Conifer Developments Pty Ltd v C & E Riha Pty Ltd & Ors [2003] QDC 239

[2003] QDC 239 DISTRICT COURT CIVIL JURISDICTION JUDGE DODDS No 471 of 2001 CONIFER DEVELOPMENTS PTY LTD Plaintiff and C & E RIHA PTY LTD and CHRISTOPHER RIHA and FRANCES RIHA and DAVID RONALD ISON and JONATHON VICTOR BAILEY First Defendant Second Defendants Third Defendants MAROOCHYDORE ..DATE 16/04/2003 JUDGMENT 1 4th Floor, The Law Courts, George Street, Brisbane, Q. 4000 Telephone: (07) 3247 4360 Fax: (07) 3247 5532 WARNING: The publication of information or details likely to lead to the identification of persons in some proceedings is a criminal offence. This is so particularly in relation to the identification of children who are involved in criminal proceedings or proceedings for their protection under the Child Protection Act 1999, and complainants in criminal sexual offences, but is not limited to those categories. You may wish to seek legal advice before giving others access to the details of any person named in these proceedings. -- 1 of 11 -- 16042003 T8/MT M/T MCY 1/2003 (Dodds DCJ) 2 JUDGMENT 1 10 20 30 40 50 60 HIS HONOUR: This was an application for summary judgment by the plaintiff against the first and second defendants, for $23,076.55. In Bernstrom v. National Australia Bank Ltd 2002, QCA 231, judgment delivered 28 June 2002, the Court of Appeal dealing with rule 292 of the Uniform Civil Procedure Rules endorsed the approach of the Court of Appeal in the United Kingdom in Swain v. Hillman 2001 1 All England reports, 1991. In effect, the power to grant summary judgment in the plaintiff's or defendant's favour is to be exercised where the claim or defence has, "no reasonable prospect of being successful, the word, 'real', distinguishes fanciful prospects of success or -- they direct the Court in the need to see whether there is a 'realistic', as opposed to a 'fanciful' prospect of success". If there are factual matters in dispute which could be resolved in favour of a respondent to an application for summary judgment, and if so found, could raise a realistic prospect of success, summary judgment is not appropriate. The plaintiff was the lessor of shop premises in the Nambour Plaza shopping centre (the shop). The first defendant was the original lessee of those shop premises, pursuant to a 10-year lease commencing on 1 October 1992. The second defendants, who were directors of the first defendant, in consideration of the granting of the lease, executed a guarantee guaranteeing the "due and punctual payment of rent, and all other moneys payable by the tenant under the lease", and, "the due performance and observance by the tenant of the terms and conditions of the tenants' covenants. -- 2 of 11 -- 16042003 T8/MT M/T MCY 1/2003 (Dodds DCJ) 3 JUDGMENT 1 10 20 30 40 50 60 It also provided: "(b) (ii) This guarantee shall not be discharged by any assignment of the lease by the tenant or it's successors - (iii) Where there is more than one guarantor the covenants herein contained on the part of the guarantors shall be deemed to have been made jointly and severally." The plaintiff's claim was for $50,429.79, comprising $23,076.55, for rent, electricity, outgoings, promotional levies and GST, outstanding when the then tenant of the shop vacated it without notice on or about 30 September 2001, and $27,353.16 for damages arising from the balance of the term of the lease to 30 September 2002. The tenant of the shop, who, it was said, vacated it on or about 30 September 2001, was an assignee of the lessee's interest under the lease. That came about as follows: (a) On or about 7 October 1998 the first defendant's interest under the lease was assigned (the first assignment) by deed made between the plaintiff as lessor, the first defendant as assignor and the second defendant as existing guarantors, and Jonathon Victor Bailey and David Ronald Ison (the third defendants) as assignees. The deed contained terms as follows: -- 3 of 11 -- 16042003 T8/MT M/T MCY 1/2003 (Dodds DCJ) 4 JUDGMENT 1 10 20 30 40 50 60 "(3) It is hereby expressly agreed and declared by and between the lessor and assignor that the assignment shall not release or relieve the assignor from its obligations to observe and perform each and every covenant agreement and condition contained or implied in the lease. --- "(9) The existing guarantor consents to the within assignment and variation and acknowledges that the assignment and variation will not vary or abrogate his respective obligations pursuant to the guarantee and indemnity contained in and annexed to the lease. The existing guarantor confirms that his obligation under the guarantee and indemnity remain in full force and effect notwithstanding that within assignment and variation." (b) On or about 28 October 1999 by deed entered into between the plaintiff as lessor, the third defendant as assignors and David Ronald Ison (one of the assignors) as assignee, the third defendants assigned their interest under the least to David Ronald Ison (the second assignment). -- 4 of 11 -- 16042003 T8/MT M/T MCY 1/2003 (Dodds DCJ) 5 JUDGMENT 1 10 20 30 40 50 60 The second defendants have said they were not aware of the second assignment. It will be observed that the first and second defendants were not a party to this deed. In their defence to the plaintiff's claim the first and second defendants did not dispute the existence of the lease or the terms contained in the lease document. It was admitted that in consideration of the plaintiff's agreeing to lease the premises to the first defendant, the second defendants executed the guarantee. It was admitted the first defendant had not paid amounts claimed for rent, electricity, outgoings, promotional levies, and goods and service tax claimed in the sum of $23,076.55. The two assignments of the lease were admitted. The first and second defendants asserted they did not agree to the second assignment, that the plaintiff had since a time prior to 25 September 2001, proposed to redevelop the site of the premises the subject of the lease, that the development would not be completed prior to 1 October 2002, and that as part of that proposed redevelopment the plaintiff had resolved that the premises the subject of the lease not be re-opened or used until redevelopment of the site was completed. They denied that the first defendant had abandoned the premises as the plaintiff had pleaded, and said they were unaware whether the plaintiff in accordance with the terms of the lease re-entered the premises. In an affidavit of Eleanor Robertson in support of the plaintiff's application, Ms Robertson deposed that the assignee of the second assignment did not pay the totality of -- 5 of 11 -- 16042003 T8/MT M/T MCY 1/2003 (Dodds DCJ) 6 JUDGMENT 1 10 20 30 40 50 60 the rent, electricity charges, outgoings, promotional levies and goods and services tax due and payable in accordance with the lease terms. That on or about 30 September 2001 the said assignee vacated the premises without notice to the plaintiff, and that at that date, $23,076.55 was due and owing according to the terms of the lease. -- 6 of 11 -- 16042003 T8/MT M/T MCY 1/2003 (Dodds DCJ) 7 JUDGMENT 1 10 20 30 40 50 60 Reference to Exhibit E to the affidavit of Ms Roberston, tax invoices/statements of account from 1 July 2000 to 30 September 2001 reveal the history of the mounting arrears particularly from January 2001. In an affidavit of the male second defendant, Christopher Riha, Mr Riha deposed that neither the first or second defendants received any notice of the second deed of assignment, nor prior to 11 October 2001 did they have any notice that the third defendants, or the assignee from them, were in breach of the terms of the lease. On 11 October 2001 he phoned Ms Robertson and was told by her the shop had been closed for several months and that the tenants had walked out. He offered to reopen the shop and take over the lease immediately. Ms Robertson was to speak to the owners but never reverted to him. On 13 October 2001 he and his wife, the other second defendant, attended at the shopping centre, spoke to other retailers and obtained the latest centre newsletter which contained what was apparently said to other retailers at the centre at a retailers' meeting on 25 September 2001. Therein was printed: "The chicken shop (the shop) will not be reopening and remain as a planned closure until the redevelopment takes place." The liability of the first and second defendants for unpaid rent and other charges due according to the terms of the lease up until 30 September 2001 will depend upon the continuing -- 7 of 11 -- 16042003 T8/MT M/T MCY 1/2003 (Dodds DCJ) 8 JUDGMENT 1 10 20 30 40 50 60 extent of their contractual obligations pursuant to the lease and guarantee in light of the assignments which occurred. The defendants referred to the reference to a planned closure referred to in the centre newsletter, lack of precision when the tenancy was abandoned by the assignee and apparent disinterest in the offer by the male second defendant to reopen the shop. It was submitted that these matters raised questions of fact to be explored and resolved and pointed to a suspicion something inequitable had occurred. It seems to me that some of these matters may be relevant to the other part of the plaintiff's claim relating to the period 30 September 2001. However I do not think they raise issues pointing to a realistic prospect of success by the first and second defendants to the part of the plaintiff's claim, the subject of this application. It is well established that assignment of a lease does not discharge a lessee assignor from the covenants in the lease. See for instance, Minister of State v. Dalziel, (1944) 68 CLR 261; Richardson v. Landecker (1950) 50 SR (NSW) 250 at 255; Ahern v. L A Wilkinson (Northern) Ltd (1929) STRQ 66. In Molina and Another v. Leask and Another, Unreported, NSWSC, 6 February 1998, Santow J; the facts were somewhat similar to this case. A lease had been assigned by the lessee and further assigned by the assignee without knowledge of the lessee. The lessor consented. The assignees defaulted on rent payments. The lessor did not inform the lessee of any -- 8 of 11 -- 16042003 T8/MT M/T MCY 1/2003 (Dodds DCJ) 9 JUDGMENT 1 10 20 30 40 50 60 default in rent payment while either assignee was in possession. The deed of assignment between the lessor, the lessee assignor, and the first assignee, contained a term as follows: "The assignor shall continue to be liable with the assignee for the payment of the rent and the performance of all the terms, covenants and conditions contained in the lease and on the part of the lessee to be performed and observed notwithstanding the assignment hereby effected." It was submitted on behalf of the lessee that the liability of the lessee only continued while it and the original assignee alone remained jointly liable and upon the further assignment by the assignee the liability would end. This was rejected by Santow J. He said: "it would seek to displace the position at general law where the original lessee's liability continues. This is purported to be done by drawing an implication to the contrary from a clause (the clause set out above) which expressly reflects the general legal position simply because the clause refers only to the assignment then in contemplation." It was also submitted that an estoppel arose from the lessor's failure to inform the lessee of the assignees' default in payment of rent until after the ultimate assignee had vacated. This also was rejected. Here the parties to the second assignment were the lessor, the third defendants as assignor, and the assignee. There was no requirement of law or in the lease for the lessee to be a party to this assignment. -- 9 of 11 -- 16042003 T8/MT M/T MCY 1/2003 (Dodds DCJ) 10 JUDGMENT 1 10 20 30 40 50 60 The terms, covenants and conditions and restrictions in the lease were, unless the context otherwise required, to be construed as continuing throughout the lease. See clause 2.24 of the lease. Part 14 thereof dealt with inter alia assignment of the lease by the tenant. The first deed of assignment contained a term (set out earlier) similar in effect to that in Molina. Additionally, it contained a term whereby the second defendant guarantors consented to the assignment, notwithstanding that the guarantee itself contained a term acknowledging it would not be discharged by any assignment of the lease by the tenant, the first defendant or its successors. The second deed of assignment in its unexecuted form apparently included reference to the second defendants as existing guarantors as parties to the deed. It recited that the existing guarantor guarantee the obligations of the lessee under the lease and recited that the existing guarantor consented to the assignment. These references were deleted before or upon execution by the executing parties. However I cannot see that this can lead to a conclusion that the position at law has been altered. There was simply no need for the first or second defendants to be parties to this deed of assignment. The guarantee guarantees the due performance and observance by the tenant of the terms and conditions of the tenant's covenants, agreements and obligations in the lease. In the -- 10 of 11 -- 16042003 T8/MT M/T MCY 1/2003 (Dodds DCJ) 11 JUDGMENT 1 10 20 30 40 50 60 event of the tenants default thereof the guarantor covenanted to inter alia perform or observe such term, condition, covenant agreement or obligation and to pay to the landlord and indemnify the landlord, et cetera. I give judgment for the plaintiff against the first and second defendants for $23,076.55 and for costs including the costs of this application. ----- -- 11 of 11 --