Zimmermann Investments Pty Ltd v Vanderplancke
[2018] WASC 142
•10 MAY 2018
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: ZIMMERMANN INVESTMENTS PTY LTD -v- VANDERPLANCKE [2018] WASC 142
CORAM: MASTER SANDERSON
HEARD: 24 APRIL 2018
DELIVERED : 10 MAY 2018
FILE NO/S: CIV 3081 of 2017
BETWEEN: ZIMMERMANN INVESTMENTS PTY LTD
Plaintiff
AND
PAUL LEO SILVIO VANDERPLANCKE as trustee for THE VANDERPLANCKE FAMILY TRUST
First Defendant
PAUL LEO SILVIO VANDERPLANCKE
Second Defendant
Catchwords:
Defendants' application for summary judgment - Whether option to renew lease validly exercised - Turns on own facts
Legislation:
Property Law Act 1969 (WA)
Result:
Application dismissed
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr M C Cuerden SC |
| First Defendant | : | Mr J Eastoe |
| Second Defendant | : | Mr J Eastoe |
Solicitors:
| Plaintiff | : | Lavan Legal |
| First Defendant | : | Jonathan Eastoe |
| Second Defendant | : | Jonathan Eastoe |
Case(s) referred to in decision(s):
Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd (1989) 4 BPR 9575
Flagstaff Investments Pty Ltd v Cross Street Investments Pty Ltd (1999) 9 BPR 17,067
Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd (1957) 59 SR (NSW) 122
Grepo v Jam‑Cal Bundaberg [2015] QCA 131
Rethmeier v Pioneer House Pty Ltd (1990) 6 BPR 13,245
MASTER SANDERSON:
This was the defendants' application for summary judgment. I have concluded that the application should be dismissed. It is therefore inappropriate for me to make any findings of fact or determination as to the applicable legal principles. The purpose of these reasons is to demonstrate why I am satisfied the plaintiff has an arguable case which should proceed through to trial.
Turning to the statement of claim, the plaintiff is the registered proprietor of certain premises in Beaufort Street, Mount Lawley. In April of 2014, it leased these premises to two corporations. The lease was for a term of five years commencing on 1 December 2012. In May of 2014, the lease was assigned to the present first defendant. The second defendant is guarantor under the lease.
In par 5 of the statement of claim, the plaintiff sets out certain specific terms of the lease. Without going through these in detail, they contain what might be described as standard terms and conditions - the first defendant was to keep the premises in good condition and repair, to make good any damage, not to obstruct certain thoroughfares and so on. By par 6 it is pleaded that on or around 13 June 2017, the first defendant purported to exercise an option for renewal for a further five years. By par 7 the plaintiff pleads that subsequent to the purported exercise of the option, the first defendant did certain things which were in breach of the terms of the lease. Once again it is not necessary for me to detail these alleged breaches. It is sufficient if I say that for the purposes of this application, and only for the purposes of this application, the first defendant admitted the breaches. The plaintiff claims in effect for a declaration that the purported exercise of the option is of no force and effect and order the first defendant deliver up the premises.
The defence is commendably brief. The issues between the parties emerge in par 2 and par 3 of the defence. They are in the following terms:
As to paragraph 6 of the Statement of Claim the Defendants say that:
(a)the Defendants duly exercised the Option by giving to the Plaintiff a Notice of Exercise of Option to Renew dated 13 June 2017; and
(b)the Plaintiff failed to issue the First Defendant with a prescribed notice (as defined in section 83C of the Property Law Act 1969) within 14 days of the exercise of the Option.
The Defendants:
(a)deny paragraphs 7, 8, 9 and 10 of the Statement of Claim; and
(b)say that, in respect of the alleged breaches, the Plaintiff failed to comply with section 81 of the Property Law Act 1969 and, as a consequence, the Plaintiff is not entitled to exercise any right of re‑entry or forfeiture as pleaded in 10.1 and 12 of the Statement of Claim.
During the course of argument, there was a further matter raised by the defendants. It was common ground between the parties that in December 2017 the plaintiff demanded and accepted rent. The defendants say this was a waiver of any rights the plaintiff may have had to refuse to renew the lease. Despite the fact this matter was not pleaded, it was covered in both parties' submissions and I will deal briefly with the issue. It is convenient first to consider the arguments based on the Property Law Act 1969 (WA) (the Act).
Section 81(1) of the Act is in the following terms:
A right of re‑entry or forfeiture under any provision or stipulation in a lease for a breach of any covenant or condition in the lease is not enforceable, by action or otherwise, unless and until the lessor serves on the lessee a notice ‑
(a)specifying the particular breach complained of;
(b)where the breach is capable of remedy, requiring the lessee to remedy the breach; and
(c)in any case, requiring the lessee to make compensation in money for the breach,
and the lessee fails, within a reasonable time after the service of the notice on him, to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money, to the satisfaction of the lessor, for the breach.
It is common ground between the parties the plaintiff never at any stage issued the defendants with any notice specifying the breaches alleged in the statement of claim and requiring them to be remedied within a reasonable time. That being the case, it is the defendants' position the plaintiff's cause of action has not arisen and the claim must necessarily fail.
The plaintiff answers that claim in this way. It points to the fact that cl 2.05(a) of the lease, which is the option provision, gives the first defendant a right of renewal of the lease for a further term upon condition the first defendant duly and punctually paid the rent and performed and observed the covenants 'at all times during the term'. That is up until 30 November 2017. Subject to statutory alteration of the provision, a breach of the lease which amounts to a failure to comply with the condition specified for exercise of an option to renew prevents the entitlement or right to a new or renewed lease pursuant to the option and relief against forfeiture is not available. That is the effect of the decision of the New South Wales Full Court in Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd (1957) 59 SR (NSW) 122 [123] ‑ [124]. The plaintiff says any breach by the lessee at any time during the term of the lease, that is up until 30 November 2017 and not merely up to the time of giving notice of exercise of the option, amounts to a failure to comply with a condition to the grant of a new or renewed lease pursuant to the option. The plaintiff pleads that the first defendant breached the lease after giving notice of exercise of the option on 13 June 2017. As the first defendant failed to comply with the conditions to the grant of a new or renewed lease pursuant to the option, there is no right to a new lease. The plaintiff accepts this reasoning is subject to the provisions of s 83C of the Act.
Section 83C is in the following form:
Breach of certain obligations not to preclude lessee from exercising option in certain circumstances
(1)In this Division prescribed notice means a notice in writing that -
(a)specifies an act or omission; and
(b)states that, subject to any order of the Court under section 83D, a lessor giving the notice proposes to treat that act or omission as having precluded a lessee on whom the notice is served from exercising an option contained in the lease.
(2)Where an act or omission that constituted a breach by a lessee of his obligations under a lease containing an option would, but for this section, have had the effect of precluding the lessee from exercising the option, the act or omission shall be deemed not to have had that effect where the lessee purports to exercise the option unless, during the period of 14 days next succeeding the purported exercise of the option, the lessor serves on the lessee prescribed notice of the act or omission and -
(a)an order for relief against the effect of the breach in relation to the purported exercise of the option is not sought from the Court before the expiration of the period of one month next succeeding service of the notice; or
(b)where such relief is so sought -
(i)the proceedings in which the relief is sought are disposed of, in so far as they relate to that relief, otherwise than by granting relief; or
(ii)where relief is granted upon terms to be complied with by the lessee before compliance by the lessor with the order granting relief, the lessee fails to comply with those terms within the time stipulated by the Court for the purpose.
It is the plaintiff's position that the section requires the prescribed notice to be given within 14 days after the purported exercise of the option in relation to breaches of the lease which occurred prior to the exercise of the option. The section is not in its terms directed at breaches which occur after the lessee gives notice of the exercise of the option but prior to the end of the term of the lease.
A series of New South Wales cases construed the original New South Wales equivalent of s 83C in a way which required the prescribed notice to be given within 14 days of the date that the new lease was to take effect rather than the giving of the notice of exercise of the option. In this case that would be within 14 days of 1 December 2017 and not within 14 days of 13 June 2017. Perhaps the best known of these cases is Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd(1989) 4 BPR 9575.
According to this line of authority on the proper interpretation of the section, where the terms of the option required the lessee not to be in breach at any time prior to the end of the term of the lease (not merely at the time that notice of exercise of the option is given), the 14 day period for giving notice of a breach would not commence to run until the date that the new lease is to take effect - that is 1 December 2017. The lessee would then have a right to apply for relief against forfeiture within one month of the receipt of the lessor's notice.
It is common ground between the parties the plaintiff did serve a notice under s 83C on 14 December 2017. The first defendant did not seek relief against forfeiture within one month after the service of that notice. It is the plaintiff's contention the line of authorities does not assist the defendants.
Furthermore, there is a contrary line of authority in New South Wales which held that the equivalent of s 83C does not bear upon breaches of covenants after the notice. The two most relevant cases are Rethmeier v Pioneer House Pty Ltd (1990) 6 BPR 13,245 and Flagstaff Investments Pty Ltd v Cross Street Investments Pty Ltd (1999) 9 BPR 17,067. The Queensland Court of Appeal in Grepo v Jam‑Cal Bundaberg [2015] QCA 131 was of the view that line of reasoning was correct.
It was the submission of counsel for the defendants that I ought decline to follow the Grepo decision and should follow the decision in Beca Nominees. Given that this was an application for summary judgment that was a heroic submission. It was counsel for the plaintiff's submission there was in fact no real difference between the two lines of authority. I need not explore counsel's reasoning. It is enough if I say that the plaintiff's position is arguable, that is particularly so given the issue of the notice by the plaintiff to the defendants on 14 December 2017. I certainly could not conclude that the plaintiff's position is hopeless.
That then leaves the waiver argument. It seems clear from the evidence that the demand for rent resulted from a clerical error within the offices of the plaintiff. Be that as it may it can be assumed, for the purposes of this application, rent was demanded and paid at a time when the plaintiff says there was no lease in existence.
In his submissions, counsel for the plaintiff pointed out the defendants were alleging the plaintiff had waived a 'right of forfeiture'. Counsel submitted this was a misconception as to the plaintiff's position. The plaintiff says there was no lease in existence - the conditions required to satisfy the option for renewal had not arisen with the effect there was no new lease. That being so there was nothing that could be waived.
In my view, the plaintiff's position is arguable. In a real sense it is tied up with the proper understanding of how s 81(1) and s 83C actually operate in the circumstances of this case. It would be inappropriate to attempt to determine the waiver issue as a standalone point.
For these reasons I am satisfied the defendants' application ought be dismissed. I will hear the parties' submissions as to the proper form of orders and as to costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
DG
ASSOCIATE TO MASTER SANDERSON10 MAY 2018