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United Petroleum Pty Ltd v 7-Eleven Stores Pty Ltd

 

[2012] QCA 172

Reported at [2013] 1 Qd R 272

 

SUPREME COURT OF QUEENSLAND

  

PARTIES:

FILE NO/S:

Appeal No 10313 of 2011

SC No 9382 of 2009

Court of Appeal

PROCEEDING:

Application for Extension of Time/General Civil Appeal

Miscellaneous Application - Civil

ORIGINATING COURT:

DELIVERED ON:

22 June 2012

DELIVERED AT:

Brisbane 

HEARING DATE:

5 June 2012

JUDGES:

Margaret McMurdo P, Fraser JA and Philippides J

Separate reasons for judgment of each member of the Court, each concurring as to the orders made

ORDERS:

1.Grant the appellant’s application filed on 3 May 2012 to amend its notice of appeal No CA 10313 of 2011.

2.Dismiss appeal No CA 10313 of 2011.

3.Dismiss appeal No CA 10311 of 2011.

4.Refuse the amended application filed by the first respondent on 4 June 2012.

5.Refuse the application filed by the appellant on 4 June 2012.

6.The appellant pay the respondents’ costs of and incidental to the applications and appeals.

CATCHWORDS:

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – REPUDIATION AND NON-PERFORMANCE – ELECTION AND RESCISSION – GENERALLY – where registered lease of service station and shop premises granted to first respondent – where second respondent subsequently became registered proprietor of premises and granted mortgage over premises – where first respondent granted sub-lease of service station to appellant – where appellant claimed first respondent breached sub-lease and accepted repudiation as discharging contractual obligations – where first respondent, in the Trial Division, sought a declaration that the sub-lease was valid and sought specific performance – where trial judge found appellant was not entitled to terminate sub-lease on claimed bases – where appellant argued that trial judge erred in construction of contractual provision providing for termination where mortgagee consent not obtained – where first respondent argued contractual provision providing for termination not complied with – whether the trial judge erred in the construction of the contractual provision – whether the appellant complied with the contractual provision

PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND –  PROCEDURE UNDER UNIFORM CIVIL PROCEDURE RULES AND PREDECESSORS – PLEADING – GENERALLY – where appellant did not specifically plead at trial the contractual basis for termination claimed on appeal – where appellant argued that reference to the incorporation of sub-lease in its defence at trial was sufficient to rely upon purported basis of termination – where appellant argued that trial judge should have allowed amendment to include purported basis for termination – whether appellant should be able to rely upon purported basis for termination

Uniform Civil Procedure Rules 1999 (Qld), r 5(1), r 149(1), r 150(4)

7-Eleven Stores Pty Ltd v United Petroleum Pty Ltd & Anor [2010] QSC 469, related

AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27, applied

Bloeman v Atkinson [1977] Qd R 291, considered

Carrick v Armstrong [1969] Qd R 185, considered

Concut Pty Ltd v Worrell (2000) 75 ALJR 312; [2000] HCA 64, cited

National Australia Bank Ltd v Bond Brewing Holdings Ltd [1991] 1 VR 386; [1991] VicRp 31, cited

Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; [2004] HCA 35, cited

Proctor & Gamble Technical Centres Ltd v Brixton Plc [2002] EWHC 2835 (Ch), cited

Sanderson v Blyth Theatre Co [1903] 2 KB 533, cited

Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359; [1931] HCA 21, considered

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52, cited

COUNSEL:

B O’Donnell QC, with D O’Sullivan, for the appellant

J Bond SC, with P Franco, for the first respondent

N H Ferrett for the second respondent

SOLICITORS:

Clayton Utz for the appellant

Shand Taylor for the first respondent

Swaab Attorneys for the second respondent

  1. MARGARET McMURDO P: I agree with Fraser JA's reasons for dismissing these appeals and refusing the associated applications with costs.
  1. FRASER JA: The appellant (“United Petroleum”) has appealed against a declaration that its notices of termination sent on 22 July 2009 were ineffective to terminate the sublease between it and the first respondent (“7-Eleven”).  After discussing that appeal, I will consider some related proceedings.

Background

  1. In 2002, Thistle Investment Pty Ltd granted a registered lease of service station and shop premises to 7-Eleven for a term of about 12 years. The second respondent (“Finesse”) subsequently became the registered proprietor of the premises. It granted a registered mortgage over the premises. In 2008 or in early 2009 (the evidence at trial did not permit a more precise finding), 7-Eleven granted a sublease of the service station to United Petroleum.  The term of the sub-lease was about five and a half years, commencing on 21 January 2009, at an initial annual rental of $159,500.  United Petroleum entered into possession under the sub-lease in early 2009. 
  1. On 22 July 2009, United Petroleum sent two letters by email to a firm of solicitors who, on 7-Eleven’s behalf, had corresponded with United Petroleum about its claims that 7-Eleven had breached the sub-lease. Only the first letter is presently relevant. It stated that: the inside bowser lane at the service station had been closed since about 22 June in order to investigate and repair a failure of the underground tanks and lines; that had interfered with United Petroleum’s use and occupation of the premises; the delay in carrying out the necessary work amounted to breaches and repudiation by 7-Eleven of the sub-lease; and United Petroleum accepted that repudiation as discharging it from further performance of the sub-lease.
  1. In August 2009, 7-Eleven commenced proceedings in the Trial Division against United Petroleum and Finesse. The claim against United Petroleum was for a declaration that the sub-lease was valid and subsisting and an order for specific performance.  The basis of the alternative claim against Finesse was that, if United Petroleum had validly terminated the sub-lease, the termination (and 7-Eleven’s consequential loss of rent) resulted from Finesse’s breach of the head lease in failing to cause repairs to the service station driveway to be undertaken expeditiously.  After a two day trial, the trial judge held that United Petroleum was not entitled to terminate the sublease on any of the bases stated in its 22 July 2009 letters or upon the basis of other alleged breaches of the sub-lease.[1]  United Petroleum does not challenge those findings.
  1. On the second day of the trial, after 7-Eleven had closed its case, United Petroleum sought to amend its defence to add an allegation that the first 22 July 2009 letter was effective to terminate the sub-lease in the exercise of a contractual right in cl 45.3 of the sub-lease.  Clause 45 was a term of the head lease, a copy of which was annexed to the sub-lease.  Clause 2.1 of the sub-lease incorporated the head lease terms and conditions mutatis mutandis, except to the extent that the contrary was provided in the sub-lease.  No such exception was made for cl 45.  Clause 2.1 also regulated the interpretation of the incorporated terms and conditions (providing, for example, that references to “the Lessor” should be construed as references to “the Sub-Lessor”).
  1. In this appeal it was common ground that, applying cl 2.1, the sublease should be taken to have included a clause in the following form:

“45.1This Sub-Lease is conditional upon consent thereto being obtained from any Mortgagee or Mortgagees of the sub-leased Premises;

45.2The Sub-Lessor must at its own cost apply for and obtain the written consent to this Sub-Lease of any such Mortgagee or of each such Mortgagees.

45.3If such consent is not obtained within 30 days of the date of this Sub-Lease or by the commencement date (which ever is the earlier) the Sub-Lessee shall be entitled to avoid this Sub-Lease by giving notice in writing to the Sub-Lessor of its election in that regard.”

  1. The trial judge refused United Petroleum’s application for leave to amend. United Petroleum nevertheless advanced arguments based upon cl 45.3 in its final written submissions. The trial judge held that United Petroleum had not pleaded such a case, but went on to consider it, holding that the first 22 July 2009 letter was ineffective to terminate the sub-lease under cl 45.3.
  1. The trial judge found, relying upon an admission made by 7-Eleven in its reply and answer, that the mortgagee’s consent to the sub-lease had not been obtained by 22 July 2009, so that cl 45.3 of the sub-lease conferred upon United Petroleum the entitlement “to avoid this Sub-Lease by giving notice in writing to the Sub-Lessor of its election in that regard”.  The trial judge held that a notice would only be effective under cl 45.3 if the notice complied with the form and content requirements of that provision and that cl 45.3 comprehensively regulated the right to bring the sub-lease to an end on account of absence of the mortgagee’s consent to the sub-lease.  United Petroleum does not challenge those conclusions.
  1. The issue concerns the trial judge’s further conclusion that the first 22 July 2009 letter did not comply with the mandatory content requirement for an effective notice of avoidance. The trial judge reasoned as follows:

In any event, I do not think that the termination letter could be regarded as an exercise of the right conferred by clause 45.3. The clause, in terms, requires an election by United Petroleum to terminate the contract because the mortgagee’s consent has not been obtained. Since this fact was not known to United Petroleum at the time when the termination letter was sent, it is difficult to see how it carried out an election. Moreover, the notice required is ‘notice in writing … of its election in that regard.’ Not surprisingly, the termination letter makes no reference to the failure to obtain the mortgagee’s consent, and, it seems to me, is not a notice of the kind specified by clause 45.3.”[2]

  1. The trial judge therefore concluded that United Petroleum had not established that it validly terminated the sub-lease, so that it remained bound by its provisions.[3]  Following various interlocutory proceedings, the trial judge made the declaration I mentioned at the outset, that United Petroleum’s notices of termination sent on 22 July 2009 were ineffective to terminate the sub-lease.

United Petroleum’s appeal against the declaration (Appeal No 10313 of 2011)

  1. United Petroleum submits that the trial judge erred in holding that its first letter of 22 July 2009 did not comply with cl 45.3. In response to 7-Eleven’s submission that United Petroleum did not plead or litigate such a case, United Petroleum submits that the trial judge erred in holding that its defence did not invoke the right of avoidance in cl 45.3 and also in refusing its application for leave to amend. United Petroleum’s application to amend its notice of appeal to permit it to advance the second of those responsive points should be granted because it is arguable and 7-Eleven is not prejudiced by the amendment.
  1. 7-Eleven supported the trial judge’s decision. Under a notice of contention it also argued that the decision should be affirmed on the grounds that, in summary: United Petroleum is precluded from arguing that it terminated the sub-lease under cl 45.3 because that was not litigated at the trial; and United Petroleum’s notice of termination was ineffective under cl 45 because 7-Eleven’s solicitors were not authorised to receive such a notice.  In support of the notice of contention, 7-Eleven sought leave to rely upon further evidence.  United Petroleum filed its own application to rely upon further evidence in response to 7-Eleven’s affidavits.

Construction of cl 45.3

  1. The principal issue is whether cl 45.3 required the sub-lessee’s written notice to communicate that it elected to avoid the sub-lease on the ground expressed in that provision or whether it was sufficient for the notice to communicate that the sub-lessee terminated the sub-lease on different grounds. The proper construction of the provision in that respect is to be determined by what a reasonable person in the parties’ position would have understood it to mean having regard to its text, the surrounding circumstances known to them, and the purpose and object of the transaction it embodies.[4] 
  1. United Petroleum framed the ultimate question as being (I summarise the submission) whether, as it contended, the words “in that regard” connoted notice merely of an election to avoid the sub-lease or whether, as 7-Eleven contended, those words also required notice of the ground of avoidance in cl 45.3. In support of United Petroleum’s contention, it argued that the mandatory content of the notice stopped at the word “election”; that the words “in that regard” did not inform the mandatory content of the notice. But cl 45.3 unambiguously describes the content of the written notice as “its election in that regard”. Content should be given to each of those words in this concise provision. United Petroleum also argued that the purpose of the phrase “in that regard” was merely to identify the choice made by the election as being to avoid the sub-lease; that the phrase was a mere “drafting flourish” designed to avoid repetition (such as “entitled to avoid this sub-lease by giving notice in writing to the sub-lessor of its election to avoid this sub-lease”). The expression “of its election in that regard” is an unlikely choice for any such purpose. A much more obvious approach would have been to end the clause at “…notice in writing to the Sub-Lessor”.
  1. United Petroleum’s arguments inappropriately focused upon the concluding expression “in that regard” in isolation from the text of the whole provision. Clause 45.3 is inextricably connected with the preceding sub-clauses. Clause 45 makes the sub-lease conditional upon the mortgagee’s consent to the sub-lease, it obliges the sub-lessor to apply for and obtain that consent, and it entitles the sub-lessee to avoid the sub-lease in a prescribed way if that consent is not obtained by the commencement date. (The commencement date seems to have been earlier than 30 days of the date of the sub-lease: see [3] of these reasons.) In that context, and also bearing in mind that the notice is of fundamental significance, that the parties bargained for the notice to be in writing, and that the stated ground of avoidance could readily be communicated with minimal effort and at no additional cost, the words “[i]f such consent is not obtained within [the specified time] the Sub-Lessee shall be entitled to avoid this Sub-Lease by giving notice in writing … of its election in that regard” convey that the notice must communicate United Petroleum’s election to avoid the sub-lease because the mortgagee’s consent was not obtained within the specified time.
  1. That construction is also suggested by the apparent purpose of the notice. That purpose, as described by Neuberger J,[5] albeit in a different context, is to make the position clear to the recipient, who “is entitled, and may need, to make dispositions in the faith of such notices, i.e. on the basis that such notices can be confidently relied on …” It is not to the point that, as United Petroleum submits, cl 45.3 is for the sub-lessee’s benefit.  As 7-Eleven submits, reference to the ground of avoidance is important because it would make it clear that the sub-lease had been avoided validly, so that 7-Eleven should then seek a replacement sub-tenant. (Perhaps it would also usefully inform 7-Eleven’s decision whether to give a corresponding notice to the head lessor if that remained open, but I put that aside because it was not argued.)  Whether or not the mortgagee had consented within the specified time should rarely be controversial.  A reference to avoidance of the sub-lease on that ground in the notice, rather than a reference merely to terminating the sub-lease, should therefore put it beyond doubt that the sub-lessee had validly avoided the sub-lease.  United Petroleum submits that this is not significant.  It submits that a purported termination often leaves the resulting position uncertain because the innocent party is entitled to justify its termination on a ground other than any ground it assigned for the termination.[6]  That is true of a common law termination for breach or repudiation, but the form and content requirements in this contractual right of avoidance may have been included for the very purpose of promoting certainty in the particular case with which the clause is concerned.
  1. Each party argued that various provisions of the head lease supported or were consistent with its construction of cl 45.3. Clause 49.7 of the head lease makes that lease conditional upon the lessee obtaining a report in respect of the contamination of the land (if any) to its complete satisfaction, and entitled it to terminate the lease if it was not so satisfied “by notice in writing to the Lessor provided that the Lessee’s notice is accompanied with [sic] a copy of the report”. Clause 34 of the head lease provides that the Lessee’s notice of exercise of an option to renew the head lease “… must state clearly that the tenant wishes to take a further Lease in accordance with the option conferred by this clause.” Those provisions are very far removed from cl 45.3. Clause 29 of the head lease is a holding over clause, under which a monthly tenancy may be determined by either party at any time “…on giving one month’s prior written notice to the other”. It is arguable that the contrast between the unambiguous limitation in cl 29 of the mandatory content of the notice (a reference merely to the tenancy being determined) and the different and more expansive text of cl 45.3 favours the trial judge’s construction. However, I would not attribute weight to any of those provisions of the head lease in construing cl 45.3 because they dealt with different topics and cl 3.1 of the sub-lease expressly excluded them from incorporation in the sub-lease.
  1. The parties also referred to clauses which are incorporated in the sub-lease. Each of those clauses did not mandate any content for the relevant notice beyond a reference to termination of the lease: “… the Lessor shall be entitled to terminate this Lease by … (a) notifying the Lessee of the termination of the Lease…” (cl 30.2); “… the Lessee shall be entitled to give notice in writing to the Lessor of its intention to terminate this Lease …” (cl 36); “… either the Lessor or the Lessee may notify the other of its intention to end the Lease …” (cl 28.2). The contrast between those provisions and the different and more expansive content requirement in cl 45.3 is consistent with the construction I prefer.
  1. United Petroleum submitted that, upon the construction propounded by 7-Eleven, the sub-lessee had abandoned the common law entitlement, confirmed in Shepherd v Felt & Textiles of Australia Ltd, that an innocent party may justify its termination on a particular ground by relying upon any other available ground for termination.  United Petroleum submitted that, if cl 45.3 was ambiguous, the ambiguity should therefore be resolved in its favour because “clear words are needed to rebut the presumption that a contracting party does not intend to abandon any remedies for breach of the contract arising by operation of law”.[7]  There is no question of any abandonment of a common law remedy in this case.  The relevant right is not the common law right of termination for breach of contract.  It is instead the right of avoidance which was created and defined by the parties’ contract.  If the principle in Shepherd v Felt & Textiles of Australia Ltd is capable of application in such a case,[8] it could only apply in a form which is adapted to conform to the contractual requirements for a valid avoidance of the contract.  The starting point must be the contract, not a presumption that the common law is preserved, and the meaning of the contract must be determined by applying the test in [14] of these reasons.  Applying that test, the purported notices of termination were ineffective because they did not comply with the requirement of cl 45.3 that United Petroleum give notice of its election to avoid the sub-lease on the ground specified in that clause.

Pleading points

  1. I would also hold that United Petroleum should not be permitted in this appeal to seek to justify its purported termination of the sub-lease by arguing that its notices of termination constituted notices avoiding the sub-lease in conformity with cl 45.3.
  1. That case was not pleaded in the defence and counterclaim filed on 19 January 2010 upon which United Petroleum went to trial in September 2011. The relevant aspect of the pleaded defence was that various breaches, and non-compliance with various alleged conditions precedent of an October 2008 agreement, including the consent of the mortgagee to the sub-lease, entitled United Petroleum to terminate the sub-lease. In that context, the allegation in the defence that United Petroleum terminated the sub-lease by its 22 July 2009 letters did not give notice of a case that it had exercised the right to avoid the sub-lease given by cl 45.3.
  1. United Petroleum argued that it sufficiently invoked reliance upon cl 45.3 in its allegation that, “[United Petroleum] will refer to the Sublease and the [deed of consent to sub-lease] at trial for their full terms, true meaning and effect and incorporates the terms of the Sublease and the Deed into this Defence.” The argument is irreconcilable with UCPR r 149(1) which requires that each pleading must “(a) be as brief as the nature of the case permits…”, “(b) contain a statement of all the material facts on which the party relies…”, and “(c) state specifically any matter that if not stated specifically may take another party by surprise; …” In addition, r 150(4) required United Petroleum’s defence to “specifically plead a matter that … (a) the party alleges makes a claim…of the opposite party not maintainable…(c) if not specifically pleaded might take the opposite parties by surprise; or…(d) raises a question of fact not arising out of a previous pleading.”  It is hardly necessary to add a reference to the express purpose of UCPR as being “to facilitate the just and expeditious resolution of the real issues in civil proceedings at a minimum of expense” (r 5(1)).  Plainly, United Petroleum’s general incorporation of the whole sub-lease in its defence did not give notice in accordance with UCPR of a claim that it had avoided the sub-lease under cl 45.3.
  1. Carrick v Armstrong[9], upon which United Petroleum relied, is authority for the proposition that, under the repealed Rules of the Supreme Court, a contract might be pleaded either by alleging its terms or by incorporating it in the pleading.  That is not to say that such a pleading complies with other applicable procedural rules.  In Bloeman v Atkinson,[10] Hanger CJ referred to Carrick v Armstrong and held that, whether or not the deed in issue in that case became part of the statement of claim, “the reading into the pleading of the Deed does not make it a statement, as brief as the nature of the case will allow, setting out the material facts on which the party relies (O.22 r.1); nor a statement of ‘those facts which will put the defendants on their guard and tell them what they have to meet when the case comes on for trial’ (per Cotton LJ in Phillips v Phillips (1883) 4 QBD 127, at p 139); nor would it convey to the mind of a stranger a clear conception of the plaintiff’s case (see Odgers [Principles of Pleading and Practice, 1939 ed.] at p 105).”  Hanger CJ went on to make the following observation, which I would adopt as being applicable under UCPR:

“A plaintiff is not entitled to tell a defendant that his case is based on an identified document (which may contain five or fifty paragraphs– the number does not affect the principle) and leave the defendant to work out for himself what particular paragraph he thinks the plaintiff may be basing his case on.  He is entitled to be told what the plaintiff says was the effect of the portion of the document which he relies on.”

  1. 7-Eleven did not understand United Petroleum’s pleading to rely upon cl 45.3. That was confirmed by 7-Eleven’s counsel in opening its case at the commencement of the trial. United Petroleum’s solicitor also confirmed as much in response to the trial judge’s question about which bases of termination were being advanced. The solicitor referred to the mortgagee’s consent as being a requirement of the memorandum of understanding and a “pre-condition of the sub-lease” and he did not then contend that United Petroleum had avoided the sub-lease in exercise of the right in cl 45.3.
  1. United Petroleum’s solicitor subsequently submitted that the incorporation in the pleading of the sub-lease incorporated the provision which required the consent of the mortgagee to be obtained (a reference to cll 45.1 and 45.2), he acknowledged that the absence of any specific pleading of cl 45 was a problem for his client, and he sought leave to amend to refer to cl 45. 7-Eleven’s counsel objected to the proposed amendment on the grounds that United Petroleum had not identified any notice of termination under cl 45 and that, if United Petroleum relied upon the 22 July 2009 letters, that gave rise to a factual issue concerning the authority of 7-Eleven’s solicitors to receive a notice under cl 45.3.  United Petroleum’s solicitor undertook to formulate the proposed amendment during the lunch hour.  Upon the resumption of the hearing, the trial judge gave United Petroleum leave to amend its defence by adding a specific allegation that it was “a condition precedent of the Sublease, by its adoption of the terms of the Lease and specifically cl 45 thereof, that [7-Eleven] obtain or alternatively do all things necessary to cause [Finesse] to obtain, the consent of the mortgagee…”.  Importantly, the amendment did not allege that United Petroleum terminated the sub-lease under cl 45.3.  Furthermore, United Petroleum’s solicitor confirmed statements by 7-Eleven’s counsel that United Petroleum did not seek to argue that notice of avoidance had been given under cl 45.3; rather, he made it clear that cl 45.1 was relied upon as making the lease conditional on consent.  When the trial judge then observed that “it might be very difficult to seek a further amendment later if you wished to change your position”, United Petroleum’s solicitor confirmed that it did not say that its 22 July letter was a notice under cl 45.3.
  1. On the second day of the trial, United Petroleum’s solicitor applied for leave to make further amendments to the defence, including by adding an allegation that the 22 July 2009 letters were notices under cl 45.3 of the sub-lease.  Counsel for 7-Eleven opposed that amendment on the grounds that United Petroleum had previously made a deliberate tactical decision not to make such an allegation and that it would give rise to issues about whether 7-Eleven’s solicitors were authorised to receive the notice, including a factual question as to whether they had ostensible authority.  United Petroleum’s solicitor acknowledged that the material did not establish that 7-Eleven had itself received the 22 July notice.  He stated that he would seek to prove that the solicitors had ostensible authority to receive the notice.  In response to the trial judge’s observation that “it’s a particular type of notice that’s required and the letter of 22 July doesn’t seem initially to satisfy that test”, United Petroleum’s solicitor said that “there’s no possible way that the first respondent would give notice on that basis with specific reference to that basis…because it didn’t know at the time.”
  1. In the course of argument, the trial judge adverted to 7-Eleven’s submission that the issue of the authority of 7-Eleven’s solicitor to receive notice of termination under cl 45.3 raised a question of fact which would require investigation and possible evidence. In refusing the application, his Honour referred also to the “late stage reached” and “the relevantly unpromising nature of the allegation in any event”.
  1. United Petroleum argues that the amendment should have been allowed because it was seriously arguable that the principle in Shepherd v Felt Textiles applied, but the real issue in that respect was instead whether the mandatory content requirement in cl 45 was fulfilled.  United Petroleum’s further argument that the trial judge failed to take into account that the amendment merely placed a legal characterisation on facts already pleaded should be rejected for the reasons I gave in [23] – [25].  United Petroleum also argues that the trial judge wrongly acted upon the view that cl 45 required, or probably required, a written notice which communicated that the sub-lessee had chosen to terminate by reason of the failure to obtain mortgagee’s consent.  In fact, the trial judge merely observed that the proposed case was unpromising in any event.
  1. United Petroleum argues that it should not be bound by its omission specifically to plead cl 45.3 because the case made in the defence and in the amendment allowed on the first day of the trial was obviously misconceived and because, on the second day of the trial, United Petroleum’s solicitor stated that he had not fully appreciated the effect of what the trial judge had said to him on the previous day. The weakness of the case made in the original pleading and in the amendment is irrelevant. The fact is that the original pleading did not allege that the 22 December 2009 letters constituted notices to 7-Eleven under cl 45.3. The record also demonstrates that, notwithstanding any misunderstanding by United Petroleum’s solicitor, there was no ambiguity about his stated position. United Petroleum did not then seek to contend that it had exercised the contractual right in cl 45.3.
  1. United Petroleum argues that the amendment would not give rise to a factual issue concerning the authority of 7-Eleven’s solicitors to receive notice of termination under cl 45.3 because so much had already been admitted. In fact, no version of United Petroleum’s pleading alleged that 7-Eleven’s solicitors were authorised to receive a notice of termination under cl 45.3. The onus was upon United Petroleum to plead and prove, not merely that such a notice was given to 7-Eleven’s solicitor, but also that the solicitor was authorised to receive that notice on 7-Eleven’s behalf. Although 7-Eleven’s reply did not plead that its solicitor lacked authority to receive the letters, that was in a context in which United Petroleum had not alleged either that the letters constituted notices of avoidance under cl 45.3 or that 7-Eleven’s solicitor was authorised to receive such a notice. If the amendment had been allowed, United Petroleum could hardly have resisted any necessary amendment to 7-Eleven’s reply to plead that its solicitor lacked authority to receive notices under cl 45.3. United Petroleum also submits that the amendment would not have disrupted the trial because 7-Eleven had in its possession an affidavit by its solicitor deposing to the absence of authority to receive such notices,[11] but United Petroleum had not admitted that and it had foreshadowed a contentious allegation that 7-Eleven’s solicitors were ostensibly authorised to receive such notices.
  1. United Petroleum referred to evidence which was submitted to support its contentions that 7-Eleven’s solicitor had ostensible authority to receive the notice and that (contrary to the concession to the contrary made on its behalf on the first day of the trial) the inference should be drawn that 7-Eleven’s solicitor sent the 22 July 2009 emails to 7-Eleven, but those contentions were not pleaded or litigated.  7-Eleven responded by advocating different conclusions upon the basis of evidence to which it referred.  7-Eleven also referred to evidence for its argument that, had United Petroleum pleaded a cl 45.3 case, 7-Eleven would have put United Petroleum to proof of the allegation that the mortgagee had not consented to the sub-lease; 7-Eleven advanced that argument even though it had admitted that allegation in its reply, it had pleaded the same allegation in its alternative claim against Finesse, and it had not made any similar argument when opposing the application for the amendment on the second day of the trial.  United Petroleum in turn responded with arguments in rebuttal.  It would be wrong to reach conclusions upon the merits of any of those matters with reference to evidence which was incidentally adduced at the trial with respect to the different, pleaded issues.  It would also be wholly inappropriate to permit those issues to be litigated for the first time on appeal.[12]
  1. The trial judge was entitled to attribute substantial weight to United Petroleum’s delay in applying for leave to amend in light of United Petroleum’s responsibility for a previous adjournment of the trial[13] and its failure to give any explanation for the delay.  Applying the principles in AON Risk Services Australia Ltd v Australian National University,[14] it was within the trial judge’s discretion to refuse the amendment in circumstances in which the trial had been adjourned on United Petroleum’s application once before, United Petroleum did not invoke cl 45.3 either in its original defence or by amendment after the first trial was adjourned, on the first day of the trial it made a deliberate forensic decision not to rely upon cl 45.3 after being put on notice that it would face difficulties if it later sought to advance such a case, the application to amend was not made until the last day of the trial after 7-Eleven had closed its case, United Petroleum did not give the trial judge any explanation for the lateness of the application to amend, and granting leave to amend would open up the prospect of delay whilst new factual questions were investigated.

Applications for leave to adduce evidence in the appeal against the declaration

  1. 7-Eleven filed an application to adduce evidence in the appeal. One aspect of the evidence concerned its argument that it might have conducted the trial differently if United Petroleum had pleaded reliance upon cl 45.3. I have already concluded, without reference to this evidence, that that such a case would have involved contentious factual issues. It would be inappropriate to permit that case to be agitated for the first time on appeal. I would reject this aspect of the application to adduce evidence on the ground that the evidence is unnecessary. I would therefore also refuse United Petroleum’s application to adduce evidence in the appeal to rebut the evidence filed on behalf of 7-Eleven. I would also refuse both parties’ applications in so far as they concern evidence upon the topics adverted to in [31] of these reasons.
  1. I should mention another category of evidence which the parties sought to adduce in the appeal. After the trial judge upheld 7-Eleven’s claim that the sub-lease was not terminated on or about 22 July 2009, the parties compromised 7-Eleven’s consequential claim for arrears of rent. 7-Eleven and United Petroleum sought to adduce evidence in the appeal which established the terms of the compromise, the fact and amount of the payment made by United Petroleum pursuant to the compromise, and the monetary value of United Petroleum’s loss of use of the amount it paid. That evidence would be relevant only if United Petroleum succeeded in its appeal. In view of my conclusion that the appeal should be dismissed, I would refuse this aspect of each party’s application to adduce new evidence.

United Petroleum’s claim for principal and interest

  1. Nevertheless, it is appropriate to refer to that uncontentious evidence for the purpose of explaining the orders which I would favour if, contrary to my own opinion, the appeal against the declaration should be allowed. The compromise was made in solicitors’ correspondence before the date set down for the hearing of 7-Eleven’s claim for arrears of rent. United Petroleum did not admit that it was liable for the arrears of rent claimed by 7-Eleven, despite the declaration made by the trial judge. Pursuant to the compromise, United Petroleum paid $285,000 to 7-Eleven on terms that it would repay that sum if, on appeal to the Court of Appeal or on a further appeal to the High Court of Australia, United Petroleum established that the sub-lease was terminated on or about 22 July 2009. United Petroleum seeks an order for payment of that sum. 7-Eleven did not oppose that order if United Petroleum won its appeal. Such an order would have been appropriate in that event.
  1. 7-Eleven did oppose an order for interest on that sum. United Petroleum invoked the principle that, in the words of Brooking J in National Australia Ltd v Bond Brewing Holdings Ltd,[15] “when an erroneous judgment or order is overturned, whether by means of appeal or by any other procedure, the court will achieve a just result by requiring anything that has been taken from him by the other party by virtue of the wrong decision to be restored.  Interest is for this purpose treated as the fruit of money and he who has had the use of money will not be heard to say that there were no fruits.”  In this case, however, there was no judgment or order which took anything from United Petroleum.  The declaration must have made it difficult for United Petroleum to defend 7-Eleven’s claim for arrears of rent, but it was United Petroleum’s payment upon the terms of the compromise, rather than any order or judgment of the Court, which deprived United Petroleum of the use of the money it paid to 7-Eleven.  None of the numerous cases to which Brooking J referred involved a similar situation.  Any right which United Petroleum has to recover the money it paid if it succeeds in its appeal derives solely from its contract of compromise.  Since it did not secure a contractual right to recover interest on any such payment, it has no such right.  I would hold that United Petroleum would not be entitled to interest on that sum if it succeeded in its appeal. 

Costs appeal against Finesse (Appeal No 10311 of 2011)

  1. Because the trial judge found that United Petroleum had not validly avoided the sub-lease, it was not necessary for his Honour to consider 7-Eleven’s alternative claim against Finesse. The trial judge made a Sanderson[16] order that United Petroleum pay Finesse’s costs incurred in defending 7-Eleven’s claim.  United Petroleum’s appeal against that order was made pursuant to the leave of the trial judge.  The necessary extension of time to bring that appeal was granted at the hearing of the appeal, the delay being adequately explained and there being no prejudice to Finesse.  This costs appeal should be dismissed because the only ground upon which it was brought, that the declaration made in the Trial Division should be set aside, has not been made good.
  1. Finesse argued that the costs appeal should be dismissed even if United Petroleum’s appeal against the declaration succeeded. However a successful appeal would have falsified an important matter – the event of the litigation- with reference to which the trial judge exercised the costs discretion. Had the principal appeal succeeded, it would have been necessary for the costs discretion to be exercised afresh.

Proposed orders

  1. The following orders are appropriate:
  1. Grant the appellant’s application filed on 3 May 2012 to amend its notice of appeal No CA 10313 of 2011.
  1. Dismiss appeal No CA 10313 of 2011.
  1. Dismiss appeal No CA 10311 of 2011.
  1. Refuse the amended application filed by the first respondent on 4 June 2012.
  1. Refuse the application filed by the appellant on 4 June 2012.
  1. The appellant pay the respondents’ costs of and incidental to the applications and appeals.
  1. PHILIPPIDES J:  I agree with the reasons of Fraser JA and with the orders proposed.

Footnotes

[1] [2010] QSC 469.

[2] [2010] QSC 469 at [95].

[3] [2010] QSC 469.

[4] Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40].

[5] Proctor & Gamble Technical Centres Ltd v Brixton Plc [2002] EWHC 2835 (Ch) at [46].

[6] Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359 at 377-378.

[7] Concut Pty Ltd v Worrell [2000] HCA 64 at [23], referring to Stocznia Gdanska SA v Latvian Shipping Co [1998] 1 WLR 574 at 585; [1998] 1 All ER 883 at 893; Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689 at 717.

[8] See, for example, ACN 096 278 483 Pty Ltd v Vercorp Pty Ltd & Anor; Vercorp Pty Ltd v ACN 096 278 483 Pty Ltd [2011] QCA 189 at [65], applying Minion v Graystone Pty Ltd [1990] 1 Qd R 157 at 164 in relation to a purported termination for breach justified by an available ground of non-fulfilment of a condition precedent.  The present issue did not arise in those cases.

[9] [1969] Qd R 185.

[10] [1977] Qd R 291 at 295.

[11] 7-Eleven disclosed the existence of that affidavit in evidence it sought to adduce in the appeal to support its notice of contention.

[12] Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438.

[13] The trial judge was informed on the first day of the trial that an earlier trial had been adjourned on the application of United Petroleum, with directions being made for further pleadings.

[14] (2009) 239 CLR 175 at 214 [102] – 215 [103].

[15] [1991] 1 VR 386 at 597.

[16] Sanderson v Blyth Theatre Co [1903] 2 KB 533.

Close

Editorial Notes

  • Published Case Name:

    United Petroleum Pty Ltd v 7-Eleven Stores Pty Ltd & Anor

  • Shortened Case Name:

    United Petroleum Pty Ltd v 7-Eleven Stores Pty Ltd

  • Reported Citation:

    [2013] 1 Qd R 272

  • MNC:

    [2012] QCA 172

  • Court:

    QCA

  • Judge(s):

    McMurdo P, Fraser JA, Philippides J

  • Date:

    22 Jun 2012

Litigation History

Event Citation or File Date Notes
Primary Judgment [2010] QSC 469 16 Dec 2010 -
Appeal Determined (QCA) [2012] QCA 172 22 Jun 2012 -

Appeal Status

{solid} Appeal Determined (QCA)