R&J Lyons Family Settlement Pty Limited v 155 Macquarie Street Pty Limited [2006] NSWSC 625

New South Wales Supreme Court

CITATION : R&J Lyons Family Settlement Pty Limited v 155 Macquarie Street Pty Limited [2006] NSWSC 625

HEARING DATE(S) : 19 June 2006

JUDGMENT DATE : 22 June 2006

JURISDICTION : Equity Division

JUDGMENT OF : Windeyer J at 1

DECISION : Parts of defence to cross-claim struck out

CATCHWORDS : CONTRACT - settlement deed after mediation - claim released by settlement of proceedings excluding cross-claim - same facts pleaded as defence to cross-claim - whether set off or cross-claim - whether release applied to those claims

LEGISLATION CITED : Conveyancing Act 1919, s133E

CASES CITED : Mackay v Dick (1881) 6 AppCas 251 Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Limited (1979) 144 CLR 596

R&J Lyons Family Settlement Pty Limited (First Plaintiff/First Cross-Defendant) Geoffrey Charles Tablot (Second Plaintiff/Second Cross-Defendant) PARTIES : 155 Macquarie Street Pty Limited (First Defendant/First Cross-Claimant) Ranec Pty Limited (Second Defendant/Second Cross-Claimant) Lend Lease Development Pty Limited (Third Defendant)

FILE NUMBER(S) : SC 1652 of 2006

COUNSEL : Mr M L D Einfeld QC with him Mr M Cohen (Plaintiffs/Cross-defendants) Mr M T McCulloch SC with him Ms P McDonald (Defendants/Cross-claimants)

SOLICITORS : Wright Stell (Plaintiffs/Cross-Defendants) Henry Davis York (Defendants/Cross-Claimants)

- 14 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

WINDEYER J

THURSDAY 22 JUNE 2006

1652/06 R & J LYONS FAMILY SETTLEMENT PTY LTD v 155 MACQUARIE STREET PTY LIMITED JUDGMENT 1 This judgment deals with the determination of an issue raised by the defence to cross-claim and reply to that defence filed in this action. On 19 June I ordered that the issue be tried as a separate issue prior to the determination of other issues on the cross-claim. The matter came on for hearing as an urgent matter in the duty list. 2 The evidence led consisted of the pleadings in the action and a settlement deed executed on completion of a mediation between all the parties to the original proceedings. The cross-claim presently in issue is between the first and second defendants as cross-claimants and the plaintiffs as cross-defendants. 3 It was accepted by the parties that the pleadings I should consider were the further amended statement of claim filed on 21 December 2004; the amended defence and cross-claim of the first and second defendants filed on 28 February 2005; the cross-claim originally filed in June 2003, but repeated in the same terms with the amended defence of 28 February 2005; and the defence to cross-claim filed on 15 October 2003, but on the understanding that paragraph 2(a)(1) of that defence to cross-claim where it refers to paragraphs 11 to 20 of the amended statement of claim, should be treated as a reference to paragraphs 11 to 20 of the further amended statement of claim. 4 The plaintiffs entered into an agreement for sub-lease from the first, second and third defendants as sub-lessors in respect of part of premises 155 Macquarie Street, Sydney. The obligations under that agreement would appear to have merged as a matter of law in the sub-lease from the first and second defendants to the plaintiffs dated 24 July 2001. That however need not be decided and some of the claims of the plaintiffs, at least against the third defendant, are pleaded as based upon the agreement for sub-lease, rather than on the sub-lease itself. The commencing date for payment of rent under the sub-lease was 1 February 2002. The initial rent was $465,000 per annum plus $32,500 for use of one kiosk in what was termed an exclusive use licence space. 5 The first claim in the further amended statement of claim can be called the "kiosk claim". It is a claim of breach of contract through refusal of the first and second defendants to permit the operation of the kiosk in the exclusive use space. Orders were sought for specific performance of that agreement and damages equal to the rent paid in respect of the kiosk from 6 June 2002. There is an alternative claim for compensation and loss of the opportunity to make profits. The kiosk claim can be disregarded. 6 The claim relevant to this judgment is pleaded in paragraphs 11 to 20 of the amended statement of claim. Put briefly, the plaintiffs allege that under the terms of agreement for lease the first, second and third defendants were to provide the plaintiffs with the necessary information to enable the plaintiffs to prepare fit-out plans in respect of the premises the subject of the proposed lease, that these were submitted to those defendants and approved on 7 June 2000; that the said defendants were to use reasonable endeavours to make the premises available to the plaintiffs for the purpose of carrying out the fit-out works; that the said defendants would supply hydraulic connection to the premises for future connection by the plaintiffs at the expense of the plaintiffs and in particular would provide hydraulic services to suit the particular kitchen layout; that the provision of these hydraulic services required penetration of the floor slab of not only premises the subject of the sub-lease but of parts of the common property and particular lots in the relevant strata plan below the sub-leased premises; and that there was thereby an implied term or warranty by those defendants that they were legally entitled to carry out of the penetrations required to provide the hydraulic services. 7 It was then pleaded by paragraph 16A and 16B put in by way of amendment in the further amended statement of claim first that it was an implied term of the agreement for sub-lease that the first, second and third defendants would procure the necessary easements for the purpose of making the necessary penetration so as to enable timely completion of the lessee's fit-out works and commencement of trading; and further that it was an implied term of the agreement for sub-lease that in the event that the first, second and third defendants were not legally entitled to make the penetrations through the strata lots as required for the purposes of providing hydraulic and other services then (a) the rent reserved pursuant to the agreement for lease and sub-lease thereby abated for the whole period of the plaintiffs' inability to have the benefit of the hydraulic services or (b) that any or all rent paid by the plaintiffs during the whole of the period in which services could not be made available constituted liquidated damages of the plaintiffs and (c) that any costs, expenses or damage arising from or consequential upon the absence of entitlement to make the penetration constituted liquidated damages or general damages incurred by the plaintiff and payable by the first, second and third defendants in the event of a breach of such implied terms. 8 Paragraphs 17 and 18 then plead breach of the express and implied terms relied upon through the failure to make the hydraulic services available; paragraph 20 then pleads loss and damage resulting from delay in completion of the plaintiff's fit-out works and gives particulars of the loss and damage as follows: (a) rent due and payable for the period from 1 February 2002 until 18 January 2003, (b) loss of profits arising from delay in completion of fit-out works; (c) interest on borrowings for the fit-out works from 27 March 2002 to date; (d) abatement of rent; (e) costs and expenses flowing from inability to make penetrations. 9 There was also a claim brought against the partners of Messrs Freehill Hollingdale and Page, but that can be disregarded. Cross-claim 10 The cross-claim of the first and second defendants is first a claim for rent due under the lease and second a claim for costs incurred at the request of the defendants in obtaining an easement for services. The second claim can be disregarded at the present moment as not relevant to the separate question. Paragraphs 23 and 24 of the original cross-claim which have now become paragraphs 35 and 36 of the document filed on 28 February 2005 are as follows: 35. Pursuant to the Lease Agreements, the first and second cross-defendants were liable to pay rent to the first and second cross-claimants on 1 February 2002 with a base rental of $465,000, such payments to be made in equal monthly payments together with a proportion of outgoings specified to be 1.784%. 36. The first and second cross-defendants have failed to pay rental for the period July 2001 to 31 January 2003 and 1 February 2003 to 30 June 2003 (entire rent not paid) less $100,000 pain on or about 24 December 2002 on account of unpaid rent. 11 The relevant claim under the cross-claim is for damages and interest for breach of the covenant to pay rent including rent for the period from 1 February 2002 until 18 January 2003.. 12 The defence to cross-claim admits paragraphs 19, 20, 21 and 22 of the cross-claim, now by paragraphs 31 to 34 of the current document, those being the averments relating to the claim for rent including an admission of paragraph 21 (now 33) of the cross-claim, namely that it was a term and condition of the lease agreements that rental would be paid at monthly intervals from 1 February 2002. What is at issue here is paragraph 2 of the defence to cross-claim, which is in the following terms: 2. In answer to paragraphs 23 and 24 of the Cross-Claim the Cross-Defendants say as follows: (a) As to the period 1 February 2002 to 31 January 2003 the Cross-Defendants: (i) Refer to and rely on the matters pleaded at paragraphs 11-20 of the Amended Statement of Claim and say that by reason of those matters the Cross-Defendants are not indebted as alleged or at all in relation to the Cross-Claimants' claim for rent for the period 1 February 2002 to 31 January 2003; and (ii) In addition, or in the alternative, say that by reason of the Deed of Release entered into between the Cross-Defendants and the Cross-Claimants on 24 December 2002 ( "the Deed of Release" ), which the Cross-Defendants rely on as if it were pleaded here in full, even if, despite the matters pleaded at paragraphs 11-20 of the Amended Statement of Claim, and which is denied, the Cross-Defendants are or could be indebted as alleged in relation to the Cross-Claimants' claim for rent for the period 1 February 2002 to 31 January 2003, no such rent is due and payable by the Cross-Defendants to the Cross-Claimants until, and depending on, the outcome of these proceedings; (b) As to the period 1 February 2003 to 30 June 2003 the Cross-Defendants say that they have fully complied with their obligations to pay rent pursuant to the Lease Agreements and the Deed of Release; and (c) Save as aforesaid the Cross-Defendants do not admit paragraph 23 and deny paragraph 24 of the Cross-Claim. 13 It is only paragraph 2(a)(i) which is relevant to this decision. 2(a)(ii) has no bearing on the matter being relevant to an agreement which had the effect of preventing the lessor calling upon a bank guarantee in certain circumstances. Mediation 14 The parties (including Freehills) entered upon a mediation of the proceedings before the Honourable G E Fitzgerald, AC, QC. 15 The mediation led to a document called a settlement deed of 3 December 2005. The mediation covered not only the proceedings the subject of this judgment but other proceedings numbered 20148 of 2004. The terms of settlement included the following: