Turner and Zollo v Kostoglou and Anor No. Scciv-02-1891

TURNER and ZOLLO v KOSTOGLOU and ANOR
[2003] SASC 105
Magistrates Appeal: Civil

PERRY J. This is an appeal from a judgment given in the Magistrates Court.
The appellants took proceedings in that court pursuant to the relevant provisions of the Landlord and Tenant Act 1936 (“the Act”), asserting that goods which they owned had wrongfully been taken by the respondents in the course of a distraint carried out by the respondents in their capacity as landlords of shop premises situated at 335 Main North Road, Enfield (“the premises”).
The premises had been leased to Tennyson Turner for a period of five years, commencing on 1 September 1998 (“the 1998 lease”). In the premises were a number of artworks, including paintings and lithographs which the appellant Ernesto Zollo claims were his property. Also in the premises were a number of artist’s supplies and materials, including paint brushes, paints and the like, which the appellant Pamela Anne Turner (“Mrs Turner”), the wife of Mr Turner, claims were her property.
Mr Turner and Mr Zollo had previously been joint lessees of the premises as tenants in common pursuant to a lease commencing on 1 April 1995 for a term of three years. While in occupation under that lease, Mr Turner and Mr Zollo conducted a business out of the shop involving the sale of artworks largely produced by Mr Zollo.
The evidence was that before the 1998 lease was executed, Mr Turner was considering closing the business down. However, he did not do so, instead entering into the 1998 lease in his own name as sole lessee, but (on his evidence and that of Mrs Turner) allowing the business to be taken over by Mrs Turner and her daughter. The business was conducted under the name “S’Easy”.
The case put by the appellants in the court below was that Mr Turner had not only made over to Mrs Turner the business conducted in the shop, but all of the contents other than those which were owned by Mr Zollo, and that this remained the position when the respondents re-entered on 22 February 2002, at the same time purporting to distrain on the goods in the premises. At the time of the re-entry, Mr Turner owed an amount in excess of $30,000 by way of arrears of rent payable under the lease.
Mr Zollo and Mrs Turner brought separate proceedings under the Act in the Magistrates Court, but they were tried together.
The hearing before the trial magistrate commenced in July 2002, but it was punctuated by a number of adjournments.
At the hearing, Mrs Turner was unrepresented, although assisted by Mr Turner, a disbarred solicitor. Mr Zollo was likewise unrepresented. The respondents were represented by Mr Dal Cin of counsel.
The hearing concluded on 17 December 2002 when the trial magistrate gave an ex tempore judgment. Effectively, the trial magistrate dismissed both Mrs Turner’s and Mr Zollo’s claims. She held that Mr and Mrs Turner were the joint owners of the art shop, the art supplies and other equipment associated with the conduct of the business in the shop.
As for Mr Zollo’s claim, she held that Mr Zollo and Mr Turner were conducting a joint venture pursuant to which Mr Zollo had “given” his artwork to Mr Turner pursuant to an arrangement which had not been fully disclosed in the evidence.
Mrs Turner brought a notice of appeal to this Court. When her notice of appeal was first listed before me, she informed me that Mr Zollo wished to appeal as well.
On 31 January 2003 I ordered that Mr Zollo be joined as an appellant. At the same time I ordered that Mr Zollo file and serve a notice setting out “such further grounds of appeal as he may wish separately to advance, failing which his appeal would be heard on the basis of the grounds set out” in the notice of appeal which had been filed by Mrs Turner. I took this course as both were unrepresented at that stage, and it seemed to be a convenient way of proceeding with a minimum of formality.
In the events which happened, Mr Zollo filed a separate notice setting out a number of additional grounds beyond those advanced by Mrs Turner.
When the appeal came on for argument, Mr Pertl appeared for both appellants.
Mr Pertl’s first submission was based on the complaint which appears as ground 1 in Mrs Turner’s notice of appeal, the relevant part of which reads:
“1.The learned SM erred in refusing to permit the appellants to ask questions in cross examination of the first respondent relating to-
A.     the exercise of the warrant of distress or its validity or invalidity;
B.     whether the tenancy of the defendant’s tenant was existing at the time of the distraint and as a result whether the distraint was lawful;
C.     .......”
It is true that at various stages of the hearing before her, the trial magistrate declined to allow the appellants to embark on questions relating to the validity of the distraint. She justified the stand which she took on that issue in part by expressing the view that any question as to the validity of the distraint had been settled in favour of the respondents by a decision of a Master of the District Court made in July 2002 in other proceedings between the respondents and Mr Turner in that court. They were proceedings in which the respondents succeeded in obtaining summary judgment for arrears of rent due by Mr Turner pursuant to the lease.
I have read the reasons for decision of the Master, and in my view, they relate purely to the liability of Mr Turner to pay the rent claimed, and the question whether or not he had an arguable defence or set-off. Neither the proceedings in the District Court nor the decision of the Master related in any way to the question of the validity or otherwise of the distraint effected by the respondents.
However, for other reasons, I am of the view that it was not open to the parties to ventilate the question of the validity of the distraint in the proceedings now in question.
These proceedings were instituted pursuant to Part 2 of the Act, the appellants having made a declaration in the form of Schedule D, asserting that the immediate tenant (Mr Turner) had no right of property or beneficial interest in the goods the subject of the distraint, and that the goods were the property of the appellants. The claims asserted in the declaration were made pursuant to s 22 of the Act and were accompanied with the inventory referred to in that section.
The jurisdiction which thereafter was exercised by the trial magistrate was that conferred by s 24 of the Act. Under that section, service of the declaration and inventory constituted a claim upon which “two or more justices may adjudicate ... in a summary manner” (s 24(2)). It is common ground that the jurisdiction so conferred may be exercised by the Magistrates Court.
The “claim” to be adjudicated upon is the claim by a third party who asserts that the immediate tenant has no right of property or beneficial interest in the goods the subject of the distraint.
As this is a specific jurisdiction arising pursuant to statute, its exercise must be confined strictly to the terms in which it is conferred. It would not be proper, upon the adjudication of such a claim pursuant to s 24 of the Act, to embark upon an inquiry as to the validity of the distraint as between the landlord and the immediate tenant.
In any event, the immediate tenant (in this case Mr Turner) is not a party to the proceedings within which the claim was adjudicated pursuant to s 24, so that for that reason alone, it would not have been proper to address the question of the validity of the distraint.
The fact remains, however, that if a serious question arises as to whether or not the distraint was valid, it would be better for that question to be resolved before what might turn out to be quite fruitless proceedings were to be embarked upon pursuant to s 24 of the Act.
In my view, a serious question does arise in this case as to the validity of the distraint. Indeed, for reasons which I come to, if it was open for me to do so, I would resolve that question against the respondents. I will therefore be suggesting in due course that an opportunity be created for the validity of the distraint to be determined in appropriate proceedings, before I determine the outcome of the appeal.
Before I deal with the validity of the distraint, I refer to one other aspect of the matter.
The appeal was argued on the footing that the power conferred by s 24 to adjudicate on adverse claims is to be exercised in accordance with the provisions of s 25, which is as follows:
“25.If it appears upon the hearing of the complaint that-
(a)    the agisted cattle claimed were the property of the person alleged to be the owner thereof, or that the goods claimed, or part of them, were the property or in the lawful possession of the claimant, being an under-tenant or lodger; and
(b)    the immediate tenant had no right of property or beneficial interest in such cattle, other than his lien for agistment, if any, or in such goods; but
(c)    the claimant did not, before the complaint was preferred, pay to the landlord, or the person authorised by him to distrain, all moneys due by the owner of the cattle, or by the under-tenant or lodger to the immediate tenant for agistment, rent, or lodging, or so much thereof as was sufficient to discharge the claim of such landlord and his lawful charges,
the justices before whom the complaint is heard shall find accordingly, and their decision shall be deemed to be in favour of the landlord.”
Since the completion of argument on the hearing of the appeal, I have noticed what seems to be a difficulty with s 25 in its application to this case.
It will be seen in s 25(a) after the words “were the property or in the lawful possession of the claimant”, the words appear “being an under-tenant or lodger”. Here, the claimants were not either under-tenants or lodgers; they were simply third parties who claimed that the landlord had seized goods which were their property, being goods in which the immediate tenant (Mr Turner) had no right of property or beneficial interest.
Just how the jurisdiction under s 24 is to be exercised where the claimant is neither an under-tenant nor lodger is not made clear in the Act.
However, for the reasons which will become apparent, the point does not need to be dealt with in order to dispose of the present appeal.
Validity of the distraint
Distress is an ancient remedy.[1] Initially, goods which were restrained could only be held as security and could not be sold. However, a power of sale of goods distrained was granted by the Distress for Rent Act 1689 (UK). Subsequently, over a period of time, various statutory provisions in the UK, which were emulated in the various jurisdictions in Australia, exempted goods of certain classes from distress and imposed other conditions upon the right to distrain.
[1] For a discussion of the historical evolution of the relevant principles, see Bullen on Distress, 2^nd edition (1899) (Butterworth & Co).
The Act now provides a procedural framework within which distress for rent may be effected. But essentially the common law principles relating to distress remain intact. Section 42 of the Act expressly preserves “any right, remedy or power of any landlord by statute, common law or otherwise” so far as is consistent with Part 2 of the Act.
One of the principles which became firmly established at common law was that distress could not be effected after the expiration of the lease: see, for example, Pennant’s case[2] in the Court of Kings Bench:
“... for after the lease determined he [the lessor] cannot distrain for the rent.”
[2] (1596) 3 K Co Rep 64a at 646: 76 ER 775 at 778.
Williams v Stiven[3] is to the same effect. The headnote reads:
“Before stat. 8 Ann. C. 14, s 6, rent, accruing before the expiration of a tenancy, could not be distrained for after the tenancy expired, though the tenant continued in occupation. Therefore, where an avowry for rent arrere is framed at common law, it must be alleged and proved that the tenancy continued up to the time of the distress.”
[3] (1846) 9 QB 14, 115 ER 1181.
The trial in that case was before Baron Platt. Lord Denman CJ, who delivered the judgment of the Court of Queen’s Bench, said:[4]
“[17].... Numerous points were made in this case (a),[5] in which the plaintiff obtained a verdict on two issues, the defendant on the third, subject to a motion for entering a verdict for the plaintiff on that also, if the Court should think him entitled to it. The leaned Baron reports that he reserved questions on evidence of the identity of the premises distrained upon, and on the defendant’s right to distrain after he had given notice to quit.
On this latter point, Jenner v Clegg,[6] was cited; which is not applicable, because the rent there distrained for became due after the determination of the tenancy by notice to quit from the landlord.
But it was argued that, as the avowry here was at common law and not under the statute of 8 Ann c 14, s 6, it was not good after determination of the lease by landlord’s notice. And it is clear from Co Lit 47 b and 1 Ro Ab 672, Distress (O), pl 10, Com Dig Distress (A, 2), that this is so.”
[4] (1846) 9 QB at 17, 115 ER at 1182.
[5] The report is confined to the point upon which the Court decided.
[6] 1 Moo & Rob 213.
In Murgatroyd v The Silkstone and Dodsworth Coal and Iron Company (Limited) ex parte Charlesworth,[7] the plaintiffs, who were the intended lessors under an agreement for a lease, obtained an order pursuant to which they entered into possession of the premises. They claimed a right to distrain on the goods of strangers on the premises for arrears of rent which had accumulated before their entry into possession.
[7] (1896) 65 L.J. (NS) 111.
Chitty J held that the effect of the order was to suspend the relationship of landlord and tenant, and accordingly, there being no existing tenancy, there could be no right to distrain.
In Gray v Stait and Anor,[8] the plaintiff sued for wrongful distress on the part of the defendant, who had been the landlord of a house tenanted by the plaintiff. The defendant determined the tenancy, whereupon, on the day upon which it was determined, the plaintiff removed his goods from the house and gave up possession to the defendant.
[8] (1982-83) 11 QBD 668.
As at the date of termination of the tenancy, one quarter’s rent was due. Subsequently, the defendant purported to distrain on the plaintiff’s goods, asserting that he had fraudulently removed them in order to prevent a distress. It was held in the Court of Appeal that although the statute 11 Geo 2, c 19, s 1 allowed a landlord to pursue goods which had been fraudulently removed to prevent a distress, it only permitted that course in circumstances where, if the goods had not been removed, there was a right of distraint. The tenancy having been determined at the time when the landlord sought to distrain, the statute did not avail the landlord.
In Serjeant v Nash, Field & Co and Anor,[9] the lessee’s mortgagee appointed a receiver who distrained. The lessee sued for wrongful distress. The trial judge, Darling J directed the jury that the distress was illegal, as the title of the mortgagees had determined at the time of the purported distraint. The Court of Appeal dismissed an appeal. Collins MR observed:[10]
“It is clear law that though a tenant cannot deny the title of his landlord to deal with the premises, he may prove that the title has determined. That fact was abundantly proved, and there was certainly no estoppel arising from any act of the tenant which could induce the mortgagees to suppose that they were acting on an admission that the relation of landlord and tenant existed when the distress was put in. This defence also fails, and the appeal must be dismissed.”
[9] [1903] 2 KB 304.
[10] Ibid 312.
See also per Stirling LJ:[11]
“I come, therefore, to the conclusion that the lease was forfeited and gone from the time when the writ was served, and that consequently there was no right of distress against the plaintiff.”
[11] Ibid 314.
The principle is confirmed in the leading textbooks. For example, see Foa’s The General Law of Landlord and Tenant (7^th edition):[12]
“At common law, a distress could only be made during the continuance of the demise (d),[13] although the tenant continued in occupation afterwards (e).[14] So, where the landlord has resumed possession of the demised premises by the exercise of his right of re-entry, or by some proceeding equivalent thereto, the right to distrain is gone (f).[15]”
[12]    Hamish Hamilton (Law Books) Ltd 1947 at page 508, para 830.
[13]    Co Lit 47 b; preamble to Landlord and Tenant Act 1709, s 6.
[14]    Williams v Stiven (1846) 9 QB 14.
[15]    See per Chitty J in Murgatroyd v The Silkstone and Dodsworth Coal and Iron Company (Limited) ex parte Charlesworth (1895) 65 LJ Ch 111.
And see Woodfalls Law of Landlord and Tenant:[16]
“At common law a distress could not have been made after the expiration of the lease.”[17]
[16] Sweet & Maxwell Ltd, 28^th edition (1978) at page 355, para 1-0884.
[17] To the same effect, see Bullen on Distress (2^nd edition) (1899) at page 139, and Hill and Redman’s Law of Landlord and Tenant (16^th edition) (1976) at 388, para 280.
It is true that under the Landlord and Tenant Act 1709[18] the landlord’s right to distrain for arrears of rent is extended for a period of six months from the determination of the lease, but this is subject to the condition that the tenant remains in possession at the time distraint is levied. That limited relaxation of the common law rule does not avail the respondents in this case.
[18] 8 Anne c 18.
Here, the evidence of Mrs Turner was that a re-entry was effected on Friday 22 February 2002 when the respondent’s agent, Ben Shingle, a licensed process server from a firm known as “World Most Wanted”, entered the premises. Mrs Turner’s evidence was that he said he wanted to see Mr Turner, and she showed him through to her husband in the office at the back of the shop.
When she spoke to her husband shortly afterwards, he informed her that the lease had been terminated and that they would have to leave. They both thereupon left the premises, noting as they did so that a locksmith was in the process of changing the locks on the shop.
Mr Turner’s evidence was that at about 10.00 am on 22 February 2002 he was evicted from the premises by the respondent’s agents. His evidence was that a man who introduced himself as Ben Shingle came to him at that time and said, “Your lease is terminated. You must leave now and everybody with you”, and that as he spoke he handed to Mr Turner a document headed “Notice of Termination”. This gave notice to Mr Turner on behalf of the respondents that in view of the default in payment of rent “... the lease is now terminated”. The notice was dated 21 February 2002 and was signed on behalf of the respondents by their solicitor, Mr Tropiano.
A warrant to distrain in the form stipulated in Schedule A to the Act was also handed to Mr Turner. As in the case of the notice of termination, the warrant was signed by Mr Tropiano on behalf of the respondents and dated the same date, that is, 21 February 2002.
During the course of his examination in chief, Mr Turner said, in answer to the trial judge:
“Q.After you were served with the termination of the lease by Mr and Mrs Kostoglou through his agent or their agent, was a distraint warrant served on you.
A.A distraint warrant was served, yes, by the agents for Mr and Mrs Kostoglou as I was evicted from the premises and I asked you to leave and another workman who was in the back shed, back warehouse. I told him that he had to go because our lease had been terminated. No distress had been carried out at that time.”
Although the trial magistrate took a poor view of Mr Turner’s credit, this part of his evidence was not challenged in any way. Indeed, Mr Dal Cin informed the trial magistrate during the course of Mr Turner’s examination in chief when a question arose as to the line of questioning which was then being pursued, “We did distrain. We did terminate on 22 February”.

I suppose that it might be suggested that a nice question arises on this evidence as to whether the distraint preceded the re-entry or came after the re-entry had been effected.
However, it seems to me that the re-entry should be taken to have occurred upon the entry into the premises by the landlord’s agent. While it is true that the landlord’s agent effecting the distress does not need physically to lay hands on the goods which are said to be the subject of the distress,[19] the Act of distraining could hardly be said to have either preceded or even been contemporaneous with the act of re-entry. The landlord was under a duty not to make an excessive distress, or to distrain goods which are by law exempt from distress. Bearing this in mind, some selection of the chattels to be made the subject of the distress was necessary before the distraint should be regarded as having been effected.
[19] See Bullen on Distress (supra) at 153 et seq.
It is clear from the evidence that some selection was in fact made, and an inventory of those goods within the premises which the respondents purported to distrain was subsequently prepared in accordance with the statutory obligation to do so,[20] by Mr Shingle.
[20] See s 17 of the Act.
On any view of the matter, it seems to me that the distraint could not be said to have been carried out before the re-entry by the respondents took effect.
In those circumstances, I am of the view that the distraint was unlawful, in that it was effected after the lease had been determined by re-entry.
Disposal of the proceedings
For the reasons already given, my conclusion that the distraint was unlawful cannot operate as a finding to that effect within these proceedings. This is in view of the limited jurisdiction which was being exercised by the trial magistrate under Part 2 of the Act.
On an appeal against an order made in the exercise of the jurisdiction under Part 2 of the Act it would not be proper for me to attempt to make an order binding on the landlord and the former tenant as to the legality of the restraint. Any binding declaration or decision as to that aspect of the matter could only be pronounced in proceedings between the former tenant in this case Mr Turner, and the landlord, in this case the respondents.
I have, however, addressed the question and expressed the conclusion which it seems to me follows from the evidence which was given, as it would not be right to determine an application under Part 2 of the Act in favour of the landlord in circumstances where the distress was shown to be unlawful. In those circumstances, the proper course would be to order an indefinite stay of the proceedings under the Act.
For these reasons, it appears to me that the proper course to take is to stand over the appeal without deciding it, for a short interval of time to enable proceedings to be brought, if he chooses to bring them, by Mr Turner to obtain appropriate relief defining the legality of the distraint.
It may be, of course, that the parties will be prepared to accept the views which I have expressed, without resorting to further litigation. In that event, I would allow the appeals and substitute an order with an indefinite stay of the proceedings from which the appeals have been brought.
I propose to publish these reasons in advance of calling the matter on for further hearing. I will then invite the parties to indicate to me the course that they would wish me to follow.
JUDGMENT CITATIONS
LISTED IN ORDER OF APPEARANCE IN JUDGMENT
1.    For a discussion of the historical evolution of the relevant principles, see Bullen on Distress, 2^nd edition (1899) (Butterworth & Co).
2. (1596) 3 K Co Rep 64a at 646: 76 ER 775 at 778.
3. (1846) 9 QB 14, 115 ER 1181.
4. (1846) 9 QB at 17, 115 ER at 1182.
5.    The report is confined to the point upon which the Court decided.
6.    1 Moo & Rob 213.
7.    (1896) 65 L.J. (NS) 111.
8. (1982-83) 11 QBD 668.
9. [1903] 2 KB 304.
10. Ibid 312.
11. Ibid 314.
12.   Hamish Hamilton (Law Books) Ltd 1947 at page 508, para 830.
13.    Co Lit 47 b; preamble to Landlord and Tenant Act 1709, s 6.
14.    Williams v Stiven (1846) 9 QB 14.
15.    See per Chitty J in Murgatroyd v The Silkstone and Dodsworth Coal and Iron Company (Limited) ex parte Charlesworth (1895) 65 LJ Ch 111.
16.    Sweet & Maxwell Ltd, 28^th edition (1978) at page 355, para 1-0884.
17.    To the same effect, see Bullen on Distress (2^nd edition) (1899) at page 139, and Hill and Redman’s Law of Landlord and Tenant (16^th edition) (1976) at 388, para 280.
18.    8 Anne c 18.
19.    See Bullen on Distress (supra) at 153 et seq.
20. See s 17 of the Act.

[2003] SASC 105

1 May 2003

Key Legal Topics

Areas of Law

Property Law

Legal Concepts

Adverse Possession

Landlord and Tenant

Specific Performance