Ahmed v GPT Funds Management Pty Ltd

DECISION : Interlocutory injunction granted

CATCHWORDS : LANDLORD AND TENANT - lessee commits single act offence against the person on shop premises after trading hours - lessor alleges breach of lease covenant forbidding doing of anything "dangerous, annoying, offensive or illegal" - lessor serves notice requiring breach to be remedied - lessor moves to terminate lease - whether serious question to be tried as to existence of grounds to terminate - lessee offers undertaking to offer business for sale and to stay away from shopping centre until further order - interlocutory injunction restraining interference with tenant's enjoyment granted

Apriaden Pty Ltd v Seacrest Pty Ltd (2005) 12 VR 319 CASES CITED : Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 Shevill v The Builders Licensing Board (1982) 149 CLR 620

Emran Ahmed - First Plaintiff PARTIES : Kim Anne Ahmed - Second Plaintiff GPT Funds Management Pty Limited - Defendant

COUNSEL : Mr S.A. Benson/Ms S. Leis - Plaintiffs Mr C.R.C. Newlinds SC/Ms S. Mirzabegian - Defendant

SOLICITORS : Kenneally & Co - Plaintiffs Addisons - Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

5468/07 EMRAN AHMED & ANOR v GPT FUNDS MANAGEMENT PTY LIMITED

1 The plaintiffs, husband and wife, are the lessees from the defendant of shop 126, level 1, in the Carlingford Court shopping centre at Carlingford. They have conducted there a business of selling seafood by retail under the name "Seafood Lovers". 2 By their summons, the plaintiffs seek to restrain the defendant from re-entering and taking possession of the shop premises. They have, through their counsel, indicated an intention of amending the summons to include a claim for relief against forfeiture. 3 As interlocutory relief, the plaintiffs seek an order securing their occupation of the premises until the principal claims are determined. It is with this interlocutory application that I am now concerned. 4 The defendant has purported to resort to provisions of the lease enabling it, as lessor, to terminate. I shall come to the lease provisions in a moment. First, it is desirable that I refer to the circumstances that prompted the defendant to take action to terminate the lease so that these may be in mind when the lease provisions are considered. 5 On 25 July 2007, the male plaintiff was convicted of an offence against s.61N(1) of the Crimes Act 1900 described as "aggravated indecent assault" against a seventeen year old girl who was employed at the shop and who was under his authority. On 7 November 2007, he was sentenced to imprisonment for twelve months, which sentence was suspended upon his entering into a bond to be of good behaviour for twelve months. The offence took place between 6.30pm and 7pm on 27 January 2007 at the shop premises. The male plaintiff has initiated an appeal against both conviction and sentence. 6 On 28 September 2007, the plaintiffs received a letter purporting to invoke certain provisions of the lease. The letter was as follows: "Dear Mr Emran Ahmed and Mrs Kim Ahmed Re: Notice of Breach of Covenant Notice to Lessee to Remedy Breach

Lease: from GPT Funds Management Limited ('the Lessor') to Emran Ahmed and Kim Ahmed ('the Lessee') Trading As: Seafood Lovers Premises: Shop 126 Level 1, Carlingford Court We refer to the Lease of the Premises and to the following covenant by the Lessee contained in the Lease: Clause 21.1 (Your behaviour) The conduct the subject of Mr Ahmed's recent conviction constitutes a breach of clause 21.1 as Mr Ahmed engaged in conduct which was dangerous, annoying, offensive or illegal or which interfered with other people in the centre. The Lessor hereby gives the Lessee notice pursuant to clause 50 of the Lease. The Lessor requires the Lessee to remedy the breach within a reasonable time and to respond to this notice within fourteen (14) days to advise the Lessor of how the Lessee proposes to remedy the breach. If the breach is not remedied within a reasonable period, the Lessor will take such action as may be legally available to it. If this is necessary, the legal costs associated with any action taken may be borne by the Lessee. The Lessor reserves its rights in relation to other breaches of the Lease. Please contact Lucinda Cowdroy on 8239 3618 for any enquiries. Yours faithfully (sgd) Nita Malhotra Legal Counsel" 7 Counsel for the plaintiffs pointed out that the letter was on the letterhead of GPT Property Management Pty Ltd, whereas the lessor is GPT Funds Management Pty Ltd, but I do not think that anything turns on that, given that GPT Property Management Pty Ltd is described on the letterhead as "licensed real estate agent" and the letterhead bears the name and logo of Carlingford Court. I am satisfied that the letter must be regarded as embodying a communication from the defendant as lessor to the plaintiffs as lessees. 8 It is necessary to mention several provisions of the lease. The first is clause 21.1 which is in these terms: "You must not do anything that is, or may be, dangerous, annoying, offensive or illegal or that may interfere with other tenants or people in the centre or adjacent buildings." 9 To provide context, it is probably relevant also to quote clause 21.2: "You must not smoke in the premises or the centre and you must not allow your customers to smoke in the premises ." 10 I refer also to clauses 49 and 50: "49. How you breach the lease You breach the lease if you disobey any term of the lease . 50. If you breach the lease If you breach the lease , we must give you a notice requiring you to remedy the breach. We must give you a reasonable time to remedy the breach." 11 The last provision to be mentioned is clause 52.1 (omitting as irrelevant its paragraphs (b) to (d)): " What we may do if you breach the lease If: (a) you breach the lease and do not remedy it as required;

… we may do any one or more of the following: (e) re-enter and take possession of the premises ; (f) end the lease (see clause 29); (g) recover from you or the covenantor any cost, liability or loss we suffer; (h) use the bank guarantee (see clause 17.3) to recover any loss we suffer; (i) remedy the breach at your cost and enter and remain on the premises for this purpose; (j) recover from you all our costs and expenses, including legal costs and expenses on a solicitor and client basis in connection with or incidental to: (i) any default by you in observing or performing any of your covenants; or (ii) the contemplated, attempted or actual enforcement, preservation or exercise of any right under the lease ; and/or (k) exercise any of our other legal rights." 12 There is, in the circumstances, a certain air of artificiality about the letter of 28 September 2007. To require someone to remedy a breach of contract consisting, it is said, of a single and completed criminal act is, in a real sense, to require the impossible. 13 There then arises a question of construction. Is clause 52.1(a) confined in its application to breaches which are of their nature capable of being remedied (such as a failure to repair or to pay rent or other money when due) or does it apply also to a breach not of a remediable nature, such as opening the leased shop premises on one occasion outside the centre's trading hours without the lessor's consent - something forbidden by clause 24.2? If clause 52.1(a) does apply to a breach of its nature not capable of being remedied (in the sense of being set right and eliminated by some action of the lessee), the position would be that any such one-off breach, however trifling and even if falling far short of repudiatory conduct, would justify termination subject only to the possibly empty preliminary of a notice by the lessor requiring that the completed and irremediable breach be remedied. 14 Other questions of construction arise in relation to clause 21.1, in so far as it deals with dangerous, annoying or illegal acts. It is not, in terms, confined to activities on the premises, so that a tenant who engaged in parachute jumping or some other dangerous pastime in his or her spare time might, on a strict reading, breach the provision. Even if it the provision is to be construed as confined to conduct on the premises, it would cover, for example, a tenant who, while sitting alone in the premises, defaced a $10 note or made an intimidating telephone call or engaged in a game of Russian roulette with a partially loaded revolver. The first two acts would be illegal and the third would be, at the least, dangerous. 15 In short, it will be necessary to examine on a final hearing a number of questions surrounding the scope and meaning of clause 21.1 and both its interaction with the termination provisions and it is co-existence with general law notions of repudiation (relevant to leases, as to contracts: see Shevill v The Builders Licensing Board (1982) 149 CLR 620; Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17; Apriaden Pty Ltd v Seacrest Pty Ltd (2005) 12 VR 319). 16 For this reason, I am of the opinion that there is a serious question to be tried as to whether the conduct resulting in the conviction of the male plaintiff - serious and repugnant as it was - was conduct within clause 21.1 and whether inaction of the plaintiffs in the face of the letter of 28 September 2007 purporting to require the breach to be remedied (or, more precisely, the particular response that they did make) meant that there was a breach of the kind referred to in s.52.1(a) which would properly ground termination of the lease by the defendant lessor. 17 I turn therefore to the balance of convenience. In doing so, I must mention at once that the defendant has received a large number of complaints from members of the public about the male plaintiff's continued presence at the shopping centre. There have also been complaints from people working in other shops within the centre. People have expressed deep concern that a person they describe as a "child molester" or "sexual predator" is at the centre, apparently with the sanction of the defendant. 18 Some people have said that they will not shop at the centre while the male plaintiff remains there. Others have said they will boycott the centre. There was a warning that protesters would visit the site. Employees of the plaintiffs' seafood business have received offensive phone calls. The police have had to go to the centre on several occasions. Nearby shop proprietors have said that their trade is being affected. They have asked who will compensate them. It appears that many people have become aware of the male plaintiff and his conviction and sentence from comments made on radio station 2GB. 19 The defendant has put into evidence statistics suggesting a reduction in visitor numbers to the centre. The statistics compare Thursday 9 November 2006 with Thursday 8 November 2007 and Friday 10 November 2006 with Friday 9 November 2007. There is an 11.42 per cent reduction in one case and an 8.76 per cent reduction in the other. The reliability of the comparison is, however, questionable since the relevant 2006 period coincided with the re-opening of a Target store, which may have increased customer numbers at that time. I can really draw no reliable conclusions from the comparative statistics. 20 I am satisfied, however, that the continued presence of the male plaintiff at the centre is causing damage to the defendant and that its goodwill, as well as the image of a family friendly shopping centre that it seeks to promote, will continue to be injured while the male plaintiff remains physically there. 21 From the plaintiffs' point of view the seafood shop business is their livelihood. They are people of modest means. They depend on the business as their sole source of income. They will suffer loss if they are forced to leave pending a final hearing - particularly if the ultimate result is that there are no valid grounds for termination of the lease and they are allowed to continue in possession. It is perhaps unlikely that they would successfully recapture their customers to the pre-existing level after being out of possession for some time. 22 The balance of convenience therefore presents something of a dilemma. But it is made easier by a particular circumstance to which I have not so far referred. The plaintiffs, through their counsel, indicated to the court that they have decided to sell the seafood business and wish to sell it as a going concern. They have already approached two business brokers with a view to their arranging a sale or finding a buyer. The plaintiffs offer to the court the following undertakings as the price of an order restraining the defendant from interfering with their quiet enjoyment pending trial: (a) that they will continue with attempts to sell the "Seafood Lovers" business operated by them at Carlingford Court on a basis involving completion within three months; and (2) that the male plaintiff will not go to or be on the leased premises or the Carlingford Court shopping centre until further order. 23 The defendant does not accept that these undertakings satisfactorily resolve the situation on an interim basis. I am satisfied, however, that the undertakings, together with the usual undertaking as to damages, represent an appropriate interim regime pending determination of the question whether the lease has been validly terminated. The second undertaking means that circumstance which is the direct source of the defendant's main concern - that is, the male plaintiff's physical presence at the centre and the adverse customer, staff and public reaction it has produced - will be removed pending final determination of the proceedings. The first undertaking means that there can be some well based expectation that the plaintiffs will seek to assign their lease to a buyer of the business, thus cutting their ties with the centre altogether. 24 From the plaintiffs' point of view, the regime based on the undertakings, coupled with the continuation of the order restraining disturbance of their quiet enjoyment pending determination of the proceedings, will mean that they have an opportunity to realise their asset in an orderly way, even though there will be some inconvenience to the business because the male plaintiff's attention to it will be restricted to places outside the centre. 25 Therefore, upon the plaintiffs by their counsel giving to the court

(b) an undertaking that the plaintiffs will continue with attempts to sell the "Seafood Lovers" business operated by them at Carlingford Court shopping centre on a basis involving completion within three months; and

(c) an undertaking that the male plaintiff will not go to or be upon the leased premises (being shop 126 level 1 Carlingford Court) or the Carlingford Court shopping centre until further order,

the court orders that the defendant be restrained until further order from interfering with the plaintiffs' quiet enjoyment of the leased premises being shop 126 level 1 Carlingford Court shopping centre. 26 I should say in conclusion that, as the plaintiffs will no doubt be informed by their legal advisers, the undertakings they have given to the court must be strictly observed and failure to comply to the letter may have very serious consequences for them. 27 I order that the costs of the interlocutory application be plaintiffs' costs in the cause. 28 I direct that the proceedings be placed in the Registrar's list on 22 November 2007 for directions. **********

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