Elders Finance Ltd v Smith [1991] QSC 388

TRANSCRIPT OF PROCEEDINGS State Reporting Bureau, 4th F1oor, The Law Courts, George . Street, BRISBANE, 0. 4000 Tel. (07) 227.4360 (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bureau.) SUPREME COURT OF QUEENSLAND CHAMBERS WHITE, Master No 1846 of 1991 ELDERS FINANCE LIMITED ACN 007 ·533 888 and NORM SMITH _ BRISBANE .. DATE 9/12/91 JUDGMENT 1. REVISED COPI.ES ,ISSUED Court Reporting Bureau Date: /cP / /..? // ~ ~/ Plaintiff Defendant -- 1 of 9 -- ( 10 20 30 40 50 ,_,,μM0dμ~-•-d-dd>-•- 091291 JUDGMENT MASTER: This application is one for summary judgment against the defendant whereby the plaintiff seeks to recover possession of a unit in a block named "Surfers Manhattan" at surfers Paradise. Witan Nominees (1986) Pty Ltd is the registered proprietor of the subject unit, which is unit 35. On 13 January 1988 Witan Nominees executed a bill of mortgage in favour of the plaintiff over, inter alia, the unit to secure the repayment to the plaintiff of certain moneys advanced to Witan Nominees. That mortgage was registered on 18 January 1988. The mortgage required Witan Nominees to make payment of principal and interest to the plaintiff on certain dates and upon default the plaintiff had, inter alia, powers· of sale,. entry and possession. Clause 19 of the mortgage provided that if Witan Nominees without the consent of the plaintiff first had in writing leased or parted with possession of the unit the principal and interest then unpaid at the option of the plaintiff.became immediately due and payable. By 30 September 1991 Witan Nominees had defaulted in the due performance of its obligations to the plaintiff and accordingly the amount of $4,916,535.96 became due and owing on that day. On 7 October 1991 the plaintiff gave notice to Witan Nominees that it intended to proceed· to exercise its rights under the mortgage and on 14 October 1991 it served a notice of exercise of power of sale pursuant to s 84 of the Property Law Act. Witan Nominees has not remedied the default. The defendant in about March 1990 entered into possession of GovL Printer. Old 2 '0'½.,,d/"'',d 10 30 40 50 EO -- 2 of 9 -- .( ' 091291 JUDGMENT the unit pursuant to an agreement with Witan Nominees, which is not of present concern in these proceedings. On 19 September 1990 the defendant entered into an agreement in writing with Wit.an Nominees on a standard REIQ Residential Tenancy Contract. The prior consent of the plaintiff, as 10 10 mortgagee, was not obtained and the lease was never registered. It is necessary to set out some of the terms of that agreement. They are as follows: "·(E) Term: 12 months with an option for 12 months ·(G) Commencing Date: 19th September, 1990 20 20 (H) Expiry Date: 19th September 1991 NOTE: [The tenant shall give notice in writing for application for further tenancy, 14 days priorto the expiry date. Upon becoming periodic, the terms and conditions of this Agreement shall continue to apply]. (I) Rentals: $500.00 per week 30 (J >' Payable by an initial payment of $26,000 per annum ... " The special condition was as follows: "1. The Landlord by its signature hereto acknowledges receipt of the amount of $26,000.00 paid on the signing hereof in full satisfaction of rental until the 19th September,· 1991. ." 40 The defendant asserted in paragraph 2 of his affidavit that on or about 18 August 1991 he forwarded a letter to ' Miss z·arro of _Wi tan Nominees exercising. ~is option in respect of the further 12~month period. The letter was not exhibited to the affidavit. This.paragraph is objected to by Mr_ H. F~i:i.ser for the plaintiff, on the best evidence rule . 50 60 but he indicated that he would not objeGt to the tender of that letter by the defendant. Mr Kent, who appeared for the defendant, indicated that he was not in a position to do that, and no explanation was proffered as to why it was not Govt Printer Q!d 3 30 40 50 60 -- 3 of 9 -- 091291 JUDGMENT possible to produce the letter or a copy. That paragraph was thus ruled inadmissible. The defendant then deposed that in early September he received a number of phone calls from a Jim Swan fran the plc;iintiff •. Certain sentences in the affidavit w1 re objected to on the grounds that they were conclusions based 10 10 20 30 40 50 60 on no primary facts and swore to the issue. An example is as follows: "The terms and conditions of my lease were discussed and acknowledged to be binding by Mr Swan." Those objections were upheld. At the very heart of this dispute between the mortgagee and the tenant is whether the mortgagee knew of the terms and conditions of the lease with the landlord. At the end of the hearing of the application for summary judgment, which had taken much longer than the estimated time, Mr Kent sought leave to haye the defendant give oral evidence as to the words that were used on the occasions when Mr Swan and the defendant had conversations about the lease. Leave was not given, as I indicated at the time, because the defendant had had ample opportunity to include such detail as he was able to give in his affidavit which had been filed by leave at the hearing and had not sought the leave until the conclusion of the plaintiff's and his own submissions. The defendant deposed that he was requested by Mr Swan to forward a copy of the correspondence with the landlord as confirmation that he had exercised the option pursuant to the agreement. On 17 September 1991-the·defendant forwarded by facsimile "a copy of a facsimile to Mr Swan confirming that I had exercised my option in respect of the property". The whole of the document needs to be set out: Govt. P<inter, Old 30 40 50 60 -- 4 of 9 -- 10 20 30 091291 JUDGMENT 11 17th September, 1991. Witan Nominees (1986) Pty. Ltd., c;~ Elders Finance Group Limited,· 10 Felix Street, BRISBANE. 4000. BY FACSIMILE: (b7) 2219165 ATTENTION: MR. J. SWAN. Dear Sir, re: UNIT 35 SURFERS MANHATTAN We hereby advise that we will be exercising the option of 19th September, 1991 and continuing to lease the above apartment as per the terms and conditions and the lease. Yours faithfully, N. SMITH. II That document was not responsive to the request an~ being dated 17 September 1991 could not be said.to constitute aD 40 so 60 exercise of the option which, by virtue of the tenancy agreement, was to be exercised 14 days prior to 19 S~ptember 1991. On 9 October 1991 Mr Swan, in a telephone conversation, asked the defendant_fo~ a copy of the tenancy agreement between himself and Witan Nominees as the auction of the unit was fast approaching, a~d the defendant did so by courier. During this and other previous conversations the defendant has sworn that Mr Swan had said that the Govl P, intN. Old 5 10 20 30 40 50 60 -- 5 of 9 -- ( 091291 JUDGMENT I ' 1 defendant's rights under-the tenancy agreement would be 10 20 40 50 protected. On that day that he was requested to send;the tenancy agreement, the defendant received a letter from the plaintiff's solicitors dated 7 October 1991 indicating that it was proposed on behalf of the mortgagee to exercise its rights over the unit and that the defendant should continue to pay the rent in respect of the unit to a particular real estate agent. The defendant received a letter from the plaintiff's solicitors on 15 October 1991, in which it was asserted that the defendant held the unit from the mortgagee on a monthly tenancy and that the mortgagee was not bound by _the tenancy agreement with Witan Nominees. By letter dated 17 October 1991 the plaint_iff' s solicitors enclosed a notice to quit predicated upon a monthly tenancy. The defendant declined to quit, asserting that the plaintiff was bound by the tenancy agreement and that he had "exercised'his option on 17 September 1991 for a further twelve (12) ·month period " (see NS8). By letter dated 25 October 1991 the plaintiff's solicitors, i·nter. alia, . . noted that whilst aware in general termstheirdefendant was occupying the unit it was not until 9 October 1991 that it knew of the terms and conditions of the·tenancy. The plaintiff has accepted no rent from the defendant, although the defendant has attempted to make a payment to the plaintiff's agent on 19 October 199·1 of $2,000. The principles of law are not iri dispute. It is clear that absent some disentitling conduct by the-plaintiff the __ ~-m_o_r_t-~ 0 -:-:::,/:lainti ff " s rights have priority over those of an ! 6' 10 20 ( 30 40 SC 6( -- 6 of 9 -- ( 10 20 30 40 50 60 091291 JUDGMENT unregistered lessee unless the mortgagee has consented to the lease. It was submitted by Mr Kent, for the defendant, that clause 19 o~ the lease, to which I have referred earlier, impliedly gives consent to the granting of leases by the mortgagor. The mere fact that the clause does not prohibit leasing but sets out the consequence of leasing without consent cannot possibly, in my opinion, lead to a conclusion of constructive consent. The whole tenor of the security document is against such a construction, see in particular clauses 6 and 11. Mr Kent referred to Midland <;r~dits Limited v .. Quic~ (1985) ANZ Conv. R. 271 per Vasta J, but in that case the mortgagee was provided with a copy of the lease during the currency of the lease. On a plain~reading of the tenancy agreement in question here the option was required to be exercised 14 days prior to the expiry date of the lease. That is, by 5 September 1991. It is quite curious that the defendant's solicitors wrote prior to action to the plaintiff's solicitors stating that the option was exercised on 17 September 1991; and the defendant, now asserts that he did so in August but is unable.to produce the document exercising the option or a copy of it. On the evidence before me, the option has not been exercised. Further, even if it had been exercised, a term of the tenancy agreement was that·rent of $26,000 per annum was to be payable in advance. At no time did the defendant make or tender this sum. Accordingly, the defendant would be in breach of the tenancy agreement. At best the rent is the same.if the option has been validly exercised. At worst the option is void because the rent is not specified, see Govt Pr•nter. Old. 7 10 20 30 40 50 60 -- 7 of 9 -- ( 10 20 30 40 50 091291 JUDGMENT Randazzo v. Goulding [1968] QdR 433 at p 441. As to the representations, even if the general nature of the assertions said by the defendant to have been made by Mr Swan is accepted, as I should on a summary judgment application, they go no further than refer to the existing tenancy agreement. There is no representation that the defendant may have a monthly tenancy at $500 per week until 19 September 1992 or anything even approaching that. Accordingly, there are no representations deposed to which, if found to have been made by the plaintiff at a trial of the matter, would be binding upon the conscience of the plaintiff such as to entitle the defendant to remain in possession of the unit until acce~t 1992. The principles enunciated in Fancourt v ! .. Merci?11tile _cr_~d;!,J:;._§. 48 ALR 1, to which reference is often made in summary judgment applications, have been borne in mind, but even so nothing has been raised by the defendant which, to my mind, requires investigation at trial. It is ordered that the plaintiff recover possession of the unit more particularly described in paragraph 1 of the summons, and it is further ordered that· ·the defendant pay the plaintiff's costs of and incidental to •the application and to the action to be taxed. MR FRASER: Master, I have a formal draft which is very similar to that. I wonder if I may hand it up in thepurpose of €Xpedition? MASTER: Yes, I understand that you wish to take this order out if it was to be a decision in the way in which it did eventually go. 10 30 40 50 ,__ __6_0---t----------------------------------~ 60 Govt Printer, Old 8 '· -- 8 of 9 -- 10 20 30 40 50 60 091291 JUDGMENT MR FRASER: Thank you, Master. MASTER: Yes, that's a satisfactory form, thank you, Mr Fraser. Order as per draft. /~ la~ I~ ' ?! •I GovL Printer, Old. 9 10 20 30 40 50 60 -- 9 of 9 --