Ell v Cisera [2001] NSWSC 242 | Case summary

1 HIS HONOUR: I have already delivered two judgments in this troublesome matter: Ell v Cisera [2000] NSWSC 768 ("my first judgment") and Ell v Cisera [2000] NSWSC 961 ("my second judgment"). It concerns a commercial lease ("the commercial lease") granted by the defendant to the plaintiff over premises at Darlinghurst ("the premises") for the term of 18 months from 18 January 1999 to 17 July 2000 with an option of renewal for a further term of 18 months for use as a printing workshop. There were problems about the payment of rent. On 17 March 2000 the defendant locked the plaintiff out of the premises. The defendant then discovered there was substantial staining of the floor by ink and oil. Thereafter there were proceedings in this Court and an interlocutory injunction application before Santow J was on 6 April 2000 compromised by an agreement that the plaintiff might go back into the premises to carry out work to reinstate damage to the floor; that if adequate reinstatement were effected then the plaintiff should resume occupation under the commercial lease; but that if adequate reinstatement were not effected the commercial lease should be taken to have been validly terminated by the re-entry of 17 March 2000 and the defendant would have a lien over a printing machine to secure the cost of the defendant himself carrying out the reinstatement ("the compromise agreement") (see my first judgment [21]). A dispute arose concerning the appropriateness of the plaintiff grinding the floor in the course of his reinstatement work and the defendant again locked the plaintiff out of the premises on 4 May 2000. In the meantime, the plaintiff had purported to exercise the option and the defendant had taken objection to him doing so. In my first judgment delivered on 3 August 2000 I decided that the re-entry on 17 March 2000 had not terminated the commercial lease because of the compromise agreement; that the re-entry of 4 May 2000 had not terminated the commercial lease because the plaintiff's mode of work was not inappropriate to reinstate the floor; but that the plaintiff was not entitled to exercise the option because of his conduct and attitude as to rent and care of the premises; the lease was therefore continuing on the basis of a holding over from month-to-month and the plaintiff was entitled to resume occupation to continue the reinstatement: see [21] - [25]. In my second judgment delivered on 5 October 2000 I dealt with the question of the costs of the hearing before me. As the plaintiff had been generally successful I ordered the defendant to pay those costs. The defendant submitted that I should take into account on the costs application the fact that a further 55 days had passed after his readmission to the premises without the plaintiff finishing the reinstatement work, but I held that irrelevant to the costs. 2 By an amended notice of motion filed on 18 October 2000 the defendant has now sought the following orders: "1 the period during which the plaintiff was required to reinstate the premises pursuant to the orders of Santo J [sic] dated 6 April 2000 and the orders of Hamilton J on 10 August 2000 expired by 5 October. 2. the defendant has a lien on the equipment (a list of which has been tendered on 6 October 2000 in these proceedings) for the cost of proper reinstatement. 3. the defendant has validly exercised his right to re-enter the premises on 9 October 2000." 3 These questions are not appropriate to be determined on motion, but I have heard evidence and argument on the issues they raise and the necessary orders can be made on appropriate originating process. The facts which have occurred or come to light on which the orders are sought are as follows. The process of reinstatement of the floor had still not been completed as at 9 October 2000 despite the passage of about 60 days since the plaintiff was readmitted to the premises. The rent due on 18 September 2000 had not been paid. It had come to light that the plaintiff at the time he entered into the commercial lease in January 1999 had been an undischarged bankrupt, which he had not revealed to the defendant. He had since been discharged from the bankruptcy. On 9 October 2000 the defendant again re entered the premises and locked the plaintiff out. He claimed, in effect, that that re-entry terminated the commercial lease. He said that the re-entry was justified by the non-payment of rent for a period in excess of 14 days (clause 29(b)(i)). He also relied on the fact that the reinstatement of the floor was not completed and had not been carried out within a reasonable time, so he said that the forfeiture of 7 March 2000 became effective through the operation of the compromise agreement (there had been further disagreement concerning this culminating in an attempted lockout on 7 October 2000). He also relied on the plaintiff's unrevealed bankruptcy at the time of entering into the commercial lease as justifying him in terminating the letting and retaking possession. 4 There is no doubt that as at the time of re-entry on 9 October 2000 the rent due on 18 September 2000 had not been paid. The plaintiff had various excuses for this. Robert Cisera, the defendant's son, says that on 22 August 2000 he asked the plaintiff to bring future rent payments to him personally, and I accept this evidence. Despite this, the plaintiff claimed to have gone to the defendant's premises on 17 September 2000 with a cheque, but, on finding them unattended, pushed it under a roller door. The plaintiff, having left it there, did not check with the defendant to see if it had been received or even, for some time, check with the Bank to see if the cheque had been negotiated (it had not). The defendant denies having received it. I accept the denial. I have the gravest doubts as to whether the cheque was in fact delivered to the defendant's premises. But, even if it was, there was no discharge in the circumstances of the plaintiff's duty to seek his landlord out and pay the rent: Haldane v Johnson (1853) 8 Ex 689; 155 ER 1529; W D Duncan, Commercial Leases in Australia (3rd ed, 1998) 79; Woodfall's Law of Landlord and Tenant (1994) [7.094]; necessity of demand on the land is in this lease dispensed with by the words in cl 29(b)(i) "whether formally demanded or not": see W D Duncan op cit 318. Informed in early October that the rent had not been paid he gave a cheque to his solicitors to deliver to the defendant. They posted it to the defendants' solicitors in an overnight envelope on 6 October 2000. But a Post Office stamp on the envelope shows that it was posted in the wrong box. Despite some challenge, I accept it was not received by the defendant's solicitors until 12 October, by which time re-entry had been made. In my view, the plaintiff had no satisfactory explanation for not seeking out and paying the defendant on time, which was particularly important in view of the embattled history of this matter, particularly as to the payment of rent (see my first judgment [2] - [4]). The only possible basis on which it could be suggested that re-entry was not justified on this ground is that clause 29(b)(i) no longer applied now that the premises were held over from month-to-month and the letting could be determined by the lessor by one month's notice, which had not been done. The precise terms of the holding over clause in the commercial lease were that the lease should "continue as a periodic lease from month to month at the same rent": see my first judgment [1]. 5 It is the law that when a tenant holds over under the holding over clause in a lease which has expired he does so on all the terms of the pre-existing lease which are appropriate to the basis on which he is holding over: see generally Redfern & Cassidy, Australian Tenancy Practice and Precedents [30 65]. As Herron CJ said in Elrington v Judd (1964) 64 SR (NSW) 150 at 153: "For it is an undoubted principle that where a tenant holds over after the expiration of a term and the facts do not exclude an implied agreement to hold upon the terms of the old lease, then the law determines that he impliedly holds subject to all the covenants in the lease which are applicable to the new situation: Wedd v Porter [1916] 2 KB 91 ; Cole v Kelly per Atkin LJ [1920] 2 KB 106 at 132. Cozens-Hardy MR in Morgan v Harrison [1907] 2 Ch 137 said that in such a case all the terms and conditions of the original lease apply so far as they are applicable or consistent with such tenancy. In Dougal v McCarthy [1893] 1 QB 736 Lopes LJ said that the implication of law is that the periodic tenancy is on the same terms as those of the lease which has expired so far as they are not inconsistent with such a tenancy. The position was examined by this Court in Felser v Walker (1953) 53 SR (NSW) 155. In the joint judgment of the Full Court the following passage occurs at 160: 'The position of tenants holding over under implied terms has been considered on numerous occasions, and various phrases have been used for determining whether or not the term sought to be implied is one which bound the parties. In some cases it is said that the term binds, if it is applicable to the new tenancy, and in other cases the test has been stated to be whether the term is or is not inconsistent with the new tenancy. Other expressions such as "incidental to" the tenancy or "appropriate" thereto have also been suggested in argument as tests to be applied. Whether there by [sic] any real difference between these phrases is open to question, but in our view, whichever of them be applied, the argument for the appellant fails, as on no view of the facts and circumstances proved in this case, could it be said that cl. 8(a) was part of the terms to be implied as binding the lessor and lessee after May, 1943'. The effect of the judgment was that the covenant in question, one requiring extensive restoration of the premises by the landlord, was wholly unsuited to and inconsistent with a tenancy from week to week, so that it was impossible to assert that such a covenant could have bound such a tenant. I think that the rule is best summarized by Sargant LJ in Lowther v Clifford (1927) 1 KB 130 where his Lordship, referring to the differences in language used, emphasizes that the tenant is deemed to hold on the terms of the original letting so far as these terms are not inconsistent with a periodic tenancy."

Young J also approved that formula in Glenbond Pty Ltd v The International House Pty Ltd NSWSC 22 June 1988 unreported. 6 Thus, repair covenants are generally held to be applicable (Cole v Kelly [1920] 2 KB 106 at 132) and a covenant to pay rates and taxes was held applicable in Elrington v Judd supra. A covenant to build and an option to purchase the reversion have been said to be inapplicable: Bowes v Croll (1856) 6 E & B 255 at 264; 119 ER 859 at 863; Bradbury v Grimble & Co [1920] 2 Ch 548; and see generally Andrew Lang, Leases and Tenancies in New South Wales (1976) [1203]; Hill & Redman's Law of Landlord and Tenant A[206]. 7 The question here is whether a prohibition for re-entry for non payment of rent for 14 days is inapplicable to, ie, discordant, incompatible or incongruous with, a lease from month to month. 8 In my view, it is not. If this clause did not carry over into the lease from month to month then all that the landlord could do as at 9 October 2000, the tenant having failed to pay rent, would be to give a month's notice to quit and in due course take ejectment proceedings. He would not only have his right to possession deferred, but also lose the benefit of the proviso for re-entry. The utility of the provision is in my view clear, it is not discordant, incompatible or incongruous with a tenancy from month to month, and it should be taken to be one of the terms on which the premises are held over. 9 It is therefore my opinion that the plaintiff's leasehold interest was forfeited by the defendant's re-entry on 9 October 2000. 10 This conclusion renders it unnecessary to consider whether the defendant was entitled to his alternative justifications for re-entry as at 9 October 2000, namely, the failure to reinstate the floor and the plaintiff's unrevealed bankruptcy. 11 However, I should say that it is clear on the evidence that the reinstatement of the floor was not complete at the time the plaintiff was excluded from the premises on 9 October 2000. As the plaintiff has been excluded from the premises by reason of his own default, it is not now possible for him to complete the work. In those circumstances he has not carried out his obligations under the compromise agreement and the defendant is entitled to a lien over the printing machine in respect of the expense which he will incur in completing the reinstatement. 12 As I have already said, declarations cannot be made in the defendant's favour on the amended motion that has been filed, but on presentation with appropriate originating process and short minutes I can appropriately dispose of the proceedings. Questions of costs can be raised on that occasion, although I do not presently see how the plaintiff can resist an order for the costs of the further hearing before me.

Ell v Cisera

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