SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
UNITED PETROLEUM v SKORPOS & ANOR
[2012] SASC 151
Judgment of The Honourable Justice Stanley
12 September 2012
LANDLORD AND TENANT - LEASES AND TENANCY AGREEMENTS - TERM OF LEASE OR TENANCY - COMMENCEMENT
LANDLORD AND TENANT - TENANCIES OTHER THAN FOR A TERM - TENANCIES AT WILL - CREATION - ENTRY UNDER AGREEMENT FOR LEASE
Landlord and tennant dispute concerning three service stations at Parkholme, Henley Beach and Port Adelaide - parties executed three memoranda of lease with respect to these sites - each agreement proposed that the parties would enter into a five-year fixed term lease subject to two express conditions.
Whether sites were occupied pursuant to lease agreements or tenancies at will - if occupation was pursuant to lease agreements, from what dates were the agreements operative - defendants submitted that tennancy at will existed because the terms of the leases had yet to commence - in the alternative, defendants submitted that the rights and obligations of the parties prior to the commencement of the agreements were governed by tenancies at will.
Held: Rights and obligations of the parties were governed by the lease agreements at all relevant times - defendant's submission that occupancy was pursuant to tenancies at will was dependent upon operation of clauses in the lease agreements - for the relevant clauses to be operative, the lease agreements must have been operative - lease agreements were operative - reference in clauses to "term not commencing" designed to confine obligation to pay rent and outgoings prescribed by the lease - no obligation on plaintiff to pay rent or outgoings at any of the sites until conditions prescribed in lease agreements had been fulfilled.
LANDLORD AND TENANT - COVENANTS - AS TO BUILDING AND ALTERATIONS AND IMPROVEMENTS - AS TO ALTERATIONS AND IMPROVEMENTS
LANDLORD AND TENANT - COVENANTS - AS TO REPAIR - WHAT CONSTITUTES GOOD AND SUBSTANTIAL REPAIR
Lease agreements' clauses regarding return of property - lease agreements include provisions for the protection of the plaintiff - whether plaintiff liable to meet the costs of, or undertake, or pay damages in respect of works claimed by defendants to make good premises, or to deliver up premises in "good tenantable repair".
Held: Liability of plaintiff to meet the costs of effecting "good tenantable repair" - condition is not so onerous as to require tenant to restore the premises to the condition they were in when they were let.
LANDLORD AND TENANT - COVENANTS - AS TO REPAIR - OBLIGATION ON LESSOR
Whether the defendants were liable under the lease agreements to pay for the costs of repair works undertaken by plaintiff at Henley Beach site.
Held: Liability of the defendants is as set out by the lease agreement.
PROCEDURE - COSTS - INTERLOCUTORY PROCEEDINGS - COSTS IN THE CAUSE
Whether plaintiff entitled to order for costs in respect of injunction proceedings.
Held: Plaintiff entitled to order that defendants pay costs of injunction proceedings.
Real Property Act 1886 (SA) s 124;
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Details
- Case
- [2012] SASC 151
- Decision Date
CaseChat Overview and Summary
In United Petroleum v Skorpos, the dispute centred around the interpretation of lease agreements between the plaintiff, United Petroleum, and the defendants, Mr and Mrs Skorpos, concerning three service station sites located at Parkholme, Henley Beach, and Port Adelaide. The crux of the legal issues revolved around whether the occupation of the sites was pursuant to lease agreements or tenancies at will, the commencement date of the lease agreements, and the obligations of the parties under the lease agreements, particularly regarding the return of the property in good tenantable repair. The defendants argued that the occupation was pursuant to tenancies at will because the terms of the leases had not yet commenced, or alternatively, that the rights and obligations of the parties prior to the commencement of the agreements were governed by tenancies at will.
The court held that the rights and obligations of the parties were governed by the lease agreements at all relevant times. The defendants' submission that occupancy was pursuant to tenancies at will was dependent upon the operation of clauses in the lease agreements. For these clauses to be operative, the lease agreements must have been operative, which they were. The reference in the clauses to "term not commencing" was designed to confine the obligation to pay rent and outgoings as prescribed by the lease. There was no obligation on the plaintiff to pay rent or outgoings at any of the sites until the conditions prescribed in the lease agreements had been fulfilled.
Furthermore, the court determined that the plaintiff was not liable to meet the costs of, or undertake, or pay damages in respect of works claimed by the defendants to make good the premises or deliver them up in "good tenantable repair." The lease agreements included provisions for the protection of the plaintiff, and the defendants were liable to the plaintiff for the costs of the repair works undertaken by the plaintiff at Henley Beach. The plaintiff was also entitled to an order for costs in respect of the injunction proceedings before Anderson J.
In conclusion, the defendants were ordered to pay the costs of the injunction proceedings before Anderson J on 13 and 15 January 2010, to be taxed. After setting off the parties’ respective liabilities to each other, the defendants were entitled to judgment in the sum of $15,305.94.
The court held that the rights and obligations of the parties were governed by the lease agreements at all relevant times. The defendants' submission that occupancy was pursuant to tenancies at will was dependent upon the operation of clauses in the lease agreements. For these clauses to be operative, the lease agreements must have been operative, which they were. The reference in the clauses to "term not commencing" was designed to confine the obligation to pay rent and outgoings as prescribed by the lease. There was no obligation on the plaintiff to pay rent or outgoings at any of the sites until the conditions prescribed in the lease agreements had been fulfilled.
Furthermore, the court determined that the plaintiff was not liable to meet the costs of, or undertake, or pay damages in respect of works claimed by the defendants to make good the premises or deliver them up in "good tenantable repair." The lease agreements included provisions for the protection of the plaintiff, and the defendants were liable to the plaintiff for the costs of the repair works undertaken by the plaintiff at Henley Beach. The plaintiff was also entitled to an order for costs in respect of the injunction proceedings before Anderson J.
In conclusion, the defendants were ordered to pay the costs of the injunction proceedings before Anderson J on 13 and 15 January 2010, to be taxed. After setting off the parties’ respective liabilities to each other, the defendants were entitled to judgment in the sum of $15,305.94.
Orders
Orders of the court
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Background
Background to the litigation
Much of what occurred relevant to this matter can be objectively determined by reference to the documentary evidence. To the extent that there are inconsistencies in the oral evidence of the various witnesses from whom I heard, I am satisfied that this was not the result of any witness attempting to mislead the Court. On the contrary, I am satisfied that each of the witnesses from whom I heard endeavoured to give evidence honestly from the best of their recollection. In this context I observe that Mr Skorpos, at times, appeared to be arguing his case from the witness box. Nonetheless, I accept that he intended to convey the truth of the situation as he genuinely perceived it even if his perception was coloured by his belief in the righteousness of his position. To the extent that any of these findings depart from his view of the evidence, that should not be misunderstood as any reflection upon his honesty in giving his evidence.Factual background The plaintiff operates approximately 225 service stations across Australia, with an annual turnover of around $1.6 billion. Mr and Mrs Skorpos are the registered proprietors of the Henley Beach, Port Adelaide and Parkholme sites. Mr Skorpos has been involved with service stations since 1972 when he leased Parkholme. The defendants purchased the Parkholme site in about 1977 or 1978. Mr Skorpos undertook considerable work on that service station to expand it to its present size. He purchased the Henley Beach site in the early 1990s. He established the Port Adelaide site after purchasing the vacant land in 1995 and opening a service station on that site in 1997. It is unnecessary to recite the lengthy history of Mr Skorpos’ business dealings in relation to each of the three sites. It is sufficient to find that the defendants operated each of the sites until 13 January 2007. They then leased the premises to South Australian Farmers’ Fuels until the liquidation of that company in or about March 2009. On 22 April 2009 the defendants entered into a heads of agreement with the plaintiff. Its terms included the following:[3][3] Exhibit P1 p 1.United Petroleum Pty Ltd And OR Nominees (“United”) has agreed to lease from Michael Skorpos and Colleen Kaula Skorpos (“Skorpos”), and Skorpos has agreed to lease to United, the following service station sites:(a)646 Marion Road, Parkholme, SA 5043 (“Parkholme”); and(b)10 Henley Beach Road, Henley Beach, SA 5022 (“Henley Beach”); and(c)Cnr Grand Junction and Endeavour Roads, Port Adelaide, SA 5015 (“Port Adelaide”).The commercial terms (binding upon the parties) under which United undertake (sic) to lease (“Lease”) each of the above premises from Skorpos are agreed as follows:1.PremisesThe areas identified as a service station and convenience store located at:(a) Parkholme;(b) Henley Beach; and (c) Port Adelaide.(“Premises”)The Leases are to include all buildings and equipment at each of the above Premises except as referred to below. Reference to Premises includes a Premises or all three of the Premises (as the context requires).2.Start DateTo be confirmed for all Premises after the results of the ESA and tank and line tests are known for each Premises. United to take possession of the sites as soon as can be practically arranged.3.TermFive (5) years for all Premises.4.Further termsFour (4) further terms of five (5) years.5.RentalThe initial gross rental cumulatively for all Premises will be $390,000.00 per annum plus GST to be paid in monthly instalments in advance. The cumulative gross rental of $390,000.00 per annum is to be apportioned between the Premises as follows:(a)Henley Beach $90,000 per annum.(b)Parkholme $150,000 per annum.(c)Port Adelaide $150,000.00 per annum.The rental will also include the equipment, referred to in paragraph 17 below.… 11.Dealing with the PremisesUnited needs Skorpos’ consent (which must not be unreasonably withheld) to assign, sublet or licence the Premises. United may, however, engage a commission agent or franchisee to operate the business without the consent of Skorpos. United will be liable for any reasonable cost, expenses and duties in connection with the procurement and execution of any assignment or sublease, together with the Skorpos’ reasonable costs and expenses in obtaining such consent.…13. MaintenanceUnited must maintain the Premises, except for fair wear and tear or where structural repairs are required or capital costs are to be incurred. Skorpos must keep the Premises in a sound structural and watertight condition and ensure all services are working efficiently. United must obtain Skorpos’ consent (which must not be unreasonably withheld) to make any structural alterations to the Premises. United may, however, erect it’s “get up” including price board and signage and must remove it at the end of the lease at its own cost. United agree that it is not to paint over the brickwork on the sites (unless already painted) on any of the properties. United however may cover the brickwork with cement sheeting (or other material) and paint that material.…18.Condition precedentPrior to United entering into Leases for the sites, United will obtain a tank and line test and an environmental assessment for each site from a qualified environmental consultant that must identify any contamination at the Premises (“ESA”). The cost of the environmental assessment and the tank and line test are to be shared equally between the parties. United may elect not to enter into a Lease for a Premises or any of the Premises if United in its absolute discretion considers that the Premises is unacceptably contaminated. …20. Additional Clauses:At the end of the Lease, United will obtain an ESA for the Premises (at the equally shared cost of the parties) stating that the Premises is suitable for ongoing use of the Premises as a service station, and must remediate (at its cost) the Premises until it can obtain such a report. Skorpos must remove all disused equipment and other chattels, and workshop stock from the Premises prior to the start date including from workshop and office areas and in particular disused cars from the Parkholme Premises. These terms are immediately legally binding, but the parties intend to negotiate and execute further, more detailed, lease documents containing additional terms which are not inconsistent with these terms. United will draft that further document and provide it to Skorpos for execution within 30 days of the date of this letter.
Evidence
Evidence Before The Court
The issues to be determined in the case are:(1)whether the sites were occupied pursuant to the lease agreements and, if so, from what date? Or were the sites occupied by the plaintiff pursuant to tenancies at will? The answers to these questions will determine the liability of the plaintiff to the defendants for rent, outgoings and interest in respect of the three sites;(2)the liability of the plaintiff to meet the costs of, or undertake, or pay damages in respect of the works claimed by the defendants to make good the premises or deliver up the premises in “good tenantable repair” as stipulated in the lease agreements, and the quantum of any costs or damages; (3)whether the defendants are liable to the plaintiff for the costs of the repair works undertaken by the plaintiff at Henley Beach; and(4)the entitlement of the plaintiff to an order for costs in respect of the injunction proceedings before Anderson J.The evidence Much of what occurred relevant to this matter can be objectively determined by reference to the documentary evidence. To the extent that there are inconsistencies in the oral evidence of the various witnesses from whom I heard, I am satisfied that this was not the result of any witness attempting to mislead the Court. On the contrary, I am satisfied that each of the witnesses from whom I heard endeavoured to give evidence honestly from the best of their recollection. In this context I observe that Mr Skorpos, at times, appeared to be arguing his case from the witness box. Nonetheless, I accept that he intended to convey the truth of the situation as he genuinely perceived it even if his perception was coloured by his belief in the righteousness of his position. To the extent that any of these findings depart from his view of the evidence, that should not be misunderstood as any reflection upon his honesty in giving his evidence.Factual background The plaintiff operates approximately 225 service stations across Australia, with an annual turnover of around $1.6 billion. Mr and Mrs Skorpos are the registered proprietors of the Henley Beach, Port Adelaide and Parkholme sites. Mr Skorpos has been involved with service stations since 1972 when he leased Parkholme. The defendants purchased the Parkholme site in about 1977 or 1978. Mr Skorpos undertook considerable work on that service station to expand it to its present size. He purchased the Henley Beach site in the early 1990s. He established the Port Adelaide site after purchasing the vacant land in 1995 and opening a service station on that site in 1997. It is unnecessary to recite the lengthy history of Mr Skorpos’ business dealings in relation to each of the three sites. It is sufficient to find that the defendants operated each of the sites until 13 January 2007. They then leased the premises to South Australian Farmers’ Fuels until the liquidation of that company in or about March 2009. On 22 April 2009 the defendants entered into a heads of agreement with the plaintiff. Its terms included the following:[3][3] Exhibit P1 p 1.United Petroleum Pty Ltd And OR Nominees (“United”) has agreed to lease from Michael Skorpos and Colleen Kaula Skorpos (“Skorpos”), and Skorpos has agreed to lease to United, the following service station sites:(a)646 Marion Road, Parkholme, SA 5043 (“Parkholme”); and(b)10 Henley Beach Road, Henley Beach, SA 5022 (“Henley Beach”); and(c)Cnr Grand Junction and Endeavour Roads, Port Adelaide, SA 5015 (“Port Adelaide”).The commercial terms (binding upon the parties) under which United undertake (sic) to lease (“Lease”) each of the above premises from Skorpos are agreed as follows:1.PremisesThe areas identified as a service station and convenience store located at:(a) Parkholme;(b) Henley Beach; and (c) Port Adelaide.(“Premises”)The Leases are to include all buildings and equipment at each of the above Premises except as referred to below. Reference to Premises includes a Premises or all three of the Premises (as the context requires).2.Start DateTo be confirmed for all Premises after the results of the ESA and tank and line tests are known for each Premises. United to take possession of the sites as soon as can be practically arranged.3.TermFive (5) years for all Premises.4.Further termsFour (4) further terms of five (5) years.5.RentalThe initial gross rental cumulatively for all Premises will be $390,000.00 per annum plus GST to be paid in monthly instalments in advance. The cumulative gross rental of $390,000.00 per annum is to be apportioned between the Premises as follows:(a)Henley Beach $90,000 per annum.(b)Parkholme $150,000 per annum.(c)Port Adelaide $150,000.00 per annum.The rental will also include the equipment, referred to in paragraph 17 below.… 11.Dealing with the PremisesUnited needs Skorpos’ consent (which must not be unreasonably withheld) to assign, sublet or licence the Premises. United may, however, engage a commission agent or franchisee to operate the business without the consent of Skorpos. United will be liable for any reasonable cost, expenses and duties in connection with the procurement and execution of any assignment or sublease, together with the Skorpos’ reasonable costs and expenses in obtaining such consent.…13. MaintenanceUnited must maintain the Premises, except for fair wear and tear or where structural repairs are required or capital costs are to be incurred. Skorpos must keep the Premises in a sound structural and watertight condition and ensure all services are working efficiently. United must obtain Skorpos’ consent (which must not be unreasonably withheld) to make any structural alterations to the Premises. United may, however, erect it’s “get up” including price board and signage and must remove it at the end of the lease at its own cost. United agree that it is not to paint over the brickwork on the sites (unless already painted) on any of the properties. United however may cover the brickwork with cement sheeting (or other material) and paint that material.…18.Condition precedentPrior to United entering into Leases for the sites, United will obtain a tank and line test and an environmental assessment for each site from a qualified environmental consultant that must identify any contamination at the Premises (“ESA”). The cost of the environmental assessment and the tank and line test are to be shared equally between the parties. United may elect not to enter into a Lease for a Premises or any of the Premises if United in its absolute discretion considers that the Premises is unacceptably contaminated. …20. Additional Clauses:At the end of the Lease, United will obtain an ESA for the Premises (at the equally shared cost of the parties) stating that the Premises is suitable for ongoing use of the Premises as a service station, and must remediate (at its cost) the Premises until it can obtain such a report. Skorpos must remove all disused equipment and other chattels, and workshop stock from the Premises prior to the start date including from workshop and office areas and in particular disused cars from the Parkholme Premises. These terms are immediately legally binding, but the parties intend to negotiate and execute further, more detailed, lease documents containing additional terms which are not inconsistent with these terms. United will draft that further document and provide it to Skorpos for execution within 30 days of the date of this letter.
Decision
Reasons for decision
The plaintiff’s entitlement to interest in respect of the costs of the reports is to be calculated from the date of payment in October 2009. The plaintiff’s entitlement to interest in respect of the payments to which it is entitled under the terms of the lease agreements for the costs of works at Henley Beach is to be calculated from the date these sums were paid, namely, November 2009. The plaintiff’s entitlement to interest in respect of the LPG rebate is to be calculated from the date of the statement of claim, namely, 25 March 2010. Conclusion Accordingly, the plaintiff is entitled to damages as follows: The defendants are entitled to damages as follows: After setting off the parties’ respective liabilities to each other, the defendants are entitled to judgment in the sum of $15,305.94. The plaintiff is entitled to an order that the defendants pay the costs of the injunction proceedings before Anderson J on 13 and 15 January 2010 to be taxed. I will hear the parties as to costs.
Ratio Decidendi
Legal Principle Established
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