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[2008] QSC 66
General information, not legal advice.
Supreme Court of Queensland
2008-04-10
Daubney J
Original judgment source is linked above.
[2] On 11 November 2002, the first plaintiff-by-counterclaim, E & N Collins Enterprise Pty Ltd ('Collins Enterprise'), entered into a written lease from the first defendant-by-counterclaim, Kingaroy Mall Pty Ltd ('Kingaroy Mall'), of the area known as Shop 17 in the 'Kingaroy Shoppingworld' shopping centre. The lease was entered into consequent upon Collins Enterprise agreeing to purchase the 'Pumpkins' restaurant, which traded from Shop 17, from Charolles Pty Ltd. On 11 November 2002, the second plaintiffs-by-counterclaim, Mr and Mrs Collins, who are the directors and shareholders of Collins Enterprise, executed a Deed of Guarantee and Indemnity ('the Guarantee'), under which they guaranteed Collins Enterprise's obligations under the lease. (Where appropriate, I will refer to Collins Enterprise and Mr and Mrs Collins collectively as "the Collins'").
[3] Kingaroy Mall contends that in March 2004, the lease was assigned to the third defendants, Mr Rogers and Mr Pydde. As will be seen, there are real factual issues as to whether Rogers and Pydde, who had agreed to buy the 'Pumpkins' business, actually took a legal assignment of the lease, notwithstanding having effectively been given possession of the premises by the landlord from early March 2004. Kingaroy Mall subsequently issued proceedings in the Magistrates Court against, inter alia, the Collins' for rent allegedly owing under the lease. Default judgment was entered against Collins Enterprise in the Magistrates Court on 2 February 2005, but that judgment was set aside in April 2005 on condition that the Collins' file and serve their defence and counterclaim within three days. That requirement was fulfilled, and the proceeding was transferred to the Supreme Court.
[4] Kingaroy Mall now seeks, pursuant to Uniform Civil Procedure Rules 1999 (Qld) ("UCPR") rule 293, summary judgment on the counterclaim brought against it by the Collins'.
[5] The current version of the counterclaim is pleaded in a document entitled 'Further Amended Statement of Claim' which was filed on 17 September 2007. By that pleading, the Collins':-
(a) plead the contract, and the terms of the contract, by which the 'Pumpkins' business was acquired;
(d) plead and particularize a number of representations which they allege were made to them on behalf of Kingaroy Mall, particularly by its retail property manager, Mr Glen Thorpe (the second defendant by counterclaim), prior to the business contract, the lease, and the Guarantee being executed. These alleged representations went to, inter alia, the sales, turnover, and profitability of the business and the suitability of the business for the Collins';
(e) plead that, in reliance on and induced by these representations, they entered into the business contract, the lease, and the Guarantee;
(f) plead and particularize the respects in which it is contended the representations were untrue;
(g) aver that the making of the representations was misleading and deceptive conduct, contrary to s 52 of the Trade Practices Act 1974 (Cth) (TPA), and claim damages pursuant to s 82 of the TPA and orders under s 87 discharging them from liability under the lease and the Guarantee. The damages claimed by Collins Enterprise are for the purchase price of the business, for capital expenditure after acquisition of the business, acquisition costs, lost profits, and the value of the lost opportunity to purchase the carvery business in which
Mr and Mrs Collins had originally been interested. The damages claimed by Mr and Mrs Collins are for their lost remuneration during the period November 2002 to March 2004.
(h) contend that, inter alia, Mr Thorpe was a person who aided and abetted or was directly or indirectly knowingly concerned in the contravention of s 52, and claim damages from him;
(i) mount an alternative case that, relevantly, Kingaroy Mall and Mr Thorpe owed Collins Enterprise and Mr and Mrs Collins a common law duty 'to ensure that advice given as to the financial affairs of the business was accurate', and allege that the making of the pleaded misrepresentations was a breach of that duty, giving rise to entitlements to damages;
(j) cast their case on the alleged misrepresentations in the alternative as giving rise to an entitlement to reasonable compensation under s 43 of the Retail Shop Leases Act 1994 (Qld) ('RSLA').
(i) on 20 May 2004, Kingaroy Mall's solicitors served a notice under s 124 of the Property Law Act 1974 (PLA) alleging that $16,421.98 was owing for rent in April and May 2004;
(ii) on 3 June 2004 'the sum of $18,918 was accepted by [Kingaroy Mall] towards payments of the then outstanding rent';
(iii) notwithstanding acceptance of that money, Kingaroy Mall re-entered the premises on 19 June 2004, and took possession of the business;
(v) they have suffered damage for 'wrongful re-entry, trespass, and/or wrongful repudiation of the lease.'
(l) plead a further case that in January 2004, Mr Thorpe, as the agent of Kingaroy Mall, unreasonably refused to consent to a transfer of the lease to certain proposed purchasers of the business, giving rise to a claim for damages for wrongful refusal of consent;
(m) separately plead, and claim damages for, alleged conversion by Kingaroy Mall of the plant and fixtures in the premises as a consequence of the alleged 'wrongful re-entry' by Kingaroy Mall in June 2004;
(n) plead that the conduct by Kingaroy Mall of the wrongful re-entry and the conversion of fixtures and fittings was 'unconscionable' and therefore contrary to s 51AA of the TPA, giving rise to a claim for damages for the value of the fixtures and fittings against both Kingaroy Mall and Mr Thorpe, under s 75B of the TPA.
[6] As I have noted, the pleading makes express claims against Mr Thorpe in reliance on the accessorial liability provisions contained in s 75B of the TPA. Counsel for the Collins' said that the pleading should also be understood as extending the claims in tort against Mr Thorpe personally, and that amendments to properly articulate this would be made.
[7] Detailed affidavits have been sworn by Mr Collins and Mrs Collins and by the proposed purchasers, Mr Dickinson and Ms Smith. These affidavits set out in some considerable detail the factual assertions underlying the pleaded counterclaim, including:
(a) details of the negotiations in which the representations were made;
(b) the history of the Collins' occupation of the business, their descent into financial distress, and the circumstances under which they discovered that they had been misled about the prior takings of the business.
(c) negotiations in October and November 2003 (in which the landlord allegedly refused to allow the tenants to be legally represented) when the Collins' sought rent relief, leading to the execution on 13 November 2003 of a document entitled 'Agreement for offer of assistance to John and Nola Collins';
(d) negotiations with potential purchasers Mr Dickinson and Ms Smith, and the circumstances of Mr Thorpe's refusal to consider an assignment of the lease to them;
(e) negotiations and dealings for the sale of the business to Mr Rogers and Mr Pydde, and the fact of Rogers and Pydde, assisted by the landlord, taking over the running of the business without having settled on it;
(f) service by the landlord of the s 124 Notice dated 20 May 2004, and the fact that on 3 June 2004 Rogers caused a cheque (albeit one that was subsequently dishonoured) for $18,918 to be deposited into the landlord's account for April and May rent and the landlord re-taking possession and locking the parties out of the premises on 4 June 2004;
(g) details of correspondence and negotiations which occurred after the landlord re-took possession concerning ownership of and entitlement to the fittings and fixtures in the shop, culminating in the landlord delivering a 'Notice of Abandonment' of the fixtures and fittings dated 21 June 2004.
[8] Notwithstanding the wide-ranging factual issues raised on the Collins' material, Kingaroy Mall and Mr Thorpe contend that they are entitled to a summary adjudication of the counterclaims brought against them. In order to obtain such a summary judgment, Kingaroy Mall and Mr Thorpe must satisfy me that:
(a) Collins Enterprise and Mr and Mrs Collins have 'no real prospect of succeeding' on the counterclaim, and
(b) there is no need for a trial of the counterclaim.[1]
[9] In Elderslie Property Investments No 2 Pty Ltd v Dunn & Anor[2], I sought to emphasize the need for the Court to be satisfied of both of these elements when considering an application for summary judgment, noting that, whilst the 'no real prospect of succeeding' test is applied according to its tenor, it is nevertheless necessary for the Court to adopt a careful approach in an application for summary judgment.
[10] Kingaroy Mall and Mr Thorpe firstly point to the terms of the 'Agreement for offer of assistance' dated 13 November 2003, which was in the following terms:
"1. We will for the interim charge 50% of base rental, this to be reviewed on 28/2/04. (This is a reduction of $3135 per month).
a) You sell your business to an assignee/new lessee
acceptable to the landlord. (under the criteria detailed in the lease for assignments).
The Landlord finds a replacement for your tenancy acceptable to the Landlord. Notwithstanding the replacement may or may not be for the same or similar use as your current use. If a replacement is found you agree to vacate any time after 7 days as requested by the landlord.
You find a buyer for the complete fitout. In which case you agree to make good and vacate the demised premises and surrender the lease within 7 days of entering into of a contract for sale of the fitout.
All monies outstanding, after adjustment for this agreement, will be held in abeyance until one of the points in item 2 has occurred or until the 4 months of this agreement has expired at which time the situation will be reviewed again. All monies that fall due under the lease and this agreement from the date of commencement of this agreement are to be paid in accordance with the lease until you exit the business or until the expiry of the 4 months [sic] term of this agreement.
Failure to adhere to any of the above conditions will, at the landlord's discretion, entitle the landlord to terminate this agreement.
The contents of this agreement are to be strictly confidential between the respective parties. Should the landlord become aware that the contents be known to any third party then the landlord reserves the right to terminate all or any part of this agreement forthwith.
To signify your acceptance of the above please sign this letter and return to the Centre Management office. We understand your desire to resolve this matter as quickly as possible so we will hold this offer open until next Monday, to enable you to seek legal advice and give it due consideration before entering into the agreement."
[11] This document was engrossed on 'McConaghy' letterhead, and was signed by
Mr Thorpe, albeit as Manager, Retail Property Management, for 'McConaghy Management Pty Ltd'. Mr and Mrs Collins have subscribed their signatures to it as signifying their agreement to the terms and conditions. It is not in issue that Kingaroy Mall is one of a stable of companies owned and controlled by
Mr Jim McConaghy. The point was taken before me on behalf of the Collins' that there is no plea that 'McConaghy Management Pty Ltd' was the agent of Kingaroy Mall, nor is there a demonstrable connection between that company and Kingaroy Mall. That submission, however, does not sit well with Mr Collins' deposition that he has 'always known and referred to [Kingaroy Mall] as "McConaghys"', and indeed he referred to Kingaroy Mall by that name in the balance of his affidavit. It also ignores the fact that, for example, the offer made to Mr and Mrs Collins to lease the premises was made by a letter dated 28 October 2002 from 'McConaghy Management Pty Ltd'. I think it objectively clear that the parties understood that Mr Thorpe was signing the document on behalf of the landlord, Kingaroy Mall, just as they understood that Mr and Mrs Collins were signing it on behalf of the tenant, Collins Enterprise.
[12] On this application, counsel for Kingaroy Mall and Mr Thorpe focussed on clause 4, and submitted that, as the misrepresentations which founded the claims under the TPA against Kingaroy Mall and Mr Thorpe, the claims in negligence, and the claim for compensation under the RSLA had all occurred prior to the signing of this 'release', each of those causes of action was discharged by the terms of clause 4. It was further submitted that this release operated on future claims such as to discharge the other claims made by Collins Enterprise and Mr and Mrs Collins.
[13] As pointed out by Collins' counsel, however, this release extends only to 'claims ... with regard to any part [sic] or matter pertaining to your occupancy or leasing of the tenancy whether jointly severally or in tort.'
[14] As clause 4 has the effect on its face of exempting Kingaroy Mall and Mr Thorpe from liability, it must be construed strictly. Thus, the only causes of action which are released by its operation are those 'pertaining to [Collins Enterprise's] occupancy or leasing of the tenancy whether jointly severally or in tort'.
[15] The verb 'pertain' is defined in the Macquarie Dictionary (3rd ed) to mean 'to have reference or relation; relate', 'to belong or be connected as a part, adjunct, possession, attribute, etc.', and 'to belong properly or fittingly; be appropriate'. The phrase 'pertaining to' in cl 4 should, in my view, be construed narrowly as requiring a direct connection between the occupancy or leasing of the tenancy and the relief claimed under the cause of action.
[16] On that basis, I consider it certainly arguable by the Collins' that cl 4 does not affect:
(a) The claims under the TPA or the claim in negligence, to the extent at least that damages are claimed under that rubric of losses alleged to have been suffered by reason of the purchase of the business and for trading and consequential losses;
(b) The claim for damages for wrongful refusal to consent to the assignment of the lease, on the basis, at least, that this is not a claim 'pertaining to' Collins Enterprise's own occupancy or leasing of the tenancy, but arises out of an alleged failure by the landlord to act reasonably in respect of the assignment of the lease;
(c) The claim for conversion, on the basis that it does not 'pertain to' the occupancy or leasing of the premises, but arises from the landlord's allegedly wrongful dealing with the fixtures and fittings contained within the leased premises.
[17] Similarly, I think it at least arguable that the claim for compensation under s 43(2) of the RSLA is not one 'pertaining to' the occupancy or leasing of the tenancy, but is a claim for an entitlement to compensation conferred by statute in circumstances where the legislation provides, in terms, that 'the lessor is liable to pay to the lessee reasonable compensation for loss or damage suffered by the lessee because ... the lessee entered into the lease ... on the basis of a false or misleading statement ... made by the lessor or any person acting under the lessor's authority'.
[18] Moreover, and in any event, Kingaroy Mall and Mr Thorpe expressly pleaded their contentions as to the effect of cl 4 in paragraph 18 of their defence to the counterclaim. In their reply to that defence, Collins Enterprise and Mr and Mrs Collins have advertised their intention at trial to 'seek to have the document set aside on the grounds of unconscionable conduct on the part [of Kingaroy Mall and Mr Thorpe]; economic duress and/or under s 51AA of the [TPA]'. The following particulars are given:
'(i) [Collins Enterprise and Mr and Mrs Collins] were at a special disadvantage in their relationship with [Kingaroy Mall and Mr Thorpe];
(ii) At the time the business was unprofitable, when [Kingaroy Mall] through [Mr Thorpe] had represented it was profitable;
(iii) [Kingaroy Mall] was threatening to sue for rent;
(iv) At a meeting on 28 October 2003, [the Collins'] were told by Jim McConaghy that they would be lucky to get $10,000 for the business;
(v) In the circumstances, the conduct of [Kingaroy Mall and Mr Thorpe] was unconscionable and the plaintiffs seek to set aside the document, if it is construed as a release.'
[19] Counsel for Kingaroy Mall and Mr Thorpe submits, with some considerable force, that the matters, as presently pleaded, would not as a matter of law be capable of engaging s 51AA, and accordingly this challenge to the validity of cl 4 must fail. Section 51AA of the TPA relevantly provides that a corporation must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law, from time to time, of the State and Territories. Counsel pointed to the distinction between conduct which is unconscionable and that which is hard bargaining. As Gleeson CJ said in ACCC v CG Berbatis Holdings Pty Ltd[3]:
'Unconscientious exploitation of another's inability, or diminished ability, to conserve his or her own interests is not to be confused with taking advantage of a superior bargaining position.'
In that case, in circumstances where a lessor extracted a particularly favourable concession in the course of hard negotiations with a lessee whose lease was due to expire and who had sold their business in the expectation of having a new lease to assign, his Honour said, at [17]:
'Reference was earlier made to counsel's submission that there was here a disabling circumstance affecting the ability of the lessees to make a judgment in their own best interests. In truth, there was no lack of ability on their part to make a judgment about anything. Rather, there was a lack of ability to get their own way. That is a disability that affects people in many circumstances in commerce, and in life. It is not one against which the law ordinarily provides relief.'
[20] Despite the fairly cursory particulars provided in the reply, the evidence filed on behalf of the Collins' suggests that they would, in their attempts to have the November 2003 agreement set aside on the grounds of unconscionability or economic duress, seek to rely on a more extensive range of circumstances than those particularized in the pleading. Mr Collins' affidavit, in particular, raises the following factual matters:
(a) That by 13 November 2003, Collins Enterprise and Mr and Mrs Collins were in a very difficult financial position by reason of the losses suffered in the business;
(b) Kingaroy Mall and Mr Thorpe were aware of the extent of that difficult financial situation;
(c) Kingaroy Mall refused to allow Mr and Mrs Collins to have a legal adviser present at negotiations between the parties about the predicament in which the Collins' found themselves;
(d) During the negotiations, the principal of Kingaroy Mall, Mr McConaghy, told the Collins' that they would only get $10,000 for the business, including the fit-out, and this was despite the Collins' having sourced willing buyers (Mr Dickinson and Ms Smith) who were prepared to pay $85,000;
(e) The form of 'rent assistance' which was ultimately proposed by Kingaroy Mall was not that which had been discussed at the meeting between the parties in October 2003, in particular because of the inclusion of the terms of the release contained in cl 4;
(f) There is a question as to whether the landlord's approach to the negotiations could be characterized as threatening. For example, by a letter dated 29 October 2003, i.e. the day after the meeting between the parties, Mr Thorpe wrote to Collins Enterprise setting out a proposal for providing rent relief. Mr Collins, on behalf of Collins Enterprise, responded to that with a letter dated 3 November 2003, setting out a counter-proposal for the terms of the rent relief. The landlord's response was a letter from Mr Thorpe dated 6 November 2003, stating an offer which required acceptance by 10.00 am on Monday, 10 November 2003, after which time the 'offer of assistance is to be considered withdrawn and no further offer will be made', and which further made it a condition of the agreement that the contents of the agreement could not be communicated to any third party. In his affidavit, Mr Collins says in relation to that letter:
'This was very upsetting. Nola and I had attempted to negotiate in good faith. On the other hand, McConaghy's had not permitted us to have a lawyer represent us or be present at the meeting. They had imposed an impossible deadline on us and were now trying to stop us obtaining any advice at all. I felt that we had no control and was frankly very stressed and intimidated by all of this.'
By a facsimile dated 7 November 2003 to Mr Thorpe, Mr Collins expressed his concerns about the process being 'intimidating and distressful to say the least', and sought to keep negotiations open. Mr Collins says that he and Mrs Collins decided, over the course of the weekend prior to 10 November 2003, to register a complaint by way of lodgement of a Notice of Dispute with the Retail Shop Leases Tribunal. He says that he telephoned Mr Thorpe on Tuesday, 11 November 2003 and told him that he was still willing to negotiate if McConaghy's were. He says 'to my surprise Glen was now willing to recommence negotiations and Nola and I therefore withdrew the Retail Shop Leases complaint'.
Under cover of a letter dated 12 November 2003, Mr Thorpe sent the 'agreement for offer of assistance' which was signed by Mr and Mrs Collins on 13 November 2003. In the letter of 12 November 2003, Mr Thorpe said, amongst other things:
'We note your comments in the third paragraph where you say you have found the process "intimidating and stressful", and "consistent with the stance McConaghy's have taken from the outset". Let us be very clear about the situation. You have in the past months approached us about your concern over your falling sales. As you know we have discussed this at length with you on many occasions and even suggested that you engage a retail consultant to assist you. We agreed to pay for half of a retail consultant's costs to assist. We have since paid for the full costs because you have not to date honoured your agreement to pay your share. We have had the business at heart when we have had discussions with you and these discussions have always been cordial. It is understandable that you are in a stressful situation at present because a failing business is not something anyone desires. We do not believe this is in any way caused or contributed to by us, in fact we have always endeavoured to help you and the business in a constructive way.
During our phone discussion yesterday you said that if you agreed to the waiver you would be deprived of your rights. This has concerned me ever since. The fact is you came to us seeking our assistance to help you sell your business. During those discussions you offered a waiver to us.
You will recall at that meeting you said you had no problems with us and that is why you offered the waiver. This was a commercial approach by you and commercial decisions are therefore required on our part. We did not raise the waiver, you did and there is no intention or subterfuge on our part. There is no intention to deprive you of your rights. We have simply accepted your offer of a waiver and in return are offering you monetary consideration somewhat along the lines suggested by you. The offer does include the waiver offered by you at our meeting and as such is not a conditional waiver.'
[21] I have set out the terms of this letter from Mr Thorpe to highlight that, in cases such as this, there are invariably shades of interpretation of conduct, on which a proper adjudicative assessment can only be made by a testing of the factual issues at trial. So, in the present case, in order to make out a case of unconscionable conduct at trial, it will be necessary for Collins Enterprise and Mr and Mrs Collins to prove that at and prior to the signing of the November 2003 agreement, they were in a position of special disadvantage with respect to the landlord. But whether they were in such a position of special disadvantage is a matter which can only be determined upon an assessment of all of the facts of the case. In ACCC v Berbatis at first instance[4] French J[5], noted that whether or not unconscionable conduct in relation to a tenant has occurred with depend on the facts of each case:
'A tenant operating a small business with limited opportunity to sell the business may be in a particularly vulnerable position and therefore in a position approaching the level of special disadvantage or in a quality which a landlord may not unfairly exploit.'
[22] It seems to me that, notwithstanding the fairly cursory particulars presently provided in the reply, the evidence does raise a sufficient factual case for investigation at trial in relation to whether the November 2003 release ought be set aside as having been the product of unconscionable conduct on the part of Kingaroy Mall and Mr Thorpe. The same, or similar, factual enquiry is required to determine whether the conduct of the landlord amounted to illegitimate pressure sufficient to found the claim for relief on the grounds of economic duress (as that notion was articulated, for example, by McHugh JA in Crescendo Management Pty Ltd v Westpac[6]). The factual issues are such that I do not think it can be said that Collins Enterprise and Mr and Mrs Collins have 'no real prospect' of having the November 2003 agreement set aside on those bases. In any event, I consider that these factual issues, in the context of this case, point to the necessity for a trial.
[23] Kingaroy Mall and Mr Thorpe next point to the terms of a Deed of Consent of Assignment to Lease which they say was entered into sometime around March 2004. Clauses 5 and 6 of that Deed provided:
The Tenant Releases the Landlord and its agents, employees and contractors from all claims that the Tenant has or may in the future have, against the Landlord in respect of or in any way arising under the Lease.
The Existing Guarantor releases the Landlord and its agents, employees and contractors from all claims that the Existing Guarantor has, or may in the future have, against the Landlord in respect of or in any way arising under the Existing Guarantee.'
[24] The material raises real factual questions as to whether the deed containing these clauses became operative as between the parties. The deed was sent by Kingaroy Mall's solicitors to Collins' solicitors under cover of a letter dated 24 March 2004 which stated, inter alia:
'Without limiting the provisions of the deed, the landlord's formal consent is subject to:
There is no evidence that the 'replacement bank guarantee' referred to in those pre-conditions was ever received by the landlord. Indeed, on 29 April 2004, Mr Thorpe sent an email to Mr and Mrs Collins stating:
'Assignment documentation as provided by Gadens duly executed by all parties except the landlord.
A letter from the ANZ Bank advising they had received an application from the assignees for the bank guarantee. We were advised this guarantee would not be available until 23/4/04. To date (29/4/04) we still have not received the guarantee and I was advised on Tuesday by [one of the purchasers] it would be another three days which would mean either today or tomorrow.' (Emphasis added)
[25] There is, then, a real factual question for investigation as to whether this deed became binding on the parties. In this regard, counsel for Collins' make the following submission, which could well be vindicated at trial:
'The Collins' clearly executed the deed in order to secure the sale of their business and the assignment of their lease to [the purchaser]. Neither the sale nor the assignment was completed. The purported releases were therefore never effected.'
[26] In any event, the release by Collins Enterprise is for all present and future claims which Collins Enterprise has or may have 'arising under the Lease'. Similarly, the release by Mr and Mrs Collins is in respect of present and future claims 'arising under the Existing Guarantee'. In my view, the words 'under the Lease' would, if anything, be construed even more narrowly than the phrase 'pertaining to'. Accordingly, for the reasons set out above, I consider that Collins Enterprise has, on this point, at least an arguable case for investigation at trial. Similarly, Mr and Mrs Collins have a clearly arguable case that their claims for damages do not arise 'under the Existing Guarantee'.
[27] Further, and in any event, Collins Enterprise and Mr and Mrs Collins would seek to have the March 2004 release set aside pursuant to s 51AA of the TPA or for economic duress. Once again, the pleading in reply supporting the setting aside of this release on these grounds is less than comprehensive. But the affidavit material raises, in addition to the factual matters to which I have referred in connection with the November 2003 release, a range of other factual issues which would require investigation for the purposes of determining whether the Collins' were in a position of special disadvantage with respect to the landlord at the time they executed the March 2004 release or if they were otherwise subject to such economic duress as to give rise to an entitlement to set the March 2004 release aside. Those facts include:
(a) The allegation that Kingaroy Mall, by Mr Thorpe, had unreasonably refused to consent to an assignment to purchasers who had offered $85,000;
(b) The fact that Kingaroy Mall and Mr Thorpe had allowed Mr Rogers and Mr Pydde into possession of the premises to trade from 8 March 2004, without the Collins' consent or knowledge;
(c) The conduct of Kingaroy Mall and Mr Thorpe in negotiating with Rogers and Pydde, resulting in the Collins' effectively losing control of the business;
(d) The landlord making demand for the incoming tenant to provide a bank guarantee for six months rent (a matter which was not provided for under the lease) which impeded settlement of the sale of the business.
'Nola and I signed the Deed of Consent to Assignment of Lease in readiness for settlement, because we were desperate to get out of our situation where McConaghy's had taken control of everything but we seemed to remain responsible for everything. In those circumstances, we had no choice but to do everything possible to formally hand over to Graham Rogers as quickly as possible.'
[29] As in the case of the November 2003 release, these factual issues mean that it would be inappropriate for me, on a summary judgment application, to determine that Collins Enterprise and Mr and Mrs Collins have no real prospect of establishing an entitlement to have the March 2004 release set aside. In any event, these issues of fact also point, in my view, to the necessity for a trial.
Cause of action for wrongful refusal of consent
[30] Clause 10.1 of the lease relevantly provided that the tenant's ability to assign the lease was:
'Subject to the Tenant first providing to the satisfaction of the Landlord that the proposed transferee is a respectable, responsible and solvent corporation or person of a stature and experience not less than equal to that of the Tenant in the conduct of the business referred to in clause 3.1 and capable of carrying on such a business upon the terms and conditions herein contained (the onus of proving all of which to the satisfaction of the Landlord being upon the Tenant)'.
[31] Counsel for Kingaroy Mall and Mr Thorpe submitted that, as the proposed purchasers, Mr Dickinson and Ms Smith, sought a reduction in rent, they could not satisfy the condition that they were 'capable of carrying on such a business upon the terms and conditions' contained in the lease, and that Kingaroy Mall therefore could not be said to have acted unreasonably. As a consequence, so it was submitted, this cause of action must fail.
[32] Notwithstanding this robust submission, there are clearly factual issues raised on the material as to the circumstances of a meeting between Mr Dickinson, Ms Smith and Mr Thorpe in December 2003 during which, according to Mr Dickinson and Ms Smith, Mr Thorpe almost immediately told them that they were 'not the type of people we are looking for', and made it plain from the outset of the meeting that the landlord would simply not consent to an assignment of the lease to them. In short, an adjudication as to the reasonableness of the landlord's conduct requires an investigation of the dealings between Mr Thorpe on behalf of the landlord and Mr Dickinson and Ms Smith. It would therefore be inappropriate for summary judgment to be granted in respect of that cause of action.
Claim for wrongful re-entry and wrongful repudiation of the lease
[33] In May 2004, Kingaroy Mall served on Collins Enterprise a Form 7 'Notice to Remedy Breach of Covenant' founded on the sum of $16,421.98 then owing to the landlord under the lease.
[34] By this time, an agreement was in place for the sale of the business to Rogers and Pydde. Mrs Collins says that Rogers showed her a deposit slip showing the sum of $18,918 having been deposited into 'McConaghy's' account on 3 June 2004 and that he told her that Kingaroy Mall was aware of this deposit. As it transpired, the cheque deposited by Rogers was subsequently dishonoured. It was submitted for Kingaroy Mall that any payment made by cheque is a payment conditional upon the cheque being honoured, and that, as this did not occur, Kingaroy Mall had the right to re-enter the premises.
[35] Counsel for Collins Enterprise and Mr and Mrs Collins sought to counter this by submitting that deposit of the cheque into the 'McConaghy's' account constituted acceptance by the landlord of payment of rent after issue of a Notice to Remedy to Breach, and such acceptance constituted a waiver of forfeiture.[7] Inherent in the notion of a landlord accepting payment, however, is the requirement that payment actually occur. In Godfrey v Sevenoaks[8], Owen J, with whom Roper CJ in Eq. and Manning J agreed, said that:
"Prima facie, a payment by cheque is not complete until the cheque is honoured. A cheque may be taken in full satisfaction of a debt, but the presumption is that the cheque is merely taken on account of the debt."
There is no payment when a cheque is dishonoured, and it seems to me that this argument is tenuous at best.
[36] The second argument advanced on this aspect by counsel for Collins Enterprise and Mr and Mrs Collins, however, does raise issues appropriate for trial. It is submitted that the demand for rent and subsequent forfeiture could not have been lawful in circumstances where Kingaroy Mall had already divested the Collins' of possession and control of the business. It is submitted that Kingaroy Mall's conduct was a clear breach of its obligation to allow peaceable occupation of the leased premises. As noted above, it seems to me that a factual investigation of the circumstances under which the Collins' were allegedly effectively deprived of possession of their premises and operation of the business in March 2004 is required for the purposes, relevantly, of establishing whether Kingaroy Mall itself was in breach of its obligations under the lease from that time.
[37] For similar reasons, this is an inappropriate case for a summary determination of whether the landlord was entitled to treat the fittings and fixtures as forfeited under the terms of the lease. A determination on this issue will necessarily require a determination as to the prior lawfulness or otherwise of the conduct of the landlord in its dealings with the tenant.
[38] As observed above, it was, in the course of argument, noted that the counterclaim, as presently pleaded, expressly seeks to set up claims of accessorial liability under the Trade Practices Act against Mr Thorpe, but does not, in terms, plead claims in tort against him. In argument before me, it was agreed as understood between the parties that the Collins' do intend to pursue such claims in tort against Mr Thorpe, and that appropriate amendments to the pleading would be required in order to articulate that claim properly.
[39] Accordingly, I consider that this is not a case in which it can properly be said that Collins Enterprise and Mr and Mrs Collins have no real prospect of succeeding on their counterclaim. In any event, in the respects that I have identified above, it seems to me that there is a need for a trial of the counterclaim, particularly for the purposes of investigating the allegations of unconscionable conduct and economic duress.
(a) The application for summary judgment be dismissed;
(b) Kingaroy Mall and Mr Thorpe pay Collins Enterprise's and Mr and Mrs Collins' costs of and incidental to the application to be assessed on the standard basis.
Kingaroy Mall Pty Ltd
E & N Collins Enterprise Pty Ltd & Ors
(1988) 19 NSWLR 40