CPT Custodian Pty Ltd v Ironbarkhills Pty Ltd
[2011] QDC 4
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- Unreported Judgment
- CPT Custodian Pty Ltd v Ironbarkhills Pty Ltd[2011] QDC 4
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CPT Custodian Pty Ltd v Ironbarkhills Pty Ltd[2011] QDC 4
CPT Custodian Pty Ltd v Ironbarkhills Pty Ltd[2011] QDC 4
DISTRICT COURT OF QUEENSLAND
CITATION: | CPT Custodian Pty Ltd v Ironbarkhills Pty Ltd & Ors [2011] QDC 4 |
PARTIES: | CPT CUSTODIAN PTY LTD ACN 077 870 243 (Plaintiff) V IRONBARKHILLS PTY LTD ACN 128 445 849 AS TRUSTEE FOR THE A.W. WARD FAMILY TRUST (First Defendant) AND DENMIA PTY LTD ACN 119 301 558 (Second Defendant) AND DENIS FRANCIS LEE (Third Defendant) AND MIA LEE (Fourth Defendant) AND CHI WAI LAU (Fifth Defendant) AND MEI MING LUK (Sixth Defendant) AND ANTHONY WILLIAM WARD (Seventh Defendant) |
FILE NO/S: | D334/10 |
DIVISION: | Civil |
PROCEEDING: | Applications |
ORIGINATING COURT: | District Court, Southport |
DELIVERED ON: | 28 January 2011 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 23 November 2010 |
JUDGE: | Reid DCJ |
ORDER: | 1.There be judgment in the proceeding for the fifth and sixth defendants against the plaintiff. 2.The plaintiff pay the fifth and sixth defendants’ costs of the proceedings including this application to be agreed or failing agreement to be assessed on a standard basis. |
CATCHWORDS: | PROPERTY – LEASE AGREEMENT – application for summary judgement – extension of lease by assignee subsequent to defendants sale of business – surrender of lease by operation of law and grant of new lease – whether s 67 of Land Titles Act affects surrender principle – statutory interpretation and property rights Uniform Civil Procedure Rules – r 293 Land Title Act 1994 – ss 67, 69 Jessup v Lawyers Private Mortgages Ltd & Ors (2006) QSC 003 Jessup v Lawyers Private Mortgages Ltd & Ors [2006] QCA 432 Savile Settled Estates (1931) Ch D 210 at 217 Gibbons Holding Ltd v Wholesale Distributors Ltd (2008) 1 NZLR 277 American Dairy Queen (Qld) Pty Ltd v Blue Rio Pty Ltd (1981) 147 CLR 677 R v H, T (2010) SASCFC 24 |
COUNSEL: | Mr R.K. Ratanatray for the Plaintiff Mr S.R. Lumb for the fifth and sixth Defendants |
SOLICITORS: | Forbes Dowling Lawyers for the Plaintiff Hunter Solicitors for the fifth and sixth Defendants |
Introduction
- [1]In this matter the plaintiff, which owns the Paradise Centre Shopping Centre in Surfers Paradise, claims money from, inter alia, the fifth and sixth defendants pursuant to a lease agreement with respect to a newsagency in the centre. The 5th and 6th Defendants have applied to have the plaintiff’s claim against them dismissed.
Brief history/chronology
- [2]Pursuant to a registered lease dated 8 August 2001 the then owner of the shopping centre, Sandhurst Nominees leased these premises to P&S Wilson for a period of seven years from 1 December 2000 to 30 November 2007. In 2003 the Wilsons assigned their interest under the lease to the fifth and sixth defendants. At about the same time, the lease was extended to 30 November 2009. In about March 2004 Sandhurst Nominees transferred its ownership of the centre and rights under the lease to the current plaintiff.
- [3]On about 15 August 2006 the plaintiff and the fifth and sixth defendants agreed to extend the expiry date of the lease to 30 November 2011. At about the same time the fifth and sixth defendants, by deed of assignment dated 31 August 2006, assigned their interest under the lease to the second defendant, to whom they sold the newsagency. The third and fourth defendants provided personal guarantees of the second defendant’s obligations.
- [4]On 16 September 2008 the plaintiff and the second defendant agreed to extend the date of expiry of the lease from November 2011 to November 2014 (see paragraph 11 of the statement of claim and paragraph 7 of the defence).
- [5]On about 25 September 2009 the second defendant sold the newsagency, and assigned its interest under the lease, to the first defendant. The seventh defendant provided personal guarantees of the first defendant’s obligations. Subsequently, the first defendant fell into arrears and the plaintiff has terminated the lease and re‑entered the premises.
Issue
- [6]The issue before me concerns the assertion by the fifth and sixth defendants that the extension of the lease from 30 November 2011 to 30 November 2014 by agreement between the plaintiff and the second defendant on or about 16 September 2008, discharged the fifth and sixth defendants from further obligations under the lease. The fifth and sixth defendants now seek summary judgment on the plaintiff’s claim against them pursuant to the provisions of r 293(2) of the Uniform Civil Procedure Rules, because the plaintiff, it is said, has no realistic prospect of success.
- [7]The fifth and sixth defendants’ assert that the extension of the lease on 16 September 2008 operates as a surrender by operation of law relieving the fifth and sixth defendants from any ongoing further obligations under the terms of the deed of assignment of 31 August 2006, and under the lease.
- [8]The plaintiff also sought further and better particulars of the second, third and fourth defendants’ amended defence and of the fifth and sixth defendants’ defence. Agreement has been reached with respect to those matters and consent orders were made involving the second, third and fourth defendants. Consent orders will also be made involving the fifth and sixth defendants if they are not successful with their application for summary judgment.
- [9]In Jessup v Lawyers Private Mortgages Ltd & Ors (2006) QSC 003, affirmed in Jessup v Lawyers Private Mortgages Ltd & Ors [2006] QCA 432, Chesterman J, as he then was, said at paragraph 22 in respect of the summary judgment provisions of the UCPR:
“It follows from what I have said that if the facts are settled and the respective rights of the parties turn upon questions of law, UCPR 292 and/or 293 would require the court to give judgment in advance of trial even where the point may be difficult. This conclusion involves a departure from the practice under the former rules as to summary judgment as explained in Theseus Exploration NL v Foyster (1972) 126 CLR 507 and Sunbird Plaza Pty Ltd v Boheto Pty Ltd (1983) 1 Qd R 248. To that extent, UCPR 292 and 293 may be said to have wrought change.”
Surrender Principle
- [10]The application really involves the question whether s 67 of the Land Title Act 1994 (“the Act”) abrogates the common law principle that an alteration of an existing lease, so that it will operate for a term extending beyond the original term, operates as a surrender of the old lease and the grant of a new one. In Savile Settled Estates (1931) Ch D 210 at 217 Maugham J said:
“I should add that in my opinion, an alteration of an existing lease so that it will operate for a term extending beyond the original term can operate, in law, only as a surrender of the old lease and a grant of a new one.”
- [11]The position at common law was further explained by Blanchard J in Gibbons Holding Ltd v Wholesale Distributors Ltd (2008) 1 NZLR 277 at 284, as follows:
“(12) Two matters were not entirely clear until quite recently. The first concerns B’s liability to A if an assignee from B (either C or D in the previous example) were without reference to B to agree with A on a variation on the terms of the lease which placed an additional burden on the lessee. Some English cases contained suggestions that B might be liable for the increase in the lessee’s burden despite never having agreed to it. In Friends Provident Life Office v British Railway Board the English Court of Appeal put this notion to rest. If what is done amounts to more than a variation and so has to be regarded as a surrender of the lease and a new grant to the current lessee, then B is released from all obligation to A. B is not liable for performance of an assignee under any lease other than the one B signed. But the court identified only two situations where this surrender and re‑grant would occur, namely where the term of the lease was extended beyond the original expiry date and where the boundaries of the premises were extended and more land bought within the lease. In other than these exceptional cases, a variation of the lease covenants between say, A and D does not altogether release B (or an intermediate assignee, C, who has covenanted with the lessor to observe them), but the variation cannot throw upon B or C any greater burden. So in Friends Provident where there was no rent review provision but an assignee had, in exchange for certain concessions by the lessor, reached agreement with the lessor for an increase in the rent from £12,000 per annum to £35,000 per annum for the rest of the term, the original lessee remained liable for the £12,000 per annum but was not liable for the increase of £23,000 per annum. On the other hand, if the rent had been reduced by variation to, say, £6,000 per annum, that was all the original lessee would have henceforth been liable for in the event of default by the current lessee.”
- [12]This principle is explained by Professor Duncan in his book “Commercial Leases in Australia” (5th Ed.) at para 14.40, as follows:
“At common law the variation of an existing lease by extending the term or adding additional land or premises to what was originally demised operated as a surrender of the old lease and a grant of a new lease. A surrender of part of the demised premises did not, of itself, extinguish the liability of the lessee to pay the entire rent unless the liability of the lessee was expressly diminished. A minor variation in the terms of some covenants would not work a surrender by operation of law. However, the variation to the term of the lease, as opposed to the rental, generally worked a surrender of the lease by operation of law.”
- [13]The fact that the lease was varied, extending the term from 30 November 2011 to 30 November 2014, and the existence of the common law principle I have set out was not in dispute before me.
Land Title Act
- [14]The respondent plaintiff contends that s 67 of the Act operates to preclude the fifth and sixth defendants from relying on those common law principles. Section 67 provides as follows:
“Amending a lease
- (1)In this section—
term of a registered lease includes a period of possession under the lease because of—
- (a)the exercise of an option to renew in the lease; or
- (b)a registered instrument of amendment extending the term of the lease;
- (2)A registered lease may be amended by registering an instrument of amendment of the lease.
- (3)However, the instrument of amendment must not—
- (a)increase or decrease the area leased; or
- (b)add or remove a party to a lease; or
- (c)be lodged after the lease’s term has ended.
- (4)The procedure for amendment specified in this section is in addition to other rights that are not inconsistent with this act.”
- [15]The defendants argue that this provision is merely a machinery provision introduced to enable a registered lease to be varied without the need to prepare and lodge a fresh lease for registration in place of an existing registered lease. They argue that nothing in the language of the section or indeed in the Act as a whole indicates the legislature’s intention to abrogate from the surrender principle I have referred to. Furthermore, reference is made to s 69(1) of the Act which specifically provides as follows:
“A registered lease may be wholly or partly surrendered by operation of law or by registering an instrument of surrender of the lease exercised by the lessor and the lessee.”
- [16]It is said on behalf of the fifth and sixth defendants that this subsection effectively preserves the common law surrender principle.
Statutory Interpretation
- [17]Finally the defendants argue that the respondents’ case that s 67 affects a fundamental change to the common law surrender principle runs counter to the general rule that courts will construe a statute in conformity with the common law and will not attribute an intention to alter it unless such an intention is manifested according to the true construction of the statute.
- [18]The principle is stated in American Dairy Queen (Qld) Pty Ltd v Blue Rio Pty Ltd (1981) 147 CLR 677 at 682-3 by Mason J, as he then was, and with whom Gibb CJ, Murphy, Aickin and Brennan (as he then was) JJ agreed; as follows:
“The general rule is that the courts will construe a statute in conformity with the common law and will not attribute to it an intention to alter common law principles unless such an intention is manifested according to the true construction of the statute. See Reg v Morris; Potter v Minahan; see also Craies on Statute Law, 7th edition 1971, pp 188-189. This rule certainly applies to the principles of the common law governing the creation and disposition of property. Indeed, there is some ground for thinking that the general rule has added force in its application to common law principles respecting property rights.”
- [19]The relevant principles of statutory interpretation are in my view particularly well summarised in a decision of Gray J in R v H, T (2010) SASCFC 24 where at paragraph 34 and following His Honour said:
“Statutory Interpretation and the Common Law
- The High Court, when considering the interpretation of statutes, has consistently recognised that it is presumed that Parliament does not intend to abrogate the common law. It is well settled that a statute is not to be construed as abrogating fundamental common law principles or rights unless the contrary intention is manifestly clear from its terms or as a matter of necessary implication.
- In American Dairy Queen (Q) Pty Ltd v Blue Rio Pty Ltd Mason J, with whom Gibbs CJ, Murphy, Aickin and Brennan JJ agreed, made the following pertinent observations:
The general rule is that the courts will construe a statute in conformity with the common law and will not attribute to it an intention to alter common law principles unless such an intention is manifested according to the true construction of the statute. See Reg v Morris; Potter v Minahan; see also Craies on Statute Law...
- In Bropho v Western Australia the Court adopted the oft-cited comments of O'Connor J in Potter v Minahan when observing:
One can point to other ‘rules of construction’ which require clear and unambiguous words before a statutory provision will be construed as displaying a legislative intent to achieve a particular result. Examples of such ‘rules’ are those relating to the construction of a statute which would abolish or modify fundamental common law principles or rights (see, eg, Benson v Northern Ireland Road Transport Board), which would operate retrospectively (see, eg, Maxwell v Murphy), which would deprive a superior court of power to prevent an unauthorized assumption of jurisdiction (see, eg, Magrath v Goldsbrough, Mort & Co Ltd) or which would take away property without compensation (Attorney-General v De Keyser's Royal Hotel). The rationale of all such rules lies in an assumption that the legislature would, if it intended to achieve the particular effect, have made its intention in that regard unambiguously clear. Thus, the rationale of the presumption against the modification or abolition of fundamental rights or principles is to be found in the assumption that it is "in the last degree improbable that the legislature would overthrow fundamental principles, infringe rights, or depart from the general system of law, without expressing its intention with irresistible clearness; and to give any such effect to general words, simply because they have that meaning in their widest, or usual, or natural sense, would be to give them a meaning in which they were not really used" (Potter v Minahan, and see, also, Ex parte Walsh and Johnson; In re Yates). ...
- The High Court in Balog…[1],http://www.austlii.edu.au/au/cases/sa/SASCFC/2010/24.html - fn18#fn18 similarly cited Potter v Minahan when making the following comments:
...If the legislation admits of a wider interpretation than that which we have given to it (and we do not think that it does), then the narrower construction is nevertheless to be adopted upon the basis that where two alternative constructions of legislation are open, that which is consonant with the common law is to be preferred: Smorgon v Australia and New Zealand Banking Group Ltd. See also Hamilton v Oades; Potter v Minahan; Wade v New South Wales Rutile Mining Co Pty Ltd; and Baker v Campbell.
- The decisions of Bropho and Balog have been subsequently referred to with approval by the High Court and applied in other jurisdictions.”
Arguments
- [20]In essence, the applicant’s argument is that the reference in s 67 of the Act to amending a registered lease, and to the term of a registered lease including a period of possession due to a registered instrument of amendment extending the original term of the lease, should be seen merely as machinery provisions enabling easier registration of such an amended lease and amendment thereof by the Registrar of Titles and not as having any effect on the rights and obligations, inter alia, of persons who, because of common law principles, are released from their obligations under any such original lease whose term is so extended.
- [21]They refer also on the objects of the Act as set out in s 3 thereof in the following terms:
“Object of Act
The object of this Act is to consolidate and reform the law about the registration of freehold land and interest in freehold land and, in particular—
- (a)to define the rights of persons with an interest in registered freehold land; and
- (b)to continue and improve the system of registering title to and transferring interests in freehold land; and
- (c)to define the functions and powers of the Registrar of Titles; and
- (d)to assist the keeping of the registers in the Land Registry particularly by authorising the use of information technology.”
- [22]It is said on the defendant’s behalf that nothing in the stated objects of the Act supports the view that it is intended to or does create fundamental changes in property rights.
- [23]The respondent/plaintiff referred to the fact that the Act was based on a draft Act included in the Law Reform Commission’s Report No 40. In respect of s 67, numbered Clause 43 of the draft Act, the Law Reform Commission said:
“Clause 43 facilitates the variation of a registered lease. It is based on the equivalent provision for the variation of a registered mortgage (Clause 51 of the bill and s 79 PLA 1974-1990).
There is no equivalent to this clause in the existing legislation. Currently, if the parties want to register a variation of lease, they must terminate the lease and register a new one.”
Findings
- [24]In my view, the words in the law Reform Commission Report in fact support the defendants’ argument that the section is a machinery provision designed to allow for easier, more efficient and less costly extension of a registered lease and do not appear to be designed to change the fundamental property rights of parties.
- [25]I note that if the respondents’ contention is correct, the effect may be that lessors and lessees could extend the terms of the subject lease indefinitely and that a party in the position of the fifth and sixth defendants may be bound to effectively underwrite the lessee’s performance of its obligations indefinitely. Such a result would in my view be quite extraordinary and counter intuitive. When I queried counsel for the plaintiff about this possibility during argument, he said:
“I readily accept that poses in … one way a bit of an impediment to the interpretation we seek to advance but it does not fly against the plain and ordinary meaning of the section.”
- [26]He submitted that a party was always able to negotiate the period over which their obligations as assignees might continue.
- [27]In my view, the argument advanced on behalf of the plaintiff is strongly counter intuitive. In my view, to find the section means as the plaintiff’s counsel urges is strongly contrary to the accepted principles of statutory interpretation that I have referred to. In my view, if parliament had intended the legislation to have the effect he asserts, one would expect a strong indication of that in the legislation and in the explanatory memorandum or minister’s first reading speech. There is no such indication in those documents. In my view the explanatory note to the Act with respect to s 67 supports the view that the section was designed to facilitate the amendment of a registered lease and not designed to itself significantly effect party’s property rights, as the plaintiff asserts.
- [28]In the whole of the circumstances, it is my view that the provisions of s 67 do not effect the fundamental common law principle of surrender. In my view, the fact that, without recourse to the fifth and sixth defendants, the plaintiff and the second defendant agreed to extend the date of expiry of the lease from November 2011 to November 2014 on or about 16 September 2008 had the effect of the surrender of an old lease and the grant of a new one, such that the fifth and sixth defendants were released from further obligations under the lease.
- [29]In my view, having regard to the comments of Chesterman J (as he then was) in Jessup v Lawyers Private Mortgages Ltd & Ors (supra) this is a case where the plaintiff will not succeed against the fifth and sixth defendants.
- [30]In the circumstances, I accede to the application of the fifth and sixth defendants and order:
- There be judgment in the proceeding for the fifth and sixth defendants against the plaintiff.
- The plaintiff pay the fifth and sixth defendants’ costs of the proceedings including this application to be agreed or failing agreement to be assessed on a standard basis.
- [31]On the application filed 1 October 2010, involving the second, third and fourth defendants, (court file document number 32) I ordered at the hearing of the matter last November that the application be dismissed and that the question of costs be reserved to the trial judge.
Footnotes
[1] Balog v Independent Commission Against Corruption (1990) 169 CLR 625.