Eye Corp Australia Pty Limited v Goliath Investments Pty Limited [2006] NSWSC 159 | Case summary

6185/05 - EYE CORP AUSTRALIA PTY LTD v GOLIATH INVESTMENTS PTY LTD JUDGMENT 1 HIS HONOUR: The plaintiff and the defendant were prior to 31 July 2005 respectively lessee and lessor of part of the roof of a building at 420 Parramatta Road, Burwood. Those were commercial premises. 2 The roof of the building now carries an advertising sign which is easily visible by people passing along Parramatta Road and so has commercial value. 3 The plaintiff is a corporation whose business is outdoor advertising. 4 The plaintiff's lease came to an end on 31 July 2005. The parties appeared to have agreed on a new lease, however on 29 July 2005 the defendant, by its solicitors, indicated to the plaintiff that it was not prepared to continue with the new lease. 5 The evidence shows that it took that view because it realised at the last moment that it had granted an option to use the roof area and the signage space to the tenant of the remainder of the building and that, if it entered into a new lease with the plaintiff, it may well be in breach of its contractual obligations to that other tenant. 6 In a facsimile of 29 July 2005, which is exhibit PX 279, the lessor's then solicitor wrote to the plaintiff as follows: "We are instructed our client no longer wishes to proceed with a new lease to your company. Your current lease is due to expire on Sunday 31 July 2005. We are instructed that you will now be holding over as a monthly tenant on the same terms and conditions as your current lease and at the same rent." 7 I should now refer to the provisions of the lease in question, which is exhibit PX 124 and following. The lease was between the defendant's predecessor in title as lessor and the defendant for five years - 1 August 2000 to 31 July 2005. Annexure A contained various clauses that are relevant to the present dispute. Clause 1 of annexure A said: " THE Lessor leases to the Lessee for the purpose of enabling the Lessee to exhibit advertising Signs ('the Sign') ALL THAT portion of the Lessor's property at 420 Parramatta Road, Burwood in the State of New South Wales comprising the front section of the roof of the main building facing Parramatta Road being the area above the premises occupied as an office and showroom ('the Site') and grants to the Lessee a right to use all other parts of the Lessor's property in fact used or necessary to be used for the support of or attachment of the Sign or its supporting structure or electric connection or floodlighting for the Sign TO HOLD for a period..." 8 Clause 4 provides so far as relevant as follows: "4. THE Lessee covenants with the Lessor: ... (ii) To obtain any necessary approval or permission of the Council and any other authority whose approval or permission is required by law in respect of the Sign and the Lessor agrees to sign any consent required from the Lessor as owner of the property to the Lessee obtaining any such approval or permission." 9 Clause 10: " THE Lessee may from time to time change or vary the advertising matter displayed on the Site and for that purpose to alter or re-arrange the structures supporting the Sign or any electric or other wiring and machinery connected or used with the Sign or to re-erect any sign which the Lessee has been required to remove due to any impediment such as is referred to in Clause 6 on such impediment ceasing to have effect. At the termination of this Lease the Lessee shall remove or cause to be removed any sign then on the Site and all structures wiring and machinery connected or used therewith or any part thereof provided that it shall make good any damage to the Lessor's property caused by such removal." 10 Clause 6 referred to the possibility of legislation requiring the sign to be changed or total or partial destruction of the building. 11 The plaintiff continued in occupation of the premises until 31 December 2005. The defendant says this was under s 127 of the Conveyancing Act 1919, but I cannot, with respect, see how this could be so because the solicitor's letter to which I have referred and the subsequent occupation of the plaintiff would seem to suggest that there was an agreement as to the terms and conditions of the continued occupation as lessee and that being so a tenancy at will under 127 of the Conveyancing Act would be excluded. The tenancy would seem to be a month to month tenancy. 12 It seems clear that from the time when it realised that it would not be granted a renewed lease the plaintiff indicated that it would remove the sign. It would seem clear that before the sign can lawfully be removed Burwood Council would need to give planning approval. 13 In September 2005 the defendant was asked to endorse its consent to a development application to obtain such approval. By e-mail of 7 October 2005 the defendant refused to sign the development application. 14 The defendant has made it clear that insofar as it can do so it has waived the obligation of the plaintiff to remove the sign. It has also clearly indicated that if the sign remains in situ it will permit the new tenant to use the sign. 15 The plaintiff commenced these proceedings on 8 December 2005 by summons in which it sought an order that it was entitled to remove the sign and an order that the defendant sign a development application to Burwood Council for the sign's removal. The summons was made returnable before Gzell J on 12 December 2005. His Honour gave a brief judgment and ordered that the matter proceed by way of pleadings. He said in paragraph 3: "In a letter of 9 December 2005, the solicitors for the defendant proposed the following to preserve the status quo until the issues can be tried in the usual way. The defendant offered to undertake after 31 December 2005, when the lease expires, and pending a final determination of the proceedings, not to interfere with the existing signage, and should the Court determine the proceedings adversely to the defendant requiring its execution of a development application and access to the defendant's premises to facilitate the sign's removal, such execution of the development application and access to the defendant's premises would be granted despite the termination of the lease." 16 The matter went into the expedition list and I fixed it for hearing before myself this morning. Mr D Robinson of senior counsel appeared for the plaintiff and Mr G Sirtes of counsel appeared for the defendant and I have been assisted by the learned arguments that both of them have put to me. 17 If the matter were not one which I expedited and commercially speaking needs a ready resolution I would have preferred to have reserved my decision as many complex points arise. However, where there is an expedited commercial matter judges need to give an extempore judgment, if at all possible, even though what is recorded may not be as polished as the Judge might desire it to be. 18 Mr Robinson says that this case must be considered as if we were dealing with the matter in December 2005 before the lease came to an end. He says that this was the condition agreed to when the matter came before Gzell J last Christmas and I think that is probably right. In any event, when the matter was commenced on 8 December the lease was still in force, or perhaps to put it more precisely, the plaintiff was still in possession as tenant, its rights originating in the lease which it terminated on 31 July 2005. 19 Mr Robinson says that the advertising sign was his client's property, that it was a tenant's fixture and that there was a right to remove it during the term of the lease. Were it not for the fact that the consent of Burwood Council was needed to remove the sign he would just have removed it. However, because the Council's consent was required and because the tenant needed consent to the development application and because the landlord had refused to enter into the consent his client has an equity to compel the landlord to consent and to avoid the result that it would be unconscionable for the landlord to refuse consent and then to forfeit the property and allow it to be used by a new tenant to the commercial profit of the landlord. 20 Mr Sirtes says that that is not really the right analysis of the problem before the Court at all. He says that this is a dispute between a former landlord and tenant as to the sign. He says that the evidence is, and it clearly is, that it would cost about $25,000 to remove the sign properly and its scrap value is only about $300. Accordingly this is a case where there would only be nominal damages at common law for any breach of contract but because damages would be obtainable at common law which could be assessed there is no equity entitling the plaintiff to relief. 21 Mr Sirtes further says that it must be remembered that the development application it was asked to sign was one which was prepared by the plaintiff's agent Urbis JHD, and the document set out at PX 286 and following was couched in terms which would be prejudicial to the defendant. 22 To flesh that out, whilst the application was to disassemble the existing steel framed signage into manageable pieces and transport it to recycling works by small truck, the accompanying letter indicated that the removal of significant signage would have a positive impact upon the existing streetscape. As the landlord or any tenant of the roof area might wish to erect a new sign then that would imperil that approval for a new sign being granted. A further twist is that if the proposal merely was to renew the sign in like size to the existing sign, no Council approval would be required. Accordingly, if the parties had come to some agreement and the landlord had compensated the lessee for its sign and the lessee was willing, then a new tenant could take it over without planning approval. However, as cases such as Smith v City Petroleum Co Ltd [1940] 1 All ER 260 show, it is important not to make elisions in the rights of people and to take things step by step in this sort of case. 23 An academic lawyer would find it tempting to explore all the avenues which were explored in submissions before me, but I will resist the temptation of doing so. That does not mean that I have not considered all the arguments put to me. 24 The first matter that I should focus upon is who owns the sign. As at December 2005 the relevant facts would seem to be that the sign originally was put up by Claude Neon (Australia) Pty Ltd Ltd, a fact that is acknowledged on page 2 of the lease at PX 125 and that it was duly transferred to the plaintiff before the 2000 lease came into operation. Accordingly, as at the date of the lease the sign was already there. However, as I understand the law of trade fixtures a matter can be a trade fixture whether or not the present tenant erected the fixture, provided that a predecessor in title of the tenant did so. 25 When a lease comes to an end the tenant may remove a trade fixture. I make that general statement. There is some arcane law as to whether the fixture must be removed before the end of the fixed term lease or whether in a reasonable time thereafter and what happens if there is a holding over for continuous occupation of the site by the tenant; see for instance D'Arcy v Burelli Investments Pty Ltd (1987) 8 NSWLR 317; McMahon's (Transport) Pty Ltd v Ebbage [1999] 1 Qd R 185 at 198. Those problems do not worry us here because as at December 2005 the lease was still in force and the undertaking given to Gzell J means that I do not have to consider whether on 31 December property would otherwise have passed to the landlord. 26 Surprisingly there is still some uncertainty in the law as to what happens to tenant's fixtures on the expiry of the lease. One theory is that the chattels never become part of freehold, even though they are securely annexed; see for instance Mowats Ltd v Hudson Brothers Ltd (1911) 105 LT 400. 27 The other theory is that they become part of the freehold but remain subject to a right in the tenant to detach them and make them chattels again; see for instance Horwich v Symond (1914) 110 LT 1016 affirmed by the Court of Appeal in (1915) 84 LJKB 1083. See also the treatment in Woodfall, The Law of Landlord and Tenant (28th ed, The Law Book Co Limited, Sydney, 1978) paras 1-1572 and following and Lewis & Cassidy's Tenancy Laws in NSW, Book 1 (Butterworths, Sydney, 1966) at pp 266 to 267. 28 There is no doubt in my mind at all that it is completely irrelevant as to whether or not the sign and its surrounds were fixtures in the ordinary sense of the word or not. I rejected the evidence tendered as to the degree of annexation. However, I admitted such evidence as might go to the point that no equitable relief should be given because "Equity, like nature, doeth nothing in vain". That is, that as the sign only had a scrap metal value and would cost a lot to remove it was quite idle to give any relief. 29 It is quite clear from looking at the lease that both parties recognised that the displaying of the sign on these premises had quite considerable commercial value. Apart from the clauses which I have set out earlier on the fact that there was to be a rent of $65,000 per year for each of five years shows that both parties recognise the commercial value of having a sign. 30 It must also be said that not only must it be recognised that the landlord was getting $65,000 a year, but it must also be recognised that the commercial value to the tenant in order to make it pay $65,000 a year was estimated by it to at least have that value. Furthermore the lease is drawn on the basis that the tenant has the right of choice, the right to change or vary the advertising matter and the sign is completely under the control of the tenant. Then in clause 10 of the lease it is expressly provided in the last sentence that at the termination of the lease the lessee shall remove or cause to be removed any sign then on the site and all ancillary wiring, et cetera. 31 It seems to me that the way the lease is framed indicates that there is a recognition that the sign has a commercial value, apart from its scrap value. It is furthermore clear to me that it is a tenant's fixture, that it was erected for the benefit of the tenant so that the tenant could enjoy the land which was the subject of the lease by exhibiting a commercial sign. The tenant accordingly would have a right of removal of the sign before the lease was up and in certain circumstances for a reasonable time thereafter. 32 Mr Sirtes took me through the lease and put to me that on its proper construction there was only a very narrow right in the tenant to remove signs and accordingly one could not say, as the High Court had said in Starline Drive-in Theatre Ltd v Commissioner of Taxation (1964) 112 CLR 458, that the tenant had a proprietary right to remove the sign. 33 The right of the tenant, however, is not to be found wholly within the lease. Mr Sirtes referred me to para 22 of the second part of the fourth schedule to the Conveyancing Act 1919, but it has long been recognised that such a provision merely expands the right of a tenant at common law and one can adopt short form 22, or conversely there could be an express provision restricting the tenant's right to remove trade fixtures as in Lambourn v McLellan [1903] 2 Ch 263 and Re British Red Ash Collieries Ltd [1920] 1 Ch 326 at 332. 34 Mr Sirtes put that the lease said nothing about removing fixtures at any time other than at the termination of the lease. The short answer to that submission is, of course not, because when one has a property and when one has a tenant's fixtures one can do during the lease with it what one will so long as one does not damage the freehold. 35 In my view the general law rights of a tenant and on the proper construction of the lease in this case the tenant has a right to remove its property. 36 The next question is then whether it has an equitable right for a mandatory injunction as opposed to a common law right to damages. 37 Now, it is truly said that equity does not interfere unless common law damages are not an adequate remedy. Actually, as the US Supreme Court said in Boyce v Grundy (1830) 28 US 377, the law is that equity will refuse relief where common law damages are plainly not an adequate remedy. Mr Sirtes truly put that in a situation where the common law will only give a person nominal damages because they have suffered no real hurt then the mere fact that the common law will only give nominal damages is no reason, to use his words, for equity to rush in. That proposition is true up to a point. There are some situations where the common law, for a particular policy reason, does not truly recognise the real substantial and commercial damages that will be flowing for the plaintiff in which case equity does render assistance. The prime example is nuisance cases. One might find very little by way of common law compensatory damages for lost sleep over a neighbour's dog barking all night, but equity will still grant an injunction. 38 Mr Robinson appeals to that line of authority where what is sometimes clumsily called quasi specific performance is invoked. Specific performance strictly applies in a situation where there is an executory contract which is not being fulfilled. There, if a plaintiff shows himself or herself ready, willing and able to fulfil the contract so far as it remains to be performed on his or her part and damages are not an adequate remedy and various other preconditions are met, then equity will force the fulfilment of the contract. 39 However, there is another situation and that is where there is an executed contract, a contract where one party has enjoyed the benefits of the contract, but there still remains some obligation in the contract which needs to be fulfilled and that party refuses or declines to fulfil it. 40 In such a situation, sometimes called specific performance, sometimes called quasi specific performance and sometimes called injunction in the nature of specific performance, equity interferes on the basis that it would be quite unconscionable for a person to take the benefit of a contractual obligation and then merely to leave the other party with some right for damages. 41 The point has come up on a number of occasions, particularly Greene v West Cheshire Railway Co (1871) LR 13 Eq 44; JC Williamson Ltd v Lukey and Mulholland (1931) 45 CLR 282 and Burns Philp Trust Co Pty Ltd v Kwikasair Freightlines Ltd (1963) 63 SR (NSW) 492. 42 I agree with Mr Robinson's submissions that this case falls into that category. There was a lease and the landlord has got the benefit of the rent over the years. There is a desire by the plaintiff to retake its property. It normally could remove it without the assistance of a court of equity. It requires its property. It cannot get it without an order of the Court compelling an application to the Burwood Council and this case falls within the quasi specific performance principle. But Mr Sirtes says that the legal purpose, the real purpose is merely to prevent other people benefiting from the existing permission to use the sign on the premises and that that is no real benefit to the plaintiff at all. The plaintiff in fact is being saved $25,000 in costs by the landlord waiving the obligation. 43 With respect, there are some flaws in that argument. First of all allowing that to happen would be allowing the landlord to take advantage of the plaintiff's property without paying for it. The mere fact that the plaintiff's property may not have much value has never, as far as I know, been an answer to a claim for conversion of the property. Now, conversion may not be a proper word to use because as I understand it as a general rule one can not have conversion of what has become fixed to the property; see for instance Woodfall, The Law of Landlord and Tenant para 1-1578, but I have used the word not in its technical sense but in a loose sense. 44 Then there is the problem that the plaintiff is seeking the relief of equity in aid of a legal right and that traditionally in the classification of Storey and Maitland, and others, is a matter within the ancillary jurisdiction of a Court of equity, not its exclusive or concurrent jurisdiction. 45 In Bankstown CC v Alamdo Holdings Pty Ltd (2005) 79 ALJR 1511 at 1514 [11], it is pointed out by the High Court that where one can work out what the damages are, a claim in the ancillary jurisdiction for injunctive relief would not normally be granted; see however p 1519 [44]. However, whilst that is the general rule one must always work out whether one is in the scenario where damages are plainly an adequate remedy and if one can see, as I can see here, that the commercial value of having or not having a sign on this premises may be something additional to the scrap value, it seems to me that the difficulties caused by that passage move away. 46 Finally, Mr Sirtes says that there has been waiver of the landlord to require the tenant to remove the sign. The requirement only benefits the landlord and the landlord is accordingly entitled to waive it. It only favours the landlord because the evidence shows that it would cost the tenant a considerable sum of money to remove the sign and the landlord is excusing the tenant from that obligation. 47 Not only is there authority against the proposition that such a clause is for the benefit of the landlord alone and may be waived by the landlord, see eg the Starline case at p 466, it would also seem to me in accordance with the line of authorities on waiving rights in vendor and purchaser contracts that this provision would not be construed as one which could be waived at the whim of any one party. 48 It follows that the tenant is entitled to relief. I do not think that the tenant is entitled to put forward a particular form of application to the Burwood Council for consent. But that point hasn't worried me to date because the landlord has made it quite clear it refuses to put forward any consent. 49 I think that there should be a declaration that the tenant is entitled to remove the sign and is entitled to receive from the landlord consent to a development application in proper form to obtain its approval for the removal of the sign. 50 I will stand the matter over for short minutes to a day suitable to the parties. 51 My feeling is that it would be appropriate for the landlord to proffer any alternative form of consent that in the light of this decision it might be prepared to agree to. If there is no agreement then, when the short minutes are brought in, I will settle the form. 52 The defendant should pay the costs of the proceedings. 53 I stand the matter over for short minutes to be brought in on 21 March at 9.30 am.

Eye Corp Australia Pty Limited v Goliath Investments Pty Limited

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Judgment (11 paragraphs)

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Cases Cited (4)

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