Kavia Holdings Pty Ltd v Bevillesta Pty Ltd

LEGISLATION CITED : Civil Procedure Act 2005 (NSW) - s.56

CASES CITED : Kavia Holdings Pty Ltd v Bevillesta Pty Ltd [2006] NSWSC 633 Wheeldon v Burrows (1879) 12 Ch D 31

PARTIES : Kavia Holdings Pty Ltd - Plaintiff Bevillesta Pty Ltd - Defendant

COUNSEL : M.A. Ashhurst - Plaintiff S.A. Kerr - Defendant

SOLICITORS : Aubrey F. Crawley & Co - Plaintiff Bartier Perry - Defendant

1290/06 Kavia Holdings Pty Ltd v Bevillesta Pty Ltd (No 2)

1 The Plaintiff ("Kavia") leases from the Defendant ("Bevillesta") substantial restaurant premises in the Festival Markets Building at Darling Harbour. In these proceedings Kavia sought a declaration that Bevillesta was required to permit it "to store" garbage generated by the restaurant business in specified areas of the Festival Markets Building or, alternatively, upon some other area in the common property, as might be designated by Bevillesta. 2 The proceedings came on for hearing before me on 14 June 2006 and I delivered judgment on 27 June: Kavia Holdings Pty Ltd v Bevillesta Pty Ltd [2006] NSWSC 633. I will assume for the purposes of this judgment that the reader will acquaint himself or herself with the previous judgment. 3 I held: "Kavia is entitled to a declaration to the effect that it may store garbage from the restaurant premises upon some convenient part of the common property in the Festival Markets Building for the purpose of having the garbage removed from the Festival Markets Building. I do not think that this implied or ancillary right gives Kavia some sort of prescriptive right over the garbage room or over the loading dock nor does it entitle Kavia to stipulate, in its own discretion, where that area is to be located. However, the location must be reasonably convenient to the demised premises." 4 I stood the proceedings over for a short time to enable Kavia to bring in Short Minutes of Order reflecting my reasons. Correspondence ensued between the parties. The matter was listed on 13 July 2006. The parties disagreed about the form of the declaration which ought to be made. 5 It became apparent that Kavia believed that the declaration which I had foreshadowed in my judgment meant that it would be entitled to leave its garbage on that part of the common property designated by Bevillesta, that Bevillesta would be responsible for the removal of the garbage, and that Bevillesta would be reimbursed by Kavia for the cost of removal pursuant to Kavia's obligations under the sub-lease to contribute to "Operating Expenses" for the Festival Markets Building. 6 Bevillesta, on the other hand, took the position that the word "store" in the declaration should be retained in the declaration, despite Kavia's wish to change it somewhat, because the word "store" did not necessarily mean that Kavia was entitled to leave the garbage for ultimate removal by Bevillesta: "store" could mean "leave for the time being", the question of who was ultimately responsible for removal and who was ultimately responsible for paying the cost thereof being left unresolved. 7 It became clear to me in the course of discussion that Bevillesta, having been unsuccessful in its defence of the proceedings, nevertheless now wished to have the declaration worded in such a way as would leave it free to assert later that the very question which these proceedings were entitled to settle - namely, who was responsible for disposing of Kavia's rubbish and at whose expense - was still open for debate. 8 It seemed to me that it was unlikely that any variation of the words of the declaration as originally sought by Kavia would address the real issue between the parties because the real issue - i.e., who is to pay - had not expressly been made the issue in the proceedings by the terms of the declaration sought. Mr Ashhurst, who appears for Kavia, says, and I accept, that Kavia believed that resolution of the question posed in the declaration as originally sought would automatically resolve the question of who was to pay for the cost of removal. However, Bevillesta does not see the matter that way. Whether leave to amend should be granted

9 Section 56 Civil Procedure Act 2005 (NSW) relevantly provides: "(1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings.

(2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule.

(3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court." 10 Bevillesta would have it that if the real issue in these proceedings is not resolved by the terms of the declaration originally sought by Kavia, so that these proceedings have been a complete waste of time and money, that is just too bad for Kavia. 11 I regard it as fundamentally inimical to the purpose of s.56 CPA that, after fully contested proceedings, a declaration should be made in terms which leave scope for one of the parties to assert that the real issue between the parties is not settled. 12 In the course of the directions hearing on 14 July 2006, the following exchange occurred: " His Honour: I would refuse to make an order at the discretion of the court because that will lead to more arguments and more costs and it is futile.

Ashhurst: If your Honour is of that view, we are content to amend to put in a further declaration which is more directly to the point of who is directly responsible for paying.

His Honour: If the parties are really keen to keep on fighting and spend a lot of money over the next five years over a pile of rubbish it is better to grasp the nettle, properly framed, and get an answer and then you can take it to the High Court, but at least you have got a question that is going to be answered one way or another and is going to resolve your problem. Why don't you frame a question, the declaration that you seek, and see what Mr Kerr says about it. Mr Kerr, do you have general instructions at this stage?

Kerr: Can I say this without binding myself, of course. In principle it would be difficult for us to resist that. It would be hard for me to point to some overwhelming prejudice which would mean the court would not entertain such an application. I would like to reserve my position until we see the actual terms of the order sought." 13 It was agreed that Kavia would serve a proposed Further Amended Statement of Claim and that, as the question raised was one purely of construction requiring no further evidence, Counsel would make their submissions entirely in writing. 14 Mr Ashhurst delivered a proposed Further Amended Statement of Claim. The amendments sought are only to the prayers for relief. Paragraph 1 of the prayers is in the same terms as in the original Statement of Claim. Amendments have been made to paragraph 2 and a new paragraph, 2A, has been added. The relevant prayers for relief in the proposed Further Amended Statement of Claim are as follows: "1. A declaration that by operation of the lease registered number AA723457S ("Lease") the defendant is required to permit the plaintiff to store the food waste, bottles and other rubbish ("garbage") generated by its business carried on at the premises being Shop 197 and Terraces T101 and T102 ("premises"), being part of the land in Volume 8628 Folio 162B and known as Festival Markets Building ("Festival Markets") in the "garbage room" located at the south west side of the festival markets adjacent to the south west entrance or alternatively at the loading dock of the Festival Markets or some other designated area in the Festival Markets suitable to the plaintiff.

2. A declaration that that [sic] by operation of the Lease the defendant is required to remove from the " garbage room" (or such other part of the common areas of the Festival Markets that the Plaintiff may be properly be directed to deposit its garbage at ) the "garbage" referred to in paragraph 1 herein .

2A . A declaration that the Plaintiff is not required to pay the Defendant for the cost of the garbage removal service referred to in paragraph 2 herein except as provided for in the Plaintiff's payments of "Operating Expenses" to the Defendant in accordance with clauses 2.1-2.4 of the First Schedule of the Memorandum and clause 1.2 of the Second Schedule of the Memorandum to the Lease . 15 Kavia delivered its written submissions on 21 July 2006. Bevillesta delivered its submissions in answer on 4 August 2006. Kavia delivered its submissions in reply on 21 August 2006. Although not given leave to respond, Bevillesta delivered further written submissions on 4 September 2006. No leave to deliver this last set of submissions was given to Bevillesta and Kavia does not consent to their acceptance by the Court. However, because Kavia's submissions in reply invoked the "slip rule" for the first time, I think it appropriate to give leave to Bevillesta to make the further written submissions. 16 Notwithstanding the attitude taken on 14 July 2006 by Mr Kerr, which I have set out above, Bevillesta now opposes Kavia's application for leave to amend in order to seek the further declarations. 17 First, Bevillesta submits that Kavia is seeking, by the amendment, "to re-open the judgment". I do not agree. The amendments do not seek a result different from the decision already made. They seek to supplement and clarify the terms of the declaration, as originally sought, which I have indicated I would be prepared to make if it had practical utility. The amendments seek additional declarations which will give such utility to the declaration already sought. 18 Second, Bevillesta submits that the amendments "raise new factual and legal issues". The amendments certainly raise a new legal issue, namely, the construction of the sub-lease as to who is to pay for the cost of rubbish removal. However, Bevillesta has given no sufficient particulars of the "factual issues" raised by the proposed amendments. On 14 July Mr Kerr could not point to any "overwhelming prejudice" if the amendments were allowed. All that is said about "new factual issues" in Bevillesta's written submissions is: "20. The question of how the cost of removal of garbage for the Festival Markets Building is currently shared between the plaintiff, defendant and other tenants, and whether, and in the event the answer is in the affirmative how, the cost of removal of the plaintiff's garbage is shared between the plaintiff, defendant and other tenants, was only briefly touched upon in the course of the trial. It was not germane to the issues agitated at the trial. It is central to a consideration of the merit of the plaintiff's claim to the declaration sought at paragraph 24 of its pleading.

21. Furthermore it was only addressed by the plaintiff in the context of whether the plaintiff had a right to store its garbage in common areas. There was no evidence given or submissions made as to who is required under the lease to pay the cost of removal of the plaintiff's garbage once it is placed in any garbage storage site." 19 These statements do not elucidate at all what the facts as to cost sharing of rubbish removal between Kavia, Bevillesta and "other tenants" have to do with the construction of the terms of the sub-lease between Kavia and Bevillesta. These "facts" seem to be either post-contractual conduct or res inter alios acta, or both. The bold and bare assertion that these "facts" are "central" to a consideration of Kavia's construction case adds nothing. 20 Further, the assertion that "there was no evidence given … as to who is required under the lease to pay the cost of removal" is beside the point. The question "who is required under the lease to pay the costs of removal" is not to be answered by the evidence of witnesses but by a construction of the terms of the sub-lease itself. 21 Bevillesta does not point to any prejudice in its ability to deal with the purely legal issues of construction raised by the amendments sought. Indeed, Bevillesta has made full submissions on the question of construction.

• Kavia has argued the case on the basis of the declaration originally sought;

• it had the opportunity to raise the present point but did not do so;

• Kavia should, therefore, be held to have abandoned this point.

I do not agree 22 Judgment in the proceedings has not yet been entered. No final orders have been made. Formulation of the draft orders has revealed the real issue underlying the dispute between the parties. In my opinion, in the interests of finality and expediency, the real issue should be resolved in these proceedings and leave to amend should be given. 23 Bevillesta has made other submissions as to why leave to amend should be refused. However, they are variations on the themes to which I have already referred. I trust that these reasons are sufficient to explain my decision to grant leave. Construction of the sub-lease

24 The sub-lease provides: "2.1 Rates and Taxes and Operating Expenses : In addition to the Minimum Rent and any other moneys payable by the Lessee to the Lessor hereunder the Lessee shall pay to the Lessor its proportionate part of the Rates and Taxes and Operating Expenses.

Clause 1.1.25 provides: "' Operating Expenses ' means the total in each Lease Year of all costs, charges, expenses and other outgoings paid or payable by the Lessor in cleaning, servicing, maintaining managing, operating and keeping secure the Festival Markets including in particular, but without limiting the generality of the foregoing …: … 1.1.25.3 all charges for water (including excess water) gas, oil, electricity, light, power, fuel, telephone, loud speaker and inter-communication and broadcast systems, sewerage, garbage and other services furnished or supplied to the Festival Markets for the benefit or purposes of the Festival Markets; … 1.1.25.6 the costs of cleaning the car parks, Common Areas, signs and the interior and exterior of the Festival Markets including the costs of garbage removal and/or compacting service which is charged on account of the Festival Markets or the costs (including without limiting the generality of the above rental and interest charges wages and removal costs) of operating any garbage removal and/or compacting service for the Festival Markets whether within the Festival Markets or elsewhere; … 1.1.25.13 all other costs and expenses in each Lease Year now or hereafter assessed or assessable charged or chargeable paid or payable or otherwise incurred or to be incurred upon or in respect of the Festival Markets or upon the Lessor in relation to the Festival Markets and/or in the conduct, management, maintenance, use and occupation of the Festival Markets as a shopping and commercial centre (and it is expressly provided that the costs and expenses included within this paragraph shall not be limited by reference to any of the preceding paragraphs)." 25 Clause 1.1.2 provides: "' Common Areas ' means those areas and facilities which may be provided, from time to time, by the Lessor in, on, under, near or about the Festival Markets for the non-exclusive, general or limited common use of Lessees, sublessees licensees and other occupants of the Festival Markets, their officers, agents, employees, customers, invitees, licensees, suppliers and workmen, and members of the public and those areas and facilities used exclusively for cleaning, servicing, maintenance, management and marketing of the Festival Markets." 26 Clause 6.1 provides: " Use, Management and Control : The Lessor shall operate, maintain and control or cause to be operated, maintained and controlled the Common Areas in such manner as the Lessor shall in its absolute and sole discretion determine from time to time." 27 In the previous judgment I held that Kavia has the benefit of an easement to store its garbage on designated areas on the common property. Clause 6.1 gives Bevillesta the exclusive control and management of the common property. No one can remove rubbish stored in those areas without Bevillesta's permission. Rubbish is stored in the garbage areas on the common property not only by Kavia but by other tenants, as the evidence previously given makes clear. The cost of garbage removal from the common property is expressly made by Clause 1.1.25.3 and 1.1.25.6 one of the "operating expenses" recoverable by Bevillesta from Kavia. There is no other provision in the sub-lease which makes the cost of removal of Kavia's rubbish from the common property an expense which Bevillesta may directly charge to Kavia. 28 It would be strange to construe the sub-lease in such a way as to enable Bevillesta to charge Kavia directly for removal of its rubbish from the common property and to charge it again under "operating expenses" for the cost of removing rubbish of other tenants from the common property. 29 In my opinion, as Mr Ashhurst submits, these considerations lead me to construe the sub-lease as giving to Bevillesta the responsibility of removing from the common property the rubbish which Kavia has a right to deposit there, and entitling Bevillesta to charge Kavia with the costs of removal as an "operating expense", but not otherwise. It is true that the sub-lease does not impose an express obligation on Bevillesta to remove anyone's rubbish from the common areas but if Bevillesta simply left the rubbish to accumulate, the building as a whole and Kavia's premises in particular would doubtless soon become untenantable, so that Bevillesta would be in breach of its covenant for quiet enjoyment. 30 In reaching this conclusion, I have considered the submissions of Bevillesta to the contrary. Those submissions, and my reasons for not accepting them, are as follows. 31 Bevillesta relies on Clauses 4.19 and 4.30 of the sub-lease, which are as follows: "4.19 Rubbish Not permit any rubbish or garbage to accumulate on the Premises nor on the Festival Markets unless confined in suitable containers of a type approved for such purpose by the Lessor and so located as not to be visible to members of the public at the Festival Markets. … 4.30 To Keep Clean : Keep the Premises, the exterior façade and the exterior and interior portions of all windows, doors and all other glass or glass fixtures in a thorough state of cleanliness free from dirt and rubbish and particularly shall store and keep all trade waste and rubbish in proper receptacles approved of by the Lessor and provide the Lessor with details of the Lessee's arrangements for the regular removal thereof from the Premises and comply with such arrangements as approved in writing by and any other requirements of the Lessor." 32 Bevillesta says that these clauses make it clear that Kavia is ultimately responsible for the permanent removal of its garbage not only from its premises but also from the Festival Markets Building. I do not agree. Mr Coles raised the same argument at the earlier hearing as a ground for denying the implication of an easement to store rubbish in accordance with the rule in Wheeldon v Burrows (1879) 12 Ch D 31. For the sake of convenience, I repeat the passage in my judgment in which I dealt with that submission: "31 Mr Coles says that these clauses, particularly the words in Clause 4.30 "the lessee's arrangement for the regular removal (of trade waste and rubbish) from the premises", coupled with the absence in the lease of any express obligation on the part of Bevillesta to arrange for the storage and removal of rubbish, make it clear that Kavia is obliged to make arrangements, at its own expense, for the storage of its trade waste within the demised premises until it can be removed directly from the premises and taken away from the Festival Markets Building.

32 I am unable to accept this submission. Clause 4.19 is directed to the type of containers used to store rubbish. Clause 4.30 relevantly requires Kavia to do no more than to keep the demised premises free of rubbish, to store rubbish in proper receptacles approved by Bevillesta - it does not say where such receptacles are to be stored - and to inform Bevillesta of what arrangements have been made for the removal of rubbish from the premises. Kavia may do all of those things by placing garbage in proper receptacles on the subject premises as the rubbish accumulates during the course of daily operations and removing that garbage from the premises at regular intervals throughout the day and taking it to the garbage room or some other rubbish disposal area within the common property in the Festival Markets Building, just as it and its predecessor have been doing since 1988.

33 Clause 4.30 does not contain an express requirement that all trade waste shall be "stored on the demised premises" nor does it contain any express prohibition against Kavia storing any trade waste from the restaurant on the common property. In light of the fact that the lessor had a specially designated garbage room and a specifically designated rubbish disposal area located on the common property as at the commencement of the lease to Kavia, I am unable to imply such a requirement or prohibition into the lease as being so obvious as to go without saying or as being necessary to give business efficacy to the lease generally or to Clause 4.30 in particular." 33 I should add the following observation. Mr Coles submits that Clause 4.30 refers to Kavia's obligation to remove rubbish from the sites on common property which are used to store rubbish deposited by all tenants. I do not agree. Clause 4.30 refers only to removal of rubbish from the restaurant premises. The clause cannot be made to extend further, for the reasons which I have given in the earlier judgment. 34 Bevillesta says that its construction of the sub-lease as requiring Kavia to be ultimately responsible for the removal of rubbish from the common property is supported by clauses in the Second Schedule of the sub-lease, which is entitled "Food Lessee Schedule". 35 Clause 1.1 of the Second Schedule provides: "The provisions of this Schedule are specifically applicable to Food Lessees.

However, Clause 5.3 of the sub-lease expressly provides that Kavia "is not a "Food Lessee" for the purposes of the Second Schedule to the Lease" . The whole of the Second Schedule is, therefore, made inapplicable to the rights and obligations of Kavia under the sub-lease. I am unable to see how its provisions can be called in aid to construe Kavia's rights and obligations under those provisions of the sub-lease which are applicable to it. 36 Nevertheless, I have considered the submission of Bevillesta founded upon the Second Schedule. I do not need to prolong this judgment by recounting those submissions in detail. With respect, I do not think they are of substance. 37 It is submitted that the provisions of the Second Schedule, which require Bevillesta itself to pay for removal from specified eating areas of rubbish generated by other tenants, is an exception to what is said to be the requirement, derived from the true construction of the rest of the sub-lease, that Kavia pay for removal of its own rubbish. It seems to be suggested that because Bevillesta is required to pay for rubbish removal for other tenants in a certain circumstance, in a different circumstance it must follow that Bevillesta is not required to pay for rubbish removal for Kavia. I do not see the logic of that submission nor do I see any necessary link between the Second Schedule (which is not applicable to Kavia) and the provisions of the sub-lease which are applicable to Kavia which could produce the result for which Bevillesta contends. 38 Bevillesta places reliance on Clause 16.9 of the sub-lease, which provides: " Lessee's Obligations : Whenever the Lessee is obliged or required hereunder to do or effect any act, matter or thing then the doing of such act, matter or thing shall unless this Lease otherwise expressly provides, be at the sole risk and expense of the Lessee." 39 I do not think that this clause takes the matter any further. It raises, but does not answer, the question: does the sub-lease require Kavia to remove its rubbish, not only from the restaurant premises (which is not in dispute) but also from the garbage storage areas on the common property? 40 Bevillesta relies on Clause 2.7 of the First Schedule which states: "… PROVIDED THAT any Rates and Taxes and Operating Expenses which are rated, levied or assessed directly upon the Premises and not upon the Festival Markets as a whole shall be paid by the Lessee." 41 The only part of this clause which could be of any relevance is the reference to "Operating Expenses". But the undisputed evidence previously given in the case was that from the commencement of the sub-lease in 1988 until this dispute arose in January 2006 no "Operating Expense" for the removal of rubbish was ever "assessed directly upon the Premises". Indeed, the evidence was entirely to the contrary: throughout the whole of that period, the cost of removal of Kavia's rubbish from the designated areas on the common property was one of many Operating Expenses for the whole of Festival Markets Building, to which Kavia made proportionate contribution under Clause 2.1 of the First Schedule. 42 Bevillesta submits that its construction of the sub-lease is supported by Clause 4.5. That clause provides: " Conduct of Business : At all times at its own expense provide and maintain materials, stock, equipment and staff necessary and adequate for the conduct in accordance with the Permitted Use of the Lessee's business with all diligence and efficiency and in a proper and business like manner consistent with obtaining a high volume of business in and at the Premises during the Term having regard to the location of the Premises and provide a level of mercantile quality which compares favourable to the standard of goods and services available elsewhere in the Festival Markets or any relevant part thereof designated as such by the Lessor from time to time and otherwise conduct its business in all respects in a dignified and courteous manner in accordance with the highest standards of an urban specialty retail store operation as determined by the Lessor from time to time and made known to the Lessee."

In my opinion, that clause is of no relevance. It is concerned only with Kavia's obligations as to the efficient conduct of its business within the restaurant premises. Orders

43 For the reasons which I have given, I conclude that Kavia is entitled to the declarations sought in paragraphs 1, 2 and 2A of the proposed Further Amended Statement of Claim. 44 Accordingly, I make the following orders and declarations:

1. Grant leave to the Plaintiff to file a Further Amended Statement of Claim in the terms initialled by me and placed with the papers.

2. Declarations in terms of paragraphs 1, 2 and 2 A of the Further Amended Statement of Claim. 45 I will hear the parties as to costs.

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