Cermak & Anor v Ruth Consolidated Industries Pty Ltd & Anor [2004] NSWSC 882

New South Wales Supreme Court

CITATION : Cermak & Anor v Ruth Consolidated Industries Pty Ltd & Anor [2004] NSWSC 882 HEARING DATE(S) : 21 September, 2004 JUDGMENT DATE : 21 September 2004 JURISDICTION: Equity Division JUDGMENT OF : Palmer J DECISION : Appellants' appeal dismissed with costs.

CATCHWORDS : RECTIFICATION - APPEAL FROM MASTER - Whether Respondents suspected Appellants had made a mistake in drafting new lease - no demonstrable error in Master's finding of fact - no question of principle involved. LEGISLATION CITED : Trade Practices Act 1974 (Cth) Karel Vaclav Cermak - First Appellant PARTIES : Maria Cermak - Second Appellant Ruth Consolidated Industries Pty Ltd - First Respondent Brett Saunders Ruth - Second Respondent FILE NUMBER(S) : SC 2796/01 COUNSEL : M.R. Lawson - Appellants G.A. Sirtes - Respondents SOLICITORS : Hunter Lawyers - Appellants Barringtons - Respondents

LOWER COURT Supreme Court (Master) JURISDICTION : LOWER COURT 2796/01 FILE NUMBER(S) : LOWER COURT Master Macready JUDICIAL OFFICER :

Ex tempore

1 By lease dated 19 December 2000, the First Respondent agreed to rent to the Appellants certain premises located at 23 Nelson Street, Annandale for the sum of $43,917 per annum. The lease expressly provided that the rental was inclusive of GST. 2 The Appellants allege that the lease misstates an agreement which had been concluded between the respective agents of the parties prior to execution of the lease to the effect that the rent was exclusive of GST. 3 The Appellants claim rectification of the lease to effect what they say was a common intention of the parties, so as to make rental exclusive of GST, and they claim damages for failure on the part of the First Respondent to pay rental in accordance with the lease as rectified. The amount of the damages claimed in respect of GST for the term of the lease is, as the Master found, a total of $7,071.22. 4 By a Cross Claim, the First Respondent claimed damages for the Appellants' alleged breach of the covenant for quiet enjoyment of the lease. The circumstances are that there was a storage area under the subject premises which the Appellants occupied, so the First Respondent says, without the First Respondent's consent, and the First Respondent claims the rental value of that space for the term of the Appellants' occupation. Damages for breach of this covenant amount to $2,400. 5 It will be seen that the total amount in dispute between the parties in this case is less than $9,500. The dispute has nevertheless generated no less than sixteen affidavits, three of which are the expert evidence of valuers. The case occupied two full days of hearing before the Master. The Master found in favour of the Respondents on the Appellants' claim and in favour of the Respondents/Cross Claimants on the Cross Claim. The Appellants now appeal to a judge of this court. 6 The parties do not dispute the principles of law upon which the Master proceeded. The Master dealt with the case in a judgment which was, in my respectful opinion, cogent, concise and, in the result, correct. 7 The Appellants say that the Master should have found that Mr Ruth, who is the Director of the First Respondent, should strongly have suspected that a provision in the lease that the rental was inclusive of GST had been included by mistake because there had been an agreement between the parties' respective agents before the lease was executed to the effect that the rental would be exclusive of GST. 8 Mr Ruth gave evidence, which was supported by Mr Jarrett, the agent whom he engaged, that the original agreement between the parties' agents was that the rental would be exclusive of GST and the terms of the lease would generally follow the terms of the old lease. However, he later received a draft new lease from the Appellants which included some terms which were quite substantially different from the terms in the old lease. He noticed that there had been a provision in the new draft lease that the rental would be inclusive of GST. He discussed this with Mr Jarrett. They agreed that the conduct of Mr Cermak, the First Appellant, in negotiating the lease had been erratic. Mr Cermak was now requiring additional, and what Mr Ruth regarded as unsatisfactory, terms in the draft lease and he and Mr Jarrett concluded that the variation in the agreement as to GST was probably a concession made by Mr Cermak to Mr Ruth in order to induce him to accept the other proposed changes in the terms of the new lease. 9 The Master accepted this evidence. In other words, he made a finding of credit based upon the evidence which Mr Ruth and Mr Jarrett gave in the witness box. Mr Lawson, who appears for the Appellants, submits that the evidence which Mr Ruth gave should have led the Master to find that Mr Ruth, contrary to his evidence, indeed did suspect that the variation as to the GST provisions had been made in error. 10 Mr Lawson says that Mr Ruth gave evidence that he believed that Mr Cermak was basically unfair in his demands and in his conduct of negotiations for the lease. This, he said, was the opinion he formed of Mr Cermak at a meeting which took place on 21 December 2000, the day before execution of the lease. However, Mr Lawson says that Mr Ruth agreed in cross examination that a number of concessions had been made by Mr Cermak in the course of negotiations at that meeting. Those concessions, says Mr Lawson, would have indicated to Mr Ruth that the basis of his belief as to the reason that Mr Cermak had made the GST concession was unfounded. 11 The Master clearly did not accept this submission and I can see no reason compelling a finding to the contrary. It is clear, in my opinion, that the Master was entitled to find on the evidence that as a result of the discussion between Mr Jarrett and Mr Ruth prior to the commencement of the meeting on 21 December 2000, both believed that the change in GST provisions had been made because Mr Cermak wished to gain other commercial advantages in the course of negotiating the new terms of the lease. In other words, the Master accepted that those two persons genuinely believed that Mr Cermak had quite deliberately and consciously made the change to the GST provisions for his own commercial benefit. The fact that the course of negotiations thereafter caused Mr Cermak to change his position somewhat could not reasonably have led either Mr Ruth or Mr Jarrett to believe that Mr Cermak must have been mistaken in his belief as to what the lease contained as to GST provisions. It might simply and reasonably have led them to believe that Mr Cermak, having deliberately made a concession in the GST provisions in the draft lease, abandoned in the course of negotiations some of the additional advantages that he had wished to achieve. 12 In short, I can see nothing in the evidence to which Mr Lawson has drawn my attention, nor in the Master's reasons, which satisfies me that any demonstrable error has been shown in the Master's finding of fact as to the belief of Mr Ruth that the change in the GST provisions in the draft lease had been consciously made by Mr Cermak. On that finding of fact, the Master, in my opinion, was perfectly correct in holding that there was no basis for the Appellants' claim for rectification. 13 I turn to the question of whether the conduct of the Respondents was misleading and deceptive for the purposes of the Trade Practices Act 1974 (Cth). On the basis of the Master's findings of fact, which I accept as correct, this claim must have failed. If the Master accepted, as he did, that the Respondents honestly believed that the change to the GST provisions occurring in the draft lease had been made deliberately and consciously by the Appellants and their solicitors, then there was and could have been no duty to speak in the sense of drawing to the attention of Mr Cermak and his solicitors, at the meeting of 21 December 2000 or at any time thereafter, the fact that the rent now included GST. In my view, no demonstrable error has been shown in the way in which the Master dealt with the Appellants' claim for rectification or damages on this ground. 14 As to the Master's finding as to the storage area, again, in my opinion, the Master was correct, for the reasons which he gave. 15 The first attack which is made is that the Master erred in his construction of the lease when he found that on an ordinary reading of the description of the property in the lease, the storage area would be included within it. The demised premises are described as Part F/1 1/227538, being a two-storey rendered building, together with three car park spaces. Within the two-storey rendered building is the subject storage area. In my opinion, the Master was plainly correct in construing the lease as including the storage area. 16 The Master also was justified on the evidence before him in finding that there had been no agreement between the parties for the separate use of that storage area by the Appellants. No basis has been shown in the evidence upon which it could be said that the Master failed to take into account evidence which he should have taken into account or misunderstood the evidence which he had before him. The most cogent evidence upon which the Master relied, and rightly so in my opinion, is the fact that contrary to the Appellants' assertion that they had paid separate rent for the storage area to the Respondents, no evidence of such a payment was forthcoming. In my opinion, the appeal against the Master's decision on this ground also fails. 17 The order of the Court is, therefore, that the Appellants' appeal is dismissed with costs. – oOo –