Salon Today Pty Limited v M.N.I.R Pty Limited [2000] NSWSC 46 | Case summary

REASONS FOR DECISION Background 1 The property in question is situated at 241-243 Princes Highway Corrimal. This property consists of four separate shops, the title reference for the whole property being Folio Identifier 3/718606 ("the property"). 2 In December 1999 the property was owned by Mr W D Ronald and Mr P F Glass. By lease dated 7 February 2000 and registered 6544135N ("Lease 1") Ronald and Glass leased Shop 1 ("the premises") to the Applicant by a Lease commencing 23 December 1999, terminating 22 December 2004 with one five year option for renewal. 3 There is nothing particularly remarkable about the lease itself except to say that it appears to have been specifically prepared (in that it did not use any standard form), contained a number of unremarkable alterations and, importantly, contained a quite specifically handwritten clause in the following terms: "10.8 The tenant has signage rights for the fascia, undereves/awning and glass windows of the demised premises." ("The Signage Clause"). 4 From these premises the Applicant operated a successful beauty business. Item 5 (Clause 3.02) of Lease 1 provides that the permissible use of the premises was as "a hairdressing salon business premises to trade under the name of "Salon Today". In addition the tenant may use the premises for hairdressing, beauty and associated treatments, massage, acupuncture, bridal wear, weddings and associated requirements including flowers and photography, fashion garments and parades, educational presentations (and) Automatic Teller Machine usage". 5 The Applicant is able to cater for cater for approximately 16 clients at any one time, draws clientele from local residents, residents from the Corrimal area and nearby suburbs and from passing motorists. The Applicant currently employs eight full time and casual persons. The Building 6 It is important to pause at this point in the narrative to discuss the building in which the leased premises is situate. 7 The building is situated on the south-west corner of Princes Highway and Railway Street, Corrimal. Its postal address is 241-243 Princes Highway. Its primary frontage is to Railway Street. The land upon which the building is situate is under the Real Property Act 1900 but, and importantly for the issues that were debated, there is constructed around and outside the actual land a verandah. This verandah is supported by a series of poles erected upon the footpath in Princes Highway and Railway Street; the verandah is constructed above the footpath (owned by the Wollongong City Council); there is/was a railing (formerly with cast iron but now recently replaced with glass panelling by the Respondent) along the verandah and there is a bullnose corrugated iron roof over and protecting the verandah. Below the verandah and along the full length of the structure above the footpath airspace is a long and deep (wide) fascia. The whole of the structure is not dissimilar to the same type of structures one sees in many country towns, often (but not by any means exclusively) attached to country hotels and, indeed and on the evidence, is not that dissimilar (except for the supporting poles) from the same structure around the Palm Court Hotel directly opposite the building. The Signage 8 Consistent with Clause 10.8 (The Signage Clause) the Applicant affixed signage to the fascia using words (in Railway Street) "salon today - total concept day spa", and the telephone number; on the corner "salon today - hair, beauty, nails, day spa"; and additional words "individual bridal service"; and in Princes Highway the words "salon today" and the telephone number. The signage is pleasant and is consistent with the colour scheme for the whole of the building, which in total presents attractively. The Second Lease 9 The Applicant exercised its option at the end of Lease 1 and thereafter entered into a new lease ("Lease 2"). At this time the owners of the building had changed somewhat: they were now the two original owners (Messrs W D Ronald and P F Glass) and Mses J Ronald, D Le Clerk, K Oliver and K E R Peetz. The unchallenged evidence showed that Mr P F Glass "held a 50 percent share in the property" and that he was "the principal owner" and was "authorised by the other owners to instruct our solicitor on their behalf on matters concerning the property". 10 Lease 2 is for a term of five years commencing 23 December 2004 and terminating 22 December 2009. Lease 2 is in a somewhat different and up-dated form than Lease 1. In addition, it contained some different clauses. Counsel for the Respondent has kindly identified those different clauses (in addition to the fact that the form of the lease adopts the Law Society's standard printed form whereas Lease 1 is not in such a form) in the following respects: firstly, there is no equivalent to Clause 10.8 (The Signage Clause); secondly, Clause 6.3.4. of Lease 2 contains a prohibition on the display of signage except with the landlord's consent, such not to be unreasonably withheld (and I shall deal with this more fully below); thirdly, it contains two options for renewal whereas under Lease 1 there was only one option for renewal; the obligation to pay outgoings is different from Lease 1; there are different provisions relating to the rent to be paid upon renewal (in Lease 1 it was to be current market rent whereas in Lease 2 the rent for the first option period has been pre-agreed and current market rent is only payable for the second option period); and finally, the ATM usage is not included in Lease 2. 11 It is not uncommon that parties will re-negotiate various commercial aspects of their leasing arrangements upon an exercise of option. There was no serious challenge to the assertion that the Applicant had exercised its option; but rather the format and some of the commercial terms had been changed. I agree with the submission by counsel for the Respondent (to which I shall refer in more detail at [30] below) that these changes and the new lease contract were a result of further negotiations, offer and acceptance, such that Lease 2 stands on its own as a separate and distinct contract without reliance upon the exercise of option. 12 Lease 2 is dated 10 January 2005 and was subsequently registered AB281339J. 13 It also seems to be the case that the Disclosure regime under the Retail Leases Act 1994 was complied with by the parties. A Disclosure Statement was put into evidence, which noted that the Applicant was "in current occupation", contained the usual type of matters that one would associate with such Statements and made no disclosure of any "details of any other agreements between lessor and lessee, or representations made by lessor or lessee including those relating to exclusivity or limitations on competing uses". Asserted Consent to Signage 14 Mr T C Johnson, a director of the Applicant, gave evidence that when Lease 2 was entered into it was "on the assumption that the same terms applied as Lease 1 with the exception we were granted an additional option period". This statement was clearly incorrect in that it is plain (for the reasons I have set out at [10] above) that Lease 2 was different in various respects. However, it is plain to me that the Applicant regarded Lease 2 as a lease entered into pursuant to the exercise of option. Mr Johnson's evidence went further: he said that following "the Christmas break, I was able to read Lease 2 in its entirety and noted that the signage rights we insisted on in Lease (1) had been left out of Lease 2." Mr Johnston then contacted Mr G J Huxley, a licensed real estate agent who was the managing agent of the property. Mr Huxley's evidence was that in early January 2005 he was asked by Mr Johnston "who had realised that the signage rights were not mentioned in Lease 2, to clarify the anomaly". Mr Huxley sought instructions from Mr P F Glass (one of the proprietors and the holder of a 50 percent share in the property) and Mr Glass authorised Mr Huxley "to confirm our on going consent to signage rights and that such rights were a condition of the Lease 2". 15 As a result of those instructions Mr Huxley as the owners' Agent wrote a letter to the Applicant 12 January 2005 ("the Huxley letter"). Omitting formal parts the letter read: "In confirmation from the start of the current lease which commenced 23 December 2004, the signage that is displayed by Salon Today Pty Ltd to the facia of the deemed premises is a condition of the original lease (commenced of 23 December 1999). At the start of the current lease this condition was not withdrawn and there was continued consent to the signage". 16 Mr Johnston's evidence was that having received the Huxley letter the Applicant "was satisfied with the clarification and relied upon the representations … as evidence that the signage rights remained a part of Lease 2. Consequently the Lessee did not take any further action regarding the discrepancy". The Purchase 17 By contract made 15 May 2007 the Respondent purchased the property for $1,300,000.00. The contract was completed on or about 26 June 2007. During the course of the conveyancing transaction the Respondent made certain Requisitions on Title before completion and in response thereto received a copy of the Disclosure Statement (to which I have made reference above). No evidence was put before me as to the terms of the Requisitions on Title, nor the replies. 18 The evidence of the Respondent was given by Mr S P Singh, a director. His evidence was to the effect that the Respondent's "motivation to purchase the property was the potential for utilising the upstairs of the property for a large Indian restaurant, and a function centre. Signage was essential to the success of the business, as the proposed restaurant was not on street level. An inspection of the leases annexed to the contract and the relevant Disclosure Statements confirmed that the tenants of the property did not have exclusive signage rights to any area of the property". 19 One of the terms of the purchase contract required an assignment of a Deed (the "Airspace Deed") entered into between Messrs W D Ronald and P F Glass and the Wollongong City Council and dated 20 February 2006. This was a lease by the Council to Messrs Ronald and Glass to occupy and use the "property" described in the Airspace Deed as "Part of 241-243 Princes Highway, Corrimal, being the airspace occupied by the verandah as shown hatched on the attached plan". 20 The Airspace Deed was said to be a lease. It has been unfortunately drafted because on occasion it uses the words licence, licensor and licensee, but I do not think anything hangs on this. It is clearly a lease made pursuant to the Roads Act 1993. The period of the lease is five years commencing 1 June 2006 and terminating 30 May 2011 and the permitted use was stated to be "Restaurant dining". I shall refer in more detail to this document later in this Decision. 21 Suffice it to say that a Deed of Assignment was entered into between the Wollongong City Council, Messrs Ronald and Glass, the Respondent and Mr and Mrs Singh (directors of the Respondent and "incoming guarantors") on 26 June 2007 (whereby the Airspace Deed was assigned to the Respondent) and the purchase contract was completed. Subsequent Activities 22 On 26 June 2007 the Respondent took possession of the property. The upstairs portion of the property was then occupied by a tenant under an expired lease and who coincidently conducted an Indian restaurant business. She vacated the area on 31 July 2007. The Respondent then took physical possession of the upstairs portion, including the surrounding balcony and verandah. Mr Singh's evidence was that the Respondent "has invested a substantial amount of money in purchasing the property, with the intention of conducting a successful restaurant business in the upstairs of the property. A further amount of money was spent on renovation and furnishings". The Respondent opened its Indian restaurant business known as "Manjits Indian Restaurant" on 2 December 2007. 23 In the meantime the Respondent had affixed to the bullnose roof on the corner a large sign "Manjit's" and an illuminated sign in Railway Street to direct customers up the stairs to the upstairs restaurant. 24 On or about 5 September 2007 the Respondent "sought to replace the current signage on the balconies (that is the fascia) with its own signage, with a view to promoting and generating business for (its) proposed new upstairs restaurant". Thereafter followed a series of demands in writing from the Respondent's agents, and later its solicitors, demanding the Applicant remove its signage from the fascia. There is no need to trawl through the demands and the correspondence. Suffice it to say that no compensation was offered to the Applicant. 25 There were other issues between the parties in relation to the relocation of a hot water service and air-conditioning motors and ultimately proceedings were commenced in this Tribunal by the Applicant seeking certain relief. Further Preliminary Observations 26 It is important to make two further observations. Firstly, strenuous efforts have been made by the parties and their legal advisors to resolve the issues. Those issues relating to the hot water service and the air-conditioning were in fact resolved and consent orders made by this Tribunal. Unfortunately, the matter going forward to hearing and which could not be resolved was the issue of signage. Both counsel have assured me that mediation has been unsuccessful and, notwithstanding my entreaties at the hearing on more than one occasion, efforts to resolve the outstanding issue were unsuccessful. 27 Secondly, evidence was given orally by Mr and Mrs Johnston and Mr Singh. There was no dent made in any of their evidence such that I am absolutely satisfied they have given their evidence truthfully and honestly to the best of their respective abilities. Indeed, it is fair to say that the evidence taken as a whole was virtually unchallenged. Although there was some cross-examination it really did not negatively effect the matters in issue. Furthermore, it is important to observe that there were quite a number of affidavits which were let into evidence without objection and the deponents were not called for cross-examination. This is an important observation simply because that evidence was very strongly corroborative and must be accepted by this Tribunal. 28 I have set out above the bones of the factual matters. It is now necessary to delve into the issue in more detail. I did indicate to both counsel (however) that much of the evidence did not really relate to the matter in issue - I shall make some reference to that sort of evidence below but only in passing because in my opinion the only issue was whether the Applicant had some sort of enforceable right to continue its signage along the fascia to the structure over the footpath. Respondent's Submissions 29 It is appropriate (in my view) to firstly analyse the submissions made on behalf of the Respondent. Its counsel had kindly prepared, as an aide memoire, a chronology and detailed Written Submissions. She identified three issues: a) Does the Applicant have any rights in respect of the signage deriving from Lease 1? b) Does the Applicant have any rights binding the Respondent arising from the Huxley letter and the course of conduct between the Applicant and the Respondent's predecessors in title? c) Is the Applicant entitled to the relief claimed on some other basis? 30 The Respondent submitted that Lease 2 is to be construed as a new lease containing different terms from Lease 1, notwithstanding the fact that it was unchallenged that the Applicant had exercised the option contained in Lease 1. Counsel complained that the Applicant had not produced any Notice of Exercise of Option. However, Mr Johnston's evidence was not challenged in this regard. I accept that the Applicant exercised the option in Lease 1. I also accept the Respondent's submission that Lease 2 is not a lease entered into pursuant to the exercise of option but rather as a result of an offer and acceptance procedure whereby, as is not unusual, the parties seek to re-negotiate certain terms of their lease relationship such that upon entry into Lease 2 the Applicant as lessee abandons its contractual rights to have presented to it a lease in exactly the same terms as Lease 1. So, for the reasons set out above, it is plain that Lease 2 is a separate and distinct contract with its own particular terms, even though the directors of the Applicant as lay persons regarded it as a lease pursuant to the exercise of its option. I agree with counsel's submission that Lease 2 "is a different lease to Lease 1, it should be construed as representing the new bargain which was struck by the Applicant and the then lessor …". 31 The Respondent's counsel then submitted that it follows that there are "no rights or implication of any such rights exist(ing) by virtue of the provisions of Lease 1". This submission may or may not be correct (in my respectful opinion) and whether it is or is not is dependent upon a number of factors. Because it is an important submission I propose to deal with it in more detail below commencing at [39]. Indefeasibility of Title 32 The Respondent submitted that any claimed rights affecting the property are "governed by the basic principles of indefeasibility contained in the provisions of the Real Property Act 1900 particularly Section 42 of that Act." The Respondent relied on the commentary in Butterworths Annotated Conveyancing and Real Property Legislation NSW 3rd ed 2003 at paragraph [41160] where the learned author stated: "Thus immediately on registration this section operates to make the registered proprietor "immune from adverse claims" other than those specifically excepted" … . However, as the Privy Council (in Frazer v Walker [1967] 1 AC 569) went on to say: "This principle in no way denies the right of a plaintiff to bring against a registered proprietor a claim in personam founded in law or in equity, for such relief as a court acting in personam may grant …". 33 Reliance was placed upon Real Property Act 1900 Section 40(3) which provides: "The person recorded in any folio of the Register as entitled to the land therein described shall be held in every Court to be seized of the reversion expectant upon any lease that may be recorded thereon, and to have all powers, rights, and remedies to which a reversioner is by law entitled, and shall be subject to all covenants and conditions therein expressed to be performed on the part of the lessor". 34 It was submitted that the Respondent, having acquired the property without notice of the signage interests, can take "subject only to those interests of which it had notice, being those recorded on the Register and any other claims described in Section 42 of the Real Property Act 1900 including, importantly, claims where to assert otherwise would amount to "fraud" for the purposes of the Real Property Act 1900." The submission was that the Respondent was bound by "only those terms of the registered leases to which its title was subject that are binding on it, subject to "fraud"". In short, the Respondent submitted that if "the alleged rights rising from the (Huxley letter) are said to amount to a variation of Lease 2, the Respondent's submission is that no such variation is binding on the Respondent because it was not registered as required by Section 55A of the Real Property Act 1900". The Respondent relied on paragraph 15176 of Land Law 5th Edition, 2006 (Butt) and Kilgrove Pty Limited v Danzas Pty Limited (1995) 7 BPR 14,536. 35 The Respondent made reference to Conveyancing Act 1919 Section 118 and a decision of Austin J. in Heggies Bulkhaul Ltd v Global Minerals Australia Pty Ltd [2003] 59 NSWLR 312. This was a quite complicated argument because it was suggested that at paragraph 15176 (note 994) of Land Law, Heggies Bulkhaul was incorrectly decided. For my part I do not think it is necessary to travel down that path. The Respondent's primary submission was that Section 118 Conveyancing Act 1919 applies in its terms: "if and as far as the lessor has power to bind the reversionary estate immediately expectant on the term granted by the lease". It follows, so it was submitted, from this that the "subject matter of the Applicant's alleged right is the balcony of the building which does not form part of the reversion held by the Respondent but rather the Respondent's rights derive solely from the (Airspace Lease) entered into with the Wollongong Council. As such, it is submitted, Section 118 can have no application, whatever be the correctness or otherwise" of Heggies Bulkhaul. 36 In the alternative, and in answer to the Applicant's assertion "that consent was given to the signage under Clause 6.3.4 of Lease 2 and that this was evidenced by the Huxley letter, reliance was placed upon Hilton Hotels (Australia) Pty Limited v Sunrise Resources (Australia) Pty Limited [2000] NSWSC 46. That case involved a sign erected with consent and the issue of whether the building owner could demand that it be removed depended upon the precise terms of the actual lease contract and, quite frankly, in my view is not relevant to the decision I am called upon to make. Fraud 37 The Respondent submitted that its title was "indefeasible", deriving from Real Property Act 1900 Section 42, and that there was "no basis for any finding that its title is affected by "fraud". There was no assertion/submission made by the Applicant of any "fraud" and this submission need not be pursued. Other Submissions 38 There was a further detailed submission relating to the concept of "estoppel by acquiescence". There was, as I remember, no submission of any form of estoppel. Although I am grateful to counsel for the Respondent's detailed submissions in this regard, presumably prepared in anticipation of this type of submission being made on the evidence, there being no suggestion of any form of estoppel there is no need for me to deal further with this aspect. Further Analysis 39 There was a wealth of evidence presented to the Tribunal by both parties. I have absolutely no doubt at all that signage for both parties is "crucial" in the advertising and public display of their respective businesses. I accept the evidence of Mr Singh and Mr and Mrs Johnson to that effect. But, it seems to me, there are other more vital aspects of the evidence that require analysis. 40 Firstly, one needs to look at the Huxley letter. It is plain from the unchallenged evidence of Mr Johnson and Mr P F Glass that, firstly "at the time Lease 2 was executed by the owners, the executing owners did not pick up that signage rights had not been mentioned in Lease 2." Mr Glass was not cross-examined. Mr Glass confirmed "that though the signage rights were omitted in preparation from Lease 2, that our consent to these rights and to their inclusion in any subsequent leases had not been withdrawn". The agent (Mr Huxley) "was authorised by the owners to confirm our ongoing consent to signage rights and that such rights were a condition of the Lease 2". 41 The Huxley letter (set out in detail at [15] above) was not very well drafted but it is plain from the evidence of Mr Johnson (set out above) and the evidence of Mr Glass (unchallenged) that the Huxley letter was intended by the parties to Lease 2 to either be a consent under Clause 6.3.4, alternatively to correct the omission from Lease 2 of the former Clause 10.8 (at [3] above) in Lease 1. Consequently, in my view the evidence is overwhelming to support the contention that Lease 2 should be rectified by inserting therein a clause in the terms of Clause 10.8 of Lease 1. However, rectification was not sought by the Applicant and there is no need for me to express any further opinion on this aspect. However, I am clearly of the view that the Huxley letter, taking into account all of the evidence, was clearly at minimum a consent to "display signs or advertisements on the outside of the property, or that that can be seen from the outside" within the terms of clause 6.3.4. 42 However, that finding does not put an end to this matter. There was a considerable body of evidence, and detailed submissions, relating to the notice, or lack of notice, given to the Respondent when purchasing the building in which the lease property is situate. The Respondent asserted, very strongly, that it had no notice of any signage rights. The starting point for analysis of this aspect is the fact that the Respondent operated an Indian restaurant just down the street - the evidence was to the effect that the Respondent "should have been aware of Salon Today's signage as the signage has been in place since 2000 and the Respondent has conducted another business only 150 metres away from Salon Today since around 2000". Mr Singh's oral evidence was to the effect that he had observed the signage of the Applicant for at least 7 years and the evidence was that the signage had been in position for 9 years. The Respondent, when purchasing the property, consulted its solicitor who advised that there was nothing in Lease 2, nor in the Disclosure Statement, that permitted the Applicant to have any signs. Mr Singh's evidence was that signage on the building was "crucial" for the success of the business "due (to) the business being located on the first floor of the property and not on street level". Mr Singh's evidence was that the Respondent "had no notice of the Applicant's alleged signage rights when it purchased the property. The Applicant's current lease and the Disclosure Statements did not reserve these rights to the Applicant". As stated above, the vendor provided to the Respondent, in answer to Requisitions on Title, a copy of the Disclosure Statements in respect of Lease 2. 43 The difficulty, so it seems to me, with this argument, is that the Respondent, through its directors, clearly knew for 7 years prior to the purchase of the signage in issue. If signage was to be "crucial" for the conduct of the Respondent's restaurant, and with knowledge of the existence for 7 years of the existing signage, then one might not unreasonably ask why it was that the Respondent made no enquiries regarding any signage rights. Mr Singh admitted as much in cross-examination. One would have thought that, in all the circumstances there might have been some sort of presumption that the signage in issue had been erected with the consent of the vendor as lessor. An analysis of Lease 2 would have identified clause 6.3.4 as a possible source of any consent such that, or so it seems to me, a prudent purchaser with knowledge of the existence of the signs and the prima facie presumption that the signs were in place with the consent of the vendor, would have made appropriate enquiry from the vendor as to the rights (if any) pertaining to the signs and the rights of the Applicant to erect and maintain the signs. The fact that no enquiry was made, even though the matter was regarded as "crucial", does not sit well (in my opinion) on the Respondent. No estoppel argument was run but it is plain to me that the Respondent took the property with whatever rights attached to Lease 2 including, in particular, whatever consents were granted under Clause 6.3.4. I find that the Huxley letter was, at minimum, a consent granted under Clause 6.3.4. 44 I am also of the opinion that such consent, once granted, and absent any contractural entitlements as in, for example, Hilton Hotels, cannot be unilaterally withdrawn during the life of the lease. Whether it enures for the benefit of any lease entered into upon exercise of option is not a point that needs to be discussed but, having regard to the clear unchallenged evidence of Mr Glass (at [40] above) relating to the omission in preparation of Lease 2 of a clause similar to Clause 10.8 in Lease 1, coupled with the evidence of Mr Johnson (at [14] above), it seems to me difficult to avoid the conclusion that a suit for rectification would result in a clause in those terms being inserted in Lease 2 and thereafter in any subsequent lease entered into upon exercise of option. 45 Finally, on this point, it is appropriate to refer again to the unchallenged evidence of Mr Glass in paragraph 9 of his affidavit where he stated "the Respondent definitely did not ever have discussions, correspond or raise requisitions with the owners to clarify whether there was any arrangement with the Applicant as to signage rights". Indefeasibility of Title 46 This takes me to the next point: the Respondent submitted that somehow the indefeasibility provisions of the Real Property Act 1900 applied such that the purchaser "is bound only by the lease as registered … (and) unaffected by any unregistered side agreement between the original landlord and tenant …". Again, reliance was placed upon Real Property Act 1900 Section 42 plus that, it was submitted, the Respondent acquired the property of which the Applicant's leased premises formed part subject only to those interests to which it had notice, being those recorded on the Register and any other claims as described in Section 42 …" such that "it was only those terms of the registered leases to which its title was subject that are binding on it, such to "fraud"". 47 For my part I do not think that the indefeasibility provisions of the Real Property Act 1900 have any application to this matter. It is common in leases to include provisions which permit certain things to happen only with the consent of the lessor and usually providing that such consent cannot be unreasonably withheld. This lease is a typical lease that includes that type of provision. The lease is registered. Consequently, it seems to me that a consideration of the lease would throw up a query by a prudent purchaser to ask whether any consent had been given to signage in accordance with the consent provisions under this Lease. No enquiry was made. An enquiry should have been made. The Respondent was aware of the signage, was aware that it had been in position for at least seven years, was aware (if it had thought properly about it) that the signage would have been unlikely to have been erected and continue in existence for that period of time without the consent of the vendor/lessor, was aware of Clause 6.3.4 and should have made the appropriate enquiry. 48 Even if I am wrong about that, the indefeasibility provisions of the Real Property Act 1900 do not operate (in my opinion) to close out a right that is created pursuant to a clause in a registered lease. Section 42 is directed to undisclosed interests - the interest is in fact disclosed in the lease and, as such, in my opinion is binding, not only the original lessor but also the assignee from that lessor, the purchaser, the Respondent. 49 And, for more abundant caution, if I am wrong about the Section 42 indefeasibility argument, it seems to me that a consent once given under clause 6.3.4 of Lease 2 is binding upon the lessor granting the consent and is binding upon an assignee from that lessor as a matter of contract. It was not suggested, and in my opinion could not be suggested, that an assignee in these circumstances is not bound by the consent granted by the assignor, such consent having been granted pursuant to the lease contract terms. A consent, once granted, cannot (absent appropriate contractual entitlement) be unilaterally withdrawn and, as part of the lease contract, "runs" with the lease contract, binds the lessee, binds the lessor and binds any appropriate assignees. It would be an extraordinary proposition to say otherwise. To interpret the Real Property Act 1900 to require all consents granted pursuant to lease contract terms to be registered would cause mayhem, not only for the public but also for the authorities - in my opinion such is not a requirement of that Act and it is peculiarly a matter of contract. In any event it seems to me that the indefeasibility argument is misconceived, for this reason: the consent under/pursuant to Clause 6.3.4 firstly, does not amount to or constitute a variation of the lease simply because it is a consent pursuant to the terms of the lease; secondly, Clause 6.3.4 is in fact part of the registered lease and therefore it was an "interest" (if that is the correct word) recorded on the register; thirdly, the clause creates a contractual entitlement to create a right in relation to something other than the land, namely the fascia on a structure not on the land but owned by the registered proprietor and connected to the building situate on the land, thereby, at least, being merely a contractual right in the Applicant which right was assigned/transferred to the Respondent when it acquired the land - after all, it was not suggested that the Respondent did not acquire ownership of the structure and did not acquire the lease of which Clause 6.5.4 formed part. If the consent is valid (it was not argued otherwise), if the signage was erected and maintained pursuant to that consent (and again it was not argued otherwise), if the interests of the vendor/lessor were assigned to the Respondent (which must be the case), then it must follow that, as a matter of contract, the consent was also assigned. The fact that the Respondent elected not to make enquiry even though it knew of the existence for many years of the signage, and knew of Clause 6.3.4, indicates to me a clear failure to exercise due diligence. There was nothing more that the Applicant could have done. In my view the Applicant is protected by its contract; and that is avoiding the clear argument in favour of rectification. I should observe that I am acutely aware of the observations of Rothman J in Khan v Hadid (short title) [2008] NSWSC 119 where His Honour said at [104]: "104 The most fundamental feature of the system of land title in Australia is indefeasibility of title under which feature the State guarantees the title of those with a registered interest in land to the extent of that interest. The principle is so important, and adherence to it so essential, that registered title can be successfully challenged only in the most exceptional circumstances. Courts must be alert to ensure that notions of justice or fairness in a particular matter are not an excuse for the qualification of the principle" coupled with the general thrust of Yazgi v Permanent Custodians Limited [2007] NSWCA 240 which makes it plain that even forgery of a mortgagor's signature does not deprive the mortgagee of indefeasible title, although the personal covenant was not enforceable; the interest of the registered title holder is however dependent upon the terms of the mortgage contract. In my view nothing is what I have said above infringes any of these basic principles but rather draws strength from them. The Airspace Argument 50 The strongest argument put forward on behalf of the Respondent was in or to the effect that there was no entitlement for the lessor/vendor to grant any signage consent as a matter of law simply because the fascia on which the signage has been affixed is over land owned by the Wollongong City Council and is subject to a lease and no consent of the Wollongong City Council has been granted to that signage. In other words, what you do not have you cannot give. 51 Reliance was placed upon the Airspace Deed and the Roads Act 1993. Firstly, the Roads Act 1993 provides, in Section 149, that a "Roads Authority may lease the airspace above … any public road … that is owned by the Authority". There is no need for me to trawl through the balance of Section 149, to analyse the objects of the Roads Act 1993 nor the definitions in the Dictionary - it was not in dispute that the Wollongong City Council had the right to lease the airspace. 52 In order to properly examine this issue it is firstly necessary to make this observation: it must be presumed/inferred that the structure over the footpath was erected with the consent of the Wollongong City Council. This presumption arises because of its existence for many years and, more importantly, because the council itself has accepted that the structure exists (presumably legally) because it was part of the Airspace Lease. 53 The terms of the Airspace Lease are educative. Clause 2.1 grants to the then lessee (Messrs Ronald & Glass) "a lease to occupy and use the property" (Clause 2.1). The property is described in Item 3 of the Schedule as being "Part of 241-243 Princes Highway, Corrimal, being the airspace occupied by the verandah as shown hatched on the attached plan". The attached plan shows a hatched area over the footpath, corner of Princes Highway and Railway Street. The permitted use is "Restaurant dining". 54 Clause 6.3.4 (co-incidentally the same numbered clause as the signage clause in Lease 2 and using basically the same words) prohibits the lessee from displaying "signs or advertisements on the outside of the property, or that can be seen from the outside unless the lessor (the council) consents in writing (but the lessor cannot withhold consent unreasonably)". 55 Nextly, one should look at the Deed of Assignment 26 June 2007 in which the benefits of the Airspace Lease were assigned to the Respondent. Clause 2.1 describes the Airspace Lease as a lease "to occupy and use the airspace occupied by a balcony attached to the building on 241-243 Princes Highway Corrimal …". 56 What follows from this analysis? Firstly, as it seems to me, the lease is only of "the airspace occupied by the verandah", its permitted use being "restaurant dining". The Deed of Assignment describes it as "the airspace occupied by a balcony attached to the building". So, on one view at least, it is only the airspace occupied by the verandah, not the poles supporting it, nor the roof, nor the fascia. The prohibition in clause 6.3.4 against displaying signs or advertisements on the outside of the property can only apply to the verandah. It cannot apply to anything other the verandah because anything other than the verandah is, firstly not so described and secondly, does not have a permitted use attached to it. 57 This analysis may seem a trifle finicky but it is relevant when one looks at the photographs. Both parties showered the Tribunal with numerous photographs of the balcony and the whole building. I have carefully looked at those photographs. It is plain from that analysis that the fascia is below the floor level of the restaurant. This conclusion I reach from a careful consideration of annexure "C" to Exhibit "A" at page 5 and page 7, and Exhibit "3" photographs No. 1 and 2 (and, indeed, the whole of this Exhibit). 58 So, in my view the Airspace Lease has got nothing to do with the rights (if any) of the Applicant to attach its signs to the fascia around the outside and below the verandah. 59 Nextly, it was unchallenged that Mr T C Johnson, one of the directors of the Applicant, spoke to a council officer (Mr Hunt) on 15 May 2008 and was informed by that officer that "your signage does not require Council's consent". (Pausing at this point the Applicant relied upon a letter from a Mr John Parkinson, an Accredited Certifier Building Professional Boards, dated 21 May 2008. Objection was made to the Tribunal entering that document into evidence. I have not relied upon it informing my opinion in this decision, Mr Parkinson was not available for cross examination, had not filed any affidavit material and, although it seems that no prior notice of objection to his letter was given, in my opinion the unchallenged evidence of the conversation with the council officer Mr Hunt is sufficient). Mr Hunt could not have made that expression of opinion, knowing that the Applicant would rely upon it, without having first accepted that the structure was legal and the signage was legal. In any event, it seems to me plain on the evidence that the structure was legal, the signage was legal and the consent given by the then lessor within power. 60 Once it is accepted that the balcony structure, its supports, the roof and the fascia board, are legal structures then it seems to me as a matter of contract that the lessor, being the owner of the building and the owner of the structure, can properly legally give consent to the signage in issue. Conclusions 61 In my opinion this case, and all the issues ventilated before me, can be distilled into one proposition: the balcony structure was a legally constructed structure, existing legally and attached to the building in which the leased property forms part. As a matter of contract the owner of the building, also the owner of the structure, permitted the Applicant to place upon the fascia board forming part of the structure certain signs with consent. That consent was either granted pursuant to Clause 6.3.4 of Lease 2 as part of the lease contract; alternatively formed part of the lease contract in Lease 2 (as a result of rectification principles). In any event, the consent, once granted cannot be unilaterally withdrawn. The consent is therefore binding as a matter of contract on the lessor/vendor. The Respondent as purchaser and assignee of Lease 2 is bound by the consent once legally granted. There is no infringement of the indefeasibility provisions of the Real Property Act 1900 and the lessee/Applicant is entitled to rely upon its contractual rights to keep and maintain the signage on the fascia. 62 In these circumstances, in my opinion, the Applicant is successful. The original proceedings in this Tribunal ranged over a number of matters. As a result of the settlement of most of those matters an Amended Application for Original Decision was filed 17 June 2008 and this was the Application before me. In that Amended Application the Applicant sought the following orders: 1. An order permitting the Applicant pursuant to the lease for premises known as Shop 1, 241 Princes Highway, Corrimal (the "demised premises") to maintain and display external signage in relation to the business of the Applicant on the fascia of the demised premises until expiry of the Applicant's lease (which includes any options to renew). 2. An order preventing the Respondent from doing or performing any act so as to interfere with the external signage in relation to the business of the Applicant as on the fascia of the demised premises until the expiry of the Applicant's lease (which includes any options to renew). 3. Order the Respondent pays the Applicant's costs. 4. Further or other order as determined by the Tribunal. 63 In my opinion it would be unwise to make orders that would include any leases entered into pursuant to the options to renew. I have expressed my opinion above relating to rectification and about the binding nature of the contract between the parties. However, times move along and, although I think the Applicant's argument in respect of the continuation of the entitlement has more than considerable merit, I am reluctant to travel down that path simply because there was no submission made to me, one way or the other, orally or in writing, relating to that aspect of the case. 64 With regard to costs my initial view is that there should be no order for costs. I am unable, at least at first blush, to see any "special circumstances" but I do not close my mind to this aspect and my orders will permit the parties to agitate that question if so advised. Orders The Tribunal makes the following Orders: 1. Declaration that the Applicant is entitled to maintain and display its current external signage in relation to the business of the Applicant on the fascia of the structure over the footpath and attached to the property at 241-243 Princes Highway Corrimal 2. The Respondent is restrained from doing or performing any act that does or may interfere with the said signage 3. Declare that the relief granted in Orders 1 and 2 hereof is as a consequence of a contractual right vested in the Applicant pursuant to consent given under Clause 6.3.4 of Lease registered AB281339J 4. Unless any party makes an application to the Tribunal for an Order for costs and serves such application within 28 days of the publication of this Decision, no order as to costs.

Salon Today Pty Limited v M.N.I.R Pty Limited

At a glance

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Judgment (8 paragraphs)

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Cases Cited (2)

Cited By (1)