Reda v Bear's Group Pty Limited

The reserved decision

1. His Honour's reasons, although reserved, were relatively brief. After quoting the reasons he had given at the trial for the refusal of the adjournment and noting the parties' failure to serve their evidence, as they had been ordered, he referred to the obligations imposed upon them by s 56 of the Civil Procedure Act 2005 (NSW), as well as the requirements of ss 57, 59 and 61. His Honour then noted that he had also given reasons for the refusal of the tender of the documents Mr Reda had sought to rely on, at the hearing.
2. His Honour concluded that "it was clear … that there were no admissions made in relation to the moneys which were claimed to be outstanding by the defendant". There were no reasons given for that conclusion. Nor was any reference made to Mr Reda's case, which was first, that his claims as to the existence of the lease, the rent payable under the lease and Bear's Group failure to pay the rent owed under the lease, had all been admitted by the amended defence; and secondly, that the defendants' case, that Bear's Group was not obliged to pay that rent, given clause 7.1 of the lease, because the building was uninhabitable as the result of damage to the roof, were matters which they had to prove. That not having been proven, he submitted that orders had to be made in his favour, relying on Cakirgoz v Crouch [2008] NSWSC 1124 at [21] - [27] and Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 at 32, 38, 56; [1985] HCA 14. Why those arguments did not succeed, was not explained.
3. His Honour concluded, however, that two letters which had been tendered, correspondence between the parties' solicitors, did not support Mr Reda's claims and that Mr Reda could not rely on the lease, its tender having been rejected.
4. His Honour then outlined the reasons the defendants had given for their failure to serve their evidence. He concluded that little weight could be given to the affidavit of Mr Karanfilovski, given that he was not present for cross-examination. His Honour also concluded: "I do note again, however, my comments as to the difficulties the cross-claimant was placed in although, the date for filing the cross-claim evidence was the same date as the evidence for the filing of the plaintiff. The difficulties for both parties in this matter was by the non-compliance by the plaintiff in the first instance by filing their documents by 23 August and the defendant in filing the documents for the cross-claim by 23 August that the other party was also placed in the unfair position in not being given an opportunity to answer the evidence of the other side at the hearing. However, the Court does note that there basically was a complete failure of compliance with the orders which led to the refusal of the notice of motion and I have already put on the record the concerns and the reasons for the Court in that regard. With regard both these matters, there is very little evidence which can assist the Court; that is, the statement of claim and also the cross-claim, where the Court could make a decision on the balance of probabilities that their cases or claims can be made out."
5. His Honour then dismissed both Mr Reda's claim and the defendants' cross-claim, with orders for costs following the event.
6. There has been no appeal from the dismissal of the cross-claim, nor any notice of contention filed.
7. Further, on this appeal, the defendants accepted that they had the onus of proving the claims which they advanced, both by their defence and cross-claim for abatement of the rent under clause 7.1 of the lease, because damage to the roof had not been repaired, as the lease required.

The earlier reasons in relation to the rejection of the tendered documents

1. At the trial, it was accepted that by the defence, the existence of the lease had been admitted, but its tender was still opposed. The defendants contended that to prove that the document was the actual lease which bound Mr Reda and the Bear's Group, it had to be tendered through a witness. Evidence was then called from Mr Reda's solicitor to explain the provenance of the documents sought to be tendered, but still the tender of the lease was objected to.
2. The reasons which his Honour gave at the trial for the rejection of the lease began with a recitation of the procedural history, which included the admission of the existence of the lease. His Honour then referred to the requirements of the Uniform Civil Procedure Rules 2005 (NSW), in relation to pleadings. He was however: "… not satisfied that the fact that matters were pleaded can be constituted as a fact or evidence in proceedings by virtue of the Act and the need for brevity of the pleadings to be short and also that they are not evidence, which has been stated in the rules."
3. His Honour also noted that Mr Reda had sought to tender the lease as a business record, but considered that "generally, leave should be sought for that evidence or any evidence or witness statement which have [sic] not been provided in accordance with the direction to be utilised or tendered in Court proceedings and that has not occurred also".
4. His Honour additionally noted that while the lease might have been provided earlier in the year, it was a lease between a Mr Rolfe and Canat Pty Ltd, not parties to the proceedings and accordingly, his Honour was not satisfied that it fell within the business record exception in section 69 of the Evidence Act 1995 (NSW).
5. The May 2014 tender of the transfer of the lease from Mr Rolfe to BS Group Pty Ltd, was likewise rejected, even though it had earlier been served on the defendants. Given Mr Reda's failure to comply with the orders as to service of his evidence, his Honour exercised what he considered to be his discretion, to refuse to admit the document into evidence.
6. His Honour gave similar reasons for refusing to receive the other business records Mr Reda sought to tender.

His Honour erred as to the effect of admissions made in the pleadings

1. The proceedings were commenced by statement of claim filed in November 2015.
2. Particulars were later sought and provided by Mr Reda in January 2016, together with various documents. They included many of those which Mr Reda unsuccessfully sought to tender at the hearing. Other documents were later served in June 2016.
3. An amended defence was filed in February 2016. Contrary to the case advanced by the defendants on this appeal, there were admissions made in that pleading, as well as in the cross-claim. They included the matters claimed in [1] - [9] and [11] of the statement of claim. The admissions made in the amended defence were, in summary, that: 1. In 2012 Canat Pty Limited was the registered proprietor of the property; 2. In July 2012 it had entered into an identified registered lease of the property with Mr Rolfe, for a period of 5 years; 3. In October 2013 Canat transferred the property to Mr Reda; 4. In May 2014, with Mr Reda's consent, Mr Rolfe assigned the lease to Bear's Group, the first defendant, by a deed of consent which contained guarantees given by the other defendants; and 5. Bear's Group had paid rent up to 31 December 2014.
4. By [2] - [4] of the amended defence it was also admitted that: 1. Subject to the terms of the lease, the total rent and outgoings payable from 1 July 2014 to 30 June 2017 was $159,127.15; 2. That Bear's Group had paid $24,448.43 rent and outgoings to 31 December 2014; 3. That Bear's Group had not paid rent from 1 January 2015 onwards, claiming that to be because Mr Reda was in breach of clause 7.1 of the lease, as the building was uninhabitable and that it was accordingly not liable to pay any rent. Particulars of the damage were there given; and 4. Bear's Group had not paid rent and outgoings from 23 April 2015, because it was claimed, Mr Reda had repudiated the lease on 22 April, a repudiation which Bear Group had accepted, its solicitor having terminated the lease by letter of 25 May, whereupon its obligation to pay rent and outgoings under the lease ceased.
5. By that defence what was put in issue was thus identified to include: Whether the building was uninhabitable from 1 January 2015; Whether Bear's Group had accordingly been relieved of the obligation to pay rent and outgoings under the lease, given the provision made in clause 7.1; Whether Mr Reda had repudiated the lease; and Whether the repudiation had been accepted.
6. The defendants' cross-claim then repeated [5] - [7] of the statement of claim, by which it was pleaded that Canat was the original registered proprietor; it had entered into the registered lease with Mr Rolfe and in October 2013 had transferred the property to Mr Reda. By [3] of the cross-claim the defendants also relied on the terms of the lease "as if the lease had been set out in the cross-claim". They again claimed that contrary to clause 7.1 of the lease, Mr Reda had failed to keep the roof in good repair and had locked them out of the premises in April 2015, resulting in repudiation of the lease. $10,000 damages were sought.
7. What was not admitted by Mr Reda's defence to the cross-claim was the alleged breach of clause 7, the failure to repair the roof, or the damages claimed.
8. An amended statement of claim was filed in August 2015 and then a further amended defence, by which the defendants repeated earlier admissions, including that the total payable under the lease was $159,187.31. That building insurance was an outgoing payable by Bear's Group was there denied, given the provisions of clauses 5 and 8 of the lease and clause 7.1 was also relied on.
9. It was thus curious, given this defence and what was claimed in the cross-claim, at trial, that when the lease and the other documents which had long been served were sought to be tendered for Mr Reda, the tender was objected to on the basis that Mr Reda had not served his evidence.
10. His Honour asked whether the parties had an agreed statement of facts. He was repeatedly informed that they had not, as the pleadings contained the agreed facts on which Mr Reda's claim for unpaid rent rested.
11. There was, in truth, no issue about those facts. What was in issue went to what was pleaded in the defence and cross-claim, but still the tender of the lease and the other documents which had been served on the defendants was opposed, even despite their obvious relevance to the defendants' case. Even when Mr Reda sought to tender the lease and other documents as business records under s 69 of the Evidence Act, they were objected to.
12. His Honour was then taken to the pleadings, which explained what had been agreed and what remained in issue. It was Mr Reda's case that the documents should each be received, there being no genuine dispute between the parties as to their authenticity, but it was said, if necessary, evidence could be called about the documents from Mr Reda's solicitor.
13. The documents were still objected to, given Mr Reda's failure to give evidence, he being the person, it was argued for the defendants, best able to identify the documents. While it was accepted that his solicitor could be called, it was submitted that her evidence could carry no weight.
14. Ms Antonopoulos was then called. She identified how the documents sought to be tendered had come into her possession, including by use of the Land and Property Information Office Infotrack search engine. She also explained the circumstances in which the documents in issue had earlier been provided to the defendants, including in response to its request for particulars.
15. It was finally submitted for Mr Reda that when the parties' pleadings were read together, they identified what had been admitted and what remained in issue. That made it unnecessary for the parties to prepare a statement of agreed facts and issues, about which his Honour nevertheless, repeatedly enquired. Reliance was also placed on s 69 of the Evidence Act, the business records exception to the hearsay rule and s 191, as to matters of evidence which were not genuinely in dispute.
16. Section 191 deals with "agreed facts", defined to mean facts which the parties to a proceeding have agreed are not to be disputed for the purposes of the proceedings. Such an agreement can be reached by pleadings. In such a case evidence is not required to prove the existence of the fact: Evidence Act, s 191(2).
17. The defendants accepted in the submissions they advanced, that the documents to which they objected had been served, but argued that it was relevant that when they were served, it had not been indicated that the documents "were served as evidence in the case". Further, it was argued, they were served "merely as part of the preliminary preparation of the case". It was also submitted, that: "If we're not going to have witness statement [sic] then we'll prepare our case entirely differently and your client would not be prejudiced by having documents now sought to be tendered when they were never served on us as evidence; they were merely served upon us as documents we requested. The pleadings are also drafted on the basis that, in my submission, the lease would be tendered in due course and, if they can't tender the evidence because there's nobody here from the plaintiff to tender that evidence, then what's said in the pleadings hasn't been made out."
18. In refusing the tender of the documents, his Honour took the view that the Uniform Civil Procedure Rules 2005 (NSW) set out what the pleadings should contain, namely a summary of material facts relied on and not the evidence by which those facts would be proved. He concluded that: "I am not satisfied that the fact that matters were pleaded can be constituted as a fact or evidence in proceedings by virtue of the wording of the Act and the need for brevity for the pleadings to be short and also that they are not evidence, which has been stated in the rules. The Court notes also that, in this matter, the timetable has not been met by the parties. That is, there has been a failure to comply with the orders of the Court, which were agreed to by consent, specifically in relation to the filing of documents, evidence and witness statements that the parties intended to rely upon. I note my comments earlier, particularly in relation to the plaintiff's failure to file documents by 23 August and noting that the other orders flowed from there up to the hearing date, which is today. It is clear that an opportunity was provided to the plaintiff to file this lease or attach it to the affidavit of someone who could properly identify it and authenticate it and that did not occur. I note the plaintiff is now seeking to rely upon it on the basis of the pleadings issue and also that it is a business record. I do note that, generally, leave should be sought for that evidence or any evidence or witness statement which have not been provided in accordance with the directions to be utilised or used or tendered in Court proceedings and that has not occurred also."
19. Similar conclusions were reached in relation to other documents.
20. I am satisfied that in so approaching the question of the admissions made in the pleadings, his Honour fell into error. The approach adopted was contrary to the Rules and s 191 of the Evidence Act.
21. Rule 14.7 certainly requires pleadings to contain only a summary of the material facts on which the party relies, and not the evidence by which those facts will be proven, as his Honour found. The Rules also contemplate however, that by its pleadings a party can make formal admissions as to such facts, as the defendants unarguably did.
22. When such admissions are made in a defence, those facts are no longer in issue and the plaintiff has, accordingly, no obligation to prove them by evidence. In this case, the defendants also themselves advanced some of the facts on which Mr Reda relied, by their own cross-claim.
23. Rule 14.26(1)(a) also provides that an allegation of fact made in a pleading is taken to be admitted by the opposite party, unless in the response, the allegation is traversed. If there is no such joinder of issue, such an admission, whether express or implied, may only be withdrawn if leave is given by the Court: UCPR r 17.2.
24. Admissions made in a defence, which operate for the benefit of the plaintiff, as they did in this case, may not be withdrawn except by consent or leave of the Court: UCPR r 12.6(2). That requires service a notice of withdrawal, which states the extent of the withdrawal: UCPR r 12.6(3). There was no such application made in this case.
25. If such voluntary admissions have been made, on the application of the other party, a court may "give any judgment or make any order to which the other party is entitled on the admissions": UCPR r 17.7. Such judgment on admissions may be given for the whole, or part of a claim.
26. That was the effect of the case which was advanced for Mr Reda, namely, that he was entitled to judgment on the admissions made, the defendants not having established their defence or cross-claim. That was a case which, as I have explained, his Honour failed to deal with.
27. In approaching what lay in issue as his Honour did, by focussing on the absence of an unnecessary agreed statement of facts, given the matters which had been agreed, his Honour fell into obvious error, given the applicable provisions of the Rules and of s 191 of the Evidence Act 1995.
28. It is also relevant to consider that s 70 of the Civil Procedure Act empowers a court, at any stage of the proceedings, to make orders dispensing with the rules of evidence for proving any matter that is not bona fide in dispute; dispensing with the proof of documents; and requiring parties to make admissions with respect to any document, or to any question of fact. Here, the exercise of those powers was unnecessary, given the admissions already made in the pleadings.
29. In exercising its powers as to admissions, a court must also facilitate the overriding purpose specified in s 56(1) of the Civil Procedure Act, the just, quick and cheap resolution of the real issues in the proceedings. The parties and their legal representatives are also obliged to assist the Court to achieve that purpose.
30. In this case, having successfully opposed Mr Reda's adjournment application as they did, all of these considerations should have resulted in the defendants not opposing the tender of the documents which they had in their possession, including the lease and the documents Mr Reda had earlier served upon them. Indeed, their defence and cross-claim depended on the terms of the lease being established. Accordingly, the duty imposed upon both the defendants and their legal advisers by s 56 required, as his Honour ought to have recognised, that the spurious objections maintained when the documents were tendered, were not made.
31. The real issue lying between the parties as to the rent, given the defendants' pleaded case, was their claim that under clause 7.1 of the lease, Bear's Group had been relieved of the obligation to pay rent, given the state of the building.
32. In order for the defendants to establish their case, they plainly themselves had to tender the lease. Whether that was attempted was in issue, but that they opposed Mr Reda's tender of the lease, in these circumstances was surprising indeed.
33. In the consent orders made in August 2016, both Mr Reda and the defendants had been directed to serve the evidence on which they intended to rely, by 23 August 2016. It does not follow that this necessitated either party serving the lease on which both parties' cases depended, or in Mr Reda's case, the documents which had already been served upon the defendants and about which there was no issue between them. Court orders as to the service of evidence are not intended to result in wasted costs, by the unnecessary further service of documents which have already been served.
34. As it transpired, neither party served any evidence, in the case of the defendants, despite what they had admitted in their defence and advanced in their cross-claim and the resulting onus which fell upon them, to establish what they claimed under clause 7.1 of the lease.
35. That service was not effected because, it was explained in the affidavit sworn by Mr Gamble, the defendant's solicitor in January 2017, of the advice received from Mr Reda's solicitor, that he was not able to serve his evidence, or attend the hearing. That was despite the defendants being in a position to comply with the Court's orders to effect service by 23 August 2016. That, of course, did not relieve them of their obligation to obey the Court's orders.
36. While the defendants deliberately chose not to comply with those orders, still they successfully opposed the adjournment of the hearing which Mr Reda sought and having forced him on, objected to the tender of the lease, on which their own case depended, as well as the other documents which had long been in their hands and about which there was, in truth, no issue.
37. When his Honour turned to the cross claim, the defendants complained and then sought to serve and tender their own evidence. Much of it was understandably objected to by Mr Reda. In the case of Mr Karanfilovski, there was no objection to his affidavit, but it was argued that it could be given but little weight, because he was not present for cross-examination. In the affidavit sworn by Mr Lozeknovski, one of Bear Group's directors, a schedule by which it quantified the losses the defendants claimed to have suffered as a result of moving out of the leased premises, was provided. In the circumstances, understandably, the objection to that affidavit was upheld, Mr Reda having been given neither notice of, nor an opportunity to consider that quantification.
38. What his Honour failed to recognise, however, was that because of their pleadings there was no issue between the parties as to either the existence or terms of the lease; the amount of the rent due under the lease; or that no rent had been paid from 1 January 2015, until Mr Reda retook possession on 22 April 2015.
39. In clause 2 of the further amended defence on which the defendants finally relied, the sum of $159,187.31 claimed to be payable for rent and council and water rates from July 2014 to June 2017 was admitted. That was a reference to the claim advanced in respect of clause 7.1 of the lease and the defendants' case that building insurance was not an outgoing Bear's Group was obliged to pay under the lease. That also depended on the terms of the lease, which were neither admitted nor in evidence.
40. Mr Reda sought to recover only $37,542.81 rent, the calculation of which was explained by reference to the rent he had obtained, under the commercial leases he entered with others, after termination of the lease.
41. Even though the defendants' objection to the tender of the lease and other documents had been upheld, his Honour was still obliged to consider and resolve what lay in issue between the parties, on their pleaded cases. Mr Reda's claims rested on the undisputed the terms of the lease, the admitted non-payment of the rent and the outstanding rent, reduced by the mitigation which resulted from his entry into the commercial leases. His Honour did not deal with the case, so advanced, but surprisingly, given that both the defence and cross-claim rested on clause 7.1 of the lease and the alleged state of the roof, his Honour dismissed the cross-claim, but did not conclude that Mr Reda had made out his claim.
42. Those conclusions were inconsistent. There was no explanation given for them.
43. In the result, that his Honour fell into legal error, cannot be doubted.

The business records

1. Section 69 "Exception: business records" of the Evidence Act provides: "(1) This section applies to a document that: (a) either: (i) is or forms part of the records belonging to or kept by a person, body or organisation in the course of, or for the purposes of, a business, or (ii) at any time was or formed part of such a record, and (b) contains a previous representation made or recorded in the document in the course of, or for the purposes of, the business. (2) The hearsay rule does not apply to the document (so far as it contains the representation) if the representation was made: (a) by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact, or (b) on the basis of information directly or indirectly supplied by a person who had or might reasonably be supposed to have had personal knowledge of the asserted fact. (3) Subsection (2) does not apply if the representation: (a) was prepared or obtained for the purpose of conducting, or for or in contemplation of or in connection with, an Australian or overseas proceeding, or (b) was made in connection with an investigation relating or leading to a criminal proceeding. (4) If: (a) the occurrence of an event of a particular kind is in question, and (b) in the course of a business, a system has been followed of making and keeping a record of the occurrence of all events of that kind, the hearsay rule does not apply to evidence that tends to prove that there is no record kept, in accordance with that system, of the occurrence of the event. (5) For the purposes of this section, a person is taken to have had personal knowledge of a fact if the person's knowledge of the fact was or might reasonably be supposed to have been based on what the person saw, heard or otherwise perceived (other than a previous representation made by a person about the fact)."
2. The documents which Mr Reda unsuccessfully sought to tender at the hearing included the lease, the transfer, the deed of consent and five commercial leases of the premises which Mr Reda entered with others, following the termination of the lease. They were all documents, it was common ground, which were either in the defendants' possession, given the admissions they had made in the defence and the claims they advanced in the cross-claim, or which had been served by Mr Reda on 22 January 2016 or 1 June.
3. In the result, there was no issue between the parties as to the existence or terms of those documents.
4. It was accordingly, contrary to the duty imposed on the defendants by s 56(3) of the Civil Procedure Act, for the objection to the tender of the documents to be made or maintained. Section 56(3) required the parties to assist the Court to further the overriding purpose specified by s 56(1), namely to facilitate the just, quick and cheap resolution of the real issues in the proceedings. Section 56(4) also required that their legal representatives must not, by their conduct, cause them to be put in breach of that duty.
5. Despite this, the tender of the documents was objected to, as I have explained, even on the basis that they were not business records, despite the evidence called from Mr Reda's solicitor.
6. In the circumstances there cannot, in truth, have been any issue that the documents were, in fact, business records. Bear's Group itself being a party to the deed of consent, that it and the lease were in fact also its own business records, was apparent.
7. In those circumstances there was no proper basis for the objection to the tender of these documents being maintained, nor for the conclusion that they were not business records to which s 69 of the Evidence Act applied. His Honour thus also erred in upholding these objections as he did. As I have already explained, that conclusion was also inconsistent with the provisions of s 191 of that Act, on which Mr Reda relied.
8. His Honour's view that he was entitled to reject the tender of the documents in the exercise of a discretion was also plainly wrong. What discretion he purported to exercise was not identified. In the circumstances, the exercise of a discretion under s 135 of the Evidence Act, for example, was not available, that section providing as it does that: "135 General discretion to exclude evidence The court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might: (a) be unfairly prejudicial to a party, or (b) be misleading or confusing, or (c) cause or result in undue waste of time."
9. There was no unfair prejudice in the receipt of the business records which reflected the parties' pleaded cases, which the defendants had long had in their hands and by which, in the case of the lease, their own defence and cross-claim depended. Their tender could not have been misleading or confusing or have resulted in the waste of any time. It was the spurious objections which were advanced, which achieved that result.

Orders

1. In the result the appeal must be upheld. The usual order under the Rules is that costs follow the event, which in this case is an order in favour of Mr Reda. Unless the parties approach within 14 days, that will be the Court's order.
2. It was not common ground between the parties that in the circumstances, the matter must be remitted to the Local Court. For the defendants, it was submitted that the remitter should be on the basis that Mr Reda should not thereby be allowed the adjournment he was earlier refused on good grounds.
3. The calculation of the order Mr Reda sought depends on deductions for what came into his hands, following entry of other commercial leases, after this lease came to an end. For Mr Reda it was argued on appeal that in the circumstances, the Court should make an order as to the amount claimed in his favour, less a sum of $10,428 for building insurance. The position of the defendants was that despite what it had pleaded, it had never admitted liability for that sum.
4. In the circumstances, given the state of the evidence, I am not satisfied that the orders sought by Mr Reda can be made by this Court. Accordingly the matter must be remitted, so that his claim can be dealt with according to law. That will not affect his Honour's dismissal of the cross-claim, that not having been challenged on appeal.
5. As I explained at the hearing, however, it is not for this Court to direct the Local Court as to the future procedural conduct of the hearing of Mr Reda's claim. It is accordingly not appropriate to impose any conditions upon the remitter which I will order.
6. For these reasons, I order that: 1. The appeal be upheld; 2. The judgment given by the Local Court in relation to Mr Reda's claim be set aside; 3. That claim be remitted to the Local Court to be dealt with according to law; and 4. Unless the parties approach to be heard within 14 days, that the defendants pay Mr Reda's costs as agreed or assessed.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 05 May 2017