New South Wales Court of Appeal CITATION : Herro Trading P/L v Kang & Anor [2001] NSWCA 309 FILE NUMBER(S) : CA 40637 of 2000 HEARING DATE(S) : 30/8/01 JUDGMENT DATE : 30 August 2001 Herro Trading Corporation Pty Limited PARTIES : v Won Kang & Anor JUDGMENT OF : Priestley JA at 1, 12; Meagher JA at 2; Stein JA at 11 LOWER COURT JURISDICTION : District Court LOWER COURT 6796/98 FILE NUMBER(S) : LOWER COURT Robison DCJ JUDICIAL OFFICER : COUNSEL : A: T Alexis with Miss M Dolenec R: F Santisi SOLICITORS : A: Rockliffs R: Nicolpoulos And Associates CATCHWORDS : Lease agreement - guarantee - where respondents guaranteed obligations under lease agreement - whether original agreement terminated - whether guarantor had any ongoing obligation - appeal dismissed. DECISION : Appeal dismissed with costs. IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40637 of 2000 PRIESTLEY JA MEAGHER JA STEIN JA Thursday, 30 August 2001 HERRO TRADING CORPORATION PTY LIMITED v WON KANG & ANOR Judgment 1 PRIESTLEY JA: I agree. In my opinion the agreement that was made on 2 April 1998 had the effect that a lease in equity began on 1 May 1998 which replaced the previous lease and in the replacement lease I do not see how there can be included either by way of construction or implication a guarantee on the part of the respondents in the appeal. The result is as Meagher J has said, the appeal should be dismissed with costs. 2 MEAGHER JA: This is an appeal by Herro Trading Corporation Pty Limited against Won Kang and Soon Kang against a judgment and verdict given by Robison DCJ in the District Court. The facts are that the appellant was the lessor of certain premises at 252 Pitt Street, Sydney and a company called Coz Coz Pty Limited was the lessee pursuant to a lease, which commenced on 30 August 1995 and terminated on 29 August 1998. 3 The respondents were guarantors under the lease with the obligation, inter alia, to guarantee the performance of Coz Coz. In 1997/1998 Coz Coz fell substantially into arrears with the payment of rent pursuant to the lease. This induced the appellant to commence proceedings in the Federal Court of Australia seeking orders for Coz Coz to be wound up and for the appointment of a liquidator. 4 The winding up proceedings came on before the Court for hearing on 2 April 1998. The appellant and Coz Coz settled the proceedings on the basis of short minutes of order which expressly contemplated the dismissal of the winding up proceedings on 17 April 1998 if Coz Coz paid to the appellant the sum of $100,000 on or before 6 April 1998 and $12,500 on or before 16 April 1998. Those monies were paid and the winding up proceedings were dismissed accordingly. 5 The sum of $12,500 represented rent under the old lease payable in April and the sum of $100,000 included anything owing by way of rent for February and March. Therefore on the payment of those sums there was no money owing for rent up until 1 May. 6 The short minutes noted an agreement between the parties which is in the following terms so far as is relevant: "The appellant will provide Coz Coz with a fresh lease with rent in the sum of $18,200 per month for three years from 1 May 1998 with no increases with a three year option with market review of rental for the option period." 7 It is conceded by learned counsel for the appellant, Mr Alexis, that that is a valid agreement for lease and one which is specifically performable. It is therefore in equity as good as a lease. 8 The appellant endeavoured to sue the present respondents as guarantors of the initial lease for all sums owing by way of rent under the agreement for lease. Robison DCJ found that this endeavour had to fail because whilst the guarantors had guaranteed the original lease they had not guaranteed any new lease, and once the old lease had terminated, with that termination the guarantee also terminated. 9 Although his Honour argued to that effect in somewhat incomprehensible language, that is the sum total of what he found. What he also found, which I find very difficult to understand, is that the old lease terminated on 2 April 1998. I should have thought on no view of it did the lease terminate until the end of April 1998 but for present purposes that does not matter. In my view the old lease clearly did terminate on 30 April 1998 and the new agreement for lease took effect as from 1 May. 10 The two documents are inconsistent with each other if read as co-extensive, and it must necessarily be involved in the entry into the agreement that the old lease had terminated. It is beyond argument that the guarantee was a guarantee merely of the old lease and not of any subsequent lease. In my view therefore the appeal should be dismissed with costs. 11 STEIN JA: I agree with Meagher J and with the additional remarks of the presiding judge. 12 PRIESTLEY JA: The order of the Court is that the appeal is dismissed with costs. ****** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.