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  4. GH Yuen & LM Yuen Pty. Ltd. as trustee for the Gum Hoy Yuen and Lai Ming Yuen Family Trust v Oscar Video Club Pty. Ltd. - [2009] QDC 412

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GH Yuen & LM Yuen Pty. Ltd. as trustee for the Gum Hoy Yuen and Lai Ming Yuen Family Trust v Oscar Video Club Pty. Ltd.[2009] QDC 412

GH Yuen & LM Yuen Pty. Ltd. as trustee for the Gum Hoy Yuen and Lai Ming Yuen Family Trust v Oscar Video Club Pty. Ltd.[2009] QDC 412

DISTRICT COURT OF QUEENSLAND

CITATION:

GH Yuen & LM Yuen Pty Ltd as trustee for the Gum Hoy Yuen and Lai Ming Yuen Family Trust v Oscar Video Club Pty Ltd & Ors [2009] QDC 412

PARTIES:

GH Yuen & LM Yuen Pty Ltd (ACN 125 004 499) as trustee for the Gum Hoy Yuen and Lai Ming Yuen Family Trust

(Plaintiff)

v

Oscar Video Club Pty Ltd ACN 052 032 381

(First defendant)

and

Sai Kin Law

(Second defendant)

and

Sindy So Lai Mak

(Third defendant)

FILE NO/S:

BD1836 of 2004

DIVISION:

Applications

PROCEEDING:

Application

ORIGINATING COURT:

District Court

DELIVERED ON:

12 October 2009

DELIVERED AT:

Southport 

HEARING DATE:

4 and 5 September 2008

JUDGE:

Andrews DCJ

ORDER:

Insofar as the application relates to a claim for money due in respect of the First defendant’s occupation in and from March 1999 the second defendant is at liberty to defend

liberty to the plaintiff until 19 October 2009 to provide to the second defendant and the court its submissions in respect of the proper sum for judgment in respect of the claims made against the second defendant relating to the First defendant’s occupation until and including February 1999 and how it is calculated including submissions as to costs

liberty to The second defendant to provide to the plaintiff’s solicitors and the court by 2 November 2009 his submissions in response to the plaintiff’s submissions

liberty to the plaintiff to provide to The second defendant  and the court submissions in reply by 9 November 2009

As between the plaintiff and the second defendant the application is adjourned for further consideration of the submissions above

The application against the Third defendant is dismissed

As between the plaintiff and the third defendant order that the questions be reserved until trial or earlier order whether to order that costs of this application be paid and whether they be assessed on a standard basis or some other basis.

CATCHWORDS:

GUARANTEE – where guarantee of lessee’s obligatons under a lease – where 3 year lease unregistered – whether a periodic tenancy arose – whether guarantors liable

GUARANTEE - where guarantee of lessee’s obligatons under a lease - where lease amended after lessee’s execution of lease and guarantors’ execution of guarantee – where guarantee amended after guarantors’ execution – where lease and guarantee deeds - whether amendments material – whether guarantee discharged

GUARANTEE - where guarantee of lessee’s obligatons under a lease – where lessee holding over after lease term ended - where sums paid and accepted in satisfaction of monthly rent during hold-over were less than rent payable under the hold-over clause of the lease – where lessee in arrears – whether lessee’s obligations were under the hold-over clause or under a new tenancy – where lessor claims for arrears under terms of hold-over clause - whether guarantors liable for arrears

GUARANTEE - where guarantee of lessee’s obligatons under a lease – where lessee holding over after lease term ended – where lessor and lessee agreed to payment of less rent than pay able under terms of hold-over clause – whether lessee’s obligations under the hold-over clause or under a new tenancy – where lessee paid the agreed reduced rent – where lessee in arrears – whether guarantors liable for arrears

SUMMARY JUDGMENT – where defendant raises defence of non est factum – where evidentiary onus upon defendant to exclude fault – where solicitor present to advise when signing – where defendant signed guarantee believing it to be a lease – where no evidence whether defendant asked solicitor what she was signing – where solicitor may be a source of evidence as to whether defendant was without fault - where solicitor not likely to be found – whether defendant has real prospect of successfully defending

section 43 of the Real Property Act 1861

section 129 of the Property Law Act 1974

Chidgey v Wellner  & Anor [2006] QDC 400

Qld Pork P/L v Lott [2003] QCA 271

Petelin v Cullen (1975) 132 CLR 355

Chan v Cresdon Pty Ltd (1989) 168 CLR 242

Jessup v Lawyers Private Mortgages Ltd [2006] QSC 003

Farrow Mortgage Services Pty Ltd (in Liquidation) v Slade and Nelson (1996) 38 NSWLR 636

Armour Coatings (Marketing) Pty Ltd v General Credits Finance Pty Ltd (1978) SASR 259

ANZ Banking Group Ltd v Rodgers [2003] QSC 304

Halsbury’s Laws of England 4th Ed para. 1378

COUNSEL:

Tucker for the applicant

Brennan for the respondent third defendant

Second defendant in person

SOLICITORS:

Roberts and Kane for the applicant

Sciacca’s for the third defendant

  1. [1]
    This is an application by the plaintiff lessor pursuant to r. 292 of the Uniform Civil Procedure Rules for summary judgment against the first respondent/second defendant (“Mr Law”) and the second respondent/third defendant (“Ms Mak”) for summary judgment.  The lessor sues Mr Law and Ms Mak upon a guarantee and indemnity given to secure the obligations of the lessee, being the first defendant. The lessee is insolvent and no application is made against it. There is no issue that the guarantee and indemnity was signed by Mr Law and Ms Mak. There are issues as to whether Ms Mak knew she was signing a guarantee, whether alterations made to the lease and guarantee after Mr Law and Ms Mak had signed them relieve them of liability as guarantors, whether the lease was unregistered and whether failure to register the lease relieved the guarantors of liability, whether the lessee’s payment of less rent than was due and the lessors’ acceptance of it meant that the lease was superseded, whether the lessee’s occupation after the term of the lease ended was occupation pursuant to the holding over clause of the lease or another basis, whether a subsequent agreement to reduce the rent  meant that the lease was superseded, if the lease was superseded or the lessee occupied on a basis other than pursuant to the holding over clause of the lease whether it relieved the guarantors of liability, whether the lessee’s obligation to pay running costs included an obligation to pay goods and services tax which was introduced years after the lease term ended and holding-over began, quantum and whether there is a need for a trial.

UCPR r. 292

  1. [2]
    UCPR r. 292 provides:

“292 Summary judgment for plaintiff

  1. (1)
    A plaintiff may, at any time after a defendant files a notice of intention to defend, apply to the court under this part for judgment against the defendant.
  2. (2)
    If the court is satisfied that—
    1. the defendant has no real prospect of successfully defending all or a part of the plaintiff’s claim; and
    2. there is no need for a trial of the claim or the part of the claim; the court may give judgment for the plaintiff against the defendant for all or the part of the plaintiff’s claim and may make any other order the court considers appropriate.”
  1. [3]
    The lessor raised two matters of principle relating to the application of r. 292. The first was that the respondents should not be permitted to resist summary judgment on the basis of defences not raised in their respective defences. On an application for summary judgment brought by a plaintiff a defendant is not confined to defences arising on the pleading. UCPR r. 292 is not expressed to be confined to defences arising on an existing pleading. The rule is concerned with the prospective outcome at trial. Upon an application for summary judgment the court will bear in mind that the Rules provide for amendment to pleadings.[1]
  1. [4]
    The second was that an evidentiary onus shifted to Ms Mak with respect to her defence of non est factum and that she failed to satisfy the onus.

Non est factum

  1. [5]
    Ms Mak established for the purposes of this summary judgment application:
  • When the guarantee and indemnity was signed Ms Mak believed that she was signing a lease;
  • Ms Mak would not have signed the guarantee and indemnity had she known it was included with the lease;
  • The agreement of guarantee and indemnity was physically incorporated with the lease so that the lease, guarantee and indemnity were presented for signature as a single document;
  • At the time of signing Ms Mak had a vocabulary of spoken English words which was less than 100 and she could read even less than that number;
  • The lease, guarantee and indemnity were expressed in English and Ms Mak spoke Cantonese;
  • Ms Mak had been educated to a Grade 6 standard;
  • For the purpose of signing the document, Ms Mak went with her husband, Mr Law, to the office of a solicitor, Mr Tso;
  • Mr Tso could speak Cantonese and was fluent in English. He spoke in Cantonese with the guarantors;[2]
  • On an occasion before going to the office of Mr Tso, Ms Mak and Mr Law had met with a representative of the landlord and Ms Mak heard the representative and her husband discussing the terms of a lease;
  • At the office of Mr Tso, Ms Mak was told “the documents were the lease which was discussed with the landlord”. 
  1. [6]
    A defendant resisting an application for summary judgment may sometimes assume an evidentiary onus. It has been observed[3]:

“[41] In this type of proceeding…the onus is on the applicant to prove the claim and to persuade the Court that there is no real prospect of the opposite party succeeding.  In some circumstances a respondent to the application may be able to convince the Court that the onus has not been discharged without filing any evidence at all.  But once a prima facie case has been made out entitling the applicant to judgment then an evidentiary onus shifts to the respondent.  R. 295 of UCPR especially provides that evidence may be given on information and belief, thus facilitating the discharge of that evidentiary onus.”

  1. [7]
    The lessor submitted that in the case of the defence of non est factum the lessor had made out its prima facie case and it was for Ms Mak to satisfy an evidentiary onus which had shifted to her.  In this respect, the lessor submitted that Ms Mak had obtained legal advice from a Cantonese speaking solicitor fluent in English and did not depose that she asked Mr Tso to explain the document. The submission implies that Ms Mak bears the onus of proof that her failure to read and understand the guarantee and indemnity was not due to carelessness on her part and that she failed to discharge that evidentiary onus. I accept that this is correct.
  1. [8]
    The matters which must be established by a person seeking to avail herself of the defence were set out in Petelin v Cullen.[4] The High Court there observed of the defence:

“…it is also available to those who through no fault of their own are unable to have any understanding of the purport of a particular document.  To make out the defence a defendant must show that he signed the document in the belief that it was radically different from what it was in fact and that, at least as against innocent persons, his failure to read and understand it was not due to carelessness on his part.  Finally, it is accepted that there is a heavy onus on a defendant who seeks to establish the defence.  It is now settled beyond any shadow of doubt that when we speak of negligence or carelessness in connexion with non est factum we are not referring to the tort of negligence but to a mere failure to take reasonable precautions in ascertaining the character of a document before signing it.  The insistence that such precautions should be taken as a condition of making out the defence is of fundamental importance when the defence is asserted against an innocent person, whether a third party to the transaction or not, who relies on the document and the signature which it bears and who is unaware of the circumstances in which it came to be executed.”

  1. [9]
    On the particular issue of carelessness, Ms Mak would bear a heavy onus at trial that her failure to understand that she was signing a guarantee and indemnity was not due to carelessness on her part. The evidence satisfactorily explains why carelessness was not the cause of Ms Mak’s failure to read the document. Was Ms Mak careless to rely on the advice that she was signing a lease? At the hearing of the application for summary judgment, Ms Mak’s own evidence on this crucial factual issue is unsatisfactory. If Ms Mak was given the advice by Mr Tso, a solicitor, and in circumstances where it was obvious that Ms Mak was relying upon the advice it would not be careless to act upon it. If Ms Mak was given the advice by her husband, when Mr Tso was absent and if Ms Mak failed to use an opportunity to ask Mr Tso to explain what she was signing it is at least arguable that Mrs Mak was careless.
  1. [10]
    When describing events at the office of Mr Tso, Ms Mak has failed to depose whether she asked by Mr Tso or was told by him what was the effect of the document she was to sign. She has deposed that she was told that “the documents were the lease which was discussed with the landlord”. That evidence leaves open the possibility that she was told these things by her husband and in the absence of Mr Tso. Ms Mak does not depose that she took advice from Mr Tso. If the evidence remains in that state, the landlord submits that Ms Mak would fail to discharge her onus on this issue of absence of carelessness. Other persons who may have been present are Mr Law and Mr Tso. Mr Law’s evidence has not assisted Ms Mak in the discharge or her onus. Mr Tso no longer works with the relevant firm of solicitors and had not been located before the hearing of the summary judgment application. He may reside overseas. If Mr Tso were found it is reasonable to assume that he would have no recollection of the actual event, being sixteen years ago. Despite that, it is possible that Mr Tso or notes made by him if obtained upon non-party disclosure may enable Ms Mak to discharge her evidentiary onus. It is plausible to speculate that Mr Tso may recall that his practice at the time was to explain documents to his clients before he allowed them to sign. That evidence, if accepted, would not assist Ms Mak. It is improbable that Ms Mak can discharge the evidentiary onus to establish the defence of non est factum. It is improbable that Ms Mak will find the lost Mr Tso or his notes before trial. I make this finding on the bases that Ms Mak has not found this evidence in the six weeks before the hearing and placed no evidence before me to show that she has further lines of enquiry to follow. Where sources of relevant evidence exist, it would be unfair to deprive Ms Mak of a trial because of the improbability of her finding the sources. It would be unfair to deprive Ms Mak of a trial because the missing evidence, if found, probably will not assist her. A real prospect of successfully defending exists though the probabilities are against it.
  1. [11]
    When facts are controversial because facts may exist which would affect a defence it has been written:

“…it is only where all the facts are known and/or are established beyond controversy that the court should embark upon determining whether to give summary judgment.  Where relevant facts are controverted, or where it appears that facts may exist which would affect a right of action or defence, there should be a trial to determine the facts.”[5]

I proceed on the basis that Mr Tso may yet be located and give evidence on the controverted issue supporting the argument that Ms Mak signed without carelessness.

  1. [12]
    For that reason, despite the currently unsatisfactory evidence on the issue of carelessness upon which Ms Mak bears the onus, I find that Ms Mak has established a need for a trial.
  1. [13]
    As to the defence of non est factum the landlord also submitted that the document signed by Ms Mak was not radically different in the sense described in Petelin v Cullen.  This was submitted to be for two reasons. The first was that the obligations imposed upon Ms Mak as guarantor were bound up physically with the obligations under the lease. The second was that the obligations under the lease with guarantee and indemnity were not radically different from the obligations under a lease.  I reject those submissions.  The difference or radical difference referred to in Petelin v Cullen is not to do with physical appearance of a document but with its legal effect.  The fact that the guarantee and indemnity were bound up physically with the lease does not prevent the document from being radically different in its legal effect from the document Ms Mak believed she was signing. 
  1. [14]
    I find that the guarantee and indemnity signed by Ms Mak is radically different as a document from the lease. Examples of the differences follow. The guarantee and indemnity makes Ms Mak personally liable. The lease does not and need not make Ms Mak personally liable. If Ms Mak believed that she was signing a lease between the landlord and Oscar Video Club Pty Ltd she should not have expected to assume any personal liability. The lease imposed obligations upon the landlord enforceable by the lessee but not enforceable by Ms Mak. The lessee could occupy the premises but Ms Mak could not.

Other Facts

  1. [15]
    The lessee occupied premises in Fortitude Valley from a date in June 1991.  The registered proprietors of the premises were Mr and Mrs Yuen who held the land in trust. Mr and Mrs Yuen, as trustees were the original lessors. The plaintiff as trustee is the Yuens’ successor in title. There was no contest before me about whether the plaintiff is the proper plaintiff to maintain the proceeding.
  1. [16]
    In 1991 there were discussions about a three year lease of the premises. In May 1991 the discussions were between, at least, Mr Law and Mr Yuen. An agreement to lease was signed for the lessors and by Mr Law on 20 May 1991. A draft lease of the premises with guarantee and indemnity incorporated was prepared by the Yuens’ solicitor in anticipation of a three year term to commence on 24 June 1991. The draft was forwarded to Mr Law’s solicitor.
  1. [17]
    The draft lease was returned to the Yuens’ solicitor in about June 1993 which was about two years after the commencement date appearing in the draft. When returned, it had been signed for the lessee by Mr Law and Ms Mak. Mr Law was then the sole director of the lessee. Ms Mak deposes, and I accept for this application, that she signed documents in 1991 but not 1993. It follows that Mr Law also did any relevant signing in 1991. The lease when returned had been altered at several clauses and the alterations had been initialled by Mr Law and Ms Mak. Each alteration favoured the lessee. Counsel for Ms Mak submitted that by making those changes the lessee was making a counter-offer to the lessor. I accept that submission. It was a counter-offer to lease to the knowledge of all defendants. The guarantee and indemnity was signed by Mr Law and Ms Mak as a deed. The counter-offer lease was not expressed to be a deed but operated as one from the time the lessee executed it.[6] The counter-offer lease had been left blank by the defendants at item 12 of the form 8 where a date of signing was to be inserted. The deed of guarantee and indemnity had been left blank by Mr Law and Ms Mak at two places in its schedule where a date was intended for insertion. One was the place for the date of the deed of guarantee and indemnity and the other was the place for the date of the counter-offer lease which was being guaranteed. 

Legal consequences of altering a lease and a deed of guarantee after execution by guarantors

  1. [18]
    In 1993 the lessors (Mr and Mrs Yuen) received the counter-offer lease with amendments made to it initialled by Mr Law and Ms Mak. The lessors signed the counter-offer lease and returned it to the office of their solicitor. In the office of the lessors’ solicitor a date, being 5 October 1993, was inserted in the counter-offer lease and in the schedule to the guarantee and indemnity. Further, the date “3 March 1991” which indicated when the guarantors had signed the deed of guarantee and indemnity, was altered to read “3 March 1993”. The initials “LAI” were inserted by hand in two places in the guarantee and indemnity into the name “Sindy So Mak” so that it became “Sindy So Lai Mak”. Counsel for Ms Mak conceded that these additions of the word “Lai” do not raise a triable issue.[7]After those amendments had been made, the guarantee and indemnity gave the appearance of having been dated 5 October 1993 though it appeared to have been signed by the guarantors on 3 March 1993 rather than 1991 and it guaranteed lessee’s obligations which were in a lease which was described as dated 5 October 1993.  In fact, Ms Mak and Mr Law signed the counter-offer lease for the lessee 2 years and seven months before. There were two changes to the counter-offer lease which were arguably made by the lessors’ solicitor after the document had been returned by the defendants.  The date “5th ” and “October 1993” were inserted in blank spaces after the words “SIGNED THIS” and on either side of the words in the form “day of”.  The form objectively called for a date be inserted in that space. Counsel for Ms Mak speculated that another amendment had been made in the office of the lessors’ solicitor.  That further amendment was submitted as possibly being made to item 15 of the form 8 part of the lease by the deletion of the words “BY LESSEE” and the insertion of the word “AND” and by the deletion of the words “OR his/her SOLICITOR”. There is no evidence about who made amendments to item 15 of the form 8.
  1. [19]
    As to the dating of the deed of guarantee and indemnity and the dating of the counter-offer lease, as 5 October 1993 and the alteration of the signing date in the deed of guarantee and indemnity from 1993 to 1991, counsel for Ms Mak made no submission as to how the dating of either document or the alteration to item 15 of the form 8 detrimentally affected the rights of the parties. No detriment to any defendant is obvious from the changes allegedly made to both documents by the lessors after being signed by the defendants. Arguably, until the counter-offer lease was executed by the lessors in 1993, the lessee was in possession without the benefit of a lease at law. Even on the basis of that argument, the insertion of dates by the lessors’ solicitors and the other immaterial changes made did not detrimentally affect the lessee or the defendant guarantors.
  1. [20]
    No written alteration to the counter-offer lease after it was signed by the lessee affected a material term. The description of the property and the parties and the term of the counter-offer lease and its other conditions were not changed after the lessee signed.
  1. [21]
    If a material part of the deed of guarantee and indemnity or of the lease had been altered with the consent of the lessors, without the consent of the guarantors and had prejudiced the position of the guarantors then the deed of guarantee and indemnity would have been void.[8]  The mere completion of a date which does not bring about a material change in the obligations of a party does not affect the validity and the filling in by one party of a date in spaces left blank by the other can be an alteration with implied authority.[9] The completion of the blank spaces by filling in dates in the documents was both immaterial and done with the implied authority of the defendants.
  1. [22]
    The filling in of blanks in two places in the schedule to the deed of guarantee and indemnity to signify the 5th October 1993 and the filling of the blank in the counter-offer lease to signify that date do not assist the guarantors.  Nor does the deletion of words at item 15 of the form 8 part of the lease assist the guarantors.  It made no material change.
  1. [23]
    The alleged change to the execution page of the guarantee and indemnity which deleted “1991” and inserted “1993” has a different quality. There can have been no implied authority given by the guarantors to the lessor to make that amendment to the year. However, there is no prejudice obvious to the guarantors as a result of that change. No prejudice was submitted by Mr Law or by counsel for Ms Mak as having been caused by that alteration. It was a change which was not material.
  1. [24]
    I find that there were no legal consequences which flowed from the alterations alleged to have been made by the lessor or their solicitors to the counter-offer lease or to the Deed of Guarantee and Indemnity.

Legal consequences of failure to register the lease

  1. [25]
    Counsel for Ms Mak submitted that the lease was unregistered and sought to take advantage of that fact for Ms Mak. That was a primary contention of fact in his written supplementary submissions. He also earlier submitted inconsistently in his written outline that the lease was registered.[10] There was no evidence that it was registered. The lessor’s predecessors in title are the persons who received the lease from the defendants’ solicitors in 1993 and they were in a position to register the lease and the lessor was in a position to advise the court whether it was registered. The lessor’s counsel advised that the lease was not registered. The parties made submissions thereafter consistently with a premise that it was unregistered. For reasons which follow, there was no reason to register the lease. Because of that and the absence of evidence of registration and because of the conduct of the parties I find that the lease was not registered.
  1. [26]
    The term of the lease was set out within the form 8 as commencing 24 June 1991 and terminating on 23 June 1993. That was a three year term. At material times the Real Property Act 1861 (Q) provided, so far as is relevant:

“43. Instruments not effectual until entry in registry book.  No instrument shall be effectual to pass any estate or interest in any lands under the provisions of this Act … until such instrument shall have been registered in accordance with the provisions of this Act …”

  1. [27]
    That section is not a bar to the creation of a lease for a term of less than three years otherwise than by registration of a memorandum of the lease.[11]  If the lease was otherwise valid, and was for a term of three years or less, it was unnecessary to register it to give it validity at law as a lease. I reject Ms Mak’s three related submissions based upon Chan[12] and lack of registration, namely, that a failure to register operated to create an equitable lease, that occupation and payment of rent under this unregistered lease created an implied periodic tenancy and that in combination with section 129 of the Property Law Act 1974 there resulted a tenancy at will terminable on a month’s notice. Those submissions would have force if the unregistered lease had been for a term greater than three years so that section 43 of the Real Property Act 1861 would then have applied.
  1. [28]
    There were other submissions made for Ms Mak which were based upon the premise that there was no lease effective at law. Most significant for the guarantors was the submission that the guarantee and indemnity was offered in respect of the lessee’s obligations in the lease and was not offered in respect of the lessee’s obligations arising under a periodic tenancy arising in the absence of a lease effective in law. As the lease was effective in law other submissions based on this false premise do not assist the guarantors.

Legal consequences of doubts about witnesses for lessors’ signatures

  1. [29]
    Counsel for Ms Mak submitted, in effect, that there was some doubt about whether the signatures of the lessors had been properly witnessed. I accept that inconsistencies between recollections of events occurring more than 15 years ago are as consistent with a hypothesis that the signatures were not witnessed as they are with a hypothesis that the signatures were witnessed and that a recollection is faulty. It was not submitted that Mr and Mrs Yuen’s signatures were forgeries nor that there was evidence of impropriety by Mr and Mrs Yuen. The submission’s essence was only that it was possible that a witness had not been present for the acts of signing and had later added a signature as witness. It was speculated by counsel for Ms Mak that if the lease had been registered this conduct may have been a fraud on the registrar of titles. The lease was not registered. There was no fraud on a registrar. It was not submitted that the lease was invalid for lack of a witness. Resolution of the factual issue about the presence of a witness has no legal consequence for this proceeding.

Uncertainty as to lessors’ identity

  1. [30]
    Within the counter-offer lease eventually signed by all parties by 5 October 1993 the lessor is described as “Gum Hoy Yuen and Lai Ming Yuen”. Within the schedule to the deed of guarantee and indemnity the lessors are described as “Gum Hoy Yuen and Lai Ming Yuen as Trustees for Gum Hoy Yuen, Lai Ming Yuen, Glenda Yuen, Kevin Yuen, Dianne Yuen, Alvin Yuen and Albane Yuen”. Counsel for Ms Mak submitted that the identity of the lessors in the guarantee and indemnity was not the identity of the owners of the property. There is no evidence that the owners of the property at material times in the 1990’s were persons other than Mr and Mrs Yuen. The difference between the descriptions of the lessors in the lease and in the schedule to the deed of guarantee and indemnity was not a difference relating to identity. The same two persons are described as lessors in both documents. It is only in the schedule to the deed of guarantee and indemnity that one reads that the lessors held their interest in the capacity of trustees of a trust. There was no submission by counsel for Ms Mak as to how the trust raised a defence to a proceeding brought upon the guarantee. It was submitted that the problem for the plaintiff could be overcome by evidence as to the true identity of the lessors. I reject the implied submission that there was a problem to be overcome. Whether the lessors held the lease in their personal capacity or as trustees did not and does not affect the enforceability of promises made to the lessors by guarantors.

Issues relating to occupation after 5 October 1993

  1. [31]
    When the lessors signed the counter-offer lease on or about 5 October 1993 the plaintiff lessor submitted that the lessors thereby accepted a counter-offer. This is not disputed by the guarantors. It follows that from 5 October 1993 at the latest, the obligations of the lessee which the guarantors were guaranteeing were the obligations in the counter-offer lease dated 5 October 1993 (“the lease”). Counsel for Ms Mak made a submission that, if there was a lease as opposed to a periodic tenancy, the term began when the lessor signed on 5 October 1993. However he conceded that if the lessee executed the lease as a deed it bound itself to accept the correctness of the commencement date of the term expressed in the lease. Clause 15.09 of the lease provides that the lease was executed as a deed by the lessee with the intent that the lessee would be immediately bound. I reject the submission that the term of the lease began on 5 October 1993.

Issues relating to occupation after 23 June 1994

  1. [32]
    The term of the lease was expressed in the lease to run from 24 June 1991 to terminate on 23 June 1994. I find that the term of the lease was as expressed. The lease made provision for the exercise of an option to extend, by deed, the lease for a further term of 3 years.[13]  The lessee did not exercise that option though it remained in possession until April 2003.  The lease made provision for a holding over by the lessee at clause 12.09. 
  1. [33]
    The lease provided:

“12.09 HOLDING OVER.  If the Tenant shall with the consent of the Landlord remain in occupation of the demised premises after the expiration of the term hereof the Tenant shall (in the absence of any express agreement to the contrary) be deemed to hold the demised premises (until such tenancy is terminated) as Tenant from month to month at a monthly rental equal to the aggregate of the monthly instalments on account of the base rental and operating expenses payable hereunder at the date of the expiration of the said term (such rental being payable monthly in advance) but otherwise on the terms and conditions of this lease so far as they can be applied to a monthly tenancy provided always that if the Tenant shall be in default in the performance of its obligations the tenancy may be determined upon not less than seventy-two hours notice to the Tenant expiring at any time.”

  1. [34]
    Counsel for Ms Mak argued that there was no holding over from 24 June 1994. The first basis for this was that there was no lease operating, that the failure to register the lease meant that possession was enjoyed on the basis of a periodic tenancy terminable upon a month’s notice. I reject that basis for reasons above. There was a holding over by the lessee from 24 June 1994. Allied to that submission were others that the rent due from 24 June 1994 was not rent payable pursuant to the terms of clause 12.09 but was either rent payable pursuant to a periodic tenancy or alternatively rent payable pursuant to the lease but for the first year of a three year term commencing on 5 October 1994. The rent, on the basis of these submissions, should have been $1,600.00 monthly from 24 June 1994 and should have remained at that rate. I reject these submissions on the basis that the terms of the lease governed the rights of the lessors and the lessee and the term of the lease ended on 23 June 1994. Counsel for Ms Mak had another basis for arguing that there was no holding over from 24 June 1994 based upon the rent which was charged by the lessors from that date.
  1. [35]
    On and from 24 June 1994 pursuant to clause 12.09 it was agreed the lessee was to become a tenant from month to month at a monthly rental equal to the aggregate of the monthly instalments on account of the base rental and operating expenses payable under the lease at 23 June 1994, payable monthly in advance but otherwise on the terms and conditions of the lease so far as they could be applied to a monthly tenancy.
  1. [36]
    The base rental payable at 23 June 1994 was a twelfth of $23,232.00 which was the base rent per annum for the third lease year according to the reference schedule to the lease. The monthly base rental payable was $1936.00 by my calculation. The lessors’ account shows only $1747.97 accruing monthly for rent until May 1995 which the lessee paid. The accounts show a separate amount accruing for rates which was not paid. In the next 13 months to June 1996 the rental shown accruing monthly in the lessors’ account increased but it remained less than the $1936.00 monthly base rental payable pursuant to the terms of clause 12.09. This led counsel for Ms Mak to submit that by operation of law, a new lease came into existence on 24 June 1994 and the guarantors were not obliged to guarantee obligations under that new lease.
  1. [37]
    By about September 1999 Mr Law, for the lessee asked the lessors’ representative Mr Kevin Yuen, if the lessor would reduce the lessee’s rent to $1400 per month as business had been slow and the lessor agreed to thereafter reduce the rent to $1400 per month. This was inconsistent with the entitlement to a greater monthly sum for rent and operating expenses if they were paid in accordance with clause 12.09 of the lease. The date of the agreement was not estimated any more precisely by the lessor’s witness Mr Kevin Yuen than “by about September 1999”. The guarantors did not lead evidence to contradict or clarify this evidence. Continuous payments of rent at a monthly rate of $1400 began in March 1999. One can speculate whether the agreement was made in March rather than September 1999, but there was no evidence offered by the defendants as to the date or existence of an agreement. Counsel for Ms Mak relied on a payment of $1400 which was made in October 1998 as evidence that the agreement occurred at about that date. Absent evidence of continuing monthly payments of $1400 from October 1998 or any evidence to contradict Mr Kevin Yuen I proceed on the basis that the continuing payments from March 1999 raise for the guarantors a real prospect that the agreement was reached in March 1999.
  1. [38]
    The lessors sent a demand for arrears of rent on 1 July 2003 with the arrears set out in accordance with Kevin Yuen’s instructions in the form of a running account. Those instructions may have been given several years after the oral agreement for reduction in rent to $1400 monthly. It is a copy of that running account which forms the basis of the lessor’s claim against the guarantors. Mr Kevin Yuen deposes to the correctness of the figures in the running account. The guarantors did not contradict that evidence of Mr Kevin Yuen.
  1. [39]
    The account for arrears shows rent accruing monthly to have reduced to $1400 from September 1999 but curiously it shows rent to have been paid at $1400 in October 1998 and at $1400 monthly from March 1999 until February 2000 when it was paid at increased and generally consistent monthly rates.
  1. [40]
    Counsel for Ms Mak submitted that by operation of law, a new lease came into existence at the date of this agreement, that the agreement may have been made earlier than September 1999 when payments began to be made at a rate of $1400 monthly and that the guarantors were not obliged to guarantee obligations under this new lease. I infer that the submission was intended to apply also to any new arrangement which was differed from a holding over pursuant to clause 12.09, for example a periodic tenancy terminable on a month’s notice.
  1. [41]
    From September 1999 the lessor claims rent at only $1400 monthly and rates and interest and from July 2000 also claims GST. The claim includes a claim for arrears of rent and rates from June 1994. If the claim is accurate, it follows that the lessee was in arrears from about the time the three year term of the lease ended. The claim does not include a claim for interest until April 1996, despite arrears which had accumulated to about $13,000 over twenty-two prior months. The arrears claimed are consistently based on a claim for monthly rent which was less than the $1936 monthly base rental due if clause 12.09 of the lease had been applied.
  1. [42]
    Ms Mak’s evidence was that she does not understand the calculations in the running account and that neither she nor Mr Law were aware that the landlord was charging interest on overdue rent. Her evidence does not impeach the accuracy of the figures or the calculations inherent in the running account. It calls for examination of the lessors’ right as against the lessee to claim interest on overdue amounts. Her counsel challenged the basis for the inclusion of GST and the liability of the guarantors but did not otherwise challenge the contents of the running account other than to note that he relied upon it without admission as to factual correctness. He relied upon the contents as showing that the lessors instructed that amounts due monthly for rent were less than would have been due pursuant to clause 12.09 of the lease.
  1. [43]
    It is significant that there is no evidence that an agreement was the basis for the lessors’ seeking less than the rent to which they were entitled between June 1994 and the agreement made by about September 1999 to reduce rent to $1400 monthly.
  1. [44]
    For the period from 24 June 1994 until the agreement which was made by about September 1999 to reduce rent, the important feature identified by counsel for Ms Mak was that the rent being charged was not the same as the rent which would have been charged in accordance with Clause 12.09 of the lease. He submitted that the effects of this were:

(a) there was no holding over pursuant to Clause 12.09;

(b) as there was no holding over pursuant to Clause 12.09 and no other agreement than section 129 of the Property Law Act 1974 applied to deem the occupation to be a tenancy determinable at the will of either of the parties by one month’s notice in writing expiring at any time;

(c)  the guarantors were not sureties of the lessee for its obligations pursuant to the tenancy which arose pursuant to section 129 of the Property Law Act. 

  1. [45]
    Counsel for Ms Mak relied upon White v Cariste Pty Ltd [2004] NSWCA 460.  In that case there was a lease for a term of three years terminating on 31 August 1990 with an option for a further term.  The option was not exercised.  The lease was executed by the lessor, by the lessee and by the lessee’s directors as guarantors.  A clause of the lease provided that in the event of the lessee holding over after the expiration of the term the lessee shall become a monthly tenant at a monthly rental equivalent to a monthly proportion of the total yearly rent including contributions to outgoings payable by the lessee at the expiration of the term and otherwise on the terms and conditions mutatis mutandis as those contained in the lease so far as applicable and that the monthly tenancy was determinable by a month’s notice in writing.  The holding over clause in White was similar in relevant respects to the holding over clause in this matter.  After expiry of the lease on 31 August 1990 the lessee remained in occupation and for a time the holding over clause applied to that occupation.  There were negotiations in February and March 1992 as a result of which the amount payable for rent monthly reduced pursuant to a binding arrangement under which the lesser amount was payable and that arrangement was inconsistent with the agreement constituted by the original lease and the holding item over provision.[14]  The court rejected a submission that the arrangement from March 1992 was no more than a concession by the lessor that left fully in place the binding terms of the lease itself.  The court rejected that submission because, on the facts of that case the parties did not intend that their relationship would be that the lessor could simply withdraw concessions in relation to rent and the agreement that lower rent was payable was inconsistent with the submission.[15]
  1. [46]
    Counsel for Ms Mak submitted that the circumstances pertaining to the period between 24 June 1994 and the new agreement reached with Mr Kevin Yuen by September 1999 were similar to the circumstances in White so that the lessee’s occupation during those five years was not an occupation pursuant to the holding-over.  I reject the submission that the circumstances were similar.  In White there was a finding about the intention of the parties which was consistent with an agreement found to have been made about the rent which was payable.  In the case before me, there is no agreement which explains or is the basis for the lessors’ accepting rent at a lower monthly rate than that to which the lessors were entitled during the five years between June 1994 and about September 1999.
  1. [47]
    For the period from 24 June 1994 until a new arrangement was made by in March 1999 the lessee’s obligation to pay rent pursuant to Clause 12.09 of the lease was not displaced by agreement. Ms Mak has not raised a real prospect of successfully defending on the basis that the obligation to pay rent in this period arose from a source other than clause 12.09 of the lease.
  1. [48]
    From the time of the agreement in March 1999 a different argument can be made. Counsel for Ms Mak again relied upon White.  Ms Mak raises a real prospect that the lessee’s occupation of the premises after the agreement in March 1999 and the lessee’s payment of and the lessors’ acceptance of $1400 monthly created a periodic tenancy which displaced the holding-over under Clause 12.09. 
  1. [49]
    In White, the fact that occupation was pursuant to a new tenancy and not pursuant to the holding-over clause of the written lease had the consequence that the guarantee of the due performance by the lessee of the terms of the written lease did not apply to the lessee’s obligation to pay rent pursuant to the new tenancy.
  1. [50]
    Counsel for the lessor submitted that a guarantee and indemnity can be drawn to extend to a lessee’s occupation of premises beyond the original term of a lease. I accept this submission.[16]  He submitted that the terms of the guarantee and indemnity achieved this.  So far as is relevant to this issue, Ms Mak and Mr Law did covenant agree:

“(b) … this Guarantee and Indemnity shall extend to the obligations of the Lessee in respect of any extension renewal   or period of holding-over of this Lease … AND shall be a continuing guarantee and shall not be wholly or partially discharged by the payment of any sum payable hereunder or by any settlement of account and shall apply to all present and future obligations AND shall remain in full force and effect until the obligations of the Lessee … have been fully discharged and satisfied and shall not be prejudiced impaired limited or affected by the giving of time or credit or indulgence of any kind to the Lessee … by the Lessor or any neglect forbearance or omission on the part of the Lessor in demanding requiring or enforcing payment of monies due to the Lessor under this Lease or enforcing the terms covenants and conditions contained or implied in this Lease or any variation in the respective obligations and liabilities of the Lessor and the Lessee … under this Lease … or any negligence or laches on the part of the Lessor in enforcing its rights …”

  1. [51]
    Ms Mak raises a real prospect that the lessee’s obligation to make payments in respect of its occupation after March 1999 was not an obligation in respect of any extension, renewal or period of holding-over of the written lease. I find that there is a real prospect that Mr Law and Ms Mak will successfully defend that part of the lessor’s claim for payments allegedly due from the lessee for its occupation in and since March 1999.
  1. [52]
    It becomes unnecessary to determine the question of whether the lessor was entitled to obtain from the lessee an amount in respect of Goods and Services Tax. The lessor included claims for that amount from July 2000. As a result of my findings, the guarantors have a real prospect of successfully defending claims relating to the lessee’s liability for occupation during the period when the lessor made claims relating to GST.

Submissions of Mr Law

  1. [53]
    Mr Law submitted that the dates on the lease create a doubt as to whether it was executed in October 1991 or October 1993. Because Ms Mak has deposed that she signed documents only in 1991 I have acted on the basis that it was signed in 1991. I have accepted that it was in the office of the lessors’ solicitor that a date, being 5 October 1993 was inserted. For reasons above I found that in this proceeding that alteration did not have any relevant legal consequence.
  1. [54]
    Mr Law made submissions with respect to Clause 16.05 of the lease. That clause was in a part of the lease relating to options for renewal. The effect of it was that if the obligations of the lessee under the lease are guaranteed and if the lessee exercised the option for renewal the landlord could require the lessee to procure the guarantor to guarantee the obligations of the lessee under the lease to be granted pursuant to the option for renewal. Mr Law correctly identified that the clause was aimed at a lessee which was exercising an option for renewal. He correctly identified that other than in clause 16.05 the lease made no provision for the lessee to obtain a guarantor.
  1. [55]
    The guarantee and indemnity signed by Mr Law imposes obligations upon him. The obligations bind him whether or not the lease required the lessee to obtain Mr Law as a guarantor. The guarantee is effective whether or not the lessee agreed with the lessor to obtain a guarantor.
  1. [56]
    The guarantee and indemnity does appear from the dates it bears to have been signed by Mr Law on 3 March 1993. Mr Law submits that because the lease was executed in May 1991, the execution of the lease was past consideration and that the guarantee fails for past consideration. I note that the guarantee and indemnity expresses in its first page that it is in consideration of the lessor agreeing to lease the premises to the lessee that the guarantor covenants and agrees in terms of the guarantee and indemnity. The issue of whether there was consideration given for the promises made by Mr Law in the guarantee and indemnity and whether that consideration was past consideration is an issue related to the law of contract. The guarantee and indemnity is expressed to have been signed, sealed and delivered by Mr Law. Accordingly, it is deemed to have been sealed[17]. It was delivered to the lessors. It thus operates as a deed and the absence of consideration would not prevent its enforcement against Mr Law enforceable against Mr Law.  The deed of guarantee and indemnity does not fail because the lease was executed before it.
  1. [57]
    Mr Law submitted that if the lease was executed in October 1993 and the guarantee executed in March 1993, the lease was not in existence at the time the guarantee was executed. I accept that logical proposition. The proposition is contrary is to the evidence of Ms Law she signed only in 1991 and on one occasion which leads to a conclusion that the lease and guarantee which bear her signature were signed on the same occasion in 1991. If the evidence was that the guarantee was signed before the lease, it would not cause the guarantee to fail. The guarantee was capable of operating in respect of a lease signed after the guarantee.

Conclusions

  1. [58]
    On the basis of these findings, subject to satisfying the court after submissions as to the proper amount for judgment the plaintiff is entitled to judgment against Mr Law in respect of the claims made relating to the lessee’s occupation until and including February 1999. No party has made submissions as to the proper amount for judgment against Mr Law or as to the amount of interest, if any in respect of the claims made relating to the lessee’s occupation until and including February 1999. Subject to resolving the issues as to amount I am satisfied that there is no need for a trial against Mr Law on that part of the claim and will receive submissions from the plaintiff and from Mr Law as to the proper sum for judgment on that part of the claim. Insofar as the application relates to a claim for money due in respect of the lessor’s occupation in and from March 1999 Mr Law is at liberty to defend. As between the plaintiff and Mr Law I will also receive submissions as to costs. The application as between the plaintiff and Mr Law is adjourned to allow those parties to make those further submissions in writing.
  1. [59]
    Mr Law is entitled to particulars of the amount claimed against him on the basis of the proposed judgment in respect of the claims made relating to the lessee’s occupation until and including February 1999 and how the amount is calculated. Those particulars can be given by way of submission as to the proper amount for judgment and how it is calculated. I give liberty to the plaintiff until 19 October 2009 to provide to Mr Law and the court its submissions in respect of these matters including submissions as to costs. I give liberty to Mr Law to provide to the plaintiff’s solicitors and the court by 2 November 2009 his submissions in response to the plaintiff’s submissions. I give liberty to the plaintiff to provide to Mr Law and the court its submissions in reply by 9 November 2009. The application as against Mr Law is adjourned for further consideration of such of those submissions as are received in accordance with the liberty given.
  1. [60]
    I dismiss the application for summary judgment insofar as it is brought against Ms Mak. As between the plaintiff and Ms Mak I order that the questions be reserved of whether to order that costs be paid and if such an order is to be made whether to order that they be assessed on a standard basis or some other basis.

Footnotes

[1]Chidgey v Wellner  & Anor [2006] QDC 400 [20] per McGill SC DCJ

[2]T 2-59 l 19

[3]Qld Pork P/L v Lott [2003] QCA 271 at [41] per Jones J

[4](1975) 132 CLR 355 at 359 and 360 per Barwick CJ, McTiernan, Gibbs, Stephen and Mason JJ

[5]Jessup v Lawyers Private Mortgages Ltd [2006] QSC 003 at [21] per Chesterman J as his Honour then was.

[6]Lease clause 15.09

[7]T2-58

[8] Halsbury’s Laws of England 4th Ed para.1378 and Farrow Mortgage Services Pty Ltd (in Liquidation) v Slade and Nelson (1996) 38 NSWLR 636 at 639G.

[9]Armour Coatings (Marketing) Pty Ltd v General Credits Finance Pty Ltd (1978) SASR 259 at 277 followed in ANZ Banking Group Ltd v Rodgers [2003] QSC 304 per Muir J as his Honour then was at [80] – [81]

[10]Outline par 26

[11]Chan v Cresdon Pty Ltd (1989) 168 CLR 242 at 249.2.

[12]Op cit

[13]Lease clauses 16.01, 16.03 and Reference Schedule Item 15.

[14]White [38] and [49].

[15]White [40], [49] and [50].

[16]White [71] per Bryson J.

[17] Property Law Act 1974 section 45(2)(b)

Close

Editorial Notes

  • Published Case Name:

    GH Yuen & LM Yuen Pty. Ltd. as trustee for the Gum Hoy Yuen and Lai Ming Yuen Family Trust v Oscar Video Club Pty Ltd & Ors

  • Shortened Case Name:

    GH Yuen & LM Yuen Pty. Ltd. as trustee for the Gum Hoy Yuen and Lai Ming Yuen Family Trust v Oscar Video Club Pty. Ltd.

  • MNC:

    [2009] QDC 412

  • Court:

    QDC

  • Judge(s):

    Andrews DCJ

  • Date:

    12 Oct 2009

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
ANZ Banking Group Ltd v Rodgers [2003] QSC 304
2 citations
Jump To
Cite 1 - [2003] QSC 304
Cite 2 - [2003] QSC 304
Armour Coatings (Marketing) Pty Ltd v General Credits Finance Pty Ltd (1978) SASR 259
2 citations
Jump To
Cite 1 - (1978) SASR 259
Cite 2 - (1978) SASR 259
Chan v Cresdon Pty Ltd (1989) 168 CLR 242
2 citations
Jump To
Cite 1 - (1989) 168 CLR 242
Cite 2 - (1989) 168 CLR 242
Chidgey v Wellner [2006] QDC 400
2 citations
Jump To
Cite 1 - [2006] QDC 400
Cite 2 - [2006] QDC 400
Farrow Mortgage Services Pty Ltd (in liquidation) v Slade & Nelson (1996) 38 NSWLR 636
2 citations
Jump To
Cite 1 - (1996) 38 NSWLR 636
Cite 2 - (1996) 38 NSWLR 636
Jessup v Lawyers Private Mortgages Ltd [2006] QSC 3
2 citations
Jump To
Cite 1 - [2006] QSC 3
Cite 2 - [2006] QSC 3
Petalin v Cullen (1975) 132 CLR 355
2 citations
Jump To
Cite 1 - (1975) 132 CLR 355
Cite 2 - (1975) 132 CLR 355
Queensland Pork Pty Ltd v Lott [2003] QCA 271
2 citations
Jump To
Cite 1 - [2003] QCA 271
Cite 2 - [2003] QCA 271
White v Cariste Pty Ltd [2004] NSWCA 460
4 citations
Jump To
Cite 1 - [2004] NSWCA 460
Cite 2 - [2004] NSWCA 460
Cite 3 - [2004] NSWCA 460
Cite 4 - [2004] NSWCA 460

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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