Cairns City Supermarkets Pty Ltd & Anor v Lightbrake Pty Ltd [2011] QCA 205

SUPREME COURT OF QUEENSLAND CITATION: Cairns City Supermarkets Pty Ltd & Anor v Lightbrake Pty Ltd [2011] QCA 205 PARTIES: CAIRNS CITY SUPERMARKETS PTY LTD ACN 064 441 934 (first appellant) ACN 056 837 506 PTY LTD (second appellant) v LIGHTBRAKE PTY LTD ACN 105 726 007 (respondent) FILE NO/S: Appeal No 305 of 2011 SC No 5773 of 2009 DIVISION: Court of Appeal PROCEEDING: General Civil Appeal ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: 23 August 2011 DELIVERED AT: Brisbane HEARING DATE: 18 July 2011 JUDGES: Margaret McMurdo P, Fraser JA and Dalton J Separate reasons for judgment of each member of the Court, each concurring as to the orders made ORDERS: 1. Application to adduce further evidence refused 2. Appeal dismissed 3. The appellants pay the costs of and incidental to the appeal on a standard basis to be agreed or assessed CATCHWORDS: APPEAL AND NEW TRIAL – APPEAL - GENERAL PRINCIPLES – ADMISSION OF FURTHER EVIDENCE – IN GENERAL – where the first appellant sought leave to rely on evidence which was not before the primary judge – where the further evidence was in existence at the original hearing – where the further evidence was not apparently credible – where the further evidence would not have made a difference to the result below – whether leave should be granted to adduce further evidence on appeal LANDLORD AND TENANT – RENT – BREACH OF COVENANT TO PAY – OTHER MATTERS – where the appellants disputed that the amounts claimed in the notices to remedy breach were in fact owing when the notices were served – where this argument was not raised before the primary judge – whether it was pleaded that the amounts -- 1 of 10 -- 2 were incorrect or disputed – whether the notices to remedy breach were valid PROCEDURE – MISCELLANEOUS PROCEDURAL MATTERS – CROSS-CLAIMS: SET-OFF AND COUNTERCLAIM – SET-OFF – SET-OFF IN PARTICULAR CASES – where the appellants argued they were entitled to set off amounts they claimed were owing by the respondent against the amounts the respondent claimed under the leases – where the leases by their terms prohibited a set-off – whether the appellants were entitled to set off amounts Corporations Act 2001 (Cth), s 109X(1)(a) Property Law Act 1974 (Qld), s 124 Supreme Court Act 1995 (Qld), s 253 Brisbane City Council v Mainsel Investments Pty Ltd [1989] 2 Qd R 204, cited Capital Finance Australia Ltd v Airstar Aviation Pty Ltd [2004] 1 Qd R 122; [2003] QSC 151, followed Clarke v Japan Machines (Australia) Pty Ltd [1984] 1 Qd R 404, followed Elsafty Enterprises Pty Ltd v Mermaids Café & Bar Pty Ltd [2007] QSC 394, followed Emhill Pty Ltd v Bonsoc Pty Ltd [2004] VSC 322, cited Re Golden Casket Art Union Office [1995] 2 Qd R 346; [1994] QCA 480, followed Viclee Nominees Pty Ltd v Team Venture Pty Ltd [2009] QSC 47, cited COUNSEL: The first appellant appeared on her own behalf and on behalf of the second appellant M R Hodge for the respondent SOLICITORS: The first appellant appeared on her own behalf and on behalf of the second appellant Jensen McConaghy as town agents for Miller Harris Lawyers for the respondent [1] MARGARET McMURDO P: I joined in the order given during the hearing of the appeal on 18 July 2011 refusing the first appellant's application to adduce further evidence for the reasons given by Dalton J. [2] I also agree with Dalton J's reasons for dismissing the appeal and with the orders proposed by her Honour. [3] FRASER JA: I have had the advantage of reading the reasons for judgment of Dalton J. I agree with those reasons and with the orders proposed by her Honour. [4] DALTON J: The first appellant leased a shop in Cairns which operated as an IGA supermarket. Its sole director is Jennifer Myra Blackwell. The second appellant leased a real estate office in the same shopping centre. Its sole director is James Keith Spencer. The respondent owns both premises. The terms of each lease are, -- 2 of 10 -- 3 for present purposes, identical. On 26 May 2009 the respondent re-entered both premises. It relied upon a right to do so under the leases in circumstances where both lessees had failed to pay rent and other amounts owing, and had failed to remedy those breaches after service of notices to remedy. [5] On 27 May 2009 solicitors for the lessees obtained orders that the lessor return possession of both premises and be restrained from interfering with the lessees‟ quiet enjoyment until further order. The application returned to Court on 11 June 2009. The orders and injunctions granted on 27 May 2009 were extended until further order of the Court. The order made on 11 June 2009 was conditioned on an undertaking that both appellants would pay the rent due under their respective leases on the first of each month. On 14 December 2010 the lessor applied to have the orders restraining it discharged and for orders that it recover, as against both appellants, possession of the two leased premises. The Conduct of the Application Below [6] The matter was heard on 20 December 2010. The first and second appellants were represented by a solicitor. The December rent had not been paid. There was no explanation as to why. There was no material before the Court saying when the December rent might be paid. To the contrary, the solicitor for the appellants swore, “I have reminded the plaintiffs of their obligations pursuant to the leases and under the existing orders of the Court. I am informed that they will address the issue with their financiers.” The applications judge dissolved the injunctions and made an order that the lessor recover possession of the two lots of leased land. The appeal is against those orders. [7] The primary judge‟s reasons for discharging the injunctions were: “… First, neither plaintiff has paid rent in accordance with its undertaking given on 11th of June last year; second, no explanation is given of this failure to pay; third, there is no evidence provided to the court of capacity to pay that rent. Mr Rozario, who appears for both plaintiffs, frankly said that he could not say with any degree of accuracy when the rent would be paid. He told me that the plaintiffs were in negotiations with their financiers, and suggested that an order for mediation be made. … In the absence of any material which would satisfy me that there is a prospect of payment of the rent within a very short space of time, I find that I have no choice to discharge the injunctions on the basis of the failure to comply with the undertakings …” [8] As to the order for recovery of possession sought by the lessor, the evidence showed that notices to remedy breach had been served on both lessees and not complied with prior to the landlord‟s initial re-entry on 26 May 2009. At the application counsel for the lessor relied on cl 23.4 of the leases: “If the lessee commits an event of default and fails to remedy the default (if it is capable of remedy) within a reasonable time (which the parties agree will be 14 days from the date of giving notice of default to the lessee by the lessor) or where compensation in money is required and the lessee fails to pay the compensation, subject to -- 3 of 10 -- 4 the provisions of section 124 of the Property Law Act 1974 (Qld), the lessor may terminate this lease: … by re-entering and taking possession …” [9] It is necessary to say something about the pleadings. In the proceeding, the appellants sought relief from forfeiture and made monetary claims against the respondent. Therefore, the application for an order for possession was effectively an application for summary judgment on some, but not all, of the matters in issue between the parties. [10] The first (but not second) appellant originally pleaded short service of a notice to remedy pursuant to s 124 of the Property Law Act 1974 (Qld). It alleged that on or about 7 May 2009 the respondent purported to serve a notice to remedy at its registered office. It alleged that the lease specified the address of Raj Lawyers for the service of notices. It pleaded that only on 13 May 2009 was the notice to remedy delivered to Raj Lawyers. Re-entry by the respondent on 26 May 2009 was said to be premature because a reasonable time (14 days) had not elapsed between 13 May 2009 and the re-entry. These factual allegations were maintained through two major re-pleadings. In January 2010 the statement of claim was re-pleaded for a third time to allege simply that the notice to remedy was dated 7 May 2009 but was served on 13 May 2009. The defence and counterclaim pleaded that the notice to remedy was served on 7 May 2009 and that Ms Blackwell had a copy of it on 11 May 2009. The answer did not admit service on 7 May 2009 and pleaded that Ms Blackwell did not receive a copy until 13 May 2009. [11] Counsel for the lessor drew the attention of the applications judge to the controversy about the notice to remedy to the first appellant. In his written outline he said: “6. The first plaintiff failed to pay rent due on 1 May 2009. The second plaintiff also failed to pay rent due on 1 May 2009. The defendant served notices to remedy and alleges that it did so on 7 May 2009. This is admitted in respect of the second plaintiff and not admitted in respect of the first plaintiff. 7. The defendant has also alleged that Ms Blackwell had received a copy of the notice to remedy for the first plaintiff by 11 May 2009. This is denied and it is alleged by the plaintiffs that Ms Blackwell did not receive a copy of the notice until 13 May 2009. However, Ms Blackwell has previously deposed that she received a copy of the notice on 11 May 2009 from her then solicitor.” [12] The affidavit referred to by counsel for the lessor was sworn by Ms Blackwell on 4 June 2009 in the following terms: “5. On 11 May 2009, I became aware of an email from Toni James at the National Australia Bank that had been sent to me on 8 May 2009, advising that she had received notification from the Respondent that the Respondent had issued a Notice to Remedy Breach of Covenant to the First Applicant („the IGA Notice‟). Now produced and shown to me and marked „C1‟ is a true and correct copy of this email dated 8 May 2009. -- 4 of 10 -- 5 6. This was the first that I heard of the IGA Notice as I had not yet received any correspondence from the Respondent in relation to the said Notice. 7. On 11 May 2009, I caused an email to be sent to Robert Grealy, of Raj Lawyers, the solicitors for the First Applicant, advising him of the apparent existence of the IGA Notice and instructing him to contact the solicitors for the Respondent, Miller Harris Lawyers. This email contains privileged communications between the First Applicant and its solicitors and I do not waive privilege in same. 8. On 11 May 2009, I received an email from Robert Grealy at approximately 5:00pm Brisbane time attaching a copy of the letter from the Respondent dated 7 May 2009 and the IGA Notice. This email contains privileged communications between the First Applicant and its solicitors and I do not waive privilege in same. 9. The letter to the First Applicant was addressed to Level 1, 280 Sheridan Street, Cairns North in the State of Queensland, despite the fact that the IGA Lease specified that all notices were to be served upon the First Applicant at Raj Lawyers, Level 6, 355 Queen Street, Brisbane in the State of Queensland. … 14. I am informed by Robert Grealy that, and I verily believe that, the Notice to Remedy was not received at Level 6, 355 Queen Street, Brisbane in the State of Queensland until after 4:00pm on 13 May 2009.” [13] That was the only evidence before the applications judge touching on this issue. Counsel for the lessor relied upon this as effective service on the first appellant on 11 May 2009 when Ms Blackwell, its sole director, in fact received the document.1 Application to Adduce Further Evidence [14] The first appellant sought leave to rely upon a further affidavit of Ms Blackwell which was not before the primary judge, and which directly contradicted her affidavit of 4 June 2009. At the hearing of this appeal leave was refused. My reasons for joining in that decision follow. [15] The new affidavit says of that sworn on 4 June 2009: “4. Paragraph 8 of that affidavit includes mention of the date „11 May 2009‟. That day should correctly be „13 May 2009‟ consistent with the plaintiff‟s pleadings. 5. The affidavit was prepared by Rachel Ashmead of my former lawyers Raj Lawyers. 6. I understand the error to be a genuine mistake on the part of Ms Ashmead. 7. The error was not identified by me when I read the affidavit prior to swearing. 1 That proposition is correct as a matter of law: Emhill Pty Ltd v Bonsoc Pty Ltd [2004] VSC 322 [27]-[28]. -- 5 of 10 -- 6 8. At the relevant time there were multiple issues pertaining not only to the entry into possession by the landlord but also with respect to disputation over fitout and property management matters and matters arising with our financiers all of which required attention. I believe this contributed to the affidavit error being missed. 9. However, the plaintiff‟s pleadings have always been clear and correct on the issue.” [16] Special grounds are needed before this Court will receive further evidence. The test was stated in Clarke v Japan Machines (Australia) Pty Ltd:2 “The classic statement of what amounts to „special grounds‟ for reception of further evidence upon an appeal was approved recently by Lord Bridge in Langdale v Danby [1982] 3 All ER 129 at 137-138. Three conditions must be fulfilled. „First it must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial; second, the evidence must be such that, if given, it would probably have an important influence on the result of the case, although it need not be decisive: third, the evidence must be such as is presumably to be believed, or in other words it must be apparently credible, though it need not be incontrovertible.‟” [17] The new affidavit sought to be introduced by the first appellant does not meet any of these three tests. First, the further evidence was obviously available at the hearing below. The date of receipt of the notice to remedy by Ms Blackwell was at all times in issue on the pleadings. Counsel for the respondent drew the controversy to the attention of the primary judge. The solicitor appearing for the first appellant did not address this matter either in written submissions or in oral submissions. [18] Secondly, there are reasons why this Court would not regard the new affidavit as apparently credible. Ms Blackwell‟s affidavit sworn on 4 June 2009 does not make just one mention of the date 11 May 2009, but several, and those references are said to be drawn from, or supported by, contemporaneous letters. Ms Blackwell chose not to exhibit those letters to her original affidavit. Even now, the first appellant continues to refuse to provide or exhibit copies of these letters. [19] Further as to the credibility point, the respondent relies upon an affidavit sworn by Mr Robert Grealy of Raj Lawyers on 27 May 2009: “IGA Notice to Remedy 7. On 11 May 2009, I received a telephone call from Jennifer Myra Blackwell and, during the course of the ensuing telephone conversation, Jennifer Myra Blackwell said words to the following affect [sic]:- „I have just been speaking to Ian at the National Australia Bank and he has advised me that he has received notification from George Papagelou, the Director of the Respondent, that the Respondent has issued a Notice to Remedy Breach of Covenant to the First Applicant‟. 2 [1984] 1 Qd R 404, 408, cited in Brisbane City Council v Mainsel Investments Pty Ltd [1989] 2 Qd R 204, 215. -- 6 of 10 -- 7 8. Subsequent to engaging in this telephone conversation with Jennifer Myra Blackwell, I forwarded an email to Sean Walsh of Miller Harris Lawyers, the solicitors for the Respondent. Now shown to me and marked with the letter „E‟ is a true and correct of [sic] this email dated 11 May 2009, pursuant to which I sought details of the Notice to Remedy Breach of Covenant allegedly served upon the First Applicant. 9. On 11 May 2009 at 4:18pm, I received an email transmission from Sean Walsh confirming that a Notice to Remedy Breach of Covenant („the IGA Notice‟) had been served upon the First Applicant on Friday, being 8 May 2009. Now shown to me and marked with the letter „F‟ is a true and correct copy of this email transmission dated 11 May 2009. 10. On 11 May 2009 at 4:40pm, I received a further email transmission from Sean Walsh, to which he attached copies of correspondence forwarded to Raj Lawyers on 7 May 2009 and to the First Applicant on the same date. Now shown to me and marked with the letter „G‟ is a true and correct copy of this email transmission dated 11 May 2009. 11. The letter to the First Applicant was addressed to Level 1, 280 Sheridan Street, Cairns North in the State of Queensland, despite the fact that the IGA Lease specified that all notices were to be served upon the First Applicant at Raj Lawyers, Level 6, 355 Queen Street, Brisbane in the State of Queensland. Now shown to me and marked with the letter „H‟ is a true and correct copy of the correspondence to the First Applicant dated 7 May 2009.” [20] Exhibit G is an email sent from the respondent‟s solicitors to Raj Lawyers at 4.40 pm on 11 May 2009 which attached the notice to remedy breach in question. Further, the preceding string of emails shows that the email was sent in response to an email from Raj Lawyers on 11 May 2009 at 3.56 pm, saying that the first appellant had received an email from the National Australia Bank claiming that the respondent had issued a default notice. It also corrects the mis-statement that the notice was originally served on 8 May 2009, saying it was originally served on 7 May 2009. [21] The first appellant puts no material before the Court to show that Mr Grealy‟s affidavit is mistaken or in error. Given the exhibits to his affidavit, that is perhaps understandable. [22] Thirdly, it is difficult to see that the new affidavit would have had any influence on the decision below. On the application to adduce further evidence, an affidavit of the respondent‟s solicitor sworn on 9 June 2009 was relied upon by the respondent. That affidavit deposes to service on the registered office of the first appellant on 7 May 2009. Had the issue been live below, that affidavit was available to be relied upon by the respondent. Once service on the registered office of the first appellant was proved, any issue as to whether Ms Blackwell received a copy of the affidavit on 11 or 13 May 2009 became irrelevant. Service on the registered office of a company is effective service on the company – s 109X(1)(a) of the Corporations Act 2001. The lease did not provide to the contrary. At cl 29.1.3 it provided that a notice given under the lease shall be, “addressed to the service address of the person to whom it is given or in the case of the lessee, the premises or the lessee‟s -- 7 of 10 -- 8 registered office in [sic] a company, or the lessee‟s last known place of residence if an individual.” (my underlining). The word “in” is an obvious error for “if”. The expression “service address” is defined elsewhere in the lease as Raj Lawyers. It seems to me that the notice served at the corporate lessee‟s registered office was properly served both under the lease and at general law. Appellants’ Case on Appeal Triable Issues [23] The appellants argue that the question of whether or not the respondent was entitled to possession of the premises should not have been finally determined on an application, but only after a trial. So far as the date of service of the notice to remedy is concerned, the point is only raised by the first appellant, and as explained above, the only evidence on the point before the primary judge was in favour of the respondent, and that evidence came from the first appellant‟s director. It was not challenged by the first appellant before the primary judge. It was proper for the primary judge to summarily determine this point against the first appellant. [24] On appeal both appellants argued that there were questions as to whether all the amounts claimed in the notices to remedy breach were in fact owing at the time the notices were served. For this to be relevant to the appeal point, it must go to the validity of the notices to remedy, and thus the landlord‟s right to re-enter. The appellants are free to litigate money claims in that part of the litigation which remains on foot in the trial division. [25] The first thing to be said about the argument is that it was not raised before the primary judge. The second thing to say is that in the fourth iteration of the statement of claim neither the first nor second appellant raises it as a reason going to validity of the notices to remedy breach. The reply and answer is, at best for the appellants, ambiguous as to this point. Taking the most generous interpretation of that pleading for the appellants, it alleges both “disputed” the amounts claimed for outgoings and that the first appellant disputed the amount claimed in respect of electricity in the notice to remedy. There is no pleading that the amounts were in fact incorrect. [26] There was no evidence before the primary judge that the amounts claimed as outgoings sought from the second appellant were incorrect or indeed disputed. There was no evidence before the primary judge that the amount sought for outgoings from the first appellant was incorrect. [27] As to electricity, Ms Blackwell swore that the electricity bill relied upon by the landlord related to the entirety of a lot, whereas her tenancy occupied only 60 per cent of that lot. At the time relevant to the invoice, the rest of the lot was unoccupied by tenants. Nonetheless, she swears to being informed by others that, at times, electricity was used in the vacant parts of the lot. The fact that a notice given pursuant to s 124(1) of the Property Law Act overstates the amount said to be owing to a landlord will not result in that notice being invalid in every case. Questions of fact and degree are involved.3 The entire amount sought for electricity in the notice to remedy was some $15,000. That is, roughly one third of the total amount claimed in the notice to remedy breach. It could not be concluded from Ms Blackwell‟s affidavit that a great part of the total electricity bill could relate to 3 Elsafty Enterprises Pty Ltd v Mermaids Café & Bar Pty Ltd [2007] QSC 394 [86] and the cases cited there. -- 8 of 10 -- 9 electricity not used by the first appellant. Thus, even if this matter had been raised below, I am not of the view that it should have prevented the primary judge from dealing summarily with the validity of the notice to remedy in the way in which he did. [28] The appellants also argue that there was a triable issue as to whether or not they were permitted to set off amounts they claimed were owing by the respondent against the amounts the respondent claimed under the leases. This matter was not raised below. While in the second and third iterations of the statement of claim the appellants had claimed a set-off, the statement of claim current at 20 December 2010 did not. The leases by their terms prohibited a set-off and this is conclusive against the appellants.4 The amounts claimed as damages by the appellants can still be litigated in what remains of the proceedings. [29] The appellants say that the hearing before the primary judge on 20 December 2010 was restricted to the question of whether or not the appellants were, on 20 December 2010, behind in their rent. That is not so. The application plainly sought orders for discharge of the injunctions of 27 May 2009, and orders for recovery of possession of land. Equally clear were the written and oral submissions on behalf of the respondent in support of the application. Irrelevant considerations [30] The appellants say the primary judge erred in taking into account three matters which go to their ability to pay the rent under their leases: (a) IGA Distributions Pty Ltd had terminated the first appellant‟s franchise agreement by a notice dated 13 September 2010 which alleged that the first appellant had failed to pay IGA over $60,000. There were photographs revealing that the supermarket had very little stock on its shelves. (b) The second appellant and Mr Spencer had ceased to be licensed real estate agents on 13 November 2010. (c) On 8 September 2010 a judgment had been given against the second appellant for $24,000 as owing to an ex-employee for long service leave. [31] None of these matters were referred to by the primary judge in his reasons for judgment. The appellants say it is likely he was influenced by them. If he was, then that was perfectly proper. They went to the appellants‟ ability to pay rent, and other amounts due under their leases, which was plainly relevant to whether the injunctions ought to be discharged, and whether the appellants had any prospect of maintaining their claim for relief from forfeiture.5 Mediation [32] The appellants submitted that, rather than make the orders he did, the primary judge ought to have ordered the parties to mediate. The decisions made by the judge below were discretionary, as was the decision not to order mediation. Having regard to the absence of evidence from the appellants as to their ability to meet their continuing obligations under the leases; the history of the matter since the injunctions of 27 May 2009 were granted, and the absence of any triable issues, it could not be said that the discretion of the primary judge miscarried in any way. To the contrary, in my view his exercise of discretion was quite correct. 4 Capital Finance Australia Ltd v Airstar Aviation Pty Ltd [2004] 1 Qd R 122, 126-7. 5 Viclee Nominees Pty Ltd v Team Venture Pty Ltd [2009] QSC 47 [30]. -- 9 of 10 -- 10 Costs [33] The primary judge made the following costs orders: “4. The plaintiffs and Jennifer Blackwell and James Spencer pay the costs of and incidental to this application on a standard basis to be assessed if not agreed; 5. The plaintiffs and Jennifer Blackwell and James Spencer pay the costs of and incidental to that part of the proceedings related to the claims by the plaintiffs for relief against forfeiture on a standard basis to be assessed if not agreed; 6. The costs of and incidental to the claims by the first plaintiff in respect of Special Condition C of the lease of 30 March 2009 between the first plaintiff and the defendant be reserved to be decided by Margaret Wilson J on the commercial list.” [34] On 31 July 2009 another judge in applications had made an order for security for costs in favour of the respondent. That order was conditioned upon an undertaking that Ms Blackwell and Mr Spencer, “will be personally liable for any adverse costs order made against either the first or second plaintiffs in proceeding number 5773 of 2009.” [35] At the hearing before the primary judge a solicitor appeared for the first and second appellants. There was no appearance from either Ms Blackwell or Mr Spencer. In those circumstances the orders against them are susceptible to appeal, although none has been made. Having regard to the terms of the undertaking recorded in the order of 31 July 2009 there may be no practical point to such an appeal. [36] No leave to appeal was sought from the primary judge in relation to the costs orders so far as they apply to the appellants. Therefore this Court will not reconsider them given that the appeals have failed in substance.6 Lest that be thought a technical basis for refusing to interfere with the orders, my view is that the orders at paragraphs 4 and 5 above were an orthodox and correct exercise of the primary judge‟s discretion. [37] Had the matter been before this Court, I would have been inclined to set aside the costs order at paragraph 6 above. It is apparent that there are several monetary claims between the first and second appellants and the respondent which may continue to be litigated. They are not limited to claims in respect of Special Condition C. By referring to one of the monetary claims there might be an implication that a judge is in the future inhibited from dealing with the costs of all those monetary claims. [38] I would dismiss the appeal and order that the appellants pay the costs of and incidental to the appeal on a standard basis to be agreed or assessed. 6 Section 253 of the Supreme Court Act 1995 (Qld); Re Golden Casket Art Union Office [1995] 2 Qd R 346, 348-9. -- 10 of 10 --