Warwick Entertainment Centre Pty Ltd v McKENZIE - [2000] WADC 138

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: WARWICK ENTERTAINMENT CENTRE PTY LTD -v- McKENZIE & ANOR [2000] WADC 138

CORAM: MACKNAY DCJ

HEARD: 14 JUNE 1999, 3, 21 FEBRUARY 2000

DELIVERED : 31 MAY 2000

FILE NO/S: CIV 3209 of 1998

BETWEEN: WARWICK ENTERTAINMENT CENTRE PTY LTD (054 246 918)
Plaintiff
AND
CAROLINE McKENZIE
PETER ROBERT DOVE
Defendants

Catchwords:

Practice - Western Australia - Appeal from decision of Deputy Registrar that plaintiff not entitled to summary judgment for sum claimed against defendants in respect of rent, outgoings and other payments under a lease - Rules of Supreme Court O14 r3 - Turns on own facts

Legislation:

Nil

Result:

Appeal allowed

Representation:

Counsel:

Plaintiff: Ms K R Poynton
Defendants: Mr A S Stavrianou

Solicitors:

Plaintiff: Freehill Hollingdale & Page
Defendants: D'Angelo & Partners

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

Chan v Cresdon Pty Ltd (1989) 168 CLR 242
Citibank Pty Ltd v Simon Fredericks Pty Ltd (1993) 2 VR 168
Connaught Restaurants Ltd v Indoor Leisure Ltd (1994) 4 All ER 834
Gilbert-Ash Northern Ltd v Modern Engineering (Bristol) Ltd (1974) AC 689
J & S Holdings Pty Ltd v NRMA Insurance Ltd (1982) 41 ALR 539
Mirvac Hotels Pty Ltd v 333 Collins Street Pty Ltd, unreported; SCt of Victoria; No 8183 of 1994; 20 December 1994
Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd (1976) WAR 109
Re Partnership Pacific Securities Ltd (1994) 1 Qd R 410
Rex v Ray ex parte Chapman (1936) SASR 241
Walsh v Lonsdale (1881) 21 Ch D 9

Case(s) also cited:

Clarke v Union Bank of Australia Limited (1917) 23 CLR 5
Dockrill v Cavanagh (1944) SR NSW 78
Hazart Pty Ltd v Rademaker (1993) 11 WAR 26
National Trustees Executors & Agency Co of Australasia v Boyd (1926) 39 CLR 72
Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17
Tony Sadler Pty Ltd v McLeod Nominees Pty Ltd & Ors (1995) 13 WAR 323
Webster v Lampard (1993) 177 CLR 598

MACKNAY DCJ:

Introduction

The plaintiff at all material times was the registered proprietor of land on which was erected a complex known as the Warwick Entertainment Centre (the centre) situated in Beach Road, Warwick.
Prior to construction of the centre, and by an agreement for lease dated 22 July 1993 (the agreement for lease), and on the terms thereof, the plaintiff agreed to grant and the defendants agreed to take a lease of premises at the proposed centre, such to form part of a food court there, and the lease to be in terms of the document annexed.
A lease, which is dated 10 August 1994 (the lease) was subsequently executed, and provided for a term of 10 years, to commence on 15 September 1993.
The premises were described as having "a floor area of approximately 30SQM (30m²)", the nominated use of the same being a coffee and cakes store.
The rent was stipulated to be, "until varied", $30,000 per annum, $1,000 per square metre, payable monthly in advance, with provision for annual reviews, those to be by reference to market rent or change in the consumer price index, in alternate years, with there to be an increase of at least 5 per cent on each review.
The defendants also became liable to pay a proportion of various outgoings, as ascertained and charged pursuant to the lease, and various other charges.
The defendants went into occupation of the premises and remained in possession until 17 October 1998, when they left the premises without the consent of the plaintiff.
For a period prior to their departure the defendants paid neither rent nor outgoings.
Prior to the defendants vacation of the premises, and on 25 August 1998, the plaintiff commenced these proceedings.
In a statement of claim indorsed on the writ the plaintiff claimed rent up to and including 1 June 1998, in the sum of $33,925.77 and outgoings and charges to 1 June 1998, as well as legal costs, to a total of $23,255.01.
The plaintiff subsequently made an application for summary judgment.
On 10 February 1999 that application was dismissed by a deputy registrar of the Court.
This appeal was then brought.
After being part heard on 14 June 1999 the appeal was adjourned for the parties to file further evidence, and was relisted at my direction, in order to ascertain progress, on 3 February 2000. The appeal was listed for completion of the hearing on 21 February 2000, and was then adjourned for a further seven days to give the defendants an opportunity to make further submissions, if they wished.
Prior to the hearing, and pursuant to leave granted on 3 February 2000, the plaintiff filed, inter alia, a re‑amended statement of claim, which claim adjusted the rent sought, to $33,824.93, and claimed outgoings, charges and legal costs in the sum of $23,254.95.
Interest was also sought on outstanding amounts, pursuant to the lease.

Claim for rent

At all material times during the defendants' occupation rent was sought, not on the basis that the initial rent was $30,000, but rather that it was $37.000.
The rent so claimed was, until all payments were ceased by the defendants, duly paid.
The basis for rent being so charged was that the premises were said to be, as constructed, not 30m² but rather 37m².
In that regard cl 9.2 of the agreement to lease provided that the lessor would "prior to the commencement of the Fitting Out Stage appoint a licensed surveyor to measure the Actual Floor Area of the Premises in accordance with the method of measurement specified in Item 8 of the Schedule".
The method of measurement in the Schedule provided for measurement to the centre line of interior partition walls and to the exterior line or face of external walls.
The plaintiff put forward a plan of the premises drawn by a licensed surveyor, and a statement from that surveyor dated 2 July 1999 to the effect that the plan had been "prepared from site measurements taken by me during 1993 in accordance with item 8 of the lease agreement".
It appeared from an earlier plan of the same surveyor that the survey was carried out on 27 July 1993, and that the measurement then recorded for the defendants' premises was 37m².
That material was put forward in apparent response to the assertion of the secondnamed defendant ("the second defendant") in his affidavit of 9 February 1999 that on 29 November 1993 the defendants were advised that the premises had been "remeasured" and the rent was to be increased. The second defendant said that he did "not accept that (that) was performed or if it was performed that it was done in accordance with Item 8 of the lease … and I put the plaintiff to proof thereof".
It was also submitted on behalf of the defendants that there was no evidence that the surveyor was appointed "prior to the commencement of the Fitting Out Stage" as provided for in cl 9.2 of the Agreement for Lease.
In my view the defendants have not raised a triable issue in relation to this question.
Rent was as stated paid on the basis that the premises had been re‑measured and were 37m² from late 1993, without apparent objection, and in those circumstances any failure on the part of the plaintiff to strictly comply with the terms of the agreement to lease was clearly waived.
Further, nothing was put forward which would suggest that a failure to strictly comply with the requirement for appointment of the surveyor would disentitle the plaintiff from the exercise of a right to increased rent.
There is evidence from the plaintiff that the survey was carried out according to the prescribed method of measurement, and no evidence to the contrary.
A failure to adhere strictly to the method of measurement would in any event be unlikely to make any significant difference to the measurement of the premises, given the nature of the same.
In my view the plaintiff has established an entitlement to rent, under terms of the lease document at least, in the sum of $33,824.93.
The defendants, however, seek to impeach any claim by the plaintiff for rent on the basis of a pleaded set-off and counterclaim, which alleges inter alia that the defendants were induced to enter into the lease because of misrepresentations made by the plaintiff, and that the defendants suffered damage as a consequence.
Alternatively the defendants say that the lease is not registered and is therefore invalid and unenforceable.
In addition, in proceedings between the parties in the Commercial Tribunal, apparently in relation to a payment made by the defendants to the plaintiff at the time of going into possession of the premises, and on 26 September 1997, the Tribunal ordered the plaintiff to pay the sum of $65,000 to the defendants.
I was informed that order is at present the subject of an appeal to the Full Court, an appeal to a judge of this Court having failed.
Given the existence of that order the defendants also seek to set off the amount thereof.
The plaintiff denies that the matters raised in the defendants' defence, set‑off and counterclaim, and the evidence put forward in support of such, raise any triable issue.
Further, the plaintiff says that in any event it is not open to the defendants to refuse payment of the rent, having regard to the terms of the Lease.
It is convenient to consider that aspect of the matter first.
Clause 6 of the Lease provides as follows:
"The Lessee shall pay to the Lessor the Rent without deduction by equal monthly payments on the first day of each month during the Term except that:
(a)the first and last payments will be apportioned on a daily basis if they are in respect of periods in less than a month;
and
(b)the first payment is due on the Date of Commencement."
It follows from the use of the words "without deduction" that the defendants are not entitled to seek to set‑off any claim for unliquidated damages, the plaintiff says.
In support of that proposition the plaintiff refers to the decision of the Supreme Court of Victoria in Citibank Pty Ltd v Simon Fredericks Pty Ltd (1993) 2 VR 168.
In that case Beach J had to consider a term of a lease which provided in relation to the payment of rent that such should be paid "without any deduction whatsoever". The learned Judge held (at 175) that provision expressly excluded any right that the tenant might have had to set‑off against rent payable under the lease an award it had obtained against the landlord, in circumstances where the rent was claimed by a mortgagee in possession which had adopted the lease.
The learned Judge had earlier decided that in any event the tenant had no claim against the mortgagee for the recovery of a debt or damages, that not being something which created any interest in the land so as to bind the mortgagee.
The determination of Beach J that no set‑off was possible under the rent provision was thus not essential to his disposition of the matter.
Reference is also made to the decision of Byrne J in the Supreme Court of Victoria in Mirvac Hotels Pty Ltd v 333 Collins Street Pty Ltd, unreported; SCt of Victoria; No 8183 of 1994; 20 December 1994 where it was held that a provision which prohibited a lessee from making any deduction from rent of "any moneys payable or claimed by the lessee to be payable by the lessor to the lessee" defeated a claim for an equitable set‑off arising out of the defective construction of the relevant premises.
Byrne J cited Citibank with apparent approval, together with the decision of the Court of Appeal in England in Connaught Restaurants Ltd v Indoor Leisure Ltd (1994) 4 All ER 834.
His Honour also noted the decision of Williams J in the Supreme Court of Queensland in Re Partnership Pacific Securities Ltd (1994) 1 Qd R 410.
The defendants rely inter alia on Partnership Pacific for their contention that the question whether a rental provision in a lease like the present permits an equitable set‑off to be made from rent that is otherwise due and owing is not yet settled, whatever the preponderance of authority might be and whatever I might think of the issue, so that it would be wrong to allow summary judgment if there be an arguable set‑off.
The relevant provision in Partnership Pacific required the lessee there to pay rent "without any deduction".
Williams J (at 424) noted that in Citibank Beach J "without citing authority or developing any argument" held that a similar provision in the lease there did suffice to exclude a right of set‑off.
After referring inter alia to Gilbert-Ash Northern Ltd v Modern Engineering (Bristol) Ltd (1974) AC 689, 717-718, where Lord Diplock observed that on construction of a contract it was presumed that neither party intended to abandon any remedies for its breach arising by operation of law so that clear express words must be used to rebut that, and (at 425) after observing that "a characteristic of equitable set‑off is that it operates as a true and substantive defence" Williams J held that the expression "without any deduction" did not amount to a clear unequivocal deprivation of that defence.
In those circumstances it seems to me that I am not able to say that the defendants would be unable to raise an equitable set‑off against the plaintiff's claim for rent, and the question is therefore one whether there is a triable issue in relation to the defendants' claimed set‑off and counterclaim.
It would follow that the position would be the same in relation to a legal set‑off.

Defendants' set‑off and counterclaim

The second defendant filed two affidavits.
In the affidavit of 9 February 1999 the second defendant said that the agreement for lease was entered into on 22 July 1993, and that the defendants were induced so to do by false representations made by the plaintiff's agents Steele & McCubbing.
In addition the second defendant said that there were later breaches of the terms of the "Agreement".
As a result of the misrepresentations and breaches the defendants had suffered damage, the second defendant said.
Representations made, and later shown to be false, were, the second defendant said:
•Layouts of the proposed foodhall were provided which showed seating of 420 persons, but on completion the foodhall had a capacity of only 302 persons.
•An estimated 1992/1993 operating expenses summary, which was annexed, "indicated" that the rent would be $30,000 per annum and that "estimated outgoings" were $6,846 per annum. On occupation the rent was almost immediately increased to $37,000 per annum whilst outgoings were increased to $16,528 and then to $22,320 within three months.
•It was said that all the tenancies in the foodhall had been let but on opening there were two vacant premises out of a total of eight.
•A grand opening was promised but not provided.
•Prominent signs of various kinds both within and without the centre were promised but did not eventuate.
•It was "expected" that the cinema complex within the centre would achieve sales of 20,000 seats per week from commencement of operations but that did not occur.
The breaches of contract were said to include:
•The floor area of the premises being 37m² and the rent $37,000 per annum.
•The increase in the variable outgoings.
The second defendant then said that the defendants had spent $130,000 to set up the business, and when they left the fittings were worth no more than $6,000.
The defendants had experienced significant trading losses every year, the second defendant said, and such were likely to be "well in excess of $100,000".
In his affidavit of 17 March 1999 the second defendant then said his "belief" that the cinema complex did not achieve the number of sales referred to was based on a conversation he had with "the theatre owner or manager whose name I do not now recall" who had informed the second defendant that the sales were significantly less than 20,000 seats per week.
As to trading losses the second defendant said that the loss for the financial year which ended on 30 June 1994 was $23,348, as set out in a 1994 partnership tax return. Tax returns had not been filed by the partnership after that time, as the business had traded at a loss. As to the amount of the loss the second defendant said that he believed "that the trading loss for the next two years was not as great as that year but that for the two years thereafter they were greater. At the end of the day those trading losses exceed $100,000". The defendants contended that as a result of the false representations previously referred to that patronage of the foodhall was "far less" than it would otherwise have been.
The plaintiff has not filed any affidavit in response to those allegations, including the allegation that the representations were false.
Plainly some of the claimed representations, such as that in relation to the "grand opening", would appear to be of no great significance. Others, however, plainly are of potentially more significance.
It is of course the case that the defendants were in possession of the premises for about five years, and there is nothing to indicate that these matters were canvassed by them or made the subject of any claim.
Further, the claimed damages both in relation to the alleged difference between the amount used to set up the business and the value of the fittings on vacation and the claimed trading losses are simply asserted without any attempt at condescension to particulars. Nothing at all is said as to the relationship between the alleged damage suffered and the claimed trading losses beyond a general assertion.
If books of account were maintained and the records then kept by the defendants it is hard to see how information as to the annual trading losses could not have been provided. If no record exists then it is hard to see how the defendants could establish any significant loss in any event.
In my view the circumstances plainly required the defendants to "condescend upon particulars" in relation to the particulars of the claimed loss: see Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd (1976) WAR 109.
That there was a failure to do and I consider the defendants have failed to provide sufficient particulars of any loss and for that reason I do not consider a triable issue has been raised by them in relation to the claimed damages in respect of misrepresentation and breach of contract.
The second matter raised concerns non‑registration of the lease.
In relation to any absence of registration the plaintiff in my view is to the extent necessary able to rely on Walsh v Lonsdale (1881) 21 Ch D 9.
Although Mr Stavrianou sought to rely on the decision of the High Court in Chan v Cresdon Pty Ltd (1989) 168 CLR 242, that case concerned a claim against a guarantor, not a tenant, and is not applicable.
The District Court of Western Australia Act 1969 (WA) s 50(1)(bb) has since 1981 permitted a suit for specific performance of any agreement where the value of the property affected is not more than the amount that has been prescribed from time to time, whilst s 61 of the Act does not require any averment of jurisdiction.
Insofar as the plaintiff's claim here is for past rent no question of Walsh v Lonsdale would in any event arise.
For those reasons I do not consider the defendants are able to rely on non‑registration.
The existence of the order of the Commercial Tribunal was not in issue.
However, in a reply and defence to counterclaim the plaintiff has pleaded that the order is subject to a further order of this Court of 23 October 1997 "to suspend the effect and operation" of the order.
None of the affidavits made any reference to the status of the order.
It is generally considered that the right to set‑off a debt, which derives from the English statutes of set‑off of 1729 and 1735, provides a procedural defence only, in that a defendant cannot by appropriation or otherwise distinguish a debt prior to the plaintiff's action, and both debts remain in existence until judgment: see "Set-off" Derham 2 ed (1996) p 20.

Further, it was necessary under the old former pleading to allege that the plaintiff had been indebted to the defendant at the time of the commencement of the action and "still is" indebted: Derham p 22.
The same author further suggests that as a judgment for payment of a sum of money gives rise to a debt it should be able to form the basis of a set‑off under the statutes: Derham p 31.
However, it is also said that the rule that the cross debt be enforceable at the time of commencement of the plaintiff's action remains: Derham p 28.
Similarly, where a moratorium statute suspended enforcement of a debt that debt could not be set‑off against a plaintiff's claim: Rex v Ray ex parte Chapman (1936) SASR 241.
In the present case therefore, if the order of the Commercial Tribunal be the subject of an order of this Court which suspends the effect of the same I do not consider the defendants are presently able to rely on it by way of set‑off under the statutes of set‑off.
It is of course another question whether any judgment in favour of the plaintiff be stayed pending an appeal in respect of the defendants' order.
An enforceable order of the Commercial Tribunal would constitute an equitable set‑off also, the relevant rule being that where "a right of set‑off exists at law, it will be recognised in equity": Meagher Gummow & Lehane 3 ed (1992) para 3707.
However, the rule in equity is said to be that, as in law, no claim will be recognised unless it constitutes an actionable right: Meagher Gummow & Lehane para 3711, citing J & S Holdings Pty Ltd v NRMA Insurance Ltd (1982) 41 ALR 539, 554 per Blackburn, Deane and Ellicott JJ.
By analogy, the existence of a stay or suspension of an order would appear to represent a bar to reliance on it by the defendants in equity as well.
In the circumstances I should hear from the defendants prior to any order.
If the operation of the Commercial Tribunal order remains suspended, however, I do not consider that the defendants can rely on the same by way of set‑off.
Subject to resolution of that question I therefore consider the plaintiff is entitled to rent in the sum of $33,824.93.

Variable outgoings, other charges and costs

In relation to the claim in respect of variable outgoings under the lease counsel for the defendants referred to cl 9.4 of the Lease, which provides in part that the defendants' obligation was to pay "the reasonable estimate provided for in Clause 9.2" of the Lease, whilst the two following clauses provided for a statement of the actual variable outgoings and rates and taxes to be provided after the expiration of the year, with an obligation on the defendants to meet the actual amount, or a right in them to receive a credit where there had been an overpayment. As I understood counsel's submission, the point sought to be made was that there was no evidence of those things here but rather the claim for variable outgoings in each year was based on the plaintiff's estimate.
That is not a matter that was raised as a factual issue in either of the defendant's affidavits. Further, in my view even if the position was as suggested by counsel, nothing turns on it.
As to each of the plaintiff's claims in relation to variable outgoings and the other charges, the plaintiff's affidavits set out in detail the basis of the charge sought to be made in each case, and no real challenge was made in any case and I am of the view that the plaintiff has made out its entitlement under the lease in respect of each of those charges.
The defendants seek to rely on the same matters of defence and set‑off as in relation to the claim for rent and for the reasons already given in my view the defendants are not able to rely on the same, again on the assumption the position has not changed.
Subject to the above the plaintiff has made out an entitlement to payment in respect of the claimed outgoings, charges and legal costs in the sum of $23,254.95.

Conclusion

As appears above, in the event that the order of the Commercial Tribunal obtained by the defendants is presently the subject of a further order of this Court suspending its operation I am of the view that the plaintiff is entitled to judgment against the defendants in the sum of $57,079.88 in respect of rent, outgoings, charges and legal costs together with interest thereon, and I will hear further from the parties in relation to the latter.