Danel Investments Pty Limited v Nexstar Investments Pty Limited & Ors

Danel Investments Pty Limited v Nexstar Investments Pty Limited & Ors - [2011] ACTSC 120 - ACTSC 2011 case summary — Zoe

[223]

Re: PREMISES AT 72 BARRIER ST, FYSHWICK

CURRENT BUSINESS NAME: "TIFFANY'S" UNITS 1-6, BLOCK 15, SECTION 21 DIVISION OF FYSHWICK

The writer refers to his recent telephone conversations with you and your previous correspondence addressed, in the first instance, to our client, in relation to a proposal concerning the entire first floor of the premises known as 72 Barrier St, Fyshwick, mentioned above.

For your client's edification, we enclose herewith copy of the Subleasing Plan registered with the Registrar of Titles in the ACT which has been registered for forty one years. As a consequence, the measurements shown in the Subleasing Plan are necessarily in feet and inches, but can be converted for the purpose of this Lease should you wish to check our client's calculations.

We also enclose for your attention a copy of the original Lease held by Jullian Ponga, which unfortunately was never assigned to Danel Investments and as such Danel Investments at best, occupy the premises on a monthly tenancy.

No security of tenure has been granted to Danel Investments in view of the fact that there seems to have been a recalcitrance on the part of the incoming assignee to sign a Deed of Assignment of the original Lease.

Be that as it may, we note your clients' request for a fresh Lease in respect of the entire first floor, rather than office 6 which was the only part of the premises formerly occupied by Tiffany's. We note that it is your clients' proposal that your clients wish to lease the premises for an initial period of five years but by way of separate Leases, one in respect of office 6, the other in respect of offices 1 to 5. Our client is prepared to agree an initial term of five years in each case, with a further two options of five years.

Hence, dealing with each Lease in turn, it is our client's instructions to advise as follows:

Office 6 (base rent $20,500.00* exclusive of GST).

*This represents the base rent referred to in the Lease plus two increments of 3% pursuant to the rent review dates set out in item 16 of the original Lease.

Initial Term: 5 years

Commencement Date: 1st October 2006

Termination Date: 30th September 2011

Rent Review: Three percent per annum (3%)

Option Periods: There will be two options, each of five years, the first commencing on 1st October 2011 and 1st September 2016 respectively.

Outgoings: Nil.

Insurance: Plate Glass and Public Liability

New Lease - Offices 1 through to 5 (base rent $18,407.00 per annum exclusive of GST)

Commencement Date: 1st October 2006

Termination Date: 30th September 2011

Rent Review: Three percent per annum (3%)

Option Periods: There will be two options, each of five years, the first commencing on 1st October 2011 and 1st September 2016 respectively.

Rent Holiday: 4 months from 1st October 2006 to 31st January 2007

Outgoings: Nil

Insurance: Plate Glass and Public Liability

You will note that the rental in respect of the new premises (offices 1 through to 5), has been calculated on a pro rata basis at the existing level of rental currently enjoyed by Tiffany's. The area occupied by offices 1 through to 5 is slightly less than the area of office 6, hence the differential in rental levels.

Would you kindly take your client's instructions as to the proposals in respect of both Leases and we suggest that you contact Mr Vizovitis direct with regard to any further negotiation, whereupon we shall await instructions from our client in this regard.

[235]

Re: PREMISES AT 72 BARRIER STREET, FYSHWICK

CURRENT BUSINESS NAME: "TIFFANY'S" - UNITS 1-6, BLOCK 15, SECTION 21 DIVISION OF FYSHWICK

The writer refers to his correspondence of 21st September last and is given to understand that there have been some direct negotiations with our client, Mr Vizovitis.

As a result of those negotiations there has been some change in respect of the terms which relate to the base rent in relation to both office 6 and the remaining part of the building.

Hence, dealing with the changes in respect of each Lease in turn, we note that it is our client's instructions that the terms might be set out as follows:

Office 6 (base rent $1,610.36* exclusive of GST ($1,771.40 inclusive of GST).

*This is the level of rent currently enjoyed by the current incumbents of office 6.

Initial Term: 5 years

Commencement Date: 1st October 2006

Termination Date: 30th September 2011

Rent Review: Three percent per annum (3%)

Option Periods: There will be two options, each of five years, the first commencing on 1st October 2011 and 1st September 2016 respectively.

Outgoings: Nil.

Insurance: Plate Glass and Public Liability

New Lease - Offices 1 through to 5 (base rent $1,500.00 (exclusive of GST), $1,650.00 (inclusive of GST).

Commencement Date: 1st October 2006

Termination Date: 30th September 2011

Rent Review: Three percent per annum (3%)

Option Periods: There will be two options, each of five years, the first commencing on 1st October 2011 and 1st September 2016 respectively.

Rent Holiday: 4 months from 1st October 2006 to 31st January 2007

Outgoings: Nil

Insurance: Plate Glass and Public Liability

Would you kindly take your client's instructions as to whether or not these terms are acceptable and if not, what parts are acceptable? Once that has been determined, it will be the writer's intention to forward to you a Disclosure Statement in respect of the new Leases.

We note your comments made in your letter of the 25th instant in which you indicate that you did not receive a full copy of the old Lease. We enclose herewith a copy of that Lease for what it is worth but wish to advise that this Lease was originally drawn by other Solicitors who acted on behalf of the earlier Landlords, Mr and Mrs Lee.

As you are possibly aware, our client has acquired the lease premises and whilst the old Lease applies so far as the current occupants are concerned. Fresh Leases will be drawn in respect of both tenancies. Hence, the contents of that Lease maybe of limited value to you. In any event we enclose same for your reference.

With regard to the Subleasing Plan, we note that we omitted to forward you a Subleasing Plan under cover of our earlier correspondence. A copy of that Subleasing Plan is now enclosed.

[259]

RE: SALE TO DANEL INVESTMENTS PTY LIMITED

BUSINESS: TIFFANY'S

I refer to my telephone conversation with you on 17 October 2006 and we regret that the letter I drafted that day was not sent to you immediately.

Please find enclosed a copy of a letter received from Wood Marshall Williams on 9 October 2006 together with my response sent today.

I have included the Deed for execution by you. I have marked each place where you should sign. You need to sign twice near the stickers which read "sign here". You will also see that there are provisions for an adult person to witness your signature. The witness, who needs to be over 18 years of age and could be related to you, should sign where indicated with pencil. The name of the witness should be printed underneath their signature in the space provided as well as their address which should be placed underneath the name. Should you have any doubts as to how to execute this document please contact me directly before signing.

I do not think you should pay the further costs though it is in your best interests for the Deed to be finalised. You would note I have requested the solicitors acting for the purchaser to pay your costs. Should they fail to agree, I will have to request you pay the costs incurred by this firm since settlement which I note should not exceed $275.00 inclusive of GST.

I understand that Rob had tried to finalise this issue, which should have being resolved before the sale, but he gave up in frustration when he failed to get responses from Wood Marshall Williams Lawyers.

Indeed, I have followed the matter up as recently as August and it is only the fact that Danel Investments appear to be trying to sell the same business when the matter has become urgent for them.

Would you kindly ensure that the Deed is returned to us as otherwise I will have not other way of ensuring that your further legal costs are paid by Danel Investments or other parties involve in this transaction, which should have been completed so long ago.

...

P.S. Since dictating this letter I spoke to Mr Charles Parisi from Wood Marshall Williams on 20 October, 2006. Mr Parisi is the solicitor for Danel Investments.

Mr Parisi apologised for the fact that his clients failed to sign this Deed and return it to us last January.

The matter is now urgent and Mr Parisi has asked that you sign the deed and return it directly to his client. Mr Parisi also considers that it is not fair to his client if it asked to pay the costs this firm has incurred since settlement of your sale.

Our account for costs incurred since settlement is enclosed. It is up to you what you now wish to do. In my view you should provide the executed deed to Danel Investments in exchange for an amount to pay the enclosed account.

[287]

RE: DANEL INVESTMENTS PTY LTD -

SALE TO CAMPBELL AND GOBEO

BUSINESS - TIFFANYS IN ACT

We refer to the above and to previous correspondence in particular your without prejudice correspondence of 10 November 2006 and the open correspondence of the same date.

With reference to your correspondence we advise as follows;

Open Letter dated 10 November 2006

We do not agree with that contracts have not been exchanged as you have suggested. We note that our clients executed contract was sent to your clients under cover of letter dated 18 August 2006 together with a copy of the contract that was to be executed and returned to our office.

On 4 September 2006 we wrote to you and advised that the contracts were exchanged upon receipt by us of your clients duly executed counter copy of the contracts. Under cover of letter dated 7 September 2006 received in our office on 8 September 2006 you sent us your clients executed counter copy of the contracts. Accordingly the contract for sale of the business has been effectively exchanged as of 8 September 2006 deed.

We disagree that our client has repudiated in any form whatsoever the agreement for the sale of the business of Tiffanys in the ACT.

In this regard we do not accept that your client has the right to terminate the agreement for alleged repudiation.

Notwithstanding the above we consider that our clients have a enforceable agreement for the sale of the business to your clients and terms of the agreement are found in your clients executed contract. If need be we will seek to obtain an order for specific performance of the agreements and or the sale of business contracts.

In this regard we consider your clients' own conduct in seeking to terminate the contracts when there was no right to do so is in effect repudiation by your client of the agreement. Our client does not accept the repudiation by will reserve its rights to damages should your client fail to complete the purchase as anticipated.

In accordance with the discussion with the writer of 9 November 2006 we reiterate that our client is ready willing and able to complete the sale of the business and will expect your client to do so.

Without Prejudice correspondence dated 10 November 2006

Once again we confirm that contract have in fact been exchanged and we do not accept any suggestion to the contarary. Notwithstanding we draw your attention to our letters dated 20 October 2006 and 1 November 2006 and again note that it is unacceptable for your client to suggest that we are unable to provide your client with a assignment of the premises in the circumstances that your client has acted not only in breach of the terms of the sale of business agreement but has clearly waived (by his actions in obtaining a new lease of the premises) any obligations by our clients to secure an assignment of the lease.

Your client is not entitled to the occupation of the premises and in this regard your client is on notice that any action to disrupt our clients occupation of the premises will result our client seeking injunctive relief together with a claim for damages for loss of business goodwill and loss of profits.

So that there is no misunderstanding our client will not and does not have to vacate the subject premises.

With regards to the tenure of the premises we note that your clients are aware that our client were attending to the settlement of the deed of assignment of lease that our client received from a previous owner of the business. We note that the deed of assignment has in fact been executed by all our clients and the previous owners of the business and we understand is in the possession of the lessors solicitors. We expect the lessor to finalise the assignment of lease in accordance with the deed of assignment, - however should he fail to do so then we advise that we are instructed to proceed with an urgent equity application for orders that our client be assigned the lease of the premises.

Completion of the Sale

In the circumstances we advise that unless completion of the sale of the business is attended to immediately then we will be left with no alternative but to seek enforcement of the terms of the agreement through an order for specific performance.

Furthermore our client reserves its rights to claim any damages from your clients.

[349]

RE: DANEL INVESTMENTS PTY LTD LEASE FROM VIZOVITIS

We refer to previous correspondence in this matter. As you are aware we act for Danel Investments Pty Ltd. We note that our clients had taken an assignment of the existing lease from Ponga and had negotiated to sell the business with a re-assignment of the lease to Nexstar Investments Pty Ltd and its principal David Campbell and Sam Gobeo. We note that contracts were exchanged for the sale of the business conducted in the leased premises but the purchaser did not complete the contract within the time allowed. A notice to complete was issued and expired without settlement having been effected. In the circumstances our client has treated the contract as terminated and the purchaser's lawyers were notified accordingly.

Notwithstanding this it appears that you and your client were allowed to believe that the purchasers were entitled to take a new lease of the premises. They have proceeded to change the front door to the building, the front door to the premises, to place chains on the front door to the building and to create openings between the premises separately leased by them from your client and the premises leased by our client.

All of these activities appear to have been unlawful as against our clients and to have been based on false and misleading conduct on the part of the purchasers.

We enclose a copy of our letter of even date to the solicitors for the purchaser. In the circumstances it is essential to our client that our client be given access to the premises and that the work necessary to ensure that the premises are in a condition which allows a resale of the business to proceed are carried out.

If we are correct in our understanding that a new lease may have been granted to the purchasers in respect of our client's premises and if in issuing that lease you have relied on any express or implied representations by the purchasers or by their lawyers as to their entitlement to the lease we would be pleased if you could:

(a) provide us with a copy of the lease and

(b) provide us with details of the material on which you and your clients relied in issuing the lease.

We note that when Alyson Pevreal spoke with you earlier she was of the understanding that you had sent extensive correspondence to our office without response. Our file does not disclose any correspondence to which no reply has been given other than your letter of 29 November 2006 which did not appear to require a direct reply and which in any case related to the assignment to our client rather than the assignment to our client's proposed purchaser. If in fact there is any outstanding correspondence kindly let us know. We also understand that the costs which were outstanding to your firm have now been paid. Again if there are any issues in this regard we would appreciate your letting us know.

[351]

RE: DANEL INVESTMENTS PTY LTD SALE OF BUSINESS TO CAMPBELL & GOBEO

We refer to previous correspondence in this matter. We note that the contract between our clients has been terminated through default on your client's part. We are instructed that your clients have:

(a) obtained a lease of the premises from the landlord notwithstanding that our client's lease remains in place;

(b) changed the front door of the premises so that it can be accessed from the inside only.

(c) created openings between the premises leased separately by your clients so that there is permanent access between them and

(d) changed the locks on the front door to the building and have placed a chain securing the front door on the inside so that our client's premises cannot be accessed.

As we understand the position the landlord has permitted these matters to occur because your clients and possibly your firm have allowed the landlord's solicitors to believe that as between our client and your clients your clients were entitled to do so.

Clearly that is not the case. The sale to your clients has not been completed and the contract has been terminated lawfully by the vendor. Our clients remain entitled to the benefit of the existing lease.

Our clients have negotiated to sell the business to another purchaser but will be unable to secure the sale and complete it unless our client has access to the building and to the premises and the premises are reinstated to their condition prior to the works carried out by your clients including closing the openings between the premises leased by your clients and our client's premises.

You will appreciate that our clients may suffer very substantial loss if the required action in this regard is not taken promptly. We are forwarding a copy of this letter to the solicitors for the lessor. In the absence of confirmation within three (3) business from the date of this letter that your clients will take the necessary action to rectify the matters complained we will advise our clients that they should:

(a) initiate proceedings in the Supreme Court for a mandatory injunction and declaratory relief and/or

(b) carry out the work themselves and then seek recovery from your clients.

Your urgent response is requested.

[355]

However, in view of the fact that Nexstar Investments Pty Ltd appear to be in possession of the premises, we do, with the greatest respect, caution your client against taking unilateral action to regain possession without the assistance of a Court Order.

We would assume that any attempt at repossession by your client would undoubtedly be resisted by Nexstar Investments Pty Ltd and whilst our clients are loathe to take sides in this issue, the provisions of the Leases (Commercial and Retail) Act, are quite clear that no possession may be taken in respect of premises without the requisite order being made through the Courts. Indeed, whilst this may be a matter for your client, we are wondering what might be served by Danel Investments Pty Ltd wishing to repossess the subject property, in view of the fact that there has been a fundamental breach of Contract for which your client can seek recourse for breach of contract in the normal way.

Having commented on the above, however, it is our clients' instructions that they would be more than prepared to abide by any Order of the Court as to possession and reinstate the assigned Lease held by Danel Investments, if in fact this was the finding of the Court. It seems clear from our clients' perspective, that our clients acted to provide Nexstar Investments Pty Ltd with a new Lease upon the misrepresentation that the Contract had been completed. The position seems to have been further exacerbated by the fact that no notification was received from your office that your client had encountered any breach of Contract and further that the premises had all the earmarks of being surrendered.

Furthermore, we might make the observation that since we have issued a new Lease in favour of Nexstar Investments Pty Ltd, the Lease remains effectively valid and is not subject to any contrary order of the Court, your client is released from any responsibility under the Lease which may, in fact, be an advantage to your client, it being left with a claim for damages for breach of Contract against Nexstar Investments.

If, on the other hand, your client wishes to re-take possession of the subject premises, perhaps you would notify us of the application being made to the ACT Magistrates Court to seek such possession pursuant to the provisions of the Leases (Commercial and Retail) Act.

[374]

Noted. It appears that the lease which has been provided to the purchasers was issued while our client was arranging assignment of the existing lease from the original lessee and prior to your client signing the assignment documents which were witnessed by your Mr Barnett. Clearly no lease should have been issued by or on behalf of your client except conditionally upon our client's lease being terminated pursuant to the arrangements, of which you and your client were aware, for the sale of our clients' business.
We are instructed that there is absolutely no basis on which a view could have reasonably been formed that the premises were abandoned by our client. We are instructed that our clients have continuously operated their business in the premises. In mid-December they did place a notice indicating that the premises were closed temporarily for refurbishment as they had done in the previous year. We are instructed that there is ample documentary evidence to show that our clients continued to trade in the premises up until the middle of December including eftpos payments, payments in respect of services to the premises, etc. We note that there is an apparent conflict between your paragraphs 1 and 2. Paragraph 1 appears to suggest that the lease was issued in favour of Campbell & Gobeo whereas paragraph 2 says that the lease was issued in favour of Nexstar Investments Pty Ltd. We agree that we had notified you that our clients had negotiated to sell the business to Nexstar Investments Pty Ltd. This simply reinforces the fact that no lease should have been granted to Nexstar Investments Pty Ltd except to allow the contract between our clients and that company to be completed.
We repeat that there was simply no basis on which you, your clients or the purchasers could have understood that the premises were abandoned and if possession has been given to and taken by the purchasers, this has occurred unlawfully. If Lewenberg & Lewenberg have led you to believe that their clients were entitled to a lease of the premises and to possession of them then they have been guilty of misleading and deceptive conduct as they were clearly aware of the contractual situation at all times.
We have been in continuous contact with your office with regard to the Deed of Assignment and indeed your clients signed the Deed of Assignment subsequent to 20 October 2006 and your Mr Barnett witnessed their signature. We would ask you to provide us with a copy of the notification you received from Lewenberg & Lewenberg referred to in this paragraph. We note that there is nothing in the contract which entitles their clients to possession except pursuant to completion of the contract. As you have been aware for some time the contract was not completed and was in fact terminated.
With equal respect there was no obligation on our part to notify you that the contract had been terminated.
We again note that the premises had no "ear marks" or indeed any other marks of being abandoned and indeed every indication would have been to the contrary. We are at a loss to understand how your client could have granted a lease in respect of the premises to Nexstar Investments Pty Ltd commencing on 1 October 2006 when you were not formally advised of the sale of the business until 20 October 2006.
We would be pleased if you would provide us with a copy of the material evidencing the misrepresentations.

[375]

We would respectfully suggest that it is interests of your client to ensure that possession of the premises is restored to our clients without the necessity of a court application. As you would appreciate significant costs will be incurred if one is necessary. It appears from our clients' enquiries that whilst the purchasers have carried out unlawful work connecting the premises they are not actually operating in the premises formerly occupied by our clients and that if they voluntarily give up possession their exposure to legal action would be minimised.

Our client has an obligation to minimise its loss and this can best be done by securing possession of the property, recommencing trading and effecting a sale of the business.

We note that our client has an obligation at law to proceed in this manner so that the loss which it suffers as a result of the breach of contract on the part of the previous purchasers is mitigated.

With reference to the penultimate paragraph on the second page of your letter we would again ask you to provide a copy of the material which you say constituted a misrepresentation that the contract had been completed. We repeat that there was no obligation on our clients' part or indeed on our part to notify you or your client that the contract had not been completed. There remained the possibility of the negotiations being revived.

We note with respect that where a second lease is granted by a lessor over the same premises it can only operate as a concurrent lease, that is a lease of the reversionary interest expectant on termination of the existing lease. The granting of the new lease does not in any way release our client from responsibility under the lease.

We further note that the landlord has continued to accept our clients rental payments. Our clients' requirements are that:

(a) possession of the premises be restored to them; and

(b) the unlawful works carried out by the former purchasers be made good.

Our clients have suffered and will continue to suffer trading losses as a result of not having possession of the premises.

It is clearly in your client's interests to ensure that our clients' rights are restored as soon as possible. The issues regarding misrepresentation whilst they may found an action on our clients' part are primarily a matter between your client and the lessee under the second lease.

[408]

Danel Investments Pty Ltd and Christos and Georgia Vizovitis

Premises: Unit 6 in Subleasing Plan 106 - Section 21, Block 15, Fyshwick (Barrier Street, Fyshwick, ACT)

We confirm that we act for Danel Investments Pty Limited. We understand that you act for Christos and Georgia Vizovitis.

We are instructed that on or around 29 November 2005 our clients purchased the business known as "Tiffany's Studios" located at the premises. The premises were subject to a lease originally granted by Eric Lee and Shirley Esme Lee to Jillian Norma Ponga (RN 1370131). Notwithstanding that a Transfer of Lease document was not filed at the ACT Registrar General's Office, your client agreed to the transfer of lease to our client. We are instructed that your client has accepted rental payments from our client since the date of the purchase of the business.

We have read correspondence to suggest that your clients claim that our client has abandoned the premises. Our client strongly denies this and instructs that at all times it continued to make rental payments in a timely fashion to your client in accordance with the lease. Our client has not received a termination notice, nor did it receive any correspondence from your client enquiring whether it has abandoned the premises.

We are instructed that, notwithstanding our client's lease, your clients have issued a new lease over the premises to Nexstar Investments Pty Limited. We are instructed that our client no longer has access to the premises and is not in occupation. Your client's repudiation of the lease does not recognise our client's legal and equitable interest in the premises.

In the circumstances, without prejudice to our client's rights under the lease, it is futile for our client to continue to pay rent and outgoings in the premises, and our client will cease making any further payment to your clients forthwith.

Our client reserved its rights to commence action for compensation and damages against your clients. Would you please confirm that you will accept service on behalf of your clients.

At a glance

Court

Decision date

Before

Source

Judgment (518 paragraphs)

Parties

Legislation Cited (10)

Cases Cited (2)