Snowpave Pty Limited v Gibo Pty Limited; Gibo Pty Limited v Snowpave Pty Limited and Edite Pty Limited

Court of Appeal (NSW)|2009-05-22

CITATION: Snowpave Pty Limited v Gibo Pty Limited; Gibo Pty Limited v Snowpave Pty Limited and Edite Pty Limited [2010] NSWADT 216

Applicant: Snowpave Pty Limited

Respondent: Gibo Pty Limited

Second Cross Applicant: Edite Pty Limited

Cross Respondent: Snowpave Pty Limited

HEARING DATES: 21,22 May 2009 24 August 2009

BEFORE: Olsson E, SC - Deputy President

Wyllie v Tarrison Pty Ltd [2007] NSWCA 184; Ryledar Pty Ltd t/as Volume Plus v Euphoric Pty Ltd [2007] NSWCA 65; CASES CITED: Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 All ER 98; Secured Income Real Estate (Australia) v St Martins Investments (1979) 144 CLR 596 at 606; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179; Leigh-Mardon Pty Ltd v Wawn (1995) 17 ACSR 741

Applicant Representative: Mr D Mitchell for Snowpave REPRESENTATION: Respondent Representative: Mr T Maltz of counsel for Gibo and Edite

1 The essence of this dispute is the contractual interpretation of a clause (clause 20) in a lease executed on 29 September 2006 but expressed to commence on 1 July 2006 made between the Applicant and Cross Respondent, Snowpave Pty Ltd and the Respondent and Cross Applicant, Gibo Pty Ltd.

2 The lease involved premises on the redeveloped site of the old Children's' Hospital at Camperdown, NSW.

3 The Applicant contends that the relevant provision of the lease permits it to recover from the Respondents certain costs incurred by it or its principal, in installing, maintaining and repairing a grease trap connected to the leased premises. The Applicant claims that is it entitled to recover from other tenants the cost of the installation and repair of the grease trap and ventilation system.

4 Mr John Oppedisano gave evidence as principal of the Applicant. He said that he was the director of three companies, Snowpave Pty Ltd, Barecall Pty Ltd and Naxatu Pty Ltd each of which had some involvement in the present proceedings. He said that in 2002, Barecall had negotiated the purchase of Lot 128 in the subject premises from a company known as Sterling. Naxatu had negotiated the purchase of four residential lots in the development.

5 Sterling permitted Barecall at least to enter into possession of the premises for the purpose of carrying out the relevant fit out for restaurants and food vendors. This was allowed in anticipation that Barecall (or one of the other companies) would proceed to purchase Lot 128. (The Respondent observes that details of this 'arrangement' or understanding were never provided but for reasons which follow, since it is unnecessary to decide the actual ownership of the ventilation and grease trap, the circumstances in which Barecall or one of its associates were permitted access to the site to carry out works does not need to be further explored).

6 To that end, Mr Oppedisano said, he proceeded to organize the installation of a mechanical exhaust system and a grease trap on the on the common property of Strata Plan 71747.

7 However at the end of 2005, Sterling encountered financial difficulties and was ultimately put into liquidation. By the time this occurred, approximately May 2006, much of the work referred to above had been carried out.

8 Lot 128 was the subject (along with other properties) of a mortgagee's auction but Mr Oppedisano was not successful. Dr Abeshouse, director of Gibo Pty Ltd, was the successful purchaser.

9 Mr Oppedisano and Dr Abeshouse met and discussed the future of the Lot. Dr Abeshouse was not insensitive to the position in which Mr Oppedisano found himself. The two men entered into negotiations which were protracted and involved lengthy and detailed correspondence between the solicitors for the respective parties.

10 The Lot itself comprised four areas that were available for lease as food retailers. The negotiations between Applicant and Respondent struck an in-principle agreement that Mr Oppedisano would take a lease over part of the premises and conduct a restaurant from it. There is a difference between Mr Oppedisano and Dr Abeshouse as to the terms of that agreement but one thing is clear - they agreed that Mr Oppedisano was prima facie entitled to recover some of the costs relating to the ventilation and grease trap from other tenants of the Lot. The difficulties which bring the matter before the Tribunal relate to that which the parties agreed regarding which costs the Applicant was entitled to recover.

11 There is another, equally important issue to be decided because the cost of installation and connection of the subject works was not borne in an original sense by the Applicant. It utilized a number of corporate structures in the course of its activities as an investor.

12 A lease was finally agreed and executed on 29 September 2006.

13 Turning to the lease in question and the evidence:

14 There is a seminal clause in relation to the parties' rights in respect of lessees' works.

15 The relevant clause in question is as follows: "20. Lessees Works 20.1 The Lessee shall be entitled to install on the common property for the strata scheme subject to prior approval by the Owners Corporation the following: (a) signage which will accommodate space for other tenants of the Lot (b) motors to complete the functioning of the ventilation ducting servicing the Lot; and (c) grease trap (all of which are called "Lessee's Works") 20.2 The Lessee must in all respects comply with the requirements of the Owners Corporation in relation to the installation, maintenance and repair of the Lessee's Works and the common property arising out of the installation and use of the Lessee's Works. 20.3 Subject to the payment of monies required by clause 20.4, the Lessee must if requested by tenants of other premises forming part of the Lot, allow such other tenants to use the Lessee's Works in conjunction with their Lease. 20.4 If any tenant of other premises forming part of the Lot is given permission pursuant to clause 20.3 to use any part of the Lessee's Works then such tenant must contribute towards the installation, maintenance, repair and the cost of electrical power incurred by the Lessee in respect of the Lessee's Works on a pro-rata basis having regard to the lettable area of the premises leased by such other tenant.

20.5 The Lessee's Works must remain the property of the Lessor upon the expiration or earlier termination of the Lease." 16 Mr Oppedisano said that after executing the lease, he arranged the motor for the exhaust system and the servicing of the grease trap so that the works were completed in late 2006.

17 He also said that the costs were paid by the three companies in his group but were ultimately borne by Snowpave as the result of loan transactions from the other two companies.

18 The Applicant seeks declarations to the effect that the definition of "Lessees Works" in clause 20 includes fixtures installed prior to the entry into the Lease and that were not paid for by Snowpave or installed by it.

19 Those fixtures that Snowpave referred to include a ventilation system, which includes ducting and a motor and an external grease trap that is connected by plumbing to restaurants, contained within the Lot.

20 If the Applicant is successful, it also claims that it is presently entitled to a financial contribution towards the cost of their installation.

21 Turning to the case outlined for the Respondent and Cross Applicant, on 30 June 2007, Gibo sold Lot 128 to Edite Pty Ltd, subject to four leases including one to SMJR.

22 SMJR planned to open a Japanese restaurant and for some time tried to connect to the existing ventilation system. The Respondent contends that the Applicant thwarted those efforts and ultimately, the Respondent and Edite Pty Ltd were obliged to give a rent holiday to SMJR to compensate it for the difficulties it encountered in commencing to trade.

23 Various interim applications have been before the Tribunal; of most significance for present purposes is the order made by consent on 12 June 2008 that the Respondent pay $45,000.00 into a controlled monies account in the name of both parties. The orders were made without admission and are recorded herein only because the monies in the account will have to be dealt with in the final orders.

24 On 23 July 2008 Gibo and Edite filed a combined Cross Application seeking a declaration as to the meaning of 'Lessee's Works' in clause 20 of the lease; a declaration as to the meaning of 'incurred' in clause 20.4 and declarations concerning implied obligations that have been breached by the Applicant. In addition they seek a permanent order restraining the Applicant from interfering with the ventilation ductwork and servicing.

25 Neither party presses a claim of unconscionable conduct.

26 There is, not surprisingly, a wealth of authority on the principles to be applied in the interpretation or construction of a document. One critical distinction to make however before any analysis begins is whether what is before the Tribunal is a suit for rectification or a suit for construction of a document. The latter is the ascertainment of he meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract and for this purpose, the law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The meaning that a document would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reasons, have used the wrong words or syntax: Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 All ER 98 at 114-115 per Lord Hoffman. 27 The present case involves a question of construction, not of rectification.

28 The judgment of Tobias JA in Ryledar Pty Ltd t/as Volume Plus and Another v Euphoric Pty Ltd [2007] NSWCA 65 at paragraph 103 onwards provides a succinct review of the relevant principles. As His Honour noted, construction of a written, commercial contract must begin with the words of the document, however the Court or Tribunal considering it must also be alive to the possibility that what seems clear by reference only to the words on the printed page may not be so clear when one takes into account as well what was known to both parties but does not appear in the document: what matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. This normally requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of a transaction: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179.

29 One other point should be made, and that is that when commencing the task of construction, the Court or Tribunal does not put the words of the document to one side and ascertain the commonly known factual context and purpose of the transaction: the words of the document must be considered first.

30 Where relief by way of rectification is not sought (as is the case here) and the actual wording of the contract does not go so far as to result in absurdity or inconsistency, it may be legitimate to read a word in a contract as if it had been inserted in order to give effect to the common intention of the parties. This common intention may be inferred from the instrument itself and its objective context without reference to the subjective intentions of the parties: Wyllie v Tarrison Pty Ltd [2007] NSWCA 184.

31 In cases such as this, the Tribunal must be chary of the use to which certain evidence may be put: Evidence of what was said and done during the course of negotiations leading up to the making of the contract, with a view to demonstrating that the parties had a particular outcome in mind may not, in truth, be evidence of surrounding circumstances but evidence of the antecedent oral negotiations and expectations of the parties and as such could not be used for the purpose of constructing the words of a written contract intended by the parties to comprehensively record the terms of the agreement which they have made: Secured Income Real Estate (Australia) v St Martins Investments (1979) 144 CLR 596 at 606.

32 The Applicant seeks declarations that clause 20 of the lease entered into between it and the Respondent on 29 September 2006: a) includes within the definition of "Lessee's Works" in clause 20.1 the motors and ventilation ducting servicing Lot 128 and the grease trap servicing Lot 128; b) entitles Snowpave to refuse to give any other tenant of Lot 128 permission to use the Lessee's works unless such tenant contributes to Snowpave a sum in accordance with clause 20.4 toward the installation, maintenance, repair and cost of electrical power of the Lessee's works. Snowpave contends that this includes installation costs first incurred by its related parties or in the alternative, indirectly incurred by it by way of transfer or assignment from its related parties. 33 Snowpave also seeks corresponding orders that: a) Gibo pay to it such sum of money otherwise payable by the lessee of shop 3 of Lot 128, SMJR Pty Ltd under clause 20.4 or b) In the alternative, Gibo procure the payment of such sum from SMJR Consideration of principles and evidence

34 Turning then to the terms of clause 20: * 20.1 The Lessee shall be entitled to install on the common property for the strata scheme subject to prior approval by the Owners Corporation the following: (a) signage which will accommodate space for other tenants of the Lot (b) motors to complete the functioning of the ventilation ducting servicing the Lot; and (c) grease trap (all of which are called "Lessee's Works") * 20.2 The Lessee must in all respects comply with the requirements of the Owners Corporation in relation to the installation, maintenance and repair of the Lessee's Works and the common property arising out of the installation and use of the Lessee's Works.

20.3 Subject to the payment of monies required by clause 20.4, the Lessee must if requested by tenants of other premises forming part of the Lot, allow such other tenants to use the Lessee's Works in conjunction with their Lease.

20.4 If any tenant of other premises forming part of the Lot is given permission pursuant to clause 20.3 to use any part of the Lessee's Works then such tenant must contribute towards the installation, maintenance, repair and the cost of electrical power incurred by the Lessee in respect of the Lessee's Works on a pro-rata basis having regard to the lettable area of the premises leased by such other tenant.

20.5 The Lessee's Works must remain the property of the Lessor upon the expiration or earlier termination of the Lease." 35 The actual words of the clause have a clear meaning: that if a lessee carries out certain works, it must do so with the Owners Corporation's permission, it must permit other tenants to use the works subject to payment of a fee and the works must be the property of the lessor, not the lessee.

36 There is nothing in the clause to indicate whether it contemplates work which has already been carried out although the reference in clause 20.2 to the installation, maintenance and repair might imply that it is intended to include new as well as existing works.

37 The reference to in 20.1(b) to 'motors to complete the functioning' might be read as meaning additional or further motors, that is, in addition to a motor or motors already installed. There is no doubt that the ventilation system itself is acknowledged in that clause as having already been installed.

38 The reference to 'grease trap' can only be a reference to the grease trap that is already in existence. It would strain the meaning of the clause to insist that it was intended to refer to a grease trap which might be installed in the future when there was a functioning grease trap already in existence, yet on its face, it does not refer to an existing grease trap.

39 The Tribunal is satisfied that this case is one in which it is appropriate to consider the surrounding circumstances of the matter in order to give proper construction of the clause.

40 The Applicant provided detailed written submissions in which it conceded that on first reading, clause 20 appears to relate to installations which occurred after the date of the execution of the lease. However, it was emphasized that the material and information reasonably (and in fact) made available to the two critical parties (Mr Abeshouse and Mr Oppedisano) was such that the clause was in fact intended to apply to installations which had occurred prior to the date of the lease.

41 Bearing in mind the principles elucidated earlier as to the evidence that the Tribunal was entitled to admit and the use to which it could be put, there were few issues of credit between witnesses which require determination but to the extent it is necessary to do so, the Tribunal generally prefers the evidence of Mr Oppedisano where it conflicts with that of Dr Abeshouse.

42 Mr Oppedisano displayed, in the witness box, a clear and good memory of the chronology of events and what work was undertaken and when and generally, his evidence could be corroborated by documents. For example, his evidence was consistent with the invoices for the installation of the works of the ventilation, the grease trap and the motor. The Respondent was critical of Mr Oppedisano in that he gave rambling and non-responsive answers in places. That is not a criticism which can be exclusively levelled at Mr Oppedisano and was not enough to persuade the Tribunal that his evidence should be rejected in favour of Dr Absehouse.

43 Dr Abeshouse, on the other hand, had a poorer recollection and during his cross examination was required to make a number of concessions about the works. For example, there was a discrepancy in the evidence as to when the motor for the ventilation system had been installed but the invoices attached to Exhibit 3 tend to demonstrate that the motor had been installed. Dr Abeshouse was reluctant to concede that the motor had been installed but the Tribunal prefers the evidence of Mr Oppedisano on this point.

44 Firstly the invoices strongly support the inference that the motor was in place; secondly the tenor of the conversations between the two men referred to in paragraph 14 of Exhibit 1 (Mr Oppedisano's first affidavit) was that the systems were functional and able to be used; thirdly Dr Abeshouse himself referred to a motor in his affidavit (exhibit 5) at paragraph 26. Although he sought to explain this reference as pertaining to putting motor in the roof, other evidence (including Exhibit 13) suggest that the notion of putting a motor on the roof had been rejected some time earlier.

45 To some extent Dr Abeshouse's difficulties in recalling conversations and events is explained by the fact that he had not been involved with the project for the same length of time as Mr Oppedisano (being the purchaser of the property some time after fit out works had commenced) and he conceded at one point that he had not paid a lot of attention to what was going on in the early stages (2006) (transcript Day 2 at 73).

46 Be that as it may, a review of the evidence of both major parties (Dr Abeshouse and Mr Oppedisano) reveals that the following circumstances were known to both of them at all material times:

a) Dr Abeshouse knew at or shortly after the purchase of Lot 128 that Mr Oppedisano had carried out (or arranged for) the fit out of the Lot and that that fit out had involved a substantial amount of money

b) Dr Abeshouse knew, from conversations with Mr Oppedisano, that the latter had carried out the works on the understanding that he or his company would be the purchaser of the Lot and that as a result of the insolvency of Sterling (or Stirling), the property had been auctioned by the mortgagee and Mr Oppedisano had not been the successful bidder. In short, he knew that Mr Oppedisano had potentially lost a lot of money as a result of a fit out of premises which he did not succeed in purchasing.

c) Dr Abeshouse was keen to have a tenant in Lot 128 and was keen to involve Mr Oppedisano because he knew or had learnt of his good reputation in the food retailing business

d) Both parties knew prior to entry into the lease that there was a substantial grease trap installed on the common property and connected to Lot 128, that Mr Oppedisano had been responsible for its connection and that it was big enough to serve the four possible tenancies contained within Lot 128.

e) The ducting and motor for the ventilation system for the Lot had been installed. f) An issue arose during evidence about the ownership of the grease trap and the ventilation system. As counsel for the Applicant points out, the Tribunal does not need to decide the question of ownership of these works - what is critical is the knowledge the parties had about each other's respective position. g) In other words, Mr Oppedisano claimed that he owned the grease trap and the ventilation system. The important feature of this evidence is that Dr Abeshouse knew that Mr Oppedisano asserted that ownership.

h) If it is accepted, as I think it must, that Mr Oppedisano claimed ownership of the works and that assertion was known to Dr Abeshouse, then it is not a great leap to accept that it was likely that Mr Oppedisano, in his dealings with Dr Abeshouse, insisted that he be compensated for the value he had expended.

i) The outstanding work to be done on the ventilation system was the installation of a 'cowl' on the roof and the connection of a switch (Exhibit 9, paragraphs 6-14) and the only work to be done on the grease trap was some minor work to correct an area in one corner which had subsided (Exhibit 9 paragraph 6). Pausing here, there was evidence from Dr Abeshouse to the effect that he had a conversation with Mr Oppedisano about the need to utilize a crane to rectify or finish the grease trap, implying that there was significant work to be done on the grease trap to make it operational. The Tribunal rejects this evidence - not only was it denied by Mr Oppedisano but it was not referred to in Dr Abeshouse's statement nor was it referred to anywhere else. 47 The Applicant argues that the reference to 'motor' in clause 20.1(b) can only be a reference to a motor that was already installed and there is and was no further need for a motor. This tends to overlook the force and meaning of words such as "shall be entitled to install" and "motors to complete" which, as the Respondent argues, are strong indicators that it is only prospective installations that come within the meaning of 'Lessee's Works'.

48 The Respondent says this is also consistent with commercial common sense because existing items would have become property of the Lessor or Owners Corporation and would not have needed the protection of the clause.

49 The Respondent cautioned against the admission or weight to be given to parol evidence for the very sound reason that this is not a case involving rectification of a contract. Nevertheless, the caselaw makes it clear that the Tribunal may have regard to the factual matrix which gave rise to the conclusion of the written document. In doing so, the Tribunal has deliberately not emphasized the material contained in the letters which passed between solicitors; rather I consider that the focus of the matter should be on what circumstances gave rise to the lease and what facts the parties were aware of, at that time rather than their subjective intentions.

50 On balance the Tribunal considers that whilst this was a commercial contract, it had significantly unusual features such that the surrounding circumstances and knowledge of the parties prevails.

51 As far as clause 20.1 is concerned, although it could be read as being prospective or retrospective, the stronger view is that it is to be read as including works which had already taken place as well as those that might in the future take place.

52 The ventilation ductwork can only refer to work already in situ and the grease trap can only be a reference to the grease trap which had already been installed and which needed only a minor repair. The Applicant contends, and the Tribunal accepts, that it stretches the language and credulity to suggest that the clause was intended to only refer to a new grease trap or a further grease trap.

53 The parties were both aware that the Applicant (or associated entity, which will be considered later) had incurred great expenditure in the installation of the subject works and expected to be compensated for the same. Dr Abeshouse was well aware of that fact as early as the conversation he had with Mr Oppedisano shortly after his purchase of the Lot. Nothing happened between then and the execution of the lease that could have persuaded Dr Abeshouse that Mr Oppedisano had changed his mind. The whole tenor of their negotiations was such that Dr Abeshouse knew and wished to help Mr Oppedisano recover some of the expenditure he had incurred in fitting out the premises.

54 The Applicant further contends that clause 20.4 is intended to permit the Applicant to recover part of the costs first incurred by Mr Oppedisano or his company in installing the works and that the reference to the 'Lessee' (being Snowpave) should be taken as including the costs incurred by Mr Oppedisano. The alternative position, equally open to the Applicant, is to rely on the accounting transfer of expenses to Snowpave, evidence of which was given by Mr Oppedisano. In other words, the fact that only Snowpave is referred to (indirectly) in clause 20.4 does not of itself support an argument that the cost of only the work done after the date of the lease is recoverable.

55 The meaning of "contribution" in clause 20.4, to the extent that it is ambiguous, must mean a contribution to the cost incurred in relation to the carrying out of the works.

56 The meaning of "request" similarly must mean that a tenant must make a request in order for the Applicant to have to provide permission for the use of the works.

57 Snowpave's entitlement to a contribution therefore only arises if and when a tenant grants permission pursuant to a request.

58 The costs which are recoverable are only those which are defined as 'Lessee's Works' and it follows from the above that those works include the installation, maintenance and repair of the ventilation ductwork, motors, exhaust fans and grease trap, as well as any other work carried out within that definition.

59 Both parties seemed to be in agreement that the formula to be applied to the costs (however the costs are calculated) is 41.5% with respect to the tenancy of SMJR.

60 It follows that the Tribunal accepts that the Applicant is entitled to recover the costs incurred in carrying out the Lessee's works as defined above. The next question is whether Snowpave is the entity which can recover the costs.

61 In Leigh-Mardon Pty Ltd v Wawn (1995) 17 ACSR 741 at 749, Justice Hodgson said "..in my opinion, a company incurs a debt when, by its choice, it does or omits something which, as a matter of substance and commercial reality renders it liable for a debt for which it otherwise would not have been liable".

62 There are two questions for the Tribunal in determining whether any costs are payable by one party to the other. Firstly, whether the lease contemplates that costs can be recovered for work done prior to the execution of the lease and if so, whether such costs are limited to those incurred by the lessee and secondly, which entity actually incurred the costs.

63 In the opinion of the Tribunal, given the finding that "Lessee's work" includes work which was done prior to the commencement of the lease, the costs to which reference is made in clause 20 must include costs which were incurred prior to the lease. The Tribunal is satisfied that what each party, by their words and conduct, would have led a reasonable person in the position of the other party to believe, expected that the costs would include costs already expended. That, after all, had been the subject of conversations between the two principals.

64 The next question then is whether the recovery of those past costs is limited to the entity which executed the lease. Once again, in the context of the unusual set of facts which gave rise to this lease, a reasonable person, in the Tribunal's view, would have expected the parties to have meant that the costs were recoverable by the entity or entity within a group which incurred them.

65 As the Applicant pointed out in submissions, Dr Abeshouse himself considered that his dealings were with Mr Oppedisano and he did not trouble himself to make any distinction between corporate entities and individuals: as might be expected of a man of his acumen and stature, he was more concerned with the facts of what had transpired at the site rather than the legal details.

66 The Respondent argued that the matter of which party incurred costs and which entity was entitled to recover them should be determined according to the principles of contract law. However, the present applications are not concerned with contractual rights between parties or breaches of contract, but rather with the proper interpretation to be given to a contract. For that reason as well as the reasons which follow, the Tribunal allows the present Applicant the right to recover the cost of the "Lessee's Work" performed at its behest at the premises.

67 Finally, Mr Oppedisano himself said that the initial works were initiated and organized by Barecall Pty Ltd of which he was director. He gave evidence in Exhibit 3 and Exhibit 9 of transfers of relevant assets and expenses between companies. He was not directly challenged on this evidence although Mr Baker, accountant, made a valiant attempt to analyse the various transactions. The Tribunal accepts that Mr Baker had misgivings about which entity had done what within the Applicant's group but for the reason outlined above, does not find his conclusions persuasive.

68 For the sake of completeness, it should be recorded that Mr Patrick Yu was called to give evidence in respect of the financial arrangements between the companies in the Applicant's group and Sterling Developments of which he was a director but his evidence was based largely on memory and on a reconstruction of the limited documents he had at his disposal. Most of the relevant documents had been taken by Sterling's liquidator and were no longer available. Accordingly, his evidence was of limited value.

69 With respect to the Applicant's claim, the Tribunal makes the following findings: a) that clause 20.1 of Lease no AC 680330D between the Applicant and Respondent and commencing on 1 July 2006 includes within the definition of "Lessee's Work" inter alia: the motors and ventilation ducting servicing Lot 128 in SP 71747 and the grease trap.

b) that the Applicant is entitled to refuse to give any other tenant permission to use the "Lessee's Works" under Clause 20.1 unless such tenant contributes to the Applicant a sum in accordance with Clause 20.4 towards the installation, maintenance, repair and costs of electrical power in respect of the Lessee's works. 70 An order that the Respondent pays the Applicant or procure from the lessee of shop 3, such sum as is equivalent to the sum of money otherwise payable by the lessee of shop 3 pursuant to clause 20.4 of the lease. The Tribunal was not called upon in the Application to determine the amount but the evidence suggests that it would be as follows: Clause 20.4 requires the Lessor, Gibo, to recover from tenants their pro rata share of the costs of installation, maintenance and repair and so on. At least in the case of SMJR the Respondent failed to do so. The relevant proportions of cost are contained in annexure C to Exhibit 2. The sum owed by SMJR is 41.5% of $115,055.60, being $47,729.00. It is that sum which the Applicant claims, together with interest from 12 June 2008 pursuant to s.72A of the Retail Leases Act 1994.

71 With respect to the Cross Application, for the avoidance of doubt, the meaning of Lessee's work" in clause 20 of the subject lease does include items which were installed prior to the commencement of the lease and does include the grease trap and ventilation ducting servicing the Lot identified in clause 20.1 of the lease.

72 Further, the meaning of the expression "incurred" in clause 20.4 does include any expenses incurred prior to the commencement date of the lease, does not refer to expenses which were incurred only by the Applicant and may include costs referred to in the letter of 21 April 2008 (referred to in paragraph 2 of the Cross Application).

73 The Tribunal is prepared to make the declaration sought in paragraph 3 of the Cross Application, being a declaration that the lease contains an implied term requiring the Cross Respondent to perform its obligations in good faith and to reasonably co-operate in the performance of its obligations. Further or in the alternative, a declaration that the lease contains an implied term requiring the Cross Respondent to perform its obligations under clause 20 in good faith and to reasonably co-operate in the performance of its obligations under clause 20.

74 The Cross Application is otherwise dismissed except with respect to paragraph 7 which deals with the monies held in the controlled monies account. The order which is proposed is that the monies be released to the Respondent since, if the calculation referred to above as to costs incurred is correct, the monies would not exceed the amount due to the Respondent. However, the parties have not had the opportunity of addressing the Tribunal on this matter and accordingly, the Tribunal will order that either or both parties may make submissions to the Tribunal regarding the appropriate order for the release of monies held in the controlled monies account within 14 days of the date hereof, failing which an order will be made forthwith that they be released to the Applicant.

75 Similarly the parties have not had the opportunity of directly making submissions as to costs. Accordingly, the Tribunal will order that the parties have 14 days from the date of this decision to apply to the Tribunal to be heard on the question of costs failing which an order will be made that each party pay its own costs.

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.

At a glance

Court

Decision date

Source

Judgment (92 paragraphs)

Cases Cited (3)