Inndeavor Apartment Wolli Creek Pty Ltd v Maroun Pty Ltd
[2024] NSWCA 237
At a glance
Source factsCourt
Court of Appeal (NSW)
Decision date
2024-08-21
Before
Ward P, Stern JA, McHugh JA
Catchwords
- [2019] HCA 49 Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153
- [2001] NSWCA 61 Farriss v Axford [2023] NSWCA 255 Suttor v Gundowda Proprietary Limited (1950) 81 CLR 418
Source
Original judgment source is linked above.
Catchwords
Judgment (14 paragraphs)
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
HEADNOTE [This headnote is not to be read as part of the judgment] Lance Li is the director of Inndeavor Apartment Wolli Creek Pty Ltd ("Inndeavor", the first appellant). Inndeavor conducted a business of providing leasing services in the southern suburbs of Sydney and subleased apartments to international students. Mark Taouk is a director of, and holds a 50% shareholding in, Maroun Pty Ltd ("Maroun", the first respondent). He also holds a 50% shareholding in TQM Design & Construct Pty Ltd ("TQM", the second respondent). Maroun is the registered proprietor of, and TQM was contracted to construct, a residential apartment complex (the "Property"). On 31 August 2018, Inndeavor and Century 21 Wentworth Real Estate - Sydney Pty Ltd (the leasing agent for Maroun and TQM, "Century 21") entered into a document styled as an "Agreement to Lease". By the Agreement to Lease, through Century 21 as agent, Maroun agreed to lease 109 apartments within the Property to Inndeavor. The lease term was 48 months (with an option to renew for a further 48 months) and the bond payable was "4 weeks rent". The parties agreed that each residential lease to be granted pursuant to the Agreement to Lease would incorporate its terms, as applicable. Between around January and March 2019, Inndeavor entered into 41 residential tenancy agreements, with the remaining residential tenancy agreements governed by the Agreement to Lease (all 109 of these agreements are referred to as the "Leases"). It was common ground that the Leases were entered into between Maroun and TQM on the one hand, and Inndeavor on the other, and that rent was payable to Maroun and TQM under the Leases. Inndeavor advanced $319,400 to Century 21 as rental bonds due under the Leases. The total weekly rent for the 109 apartments was $79,850. From around December 2019, Inndeavor was under financial pressure due to an increasing number of apartment vacancies. A one-off, one week rental reduction of $20,000 was agreed between Mr Li and Mark Taouk. There followed a number of Rent Reduction Arrangements in 2020 and 2021. There was no agreement as between the evidence of Mark Taouk and Mr Li as to what exactly was agreed by way of temporary rent reduction. Inndeavor says that the amount owing under the Rent Reduction Arrangements was $45,142.86 ("Inndeavor Reduced Arrears Figure"). A "Handover Agreement" dated 5 October 2021 was signed by Mr Li and Mark Taouk, who was described as "Authorised representative of Maroun Pty Ltd." There is no mention of TQM in the Handover Agreement. Under the Handover Agreement, Inndeavor remained obliged to pay "arrears", a word which was not defined in the Handover Agreement. The parties agreed that at the relevant time Inndeavor owed rental arrears of $1,313,710 under the Leases ("Rental Arrears"). However, Inndeavor contended that it was not required, under the Handover Agreement, to pay the Rental Arrears, but was instead obliged only to pay the Inndeavor Reduced Arrears Figure, which it paid on 9 November 2021. Inndeavor commenced proceedings against Maroun and TQM for the repayment of $319,400 which it had paid by way of rental bonds under the Leases ("Bond Repayment"). Maroun and TQM cross-claimed against Inndeavor for the payment of the Rental Arrears. By an ex tempore judgment on 6 December 2023, the fourth day of the trial, the primary judge found that TQM was not bound by the Handover Agreement. The primary judge concluded that, in those circumstances, Inndeavor could not resist TQM's claim to be paid the Rental Arrears subject only to setting off the Bond Repayment. The primary judge entered judgment for TQM on the cross-claim for $1,117,653, being $1,313,710 (the amount of the Rental Arrears) less $319,400 (the Bond Repayment) plus pre-judgment interest. Maroun was granted leave to withdraw its cross-claim. Inndeavor appeals against this decision. The issues on appeal were: (i) Whether there was any release of Inndeavor's obligations to pay the Rental Arrears by an accord constituted or evidenced by the Handover Agreement, which it satisfied. This relevantly turned (as a threshold issue) on whether the term "arrears" in the Handover Agreement should be construed as referring only to the amount owing under the Rent Reduction Arrangements. (ii) Whether Inndeavor proved the amount owing under the Rent Reduction Arrangements at 3 November 2021 was $45,142.86. (ii) Whether the primary judge erred in finding that TQM was not a party to the Handover Agreement. (iii) Whether the primary judge erred in finding that the obligation to pay the Rental Arrears was owed severally, and not jointly, to Maroun and TQM. The Court (Stern JA, Ward P and McHugh JA agreeing) held, dismissing the appeal: As to issue (i) (1) Inndeavor could not succeed in its appeal unless its obligations under the Leases to pay the Rental Arrears was somehow released by an accord, which it satisfied, constituted or evidenced by the Handover Agreement. This, in turn, required that the word "arrears", where it appeared in the Handover Agreement, be construed as referring only to the amount owing under the Rent Reduction Arrangements (and not the Rental Arrears): [9], [27]. (2) "Arrears" in the Handover Agreement did not mean only amounts owing under the Rent Reduction Arrangements in circumstances where the parties were agreed that the arrears for which Inndeavor was then liable were in fact the Rental Arrears and not the amounts owing under the Rent Reduction Arrangements, where there is nothing in the Handover Agreement that suggests that "arrears" should mean anything other than the amounts actually owing under the Leases, where cl 5, and to some extent cl 15, of the Handover Agreement is consistent with the parties, objectively, understanding that it was possible that a sum in excess of the $319,400 Bond Repayment figure was owing by way of "arrears" at that time, and where matters after 5 October 2021 could not be prayed in aid of construction of the Handover Agreement: [29]-[34]. Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61, considered. (3) The Handover Agreement did not constitute or evidence a release of the obligation of Inndeavor to pay the Rental Arrears: [34]. As to issue (ii) (4) On balance, the evidence did not meet the threshold of showing, on the balance of probabilities, that the $45,142.86 paid on 9 November 2021 was the amount then owing under the Rent Reduction Arrangements. The factual premise for those calculations was lacking in circumstances where, under the Rent Reduction Arrangements, Maroun and TQM expressly required that the full amount of rent be paid in the event of any default in the Rent Reduction Arrangements such that even under those arrangements it could not be said that the reduced weekly figure was all that was owing. There was no contemporaneous document that supported Inndeavor's characterisation of this sum as the balance due under the Rent Reduction Arrangements. The Court could not find that there was any agreement that $45,142.86 was the amount owing under the Rent Reduction Arrangements when no such agreement was put to Mark Taouk in cross-examination and there was no evidence of Mr Li to that effect: [49]. As to issue (iii) (5) Having regard to the position taken by Inndeavor at first instance, Inndeavor should not be permitted, on appeal, to contend that TQM was a party to the Handover Agreement. As Maroun and TQM submitted at first instance, Inndeavor expressly conceded that TQM was not a party to the Handover Agreement and that Maroun did not enter the Handover Agreement as agent for TQM. It would be prejudicial to the administration of justice to permit Inndeavor to resile from that concession on appeal: [70]. Farriss v Axford [2023] NSWCA 255, considered. (6) Had Inndeavor advanced a contention at trial that TQM was bound by the Handover Agreement, TQM may well have sought to meet that contention by adducing evidence by way of surrounding circumstances. To the extent that Inndeavor's submissions on appeal relied upon both principles of agency, and partnership, Maroun and TQM may well have sought to lead evidence going to how those principles may have operated on the facts of this particular case. Contrary to the submission of Senior Counsel for Inndeavor on the appeal, it could not be assumed that there would be no evidence that could be led going to these issues. That was a further reason for refusing to permit Inndeavor to raise the point on appeal, for the first time: [70]. Suttor v Gundowda Proprietary Limited (1950) 81 CLR 418; [1950] HCA 35, considered. As to issue (iv) (7) Inndeavor's contention that the primary judge should have found that the entitlement to payment of the Rental Arrears was a joint entitlement of Maroun and TQM had no "anchor" in Inndeavor's pleadings and Inndeavor did not make any submissions before the primary judge to the effect that the entitlement to be paid the Rental Arrears was one held jointly by Maroun and TQM such that any release by Maroun extinguished the entitlement of TQM. In these circumstances, Inndeavor should not be permitted to raise this contention for the first time on appeal: [72]-[75]. (8) In circumstances in which (a) there was no finding that the entitlement of Maroun and TQM to be paid rent was joint, as opposed to joint and several, or several, (b) there was a finding that TQM was not bound by the Handover Agreement, and (c) there was a finding that the Handover Agreement did not operate to discharge or release Inndeavor's liability to pay the Rental Arrears in any event, it was not appropriate to consider further the question whether any obligation Inndeavor owed to pay the Rental Arrears to TQM might have been released by reason of the Handover Agreement: [76].