Commercial tenancy - Re­entry by landlord - Interim order sought for removal of locks and access - Nature proceedings - Whether relief against forfeiture or mandatory injunction - Jurisdiction

Commercial Tenancy (Retail Shops) Agreement Act 1985 (WA) s 3, s 12(1)(d), s 12(1d), s 26,

Stamp Act 1921 (WA) s 27(3)

Clark v Rowell Consulting Services Pty Ltd [2003] WASC 178

Mavromatidis v Dundon [1997] 18 WAR 298

Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd [2001] HCA 63

Esther Investments Pty Ltd Cherry Wood Park Ltd [1986] WAR 279

Jam Factory Pty Ltd v Sunny Paradise Pty Ltd [1989] VR 784

Love v Gemma Pty Ltd [1983-84] ANZ ConvR 68

Platz v Osborne [1943] HCA 39; [1943] 68 CLR 133

Shiloh Spinners v Harding [1973] AC 691

Sparta Nominees Pty Ltd v Orchard Holdings Pty Ltd [2002] WASC 54

Wynsix Hotels (Oxford Street) Pty Ltd v Toomey [2004] NSWSC 236

MR C RAYMOND (SENIOR MEMBER):

REASONS FOR DECISION

1 It is common cause that, at least until 14 February 2005, the applicant and respondent were in a relationship towards each other of tenant and landlord respectively of the premises known as Shop 1 Villanova Street, Wanneroo which are retail shop premises within the meaning of the Commercial Tenancy Retail Shops Agreement Act 1985 (WA)

2 On 14 February 2005 the respondent changed the locks on the premises the subject of the lease. This resulted in the applicant filing an application in the Tribunal on 25 February 2005 for substantive relief, in the form of questions for determination by the Tribunal as to whether the respondent was entitled to act as it did, whether the applicant was entitled to compensation due to the respondent's alleged failure to maintain the shopping centre, whether the applicant was entitled to enjoy quiet possession of the premises and other related matters. On the same day a further application was made on the form to be used when an order is required in an existing SAT proceeding. Under this application the applicant sought an interim order that the respondent immediately remove the locks and allow the applicant access to continue its business operations.

3 One of the questions raised by the applicant for determination in the substantive application was whether the respondent was obliged to provide him with an executed and sealed copy of the assignment of lease. It emerged from the information conveyed during the first part of the hearing of the interim application on 1 March 2005, and during the continuation of that hearing on 15 March 2005, that this was intended to refer to an agreement to vary and extend the term of the lease.

4 At the resumed hearing on 15 March 2005 Mr Solomon appeared for the respondent. He drew to the Tribunal's attention that no regard could be had to the deed of variation and extension of the lease in respect of the premises by virtue of s 27(1) of the Stamp Act 1921 (WA). However, he went on to contend that the respondent was entitled to make use of the unstamped deed by virtue of s 27(3) of that Act. This was because the respondent had informed the Commissioner that the applicant was the person liable to pay the duty on the instrument and had lodged the instrument with the Commissioner. The affidavit filed on behalf of the respondent included the deed and established the correctness of the above submission. The Commissioner for State Revenue had issued a stamp duty assessment in respect of the deed a copy of which is annexure AK9 to the affidavit of Ashok Kinariwala, filed in support of the respondent's opposition to the relief sought.

5 Out of abundant caution the Tribunal required the applicant to provide a bank cheque payable to the Commissioner of State Revenue for the amount of duty assessed in the sum of $243.15. The applicant advised that he would provide the cheque but it has not been received by the Tribunal.

6 In any event, the deed is now in evidence, the respondent having tendered the deed as it was entitled to do; and in my view regard can be had to it for all purposes. It is not of great significance save that it establishes that the term of the lease commenced on 1 April 2004 and expires on 31 March 2009. Even without regard to the deed the entire manner in which the case was conducted conveyed that the lease relationship between the party was not one which could be terminated other than for material default.

7 The way in which the applicant's case was put in submissions was that the applicant had not been in default and that the respondent was therefore not entitled to take the steps which it did. The basis for this contention was as follows.

8 The applicant conceded that from time to time he had fallen into arrear with the rental. As a result of that he asserted that he had provided Mr Ashok Kinariwala, to whom he referred as Mr Ash, with post dated cheques to cover future rental. He said that the practice was that Mr Ash would hold the cheques until the date of each cheque arrived and would thereafter deposit the cheque whenever it was convenient for him to do so.

9 Further, the applicant contended that in consideration for the applicant carrying out improvements to the shop premises, the respondent had agreed that the rental for November 2004 need not be paid.

10 The applicant contended that he had received no estimates of outgoings and that accordingly the respondent was not entitled to charge the outgoings which had been charged.

11 The applicant's affidavit did not set out the facts quite as strongly as suggested by the submissions. In [8] of his affidavit Mr Bilek stated:

"I have told him I only wanted to sit down and go through everything with Mr Kinariwala including the outgoings we have been paying him and why we were also paying separate the land tax, water and rates. And if I owed any outstanding amount I would gladly pay him."

12 The applicant also referred in his affidavit to the poor maintenance of the centre, its dirty condition and poor lightning. A letter dated 25 May 2004 was attached to the application in which these issues were raised and reference was made to a failure to repair "damaged things" causing loss of trade. The affidavit made no reference to this letter.

13 The applicant annexed to his affidavit unsworn statements from Colum Ryan and Hussan Hattab. The applicant asked that weight be given to the unsworn statements because in the time available he had not been able to prepare affidavits and could not know when the witnesses would be available to sign anything at all. The statement of Colum Ryan refers to the condition of the shopping centre. It also refers to his own experience in not being provided with a copy of the lease from the respondent. Mr Hattab's statement refers to the alleged arrangement in relation to November rental. It reflects that on 23 October 2004 he was helping the applicant to paint one of the walls of the premises and proceeds as follows:

"Mr Kinariwala walked into the shop and they (meaning Mr Bilek and Mr Kinariwala) have started talking about decorating and tiling the place Mr Bilek pointed out that it is costing him more than he anticipated and business was bad, also shop was closed to the trade for redecorating, and he was having a hard time financially. Mr Ash told Mr Bilek not to worry that business will pick up as soon as he has reopened the shop. When Mr Bilek asked would he pay for the tiles and decorating he said he would not, but he would give him one month's rent free."

14 The applicant annexed to his affidavit an internet generated copy of his bank statement for the periods 8 June to 11 June 2004, 2 August to 11 August 2004, 6 September to 23 September 2004 and 14 December 2004 to 14 January 2005. Against certain entries or cheque numbers the applicant had annotated a reference to the respondent indicating that the transaction related to the provision of a cheque to the respondent. An analysis of the account and of the applicant's used cheque books which were tendered during the hearing (exhibits A1 and A2) show that no rental was paid in July 2004. August rental was paid and two payments of rental were made in September. The applicant contended that cheque number 183 dated 30 September 2004 had not been deposited by the respondent. The next payment shown in the accounts was made on 14 January 2005.

15 The applicant contends that he was not to know that the respondent had not deposited the cheque dated 30 September 2004 and that he therefore believed that the October rental had been paid. The applicant submitted that once credit was given in respect of outgoings which should not have been charged that would be sufficient to cover the December rental which was not paid. Further, Mr Bilek stated in his affidavit that he tendered a cheque for payment of the February rental but this was refused by Mr Kinariwala.

16 Mr Kinariwala does not dispute in his affidavit that payment was tendered in respect of the February rental. Although the parties affidavits were filed in the Tribunal on the same day this is no excuse for this issue not being dealt with, because the matter was raised during the hearing on 1 March 2005. The affidavits were filed on 11 March 2005.

17 Mr Kinariwala also did not expressly deny the arrangement in relation to the November rental but in [27] of his affidavit he deposed that on 8 November 2004 he personally delivered a notice of default-exhibit AK21.

18 The applicant did not dispute that various invoices were delivered to him by Mr Kinariwala, although he did put an issue whether some of the handwriting which appears on the invoices was present at the time of delivery. Those invoices at pp 160 and 163 of the respondent's affidavit or on either side of the notice of default which appears at p 161.

19 The respondent also did not dispute that from time to time Mr Kinariwala held post dated cheques provided by the applicant to cover rental as it fell due.

20 In all other respects the respondent joined issue with the applicant. In his affidavit Mr Kinariwala outlined a history of dealings with the applicant which showed that he was frequently in arrear and that there had been a long course of dealings in which non-payment by the applicant had been an issue. This led to a notice of legal action being served on 11 July 2004 and to the notice of default, to which I have already referred, being served on 8 November 2004. According to the notice of default served on or about 10 or 11 February 2005, the precise date being in issue between the parties, the applicant was then in arrear by the amount of $6,027.97. That amount did not include any claim for interest.

21 Mr Solomon, for the respondent, raised a number of legal issues. He referred in his written and oral submissions to Mavromatidis v Dundon [1997] 18 WAR 298 at 303.4, a decision of the full court, to the effect that s 26 of The Commercial Tenancy (Retail Shops) Agreement Act 1985 (WA) is not intended to empower the Tribunal to grant relief against forfeiture. Although there have since been amendments to that Act there has been no attempt to widen the power of the Tribunal in this respect. I accordingly accept the submission made on this issue.

22 Mr Solomon argued that the arrangement alleged to have been made in relation to the holding of post dated cheques could not avail the applicant. Firstly, it could not be disputed that payment had not been made and that a cheque payment was conditional upon the cheque being met on presentation. Secondly, it was submitted that the arrangement could not form the basis for any relief because it did not relate to or constitute a question arising under the lease and there was no power to make any order under s 26 which would assist the applicant. He submitted that the nature of the applicant's application could not be characterised as an application for a mandatory injunction.

23 I do not accept these submissions. The power under s 26 to make an order that a party do, or refrain from doing, anything specified in the order, can in my view include the grant of an injunction. Further, the arrangement between the parties was such that a term could be implied without difficulty that the respondent would present the cheques for payment within a reasonable time of the due date.

24 If the applicant's version were to be accepted it could not be open to the respondent to deliberately withhold depositing a cheque, the tender of which has been accepted, and then to contend that the applicant is in default. Further, the extended definition of what constitutes a question arising under a lease as set out in s 3 of the Act includes "any other matter that is in dispute between the landlord and the tenant in connection with the retail shop lease (italics added for emphasis). These are words of the widest import.

25 It is usual when a tenant seeks relief against forfeiture that the breach alleged is admitted. There is some authority that it is open to deny the breach but in the alternative to claim relief against forfeiture. The applicant, in this case, as the submissions have been put, simply denies that it is in breach and contends that the respondent was not entitled to act as it did.

26 In any event, if relief against forfeiture is not within the jurisdiction of the Tribunal, as I acknowledge to be the case, any ambiguity concerning the relief sought must be resolved in favour of those remedies which are within jurisdiction. In my view the relief sought can be categorised as an application for a mandatory injunction.

27 Consequently to be entitled to relief the applicant must demonstrate:

1. that there is a serious question to be tried;

2. that the applicant will suffer irreparable injury for which damages will not be adequate compensation unless an injunction is granted; and,

3. that the balance of convenience favours the granting of an injunction.

28 Additional considerations have been summarised in Clark v Rowell Consulting Services Pty Ltd [ 2003] WASC 178 by Justice Barker, now the President of this Tribunal. His Honour stated that it is plain that in only very rare cases will a mandatory injunction be granted at an interlocutory stage. In particular, it is not common to grant a mandatory injunction which would, if granted, affect the major part of the relief in the action. Accordingly, such an application should be approached with caution and granted only in a clear case-although the fundamental principle remains that the court should take whichever course carries the lower risk of injustice in the event that the party who claims the injunction fails to establish his or her right of trial. It was accepted that a judge hearing an application for an interlocutory mandatory injunction must apply exactly the same test as he would in the case of an interlocutory prohibitory injunction, that in the application of the normal tests, often, but not always, the fact that the relief sought is mandatory will tilt the balance of convenience in the defendants favour-citing Meagher Gummow and Lehane, Equity Doctrines and Remedies, Third Ed at p 6 [2178].

29 I am prepared to accept, as I should in weighing disputes of fact on affidavit evidence, that the respondent did not deposit a cheque covering one month's rental, being the cheque dated 30 September 2004. In accepting that, it may well be that evidence at the final hearing will show this not to be the case. There are a number of cheque stubs with no details inserted by the applicant.

30 I am not prepared to accept, taking all the undisputed evidence into account, that there was any arrangement made in respect of the November rental. On the facts presented by the applicant he was proceeding with the works without any prior agreement being in place. On the face of it, there was no consideration.

31 Further, in any event, the applicant did not dispute receipt of the notice of default of 8 November 2004. There is no evidence to suggest that he at any time challenged the notice. It may be possible that the applicant did not realise that the October rental was covered by a post dated cheque and that might explain not challenging the demand insofar as it referred to October rental. But if the arrangement to be relieved of the obligation to pay the November rental had been made on 23 October 2004, it is difficult to believe the demand for November rental would not have been challenged.

32 I am prepared to accept that for the purposes of any interim application, on the basis outlined above, that the February rental was tendered to the respondent and that Mr Kinariwala declined to accept it.

33 There is a serious issue to be tried as to whether any estimates were given of outgoing expenses. The amount of any credit to which the applicant may be entitled in relation to this issue is not likely to be significant. Section 12(1)(d) and s 12 (1d) of the Commercial Tenancy (Retail Shops) Agreement Act 1985 (WA) simply have the effect that a tenant is not obliged to pay the outgoings until the landlord complies with its obligations to provide an estimate or statement as the case may be. The applicant was not obliged to pay but has done so. These proceedings to actually recover that late payment will inevitably result in the necessary information being provided and an entitlement to recover any amount will be limited to the amount overcharged.

34 Similarly there is a serious issue to be tried as to whether the applicant is entitled to compensation in relation to the alleged failure to maintain the shopping centre. But that claim is not amenable to providing a basis for set off against a claim for rental until it has been quantified.

35 Taking all matters into account, it seems most unlikely to me that any credits to which the applicant may be entitled will be sufficient to reduce the amount which was owing to the respondent to such an extent that the respondent would not have been entitled to re-enter. In saying this I include as a credit for the purposes of that judgment the cheque which was withheld and not deposited. Even if I am wrong in my view in relation to the November rental there would be likely to be monies outstanding and payable to the respondent at 14 February 2005.

36 Thus, while it can be said that there is a serious issue to be tried, that relates to what may be referred to as the ancillary claims, not the main issue as to whether or not the applicant was entitled to re-enter.

37 In relation to the balance of convenience the applicant made it clear that he would not be able to provide any meaningful undertaking as to damages, or security, for the amount outstanding as claimed by the respondent. He made clear, that because of the closure of the business, it would take him several months to have any chance of making up any backlog of payments. Given the history of non-payment in the past there must be some risk as to whether the applicant will be able to make up the arrears.

38 In addition, the applicant has formulated a claim in the substantive application in which he has substantially quantified the damages which he will suffer. While there may be some elements of damage, such as goodwill, which cannot be recovered, that has not been raised and what has been of concern to the applicant in terms of lost business appears to be quantifiable. It will be open to the applicant to amend the substantive application to claim damages, which will of course only arise if it should ultimately prove that the applicant is correct in his contention that nothing was owed at the date of termination. Adding to that the fact that any relief granted would be tantamount to final relief in relation to the major part of the claim I do not consider that it would be appropriate to make an interim order as sought.

39 Mr Solomon foreshadowed in his submissions that he assumed that he would have an opportunity to address on the question of costs. Accordingly the order issued on 18 March 2005 dismissing the application also reflected that the question of costs may be raised at the next directions hearing in relation the substantive application.

I certify that this and preceding nine pages comprise the reasons for decision of the State Administrative Tribunal

_________________

C RAYMOND

Senior Member