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[2016] QDC 77
General information, not legal advice.
District Court of Queensland
2016-04-08
Original judgment source is linked above.
LESSOR AND LEASEE - TERMINATION OF THE TENANCY - FORFEITURE - GENERALLY - whether the lessor was entitled to terminate the lease at common law and/or under the Lease - whether lessor entitled to terminate without giving requisite statutory notice under section 124 of the Property Law Act 1974 (Qld) - whether leasee's conduct amounted to repudiation of the lease
DEFAMATION - GENERALLY - whether defamatory imputations were made - defence of 'substantial truth'
Acts Interpretation Act 1954 (Qld) ss 39, 39A
Defamation Act 2005 (Qld) s 25
Corporations Act 2001 (Cth) s 109X
Property Law Act 1974 (Qld) ss 124, 132, 347
Property Law Act 1958 (Vic) s 146
Bill Duncan and Sharon Christensen, Commercial Leases in Australia (Thomson Reuters, 7th ed, 2014) - considered
Environmental Defenders Office Ltd, Defamation in Victoria, October 2011 - considered
Westlaw, Property Law and Practice Qld (at 1 April 2016) '124 Restriction on and relief against forfeiture' [124;.30] - considered
Apriaden Pty Ltd v Seacrest Pty Ltd & Anor [2005] VSCA 139 - considered and applied
Batiste & Ors v Lenin [2002] NSWCA 316 - applied
Bui v Huynh [2011] QDC 239 - applied
Carson v John Fairfax & Sons Ltd [1993] HCA 31; (1993) 178 CLR 44 - applied
Cerutti and Anor v Crestside Pty Ltd and Anor [2014] QCA 33 - applied
CMA Recycling Victoria Pty Ltd v Doubt Free Investments Pty Ltd [2012] TASFC 7 - applied
Elsafty Enterprises Pty Ltd v Mermaids Café and Bar Pty Ltd [2007] QSC 394 - applied
Ex parte Taylor [1980] Qd R 253- applied
Ex parte Whelan [1986] 1 Qd R 500 - applied
Fu-Laihsu & Anor v Graham Retailers Pty Ltd & Ors [2003] QDC 20 - applied
Grayprop Ptd Ltd v Maharaj International Pty Ltd [2001] QSC 387 - applied
Hallam v Ross [2012] QSC 274 - applied
Howden Pty Ltd v Truth and Sportsman Ltd [1937] HCA 74; (1937) 58 CLR 416 - applied
Hsu & Anor v Graham Retailers Pty Ltd & Ors [2004] QDC 230 - applied
Kiama Development Co Pty Ltd v Wilcox [1999] NSWSC 277 - applied
Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1989) 166 CLR 623 - applied
Macquarie International Health Clinic Pty Ltd v South West Sydney Area Health Service [2010] NSWCA 268 - applied
Marshall v Council of the Shire of Snowy River (1994) 7 BPR 14,447 - applied
Mizikovsky v Queensland Television Ltd & Ors (No 3) [2011] QSC 375 - considered
Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17 - applied
Queensland Newspapers Pty Ltd v Palmer [2011] QCA 286 - applied
Ratcliffe v Evans [1892] 2 QB 524 - applied
Shevill v Builders' Licensing Board [1982] HCA 47; (1982) 149 CLR 620 - applied
World Best Holdings Ltd v Sarker [2010] NSWCA 24 - applied
[1] This action involves a variety of claims for damages made by the named parties. Damages are claimed by the 1st plaintiff from the 1st defendant for breach of contract ('the lease') in respect of an alleged wrongful repudiation of it by the 1st defendant on the 25th of June 2013. The 2nd and the 3rd plaintiff seek damages jointly and severally from the 2nd and the 3rd defendant respectively in a claim made for defamation. There had been an action for defamation against the 1st defendant also pleaded by all the named plaintiffs, however that was subsequently not pursued at trial. The 1st defendant has also made a counterclaim against all of the named plaintiffs (the 1st plaintiff as lessee and the 2nd and 3rd plaintiffs as guarantors under that lease) seeking damages for alleged breach of the lease. The damages sought in respect of each of those claims are set out in the pleadings.
[2] In order to make this decision more readily understood by the parties, I intend to deal with each of those claims separately.
The Lease (1****st plaintiff claim against the 1st defendant for breach of contract)
[3] On or about the 14th of April 2011, the 1st plaintiff as lessee and the 1st defendant as lessor entered into a lease for an initial term of ten years ending on 21 June 2021 (Ex 1 Doc 22). The 1st plaintiff by way of security provided a bank guarantee in the sum of $41,250. The 2nd and 3rd plaintiffs ('Mr and Mrs Royal') guaranteed the performance of the 1st plaintiff under the said lease. Subsequent to the signing of that lease by the parties, the 1st plaintiff commenced its' operation of a car washing business at Ningi on Bribie Island in about May of 2011. That business however struggled financially not long after it commenced trading, as early as November 2011, and ultimately fell behind in respect of its' rent and outgoings obligations. On the 8th of August 2012, the 1st plaintiff was served with a Notice to Remedy Breach of Covenant (pursuant to s124 of the Property Law Act 1974 (Qld) ('PLA') in respect to its' failure to pay the rent and outgoings that was owing at that time. It is uncertain whether that breach was rectified in full. Mrs Royal gave evidence that it was, however Mr Okan, a director of the 1st defendant, was not one hundred percent sure whether it was or not. He stated that he believed that it was not long after that that the 1st plaintiff went into 'breach' again (T6-73). The business in any event continued to struggle financially and by 2013 it had once again fallen well behind in respect of its' rent and outgoings obligations (Mr Okan T6-74). Consequentially, Mr Okan says that he then sent and prepared a Notice to Remedy Breach of Covenant ('s124 notice') on the 4th of June 2013 to the 1st plaintiff.
[4] On the 25th of June 2013, the 1st defendant re-entered and took possession of the demised premises where the business had been operating. The 1st plaintiff's claim is that the 1st defendant wrongfully repossessed the demised premises at the time that it did because it was neither entitled to do so under the terms of the lease nor otherwise as no s124 notice had been sent or indeed, received. The 1st defendant on the other hand says that it was in fact so entitled, because the 1st defendant was in any event, in fundamental breach of an essential term of the lease by its' continuing persistent failure over a lengthy period to comply with its obligations to pay rent and outgoings under the lease. This it was said was evidenced by its continued notification over the duration of the lease of an inability to meet those obligations and the ultimate notification which it made in writing on the 19th June 2013 that it would have no option but to close the business and declare bankruptcy if a rent reduction was not given as a matter of urgency. The 1st defendant says that it was therefore entitled at common law to exercise its' right to terminate the lease at that time, and re-enter the demised premises in order to take back possession of it on the 25th of June 2013. The 1st defendant says that there is nothing in the terms of the lease, which, under those circumstances, requires the 1st defendant to have served any s124 notice upon the 1st plaintiff prior to taking that action.
[5] The 1st plaintiff on the other hand says that irrespective of what right the 1st defendant says it had (whether that be under a term of the lease or a common law right) in respect of its' entitlement to repossess the demised premises on the 25th June 2013, the 1st plaintiff says that the 1st defendant was nevertheless still required to have served a s124 notice on the 1st plaintiff in accordance with clause 17.2 of the lease in respect of any default arising under clause 17.1 before it re-entered and took back possession on the 25th June 2013.
The s124 Notice
[6] As a consequence of the respective positions taken on this point regarding whether any s124 notice was in fact sent or indeed received prior to the repossession of the demised premises taking place on the 25th June 2013, this in turn occupied a large part of the trial.
[7] The 1st defendant's position was that it had in fact (through its' director Mr Okan) sent a s124 notice on the 4th June 2013, dated 7th June 2013 (Ex 1 Doc 19, page 20) to the 1st plaintiff at its' named address for notices as set out in Item 7 of that lease (namely 1 Sandheath Place, Sandy Point, Qld 4511). The evidence from Mr and Mrs Royal (the 2nd and 3rd plaintiffs) was that they denied ever having received that notice or any notice of that type at any point prior to the 1st defendant taking repossession of the demised premises on the 25th June 2013. Mr and Mrs Royal also denied being served with a Notice of Termination of Lease (pursuant to s132 of the PLA ('s132 Notice')) on that date (see also Second Further Amended Reply and Answer, paragraphs (3)(e) and (f) respectively, filed by leave 28/01/16) when the 1st defendant's representatives attended to take repossession at the demised premises. I shall deal with the eviction later in my reasons.
[8] The 1st defendant says on this issue that the question of whether a s124 notice was to be given or not to the 1st plaintiff before it took repossession of the demised premises is beside the point, because it says it had an entitlement at common law to do so. The 1st defendant in this regard relies on, as I have already indicated, the continued longstanding failure by the 1st plaintiff to meet its rent and outgoings obligations, the various communications by the 1st plaintiffs of their continued inability, particularly from mid to late 2012 and thereafter, to meet those obligations unless a rent reduction was given, and finally in light of the letter of the 19th June 2013 sent by its solicitors on its' behalf. It is this letter that the 1st defendant says clearly evinces, at that point, that the 1st plaintiff no longer intended, nor could, fulfil the terms of the lease in a manner substantially consistent with its terms. As such, the 1st defendant says it was entitled to terminate the lease and re-enter.
[9] The PLA applies to a right of re-entry or forfeiture in the lease for a breach of a lease.[1]
[10] As such, the first issue that arises for determination in this matter is whether a s124 notice (Ex 1, pages 20, 20.1 and 20.2) was in fact sent, and if so, secondly, was it properly served and received by the 1st plaintiff. A further issue for determination is whether the s124 notice, as asserted by the plaintiffs in its pleaded case, was ineffective in any event due to the deficiency of its terms.
[11] In determining these issues, I have had regard to the following evidence.
[12] Item 7 of the lease states the address for notices in Clause 19.1, which sets out those addresses in respect of the Landlord and the Tenant. Clause 19.1 of the lease provides that the method of giving notice by either party shall be in writing and left at or posted by certified mail to the address of the party as set out in Item 7. The address for the Lessor in Item 7 is stated as C/- of Minter Ellison Gold Coast, PO Box 11, Varsity Lakes, Q. 4227. The address for the tenant is stated as 1 Sandheath Place, Sandstone Point, Qld 4511. There was no available evidence at trial which showed or supported a conclusion being drawn that any notice of a change of address by the tenant from 1 Sandheath Place, Sandstone Point, QLD 4511 to 29 Gecko Street, Ningi, Qld, 4511 given to Chad Freshwater of Richardson and Wrench Real Estate Agents by e-mail (Ex 1, page 167) was ever actually sent to the landlord's address as specifically stated in Item 7 the Lease. Mr Okan gave evidence that neither himself nor his solicitors' received a notice as stated in Item 7 of the lease (T6-77). He also gave evidence that it was only in late 2013, after it was brought to his attention by his solicitors, that he became aware that any notice of a change of address had been sent (T6-76 L 40).
[13] Mrs Royal however told the court that she had sent a notice of a change of address by e-mail on the 16th December 2012 to Richardson and Wrench, which was the landlord's property manager, and to the landlord, Mr Okan. While it does seem that her e-mail has cc'ed in the landlord (see Ex 1 page 354), that still did not satisfy what was required to be done under clause 19.1 of the lease with respect to notices, consent or approvals. I have no reason to doubt Mr Okan's evidence that he had not received a notice of any change of address at that time, or indeed even if he did, that he had actually accepted that change as Mrs Royal herself confirmed in her evidence that she did not ever hear back from him. As such, any purported notice of a change of address by the 1st plaintiff in the manner that it was in fact communicated to the landlord, or indeed to Mr Freshwater, by e-mail from Mrs Royal in the manner she did was ineffectual in light of clause 19.1 of the lease.
[14] It is accepted that there was in fact other correspondence subsequently received by the plaintiffs after they took up residence at 29 Gecko Place Ningi in December 2012 from Richardson and Wrench, Real Estate agents and property managers for the landlord. This included a notification of CPI increase and a few other statements (T2-45 L10 Mr Royal). There was however other documents in Exhibit 1 that also showed that statements were also still being addressed to the former address as stated in the Lease (1 Sandheath Place, Sandstone Point, Qld 4511) by Richardson and Wrench even as late as November 2014 (see Ex 1 page 247).
[15] I have also had regard to the s124 notice dated 7th June 2013 itself (Ex 1 page 20, 20.1 and 20.2). It is clear on the face of that document that the address for the tenant was stated in accordance with Item 7 of the said Lease, and therefore correct. However, that is not the end of the matter as the 1st plaintiff maintained at trial, in accordance with its' pleadings, that no such notice was ever sent.
Was the said s124 notice even sent?
[16] The 1st plaintiff disputes that the said notice was even sent by the 1st defendant. Mr and Mrs Royal both said during their evidence that no such notice was ever actually received by them prior to their 'eviction' from the premises on the 25th of June 2013. Indeed, both of them said that it was only sometime after that date that they first saw that notice after their solicitor had shown them what had been received from the 1st defendant's solicitors (T2-46 L15-Mr Royal says about 8 weeks after the 25th June 2013; and T3-64 L35-Mrs Royal says about 1 week into August). The defendant on the other hand says that the said s124 notice was in fact sent.
[17] The point about whether or not that notice was even sent by Mr Okan on the 4th June 2013 became a contentious issue between the parties at trial. Mr Okan gave evidence that he had prepared that notice himself on the 4th of June 2013 (T6-75 and T6-93) using one of the computers available at his home. He stated that he had prepared that notice by using the one that had been sent previously to the 1st plaintiff in August 2012 (of which he had received a copy of it at that time). He had also requested a statement from Richardson and Wrench from either Matt or Chad Freshwater on the 4th June 2013 which he had then received by either fax or e-mail. He then prepared the said s124 notice which he identified at Ex 1 pages 20. 20.1, 20.2. He stated that he sent it on the 4th of June 2013 (as faintly noted on it in his handwriting) but had dated it the 7th of June 2013 in order to allow for 3 days postage. He stated that he then put the s124 notice in an envelope, addressed it to the tenant in accordance with the lease address (Item 7), put a stamp on the envelope and then posted it by putting it into a post box himself and ensuing that he had put his return address on the back of it (T6-76). He in effect confirmed this evidence again to me when I specifically questioned him about it (T7-32).
[18] I accept Mr Okan's evidence on this issue. I had no reason to reject his evidence. Mr Okan struck me as a truthful witness who made no attempt to embellish his evidence even when he had an opportunity to do so. For example, Mr Okan did not try to suggest that he had sent the s124 notice which he had prepared by certified mail (as was required under clause 19.1) or even by registered post after being given an further opportunity by me to do so. I find that his preparation of it using a previous notice, which had been sent to the 1st plaintiff earlier on in August 2012 which he had received a copy of from his solicitors at that time, as a reference tool when preparing his notice dated 7th June 2013 was entirely consistent with his evidence that he had also obtained a statement from Richardson and Wrench in order to prepare his notice to remedy breach at that time. That is particularly so having regard to the conversation which he had with Mr Zarafa in March 2013, which was to the effect that the 1st plaintiff was struggling to pay its rent and outgoings again, and were behind in respect of those obligations.
[19] The submission made that Mr Okan did not in fact have a statement up to the 4th of June 2013 at the time that he sent it because he had must have only ever requested one in either late June 2013 or early July 2013 from Richardson and Wrench is rejected. The evidence which Mr Okan gave, which I had no reason to disbelieve, was that he had requested a statement from either Matt or Chad Freshwater on the 4th June 2013 which he had received by either fax or e-mail and had subsequently attached it to the said s124 notice that he had prepared. I have no reason to reject Mr Okan when he says that in preparing that notice himself he used two computers, in order to look at the previous notice sent in August 2012 and the lease itself, in order to prepare the latter notice (T6-102). He also gave evidence he didn't save a copy of that latter notice on any of computers he was using. That isn't in my mind particularly unusual as he stated that he had printed two copies of it at that time; one to send and one which he kept himself.
[20] Mr Okan also gave evidence that on the 18th of June 2013 he had sent an e-mail to the 1st plaintiff asking if it had made a payment towards the rent and arrears (Ex 2 page 31) (T6-113). That evidence in my mind is consistent with Mr Okan determining whether or not the 1st plaintiff had in fact made any payment towards the outstanding arrears at that point in light of the notice which he had already sent. The fact that no mention in that correspondence was made by him regarding whether there had been any receipt of his notice sent on the 4th of June 2013, is of no real consequence in light of his evidence, which I accept, that he didn't ask the 1st plaintiff if it had received the notice which had been earlier sent in August 2012 either (T6-113). It is also consistent with him simply wanting to know at that point if a payment had in fact been made by that stage towards the rent that was still in arrears (18th of June 2013). This is particularly so where some payments had been made by the 1st plaintiff from 3rd of June 2013 (Ex 2 page 27) but where there was an indication by Mrs Royal on the 14th of June 2013 that no payment could be made at that point (Ex 2 p30).
[21] The 1st plaintiff also relied on evidence given by Ms Riek at trial in support of its submission on this issue. This evidence was led as part of the plaintiff's case regarding the point as to whether or not the s124 notice could have even been sent on the 4th June 2013, as stated by Mr Okan, because the 1st plaintiff says that the evidence shows that the statement attached to that s124 notice could only have come into being (that is, created) either in late June and/or early July 2013.
[22] Ms Letitia Riek was a bookkeeper at Richardson and Wrench at the relevant time. Ms Riek was referred to certain documents contained in Ex 1 for comment. She referred to certain documents in Ex 1 namely page 157 with reference to 180,181 and 182 respectively; page 178 and 263; page 184 with reference to 185 and 186 and finally to pages 187 and 188. She was also referred to page 20, 20.1 and 20.2 of that exhibit during her examination in chief. Ms Riek made the following points about those documents.
[23] She said in respect to page 178, that she had referred this request, which was sent by the landlord to her on the 24th of June 2013, to Mr Freshwater as it wasn't something that would be in her job role.
[24] With respect to page 184, she stated that she had sent the statement up to the 4th of June 2013, referred to at page 185 and 186, to the landlord (Mr Okan) on the 29th of June 2013 because her principal, Mr Chad Freshwater, had asked her to do so. In respect to pages 187 and 188 she says that she was told it was wrong so she completed another one and sent it over to the landlord on the 1st of July 2013.
[25] In order for all the documents to which Ms Riek was referred during her evidence to be more readily understood, and so that my findings in respect of them are clear, I shall set out the chronology of some of those documents referred to by the witness as follows.
[26] There was no mention in the evidence of whether Ms Riek (because she was not asked) had in fact actually sent another e-mail to Mr Okan on the 24th of June 2013 attaching a current statement. Ex 1 page 178 shows that an e-mail was sent at 8.18am that same day to Mr Okan from her. Put another way, it was sent one minute before the e-mail sent on the same day by her which she identified in her evidence with reference to Ex 1 page 157.
[27] During the course of her evidence Ms Riek made the following comments; that she could not even specifically remember if she actually changed the address of the tenant on the statements to which she had been referred (commencing Ex 1 page 185 and page 188 respectively), nor could she in fact remember whether or not she had actually sent another statement up to the 4th June 2013 to the owner or not at another time. As she indicated (T4-14) she didn't particularly look for that when going through other documents which she had her possession at a later time because she simply couldn't remember now (T4-14 L24). She also confirmed that other staff within the office also had access to the computer and could provide a similar type statement to an owner, to that which she had been referred in examination in chief, if requested (T4-15). She also accepted that page 182 contained in the statement commencing at Ex 1 page 180 was created subsequently to the statement at Ex 1 page 185 (T4-15) by reference to the time periods on the face of those documents. She also noted that even though there were differences that she could see on those statements, that is as contained in Ex 1 at page 180 and 185 respectively, regarding the name of the owner (Sinan Okan) having been moved over in its' position on that document, that the 'm' was cut off from the word 'from', she could not explain, nor did she know nor indeed could she give any explanation at all as to why there was in fact those differences (T4-21).
[28] After a careful consideration of the documents referred to in evidence by Ms Riek and having careful regard to her evidence in respect of them I make the following findings. I find that while Ms Riek did her very best to assist the court during her evidence, her evidence taken as a whole with the other evidence available on this issue (Mr Okan and Mr Freshwater), did not advance the ultimate submission made by the 1st plaintiff on this point.
[29] For example, Ms Riek's concession during cross examination that the creation of the statement commencing at Ex 1 page 180, by reference to the period to which it referred was therefore subsequent to the creation of the statement commencing at Ex 1 page 185, did little to assist the plaintiff's case. Nor am I persuaded in any event that even if I accept that Ms Riek did create documents for the sole purpose of sending them on to an landlord, whether that be on the 24/6/13, 29/6/13 or the 01/7/13, that this in some way therefore supports a conclusion or even a reasonable inference being drawn that the statement that was said to be annexed to the s124 notice (found at Ex 1 pages 20.1 and 20.2, which is identical to the statement found in Ex 1 at page 188 and 189) was not in fact the same document that was in fact sent as part of the notice which was dated 7th of June 2013. As Mr Freshwater and indeed Ms Riek both conceded, there were other staff who had access to the office computer system and any of those staff could have accessed it to provide such a statement to an owner (landlord) if requested during June to July 2013.
[30] It was submitted by the 1st plaintiff that the various statements sent by Ms Riek to Mr Okan, particularly the one on the 1st July 2013 (Ex 1 pages 188 and 189 which is in fact identical to the one said to have been attached to the s124 Notice sent on the 4th June 2013) could have only been created at that time by her and therefore Mr Okan could not have therefore sent it on the 4th of June 2013, as he stated in his evidence. If that submission were to be accepted as true, then one would have expected that Ms Riek would have been able to remember why that statement (Ex 1 pages 188 and 189) or even indeed the one she says she sent on the 29th June 2013 (Ex 1 page 185 and 186) which the 1st plaintiff said she must have only created on either of those days, had a different tenant address changed on it, had the name of the owner indented on it and the 'm' removed from the word 'from' to that statement which she says she had earlier sent on the 24th June 2013 (Ex 1 pages 180, 182 and 183). Her evidence was that she had no idea how that had happened nor could she explain those differences (T4-21).
[31] A careful examination of the chronology set out above shows that a statement was sent to Mr Okan by Ms Riek on the 29th of June 2013 as a result of a request by him on the 20th of June 2013 (apparently to Chad Freshwater who couldn't specifically remember) in order that he could be sent a copy of the tenant's statement up to the 4th of June 2013. Mr Okan said that he had made such a request (Ex 1 page 177 which is the same as Ex 1 pages 157, 158) (T6-115) in order to see if the 1st plaintiff had in fact made any more payments and to see if his s124 notice had been remedied as he had not heard back from Mrs Royal regarding his query to her on the 18th June 2013 (Ex 2 page 31) as to whether any further payments had been made towards the rent in arrears. I accept that evidence. It must be remembered that by then that Mr Okan had said he had already sent a s124 notice on the 4th of June 2013. It was therefore not surprising then that a landlord would be following up whether payment had been made or not by the 20th of June 2013 in respect of it. As Mr Okan pointed out, he wasn't the one who prepared or sent out the invoices or statements to the tenant; Richardson and Wrench were responsible for doing that. He also stated, which I accept as true, that he wanted to make sure that everything had been done correctly this time because of the problems that had occurred the last time a s124 notice had been sent to the 1st plaintiff in August 2012. Mrs Royal gave evidence and it was not disputed at trial, that calculation errors had occurred in relation to the earlier s124 notice sent in August 2012 in respect of rentals and outgoings actually owing.
[32] It is also significant in my mind regarding the correspondence sent by Ms Riek to Mr Okan on the 29th of June 2013, and indeed on the 1st of July 2013, that by the time the 1st defendant had already re-entered and taken possession of the demised premises on the 25th June 2013, they had already received correspondence from the 1st plaintiff's solicitors (dated the 19th June 2013) indicating that unless a rent reduction was given it would have to 'close up shop' (my words) and declare bankruptcy. They had also received correspondence by e-mail dated 27th of June 2013 (Ex 2 page 46) from the 1st plaintiff's solicitors asserting that the rent and outgoings outstanding as at the date of 'termination' (being the 25th of June 2013) was in fact wrong and should have only been calculated at $28,274.95 and not at what had been claimed to be outstanding, namely $33216.17 in the s124 notice sent on the 4th of June 2013. Accordingly I find, having regard to the whole of the available evidence, that Mr Okan was seeking certain documentation from Richardson and Wrench after the 25th of June 2013 in view of the said correspondence from the 1st plaintiff's solicitors to which I have just referred. As such, I find that his requests therefore for certain statements from Richardson and Wrench from late June and early July 2013, under those circumstances, does not support a conclusion or a reasonable inference being drawn that he was only seeking those statements at that time from the real estate agency because he did not in fact have a statement sent to him by that agency on the 4th of June 2013. This was a fact which he denied and I have no reason to reject.
[33] The 1st plaintiff says the evidence of Ms Riek to the effect that she sent to Mr Okan on the 24th June 2013 the statement which appears at Ex 1 page 180 to 182, came directly from the Console Program and could not be edited in that form overlooks the fact that Ms Riek admitted that that was the current statement at that time up to the 24th of June 2013. The fact that the statement or any other tenant statement may only be 'edited' if transferred to excel or word is also of little moment particularly where Ms Riek admits that another staff member (confirmed by Mr Freshwater, the principal of Richardson and Wrench) could have access to the Console program and have sent a tenant statement to any owner at any given time, and as Mr Freshwater indicated, can change an address of a tenant within that Console program (T7-76).
[34] The 1st plaintiff also says that the version of the statement sent to Mr Okan on the 1st of July 2013 (Ex 1 page 188) was only ever created by Ms Riek on that date. Ms Riek certainly did not say that in her evidence when regard is had to her evidence as a whole. She also stated that when she looked through other documents in her possession at a point much later to see if she had ever sent a statement on the 4th of June 2013 for that tenant to the landlord, she conceded she hadn't in fact looked for that specifically (T4-14). As I already stated in my reasons, had Ms Riek only ever created the statement (Ex 1 page 188) on the 1st of July 2013 as the 1st plaintiff says, then one would have expected that she would have been able to account for the any differences in the format, tenant address and the like from the other statement she said she took directly from the Console Program on the 24th of June 2013 that day (Ex 1 pages 180 - 182).
[35] The 1st plaintiff also submits on this issue that the fact that Mr Okan cannot now produce any relevant electronic copy of the s124 document he created at home, that the statement attached to it had no fax markings on it, and no e-mails were found by Richardson and Wrench relating to any request for such a statement on the 4th of June 2013 by Mr Okan or one having been sent to him by that means supports a conclusion or a reasonable inference being drawn that the s124 notice with its attached tenant statement up to 4th June 2013 was not in fact created until at least 1 July 2013. I am unable to accept that submission.
[36] As I have already set out in my reasons, I accept Mr Okan' s evidence insofar as the creation of the said s124 notice at home and the evidence which he gave which was that he had received a tenant statement up to the 4th of June 2013 from Richardson and Wrench on that date. Mr Okan said that he had in fact used the previous Notice to Remedy Breach document sent to him in August 2012 after it had been given to the 1st plaintiff by his solicitors. That document at Ex 2 pages 15 - 20 includes a reference (at page 16) to an attached invoice from Richardson and Wrench for the amount outstanding (at page 18). I find that it is clear on the face of the earlier notice which he used, that such an invoice was attached and as such I find that he did seek a statement from Richardson and Wrench on the 4th June 2013 in order that he could then send it with the s124 notice that he was preparing himself at that time.
[37] There was in any event other evidence on this issue by Mr Freshwater. He confirmed in his evidence that all of his staff at Richardson and Wrench during June and July 2013 could have accessed 'Console', the computer program which was used to issue tenant statements. He also specifically recalled that Matt also worked at Richardson and Wrench at that time. That evidence confirms in my mind the evidence which Mr Okan gave regarding having obtained a tenant statement up to the 4th of June 2013 from Matt or Chad at that time in order for him to prepare his Notice to Remedy Breach dated 7th June 2013. I also accept Mr Freshwater's evidence which was that at no stage did he tell someone in his office to change the address of the tenant as it appeared on the statement up to the 24th June 2013 (Ex 1 pages 185) which showed 29 Gecko Place. The 1st plaintiff says that because no documents were produced by Richardson and Wrench regarding any e-mail trail on the 4th of June 2013 attaching any statement sent to Mr Okan that day, or that Mr Okan has no produced any such e-mail (or fax) himself for that day or another day that he thought he may have communicated with Ms Riek on the 29th or 30th of June 2013 (T7-9 and 7-10) that these failures support a conclusion or a reasonable inference being drawn that he did not in fact have any statement up to the 4th June 2013 ever sent to him on that day by any staff member at Richardson and Wrench and had only in fact received such a statement on the 1st July 2013 from Ms Riek. For the reasons which I have already stated, having regard to the whole of the available evidence on this point, I do not accept that submission.
[38] Finally, as a matter of completion I shall refer to the document created on the 26th of November 2014 (commencing at page 247 but specifically page 263). The fact that there are entries contained in that document for entries after the 4th of June 2013 in my mind does little more than to demonstrate that if those payments were received on the 11th and 12th June 2013 from the tenant, they would have then entered into that tenant's rental and outgoings statements as a consequence of receipt of those amounts after the 4th of June 2013. That is precisely what Ms Riek confirmed and what she said could not be edited under the Console program, namely the actual receipt of payments received which had been entered into the Console program in respect of a tenant statement.
[39] Accordingly, I find that notwithstanding Mr and Mrs Royal's evidence at trial to the effect that they never saw or in fact received such a document, I am satisfied that the said notice was in fact sent by Mr Okan on the 4th June 2013 addressed to 1 Sandheath Place, Sandstone Point, Qld 4511.
[40] However, that is not the end of the matter. As I have already indicated, the process for sending notices by either a landlord or a tenant under the subject lease appears to be set out in clause 19.1. There is however another provision in the lease regarding Notices and Servicing Notices (Clause 24). That seems however of no consequence as it specifically relates to Notices required to be given under the lease and not as required here in accordance with the PLA.
Was the s124 Notice properly served even if it was sent?
[41] The initial Notice to Remedy Breach of Covenant (Ex 2, pages 15 and 16) delivered by the 1st defendant's solicitors on the 8th August 2012, was accepted by the 1st plaintiff 'by delivery' as service even though it was addressed to the address where the business was in fact operating from (1102-1108 Bribie Island Rd, Ningi, Qld) which is not the address for service in Item 7. The method of service in respect of that notice was not given in accordance with Item 7 and Clause 19.1 yet it was nevertheless accepted by the 1st plaintiff as being compliant because according to Mrs Royal, the 'breach' in respect of which that notice was given was paid in full.
[42] I turn now to the s124 notice under dispute. Mr Okan admits that he did not send the letter containing the said notice by certified mail. The 1st plaintiff says that is fatal as there has been no proper service of that notice upon the 1st plaintiff as required under Clause 19.1. It says that the 1st defendant has therefore not compiled with what was actually required under the terms of the subject lease with respect to notices. The 1st plaintiff says that coupled with the fact that Mr and Mrs Royal gave evidence that they never received any s124 notice even if it was sent, then the taking of the possession of the demised premises on the 25th June 2013 was a wrongful repudiation of the lease and the 1st plaintiff is therefore entitled to damages. The 1st plaintiff has substantially relied on the fact that no s124 notice was ever sent or received by the 1st plaintiff prior to re-entry. There is judicial suggestion however that a breach of s124 PLA in itself does not mean that the lessors had repudiated the lease.[2] As Judge McGill observed in Hsu, repudiation depends on what has been made manifest to the other party by words and actions.[3]
[43] The 1st defendant on the other hand says that even though its' primary submission is that nothing turns on this point in that it was not required to serve a s124 notice in any event, it says that the said notice was in fact sent, that it was properly served and received by the 1st plaintiff.
[44] The 1st defendant relies on the decision of Justice Philippides in Grayprop Ptd Ltd v Maharaj International Pty Ltd ('Grayprop')[4] to show that certified mail no longer existed in Australia Post from as early as 2001. As such, the 1st defendant says that regard should therefore be had to s347(1)(d) PLA for assistance which allows for service on a company by usual pre-paid post. The 1st defendant says that having regard to that provision and s39A of the Acts Interpretation Act 1954 (Qld) ('AIA'), the service of the said s124 notice was therefore compliant with the terms of the lease, Clause 19.1 and Item 7, as it was consistent with those Acts. Put another way, the 1st defendant says that even though the s124 notice was sent by ordinary post it was nevertheless validly served at the address for notices consistent with the Item 7 and Clause 19.1 of the lease, as it was sent to 1 Sandheath Place, Sandstone Point QLD 4511.
[45] It seems clear on the face of the lease that the parties intended that notices including s124 notices, required them to be served by a method of delivery which was something more than ordinary post. Otherwise, the insertion in Clause 19.1 would not have included a specific reference to 'certified mail' as a method of delivery if ordinary post was meant to be the method for delivery. The 1st defendant relies on the provisions of the PLA (s347) and AIA (s39A) stating that 'registered post' is only required for a 'person' and not a 'corporation'. However, s347(1)(d) PLA says that in the case of a corporation, service of notice by ordinary post is effected by addressing it either at its registered office or principal place of business in the State. Ex 2 page 81, which is an ASIC and Business Names search conducted on 12th August 2013 for the 1st plaintiff, shows the current principal place of business as 29 Gecko Place, Ningi, Qld. Accepting for the moment the finding which I have already made that no proper notice of any change of address was given by the 1st plaintiff in accordance with Clause 91.1 and Item 7, it is arguable that the principal place of business at the relevant time was therefore 1 Sandheath Place, Sandstone Point at the time the s124 Notice was sent by Mr Okan. That would also be consistent with the address as stated in Item 7. However that is not the end of the matter.
[46] As I already stated, the s124 notice here was sent to that address (even in the event that it is accepted that the principal place of business address at the time that notice was sent was consistent with the address stated at Item 7 of the lease) only by ordinary post. That however was not what the parties' intended in respect of Clause 19.1 in that such notices were agreed to be delivered by a means other than just by ordinary post. Section 347(6) of the PLA also says that s347 of the PLA only applies 'unless a contrary method of service of a notice is provided in the instrument or agreement or by this Act'.
[47] I have given judicial notice to the decision of Grayprop where it was recognised that certified mail was an obsolete method of delivery even at the time the parties in the present case entered into the lease in 2011.[5] However, I am nevertheless of the view that the parties intentions regarding Clause 19.1 was that any notices that were to be given was to be something more than just simply posting it by ordinary post, which is what unfortunately happened here.
[48] Accordingly, I accept the submission made by the 1st plaintiff that even if it was found that a s124 Notice was in fact sent, that it still did not comply with Clause 19.1 of the lease, in accordance with what was the parties' clear intentions were as the method of giving such notices. I should indicate for the purpose of this issue I also had regard to s109X of the Corporations Act 2011 (Cth) (Service of Documents - Service on a company by post to be made to the company's registered address). No such service was effected here.
[49] It is however still necessary for me to deal with the evidence given regarding Mr and Mr Royal and their respective denial regarding any receipt of that notice as this is relevant to explain the findings which I have made as to credit of witnesses.
[50] Mr and Mrs Royal both gave evidence that after they left the Sandheath Place address in late 2012, arrangements were made for their mail to be delivered to their new address at 29 Gecko Place, Ningi. Those arrangements included having their mail delivered to their new address which apparently wasn't that far away. Both Mr and Mrs Royal confirmed that their mail from Sandheath Place continued to be delivered to them by the tenant in residence, or as stated by Mr Royal, the Royals would sometimes collect their mail themselves (Mr Royal 3-48 and T3-61 L25 Mrs Royal). There was no suggestion that this 'arrangement' had failed in the past or that any of their mail had gone 'astray' in the past under this arrangement. As such, having found that I am satisfied that the notice dated the 7th of June 2013 was in fact sent on the 4th of June 2013 to that address, I find that it would have more likely than not have come to their attention notwithstanding that they had in fact moved in December 2012 to 29 Gecko Place, Ningi.
[51] In other words, I do not accept Mr and Mrs Royal's denial regarding any receipt of that notice. I find that the notice dated the 7th June 2013 posted to the Sandheath Place address would have found its' way to that address within the normal delivery time (deemed in any event under clause 19.2 to be received if posted on the 3rd day after posting). I find this particularly so having regard to the arrangement that was put in place by them regarding delivery of mail to them at their new address.
[52] I shall now refer to the other evidence available which I have considered which persuades me of this fact. Mr and Mrs Royal both gave evidence that during their eviction on the 25th of June 2013, they both independently informed their solicitor (Mr Stibbe) by phone that they had not ever received such a notice (i.e. s124 notice). Mrs Royal confirmed that she would have most certainly have rung up her solicitor had she received one between seeing him on the 6th June 2013 and being evicted on the 25th June 2013 (T4-49). The evidence available shows and supports a conclusion that had Mr Stibbe been informed of such, as stated by Mr and Mrs Royal by phone on the 25th June 2013, then his subsequent correspondence to the 1st defendant would have stated as much (Ex 2 page 46, Ex 1 page 363). Indeed that first letter states that even Mr and Mrs Royal considered the 'matter would come to an end' once the bond monies they requested were refunded to them and their equipment and stock as then listed was subsequently returned to them.
[53] It is significant in my mind that that correspondence makes no reference whatsoever of any alleged failure on the 1st defendant's part to serve a s124 notice particularly in circumstances where Mrs Royal gave evidence that after she told Mr Stibbe by phone on the 25th of June 2013 that they had never received a s124 notice prior to the day of their eviction, that he (Mr Stibbe) then stated that (in her words) 'they would tackle it later' (T4-50). Nor was there any mention of any alleged failure to serve a s124 notice in the second correspondence. When observing Mrs Royal give her evidence in respect of this letter (T4-52), I sadly formed the view that she was being deliberatively evasive in answering the questions that were posed. That is even after making allowances for the fact that the witness was being subjected to cross examination at that point about matters that had occurred a long time beforehand.
[54] Secondly, it is also significant that at no stage thereafter, at a time when it would be expected particularly having regard to the fact that Mr Stibbe is an experienced commercial solicitor, was an application for relief from forfeiture[6] made to the court. If in fact the plaintiffs were intending to continue operating the car wash business in the future as they both stated, and having not received a s124 notice as required under the lease before their 'eviction' because of their failure to simply pay rent and outgoings on time, then it is curious that no such application was ever made in that regard. There was certainly opportunity for them to do so even notwithstanding they had been ejected from the premises on the 25th of June 2013. It was not contested that the landlord had attempted to run the business itself from that time up until the time that a new tenant was acquired on the 1st of November 2013. There was also the fact that the 1st defendant commenced operating the carwash business the next day which in itself is no impediment upon the 1st plaintiff seeking that relief. In other words, they could have simply returned to the premises and recommenced trading if such relief was subsequently granted as no other new tenant came into those premises under a lease until the 1st of November 2013. Accordingly, I reject Mr and Mrs Royal's denials that they never in fact received the s124 notice sent by Mr Okan to them on the 4th of June 2013. It is nevertheless of little consequence now. Mr Royal, being the sole director of the 1st plaintiff, admits in any event to having seen that notice after it was sent to him by his solicitors about 8 weeks after his eviction.
[55] Notwithstanding that fact, I am satisfied, to the requisite standard required, that Mr and Mrs Royal did in fact receive the said s124 notice sent on the 4th of June 2013 shortly thereafter. Put another way, I reject their respective denials on this issue.
Was the notice in any event 'deficient as alleged in the pleadings by the 1__st plaintiff?
[56] This was contended for by the 1st plaintiff in its pleadings and again, in submissions.
[57] It is clear that the notice in question is in accordance with the correct form to be used (PLA, Form 7). It is also clear that it contains the necessary 'Additional Note' at the bottom of that notice, the absence of which can prove fatal.[7] The 1st plaintiff pleads that because the notice refers to the wrong property description (namely its survey plan number being 239574 instead of 239514), the wrong amount regarding its claim, as well as its failure to make clear the nature of the amounts owing/and or over what periods those amounts relate then the notice is 'ineffective' or put another way, is invalid.
[58] Section 124(1) PLA requires that the notice specify the particular breach or breaches complained of in order that the lessee can remedy those breaches. It is trite to say that a notice is not invalid in every case where it complains of a default which does not exist or which has been remedied, or where it demands an excessive sum.[8] As noted by McMurdo J in that summary, it will be a question of fact and degree involved in each case and the most relevant factors determining validity will be the extent of the error and the capacity of the notice to give the mortgagor (or lessee as is the case here) a reasonable opportunity to do what he is obliged to do to remedy the breach.
[59] Having regard to the notice involved in the case before me, it cannot be said that the lessees in any way would have been misled regarding any misstatement of the Survey Plan number having regard to the description given of the property in its entirety. Nor can it be said that the 1st plaintiff would not have understood what amount was owing or over what period in view of the annexure to that notice. Nor can it be said that there is a great deal of difference in any event between the amount claimed of $33,216.17 and the amount which the 1st plaintiff says (which is denied) was in fact owing (namely $28,274.95 as at the 4th June 2013). Put another way, even if it was accepted that the document erroneously calculated the outstanding rent and outgoings up to the 4th of June 2013, it was not in my mind so substantial as to invalidate the notice. I also note in respect of this last point, that the Amended Statement of Claim filed on the 23rd June 2013 (Court Document 38) at paragraph 9(a) accepted, in any event, that the 1st defendant was entitled to an amount of $33216.17 to be retained. This was the exact same amount which the 1st plaintiff so alleges to be in error on the said notice when it was issued on the 7th of June 2013. Mr Freshwater, the principal at Richardson and Wrench, which was the property managers at the time, also considered that the statement annexed to the said notice up to the 4th of June 2013 (Ex 1 page 20.1 and 20.2) was correct (T7-71). Having regard to the notice and in particular it's annexure, I am not persuaded that it was deficient as alleged. Accordingly, I find the notice compiled with s124 of the PLA in this regard.
[60] I shall now deal with the issue regarding the actual eviction and the s132 PLA notice served, as these matters are relevant as it relates to my assessment of the credibility of witnesses.
[61] In its' second further amended Reply and Answer, at paragraph 2(e), the 1st plaintiff asserts that they were not served with a s 132 PLA notice on that day that the document entitled 'eviction'. This is because it is argued that the s132 notice was shown to the plaintiffs and was then simply placed on the desk in the office of the demised premises, and that they were then evicted without being provided with, or permitted to take, a copy of that document. The 1st plaintiff also contends that a document which was subsequently produced referred in any event to the wrong survey plan number. While the 1st plaintiff did not seriously contend at trial in respect of these allegations I do intend to deal with this issue in any event as it is relevant insofar as my findings as it relates to credit.
[62] The evidence given by Mr and Mrs Royal on this issue did not support those pleadings. According to Mrs Royal, Claude Zarafa had a 'notice' (at least she thought it was), but that he threw it on the desk and she simply chose not to pick it up. She described that document as being folded in three and being just white on the outside so she didn't read it. Notwithstanding the opportunity to do so, I find that Mrs Royal simply chose herself not to read the document which had been placed on the desk in front of her. On her own admission, she certainly had time to do so. She admitted that she had been given time to pack some things up, get into an argument with Mr Zarafa over his right to evict them and indeed call her solicitor on the phone, Mr Stibbe (T3-65). I therefore find it incredulous that Mrs Royal would not have picked up that document and read it especially when she knew she was being evicted immediately from the demised premises, had not according to her received any s124 notice and particularly when she had gotten onto the phone to her solicitor during the course of that ordeal. Accordingly, I reject the evidence of Mrs Royal on this issue. Sadly, her evidence especially on this issue caused me real concern regarding her veracity for truth as a witness as a whole. According to Mrs Royal, she did not consider she had actually received the s132 notice as "she did not pick it up and she did not take it so therefore she did not receive it" (T4-53 L30).
[63] The evidence from Mr Royal was also unsatisfactory on this point. According to Mr Royal, Mr Zarafa actually told him that the bit of paper he placed on the office desk in front of Mr Royal was their 'eviction notice'. He also admitted that he didn't take much notice of that paper because he had then gotten into a 'to and froing about it with him' (T2-44 L43). He also conceded under cross examination that Mr Zarafa did nothing to stop him from reading it, yet he had stated in an earlier police statement that he had tried to read the document as he packed up some things, but that he didn't get a chance as Mr Zarafa was in the office watching him and his wife at all times (T2-99). That evidence taken as a whole in my mind persuades me that Mr Royal was also being selective in his memory of the events of the 25th of June 2013 and was not being entirely truthful. I again find it incredulous that Mr Royal, with the past business experience he had, would simply choose not to read a document which had just been stated to him to be an eviction notice which was then placed in front of him on the desk. This is my finding even making allowances for any 'upset' that may well have arisen as a consequence of any 'eviction' taking place. That evidence to which I have just referred, when taken as a whole, also in my mind persuades me that Mr Royal like Mrs Royal, was not being entirely truthful.
[64] Accordingly, I find that Mr and Mrs Royal were both given the opportunity to read the document provided to them and placed on the desk in front of them on the 25th of June 2013 by Mr Zarafa. I find that the document contained in Ex 1 page 51 was in fact the document which was given to them to read, but that they both simply, in the heat of the moment, chose not to look at it. I find nevertheless that it was properly served even in those circumstances. I also find that it was compliant with s 132 PLA. The misdescription of the survey plan number as already indicated is not enough to invalidate the notice.
[65] I shall also now take the opportunity to talk about my general assessment of the respective witnesses, Mr Zarafa and Mr and Mrs Royal. I find Mr Zarafa to have been a truthful witness insofar as his recollection on the said eviction (T7-37). I find that the document which he says he placed on the desk of the office after it was flicked out of his hand by Mr Royal was in fact the s132 notice which had been signed by him. I have no reason to reject Mr Zarafa when he told the court that he wanted no trouble and that any dispute regarding property and the like could be left to the solicitors to 'sort out'. That evidence is supported by other available evidence which shows that in fact the solicitors did subsequently engage in correspondence with each other regarding that point.
[66] I also accept Mr Zarafa's evidence when he said that he arranged for someone to come the next day to 'run' the business as he lived over an hour and a half away (Paradise Point) and he was running his own business at the time and he simply would not be able to do it. That is consistent with his evidence which was that he rarely attended at the carwash between that time and end of July 2013 other than to drop in periodically.
[67] Mr Freshwater also gave some evidence on this issue. He recalled the 'heated' nature of the eviction which he considered to be quite normal in the circumstances. He specifically did not hear Mr or Mrs Royal indicating that they told Mr Zarafa that he couldn't evict them because they had not been breached or that they told him that they hadn't in fact ever received a Notice to Remedy Breach as required (T7-71 and again at T7-84). He specifically did not recall Mr Zarafa saying to Mr and Mrs Royal that 'they haven't remedied the default from the last year' (T7-85) or that Mr Zarafa said' don't fight this, or our lawyers will suck you dry' (T7-85). The evidence to which I have just referred is consistent with Mr Zarafa's evidence on that point, which I accept where it conflicts with Mr and Mrs Royal's memory of the events surrounding their' eviction'.
[68] Having carefully watched Mr and Mrs Royal give their evidence to the court, I find that while Mr and Mrs Royal both believed that their business could be 'saved' as an ongoing concern if a rent reduction could have been formally arranged with the landlord over the course of the lease, I did not find either of them to necessarily to be witnesses worthy of belief overall. In addition to the findings which I have already made regarding their lack of veracity for truth, especially with respect to any alleged failed receipt of the relevant notices in issue (s124 and s132 PLA notices), I have also had particular regard to the evidence which they both gave regarding the signing of the guarantee by them under the lease. Notwithstanding that an amended pleading by the 1st plaintiff (doc 53 paragraph 16) was subsequently abandoned (such amendment being made after an initial denial in respect of the signing of the guarantee under the subject lease was been given on oath by Mr Royal; see T1 -16), Mr Royal still nevertheless maintained during the course of his evidence to the effect that it was only now that he realised that he had signed the guarantee attached to the subject lease. He also maintained, even under cross examination, that he had made his initial denial in respect of his signing of it on oath because he had thought that he had only signed as guarantor under an agreement to lease (T2-41 and T3-29).
[69] Mrs Royal also maintained during her evidence that she had also believed they had only ever signed an agreement to lease as guarantors in relation to the subject premises (T4-66) and in fact could not even remember signing as guarantor the subject lease (T4-67). Even after making allowances for the passage of time, I find that evidence not only difficult to accept but also not worthy of belief at all, especially in circumstances where not only was Mr Royal the director of the 1st plaintiff company who had signed the lease on behalf of the 1st plaintiff but also having particular regard to his business background and experience at that time. In respect of Mrs Royal, I find her evidence on this issue also hard to accept. Mrs Royal was actively involved in the starting up and day-to-day operation of the business. I find it therefore difficult to accept that she didn't even realise that she was signing as a guarantor under the subject lease. I therefore reject the submission made on behalf of the plaintiffs that they were simply mistaken and honest when each stated that they thought they had only signed an agreement to lease as guarantors. As such, the evidence to which I have just referred did little to enhance my overall view of Mr and Mrs Royal as credible witnesses.
[70] There was further evidence that also gave me reason for concern. Mr Royal's evidence regarding whether or not the 1st plaintiff had ever received an original of the subject lease (as put through instructions through his counsel to the court (T3-31) on Day 1 of this proceedings are inconsistent with the letter now marked Ex 4. Mr Royal's further explanation when asked about that letter (T3-31 L35) that 'he didn't think that the plaintiffs had received an original copy' (T3-33 L29) is rejected and indeed, not worthy of belief as it was in fact incorrect.
Was there a common law right to terminate the lease without a s124 notice being given in any event?
[71] It is conceded on the pleadings and was conceded as such at trial that the 1st plaintiff did in fact owe the 1st defendant outstanding rent and outgoings as at the 4th of June 2013. The first defendant has remained in default since that eviction on the 25th of June 2013. Even on the 1st plaintiff's own case, the amount said to be owing at that point was $28,274.95. The 1st plaintiff says that if it found that the s124 notice has not been properly served then, the 1st defendant was not entitled under the terms of the lease to re-enter and take repossession of the demised premises on the 25th of June 2013 (in accordance with clause 17.2) without first giving the requisite notice required. However, that is not the end of the matter.
[72] It is trite to say that a lease is simply a contract and, subject to its terms, may be terminated on the same basis as any other contract.[9]
[73] The ways in which that may occur are by the acceptance of a tenant's repudiation by a landlord; as a result of a breach of an essential or fundamental term of the lease; or under a right actually stated in that lease.[10]
[75] Such a common law right arises concurrently to any right to terminate contained in a lease provided there is no express provision to the contrary contained in the subject lease excluding such a common law right. A perusal of the subject lease does not contain any such express provision.
[76] However it has been recognised that there could be a difference between conduct constituting repudiation of a lease and a breach of an essential term of it; the latter of which would usually require a Notice to Remedy Breach to be given prior to exercising the contractual right of re-entry under the lease.[13] That is because breach of such an obligation, particularly where it is expressly deemed to be essential in the lease, may not necessarily manifest an unwillingness or inability to render substantial performance of the.[14] There are others cases which lend support to that proposition.[15] In World Best Holdings Ltd v Sarker, the court held a notice to remedy breach was required to be given to the defaulting lessee prior to re-entry even in the case of breach of an essential term falling short of repudiation of the lease.[16] Again in CMA Recycling Victoria Pty Ltd v Doubt Free Investments Pty Ltd this was a case where another lessor who had failed to serve a Notice to Remedy Breach before re-entry was held required to do so although the breach relied upon was agreed by the lease to be breach of an essential term.[17] It has however nevertheless been recognised that where there is a breach of an essential or fundamental term of the lease so substantial by a tenant that may well entitle a landlord under a common law right to bring the lease to an end, particularly where it can be said that that breach went to the 'root' of the contract, and that commercially it could not be performed and that the other party has been deprived of substantially the whole benefit of the contract.[18] That principle was recognised again in Tourello Nominees Pty Ltd & Wilbow Pty Ltd v Begg Dow Priday Pty Ltd where it was pointed out that "whether repudiation is by unwillingness or inability to perform, the question is what objectively has been indicated to the other party in the circumstances by the conduct of the party alleged to have repudiated".[19] This principle was recognised again in Apriaden.[20] In Marshall v Council of the Shire of Snowy River,[21] the lessor failed to serve the notice required by s129 of the Conveyancing Act 1990 (NSW) before purporting to terminate the lease. Meagher JA considered the effect of the lessor's failure to serve the statutory notice and concluded that where the lessor had relied upon an application of ordinary principles of contract law to terminate for breach then s129 became an irrelevance.[22]
[77] As already recognised, a landlord may terminate a lease in exercise of a common law right to do so for repudiation by a tenant without notice. In order for there to be repudiation of a lease however, as noted in the authorities, "a contract may be repudiated if one party renounces his liabilities under it - if he evinces an intention to longer be to be bound by the contract or shows that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way".[23]
[78] It is trite to say that if repudiation is to be gleaned from conduct of the lessee alone, that conduct must be examined to determine whether or not is in fact repudiatory. As demonstrated by the cases already referred to, a breach of an essential term in some circumstances was found not to be enough. Further authorities are also of assistance.
[79] In Shevill's case,[24] it was determined that simply falling into arrears, even persistently while still nevertheless attempting to pay rent arrears, did not amount to repudiation by the tenant.[25] It is also recognised that courts will generally not lightly find repudiation by a tenant, and will only do so in a rare case where actions short of abandonment amount to repudiation.[26] However as evident from all of those authorities to which I have just referred, if a party to a lease repudiates the lease or substantially breaches an essential or fundamental term which amounts to a repudiation, then, the other party is entitled to accept that repudiation and bring the lease to an end.
[80] In this case, the 1st defendant says that it had a common law right in any event to terminate the lease notwithstanding that a mechanism also existed under the terms of the lease itself, to re-enter and forfeit the lease (Clause 17.2) for any failure to remedy any breach of covenants within a reasonable time.
[81] In support of its primary submission, the 1st defendant refers to the persistent requests by the 1st plaintiff to obtain a rent reduction over the course of the lease commencing from November 2011. The 1st defendant refers to the various communications from Mr and Mrs Royal to the landlord seeking a rent reduction, confirmed by Mr Okan in his evidence (T6-61 to 6-66), which he said was a recurring theme. Mr Okan also gave evidence that in August 2012 Mr Royal had again asked for a rent reduction and Mr Okan refused Mr Royal by words to the effect that "he didn't care, I dare you to bankrupt me" (T6-72). That conversation, Mr Okan said, was the catalyst as to why he then initially instructed Richardson and Wrench to issue a Notice to Remedy Breach on the 1st occasion in August 2012 (T6-73). Mr Okan was also referred to Ex 2 page 44 (letter from Files Stibbe Lawyers dated 19th June 2013). Mr Okan gave evidence that upon receiving that letter he understood it to mean that they (the plaintiffs) had had enough and that was it, that they were going bankrupt, as the letter said (as he understood it). In effect Mr Okan said that they were doing what they had basically been threatening to do over the last two years (T6-78). Mr Okan then said he sought legal advice, prepared the s132 notice and sent it to Mr Zarafa. As no further rent had come in he requested Mr Zarafa to serve that notice on behalf of the 1st defendant (T6-80).
[82] The 1st defendant also referred to the longstanding failure to pay rent and outgoings, which began in late 2011 but becoming persistent from mid-2012 and thereafter. There were ample e-mails (Ex 2, page 5 - 31) exchanged between the 1st plaintiff (by Mr and Mrs Royal) and with the 1st defendant (through Mr Okan) that in my mind confirms that the 1st plaintiff had been in continual breach of its obligations from June 2012 to the time of the re-entry a year later, in June 2013. Even Mrs Royal admitted that the 2013 arrears of rent and outgoings was a 'constant conversation' she had with Mr Okan (T4-30). Those e-mails also in my mind confirm that the 1st plaintiff was indicating to the 1st defendant as early as March 2012 that it was unable to perform its obligations to pay rent in accordance with what was required of it under the terms of the lease.
[83] The lease provides in its terms that the tenant shall pay to the landlord the rent by equal monthly instalments in advance on the first day of each month throughout the term (Clause 2.1). It also agreed to pay outgoings for each accounting period. Clause 5.6 of the lease states that time is of the essence in connection with the tenant's obligations to pay money. It is trite to say that that clause can be viewed as an 'essential' term of the lease.
[84] I accept the submission made that the lease terms which I have just referred are essential or fundamental terms of the subject lease and go to the 'root' of the lease. However, as I have already noted, simply showing a breach of such a term (such as a failure to pay rent even over a number of months) may not be sufficient to justify termination even under common law.[27] It is open on the evidence to find that the 1st plaintiff had been attempting to meet its' obligations even though it has to be said that only some payments were sporadically being made. It nevertheless was not meeting the actual payment obligations as required under the lease and had not done so for quite a period of time prior to the eviction on the 25th June 2013. There was other evidence which the 1st defendant relies upon which in my mind cannot be ignored when considering this point. That was the correspondence sent by Files Stibbe on 19th June 2013 to the 1st defendant. The 1st defendant says that that letter clearly evinces an intention by the 1st plaintiff to no longer be bound by the lease, or have any intention to fulfil it only in a manner substantially inconsistent with its obligation and not in any other way. As already stated, courts do not readily make a finding of repudiation.[28] Nevertheless, such a finding has been made as already indicated in the authorities referred to.
[85] The letter sent on behalf of the 1st plaintiff dated 19th June 2013 (Ex 2 page 44) confirms the dismal picture of the 1st plaintiff's financial position at that time. Two significant points may be made about that letter. The first is that it is clear on its' face that unless a rent reduction was given by the landlord as a matter of urgency at that time, then the 1st plaintiff was indicating that it would no longer continue trading. The second is that without that indulgence being extended to the 1st plaintiff, Mr and Mrs Royal had instructed their solicitor to communicate to the landlord that they would have no option but to close the business and declare bankruptcy.
[86] The evidence given by Mr Royal regarding this letter was that it was only sent as a 'bargaining tool': 'to let them know we were serious because a solicitor had written the letter' (T2-90; T2-96 per Mr Royal) and 'because they knew we had been struggling'. Mrs Royal's evidence on this letter was somewhat similar in that she too thought a formal letter sent by their solicitor regarding a reduction of rent might be considered more favourably (T3-64 L5). There was evidence from both Mr and Mrs Royal that they had in fact had a meeting with Mr Stibbe on the 6th of June 2013. A draft of that letter the subject of the meeting was sent to them the next day and the final letter was sent to the landlord dated 19th of June 2013. The explanation for why it was eventually only sent around that time was because their solicitor, Mr Stibbe, had been away on leave in the intervening period.
[87] The submission made for the 1st plaintiff, is that the letter sent on the 19th of June 2013 was simply a letter proposing a rent reduction, premised on the ongoing nature of the lease. I reject the submission made. It is apparent from the content of that letter that the financial situation of the 1st plaintiff had remained the same as before, that it was struggling to meet its obligations under the lease and unless a rent reduction was given, that it would not, and could not meet those obligations any longer.
[88] Having regard to the continuing and persistent failure to meet its obligations under the lease insofar as the payment of monies coupled with the letter sent on the 19th of June 2013, I find that this was conduct sufficient enough to amount to repudiation. Repudiation is not something which depends on the state of mind of the tenant, it depends on what the tenant has made manifest as to its attitude to the lease, that is to say, what has been communicated to the landlord about the state of mind of the tenant.[29] Coupled with the persistent failure to pay rent and outgoings, the 1st plaintiff did in my mind communicate to the 1st plaintiff that it would not be meeting any of its obligations under the lease anymore unless a rent reduction was negotiated. Even a liberal reading of that correspondence cannot in my mind give rise to a finding that there was any indication by the 1st plaintiff that it would nevertheless continue to pay rent and outgoings as obliged under the lease even in the event that its' demand for a rent reduction was not met. It is accepted that the 1st plaintiff did make some payments towards the arrears outstanding in early June 2013. However, it is also clear from the evidence that no further payments could be made at the point that Mrs Royal communicated to Mr Okan on the 14th of June 2013 that a further payment could not be made at that stage. Indeed Mr Okan's enquiry on the 18th of June 2013 regarding whether any further payments would be made towards the outstanding arrears was not answered. Rather the letter of the 19th of June 2013 was sent to Mr Okan, the contents of which I have already referred. I therefore find that the 1st defendant was entitled to treat that conduct as amounting to repudiation and as a consequence, was therefore entitled to terminate that lease under those circumstances and bring it to an end.
[89] As such, by the 25th of June 2013, the 1st defendant was therefore entitled to lawfully re-enter and take possession of the demised premises, which it did on the 25th of June 2013 as a consequence of the 1st plaintiff's continued substantial breach of the lease and as a result of its last communication in writing to which I have already referred.
[90] I also find that the re-entry by the 1st defendant on the 25th of June 2013 was therefore necessary to take back the demised premises and by doing so, it indicated an unequivocal act by the 1st defendant regarding its' clear intention to bring the lease to an end. That was achieved by physically entering upon the premises and making an unequivocal demand for immediate possession which it in fact did here.[30] There is no evidence to suggest here that at any stage on that day or any day subsequent that the 1st defendant as landlord in any way dealt with the premises in a way other than that the lease had been finally determined by it or put another way, had not been bought to an end.
[91] The evidence shows that the 1st defendant commenced trading itself from the demised premises the next day and did so up until a new tenant commenced business on the 1st of November 2013 under a new lease. There is no evidence to show that the 1st defendant in any way allowed the 1st plaintiff to think that it could return to the said premises to recommence trading again or that it could do so if it offered to meet the outstanding arrears and/or make even future payments regarding rent and outgoings.
[92] Mr Zarafa gave evidence (T7-35) that a couple of days prior to the eviction when he had a meeting with Mrs Royal he felt that she was accepting that the 1st plaintiff could not make the rent payments and that she wanted 'out'; the effect of which he says he then communicated to Mr Okan. Mrs Royal in her evidence (T4-45-46) however denied saying that or ever giving such an impression. It is not necessary for me to reconcile this issue what was the true position as I have already found, having regard to the other available evidence to which I have referred, that the 1st defendant was entitled to take repossession of the demised premises on the 25th June 2013 in any event. It follows then that the 2nd and 3rd plaintiff as guarantors under that lease are also liable for damages.
[93] I find therefore that the 1st defendant was entitled to damages prior to that termination that arose on the 25th June 2013. As such, the 1st defendant was entitled to damages that arose not only prior to the termination but also after that termination in accordance with clause 18 of the lease. It follows that the 1st plaintiff's claim for damages for an alleged wrongful repudiation by the 1st defendant on the 25th June 2013 is dismissed.
[94] It also follows that in light of the findings which I have just made, that no s124 notice was in fact required to be given by the 1st defendant prior to such re-entry. Put another way, I find that the lease was terminated by the acceptance of the 1st plaintiffs 'repudiation' of it notwithstanding the 1st defendants failure to have served a notice under s124 PLA. As such I cannot accept the submission made by the 1st plaintiff which was that such a notice was still nevertheless required irrespective of whether the 1st defendant was acting in accordance with its' common law right to terminate under those circumstances. The 1st plaintiff referred to an authority in support of that submission; Fu-Laihsu & Anor v Graham Retailers Pty Ltd & Ors.[31] The 1st plaintiff also referred to the fact that the authorities which the 1st defendant had referred to his submissions referred to authorities from other states which do not have the same legislation as the applicable Queensland PLA provisions. I cannot accept the submissions made. Firstly, the Queensland case authority referred to simply confirms what is indeed correct; the s124 PLA requirement to give notice before exercising a right of re-entry under a lease cannot be contracted out of. That authority also acknowledged that a tenant's conduct may constitute a breach of a fundamental term of a lease or repudiation;[32] and that repudiation may be established without proof of an effective notice to complete by reference to the relevant case authority in that regard;[33] Further, Wolfe CJDC found that in the case before her for summary judgment, that absent the dealings with the solicitors, the continuing breach of non-payment of rent for four months' rent coupled with a breach of a particular other clause would have supported a finding of repudiation by the lessee.[34]
[95] The submission made by the 1st plaintiff also on this issue regarding no equivalent s124 PLA in other states overlooks the fact that all of the other States in Australia do in fact have similar legislation.[35]
[96] Having found that there was repudiation by the 1st plaintiff of the lease, manifested in its' conduct and having particular regard to the express communication to the lessor dated 19th of June 2013 to the effect that it no longer intended to be bound by the terms of the lease, coupled with the persistent and ongoing breach of an essential term of the lease to pay monies as obliged, it follows that the 1st plaintiff's claim for damages for breach of contract must fail.
[97] I should mention that it was raised during the course of the trial that the 1st plaintiff says that they were 'ambushed' regarding any reliance by the 1st defendant upon any common law right to terminate the lease on the 25th of June 2013. The 1st plaintiff says that the pleadings were deficient and the 1st defendant should not be entitled to succeed on any such basis now. That submission overlooks the following matters. The pleadings (Court document 17 Amended Defence and Counterclaim), while scant, nevertheless says that at the time of entry by the 1st defendant, the 1st plaintiff was in material default of the lease. Secondly, the right to terminate a lease under common law is a concurrent right which exists with any contractual right provided for in that same lease unless expressly provided for to the contrary by the parties. No such exclusion is found in the subject lease. Finally, this issue was addressed during the course of the evidence in any event. Mr and Mrs Royal gave evidence to which I have already referred that they only considered that any letter sent on the 19th of June 2013 by its' solicitors was only a bargaining tool and that neither of them ever intended to walk away from the business after two and a half years. Nothing therefore can turn on the submission now made by the 1st plaintiff in this regard.
[98] In the event that my ultimate finding that the 1st plaintiff's claim for breach of contract against the 1st defendant be dismissed, is found elsewhere to be wrong, I shall deal with whether or not the 1st plaintiff would have been entitled to any damages as alleged in the event that there was a wrongful repudiation of the lease by the 1st defendant on the 25th June 2013.
Loss of Future Income (Amended Statement of Claim para 9(b))
[99] Mr and Mrs Royal and two experts, Mr Ponsonby and Mr Vincent, gave evidence on this issue. Having regard to the whole of the available evidence, I make the following findings.
[100] The business was struggling to meet its obligations under the lease in respect of rent and outgoings as early as late 2011 (Mr Royal T2-65).
[101] The business continued to struggle to meet those obligations even during 2012 which gave rise to a Notice to Remedy Breach of Covenant being served upon it in August 2012. Mr and Mrs Royal both conceded this fact.
[102] The business has traded at a loss for each financial year the lease was on foot. The experts did not dispute this.
[103] There were numerous requests made over the course of the lease to the 1st defendant to reduce the rent in order to assist the business financially in its' continued operation. Mr Royal conceded as much (T2-73) as did Mrs Royal (T4-30). One such request was made as late as the 19th of June 2013 through the 1st plaintiff's solicitors, Files Stibbe (Ex 2 page 44).
[104] It is admitted that the business was in fact trading at a loss as at 25th June 2013 (Second Further Amended Reply and Answer paragraph 4 (a)). That admission is somewhat at odds with the evidence that Mr Royal gave at hearing, where he believed that as at the date, the business had been trading fairly well as it had just come out of a good period, namely the summer period (T2-52). An examination of Schedule 5 attached to Ms Ponsenby's Report (Ex 1 page 122) does not support Mr Royal's evidence in any event as there had been a decline in the average number of cars going through the carwash since September 2012 and thereafter. Mr Royal also thought that the business was running at a profit in May 2013 (T2-55) which clearly it was not.
[105] Ex 2 Doc 62-Doc 68 shows a series of e-mails also seeking a rent reduction. Docs 72 to 82 also show a series of further e-mails. Both Mr and Mrs Royal were taken to those documents during their evidence. Those collective documents, I find, show that the business continued to struggle financially to meet its' ongoing obligations under the lease but was attempting to make payments whenever it could. Some of those documents also show that the bad weather played a significant part in the success or otherwise of the ongoing concern of the car wash business, a fact even both experts agree. Mrs Royal was not prepared however to concede under cross-examination when taken to those documents, that she was indicating that the business was a whole was not a viable one. She gave evidence that she had only been seeking a rent reduction because 'the carwash makes money when the sun shines' (T4-37). Mrs Royal's own evidence in this regard is in fact stated by her again in writing to that effect; that the business was 'only just sustainable if we have continual sunshine' at that time' (Ex 2 page 22 dated 27th February 2013).
[106] I observed that Mrs Royal however was unwilling to accept that even at that time that the weather would play a major role in the future viability of the business, (T4-37) and in fact gave evidence that it was not just the weather but because everything had increased and they were still paying from the wet season that had occurred in December 2012 and January and February 2013. An examination of Exhibit 6 however reveals that there was very little wet weather recorded at all in December 2012 in fact. Even allowing for the passage of time that has since passed, I find Mrs Royal was less than forthright in her answers regarding what she had written in the various e-mails to which she had been referred regarding the future viability of the business.
[107] Significantly, the last of those documents (Ex 2, page 31 dated 18th June 2013) shows that the landlord had asked whether a payment of the arrears had be made. There is no e mail on the available evidence tendered in reply to that query, however the letter written on 19th of June 2013 by the 1st plaintiff's solicitors (Ex 2, page 44) confirms in any event that numerous discussions had been occurring between the parties over a period of time regarding the poor performance of the carwash, that without a rent reduction their business could not continue to operate and would have no option but to go into bankruptcy.
[108] Mr and Mrs Royal's evidence (T2-93, 94) with the respect to their 'actual' intention behind having that letter sent to the 1st defendant (as already stated in these reasons) is rejected. Nor do I accept Mr Royal's assertion that he wasn't intending at all to simply walk away from the business after two and a half years. The letter is clear enough in my mind on its' face as to its' intended meaning to the recipient.
[109] Mrs Royal also gave evidence regarding her view in respect of the outstanding amount of rent and outgoings which she says was owing as at the 4th of June 2013 (the subject of the s124 notice). She gave evidence that after she maintains that document was received by her solicitors in August 2013 she stated that she compared her 'figures' and saw that it was different (T4-39). She later admitted that she didn't actually go through any of the entries individually on that notice at all in order to make a comparison with her books. During re-examination, Mrs Royal was referred to correspondence sent by her solicitor on 27th June 2013 (Ex 2 page 46), however it must be said that the calculation set out in that letter to Mr Stibbe regarding rent and outgoings has been calculated up to 25th June 2013.
The relevance of the 1__st plaintiff's failure to mitigate its' loss
[110] There has in any event a failure by the 1st plaintiff to mitigate its' loss. The most significant factor here is the failure by it to seek relief from forfeiture. This is particularly so in circumstances where the 1st plaintiff's case was that the 1st defendant had wrongfully repudiated the lease by its' actions on the 25th June 2013. This is also so where Mr and Mrs Royal both asserted during their evidence that 'they would not have walked away from that business after two and a half years' (T4-23 Mrs Royal - T2-94 Mr Royal). That does not sit with the evidence to which I have already referred to in these reasons, namely the numerous communications by e-mail and the letter sent by its' solicitors on the 19th June 2013 to the 1st defendant. Nor does it sit well with a failure to seek relief from forfeiture if any alleged breach required to be remedied was simply as a result of falling into arrears in respect of the rent and outgoings. If Mr Royal is to be believed, of which I cannot be satisfied, he even thought that they were trading well enough after the summer period in 2013 to make a fair go of the business in the future. If he truly held that belief, then it is curious why he did not, as director of the 1st plaintiff, immediately seek relief from forfeiture or seek some other relief (such as declaratory relief to the effect that the lease was not forfeited on the 25th of June 2013) particularly where it is alleged that s124 of PLA had not been compiled with and where he believed that that he could as he stated, in the future, make a fair go of it.
[111] I have preferred the evidence of Mr Vincent to that of Mr Ponsonby. I shall now explain why. Mr Ponsonby's report was based on a number of assumptions which I consider were either not supported by the evidence or were indeed flawed.
[112] Mr Ponsonby has relied on an assumption (provided by the plaintiffs themselves in respect to the former) that the business would be turning over a minimum of an average of 1500 cars per month (that is, 48 cars per day) and a maximum of an average of 2129 cars per month (that is, 70 cars per day) by 30th June 2016. That is however inconsistent with the material upon which he has relied. Schedules 5 and 6 do not bear out such a prediction. As Schedule 5 demonstrates, there has been in fact a decline in the amount of cars per month going through the carwash since September 2012 even though there had been good weather, a decline that Mr Ponsonby initially denied but subsequently had to agree with, but only after it was pointed out to him that his own Schedule even demonstrated that decline.
[113] Schedule 6 also shows that there were in fact only two occasions over the stated 12 month period (rather than one, see September 2012) that the carwash business actually achieved the amount of cars per day which Mr Ponsonby has assumed (67 cars per day) will be achieved in the future. Schedule 5 also shows that the average cars per day during that 12 month period only achieved an average of 48 cars per day on one occasion, namely August 2012. Schedule 5 also did not include any consideration of the number of cars that actually went through the carwash during the preceding period (1 May 2011 to 30th June 2012) of operation. Mr Ponsonby explained that because he considered the business to be a 'new business' that period would therefore not necessarily be truly reflective of the future car wash business operation.
[114] Mr Ponsonby had also taken into account and deducted two months off the financial year as set out in Schedule 5 when arriving at his opinion, stating that the two months were taken out of his 'calculations' as an allowance had been made by him for annual 'bad weather'. While it is accepted by both experts that bad weather will invariably impact upon a car wash business and its' car turnover, I prefer Mr Vincent's evidence on this point which was that the monthly rainfall figures which Mr Ponsonby has used from data gathered from the Bureau of Meteorology ('BOM') (Ex 7) are artificial as it may be that the rainfall so recorded per month by BOM in any given month, may well have only fallen over the course of only a couple of days in that month, allowing therefore for the car wash business to operate more productively on the days where rain had not fallen throughout the course of any given month.
[115] Mr Vincent also provided schedules that he had prepared to demonstrate that the predicted cars per month through the carwash in the future were untenable (Ex 7). The second of those documents (highlighted) show, as Mr Vincent stated, the amount of cars that would be required each month to pass through the carwash in order to achieve even the predicted 1500 cars per month by 2016. The third of those documents also showed as Mr Vincent stated the amount required per month to achieve the predicted 2129 cars per month. I accept Mr Vincent's evidence that the historical figures which Mr Ponsonby had regard did not bear out either of those predicted figures being reached having regard to the achieved 13% growth in sales revenue between 2012 and 2013.
[116] Mr Ponsonby has also assumed that the carwash business currently operating at the same site now must be trading well (my words) otherwise it would not be still open and operating today. Mr Ponsonby however admitted that he knew nothing whatsoever of the financial situation of that current business or otherwise other than that he had driven past and it was operating and open for business and that Geo was in fact part of a franchise model.
[117] Mr Ponsonby also did not take into account, for the purpose of determining what the potential underlying profit of the business would be in the future, the wages which had been paid to Mr and Mrs Royal or their daughter since the business's inception. Mr Vincent said this was flawed process of reasoning particularly when Mr and Mrs Royal were intending to return full time to work that business as stated to Mr Ponsonby. I accept Mr Vincent's evidence that this therefore should be accounted for as it would be in fact a true running expense of that business. In addition, I see no reason to reject Mr Vincent's assessment of those wages as being in the category of a Car Detailer. Mr Ponsonby was of the view that he regarded if wages were to be taken into account as a future running expense of the business, that it should be about only $35,000 per annum to account for a small business operating with one person and not two being paid wages. This opinion was difficult to accept in circumstances where Mrs Royal gave evidence that both herself and Mr Royal had been working full time at the car wash in order to keep it operating on occasion, were not drawing down wages for themselves in order that they could meet their rent and outgoings obligations and had told Mr Ponsonby that they both had intended to return to the business full time to work.
[118] While Mr Vincent even accepted that there had in fact been some revenue growth within the business since 2012 of approximately 13%, I prefer Mr Vincent's opinion to that of Mr Ponsonby that the increase in growth of the business even to that extent had had very little impact. Both experts agreed that the business had nevertheless still run at a loss each financial year since its inception regardless of the respective growth attributed by both experts (Mr Ponsonby had given even a higher growth percentage to that of Mr Vincent).
[119] While Mr Vincent accepted the fact that the business could have grown in the future, he did not believe that it could have grown to 1500 cars per month. As Mr Vincent explained, to achieve that result in the future even by 2016 it would mean a 15% revenue growth year in, year out (T6-25). He considered that even with the 13% revenue growth between 2012 and 2013 of the business, these figures suggested it was only 'limping' in the right direction but nevertheless did not believe that the business, when closely examined, could turn itself around (after trading at a loss since its' inception) and then continue to make a profit in the future (T6-26). I accept Mr Vincent's opinion having regard to the evidence to which I have already referred.
[120] Mr Ponsonby was also of the view that even though as at the 25th June 2013 the business was running at a loss, he did not consider it would have closed up shop even at that point and he had expected that it would have been able to continue to trade. In support of that opinion, Mr Ponsonby considered a number of factors:
[121] That opinion however in my mind failed to take into account the following important factors.
[122] Mr and Mrs Royal's own view of the future viability of their carwash business, which had already been indicated by them in the various e-mails exchanged and correspondence sent by their own solicitor Mr Stibbe over the duration of the lease.
[123] The fact that the car average per month expected to be turned over by the carwash by 30th June 2016 (namely 1500 cars av per month), was not supported by the evidence provided to him by Mr and Mrs Royal as relied upon by Mr Ponsonby.
[124] That his assumption that Mr Royal would continue working externally to support the family financially was incorrect in light of the evidence which Mr Royal gave, that both he and Mrs Royal had in fact worked full time at the carwash for 18 months since its inception and he had worked externally off site only to assist the family. There was also the fact that Mr Ponsonby was in fact told that both Mr and Mrs Royal were intending to return full time to the business in any event.
[125] That any increase in the growth generally in the Moreton Bay region of approximately 3% cannot necessarily be directly attributed to Bribie Island (Ningi where the carwash business was situated). As noted in the reference documents which Mr Ponsonby had regard, the Moreton Bay region covers a very wide region of South East Queensland. Such population growth therefore in the region as a whole cannot be solely attributed to an island within that region, such as Bribie Island.
[126] Mr Ponsonby also applied a 35% discount figure (which was to represent the future loss of profits in today's value terms). Mr Vincent considered 50%, more realistically. Mr Vincent considered that Mr Ponsonby's figure was not sufficient as the business had failed to generate any profits since its' inception, the owners had not been getting much remuneration out of the business at all for their labour, and even though it was probably a business that was needed as it had started out pretty quickly, his opinion was the same. The discount figure needed to be much higher as this was not a business that had demonstrated that it was a profitable business since its' inception and as such, the general 35% discount figure applied by Ponsonby (usually given to a profitable business) was too low. I accept Mr Vincent on this issue. The business was and had been trading at a loss since inception and the average number of cars per day through the carwash was in decline since September 2012 (Sch 5).
[127] Mr Ponsonby also did not include the 'one off sewerage' expense when determining the future profitability of the business. Mr Vincent agreed that this was reasonable however still nevertheless considered that other expenses of the business in the future would not be fixed (or not arise again as it was only one off: e.g. sewerage) particularly if there was any revenue growth in the business in the future. Mr Vincent considered that any increase in that regard automatically translated to an increase in any running expenses of the business, a fact which Mr Ponsonby did factor in other than for CPI (T6-5).
[128] It was conceded by the 1st plaintiff in it's submissions that Mr Ponsonby's report might be overly optimistic on profit levels that would be achieved; that factors such as wages for one on site manager should be incorporated and the unseasonal weather should have been adjusted for rather than simply removed for a period of two months as part of his calculations. Indeed it was accepted that even certain running expenses might be increased at a rate higher than CPI or even that a 50% discount figure be applied. Nevertheless it was submitted that due to the fact that the business was still a young business, had experienced a sales revenue growth of 13% from 2012 to 2013 and its losses according to Mr Ponsonby were reducing each year of operation, then it should be found that it would have made a profit in the future as predicted by Mr Ponsonby.
[129] I cannot accept that submission. The submission made overlooks the matters to which I have already referred. It follows that I am not satisfied to the requisite standard required that the 1st plaintiff has proved any future loss of income as claimed.
Cash not returned (Amended Claim paragraph 9(c) to (g))
[130] Mr Royal gave evidence that none of the cash as particularised was returned after they were evicted (T2-50). Indeed, Mr Royal in re-examination considered that the offer made by the 1st defendant on 1 July 2013 (ex 1 page 85) of $3000 as satisfaction of those items including equipment and cash that had been left behind by them on the day of the eviction was unsatisfactory (T3-52).
[131] Mr Freshwater confirmed that he didn't believe any money was taken by Mr and Mrs Royal on the day of the eviction because it had gotten thrown all over the floor (T7-74). It is conceded by the 1st defendant that it is prepared to accept that $1,013 in cash is still owing and should be set off if the court considers appropriate against any award the 1st defendant might receive if successful.[36]
Stock and Equipment not returned (Amended Claim paragraph 9(h))
[132] There were no receipts produced regarding the list of stock and equipment said to have not been returned after the eviction on the 25th of June 2013 (Ex 3). Nor was there any independent valuation in respect of it. The list contained in Exhibit 3 in my mind is inconsistent in any event with the letter sent by the 1st plaintiff's solicitor regarding the return of any stock or equipment said to be withheld at the time (Ex 2 page 46). It is plain that the list has since 'expanded' and even after certain items were returned (Ex 2 page 39) (See the further demand made on 12th July 2013 by 1st plaintiff's solicitors seeking the return of any outstanding items (Ex 1 page 363)). Those items again did not reflect what is being claimed now (Ex 3) by Mr Royal that he said at trial were never returned to him (T2-50 and 51).
[133] Mr Freshwater recalls that about a week or two after the eviction, it was arranged that the Royals could come and collect their goods, where they had been put by the 1st defendant in a separate building (T7-71). He believed they picked up those goods ticked off (T7-72) (Ex 2 page 40). Having regard to the claim made and the fact that it was unsubstantiated and unclear as to how those amounts have been calculated (aside from Mr Royal's own estimates in respect of it) I am disinclined to order any damages absent the necessary proof, particularly having regard to the findings I have made regarding Mr Royal's credit.
[134] Finally, it is accepted by the 1st plaintiff that a 'set off' amount should be made in the event that its' claim for damages for breach of contract is successful in the order of the amount owing for outstanding rent and arrears as at 25th June 2013 to the 1st defendant. This would necessarily be deducted against the bank guarantee given, leaving a sum of $8,033.83[37] in light of the findings I have made regarding the amount outstanding.
[135] In this regard, I refer to the evidence of Mrs Royal, Mr Freshwater and Mr Okan in determining that $33,216.17 was the outstanding arrears of rent and outgoings owed.
The Counterclaim (the 1****st defendant's claim against the 1st plaintiff as lessee and the 2nd and 3rd plaintiffs as guarantors).
[136] The following findings are made in view of my ultimate conclusion which is that the 1st plaintiff's claim for damages for breach of contract against the 1st defendant be dismissed.
[137] The repairs costs subsequently incurred after the termination are no longer pursued.
Loss of rent and outgoings (against the 1__st plaintiff)
[138] An amount of $95,762.68 is claimed in damages for loss of rent and outgoings pursuant to clause 17.4 of the lease, calculated as follows -
Rent and outgoings between 01/07/2013 to 31/10/2013
Difference between new and old lease period (01/11/2013-30/06/2014) (sale of property by 1st defendant)
[139] An amount of $23,719.87 is claimed for legal fees pursuant to clause 18.2(b) of the lease (Ex 2, pp 51-52, 61-62, 67-68 and 78-79).
[140] Mr Okan gave evidence from the date of the eviction of the 1st plaintiff up until the new tenants commenced their operation from 1st November 2013, that at no time did the 1st defendant make any profit from the carwash business. That, he said, was as a consequence of the one automatic carwash machine not working correctly (T6-92). The lease itself shows that only one automatic carwash machine was in fact installed on site (Clause 27.1). I have no reason to reject Mr Okan's evidence on this issue.
[141] It is accepted between the parties that rent and outgoings were in fact owing as at the 25th of June 2013. In light of my findings, I find that the amount of $33,216.17 was owing prior to termination of the lease as at the 25th of June 2013. I accept that the calculation of that amount is correct. Mrs Royal certainly could not give any real evidence as to why she considered it was less other than a communication by her solicitors that as at 25th of June 2013, it was a lesser amount. Mr Freshwater considered the former amount to be correct.
[142] The amount of $1,013.00 has been set off against the amount calculated to be awarded to the 1st defendant.[38]
[143] The 1st defendant is also entitled to interest paid on these amounts in accordance with clause 5.7 of the lease.
[144] Mr and Mrs Royal admit they guaranteed the performance of the 1st plaintiff under the lease. Clause 23 of the lease sets out the scope of that liability (in particular clauses 23.2,[39] 23.3, 23.4 and 23.7). The plaintiffs admit Wash Investments was in breach of the lease. Mr and Mrs Royal are liable to indemnify the 1st defendant for the amount of $118,469.55.
The Defamation claim (the 2nd and 3rd plaintiffs' claim jointly and severally against the 2nd and 3rd defendants in defamation).
[145] There are in effect two claims for defamation. The submission made is that in respect of each of claims, it need only be supported by a finding, to the requisite standard required, that one publication occurred.
[146] When considering an action for damages for defamation the following principles have been taken in account.
Was the publication to a third party of a defamatory matter of and concerning, or identifying, the plaintiff(s) and if so, was it without lawful excuse?
[147] Here, the publication clearly identifies the plaintiffs, and this element is established.
[148] The publication to just one person other than the person allegedly defamed is sufficient in providing the element of 'third party'.[40] As such, either one of the alleged defamatory words published as pleaded can be sufficient to prove this element.
[149] Once it has been established that there has been a publication to a third party, is it necessary to determine whether it was of a defamatory matter? The Defamation Act 2005 (Qld) does not expressly define 'defamatory matter', however it preserves the common law. At common law, material which "tends to lower the plaintiff in the estimation of right-thinking members of the community is defamatory".[41] The usual objective test adopted by the courts when considering whether or not the publications complained of are defamatory was discussed in Queensland Newspapers Pty Ltd v Palmer.[42] A matter can be defamatory if the plaintiff can show that their reputation has been damaged by the publication of the defamatory matter. In other words, the plaintiff must have had a reputation to start with that could be damaged, though it is usually presumed that a person does have such a reputation and that their reputation is injured upon publication of the defamatory material.[43]
[150] Generally speaking, defamatory material may be a blatant or obvious lie about a person, however it is trite to say it can also be an 'imputation' for the purposes of the Defamation Act.
[151] The publication must also have been made without lawful excuse. Even if a plaintiff can show that the publication was defamatory, then if one of the statutory defences apply, the other party will not be liable in defamation.
[152] The pleadings reveal that the defence of 'substantial truth' is relied on by the defendants in respect of both of the alleged publications said to have been made.[44] For the 'justification' defence to apply, a party must prove that what he has published is substantially true.[45] The concept of "being substantially true" denotes "not materially different".[46] Further, use of the word 'substantial' suggests that if the publication is mostly true, then this may well be enough to raise this defence.
[153] I shall now turn to the evidence that was given at trial that I have taken into account when making my findings.
Jeanette O'Connor (1__st defamatory words published 8th of July 2013)
[154] Mrs O'Connor gave evidence that she was a driving instructor at the material time. She first came to know the Royal family as a result of teaching their daughter Caitlyn to drive and as a result of her son being in a relationship with Caitlyn for a period of about 2 years. She stated she had met Mr and Mrs Royal only a couple of times at the car wash business. She did not however meet them in any other place prior to her son and Caitlyn Royal commencing their relationship.
[155] She specifically recalled the 8th of July 2013. She had gone in to get her car washed. She walked into the office of the business 'because she knew Paul and Yvonne' and to get some coins. There was a different person there. She was stunned. She asked where Paul and Yvonne were because she had not heard anything. That person replied that he had pretty much kicked them out because they were six months behind in their rent and owed $70,000. She stated when asked to give a description of that person that he did mention that he was the owner and he had dark skin.
[156] She stated she was 'gobsmacked' when she had walked in there because Paul and Yvonne are 'one of the most respectable, hardworking people I've ever known, totally'. When driving past the business whilst supervising Caitlyn during her driving lessons, she stated that they were always there. Caitlyn had also told her how hard her Dad worked during the lessons.
[157] She also stated that she believed they 'just worked seven days a week. They had no life, they weren't like second rate people at all and were genuine hardworking 'Aussies'.
[158] She stated that when told they hadn't paid rent for six months that she nearly fell over. I thought that can't be right. I mean, its' none of my business, but I was - I was totally shocked (T3-70).
[159] Under cross examination, Ms O'Connor conceded that she had based her opinion of the Royals as hardworking and respectable people primarily on what Caitlyn told her and what she observed when she drove past every week. In being asked how she thought they were 'respectable', as it was a very personal observation to make, she stated that it was just her observation because they worked so hard and that they were totally dedicated to the carwash.
[160] She denied however having any social relationship with the Royals during the period her son and their daughter dated and the only time she could remember actually catching up with them socially was Caitlyn's 21st. She only recalled speaking to Yvonne that night. She however subsequently conceded, but only during the course of cross-examination, that she, Paul and Yvonne were in fact all friends (T3-72). She denied however the suggestion that she had come along to court to assist them to win their case.
[161] Mrs Royal gave evidence that she had run into Ms O'Connor in the street and she had told her that she had been told that the Royals had been kicked out, that they had left, they were six months behind in rent and owed a lot of money. She had thought that figure was around 70,000. Mrs Royal stated that she was very upset to be told this. That was because it was a small community and as Ms O'Connor was a driving instructor and she knew a lot of people, word can spread in a community very quickly (T4-25). Mrs Royal also gave evidence that she and Ms O'Connor had no social relationship at all even though Ms O'Connor was a regular customer at the carwash and her son had dated her daughter for a period of two years. She stated that she recalled having only one social contact with Ms O'Connor during the relevant period, which was at Caitlyn's 21st. When asked if she considered Ms O'Connor to be a friend of hers, she replied 'No, an acquaintance' (T4-69). She explained that their 'acquaintance' was through the carwash (in that she was a regular customer who came in all the time (T4-69) and through her teaching Caitlyn (driving). She denied the proposition put to her that she had asked Ms O'Connor to assist her in their claim by making up some allegations of defamatory statements.
[162] Mrs Royal conceded however that as at the 25th of June 2013, the business was in fact in arrears in respect of its' outgoings for a period of 5 months (T4-45).
[163] Mr Royal gave evidence that in June 2013 the 1st plaintiff wasn't behind in its' rent in the order of $70,000, that the 1st plaintiff was not insolvent at that time and that he personally wasn't bankrupt. He also recalled Ms O'Connor approaching both himself and his wife. He thought they ran into her up at the shops and she said words to the effect 'I heard that you got kicked out. I was in the wash the other day and something was wrong with the wash and I went in the office to say g'day and see you and when I walked in, there was another bloke there'. Mr Royal stated that she told them that she had asked where the Royals were and that person had replied 'I'm the new owner. They were six months behind in the rent, 70,000, so we kicked them out and I'm it now, basically' (T2-58).
[164] Mr Zarafa gave evidence in respect of this issue. He stated that after the 1st plaintiff had been evicted, he had arranged for a friend of his son's (Rick), the next day, to take over the running of the carwash business as he was unable to do so because of distance and work commitments. Mr Zarafa gave evidence that he then only attended at the site periodically (three or four times after the eviction and up to end of July 2013) and specifically denied being there to 'supervise'. I have no reason to reject Mr Zarafa on this point. The fact of where he lived at the time coupled with the running of his own building business, and my own assessment of him as a credible witness, supports a conclusion being made that he would not have been able to 'supervise' as proposed. I found Mr Zarafa also to be credible insofar as his answer to the proposition that he could have been on site on the 8th of July 2013. Mr Zarafa had an opportunity to specifically deny outright that he wasn't there at all or indeed was elsewhere on that date, however his evidence was that he simply couldn't remember whether he was in fact there or not on that date. Mr Zarafa gave evidence that he would not have said any of the words that Ms O'Connor says that she heard spoken on the 8th of July 2013 to her. Mr Zarafa gave evidence, which I have no reason to reject, that Mr Okan was the one who primarily dealt with the lease and that he only went to the site when requested by Mr Okan to do so to make inquiries with the 1st plaintiff regarding when and if they might be in a position to pay any (outstanding) rental and outgoings in arrears (T7-34). I also have no reason to reject Mr Zarafa when he says that he would not have spoken those words that Mr O'Connor recalls that were spoken by someone at the carwash that day to her. Mr Zarafa stated that he had no reason or even cause to speak those words to anyone (T7-49) at that point.
[165] Ms O'Connor struck me as a witness who was prepared to support Mr and Mrs Royal in any way she could. Mrs Royal considered Ms O'Connor as only an acquaintance yet Ms O'Connor conceded, but only during cross-examination that they were in fact friends, a fact she attempted to downplay during her earlier evidence. Ms O'Connor seemed reluctant to even concede that she might well have had a greater friendship with Mr and Mrs Royal even as a result of her son and their daughter's period of 'courting' and was at pains to point out that the only social contact she had ever had with them was at Caitlyn Royal's 21st.. That struck me as inconsistent with Mrs Royal's view of their relationship as that of being 'friends'. Overall, having regard to her when giving her evidence, she struck me as an unimpressive witness. I shall expand a little now why I have come to this view. Her statement that when she initially walked into the office of the carwash on the 8th July 2013 and was 'stunned' to see another person sitting there struck me as not only odd but unusual in the sense that there was no reason for her at that point to be stunned about anything at all considering she stated that she hadn't heard anything prior to seeing another person sitting there in the office. I also find it odd that the simple fact of someone else being there other than the Royals was enough for her to be stunned in light of the carwash business having engaged other employees to work there for them in the past. This is also true in light of the fact that Mr Royal himself was working externally off site at that time. She also said that she had in fact walked right into the office because she needed coins and because she knew the Royals. At no stage did she say she had walked into the office because the machine was not working (the latter proposition put by Counsel to Mr Zarafa (T7-47)). She also stated she had only ever met the Royals a couple of times at the carwash (T3-69), and Mr and Mrs Royal both said she was a regular customer of the carwash (T4-46 per Mrs Royal and T2-58 per Mr Royal).
[166] The submission made on behalf of the 2nd and 3rd plaintiffs is that Ms O'Connor was not a close friend of the Royals. That submission in my mind overlooks the evidence which Ms O'Connor gave herself in which she in fact herself considered Mr and Mrs Royal and herself to be friends. It is a matter of semantics in my mind to consider whether they were in fact close friends. The fact remains the same. Ms O'Connor did therefore have a reason to gild the lily as it were to assist Mr and Mrs Royal in their claims for defamation. I accept the submission made on behalf of the 3rd defendant that Ms O'Connor, which was also my assessment of her while giving evidence, was at times evasive (T3-72 and T3-73) in providing answers to the questions asked of her. While some allowance must always be made for lay witnesses while giving evidence particularly under cross-examination, Ms O'Connor did not impress me in her account.
[167] The 2nd and 3rd plaintiff submit that the evidence of Ms O'Connor ought to be accepted and a finding made that the statements were in fact made by Mr Zarafa to her on the 8th July 2013 even though her description of that person was a person with dark skin who also mentioned that he was the owner. In reliance on that submission, the 1st plaintiff referred to the fact that Mr Zarafa considered himself to be a director of the 1st defendant even well after 8th July 2013 (Ex 1 page 149 Answer to Interrogatories sworn 16th May 2014 by Mr Zarafa). I cannot accept that submission. All that the document shows (at page 149 dot point 10) was that Mr Zarafa was in fact a company director at the point the Notice of Forfeiture was signed (25th June 2013).
[168] It is accepted that Mr Zarafa himself stated that he was a company director of the 1st defendant from the start of its commencement up until his wife took over as a company director. There is no available evidence led at trial which shows that he was in fact a company director as at 8th of July 2013. Indeed, the submission made on behalf of the 1st plaintiff by counsel to Mr Okan regarding his preparation of the s124 notice on the 4th June 2013 was that Mr Okan had no authority (not pleaded) to send that notice if he had in fact prepared one because he had failed to speak with the other director Maria Zarafa before he sent it (T6-103). Therefore on balance, I am unable to make a finding one way or another whether Mr Zarafa was in fact a company director or an 'owner' as at 8th July 2013. The question however is whether I should draw a reasonable inference in any event against Mr Zarafa on this point on the basis that the description given by Ms O'Connor was that the person who spoke those words suggested that he was an owner and was dark skinned. Mr Zarafa was dark skinned. There was evidence however which was not contested that the person called Rick had taken over the day to day running of the carwash business after the eviction on the 25th June 2013. There were no questions asked of any of the witnesses who might have in fact known whether Rick could have also fitted that description. The 2nd and 3rd plaintiffs submit that an inference ought to be drawn that the only person who would likely be at the carwash on that day who would describe themselves as owners would have been Mr Zarafa. That submission however is premised firstly on a finding being made, on the balance of probabilities, that the words said to be spoken that day were in fact spoken by a person at the carwash on that day. As already indicated and for the reasons already set out, I cannot be satisfied of that fact, that is that the words were in fact spoken as Ms O'Connor now recalls them to be. I have not accepted her as a witness worthy of belief. I have already indicated that I overall did not find Mr or Mrs Royal to be witnesses worthy of belief.
[169] Accordingly, I am not satisfied on the balance of probabilities having regard to the available evidence and the findings which I have made that the words alleged to have been spoken were in fact spoken.
Ricky Starmer (2__nd defamatory words alleged to have been published in July 2013)
[170] Mr Starmer gave evidence that he had known Mr Paul Royal for 15 years plus through his past business contact with him and knowing him personally. Mr Starmer recalled that in 2013 he had received many calls about going out to the site (Ningi Carwash) and looking after the carwash and the recycling system (T3-75 L5). He recalled speaking with the owner 'Sini' and had presumed because of the content of the call that he thought that 'Sini' and others who had also been ringing him were in fact ringing from site. He conceded however he didn't in fact know that for sure. He said that he thought that because "I believe I got my name, because they obviously rang someone else or had my number from Paul or whatever on the wall or something like that, and they asked me to come out and have a look at it, because the machine wasn't working" (T3-75).
[171] When shown phone records of Sinan Okan (Ex 2 page 136) Mr Starmer identified his phone number having been called only as appearing on the 12th and 18th of July 2013 respectively.
[172] Mr Starmer recalls that that during one of the conversations on either of those dates, the content of that discussion with Sinan Okan was along the lines of coming out to have a look at the equipment and its condition because it wasn't working and in talking to him about that, Mr Starmer told him that he said that he believed it was Paul's site and that he didn't know anything about him owning it at the time and he said no, that Paul was no longer there, that he hadn't paid his rent for some time and that he is not on the premises anymore (T3-89).
[173] He recalled the period of time that the rent hadn't been paid for that he was told was five, six months - a period like that (T3-90). He stated that when he was told that, he had thought that Mr Royal's business was doing pretty well and that he was going okay, so he was a bit shocked, because its' a good site in a good area.
[174] In cross examination Mr Starmer did not accept the proposition put that the phone conversation timing of 25 seconds in total as evidenced by the phone records he had been shown would not have allowed for the discussion that he had just given evidence in respect of.
[175] Mr Royal recalled Mr Starmer ringing him for advice on one of the car wash equipment that had broken down because he had the manuals for it. He recalled Mr Starmer saying 'Sorry to hear about what happened. I didn't think you were that far in the shit' (T2-60). He told Mr Royal that he had spoken to Sinan ('3rd defendant') as Sinan had rung him for advice on the Ningi carwash and had said that the Royals were six months behind in rent. Mr Royal stated that when Mr Starmer told him that he felt 'very angry and upset and embarrassed to Ricky, that, you know, people had said that about me to him' (T2-61).
[176] Mr Okan gave evidence that he had never spoken at any stage to Mr Starmer. He confirmed under cross examination when shown his own phone records that he recalled ringing Mr Starmer on several occasions to speak to him about fixing the car wash machines that were not operating but that when he had rung Mr Starmer's number, it went to message bank and he had left a message for him to ring him back. Mr Okan stated that Mr Starmer did not return his calls (T7-25).
[177] A matter arose during the course of the hearing while Mr Starmer was giving evidence. His evidence at trial was in effect that the published words said to have been spoken to him had in fact been made during a phone call which he had with Mr Okan sometime during July 2013. That evidence raised an issue regarding the state of the amended pleadings (Court document 38 para 17) which were that:
"They have been evicted because they hadn't paid rent in six months".'
[178] It was submitted on behalf of the 2nd and 3rd plaintiffs that leave be given to amend those pleadings to take into account the effect of Mr Starmer's evidence given at trial. It was submitted that the date or the actual place of that alleged publication was immaterial insofar as it is whether the publication that was said to be made to Mr Starmer from Mr Okan was in fact made, which is the relevant factor and not the when, where, or by what means that publication was made. The 2nd defendant, not surprisingly, submitted that no such amendment ought to be given as it had unfairly prejudiced the 2nd defendant in meeting the case against him.
[179] It is true that any amendment may be made by the court's leave at any time during the proceedings. It is also true that leave should be granted where any 'expansion' beyond the pleadings at trial has resulted during evidence that does not surprise or unduly prejudice the other side who has prepared for trial to meet the case alleged against it in the pleadings. Even if I was to allow the amendment to be made by leave now, my finding would be the same. I am not satisfied in any event, on the balance of probabilities, that the words said to be spoken by Mr Okan to Mr Starmer by telephone were made. I shall now explain why I have come to that conclusion. I had careful regard to Mr Starmer while he was giving his evidence. He struck me as being completely confused regarding when or even where he had the conversation with Mr Okan. For example, when asked in examination in chief 'did you speak with anybody about a carwash at Ningi? He asked "is that 2013?' He then stated that he had received calls in 2013 'about going out to the site and looking after the car wash that was there at the time, and they would've - calls would've come from head office and from the people that had taken over the site - or I thought had taken over the site'. He then went on to say that he spoke with whom he believed was the owner, Sini, and there was other people that rang me from site as well, but he wasn't sure of their names when giving evidence (T3-75). He stated that he believed the calls were made from the site at the carwash itself at Ningi, asking for support to come out and have a look at a car wash and the recycling system because they weren't working at the time. That's how he understood they got his name, from someone else, had his number by Paul or whatever or whatever on the wall or something like that, and they asked me to come out and have a look at it because the machine wasn't working.
[180] Several points may be made about that evidence. The first is that even at the point Mr Starmer said he was receiving those calls in 2013, it is evident that he believed that he had received those calls that would've come from head office and from the people that had taken over the site - or I thought had taken over site (emphasis added). The second point is that Mr Starmer was not even clear when those calls were received. Indeed his answer was telling when asked in chief 'And do you remember when it was that you had a conversation with the man - I think you said Sini?' the answer was 'July I'd imagine - around that time - if you said it was July 2013' (emphasis added). Mr Starmer then admitted that he didn't remember any particular dates. It is evident that Mr Starmer then only recalled that it must have been in July but only after being shown Mr Okan's phone records (which showed two calls to his phone 12th and 18th July 2013 respectively, 25 seconds in duration). Even then he was unclear in that he said that it would've been on one of the dates here, probably the 18th of July, I would say (T3-90 L7), then later says that it could have been the 12th or the 18th July (T3-93 L23). He then emphatically stated it was not on any other dates (T3-93 L30). Indeed, Mr Starmer went further to say that the only reason that he thought it was either of those days was because 'that was what the log said', referring to the phone records that he had been already shown of Mr Okan's. He also confirmed in re-examination that he couldn't even be sure that it was Mr Okan's phone number that called him on the occasion that he said the publication was made. Mr Starmer stated that he had already said earlier in his evidence that he had said no. That was because he received so many calls from so many different people relating to that site. So he couldn't really say whether it was from a landline or a mobile that the person had rung him from (T3-95).
[181] That evidence to which I have just referred in my mind supports a finding being made that Mr Starmer himself really had no real idea at all when he did in fact speak to Mr Okan during 2013. Nor does that evidence support a finding even on the balance of probabilities that Mr Starmer did in fact speak to Mr Okan during July 2013 (in accordance with the pleadings sought now to be amended by leave which is that in July 2013 that conversation took place). In this regard I accept the evidence of Mr Okan which was that he had left calls for Mr Starmer to return his calls but he failed to do so. The duration of the respective calls made from his phone to Mr Starmer's number on the 12 and 18th July 2013 supports a finding being made that that duration is in fact more consistent with leaving a message for Mr Starmer to call him back as opposed to the conversation which Mr Starmer says he had with Mr Okan particularly regarding the actual content which he says they covered over the course of any such conversation.
[182] Accordingly, because of the vagueness of Mr Starmer's recollection alone regarding when that call may well have been even received by him during 2013, I find that the publication as alleged, either as originally pleaded or indeed, by the leave sought to amend those pleadings at trial by the 1st plaintiff was not made and certainly not during July 2013. In any event, I prefer the evidence of Mr Okan which was that he did not speak to Mr Starmer at all, nor did he ever spoke the words as alleged.
[183] Accordingly, I am not satisfied, on the balance of probabilities that the alleged 2nd publication was made. It follows then that the defamation claims jointly and severally made by the 2nd and 3rd plaintiffs against the 2nd and 3rd defendants must fail in light of my findings that neither alleged publication was even made.
[184] In the event that I am found to be wrong in respect of the findings which I have just made, I shall briefly deal with whether or not I consider in the event that, what, if any damages would flow if it was found that there had been a publication or publications as alleged.
[185] Insofar as the imputations themselves, I accept the defendants submission that even if it was accepted that what was said during either publication was in fact stated, that it cannot in my mind carry, (which was the non-payment of rent, which was in arrears up to a certain amount (O'Connor only in respect of $70,000)), an imputation that could be capable of supporting a general imputation that both Mr and Mrs Royal were insolvent, of bad character and lacked moral probity.
[186] As discussed above, the test to be applied is an objective one, which is whether the statements, given the natural and ordinary meaning of the words which an ordinary reasonable woman or man would perceive, convey the imputations alleged and those imputations are, in fact, defamatory.[47]
[187] The 2nd and 3rd defendants submit that the reality is for a variety of reasons people can and do fall into arrears under leases and may be required to leave. That it is submitted does not mean that looking at it objectively that an ordinary person would perceive that Mr and Mrs Royal were of bad character, insolvent or lacking moral probity. The plaintiffs on the other hand submits that the publications or even one of them was capable of carrying the pleaded defamatory imputations.
[188] In this regard, it is appropriate at this point to refer to the amended defence (Court document 17 paragraphs 7 and 12 respectively) which admit, that the alleged words, if they were spoken (which is denied), were capable of carrying the imputations alleged in subparagraphs 12(a), (b) and (d) and subparagraphs 18 (a) and (c) of the Statement of Claim.
[189] I find that even if it was found that the words were in fact published in respect of either publication, that the words spoken could not be said to be capable of carrying the pleaded defamatory imputations. Having regard to the words spoken, in two discrete and specific instances, and specifically concerning the non-payment of rent and any arrears in respect of it (only Ms O'Connor), the alleged publications are not capable of carrying a defamatory imputation. By their own admission, the 1st plaintiff was in fact 5 months in arrears of rent and outgoings even at the point of their eviction on the 25th of June 2013. I accept the submission made by the defendants that it is indeed artificial to suggest or imply a distinction in ordinary everyday parlance between rent and outgoings.
[190] Mr Okan gave evidence that when he was referring to rent outstanding he meant to say rent and outgoings. I accept that objectively looking at it that outgoings, to an ordinary person, would be understood to be included within the general meaning of the term 'rent'. That is to say, they owed money. It is accepted by the plaintiff's own admission the fact that they had not paid rent (outgoings) for 5 months at the time of their eviction. I find therefore that any reference therefore to 'rent' is not in my mind capable of suggesting some difference in the mind of an ordinary person between rental default of five or six months or indeed that there would be any difference in that same mind regarding the actual amount said to have been stated to be have been owing to Ms O'Connor.
[191] The 2nd and 3rd plaintiffs submitted that the publications were capable of carrying the defamatory imputations as pleaded. In this regard, the responses to the publications made to them by Ms O'Connor and Mr Starmer was indicative, the plaintiffs say, of the publications being capable of being defamatory (i.e. Ms O'Connor was 'gobsmacked' and Mr Starmer 'was shocked'). I do not accept that submission made for the reasons already stated. I also reject any submission insofar as the application of any 'grapevine effect'.[48] Ms O'Connor herself stated that she had not heard anything prior to going into the car wash that day. Mr Starmer also clearly had not heard anything either as he stated he was surprised that someone else had taken over the business. Finally, there was insufficient evidence to support a finding that there would be a grapevine effect as a result of either or both of the publications having been made in the specific and distinct way that it has been alleged. The submission made relies on what Mr Royal said about having to pay his bills in advance from other suppliers only after the publications were said to have been made (T2-61 L30). That evidence is equally consistent with a supplier simply requiring a bill to be paid in advance because of the fact that the 1st plaintiff, which Mr Royal was the sole director, had been evicted on the 25th of June 2013 and no longer ran the car wash at Ningi.
[192] The defence of substantial truth has been relied on.[49] In light of the findings which I have made, I find that this defence would apply in any event. I do not accept the submission made on behalf of the plaintiffs that the defence would not apply as it cannot be said that the publications made were true in substance or were not materially different from the truth. I have already dealt with this point earlier and do not intend to deal with it again. The fact was that at the point the publications were said to have been made, the 1st plaintiff, which the 2nd and 3rd plaintiffs had been operating as a business was trading at a loss, had been unable to meet its payment of monies obligations arising under the terms of the lease, owed 5 months outgoings and 1 and a half months approximately of rent and the 2nd and 3rd plaintiffs were indicating that it was unable to continue operating from late in June 2013 unless a rent reduction was given to them otherwise 'they' would have to declare themselves bankrupt.
[193] Having regard to those features that I have just mentioned, I shall, for the purpose of completion, briefly deal with what damages, if any, I would have awarded in the event that my findings in respect of the last point are found to be wrong.
[194] I accept the submission made by the defendants that if any such award is made that it should be nominal. I make that finding on the basis that the publications were distinct and separate in nature and limited to only two people. Further there was no actual harm caused to the respective 2nd and 3rd plaintiffs by the alleged publications, and the reaction by the said two people upon being told was not determinate of this issue. I accept that if damages are awarded, they are to compensate a person for past, present and future harm done to him or her and their reputations by the publication of defamatory material.[50] An award of damages must also be sufficient to vindicate the plaintiffs' reputations.[51] Here I note that in the written submissions made that an award of $50,000 is sought for the 2nd and 3rd plaintiffs. This is in contrast with the claim actually made in the pleadings. This is of little matter in any event as I consider that if any damages were awarded in respect of this matter I would have only awarded a nominal sum in respect of both plaintiffs to console them for not only the personal distress or hurt that they may have felt in having the publications recounted to them by two other members of the community in which they lived, but also by way of vindication.[52]
[195] I would have awarded each of the plaintiffs a sum of $500.00
1. The claim for damages by the 1st plaintiff for breach of contract against the 1st defendant is dismissed
2. The counterclaim of the 1st defendant is allowed
3. The 2nd and 3rd plaintiffs' claims for defamation jointly and severally made against the 2nd and 3rd defendants are dismissed.
4. The parties are to provide written submissions (no more than 5 pages) as to costs by email to my Associate, but not until after 28 days has expired from the date of publication of this judgment, unless the parties otherwise agree as to costs.
[1] Property Law Act 1974 (Qld) ss 124, 132.
[2] Hsu & Anor v Graham Retailers Pty Ltd & Ors [2004] QDC 230, 17 ('Hsu').
[4] [2001] QSC 387 [49].
[5] [2001] QSC 387 [49].
[6] Pursuant to s 124(2) of the Property Law Act 1974 (Qld).
[7] Ex parte Taylor (1980) Qd R 253.
[8] Elsafty Enterprises Pty Ltd v Mermaids Café and Bar Pty Ltd [2007] QSC 394 [86] per McMurdo J.
[9] Shevill v Builders' Licensing Board [1982] HCA 47; (1982) 149 CLR 620 ('Shevill's case'); Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17 ('Tabali').
[10] Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17.
[11] Property Law Act 1958 (Vic) s 146.
[12] [2005] VSCA 139 [66] ('Apriaden').
[13] Macquarie International Health Clinic Pty Ltd v South West Sydney Area Health Service [2010] NSWCA 268.
[15] Westlaw, Property Law and Practice Qld (at 1 April 2016) '124 Restriction on and relief against forfeiture' [124;.30]
[18] Byrnes v Jokona Pty Ltd [2002] FCA 41[79].
[20] [2005] VSCA 139 [69].
[22] That view was endorsed in Apriaden at [57] and again accepted in Kiama Development Co Pty Ltd v Wilcox [1999] NSWSC 277, and Batiste & Ors v Lenin [2002] NSWCA 316.
[23] Shevill v Builders' Licensing Board [1982] HCA 47; (1982) 149 CLR 620, 626.
[26] Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1989) 166 CLR 623, 657; Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17.
[27] Shevill v Builders' Licensing Board [1982] HCA 47; (1982) 149 CLR 620.
[28] Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1989) 166 CLR 623, 657.
[29] Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1989) 166 CLR 623, 658.
[30] Ex parte Whelan [1986] 1 Qd R 500.
[35] Bill Duncan and Sharon Christensen, Commercial Leases in Australia (Thomson Reuters, 7th ed, 2014), 431.
[38] $95,762.68+$23,719.87 = $119,482.55 - $1,013.00 = $118,469.55
[40] Bui v Huynh [2011] QDC 239 [30].
[41] Hallam v Ross [2012] QSC 274 [16].
[42] [2011] QCA 286 [19]-[21].
[43] Mizikovsky v Queensland Television Ltd & Ors (No 3) [2011] QSC 375 [19]; Ratcliffe v Evans [1892] 2 QB 524, 528.
[44] Defamation Act 2005 (Qld) s 25.
[45] Defamation Act 2005 (Qld) s 25.
[46] Howden Pty Ltd v Truth and Sportsman Ltd [1937] HCA 74; (1937) 58 CLR 416, 420-421.
[47] Hallam v Ross [2012] QSC 274 [16].
[48] Cerutti and Anor v Crestside Pty Ltd and Anor [2014] QCA 33 [35].
[49] Defamation Act 2005 (Qld) s 25.
[50] Carson v John Fairfax & Sons Ltd [1993] HCA 31; (1993) 178 CLR 44, 60.
[51] Cerutti and Anor v Crestside Pty Ltd and Anor [2014] QCA 33 [35].
Wash Investments Pty Ltd & Ors
SCK Properties Pty Ltd & Ors [2016] QDC 77
(1989) 166 CLR 623
(1937) 58 CLR 416
(1985) 157 CLR 17
(1993) 178 CLR 44
(1982) 149 CLR 620