwise directs an affidavit may contain statements of information or belief with the sources and grounds thereof.
Order 14 r 3 provides that on hearing the application for summary judgment then unless the application is dismissed, which in the absence of consent it is only likely to arise where the affidavit fails to verify the facts upon which the claim is based or the application is in some other way misconceived, or the defendant satisfies the court that there is an issue or question in dispute which ought to be tried or for some other reason to be a trial of the claim, the court may give judgment for the plaintiff on the claim or part thereof as may be just having regard to the nature of the remedy or a relief claim.
The requirement that the affidavit verify the facts in which the claim or part of the claim is brought, requires the affidavit in support to verify the essential elements of the cause of action upon which the application is based. Thus, the existence of an affidavit that fails to verify various facts that are pleaded in the statement of claim but which facts are not essential to the cause of action is not fatal to the success of the summary judgment application.
Where the affidavit refers to statements of information or belief it is essential the source of that information is identified and the reasons why it is believed is stated. A proposition of fact within an affidavit constituted by a statement of information and belief which does not state the source of the information or belief is irregular and inadmissible as evidence. In Blythe v The State of Western Australia [2008] WASCA 10 the Court of Appeal, at [43], observed objections to various paragraphs of an affidavit should have been upheld on the basis the evidence was hearsay and inadmissible unless made admissible by O 37 r 6(2)(a). In essence, those parts of an affidavit that fail to comply with O 37 r 6 are inadmissible and should be struck out. Order 37 r 6(3A) informs the operation of O 14 r 2(2) insofar as it requires affidavits containing statements of information of belief to set out the sources or grounds of that information or belief.
Finally, it is to be observed that this is not necessary where documents adduced in evidence which might otherwise be objectionable on the grounds of hearsay are admissible by force of statute. More particularly I refer to s 79C of the Evidence Act 1906 which allows business records to be adduced into evidence without the need to call the author of those records as a witness.

The evidence

Objections to the affidavit

Trend Ceramics relied principally on the affidavits of Mr Frank Elio Spiccia dated 10 October 2014 and 25 February 2015. A number of the objections to the contents of the affidavit of Mr Spiccia dated 10 October 2014 subsequently fell away as a result of the filing supplementary affidavits. Most of the remaining objections were in respect of the failure by Mr Spiccia to state the source and grounds of his information or belief, that some paragraphs affidavit were argumentative, that other paragraphs did a little more than paraphrase or repeat the terms of the lease that was in fact annexed to the affidavit itself and that copies of the invoices rendered by Trend Ceramics to Hub Group and annexed to the affidavit were secondary evidence.
The objections insofar as they complained of statements of information and belief not being sourced or explained were upheld with the effect that pars 4, 14, 19, 27, 34 and 37 were struck out.

The remaining evidence

The remaining paragraphs of the affidavit of Mr Spiccia dated 10 October 2014 establish that he was at all relevant times a director of Trend Ceramics. Whilst a complaint was made that there was no evidence Mr Spiccia was authorised to give evidence on behalf of the plaintiff, I conclude that in his capacity as director and having regard to the contents of his affidavit, the question of whether he was authorised or not is immaterial, as he was a witness to the material facts. However, in any event, the fact that he swore an affidavit that was filed by Trend Ceramics and relied upon by Trend Ceramics permits of an inference, which I draw, that he was authorised by Trend Ceramics to give evidence on its behalf.
I regard the relevant or essential elements of the cause of action as follows:
1.the plaintiff exists as a legal entity;
2.the defendant exists as a legal entity;
3.there was a lease between the plaintiff and the defendant for premises located at Unit 5, 10 – 12 Main Street, Osborne Park Western Australia entered into on 22 May 2009 for a term of 3 years commencing 15 May 2009 and expiring 14 May 2012 with an extension of the lease for the period 15 May 2012 to 14 May 2014;
4.that the second defendant guaranteed the performance of the first defendant's obligation under the lease;
5.that the first defendant has failed to make payment of its obligations under the lease as alleged in the statement of claim;
6.the second defendant has failed to make payment of the first defendant's obligations pursuant to the guarantee.
Mr Spiccia deposes to the plaintiff being the registered owner of premises known as Unit 5, 10 – 12 Main Street, Osborne Park, Western Australia which is more particularly known as Lot 414 and Lot 415 on Plan 2453 and being the whole of the land in certificates of title volume 1759 folio 149 and folio 150, copies of which are annexed as FES 1.
The defendant's counsel also submitted there was no evidence that Trend Ceramics was the trustee for the Trend Superannuation Fund. In this regard my view is as follows:
1.That Trend Ceramics be proven to be the trustee of the Trend Superannuation Fund is irrelevant to the cause of action. If it is the trustee of the Trend Superannuation Fund it is the legal owner of the land and has the right to enter into a lease of the land. If it is not the trustee of the Trend Superannuation Fund, then it remains the legal owner of the land and has the right to enter into a lease of the land.
2.The first defendant and second defendant entered into a lease of the land (par 3 of the affidavit of Frank Spiccia). The lease is annexed as FES 2 and is signed by Hub Group and Mr Forgione. In my view the signing of the lease by Hub Group and Mr Forgione, a lease in which the landlord is described as 'Trend Ceramics Pty Ltd as trustee of the Trend Superannuation Fund' is an admission of this fact by the first and second defendants. It seems inconceivable that the first and second defendants would go and expend the time and money associated with endeavouring to obtain possession of Unit 5 from an entity that did not exist or have authority to enter into the lease as represented.
3.In any event a superannuation deed was produced by Mr Frank Spiccia as an annexure to his affidavit of 25 February 2015 with a chain of variations culminating in a deed of 15 August 2005, demonstrating that Trend Ceramics is the trustee of the Trend Superannuation Fund.
The lease annexed to the affidavit of Mr Spiccia of 10 October 2014 provides that Hub Group is required to pay equal monthly instalments (cl 4.1) and to pay for electric light, power, water and gas and other utility charges and the landlord's 'variable outgoings' (cl 5). Depending on the circumstances, those costs require evidence to be produced in order that they can be calculated. For example, where the plaintiff seeks to recover any of the costs dealt with in cl 5.2 or cl 5.3, the amount payable by the defendants might be calculated by the proportion the leased premises has to the 'total lettable area'. The evidence bearing on the costs claimed under these clauses does not demonstrate whether they have been calculated by reference to the total lettable area or, if so, how they were calculated.
The evidence of Mr Spiccia is that on or about January 2013 Hub Group ceased making payments due under the lease, or any payments at all, and that on 15 October 2013 Trend Ceramics' solicitors sent to Mr Forgione a default notice which notice is annexed to his affidavit as FES 6. He goes on to depose that on 8 November 2013 by way of an email which was attached as FES 7, Mr Forgione proposed to pay the overdue amounts in five instalments but that notwithstanding, no payment was in fact made.
Mr Spiccia also deposed to the facts that Trend Ceramics took back possession of the premises on or about 14 May 2014 and that the premises had not been made good. This was due to a failure to remove signage, non‑working lights, broken blinds, unpainted walls, unremoved stickers, and uncleaned carpets, windows, sinks, bathrooms and unremoved data cables.
Mr Spiccia annexed to his affidavit copies of invoices issued in the name 'The Trend Superannuation Fund' commencing 1 January 2013 which sums totalled $211,248.96.
The defendant took objection to the annexure of the invoices on the basis that they were secondary evidence. Insofar as the objection is, if properly understood, a complaint the 'copies' are 'secondary evidence' it appears to me the objection is really one that the plaintiff has failed to produce the best evidence, being the original invoices.
In that regard, given the originals would have been sent to the defendant, it seems to me the copies are the best evidence available to the plaintiff for the purposes of a summary judgment application which is undertaken in the absence of interlocutory steps such as discovery and the issuing of notices to produce. Further they are admissible as records pursuant to s 79 of the Evidence Act.
In the event the objection that the copies of the invoices are secondary evidence is based on the proposition that they are a restatement or reformulation of invoices or accounts presented to Trend Ceramics by third parties, such as power, water and council authorities and that the original invoices or accounts raised by these authorities ought to have been produced, it is in my view the invoices raised by Trend Ceramics are hearsay, representing the unsworn statements of an unknown witness that the information in Trend Ceramics' invoices is a summary of what third parties have told Trend Ceramics, by way of the third parties own invoices, what Trend Ceramics owes them.
To that extent there may be something in the objection, but even then I regard the copies as admissible pursuant to s 79C in that the copies of the invoices annexed to the affidavit of Mr Spiccia are genuine business records and are statements derived from genuine business records being the records of the authorities rendering the accounts.
The indorsement of claim within the writ seeks damages for breach of the terms of the leave including non‑payment of rent and other moneys payable under the lease and costs associated with making good the premises and other costs associated with recovery and interest at 6% per annum pursuant to s 32 of the Supreme Court Act 1935 or alternatively at 15% pursuant to the lease. The plaintiff cannot recover damages in respect of any cause of action for unpaid rent that might arise after the issue of the writ.
The evidence of Mr Spiccia, the records attached to his affidavit and the admissions of Mr Forgione found within his emails cause me to be satisfied neither Hub Group nor Mr Forgione have made the payments they are liable to make under the lease since 1 January 2013 to the date of issue of the writ on 20 June 2014. It follows that I find the defendants are liable to pay damages to the plaintiff and the only question which remains is whether the damages must be assessed or if I can enter final judgment.
The claim for rent is governed by cl 4.1 and cl 4.2. The rent, by cl 4.1 and Item 4 of the schedule to the lease, was $8,333.33 per month payable in equal monthly instalments in advance and, apart from the first payment to be made on 15 May 2009, to be made on the first day of each month.
By cl 4.2 the rent is to be reviewed at specified dates. The clause provides for the rent upon review to be as agreed or, in the absence of agreement, as determined pursuant to a formulaic process set out in that clause but, in any event, not to be less that it was immediately preceding the rent review.
I have no evidence as to how the rent claimed by the plaintiff in the invoices annexed to Mr Spiccia's affidavit related to the rent provided for in the lease and/or varied pursuant to cl 4.2. For example the rent payable following the rent review date is calculated by reference to the Consumer Price Index or alternatively by an index substituted by the President of the Institute of Chartered Accountants in Australia (WA Branch) of which there is no evidence.
In respect of the losses claimed by Trend Ceramics for repairs, maintenance, cleaning, painting and the like under cl 6. The defendants' liability to make payment is dependent on value judgments as to whether various acts or omissions are 'necessary' or 'reasonable' or 'proper'. Similarly claims for legal fees must be assessed as the invoices annexed to the affidavit give no indication as to whether the claimed legal fees relate to cl 5.5 or cl 5.4 as there is no indication of what they are for. Nor can it be determined on the evidence how the other amounts invoiced relate to recovery of entitlements, if any, Trend Ceramics have pursuant to cl 5.1 and cl 5.2 which are limited to the recovery of utility charges in respect of the 'Leased Premises'.
In Spotlight Pty Ltd v NCON Australia Ltd [2012] VSCA 232 [16] it was said that:
Where a calculation can be made, it must be made – and evidence to substantiate the calculation must be called to such a degree of accuracy as is reasonably possible.
In my view there is little or no evidence available that enables the damages to be calculated. Accordingly I am prepared to order interlocutory judgment for the plaintiff against the first and second defendants with damages be assessed.