Midaz Pty Ltd v Benberg Pty Ltd & Bennell, David Allison & Von Berg, Kathleen Rosemary [1999] TASSC 66

Midaz Pty Ltd v Benberg Pty Ltd & Bennell, David Allison & Von Berg, Kathleen Rosemary [1999] TASSC 66 - TASSC 1999 case summary — Zoe

[12]

2 The various clauses then follow. Clause 1 is expressed in the manner of a lease. It is headed "DEMISE OF PREMISES" and the purport of its words are that certain real estate is leased. It provides that "the Lessor ... DOTH HEREBY lease to the Lessee ... the demised premises ... TO BE HELD by the lessee as tenant for the term ... SUBJECT TO the covenants conditions and restrictions set out hereunder ...". The demised premises are Shop 7, City Plaza, Corner Charles and York Streets, Launceston being part of the lessor's land described as the lessor's Shopping Complex situated at the corner of York and Charles Street, Launceston, and known as City Plaza. The term is stated to commence on 1 July 1992 and to terminate after five years on 30 June 1997. Clause 2 is an interpretation clause and provides for the meaning of certain words and expressions in "this agreement". That is the second of the exceptions to which I referred. That expression is used twice in the clause and arguably it suggests an agreement for lease, but it is not significant in that connection. Clause 3 is headed "COVENANTS BY THE LESSEE" and by it "the Lessee hereby covenants with the Lessor as follows ...". A covenant is a word which applies to promises in deeds and is an inappropriate term for promises in an agreement not under seal. In this case the lessee's covenants are of great number and extend for about 10 pages. They are worded in a manner appropriate for an indenture of lease, with words and expressions such as "the Lessor", "the Lessee", "this lease", "the demised premises" and "any estate or interest therein", and "the execution hereof". Clause 4 refers to "the execution hereof" and "every assignee of this Lease", suggesting an indenture of lease. Clause 5 is headed "COVENANTS BY THE LESSOR" and cl 6 contains "MUTUAL COVENANTS" and the "covenants" contain a great number of words and expressions in keeping with the 1992 instrument being an indenture of lease. The words and expressions of cl 7 are also more in keeping with an indenture than an agreement.

[17]

7 A deed describing itself as a "deed of assignment" dated 22 June 1995, was entered into by the Jetsons of the first part, the first defendant, Benberg Pty Ltd, of the second part, the plaintiff, Midaz Pty Ltd, of the third part and the second and third defendants, David Allison Bennell and Kathleen Rosemary Von Berg, of the fourth part. It was executed under seal. It recites that there was a lease which was undated but which was made on or about 1 July 1992 (the 1992 instrument in evidence has as its date, inserted by hand, 21 September 1992, and states that the five year term of the lease commenced on 1 July 1992) between SLK of the one part and the Jetsons of the other part, whereby SLK agreed to let and the Jetsons agreed to take as the lessee of SLK the shop premises which were the subject of the instrument to which I referred at the outset of these reasons. The same confusion between a deed and an agreement can be seen. If it was a lease, SLK would have leased and the Jetsons would have taken it. They would have agreed to let and agreed to take if it was an agreement for lease only and not a lease. The deed of assignment further recites that the plaintiff "is now" the registered proprietor of the property described in the lease and thereby entitled to the benefit of the reversion of the lease and that the Jetsons had agreed with the first defendant to assign to it, from 7 December 1992, the benefit of the unexpired term created by the lease, subject to its terms and conditions. By the deed of assignment the plaintiff consents and the second and third defendants join in the deed to guarantee the obligations of the first defendant under the lease. In particular it is a term of the deed of assignment that the second and third defendants guarantee the payment of rent and the observance and performance of all of the obligations of the first defendant "as specified in the lease throughout the balance of the lease term", including during holding over after the expiration of the term. The guarantee is expressed to extend to claims by the plaintiff for damages for breaches of lease covenants and for the plaintiff's loss or damage, in the event of the first defendant abandoning or vacating the leased premises and also in the event of the plaintiff electing to re-enter or to terminate the lease for the first defendant's repudiation of it. The full terms of the clause in the deed of assignment which contains the guarantee is to be found later in these reasons. The defendants, by their defence, admit that the deed of assignment contains all of the terms of it which were pleaded but, in the circumstances of their defence, they assert that those terms are ineffective.

[32]

22 It can also be seen from Chan at 252, that the 1992 instrument will be treated by a court administering equity, in the circumstances of this case, as giving rise to an equitable lease for the term agreed upon which, as between the parties, is the equivalent of a lease at law, though the lessee does not have a lease at law in the sense of having a legal interest in the term. That proposition depends for its validity, in an individual case, on whether a court of equity would specifically enforce the agreement, but counsel for the defendants did not seek to argue that a court of equity would not do so in this case. However, it should be emphasised that even so, the obligations between the landlord and the tenant arise, not under the lease at law but under an equitable lease which is the equivalent of the lease at law. Chan at 256. Chan at 256 - 258, is also authority for the conclusion that the unregistered 1992 instrument itself was ineffective to create either a legal or equitable estate or interest in the land, before registration. It is an antecedent agreement ("the transaction behind the instrument": Brunker v Perpetual Trustee Co (Ltd) [1937] HCA 29; (1937) 57 CLR 555 at 581), evidenced by the unregistered 1992 instrument, not the instrument itself, which created the equitable estate or interest. In that way no violence is done to the statutory command of s49(1). What was said about this topic by the majority of the High Court, may not have been literally consistent with earlier curial statements. For example, in National Trustees, Executors and Agency Company of Australasia Ltd v Boyd [1926] HCA 44; (1926) 39 CLR 72, Knox CJ, Gavan Duffy and Rich JJ at 82 said that an instrument, without registration, operated only as a contract and not as a lease binding third parties, but nevertheless the instrument "operates, not merely to create contractual rights and duties, but to create an equitable term of years ... ". That is to say, it was there stated that the unregistered instrument itself creates the equitable estate or interest. Only four years before Chan's case, Mason J (as he then was), stated the position differently to Chan in Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17 at 27, when he referred to the unregistered memorandum of lease in that case as bringing "into existence an equitable term of the duration which it specified and subject to the conditions which it contained". Nevertheless, I apply what was said more recently in Chan.

[46]

25 If instead of stating that "the lease" was undated but made on or about 1 July 1992, the recital had stated that "the lease" was dated 21 September 1992, I would not hesitate concluding, on the evidence, that it was referring to the 1992 instrument and that the second and third defendants are liable to the plaintiff under the guarantee contained in the deed of assignment. I would so conclude notwithstanding what was referred to in Chan at 256 as the "settled principle governing the interpretation of contracts of guarantee" that "at law, as in equity, the traditional view is that the liability of the surety is strictissimi juris and that ambiguous contractual provisions should be construed in favour of the surety". Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15; (1987) 162 CLR 549 at 561. The document referred to as "the lease" would plainly be identified as the 1992 instrument. That it was called a lease, but strictly was not (either because under general law it was not a deed or under the Land Titles Act 1980 it was neither registered nor registrable), would be of no material consequence. The internal confusion in the 1992 instrument, as to whether or not it was a lease, was reflected in the description of it in the recital in the deed of assignment. The recital correctly identified the parties to the 1992 instrument and precisely stated the essence of what the parties to that instrument agreed, that is to say that one agreed to let and the other to take for a term of five years from 1 July 1992 identical premises, with an option for a further term. In Chan, the guarantee was expressed to be of obligations "under this lease", and the majority of the High Court held that there were no obligations which strictly arose under the document which was referred to as the lease. In this case, the primary obligation of the second and third defendants as guarantors, as expressed in cl 4(a) of the deed of assignment, is not to guarantee the payment of rent and the observance and performance of obligations under "the lease" but as "specified in the lease", an accurate description of where the text of the obligations is to be found, notwithstanding that the description of the instrument as a lease may not strictly be accurate. Accordingly, if the recital in the deed of assignment referred to "the lease" as being dated 21 September 1992, I would confidently reject the submissions of counsel for the defendants that "no document has been referred to which corresponds with the definition in the deed of assignment" and that the guarantors were not liable because "there never was a lease ... it never came into existence".

[47]

26 I have, however, experienced considerable difficulty determining whether I should find for the plaintiff against the second and third defendants on a guarantee of obligations said to be specified in "a lease", which may have been merely an agreement for lease, and which is said by the terms of the deed which contains the guarantee to be undated and to have been made on or about 1 July 1992, when there is no evidence concerning whether there was a document of that description. The plaintiff's claim to rent or damages is based on the 1992 instrument which is in evidence and which bears 21 September 1992 as its date. It is endorsed as having been assessed for stamp duty by an Assessor of Stamp Duties, on 23 September 1992. I find that it was in existence and bore 21 September 1992 as its date both at the time the deed of assignment was dated (on 22 June 1995) and at the time when, according to Mr Zuccala, it was initially prepared (in December 1992). The plaintiff has not applied to rectify the deed of assignment in an attempt to establish that the deed did not accurately record the parties' intentions. The plaintiff has not sought to establish that the second and third defendants are in some way estopped from asserting that the 1992 instrument is not the document referred to in the deed as "the lease". Further, no evidence was led tending to establish that the 1992 instrument was the only instrument in the nature of a tenancy agreement which was entered into by SLK and the Jetsons with respect to Shop 7, or that the 1992 instrument was the one and the same document as that referred to in the recital to the deed of assignment. It has been accepted in a number of cases that evidence of surrounding circumstances may be used to resolve an ambiguity in a guarantee. For example, in Coghlan v SH Lock (Australia) Ltd (1986) 61 ALJR 289 at 291, the Privy Council referred to "the principle that where wording is susceptible of more than one meaning regard may be had to the circumstances surrounding the execution of the document as an aid to construction", immediately after a reference by their Lordships to "certain well-known principles of construction in relation to guarantees", including that "such a document falls to be construed strictly; it is to be read contra proferentem; and, in case of ambiguity, it is to be construed in favour of the surety".

At a glance

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Judgment (49 paragraphs)

Midaz Pty Ltd v Benberg Pty Ltd & Bennell, David Allison & Von Berg, Kathleen Rosemary [1999] TASSC 66 (7 June 1999)

Parties

Legislation Cited (1)

Cases Cited (7)