These proceedings were commenced in May 2015, when Belle Vue sought possession of land at Gladesville, which it had leased to Piave.
They were resolved on 18 May 2015, during discussions which eventuated when the matter came into the Duty list, before Button J. That day the parties' solicitors signed consent orders, which his Honour then made in the following terms:
1. Declares that Registered Lease XXXXXXXXX between the plaintiff and the defendant in respect of the premises Shop 1, XXX-XXX XXXXXXXX XXXX, XXXXXXXXXXX NSW being the whole of the land contained in folio identifier XX/SPXXXXX has been forfeited by the plaintiff's service upon the defendant of the Notice of Determination dated 11 May 2015 and by service of the Statement of Claim commencing these proceedings on 11 May 2015.
2. Orders that relief against the forfeiture of the Lease be granted by relieving the defendant from its breaches of the Lease as pleaded in the Statement of Claim and by declaring that the defendant holds the premises as Lessee from the plaintiff as Lessor according to the terms of Registered Lease XXXXXXXXX and without the necessity of a new lease.
3. Orders the defendant to pay the plaintiff's costs and expenses by reason of the breaches of the Lease the subject of the proceedings including the cost of employment of solicitors, barrister and managing agent and any other person retained by or on behalf the plaintiff in relation to such breaches, such costs and expenses to be agreed or as determined by the Registrar.
4. Orders the defendant to pay the plaintiff's costs of the proceedings on an indemnity basis as agreed or as otherwise assessed.
5. Orders that if the defendant fails to pay the sums referred to in orders 3 and 4 above within 28 days of the date agreed, determined or assessed, the plaintiff shall, upon there being filed in these Proceedings an affidavit sworn by its solicitor deposing to the fact of the defendant's failure to pay the said sums, be at liberty thereafter;
a. To enter judgment in its favour for possession of said premises;
b. Forthwith to issue a writ of possession for the said premises.
6. Liberty to apply.
As discussed in Paino v Hofbauer (1987) 13 NSWLR 193, in the context of an application for a variation of consent orders, Button J's orders reflected the agreement by which the parties resolved the dispute over Piave's breaches of the lease, which had brought them to this Court.
There was no issue between the parties that Piave did not adhere to the agreement it had made, with the eventual result that in October 2015, Belle Vue sought judgment in its favour and the issue of a writ of possession. Under r 39.2 of the Uniform Civil Procedure Rules 2005 (NSW), it was not obliged to serve the motion by which the writ was sought on Piave. Judgment for possession in Belle Vue's favour was entered on 19 October and on 20 October, a writ of possession was issued. That writ was due to be executed by the Sheriff at 10am on 9 December.
There was also no issue between the parties as to the Court's power to grant the stay sought, as a matter of discretion. It is that discussed by Johnson J in GE Personal Finance Pty Limited v Smith [2006] NSWSC 889, albeit there in the context of a mortgage, rather than a lease. As his Honour discussed, there are a number of factors relevant to the exercise of the discretion, including the time at which the application for stay of a writ of possession is made; the nature of the proceedings; the stage the proceedings have reached; the explanation for the defendant's action or inaction, before the stay was sought; the basis of the application; the circumstances in which it was made; the prospects of the defendant paying what is owed to the plaintiff; and considerations of hardship.
The onus lies on the defendant seeking the stay to establish that a sound and proper basis exists for its grant. Any stay must be granted on terms which take proper account of the interests of both parties.
Those questions must also be resolved in light of what the dictates of justice require, consistently with the obligations imposed on the Court under s 56 and s 58 of the Civil Procedure Act 2005 (NSW), the former requiring the Court to exercise its powers, having in mind the overriding purpose there specified, the just, quick and cheap resolution of the real issues in the proceedings. Section 58 requires consideration to be given to relevant matters such as:
"(i) the degree of difficulty or complexity to which the issues in the proceedings give rise,
(ii) the degree of expedition with which the respective parties have approached the proceedings, including the degree to which they have been timely in their interlocutory activities,
(iii) the degree to which any lack of expedition in approaching the proceedings has arisen from circumstances beyond the control of the respective parties,
(iv) the degree to which the respective parties have fulfilled their duties under section 56 (3),
(v) the use that any party has made, or could have made, of any opportunity that has been available to the party in the course of the proceedings, whether under rules of court, the practice of the court or any direction of a procedural nature given in the proceedings,
(vi) the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction,
(vii) such other matters as the court considers relevant in the circumstances of the case."
Whether Piave had met the onus which fell upon it and whether the Court would exercise its discretion to grant the stay sought, was in issue. These questions turned on the affidavit evidence on which the parties each relied and the cases which they advanced.
[2]
The circumstances in which the application was brought do not favour the grant of the stay
The matter came into the Duty list on Piave's application at 3pm on 8 December, when it filed in court a motion seeking orders pursuant to s 67 and/or s 135 of the Civil Procedure Act (which gives the Court power to give directions with respect to the enforcement of its judgments and orders) and/or the inherent jurisdiction of the Court, that the writ be stayed until further order, so that it could make application to the Court for relief against forfeiture. The application, which was supported by an affidavit sworn by Mr Marando, Piave's general manager and also formerly the solicitor on the record, was opposed.
On 23 October, the Sherriff had issued a notice to vacate the premises. Mr Marando also received a statutory demand made on Piave under the Corporations Act 2001 (Cth) from Belle Vue on 11 November and still he did not cause Piave to pay the outstanding $45,000. Nor did he approach the Court for relief from forfeiture. Instead, he deposed, he attempted to pursue negotiations with the directors of Belle Vue, who were not prepared to meet with him. The $45,000 was only paid on 2 December and still no application was made to the Court for stay of the writ or relief from forfeiture.
Why Mr Marando, a solicitor, sat on his hands until 3pm on the day before the writ was to be exercised at 10am, was unexplained. That conduct does not support the stay application.
In his affidavit Mr Marando explained that the reason for the failure to pay the $45,000 as agreed, was because he wanted to further negotiate with Jian Wang, one of Bell Vue's directors, as to the timing of the agreed payment. Initially it was agreed that the payment could be made after 30 July, when it was due and then it was agreed that it could be deferred to 28 September. Still, it was not paid.
Mr Marando was then representing Piave in negotiations it sought to pursue with Bell Vue, regarding grant of a new lease. He had himself also made an offer to acquire Piave's business. He said that he could not pursue negotiations with Bell View's other director, Mr Ng, because he refused to meet with him. In late June or early July Jian Wang, he deposed told him:
"My father is dying and I have to go to China. I will be away for a few months. As long as you keep paying the rent we will sort out the lease when I get back."
Jian Wang did not return from China until late November. Mr Marando said he had not approached the Court in circumstances where he was then the solicitor on the record and reluctant to communicate directly with Jian Wang. He tried, however, unsuccessfully to arrange a meeting with him. It was only then that he took steps to pay the $45,000 and to communicate with Bell Vue's solicitor, about execution of the writ. While all that was owing under the lease was then paid, Bell Vue still pursued execution of the writ and so he approached the Court.
Given the late application made to the Court, Belle Vue was not in a position to meet this evidence. Nevertheless, it well explained why the stay of the execution of the writ was opposed, given Piave's repeated failures to adhere to the agreements which it had made.
[3]
Hardship
That Piave will suffer hardship if the stay is not granted was established, albeit that appears to be hardship of its own making.
Piave claims to have spent some $4 million on start up and fit out costs since November 2013, in circumstances, its counsel explained, where effectively the parties had agreed a 25 year lease and an extensive rent free period to November 2014. It operates a 90 seat restaurant at the premises, as well as a butcher, delicatessen, bottle shop, fruit and vegetable store, patisserie, grocery store, as well as a catering business, supplying schools, retirement villages, community clubs and other local customers. The premises also have underground parking for 90 vehicles.
Piave has numerous orders for Christmas parties and other events in December, for outside catering and on site meals in the restaurant. It also has considerable perishable foods on the premises, its stock being worth some $500,000. It employs 45 full-time and part-time staff to conduct its 7-day a week operation. Three of them are sponsored under s 457 visas.
During the course of the hearing, I adjourned in order to enable the parties to consider terms of settlement. No agreement was reached, but open offers were made, which are relevant to consider. They were:
[4]
For Belle Vue
"… a stay on enforcement of the right up to 7 January on condition the defendant will vacate the premises thereafter on that date or shortly thereafter on the 7th, and provided we are permitted to show prospective tenants through the premises during that time.
[5]
For Piave
"… an open offer or in fact go one step further, undertake to the Court my client will pay two months rent in advance within 14 days so as to show it is serious about complying with its obligations under the lease and about its willingness, ability and intention to stay in the premises and continue to conduct its business."
[6]
The foreshadowed claim for relief from forfeiture
The pleadings by which Piave will attempt to seek relief from forfeiture have not yet been formulated. Why Mr Marando has sat on his hands in that regard, was also not adequately explained.
As Brereton J discussed in International Business College Pty Ltd v Alphacrucis College Ltd (previously known as 'Southern Cross College of the Assemblies of God in Australia Ltd') & anor [2009] NSWSC 1088 at [39], while relief against forfeiture is ordinarily given to a lessee whose sole breach is non-payment of rent, if rent has since been paid, nevertheless the grant of such relief always remains discretionary.
In this case, under the agreement which the parties reached in May, Piave has already received relief from forfeiture as the result of its extended failure to pay very considerable rent. The question which would arise, if it made an application for further such relief, would turn on whether the Court is prepared to exercise its discretion in Piave's favour, in the circumstances discussed, involving as they do clear breaches of the agreement which the parties made in May and those which Mr Marando disclosed had been later made. In that regard, it is relevant that Brereton J also observed at [39]:
"… But relief is granted in respect of wilful breaches only in exceptional cases, and relief is not granted where future compliance with the lessee's obligations appears unlikely [Shiloh Spinners Limited v Harding [1973] AC 691, 725-6 (Lord Wilberforce)]. In Shiloh Spinners, Lord Wilberforce concluded that the refusal of relief was justified in a case of clear and wilful breaches of more than one covenant which, if each individually was not serious, were certainly substantial and demonstrated a continuous disregard of the lessee's rights over a period of time; where there was a total lack of evidence regarding the lessee's ability to speedily and fully make good the consequences of its default; and there was also a failure to show any windfall or other disproportionate outcome so as to show a case for hardship."
In that case, Brereton J refused to grant the relief sought, given the absence of evidence of the plaintiff's ability to service the lease in the future. While here what was long outstanding has been belatedly paid, that Piave will be able to establish an evidentiary basis for a conclusion that it has either a real ability to service the lease in the future, or that it will abide by its obligations, as and when they fall due, is questionable. It is relevant that there is now a bank guarantee and the undertaking offered, but that alone does not overcome the obvious difficulties which it faces in making out its case for further relief from forfeiture.
As discussed in Paino, it will require an exceptional case before the Court would exercise its discretion to make orders which would have the effect of interfering with an agreement underpinning consent orders of the kind which the parties here asked the Court to make in May (see at 198). By itself, a party's failure to comply with the terms of a consent order, is not a basis on which the Court will vary such consent orders. Here Piave did not even abide by later agreements made to relieve it of the consequences of the breach of those orders.
True it is that here the orders which Piave now seeks, staying execution of the writ, do not require the terms of the May orders themselves to be varied. Unarguably, however, the stay will interfere with what the parties agreed would flow from Piave's failure to adhere to their agreements. Given the evidence I have discussed, this is truly a case, it seems to me, where justice demands that form, not triumph, over substance.
As observed in Lachlan v HP Mercantile Pty Ltd [2015] NSWCA 130 at [27], when the exercise of another discretion granted the Court under r 1.12 of the Uniform Civil Procedure Rules, to extend or abridge time fixed by the rules or by any judgment or order of the court, arose to be considered at [27]:
"Contrary to the appellant's submission, Paino did not impermissibly fetter the general discretion for which the rule provides. Rather, his Honour's remarks were directed to a case where parties have bound themselves to a contract which underpins the court's orders. In such a case, the court's general discretion is to be exercised in the context of the respect the law gives to parties being held to their bargain. To relieve a party from the bargain they had freely entered, would, as McHugh JA remarked, require an exceptional case. Such an approach does not fetter the discretion of a judicial officer. Rather, it is a statement of an appropriate exercise of discretion in a particular type of case.
In the result, I cannot see a basis on which the Court's discretion would be exercised in favour of Piave, given the evidence which it led, notwithstanding what White J observed in Water Wine & Juice Pty Ltd v Steve Konstantopoulos [2010] NSWSC 312. Equity regards a lessor's right to terminate a lease by re-entry for non-payment of rent as a security for the rent due and if the lessee pays the outstanding rent, it may be relieved from forfeiture. That remains a discretionary remedy. Piave's breaches of the agreement which it reached in these proceedings in May and its later conduct, provide a substantial impediment to any application for further relief against forfeiture being granted, were it to press such an application.
Stay on terms to be granted
Notwithstanding this conclusion, I have been persuaded that the writ should be stayed, albeit only for a relatively short period, on hardship grounds, given the time of the year and the impact which the execution of the writ would have on Piave, its employees and customers, third parties who, it seems on the evidence, could be adversely affected to a significant extent, by execution of the writ today.
That will permit Piave to arrange an orderly departure from the premises and address the hardship it would otherwise suffer, having nowhere to store the some $500,000 of stock presently kept there.
I will hear the parties on terms of such a stay.
[7]
Amendments
11 December 2015 - typographical errors
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Decision last updated: 11 December 2015