GOLDEN RAMS AUSTRALIA PTY LTD v SHTEYMAN & ANOR [2000] NSWSC 417 | Case summary

and a period for exercise is indicated by reference to a schedule so that the first day is 1 February 1998 and the last day is 30 May 1998. 3 Clauses 4.4.2 and 4.4.3 set out conditions for the exercise of the option, those being that at the time of service no rent or outgoing is overdue for payment and that at the same time the obligations of the tenant have been complied with or full remedied in accordance with the terms of any notice to remedy given by the landlord. 4 At the time when the plaintiff alleges it gave a notice of exercise no rent was overdue for payment; this appears from a schedule of payments of rent produced in evidence by the defendant according to which rent which the defendant claimed for a period expiring on 21 March 1998 had been paid on 2 March and rent which the defendant claimed for a period expiring 21 April 1998 was paid on 26 March 1998. There is no evidence that any outgoing was overdue for payment and no evidence and no claim that any notice to remedy a breach of obligation had been given. Nor, indeed, is there any claim of any substance that any obligation of the tenant had not been complied with or had been left without remedy. 5 It is necessary to say something further about the obligation to pay rent. Clause 5.2 of the lease provides: "The first month's instalment of rent is to be paid by the commencement date. Each later month's instalment of rent is to be paid in advance." 6 The commencing date was the first day of a month, 1 September 1995, so it follows that each later month's instalment of rent was to be paid in advance which, in my interpretation, means it was to be paid on or before the first day of each succeeding month. 7 By a transaction which took place in or before January 1998 and appears to have been completed on 21 January 1998 the freehold ownership and the reversion of the lease was assigned to the defendant. The defendant became the registered proprietor on some day which has not been established, but it appears to have been earlier than 16 March 1998 according to the search paper in Ex A, which does not establish the date of registration exactly. 8 The ordinary practice about payment of rent and adjustment on sale of the freehold was not followed for some reason and Mr Kelly, on behalf of the vendor, told Mr Carroll, on behalf of the plaintiff, to pay rent to the vendor for the first twenty-one days of January, and to pay the rest to the defendant. This was done on 5 February 1998. 9 The defendant's counsel observed that at that time the rent was two months in arrears and, while there may be some technical basis for this observation, there can be no substantial grievance in respect of a late payment of rent in association with the transfer of ownership of the freehold and the special requirement by the vendor about how rent was to be paid and adjusted. 10 On or about 5 February 1998 the first defendant demanded payment of rent for a one month period which he calculated from 21 January to 21 February, and that payment was made. Thereafter Mr Shteyman delivered to the plaintiff statements, it would seem every month, within a few days after the 21st of each month, claiming rent for a period commencing on the 21st of a month and concluding on the 21st of the following month. By doing this Mr Shteyman, in effect, accelerated by about ten days his demands for rent. The defendants' real entitlement was to be paid an adjusting payment of the rent for January 1998 forthwith on becoming owners on settlement on 21 January 1998 and to receive a month's rent on or before the first day of each succeeding month. 11 Mr Shteyman made a complaint in his case that there was consistent delay in paying rent but this complaint was based on the position he adopted that the rent should have been paid on the 21st of each month. This was not in accordance with the provisions of the lease. He claimed to see the matter differently but I do not accept that his claim to see his entitlement in accordance with his statements was one in which he actually believed. As a reasonable person who had made a large investment in a rental property and had occasion to familiarise himself with the terms of the lease, it seems to me to be highly improbable that he truly believed that he was entitled to a month's rent on the 21st of each month, or that he truly felt aggrieved. 12 The schedule of payments shows that the claims he made for payment were, on most occasions, paid before the first day of the next month. There are no more than two or three occasions when these claims were made later than the first day of the month. It is clear to me, and in my view it must have been clear to the first defendant, that there was no unsatisfactory continuing position about payment of rent and that rent was paid regularly and reliably. 13 The plaintiff claims that a notice of exercise of the first option was delivered to the first defendant by Mr Carroll, a director and the principal of the plaintiff, in March 1998. Mr Carroll's evidence is to the effect that on an occasion when Mr Shteyman attended the premises and presented a statement claiming rent for a period of 21 March 1998 to 21 April 1998, Mr Carroll took the statement and hand wrote on it words of exercise, made a copy or copies, and handed the original statement back to Mr Shteyman. The words which he wrote were, "To Isaac and Sonya Shteyman 25 March 1998. We wish to take up option on lease for second period of said lease of property Ground Floor A/283 Princes Highway, St Peters, John Carroll." Mr Carroll's evidence was divergent at several places as to the date of the event. At one time he said it happened on 23 March but he acknowledged that he did not truly know on what date it had happened and said it could have happened as late as 4 April. I note that in Mr Shteyman's schedule the payment of rent recorded in the statement is said to have been made on 26 March. On the copy which Mr Carroll produced in evidence and said was a copy of the notice of exercise which he delivered to Mr Shteyman he had written the date 25 March 1998. 14 The most substantial matter of defence is a denial that any such event happened, that any document of this kind was delivered to Mr Shteyman at all. The happening of the entire event as narrated by Mr Carroll in which Mr Shteyman attended the premises, presented a statement, words were written on the statement and the same piece of paper was given back to him is entirely denied. 15 Neither of the protagonists who, according to the plaintiff's case, took part in the events claims that anyone else was, or may have been present when the statement for the period from 21 March was handed to Mr Carroll. 16 Mr Carroll's evidence contained internal inconsistencies as to the date of the event to which I have referred. Although challenged in cross-examination he adhered firmly to his claim that the event actually happened, notwithstanding his difficulty in allocating an exact date to the event. 17 In the plaintiff's case, counsel pointed to some corroborating circumstances. These are not direct corroborations of the plaintiff's claim that the event happened. The evidence points to circumstances which, at a second or indirect level, appear to substantiate the claim. One is that I regard it as clearly established by the evidence of Mr Carroll and also of his solicitor, Mr David Hand, that at some time about March 1998 Mr Hand gave to Mr Carroll advice by telephone that a notice to the landlord in writing had to be given if the option was to be exercised, that it had to be given by 30 May; and the terms of the notice were indicated in oral advice given by Mr Hand on the telephone. Mr Hand does not have a file note or any other record of giving the advice. Indeed, he says that at that time he was not maintaining a file, as the business of acting for the tenant on the grant of lease had been completed in 1995. The only document relating to the subject which Mr Hand has produced is a document, or it may be a copy of a document, which he found in his security packet after controversy arose; the document was filed with the tenant's copy of the lease, and is a copy of the document which Mr Carroll claims he gave to Mr Shteyman. 18 Having heard Mr Hand's evidence and the cross-examination directed to it, I regard it as clearly established that Mr Hand in fact gave the advice which he claims to have given, including dictating to Mr Carroll over the telephone the terms of a notice which Mr Carroll could give. 19 Mr Hand's evidence was not altogether clear about whether the copy which he had available to produce in evidence (and it got into evidence by annexing a copy to Mr Carroll's affidavit) was the very piece of paper which he found in the security packet or another production which was the result of trying to darken an indistinct document by photocopying or repeated photocopying. 20 Another matter put forward as corroborating the circumstances of the plaintiff's claim was that Mr Carroll produced in evidence exhibit B, a copy of the document which he says he gave to Mr Shteyman. According to his narration, while Mr Shteyman was present and after Mr Carroll wrote out the notice on the original statement, Mr Carroll made a copy which he kept in his file. Later he sent a copy of that copy by fax to Mr Hand's office and telephoned a secretary working there to point out that he had done this. 21 There are internal inconsistencies in Mr Carroll's affidavit and oral evidence about when exactly he transmitted the copy to Mr Hand's office. On affidavit he said within a few days. In his oral evidence he said within an hour. What he says is borne out in a way by the fact that a copy was found well over a year later in the security packet, an event consistent with the copy having been received in Mr Hand's office by someone who worked there and placed in the security packet with the lease which would be an appropriate place. However, Mr Hand does not remember such event. 22 These matters support, but only in indirect ways, acceptance of Mr Carroll's claim to have delivered the notice. It is very improbable that Mr Carroll would have written out a notice and in some way transmitted a copy to Mr Hand's office and kept a copy in his own premises, yet did not deliver the original which was what the whole exercise was directed to. Mr Carroll is a poor recorder of detail. He acknowledged in evidence that he has great difficulty with papers, files and diaries and also showed by evidence that he can be quite unreliable on exact dates and other matters of detail. 23 Although challenged, Mr Carroll adhered very firmly under cross-examination to his claim, and when it was suggested that he did not give notice to Mr Shteyman he replied to the effect that that was impossible: "I most certainly gave it to him." 24 Mr Shteyman, in his affidavit and oral evidence, was no less emphatic in his denial of any such event, although the plaintiff's case was distinctly put to him by the cross-examiner. His response to the challenge took the course first of saying, when it was suggested that the notice was delivered about 23 March, that he did not come on the 23rd and that he came on the 25th. He then directed himself to the challenge itself and said, "I did not get any notification of exercise of the option. It never happened." He went on to say that if it had happened he would have accepted it on conditions. I thought this a curious response. It has to be taken with the position which he had taken earlier in his evidence when it was suggested to him that from March 1998 onwards his actions had been consistent with a belief that the option had been exercised. He responded by saying, referring to March 1998, that he did not know what an option was. To my mind this exhibits an unfortunate tendency to make overstatements and adopt very improbable positions, which was also shown in his emphatically expressed position with respect to late payment of rent. I do not accept that he sincerely believed the position he expressed when he complained of late payments of rent. 25 It was very difficult for the cross-examiner to bring Mr Shteyman to give an answer to any question which was truly directed to the subject of the question and I experienced the same difficulty when I attempted to clarify some matters. He spoke rather widely and at large and it was difficult to establish what had happened about any particular event because he did not address subjects put to him directly. On a number of occasions he introduced into what was nominally a response to a question matters of grievance or complaint which were not truly related to the question and I had the impression that he was seeking to improve his position by so doing; that he was endeavouring to create clouds about the subject matter and that he was evasive. 26 After March 1998 and the alleged delivery of the notice, the relationship of landlord and tenant continued without any apparent impact flowing from the notice. The first lease term expired at the end of August 1998 but the event seems to have been unmarked. It was the middle of the following year between correspondence between solicitors began and the position was put on behalf of the plaintiff that the plaintiff was looking for a grant of a lease for the extended term. In response the solicitor representing the defendant put a position which disputed entitlement but showed ready contemplation of continuance of the relationship of landlord and tenant on other terms. 27 Mr Carroll explained his not having done anything to obtain a further grant by saying that he did not see the necessity for a further grant of lease. I find this credible in relation to his general style of business and manner of conducting affairs as exhibited throughout his evidence. Many leasehold arrangements continue quite happily on the footing that entitlements to grant of a lease do not need to be formalised. 28 The defendant put some matters as grievances bearing on the question whether the plaintiff was ready, willing and able actually to comply with the obligations of lessee in a renewed lease and also bearing on the Court's general discretion to grant or withhold specific performance. 29 There are anomalies in what were said to be grievances. A striking anomaly is that if the plaintiff were perceived by the defendant as an unsatisfactory tenant and the continuation of the relationship was something which it was appropriate to resist, the defendant's concept of the relationship was that from the end of August 1998 the leasehold term had expired and the defendant was in a position to terminate the plaintiff's holdings on a month's notice. If the true position is that the defendant saw the plaintiff as an unsatisfactory tenant in breach of several obligations, it is an anomaly for the acceptance of the view that there was no exercise of the option that no action was taken, as could very simply have been taken, to terminate the holding with a month's notice. 30 Neither Mr Carroll nor Mr Shteyman exhibited what I regard as altogether satisfactory demeanour as a witness. Mr Carroll's manner of delivery and internal inconsistencies show that he is not a person of exact habits of mind or full or clear recollection, while I have also commented on what I see as unsatisfactory aspects of Mr Shteyman's giving of evidence and demeanour. 31 On the review of the evidence which I have made. my conclusion is that the balance of probabilities rather strongly favours the plaintiff's account being true, and I find that notice of exercise was in fact delivered at some date which cannot be exactly established late in March 1998 in the terms of the notice, Ex B. 32 The defendant did not deliver any notice under s 133E of the Conveyancing Act showing an intention to rely on any breach of a leasehold obligation. In any event, there was no significant breach of a leasehold obligation. If such an obligation had been perceived by the defendant as important it was open to the defendant to give a notice under s 129 of the Conveyancing Act or, on the defendant's view of the facts, to give a month's notice to quit after October 1998. Those courses were not taken. These circumstances and the lack of any kind of remedial action, together with the defendant's readiness to contemplate continuance of the relationship on different terms, are important in setting the context for the appraisal of what are said to be unsatisfactory aspects of the relationship and the plaintiff's performance under the lease. 33 One matter complained of is that it is said that the plaintiff has not complied with the lease with respect to the purposes for which the premises may be used. The lease specifies that the permitted use is "manufacturers and wholesalers of kangaroo and sheepskin products". The evidence establishes clearly that the premises are used for those purposes. However, they are also used for the retail sale on the premises of goods within limits imposed by approval granted by the local council under town planning powers, that is, that the goods sold by retail must be goods manufactured on the premises. It is not clear to me that sale by retail ancillary to the manufacture of goods on the premises by the lessee is not within the permitted use. Ancillary retail sales "out the back door" are quite a common aspect of use of premises by manufacturers. However that may be, Mr Carroll's evidence was that he obtained consent (and Pt 6 of the lease contemplates the giving of consent) from the original landlord for the retail sales activity. 34 In these circumstances it should not be found that there has been any breach of an obligation under the lease in this respect. 35 It was also put forward that the plaintiff has failed to comply with Council requirements regarding building control and has altered the premises without the defendant's consent. The evidence on this subject is to the effect that the alteration referred to occurred before the defendant became the owner. It is not clearly established when it happened; the evidence leaves open the possibility that it happened before the grant of the lease itself in September 1995. No current breach of an obligation in this respect has been established. 36 It has also been complained that payment of rent was late. I have already made observations on this and, while the rent may have been late on two or three occasions, there has been no substantial failure to meet the obligation, and the most significant aspect of the relationship with respect to rent is the regularity and reliability of payment. This regularity and reliability is itself strong testimony of the plaintiff's readiness, willingness and ability to comply with its obligations, in particular with the obligations which are of most significance. 37 In my judgment the plaintiff is entitled to succeed. The orders are as follows:

GOLDEN RAMS AUSTRALIA PTY LTD v SHTEYMAN & ANOR

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Decision date

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Judgment (9 paragraphs)

Parties

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