Water Wine & Juice Pty Ltd v Steve Konstantopoulos [2010] NSWSC 312 | Case summary

Water Wine & Juice Pty Ltd v Steve Konstantopoulos [2010] NSWSC 312 | Case summary | Zoe

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2009/291740 Water Wine & Juice Pty Ltd v Steve Konstantopoulos & Anor JUDGMENT 1 HIS HONOUR: This is a case about a lease. In December 2005 the parties signed the lease which commenced on 15 December 2005. The lease was for a term of four years with three options of renewal each for a further three years. The defendants were the lessors. The plaintiff was the lessee. On 9 September 2009 the plaintiff exercised the first option of renewal. There is no issue as to the validity of that exercise. On 4 December 2009 the defendants served a notice of termination of the lease. There is no issue that if the lease was validly terminated by the defendants then unless the plaintiff is entitled to relief against forfeiture, it is required to vacate the premises and cannot insist upon a renewed lease. 2 The leased premises are part of a larger industrial site owned by the defendants. The building leased to the plaintiff is used by it for the manufacture of bottled water and fruit juices and the manufacture of frozen concentrates of juices and wine. As part of its business the plaintiff stores juices and concentrates in refrigerated shipping containers. 3 On 13 January 2006 the plaintiff arranged for the installation of four shipping containers on land immediately adjacent to the building it occupies and uses as a factory. The containers were connected to power outlets in the building to provide the power for refrigeration. These containers are the principal source of contention between the parties. It is common ground that they are not located on land the subject of the original lease. That is to say, the plaintiff does not contend that the land adjacent to the building it leases and on which the containers are situated is or is part of the curtilage of the building, being land necessary for the convenient use and occupation of the building, which was demised by the lease of the building (compare ET Petroleum Holdings Pty Limited v Clarendon Pty Limited [2005] NSWSC 435 at [28]). 4 Initially the plaintiff pleaded and the defendants denied that at or around the time the lease was executed it was agreed that in consideration of the plaintiff entering into the lease, it could store the shipping containers used in its business on the land adjacent to the building (called the parking area). 5 There is no term to that effect in the lease. The alleged agreement is not evidenced by any memorandum let alone any signed memorandum. The defendants pleaded that the alleged agreement was unenforceable by virtue of s 54A of the Conveyancing Act 1919 (NSW). At the hearing the plaintiff filed an amended statement of claim that withdrew this allegation. Nonetheless the question whether the defendants did agree to the plaintiff's using the land adjacent to the building as a place for the shipping containers remained a live issue. 6 The defendants are husband and wife. All of the dealings with the plaintiff were through the first defendant, Mr Steve Konstantopoulos. He deposed that it was not until after the lease was signed that he became aware of the plaintiff's intention to place the containers outside and adjacent to the leased building. He deposed that Mr Warren Peffer of the plaintiff told him that the containers would be moved and he agreed to their remaining in place only temporarily, namely for a couple of months. 7 In 2007 the defendants appointed a managing agent for the site, namely PRD Nationwide of Brighton-Le-Sands. On 5 September 2007 Mr Alexander Kanevsky of PRD Nationwide wrote to Mr Peffer complaining about the positioning of the containers on the driveway adjacent to the leased building. He said that: " ... the storage of containers on the driveway is not covered by/within the Lease Agreement. There are two (2) solutions to dealing with this issue: 1. PREFERRED - that the containers be removed from the site and/or 2. If they are to remain a square metre rate will be applied to the area taken by the containers and will be added to the monthly rent payable by you. "

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9 The defendants deny that the agreement reached in about October or November 2007 was a variation of the lease. They contend that the alleged variation of the lease is unenforceable by virtue of s 54A of the Conveyancing Act. They say that the agreement reached in about October or November 2007 was a licence or alternatively a tenancy at will determinable on one month's notice. They say that the licence or tenancy was terminated either by a letter dated 11 April 2008, or by further correspondence dated 30 April 2009, or further notices dated 21 October and 30 November 2009. 10 The defendants plead that the plaintiff has paid the additional rent of $183.93 per month from 1 November 2007 to date. Notwithstanding the agreement admittedly reached in 2007 pursuant to which the plaintiff paid that increased rent for storage of the containers, on 11 April 2008 the defendants' solicitor wrote to the plaintiff as follows: " Konstantopoulos lease to Water Wine & Juice Pty Ltd Premises: Unit 2, Building B, 25 Fairfield Street, Fairfield We advise that we act for the proprietors of the above property and understand that you have occupied the property since late 2005. Further, we are instructed that you have never executed the lease and have remained in occupation of unit 2, as a month to month tenant. Our clients have on numerous occasions advise [sic] you that you are not to keep any containers in the driveway to unit 2 and you are to remove the containers currently stored in the drive way. You have failed to remove the containers and in fact have been increasing the number of the containers you are storing in that location. You have no right to use any other part of the property other than unit 2, and your non adherence to our clients' request have been frustrating the use of the property by other tenants and our clients. Accordingly, we advise you remove [sic] all containers and other material located in the drive-way of unit 2, within 7 days of the date of this letter. In the event that you fail to comply with this letter and our clients' requests, our clients will have no other option but to give you one month's notice to vacate the premises. We urge you to take heed to this letter and our clients' request. "

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15 When that letter was written the lease was due to expire on 15 December 2009 and the option of renewal had not been exercised. Evidently the plaintiff later decided to exercise the option of renewal rather than vacate. Meanwhile on 3 August 2009 the defendants served a further notice expressed to be given under s 129 of the Conveyancing Act. It stated as follows: " NOTICE OF BREACH OF COVENANT From: Steve Konstantopoulos and Rosa Konstantopoulos ('the Lessor') To: Water Wine & Juice Pty Limited ACN096 263 204 ('the Lessee') The Lessee of Part Lot B in Deposited Plan 395577, being Unit 2, Building B, 25 Fairfield Street, Fiarfield [sic], NSW, (the 'Lease'). With reference to the Lease of the abovementioned Premises, Commencing 15 December 2005, from the Lessor to the Lessee, and the covenants by the Lessee therein contained: 1. RENT a. Clause 5.1: 'The tenant must pay to the landlord or as the landlord directs - 5.1.1 the rent stated in item 13A in the schedule;' b. Item 13A of the Schedule: RENT: (Clause 5) 'From the commencement date to the first rent review date: $72,000.00 a year by monthly instalments of $6,000.00 (exclusive of GST)'; c. 12.5 'Essential terms of this lease include - 12.5.1 the obligation to pay rent not later than 14 days after the due date for payment of each periodic instalment (and this obligation stay essential even if the landlord from time to time, accepts late payment;' 2. OUTGOINGS a. Clause 5.1: 'The tenant must pay to the landlord or as the landlord directs - 5.1.2 the share stated in item 14A in the schedule of those outgoings stated in item 14B in the schedule'; b. Item 14A Schedule: 'A. Share of Outgoings: 9.6% of total outgoings to be paid by Lessor; B. Outgoings - (a) local council rates and charges; (b) water sewerage and drainage charges; (c) land tax (d) insurance For the land or the building of which the property is part, fairly apportioned to the period of this lease.' c. 12.5 'Essential terms of this lease include - 12.5.2 the obligations of the tenant in clause 5.1.2 (dealing with outgoings)'. And the breaches by you of those covenants, we hereby give you notice and require you to remedy the breaches by 5pm on Wednesday, 19 August 2009 , by : 1. Pay us the rent arrears in the sum of $14,542.08 (incl. GST) for the following periods: - 1 July 2009 - 31 July 2009: $7,271.04 (incl. GST); - 1 August 2009 - 31 August 2009: $7,271.04 (incl. GST); Sub-Total: $14,542.08 (incl. GST) 2. Pay us the outgoing arrears in the sum of $7,914.54 (incl. GST) for the following periods:

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16 I deal with the validity of this notice later in these reasons. Suffice it to say that on 18 August 2009 the plaintiff paid the sum demanded. Also on 3 August 2009 and under cover of the same letter which enclosed the notice of breach of covenants set out above, the defendants served a tax invoice from their solicitor in the sum of $1,001. That sum comprised $990 (including GST) professional costs and $11 for disbursements. The professional costs were said to relate to the following work: " TO OUR PROFESSIONAL COSTS ... relating to breaches of covenants under lease, including obtaining instructions, drafting the Notice of Breach of Covenant, service of Notice, ... ". It was common ground that the "Notice of Breach of Covenant" referred to was the notice of 3 August 2009. 17 On 21 October 2009 the defendants served four further notices expressed to be given under s 129 of the Conveyancing Act. Two related to alleged arrears of rent and outgoings and the moneys so demanded were paid within the time specified in the notices. The remaining two notices formed the basis of the defendants' termination or purported termination of the lease on 4 December 2009. 18 One notice demanded removal of all of the containers within 14 days. It stated: " NOTICE OF BREACH OF COVENANT From: Steve Konstantopoulos and Rosa Konstantopoulos ('the Lessor') To: Water Wine & Juice Pty Limited ACN096 263 204 ('the Lessee') The Lessee of Part Lot B in Deposited Plan 395577, being Unit 2, Building B, 25 Fairfield Street, Fairfield, NSW, (the 'Lease'). With reference to the Lease of the abovementioned Premises, Commencing 15 December 2005, from the Lessor to the Lessee, and the covenants by the Lessee therein contained: 1. PROPERTY a. Clause 3.1: 'The property leased is described on page 1 of this lease' b. Clause 6.1.4: 'The tenant must...comply with all laws relating to strata schemes and all other laws regulating how the property is used, obtain any consents or licenses [sic] or registrations needed for the use of the property or for the conduct of the tenant's business there'. c. Clause 6.3.1: 'The tenant must not...do anything that might invalidate any insurance policy covering the property or that might increase the premium unless the landlord consents in which case the tenant must pay the increased premium...' d. Clause 6.3.2: 'The tenant must not...become a nuisance or annoyance tot [sic] the landlord or to the owner or occupier of any neighbouring property...' And the breaches by you of those covenants, we hereby give you notice and require you to remedy the breaches by 5pm on Friday, 6 November 2009 , by : 1. Removing all containers otherwise not within the property demised under the Lease, within fourteen (14) days. Dated this 21 st day of October 2009. "

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19 The other notice demanded payment of the solicitor's costs of $1,001. That notice stated: " NOTICE OF BREACH OF COVENANT From: Steve Konstantopoulos and Rosa Konstantopoulos ('the Lessor') To: Water Wine & Juice Pty Limited ACN096 263 204 ('the Lessee') The Lessee of Part Lot B in Deposited Plan 395577, being Unit 2, Building B, 25 Fairfield Street, Fairfield, NSW, (the 'Lease'). With reference to the Lease of the abovementioned Premises, Commencing 15 December 2005, from the Lessor to the Lessee, and the covenants by the Lessee therein contained: 1. MONEY - LEGAL COSTS a. Clause 5.1.8: 'The tenant must pay to the landlord or as the landlord directs - ... if the tenant defaults, the landlord's reasonable legal costs relating to the default' And the breaches by you of those covenants, we hereby give you notice and require you to remedy the breaches by 5pm on Friday, 6 November 2009 , by : 1. Pay us the legal costs arising out of your defaults, including: - D C Chambers & Associates Tax Invoice 2050, dated 3 August 2009: $1,001.00 Total: $1,001.00 ____________________________________________ Making the Total Payable: $1,001.00 (incl. GST) Dated this 21 st day of October 2009. " 20 Neither notice was complied with by the time limited. The containers have not been removed. On 16 December 2009 the plaintiff paid the sum of $1,001 under protest. 21 I deal first with the validity of the defendants' termination or purported termination of the lease based on non-compliance with the notice requiring removal of the shipping containers. 22 There are separate questions whether the failure to remove the containers from the defendants' land was a breach of the lease justifying its termination, or whether it was a trespass entitling the defendants to damages or a mandatory injunction requiring removal of the containers, or both. To justify termination of the lease on the ground of non-removal of the containers the defendants contend that the failure to remove the containers was a breach of the lease. 23 The notice of 21 October 2009 set out earlier in these reasons quoted parts of the relevant clauses of the lease said to give rise to the breach. The notice omitted relevant parts of clause 6.3.2 and thereby altered the sense of the text. Clause 6.3.2 of the lease provides: " 6.3 the tenant must not - ... 6.3.2 use the property as a residence or for any activity that is dangerous, offensive, noxious, illegal or immoral or that is or may become a nuisance or annoyance to the landlord or to the owner or occupier of any neighbouring property; " 24 The word "property" is not defined in the lease. It is clear from the lease read as a whole that the word "property" means the leased property. Even if the containers were placed on the defendants' land without their consent, or even if the defendants have validly and effectively withdrawn their consent, the continued siting of the containers on the defendants' land was not a breach of the lease, whether or not it was a trespass. 25 The siting of the containers on the defendants' land did not alter the "property leased" as set out in clause 3.1. It is common ground that the property leased was the building described in the lease as "part lot B in deposited plan 395577" being unit 2, building B, 25 Fairfield Street, Fairfield. (It appears there is an error in that description in that reference should be made to an additional lot but that does not affect the present question.) 26 No evidence and no argument was addressed to clause 6.1.4, that is to say there is no evidence that the presence of the containers on the defendants' land means that the plaintiff has failed to comply with any law regulating its use of the leased property. Nor is there any evidence that the plaintiff has failed to obtain any consent or licence needed for its use of the leased property or the conduct of its business on the leased property. Nor was any submission advanced that the continued presence of the containers on the defendants' land was a breach of clause 6.3.1, although Mr Konstantopoulos asserted in correspondence that the continued presence of the containers would result in an increase in the insurance premium of $58,000. There was no evidence to that effect. 27 Hence the argument that the continued presence of the containers on the defendants' land was a breach of the lease centred on clause 6.3.2. When the whole of clause 6.3.2 is read it is clear that it is the use of the leased property which must be or become a nuisance or annoyance for the clause to be breached. The only use of the leased property which might be said to be a nuisance or annoyance to the defendants or to an occupier of a neighbouring property arising from the presence of the containers on the defendants' land might arise from the loading and unloading of trucks delivering goods to or from the plaintiff's premises. Because the containers are situated where they are, it is obviously not possible for trucks to park on the same site to load or unload. But it was not the loading or unloading of trucks which was alleged to be a breach of clause 6.3.2. Nor does the evidence establish that the loading or unloading of trucks with goods for or from the plaintiff's premises amounts to an annoyance or a nuisance. 28 There was some evidence which, if accepted, would suggest that the presence of the containers inhibits the passage of trucks along the driveway. But that inhibition would not arise from the use of the plaintiff's demised premises as distinct from the siting of the containers off the demised premises. The evidence as to such obstruction was slight. 29 An affidavit was read by the defendants of a Mr Marolla who said that he observed trucks having difficulty in passing the unit occupied by the plaintiff because of the narrowness of the driveway caused by the presence of shipping containers and that difficulty is made worse where there are motor vehicles parked along the side or near or next to the shipping containers. 30 However Mr Marolla was not available for cross-examination and the plaintiff was not able to test that evidence. His affidavit was served late and I do not regard the evidence of inhibition of the passage of trucks along the driveway as establishing any annoyance or nuisance which would infringe clause 6.3.2, even if that nuisance or annoyance could be said to arise from the use of the demised premises. 31 Accordingly, even if there were no consent to the situation of the containers on the defendants' land there was no breach of the lease which would warrant the defendants terminating the lease on this ground. However, I am also of the view that there was no such breach because the defendants consented to the containers being positioned where they were. That consent was initially given at or about the time the lease was entered into. 32 The then director of the plaintiff, Mr Lance Peffer, deposed that at a meeting at the defendants' premises in about September or October 2005 his son Warren asked Mr Konstantopoulos what parking the plaintiff would be entitled to under a lease and said that "We have some containers". He deposed that Mr Konstantopoulos replied, "You can have the length of the premises that you will be renting. The containers will have to go in that space", indicating the land outside the building. 33 Mr Konstantopoulos denied that conversation, but I prefer Mr Peffer's evidence. Both he and Mr Warren Peffer were more credible witnesses than Mr Konstantopoulos. I found Mr Konstantopoulos' evidence to be generally unimpressive and his conduct in relation to various aspects of the plaintiff's tenancy has left much to be desired. 34 I have already referred in that respect to his service of the letter of 11 April 2008 at a time he was accepting an increased rent for the storage of the containers. But there are other aspects of his behaviour which reflect on his credit, not least his failure to take any step to register the lease, notwithstanding that the plaintiff paid the fees which would be payable on registration of the lease when it was entered into. 35 Mr Warren Peffer deposed that in November 2005 he had a conversation with Mr Konstantopoulos when they were standing outside the premises. He deposed having told Mr Konstantopoulos words to this effect: " Peffer: 'We use shipping containers for storage of our juices. Where could we put them?' Konstantopoulos: 'You can put them at the back of the property as there is plenty of space.' Peffer: 'The containers are refrigerated. We need to have power for them.' Konstantopoulos : 'You can put them at the side of the building. You lose your car parking but that's up to you. Your parking is along here.'"

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And then Mr Konstantopoulos is said to have made a sweeping motion indicating the side of the unit. 36 I accept that evidence. I also accept Mr Peffer's evidence that at a visit to the plaintiff's then premises in Whitaker Street, Yennora, Mr Peffer showed Mr Konstantopoulos how the concentrating system worked and how the juice or concentrates were stored in refrigerated containers. 37 As I have said earlier in these reasons Mr Konstantopoulos denied becoming aware of the intended use of the shipping containers until after the lease was signed and the plaintiff took possession of the premises. I do not accept that evidence. It appears to be objectively unlikely that when the parties were discussing the nature of the plaintiff's operation that no mention would be made of an integral part of that operation which involves the storage of juices or concentrates in containers. 38 One of the reasons for which counsel for the defendants submitted that the evidence of Mr Warren Peffer on that topic should not be accepted was that Mr Peffer spoke to the lessor's solicitor before the lease was entered into about two matters which had been the subject of discussion with Mr Konstantopoulos. Those matters were the inclusion in the lease of what was called by the parties an option to purchase and described in the lease as a first and last right of refusal. The other was the plaintiff's intention to install a concrete slab, it having been agreed with Mr Konstantopoulos that the plaintiff would remove the slab when it vacated the premises. 39 Mr Peffer did not raise with the defendants' then solicitor the location of storage containers outside the building. However Mr Konstantopoulos acknowledged that there were discussions about parking. He said that he nominated ten car parking spaces in front of the building to Mr Peffer before the lease was entered into. The lease makes no reference to that matter either. It is thus clear that whatever were the discussions between Mr Konstantopoulos and Mr Peffer about parking or the situation of containers in the car parking spaces, the outcome of those discussions was not conveyed to the solicitor who prepared the lease. 40 In those circumstances one cannot infer from the absence of any reference in the lease to the siting of shipping containers outside the demised premises that there were no such discussions. 41 The containers were installed on the site on 13 January 2006. There were evidently an early source of dispute. On 2 February 2006 Mr Konstantopoulos wrote to the plaintiff. He said: " I refer to previous correspondence and will be referring this matter to our solicitors and confirm that your lease will be terminated as you have not complied with the terms of the lease. I also believe that you are also subletting the containers which is considered a breach of this lease and I am also aware that someone has also been living on the premises. "

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42 No step was taken after delivery of this letter to terminate the lease, but what is noteworthy about the letter is the absence of any complaint that the containers had been put on the defendants' land without Mr Konstantopoulos' knowledge or approval. It is also noteworthy that no reference is made to what Mr Konstantopoulos said had then been agreed, namely that the containers would be removed within a couple of months. 43 The next evidence of complaints about the situation of the containers is the letter from PRD Nationwide of 5 September 2007 to which I have earlier referred. As I have said the outcome of the complaint of 5 September 2007 was that the parties reached an agreement for the payment of additional rent. Counsel for the defendants rightly makes the point that at no stage in this correspondence did the plaintiff assert that the defendants had no right to claim additional rent because they had given consent to the location of the containers at the time the lease was entered into, and as consideration for the plaintiff entering into lease. 44 There is some substance in that submission and were it the only matter, it might have persuaded me that no consent was given as the Messrs Peffers deposed. However I do not think too much should be made of this point. There was clearly a dispute about the containers and PRD Nationwide was obviously right in contending that the storage of the containers was not covered by the lease agreement. It is not inconsistent with the plaintiff's case that the plaintiff should have agreed to pay what is a modest additional sum to forestall the dispute about the containers. 45 After the defendants' solicitor served the letter of 11 April 2008 which I have set out above the plaintiffs then solicitor Mr David Golotta of Golottas replied by letter dated 21 April 2008. He said amongst other things: " ... we are instructed as follows:- ... 3. The containers your client refers to were put in place by our clients with the expressed consent of your client prior to our clients entering into the Lease. As the containers were essential to our clients [sic] business, our client would not have proceeded with a Lease nor taken possession of the premises had that consent not been given. "

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47 Mr Konstantopoulos received both items of correspondence. He did not directly or through his solicitor respond by denying those claims. This corroborates the conclusion which I would otherwise draw that he, for himself and on behalf of his wife, gave consent at, or shortly before, the time the lease was entered into to the containers being placed where they were. 48 I should add that counsel for the defendants also relied upon the plaintiff's letter of 25 May 2009 in reply to Mr Konstantopoulos' letter of 30 April 2009. Counsel points out that the plaintiff did not in its letter of 25 May 2009 assert that the defendants had consented from the outset to the shipping containers being placed where they were. 49 I do not think that carries significant weight. The plaintiff through its solicitor had asserted its position on at least two occasions and that had not been rebutted. Moreover if, as I infer was the case, it was then its intention to vacate the premises there would be little to be gained by raising the matter again. 50 Although the plaintiff did not plead what had earlier been pleaded as a collateral agreement made at the time the lease was entered into as a separate contract giving rise to a separate cause of action (perhaps because of the defendants' reliance on s 54A of the Conveyancing Act) the plaintiff did rely upon the discussions between the parties as a consent to what might would otherwise be a trespass. 51 In my view that consent has been made out. I should add that the defendants in answer to the plaintiff's earlier claim as then pleaded contended that the agreement the plaintiff then asserted could not be established because the plaintiff was barred by what is called the parol evidence rule. In Maybury v Atlantic Union Oil Company Limited (1953) 89 CLR 507, the High Court (Dixon CJ, Fullagar and Taylor JJ) said (at 516- 517): " ... a collateral agreement made in consideration of the making of a main agreement. It sets forth a term, introduced by way of collateral agreement, which seeks to control the action of the plaintiff respondent under the main agreement. A collateral agreement made in consideration of a main agreement cannot effectively subsist unless it is consistent with the main agreement. Once an agreement is made in writing it is treated, unless the parties are shown otherwise to intend, as the full expression of their obligations. If it is established that the writing was intended to contain only part of a fuller agreement it may be otherwise. That, however, is not the present case. But it may be established that an entirely separate agreement was made by the parties. One of them may give a collateral promise in consideration of the other entering into the principal agreement. But if such a collateral agreement is to have effect as a contract it must be consistent with the provisions of the main agreement, the making of which by the other party provides the consideration. If the promise sought to modify, control or restrict the principal agreement it would detract from the very consideration which is alleged to support the promise. "

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52 In this case there is no inconsistency between the collateral agreement and the main contract contained in the lease. This distinguishes the present case from Hoyts Pty Ltd v Spencer [1919] HCA 64; (1919) 27 CLR 133 on which the defendants relied. Moreover, it is clear that the parties did not intend the lease to be the full expression of their obligations. That is so because on any view the lease does not contain matters to which the parties had agreed in relation to car parking. 53 Further consent to the situation of the containers adjacent to the building was given in 2007. It is common ground that what was negotiated in 2007 gave rise to an agreement with legal effect, although there is a dispute as to the nature and terms of that agreement. 54 In their cross-claim the defendants pleaded: " 18. The Cross-Claimants allege that on or about 5 September 2007 the Cross-Claimants did offer to permit the Cross-Defendant to continue to place and keep the large containers in the car parking area adjacent to the property upon the payment to the Cross-Claimants of the sum of $183.93 per month in addition to and separate from the amounts payable to the Cross-Claimants by the Cross-Defendant pursuant to the terms of the agreement. PARTICULARS The offer was contained in letters dated 5 September 2007 and 22 October 2007 sent from the Cross-Claimants [sic] then agents to the Cross-Defendant. 19. The Cross-Defendant by its conduct accepted such offer and did pay to the Cross-Claimants the sum of $183.93 per month in addition and separate from the amounts payable to the Cross-Claimants by the Cross-Defendants pursuant to the terms of the agreement. PARTICULARS OF PAYMENT The payments of $183.93 per month were made by the Cross-Defendants to the Cross-Claimants from 1 November 2007 to date and continuing. 20. The offer and acceptance referred to in paragraphs 18 and 19 herein created a licence agreement between the Cross-Claimants and the Cross-Defendant or alternatively a tenancy at will in respect of the car parking area adjacent to the property such licence agreement or tenancy was determinable at the will of either the Cross-Claimants or the Cross-Defendant by one months [sic] notice in writing expiring at any time. 21. By letter dated 11 April 2008 (served on the Cross-Defendant on or about that day) the Cross-Claimants (by their solicitors) determined the licence agreement (or alternatively the tenancy at will) of the car parking area adjacent to the property and demanded that the Cross-Defendant remove the large containers from that area. 22. Alternatively, by letter dated 30 April 2009 and/or by letter dated 30 November 2009 and/or by Notice dated 21 October 2009 (served on the Cross-Defendant on or about the dates they bear) the Cross-Claimants (by their solicitors) determined the licence agreement (or alternatively the tenancy at will) of the car parking area adjacent to the property and demanded that the Cross-Defendant remove the large containers from that area. 23. The Cross-Defendant has refused or neglected to remove the large containers from the car parking area adjacent to the property and thereby has committed and continues to commit trespass to the Cross-Claimants' land. "

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61 The evidence before me is that the area occupied by each container is not 14.78m², but is approximately 16.8m². 62 The complaint in the letter of 5 September 2007 was not a complaint about two out of three or four containers, but a complaint about all of the containers on the driveway. That complaint was resolved by the agreement for the payment of an additional rent of $183.93 per month. 63 It may be that Mr Kanevsky of PRD Nationwide was mistaken in assuming that there were only two containers on the driveway. Whether or not that is so, the dispute in relation to all of the containers was resolved by the agreement to pay the additional rent, and that is not the less so because the additional rent was calculated by reference to the area taken by two containers. Nor is the resolution of the complaint about all containers affected by the fact that the calculation of the area appears to be mistaken. 64 Mr Konstantopoulos also said that he had only authorised PRD Nationwide to give a licence revocable on a month's notice and he said that he did not authorise the quantum of the additional rent to be charged. But he and the second defendant are bound by the actions of their agent and the defendants have, in any event, ratified the agreement arising from the correspondence by pleading that agreement in the amended cross-claim. 65 It is not an express term of the correspondence that consent to the continued location of the containers could be revoked at will, or on one month's notice. The consideration for a consent to the containers remaining on-site is provided by the agreement to pay additional rent. Rent is payable as the consideration for the landlord's grant of possession of the demised premises for the term of the lease and any renewal thereof. 66 By providing that the rent was to be increased and by providing that the lease agreement would be amended to reflect the agreement in the correspondence, the defendants promised that, as long as the additional rent was paid, the containers could remain on-site for the duration of the lease or any renewal thereof. 67 The defendants did not give instructions to their solicitor to amend the lease, but that does not deprive the agreement of effect, nor does it alter the construction to be given to the correspondence. Even if the offer contained in the letter of 22 October 2007, which was accepted by the payment of the increased rent, does not give rise to a new or varied tenancy, nonetheless, it was a licence given for valuable consideration, to the continued placement of the containers on the defendants' land. 68 No doubt, such a licence can be revoked at law (Cowell v The Rosehill Racecourse Company Limited (1937) 56 CLR 605), but equity will restrain an attempted revocation of the licence in breach of contract. (See R P Meagher, J D Heydon & M Leeming, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies, 4th ed (2002), LexisNexis Butterworths, at [21-260]-[21-275].) 69 As I have said, the defendant pleaded that the agreement is a variation of the lease. The plaintiff did not plead that the lease had been varied by including in the leased area, or adding to the leased area, that land on which each of the containers stood at the time the agreement was made. It would not be an objection to such a claim that parol evidence would be needed to identify the precise location and dimensions of that land (Akot Pty Ltd v Rathmines Investments Pty Ltd [1984] 1 Qd R 302). Instead, the plaintiff pleaded that the lease was varied by the inclusion of an additional area of 29.56m². However, it is impossible to say which of the sites on which the containers stood would be the subject of such a varied lease. Not only are the dimensions wrong on the evidence before me, but assuming they were right and the land referred to is the land on which stand two containers, it is impossible to say which of the areas on which two containers stand were to be included in the lease. 70 Section 54A of the Conveyancing Act provides that no proceeding may be brought upon a contract for the disposition of an interest in land, which includes a contract for the grant of a lease, unless there is some memorandum, or note of the agreement in writing, signed by the person to be charged, or by a person lawfully authorised by the party to be charged. A memorandum to satisfy s 54A must, amongst other things, identify with certainty the land to be the subject of the disposition. There is no such certainty in relation to an area of 29.56m². 71 Accordingly, the plaintiff is not entitled to the relief which it seeks that the lease has been varied in the way pleaded. 72 The defendants submitted that if, by reason of s 54A, there is not an enforceable agreement to vary the lease, the agreement could not be relied upon as a licence. This, it was said, would be a backdoor method of enforcing an otherwise unenforceable claim. 73 I do not think this is correct in principle. No authority for it was cited. There is no doubt that an agreement which is not enforceable by specific performance because of s 54A can, nonetheless, give rise to legally enforceable rights, for example, a right to claim damages for breach of the agreement. I do not see why, as a matter of principle, an agreement which cannot be specifically enforced as an agreement for the disposition of an interest in land cannot, nonetheless, be operative as a consent to what would otherwise amount to a trespass. 74 For these reasons, I consider that consent to the location of the containers on the land was also given in 2007. That consent was not capable of being revoked, either at will, or on the giving of 28 days' notice. It follows for this reason also, that there was not a breach of the lease, as claimed in the notice of 21 October 2009. It also follows that the defendants' claim for damages, or an injunction for trespass fails. I should add that, in any event, no damages were established for the alleged trespass. 75 I turn then to the second basis on which the defendants have purportedly terminated the lease, namely, the second notice of 21 October 2009, demanding payment of $1,001. That notice was based upon clause 5.1.8 of the lease. That clause is set out in the notice itself, which I have quoted above. The lease does not specify a time by which the tenant is to pay the landlord reasonable legal costs relating to the default. In the absence of a specific provision, the time for payment would be a reasonable time. The basis for the claim must be that the plaintiff was in default of the lease and that notice of breach of covenant of 3 August 2009 was given in respect of the default, such that the lessor was entitled to claim the reasonable legal costs. 76 The plaintiff disputed and disputes that the landlord was entitled to claim reasonable legal costs under clause 5.1.8 but, in the alternative, seeks relief against forfeiture. As I have said, it paid the sum demanded on 16 December 2009. 77 The defendants submitted that it was not open to the plaintiff to deny the breach, but seek relief against forfeiture if its denial were not accepted. Reference was made to Kumaragamage v Rallis [2001] NSWSC 466, in particular, at [10]. There, Austin J said: " [10] In my opinion the cases establish that a lessee must elect between seeking relief on the basis that there has been no breach, and seeking relief against forfeiture. Having elected to conduct the interlocutory hearing on the former basis, the plaintiffs were not in a position to invite the Court to grant interlocutory relief on the latter basis. Indeed, they did not seek to do so until final submissions. In my view, they were not precluded, simply by seeking relief against forfeiture in the summons, from putting their interlocutory case solely on the basis of the contention that there had been no breach. A real problem will arise for them if they go to the final hearing seeking the two inconsistent forms of relief. They will have to decide, before that time, whether to admit that there have been breaches and offer to remedy them, as the price for obtaining relief against forfeiture, or to deny breaches and thereby jettison their relief against forfeiture case. " 78 The authorities to which his Honour referred, which supported the principles set out in para [10], were Langley v Foster (1909) 10 SR (NSW) 54; Tooth & Co Ltd v Coombes (1925) 42 WN (NSW) 93; and David Jones Limited v Leventhal (1927) 27 SR (NSW) 350. 79 In Solowave Pty Ltd v Nechi Holdings Pty Ltd [2005] NSWSC 837, I said (at [42]): " [42] No point was taken that it was not open to the plaintiff both to deny that the defendant had validly terminated the lease and in the alternative to seek relief against its forfeiture. Notwithstanding the observations of Austin J in Kumaragamage v Rallis [2001] NSWSC 466 at [10]-[19], it is at least arguable that such claims can be made in the alternative. ( MI Design Pty Ltd v Dunecar Pty Ltd (2000) 10 BPR 18,387 at 18,399 [56]; Islam v South Sydney City Council (1998) 9 BPR at 16,865 at 16,870). Indeed, it might be thought that s 63 of the Supreme Court Act required such an alternative claim to be made. Tannous v Cipolla Bros Holdings Pty Ltd [2001] NSWSC 236 is an example of a plaintiff obtaining relief against forfeiture after unsuccessfully disputing the validity of the termination of the lease. "

[35]

80 If the position is as the defendants contend, a tenant who denied a breach of the lease, but offered to remedy the breach if his principal contention was rejected by the Court and sought relief against forfeiture in that event, would be forced to be involved in two separate sets of proceedings with the lessor. The tenant would be required first to litigate the question of breach and then, if he or she failed on that question, to bring separate proceedings for relief against forfeiture. Whether or not that course would have been permitted in 1909, 1925 or 1927, it does not reflect the current position. 81 Section 63 of the Supreme Court Act 1970 authorises the Court to give all remedies as any party is entitled to and requires the Court and the parties to endeavour so far as possible to ensure that all matters in controversy between them are resolved to avoid multiplicity of legal proceedings. 82 It is commonplace for parties to maintain claims in the alternative. As Santow J (as his Honour then was) said in MI Design Pty Ltd v Dunecar Pty Ltd (2000) 10 BPR 18,387 at 18,399 [56], there would be no implied admission of a breach by seeking relief against forfeiture if the claim for relief against forfeiture is brought as an alternative claim. Whatever the position in the past, it is not now the position that a lessee cannot both dispute a breach and seek relief against forfeiture in the one proceeding. 83 In Mineaplenty Pty Ltd v Trek 31 Pty Ltd [2006] NSWSC 1203, Brereton J said (at [69]): " [69] Although it was once the case that before relief against forfeiture would be granted, the relevant breaches and if need be the forfeiture must be first be admitted by the plaintiff [ Langley v Foster (1909) 10 SR (NSW) 54; T Hyland Enterprises Pty Ltd v Alliance Acceptance Co Ltd (NSWSC, Powell J, 2 October 1984, BC8400245)], there is no reason in equity why a tenant who bona fide disputes that it has been in breach of an obligation under a lease should be denied relief against forfeiture for that breach if it is ultimately established. " 84 His Honour then referred to World by Nite Pty Ltd v Michael [2004] 1 Qd R 338, which illustrated that principle. His Honour repeated this in Greek Macedonian Club Ltd v Pan Macedonian Greek Brotherhood NSW Limited [2007] NSWSC 92 at [73] and [74]. 85 In Byron Bay Retirement Villages Pty Ltd v Zandata Pty Ltd [2008] NSWSC 1123, Palmer J said (at [40] and [41]): " [40] According to Mr Bevan, a lessee must elect prior to commencing proceedings whether or not to admit breach and thereby seek relief against forfeiture, or to deny breach and thereby eschew any claim for relief against forfeiture. In my view, this is no longer the position in equity - if it ever truly was the position.

[36]

[41] It is quite common, indeed almost an everyday occurrence, that a plaintiff lessee denies having committed a breach of the lease entitling or justifying termination and, in the alternative to a declaration, claims relief against forfeiture. If the claim that the lease has not been breached is made bona fide and on reasonable grounds, then there can be no objection to a claim in the alternative for relief against forfeiture. Such, I think, is now made clear by a number of decisions at first instance, namely, Greek Macedonian Club Ltd v Pan Macedonian Greek Brotherhood NSW Ltd [2007] NSWSC 92, at [73] per Brereton J; Mineaplenty Pty Ltd v Trek 31 Pty Ltd [2006] NSWSC 1203, per Brereton J at [69]; and Solowave Pty Ltd v Nechi Holdings Pty Ltd [2005] NSWSC 837, per White J. " 86 I respectfully doubt that it is only if a claim that the lease has not been breached is made bona fide and on reasonable grounds that there is no objection to such a claim, and a claim for relief against forfeiture, being made in the alternative. Doubtless, if a claim that there had been no breach of the lease was not made in good faith, that would be telling against an alternative claim for relief against forfeiture. It would also be relevant to a claim for relief against forfeiture if a denial of breach was not advanced on reasonable grounds. But matters which would be relevant to a decision whether or not to relieve against forfeiture are not, in my view, relevant to whether or not it is possible for a lessee to make alternative claims. 87 In my view, s 63 of the Supreme Court Act and the parties' obligations under s 56 of the Civil Procedure Act 2005 (NSW) require a lessee to make such claims in the alternative if they are part of the real issue in dispute between the parties. 88 Therefore, I do not consider that the plaintiff is barred from seeking relief against forfeiture because it denies the alleged breach. Nor is it precluded from denying the breach because it makes a claim in the alternative for relief against forfeiture. 89 There would be no breach of the obligation under clause 5.1.8 of the lease unless the legal costs claimed relate to a default. At least part of the notice of 3 August 2009 did not relate to a default. The notice claimed rent said to be due as at 1 August 2009 for the month of August 2009, as well as rent for the month of July. Under the lease, rent was payable in advance, but was payable each month from the commencement of the lease and thus, was payable in advance on the 15th of each month. 90 In correspondence, the defendants' solicitors contended that rent had become payable from the 1st of the month. They contended that the plaintiff had not paid the first month's instalment of rent until 1 January 2006 and that although this was a contravention of clause 5.2 of the lease, the parties had agreed to a continued routine from 1 January 2006 that rent was payable from the beginning of the month. The plaintiff disputed this and asserted in correspondence that it paid rent on the 15th of each month and never on the 1st. 91 Such evidence as there is on this question corroborates the plaintiff's position. There is no evidence that rent had become payable in advance from the 1st of the month. 92 Insofar as the notice of 3 August 2009 demanded rent which had fallen due on 15 July 2009, it was not reasonable for the defendants to incur costs to be passed on to the plaintiff in drawing a notice expressed to be given under section 129. Section 129 of the Conveyancing Act does not affect the law relating to re-entry for non-payment of rent (s 129(8)). Under the lease, the time for payment of the rent became essential 14 days after the rent had become due. The landlord was entitled to re-enter if rent or other money due under the lease was 14 days overdue for payment. 93 The notice of 3 August 2009 also claimed arrears of outgoings. The plaintiff queried the demand. It requested a reconciliation of the charges for outgoings and requested evidence as to what outgoings the defendant had, in fact, paid, or been charged. Its requests for information in this respect were not complied with. Although it paid the amount demanded in the notice, that payment is not an admission that it had defaulted in paying arrears of outgoings. 94 To establish a breach of clause 5.1.8, the onus is on the defendants to show that there had been a default in payment of arrears of outgoings so as to justify the claim for reasonable legal costs in respect of that default. 95 There was no basis upon which I could find one way or the other as to whether or not there had been a default in the payment of outgoings. I am not satisfied that the alleged breach has been made out. 96 If I am wrong in that, nonetheless, it is a clear case for the grant of relief against forfeiture. The default, if it be a default, between 6 November 2009, being the date by which payment was demanded, and 16 December 2009 when payment was made, is only a matter of weeks. The sum involved is small. There was good reason for the plaintiff to dispute its liability to pay the amount demanded. In those circumstances, it could not be said that the default, if it be a default, was wilful. 97 The amount in question is not rent, nonetheless, the principles in relation to relief against forfeiture for non-payment of rent are applicable by analogy to the claim for relief against forfeiture for non-payment of claimed legal costs. Equity regards a lessor's right to terminate a lease by re-entry for non-payment of rent as a security for the rent due. Provided the lessee pays the outstanding rent, or other moneys, interest and costs, it is only in special circumstances that relief against forfeiture for non-payment of rent will be refused. Nonetheless, the relief remains discretionary (Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co NSW Ltd (1970) 2 BPR 9,562). 98 Here, the defendants are more than secured for their claim; it has been paid. Hence, if I had been satisfied that there was a default which justified termination of the lease, the plaintiff would have been entitled to relief against forfeiture. 99 For these reasons, I conclude that the defendants' purported termination of the lease was invalid. As I have said, there is no issue as to the validity of the exercise of the option of renewal. 100 The plaintiff seeks an order that the defendants deliver to the plaintiff for execution a new lease of the premises for the period 15 December 2009 to 14 December 2012, in accordance with the provision of the lease, that is to say, the lease which commenced on 15 December 2005. They are entitled to that order, although, if, as appears to be the case, there is a misdescription of the property the subject of the lease, in so far as there is a misdescription of the lots and deposited plans on which the building is located, that misdescription should be corrected. 101 The plaintiff also seeks an order that the defendants do all things necessary to have the new lease executed and registered. Clause 11.4 of the lease, which will be incorporated in the new lease, requires the defendants to ensure that the lease is registered. The plaintiff is entitled to an order to that effect. 102 On the evidence before me, the leased property is situated on parts of two lots in two plans of subdivision. Because of the term of the lease and the existence of the options of renewal, the Registrar General might refuse to register the lease, unless the land demised to the plaintiff is shown on a current plan and the boundaries of the land demised follow the boundaries of an existing lot (Conveyancing Act, s 23F). In other words, the Registrar General might refuse to register the lease unless a new plan of subdivision is prepared and registered. 103 It is not known whether the Registrar General will refuse to register the lease. It appears to me that if he were to do so on that ground, the defendants' obligations under clause 11.4 would be to do what was necessary on their part to obtain registration of the plan of subdivision to permit registration of the lease. 104 The plaintiff sought a declaration that the lease had been varied on or around 22 October 2007. For the reasons I have given, I will refuse that declaration. It sought a declaration that it had validly exercised the option for renewal. Although there was no dispute about that at the hearing, there had been a dispute about that matter in correspondence and the plaintiff is entitled to the declaration sought. 105 The plaintiff sought a declaration that it is entitled to quiet enjoyment of the premises until 14 December 2012. I see no purpose in making such a declaration. Nor would it be possible to judge the position until 14 December 2012. Anything might happen in the meantime, which might justify the defendants in terminating the renewed lease. 106 The declaration sought in paragraph 6 of the relief claimed was not pressed. 107 The plaintiff is entitled to the declaration sought that the purported termination of the lease is invalid. For the reasons I have given, it is not necessary to make an order for relief against forfeiture. 108 For these reasons, I make declarations in accordance with paragraphs 1, 4 and 7 of the "relief claimed" in the amended statement of claim. 109 I order that within 28 days the defendants deliver to the plaintiff for execution by it of a new lease of the Premises, (as defined in paragraph 1 of the "relief claimed") for the period 15 December 2009 to 14 December 2012, in accordance with the provisions of the Lease (as defined in paragraph 1 of the "relief claimed" in the amended statement of claim), and otherwise do all things necessary on their part to be done to have such new lease executed and registered. 110 I order that the claims for relief in the amended statement of claim be otherwise dismissed. 111 I order that the amended cross-claim be dismissed. 112 The exhibits may be returned after 28 days.

Water Wine & Juice Pty Ltd v Steve Konstantopoulos

At a glance

Court

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Before

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Judgment (38 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (11)

Cited By (2)