Reported Decision : (2002) NSW ConvR 56-026 New South Wales Supreme Court CITATION : Rob Nichol Pty Ltd v Australia NID Pty Ltd [2002] NSWSC 371 CURRENT JURISDICTION: Common Law Division FILE NUMBER(S) : SC 11200/98 HEARING DATE(S) : 24 April 2002 JUDGMENT DATE : 6 May 2002 PARTIES : Rob Nichol Pty Ltd Australia NID Pty Ltd JUDGMENT OF : Davies AJ at 1 LOWER COURT Local Court JURISDICTION : LOWER COURT 34/96 FILE NUMBER(S) : LOWER COURT Wakely LCM JUDICIAL OFFICER : COUNSEL : Mr R Harper for the Appellant Mr C Bruge for the Respondent SOLICITORS : Edmunds & Co Solicitors for the Appellant Jason Li Lawyers for the Respondent CATCHWORDS : Landlord and tenant - commercial lease - appeal from decision of Local Court by way of stated case - whether respondent entitled to exclusive possession of the whole of the premises - whether sufficient evidence to support Magistrate's finding that lease agreement repudiated by conduct of appellant LEGISLATION CITED : Justice Legislation Amendment (Appeals) Act 1998 Local Courts (Civil Claims) Act 1970, s69 CASES CITED : D T R Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 DECISION : Appeal dismissed with costs. - 7 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION Davies AJ Monday, 6 May 2002 11200 / 98 Rob Nichol Pty Ltd v Australia NID Pty Ltd Judgment 1 His Honour: This appeal, from the judgment of Magistrate R Wakely in the Local Court at Raymond Terrace, given on 17 April 1997, was instituted prior to the amendments introduced by the Justice Legislation Amendment (Appeals) Act 1998. Accordingly, it was instituted by the procedure of case stated. As has happened so often in the past, the adoption of that procedure unduly complicated the presentation and consideration of the appeal. 2 Section 69 of the Local Courts (Civil Claims) Act 1970 confines the appeal to a point of law. The stated case enunciated points of law which the appellant sought to raise under seven paragraphs, which, being divided into sub-paragraphs, raised a total of 17 points. These points, in one way or another, attacked the findings of fact of the Magistrate. 3 On the hearing of the appeal, three points of law were relied upon by counsel for the appellant. They are: (a) The material relied upon by the Magistrate to support his conclusions in paragraphs 16 and 18 of the case stated was incapable of supporting such conclusions Paragraphs 16 and 18 of the case stated read: "16. The Appellant took possession of the premises after completion of the auction conducted by McCloys at the end of August 1993. 17. … 18. The evidence establishes that the Plaintiff denied the Defendant the use of the whole of the premises." (b) If the Magistrate erred in those conclusions, his ultimate conclusion that there was a repudiation of the lease by the appellant must fail. (c) Alternatively, the Magistrate's conclusion in paragraph 19 of the case stated that the appellant repudiated the lease cannot be sustained as a matter of law. Paragraph 19 of the case stated reads: "The evidence establishes that the Plaintiff, by the insistence that the Defendant's business activity be restricted to the garage, had indicated an intention to the Defendants of not fulfilling its obligations under the Lease agreement and the Defendant was entitled to consider the Plaintiff to have repudiated the agreement by the Plaintiff's insistence on that restriction." 4 As these grounds raise issues of "no evidence" or "insufficient evidence", I find it surprising that counsel for the appellant did not ensure that all the relevant evidence was before the Court. At an interlocutory stage in these proceedings, Studdert J remitted the stated case back to the Magistrate to set out the evidence on which certain findings in the stated case were based. The Magistrate supplemented the case stated by setting out essential parts of the evidence given before him. However, the supplementary material was not the whole of the relevant evidence. The transcript and the exhibits were not attached to the stated case. 5 On the hearing of the appeal, counsel for the appellant declined to supplement the case stated by tendering further material. In my view it is wrong, indeed improper, to proceed with a no-evidence submission when the whole of the relevant material on which the challenged conclusion was based is not before the Court. 6 Fortunately, the material was supplemented by the tender by counsel for the respondent of the exhibits to which the Magistrate had had regard. Even so, the submissions as to no evidence or no sufficient evidence were put without there being before the Court a transcript of the proceedings before the Magistrate. 7 The respondent, who was the defendant below and who had been sued for unpaid rent and for damages for breach and repudiation of a lease, owned a property called "Horizons Estate" which it was developing into a residential estate and golf course. The appellant, who was the plaintiff below and the lessor, was a builder. The appellant proposed building houses on the residential development. It was agreed that the respondent would sell lot 46 of the Horizons Estate to the appellant, that the appellant would build an exhibition home upon it and that the appellant would lease the premises back to the respondent. 8 In February 1993, in the course of negotiations, the appellant's solicitors indicated, in a letter of 25 February, that the appellant wished to retain "right of access to the dwelling to be erected, for the purpose of the introduction of potential building clients and the display of our client's activities." That request was agreed to by a letter of 26 February 1993 from the respondent's solicitors in the following terms: "Our client agrees that your client shall be allowed limited access to the premises, by appointment, for the purpose of showing it to potential building clients. However, your clients shall not be allowed to install an office or office facilities, and our clients shall always be entitled to refuse admittance, if, in its opinion, admittance would interfere with its use and occupation of the premises." 9 The sale of the property to the appellant was completed on 30 April 1993 and, about that date, a Commercial Lease was entered into in which the appellant leased the premises, lot 46 Horizons Estate Salamander Bay, to the respondent as lessee. It was a term of the lease that "the premises shall be used only as a display home and sales office". It was a further term of the lease that the appellants would "give possession of the premises to the tenant on the day on which the term of the lease commences". The term of the lease was specified to commence on a date in May 1993 which was left blank. No term as to the appellant's right of access was referred to in the Commercial Lease but it is not in dispute that that term formed part of the terms on which the respondent was to occupy the premises. 10 To use the words of Woodfall on Landlord and Tenant, paragraph 1.003, a "demise" or "lease" is the grant of a right to the exclusive possession of land for a determinate term less than that which the grantor has himself in the land. I emphasise the point because it is of fundamental importance in this case that the effect of the lease was that the appellant leased the premises, being lot 46, to the respondent thereby granting to it a right to the exclusive possession of the premises for the term specified, subject to the right which the appellant retained under the agreement of February 1993 that it would have limited access to the premises, by appointment, for the purpose of showing the premises to potential building clients. The respondent, as lessee, was entitled to exclusive possession and thereby to quiet enjoyment of the premises without interruption from the appellant; but its use of the premises was limited to that of "a display home and sales office". 11 On 11 August 1993, the appellant's solicitor informed the respondent's solicitor that the property was ready for occupation pursuant to the lease. However, between 9 and 29 August 1993 by arrangement between the parties, a company called McCloy's used the property for the purpose of an auction of a number of lots in the Horizon Estate. McCloys paid the rent, a total of $900, for the three weeks. 12 The position was therefore that, immediately after 29 August 1993, it was the duty of the appellant to give possession of the premises to the respondent and of the respondent to take possession thereof, or at least to pay rent for the premises from that time. 13 However, during August 1993, the appellant had indicated to the respondent that its understanding of the arrangement was that the appellant could use that part of the premises which was the house for the purpose of displaying it to persons interested in having homes built by the appellant and that the respondent was entitled to occupy only the garage on the premises, which it was to use as a sales office. 14 The stated case set out the following evidence of Mr Nichol, director of the appellant: "Q. Let's just get to the bottom of this Mr. Nichol, regardless of what the court finally makes of this lease in terms of its interpretation, is your interpretation as a lay person that by granting that lease to NID as a lessee, inserting the words 'to be used as display house and sales office', it was it your understanding [ sic ] as a lay person by giving that lease that that was in fact conveying rights to yourself as well? A. Yes, the way I read it as a lay person yes. I would not have gone into it otherwise. … Q. And did you take the view Mr. Nichol that, using your expression of agreements between you and the defendant, did you take the view at that time that what was being agreed to or one of the things that was being agreed to was that you were going to, in effect, lease them part of that property for use as sales office, and you were going to retain possession of the rest of the property for use by Rob Nichol and Rob Nichol Pty. Limited as a display home? A. I was under the understanding that together, we were going to work together to promote and sell in Horizons. That's how I thought it was to be. Q. Like equal rights? A. Not equal rights no because they are leasing the house and paying $300 a week. It cost me $600 a week to own the damned thing." 15 The former general manager of the respondent, Mr Geoffrey Smith, gave this evidence: "A. Yes, Mr. Nichol said words to the effect of 'You'll have to use the garage, I have furniture for the house, it's fully furnished, and will be for display purposes, it can't be used'. … Q. And did he tell you you couldn't use the house to put an office in? A. Yes, he did say that we couldn't use the house, that the bedrooms would have bedroom furniture. … Q. And did you feel at the end of that meeting that you'd been able to sort out the problem? A. Well we clearly knew that we couldn't use the house, that we were only being offered the garage." 16 Mr Nakamaru, the managing director of the respondent, gave this evidence in cross-examination: "Q. He didn't say you can't use it did he, he said 'You can't use it as an office'? A. In the house? Q. Yeah. A. Yes." This short extract from the cross-examination is set out in the stated case, but not Mr Nakamaru's evidence in chief. I assume that the Magistrate understood Mr Nakamaru to say that Mr Nicol stated that the respondent could not use the house on lot 46 as an office. 17 It is clear that Mr Nichol was under a misapprehension as to the nature of the arrangement into which the appellant and the respondent had entered. The lease entitled the respondent to exclusive possession of the whole of lot 46 for use as a display home and sales office. The appellant's only entitlement to use the premises arose from the agreement reached in the letters of 25 and 26 February 1993 whereby the appellant was entitled to limited access to the premises, by appointment, for the purpose of showing it to building clients. 18 Counsel for the appellant submitted that the mere holding of an incorrect view as to the meaning and effect of the lease did not have the effect that the appellant was not willing to abide by a correct interpretation. Counsel for the appellant relied upon D T R Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 where Stephen, Mason and Jacobs JJ said at 432: "No doubt there are cases in which a party, by insisting on an incorrect interpretation of a contract, evinces an intention that he will not perform the contract according to its terms. But there are other cases in which a party, though asserting a wrong view of a contract because he believes it to be correct, is willing to perform the contract according to its tenor. He may be willing to recognize his heresy once the true doctrine is enunciated or he may be willing to accept an authoritative exposition of the correct interpretation. In either event an intention to repudiate the contract could not be attributed to him. As Pearson L.J. observed in Sweet & Maxwell Ltd. v. Universal News Services Ltd. (1964) 2 QB 699, at p 734 : 'In the last resort, if the parties cannot agree, the true construction will have to be determined by the court. A party should not too readily be found to have refused to perform the agreement by contentious observations in the course of discussions or arguments...'" 19 However, in the present case, the appellant did not limit its actions to conveying to the respondent its view about the construction of the documents. On 24 August 1993 the respondent had written to the appellant as follows: "As discussed in our meeting of Thursday 19th August 1993, we would like to renegotiate the terms of our lease arrangement with you in regard to the above property. Currently, as it stands, we really only have the use of the garage as a sales office for $300-00 per week. Our original understanding of the lease was that we could also use the house for this purpose. We feel that this arrangement is not acceptable to us under present circumstances. We also see that the 'display house' is more for your benefit than it is for ours." 20 The appellant did not, thereafter, enter into any discussion about the matter. Rather, the appellant entered into possession of the house on lot 46 immediately after McCloy's had ceased to use the premises. Mr Nichol gave this evidence: "Q. What I'm suggesting to you is that instead of replying to the letter of 24 August and maybe seeking to arrange some further meetings to discuss it, instead of doing that, as soon as McCloys was finished, you were in, is that right? A. I was in, I had the key to the door, I was in and out, yes. Q. Well in the sense that it was you, Rob Nichol Pty Limited… A. That's right Q. … making use of the house? A. That's right. Q. From early September? A. Yes, straight after the auction yeah Q. And from that point onwards, you were totally of course unrestrained in the manner in which you used the premises, that's correct isn't it, you could use it however you liked, you were the owner? A. Because there was no tenant coming in who should have come in ages ago yes." 21 Although the case stated does not say so expressly, I assume that the learned Magistrate ignored the last sentence of that evidence. The premises were not ready for occupation until 11 August 1993. McCloy's occupied the premises until 27 August 1993. The Magistrate found, as he was entitled to do on the evidence before him, that the appellant moved into the premises to conduct its own business straight after the premises were vacated by McCloy's. 22 The respondent treated the fact that Mr Nichol did not reply to Mr Smith's letter of 24 August 1993 as an affirmation that the appellant persisted in its view that the respondent was limited in its use of the premises to using the garage of the house a sales office. Mr Smith gave this evidence: "Q. Did you get a response to this letter from Mr. Nichol, or is solicitors? A. No, not that I recall. Q. And how did you treat that then as a, without any response coming back to you? A. I guess it confirmed the fact that we were relegated to the garage of the house as a sales office." 23 The Magistrate found that the action of the appellant of going into occupation of the premises, placing furniture, including bedroom suites, therein and expressing to the respondent that its entitlement was simply to use the garage as a sales office, constituted a repudiation of the lease on which it sued. The Magistrate was correct in that conclusion. The appellant, through Mr Nichol, acted in a manner entirely inconsistent with the lease, which granted to the respondent the exclusive possession of both the house and the garage. 24 I should add, although the point was not taken below, that there was an even more fundamental answer to the appellant's claim in the Local Court. The appellant sued for rent. Yet, the evidence was that the appellant never gave or offered possession of lot 46 to the respondent. At the termination of McCloy's occupation, the appellant went into possession of the house and considered that it was entitled to occupy the house for its own purposes. Woodfall, in paragraph 7.138, states the law as follows: "The rent is suspended by an entry of the lessor, or anyone claiming through him, into any part of the demised premises to take possession thereof [ Morrison v. Chadwick (1849) 7 C.B. 266; London & County (A. & D.) v. Wilfred Sportsman [1969] 1 W.L.R. 1215. To constitute an eviction the landlord's act must have the characteristics of permanence and wrongfulness: Commissioners of Crown Lands v. Page [1960] 2 Q.B. 274. See further Relvok Properties v. Dixon (1972) 25 P. & C.R. 1 (entry by landlord merely to secure premises during prolonged absence of tenant: no eviction)]. Accordingly the eviction will be a bar to the recovery of subsequently accruing rent [ Boodle v. Campbell (1844) Man. & G. 386.]." 25 The appellant's claim below failed because Mr Nichol was under a misapprehension as to the effect of the agreement into which he had entered. He considered that the provision in the lease as to the use of the premises as a display home and sales office meant that the respondent was entitled to use the garage as a sales office while the appellant was entitled to use the house for the purpose of displaying it to persons interested in using the appellant's building services. The lease did not have that meaning and, indeed, it was entirely inconsistent with the grant of a lease of the premises, being lot 46 Horizons Estate, that the lessor should retain the right to occupy the most substantial part of the premises for its own purposes. 26 Counsel for the appellant submitted that there was no evidence to justify the Magistrate's finding which is set out in paragraph 18 of the amended stated case, namely: "The evidence establishes that the Plaintiff denied the Defendant the use of the whole of the premises." However, it is clear that the Magistrate did not intend to say that the respondent was excluded from the whole of lot 46. It is clear from the stated case and from the Magistrate's reasons for judgment, which are in evidence, that the Magistrate proceeded on the footing that the appellant had indicated to the respondent that the respondent was to carry on its sales activities in the garage. Paragraph 18 of the stated case is simply an inappropriately expressed sentence. It probably encompasses the thought that the appellant was obliged under the lease to grant to the respondent exclusive possession of the whole of the premises and did not do so. In any event, I am satisfied that the Magistrate did not proceed on the basis that the respondent was excluded from the entire premises. The Magistrate proceeded on the basis that the words and actions of the appellant constituted a repudiation of the lease. That conclusion was well supported by the evidence before him 27 I need not discuss any anticipatory breach prior to 29 August 1993. When the premises became available for occupation, that is after 29 August 1993, the appellant did not offer possession to the respondent but went into occupation itself, indicating to the respondent that its only entitlement under the lease was to use the garage on the demised premises as a sales office. That was not suitable to the respondent and, therefore, it did not enter into possession. Although the case stated did not expressly say so, it is implicit that the Magistrate found that the respondent accepted the repudiation. Having regard to the evidence which is set out in the case stated, it was open to the Magistrate to come to that view. 28 The principal submissions put in the appeal on behalf of the appellant therefore fail. 29 Counsel for the appellant also put two additional submissions. The first was that the respondent never intended to take possession of the premises in accordance with the lease or that there was no evidence before the Court that it did so, and, secondly, that the respondent repudiated the lease. 30 On these matters I need say little more than that the substance of the evidence which is before the Court, which is not the whole of the evidence which was before the Magistrate, does not support either submission. Insofar as the evidence before the Court goes, it supports the finding of the Magistrate that the respondent would have complied with its obligations under the lease but for the appellant's action of occupying the house after McCloy's auction. The material before the Court does not suggest that there was any error of law in the manner in which the Magistrate dealt with the issues which were before him. 31 Counsel for the appellant also put the point on the basis of onus of proof, saying: "There is no evidence before the court that the Respondent ever intended to take possession in accordance with the lease and in those circumstances it is simply impossible to conclude that the Appellant denied possession to the Respondent." However, in the absence of a transcript of the proceedings below to show at lease that the point was raised below and what was the evidence touching it, the point is not arguable. 32 For these reasons the appeal will be dismissed with costs. -o0o- Last Modified: 05/06/2002 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.