Kavia Holdings Pty Ltd v Bevillesta Pty Ltd

Supreme Court of NSW|2006-06-14|Before: Palmer J, Young CJ, Handley JA

CITATION : Kavia Holdings Pty Ltd v Bevillesta Pty Ltd [2006] NSWSC 633

DECISION : Plaintiff entitled to declaration of right.

CATCHWORDS : REAL PROPERTY - EASEMENT - ANCILLARY RIGHT - Whether demise of restaurant premises carried implied right to store garbage on common property - rule in Wheeldon v Burrows applied.

LEGISLATION CITED : Real Property Act 1900 (NSW) - s.42

Arndale (Kilkenny) Pty Ltd v Gaetjens (1970) 44 ALJR 434 - Hart v MacDonald (1910) 10 CLR 417 - Hemmes Hermitage Pty Ltd v Abdurahman (1991) 22 NSWLR 343 CASES CITED : - "Lessees Ancillary Rights" (2000) 74 ALJ 384, Young CJ in Eq - Schwann v Cotton [1916] 2 Ch 459 - Wheeldon v Burrows (1879) 12 Ch D 31 - Wilcox v Richardson (1997) 43 NSWLR 4

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

COUNSEL : M.A. Ashhurst - Plaintiff B.A.J. Coles QC, S.A. Kerr - Defendant

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

1 The Plaintiff ("Kavia") leases from the Defendant ("Bevillesta") substantial premises in the Festival Markets Building at Darling Harbour upon which Kavia operates a restaurant known as "Jordon's Seafood Restaurant". The restaurant has a seating capacity of over 600. 2 The restaurant has been in operation since about 1988. Until early January 2006, there was an arrangement (to use a neutral term) between Kavia and its predecessor in title on the one hand and Bevillesta and its predecessor in title on the other, whereby the garbage from the restaurant would be taken from the restaurant to an area commonly known as "the garbage room", which is located on the common property within the Festival Markets Building. From there it would be removed by Bevillesta and its predecessor, the cost of removal being paid in the first instance by Bevillesta. The cost would be included in the outgoings for the Building and, under the terms of its lease, Kavia and its predecessor would pay a proportion of those outgoings. 3 On 17 January 2006, Bevillesta advised Kavia that, by the terms of its lease, Kavia was required to store its garbage on the restaurant premises, not in the garbage room and to dispose of the garbage directly from the restaurant premises at its own cost. Bevillesta advised that the garbage room would be closed on 20 January 2006. 4 In these proceedings, Kavia seeks declarations that Bevillesta is required to permit it to store the garbage from the restaurant either in the garbage room which had previously been provided on the common property since 1988 or, alternatively, on some other part of the common property suitable to Kavia, and that Bevillesta is required to remove that garbage, the cost being added to the outgoings of the building to which Kavia is liable to contribute a proportion under the terms of the lease. 5 Kavia's claim, as pleaded in the Amended Statement of Claim, rested in the alternative upon:

an estoppel founded upon an alleged agreement or understanding as to the manner of storage and disposal of the garbage since 1988; or

a term in the lease or an ancillary right, implied by law, appurtenant to the demised premises because such right is necessary for the reasonable enjoyment by Kavia of the demised premises. 6 When he opened the Plaintiff's case, Mr Ashhurst of Counsel expressly abandoned the causes of action founded upon construction of the lease and upon estoppel.

7 Mr Ashhurst relies upon the principle sometimes referred to as the rule in Wheeldon v Burrows (1879) 12 Ch D 31, stated by Thesiger LJ at p49 as follows: "… on the grant by the owner of a tenement of part of that tenement as it is then used and enjoyed, there will pass to the grantee all those continuous and apparent easements (by which, of course, I mean quasi-easements), or, in other words, all those easements which are necessary to the reasonable enjoyment of the property granted, and which have been and are at the time of the grant used by the owners of the entirety for the benefit of the part granted." 8 The rule is well established and frequently invoked: see e.g. Wilcox v Richardson (1997) 43 NSWLR 4, at 13ff per Handley JA; Young CJ in Eq "Lessees Ancillary Rights" (2000) 74 ALJ 384. 9 For the purposes of this case, application of the rule in Wheeldon v Burrows requires answers to the following questions:

at the time of grant of the relevant lease to Kavia, what were the factual circumstances relating to the storage and disposal of garbage from the restaurant business?

at the time of the grant, was the use of the "garbage room" or some other part of the common property in the Festival Markets Building, "necessary for the reasonable enjoyment" of the restaurant premises leased to Kavia?

It must be emphasised that the determination of what is "necessary for the reasonable enjoyment" of demised premises in this context does not require the application of "the strict test relevant for the implication of an easement of necessity" : see also Wheeler v J J Saunders Ltd [1996] Ch 19 at 31, per Peter Gibson LJ. What is necessary for this rule is what 'conduces to the reasonable enjoyment of property' (ibid). Moreover in Schwann v Cotton [1916] 2 Ch 459 at 469, Lord Cozens-Hardy MR said: "The word necessary must not be taken in a rigid sense. The better phrase is that which is used by Lord Campbell … 'convenient and comfortable enjoyment of the property'." : Wilcox at p.15 per Handley JA. 10 It is a mistake, therefore, to ask whether it is possible, by some means or other, for the grantee of an estate in land to carry out the activity in question without making any use of the grantor's property: see e.g. Wilcox at p.8D-E. The test is one of reasonable convenience and practicality, not of absolute necessity, and convenience and practicality must be assessed in the light of the factual matrix at the time that the estate in land was granted. So, if both parties to the grant contemplate that the grantee will use its land for a certain purpose or in a certain way, and at the time of the grant the land is in fact used in that way or for that purpose by means of an accommodation over the grantor's land, that in itself will usually be strong evidence that the accommodation is necessary, in the sense of reasonably convenient and practicable, for the reasonable enjoyment of the estate granted.

11 There is little, if any, dispute as to the relevant facts, which may be stated shortly. 12 Kavia holds the demised premises under a registered sub-lease executed on about 29 March 2004, although its term is from 1 July 2001 to 30 June 2011. The current lease was entered into as a result of Kavia exercising an option to renew which had been conferred by a prior lease. Nothing turns on the fact that the term of the current lease commenced on a date earlier than the date of execution of the lease: the relevant factual circumstances were the same on both dates. 13 The demised premises has been used to carry on a business called "Jordon's Seafood Restaurant" since January 1988. Kavia acquired the restaurant business in December 1991 and entered into a sub-lease with the then sub-lessor, Darling Harbourside (Sydney) Pty Ltd. That sub-lease required, as does the current sub-lease, that the demised premises be used solely for the conduct of an a la carte seafood restaurant with a seating capacity of not less than 350 persons. In fact, the restaurant has a seating capacity of more than 600 persons and employs about fifty staff. 14 The sub-lease was assigned by Darling Harbourside (Sydney) Pty Ltd to Werncog Pty Ltd in about August 1995 and by Werncog to Bevillesta in November 2004. 15 The plans of the restaurant premises as at May 2000 show that while a number of storage areas are delineated within the premises, none is shown as provided for the storage of garbage. 16 The uncontradicted evidence of Mr Crawley, a director of Kavia who has participated in the management of the restaurant business since 1991, and of Mr Sau, the General Manager of the restaurant since November 2000, may be summarised thus. 17 During a typical week, the restaurant serves between 3,000 and 6,000 meals. Friday, Saturday and Sunday are generally the busiest days. During those days the restaurant serves between 1,000 and 1,500 meals per day. 18 There is, and was as at the commencement of the current lease, no area within the restaurant premises which could accommodate the storage of all of the garbage produced during the course of a trading day. The garbage comprises food waste, packaging material, empty bottles and oil. 19 There are eleven 80L rubbish bins located throughout the kitchen area of the restaurant as well as one 240L Sulo bin for the collection of food waste. There are separate bins for empty bottles. As the 80 L bins fill up they are emptied into the 240L Sulo bin. When the Sulo bin is full it is wheeled by a staff member to a specially designated area of the Building, emptied into the rubbish disposal facility and returned to the premises. The restaurant staff make between ten and twelve trips each day to dispose of food waste deposited into the Sulo bin and between six and eight trips each day to dispose of bottles. 20 Up until 29 January 2006, the garbage was removed from the premises and stored in a dedicated room on the common property of the Building, located approximately 55 metres from the back kitchen door of the restaurant. This was known as the "garbage room", to which I have referred above. The daily removal of garbage from the garbage room was arranged by a cleaning contractor employed by Bevillesta and its predecessors in title. The contractor took the rubbish to another area on the common property of the Festival Markets Building known as the rubbish disposal area, whence it was removed from the Building. 21 On 20 January 2006, Bevillesta closed the garbage room and since that time Kavia's restaurant staff has been removing garbage to a rubbish disposal area on the common property, which is between 300 and 350 metres from the restaurant. The rubbish disposal area contains a large container (approximately the size of a shipping container) and a crusher/compactor located in a wire cage at the rear of the container. Rubbish bins are placed on a lifting mechanism, the cage is then closed and the staff member, using the controls of the crusher/compactor, hydraulically lifts and tips the contents of a bin into the mouth of the compactor. 22 The rubbish disposal area also contains two tanks for the disposal of oil. Kavia's restaurant staff empties oil into these tanks approximately every two days. 23 The rubbish disposal area also contains bins for the storage of empty bottles. Such bins are located near the loading dock and are used by all tenants in the Building. Each day, especially on weekends, the restaurant generates approximately 300 to 1,000 empty glass bottles, which take up ten bins, and about ten to twelve Sulo bins full of food and other refuse. Each week, there are some 600L of oil which requires disposal. 24 Mr Crawley was unshaken in his evidence that there is no suitable area within the demised premises in which to store all of the waste from the restaurant which may be accumulated in any one day's trading. Mr Sau's unchallenged evidence is that the kitchen area and the surrounding areas are quite hot as a result of cooking, frying and boiling in the preparation of food and that food waste, especially seafood, starts to deteriorate and emit odours after a few hours.

25 Mr Ashhurst's essential submission is that the facts which I have recounted above demonstrate that an accommodation on the common property of the Festival Markets Building, whether in the garbage room or elsewhere, for the storage of garbage removed from the restaurant premises is, and was at the time of grant of the sub-lease to Kavia, necessary for the reasonable enjoyment of the demised premises, so that a term affording such an accommodation or ancillary right is to be implied in the grant. Mr Coles QC, who appears with Mr S. Kerr for Bevillesta, relies upon a number of submissions to the contrary. 26 First, Mr Coles says that the accommodation, or ancillary right, for the use of the common property is not necessary for the reasonable enjoyment of the demised premises. He says that it could be possible for Kavia to arrange with a rubbish removal contractor to attend at the premises as and when the 80L rubbish bins and the large Sulo bin are filled during the course of the day and take them away directly from the premises. Mr Coles lays particular emphasis on the fact that Kavia has made no enquiries from any rubbish removal contractor as to whether such an arrangement is possible and as to how much it would costs. 27 Mr Crawley rejected this suggested method of removing rubbish from the premises as impractical. He said that there is no room in the demised premises to store more than the eleven existing bins and the Sulo bin. He pointed out that the rubbish bins do not fill up at the same rate every day, so that one could require a rubbish removal contractor to attend at the premises at specified intervals: this is because one cannot predict how busy the restaurant will be at any particular time. The bins have to be emptied between ten and twelve times a day and it is unrealistic to expect that one could call a rubbish removal contractor between ten and twelve times every day to come to the premises to remove rubbish on a few minutes' notice. 28 I accept Mr Crawley's evidence. It is self-evident, as a matter of common sense, that the arrangement suggested by Mr Coles, although theoretically possible, would never work conveniently in reality in the operation of a large and busy restaurant. The fact that a garbage room 55 metres away from the back door of the restaurant premises was made available for the storage of the restaurant's garbage from 1988 to January 2006 indicates what both the lessor and the lessee of the premises regarded as a reasonable and convenient means of dealing with the problem of rubbish removal from the restaurant. 29 As I have observed above, for the purpose of the rule in Wheeldon v Burrows , the word "necessary" for the reasonable enjoyment of demised property is to be understood in the sense of "convenient and comfortable". I am satisfied that the use of a designated garbage area on the common property within the Festival Markets Building is, in this sense, necessary for the reasonable enjoyment of the restaurant premises demised to Kavia. 30 Second, Mr Coles says, the implication of a term in the sub-lease giving Kavia a right to store its garbage on the common property is inconsistent with, and repugnant to, the express terms of the sub-lease, so that such a term cannot be implied. Mr Coles relies upon the following clauses: "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." 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. 34 In my opinion, Clauses 4.19 and 4.30, read separately or together, are not inconsistent with the implication in the sub-lease of the term for which Kavia contends. 35 Third, Mr Coles says, it is impermissible to imply the ancillary or appurtenant right in the lease because of Clause 16.16, which provides: "16.6 No modification : This document is intended by the parties as a final expression of their agreement and as a complete and exclusive statement of the terms thereof, all relevant negotiations, considerations and representations between the parties having been incorporated herein. In the absence of manifest error no course of prior dealings between the parties or their officers, employees, agents or affiliates shall be relevant or admissible to supplement, explain, or vary any of the terms of this Lease and acceptance of, or acquiescence in, a course of performance rendered under this Lease or any prior agreement between the parties or their affiliates shall not be relevant or admissible to determine the meaning of any of the terms of this Lease. The Lessee acknowledges that no representations, understandings or agreements have been made or relied upon in the making of this Lease other than those specifically set forth or referred to herein and all prior communications from the Lessor with respect to estimated charges payable by the Lessee hereunder are for information only and are not to be construed as representations of the actual charges which the Lessee is required to pay hereunder, or as binding on the Lessor in any manner whatsoever. This Lease can be modified only by writing signed by each of the parties hereto." 36 I am unable to accept this submission. It is well established that a clause such as this does not prevent the implication of a term into the contract, whether the term is implied by law or is implied because it is necessary to give business efficacy to the contract: see e.g. Hart v MacDonald (1910) 10 CLR 417, at 421 and 427. The implied grant of an ancillary or appurtenant right in a demise, in accordance with the rule in Wheeldon v Burrows , is, therefore, not excluded by a clause such as Clause 16.6 of the lease. 37 Fourth, Mr Coles says that any right to use part of the common property in the Festival Markets Building for storage and removal of rubbish is equitable, arising from the circumstances in which the lease was granted, and is enforceable only by Kavia against Werncog: as against Bevillesta, such a right is defeated by operation of s.42 of the Real Property Act 1900 (NSW). 38 I am unable to accept this submission. A right which is implied by reason of the rule in Wheeldon v Burrows is in the nature of an easement. It is not merely an equitable right enforceable only against the grantor of an interest in land personally. The lease to Kavia is registered under the Real Property Act . It is well established that an easement or ancillary right implied in an instrument which is registered under the Act is as much on the register as the express terms of the instrument, so that such a right is not defeated by operation of s.42: Hemmes Hermitage Pty Ltd v Abdurahman (1991) 22 NSWLR 343, at 350, 354-356. 39 Finally, Mr Coles says that the implication in the lease of the term for which Kavia contends is repugnant to Clause 6.5, which gives Bevillesta the right, amongst other things, to change the access to common areas. I am unable to accept this submission. 40 A clause similar to Clause 6.5 was considered in Arndale (Kilkenny) Pty Ltd v Gaetjens (1970) 44 ALJR 434. At 436, Windeyer J said that such a clause does not entitle a lessor to act "in disregard of the rights of its tenants in the premises leased to them or of rights expressly granted or appurtenant thereto " (emphasis added). In other words, such a clause is to be read as subject to the rights granted to the lessee in the demise, whether such rights are express or implied.

41 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. 42 Because it is open to Bevillesta to designate some area on the common property other than the garbage room or the loading dock as the rubbish storage area in accordance with the declaration I propose, I do not think it is appropriate at this stage to grant injunctions against Bevillesta in the terms presently sought in the Amended Statement of Claim. If Bevillesta does not provide a garbage storage area in accordance with Kavia's rights, as declared, Kavia may bring the matter back for the working out of further orders and the granting of further relief. 43 I will stand the matter over for a short time to permit Kavia to bring in Short Minutes of Order. On that occasion I will hear argument as to costs, if necessary. - oOo -

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