Vella v Wah Lai Investment (Australia); Wah Lai Investment (Australia) v Gleeson; Vella v Wah Lai Investment (Australia) - [2004] NSWSC 748

No judgment structure available for this case.

CITATION: Vella v Wah Lai Investment (Australia); Wah Lai Investment (Australia) v Gleeson; Vella v Wah Lai Investment (Australia) [2004] NSWSC 748

HEARING DATE(S): 21/6/04 - 1/7/04

JUDGMENT DATE:
15 October 2004

JURISDICTION:
Equity

JUDGMENT OF: Campbell J

DECISION: Intending assignee of lease not entitled, as against landlord, to equitable lease by virtue of Walsh v Lonsdale (1882) 21 Ch D 9 - Intending assignee establishes tenancy by estoppel, until landlord notifies intending assignee that it has no rights concerning the lease - intending assignee bound to pay rent and outgoings in accordance with lease during the time that tenancy by estoppel existed - claims for breach of Trade Practices Act 1974 (Cth) and Fair Trading Act 1987 not made out - claim for unconscionable conduct not made out

CATCHWORDS: LANDLORD AND TENANT - assignment, severance and underlease - lessee pursuant to registered lease agrees to assign, with consent of landlord, to third party - transfer of lease never registered - whether landlord bound to treat third party as lessee - payment of rent by third party to landlord - whether landlord and tenant estopped from denying that tenancy exists in terms of the lease - circumstances in which tenancy by estoppel comes to an end - principle in Walsh v Lonsdale (1882) 21 Ch D 9 creates no equities against persons not party to the agreement - TRADE PRACTICES AND RELATED MATTERS - misleading and deceptive conduct - no question of principle - EQUITY - alleged unconscionable conduct by landlord in circumstances of obtaining possession of tenanted property - no question of principle

LEGISLATION CITED: Conveyancing Act 1919
Fair Trading Act 1987
Liquor Act 1982
Local Government Act 1993
Real Property Act 1900
Statute of Frauds
Trade Practices Act 1974 (Cth)

CASES CITED: Australian Competition and Consumer Commission v Samton Holdings Pty Ltd (2002) 117 FCR 301
Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130
Brown & Root Technology Ltd v Sun Alliance and London Assurance Co Ltd [2001] Ch 733
Chan v Cresdon Proprietary Limited (1989) 168 CLR 242
Chronopoulos v Caltex Oil (Australia) Pty Ltd (1982) 70 FLR 8
Colman v Golder [1957] VR 196
Ferguson v Hullock [1955] VLR 202
Foran v Wight (1989) 168 CLR 385
Giumelli v Giumelli (1999) 196 CLR 101
Gould v Vaggelas (1985) 157 CLR 215
Huntsman Chemical Company Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242
Legione v Hateley (1983) 152 CLR 404
Lewandowski v Mead Carney - BCA Pty Ltd [1973] 2 NSWLR 640
Manchester Brewery v Coombs [1901] 2 Ch 608
Maredelanto Compania Naviera SA v Bergbau-Handel GmbH; The Mihalis Angelos [1971] 1 QB 164
Mobil Oil Australia Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475
Official Trustee of Charity Lands v Ferriman Trust, Ltd [1937] 3 All ER 85
Rodenhurst Estates, Ltd v W H Barnes, Ltd [1936] 2 All ER 3
Tanwar Enterprises Pty Ltd v Cauchi (2003) 201 ALR 359
TCN Channel Nine Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130
The Commonwealth of Australia v Verwayen (1990) 170 CLR 394
Tichborne v Weir (1892) 67 LT 735
Walsh v Lonsdale (1882) 21 Ch D 9
Williams v Heales (1874) LR 9 CP 177

PARTIES :
Paul Vella - First Plaintiff/Cross Defendant in 4900/98; Plaintiff in 2907/96
Craftmill Pty Limited - Second Plaintiff in 4900/98; Second Defendant in 1850/99
Wah Lai Investment (Australia) Pty Limited - Defendant/Cross-Claimant in 4900/98; Defendant in 2907/96; Plaintiff in 1850/99
Koleta Gleeson - First Defendant in 1850/99

FILE NUMBER(S): SC 4900/98; 1850/99; 2907/96

COUNSEL: J B Simpkins SC; E M Frizell - Vella interests
J McKenzie - Wah Lai interests

SOLICITORS: Beilby Poulden Costello - Vella interests
William Chan & Co - Wah Lai interests

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
EQUITY LIST

CAMPBELL J

15 OCTOBER 2004

4900/98 PAUL VELLA & ANOR v WAH LAI INVESTMENT (AUSTRALIA) PTY LTD
1850/99 WAH LAI INVESTMENT (AUSTRALIA) PTY LTD v KOLETA GLEESON & ANOR
2907/96 PAUL VELLA & ANOR v WAH LAI INVESTMENT (AUSTRALIA) PTY LTY

JUDGMENT

HIS HONOUR:

Nature of the Case

1 Wah Lai (Investment) Australia Pty Limited (“Wah Lai”) owned the land on which was erected a hotel called the Waterloo Tavern (“The Tavern”). For the period 21 July 1994 to 14 May 1996 the Tavern was in the physical possession of either Mr Paul Vella (“Mr Vella”), or his company Craftmill Pty Limited (“Craftmill”). On 14 May 1996 Mr Vella and Craftmill were evicted from the Tavern pursuant to an Order for Possession of the Supreme Court of New South Wales. Mr Vella and Craftmill claim that their ejection from the premises was wrongful.

2 Three alternative cases are put about why it was wrongful. The first is that the ejection involved a breach on Wah Lai’s part of a covenant for quiet enjoyment in a lease said to exist between Wah Lai as lessor, and either Mr Vella or Craftmill as lessee. The second is that Wah Lai had represented that Mr Vella would have the rights of a lessee of the Tavern, that Wah Lai either had no belief to the effect of its representation or had no reasonable grounds for such a belief, that the representation consequently was a contravention of section 52 Trade Practices Act 1974 (Cth), and that Mr Vella and/or Craftmill have suffered damage as a consequence of relying on the representation. The third way in which the claim is put is that Wah Lai engaged in unconscionable conduct in the circumstances in which it obtained the Order for Possession of the Tavern, for which Mr Vella and/or Craftmill are entitled to equitable compensation.

3 As well, Mr Vella seeks damages for conversion of various items of property which were in the Tavern at the time of his ejection.

4 Wah Lai, by a cross-claim, alleges that Mr Vella was in breach of an agreement he made with Wah Lai relating to the carrying out of certain work at the Tavern required by a Fire Safety Order (“the Fire Safety Works”), and that in consequence Wah Lai has suffered damage. In the alternative, Wah Lai alleges that the agreement relating to the Fire Safety Works constituted a representation by Mr Vella which amounted to misleading or deceptive conduct contrary to section 42 Fair Trading Act 1987, being as to a future matter within section 41 of the Fair Trading Act 1987, in consequence of which Wah Lai has suffered damage. Wah Lai also seeks to recover from Mr Vella certain rent which was not paid and which it asserts accrued due prior to the eviction.

5 Ms Koleta Gleeson (“Ms Gleeson”) is the de facto wife of Mr Vella. In proceedings number 1850 of 1999, listed to be heard at the same time as the principal proceedings, Wah Lai sued Ms Gleeson and Craftmill. By the time of the hearing no live matter of controversy remained in those proceedings.

The Lease From Wah Lai to Buddies

6 By lease registered number I254621 (“the Lease”) Wah Lai leased the Tavern to Buddies Liquor Pty Limited (“Buddies”) for a term of ten years commencing 25 March 1993. Mr Nelson Meers (“Mr Meers”) was a director of Buddies, and acted on its behalf concerning the Lease.

7 The starting point for calculating the rental under the Lease was an amount of $78,000 per annum payable by monthly instalments of $6,500 in advance. I will refer to that amount as the “Basic Rent”. Under Clause 4, in addition to the Basic Rent the lessee paid forty five percent of the licence fees payable to the Liquor Administration Board, but then deducted from the rent two fifths of the licence fees. As well, Clause 5 made provision for annual increases of rental by whichever was the greater of five percent, and a figure calculated by reference to one of the consumer price indexes. Clause 5(iv) also obliged the lessee to pay all outgoings of the building.

8 Clause 7(ii) said:

“Unless the Lessee first obtains the Lessor’s consent in writing, which consent shall not be unreasonably withheld, the Lessee will not during the continuance of this lease assign transfer demise sublet or part with or share possession of the premises or any part thereof or by any act or deed procure the premises or any part thereof to be assigned transferred demised sublet unto or put into possession of any person or grant any licence affecting the premises and the proviso contained in paragraph (a) of S133B(1) of the Conveyancing Act, 1919, as amended, shall apply.”

Conveyancing Act 1919

“such licence or consent is not to be unreasonably withheld, but this proviso does not preclude the right of the lessor to require payment of a reasonable sum in respect of any legal or other expenses incurred in connection with such licence or consent.

9 Clause 7(i) (headed “Maintenance and Repair”) imposed an obligation on the lessee to:

“… when, where and so often as need shall be decorate, re-decorate, maintain, renew, repair and keep the whole of the premises in good and substantial repair, working order and condition having regard to their condition at the commencement of this lease, reasonable wear and tear only excepted PROVIDED HOWEVER that nothing herein contained shall impose any obligation upon the Lessee to do any work of a structural nature except such as may be occasioned by the act, neglect or default of the Lessee or by its use or occupancy of the premises.”

10 Clause 7(iii)(c) (headed “Compliance with Regulations”) contained a further obligation:

“From time to time forthwith comply with all statutes, ordinances, proclamations, orders, regulations and by-laws, present or future, affecting or relating to the premises and with all requirements which may be made or notice or orders which may be made or given by any governmental, semi-governmental, municipal, health, licensing or any other authority over or in respect of the premises or the use thereof and will keep the Lessor indemnified in respect of all such matters in this paragraph referred to PROVIDED ALWAYS that the Lessee shall be under no liability in respect of any structural alterations which may be required but not caused by the Lessee’s use or occupation of the premises.”

11 Clause 10(i) was a covenant by the lessor that:

“The Lessee paying the rent hereby reserved and duly and punctually observing and performing all covenants, obligations and provisions in this lease on the part of the Lessee to be observed and performed may peaceably possess and enjoy the premises for the term hereby granted without any interruption or disturbance from the Lessor or any other person or persons lawfully claiming by from or under the Lessor other than such interruption or disturbance from the Lessor as are expressly provided for in this lease.”

12 Clause 11(i) provided:

“That if the rental hereby reserved or any part thereof shall be unpaid for the space of fourteen (14) days after any of the days on which it ought to have been paid … or if the Lessee commits permits or suffers to occur any breach or default in the due and punctual observance and performance of any of the covenants obligations and provisions of this lease … then … the Lessor … shall have the right without any notice to re-enter into and upon the premises or any part thereof … The covenant to pay rent and to preserve the licence herein contained is an essential term of this lease and the Lessee hereby acknowledges and agrees that equitable relief against forfeiture shall not be available to the Lessee.”

13 Clause 15 included:

“15.4 The Lessee covenants with the Lessor for the more effectual preservation of the licence of the said hotel, in the event of default by the lessee; then the lessee irrevocably appoints the lessor the true and lawful attorney of him, the lessee to transfer or cause to be transferred the hotelier’s licence for the time being held in connection with the said premises to any person whomsoever and to apply for the renewal or removal of the said licence or any new licence … AND GENERALLY to do and perform all such further acts, matters and things as shall be necessary or expedient to enable the lessor … to obtain the renewal of any licence or any new licences or the transfer of any licence then existing and in force and in the name of the lessee or other person or persons in whose name the said licence or licences shall then be …

15.5 On every transfer or sub-lease the lessee shall at his own expense procure the new or intending transferee or sub-lessee to enter into and execute a power of attorney in respect of the licence similar to that hereinbefore contained and to confirm the covenants hereof and no transfer or sub-letting shall be complete or effective until the lessor’s consent shall be obtained thereto as aforesaid and the said power of attorney from the new or intending transferee or sublessee shall have been in each case duly executed, stamped and delivered to the lessor without any expense to the lessor.”

The Agreement for Sale of Business

14 By agreement made 7 March 1994 Buddies entered an agreement with Mr Vella to sell the business of the Tavern to Mr Vella or his nominee. The agreed price was $105,000, apportioned as to $105,000 to “Hotel lease and Goodwill”, and as to “Nil” to “Plant, Fittings and Chattels”. A deposit of $5,250 was payable on the making of the agreement, and the balance on completion. In addition, the stock was sold at valuation. Completion was to take place within eight weeks from the date of the agreement. The agreement contained a clause making completion of the agreement conditional upon the transfer of the existing lease, and conditional upon the lessor consenting to the transfer of the lease. Clause 6 made provision for the purchaser obtaining possession of the business on completion.

15 Clause 21 provided that the vendor and purchaser agreed (subject to the consent of the lessor) “to attend to [sic] the Provisional Transfer … rather than the full and final transfer of the Hotelier’s licence … attaching to the premises”. Clause 22 set out a regime for that transfer to occur:

“22.1 The Purchaser shall upon the date of the exchange of this Agreement furnish in writing to the Vendor’s Solicitor the full name and address of the proposed Transferee of the Licence …

Liquor Act, 1982

22.5 The Vendor’s Solicitor shall as soon as practicable after receiving the Purchaser’s Affidavit of Transferee … thereafter lodge such Application and Affidavit together with an Application and Affidavit of the Transferor with the Registrar of the Licensing Court for the Transfer of the licence. …

22.8 The Purchaser will take such steps and do all things necessary to have the Application heard by a Licensing Magistrate at the first available date after the receipt of the Report from the Metropolitan Licensing Inspector upon the said transfer.

22.9 In the event of the Application for transfer of the License being refused by the Court owing to objection to the Purchaser nominee then another nominee shall be obtained by the Purchaser and the Purchaser will comply with and agrees to clause 22 herein with respect to the other nominee …”

Steps Towards Assignment of the Lease

16 Wah Lai at all relevant times engaged Peter A Simon Real Estate Pty Limited as its real estate agent in connection with the Tavern. Mr Simon Touma, of that company, was responsible for the Tavern. On 6 July 1994 Mr Meers wrote to Mr Touma stating that:

“… Mr Paul Vella has entered into an agreement with my company, Buddies Liquor Pty Ltd, to purchase the business of the Waterloo Tavern, subject to the approval of the Lessor which, as you are aware, understands the Lease cannot be unreasonably withheld” [sic]

“I, therefore, formally request your client’s consent to the transfer of the Lease and should be pleased if you would treat this matter as one of urgency.”

17 The directors of Wah Lai have at all relevant times been Dr Wah Chan and Mrs Chan. They are both Cantonese speakers, with extremely limited ability to speak, read or write English. Dr Chan appears, on the evidence, to ordinarily have been in Hong Kong in the 1994-96 period, while Mrs Chan was sometimes in Hong Kong, and sometimes in Australia during that period.

18 On 12 July 1994 Mr Touma sent to Wah Lai, in Hong Kong, by fax, a copy of Mr Meers’ letter of 6 July 1994. The covering page of the fax contained a message, “Under the terms of Mr Meers letter we have no option but to transfer the lease.”

19 On 20 July 1994 Mr Touma sent another fax to Wah Lai in Hong Kong, saying:

“We refer to our fax of 12/7/94 and ask you to acknowledge transfer of lease by signing & returning this fax to us.”

20 On 20 July 1994 a meeting took place at the offices of Michael J Wilcox & Associates, solicitors, at Ultimo. Mr Wilcox of that firm had been retained by Mr Vella to act for him in connection with the purchase of the Tavern. The meeting was attended by Mr Wilcox, Mr Meers, and Mr Vella. At that meeting, Mr Meers handed over a Real Property Act 1900 form appropriate for the transfer of a lease, filled out so that it related to the lease I254621 of the Tavern, naming Mr Vella as transferee, and executed by Buddies. Mr Vella signed that document when it was handed over.

21 The copy which is in evidence of the Transfer of Lease executed by Mr Vella, bears a handwritten endorsement that the lease was transferred subject to an encumbrance number U152518. That dealing number identifies a mortgage given by Buddies to Westpac on 17 May 1993. The register at the Land Titles Office has at all relevant times shown that the lease is subject to that mortgage. However, it was not the intention of Mr Meers (on behalf of Buddies) to transfer the Lease subject to that mortgage, nor the intention of Mr Vella to take the transfer of the Lease subject to that mortgage. The handwriting in which the identifying number of the encumbrance appears on the Transfer of Lease document looks quite similar to the handwriting in which the name and address of Stewart Levitt & Co appear on that document, in a box intended to identify the lodging party. Stewart Levitt & Company do not appear in the story of events relevant to this litigation until well after July 1994. It is likely that the reference to the encumbrance was added to the Transfer of Lease document well after that document was handed over on 20 July 1994.

22 Mr Meers wrote to Mr Wilcox on 20 July 1994, saying:

“I refer to the settlement of this matter of today’s date and advise that I have notified the Lessor’s agent, Peter A Simon Real Estate Pty Limited, of the transfer of the Lease. I remind you that the next month’s rent of $6,500 is due on the 25th instant.”

23 Though the meeting on 20 July 1994 was referred to as a settlement, Mr Vella did not pay the balance of the purchase price on that date. There was an agreement between Mr Meers and Mr Vella whereby Mr Vella could defer the balance of the price until March 1995, on terms that he provide security over his property at 10 Clarendon Road, Stanmore. There was a later agreement extending the date for payment even further. My findings about the time, and terms, of these agreements are imprecise because the evidence on this topic is imprecise.

24 The mortgage over 10 Clarendon Road, Stanmore was never given. Mr Vella paid some of the remainder of the purchase price, but left $85,000 owing, which he has never paid. (On this topic I accept the evidence of Mr Meers in preference to that of Mr Vella.) Further, a power of attorney, of the type referred to in clause 15.5 of the Lease, has never been provided by Mr Vella, or any person or entity connected with him, to Wah Lai. Nor has Mr Vella, or any person or entity connected with him, entered into any document with Wah Lai whereby he (or any other person or entity) confirmed the covenants contained in the Lease, as clause 15.5 of the Lease required to be done.

25 On 21 July 1994 Mr Vella and Ms Gleeson moved into occupation of the Tavern. They began living in a manager’s flat on the premises, operating the Tavern, and letting out the bedrooms associated with the Tavern.

26 The Transfer of Lease document was not registered with the Land Titles Office. After the “settlement” on 20 July 1994 Mr Vella left the document with Mr Wilcox. In December 1994 or January 1995 Mr Vella collected from Mr Wilcox a box of documents relating to various matters in which Mr Wilcox had acted for Mr Vella.

27 Mr Vella gives evidence that soon after he had been ejected from the Tavern on 14 May 1996, he looked in the box of documents, and found the original of the Sale Agreement and Transfer of Lease. He says that he then found out for the first time that the Transfer of Lease had never been stamped nor registered. He arranged for it to be stamped on 31 July 1996, and it was lodged at the Land Titles Office soon thereafter. It has never been registered.

28 I do not accept Mr Vella’s evidence that it was only after his ejection from the Tavern that he found out that the transfer of lease had never been stamped nor registered.

29 In connection with the proposed transfer of the liquor licence Mr Vella engaged the services of Mr Jim Adams, solicitor. An employed solicitor, Mr Tillbrook, assisted Mr Adams. As explained in para [35] ff below, Mr Vella had applied for a transfer of the liquor licence to himself; the police had objected to that transfer, and he had decided not to press on with his application. Instead, application was made for the licence to be transferred to Ms Gleeson. On 6 December 1994 Mr Tillbrook wrote to Ms Gleeson reporting that an application for transfer of the liquor licence to her had been lodged, and saying:

“It now remains to be seen whether the police lodge an objection to the transfer of the licence to yourself because of your personal involvement with Paul. If this occurs, we may have to take a close look at the lease agreement to see whether Paul and/or Craftmill Pty Limited can avoid the lease.”

30 A file note of Mr Adams of 12 December 1994 shows Mr Adams making enquiries to clarify the status of Mr Vella and/or Craftmill concerning the Lease. Mr Ellis Reuben is a solicitor who had acted for Wah Lai on the entering of the Lease to Buddies, but he had not been involved in any assignment of the Lease to Mr Vella or anyone connected with Mr Vella. Mr Adams ascertained that Mr Reuben had been solicitor for the lessor, spoke to Mr Reuben, and Mr Reuben “indicated that he knew of an approach being made to consent to the assignment of a lease which was made to a real estate agent at Bankstown.” Mr Adams’ note continues:

“I have since spoken to the agent who confirms that an approach was made and that he responded on behalf of the lessor confirming the consent. He was unable to comment on the fact that there had been no formal assignment as it is a registered lease. He also indicated that he had spoken to Mr Meers as late as last Friday and Mr Meers had agreed to go back into the hotel. He also indicated that there was an arrangement in writing between his client and Mr Meers whereby upon one months’ notice Mr Meers was required to enter into possession of the hotel.”

31 A file copy of a letter from Mr Jim Adams, solicitor, to Mr Vella dated 20 December 1994 records:

“… we have discussed the question of your tenancy at the Waterloo Tavern on a number of occasions, not the least of which was at the meeting this morning in the writer’s office…

I note that you did not attend to stamping of the contract for the purchase of the business nor has the transfer of the lease document been stamped, nor registered.”

32 That Mr Adams was at this time investigating the status of Mr Vella’s occupancy of the Tavern (at, I would infer, the request of Mr Vella) is confirmed by a fax sent by Mr Meers to Mr Adams on 20 December 1994. That fax enclosed a signed copy of the fax dated 20 July 1994 (para [19] above) whereby Wah Lai acknowledged transfer of the Lease (of which Mr Meers had obtained another copy from Peter A Simon Real Estate earlier in the day on 20 December 1994), and a freshly executed Real Property Act 1900 form appropriate for the transfer of a lease, filled out so that it related to a transfer of the Lease of the Tavern from Buddies to Mr Vella.

33 At least two people in Wah Lai’s camp were aware, in 1994, that there might have been an irregularity concerning the assignment of the Lease. For reasons not made clear by the evidence, Mr Reuben had written to Mr Touma on 7 November 1994 concerning the Lease, saying:

“Has the Lease been properly assigned in the matter. If not, do you wish me to prepare an assignment of Lease.

I note that I have not been requested to consent to a Transfer of Lease to be Registered at the Land Titles Office.

Please advise present position.”

Transactions Concerning the Liquor Licence

34 I shall trace under this heading events relevant to the liquor licence of the Tavern, even though some of the events are out of the chronological sequence of the main events with which this litigation is concerned.

35 Even though he had been in the premises since 21 July 1994, it was only on 2 September 1994 that Mr Vella applied to the Licensing Court of New South Wales for a transfer to himself of the liquor licence. Mr Vella filled out the section of the application form relating to the licensed premises as follows:

Question	Answer
Name(s) and address(es) of lessee(s)	Paul Vella 10 Clarendon Street, Stanmore NSW
Name(s) and address(es) of co-lessee(s)	Not Applicable
Duration of the lease	Lease terminates on 25 May, 2003
Who will be entitled to the profits of the business?	The applicant Paul Vella

36 In the course of the affidavit which accompanied that application, Mr Vella answered questions as follows:

Question	Answer
Have you in Australia or elsewhere, ever been summonsed, charged or convicted or had any offence proved against you	No
Who will own the license if this application is granted	The applicant Paul Vella
In what capacity will you hold the license	As owner
Who are the persons directly or indirectly interested in the business or the profits of the business carried on pursuant to the licence?	The applicant Paul Vella
Where a proprietary company is so interested, state the name of the company, the names of directors and all shareholders, their dates and places of birth, addresses, any former name(s) and date of arrival in Australia, if applicable	Not applicable

37 In answer to the question “What previous experience or training have you had in the conduct and operation of a hotel/licensed restaurant in NSW or in the liquor trade?” his answer included:

“In 1968 the applicant obtained a Restaurant/Cabaret licence to operate premises known as Club 75, 75 Enmore Road, Enmore. In 1982 the applicant established a restaurant known as Fantales at 128 Pyrmont Bridge Road, Camperdown and operated these premises continually until the end of 1992.”

38 The application also included an application for transfer of ownership to Mr Vella of ten Approved Amusement Devices (“AADs”). In that part of the application he answered questions as follows:

Question	Answer
Will you as holder of the hotelier’s licence:
(a) share any receipts arising from the use or operation of an approved amusement device with any person other than person(s) mentioned in Question 4(b) or Part 1?	No
(b) make any payment, or part payment, by way of sale or commission or allowance from or upon any such receipts to anyone other than the person(s) mentioned in Question 4(b) or Part 1; or receive any payment, or part payment, or any other benefit by way of commission or allowance from the operation of the amusement devices on the licensed premises	No

39 Mr Vella’s signature on the application was witnessed by Mr Michael Wilcox, solicitor.

40 On 2 November 1994 Sgt Novak, of the Redfern Licensing Police, lodged an objection to the provisional transfer of the hotelier’s licence. The objection was on the grounds that Mr Vella was not a fit and proper person to hold such a licence, on grounds which included that he had 16 breaches in previous times for liquor offences, and that he had answered “No” to the question which asked if he had in Australia or elsewhere ever been summonsed, charged or convicted or had any offence proved against him.

41 By letter dated 3 November 1994 to Mr Vella, the Principal Registrar of the Licensing Court notified him of that notice of objection, and stated that the consequence of the objection was that the licence had automatically reverted to the former licensee/transferor. Though Mr Vella gives evidence that he did not see that letter, I find that the substance of its contents came to his attention in one way or another. Mr Vella did not seek to contest the objection which had been taken to the transfer of the licence to him.

42 Craftmill is a company which Mr Vella had purchased as a shelf company in November 1993. The directors were Ms Gleeson, and Mr Vella’s son, Anthony Mark Vella. Mr Vella held half the shares, and the other half were held by another person on trust for Mr Vella. Mr Vella gives evidence in his affidavit that he had set up Craftmill in November 1993 with the intention that Craftmill would operate the Tavern after he had purchased the business. He also gives evidence that during the period 21 July 1994 to 14 May 1996, Ms Gleeson and he ran the Tavern on behalf of Craftmill. This evidence is inconsistent with the affidavit he swore for the Licensing Court proceedings on 2 September 1994 (para [36] above), and with the terms of his application for transfer of the AADs (para [38] above). I am not persuaded that Craftmill had any role in operating the business until after Mr Vella abandoned his plan to run the Tavern himself.

43 Mr Michael Piastri had been the licensee of the Tavern when it was operated by Buddies. He continued to be the licensee until 14 September 1994, and was again the licensee from 2 November 1994 to 20 December 1994. According to Mr Vella, once he was aware of the objection to his application for the liquor licence, and had decided not to proceed with the application, Mr Piastri returned to the Tavern and supervised its day-to-day operations until a licence was granted to Ms Gleeson. There is evidence to the contrary in the file copy of Mr Adams’ letter to Mr Vella of 20 December 1994 (para [31] above), which records:

“The position now is that the hotel is shut, that the police will object to Koleta having any interest because of her association with you.”

44 On 30 November 1994 Mr Piastri lodged in the Licensing Court an application for the provisional transfer to Ms Gleeson of the hotelier’s licence relating to the Tavern. In that application, he stated that Buddies owned the licence, and that Buddies was the only person directly or indirectly interested in the business or the profits of the business carried on pursuant to the licence. He stated that the lessee of the premises was Craftmill, of 10 Clarendon Road Stanmore, and that there was no co-lessee. Concerning the ten AADs on the premises, he stated that his intention was to transfer ownership of the devices to the proposed licensee/owner, Ms Gleeson.

45 On 25 November 1994 Ms Gleeson made an application for the transfer of the liquor licence to her. In connection with that application, she answered questions as follows:

Question	Answer
Who will own the licence if this application is granted?	Buddies Liquor Store Pty Limited
What is the purchase price of the business conducted pursuant to this licence?	$100,000
State exact details of the source of the moneys for the purchase (including name of financial institution or persons providing funds and details thereof. If other, please state):	Craftmill Pty Limited - $5,000 Buddies Liquor Pty Limited vendor finance - $95,000
In what capacity will you hold the licence?	Manager
Who are the persons directly or indirectly interested in the business or the profits of the business carried on pursuant to the licence? …	Craftmill Pty Limited
If you will not own the freehold of the licensed premises, state full details of: the name of the lessor name/s and address/es of lessee/s: Who will be entitled to the profits of the business?	Wah Lai Investments (Australia) Pty Ltd Buddies Liquor Store Pty Ltd (sub-lessor) Craftmill Pty Ltd (lessee) Craftmill Pty Ltd

46 On 27 November 1994 a written agreement was entered between Craftmill and Ms Gleeson, whereby Ms Gleeson would have the full, free and unfettered control of the conduct of the business of the Tavern. That agreement was one of the type then required by section 39 of the Liquor Act 1982. It was attached to Ms Gleeson’s application for transfer of the liquor licence.

47 Ms Gleeson’s application also included an application to transfer the ownership of the AADs. Concerning that part of the application, she responded to the question “What is the sale price and terms of purchase, if any?” by saying “None. Very old machines with no residual value”.

48 A provisional liquor licence was granted to Ms Gleeson on 20 December 1994. Affidavit evidence from Mr Vella that it was granted to her on 30 November 1994 is incorrect. A licence which was not provisional was granted to her on 20 March 1995.

49 On 29 May 1996 Ms Gleeson lodged with the Licensing Court an application to surrender her licence, on the ground that she had been evicted from the premises.

The Fire Safety Order

50 I will trace under this heading the history of formal action taken by the South Sydney City Council (“the Council”) concerning the adequacy of the fire safety precautions at the Tavern, even though some of the events are out of the main chronological sequence of events relevant to the litigation.

51 In around August 1994 an officer of the Council came to the Tavern, and informed Mr Vella that the premises did not comply with council fire safety requirements. He handed Mr Vella a copy of a notice dated 7 June 1994, issued by the Council and addressed to Wah Lai at a post office box number in Bankstown which was the post office box number of Peter A Simon Real Estate. That notice stated that Council’s records showed that no Certificate of Compliance in respect of essential services had been supplied to the Council, and that essential services were required to be installed at the premises in the categories of:

· Emergency lighting,

· Exit signs,

· Fire doors,

· Hose reels,

· Portable fire extinguishers.

52 The certificate of compliance was not supplied. On 25 August 1994 the Council issued a formal Fire Safety Order, under section 124 of the Local Government Act 1993. It was posted, addressed to Wah Lai at the address of the Tavern. It required Wah Lai to carry out certain listed works within 270 days of service of that Order. The list of works occupied three typed pages. That notice was returned to the Council on 7 October 1994, and subsequently hand-delivered to the Tavern on 20 October 1994.

53 On 10 November 1994 the Council issued another Fire Safety Order, in identical terms to the order it had issued on 25 August 1994. That Order was also posted, addressed to Wah Lai at the address of the Tavern. That notice was returned undelivered to the Council on 16 November 1994, and subsequently hand-delivered to the Tavern on 17 November 1994.

54 On 2 August 1995 Mr Sivayoganathan, a building inspector employed by the Council, inspected the Tavern, and found that none of the works required by the Fire Safety Order had been commenced.

55 On 4 August 1995 the Council wrote to Wah Lai, at the address of the Tavern, referring to the Order under section 124 of the Local Government Act 1993 which had been served on 10 November 1994. It asserted that, as at 4 August 1995, the work had not been commenced. It stated the Council’s view that the premises were an extreme fire hazard, and that unless the works required in the Order were carried out the Council would instruct its solicitors to instigate legal proceedings under section 628 of the Local Government Act 1993.

56 On 1 November 1995 Mr Sivayoganathan inspected the premises again, and found that none of the works required by the Fire Safety Order had been commenced.

57 On 29 November 1995 Pike Pike & Fenwick, solicitors for the Council, wrote to Wah Lai at the address of its Sydney accountants, who were a reliable channel of communication to Wah Lai. That letter referred to the Fire Safety Order made on 10 November 1994, stated that the works remained outstanding, and required,

“an unequivocal undertaking that the work specified in the Notice dated 10 November 1994 will be completed within sixty days of the date of this letter. The undertaking must be received in this office within seven (7) days of the date hereof. If no such undertaking is received we are instructed to commence legal proceedings for orders directing that the works be carried out. You will also be liable to penalties for failure to carry out the work …”

58 Mr Sivayoganathan inspected the premises again on 29 February 1996 and found that, while some work had been done, large amounts of the work required by the Fire Safety Order remained outstanding. I will deal later (paras [105] and [251] ff below) with the detail of what work had, and had not, been done.

59 The Council took proceedings against Wah Lai in the Land and Environment Court of New South Wales, resulting, on 12 July 1996, in consent orders being made that the premises not be occupied until the Fire Safety Order had been complied with, and that they be securely locked and boarded up and secured against entry to the satisfaction of the Council pending compliance with that Fire Safety Order.

Payments of Rent and Outgoings

60 After moving into the Tavern on 21 July 1994, either Mr Vella or Craftmill paid rent to Wah Lai’s real estate agent for each of the instalments of the Basic Rent falling due on the 25th of the month, to and including 25 May 1995. Some of the payments of the Basic Rent were late, the first of them up to three weeks late. To the extent that Craftmill made the payments, Wah Lai had no reason to believe that they were paid on any other basis than on behalf of Mr Vella.

61 On 29 August 1994 Mr Touma wrote to Mr Vella referring to the fact that a rental cheque for $6,500 which he had given had been dishonoured, and that a further rental instalment had fallen due on 25 August 1994, bringing the total due to $13,000. Mr Touma’s letter asked Mr Vella to vacate the premises within seven days. On the same day, Mr Touma faxed to Mr Meers a copy of that letter, and asked Mr Meers to take back possession of the Tavern immediately. Mr Vella caused the rental to be paid, and nothing more was done at that time about Mr Meers taking back possession.

62 Wah Lai contends that a rental increase had become payable from 25 July 1994, of $325 per month, and that Mr Vella never paid $775 of that increase, which accrued in the period 25 July 1994 to 25 October 1994. The first claim for a rental increase was made when Mr Touma wrote to Mr Vella on 6 September 1994, saying:

“We have advised Mr Meers that according to the lease agreement rental has been increased to $6,825 per month.

Could you please remit the difference for the last 2 months being $650.00 and pay the new amount as from 25th September 1994.”

63 No rental instalment falling due after 25 May 1995 has been paid by Mr Vella, Craftmill, Buddies, or anyone else, whether as to the amount of the Basic Rent, or the amount of any increase in rental. Further, some of the outgoings which fell due prior to 25 June 1995 have not been paid, and the vast bulk of the amounts of council rates, water rates and land tax which fell due in the period since 25 June 1995 were not paid by Mr Vella or anyone connected with him.

64 The real estate agent sent Wah Lai monthly statements of rental collected, from June 1994 to May 1995 inclusive. On each of those statements the tenant was shown as “Buddies Liquor Pty L”. It has not been shown that anyone from Wah Lai (as distinct from its real estate agent) noticed or paid any particular attention to this identification of the lessee.

65 Relevant officers of Wah Lai were aware, from 21 July 1994, that Mr Vella was physically present on the premises, and involved in carrying on the hotel business there. They were aware, from the time of the first payment of rental, that rental and outgoings were being paid or caused to be paid by Mr Vella.

1995 – Steps Taken Concerning Rental and Outgoings Arrears

66 On 7 February 1995 Mr Touma wrote to Mr Vella about outstanding rental and outgoings, which then totalled a little over $16,000, threatening that “further action will be taken” if payment was not received in full within seven days. A copy of that letter was sent to Mr Meers, and another copy was sent to Mr Ellis Reuben, solicitor. On 8 May 1995 Mr Touma wrote again to Mr Vella concerning unpaid rental and outgoings, which by that stage were a little over $20,000. In each of these letters, the outstanding rental represented the $775 of rental increase which had become due under the rental escalation clause, but not been paid. On 19 June 1995 Mr Touma wrote again to Mr Vella about outstanding rent and outgoings, which by that time totalled nearly $27,000. By 19 June 1995 the unpaid rental was $7,600, made up of the $775 rental increase amount, plus $6,825 of more recently accrued rent.

67 By 15 February 1995 Mr Touma had instructed Mr Reuben to take some steps concerning the arrears. On 15 February 1995 Mr Reuben wrote to Buddies, referring to the Lease, and saying:

“… I have been instructed by Peter A Simon Real Estate that Mr Paul Vella is in occupation of the premises at 1-3 Botany Road Waterloo.

Under the terms of the Lease, it is a requirement that Council Rates, Water Rates and increases in rent be paid.

I am instructed that the sum of $16,067.65 is currently outstanding to 7 February 1995 from Mr Vella.

There appears not to have been a formal assignment of the Lease, although I am instructed that the Real Estate Agent gave a letter of consent to the proposed Transfer on behalf of the Lessor.

I am instructed to commence legal proceedings against Mr Vella, but I am loathe to involve Buddies Liquor Pty Limited in view of the good relations that you have with the Real Estate Agent, Peter A Simon Real Estate, and with this firm.

Perhaps you could see it clear to place some pressure on Mr Vella to meet his outstanding obligations.”

68 Mr Reuben’s retainer did not continue at that time. Around 28 April 1995 Mr Touma instructed Roxburgh & Co, solicitors, to recover the unpaid outgoings and outstanding rent from Mr Vella.

69 On 20 July 1995 Roxburgh & Co wrote to Mr Touma, under the heading “Re: Mr Paul Vella and Buddies Liquor Pty Limited”, saying:

“I refer to your instructions to commence legal proceedings against Mr Paul Vella and Buddies Liquor Pty Limited.

We have served a letter of demand with no response.

Therefore, we intend to commence immediate legal proceedings.”

70 On 26 July 1995 Mr Touma faxed Wah Lai in Hong Kong, saying:

“We advise that the tenant of the above address has not been co-operating in paying rent or outgoings.

We recommend starting legal action to recover same.

If you are agreeable please acknowledge your consent by signing and returning this fax.”

71 By letter dated 25 July 1995, but not faxed until 26 July 1995, Mr Touma replied to Roxburgh & Co’s letter of 20 July 1995. Though Mr Touma’s letter said he was providing a full breakdown of the amounts outstanding, and a copy of the letter of consent with regard to the assignment of lease, in fact he sent Roxburgh & Co details of the amount outstanding, and Wah Lai’s consent to starting legal proceedings, which Mr Touma had received a few hours before. On 27 July 1995 Roxburgh & Co asked Mr Touma to send any consent given to Buddies “to permit any purported transfer of Licence” by Buddies to Mr Vella. Mr Touma, on 27 July 1995, sent Roxburgh & Co a copy of the consent to transfer of the Lease dated 20 July 1994, signed by Wah Lai (para [19] above).

72 On 15 August 1995 Mr Touma wrote to Mr Vella, listing the outstanding rental and outgoings, which by that time totalled in excess of $38,000. The letter said, “[p]lease be advised that if payment is not received in full within seven (7) days further action will be taken.” After 15 August 1995, however, neither Mr Touma, nor anyone else on Wah Lai’s behalf, wrote any more letters of demand to Mr Vella, seeking outstanding rent or outgoings. This happened because Mr Reuben became involved in the matter once more, and took the view that Mr Vella was not Wah Lai’s tenant.

73 Prior to September 1995 Mr Touma had had discussions with Mr Reuben about Mr Vella, “mainly the registration of Mr Vella’s lease, Mr Reuben was always concerned it was never registered.”

74 On 14 September 1995 Mr Touma instructed Roxburgh & Co to transfer their file to Mr Reuben. That file had been opened in the name of “Peter A Simon Real Estate v. Mr Paul Vella”. When Mr Reuben received it he crossed out the reference to Mr Vella on the cover of the file, and wrote in a reference to “Buddies Liquor Pty Ltd & Anor”. The file contained, among other things:

· a copy of Mr Touma’s letter of 25 July 1995 to Roxburgh & Co (para [71] above);

· the letter of demand to Mr Vella dated 19 June 1995 (para [66] above);

· Wah Lai’s written consent to commencement of litigation dated 26 July 1995 (para [70] above); and

· Wah Lai’s consent to assignment of lease dated 20 July 1994 (para [19] above).

75 On 15 September 1995 Mr Touma faxed Wah Lai in Hong Kong, saying:

“Attached please find various correspondence from South Sydney Council requesting various work to be done to ensure safety in the event of a fire.

As you are aware there are legal proceedings going on to recover monies from the tenant, therefore we are asking to pay for the various works that will need to be carried out.

The legal proceedings are progressing well at this stage and costs for these at the moment are $1500.00 to the solicitor, however if a barrister is required these costs will of course rise.

Would you kindly sign and return this part of the fax to us if you are agreeable to the above fire requirements.”

76 Notwithstanding Mr Vella’s evidence to the contrary, Mr Touma was not aware of the work required to be done pursuant to the Fire Safety Order until September 1995. Nor was Mrs Chan aware of that work until September 1995. Nor is there any reason to believe that any other person connected with Wah Lai had notice of the work required by the Fire Safety Order until September 1995.

77 On 19 September 1995 Mr Reuben sent to Mr Touma some draft pleadings. Those draft pleadings were for an action to recover outstanding rent and outgoings, and recover possession, where Wah Lai was the plaintiff, and Buddies and Mr Meers were the defendants.

78 On 20 September 1995 Mr Reuben wrote, on behalf of Wah Lai, to Buddies. The letter referred to the Lease from Wah Lai to Buddies and the obligation under that lease to pay rent and outgoings, and continued:

“We are also instructed that you are in breach of clause 7(ii) as you have assigned, transferred, sub-let or parted with possession of the premises without the Lessors consent properly had and obtained.

We are instructed that you are in breach of clause 15 of the Lease in particular Clause 15.1 and 15.5 of the Lease to procure those covenants and Powers of Attorney as required under the Terms of the Lease in favour of the Lessor by any assignee or transferee of the Lease.

Search at the Land Titles Office discloses that you have mortgaged the interest in the Lease to Westpac Banking Corporation without the Lessors proper consent first had and obtained.”

Conveyancing Act 1919

79 On 29 September 1995 proceedings number 13712 of 1995, in the Common Law Division of the Supreme Court of New South Wales (“the Possession Proceedings”), were commenced. The plaintiff was Wah Lai, and the defendants were Buddies and Mr Meers. The Statement of Claim pleaded the Lease of the Tavern to Buddies, failure to pay rent and outgoings in an amount totalling $36,776, and breaches of the Lease on the part of Buddies, in that Buddies had:

“assigned, leased or parted with possession of the premises without the Plaintiff’s proper consent first had and obtained.

… assigned, leased or parted with possession of the premises without the assignee, lessee or transferee first having entered into a covenant and agreement with the Plaintiff in accordance with the Lease.

… mortgaged the Lease to Westpac Banking Corporation without the Plaintiff’s proper consent first had and obtained..”

80 Mr Meers was sued as a guarantor of Buddies’ obligations under the Lease. The prayers for relief included the sum of $36,776, damages, judgment for possession, leave to issue a writ for possession, and an order that the plaintiff may forfeit and terminate the Lease. Mr Reuben was the solicitor who filed the Statement of Claim on behalf of Wah Lai. The omission of Mr Vella from the list of defendants was not the result of any specific instructions which Mr Reuben received; rather, it was based on his own views about who the appropriate defendants were.

81 Mr Vella has given evidence that soon after a visit from a Council officer in around August 1994 (para [51] above), he met Mr Touma, and asked him what was going to happen with all the work that needed to be done. Mr Vella’s evidence is that Mr Touma told him that the owner would not be able to afford to do it, that Mr Vella expressed reluctance to spend money on a building which did not belong to him, but said that he would do the work, that Mr Touma asked him to get a quotation to see how much it would cost, and that Mr Vella said he would get Mr Simpson to give him a quote.

82 I do not accept Mr Vella’s evidence about discussing the Council’s requirements with Mr Touma as early as August 1994. Mr Touma denies having any such conversation at that time. He was not aware of those requirements until September 1995 (para [76] above). However, Mr Vella at some stage sought help from Mr Simpson concerning the Council’s fire requirements.

83 Mr Neil Simpson has qualifications in environmental health, and building, and has specialised in dealing with building issues relating to licensed premises. He had dealt with Mr Vella concerning other licensed premises with the operation of which Mr Vella had been involved, before the Tavern. Mr Vella had a limited ability to read and write English. Mr Simpson on occasions prepared documents and correspondence for Mr Vella, and read over and explained to Mr Vella incoming correspondence, and legal documents. He gave Mr Vella quite a thorough explanation of the requirements of the Fire Safety Order, and assisted him in seeking further advice in relation to matters such as a requirement for electrical wiring and other matters in which Mr Simpson did not have expertise. He also conducted some negotiations with the Council on Mr Vella’s behalf.

84 At some time, Mr Simpson prepared a letter dated 11 October 1994, addressed to Mr Vella headed “Re: Fire Safety Order”. It said, “We estimate the following costs”, and then gave a list of six items, each with a cost alongside it, and showed the total of those costs as being $44,490.

85 Though I cannot make a positive finding to this effect, it is at least a possibility that Mr Simpson’s letter dated 11 October 1994 estimating the costs of complying with the Fire Safety Order (para [84] above) was misdated. Whatever date it was first prepared on, it was sent to Mr Touma by fax on 13 October 1995. On the copy of the quotation which was faxed to Mr Touma on that day, Mr Vella had handwritten “Because the short time preparing the quotation, that we agree, could not put prices of all the fitting, required in the quotation”.

86 Ms Josephine Hui is the daughter of friends of Dr and Mrs Chan. Ms Hui has been the secretary of Wah Lai since 21 March 1995. She lives in Sydney, and sometimes helped Dr and Mrs Chan with business arrangements concerning the Tavern. She was the person to whom Mr Touma usually spoke if he needed instructions concerning the Tavern.

87 Mr Vella gives evidence that in early 1995 Ms Hui visited the Tavern with Dr Chan and Mrs Chan, that he showed them around the Tavern, and pointed out various items of work which would need to be done, of a kind referred to in the Fire Safety Order. I do not accept that either Ms Hui, or the Chans, made any such visit to the Tavern in early 1995. It is possible that Mr Vella is referring, in this evidence, to a visit Ms Hui, Dr Chan and Mrs Chan made to the Tavern on 6 February 1996.

88 On 26 October 1995 Mr Touma sent a fax to Wah Lai in Hong Kong, saying:

“Attached is a quote for various works to be carried out at the above property. These repairs are considered urgent and money for these need to be banked into our trust account as soon as possible.

We have been advised that Council will close the hotel if these works are not carried out.”

89 On 29 October 1995 a letter was written on the letterhead of Patrick Simpson & Associates, addressed to Mr Vella, headed “Re: Fire Safety Order”. It said “we estimate the following costs”, and listed six items of work. Those items of work were described more fully than the items of work in the letter dated 11 October 1994 (para [84] above), but the same price was allotted to each of the six items as had been allotted in the letter of 11 October 1994, and consequently the total shown in the letter of 29 October 1995 was also $44,490.

90 Around the time of receiving the quotation dated 29 October 1995 Mr Touma had a conversation with Mr Vella, where Mr Vella asked “If I undertake the work to satisfy the fire service order, can the cost of the work be offset against the rent that is owing?”. Mr Touma said he would speak to the owners about it.

Service of the Notice to Occupier

91 On 11 November 1995 Mr Ramshaw, a process server, attended at the Tavern, and served there a Notice of Claim for Possession, and a copy of the Statement of Claim in the Possession Proceedings. The Notice of Claim for Possession was addressed “To: Koleta Gleeson ‘the Occupier’” at the address of the Tavern. Mr Ramshaw gave the documents to a man behind the bar.

92 Mr Ramshaw has a practice of making a verbatim note soon after service of a document of any conversation that occurred at the time of service. On 30 November 1995 he swore an affidavit of service, which deposed to the person who was served saying “This is the Waterloo Tavern. Koleta Gleeson is the occupier, I’ll take that for her”, and “She is the only person in possession of the Property and no-one has come to the property or left it since the 29th September”. (29 September was the day the Possession Proceedings were started.)

93 The conversation which Mr Ramshaw deposes to is rather disjointed. It also attributes to the speaker a degree of specificity, which is at first sight surprising, in the remarks he makes to Mr Ramshaw, someone who was a complete stranger to him. However any reservations arising from these matters disappear when one realises that the affidavit includes no account of what Mr Ramshaw himself said. I accept that the substance of the words to which Mr Ramshaw deposed were said by the person to whom he handed the documents, and that the account of the conversation in his affidavit was based on his contemporaneous note.

94 There was a system at the Tavern whereby mail or any other documents which were handed to the person in charge of the bar were placed in a box behind the bar, and later distributed to the intended recipient. Notwithstanding the existence of that system, the documents which Mr Ramshaw served did not come to the attention of either Mr Vella or Ms Gleeson, until after the eviction had occurred.

The Rental Offset Agreement

95 The letter of 29 November 1995 from the Council’s solicitors to Wah Lai, giving 60 days in which to do the work the Council required (para [57] above), created a heightened urgency, so far as Wah Lai was concerned, to find a way of having the work done.

96 In early December 1995 Ms Hui was told by Mr Touma that Mr Vella had made a proposal to Wah Lai concerning the Fire Safety Order and the rent owing on the premises. She instructed Mr Touma that the matter should be referred to the Chans in Hong Kong.

97 On 4 December 1995 Ms Hui sent a fax on behalf of Wah Lai to Mr Touma, saying:

“Referring our telephone conversation this morning, we hereby authorise you to negotiate with the tenant in regard with the abovementioned property.

The arrangement be tenant is paying for all the cost of the renovation in regard with the fire safety. Accounts is to be settled with their rents in arrears.”

98 On 7 December 1995, in Hong Kong, Mr Touma met Dr and Mrs Chan, and two of their friends who acted as translators, at a restaurant in the Mirramar Hotel. Mr Touma told Mrs Chan that he wanted her to do the fire safety work; Mrs Chan said she did not have any money. There was some discussion about the quotation, of $44,490 received from Mr Simpson. Mr Touma was told that Mr Vella could carry out the work required under the Fire Safety Order with the costs to be offset against arrears of rent.

99 On 15 December 1995 Wah Lai’s real estate agent wrote a letter addressed to Buddies, at the address of the Tavern, marked for the attention of Mr Vella, saying that the landlord had consented to an outside staircase being erected subject to council approval, and that “we note you are to wear the cost of same.”

100 Just prior to Christmas in 1995 Mr Touma handed to Mr Vella a copy of Ms Hui’s fax of 4 December 1995 (para [97] above). Mr Touma told him he could do the work to comply with the Fire Safety Order, and offset the costs against his arrears of rent. Though they were both aware that Mr Simpson had given his quotation, Mr Touma did not explicitly say that it was only work comprised in Mr Simpson’s quote which was authorised, or that there could be offsets only up to the amount of Mr Simpson’s quote, or that there was any other sort of upper limit on the amount that could be offset against the arrears of rent. There was no express statement that Mr Vella was to do the work within the time limited by the Fire Safety Order, or within any other particular time, or the 60 days from 29 November 1995 which the Council’s solicitors had required (para [57] above). It has not been shown that the Council’s imposition of that 60-day time limit was ever brought to Mr Vella’s attention.

101 Mr Vella gives evidence that around early 1996 he had a meeting with Mr Touma where a conversation to the following effect occurred:

“Vella: “You know, don’t you, that the quote I gave you is not accurate?”

Touma: “Why?”

Vella: “We’ve realised that there is all sorts of work which will need to be done so that the Council’s requirements can be met.

We have to do painting. We have discovered that the wiring has all been eaten by rats and will have to be replaced. We have water leaking from the rooms above onto the wiring so it is very dangerous. We have had to replace the doors to all the upstairs rooms and the windows above the doors have to be covered with fireproof material. We needed to put in fireproof carpet upstairs.

The other big issue is that we will have problems using the original staircase. Either we will have to brick in the garage door and put in a proper exit door, which will mean that we can’t use the garage for any other purpose, or else we will have to put a steel staircase on the outside of the building. If we do that, then everyone will have a clearer exit into the carpark from the building if there is a fire. I think that the safest and quickest way is to put a staircase on the outside of the building.”

Touma: “Well you have to do what you have to do to get the premises to comply with the Council’s orders. You should go ahead and do what is necessary.”

Vella: “It’s going to cost a lot more than $44,000.”

Touma: “We’ll work it out when you finish the work.”

102 Mr Touma swore an affidavit which dealt, paragraph by paragraph, with Mr Vella’s affidavit evidence. Concerning the conversation I have just set out, his only evidence was to deny that the words attributed to him in the last line were said. Given Mr Vella’s general unreliability as a witness, I prefer Mr Touma’s evidence on that point.

103 As to the rest of the conversation, apart from the last line attributed to Mr Touma, I am not persuaded that all the detail recounted by Mr Vella was said. There was no council requirement to do painting. Such replacement of wiring as had taken place was all done by June 1995. The issue of an outside staircase had already been discussed between Mr Vella and Mr Touma in December 1995. However, I am satisfied that Mr Touma was aware, in early 1996, that the work might exceed $44,000 in cost. The handwritten note on Mr Simpson’s first quote (para [85] above) was enough to inform him of that possibility.

104 On 2 July 1996 a letter signed by Dr Chan was written to an officer of the Council requesting the adjournment of Land and Environment Court proceedings which were listed for 16 July 1996. In the course of that letter he said:

he would carry out the necessary work as required by the Council and all the expenses for the work done will be used to offset against the monthly rental paid to us.

Building Work Done at the Tavern

105 Over a period from October 1994 to May 1996 Mr Vella engaged various tradesmen to carry out work at the Tavern. For reasons set out in the First Schedule to this judgment, (para [251] ff below) the performance of that work entitles Mr Vella to a setoff of $61,820 pursuant to the rental setoff agreement.

1996 – Events Re Obtaining Possession of the Tavern

106 Dr and Mrs Chan flew to Australia, arriving in Sydney on the morning of 6 February 1996. They went that morning, with Ms Hui, to inspect the Tavern. Mr Vella was there at the time. Mrs Chan’s contemporaneous diary note (translated) is that “no repair was done”. Mr Vella gives evidence, which I accept, that Ms Hui asked him when he was going to start paying rent, to which he replied “Josephine, that’s not a problem. As soon as I have finished, which won’t be very long, the solicitors can sit down and work out who owes what.”

107 That night, Dr and Mrs Chan and Ms Hui had dinner with Mr Touma. The directors of Wah Lai decided that it would be in the company’s interests to retake possession of the Tavern and have it sold at auction. They decided that, if possession was obtained, Ms Hui should take over the liquor licence. Mr Touma was instructed to retain Mr Reuben to commence possession proceedings against the lessee immediately. The Chans do not seem to have appreciated that the Possession Proceedings, which Mr Reuben had commenced on 29 September 1995, already contained prayers for relief in the form of an order for possession.

108 On 15 February 1996 Mr Reuben swore an affidavit under Part 40, rule 11 Supreme Court Rules 1970 in the Possession Proceedings, which included the following statements:

“1. Annexed and marked with the letter “A” is a search from the Liquor Administration Board dated 21 July 1995 which discloses that Koleta Gleeson is in occupation of the land the subject of these proceedings.

2. A notice pursuant to Part 7 rule 8(1)(b) has been served on Koleta Gleeson on 11 November 1995 and has been filed herein.”

109 On 28 February 1996 Mr Reuben told his legal searcher that on 14 and 15 February he had filed an application for judgment and a writ of possession relating to the Tavern, and asked the searcher to check at the Supreme Court and find out the current position concerning the minute of judgment and writ of possession. Mr Reuben was informed, on 29 February 1996, that Buddies had filed a Defence on 21 February 1996.

110 On one occasion, which cannot be precisely placed in time but is likely (ignoring any questions of onus) to have been in February or the first week of March 1996, and after the meeting over dinner on 6 February 1996 (para [107] above), there was a meeting between Mr Touma, Mr Vella, and Mr Simpson. At that meeting Mr Touma said words which Mr Vella recalled as “Wah Lai going throw you out”. Mr Touma told them that he had advised Wah Lai that the hotel would be better utilised as a number of subdivided shops, and also told them that there was a problem with Mr Vella’s lease. Mr Touma also told them that he thought that Wah Lai wished to subdivide the property, and that Mr Vella might think about moving. Mr Touma told them that Mr Vella did not have a lease, and that he (Mr Touma) was there to discuss the work which could be carried out, to offset the rental arrears. He said that the Fire Safety Order work had to be done, and consistently with the practice of the Licensing Court, there should be some apportionment of the cost between landlord and tenant, or an offsetting against rent. There was a discussion between them about what work was being carried out, in the course of which Mr Vella and Mr Simpson showed Mr Touma the external metal fire stairs, which at that stage had not been installed but were lying on the ground. Mr Touma said that there would still be a difference in the cost of the repairs according to the quotations, and the rental arrears. Mr Vella then took Mr Touma upstairs and explained to him that in addition to the work set out in the quotation the entire roof had to be replaced to prevent water getting onto the electrical wiring. Mr Touma said he wanted receipts for the work that was carried out. I will refer to this meeting as “the “You’ve Got No Lease” meeting”.

111 Mr Touma’s statement at this meeting that Mr Vella had no lease caused Mr Vella to become quite agitated. Mr Simpson and Mr Vella decided that Mr Vella should obtain some legal advice, and for that purpose engaged Mr Michael Kirkpatrick, solicitor. One of the tasks which Mr Kirkpatrick was instructed to perform was to try to organise a fresh lease for Mr Vella. Mr Kirkpatrick was not called as a witness.

112 On 7 March 1996 Mr Kirkpatrick wrote to Mr Vella, thanking him for his instructions to act, setting out a basis of charging, and also identifying the tasks which he was engaged to carry out:

“1.1 contact the solicitor for the landlord of 1 Botany Road, Waterloo, which is Wah Lai Investment (Australia) Pty Limited. Then try to arrange a meeting with the landlord and you and us to discuss having you replace Buddies Liquor Pty Ltd as the lessee of 1 Botany Road.

1.2 read all of the documents which you have given us regarding the lease and sub-lease over 1 Botany Road.

1.3 have a conference with you and Mr Neil Simpson to get the whole background of this problem.

1.4 make any further necessary enquiries before having the meeting with the landlord or its solicitor, so that we are fully prepared for that meeting.

1.5 have the meeting with the solicitor for Wah Lai Investment (Australia) Pty Limited and you and us. The purpose of trying to have this meeting is to have you installed as the lessee and to come to some satisfactory arrangement with the landlord over the payment of the repairs which you have made to the property so that it complies with Fire Regulations and stops leaking water.

If the landlord refuses to negotiate with you about either taking over the lease or paying for some or all of the costs of the repairs, we will discuss with you then what we consider is the next best course of action.”

“regarding the lease and sub-lease over 1 Botany Road”

113 There were three or four meetings attended by Mr Kirkpatrick, Mr Vella and Mr Simpson. Those meetings occurred, at times which cannot be precisely placed, over the period from when Mr Kirkpatrick was first engaged, until a couple of weeks after Mr Vella was evicted from the hotel. Mr Simpson’s recollection, which I accept as accurate, is:

“At the meetings with Mr Kirkpatrick, I can recall … that Mr Kirkpatrick was concerned that the matter needed to be sorted out very urgently to prevent any action and Mr Kirkpatrick virtually took the role of a negotiator to try and organise a fresh lease for Mr Vella. He discussed his role as being that, in my presence.”

114 On 8 March 1996 Mr Kirkpatrick wrote to Mr Vella saying:

“We have spoken to the solicitor for Wah Lai Investment (Australia) Pty Limited. We have both agreed in principle that:

1. we will organise for a building and quantity surveyor to inspect all of the repair work which you have effected at the Waterloo Tavern. He will then prepare a written list of that work done and what it should have cost to do.

2. we will send that list of prices to the solicitor for Wah Lai Investments.

3. Wah Lai Investments will deduct the total on that list of prices, off the outstanding rent which is owed to Wah Lai Investments. The solicitor for Wah Lai Investments claims that about $70,000.00 is outstanding.

4. You will pay the balance of the outstanding rent in exchange for a new lease over the property. Wah Lai Investments will include a covenant in this new lease that it will complete all of the repairs to the property.

In accord with our letter to you of 7 March 1996, would you please send us a retainer of $1000 before we proceed with the matter.”

115 Mr Reuben gave affidavit evidence that he had a telephone conversation with Mr Kirkpatrick on 8 March 1996 to the following effect:

KIRKPATRICK: “I am Michael Kirkpatrick and I act for Mr Vella in relation to the Waterloo Tavern.”

REUBEN: “Our client has commenced legal proceedings in the Supreme Court seeking possession of the premises.”

KIRKPATRICK: “I want to try and resolve this matter, and is there any way that we can? My client has done work on the premises.”

REUBEN: “Without prejudice, there is a Fire Order that affects the premises and if work has been done on the premises which you say should be set off against (outstanding) rent then the only way this can be resolved, is, that you should appoint a quantity surveyor to show all work done and all outstanding rent has to be paid otherwise I cannot obtain instructions to attempt to resolve the matter. In the meantime, we are proceeding in the Supreme Court of New South Wales to get Orders for possession of the premises. This may be a way of resolving the matter but you will have to act quickly as we are proceeding to get Orders for possession of the premises.”

116 Mr Reuben’s file note of that conversation is a handwritten contemporaneous note which does not purport to be a complete account of the conversation. It says:

“A Mr Kirkpatrick phoned – said he acted for Vella. I said we had commenced legal proceedings – he said want to try & resolve matter is there any way – said – without prejudice – you get quantity surveyor to show all work done & rent outstanding be paid. In the meantime we are proceeding in Supreme Court. This may be a way of resolving the matter – but you would have to act quickly as we are proceeding”.

117 On 14 March 1996 Mr Reuben wrote to the firm of solicitors of which Mr Meers was a member enquiring whether Buddies and Mr Meers would consent to the orders for possession and leave to issue a writ of possession. He said that if consent was not given, he would seek to have the Defence struck out. No request was made for Buddies or Mr Meers to consent to the orders for payment of arrears of rent, or damages.

118 On 18 March 1996 Mr Meers’ firm replied, saying, amongst other things:

“We are instructed that your client consented to the assignment of the lease in question. This fact is acknowledged by you and your client’s agent in various correspondence. As such, our client does not in fact have possession of the premises and we are at a loss to understand upon what basis you will be seeking possession from our client. In any event, you would of course require a judgment before obtaining an order for possession.

… neither of my clients are in a position to consent to any orders regarding possession.”

119 On 19 March 1996 Mr Reuben filed a Differential Case Management Statement (“DCM Statement”) in the Possession Proceedings. That document identified Mr Vella as a person from whom Buddies may be entitled to contribution or indemnity if Wah Lai obtained judgment against Buddies. He identified the letter from Mr Meers to Peter A Simon Real Estate Pty Ltd dated 6 July 1994 (para [16] above) as the document giving him that belief.

120 The DCM Statement said that discovery of documents may be required in the event of a defence as to:

“The legal status of any assignee or sub-lessee ie whether they are assignee or sub-lessee of the Defendant and the documents relating thereto (if any).

To determine whom the person currently holding the liquor licence of the premises are contractually related ie whether the Defendant or other party …

In the event that the Defendant does not discover documents determining the legal status of any occupant of the premises the Plaintiff may have to interrogate the Defendant.”

121 On 22 March 1996 Mr Reuben wrote to Wah Lai explaining the position which the Possession Proceedings had reached, up to Buddies’ refusal to consent to judgment for possession. He continued:

“An application has to be made to the Supreme Court of New South Wales that judgment be entered so that we can get possession of the property at least. Mr Nelson Meers has said that he will consent to a Judgment for Possession of the property if he is released from any liability in respect of any outstanding rent. This cannot be the case.

In the circumstances I intend to brief counsel to prepare the necessary documents for an application to the Supreme Court of New South Wales to urgently apply for Judgment for Possession of the Premises.”

122 On 2 April 1995 Mr Meers’ firm wrote to Mr Reuben, saying that their clients would consent to the judgment asked for, on conditions which included:

“The Defendants be given the opportunity to be involved in any discussions between the Plaintiff and Mr Paul Vella, or any persons on their behalf, regarding the resolution of the issues giving rise to these proceedings, or the proceedings themselves.”

123 On 12 April 1996 Mr Meers’ firm wrote to Mr Reuben, enclosing executed consent orders.

124 Also on 12 April 1996 Mr Rueben had another telephone conversation with Mr Kirkpatrick. Mr Reuben’s account of that telephone conversation is that he said words to the effect:

“There is a large amount of rent due. I will get the details of how much rent is due and send it to you. In the meantime rent continues to be in arrears and my instructions are to proceed in the Supreme Court to get Orders for possession of the premises.”

125 Mr Reuben’s contemporaneous diary note is dated 12 April 1996, and says:

“I said large amount of rent due – I would get details and send to him. Rent continues to be in arrears & instructions are to proceed“

212 In all these circumstances, Mr Reuben was not deliberately keeping from Mr Vella, or Mr Vella’s solicitor, the fact that proceedings for possession were on foot relating to the Tavern.

213 The first legal basis upon which Mr Vella brings this unconscionability claim is that by obtaining possession in the circumstances which it did, whereby Mr Vella was not aware that possession was being sought, Wah Lai was exercising legal rights unconscionably. Reference was made to Legione v Hateley (1983) 152 CLR 406 at 444, Foran v Wight (1989) 168 CLR 385 at 394-5, Australian Competition and Consumer Commission v Samton Holdings Pty Ltd (2002) 117 FCR 301 at 317-8, and Tanwar Enterprises Pty Ltd v Cauchi (2003) 201 ALR 359. I do not accept, on the facts, the contention that there is unconscionability arising from Wah Lai (through its agent Mr Reuben) knowing that Mr Vella was ignorant of the Possession Proceedings. This is because I do not accept its factual basis, that Mr Reuben knew Mr Vella was ignorant of the Possession Proceedings.

214 Mr Vella submits that even if Wah Lai did not act with knowledge of Mr Vella’s ignorance, there would still be an equity of accident or surprise established, which would make it inequitable for Wah Lai to obtain possession.

215 I will not pause to examine whether these contentions are correct. The remedy which Mr Vella claims is equitable compensation, which would put him in the position he would have been in if the unconscientious behaviour had not occurred. Neither shall I pause to examine whether equitable compensation is available for a breach of equitable duty of the type alleged. If Mr Vella had been informed of the Possession Proceedings, before the eviction took place, I am not persuaded he would have been any better off. After the “You’ve Got No Lease”, meeting he could not assert that he had, by estoppel, rights analogous to those conferred on the lessee under the Lease. If he had known about the Possession Proceedings, he would have been in a position to obtain an injunction preventing Wah Lai from ejecting him without one month’s previous notice in writing. He has not established that, even if he had been able to obtain such an injunction, it would have resulted in him staying in the Tavern for any longer than he in fact stayed: cf the arguments considered at paras [189] – [190] above. Finally, even if obtaining such an injunction would have enabled him to stay longer in the Tavern than he in fact stayed, he has not proved that being deprived of that opportunity has caused him any loss for which he should be compensated: cf para [191] above. For these reasons, the unconscionable conduct claim fails.

Wah Lai’s Unclean Hands Defence

216 Wah Lai pleaded a complex unclean hands defence to Mr Vella and Craftmill’s claim based on Mr Vella’s alleged rights as tenant. In circumstances where I have found that no case is made out for any such claim, it is unnecessary to consider this defence.

Mr Vella’s Conversion Claim

217 Mr Vella purchased all manner of chattels for the Tavern – crockery and cutlery, cooking utensils, fridges and a freezer, a microwave oven, lengths of copper, gym equipment, office equipment, tools and furniture. When the possession order was executed Mr Vella was able to take away stock, and some of the chattels which he had in the hotel, but not all of them.

218 Mrs Chan’s diary (which I accept is likely to be accurate) contains an entry for 14 May 1996 which, when translated, reads “at that time the occupant used large truck[s] to carry away the wine and the stock.”

219 Mrs Chan’s diary for 9 July 1996 records that she “made a call to a junk dealer, inviting him to the bar to have a look at the miscellaneous items. He only bought the fridge[s] and the television set[s]. He refused to take the furniture the bed[s] and the table[s].” There is no evidence of the price the junk dealer paid for the fridges and television sets.

220 Her diary entry of 10 July 1996 records that Mr Vella “requested us to return the beddings, old television set[s] and the fitness equipment”. I accept her evidence that on that day Mr Vella removed from the Tavern a number of beds, a television set and an exercise machine. Her diary for 26 September 1996 records that Mr Vella “again demanded to have fitness equipment back”. I accept her evidence that on that day Mr Vella removed the remainder of his gym equipment and some other personal property.

221 Some property which Mr Vella had left in the Tavern was removed by cleaners employed by Colliers Jardine (the real estate agents who Wah Lai had instructed to act on the sale of the Tavern site) in early 1999. Mrs Chan described the removal as of “rubbish”, which she explained was the “broken tables and the broken cupboards, those things”, and “broken tables, broken chairs”.

222 Between the time that the eviction occurred on 14 May 1996, and the time the property was sold in mid 1999, it was broken into, and to some extent vandalised. It is not possible to make a finding that any particular items of property which Mr Vella left in the premises were ones which the cleaners employed by Colliers Jardine threw out.

223 Even so, for Wah Lai to take possession of the premises on 14 May 1996, at a time when those premises contained Mr Vella’s chattels, and not give him the opportunity to get those chattels out, amounts to a conversion of them.

224 By letter dated 31 July 1998 from Mr Vella’s then solicitors, Stewart Levitt & Company, to Wah Lai’s solicitors, a request was made for Wah Lai to account for Mr Vella’s possessions which were no longer to be found on the premises.

225 Though Mr Vella has proved what the chattels other than the AADs cost when new, he has not proved precisely which ones he was able to retrieve and which he has not. Nor has he proved their value at the date of eviction, or even that they had a value at that date. I do not accept the submission made on behalf of Mr Vella that I should treat the cost of these items as the best evidence of their value at the time of the eviction. They are items whose intrinsic nature is such that their value declines once they are used. In those circumstances I cannot award damages for the conversion of those items.

226 Amongst the items of Mr Vella which were not returned were 10 AADs. I accept the evidence of Mr Keith Kelly valuing those devices at $28,000. Even if Ms Gleeson’s statement about the ”sale price and terms of purchase” of those machines, in her application for transfer of the liquor licence (para [47] above) were regarded as an admission made on Mr Vella’s behalf (which I doubt), her answer, fairly construed, is that the machines were not being purchased, or leased, and they had no “residual value”. That statement does not detract from Mr Kelly’s valuation. Nor does the fact that no value was attributed to the amusement devices in the Contract for Sale whereby Mr Vella purchased the business from Buddies (para [14] above), detract from Mr Kelly’s valuation.

227 The only conversion claim which has been made out is in relation to the AADs. Mr Vella is entitled to a judgment for $28,000 concerning them.

228 Wah Lai relied, in the event that Mr Vella was found to be lessee of the premises under the Lease at the date of the eviction, on clauses which purported to entitle the lessor to keep and sell any goods on the premises, if the lessee was in breach. By the time of the eviction, no estoppel bound Mr Vella to act as though he was lessee under the Lease. Even if he was, at that time, representing that he was still bound by the Lease (which I doubt), Wah Lai was certainly no longer acting on the basis of any such representation. Thus, those clauses provide no defence.

229 An alternative defence which Wah Lai raises is that if Buddies remained the lessee then the same clauses which I have just referred to, together with a clause which provided that if the lessee did not remove its goods at the end of the Lease then they became the property of the lessor, absolve Wah Lai from liability. It is not necessary, for the purpose of dealing with this alternative defence, to make findings about what the legal relations were between Wah Lai and Buddies. No contractual arrangement between Wah Lai and Buddies entitles Wah Lai to take someone else’s property. That alternative defence also fails.

Wah Lai’s Cross-Claim

Recovery of Rent and Outgoings

230 Wah Lai’s cross-claim is of two kinds. The first is a claim to recover from Mr Vella, rent and outgoings under the Lease.

231 In accordance with the principles at para [166] – [168] above, Mr Vella has, by his conduct in entering possession of the premises after Wah Lai had consented to an assignment to him of the Lease, and paying rent, represented to Wah Lai that he was in the position of a tenant of the premises on the terms of the Lease. Wah Lai acted to its detriment in reliance on that representation by permitting Mr Vella to remain in the premises as though he were a tenant. That estoppel continued to bind Mr Vella until the “You’ve Got No Lease” meeting. Whatever Mr Vella’s own beliefs were after that meeting, Wah Lai was not then relying on any representation by him that he was a tenant on the terms of the lease, and that is sufficient to prevent Mr Vella being bound by an estoppel after the date of that meeting.

232 The evidence did not enable the date of the “You’ve Got No Lease” meeting to be fixed with certainty. For the purposes of making a claim for unpaid rental and outgoings, Wah Lai bears the onus of proving the period during which there was a liability to pay rental and outgoings. It has not discharged the onus of proving when, within the range of dates during which the “You’ve Got No Lease” meeting might have happened, it actually occurred. Therefore, for the purpose of Wah Lai’s cross-claim, the meeting should be taken as having occurred at the date most unfavourable to Wah Lai of those possible dates. That is the beginning of the range of possible dates, namely, 7 February 1996 (the day after the decision to evict Mr Vella).

233 I find that the amount of unpaid rental and outgoings which Wah Lai is entitled to claim against Mr Vella, for the period up to 7 February 1996, is $85,228.22. The basis for this calculation is set out in the Second Schedule to this judgment, at para [275] ff. Against that amount Mr Vella is entitled to offset the amount of $61,820 (para [274] below). Thus the amount of damages to which Wah Lai is entitled pursuant to its cross-claim is $23,408.22. Wah Lai made no claim for mesne profits, or for rent on any basis other than pursuant to the Lease.

Damages for Non-Compliance with Rent Offset Agreement

234 The second kind of claim which Wah Lai brings arises from Mr Vella’s non-compliance with the rent offset agreement. That kind of claim is put in two ways, one as breach of contract, and the other as misleading and deceptive conduct.

235 Wah Lai pleads the rent offset agreement as follows:

“On or about 4 December 1995 and notwithstanding that under the lease it was not liable (as between lessor and lessee) for carrying out the Fire Safety Works Wah Lai agreed that if [Mr] Vella would cause the Fire Safety Works to be done without cost to Wah Lai within the time required by the Council Wah Lai would contribute to the cost thereof to a limit of the said sum of $44,490 by way of off-set (to that limit) against arrears of rent and outgoings then due under the lease and to this [Mr] Vella (for himself and Buddies) agreed.”

236 The precise agreement pleaded is not made out – the rental offset agreement was arrived at after 4 December 1995, and after Mr Touma had been to Hong Kong; further, it had no term as to time (other than an implied term that the works would be carried out within a reasonable time), and there was no upper limit on the amount of money which might be offset against arrears pursuant to it (para [103] above). Even so, an attenuated version of the agreement pleaded was established, which differed from it in the ways I have just mentioned. It is sufficiently close to the agreement pleaded for a claim for its breach to be within the scope of the issues raised by the pleadings.

237 Wah Lai has not persuaded me that Mr Vella breached the attenuated version of the rental setoff agreement which it has proved. Understandably, given that Wah Lai’s case was that the rental setoff agreement required the work to be done within the period nominated by the Council’s notice, no evidence was called on the topic of what would have been a reasonable time, from the date in December 1995 when the rental setoff agreement was made, for the carrying out of those works. For the purposes of an implied contractual term to carry out work in a reasonable time, the knowledge which both parties have of the circumstances relevant to urgency is a relevant matter. When Wah Lai has not shown that Mr Vella knew about the Council’s 60-day limit, that 60-day limit cannot be used as a factor taken into account in deciding what is a reasonable time. Another relevant matter is how long it would take competent workmen to carry out all the tasks listed in the Fire Safety Order. There is no evidence on that topic at all. It is not a topic appropriate for judicial estimation. Under those circumstances, Wah Lai has not made good the contractual version of its cross-claim concerning the rental offset agreement.

238 In case I am wrong in finding no breach has been established, I also examine Wah Lai’s claim for damages said to have arisen from this alleged breach. It is, in substance, that in consequence of Mr Vella’s breach of the agreement, the orders of 12 July 1996 in the Land and Environment Court (para [59] above), closing the premises down, were made, and that the closure of the Tavern caused Wah Lai to incur interest liabilities to its financier until such time as the Tavern was sold. The Tavern was eventually sold to Callwork Pty Ltd for $1.6m, in a sale which settled on 20 May 1999. Wah Lai had purchased the premises for about $1.7m, with the purchase settling in about September 1990.

239 Southgate Inc (“Southgate”) is a company incorporated in Liberia, of which Dr and Mrs Chan are shareholders. Dr Chan is a director of that company. To finance the purchase of the Tavern in 1990, Wah Lai borrowed A$1m from Southgate, with interest at ten percent per annum adjustable according to the prime rate in the money market in Liberia, and secured by the Tavern. Wah Lai also borrowed A$900,000 from Westpac. On 10 September 1992 Wah Lai borrowed a further A$900,000 from Southgate, and used that money to discharge the loan from Westpac. A written loan agreement relating to the 1992 borrowing said that the loan would bear interest at the rate of seven percent per annum, and said nothing about the loan of A$900,000 being secured in any way.

240 Mrs Chan gave evidence that, at some time around the date the second loan agreement was entered (she vacillated about just when it had happened) she had a conversation with her husband to the effect that the interest rate on that second loan should be ten percent, and that it should be secured against the Tavern. Given the involvement of solicitors in the drawing of the loan agreement for the second loan, and Mrs Chan’s vacillation about the date of her conversation with her husband, I am not persuaded that the second loan was made on terms other than those appearing in the written loan agreement relating to it.

241 There is no specific evidence about what Wah Lai would have done with the proceeds of any sale of the property, if it had been effected in 1996. However, given that the loans from Southgate had originally been made for the purpose of the Tavern, and that the $1m loan from Southgate was secured on the Tavern (even though the second loan was not) I infer that it is more likely than not that the proceeds of any sale of the property in 1996 would have been applied towards repayment of the loans to Southgate.

242 Mr Vella’s counsel submits that there is a fundamental problem with Wah Lai’s case on damages, in that there is no evidence as to how (ie whether by auction or otherwise), or for what price the property was likely to have been sold if the sale took place at or about the time of Mr Vella’s eviction from the Tavern. I do not regard this as an insuperable problem to the calculation of damages. In the absence of other evidence, and given that Wah Lai had the onus of proving its damages, if damages were payable I would calculate them on the basis that, if Wah Lai had been able to sell the Tavern promptly after Mr Vella’s eviction, it would have done so within the three months after 14 May 1996, and for a sum of $1.6m. This would have the effect that not all of the interest which was payable to Wah Lai’s financier was attributable to the breach. In circumstances where I have found, however, that Wah Lai have not established any breach, there is no point in going on to calculate the precise amount of these damages, nor to consider Mr Vella’s argument that Wah Lai failed to act reasonably to mitigate its damage.

Damages for Non-Compliance with Work Performed Representation

243 The Fair Trading Act 1987 version of this claim amounts to saying that Mr Vella represented that he would carry out the works required by the Fire Safety Order within a reasonable time, and that that representation was misleading and deceptive because he did not have reasonable grounds for believing that he would do so. That being a representation as to a future matter, the onus is on Mr Vella to prove he had such reasonable grounds (section 41 Fair Trading Act 1987). He has not discharged it.

244 Wah Lai’s case for damages on this cause of action is in substance the same as its case for damages for breach of contract concerning the rent offset agreement (para [238] above). Wah Lai has not made that case out, because it has not demonstrated that the closure of the Tavern was caused by Mr Vella’s having had no reasonable grounds for representing that he would carry out the Fire Safety Works within a reasonable time. Wah Lai called no evidence to the effect that, if Mr Vella had not made that representation, it would have found some other way of having the works carried out. I do not infer that Wah Lai would have done so. It had known, since September 1995, that work was required to be done pursuant to the Fire Safety Order (para [76] above). Mr Touma had informed Wah Lai, on 26 October 1995, that the repairs were urgently needed, and that the Council would close the hotel if they were not done (para [88] above). It was Mr Vella, in October 1995, who raised the prospect of doing the work himself, with the cost offset against arrears of rent (para [90] above). Mrs Chan, when asked directly by Mr Touma in Hong Kong to do the work, said she did not have any money (para [98]). When Dr and Mrs Chan saw, on 6 February 1996, that little progress had been made in carrying out the works, their reaction was not to terminate the rental setoff agreement and have Wah Lai undertake the work itself, but rather to set about obtaining possession of the hotel. Even after it had obtained possession, in the nearly two months which elapsed between the eviction on 14 May 1996, and the Land and Environment Court making orders for the closure of the premises on 12 July 1996, Wah Lai did nothing to set about carrying out the work itself. In these circumstances, Wah Lai has not satisfied me that, if Mr Vella had never made the representation about his own future actions which was involved in the rent offset agreement, the Tavern would not still have been closed by the Council. The Fair Trading Act 1987 version of Wah Lai’s cross-claim also fails.

Proceedings Number 1850 of 1999

245 These proceedings, as eventually amended, sought a declaration that, as at 29 September 1995, Ms Gleeson had no right, title, estate or interest in the land on which the Tavern was erected, and a declaration that she had no claim upon Wah Lai in respect of her loss of her liquor licence. Mr Simpkins SC appeared for Ms Gleeson at the hearing. Upon being asked whether there was any live issue that Ms Gleeson had any such right, title, estate or interest in the land, or claim upon Wah Lai in respect of her loss of the liquor licence, Mr Simpkins informed me that there was no such issue.

246 Other relief sought in the proceedings was an injunction restraining Ms Gleeson from lodging any further caveat against the land, and an injunction restraining Craftmill from lodging any caveat in respect of the land. There is no threat by either Ms Gleeson or Craftmill to lodge any such caveat. Furthermore, Wah Lai no longer owns the land.

247 In these circumstances there is no live issue which remains to be determined in proceedings number 1850 of 1999. The parties have already (by a deed made 28 April 1999) agreed that they shall bear their own costs.

248 For these reasons, I shall dismiss proceedings number 1850 of 1999, with no order as to costs.

Orders

249 It would be appropriate for the respective entitlements to damages which Mr Vella and Wah Lai have established against each other to be set-off.

250 I direct the parties, within 14 days of the date of delivery of these reasons for judgment, to make an appointment with my Associate to fix a time for the bringing in of Short Minutes of Order to give effect to these reasons for judgment. At that time I will hear any argument concerning costs.

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FIRST SCHEDULE

BUILDING WORK DONE AT TAVERN (PARA [105] ABOVE)

251 Mr Wallder, an electrical contractor, did work on the electrical wiring, the last of which was done in June 1995. That work was not required by the Fire Safety Order.

252 Mr Kirkpinar, a labourer, did various items of work over the period 1994 to 1996. One significant task he performed was replacing the roof over the front bar area. That work was done in June 1995. It was not required by the Fire Safety Order. As well, Mr Vella requested him to install a fire hose reel system in the hotel. That work was required by the Fire Safety Order. Mr Kirkpinar purchased the pipes, and they were delivered to the Tavern, but the work was not completed by the time Mr Vella was evicted. The pipes were never recovered, and Mr Kirkpinar says he is owed some $3,000 by Mr Vella as a result.

253 There is a question of principle whether Mr Vella ought be allowed a credit, under the rental offset agreement, for obligations which he incurred for work or materials to comply with the Fire Safety Order, where the work was done or the materials provided, but Mr Vella has not discharged his obligation to pay the person who did the work or provided the materials. In my view, Mr Vella’s failure to discharge his obligation to the supplier is res inter alios acta. As against Wah Lai, he is entitled to credit for such amounts, even if he has not discharged his obligation to pay those third parties.

254 Mr Rascionato is a metal fabricator and boilermaker. Mr Vella engaged him to make and install a metal fire stair, to be affixed to the exterior of the building. That work was required by the Fire Safety Order. After receiving some progress payments, Mr Rascionato delivered the metal fire stair to the site in early 1996. It was affixed to the side of the building, but the installation was never completed. He says Mr Vella paid him $18,500 in total. He says he is still owed $8,000 for the work he did.

255 Mr Morgan is a labourer. In a period which he does not identify more precisely than “1995-1996” he says he did work at the Tavern, replacing the doors of sixteen rooms with solid core doors, fixing in a closed position and lining with gyprock “most” of the glass panels above those doors, doing minor repair works to damaged portions of the Tavern, and closing off three archways in an old billiard room downstairs. He says he was paid a total of $10,000. Insofar as this list includes work required by the Fire Safety Order, I am not satisfied it was performed.

256 Mr Novakovic is a painter. From late 1994 onwards, he repainted most of the inside areas of the structure. The work was done over the period January 1995 to May 1996. He was paid in cash $28,500, and is owed another $5,000.

257 When Mr Novakovic first inspected the Tavern in 1994, he found it had been painted with older style lead and oil based paints. Mr Novakovic told Mr Vella that they would need to be removed before repainting could be contemplated. One reason was because the fire rating of painted areas depends not only on the fire retardant capacity of the paintwork, but also on the composition of the fumes and smoke that result from paint. The reason that acrylic paints were mandatory in fire rated areas, was not so much their superior fire retardant effect, but the fact that when burnt they do not give off highly toxic fumes, whereas toxic fumes resulted from burning the older style oil and lead based paints. As well, the acrylic paints would not stick long to the older paints and would quickly peel and deteriorate. Further, in his view, the Council would never approve an “overpainting” job. He quoted $50,000 – an amount about which Mr Vella complained vigorously. Eventually Mr Novakovic agreed to do the work in stages, on the basis that he would require payment for one stage before he started on the next. His evidence in cross-examination established that the work he did was of a type consistent with maintaining a fire rating.

258 Neither he nor Mr Vella have any records of the amount paid.

259 There was, however, no requirement in the Fire Safety Order that any painting works be carried out. Ultimately Mr Vella did not press a claim to be allowed any part of the cost of painting under the rental set-off agreement.

260 Mr Jones is a fire safety consultant. He gives affidavit evidence which I summarise in this paragraph. In late 1995 Mr Vella contacted him, showed him a fire order, and obtained a quote for the supply of some of the items contained in it. That quotation was for supply only – Mr Vella said he would arrange for installation of the items himself. Mr Jones supplied 12 exit signs ($4,800), 2 fire alarm bells ($400), 24 smoke detectors ($4,320), 12 fire extinguishers ($6,000), cabinets for 12 fire extinguishers ($6,000), a fire blanket ($120) and 4 hose reels ($4,800). The total cost of these items is $26,440. It was agreed that Mr Jones would receive another $5,000 for his time and expertise. In fact he was paid $20,000, and was supposed to get the balance, $11,440 at the end of the job. However, in February 1996 Mr Vella told him that the fire inspector had said that the smoke detectors did not comply with the regulations, and refused to pay any further money. Mr Jones contacted the Council, and found that the detectors he had supplied were not what the Council required. Mr Jones therefore agreed to design a system which met with the Council’s requirements, and to give Mr Vella a credit of $4,320 for the old detectors at the end of the job. In March 1996, Mr Vella gave him another $10,000 to design the plans for the system, submit them to the Council and buy the equipment. Mr Jones designed the system, and purchased the equipment, but had done nothing further before Mr Vella was evicted from the Tavern. All the equipment was delivered in boxes to the hotel in April 1996, and he does not know what happened to it after that.

261 The total amount actually paid to Mr Jones was thus $30,000. Mr Jones’ obligation to give a credit of $4,320 for the defective smoke detectors, plus the decision I make that Mr Vella should not be allowed credit for $4,800 spent on exit signs as the work was non-complying, is more than offset by Mr Vella’s still owing $11,440 to Mr Jones. The remainder of Mr Vella’s debt to Mr Jones ($11,440 - $4,320 - $4,800) $2,320, is also a recoverable item under the rent set-off agreement. All the work concerning which Mr Jones gives evidence, was required by the Fire Safety Order.

262 Of these workmen, Mr Jones, Mr Morgan and Mr Wallder were required to attend for cross-examination, but did not attend. I permitted their affidavits to be read notwithstanding their non-attendance, on the basis that the fact that they had not been cross-examined might affect the weight ultimately given to their evidence.

263 There was evidence of the attempts which Mr Vella’s solicitor had made to obtain attendance of these people. She sent a process server to the address which Mr Jones had stated in his affidavit. The process server reported that the address did not exist. She conducted an organisational search under the name “Sydney Fire Services” which showed two businesses of that name. The Register of Business Names showed that one of those businesses had been conducted by TG Jones Plumbing Pty Ltd, over a period 28 September 1989 to 17 January 1993. An ASIC search of TG Jones Plumbing Pty Ltd showed that it was deregistered on 13 August 1993 but had had an Anthony Grahame Jones as a director at one stage. A search at the Land Titles Office in the Purchasers’ Index did not reveal Anthony Grahame Jones as being presently the owner of any property. She arranged for an Electoral Roll search to be undertaken for Anthony Grahame Jones, of the date of birth which the ASIC records had shown. That search showed an address for such a person. Several attempts by a process server to serve a subpoena at that address were fruitless. The address in question was a home unit. The process server reported that most windows in the unit appeared to be wide open.

264 The second business which had been registered under the name of “Sydney Fire Services”, is a business currently in operation. Enquiries there disclosed that there was no Tony or Anthony Jones associated with that organisation.

265 Mr Jones’ affidavit annexes no documents like invoices, quotes or receipts. Nor did Mr Vella tender any other such documents, or proof of payment. However, Mr Vella has given affidavit evidence, on the detail of which he was not cross-examined, which is consistent with Mr Jones’ evidence. In those circumstances I shall accept Mr Jones’ evidence.

266 Attempts to serve Mr Wallder with a subpoena at the address shown in his affidavit were unsuccessful. The process server was told that Mr Wallder had left the address, and was now believed to be living on the Central Coast. Searches in the Australian Population Index, and at the Electoral Office, failed to track Mr Wallder down.

267 The address which Mr Morgan had given in his affidavit was found, by the process server, to be a postal box at a newsagency. There was some suggestion he had been a backpacker. Attempts to track him down on the Electoral Roll, in the telephone White Pages, and through the New Zealand Electoral Roll (as Mr Vella thought he had come from New Zealand) were unsuccessful.

268 When Mr Sivayoganathan inspected the premises on 1 November 1995 he found that none of the work required by the Fire Safety Order had been commenced. He inspected the premises again on 29 February 1996, and observed that large parts of the work required by the Order were either not done, or were incomplete. His contemporaneous note revealed the state of progress, concerning each of the items required to be done by the Fire Safety Order, as follows:

“Item
1.1	Second Egress	‘No approval’ but started work
1.2	S/H Action	“No”
1.3	Electrical S/Bond	OK
1.4	Emergency Light	No
1.5	Exit Signs	“Few” Not completed
1.6	Fire alarm bell	‘No’
1.7	Automatic Fire Alarm	‘No’
1.8	Evacuation Procedure	No
2.3	Electrical Report	No
3.1, 3.2, 3.3	No
4.1	Portable Fire Extinguisher	No
4.2	Fire Blanket	No
4.3	Hose Reels	No”

269 Mr Simpson’s evidence is that the work which Mr Vella had done prior to December 1995 or January 1996 was not referable to the Fire Safety Order, but to other repairs or improvements to the Tavern. I accept that evidence. That such work was done is consistent with the obligations of the lessee under Clause 7(i) of the Lease (para [9] above) to repair, and with Mr Vella having known from August 1994 (before any Fire Safety Order was issued) that a Certificate of Compliance was needed concerning certain essential services (para [51] above), and that Clause 7(iii)(c) of the Lease (para [10] above) cast the obligation of compliance on the lessee.

270 Mr Simpson gave evidence about the state of compliance with the Fire Safety Order at a time after Mr Vella had been evicted. While Mr Simpson was an honest witness, his evidence was not based on a full survey of the property to identify all the works which had, or had not, been carried out.

271 Mr Keith Campbell is a building consultant who inspected the premises on 1 July 1999 for the purpose of ascertaining which works referred to in the Fire Safety Order had been carried out, and which works referred to in the various affidavits of workmen had been carried out. His methodology is one more likely to produce an accurate result than the impressionistic evidence which Mr Simpson gave, and to the extent that there is conflict between them, I prefer the evidence of Mr Campbell. Mr Campbell’s report contained various photographs, some of which demonstrated that work which other witnesses said had been done, had not been done.

272 As well, Mr Richard Austin, a fire safety expert, inspected the premises on 6 August 1996. He prepared a report which considered whether the individual items in the Fire Safety Order had been carried out. It was a terse report, which simply stated whether an item had or had not been carried out. I accept it, but where other evidence shows that a reason why Mr Austin may have said that an item had not been carried out was because it had been carried out only partly, I take into account that other evidence.

273 My conclusions about the work in compliance with the Fire Safety Order which had been performed by the time of the eviction on 14 May 1996, are as follows:

Item	Description	State of Affairs Visible on Inspection
1.1	Second egress from first floor	Metal staircase affixed to wall, but work not completed
1.2	Exit door opening mechanism	Not done
1.3	Switchboards enclosed	Done
1.4	Emergency lighting	Done to the extent that exit signs could satisfy the requirement – but the better view is that that is not compliance
1.5	Exit signs	Some installed, but not of a type or in locations that would satisfy the order
1.6	Fire alarm bells	Not installed. Two bells supplied.
1.7	Automatic fire alarms with photo optical detectors, complying with AS 1670	Photo optical detectors not complying with AS 1670 installed
1.8	Procedures established with fire brigade	Not done
2.3	Electrical installation certified by electrical contractor	No certification, but some electrical works done
3.1	Solid core doors with self closing devices	Not done
3.2	Transoms above doors sealed and fire rated	Not done
3.3	Walls of sole occupancy units not combustible	No work done, but original building complied
4.1	Fire extinguishers	Some but not all installed
4.2	Fire blanket	Available
4.3	Fire hose reels installed	Plans drawn up but not approved by fire brigade, and no installation carried out

274 The cost of the works which were an allowable deduction from the rent, pursuant to the rent set-off agreement, are:

Item	Amount
Mr Kirkpinar – supply of hose pipes	$3,000
Mr Rascionato	$26,500
Mr Jones	$32,320
Total	$61,820.00

SECOND SCHEDULE

CALCULATION OF UNPAID RENT AND OUTGOINGS

(PARA [233] ABOVE)

275 The submissions of both parties proceeded by reference to a schedule contained in Wah Lai’s submissions. I set out below a table in substantially the same format, containing those items which I find are allowable on Wah Lai’s claim for unpaid rental and outgoings.

Item	Period	Amount Owed
1	RENT	25.6.95 - 24.7.95	$6,825.00
2	25.7.95 - 24.8.95	$6,825.00
3	25.9.95 - 24.10.95	$6,825.00
4	25.10.95 - 24.11.95	$6,825.00
5	25.11.95 - 24.12.95	$6,825.00
6	25.12.95 - 24.1.96	$6,825.00
7	25.1.96 - 7.2.96	$3,082.00
8	RENTAL INCREASES	25.7.94 - 24.8.94	$325.00
9	25.8.94 - 24.9.94	$325.00
10	25.9.94 - 24.10.94	$125.00
11	COUNCIL RATES	1.6.94 - 31.8.94	$3,157.00
12	1.9.94 - 30.11.94	$3,157.00
13	1.12.94 - 28.2.95	$3,158.00
14	1.3.95 - 31.5.95	$3,158.00
15	1.6.95 - 31.8.95	$3,248.00
16	1.9.95 - 30.11.95	$3,247.00
17	1.12.95 - 7.2.96`	$2,463.00
18	WATER RATES	17.7.94 - 30.9.94	$1,034.74
19	1.10.94 - 31.12.94	$2,776.70
20	1.1.95 - 31.3.95	$2,009.21
21	1.4.95 - 30.6.95	$2,011.36
22	1.7.95 - 30.9.95	$1,806.92
23	1.10.95 - 31.12.95	$2,576.85
24	LAND TAX	20.7.94 - 25.6.95	$10,527.37
25	25.6.95 - 7.2.96	$6,954.00
26	LESS PAYMENTS MADE TO SYDNEY WATER	- $10,863.93
TOTAL	$85,228.22

276 Only some of the line entries in this table were matters of controversy or otherwise call for explanation.

Line 7

277 The rental of $6,825 attributable to the period 25 January 1996 to 24 February 1996 has been pro rated, so that it relates to the period to 7 February 1996 only.

Lines 8, 9 and 10

278 Mr Vella’s evidence about having paid these rental increases is unsupported by any documentation. It is more likely that calculations proceeding from the real estate agent, and Wah Lai’s accountant, are correct. However, a claim of $325 which Wah Lai made in line 10 should, in accordance with the contemporaneous records of the real estate agent, be for $125.

Line 17

279 The Council rates of $3,248 attributable to the period 1 December 1995 to 29 February 1996 should be pro rated, so as to end on 7 February 1996. This reduces the figure to $2,463.

Line 25

280 The amount for land tax attributable to the period 25 June 1995 to 14 May 1996 should be pro rated, so that it ends on 7 February 1996. That reduces the amount Wah Lai claims to $6,954.

Line 26

281 Wah Lai has in some fashion reduced a credit of $10,863.93, relating to payments made by, or on behalf of, Mr Vella. That reduction should not have occurred, and Mr Vella should have been credited with the full amount he paid.

Generally

282 While Mr Vella claims various other credits, I am not persuaded any of them are appropriate. Some depend upon evidence from Mr Vella that he made payments, which I am not prepared to accept in the absence of supporting documentation. Some depend upon pointing to isolated items in accounts which have passed between the parties, or between Wah Lai and Buddies. It has not been demonstrated that these items have not been taken into account in the overall statements of account prepared by the real estate agent, or Wah Lai’s accountant.

283 The rental clause in the Lease contained (para [7] above) a provision whereby the rental fluctuated with licence fees payable to the Liquor Administration Board. Both parties ignored that aspect of the rental provisions in their submissions. I have done likewise.

**********

Last Modified: 10/15/2004

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Citations

Vella v Wah Lai Investment (Australia); Wah Lai Investment (Australia) v Gleeson; Vella v Wah Lai Investment (Australia) [2004] NSWSC 748

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CITATION:	Vella v Wah Lai Investment (Australia); Wah Lai Investment (Australia) v Gleeson; Vella v Wah Lai Investment (Australia) [2004] NSWSC 748
HEARING DATE(S):	21/6/04 - 1/7/04
JUDGMENT DATE:	15 October 2004
JURISDICTION:	Equity
JUDGMENT OF:	Campbell J
DECISION:	Intending assignee of lease not entitled, as against landlord, to equitable lease by virtue of Walsh v Lonsdale (1882) 21 Ch D 9 - Intending assignee establishes tenancy by estoppel, until landlord notifies intending assignee that it has no rights concerning the lease - intending assignee bound to pay rent and outgoings in accordance with lease during the time that tenancy by estoppel existed - claims for breach of Trade Practices Act 1974 (Cth) and Fair Trading Act 1987 not made out - claim for unconscionable conduct not made out
CATCHWORDS:	LANDLORD AND TENANT - assignment, severance and underlease - lessee pursuant to registered lease agrees to assign, with consent of landlord, to third party - transfer of lease never registered - whether landlord bound to treat third party as lessee - payment of rent by third party to landlord - whether landlord and tenant estopped from denying that tenancy exists in terms of the lease - circumstances in which tenancy by estoppel comes to an end - principle in Walsh v Lonsdale (1882) 21 Ch D 9 creates no equities against persons not party to the agreement - TRADE PRACTICES AND RELATED MATTERS - misleading and deceptive conduct - no question of principle - EQUITY - alleged unconscionable conduct by landlord in circumstances of obtaining possession of tenanted property - no question of principle
LEGISLATION CITED:	Conveyancing Act 1919 Fair Trading Act 1987 Liquor Act 1982 Local Government Act 1993 Real Property Act 1900 Statute of Frauds Trade Practices Act 1974 (Cth)
CASES CITED:	Australian Competition and Consumer Commission v Samton Holdings Pty Ltd (2002) 117 FCR 301 Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 Brown & Root Technology Ltd v Sun Alliance and London Assurance Co Ltd [2001] Ch 733 Chan v Cresdon Proprietary Limited (1989) 168 CLR 242 Chronopoulos v Caltex Oil (Australia) Pty Ltd (1982) 70 FLR 8 Colman v Golder [1957] VR 196 Ferguson v Hullock [1955] VLR 202 Foran v Wight (1989) 168 CLR 385 Giumelli v Giumelli (1999) 196 CLR 101 Gould v Vaggelas (1985) 157 CLR 215 Huntsman Chemical Company Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242 Legione v Hateley (1983) 152 CLR 404 Lewandowski v Mead Carney - BCA Pty Ltd [1973] 2 NSWLR 640 Manchester Brewery v Coombs [1901] 2 Ch 608 Maredelanto Compania Naviera SA v Bergbau-Handel GmbH; The Mihalis Angelos [1971] 1 QB 164 Mobil Oil Australia Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475 Official Trustee of Charity Lands v Ferriman Trust, Ltd [1937] 3 All ER 85 Rodenhurst Estates, Ltd v W H Barnes, Ltd [1936] 2 All ER 3 Tanwar Enterprises Pty Ltd v Cauchi (2003) 201 ALR 359 TCN Channel Nine Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 The Commonwealth of Australia v Verwayen (1990) 170 CLR 394 Tichborne v Weir (1892) 67 LT 735 Walsh v Lonsdale (1882) 21 Ch D 9 Williams v Heales (1874) LR 9 CP 177
PARTIES :	Paul Vella - First Plaintiff/Cross Defendant in 4900/98; Plaintiff in 2907/96 Craftmill Pty Limited - Second Plaintiff in 4900/98; Second Defendant in 1850/99 Wah Lai Investment (Australia) Pty Limited - Defendant/Cross-Claimant in 4900/98; Defendant in 2907/96; Plaintiff in 1850/99 Koleta Gleeson - First Defendant in 1850/99
FILE NUMBER(S):	SC 4900/98; 1850/99; 2907/96
COUNSEL:	J B Simpkins SC; E M Frizell - Vella interests J McKenzie - Wah Lai interests
SOLICITORS:	Beilby Poulden Costello - Vella interests William Chan & Co - Wah Lai interests