Maxted & Anor v LC Smith & Co Pty Ltd

[1] MULLINS J: I published my reasons for judgment in this proceeding on 6 August 2008: Maxted & Anor v LC Smith & Co Pty Ltd [2008] QSC 165 (the reasons). I adjourned the matter to give the parties an opportunity to make further submissions in the light of the reasons for judgment. Those further submissions were made yesterday.

[2] I had identified a technical problem with the pleadings in par [88] of the reasons. The trial had proceeded on the assumption that the fence (or at least some parts of it) that was removed from the boundary between the property and the Olssons' property was an improvement of the property. The defendant has drawn attention to the plaintiffs' pleading in par 3 of the statement of claim that the property had a number of improvements including "perimeter and internal fencing" which was admitted by the defendant. In addition, the defendant has identified in its supplementary submissions (exhibit 34) repeated references in evidence by Mr Maxted and Mr Olsson to the boundary between the property and the Olssons' property in the sense of being on the boundary.

[3] I am therefore satisfied that, despite the technicality in the pleading that I identified in the reasons, the assumption of the parties at the trial about the location of the boundary fence was justified because of the acceptance of the parties that was the location of the fence. There is no impediment to the proof by the defendant of the breach of the tenancy agreement that I otherwise set out in par [89] of the reasons.

[4] On the basis of my finding that the plaintiffs' authorisation of the removal of the fence breached either cl 12.1 or 13.1 of the tenancy agreement, the questions that I raised in the reasons with respect to the issue of relief against forfeiture must be addressed.

[5] In par [94] of the reasons I referred to the authority of Lam Kee Ying Sdn Bhd v Lam Shes Tong [1975] AC 247, 257 (Lam Kee Ying) for the proposition that relief against forfeiture can be granted to a tenant where a landlord has brought proceedings for forfeiture, even if the tenant has not specifically sought that relief. The plaintiffs seek to rely on that authority. The defendant seeks to distinguish it.

[6] In Lam Kee Ying a tenant was found at first instance to have breached the covenant not to assign, underlet or part with possession of the premises. The tenant had denied breach on the basis that the company that was incorporated that took over the tenant's business belonged to him and his family. On appeal to the Federal Court of Malaysia from the order that the tenant deliver up possession to the landlord, the tenant made an application for relief under the equivalent provision to s 124 of the Property Law Act 1974. The Federal Court would have granted that relief. On appeal to the Privy Council, it was observed that the lodging of a counterclaim for relief was not a condition precedent to obtaining the order for relief and it had not been shown that any injustice resulted in considering the granting of relief against forfeiture (at 257-258). It was a case in which it could not be suggested that the landlord had been taken by surprise by the application for relief against forfeiture on the appeal. It also did not appear that there was any relevant material, not already in the evidence, that could have been adduced on the question of whether relief should be granted (at 258).

[7] The defendant points to the pleading obligations imposed by r 149 of the UCPR and submits that the defendant was entitled to expect that, if the plaintiffs intended pursuing a claim for relief against forfeiture, the plaintiffs would plead the material facts on which they relied to claim relief.

[8] In both the original answer to the counterclaim and the amended answer filed by leave at the trial, the plaintiffs dealt with the allegation of the breach of the tenancy agreement by denying the breach and making a positive allegation as to why the removal of the fence did not breach the tenancy agreement. At the conclusion of the evidence, when I raised with the plaintiffs' counsel that there was no claim for relief against forfeiture, the response was that there was no breach of the lease involved (at Transcript p 239). See also Transcript p 264.

[9] The defendant submits that it conducted the trial in the light of the issues which were in dispute, as defined by the pleadings and that did not include relief against forfeiture. The defendant submits that it may have conducted its case at trial in a different manner, if the plaintiffs had sought such relief and pleaded the basis for doing so. The defendant submits that it cannot be precise about what it would have done differently, because in the absence of pleadings on the issue, the defendant does not know the basis of the plaintiffs' case for relief against forfeiture. The attitude of the plaintiffs' counsel to the issue at the trial in contending that there was no breach (and therefore no need to consider relief against forfeiture) is consistent with the defendant's understanding at trial that there was no issue of relief against forfeiture being pursued.

[10] It is not necessary to decide whether r 149 of the UCPR prevents the application of the approach in Lam Kee Ying in all cases, as in this matter there is a basis for distinguishing Lam Kee Ying. It cannot be said that the defendant would not have been taken by surprise by a claim for relief against forfeiture being pursued after the evidence at the trial was completed. It is also not a case where it can be concluded that all the evidence relevant to whether there should be relief against forfeiture was before the court. I therefore accept that this is not a case where the plaintiffs should be permitted to pursue relief against forfeiture without it being pleaded and it is too late for an application to amend the pleadings in that regard to be made.

[11] That leaves the question of what orders the court should make on the defendant's counterclaim. There should be a declaration about the breach. The defendant is also entitled to recover as damages the sum of $3,069 for the cost of reinstating the fence (at par [96] of the reasons). The issue that has to be determined is whether the defendant has shown an entitlement to the relief that it seeks for termination of the tenancy and delivery of possession by the plaintiffs of the property to the defendant.

[12] In par [93] of the reasons I adverted to the constraints that would have applied to the making of a termination order by the Small Claims Tribunal, if the defendant had pursued its claim for a termination order in that Tribunal.

[13] Because the defendant's counterclaim is proceeding in the Supreme Court, s 204 of the RTA does not apply to the jurisdiction exercised by this Court. It would be an odd result, however, if factors that were relevant to whether a termination order were made by the Tribunal could not be considered by this Court in effectively deciding the same issue. Because there must be a discretion whether or not to order the relief that is sought by the defendant, I consider it appropriate to take into account the discretionary factors of the type that could be raised under s 204(3) of the RTA.

[14] The defendant conducted its case on the basis that proof of breach of the tenancy agreement was sufficient to entitle the defendant to terminate the tenancy and obtain the assistance of the Court in doing so. When the assistance of the Court is sought to end an interest in land, the Court's jurisdiction is exercised in the context of all relevant matters. The evidence in the trial raised issues that I flagged (at par 93 of the reasons) as relevant to whether the breach of the plaintiffs of the tenancy agreement was serious enough to justify the termination of the long-term tenancy agreement, including the beneficial terms of the tenancy agreement, the reason for the removal of the fence, the state of the fence at the time of the removal and the breakdown of the familial relationship that occurred leading up to the breach of the tenancy agreement. In addition, the defendant has adduced no evidence as to any loss it has suffered as a result of the breach, other than the cost of reinstating the fence. This is consistent with the fact that the defendant had done nothing since the removal of the fence to reinstate the fence. The defendant successfully pursued a claim for damages for the cost of reinstating the fence in this proceeding. I adverted in the reasons to the evidence adduced by both parties to show that the property had a substantial value (at par [40] of the reasons). The quantum of the damages of $3,069 and the nature of the breach has also to be considered in that context.

[15] I am therefore not satisfied that the defendant has shown that in the circumstances revealed on the evidence at this trial the orders it seeks in relation to delivery of possession of the property and termination of the tenancy should be made as a result of the finding about the breach of the tenancy argument and that part of the claim for relief must be dismissed.

[16] It therefore follows that the orders that I will make in this proceeding are:

1. The plaintiffs' claim against the defendant is dismissed.

2. It is declared that the plaintiffs breached either clauses 12.1 or 13.1 of the Tenancy Agreement dated 22 October 1996 by authorising the removal of the boundary fence between the demised property and the property belonging to Mr and Mrs Olsson in November 2004.

3. The plaintiffs must pay to the defendant damages in the sum of $3,069 for breach of the tenancy agreement.

4. The defendant's application for an order that the plaintiffs vacate the demised property within 14 days or a declaration that the defendant is entitled to terminate the tenancy or an order for determination of the tenancy is dismissed.

[17] I will now hear the submissions of the parties on the question of costs.