Kingswood Press Pty Ltd v Barry Edward Connor
[1996] QDC 322
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- Unreported Judgment
- Kingswood Press Pty Ltd v Barry Edward Connor[1996] QDC 322
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Kingswood Press Pty Ltd v Barry Edward Connor[1996] QDC 322
Kingswood Press Pty Ltd v Barry Edward Connor[1996] QDC 322
IN THE DISTRICT COURT HELD AT BRISBANE QUEENSLAND | Plaint No 5491 of 1989 |
BETWEEN
KINGSWOOD PRESS PTY LTD | Plaintiff |
AND
BARRY EDWARD CONNOR | First Defendant |
AND
PENELOPE JANE CONNOR | Second Defendant |
REASONS FOR JUDGMENT - ROBIN Q.C., D.C.J.
Catchwords:
Landlord and tenants - claim for mesne profits - no written agreement for lease - landlord's offer letter (5 months before tenant went into occupation) did not include all terms - tenant alleges occupation referrable to agreement for lease for three years with three year option - landlord alleges occupation referrable to tenants prospective purchase of premises - whether tenancy (if any) determined by notices given by landlord - Property Law Act (1974) ss. 124 and 129
Contract - uncertainty - whether provision for rent increase in accordance with consumer price index was uncertain and/or severable
Counsel: | R. Lilley for plaintiff |
| P. Hack for defendants |
Solicitors: | Deacons Graham and James for plaintiff |
| David Alexander for defendants |
Hearing Dates: | 18 - 19/11/96 |
IN THE DISTRICT COURT HELD AT BRISBANE QUEENSLAND | Plaint No 5491 of 1989 |
BETWEEN
KINGSWOOD PRESS PTY LTD | Plaintiff |
AND
BARRY EDWARD CONNOR | First Defendant |
AND
PENELOPE JANE CONNOR | Second Defendant |
REASONS FOR JUDGMENT - ROBIN Q.C., D.C.J.
Delivered the 9th day of December 1996
These are proceedings of some antiquity commenced in the Supreme Court on 2 June 1989. The plaintiff claimed possession of land, rent to the date of the writ or thereabouts, and mesne profits at the same monthly rate ($2,184.75) thereafter. A monthly tenancy was pleaded and its determination on 30 April 1989 by a notice to quit given on 29 March 1989 pursuant to s.130 of the Property Law Act (1974) as amended. The defence asserted that the true arrangement was a “tenancy... for a period of three years commencing in the month of October 1988 with an option for a further three years”. The tenant was claimed to be the second defendant, the first defendant (her husband) being her agent.
Much has happened since, the defendants admitting that “they” remained in possession (claimed to be lawful possession) until 14 November 1994.
The parties have been in Court on numerous occasions over the years, without obtaining any resolution of the basis on which the defendants have had possession. I have speculated that the plaintiff ran out of funds to expend on litigation. It has been compelled by financial pressures to sell the subject property somewhere along the line, and to lease it back, thus converting the defendants' entitlements (if any) to those of a sub-tenant.
It is common ground that the monthly sum referred to above represents a fair charge for mesne profits to cover enjoyment of the occupation of the premises and that the defendants have paid nothing for the last two months of their occupancy or for the 17 months from 15 January 1991 to 14 June 1992. The plaintiff claims that there was an additional month attaching to each of those two periods for which no payment was made and (by amendment made at the trial) that additional “occupation payments” (my description) are due to it by reason of the withholding of rental of $1,850 from monthly payments made to it between August 1993 and April 1994 ($118 was for replacement of a fire reel or hose, $355 for repair of a roll-a-door, $1,377 for changing the locks on the subject premises).
I permitted that amendment, once satisfied there was no injustice to the defendants in permitting it. I indicated I would not be inclined to let the plaintiff further amend to claim an additional sum in respect of what the defendants assert was a verbally agreed rent free period at the beginning of their occupation.
It will be seen that the defendants have (subject to the matters of their counter-claim) enjoyed the full benefit they might have hoped for from the premises.
The defendants, admitting that the second defendant would otherwise be indebted to the plaintiff for $41,510.25 in respect of rent, say she has a counter-claim which consists of $18,000 (representing an annual entitlement to $3,000 worth of off-set printing by the plaintiff without charge for the original term as alleged, and the option period), $4,500 for installation of carpeting and partitions and $15,120 for the costs of leasing an air conditioning unit (these last matters being claimed to be the plaintiff's responsibility). In addition, the second defendant claims $86,400 “loss of revenue as a consequence of a lack of advertising” attributable to the plaintiff's preventing her using the rear external wall of the premises (and, also, a portion of the external wall of the part of the building occupied by the plaintiff). The claim was for $1,200 per month. It seems to me untenable for the first six months or so of occupation, at which point an interim injunction obtained ex parte from Master Horton came into operation; it does not appear that the defendants ever sought to have the Master's order reviewed. By a late amendment, the second defendants subsumed their claim for partitions and carpets in the leasing of the air conditioning unit, claiming leasing charges of $530 per month, for a total of $25,440.
The plaintiff's claim is now $45,879.75 (excluding the $1,850), being 21 monthly occupation payments; it further claims, in an alternative claim for rent, rather than mesne profits, “$24,190.80 due and owing in respect of CPI increases in the rent” against the possibility that the defendants' contention as to the existence of a lease and option should prevail. The plaintiff's primary position was that there was no lease.
If there was a lease, it is a case of the essential terms being “cobbled together”, to use the language of Mr Lilley, who appeared for the plaintiff, from here and there, having some similarity to the events underlying South Coast Oils (Qld & NSW) Pty Ltd v. Look Enterprises Pty Ltd (1988) 1 QdR 680. In that case the primary Judge and the Full Court had different views of the commencement date, as to which the defendants here are rather coy. The defendants rely on the few documents we have where these favour them, for example, in defining the duration of the original lease period and the option and the printing entitlement, but cavil at accepting the CPI provisions, said, in the alternative, to be uncertain and severable. Verbal exchanges are relied on to incorporate other details favourable to the defendants' case, such as the second defendant being the lessee and a rent free period claimed to be 2 months. I will say at this point that I greatly prefer the evidence of the plaintiff's principal, Mr Moody, to that of the first defendant. One interesting instance of the calculating way in which I thought he gave his evidence concerns Exhibit 59, the import of which he acknowledged willingly enough on first sight at page 117; however, on the very next page he professed an unconvincing lack of knowledge and understanding of the document. One respect in which the two witnesses differed concerned whether the plaintiff (as one might expect would happen, and as Mr Moody swore did happen, volunteering an account of Mr Connor's refusal to pay lessor's solicitor's costs, even on a discounted basis) ever showed an interest in getting a lease document signed by the lessee. Mr Connor swore that nothing along these lines ever happened. Here I would prefer Mr Moody's version; apart from questions of the witnesses' demeanour, it is the more likely, in my opinion.
The whole transaction has been a curious one. The plaintiff company devised a plan to purchase land and erect a commercial building on it with space over and above its own immediate requirements. It hoped to lease out the extra space which would have the advantage of generating rent income; that was considered likely to lead to the plaintiff's financier viewing the project more favourably. Kona Coffee Company was a business of one or both of the defendants for which the plaintiff had done printing work over the years. I would infer its dealings had been with Mr Connor, or at least, that Mr Moody and his fellow principal, Mr Keeffe regarded him as the proprietor, and the person to discuss a possible lease with.
It was in that character that Mr Connor signed the letter, Exhibit 1 - he says by mistake, he having not noticed the way the letter described him at its foot:
“Kona Coffee Company
Kingswood Press P.O. Box 552, WOODRIDGE Q. 4114 | 11/5/88 |
ATTENTION: Mark Keeffe & Phil Moody
Dear Sirs,
Re: Lease of Building from Kingswood Press
I hereby agree to lease one side of the building situated at Lot 16, Parramatta Road, Underwood for a period of 3 years with an option to lease for a further 3 year term.
The area for lease is, factory area 5,142 sq. ft., office area 684 sq. ft, giving a total area of 5,826 sq. ft.
I agree to pay $5.00 per sq. foot per annum on a monthly basis, such price to be held firm for 1 year, after which the price will rise with the Consumer Price Index.
This is on the condition that Kingswood Press install air conditioning and office partitioning and floor coverings as per our requirements.
This agreement is conditional on the building being ready for occupation by 30 September, 1988.
The back of my side of the said building is available to me for advertising purposes.
Yours faithfully,
BARRY CONNER (sic)
PROPRIETOR”
The handing to the plaintiff of this document (which Mr Moody had little or no recall of) was accompanied by execution of Exhibit 2:
| “11/5/88 |
Re: Lease Agreement on Lot 16 Parramatta Road, Underwood.
In reference to leasing agreement on Lot 16, Parramatta road, Underwood, dated 1/5/88, either party reserves the right to terminate this agreement without notice.
P. MOODY | M. KEEFFE | B. CONNER (sic) |
KINGSWOOD PRESS | KINGSWOOD PRESS | KONA COFFEE” |
Further discussions took place, leading to important variations in the proposal, all favourable to Kona Coffee Company to whom the plaintiff addressed the following letter, Exhibit 3:
| “Kingswood Press |
30th May 1988
Kona Coffee Co.,
7 Aranda Street
SLACKS CREEK. Q.
Dear Barry,
We hereby propose for your company to lease one side of the building situate at Lot 16, Parramatta Road, Underwood. The area for lease is:
Factory 5142 sq ft.,
Office 684 sq ft.
This gives a total area of 5826 sq. ft.
The net monthly repayments to be $2,184.75 which will be held firm for one year, after which the price will rise with the Consumer Price Index. However, we agree to produce $3000 worth of offset printing per year for you at no charge.
We agree to install floor coverings, office partitioning and air conditioning in the office area. We also agree to install an extra flight of stairs from the office to inside of the factory area, or windows at back of offices for viewing into factory area.
Providing cement slab has not already been laid we agree to provide plumbing and electricity as per your requirements. Also skylights in factory area.
The back and front of the building on said side is available for advertising purposes.
Yours faithfully,
PHIL MOODY
DIRECTOR”
As a matter of history, the plaintiff's issuing of this document was followed by Kona Coffee Company's going into possession of the area earmarked for it. It thus became possible to regard Exhibit 3 as indicating the terms of occupation. However, not much happened in the five months (or nearly) before possession was taken. I find that Mr Moody was making approaches along the lines he swore to, to have a lease executed. I find that the prospect of Kona Coffee Company or some related person or entity purchasing the space to be taken by it, rather than leasing, arose, as Mr Moody claimed. The explanation he says was given to him was that Kona Coffee Company was trading very profitably at Expo '88. This would explain why nothing happened in relation to a formal lease being prepared. It was not put by Mr Lilley to Mr Connor that the notion of a purchase was merely a ploy on the defendants' part to avoid committing themselves to a lease. Strong corroboration that a sale was in prospect comes from the plaintiff's engagement of Mr Sommerville, surveyor, to effect a subdivision of the premises by building unit plan in July 1988.
I find that what happened after the creation of Exhibit 3 is sufficiently indicated for present purposes by Mr Moody's evidence at pages 18-22;
“What was the nature of those discussions:-- After we finally agreed - said that we would pay for the lease he said, “Look, I'm not interested in leasing it. What about coming up with a price to buy half the building?”, and I replied that I didn't even know whether it could be done and I'd find out about it.
Did you make some inquiries about that?-- I did.
And as a result what happened?-- I spoke to Roy Somerville from Roy Sommerville Surveys, he came and had a look. He said seeing as there's a centre wall down the building it can be separated which - that was all I needed to know at that time.
And what happened then with Mr Connor?-- As far as for a price we went - I went back to Mark, my partner, we worked out that the area on the right hand side of the building was 46.2 percent of the total area. We worked out the cost price which was 604,000, I think, and which came to between 275 and 280 thousand which I rang Connor and told him that was the price.
Now, you mentioned before the right hand side of the building, is that one and the same as the southern side of the building?-- I think it would be, yeah.
Now what did Mr Connor say about the price you proposed?-- He said, “That's great.”
Now, after the building was completed what happened in relation to Mr Connor or Kona Coffee?-- Well, nothing had been put in - nothing had been - happened. The strata title was still going through and we didn't - hadn't had approval for the subdivision as yet from the Council. We moved into the building on 7 September, they moved in sometime in September as well.
Now, after they entered into possession had you by then done anything about carpets for the premises?-- I had organised the carpet through the people that did the carpets throughout the whole building which finally installed them all, but he had told me that he was organising his own carpets.
Well, how did that occur, can you-----?-- As far as - with the carpets at the same time as the curtain - the venetian blind person came to install the venetian blinds on his side as well Matt, from Uniline, come and saw me and he said, “look, they've already been installed.”
Well, that's the curtains, isn't it?-- Yeah.
No, you-----?-- But at the same time I spoke to Barry Connor and he said he was organising his own carpets and curtains.
Do you recall when that discussion took place, before or after they - he entered into possession?-- It would have been in September - when they were in possession.
Now, did they tender any money to you by way of rent for being in possession in September?-- No.
When did you first receive money from them?-- On January the 25th.
And did you do anything in relation to that - prior to receiving that money?-- I went over and asked him through the adjoining door in early November, which he told me that he had money problems with Sarah Lee or someone - some problem they had with them, and he didn't have the money. I come and saw him at the end of November, and he said that they still had money problems, and then early December he'd gone overseas.
Now, at some stage did you change your mind about the price you wanted for the building?-- No.
The price you wanted for half the building?-- The price was always the same, nothing had changed.
Do you recall that you - what did you do in respect of Kona Coffee in order to get payment of rent?-- When he had moved in I asked, “What the hell - why are you moving in?” Like, nobody - I haven't even talked to you, I haven't said you can or anything, and he said, “Don't worry about it, we'll pay the rent at the agreed rate until we get the strata title through.”
Now - but then he didn't pay rent, and you had the discussions. What did you do about getting paid?-- Other than going over and asking him for it, we sent a letter on - well, we made - drew up a letter on 25 December which was drawn up through our solicitor, which also included the sale contracts, and payments for rent.
Could the witness see Exhibit 6 please, Your Honour? Is that a copy of the letter you were just referring to?-- That is.
Just read it carefully would you please?-- From start to finish?
Yes please. To yourself?-- Okay.
Now you see the date of that letter?-- Yes.
What's the date?-- 15 December.
And that's the letter you were referring to?-- It is.
So it was incorrect when you referred to it as the 25th?-- Yes.
Now did you deliver that letter, or how did you get that letter to Kona Coffee?-- I wasn't able to see him until around 3 January when he got back from overseas, and I remember giving it to him then.
Now, you said - I'll just ask you again, when did you first receive any rent from Kona Coffee or Mr Connor, or Mrs Connor?-- It was late in January.
Could you have a look at this letter please? That's a letter dated 22 January?-- Yes.
And it refers to enclosing a cheque does it?-- Yes.
For how much?-- For 4-3-6-9.
And is that the first time you received any money from the defendants?-- It is.
I'll tender that letter, Your Honour. I'll just let my learned friend see it.
HIS HONOUR: 26th.
ADMITTED AND MARKED “EXHIBIT 13”
MR LILLEY: Mr Moody, after you received that rent, or that cheque, what did you do with it?-- I - the day before I received that he came over and told me that he was not - no longer going to buy the premises. Which-----
The day before you received that?-- The day before I received that letter he came over to our side of the premises, said he wanted to see me, come in and saw me and said that he's decided that he can't ahead with the buying the building as agreed as - because his accountants advised him that he's better off renting.
Right. Now, did you have any discussions with Mr Connor at anytime after he - the defendants or entered into the premises, did you have any discussions about partitioning?-- No.
Did you - did he at any stage ask you to do any printing?-- No.”
On the face of it, there is inconsistency between Mr Moody's assertion that the price did not change and Exhibit 6 which nominates the higher price. It reads:
| “ASSEMBLY KINGSWOOD PRESS |
15th December, 1988
The Manager Kona Coffee Company
84 Parramatta Road
Underwood Q. 4119
Dear Sir,
RE: LEASE OF BUILDING FROM ASSEMBLY KINGSWOOD PRESS AT LOT 16 PARRAMATTA ROAD UNDERWOOD
We refer to your letter to us of the 11th May 1988 and to our letter in reply dated 30th May 1988.
We note that following this agreement to rent the premises you took occupation in October 1988. We note that the correct rental at $4.50 per square foot on the total factory area of 5,826 square feet which you have agreed to pay is the sum of $2184.75 per month. We note that we have received no rental to date and at present the rental owing to us is the sum of $6554.25.
We further note that we have had recent discussions with you in relation to the proposed purchase of the area you are presently renting and we are writing to you to confirm the terms of an offer to sell this property.
We are presently in the process of converting the property from Leasehold to Freehold and to a sub-division of the property by way of a building units plan to allow for the sale to you of the premises presently rented by you.
We offer to sell you the premises presently rented at a figure of $324,000 (Three Hundred & Twenty Four Thousand Dollars) which would include the rental outstanding to date. We require payment of a deposit of $32,400 (Thirty Two Thousand Four Hundred Dollars) and due to delays in Freeholding Title and to completion of Titles Office requirements we would anticipate a final settlement date of four months after the contract to sell was executed.
This officer is conditional upon you continuing to pay rental in the sum of $2184.75 per month as and from the 1st February 1989 and monthly thereafter to the date of settlement.
The contract would be subject to us obtaining a Freehold Title to the property from the Lands Administration Commission and to the registration of the building units plan in the Titles Office prior to the date of completion of the contract.
We are also prepared to grant you exclusive right to use carparks numbered 5, 6, 7, 11, and 12 as per the proposed building units plan.
The other terms of the contract would be those normally contained in the standard sale contract produced by The Real Estate Institute of Queensland.
Kindly confirm your acceptance of this offer in writing with a payment for the deposit. We will then instruct our Solicitors to prepare a formal contract of sale which would include all the above terms.
This officer remains valid until 17th January 1989, after which time the offer will be withdrawn and the property will be put on the open market.
Yours faithfully,
----------------------------
Phil Moody : Director
Mark Keeffe : Director”
The letter includes schedules (set out in an appendix to these reasons) which show how some of the figures are derived, including the $324,000 asking price. It appears that the plaintiff was interested in recouping costs, which doubtless were inflated as time passed so that in that sense Mr Moody was justified in saying the asking price did not increase. There was no suggestion from the defendants at the trial that they were ready, willing and able to purchase for the price mentioned in Mr Moody's evidence.
While there are indications in Exhibit 6 that a lease in terms of correspondence may have been in existence, the conduct of the parties, in particular of the defendants, tells against their holding a view along those lines. Above all is the complete failure of the defendants, either of them, to pay rent. On any theory of rent free periods and the like, rent ought to have been paid before 26 January 1989 when Kona Coffee Company wrote as follows to Mr Moody:
“Further to our conversation please find enclosed our cheque for $4,369.50, being rental for the first two months of the lease commencing as from the 15th day of December 1988.
As agreed, our solicitor has been asked to forward a draft lease for yourselves to approve. Kona will pay the costs for the lease.”
I find the about-turn in respect of Kona Coffee Company committing itself in writing to a lessee's obligations and bearing the legal costs of a lease document discreditable so far as the defendants are concerned, particularly when other factors are taken into account, such as the failure to pay any rent whatsoever and Mr Connor or Kona Coffee Company's taking over the selection and installation of items such as carpeting and air conditioning, in which one would normally expect a lessor to be involved. It seems to me there are two ways of characterising the defendants' performance, the first that they acted in a high handed way more or less repudiating the obligations of a lessee, except for clinging to possession of the premises, willing to perform those obligations only as and when it was convenient. The second explanation, which the plaintiff puts forward, is that Kona Coffee Company went into possession in the expectation of completing purchase of its “half” of the building, on the basis of some interim arrangement such as a monthly tenancy. In my opinion, in the circumstances, it is not tenable to say that a three year lease with a three year option was the fall-back provision. I find the second scenario summarises what happened. It certainly is the one not calling for obloquy against the defendants, who might well be forgiven for repenting of the expected purchase, for economic or fiscal reasons. I appreciate that my finding regards as mistaken any analysis of the situation as one of concluded agreement for lease which the plaintiff may have expressed in Exhibit 6 or, indeed, in notices and pleadings.
The change of plan had dramatic effects. Mr Moody's cross-examination (page 39) contains the following:
“So every week for the period from June/July 1988 to December 1988, there were discussions about purchasing the building, is that what you're saying?-- Yes. Now, the letter of 15 December was not given to Mr Connor until January of 1989, was it?-- That's right.
He was overseas at the time?-- That's it.
And he took the letter from you and said that he would get back to you about that, did he not?-- Yeah, two days later.
Sorry?-- He got back to me two days later.
And he said, in effect, he wasn't interested in purchasing at that price?-- No, he said, “Can you give me a break up of the finance cost?”
Right, a break up was provided?-- It was.
And about 25 January he told you that they were not interested in proceeding with a purchase?-- That's right.
And they were interested in proceeding with the tenancy?-- That's right.
When he moved in there were some temporary carpets on the floor, were there not?-- He put the carpets in.”
The questioning turned to Exhibit 13 (dated 26 January 1989):
“In January he wrote to you, in effect, saying that he would get a solicitor to forward a draft lease for you to approve, do you remember that?-- Yes.
It was the day after he came in and said he was going to buy it?-- The day after he said he wasn't going to buy it.”
The issue had clearly arisen whether Kona Coffee Company was entitled to a lease. This was the cross-examination of Mr Moody (page 36) in relation to Exhibit 20 in which solicitors clearly purporting to act for Mr Connor and/or “his business” made the affirmative assertion on 1 February 1989:
“MR HACK: Now, you received that letter?-- Yes.
The third paragraph, “Mr Connor has now advised that in recent conversation with you, with your Mr Moody, that you are no longer prepared to enter into the lease agreement with our client.” Is that what you had said to Mr Connor?-- That's right.
And the basis of that was what? Because he had declined to purchase half of the building?-- That's right.
So it wasn't a question of him having refused to get your solicitors to prepare a lease. You had, as you saw it, refused to go ahead with it because he wouldn't purchase half the building. Is that a fair statement?-- When the original offer was for him to lease it, he then decided to buy it, he approached me on 23 January and said he's not going to buy it, he wants to lease it. I said, “Well, we're selling it anyway, if you're not going to buy it, so work it out with the people who buy it, if you can.”
Mr Connor confirmed (page 103) that the plaintiff was no longer interested in a lease, and that the result of intervention of solicitors was the generation of notices to remedy breach (non payment of rent) under the Property Law Act and notices determining the agreement for lease (asserting reliance on Exhibit 2), all dated 2 February 1989. By these documents, the plaintiff appears to assert the existence of an agreement for a three year lease. These notices are Exhibits 14, 15, 21 and 22. The doubling up is attributable to like notices being sent to both defendants - the plaintiff was apparently alerted to the possibility that Mrs Connor might have an interest, although it was some time before her own solicitors asserted one. Exhibits 21 and 22 are notices in Form 10 given to overcome the inhibition created by s. 124 of the Property Law Act against re-entry or forfeiture against a lessee for breach unless such a notice is given, and a reasonable time for remedying the default permitted. Those notices allowed 30 days for payment, which I think is reasonable.
The defendants' company tendered no rent whatsoever until Mr Moody had clearly manifested the plaintiff's intention not to deal with them. It paid two months rent by a cheque dated and given by 26 January 1989. Thereafter came a cheque for one months rent dated 20 February 1989 and monthly cheques for a single month's rent on or before the 15th of each month for seven months or more (see Exhibit 43). The plaintiff was never paid any rent for any period prior to 15 December 1988. No part of the two months' arrears demanded in Exhibits 21 and 22 ($4,364) was ever paid. My conclusion is that each addressee must be taken as having failed to comply with the notice. The defendants' case is that a rent free period applied until 15 December 1988. Mr Connor said (at page 100):
“We started - I think we started painting in September, that was ceiling walls and floors, that was inside. The builders were still there, I think. We pained the rear outside wall or the side wall as well to seal it from moisture. At that time I can remember raising with Phil about we didn't have the things that had been promised.
What were they?-- Well, there was no carpets. He did mention something about putting carpet squares down, I said, that's not satisfactory because we have to have an antistatic carpet and we have to have a felt underneath, not a foam or something, because of the computers, because he had brought up that he was putting carpet squares in his side and he had proposed to put carpet squares on our side. The discussion also was around that well, if we're going to strata title the building then you're going to save money because I won't spend all this money in doing all these things for you. We had agreed upon a two month rent free period.
Can I stop you there. When was that?-- When we agreed upon the two month rent free period?
Yes?-- That was when this agreement was put in in May, early June when we were talking then.”
Exhibit 3 says not a word about a rent holiday.
Mr Moody's version, when the defence case was put to him in cross-examination, is the one I prefer:
“Do you disagree with that statement?-- No.
Do you disagree with the proposition that the occupation commenced in the middle of October 1998?-- He started moving in in September, but if you - I don't mind as far as like, they worked from two different premises. Whether they all moved over then, I don't know.
Now there were some discussions between you and he about a rent free period, weren't there?— That's right.
And ultimately it was agreed that the first two months would be rent free, weren't they?-- One month rent free.
Well I'm going to suggest that it was agreed that two months would be rent free, commencing on 15 October and ending on 14 December?-- No, the letter of 30 May we sent him, that's what we actually made it, another change that if he signed the lease, we'd give him a month free.
There's nothing in the letter of 30 May about rent free periods though, is there?-- No.
Originally it was expected that the building would be completed in August and September - August or September?-- That's right.
Prior to the completion of the building, I'm going to suggest that you agreed to a two month rent free period expressed to compensate for the cost of moving?-- Before the letter of May, that's when it was agreed, so he would sign a lease agreement.” (page 34).
The defendants had the potential to earn a one month rent holiday by signing a lease. So far as the evidence shows, neither of them ever did this, notwithstanding what was said in the letter of 26 January 1989.
The plaintiff, asserting there only ever was a monthly tenancy, alleged that the defendants assumed the character of trespasser in the following way:
“4. On 29 March 1989 pursuant to section 130 of the Property Law Act 19741986 the plaintiff determined the tenancy by Notice to Quit in writing expiring on 30 April 1989 and demanded possession of the land.
- The First Defendant and/or alternatively the Second Defendant failed and/or refused to comply with the said Notice to Quit and remained in possession of the land until in or about November 1994.”
Although paragraph 4 was denied by them, the defendants' pleading says:
“The first and second defendants admit the matters alleged in paragraph 5 of the further amended plaint, however, the first and second defendants deny that they are or were required in the premises to comply with the said Notice.”
That notice is not in evidence, but in my opinion, the defence does acknowledge its existence. Further, I consider that in the circumstances it was sufficient to determine any lease or tenancy. No point was argued that it expired on the wrong day. The defendants were understandably not anxious to highlight that the commencement date of the lease they alleged could not be identified. There has been no application by the defendants or either of them for relief under s.124. The defendants would hardly have been sympathetic candidates for relief. This matter is no longer significant from the point of view of entitlement to possession of the premises, but it determines the fate of the counter-claim which depends for success (full success, at any rate) on a continuing lease or agreement for lease being established. If there was a continuing lease, the plaintiff's first claim is for rent rather than mesne profits, and the plaintiff has an arguable entitlement to CPI increases being awarded on top of the original rent.
Dealing with this last matter, Mr Hack submitted, with reference to Hely v. Sterling (1982) VR 246, the provision for CPI increases in Exhibit 3 (and Exhibit 1, come to that) lacks sufficient certainty to be enforceable. The real problem, he suggested, was uncertainty as to what the base rental should be for the calculation and the dates upon which the variations were to take effect (see page 198 of the transcript); he appeared to submit there was doubt as to the base date from which the index was to apply. If Mr Hack was suggesting that the provision for CPI increases could be severed, leaving the plaintiff without something that it had clearly bargained for, I would find that an unattractive proposition, and favour the view that uncertainty as to what the rent was to be after the first year vitiated the entire agreement for uncertainty: compare what McHugh J said in Humphries v. The Proprietors, “Surfers Palms North” Group Titles Plan, 1955 (1994) 179 CLR 597, 621:
In my opinion, in cases where a provision in a contract is void, is not for the xclusive benefit of the party seeking to enforce the contract, and is part of the consideration for an indivisible promise of the defendant, the proper test for determining whether the void provision is severable from the indivisible promise is that formulated by the Full Court of the Supreme Court in Brew v. Whitlock [No. 2] [1967] V.R. 803. In that case, the Full Court said that ibid., at p. 813. “once the conclusion is reached that the invalid promise is so material and important a provision in the whole bargain that there should be inferred an intention not to make a contract which would operate without it”, the invalid promise should be treated as inseverable from the contract.”
This case is easily distinguished, in my view, from one such as South Coast Oils in which uncertainty or some equivalent difficulty in identifying the rental applicable for the new term which would come about on exercise of an option did not vitiate the original term. If there are problems respecting the certainty of stipulations here of the essential terms of an agreement for lease, the consequence would appear to be that there is a monthly tenancy, or a tenancy determinable on one month's notice in writing. See s.129 of the Property Law Act. Mr Lilley referred to the House of Lords' decision in Prudential Assurance Co Ltd v. London Residuary Body (1992) 3 WLR 279, 281, per Lord Templeman. I agree with Lush J in Hely v Sterling (249) that, faced with a provision such as that for CPI increases encountered here,
“It is the function of the Court to make it operate and operate sensibly, if that is 1 possible, within the reasonable confines of its language”.
The plaintiff's submission, which calls for increases in each year of the tenancy based on the increase in the Consumer Price Index (September quarter), is correct in my opinion. Exhibit 10 is a certified document establishing the five relevant increases (measured against the corresponding quarter the previous year) as 7.7%, 5.3%, 3.2%, 0.8% and 2.8%. Exhibit 11 is a calculation, to which the defendants made no challenge, showing the additional rent the plaintiff would be entitled to if the CPI provision operated in that way as $20,290.20.
The history of payment of rent or “occupation payments” was murky. After banking the first cheque, the plaintiff had second thoughts and refrained from banking those which followed. Financial pressures subsequently led the plaintiff to determine it was imperative to get some money in. It asserted that it was entitled to the sums proffered as mesne profits, if not as rent, and informed the defendants' solicitor it proposed to bank all cheques. Little notice of this was given, and a number of cheques bounced (the plaintiff makes no point of this), but were replaced by other cheques which were honoured. The defendants then took it on themselves to withhold monthly payments for 17 or 18 months, ending in June 1992, and a couple of months at the very end, as well as making short payments in the interim (totalling $1,850 as mentioned above) for expenditures of theirs which were said to be chargeable against the plaintiff. The long period of non-payment represents a self-help approach to obtaining security for the counter-claim.
My conclusion is that there was no agreement for lease. The plaintiff's view is that Kona Coffee Company went in and was let in as a future purchaser; Mr Connor swore in his affidavit of 14 March 1996 (Exhibit 61) that the plaintiff had made alternative offers “to sell us a portion of the building on completion for $280,000 or lease the premises at a stipulated rental”. His (or his wife's) going into possession is not, therefore, unequivocally referable to Exhibit 3. Even if the Kona Coffee Company's going into occupation was not only by consent of the plaintiff, but brought about some tenancy, by the end of April 1989, whoever was in occupation (and this was both defendants, on my view of the evidence) was a trespasser. On this basis, mesne profits are payable for the whole of the period; technically, for the first few months it may have been “rent”. No trespasser, in my view, has a claim against a person properly entitled to possession of premises for expenditure on items such as the fire hose or reel, roll-a-door and replacement locks. As to the first and second, the evidence does not show what caused replacement or repair to be necessary years after the defendants had gone into exclusive occupation: it may have been some accident or abuse for which the defendants rather than the plaintiff should be held responsible. The changing of the locks occurred when differences over use of parking spaces outside the building led Mr Connor to leave a trailer used for transporting a hot air balloon in the plaintiff's parking place chained to a post and locked with a Lockwood lock. Mr Moody, all ready to cut the lock and chain, found a key to the lock on the ground, and was able to move the offending trailer without damaging any property; he says he taped the key somewhere where it would be found. Mr Connor's conclusion, when he returned to the scene, was that a locksmith had been brought in to fabricate a key to work the lock (this Mr Moody denied) and that the unwelcome consequence was that anyone with a copy of that key would have access to Kona Coffee Company's entire premises. Accepting Mr Moody's evidence, this would not have come about unless some malefactor copied the taped key. Mr Connor's taking every precaution for Kona Coffee Company's security may be understandable, but does not justify making a charge against the plaintiff in the circumstances.
It is just as untenable that the plaintiff (which I find was at all times willing to provide air conditioning, carpets and partitions at its own expense - subject, of course, to recoupment on sale of the premises) should be charged with the cost of the defendants' providing such items themselves, as a set-off against rent or, indeed, by way of counter-claim. For the most part, those items were taken away in November 1994, or partly dismantled so that the plaintiff never obtained enjoyment of those items as owner. A further feature of the counter-claim regarding these items is the expensive means adopted by the defendants of providing them. The pleaded case varied, but ultimately it came down to a claim that all three were acquired by a business of Mr Connor's, BEC Finance Company, and leased to “Penelope J Connor trading as Kona Coffee Company”. The lease rental agreement is Exhibit 58. It purports to operate from, and have been made on, 1 January 1989, which I cannot regard as the genuine date of the agreement; there may have been reasons of business or convenience for the backdating. No point was made of this, but I am far from confident, upon looking at Exhibit 58, and the history of the defendants' pleadings, that the schedule of chattels originally included all the items written in there now. The defendants were able to meet a challenge to the genuineness of Exhibit 58 by producing Exhibit 64, an invoice dated 16 March 1989 for the air conditioning at a price of $6,480 to BEC Finance. Workings on the back of Exhibit 58 reveal the following:
“Air Conditioning carpet | Invoice | $10,000.00 |
24 mth interest |
| 5,625.00 |
48 payments $530 mth |
| $25,440.00 |
The agreement is unusual in that no payments were called for for the first two years. It seems that $5,625 was regarded as appropriate interest for those first two years at something like credit card rates. The “bottom line” suggests that in respect of this component of the counter-claim, more than 60% is for interest and/or credit charges. It is not immediately obvious to me that the plaintiff ought to bear those. It is hard to avoid the suspicion that the defendants were giving effect to what was seen as in the best interests of their own respective businesses. While there is evidence that in the financial years 90-91, 91-92 and 92-93, Kona Coffee Company paid the monthly instalments, I could not be satisfied that this happened in 93-94 and 94-95 as the defendants claimed. In those two periods what is relied on is “three cheques totalling $6,000” and “four cheques totalling $3,500” respectively (See Exhibit 69), further information about those cheques appearing in Exhibit 70 and Mr Haddock's evidence. The attribution of cheques has been changed from “cash” or “Visa” to “BEC” and the amounts do not coincide with multiples of $530. It is not possible to be satisfied that after the 92-93 financial year Mrs Connor continued to make payments under her agreement with Mr Connor.
The remaining aspects of the counter-claim, relied on also as a set-off, are the loss of free printing and the loss of revenue claimed to flow from Kona Coffee Company's being denied use of the exterior of the premises for advertising and like purposes. On the basis that the defendants became trespassers at the end of April 1989, and were not enjoined from “painting” until Master Horton granted an interim injunction on 14 April 1989, to run for five days only, or until-earlier order, I would regard any loss in this respect as de minimis, and productive of no real damage. Both this right of the defendants and that to free printing I would regard as arising only if (contrary to what I have found) Exhibit 3 identified the basis of the defendants' occupancy of the premises. Even if that view be wrong, the defendants still are in difficulty. Their entitlement to printing was on an annual basis (so that the plaintiff may well have been justified in declining to respect it in any year until it became clear that the defendants would remain in occupation and comply with their obligations for a full year). On the view I take of the evidence, there was no request by the defendants for free printing before the matter arose about the time of the service of the final notices to quit, when the plaintiff appears to have indicated it expected goods and services provided by it to be paid for. See Exhibits 28 and 29.
No set-off is established. The plaintiff's entitlements on its claim appear from Mr Keeffe's document, Exhibit 43, subject to the plaintiff's abandonment, which he volunteered, of any claim to rent from 15 November 1994 until the end of that month. See his evidence-in-chief at page 53.
The pleadings raised two issues regarding the rent/mesne profits claim, the first whether the period not paid for in 1991-92 ran for 17 months from 15 January 1991 as the defendants plead, or 18 months from 15 December 1990, according to sworn evidence from the plaintiff, with detail given in Exhibit 43. That is the version I prefer. The defendants did not challenge it in any detail; reference in cross-examination to a particular cheque as “the December cheque” is quite unhelpful. It is clear that there has been uncertainty or indecision all along as to whether rent periods ran from the middle of calender months or the end of them. It is impossible to say what period “the December cheque”, assuming such a thing existed, covered. So far as the defendants' evidence on this issue is concerned, when Mr Connor at page 107 described his wife's withholding of rent to cover “all the expenses that have been incurred...not just the things that weren't done, but also the legal costs that have been involved”, he said he thought cheques were withheld for “a period of 19 months...or something like that”. I accept the plaintiff's claim to 18 months.
Then there is the plaintiff's contention that at the end of the period of occupation, three months' “occupation payments” were unpaid, supported by evidence, including Exhibit 43, against which the defendants in their pleading admit to two months only being unpaid. The defendants adduced no evidence helpful to their contention, nor did they make any useful challenge to Mr Keeffe's evidence. Exhibit 43 shows that the defendants, from 15 August 1992, adopted a procedure of paying two months' rent at a time, subject to withholding of items aggregating $1850 on three occasions (the defendants at this stage were specifying the periods covered by the payments, which still might come unimpressively late - Exhibit 46, for example, shows that rent for 15 February 1994 to 14 April 1994 was paid by cheque dated 4 April 1994). One would have thought that a cheque for $2,184.75 paid towards the end, so that monthly payments would run to the middle of the appropriate “odd” month (November), rather than as they had for two years run to an “even” month, would have been easily pointed out. The evidence supports the plaintiff's contention that nothing was paid for any period after 14 August 1994. The plaintiff's claim therefore succeeds (before questions of interest are looked at), as to 21 months “occupation payments”, which is $45,879.75, the plaintiff being entitled to a further $1,850 in respect of periods that were not paid for in full. I might say that the plaintiff appears to me to be short changing itself, limiting its claim to those sums. Although I ruled (without any application having been made by the plaintiff for an appropriate amendment) it was too late to do anything about it by then, it seems to me the plaintiff could have validly claimed for the two months ending 14 December 1988.
It appears the plaintiff should have judgment for the total of the sums mentioned, together with appropriate interest and costs. I will hear the parties as to what orders ought to be made.
An issue is whether judgment ought to go against one only of the defendants (and which) or against both. It ought to be both. Although the defendants at trial joined in implicating Mrs Connor only, the documents, including the defendant's solicitors' communications for many months, pointed to Mr Connor only. Of the solicitor's letters, Exhibit 20 (1 February 1989) talks of Mr Connor moving “his business into these premises at considerable expense.” Exhibit 25 (27 February 1989) accuses the plaintiff of an “attempt to intimidate him, and to discourage him from exercising his lawful rights.”: Exhibit 26 (28 February 1989) mentions “the works being carried on by himself” (which a building inspector was said to have opined involved no structural alterations in the premises); Exhibit 29 (13 April 1989) refers to advice to the “client to seek his printing services elsewhere”. The contention was made in due course that it was Mrs Connor, not Mr Connor, who was interested in the premises, but the plaintiff would not accept that contention; see its solicitors' letter of 30 May 1989 (Exhibit 63). It's clear that Mr Connor was often at the premises and taking an influential role in what happened to them. I do not think it is necessary to decide whether suggestions that he was conducting business of his own there, and not simply acting as his wife's agent in the affairs of her business, are correct. Even when the controversy over the identity of the person(s) in possession had clearly emerged, Mr Connor refers in Exhibit 61, sworn earlier this year, to the plaintiff's offer “to sell us a portion of the building .... or lease”; he goes on to swear that “after we moved into the premises, Mr Moody.......said that he now wanted $324,000 for the portion of the premises that we had moved to, instead of the $280,000....previously.” Paragraph 7 talks about “the lease that was offered to us”. Paragraph 12 says: “My claim against the Plaintiff included an action for damages for failure of the plaintiff to provide air conditioning, carpeting, office partitions, plumbing and electrical installations and printing”.
There is sufficient evidence to hold Mr Connor liable to provide recompense to the plaintiff for occupation of its premises. Given that the defendants make common cause in claiming the person truly liable is Mrs Connor, there seems no injustice in holding her liable as well. Mr Connor's evidence mentioned some personal vicissitudes she is going through at present: there was nothing to suggest that anything would prevent the two of them from reaching and carrying into effect some amicable adjustment of their liabilities inter se so that neither is treated unjustly in the final wash up.
For what it may be worth, I record my view that if, contrary to what I think, a three year lease with an option for a further term of three years was created and not determined by the end of April 1989, the plaintiff is entitled to recover an additional $20,290.20 (Exhibit 11) for rent increases following the CPI and appropriate interest.
In this event, the second defendant is entitled to some success on her counterclaim, which presumably gives rise to a set-off as well. On the evidence she would have availed herself of the free printing, the value of which to her (which would fall far short of the cost to the plaintiff of providing it) being $18,000. The plaintiff would be liable for the full value. I would still allow nothing in respect of air conditioning, carpets and partitioning, on the basis that the plaintiff was ready, willing and able to supply those items itself, which it did not do in the event because of the interference of Mr. Connor - reasonable enough, given that those items were to be installed in a strata titled property everyone expected to become the defendants'. If my view is wrong, and the plaintiff should be charged with the cost of such items, there is evidence already noted of the cost of the air conditioning which I would accept, but no evidence of the cost of the other items. I regard Exhibit 58 as a peculiar non-arms-length transaction between spouses which provides no useful information of market values of anything. I reiterate my ruling regarding the fire reel or hose, roll-a-door and new locks.
All that remains is the counterclaim for “loss of revenue as a consequence of a lack of advertising - $1,200 per month for 72 months equals $86,400.” The defendants called an experienced advertising executive to say what would be the cost of going into the market to buy equivalent advertising space, which I presume indicates what a client of hers might have had to pay, as a complete stranger to the plaintiff's building, coming along to rent the appropriate parts of the rear walls for advertising purposes.
The evidence was that the rear wall of the defendants' premises proper would cost $1,000 to $1,500 per calendar month to rent for advertising purposes, and that the cost of an adjoining wall at right angles (the rear part of the side of the portion of the building retained by the plaintiff which projected some distance beyond the rear wall of the defendants' side) was $450 to $600 per calendar month.
The counterclaim as pleaded was ambiguous as to its intention; for example, it might have been read as a claim that the takings (or profit) of Kona Coffee Company were reduced by the sum claimed. It was made clear this was not so, although Mr Hack (p.95-6) submitted that it was “commonsense” that what a business earned from advertising would exceed what it spent for the advertising. Without going through them, I will say that the points made by Mr. Lilley as to the irrelevance of the evidence under discussion in the circumstances were persuasive. The defendants did not pay for substitute advertising elsewhere; the evidence does not show what they would have done with the space the second defendant claimed a right of access to; it does show that they were permitted to display a large sign showing the name of the business on the “rear” wall proper, similar to one that was placed on the front wall and to the signage on Kona Coffee Company's new premises where the firm moved (in or after November 1994). I would construe the meaning of Exhibits 1 and 3 to be that the advertising permitted was limited to advertising of Kona Coffee Company and its products and services. As already noted, for the first six months of the alleged lease there was nothing to prevent the second defendant from advertising on the space in question; no advantage was taken of the opportunity. I regard the claim to a right to advertise on the exterior wall of that part of the building actually occupied by the plaintiff as untenable as a matter of interpretation of Exhibits 1 and 3. The defendants appear to have taken no advantage of their right to approach the Supreme Court to establish the right to advertise, although the parties were certainly in that forum on occasions after the injunction granted by Master Horton. All things considered, even if the defendants had some right to advertise which was wrongfully denied them, they have not established what the damages flowing in consequence are.
The counterclaim fails, notwithstanding the views I have expressed in the last couple of paragraphs. The result of the action is that the plaintiff succeeds in obtaining judgment against both defendants for $47,729.75 plus interest yet to be worked out and costs of the action to be taxed. The counterclaim of the second defendant is dismissed with costs to be taxed in favour of the plaintiff against her. My Associate will liaise with the parties' legal representatives to fix a time for any further submissions desired to be made and for the pronouncing of judgment.
APPENDIX
COSTS COMMON TO BOTH SIDES
Land | $ 147,000 |
|
Building |
|
|
Main Building |
| $ 457,000 |
Extra Building Costs |
|
|
Painting: Outside Front |
|
|
Upstairs offices | $ 2,560 |
|
Logan Council class cert | $ 130 |
|
Surveyor; check flood levels | $ 525 |
|
Telecom; wire to build. & intern | $ 623 |
|
Strata title: Surveyor |
|
|
Legals | $ 2,250 |
|
Administration Costs (including $2,275 Real Estate Commission) | $15,136 | $ 21,000 |
Legals |
|
|
Land: |
|
|
Stamp Duty on $147,000 | $ 3,878 |
|
Legal Costs | $ 2,200 |
|
Building: |
|
|
Stamp Duty on $457,000 | $ 14,470 |
|
Legal Costs | $ 4,960 |
|
Financing Costs: |
|
|
Stamp Duty | $ 3,310 |
|
Professional Costs | $ 4,100 | $ 32,918 |
TOTAL |
| $ 658,142 |
46.2% FOR OTHER SIDE |
| $ 304,062 |
COSTS FOR OTHER SIDE ONLY
Glass, shop front and office upstairs | $ 4,856 |
|
Alsinite roofing | $ 1,102 |
|
Extra cost for roll-a-door | $ 750 |
|
Electricity | $ 9,000 |
|
Rent | $ 6,554 | $ 22,262 |
GRAND TOTAL |
| $ 326,324 |
BREAK-UP OF ADMINISTRATION COSTS |
|
|
Soil test: K.R. Smith & Assoc. |
| $ 300.00 |
Temporary builders pole switchboard |
| $ 420.00 |
Quantity Surveyor nominated by Leasepac J Kervin; to confirm development costs |
| $ 600.00 |
Insurance on building through Robert Barrow & Assoc sum insured $570,000 |
| $ 720.00 |
Keys etc. from Dial-a-Locksmith |
| $ 120.00 |
Cleaners & truck hire to clean up |
|
|
after builder |
| $ 170.00 |
Supply & install emergency exit signs |
| $ 380.00 |
Industrial bin service |
| $ 136.00 |
Gardener & yardman. 3 months @ $60/week |
| $ 780.00 |
Line marking for car parks etc |
| $ 360.00 |
Wormald security patrols |
| $ 92.00 |
Time involved in organising the following: plans, soil test, plumbing, electricity, finance, council approval and monitor building progress, telephone calls & conveyancing to solicitors, financiers, builder etc 480 hours at $20 per hour |
| $ 9,000.00 |
TOTAL |
| $13,078.00 |
TRANSCRIPT OF PROCEEDINGS
Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bureau.
DISTRICT COURT | Plaint No 5491 of 1989 |
CIVIL JURISDICTION
JUDGE ROBIN QC
KINGSWOOD PRESS PTY LTD | Plaintiff |
and
BARRY EDWARD CONNOR | First Defendant |
and
PENELOPE JANE CONNOR | Second Defendant |
BRISBANE
DATE 13/12/96
JUDGMENT
HIS HONOUR: The trial in this action occurred last month and reasons for my conclusions were published to the parties on the 9th of this month.
A number of issues have been the subject of submissions this morning. The first concerns what ought to be the amount of the judgment. Mr Hack succeeds in establishing that my proposal to award the plaintiff 21 months “occupation payments” ought not to be persisted in. I had in mind that the evidence clearly established that for the last three months of the defendant's occupation nothing had been paid.
The plaintiff's pleading is, and has for some time been, conflicting in that paragraph 6C claims for a period of “three months (from 15/9/94 to 14/11/94)”. The quantum of the plaintiff's claim as pleaded, in my view, indicates that the claim was for three months rather than the two months indicated by the commencement and cut off dates quoted. The plaintiff's evidence was in the same vein. At pages 226 to 227 of the transcript this matter was ventilated. It shows Mr Lilley agreeing, “that we would be left with two months in that period”. That seems not entirely consistent with Mr Lilley's taking issue with me at the foot of the previous page that it was only two months claimed in the latter period. As I think ought to be the case, the resolution of this matter comes down to Mr Lilley accepting that he is bound by the way in which his client's case was conducted. Thus, Mr Hack, whose own side's pleading has acknowledged a two month non-payment and no more, makes his point.
The 20 monthly payments the plaintiff is entitled to aggregate $43,695, before the question of interest is looked at. Adding in another sum for part payments withheld over the years, the plaintiff is entitled to $45,545.
Mr Lilley's claim for interest for his client has not really been contentious; I fixed the rate at 10 per cent. The last two months for occupation payments, which aggregate $4,369.50, attract interest at that rate for the last 25 months, which is $910.31. The 18 months unpaid for the period ending in the middle of June 1992 attract interest for four and a half years, which I calculate at $17,696.47. The total interest is $18,606.80 and the total judgment sum $64,151.80. No interest has been allowed on the component of the plaintiff's claim for rent withheld, since that claim was raised very late. The interest claim is modest; maybe that reflects some recognition by the plaintiff that the delay in bringing the proceedings to trial may be in part attributable to it.
My assessment is that the plaintiff's principals are more at home running their printing business than in the sometimes difficult worlds of litigation, lessor and lessee. It is clear that over the years they, perhaps their legal advisers too, have been in some confusion about what to do. One consequence has been that the defendants were able to achieve their purpose of enjoying occupation of the premises for the full six years which they required. Indeed, a month longer. These delay factors are significant when it comes to issues of costs, which have also been argued.
On 22 February 1996 the plaintiff made an offer under Part 9 of the Rules to take $46,000 together with costs of the action. That offer was not accepted by the defendants. As Mr Lilley has pointed out it extended to settling the counterclaim as well. That counterclaim has failed entirely in the event. Read literally Rule 118(1) would require the Court to order the defendants to pay the whole of the plaintiff's costs back to the commencement of the proceedings in mid 1989 before the District Court's jurisdiction was enlarged on a solicitor/client basis.
What the action has been about has changed considerably over the years. I suppose it is not for the Court to pronounce one of its own Rules iniquitous. Within the proviso of Rule 118(1) there is scope for the defendant to show that another order for costs is proper in the circumstances. Mr Hack has done that.
On the other hand, it is in line with the spirit of the Rule and it is salutary to promote early and inexpensive resolution of disputes, so that the plaintiff ought to gain something from its offer, its willingness to take a substantial discount against its claim.
I propose to make a somewhat complicated order for costs, although I do not think in the end it will be too difficult for the parties preparing or assessing bills or for the Taxing Officer to administer.
The orders are that there be judgment for the plaintiff against both defendants in the action for $64,151.80, $18,606.80 of which is interest.
The second defendant's counterclaim against the plaintiff is dismissed with costs to be taxed.
I order that the plaintiff have its costs taxed on a party and party basis until 7 March 1996, which is 14 days after the Part 9 offer, and thereafter except as set out below on a solicitor/client basis.
The costs are to be taxed on the Supreme Court scale until transfer of the action to the District Court, then on the District Court scale appropriate to judgment sums of less than $50,000 to 14 December 1994, thereafter on the District Court scale appropriate to judgment sums in excess of $50,000. I have calculated 14 December 1994 as the date when interest would have brought the plaintiff's just claim to a level of $50,000.
The costs are to include reserved costs of the plaintiff's summons filed 10 July 1996, reserved by Judge Robertson, which, however, are to be taxed on a party and party basis.