Abacist Pty Ltd, Re [1991] QSC 210

IN THE SUPREME COURT OF QUEENSLAND CHAMBERS O.S. No. 509 of 1991 Before Mr Justice McPherson S.P.J. CATCHWORDS IN THE MATTER of the Rules of the Supreme Court - and - IN THE MATTER of an Application by ABACIST PTY. LTD. pursuant to O. 64 r.1A of the Rules of the Supreme Court - and- IN THE MATTER of an Application by ABACIST PTY. LTD. against MANAGED INVESTMENTS PTY. LTD. (IN LIQUIDATION) and D. A. C. PROPERTIES PTY. LTD. JUDGMENT - McPHERSON S.P.J. Delivered the 18th July, 1991 Contract - Agreement for five year lease - To be registered "without delayw - Lessee demanding registration - Lease not registered after two years from execution - Notice requiring registration within 30 days, failing which rescission - Lease not registered - Whether lessee entitled to rescind agreement. Counsel: H.G. Fryberg Q.C., with him D.G. Mullins for the Applicant Plaintiff P.E. Hack for the Respondent Defendant Solicitors: Bowdens for the Applicant Plaintiff Primrose Couper Crown Rudkin for the Respondent Defendant Hearing Date: 12 June 1991 -- 1 of 12 -- IN THE SUPREME COURT OF QUEENSLAND CHAMBERS O.S. No. 509 of 1991 IN THE MATTER of the Rules of the Supreme Court - and - IN THE MATTER of an Application by ABACIST PTY. LTD. pursuant to 0. 64 r.1A of the Rules of the Supreme Court - and- IN THE MATTER of an Application by ABACIST PTY. LTD. against MANAGED INVESTMENTS PTY. LTD. (IN LIQUIDATION) and D.A.C. PROPERTIES PTY. LTD. JUDGMENT - McPHERSON S.P.J. Delivered the-18th July, 1991 The applicant seeks a declaration that it has validly rescinded an agreement for lease made with the two respondents Managed Investments Pty. Ltd. ( "M. I.") and D. A. C. Properties Pty. Ltd. ("D. A. C. II) • The applicant is described as the "service company" for a firm of solicitors Witheriff Nyst, who practise at Southport. The respondents are or at relevant times were registered prop+ietors as tenants in common of land with improvements including in particular a commercial or office building. A part of it, delineated in red on the plan accompanying the lease agreement, was the subject of the agreement to lease in favour of the applicant. On 28 August 1989 the respondent M.I. was ordered to be wound up on the ground of -- 2 of 12 -- 2 insolvency. It was this event that lay at the foundation of many, but not all, of the ensuing difficulties. The agreement for lease is in writing and was executed by the applicant on 26 January 1989. The term of the lease was to be five years commencing on 1 February 1989 and terminating on 31 January 1994. There is in cl.18.01 also a provision in favour of the lessee for renewal of the lease, exercisable by notice in writing at least three months before the expiration date of the lease, for a further term of two years. Although the agreement for lease was executed in the form prescribed for an instrument that is to be registered as a lease, it has in fact never been registered in the Titles Office. Being specifically enforceable, it is valid as a lease in equity; but, in the character of an agreement for a term in excess of three years, it was, without registration, not effective .at law as a lease for five years : see Laurinda Pty. Ltd. v. Capalaba Park Shopping Centre Pty. Ltd. (1989) 166 C.L.R. 623, 641, per Brennan J. That placed it at risk of being defeated altogether if some other instrument (such as a transfer or a mortgage or another lease) dealing with the same land was registered in priority to the applicant's lease. The option for renewal was liable to be defeated in the same way. The applicant could protect its rights by caveat, which would however lapse unless proceedings were commenced within three months for specific performance of the agreement for lease. It was ultimately because of non-registration of the lease that the applicant elected to determine the contract pursuant to a notice given on 3 April 1991 requiring registration to be -- 3 of 12 -- 3 effected within 30 days; that is, by 3 May 1991. Registration did not take place within that time, which is why the applicant now claims to have validly rescinded the agreement. Its claim is based on breach of the express provisions of cl.25 of the lease, coupled with failure of the respondents to comply with the notice given on 3 April 1991, which expressly foreshadowed rescission if registration was not effected within the 30-day period specified in the notice. The respondents before me submitted that the notice period of 30 days was insufficient for the purpose of registering the lease under the circumstances that then prevailed. On this point I permitted at the hearing cross-examination of three of the deponents who had made affidavits that were read before me. One was Mr J.R.E. Campbell, a civil engineer, who is employed by the Gold Coast City Council as Deputy Planning and Development Manager. From what he said on affidavit and in evidence, I am satisfied that, had urgent application been made in that behalf, the necessary Council approval to the subdivision involved in a lease for five ·years could have been obtained within four days. Having also read and heard what Mr W.T. Purcell and Mr W.H. Hart had to say on the subject of the conveyancing processes that would have been involved, I am persuaded by the evidence of Mr Purcell that it was reasonable to expect that the lease could have been registered within the period of 30 days specified in the notice dated 3 April 1991; or, in other words, that the period allowed for its registration was sufficient. In fact, the principal delay that followed during that time was some 14 days between delivery on 12 April 1991 to the respondent M.I. for -- 4 of 12 -- 4 execution by it of an amended form of the original executed lease, and its subsequent delivery on 26 April to the applicant for re-execution. Solicitors for the applicant in their letter dated 1 May 1991 expressed the view that no further execution by the applicant was needed; but they offered to make two directors of the applicant available on short notice if required to execute or initial the document in order to effect its registration. The lease was returned by the applicant on 2 May. At the expiration of the 30-day period it had neither been registered, nor even lodged for registration; indeed, the assessment of the stamp duty payable in respect of it did not issue until as late as 4 June 1991, which was well after the notice had expired and the election to rescind had been confirmed by the applicant on 7 May 1991. In my view, not only was 30 days a sufficient time .within which to have the lease registered, but the failure to - register it within that period was something for which the respondents and not the applicant were responsible. Having formed this conclusion, it is necessary to advert to events preceding 3 April 1991, when the notice was. given, in order to determine whether the applicant was then entitled to give the notice as it did; and whether, in the circumstances, it acted reasonably in giving a notice of that duration threatening rescission if the notice was not complied with. As regards the first aspect of the question, cl.25 of the agreement for lease provided:'- "The parties agree that this agreement to lease the demised premises is to be registered in the office of the Registrar of Titles and the Lessor will be attending to registration of same upon payment of costs associated with such registration as required -- 5 of 12 -- 5 pursuant to this agreement. The Lessor agrees to ensure that the Lease is registered without delay ... " It will be noticed that cl.25 does not fix a date on or by which the lease had to be registered and time is not made of the essence of the agreement. Nevertheless, the clause imposed an affirmative obligation on the respondents, dependent on payment by the applicant of the requisite costs, to ensure that the lease was registered "without delay". In this respect it is much more favourable to the applicant lessee than the provision (cl.15.7) in the agreement for lease considered by the High Court in Laurinda Pty. Ltd. v. Capalaba Park Shopping Centre Pty. Ltd. (1989) 166 C.L.R. 623, 627-628, which expressly provided that the obligations of the parties were "not affected by any default or delay in ... preparation or execution of the lease", and that despite non-completion of the lease, each of the lessor and the lessee would be bound to perform its obligations under the agreement. With this in mind I turn to the sequence of events in the matter. On this question, it was submitted by Mr Hack for the respondent that there was a substantial dispute of fact that ought not to.be determined on an application such as this. I am, however, satisfied that, apart from the question of sufficiency of the duration of the period allowed for registering the lease, no dispute of fact exists between the parties. The events that occurred are recorded in, and for the most part consist of, correspondence between the solicitors for the parties, leaving only inferences to be drawn, or conclusions of law to be reached, from facts that are otherwise not in issue. Having regard to the need for an expeditious resolution of the question whether the -- 6 of 12 -- 6 agreement for lease remains binding, and the state of uncertainty that will prevail if a decision is not made now, any discretion that I may possess in the matter ought in my opinion to be exercised in favour of determining the question in this form of proceeding. The instrument of lease, or agreement for lease as it is to be considered, was as I have said executed by the applicant on 26 January 1989. On the same day Witheriff Nyst forwarded to respondents' solicitors a cheque for $1,727 on account of stamp duty in accordance with cl.25. On 3 March 1989 solicitors for the applicant first wrote inquiring whether the lease had been registered. In the ensuring period of two years or more before the notice was sent on 3 April 1991, there are at least a further three demands or requests from the applicant or its solicitors for registration of the lease. On occasions solicitors for M.I. gave assurances that that respondent was prepared to do what was necessary to achieve registration of the lease, or that it was "prepared to assist your client in any .manner they can". Nothing came of these promises, and as iate as 5 March 1991 those solicitors advised that their client "is not able to advise you when it is anticipated that the lease in favour of your client will be registered". The notice of 3 April 1991 followed a month later, and the applicant's election to rescind followed after a further month. Several difficulties were encountered in the course of attempting to have the lease registered. None of them was of the applicant's making. Problems began even before the instrument of lease was executed by the applicant on 26 January 1989. In -- 7 of 12 -- 7 the course of events after that date it emerged that well before execution of that instrument M.I. had executed a transfer of its interest as co-owner in fee simple of the land to a company named Massey Holdings Pty. Ltd. ( "M. H.") . The transfer is dated 11 August 1988 but it was not produced for registration until 30 May 1990. When this circumstance became known, strenuous effort,p and correspondence were devoted to seeking to persuade the applicant to agree to substitute M.H. for the respondent M.I. as co-lessor of the premises. This the applicant steadfastly refused to do, taking the stand, as in law it was entitled to do, that it had a binding agreement with the respondents for a lease in the terms contained in the instrument it had executed on 26 January 1991. Instead, on 15 May 1989, the applicant lodged a caveat to protect its interest under the agreement. The wisdom of the applicant's attitude, and the prudence of the step it took in lodging the caveat, are in my opinion amply demonstrated by _the material before me. In the first place, there was a number of unregistered instruments including a mortgage over or in respect of the land. Questions naturally arose as to whether the mortgagee had consented or would consent to the lease to the applicant. The risk to the applicant that its equitable leasehold interest might be defeated by registration of a prior or subsequent instrument of transfer or mortgage was therefore a real and not merely a theoretical danger. The applicant's attitude of refusing to agree to the substitution of M.H. for M.I. as co-lessor, or to remove the caveat to allow various of these instruments to be registered, -- 8 of 12 -- 8 was therefore fully justified. If a new co-lessor was substituted, and for that purpose the lease was re-executed, a real risk would arise that the priority of the applicant's equitable interest based on the agreement for lease of 26 January 1989 would be lost or postponed to some other, possibly unknown, unregistered transaction or instrument of later date. As it transpired, the applicant's stance was also vindicated by other events. M.I. and M.H. are (or were) companies having directors and shareholdings in common. The liquidator of the former company accordingly interested himself in the transaction by which M. I. 's interest in fee simple in the land had been transferred to M.H. in August 1989. He declined to acknowledge its validity pending closer scrutiny of the circumstances surrounding its execution. A stalemate resulted. Until the liquidator acknowledged the validity of the transfer to M.H., the applicant could not reasonably be expected to .agree to the substitution of that company as co-lessor. Liquidators, as everyone knows take time to reach decisions on matters like these. So it proved to be in the present case. In addition to these difficulties, complaints were made by the applicant and Witheriff Nyst, solicitors, about interruption of their quiet enjoyment of the premises. The solicitors had gone into possession of the area to be leased and were conducting their practice in it. Without prior warning, as it was alleged, workmen appeared during business hours and carried out repairs on the roof or ceiling of the building interrupting the proper conduct of the solicitors' practice. Application was made to the Supreme Court for an injunction to restrain this activity. On -- 9 of 12 -- 9 24 May 1989, Connolly J. granted the injunction sought. The writ that issued on 17 May 1989 claimed specific performance of the agreement for lease and so served the dual purpose of preventing lapsing of the caveat lodged on 15 May 1989 and of initiating the proceedings for the injunction. After those events in May 1989, the parties entered into negotiations with a view to settling all issues between them. These included the matter of registration of the lease. The· negotiations continued over many months. They were interrupteq or suspended from time to time. In one of these intermissions the applicant on 25 July 1990 gave notice calling again for registration of the lease and advising of its intention to rescind in the event of non-compliance. The threat was in the end not carried into effect. Further negotiations ensued in November 1990. By 24 January 1991 they had come to an end. The applicant once again required registration of the lease. It received an offer of an amended lease, which was declined. On 3 April 1991 the notice requiring registration, and· in defau~t threatening rescission, was despatched. What followed has already been recounted. To return to matters of law, the respondents were under cl. 25 required to ensure that the lease was registered "without delay" after execution of the agreement by the applicant on 26 January 1989. The applicant was not obliged to accept a new agreement or even the old agreement amended to substitute a different co-lessor. It had an incontestable legal and equitable right to registration of the original lease with all the security of tenure which that imported. The agreement was for a lease of -- 10 of 12 -- 10 five years commencing on 1 February 1989. By the time it gave its notice on 3 April 1991, more than 40 per cent of the term had already expired. It could not be expected to sit idly by and submit to the difficulties to which it had already been subjected, together with the legal costs inevitably entailed in having independent solicitors representing it in negotiations and litigation. That is not to be expected or endured in commercial or professional circles when one enters into what is admitted on all sides to be a binding lease .. The respondents were by 3 April 1991 quite plainly in breach of their duty under cl.25 to register the lease "without delay". The applicant was, in my opinion, in no way responsible in fact or law for the delay. In relation to the reasonableness of the notice given on that date, there is a passage in Laurinda Pty. Ltd. v. Capalaba Park Shopping Centre Pty. Ltd. (1989) 166 C.L R. 623, 638-639, in -which Mason C.J. approved- the following statement of Lord Parker in Stickney v. Keble [1915] A.C. 386, 419: "In considering whether the time so limited is a reasonable time the Court will consider all the circumstances of the case. No doubt what remains to be done at the date of the notice is of importance, but it is by no means the only relevant fact. The fact that the purchaser has continually been pressing for completion, or has before given similar notices which he has waived, or that it is specially important to him to obtain early completion, are equally relevant facts ... It would be unjust and inequitable to allow the vendor to put forward his own unnecessary delay in the face of the purchaser's requests for expedition as a ground for allowing him further time or as rendering the time limited by such a notice as that to which I have referred an unreasonable time." What his Lordship said in that case is applicable here. The applicant has been pressing for registration of the lease from -- 11 of 12 -- 11 a time dating back as far as March 1989. It has on several occasions demanded registration of the lease, but failed to receive it. It gave notice on 3 April 1991 requiring registration on pain of rescission if not complied with. It had as far back as 25 July 1990 previously given such a notice, but without effect. The seriousness to a firm of solicitors of the existence of defects in the right to remain in the premises in and from which they conduct their practice scarcely needs to be stressed. In all the circumstances the notice on which the applicant relies was in my opinion reasonably given, and, in terms of the time allowed for compliance with it, was in itself a reasonable notice. The respondents failed to comply with it, and the applicant was therefore justified in rescinding the agreement for lease. There will be a declaration that the applicant has validly rescinded the agreement for lease entered into with the two respondents and contained in a form of instrument of lease dated 26 January 198~. The respondents should pay the costs. Because.the first respondent M.I. is in liquidation leave was needed to bring these proceedings against it. Leave to proceed was not opposed, and it is granted. -- 12 of 12 --