Plaintiff v Defendant

Plaintiff v Defendant - [2010] VSC 2 - VSC 2010 case summary — Zoe

[29]

What Lord Wilberforce in Shiloh Spinners[19] called 'the special heads of fraud, accident, mistake or surprise' identify in a broad sense the circumstances making it inequitable for the vendors to rely upon their termination of Tanwar's contracts as an answer to its claim for specific performance. No doubt the decided cases in which the operation of these 'special heads' is considered do not disclose exhaustively the circumstances which merit this equitable intervention. But, at least where accident and mistake are not involved, it will be necessary to point to the conduct of the vendor as having in some significant respect caused or contributed to the breach of the essential time stipulation. Tanwar's situation falls beyond that pale. The statement by Mason CJ in Stern[20] respecting the insignificance of subsequent events for which the vendors were in no way responsible is fatal to the main thrust of Tanwar's case.

It should be made clear that what is said above does not support any proposition that the circumstances must be 'exceptional' before equity intervenes. In their joint judgment in Stern, Deane and Dawson JJ, with reference to what had been said by Mason and Deane JJ in Legione[21] said, in a passage which puts the point of present significance:

"Mason and Deane JJ were not saying that there must be unconscionable conduct of an exceptional kind before a case for relief can be made out. Rather, what was being said was that a court will be reluctant to interfere with the contractual rights of parties who have chosen to make time of the essence of the contract. The circumstances must be such as to make it plain that it is necessary to intervene to avoid injustice or, what is the same thing, to relieve against unconscionable - or, more accurately, unconscientious - conduct."

Thus, it remains for Tanwar to show that it is against conscience for the vendors to set up the termination of the contracts. In the present appeal, as already has been indicated, there was no representation by the vendors which could found any estoppel. Nor has Tanwar asserted that there was any mistake in any relevant sense.

[Emphasis added by plaintiff.]

[77]

(a) where the Lessee is indebted to the Lessor in respect of any amounts due under the terms of this Lease then the Lessor shall have the right to seize and take possession of all of the stock of the business and all of the fixtures, fittings, plant, equipment and other chattels used in connection therewith at the demised premises and to retain the same until the whole of the Lessee's indebtedness is discharged; and,

(b) whether or not the Lessee is indebted as aforesaid the Lessee shall pay forthwith to the Lessor the sum of $5000.00 as and by way of a security bond to protect and hold the Lessor safe against any damage which might be caused to the demised premises arising out of or in connection with the removal by or on behalf of the Lessee of the Lessee's fixtures, fittings and equipment subject to and upon the following conditions -

(i) the Lessee shall have no right or entitlement whatsoever to remove any of the said fixtures, fittings and/or equipment unless and until the said sum is paid by the Lessee and the Lessor shall have the right to seize and retain the same until the said sum is so paid;

(ii) in the event that no damage is caused to the demised premises as is referred to above then subject to (v) hereunder the said sum shall be paid or credited to the Lessee by the Lessor within 7 days of the removal of the last of the fixtures, fittings and equipment;

(iii) in the event that damage is caused to the demised premises as is referred to above then the Lessor shall be entitled to retain out of the said sum for its own benefit absolutely sufficient moneys to compensate it for and in respect of such damage; and,

(iv) the Lessor shall be entitled to retain the whole or any part of the said sum which may remain after implantation of the foregoing conditions for its own benefit absolutely in circumstances where and to the extent the Lessee is indebted to the Lessor on any account whatsoever and the indebtedness of the Lessee shall be correspondingly reduced.

[84]

51 The defendant submitted that the plaintiff only relied on paragraph 17(1)(b) of the Retail Tenancies Act. It was said that the plaintiff alleged in paragraph 25 of the further amended statement of claim[29] that in the course of the refurbishment of the shopping centre, and by the conduct of agents of the defendant during the refurbishment, there was a substantial alteration and inhibition in the flow of customers to the premises. The plaintiff alleged that as a result it suffered a substantial decline in sales revenue generated by the business, and was consequently unable to pay rental to the defendant for the period November 1993 to January 1994. The defendant also said that the Notice of Dispute under s 21 of the Retail Tenancies Act claimed a breach at paragraph 17(1)(b) of that Act, but that no breach of clause 13.11 of the Lease was claimed, and no breach of that clause was alleged in the statement of claim. Clause 13.11 expressly conferred on the landlord the right to undertake works, by way of additions or otherwise, to the shopping centre. The provisions and effect of the clause are discussed further below.[30] It was also alleged, in paragraph 50 of the statement of claim, that the defendant was estopped and precluded from re-entering the premises as it was unconscionable and unconscientious of the defendant to purport to exercise the legal right of re-entry whilst the arbitration was extant and without taking into account the plaintiff's statutory right to compensation pursuant to s 17(1)(b) of the Retail Tenancies Act. The defendant submitted, with respect to this claim, that it is "without any relevant content and is not meaningfully formulated". I accept the defendant's submissions in this respect. I do so on the basis of the pleading (as it appears in the further amended statement of claim), and having regard to the argument and submissions by the plaintiff (which did not indicate how the estoppel claim was formulated or came within the principles spelt out in this respect in cases such as Waltons Stores Interstate Ltd v Maher[31] or Commonwealth v Verwayen[32], for example). In any event, it appears to me that any claim of estoppel as formulated on the basis of paragraph 17(1)(b) of the Retail Tenancies Act must depend upon the extent to which these statutory provisions might operate in the present circumstances.

[156]

On 13 April 1993, the chief executive officer of the defendant, Mr Alan Cox, wrote to Thomas and said that his 29 March 1993 letter had been referred to Mr D Teroxy, since the Centre formed part of his responsibility. On 16 April 1993, Teroxy (the Chief Manager, Credit Management of the defendant at its Sydney office) wrote to Thomas and informed Thomas that his concerns would be discussed with Teroxy's colleagues and Centre management before replying. Norman Sturrock, the Senior Manager, Credit Management of the defendant at its Melbourne office, wrote to Thomas on 12 May 1993. Sturrock said in his letter that the defendant was concerned that Thomas considered he had been disadvantaged: "It was not intended that refurbishment works would cause any hardship to our existing tenants, but rather to improve the Centre to the benefit of both shopkeepers and shoppers." Sturrock pointed out that there had been an increase in foot traffic of approximately 10,000 per week directly attributable to the Franklins store. Thomas wrote a long letter to Sturrock in response on 16 May 1993. Thomas considered the conduct and actions of Centre management to be 'vindictive, vexatious and deliberate'. He claimed (unjustifiably) that as a result the actions of Centre management, he had lost his house, 'been financially ruined', had his 'prospect for the future aborted' and suffered health problems. 'Were it not for the assistance of family and friends I would not still be open because my business is ruined.' The letter again directs attention to the operation of the food court as the reason for the demise of the plaintiff's business. After meeting with Thomas on two earlier occasions (including on 8 June 1993), Sturrock wrote to Thomas on 15 June 1993 to get a clearer idea about what he said the defendant was realistically supposed to do to address Thomas' complaint's [sic] about Centre management.
By 15 June 1993, Thomas was of the view that the damage to the plaintiff's business was terminal. Consistent with that thinking, Thomas, in a letter dated 17 June 1992 to Sturrock, made it clear that a rent free period and re-fit was unacceptable. He concluded that if the matter was not resolved within seven days he would take it out of Sturrock's hands. Thomas did just that and wrote to Cox on 27 June 1993. In the letter he accused (without the slightest justification) Gray of fraud and referred in writing, for the first time, to the supposedly fraudulent imposition of management fees. Thomas sought a release from the plaintiff's obligations under the lease and a payment of $1.4 million, which he regarded as reasonable.
On 28 June 1993, and without referring to Thomas's 27 June 1993 letter to Cox, but addressing his 17 June 1992, Sturrock wrote to Thomas on 28 June 1992. Sturrock remarked in his 17 June 1993 letter, that Thomas attributed virtually all of his problems to the 'alleged misdeeds' of the defendant and Centre management. The defendant's aim, and clear message to Thomas, was to explore a basis for the remaining period of the tenancy to pass happily and profitably for the defendant and the plaintiff. Sturrock reminded Thomas that the defendant was prepared to consider any reasonable proposal which Thomas might care to make to achieve that outcome. A proposal was put by Sturrock to Thomas that the defendant spend $25,000 on the plaintiff's business in a manner to be agreed. Such an amount could readily have paid for new bulkhead signage.

[187]

The insistence upon rights in circumstances which make this harsh or oppressive is a further form of unconsionability. In Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406 at 444, Mason and Deane JJ stated the general principle that 'a party having a legal right shall not be permitted to exercise it in such a way that the exercise amounts to unconscionable conduct'. Unconscionability in this context is more particularly defined through a number of doctrines. For example, the law of estoppel may operate to preclude an unconscionable insistence upon legal rights. The doctrine of promissory estoppel, as it was accepted as part of the law of Australia in Legione v Hateley, is an illustration of this. A party to a contract, who has induced another party to place detrimental reliance upon an assumption that legal rights will not be enforced, will not be allowed to enforce those rights, temporarily or permanently, where it would be inequitable having regard to the dealings between the parties.

...

Relief from penalties and forfeiture provides another example of the same principle. In certain circumstances, it may be unconscionable to insist upon one's strict contractual rights concerning the consequences of breach. Equity will relieve against a clause which is in the nature of a penalty, and will also relieve against forfeiture.

...

Equity's concern to relieve against a harsh or oppressive exercise of rights has many other applications. It provides the historic justification for the development of the equity of redemption, by which equity protected the position of those who mortgaged their property through the transfer of legal title as security for a debt. More recently, it has been said to be the basis on which courts will refuse to allow vendors to rescind contracts for the sale of land under a contractual provision which entitles them to do so if they are 'unable or unwilling' to comply with a requisition (Pierce Bell Sales Pty Ltd v Frazer [1973] HCA 13; (1973) 130 CLR 575, Barwick CJ at 587). The same concern may also be the basis of equity's jurisdiction to relieve for common mistake.

The law of equitable set-off may also be explained by the same concern of equity to prevent the harsh exercise of rights. ... Another application of the principle that equity will not allow the unconscionable insistence upon rights is in relation to time stipulations in contracts. Equity would intervene to restrain the termination of a contract for breach of a time stipulation if time has not been said to be of the essence. As Deane and Dawson JJ explained in Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1989) 166 CLR 623 at 624:

"The whole point of equity's intervention in relation to stipulations as to time was that, in the absence of express or implied contractual provision to the contrary, it regarded it as inequitable or unconscionable for a party to a contract to rescind for breach of a time stipulation without having given reasonable warning to the party in default."

More broadly, the courts' concern to restrain the harsh exercise of rights may be seen in equity's attitude to remedies. Specific performance may be denied on the grounds of hardship to the defendant, and injunctions are discretionary. Indeed, the courts have traditionally insisted that equitable remedies are not 'of right' at all, and this discretionary element can be used to ensure that harsh and oppressive outcomes do not occur. ...

At a glance

Court

Decision date

Before

Source

Judgment (288 paragraphs)

Parties

Legislation Cited (7)

Cases Cited (27)