Kevin Edward Smith & Anor v Scott Lutiger T/As Scott Doney Autos & Anor

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

3910/99: KEVIN EDWARD SMITH & ANOR v SCOTT LUTIGE R T /A s SCOTT DONEY AUTOS & ANOR

1 HIS HONOUR: The first plaintiff, Mr Smith, is the registered proprietor under the Real Property Act of property Unit 1, 34-36 Plasser Crescent, St Marys. The second plaintiff, Tresaire, a company controlled by Mr Smith, was purportedly appointed a new trustee of a trust called the Plasser Property Trust by a deed dated 1 July 1996. 2 The defendants, Mr and Mrs Lutiger, are in occupation of the property, having gone into occupation pursuant to a lease between Scott Doney Autos as lessee and Plasser Property Trust as lessor, apparently executed on 29 September 1996.

3 In these proceedings, the plaintiffs seek possession of the property and damages. The defendants claim that either they are entitled to remain under an agreement for lease, which will not expire until the end of 2000, or they are entitled to remain under a lease from month to month, which has not been validly terminated.

4 I will commence with an outline of facts which are not in dispute.

5 The property was apparently acquired by Mr Smith and his then wife in about 1992. By a trust deed dated 7 May 1994, Plasser Property Trust was established, and Mr and Mrs Smith were appointed trustees. The deed contained no provision for the number of trustees to be less than two.

6 By a deed dated 1 July 1996 Mr and Mrs Smith purportedly retired as trustees and appointed Tresaire the new trustee of the Trust.

7 A lease was executed on 29 September 1996 between the Plasser Property Trust as lessor and Scott Doney Autos as lessee for one year, commencing 1 January 1997, with an option for a further year. It appears that Scott Doney Autos is a business name under which the defendants trade. The lease was signed by Mr Smith as lessor and Mr and Mrs Lutiger as lessees.

8 On 24 April 1997, Family Court proceedings between Mr and Mrs Smith were settled. Under the terms of the settlement, Mrs Smith was to transfer her interest in this property to Mr Smith. That transfer was registered on 10 July 1997.

9 On 29 September 1997, the defendants exercised their option for a further year under the lease.

10 On 23 December 1997, a letter was sent by solicitors acting for the defendants to an estate agent acting for the lessor, asserting a belief that agreement had been reached that the rent for the year of the option would be $37,660 per annum, and requesting the use of a wash bay at the rear of the premises for a payment of $208 per month.

11 On the same day the solicitors sent to the estate agent a without prejudice letter, offering to enter into a new lease for a term of one year with an option for a further two years, with CPI adjustments for those further two years,.

12 There were five numbered paragraphs in this letter. The paragraph numbered 4 asserted as follows: that our client have the right to use the wash bay constructed by the landlord provided a payment of $208 per calendar month is paid to the landlord and the landlord agrees to consent to an application by our clients for construction of their own wash bay within the subject premises if our clients wish to during the term of the lease.

13 On 8 January 1998, the estate agent wrote back to the solicitors acting for the defendants a letter in the following terms: We are pleased to confirm the landlord's consent to a lease with your clients based on a letter of 23 December 1997 with the exception of point 4.

The landlord is prepared to consent to a wash bay provided he peruse the proposed plans prior to their submission to the local authorities. The landlord reserves the right to approve the location and scale of any proposed wash bay. 14 From the beginning of 1998, payments were made by the defendants to the agent at the rate of $3,345.33 per month, being the monthly equivalent of $37,660, plus an extra $208 per month, which apparently was for use of the wash bay.

15 In the week commencing 12 January 1998, there was a telephone conversation between Mr Lutiger and the estate agent, in which the estate agent asked whether Mr Lutiger had received a copy of the letter of 8 January. Mr Lutiger replied: "Yes. We are happy with the agreement we have reached. Please proceed with the lease". The estate agent then said: "The documentation will be forwarded to you." However, there was no further documentation of any agreement for lease.

16 On 30 September 1998, Mr Lutiger handed to Mr Smith a document purportedly to exercise an option for a further period of two years. Mr Lutiger says that he told Mr Smith what the document was, and that Mr Smith responded: "That is okay. You can continue on as you have in the past."

17 The defendants continued to pay the same monthly amounts for periods of up to and including August 1999.

18 On 6 August 1999, solicitors purporting to act for the lessor gave the defendants one month's notice to vacate the premises, and no more rent was accepted after that date.

ISSUES 19 There are essentially two issues that have been debated. First, do the defendants have an agreement entitling them to a lease of the premises until the end of 2000? Second, if they do not, was the one month's notice given to them a valid notice?

AGREEMENT FOR LEASE? 20 I will deal first with the question of the alleged agreement for lease.

21 Mr Raphael for the defendants submitted that the agent's letter of 8 January 1998 amounted to a counter offer, arising from the offer contained in the without prejudice letter of 23 December 1997, and that that counter offer was accepted. He submitted that the acceptance was shown by the payment by the defendants of the higher rent for a period of twenty months, by the conversation with the agent in which the agent said he would send documentation, and by the exercise of the option for a further two years, coupled with Mr Smith's response that that would be okay.

22 In my opinion, an agreement for lease as alleged by the defendant has not been proved.

23 I do not think the letter of 8 January 1998 can be regarded as a counter offer capable of simple acceptance. If one reads just the first two lines of the letter, it could be taken to be an offer to enter into a lease on all the terms of the defendants' offer except for par 4. However, in my opinion, the letter must be read as a whole, and when one does that, and particularly when one has regard to all the circumstances, it is clear that it is not a correct interpretation of the letter to treat it as a counter offer in the terms I have mentioned. The rest of the letter goes on to open up for discussion what the lessor was prepared to do in relation to the subject matter dealt with in the numbered par 4. Accordingly, as I said, the letter itself did not offer concluded terms of an agreement. It indicated agreement with the terms apart from par 4, and initiated negotiations in relation to the subject matter of par 4.

24 In my opinion, the amounts that were actually paid tend to confirm that interpretation. What was paid was a monthly sum calculated at the rate of $37,660, being the rate mentioned in the open letter, plus a further $208 in respect of the wash bay. If what was contemplated by the letter of 8 January was a lease without par 4, then the payment of the extra $208 for the wash bay would not have any explanation. In my opinion, the payments that were made are more consistent with the parties acting under the terms of the open letter, than acting under the supposed terms of an agreement for lease in the terms of the without prejudice letter but excluding par 4.

25 In my opinion, this is further confirmed by the absence of any further attempts at documentation of an agreement. Documentation was mentioned by the agent in the conversation with Mr Lutiger, but it was not followed up, and in my opinion that conversation itself could not conceivably amount to an agreement.

26 Similarly, in my opinion, the conversation at the time of the purported exercise of the option could not conceivably amount to an agreement. In my opinion the terms of that conversation are not sufficient to outweigh the considerations I have already mentioned, or the view I have reached that an agreement for lease has not been proved.

27 I turn to the second issue, namely the validity of the one month's notice.

28 Mr Raphael for the defendants has provided written submissions on this matter, which I will leave with the papers.

29 He submitted first that the purported appointment of a new trustee on 1 July 1996 was invalid. It was invalid because it was not registered: see Trustee Act s 6(1), Retravision NSW Ltd v Copeland , Young J, Supreme Court of New South Wales, 8 October 1997. It was also invalid, he submitted, because only one trustee was appointed to continue as a sole trustee, contrary to ss6(6) and 8(2) of the Trustee Act. Accordingly, he submitted,Mr and Mrs Smith remained trustees of the Plasser Property Trust.

30 Next Mr Raphael submitted that the subject property was still an asset of the Trust. This was alleged by the plaintiffs in the statement of claim. The Trust was named as the lessor in the subject lease. It was named also as the lessor in the subject lease in the estate agent's documents and in receipts that were issued.

31 Next, Mr Raphael submitted that the defendants, if they did not have the agreement for lease which they claim, at least have a lease which can only be terminated on one month's notice. This is either pursuant to the holding over clause in the original lease, or else pursuant to the Conveyancing Act s127.

32 Finally, he submitted that such a one month's notice can only be given with the authority of the Trust which is the owner of the property, that is, with the authority of both Mr and Mrs Smith. At best, Mr Smith and Tresaire could be trustees de son tort, not having the power to give a valid notice on behalf of the Trust.

33 I accept Mr Raphael's first three propositions, that is that Mr and Mrs Smith are still trustees, that the property is an asset of the Trust, and that the defendants have a lease terminable on one month's notice. However, in relation to the third of these propositions, I would qualify it to the extent of saying that that lease can be asserted only against the persons who granted it. It is that qualification which leads me to disagree with Mr Raphael's fourth proposition.

34 In my opinion, the rights which the defendants have, in particular their right to one month's notice, depend upon action taken by the very same persons who gave the one month's notice in August last year.

35 On the material before me, I would not infer that the lease was entered into with the authority of Mrs Smith. When one has regard to the retirement of Mr and Mrs Smith in July 1996 and the appointment as new trustee of a company controlled by Mr Smith, coupled with the divorce of Mr and Mrs Smith and the property settlement agreed in April 1997, I think the proper inference is that the lease was entered into by Mr Smith and/or Tresaire, without the authority of Mrs Smith.

36 Accepting as I do Mr Raphael's submission that only Mr and Mrs Smith could bind the Trust, the act of Mr Smith in granting the lease did not bind the Trust;so that, in my opinion, the rights of the defendants under that lease, and their rights which depend upon the lease, are rights against Mr Smith and/or Tresaire and not rights against the Trust as such.

37 Accordingly, the right which they have to retain possession until that right is terminated by one month's notice is a right that they have against Mr Smith and/or against Tresaire, not against the Trust and, in my opinion that means that Mr Smith and/or Tresaire can give the one month's notice.

38 To put it another way, in my opinion Mr Smith as registered proprietor is entitled to possession unless the defendants can show a right which they have that can be asserted against him. The only right shown on the evidence is a right to one month's notice which the defendants have as against Mr Smith and/or Tresaire and, in my opinion, the notice that was given was given with the authority of Mr Smith and/or Tresaire.

CONCLUSIONS 39 So, for those reasons, in my opinion the plaintiffs are entitled to an order for possession.

40 That gives rise, I think, to questions about time. There is also a claim for damages. I am not sure if the plaintiffs want to pursue that claim..

(Discussion Ensued) 41 I have heard submissions concerning the time to be given to the defendants before possession is enforced against them. Mr Raphael submits that his clients are attempting to make other provision for premises for their business, and that it is expected that the alternative premises will be available by the end of May. He asked me that possession not be enforced until then.

42 Mr Beale submitted that, although the circumstances of his clients have changed, there is still urgency from his clients' point of view, and he asks that no more than one month be given.

43 Mr Beale has also submitted that the matter should be kept open for a claim for damages by his client.

44 As I understand it, it is common ground that until possession is given an occupation fee equal to the previous rent must continue to be paid, and at present there is no evidence before me which would justify the reference of the matter to an inquiry as to damages. Unless that question is held open by agreement, or unless the Court has acceded to an application that that question be held open, the Court would, at a hearing such as the present, require evidence that a plaintiff had suffered substantial damages before a reference to a Master or for some other further hearing about damages would be justified. As the matter stands at present, in my opinion I could not accede to that request, and I will treat the order that I am making as finalising the matter.

45 However, because I am being asked to make orders concerning the time of possession without the benefit of evidence, I have come to the view that the appropriate course is to, in effect, grant the defendants six weeks, that is until 1 May, but provide that if they wish to seek any additional time, that be done on the basis of an application and evidence which is filed and served on or before 6 April; and if that happened it would be open at that stage to the plaintiffs, in putting forward any material they wish to put forward opposing an extension, to put forward material showing substantial damage which goes beyond what would be compensated by an occupation fee; and if that happened, I might be prepared to consider an inquiry as to damages if the material then presented justified it.

47 I give judgment that the defendants give to the first plaintiff possession of the property Unit 1, 34-36 Plasser Crescent, St Marys.

48 I give leave for the issue of a writ of possession, but direct that that writ must not be executed prior to 1 May.

50 I note that the defendants will continue to pay an occupation fee at the rate at which they previously paid rent until they vacate the propeerty.

51 I order that the defendants pay the plaintiffs' costs of the proceeding.

52 I give leave to the defendants to seek an extension of time for giving up possession on the basis of an application and evidence filed and served on or before 6 April, which may be returnable before me on 28 April.

53 I direct that any material to be relied on by the plaintiffs in response be filed and served on or before 17 April. I note that that material may include material in support of an application which the plaintiffs may then make for an inquiry as to damages.

54 The exhibits may be returned after twenty-eight days if there is no appeal.

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