//
[1993] NTSC 21
General information, not legal advice.
Supreme Court of the NT
1993-03-26
Asche CJ, Thomas J
Original judgment source is linked above.
COURT IN THE SUPREME COURT OF THE NORTHERN TERRITORY OF AUSTRALIA THOMAS J CWDS Contract - lease of shopping complex HRNG DARWIN, 27-29 January and 1 February 1993 #DATE 26:3:1993 Appearances not available. ORDER Judgment for plaintiff. JUDGE1 THOMAS J This is an application by the plaintiff for summary judgment pursuant to Rule 22.02 (1). It was heard before me on 27, 28 and 29 January and 1 February 1993. 2. The dispute between the plaintiff and the defendant arises out of a contract for lease of part of the premises known as the "Hibiscus Shoppingtown" which is situated in the Darwin suburb of Leanyer. The dispute is over the application of clause 3.03 in the lease, which states: "PERCENTAGE RENTAL - The lessee shall pay to the lessor not later than one month after the end of each rental year without any further or other demand by way of additional rental (hereinafter called "percentage rental") for the rental year last concluded the amount or amounts payable as and for percentage rental as set out in the manner hereinafter provided. Percentage rental payable by the lessee to the lessor in the manner and at the times
hereinbefore provided shall be a calculated percentage of
gross receipts determined as follows:-
3.03.1 in the range from
$15,000,000.00 to $20,000,000.00 2%
of annual gross receipts (with the exception of annual
receipts from liquor sales) together
with 1% of total annual
receipts from liquor sales; and
3.03.2 in the range from $20,000,000.00 to $26,000,000.00
1.5% of
annual gross receipts (with the exception of total
annual receipts from liquor sales) together with 1% of total
annual receipts
from liquor sales; and
3.03.3 1% of annual gross receipts in excess of
$26,000,000.00."
3. The plaintiff, who is the owner
of the premises, contends that the
defendant tenant is liable for payment of rent in accordance with this clause
of the lease (in
particular clause 3.03.1) because gross receipts in the
defendant's shop have now exceeded fifteen million dollars. There is now
no
dispute between the parties that the gross receipts in the shop have exceeded
fifteen million dollars for the period 16 June 1991
to 15 June 1992. For the
rental year ended 15 June 1992 the defendant's annual gross receipts (as
defined in the lease) amounted
to $15,670,799.00.
Particulars
Gross receipts from liquor sales $ 1,731,441.00
Gross receipts from other sources
$13,939,358.00
$15,670,799.00
4. The parties have agreed, for the purposes of this
proceeding, to be bound
by the ruling of Asche CJ made on 24 December 1992 that the correct
interpretation of clause 3.03 is that
contended by the plaintiff, that is, the
component of percentage rental is calculated on the whole of the gross
receipts, and not
the amount by which gross receipts exceed fifteen million
dollars.
5. The plaintiff's claim is for: In the premises, the defendant
is indebted
to the plaintiff for the sum of $296,101.57 for percentage rental pursuant to
the lease.
Particulars
1% of annual
gross receipts from
liquor sales $ 17,314.41
2% of annual gross receipts from
other sources
$278,787.16
$296,101.57
6. The defendant contends that there are a number
of alternative defences and
a counterclaim available to it.
7. I turn now to consider the applicable law in respect of applications
for
summary judgment:
8. Rule 22.02(1) states:
"Where the defendant has filed an appearance, the plaintiff
may at any time
apply to the Court for judgment against the
defendant on the ground that the defendant has no defence to
the whole or part
of a claim included in the writ or
statement of claim, or no defence except as to the amount of
a claim."
9. In this matter
the plaintiff issued a writ and Statement of Claim dated 25
September 1992. On 16 October 1992 the defendant filed an appearance.
10. A plaintiff seeking summary judgement must make application by ordinary
summons (Order 46.02), and file an affidavit under Order
22.03 (1) "verifying
the facts on which the claim or the part of the claim to which the application
relates is based and stating
that, in the belief of the deponent, there is no
defence to that claim . . . .".
11. On 29 October 1992 the plaintiff issued an
ordinary summons seeking
summary judgment.
12. The summons was supported by the affidavit of Gregory Anthony Ryall sworn
28 October
1992.
13. The powers of the court in hearing the application are set out in Order
22.06. The court can (a) dismiss the application;
(b) give judgment for the
plaintiff for the whole of the claim; (c) give the defendant leave to defend
all or part of the claim either
conditionally or unconditionally; or (d)
dispose of the proceeding summarily (with the consent of the parties).
14. In deciding
whether to grant the application, the court will refuse the
application if relevant facts remain in dispute, or a difficult question
of
law remains to be decided. In cases where the defendant has a reasonably
arguable defence, the court will find that it is appropriate
for the matter to
proceed to trial.
15. The power to grant summary judgment should be exercised with care and
should not be exercised
unless it is clear there is no real question to be
tried. Fancourt v Mercantile Credits [1983] HCA 25; (1983) 154 CLR 87 at 99; Theseus
Exploration N.L. v Foyster [1972] HCA 41; (1972) 126 CLR 507.
16. The legal burden of proof is borne by the plaintiff throughout the
application, however when he has established a prima facie
right to an order,
a "persuasive" or "evidential" burden shifts to the defendant to satisfy the
court that judgement should not
be given against him. See Australian and New
Zealand Banking Group v David (unreported, Supreme Court of The Northern
Territory,
Kearney J, 6 December 1991).
17. Following the decision of Asche CJ in Civil and Civic Pty Ltd v Pioneer
Concrete (NT) Pty Ltd [1991] NTSC 3; (1991) 1 NTLR 43, it would appear that the mere raising
of a defence that is complicated or difficult will not of itself result in a
refusal to grant
summary judgement. His Honour had this to say at page 53:
"Why should not the plaintiff be entitled to judgment as soon
as
possible if there really is no defence? Why should he not
be entitled to save himself, and for that matter, the
defence, further
costs and delay when the issue can be
decided, albeit after somewhat extensive argument? I do not
think the mere complexity
or apparent complexity of the
argument should automatically shut out the plaintiff from
immediate relief. He faces the sanction
of costs if he is
unsuccessful; but if, ultimately, he shows clearly that there
is no defence there is every sensible commercial
reason why
the case should go no further."
18. Before I consider the defences and counterclaim, it is necessary to
consider in
some detail the events leading up to the dispute.
19. On 7 January 1983 the defendant entered into a lease for part of the
Hibiscus
Shoppingtown complex with the then registered proprietor of the land,
Kern Land Pty Ltd ("Kern"). This lease was for a period of
20 years
commencing on 16 June 1982. On 14 June 1983 the lease was registered at the
Land Titles Office.
20. The land was transferred
to Perpetual Trustees Australia Limited on 27
June 1984, and on 21 February 1989 it was purchased by the plaintiff, this
transaction
being registered on 15 May 1989. The plaintiff company was
incorporated in December 1988.
21. During the rental year ended 15 June
1992, the defendant's annual gross
receipts exceeded fifteen million dollars, and the plaintiff issued an invoice
to the plaintiff
seeking payment of percentage rental in accordance with
clause 3.03 on 1 July 1992. This invoice (and the subsequent statement of
claim) was based on gross receipts for an incorrect period, however this was
rectified at trial and I am satisfied that the correct
rental period has now
been applied.
22. On 29 October 1992, the plaintiff made application for summary judgment.
A defence and counterclaim
was filed by the defendant, and the matter came
before the then Chief Justice on 17 December 1992, resulting in the ruling
made on
24 December 1992 concerning interpretation of clause 3.03.
23. The plaintiff seeks judgment in the sum of $296,101.57, this amount
being
the amount of percentage rental payable under clause 3.03 calculated in
accordance with the interpretation of that clause
given by Asche CJ on 24
December 1992. The plaintiff also seeks interest and costs.
24. The defendant has raised a number of alternative
defences to the
plaintiff's claim, and a counterclaim has also been made. The plaintiff,
while not conceding that any of the defences
or the counterclaim have any
merit, has invited me to limit the issues to be considered at trial in the
event that I do not grant
summary judgment.
25. I must state at the outset that I approached the hearing with more than a
little concern because of the number
and complexity of the defences that had
been raised by the defendant. At first glance, it would seem difficult to
obtain summary
judgment when there is such an array of defences put forward.
I do, however, agree with the sentiments expressed by Asche CJ in Civil
and
Civic Pty Ltd v Pioneer Concrete (NT) Pty Ltd (supra) that "cuttlefish" should
not be able to defeat applications for summary
judgment by raising seemingly
complex issues to blot out otherwise simple cases. I note also that this is
the approach taken by
Mildren J in Territory Loans Management v Turner
(unreported, Supreme Court of the Northern Territory, 16 December 1992).
26. I
turn now to consider each of the defences and the counterclaim in turn.
27. The defendant firstly argued that the covenant to pay
percentage rental
created by clause 3.03 is a personal one and therefore does not pass with the
land. Because of this, the defendant
argued, the plaintiff is unable to rely
on the clause to claim additional rent from the defendant. The defendant
further argued
that the covenant does not touch or concern the land because
the method for calculation of "gross receipts" may result in the inclusion
of
transactions that do not have a connection with the leased premises.
28. I accept the submission of counsel for the defendant
that use of the word
"rent" in a lease does not automatically result in a finding that particular
payments are indeed rent, see Cox
v Harper (1910) 1 Ch 480, at page 487. I
am, however, unable to accept the argument by the defendant that clause 3.03
of the lease is unenforceable by the
plaintiff. It is clear to me that all
the types of receipts which are included as gross receipts are payments that
the defendant
would only receive by virtue of its business activities carried
on at the leased premises.
29. I therefore accept that clause 3.03
of the lease provides for the
calculation of payments of rent, and that the clause is therefore a covenant
of the type which runs
with the land. I therefore find that this element of
the defence has no merit and should not proceed to trial.
30. The next defence
listed in the defendant's defence and counterclaim is
that clause 3.03 is void for uncertainty. This defence was not expanded upon
at the hearing, and I therefore find that it is of no merit and should not
proceed to trial. In any event, the ruling on the interpretation
of clause
3.03 given by Asche CJ would appear to settle the matter.
31. The defendant next argued that the plaintiff is estopped
from denying
that percentage rental is payable on an overage basis only and that it is
unconscionable for the plaintiff to assert
otherwise.
32. In making this submission, the defendant relies upon a conversation
between a director of the plaintiff, Mr Tony
Ryall, and an employee of the
defendant, Mr Jim Miers, which took place on or about 9 March 1988. The
conversation took place because
Mr Ryall was considering the purchase of the
Woolworths supermarket business operated at the Hibiscus Shoppingtown by the
defendant,
including the defendant's interest under the lease. Mr Miers, in
his affidavit of 16 December 1992, stated that at this meeting
he provided Mr
Ryall with a document entitled "Lease Summary", and that he:
"pointed to the entry on the Lease Summary and said
to Mr
Ryall words to the effect that, 'in addition to base rent,
percentage rental is payable on the amount of turnover that
exceeds $15,000,000.00 at these rates.' At no stage was it
suggested by either of us that percentage rental would be
calculated
otherwise than as stated by me and particularly it
was never suggested by either of us that percentage would be
calculated
on the whole of the turnover rather than the
'overage', that is, the amount by which it exceeds a
particular base level, in
this case, $15,000,000.00."
33. Mr Miers went on to describe further conversation between himself and Mr
Ryall to the effect that
Mr Ryall was confident of increasing turnover and
making the percentage ratio of rental to sales more acceptable.
34. Mr Ryall,
in his evidence before me on 20 January 1993, stated that
although he did meet with Mr Miers on 9 March 1988 to discuss the possible
purchase of the Woolworths supermarket, he did not recall discussing with Mr
Miers how the rent on the premises was calculated.
35.
The defendant argued that, because of this conversation between Mr Miers
and Mr Ryall, the plaintiff: knew that the defendant believed
that percentage
rental was payable on 'overage'; that the plaintiff encouraged this belief by
Mr Ryall's silence about the true state
of affairs up until the time he
rendered an account on the defendant; that in reliance upon this
understanding the defendant acted
to its detriment by not seeking
rectification or otherwise organising its affairs to properly protect its
interest; and it would
therefore be unconscionable for the plaintiff to now
seek to enforce the provision of the lease and that it should be estopped from
doing so.
36. I accept that Mr Ryall had no reason to specifically remember the
conversation with Mr Miers so far as it had to do
with the method for the
calculation of rental payable. He says, and I accept, that at the time of his
conversation with Mr Miers
he did not consider it likely that gross receipts
would exceed $15,000,000.00 in the foreseeable future, and that he therefore
had
no reason to contemplate the true meaning of clause 3.03 until some time
later. He says, and I accept, that he first turned his
mind to the meaning of
clause 3.03 sometime in 1991.
37. I accept the evidence given by Mr Ryall on this aspect as set out on page
58 and 59 of the transcript of evidence:
"All right. Now, at the time when you obtained finance from
Beneficial to acquire
the shopping centre, did you have any
understanding as to the amount of rent that you'd be
receiving from Woolworths?---Yes.
All right. And was that based on any view that you had as to
the meaning of clause 3.03?---No.
All right. So you still
hadn't - hadn't formed the view of
the meanings of clause 3.03 that you rely on in these
proceedings?---That's as I understand
it.
When did you first form that view?---Well, I never took the
percentage rent clause seriously till some 18 months/two
years after I purchased the property. So, can you put a date on that for me?---It was really when I got the - the turnover started to escalate toward the 13m mark. Yes. I'm just asking for a date?---I would have thought that it was some - when I turned to seriously look at it it was some time in '91. All right. And at that point in time did you take legal adivce?---Not straightaway then, I did some months later. All right. That was about November '91, was it?---Correct. And, by this time you still hadn't told Woolworths that that was your view, had you?---No." 38. I refer to evidence given by Mr Ryall in cross examination concerning the meeting he had with Mr Miers on 9 March 1988. This evidence appears at page 23 and 24 of the transcript of Evidence. I accept the truth of the answers given by Mr Ryall. "Yes. At that point in time; at the time of your discussions with Mr Miers, did you have any opinion yourself as to the way in which clause 3.03 of the lease operated?---Definitely not. Would it be right to say that at that point in time you therefore accepted and proceeded on the assumption that Mr Miers' description to you of Woolworths' understanding of the way in which percentage rental worked was correct?---No, I've said that I don't recall that conversation taking place. I see?---It may have taken place, but I - it would have had not (sic) relevance to me whatsoever. At this point in time am I right in thinking that you had not (sic) interest in purchasing the freehold, you were just looking at buying the leasehold?---Most definitely. Those negotiations progressed, didn't they, to the point at which contracts were drawn up and you started looking for finance and that sort of thing?---Finance was approved and both sides were very keen to settle the matter. Yes. So you took it quite a long way, it wasn't just a tentative or preliminary inquiry?---Correct. You went a long way down the path?---Correct. No doubt at some stage during the course of your investigations you were concerned to note how much rent you'd be up for if you purchased the property?---Correct. Did you take advice as to the meaning of clause 3.03 at that time?---No. Did you have a view of your own as to what clause 3.03 meant at that time?---At that time, no. Well, did it occur to you at that point in time that on one view of the meaning of the lease as soon as you reached a turnover of $15m you'd suddenly have extra $300,000 rent to pay?---I never considered percentage rental because turnover was some 7 to 10 years away." 39. In the circumstances, I am unable to find that the facts support an argument in favour of an estoppel. The plaintiff had not been incorporated at the date of the meeting, and, in any event, I find that Mr Ryall's silence at that time could not amount to a representation, nor could his later "failure" to advise the defendant of his view of the correct interpretation of clause 3.03. The facts here are very different from those in Waltons Stores (Interstate) v Maher [1988] HCA 7; (1988) 164 CLR 387, where the silence did amount to an implied promise to enter the lease. I therefore conclude that this defence has no merit and should not go to trial. 40. The next argument made by counsel for the defendant was that the defendant is entitled to rectify clause 3.03 not only against Kern but also against the plaintiff so that it accords with the common intention of the parties to the lease when it was signed. 41. For rectification to be available, the defendant needs to establish firstly that there was a right of rectification against Kern by virtue of a common intention of the original parties to the lease that the percentage rental clause would apply only in respect of overage; and secondly that this right has not been extinguished by the subsequent sale of the property to Perpetual Trustees Australia Limited and the plaintiff. 42. In support of the first matter, the defendant relies upon the various affidavits sworn by persons involved with the management of either Kern or the defendant, either when the lease was being negotiated or at the time of trial. These are the affidavits of Mr Stephen McCarthy sworn 16 December 1992, Mr Martin White sworn 17 December 1992, Mr James David Miers sworn 16 December 1992 and affidavit of James David Miers sworn 20 January 1993. 43. I accept that, on a reading of these affidavits, and in particular the correspondence annexed to the affidavit of Mr Miers dated 20 January 1993, it is arguable that the agreement between the defendant and Kern Land Pty Ltd was that percentage rental be paid only on the overage. However, it is worth noting this correspondence was between June and August 1981. The lease was not entered into until June 1983. Because of my ultimate finding on this point, it is not necessary for me to decide the common intention of the parties to the lease, however, it is clear that if the agreement was for payment of percentage rental on overage only, this agreement was not reflected in the document which was ultimately executed by the defendant and Kern. 44. The effect of this is that the defendant may have been able to have the lease rectified while Kern remained the proprietor of the property. 45. For the defendant to be able to rectify the lease against the plaintiff now, it would have to establish fraud on the part of the plaintiff. Even applying the extended concept of fraud as adopted by the High Court in Bahr v Nicolay [1988] HCA 16; (1988) 164 CLR 604, I do not find anything in the actions or statement of Mr Ryall that could possibly be considered to be fraud such as to enable the defendant to obtain rectification as against the plaintiff. I therefore find that this element of the defendant's defence has no merit and should not proceed to trial. 46. Counsel for the defendant argued that the plaintiff has misled the defendant in respect of the true meaning of clause 3.03 and that this is in breach of section 52 of the Trade Practices Act 1974. The defendant argued that this means that it is entitled to an order pursuant to section 87(2)(g) to compel the plaintiff to execute an instrument to vary the lease so that percentage rental is payable on overage only. 47. In making this claim, the defendant again relies upon the conversation between Mr Miers and Mr Ryall on or about 9 March 1988, together with Mr Ryall's "failure" to correct the defendant's misapprehension about the true meaning of clause 3.03. Because of the reasons stated above in my discussion on the defence of estoppel, I cannot accept that Mr Ryall's actions can possibly amount to a representation, whether innocent or otherwise. 48. I have accepted Mr Ryall as a credible witness. In accepting his evidence I am not able to make a finding that Mr Ryall engaged in conduct that was misleading or deceptive or was likely to mislead or deceive. 49. The defendant has also raised the question of liability of Kern for breach of Section 52 and 53A of the Trade Practices Act 1974, and whether any liability for breach can be attributed to the plaintiff, by virtue of it being "directly or indirectly knowingly concerned in" the breach. 50. Irrespective of whether Kern has committed a breach of the provisions of the Trade Practices Act, the plaintiff cannot be a party to any breach unless it has knowledge of the elements of the contravention. There is no evidence in this case to show that the plaintiff knew of any potential breach by Kern. On the contrary, Mr Ryall gave evidence to the effect that he did not consider the provisions of clause 3.03 until some time after purchase of the premises. I accept the evidence given by Mr Ryall. 51. The defendant has argued that this issue should proceed to trial so that the defendant may bring forward evidence to show that the plaintiff did have knowledge of a breach by Kern, however, the defendant did not refer me to any such evidence or indicate what that evidence would be, and Mr Ryall has given evidence to the contrary. I have accepted the evidence of Mr Ryall and I do not consider there was misleading or deceptive conduct by Mr Ryall or that he was a party to misleading and deceptive conduct committed by Kern. I find that this issue should be disposed of here and not proceed to trial. 52. Following the evidence of Mr Ryall given in these proceedings, the defendant has made a counterclaim based on the charging by the plaintiff of operating expenses for the running of the shopping complex. The defendant's counterclaim is in respect of amounts charged for work performed by Mr Ryall as manager of the shopping centre. The defendant claims that, because the defendant did not actually pay to Mr Ryall a salary equal to the amount included in the operating expenses, or recognised in the accounting records a liability to pay such a salary, the plaintiff was not entitled to charge the defendant for the salary as part of the operating expenses for the shopping centre. 53. I accept that, on a strict interpretation of clause 1 which deals with the calculation of the operating expenses payable by the defendant, it is arguable that the plaintiff was not entitled to seek reimbursement for work performed by Mr Ryall but not recognised either by payment of a salary or acknowledgment in the accounting records of the plaintiff of a debt in respect of salary payable. 54. I am not satisfied, on the evidence currently before me, that this matter can be finally resolved by me at this point. I therefore find that there should be a trial in respect of the counterclaim. 55. Counsel for the defendant also submitted that I am entitled to consider the effect of the former Chief Justice's ruling in the event that I proceed to order summary judgment. The argument is that, by making such an order, I effectively close off the opportunity for new argument on the interpretation of clause 3.03 which would have been available had the matter proceeded to trial. 56. I have some difficulty with this line of argument. Both parties had an opportunity to put their submissions to His Honour the Chief Justice on 17 December 1992. His Honour the Chief Justice then made a ruling on this issue on 24 December 1992. The defendant refers in particular to the extrinsic evidence that is now available particularly annexures JDM1, JDM2 and JDM3 of Mr Miers' affidavit dated 30 January 1993 that were not before the Chief Justice. These annexures are the correspondence I have already referred to between the defendant and Kern in the period 19 June 1981 - 5 August 1981. I am not persuaded that this evidence would alter the ruling made by the former Chief Justice. I do not think it is appropriate for me to consider the chances (or otherwise) of success by the defendant on a fresh argument of this issue. 57. I turn now to consider the appropriate form of the order that I should make in this matter. I have found that all of the defences to the plaintiff's claim have no merit, but that a counterclaim in respect of the charging of operational expenses should proceed to trial. 58. Counsel for the plaintiff submitted that the appropriate order to make in these circumstances is an order for summary judgment, subject to the counterclaim being heard. 59. Counsel for the defendant argued that because Rule 13.14 enables a counterclaim for a debt or damages to operate as a defence to the plaintiff's claim, it is either not possible to give summary judgment when the counterclaim is yet to be heard, or alternatively, there would need to be extraordinary circumstances before I should grant an order for summary judgment at this stage. 60. My view is that Order 22 anticipates that, in circumstances where a plaintiff would be entitled to summary judgment but for the existence of a counterclaim, the court may grant the summary judgment in respect of the claim but may stay the execution of the judgment until after the trial of the counterclaim. See particularly Rule 22.06(2) read with Rule 22.06(1)(b). 61. I therefore give judgment for the plaintiff in respect of the claim for percentage rental in the sum of $296,101.57. I grant the parties liberty to apply in respect of the questions of interest, costs, and whether there should be a stay of the judgment pending hearing of the counterclaim. I grant a temporary stay of execution, pending argument on the question of whether there should be a stay until hearing of the counterclaim.
Hibiscus Shoppingtown Pty Ltd
Woolworths
(1983) 154 CLR 87
(1972) 126 CLR 507
(1991) 1 NTLR 43
(1988) 164 CLR 387
(1988) 164 CLR 604