Kiem Dang Investment Pty Ltd v Jewel Food Stores Pty Ltd & Ors [2009] NSWSC 870

New South Wales Supreme Court

CITATION : Kiem Dang Investment Pty Ltd v Jewel Food Stores Pty Ltd & Ors [2009] NSWSC 870

HEARING DATE(S) : 11, 12, 13, 14, 15,19, 20,21, 22 May 2009 19 June 2009

JUDGMENT DATE : 28 August 2009

JUDGMENT OF : Patten AJ

DECISION : See paragraphs 176 and 178

LEGISLATION CITED : Conveyancing Act 1919;

CATEGORY : Principal judgment

Hawkesbury Nominees Ltd v Battick Pty Ltd [200] FCA 185; CASES CITED : Karacominakis v Big Country Developments Pty Ltd & Ors [2000] NSWCA 313; Lucott v Wakely and Wheeler [1911] 1KB 62

Kiem Dang Investment Pty Ltd - Plaintiff PARTIES : Jewel Food Stores Pty Ltd - First Defendant Zian Fu - Second Defendant Cheng Yao - Third Defendant

FILE NUMBER(S) : SC 20427/2007

Mr C Freeman - Plaintiff COUNSEL : Mr D Knoll - First Defendant Mr A Canceri - Second and Third Defendants

Than & Co - Plaintiff SOLICITORS : NOT Lawyers - First Defendant Byles Canceri Lawyers - Second & Third Defendants

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

Patten AJ

28 August 2009

No: 20427 of 2007

Kiem Dang Investments Pty Limited v Jewel Food Stores Pty Limited – First Defendant

Zian Fu – Second Defendant

Cheng Yao – Third Defendant

JUDGMENT INTRODUCTION: 1 This action concerns premises known as 2 Winnima Way Berkeley NSW (the premises). At all material times they were owned by the Plaintiff, which acquired them in June 1999. 2 Previously, they were owned by Dean Fleming Pty Ltd, which by registered lease 3957946 (the lease) leased them in 1997 to the First Defendant for a term of 12 years, which commenced on 18 March 1997 and terminated on 18 March 2009. 3 In 2000, the First Defendant assigned the balance of the term of the lease to the Second Defendant (Zian Fu) and his wife, the Third Defendant (Cheng Yao). The assignment was effected by deed (the Deed of Assignment) to which the Plaintiff was a party. The First Defendant expressly remained liable upon the covenants in the lease notwithstanding the assignment. 4 In the action, the Plaintiff claimed loss arising from breaches of the covenants in the lease by the Second Defendant and Third Defendant and for damages following the termination of the lease before the expiration of its term. It claimed that the First Defendant is also liable for such loss and damages. Each of the defendants denied the Plaintiff's entitlement and it will be necessary to return to the basis upon which the Second Defendant and Third Defendant did so. 5 There was a Cross Claim by the Second Defendant and Third Defendant whereby they sought damages for alleged breaches of the lease by the Plaintiff. Again, I will need to return to this and the defence to it. There was also a Cross Claim by the First Defendant against the Second Defendant and Third Defendant but, for reasons which will shortly appear, I need not presently concern myself with this. 6 When the matter was called on for hearing, Mr C. D. Freeman appeared for the Plaintiff, Mr D Knoll for the First Defendant, and Mr A Canceri for the Second Defendant and Third Defendant. During the third day of hearing, Mr Knoll informed the Court that the proceedings between his client and the Plaintiff had been settled, although it would remain necessary for him to be present when judgment is delivered. He was excused from further participation in the trial THE PLEADINGS 7 In essence the breaches of lease and the basis of the Plaintiff's claim are set forth in paragraphs 8 to 13 of the Statement of Claim as follows: "8. From 25 August 2007 to 11 October 2007 the second and third defendants failed to: (a) Pay rent and outgoings due to the plaintiff in accordance with clauses 4 and 8 of the Lease totalling $81,860.; (b) Trade in accordance with clause 9.20 of the Lease in that the premises were not open for business at any material time. 9. On 17 October, the plaintiff served: (a) On the second and third defendants a Notice of Breach of covenant dated 17 October, 2007 (Notice) requiring them to pay to the plaintiff the outstanding rent and outgoings referred to in paragraph 8(a) herein and to trade in accordance with clause 9.20 of the Lease; (b) A copy of the Notice on the first defendant. 10. The second and third defendants failed within 21 days after receipt of the Notice to comply with the Notice and to: (a) Pay to the plaintiff the outstanding rent and outgoings referred to in paragraph 8(a) herein; and (b) Trade in accordance with clause 9.20 of the Lease. 11. In the premises, the second and third defendants breached clauses 4, 8, and 9.20 of the Lease and were in default under the Lease. 12. By Notice of Termination of Lease dated 16 November 2007 served on the second and third defendants, the plaintiff terminated the lease. 13. On 19 November 2007 the plaintiff made a demand of the first, second and third defendants for payment of the outstanding rent and outgoings up to 17 November,2007 together with costs and expenses pursuant to clause 15.2 of the Lease." 8 The Plaintiff's claim for damages encompassed outstanding rent, outgoings, and legal fees, up to 17 November 2007, amounting to $145,761.48 and damages for loss of the benefit of the lease for the balance of the term quantified in the Amended Statement of Claim at $641,281.50. 9 By their defence the Second Defendant and Third Defendant raised the following matters: That a fire at the premises on or about 4 February 2007 rendered the premises substantially unusable for their business. That the Plaintiff failed to repair the premises following fire damage within a reasonable time. That in breach of the lease the Plaintiff failed to keep the roof of the premises in good repair and condition. That in breach of the lease the Plaintiff filed to maintain the air conditioning system in the subject premises in good repair. That the Plaintiff in breach of its covenant of quiet employment permitted tradesperson to carry out work within the subject premises. That the Plaintiff unreasonably withheld its consent to assignment of the balance of the term of the lease or a sublease to Food Work Pty Ltd. That by reason of its breaches the Plaintiff repudiated the lease. That from 4 February 2007 to at least 11 October 2007 the subject premises were substantially unusable for the business of the Second Defendant and Third Defendant with the effect that rent and outgoings abated for that period. That by virtue of continuing breaches of the lease on its part, the Plaintiff was not entitled to give notice to the Second and Third Defendants terminating the lease on 16 November 2007 and such notice constituted a repudiation of the lease by the Plaintiff, which in their defence the Second Defendant and Third Defendants purported to accept. That the Plaintiff failed to mitigate its loss. 10 In their Cross Claim, the Second Defendant and Third Defendant sought damages for the Plaintiff's alleged breaches of the lease referred to above. 11 The Cross Claim also raised a separate issue by pleading; "8. From about August 2000 Advanced First Supermarket Pty Limited (ACN 094 448 601) owned and operated a grocery store from the premises which traded as Jewel Country Fresh (the Business). 9. At all material times, the cross claimants were directors and shareholders of Advanced First Supermarket Pty Limited. 10. At all material times, the cross defendant knew that Advanced First Supermarket Pty Limited owned and operated the Business. 11. As shareholders of Advanced First Supermarket Pty Limited, the cross claimants were entitled to receive dividends from the net income of the Business and ultimately would have enjoyed the net sale proceeds of the Business, if it were sold. 12. At all material times, all net profits earned by the Business would be wholly distributed to the cross claimants by Advanced First Supermarket Pty Limited." 12 As to this cross-claim, the Plaintiff pleaded: "The cross-defendant does not admit paragraph 8 of the Cross-Claim and says that if Advanced First Supermarket Pty Limited CAN 094 448 601 (Company) was operating the grocery store from the premises (which is not admitted): (a) The cross-defendant had no prior knowledge of the company operating the grocery store from the premises; (b) The cross-defendant did not consent to the Company operating the grocery store from the premises; (c) The cross-claimants did not comply with clause 14 of the Lease in that they did not first obtain the consent in writing of the cross-defendant for the transfer or assignment of the Lease to the Company."