New South Wales Supreme Court CITATION : Becklay Pty Limited v A. R. J. Freight Pty Limited [2003] NSWSC 155 HEARING DATE(S) : 20 February 2003 JUDGMENT DATE : 20 February 2003 JURISDICTION: Equity JUDGMENT OF : Campbell J DECISION : Injunction refused CATCHWORDS : PROCEDURE - Supreme Court procedure - action seeking possession of land already on foot in Common Law Division Possession List - fresh action started in Equity Division seeking similar relief - whether interlocutory injunction should be granted to prevent interference with lessor retaking possession of premises - significance of proceedings already being on foot in Possession List for grant of interlocutory injunction - EQUITY - equitable remedies - interlocutory injunction - balance of convenience - relevance of Court's own procedures Batiste v Lenin [2002] NSWSC 233 CASES CITED : Bishop v Moy [1963] NSWR 468 Georgeson v Palmos (1962) 106 CLR 578 Becklay Pty Limited - Plaintiff/Cross-Defendant PARTIES : A.R.J. Freights Pty Limited - First Defendant/Cross-Claimant John Cecil O'Donnell - Second Defendant/Second Cross-Claimant Anne Kathleen O'Loan - Third Defendant FILE NUMBER(S) : SC 1329/03 COUNSEL : L J Aitken - Plaintiff/Cross-Defendant R J Horsley - Defendants/Cross-Claimants SOLICITORS : Horowitz & Bilinsky - Plaintiff/Cross-Defendant Clarks Business & Property Lawyers - Defendants/Cross-Claimants IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST CAMPBELL J THURSDAY 20 FEBRUARY 2003 1329/03 BECKLAY PTY LIMITED v A.R.J. FREIGHTS PTY LIMITED JUDGMENT 1 HIS HONOUR: This is the hearing of a notice of motion that seeks an interlocutory injunction restraining the defendant from preventing the plaintiff from regaining possession of some premises situated at 10 Ocean Street, Botany. 2 Those premises were leased by the plaintiff to the defendant, pursuant to a lease entered for four years, to commence on 12 October 1997 and end on 11 March 2001. 3 That lease contained an option. The option clause provided that if the lessee wanted a further lease of the premises, he had to give the lessor notice in writing to that effect not more than three months and not less than six months prior to the termination date and, provided that at the date of the exercise of the option by the lessee and at the termination date there was no subsisting breach of the lease, a new lease would be granted on the same terms as the lease originally granted, subject to some alterations which are not presently relevant. 4 On 17 November 2000, that is, within the window of time falling between the six months and three months prior to the expiration of the lease, the lessee sent to the lessor's solicitors a fax saying: "Notice is given today 17/11/00 that I will be taking up my option (4 years) on the property at 10 Ocean Street, Botany. Please discuss this matter with Mr Matalon as quite a number of changes must take place. When agreement is reached I will forward to my lawyers that confirmation." Mr Matalon is a director of the lessor. 5 In April 1999 the premises had been severely damaged by a hail storm. It is clear that that hail storm caused substantial damage to the roof. The premises were used as a warehouse and ancillary offices. The damage to the roof in 1999 made them unsuitable for use for that purpose during the period that the roof was unrepaired. 6 The landlord's case is that the roof was properly repaired. The tenant's case is that the repairs were never carried out adequately. There is evidence of ongoing complaints by the tenant concern the state of the premises, with particular concentration on the way water continued to get into the premises. 7 The tenant has not paid any rent at all since April 2000. The tenant contends that it has validly exercised the option, and that it is entitled to pay no rent pursuant to an abatement clause in the lease. That abatement clause says: "In case the whole or any part of the Premises shall be damaged by fire or other cause so as to render the Premises unfit for occupation and use by the Lessee, then PROVIDED such damage is not occasioned by any act or neglect of the Lessee: (a) The rent and all other monetary obligations reserved by this Lease or a proportionate part thereof according to the nature and extent of the damage shall abate; (b) Any remedies for the recovery of rent and any other monies falling due after such destruction or damage shall be suspended until the Premises have been made fit for occupation by the Lessee." 8 There is evidence, tendered by the tenant, as to the present state of the premises. A building inspector, Mr Billinghurst, inspected the premises in November 2002 and reported on the emanation of various leaks in the building. He concluded that the box gutters may well be incapable of handling heavy volumes of rain water run off. 9 The age of the material making up the box gutter appeared to be similar to the roofing material, which suggested to him that it was replaced at the same time as the roof had been repaired. 10 Mr Billinghurst says that, on the basis of his instructions rather than his own observation, a little over 45 per cent of the total warehouse was affected by rain from time to time. Given the nature of a warehousing business, in his opinion, "there is a strong argument to say that the building is wholly unfit for its intended use". 11 In March 2002 the landlord filed a statement of claim in the Common Law Division claiming possession of these premises. Those proceedings have been advancing somewhat slowly. 12 On 30 September 2002 the landlord filed a notice of motion in the common law proceedings claiming summary judgment for possession. Meanwhile, there are some questions outstanding, as a result of which the pleadings in the common law proceedings might be amended. 13 On 2 December 2002 orders were made in the common law proceedings requiring pleadings to be amended in accordance with a timetable then laid down and specially fixing for hearing before a Master on 19 March 2003 the notice of motion seeking summary judgment. 14 The proceedings in which I am hearing a notice of motion are ones which the landlord commenced in the Equity Division on 6 February 2003. They were commenced by summons seeking a declaration that the 1997 lease was at an end, that the landlord was entitled to immediate possession of the premises, a interlocutory injunction restraining the tenant from interfering with the landlord regaining possession of the premises, an order for possession of the premises and an order consolidating these Equity Division proceedings with the proceedings already on foot in the Common Law Division. 15 The notice of motion which I am now hearing was filed on 13 February 2003. 16 The landlord submits that the option has not been validly exercised and in consequence of it the tenant is a trespasser in the premises. There is a serious question to be tried about whether the option has been validly exercised, given the way that the purported exercise also contemplated negotiating some changes to the lease. It is not convenient to decide that question now. 17 The landlord says that even if the option has been validly exercised, the rent abatement clause does not apply, that in consequence the tenant is in significant breach of the lease by failing to pay rental, and that in further consequence the landlord is entitled to immediate possession of the premises. 18 The landlord submits that the rent abatement clause does not operate for two reasons. One is a question of construction of a rent abatement clause. It is submitted that the clause on its true construction is one which allows the rent to abate only if the cause rendering the premises unfit is one which arises during the term of the lease. 19 The landlord argues that if there is a lease on foot at all today, it is a new lease which arose because of the exercising of the option and it was not during the term of that new lease that the event said to be a cause of abatement arose. The claimed cause of the abating of the rent is the hailstorm in April 1989. 20 That argument is one which is not obviously and indisputably correct, and it is not convenient to decide its correctness on this interlocutory hearing. 21 The second basis on which the landlord submits that the abatement of rent clause is not triggered is that the cause of the current problems experienced in the premises is not that the premises have been "damaged by fire or other cause". Rather, the cause of the current problems are matters arising from the design of the box gutters and the fact that water is entering from areas described by Mr Billinghurst as clerestory lights. 22 If that is the reason for the water getting in, the landlord concedes for the purpose of today's argument only that it well may be that that is a breach by the landlord of its obligation under clause 9(e) of the lease, which requires the landlord to use its best endeavours to ensure that the building is kept in a first class state of repair and condition. 23 However, the landlord submits that even if there were to be a breach by the landlord of this condition, it is not one which would entitle the tenant to fail to pay rent. 24 The usual situation is that the lessee's obligation to pay rent continues even if the lessor commits some breach of his obligations under the lease, like failing to repair, unless the covenant to pay rent and the covenant to repair are mutually dependent, so that performance by the lessor of its covenant is a condition precedent to the lessee's obligation to pay rent: Bishop v Moy [1963] NSWR 468. 25 There is some qualification to this in that sometimes a right of recoupment exists, if a lessor is in breach of a covenant, and the lessee spends money in rectifying the breach of that covenant. Then the lessee can make some deductions of the cost of rectifying the breaches from the rent, provided that the covenant to pay rent is not one that expresses the obligation to pay rent as being to pay "without deduction": Batiste v Lenin [2002] NSWSC 233. 26 However, the present case is not one where the lessee has expended money in making good any breaches on the part of the lessor. 27 There is, it seems to me, a serious question to be tried about whether the landlord is entitled to possession of the premises by reason of any of the matters which I have been discussing so far. 28 It is therefore necessary to turn to the balance of convenience to decide the present application. The landlord submits that the balance of convenience favours it. It says that it will give an undertaking as to damages which will protect the tenant against any damage it might suffer. It says that there is some $400,000 owing as back rent. 29 It also points to evidence that the tenant is receiving some rent from sub-tenants in the building, which the tenant is keeping for itself. 30 The landlord says that while the matter might be specially fixed for hearing in the Common Law Division on 19 March 2003, one cannot be sure it will actually be heard on that date. 31 The tenant, for its part, says that the question of whether the option has been validly exercised is at least arguable. It says that there is some evidence in Mr Billinghurst's report that the ongoing cause of the water getting into the building is that it was never repaired properly after the 1999 storm. 32 If it is the case that the building was never repaired properly after the 1999 storm, then the tenant says the right to an abatement of rent continues on. 33 The tenant points to the inadequacy of the box gutters as being itself something which is a matter of inadequate repair following the 1999 storm. 34 The tenant referred me to Georgeson v Palmos (1962) 106 CLR 578 as authority for the proposition that premises do not need to be totally useless to be in a situation where they are "unfit for occupation and use" within the meaning of a rent abatement clause. 35 The tenant also points to the fact that there is no apparent cause for urgency in the present application. Nothing in particular has changed since the common law proceedings were started in March last year, save perhaps that the landlord has run out of patience. 36 In my view there is nothing fundamentally different about the circumstance which is being presented to the Court today to the circumstances which existed at the beginning of last year when the common law proceedings were begun. 37 The fact that the landlord has chosen to go to the Common Law Division to enforce its rights is one which is relevant to the balance of convenience. It is undesirable that there be multiple proceedings seeking essentially the same relief within the Court. The existence of multiple proceedings is a matter which leads to waste of resources of parties and the Court, and inconvenience to the administration of the Court. These are matters which can be taken into account in the balance of convenience. 38 When there is a procedure laid down for the conduct of proceedings seeking an order for possession of land, as there is by Supreme Court Practice Note 106 and a litigant has availed itself of that procedure, the Court needs to be shown a reason why a dispute should suddenly be put on a different track. Of course, the existence of Practice Note 106 does not require that all possession proceedings be brought in the Possession List. Further, there will be occasions when special circumstances mean that it is appropriate for a party who already has proceedings on foot in the Possession List to come to the Equity Division for some sort of relief. However, no such special circumstances have been shown in the present case. 39 In my view, delay in bringing the present application is a sufficient reason for refusing it. I decline to make the order asked for. I order the plaintiff to pay the costs of the defendant of today's application. ********** Last Modified: 03/17/2003 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.