Phoenix Commercial Enterprises v City of Canada Bay Council [2009] NSWSC 17 | Case summary

l) whether the Council is required to give credit on its cross-claim for rent and interest for moneys it received after re-entering the lands from licences granted to third parties for use of the advertising structures erected on the lands. 14 When the parties were advised that I would deliver judgment, the plaintiff foreshadowed that it would seek leave to further amend the statement of claim and re-open to tender further documents supporting its further claims. I deal with that application at paras [103]-[128] below. The reasons which follow deal with the plaintiff's case as pleaded in the further amended statement of claim (being the last pleading the plaintiff has leave to file) and as presented at the hearing on 7 and 8 April 2008 and in subsequent written submissions. The Original Leases 15 The leases were identical except as to the commencement date of each term and rent (called "Lease Fee"). Both leases were signed on 9 April 1996. They provided that the plaintiff should not use or permit to be used the demised premises or any part thereof for any purpose other than an advertising display structure. The term "Advertising Display Structure" was defined to mean "all the improvements erected on the Land". Each lease was for a period of five years to be computed from the date that advertising was first displayed on the Advertising Display Structure. It appears from handwriting later added to the first page of each lease that one lease commenced on 16 February 1997 and the other commenced on 1 May 1997. Clause 3 required the plaintiff to pay a "Lease Fee" during the term of the lease, the first of such payments to be made one month after the date on which advertising was displayed on the Advertising Display Structure. The "Initial Lease Fee" was $100,000 in the case of the Victoria Avenue lease and $120,000 in the case of the Young Street lease, payable by equal monthly instalments in arrears during the first year of the term. Clause 5 provided for the Lease Fee to be increased in accordance with movements in the Consumer Price Index ("CPI"). Whilst the term was for five years, clause 4 contained a put option and a call option. The plaintiff would be entitled to a renewed five-year term if it gave the requisite notice and had in the meantime duly and punctually paid the Lease Fee and otherwise observed the covenants of the lease. The Council was also entitled to require the plaintiff to take a renewed term for a further term of five years on giving the requisite notice. 16 Clause 10 dealt with the removal of fixtures. It was not changed by the subsequent deed of variation. Clause 10 provided: " (a) The Lessee will at the expiration of the term or any renewal thereof by effluxion of time peaceably surrender and yield up unto the Lessor without cost or compensation of any nature or kind the demised premises with the appurtenances together with all buildings, erections, and fixtures now or hereafter to be built or erected thereon other than advertising structures erected by the Lessee in good and substantial repair and condition in all respects. The Lessee shall (unless otherwise mutually agreed by the Lessor and the Lessee) remove any advertising structures erected by it upon the Land and in doing so shall make good any damage caused thereby. (b) The Lessee will on the determination of the said term or any renewal thereof before expiration of the said term or renewal thereof, peaceably surrender and yield up unto the Lessor without cost or compensation of any nature or kind the demised premises with the appurtenances together with all buildings erections and fixtures now or hereafter to be built or erected in good and substantial repair and condition in all respects. (c) Where the Lease is determined, the Lessor may require the Lessee at its cost upon the expiration or sooner determination of this Lease, demolish and remove from the demised premises all buildings, erections, fixtures and appurtenances constructed by it or on its behalf on or within the demised premises and restore the demised premises to reasonably the same condition as at the date of this Lease. All services to the demised premises in the nature of sewerage, water, gas and electricity shall be sealed and capped to the satisfaction of the relevant supplier or authority but otherwise the piping and conduiting of such services shall remain in place. " 17 Clause 15(a) provided that if there were default for one month in payment of the Lease Fee or part thereof, the lessor could treat such failure as a default, whereupon the plaintiff's interest in any agreement between it and any other party to display advertisements on the advertising display structure should revert to and vest in the lessor until such time as the lessor had received all of the Lease Fee outstanding. If the lessor did not recover all outstanding Lease Fees within three months of the initial default, it was then entitled to re-enter into and upon the demised premises and terminate the lease. 18 Clause 18 provided for the payment of an additional lease fee of 25 percent but for such additional fee to abate if the lessor in its capacity as consent authority approved the erection of an advertising structure on other land within its local government area. The clause was in the following terms: " ADDITIONAL LEASE FEE In addition to the Lease Fee payable hereunder, the Lessee expressly covenants with the Lessor, during the term of the lease, to pay to the Lessor by way of additional rental an amount equivalent to 25% of the Lease Fee, such additional rental being payable on the same days as stipulated herein for the payment of the Lease Fee. Payment of the additional Lease Fee hereunder shall be subject to the rights and obligations of the parties pursuant to Clause 15 hereof as if the additional Lease Fee formed part of the Lease Fee PROVIDED HOWEVER that should at any time during the term of the Lease, the Lessor in its capacity as consent authority, approve the erection of an advertising structure on other land within the Lessor's Local Government Area THEN during the period of such approval the additional Lease Fee hereunder shall abate and the obligation of the Lessee to pay such additional Lease Fee shall only be revived by the termination of such consent, either by effluxion of time, cancellation, surrender or other reason. " 19 This clause was deleted in the deed of variation. It is clear that under clause 18 the additional fee of 25 percent would abate whether the lessor in its capacity as consent authority approved of the erection of one advertising structure or more than one, and whether it gave one or more such approvals. The clause also provided for the revival of the obligation to pay the additional lease fee if the consent to the erection of an advertising structure on other land within the local government area expired, or was terminated or surrendered. Plaintiff's Licence Agreement with Boyer 20 On the same day as it entered into the leases, the plaintiff entered into an agreement with Boyer Group Pty Ltd ("Boyer"). That agreement recited the plaintiff's agreement to lease the land at Victoria Avenue, Concord West and Young Street, Concord. The plaintiff granted to Boyer the exclusive right to license all Advertising Display Structures (as therein defined) which had been erected or might be erected on Victoria Avenue and Young Street for advertising purposes. The term of the licence was for five years (subject to rights of earlier determination in the event of breach or certain defined events). The annual licence fee was $397,500 payable quarterly and subject to increases in accordance with movements in the CPI. Boyer agreed to pay an additional licence fee in the event its gross revenue exceeded $581,250 (adjusted according to changes to the CPI). Boyer agreed to pay 50 percent of the construction costs of the advertising display structures. 21 Clearly, once the plaintiff had paid for its share of the cost of constructing the advertising display structures, it was entitled to expect a substantial net revenue from its licence agreement with the Boyer Group after paying its lease fee to the Council. It was paying the Council $100,000 or $120,000 per year (indexed to CPI) for each lease, and was entitled to $397,500 per year (indexed to CPI) for each licence. 22 Clause 3 of the licence agreement with Boyer provided for the grant of put and call options for a further five-year term. Pursuant to clause 3.2 the plaintiff had an option to require Boyer to take a renewed term of the licence for a further term of five years from the expiration of the term at a licence fee which should be not less than the licence fee payable for the last year of the term. Such a renewed licence was to be on the same terms as the deed of 9 April 1996 except in relation to clause 3.2, the payment of the entry fee under clause 8, and the payment of construction costs under clause 9. On 14 August 2001, the plaintiff exercised its put option. 23 The advertising display structures in question were very large. They stood on towers over 16 metres tall and the advertising signs themselves were in the order of 15 metres by 4.7 metres. Deeds of Variation of Lease 24 The leases were substantially amended with effect from 1 February 1998 by the deeds of variation. Apart from clause 10, none of the other material provisions of the original leases remained unchanged. The term "Lease Fee" was replaced by the word "Rental". "Rental" was defined as follows: " ' Rental ' means the amount stipulated in the schedule hereto to be paid one (1) month from the date that advertising is displayed on the Advertising Display Structure and thereafter by equal monthly installments. For the remaining Term from the date of execution of this Deed of Variation as prepayment of Rental the sum of nine hundred thousand dollars ($900,000) of which the sum of four hundred and fifty thousand dollars ($450,000) is to be paid on execution of this Deed of Variation. " 25 The original clause 15 was deleted and replaced with a new clause 15. Clause 15(g) provided: " (g) That part of the Rental remaining outstanding after execution of this Deed of Variation, namely $450,000, will accrue interest from the date of execution at the rate of two percentum above the 90 day AFMA Bank Bills Interest Rate. The Lessee will pay to the Lessor the outstanding Rental, including interest, within five years from the date of execution of this Deed of Variation. The Lessee hereby acknowledges that the Term of the loan with ING Mercantile Mutual Bank is for a Term less than 5 years. The Lessee further acknowledges that the Lessee will not alter the Term of the loan with ING Mercantile Mutual Bank without the approval of the Lessor. The repayment of the loan to ING Mercantile Mutual Bank shall be repaid in full prior to any obligation on the part of the Lessee to pay to the Lessor any outstanding Rental however failure to pay the outstanding Rental within five years of the date of this Deed of Variation will constitute a breach of an essential term of this Lease. " 26 The term of the lease was amended to be the period commencing from the date of the lease and terminating on 1 January 2008. In substance, instead of annual rent of $100,000 or $120,000 increased in accordance with changes to the CPI, the Council was to receive from 1 February 2008 a total rent of $900,000 for a term of nine years and 11 months with the same economic benefit as if the rent were paid in advance. Half the rent of $450,000 was payable in advance, that is, on execution of the deed. The remaining rent of $450,000 was payable within five years and would accrue interest from the date of execution of the deed until payment. 27 There was no evidence about the loan with ING Mercantile Mutual Bank referred to in clause 15(g). It was common ground that that part of clause 15(g) is not relevant to the questions of construction which arise. 28 Consistently with the change to the term of the lease, the provisions for put and call options were deleted. The deed of variation included a new clause 6 giving the plaintiff a right of first refusal in the event the lessor proposed to sell or transfer the land either during or on expiration of the lease, or to lease the land on expiration of the lease. Clause 6 provided: " 6. COVENANT BY THE LESSOR (a) In the event that the Lessor proposes during or on expiration of this Lease to sell or transfer or lease the Land, then upon proposing to sell or transfer or lease the Lessor shall forward to the Lessee an agreement incorporating the conditions under which it offers the land including price and terms of payment. (b) If the Lessee fails to accept the offer under this clause within one (1) month of the date of receipt of such agreement by the Lessee, the Lessor may dispose of or lease the land on the same terms and conditions as that offered to the Lessee. (c) If the Lessee accepts the offer within the period of one (1) month then it shall within this period of one month tender to the Lessor an executed agreement without amendment (unless previously agreed by the Lessor) together with the deposit as stipulated in the agreement. (d) In the event that the Lessee fails to accept the offer under this clause then the Lessor shall not sell or transfer or lease the Land for a price less than that stipulated in the agreement forwarded to the Lessee or on more favourable conditions without in the first instance reoffering the Land to the Lessee on such amended conditions and in these circumstances the Lessee shall have the further opportunity of accepting any such amended offer within one (1) month of receipt of the amended offer and otherwise the conditions of this clause shall apply between the parties. (e) The Lessor and the Lessee will do all such acts and sign and execute all such documents as may be necessary to give effect to an agreement entered into pursuant to this clause. " 29 The former clause 15 was also deleted and replaced by a new clause 15. Subclauses 15(d) and (g) are set out at paras [7] and [25] above. Clause 15(e) provided: " The Lessor and Lessee COVENANT AND AGREE that: ... (e) Without prejudice to the rights powers and remedies under this Lease the Lessor will pay to the Lessee interest at the rate of ten percentum (10%) per annum on all monies due but unpaid for fourteen (14) days by the Lessor to the Lessee on any account whatsoever pursuant to this Lease. Such interest to be computed from the due date for the payment of the monies in respect of which the interest is chargeable until payment of such monies in full and to be recoverable in like manner as overpaid Rental. "

Counsel for the plaintiff emphasised the last words of clause 15(e). 30 Apart from the concluding words of clause 15(g), that is, the provision that "failure to pay the outstanding Rental within five years of the date of this Deed of Variation will constitute a breach of an essential term of this Lease", there was no provision in the lease as varied dealing with determination of the lease by the lessor. There was no express provision dealing with rights of re-entry. Nor does the lease contain any term requiring payment of rent or other moneys to be made without deduction or set-off. Plaintiff's Agreement with Boyer of 16 June 1999 31 By letter dated 16 June 1999 signed by Mr Agresta, the director of the plaintiff, and by Mr Dollisson, the managing director of Boyer, the plaintiff and Boyer formalised an agreement in relation to advertising opportunities. It was agreed that Boyer was to pay the plaintiff $75,000 on signing the letter to be used by the plaintiff to pursue advertising panels. Clause 1 provided that "The payment binds the parties to the terms and conditions as hereinafter noted until termination of the Deed between Boyer and Phoenix dated 9 April 1996." The plaintiff was to pursue all reasonable advertising opportunities and pay associated costs including land rental costs or the like for each advertising panel. The panels were to be illuminated and not less than 12 metres long by 3.6 metres high. There were terms as to amounts Boyer was to pay by way of rent in respect of such panels. Clauses 7, 8 and 9 provided: " 7. Boyer hereby grants to Phoenix and Phoenix accepts from Boyer an Option for the licence to Boyer for a period of ten (10) years of any advertising panel that Phoenix obtains and/or constructs pursuant to clause 3 including the Victoria Avenue and Young Street advertising panels. Each panel shall be suitable for Boyer to sub-licence to Advertisers. 8. The Option for the licence to Boyer of each panel is exercised by Phoenix notifying Boyer that a ten (10) year term is available. Within one (1) month of Phoenix notifying Boyer, Boyer will, on every occasion of being notified, pay to Phoenix the greater of: (a) an amount representing the average annual gross earnings, less reasonable advertising agency commissions plus maintenance and outgoing costs for a ten (10) year term multiplied by 6.5; or (b) one million two hundred thousand dollars ($1,200,000). 9. The quarterly licence fee payable by Boyer to Phoenix pursuant to the Deed between Boyer and Phoenix dated 9 April 1996 will cease three (3) months after the date that Boyer pays for the ten (10) year licence for both the Victoria Avenue and Young Street panels. " 32 The effect of these terms was that if the plaintiff notified Boyer that a ten-year term for the Victoria Avenue and Young Street advertising panels was available, Boyer was required to pay in respect of each panel at least $1,200,000 and the quarterly licence fee payable under the agreement of 9 April 1996 would cease three months thereafter. There were two advertising panels at each of the Victoria Avenue and Young Street sites. Council Approval for the Provision of Bus Shelters with Advertising Panels 33 On 5 October 1993, the Council made an agreement with Australian Posters Pty Ltd whereby that company was required at its own expense to supply and install illuminated bus shelters (called "Advertising Shelters") on footpaths within the Council's boundaries in return for exclusive rights to display advertisements thereon. Clause 5 of that agreement dealt with how the advertisements were to be displayed and the dimensions for any advertisement. Clause 6 regulated the content of advertisements. The company was required to clean and maintain the shelters. The company agreed to pay a fee to the Council being a proportion of advertising revenue to be derived by it. 34 The minutes of a meeting of the Council held on 22 February 2000 record a report from the Manager, Technical and Transport Services, in relation to the provision of bus shelters. It can be inferred from that report and from subsequent correspondence that Australian Posters Pty Ltd had changed its name to Adshel Street Furniture Pty Ltd. 35 The report to the Council included the following: " Council has reached the full provision of 20 shelters under its existing contract with Adshel. This contract is a build, own, operate and transfer (BOOT) contract, with a 15-year term due to expire in January 2009. Council has recently held discussions with Adshel, who are prepared to furnish an additional 10 advertising shelters at a reduced revenue share of 5% (given the shortened time remaining in the contract). ... ... In 1993, Council entered into a contract for provision of advertising bus shelters with Australian Posters Pty Ltd. Two years ago this company was taken over by Adshel who are continuing to perform under the contract. Council has reached the full provision of 20 shelters under clause 2.1 of the contract. In 1994 twelve shelters were constructed, 1995 a further five, and 1997 three. ... Council has recently had requests for additional shelters to be provided by members of the community at the following locations: ... Council has recently held discussions with Adshel, who are prepared to furnish another 10 advertising shelters at a reduced revenue share of 5% (given the shortened time remaining in the contract.) This compares with the sliding scale of revenue share under the contract as: ... Given the ongoing and unsatisfied community requests for more shelters it is further recommended that the contract be altered to include the provision of an additional 10 shelters. ... Options for Consideration ... Option B Council could accept the additional 10 shelters at the offered 5 percent revenue income and maintain quarterly payments under the contract. The income currently goes to general fund, and is not earmarked toward other street furniture improvements. " 36 The manager recommended that Council accept Option B being the offer of ten additional advertising shelters under the current contract terms with all other contract terms remaining unchanged. He recommended the Council negotiate with Adshel and residents for the additional shelters to include replacement of the existing unlit shelters and not accept an offer of a one-off front payment in lieu of the advertising revenue stream of quarterly payments. The Council resolved without dissent: " THAT THE RECOMMENDATION BE ADOPTED SUBJECT TO:- (1) ONE OF THE NEW ADVERTISING BUS SHELTERS BEING PLACED AT THE BUS STOP NEAR THE CORNER OF MAJORS BAY ROAD AND GALLIPOLI STREET, CONCORD. (2) THAT THE REVENUE RECEIVED FROM THE ADDITIONAL TEN (10) ADVERTISING SHELTERS BE HELD IN A SEPARATE RESERVE SO AS TO BE AVAILABLE TO FUND IMPROVEMENTS AND EMBELLISHMENTS FOR STREET FURNITURE. " 37 So far as appears, no consideration was given by the Council to whether this resolution or its implementation would trigger an obligation to pay moneys under clause 15(d) of the leases with the plaintiff. 38 On or about 5 May 2000, Adshel installed bus shelters with illuminated advertising panels at Majors Bay Road and Gallipoli Street, Concord and 142 Concord Road, North Strathfield. On or about 8 September 2000, it installed such a shelter at 48-54 Majors Bay Road. Each bus shelter has a side panel for advertisements on each side of the panel. The advertisements exceed two feet in height. Demand for Rent and Re-Entry 39 On 23 January 2003, a solicitor acting for the Council wrote to the plaintiff advising that the second instalment of rent of $450,000, together with interest, was due for payment on 1 February 2003 in respect of each lease. He advised that the interest payable was $167,359.72 and that the total indebtedness of the plaintiff as at 1 February 2003 was $617,359.72, in respect of each lease. 40 On 6 February 2003, the plaintiff paid $20,578.66 described as "one month's rental payment" and, implicitly, requested that the Council agree to accept monthly rental payments. On 20 February 2003, the plaintiff proposed that it acquire the freehold title to the land or alternatively that it obtain a 21-year term with monthly rental payments commencing at $20,600 per month. On 28 February 2003, Abbott Tout, solicitors for the Council, advised that the plaintiff's proposal in its letter of 20 February 2003 was not acceptable to the Council. They advised that the total indebtedness of the plaintiff as at 1 February 2003 was $617,359.72 in respect of each lease. They advised that if payment were not received within seven days, they were instructed to take immediate action in accordance with the terms of the lease without further notice. 41 On 14 May 2003, Abbott Tout served a document described as a notice of breach of covenant. It is this notice which is alleged to be misleading. It was addressed to the plaintiff (described as the "Tenant") and stated as follows: " The Tenant is the lessee of lot 5 in deposited plan 778667 located adjacent to Victoria Avenue at Concord West and the lessee of lot 27 in deposited plan 719909 located parallel to Young Street at Concord (together, Premises ). By leases of the Premises dated 9 April, 1996 from Concord Council (now known as the City of Canada Bay Council ( Council )) to the Tenant ( Leases ) and the variations of Leases dated 18 February, 1998 ( Variations ), the Tenant covenanted to pay Rental as defined in the Variations to the Council within a period of five years from the date of execution of the Variations. The Tenant has failed to make the payments. Take notice that the Council requires the Tenant to comply with its obligations under the Leases and the Variations by paying the Rental and all other amounts owing under the Leases and the Variations within 21 days of the date of this notice. " 42 As previously noted, on 25 June 2003, the Council served a document described as a notice of termination. That notice stated that by the two leases the plaintiff had covenanted to pay "Rental" as defined in the variations of leases within a period of five years from the date of execution of the variations. The notice stated that the tenant had failed to make the payments of rent and that the Council terminated the leases effective immediately. As previously noted, it is admitted on the pleadings that "on 25 June 2003 the Defendant issued notices purporting to terminate the Leases and at about the same time re-entered both sets of premises thereby determining the leases". 43 Boyer changed its name to Eye Fly Sydney Pty Ltd. I shall continue to call it Boyer. The Council entered into licence agreements with Boyer in respect of each of the premises by which it granted licences of the signs affixed to the lands for a term of eight months from 1 July 2003. 44 On 1 December 2003, the plaintiff made demand on Boyer for two amounts separate from the quarterly licence fees claimed to be due under the agreement of 9 April 1996. It claimed interest on late payments totalling $3,780.95 and claimed $93,562.16 for amounts which it said Boyer was liable to pay to it as 50 percent of the construction costs. 45 On 30 January 2004, the plaintiff notified Boyer, purportedly pursuant to clause 8 of the agreement of 6 June 1999 between the plaintiff and Boyer, that a ten-year term was available for an advertising opportunity at a site in Blacktown. It sought payment from Boyer of moneys pursuant to clause 8 of that agreement (see para [31] above). 46 On 6 February 2004, the plaintiff gave a further notice to Boyer pursuant to the agreement of 6 June 1999 that a 10-year term was available for two advertising panels at Victoria Avenue, Concord and two advertising panels at Young Street, Concord. It sought payment in respect of each panel of moneys pursuant to clause 8 of that agreement. 47 The plaintiff commenced its proceedings on 13 February 2004 by summons. It claimed against the Council, amongst other things, declarations that the purported termination of each lease was invalid and orders to restore to it the possession of the lands the subject of those leases. Boyer was joined as a defendant to the proceedings. The plaintiff sought against Boyer, amongst other relief, a declaration that the deed of 9 April 1996 was valid and subsisting, and a declaration that the agreement of 19 June 1999 was valid and subsisting. The plaintiff sought orders against Boyer requiring it to pay quarterly licence fees under the Boyer deed from 1 August 2003 plus interest on unpaid amounts. It also sought orders against Boyer that it pay moneys pursuant to clause 8 of the agreement of 19 June 1999 per advertising panel. In its statement of claim filed on 18 March 2004, the plaintiff alleged that Boyer had refused and failed to pay quarterly licence fees from 1 August 2003. It sought a declaration that Boyer was liable to pay moneys in accordance with clause 8 of the agreement of 16 June 1999 in respect of its notifications of 30 January and 6 February 2004 that 10-year terms were available for an advertising structure at Blacktown and for four advertising structures at Concord. 48 In its defence, Boyer pleaded that the letter dated 16 June 1999 did not constitute an enforceable agreement as it was void for uncertainty. Boyer admitted that it had not paid quarterly licence fees and pleaded that it was not liable to pay such fees because the Young Street lease and the Victoria Street lease had been terminated by the Council on or about 25 June 2003; that upon termination, ownership of the advertising display structure reverted to the Council; and the plaintiff had no interest in the land or the advertising display structures. It pleaded that the plaintiff was thereby in breach of the deed of 9 April 1996 and that it had accepted the plaintiff's repudiation and terminated that deed. It also pleaded that by reason of the same matters, from 26 June 2003, it was not bound by the terms and conditions contained in the letter dated 16 June 1999. It further pleaded that it and the plaintiff had agreed that the Blacktown site was not a "reasonable advertising opportunity" and would not be "put to [it]". It pleaded that on or about 7 April 2003, the plaintiff withdrew its proposal that the Blacktown site be put to the second defendant pursuant to clause 8 of the letter. No evidence was adduced by the Council in respect of that matter. 49 On 16 June 2005, the plaintiff's proceedings against Boyer were dismissed by Master McLaughlin (as his Honour then was) on the grounds of the plaintiff's failure to comply with an order that it provide security for costs. 50 It is apparent from the court record that Boyer ceased to pay the quarterly licence fees from 1 August 2003 and that it denied liability to make payments under the letter dated 16 June 1999 on the grounds, inter alia, that the deed dated 9 April 1996 had been terminated, and that as a consequence the parties ceased to be bound by the terms and conditions of the letter of 16 June 1999. Although the plaintiff did not adduce direct evidence that it had ceased to receive payments from Boyer under the deed of 9 April 1996, the Council made no submission that the plaintiff had failed to adduce evidence that it had ceased to receive the revenue under that deed. The fact that Boyer entered into licence agreements with the Council in respect of the same advertising structures under which it was liable to make payments to the Council would in any event suggest that it treated its agreement with the plaintiff as having come to an end. 51 On 14 April 2005, the Council entered into licences with another company, Manboom Pty Ltd, giving that company the right to sell advertising on the "licensed areas" which it might be inferred include the advertising structures erected on the lands at Young Street and Victoria Avenue. The term of those licences was 12 months. A licence fee of $100,000 was payable. 52 The plaintiff submitted that it was entitled to recover as the following amounts damages for the wrongful termination of the leases by the Council: " 1. For the period in 1 July 2003 (date of re-entry by Council) to 1 January 2008 (termination date of the amended Leases) Phoenix was entitled to be paid the amount of $2,375,537.68 (inclusive of GST) by Eye Pursuant to the Phoenix and Boyer agreement dated 9 April 1996. 2. The amounts of $3,780.95 and $93,562.12 to be paid by Eye Fly Sydney to Phoenix pursuant to the Phoenix and Boyer agreement dated 9 April 1996 under cover of letter dated 1 December 2003 from Phoenix to Eye. 3. Pursuant to clause 17.1(c) of the Phoenix and Boyer agreement dated 9 April 1996 an amount in interest, at 15% per annum, for any unpaid amounts. 4. The loss of future benefit of clause [6] of the amended Leases, i.e. the first and last right to either lease or purchase the land leased by Phoenix from Council under the amended Leases. 5. The future value of the Phoenix and Boyer agreement dated 16 June 1999. At the minimum Phoenix lost the benefit of the monies it was entitled to be paid by the notifications dated 30 January 2004 and 6 February 2004. 6. Monies that Phoenix was entitled to be paid by Eye pursuant to the Phoenix and Boyer agreement dated 16 June 1999 being: 6.1 The amount of $1,200,000 (exclusive of GST) under the notification by Phoenix to Eye Fly Sydney Pty Limited under cover of letter dated 30 January 2004; and 6.2 The amount of $120,000 for GST; and 6.3 The amount of $4,800,000 (exclusive of GST) under the notification by Phoenix to Eye Fly Sydney Pty Limited under cover of letter dated 6 February 2004; and 6.4 The amount of $480,000 for GST. 7. The amount of $20,578.66 paid on 6 February 2003 by Phoenix to Council. 8. Any overpaid Rental as a debt. 9. Monies paid to Council from the wrongful use by Council of Phoenix's two (2) advertising structures, being the monies paid to Council by Eye and Manboom. 10. Any monies that Phoenix has incurred in the proceedings between Phoenix and City of Canada Bay Council including any cost orders. " 53 The present claim was not articulated in either the statement of claim filed on 18 March 2004, nor in an amended statement of claim filed on 17 August 2005. On 20 March 2008, I gave the plaintiff leave to amend further its amended statement of claim to raise the allegation that the Council had breached clause 15(d) of the lease by giving approval at its meeting on 22 February 2000 to the erection of the three advertising shelters alleged to constitute general advertising structures. One ground on which the Council contends that the plaintiff cannot set off any debt owed to it under clauses 15(d) and 15(e) against rent as an equitable set-off is that it did not make such a claim until 20 March 2008. There was evidence at the time I gave leave to amend that the plaintiff only became aware in late 2007 of the approvals of February 2000. That same evidence was not read at the hearing before me and has not been tested, although if there had been a dispute about that matter I would have expected the dispute to have been raised when leave to amend was sought. I would also have expected any such dispute to have been raised on an earlier application for leave to administer interrogatories. 54 Be that as it may, at the final hearing there was no direct evidence as to when the plaintiff first learned of the facts which are claimed give rise to debts owed by the Council under clauses 15(d) and (e) of the lease. So far as appears, the minutes of the Council's meeting are not a public document. No correspondence was tendered to indicate that the Council had provided a copy of the minutes to the plaintiff or had informed the plaintiff of the matter contained in the minutes. On the Council's case, it had no occasion to do so because it would not have considered that the resolution to enter into an agreement with Adshel for the erection of further bus shelters with advertising displays would have triggered clause 15(d) of the leases. Those facts, coupled with the absence of any reference to those matters in the earlier pleadings give rise to the inference that the plaintiff was not aware of the resolutions until sometime during the course of these proceedings, which, I infer, was after 17 August 2005. Was Clause 15(d) Triggered? 55 Mr Coles QC and Mr Armfield, who appeared for the Council, submitted that the bus shelters the subject of the Council's resolution of 22 February 2000 were not general advertising structures within the meaning of clause 15(d), notwithstanding that they included an advertising panel. They submitted that the expression "general advertising structure" should be construed in the light of the definition of "advertising structure" inserted into the Environmental Planning and Assessment Act 1979 (NSW) by amendments assented to on 19 December 1997. In that Act the expression "advertising structure" means a structure used or to be used principally for the display of an advertisement. They submitted that the bus shelters in question were not to be used principally for the display of an advertisement but to provide somewhere for commuters waiting for a bus to sit and to take shelter. They also submitted that even if the expression were not to be construed in the light of that definition in the Environmental Planning and Assessment Act, but should be construed according to ordinary notions of what is a general advertising structure, the bus shelters did not so qualify. It was insufficient, they submitted, that the structures in question carried advertising. Rather, to come within the clause, if it were construed without recourse to statutory definitions, the carrying of advertising must be the "defining feature" of the structure for it to fall within the expression "general advertising structure". Counsel also submitted that the phrase "general advertising structure" was intended to refer to a large scale construction for the sole or at least for the primary purpose of placing or installing advertising of the same kind as the advertising display structures erected on the demised lands. 56 The phrase "general advertising structure" is not to be read as meaning an advertising structure of the same size or description as the advertising structures to be erected on the demised land. Clause 15(d) contains no such limitation expressly. Nor should such a limitation be implied. It does not arise from the construction of the express words and does not meet the requirements for the ad hoc implication of a term (BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 at 283); in particular it is not necessary to give business efficacy to the contract, nor so obvious as to go without saying. 57 Because the document to be construed is a long-term registered lease, the extrinsic material to which regard may be had to resolve ambiguities is limited to evidence of the most obvious kind (Burns Philp Hardware Pty Ltd v Howard Chia Pty Ltd (1987) 8 NSWLR 642 at 655; Riltang Pty Ltd v L Pty Ltd [2004] NSWSC 977; (2004) 12 BPR 22,347 at [27]; Westfield Management Ltd v Perpetual Trustee Co Ltd [2007] HCA 45; (2007) 233 CLR 528; 239 ALR 75; 81 ALJR 1887 at [39]). It may be legitimate to have regard to relevant statutes or delegated legislation to ascertain objectively the intended connotation of the expression "general advertising structure" (Gardner v Agricultural & Rural Finance Pty Ltd [2007] NSWCA 235 per Spigelman CJ at [24]). The question is whether it should be inferred that the parties intended the words in the lease to have the same meaning as like expressions in such instruments. 58 As noted in the submissions for the Council, amendments were made to the Environmental Planning and Assessment Act to insert into that Act definitions of "advertising structure", "advertisement" and "consent authority" between the entry into the leases on 9 April 1996 and entry into the deeds of variation of 1 February 1998. 59 "Advertising structure" was defined to mean "a structure used or to be used principally for the display of an advertisement". An "advertisement" was defined to mean "a sign, notice, device or representation in the nature of an advertisement visible from any public place or public reserve or from any navigable water". I was not referred to any use of the expression "advertising structure" in the amendments made to the Environmental Planning and Assessment Act from which it might be inferred that the parties to the lease intended to adopt that defined meaning as the meaning of the expression of "general advertising structure" in the lease. If the parties had those amendments in mind when they entered into the deed of variation, it would be inferred that they did not intend to adopt the definition of "advertising structure" in that Act. In clause 18 of the original lease the expression used was "approve the erection of an advertising structure" rather than "approve the erection of a general advertising structure". If the parties had that legislation in mind, it would be inferred that by introducing the word "general" they were indicating that they were not adopting a reference only to those structures which were "advertising structures" within the meaning of that Act. 60 A more relevant instrument was the Concord Planning Scheme Ordinance gazetted in 1969 and which at relevant times provided in clause 47 that: "A person shall not erect a general advertising structure in Zone No. 2(a), 2(b) or 2(c)". That prohibition did not apply to a general advertising structure erected on premises within those zones to indicate the purpose for which the premises were used. In that clause, the expression "general advertising structure" had the meaning ascribed to it in ordinance 55 made under the Local Government Act 1919 (NSW). Clause 2 of ordinance 55 provided that: " 'General Advertising Structure' means any structure used or to be used for the display of advertisements other than a commercial sign, and includes (a) a signboard, (b) a wall sign, (c) a hoarding, (d) a painted bulletin, and (e) an illuminated sign. " 61 "Commercial Sign" meant "any advertisement or any sign, notice, device, or representation in the nature of an advertisement (other than a structure having a length in excess of 4 feet or a height in excess of 2 feet erected upon any premises), erected in conformity with the provisions contained in Part "B" of this Ordinance." 62 All three of the advertising panels exceeded two feet in height, and were thus not "commercial signs" within the meaning of the definition of "General Advertising Structure" in clause 47 of the Ordinance. 63 If the parties intended to pick up language in legislative instruments it could be expected that they would have defined the expression "advertising structure" or "general advertising structure" by express reference to such an instrument. In the absence of such a provision I do not think that the clause should be construed by reference to either sets of legislative provisions. However, if I am wrong in that, it would make more sense that the parties intended to adopt a definition of the exact phrase used, namely, "general advertising structure", which was still in current use in the planning scheme ordinance for the council municipality, than a legislative definition of "advertising structure", given that they chose the former language. The bus shelters would be general advertising structures within the meaning of the ordinance. 64 It was common ground that the purpose of requiring the Council to make a payment if, in its capacity as consent authority, it approved the erection of a general advertising structure, was to seek to ensure that the plaintiff's advertising display structures were the only advertising structures erected in the local government area, presumably because exclusivity would enhance the value of the structures it was to erect or had erected. Such exclusivity could not be guaranteed because the Council could not by contract fetter the exercise of its statutory discretion to grant or withhold approval to the erection of advertising structures. Clause 15(d) would provide compensation to the plaintiff if exclusivity were lost, although there would be no necessary correlation between any detriment suffered by the plaintiff as a result of loss of exclusivity and the amount payable under the clause. Hence, counsel for the plaintiff submitted that a construction which promoted the purpose of clause 15(d) of protecting the plaintiff as the exclusive erector of advertising displays should be preferred to a construction which did not promote that purpose. He submitted that this indicated a wider rather than a narrower, construction of the expression "general advertising structure". There is some force in this argument, but it cannot be taken too far. There is usually a compromise in commercial negotiations such that it should not be assumed that the purpose of securing or protecting the exclusivity of the advertising on the demised lands would be given full effect. 65 In my view, the expression "general advertising structure" in the leases is to be construed without recourse to such legislative instruments. The word "general" made it clear that a structure that was to carry only advertisements for a particular person, such as an awning advertising the name and the wares of a particular shop, was not caught by the clause. In my view, a "general advertising structure" within the meaning of clause 15(d) was a structure to be erected for the purpose of carrying general advertising. This did not mean that that had to be the sole or principal purpose of the erection of the structure. I see no reason that a bus shelter could not also be a general advertising structure. Notwithstanding that the Council described the shelters in question as "advertising shelters" and that Adshel's purpose in proposing their construction was that they carry advertising, I accept that the primary function of the bus shelters the subject of the Council's resolution of 22 February 2000 was to provide seating and shelter for bus commuters. But the fact that the shelters' primary function was to provide seating and shelter does not mean that the shelters were not also general advertising structures. 66 In my view, the issue of construction is simply answered by asking whether in order for a structure to qualify as a general advertising structure, the purpose of the structure must be principally or solely for the display of advertisements (as the Council contends), or whether it is sufficient that an intended use of the structure is to display advertisements. There is no reason that a structure cannot have more than a single purpose or function. It is no answer to the plaintiff's submission to say that the structures in question are bus shelters. That begs the question as to whether they are also general advertising structures. In my view they are because they were constructed to display general advertising. 67 Mr Coles QC and Mr Armfield cited Eastlake Golf Club v Botany Bay Council [2007] NSWLEC 236 in support of their submission that a structure will not be regarded as a structure erected for the display of general advertising merely because it supports advertising material, even if its support for that material was the primary commercial motivation for the structure, where it performs another and more significant function. I do not agree. The passage in the judgment of Lloyd J upon which the Council relied was as follows: " 42. The LEP defines ' advertising structure ' as meaning ' any structure erected for the display of general advertising ' ... In the present case it is possible to take the view that this is not a ' structure erected for the display of general advertising ' - it is a bridge. " 68 The context of that observation was a submission that the Commissioner from whom the appeal was brought had failed to consider the requirements of a clause of the relevant local environmental plan in relation to the advertising panels as a discrete development separate from the bridge on which they were to be located. The relevant clause (set out at [36] of his Honour's judgment) set out matters about which the Council was required to be satisfied in relation to a proposed development. The proposed development was the construction of a bridge over a motorway which would carry two illuminated advertising panels on each side. Lloyd J held that the Commissioner considered the requirements of the relevant clause for the proposed development including the advertising panels (at [41]-[43]). In any event, the expression to which his Honour referred in the passage quoted from para [42] was not a general advertising structure, but referred specifically to the purpose for which a structure was erected. It may well be that the words of the LEP referred to the sole or the principal purpose of the erection of the structure. I express no view about that. Those words are different from the words in clause 15(d). 69 For these reasons, I consider that the three bus shelters in question are general advertising structures within the meaning of clause 15(d). Approval in the Capacity of Consent Authority 70 It was not every approval to the erection of a general advertising structure which was caught by clause 15(d). To be the subject of clause 15(d) such an approval had to be given by the Council in its capacity as a "consent authority". The phrase "consent authority" was not defined in the lease. Mr Coles QC and Mr Armfield submitted that this was a reference to the Council acting as a consent authority pursuant to the Environmental Planning and Assessment Act in relation to a development application or an application for a complying development certificate under that Act. They submitted that the Environmental Planning and Assessment Act defined the Council's role as a consent authority and that the Council did not act in such a role unless and until it received a development application or an application for a complying development certificate. 71 The bus shelters were erected on footpaths which were public roads. The roads were not zoned. In passing the resolution of 22 February 2000 the Council was not exercising any function as a consent authority under the Environmental Planning and Assessment Act. However, the Council was the "roads authority" for those roads (Roads Act 1993 (NSW), s 7). Section 138(1)(a) of the Roads Act provides that a person must not erect a structure or carry out a work in, on, or over a public road, otherwise than with the consent of the appropriate roads authority. Accordingly, Adshel needed the consent of the Council to erect the bus shelters. The Council consented to the erection of the bus shelters by its resolution of 22 February 2000 and its communication of that resolution to Adshel. As it was a public authority whose consent was required to the erection of the structures, and as it gave that consent, I consider that the Council approved of the erection of the structures in its capacity as consent authority. 72 It was submitted for the Council that clause 15(d) contemplated that the Council would be required to consider a much wider range of matters than would be appropriate to be considered for the exercise of functions under s 138 of the Roads Act, and this showed that the expression "in its capacity as consent authority" meant in its capacity as consent authority under the Environmental Planning and Assessment Act. I do not accept either premise implicit in that argument. There is nothing in clause 15(d) which assumes that the Council will be acting in a capacity where it is required to take into account any particular range of matters in deciding whether or not to approve of the erection of a general advertising structure. In any event, there is nothing in s 138(1) of the Roads Act which confines the matters to which the Council should have regard in deciding whether to give or withhold its consent to the erection of a structure on a public road. It was submitted for the Council that the only appropriate matters to be taken into account in exercising the function under s 138(1)(a) would be whether or not the erection of the structure would impede the flow of traffic. I see no reason why that should be so and why the Council would not be entitled under that section to take into account aesthetic considerations. 73 If it had been intended that the expression "consent authority" should be limited to a consent authority under the Environmental Planning and Assessment Act, it would have been easy so to define the expression. In the absence of such a definition, I consider that the clause 15(d) is satisfied and that relevant approval was given by the Council in its capacity as a public authority whose consent was required to the erection of the structure. 74 For these reasons, I conclude that by reason of the communication to Adshel of the Council's resolutions at its meeting of 22 February 2000, the Council did, in its capacity as consent authority, approve of the erection of ten general advertising structures on other land within its local government area within the meaning of clause 15(d) of the leases. Whilst approval was given for the erection of ten such structures, only the approval of three were relied upon by the plaintiff. Multiple Approvals 75 I accept the plaintiff's submission that although the approval of multiple general advertising structures was given by a single resolution of the Council, multiple approvals were given. Each structure required the consent of the Council to its erection pursuant to s 138(1)(a) of the Roads Act. The Council gave its approval in respect of each structure. For the purposes of clause 15(d) there were at least three separate approvals. Extent of Council's Liability under Clause 15(d) 76 Mr Coles QC and Mr Armfield submitted that if the Council were liable under clause 15(d) then the full extent of its liability was to pay 25 percent of the rent outstanding as at the date of an approval for the erection of a general advertising structure, irrespective of how many approvals were given. They submitted that any other construction would be liable to lead to unreasonable and unjust results. They submitted that clause 15(d) had the same purpose and should be construed as being to the same effect as clause 18 of the original lease. The purpose of the clause was to compensate the plaintiff if it lost exclusivity of its advertising structures, but exclusivity "like a number of other virtues" could only be lost once. 77 I do not accept all of these arguments. Dealing with them in reverse order, whilst it is true that exclusivity can only be lost once, it does not follow that the effect on the plaintiff of the grant of one approval for the erection of one other general advertising structure in the municipality would be the same as the grant of multiple approvals for multiple structures. 78 It is correct that clause 18 of the original lease (set out at para [18] above) provided for the abatement of the additional lease fee of 25 percent whether the Council in its capacity as consent authority approved the erection of one or more advertising structures on other land within the local government area. There was only one additional lease fee and it was to abate during the period of approval for the erection of another advertising structure, whether there was one or more than one such approval current at any particular time. However, that clause was deleted in the deeds of variation and the wording was changed. On any view, the amendments improved the position of the lessee. Instead of the lessee being required to pay an additional 25 percent lease fee which would abate if the Council approved the erection of an advertising structure on other land, clause 15(d) required the Council to pay 25 percent of the rent if, as consent authority, it approved the erection of a general advertising structure on other land within the municipality. Interest was to be payable on that amount pursuant to clause 15(e). Money was payable under clause 15(d) on the giving of an approval, irrespective of the period for which the approval remained current. Given that these were substantive changes in favour of the lessee, and given the rewriting of the clause, it cannot be assumed that clause 15(d) was intended to operate in the same way as clause 18 of the original lease. On the other hand, the changes do not necessarily imply that a different operation was intended. 79 There is substance in the Council's submission that unless its liability under clause 15(d) were capped at 25 percent of the rent corresponding to the amount of time remaining within the term, the clause could operate unreasonably and it should be inferred that that was not intended. The Council would be required to consider an application for the erection of a general advertising structure, either in its capacity as a consent authority under the Environmental Planning and Assessment Act or under the Roads Act, by reference only to those considerations which were relevant under such legislation. If the Council considered that an application was in the public interest, judged by such relevant considerations, it would be required to grant its approval. It would therefore be unlikely that the parties would have intended that the Council might become liable to make payments which, if the Council granted more than four approvals, would deprive it of any commercial benefit from the lease of its land to the plaintiff, and instead require it to make substantial payments which could be out of all proportion to any diminution in the value of the lease of the site to the plaintiff. The lease should be given a business-like interpretation, having regard to the language used, the commercial circumstances in which it was entered into and the objects it was intended to secure (McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579 per Gleeson CJ at [22], 589). Whilst the language of clause 15(d) is open to the construction that for each approval for the erection of a general advertising structure on other land, the Council was required to pay the plaintiff 25 percent of the rent corresponding to the amount of time remaining within the term, that construction is not to be preferred if it leads to unbusiness-like results. 80 The plaintiff did not contend that clause 15(d) should be construed in the way outlined above, namely, that for each approval, the lessor was required to pay an amount equivalent to 25 percent of the whole of the rent corresponding to the amount of time remaining within the term. The plaintiff contended that clause 15(d) had a cascading operation, which could never result in the Council being liable to pay more under clause 15(d) than the outstanding rent for the balance of the term. The plaintiff submitted that on the giving of one approval within the clause, the lessor became liable to pay an amount equivalent to 25 percent of the rent corresponding to the amount of time remaining within the term. The plaintiff submitted that that liability was set off against the lessee's obligation to pay rent and the set-off operated as a payment. The second approval under clause 15(d) required the Council to pay an amount equivalent to 25 percent of the remaining unpaid rent corresponding to the amount of time remaining within the term, that is, 25 percent of 75 percent of the original amount of outstanding rent. The third approval required the Council to pay an amount equivalent to 25 percent of 56.25 percent of the outstanding rent. Had there been more approvals (as in fact there were, although the plaintiff did not rely on them) the Council's liability under clause 15(d) would be to pay 25 percent of a successively diminishing sum, to be set off against the plaintiff's liability for outstanding rent. 81 The correctness of this argument depends partly upon the correctness of the plaintiff's submission that the liability of the Council under clause 15(d) can be set off against the plaintiff's obligation to pay rent and that set-off operated as payment. For the time being, I will assume that that submission is correct. Nonetheless, I do not accept the plaintiff's construction of clause 15(d). It requires reading clause 15(d) as if it required the Council to pay to the plaintiff an amount equivalent to 25 percent of the unpaid rent corresponding to the amount of time remaining within the term. The clause does not so provide. There is nothing in the definition of "Rental" which supports a construction that it means unpaid rent. There is no logical reason why the plaintiff should be in a worse position in terms of its ability to recover moneys under clause 15(d) if it paid all or part of the rent before the expiry of five years after the Deed of Variation was entered into than if it did not. 82 Accordingly, I do not accept that the potentially harsh operation of the clause can be mitigated by the construction contended for by the plaintiff. That potentially harsh operation is highlighted by the fact that the Council gave approvals for the erection by Adshel of ten general advertising structures. The fact that the plaintiff relies only on three such approvals does not affect this. To avoid giving the clause an unbusiness-like construction, it should be interpreted as requiring the Council to pay an amount equivalent to 25 percent of the rent corresponding to the amount of time remaining within the term, whether it gave one or more than one approval to the erection of a general advertising structure or structures on other land within the Council's area. 83 The plaintiff calculated that for each lease the amount of rent "corresponding to the amount of time remaining within the Term" as at 22 February 2000 was $714,375. The Council did not dispute that calculation. Accordingly, pursuant to clause 15(d), the Council became liable to pay 25 percent of that amount, namely $178,593.75 to the plaintiff in respect of each lease. It also was liable to pay interest on that sum pursuant to clause 15(e). I do not accept the plaintiff's contention that the Council was liable to pay $412,998.04 pursuant to clause 15(d) by reason of the grant of three approvals. Set-off 84 It follows from my conclusion above, that irrespective of arguments about set-off, the plaintiff was in breach of its obligation under clause 15(g) to pay outstanding rent within five years from the date of execution of the Deed of Variation. Nonetheless, it is necessary to deal with the plaintiff's contention that the amounts which the Council was liable to pay under clause 15(d) were set off against the plaintiff's obligation to pay rent under clause 15(g) and that such set-off operated as payment towards rent (as distinct from payment towards interest accruing under clause 15(g)). 85 Unless the debt owed by the Council under clause 15(d) was immediately set off against the outstanding rent which was owing under clause 15(g) but was not immediately payable, the debt incurred interest under clause 15(e) at 10 percent per annum. An anomaly in the plaintiff's submission was that although the argument for the cascading effect of clause 15(d) assumed that set-off operated as immediate payment, other parts of the plaintiff's submission assumed that set-off was not effected until the end of the five-year term when the outstanding rent became payable, so that interest accrued on the debt at ten percent per annum pursuant to clause 15(e) which was a higher rate than interest on the rent. 86 Clause 15(e) provided that interest on moneys payable by the lessor to the lessee would be recoverable "in like manner as overpaid Rental". That clause is to be construed against the definition of "Rental" and clause 15(g) which provided for $450,000 of rent to be paid on the execution of the Deed of Variation and the balance within five years. To treat interest payable by the lessor as "overpaid Rental" is equivalent to saying that the lessee is to be taken to have paid more by way of rent than the sum of $450,000 payable on execution of the Deed of Variation. Although the language is awkward, the phrase "recoverable in like manner as overpaid Rental" connotes that interest under clause 15(e) is treated as a pre-payment of rent and is to be set off against outstanding rent. 87 There is no comparable provision in the case of an unpaid debt owed under clause 15(d). 88 Contractual set-off is the equivalent of payment (Re Application of Keith Bray Pty Ltd (1991) 23 NSWLR 430 at 431; National Australia Bank Ltd v Idoport Pty Ltd [2007] NSWSC 1349 at [56]). I do not accept that by providing that interest on a debt under clause 15(d) should be recoverable as overpaid, that is, prepaid, rent, the parties are to be taken to have agreed that the debt itself under clause 15(d) could be set off against unpaid rent. If the debt payable under clause 15(d) were set off against rent, then unless that debt exceeded unpaid outstanding rent, no interest would accrue under clause 15(e). On the other hand, if the debt under clause 15(d) exceeded outstanding unpaid rent so that interest accrued under clause 15(e), then the concluding words of clause 15(e) discussed in para [86] above would have no work to do. This indicates that the parties did not intend that a debt under clause 15(d) could be set off against outstanding rent. 89 Equitable set-off can be excluded by contract. In my view set-off of a debt under clause 15(d) against rent is excluded in this case. But because the contractual language is unclear, I will consider whether equitable set-off would otherwise be available. A debt owed by the Council under clause 15(d) could only be set off against the plaintiff's obligation to pay rent under clause 15(g) if it were so closely connected with the plaintiff's obligation to pay rent that it would be unjust for the Council to recover rent without deduction of the debt it owed under clause 15(d). Its liability under clause 15(d) must go to the root of its entitlement to rent. 90 In my view, clause 15(d) did not impeach or go to the root of the Council's claim to rent because nothing in its obligation to pay an amount of money under clause 15(d) affected the plaintiff's having the benefit of quiet enjoyment of the land upon which its advertising structures were erected. By granting approval to the erection of general advertising structures elsewhere in the municipality, the Council did not make the value of the land which the plaintiff occupied under its leases less valuable to the plaintiff. The plaintiff was still able to erect its advertising structures on its land and licence the advertising structures to others. A typical case in which set-off is allowed against rent is where a landlord has breached its covenant for quiet enjoyment or a covenant to repair. In such a case, the landlord's entitlement to rent is impeached because by reason of its breaches the tenant is not receiving the physical enjoyment of the property which it is entitled to expect in return for the rent. By contrast, in the present case, the Council's liability under clause 15(d) does not arise from any breach of the lease on its part. The plaintiff's use of the demised land was unaffected by the approval of other general advertising structures. Whilst the erection of such other structures meant that the plaintiff could not offer exclusive outdoor general advertising signage to a licensee, and for that compensation was payable under clause 15(d), that did not affect the use to which the demised land was put for which rent was payable. 91 The fact that interest on the debt owed by the Council under clause 15(d) accrued at a different rate from interest accruing on rent pursuant to clause 15(g) also indicates that a claim under clause 15(d) does not impeach the Council's entitlement to rent under clause 15(g). 92 The mere fact that both the plaintiff's liability to pay rent and the Council's liability to pay moneys under clause 15(d) give rise to liquidated claims under the same instrument is not itself sufficient to give rise to a set-off in equity. On being sued for rent, the plaintiff could plead, by way of defence, a set-off against the Council's claim for rent pursuant to s 21 of the Civil Procedure Act 2005 (NSW), but that would not operate to extinguish or reduce the Council's entitlement to rent for the non-payment of which the lease was forfeited. 93 Whilst the principal debt owing under clause 15(d) is not to be set off against rent, interest under clause 15(e) is to be set off against rent. 94 It is unnecessary to decide whether equitable set-off, had it been available, would be a basis for resisting the exercise by the Council of a right of re-entry for non-payment of rent (as to which see M Lambert Pty Ltd v N A & T Papadatos Pty Ltd (1991) 5 ACSR 468 at 471). For the reasons I have given, I do not consider that the Council's liability under clause 15(d) is set off in equity against the plaintiff's liability for rent. Even if it were, the claim would only reduce, rather than extinguish, the liability for rent. Indeed, that would be the position even if I had adopted the plaintiff's construction of clause 15(d). On that construction there would still have been a debt owing for rent as at 22 February 2000. The plaintiff's claim that the debt for rent was extinguished by the set-off of the Council's liability under clause 15(d) depended upon the debt under clause 15(d) continuing to accrue so that interest was payable under clause 15(e) until rent accruing under clause 15(g) became payable. It is only by setting off the debt claimed by the plaintiff under clause 15(d) and interest under clause 15(e) against rent, as distinct from interest accruing under clause 15(g), that the plaintiff could contend that its obligation to pay rent had been satisfied and that all that was owing was an amount for interest under clause 15(g). However, if set-off in equity were available, it would have taken effect when the Council was liable to pay the debt. At that time, the plaintiff owed money for rent, although that liability was not presently payable. There was nothing to prevent the plaintiff from reducing the debt for rent by making payments of rent. If there were a set-off in equity, the plaintiff's liability for rent would be treated as having been reduced by the amount the Council was liable to pay it under clause 15(d) at the time that liability arose. 95 The Council issued notices purporting to terminate the leases for non-payment of rent. Its right to do so was challenged on the ground that no rent (as distinct from interest under clause 15(g)) was owing at the time of the purported termination. For the reasons above, I do not accept that contention. Rent was owing notwithstanding that the Council was liable under clause 15(d) to pay $178,593.75 and that the interest which had accrued on that sum from 22 February 2000 was set off against rent and reduced the amount owing. Accordingly, the leases were validly terminated. Claim for Misleading and Deceptive Conduct - Notice of Breach of Covenant 96 The text of the notice which is alleged to be misleading or deceptive is set out at para [41] above. The notice was sent "in trade or commerce". It was sent in the course of a business carried on by the Council of leasing its land for reward (Fair Trading Act s 4, definition of "trade or commerce"). The notice was alleged to be misleading or deceptive because it claimed that rent was outstanding when, according to the plaintiff, no rent was due. However, rent was due. No specific amount of outstanding rent was specified in the notice. For the reasons I have given, the full amount of rent, after allowance for the payment of $20,578.66 on 6 February 2003 and deduction of interest under clause 15(e) was outstanding. 97 It was argued that the notice was misleading because it made no reference to the Council's having a liability to make a payment to the plaintiff under clause 15(d). In Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 34 and 41, the Full Court of the Federal Court emphasised that silence is to be assessed as one of the factors in a party's conduct, having regard to what the party did, what it said, and what it did not say or do, in order to determine whether its conduct as a whole was misleading or deceptive. If the circumstances are such as to give rise to a reasonable expectation that if some relevant fact exists it will be disclosed, silence may support the inference that that fact does not exist (Kimberley NZI Finance Ltd v Torero Pty Ltd [1989] ATPR (Digest) 53,193 at 53,195; Demagogue Pty Ltd v Ramensky at 32, 41; Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97 at 114; Warner v Elders Rural Finance (1993) 41 FCR 399 at 405). 98 The notice in question was a demand from the Council's solicitors for unpaid rent. It did not address any other aspect of the parties' relationship. The notice contained no implied representation about any matter in respect of which the Council might have had a liability to the plaintiff under the lease. I do not consider that the plaintiff could reasonably have expected that if the Council had given approval as a consent authority to the erection of a general advertising structure which created a debt under clause 15(d), that that fact would be disclosed in the solicitors' letter of demand. The solicitors were asserting the Council's position. They were not purporting to provide a general evaluation of each party's rights and obligations. In my view, the notice was not misleading or deceptive. 99 Moreover, the plaintiff has not established that it suffered any damage as a result of receipt of the notice and the non-disclosure of the Council's liability under clause 15(d). There is no evidence that it was in a position to pay the outstanding rent. Even if it could have obtained relief against forfeiture by paying the difference between the amount of outstanding rent calculated in accordance with clause 15(g) and the amount due by the Council to the plaintiff under clauses 15(d) and 15(e), there is no evidence that it was able to pay that difference. Title to Advertising Structures 100 Pursuant to the Deed of Variation, the term of the lease was 1 January 2008. The lease was determined by the Council for non-payment of rent prior to the expiration of the term. Pursuant to clause 10(b) (quoted at para [16] above), the plaintiff was required on the determination of the term to yield up to the Council without cost or compensation the land and/or buildings, erections and fixtures on the land in good and substantial repair and condition. The advertising structures erected by the plaintiff were fixtures. The plaintiff would have been entitled to remove the structures had the lease run its full term. As it did not, the Council was entitled to the structures as fixtures on the land and pursuant to clause 10(b). Quantum of Plaintiff's Claim for Damages 101 Because the Council did not breach the lease by giving notice of termination and re-entering the leased premises, and because it did not engage in misleading or deceptive conduct in giving the notices of 13 May 2003, the plaintiff is not entitled to damages. As the evidence on quantum was all documentary, it is not necessary to consider questions of quantum against the possibility of a successful appeal. Credit for Moneys Received by the Council after Re-Entry 102 As noted in paras [43] and [51], after termination of the lease the Council granted licences to other companies to sell advertising on the structures. If the Council's claim were for damages, it would be required to give credit for the licence fees paid to it as those amounts would have reduced any loss suffered by it. However, whilst the Council in its cross-claim sought damages, it did not seek to prove that it had suffered loss arising from its termination of the lease following the plaintiff's default in payment of rent. The plaintiff was liable to pay rent of $450,000 in respect of each lease, together with interest calculated in accordance with clause 15(g) on 1 February 2003. That sum is payable as a debt, not as damages. The fact that if the rent had been paid, the plaintiff would have been entitled to remain in possession of the premises for the remainder of the term of the lease, and the fact that it did not receive that term because the lease was forfeited, does not mean that the debt for rent had not fully accrued as at 1 February 2003. The lease made no provision for the debt to be reduced by the value of benefits the Council received after termination of the lease, and no such term could be implied. The plaintiff is not entitled to credit for the licence fees received by the Council from third parties after terminating the lease. Application for Leave to Amend 103 On 3 February 2009 the parties were advised that I would deliver reasons for judgment on 5 February. Before reasons were delivered the plaintiff gave notice that it would be seeking leave to file a notice of motion seeking, amongst other things, leave to amend. The plaintiff also seeks to re-open to tender further documentary evidence. I deferred giving reasons so as to deal with this application. 104 As presently formulated the plaintiff's claim is that the Council became liable to pay moneys under clause 15(d) of each lease by reason of its approval given on 22 February 2000 to the erection of three bus shelters with advertising display cases in the local government area. On the existing pleadings the plaintiff claims that by reason of what it claims are three approvals, the Council became liable under clause 15(d) of each lease to pay to the plaintiff $412,998.04 and interest pursuant to clause 15(e). 105 The plaintiff seeks leave to file a second further amended statement of claim to include the following new allegations. The first allegation is that on or about 7 June 1999 or 12 July 1999 the Council approved the erection of 20 advertising panels in bus shelters in the Concord Municipality. 106 Secondly, the plaintiff seeks to amend the dates of the approval of the three alleged general advertising structures the subject of the present claim. It seeks to allege that separate approvals in respect of those three structures were given on 22 February 2000, 9 March 2000 and 1 September 2000. Consequential adjustments are then made to the quantum of the claims under clauses 15(d) and 15(e). 107 Using the plaintiff's cascading reductions of rent after set-off of amounts payable under clause 15(d) the amount of rent alleged to be due for each lease to the end of term from 1 September 2000, that is, after the date of the 23rd alleged approval, is a mere $1,185.26. Interest of $266,159.25 claimed pursuant to clause 15(e). The plaintiff says that, as at 1 February 2003, the Council owed it a substantially greater sum under clauses 15(d) and 15(e) than was payable by it under clause 15(g). The plaintiff alleges that the moneys payable under clauses 15(d) and 15(e) are to be treated as an advance made by the plaintiff to the Council and that consequently the Council was not entitled to terminate the leases for non-payment of rent. 108 In the proposed further amended pleading the plaintiff also seeks to allege that the Council is not entitled to terminate the leases because the demand of 13 May 2003 did not include the notice required under Sch 6 of the Conveyancing Act (1919) NSW, and also because neither lease included a forfeiture clause. The plaintiff's counsel did not make any submissions in support of these proposed amendments. A notice in accordance with Sch 6 of the Conveyancing Act is required where a lessor is required to give notice under s 129 of the Conveyancing Act. That section does not apply to the forfeiture of leases for non-payment of rent (s 129(8)). Clause 15(g) provided that a failure to pay outstanding rent within five years of the date of the Deed of Variation constituted a breach of an essential term of the lease. Because the obligation to pay rent was essential, the Council was entitled to terminate or forfeit the lease for non-payment of rent. 109 The proposed further amended pleading also included an allegation that the Council, in trade and commerce, engaged in conduct which was likely to mislead, contrary to s 42 of the Fair Trading Act not only by issuing the notice of 13 May 2003, but also by not informing the plaintiff that it had approved the erection of any of the alleged general advertising structures. On the hearing of the application for leave to amend, counsel for the plaintiff advised that the plaintiff did not seek to widen the occasion on which it is alleged that the Council engaged in misleading or deceptive conduct. That is, the plaintiff contends that the Council contravened s 42 of the Fair Trading Act by the sending of the notices of 13 May 2003 which did not disclose the alleged fact that the Council had approved the erection of general advertising structures. That contention had been advanced without objection at the principal hearing and is within the scope of the existing pleading. The plaintiff does not seek to allege that the Council engaged in conduct in contravention of s 42 of the Fair Trading Act by failing to inform the plaintiff at other times of the giving of such approvals. 110 In opposing leave, the Council refers to the many amendments already made to the statement of claim and the lateness of the present application. It complains that if leave to amend were allowed, additional costs would be incurred. The plaintiff was ordered to pay costs thrown away by reason of the vacation of the hearing before Gzell J in August 2005. Those costs have been assessed but not paid. There is reason to apprehend that any further costs which the Council is required to incur will not be recoverable if the Council is successful in the proceedings. 111 However, there is some justification for the present contentions not having been raised at the principal hearing. The documents on which the plaintiff now seeks to rely were not made available to it until very shortly before the hearing. At that time the plaintiff was experiencing considerable difficulty in obtaining legal representation. It appeared that its director, Mr Agresta, would have to conduct the proceedings himself. On 2 April 2008 I dismissed an application by the plaintiff to adjourn the hearing date. I made an order pursuant to Pt 66A r 4 of the Supreme Court Rules, referring the plaintiff to the Registrar for referral to a barrister on the pro bono panel for legal assistance. The hearing commenced on 7 April 2008. The plaintiff was represented by Mr Cheshire of counsel who accepted the reference. He had previously appeared on 20 March 2008 on an application to amend the statement of claim. That application was partially successful. The documents on which the plaintiff now seeks to rely were not provided to Mr Agresta until 2 April 2008 at the earliest. Mr Cheshire presented the plaintiff's case with admirable skill, clarity and conciseness. In the limited time available, it is entirely understandable that his attention was focused on the claim as it was then pleaded. Without the benefit of an instructing solicitor, it is entirely understandable in the circumstances at that time that counsel did not appreciate that the documents, which had only just been made available to the plaintiff, might support additional claims. 112 The plaintiff also relied upon certain unresponsive answers to interrogatories. On 28 February 2008 I ordered that the defendant answer certain interrogatories including the question: " Did the defendant consent to erection of each and any of the structures identified at the following locations, and if so, on what date did the defendant consent to erection [sic] each and any structure?

Phoenix Commercial Enterprises v City of Canada Bay Council

At a glance

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Decision date

Before

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Judgment (38 paragraphs)

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Legislation Cited (8)

Cases Cited (14)

Cited By (4)