Roseburn Pty Ltd v Eastride Pty Ltd
[2009] QSC 159
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- Unreported Judgment
- Roseburn Pty Ltd v Eastride Pty Ltd[2009] QSC 159
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Roseburn Pty Ltd v Eastride Pty Ltd[2009] QSC 159
Roseburn Pty Ltd v Eastride Pty Ltd[2009] QSC 159
SUPREME COURT OF QUEENSLAND
PARTIES: | Plaintiff Defendant |
FILE NO/S: | |
Trial Division | |
PROCEEDING: | Application |
ORIGINATING COURT: | |
DELIVERED ON: | 15 June 2009 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 15 June 2009 |
JUDGE: | McMurdo J |
ORDER: |
|
CATCHWORDS: | LANDLORD AND TENANT – RETAIL AND COMMERCIAL TENANCIES LEGISLATION – DEFINITIONS – RETAIL SHOP LEASE OR LEASE – where proposed lease could not have been a “retail shop lease” as defined in the Retail Shop Leases Act 1994 (Qld) as at the critical date – whether a grant of a lease of premises within a retail shopping centre gives rise to a retail shop lease if the lessor proposes to use land as a retail shopping centre, although at the time of the grant the land does not satisfy the definition of retail shopping centre LANDLORD AND TENANT – RETAIL AND COMMERCIAL TENANCIES LEGISLATION – OBLIGATIONS, PROHIBITED TERMS AND PROTECTION FOR LESSEES – PROHIBITED PAYMENTS: KEY MONEY, PREMIUM OR LIKE PAYMENTS – where s 39 of the Retail Shop Leases Act 1994 (Qld) precludes the lessor from seeking or accepting key money for the goodwill of the lessee’s business carried on from the leased shop – whether s 39 of the Retail Shop Leases Act 1994 (Qld) precludes the lessee from seeking or accepting key money for the goodwill of the lessee’s business carried on from the leased shop PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PLEADING – GENERALLY – where plaintiff pleads in statement of claim that the lease was to be assigned at market value – where plaintiff pleads in reply that the lease was to be assigned to a certain entity for not less than $1.2 million – whether the allegation made in the reply is inconsistent with the allegation in the statement of claim Retail Shop Leases Act 1994 (Qld) s 39(1), s 39(2) Uniform Civil Procedure Rules (Qld) r 154(2) |
COUNSEL: | M D Evans for the plaintiff R P S Jackson for the defendant |
SOLICITORS: | Baxters Solicitors for the plaintiff Brian Bartley & Associates for the defendant |
[1] Each party applies to strike out part of the pleadings of the other.
[2] I go first to the plaintiff’s application to strike out certain parts of the defence which plead an alleged operation of the Retail Shop Leases Act 1994 (Qld) (“the Act”). It is necessary to put those parts into the context of the plaintiff’s claim.
[3] The plaintiff sold to the defendant vacant land at Oxenford. It pleads that the land was sold upon an agreed condition that the defendant would construct two childcare centres on the land and lease them back to the plaintiff for a term of five years with three options to renew, and that the lease was to commence when the childcare centres had been constructed. It is alleged that construction had been completed by 13 February 2008. The plaintiff issued these proceedings at first claiming specific performance of the alleged agreement for lease. The case was set down for trial last August. On 15 August 2008 the plaintiff elected, or purported to elect, to terminate the agreement for the defendant’s refusal to perform it. The trial was adjourned and the plaintiff’s claim is for damages for breach of contract.
[4] The alleged loss and damage is pleaded in paragraph 15D of the current statement of claim. It is pleaded somewhat differently in the plaintiff’s current reply, which is the subject of complaint in the defendant’s strike out application to which I will come. But for the plaintiff’s application it is sufficient to refer to the statement of claim. The plaintiff there pleads that it sustained certain capital and revenue losses, “by reason of the defendant’s wrongful repudiation of the agreement”.
[5] In paragraph 13 of the statement of claim, the plaintiff pleads that the defendant repudiated the agreement by insisting upon a form of lease which contained terms which had not been agreed. That includes a complaint that the draft lease submitted by the defendant contained a clause which would have given the defendant as landlord, the right to end the lease early if it proposed to demolish or rebuild and to relocate the area of the tenancy, without any right to compensation. In response to that allegation the defendant pleads in paragraph 8(b) of the current defence that if there was a concluded agreement to lease, the childcare centres as constructed form part of a “retail shopping centre” within the meaning of the Act, that leases of premises in or adjacent to “retail shopping centres” customarily contain demolition, building and relocation clauses as were contained in the draft lease submitted by the defendant and that the effect of such clauses is regulated by sections 43(1)(f) and Subdivision 1 of Division 9 of the Act. On that basis, the defendant denies the allegations in paragraph 13 of the statement of claim, including the allegations that the demolition clause proposed by the defendant in its draft would not be fair and reasonable and for other reasons could not be thought to have been impliedly agreed by the alleged agreement for lease.
[6] It must be noted that the complaint in paragraph 13 of the statement of claim is that “at all times up to when the plaintiff accepted the defendant’s repudiation of the agreement” (which is 15 August 2008) the defendant refused to lease the childcare centres to the plaintiff except in terms of the draft which it had submitted. It is that allegation to which paragraph 8(b) responds.
[7] In this application the plaintiff says that the Act had no operation, because the critical date was 13 February 2008, at which point the proposed lease would not have been within the Act.
[8] The term “retail shopping centre” is defined in s 8 of the Act as a cluster of premises having certain attributes, the first being that it consists of “five or more … premises … used wholly or predominantly for carrying on retail businesses”. It is uncontroversial that as at 13 February 2008, what is said to have become at some stage the retail shopping centre did not satisfy that part of the definition. In the schedule to the Act the term “retail shop” means premises that are situated in a retail shopping centre or which are used wholly or predominantly for the carrying on of one or more retail businesses. It is conceded that childcare centres do not fall within the latter category. If they were not within a retail shopping centre as at 13 February 2008, they could not have then been a retail shop. Consequently, a lease of the childcare centres as at 13 February 2008 could not have been a retail shop lease as defined in the schedule to the Act.
[9] On this basis the plaintiff contends that paragraph 8(b) of the defence fails to disclose a defence and ought to be struck out.
[10] The defendant argues for a different construction of the Act. It is submitted that s 8 should be given what is described as a prospective effect, for otherwise, for example, a proposed lessor could be outside the Act when negotiating leases for a centre proposed for as many as 100 shops, as long as there were not already five retail businesses being conducted within the development. The effect of this argument is that if the lessor proposes to use land as a retail shopping centre, a grant of a lease of premises within that building gives rise to a retail shop lease, although at the time of the grant the land does not satisfy that part of the definition of retail shopping centre which is within s 8(1)(a).
[11] The plaintiff’s answer to this argument is to point to s 15 of the Act. It provides, by s 15(1), that the Act does not apply to a lease of premises that becomes a retail shop only after the commencement of the lease, an assignment of the lease, or a renewal of the lease under an option. So it is said that the lease to which the plaintiff was allegedly entitled, which is a lease from 13 February 2008, would not have been a retail shop lease and the various provisions of the Act pleaded in paragraph 8(b) of the defence could not have applied.
[12] The plaintiff’s argument as to the construction of the Act appears to be correct but it is unnecessary to express a concluded view. This is because I am not persuaded that in this litigation the operation or otherwise of the Act is to be assessed only as at 13 February 2008. As noted already, paragraph 8(b) is pleaded in response to an allegation that there was a repudiation over a period which extended to 15 August 2008. If the development became a retail shopping centre within that period, then the lease proposed by the defendant, had it been accepted by the plaintiff, would have been subject to the provisions of the Act pleaded within paragraph 8(b). In this way paragraph 8(b) is relevant, or at least not so obviously irrelevant that it would be struck out, assuming the correctness of the interpretation of the Act for which the plaintiff contends. The result is that paragraph 8(b) should not be struck out.
[13] The plaintiff applies to strike out also paragraph 14(b)(i) of the amended defence, which is pleaded in response to the allegation that the plaintiff is worse off for not having the value of a lease which could have been assigned for something of the order of $1,000,000 or more. The defendant there pleads that if there was a concluded agreement for lease, then the acceptance by the plaintiff of any sum for the assignment of its interest as lessee would contravene s 39 of the Act and would expose it to an action by its assignee to recover the amount paid.
[14] Section 39 provides, by subsection (1) that:
“(1)A person must not, as lessor or for the lessor, under or in relation to a retail shop lease, seek or accept the payment of key money or any amount for the goodwill of the lessee’s business carried on in or from the leased shop.”
Section 39(2) provides that this does not prevent “a lessor” from doing various things. Each of the exceptions within s 39(2) refers to some action which might be taken by a lessor. None of them is referable to something which might be done by a lessee. That confirms what is clear in any case in s 39(1), which is that it operates upon the lessor and does not preclude a lessee from seeking or accepting the payment of any amount for the goodwill of the lessee’s business.
[15] Nevertheless it is argued for the defendant that in some way s 39 would prohibit the plaintiff as lessee seeking or accepting the payment of “key money”. There is simply no basis for that argument in the language of s 39 or in the definition of the term “key money” in the schedule to the Act, by which the term is defined to mean a certain kind of payment to or benefit conferred on, or at the direction of, a lessor. There is no basis for paragraph 14(b)(i) and it will be ordered to be struck out.
[16] I turn to the defendant’s application, which is to strike out paragraph 8 of the current reply. The complaint is that this offends rule 154(2) of the UCPR, which provides that a party must not make an allegation that is inconsistent with an allegation made in another pleading of the party without amending the pleading. The argument is that this part of the reply is inconsistent with what is alleged in the statement of claim.
[17] Paragraph 15D of the statement of claim pleads the alleged loss and damage from the repudiation of the agreement for lease. Within subparagraph (a), it pleads that the plaintiff lost the value of the lease, which it would have been able to assign for a premium. It says that the value as at August 2008 was $950,000 but it claims $1,250,000 as the value of the lease at the likely date of a trial. Whether that higher amount may be claimed was not the subject of debate. Alternatively, it claims that “as part of its duty to mitigate the plaintiff will incur a premium to acquire a further lease in other premises of $1,250,000”. Thirdly, it pleads a loss of profits from being unable to conduct the business of the childcare centres from 13 February 2008 onwards “until the plaintiff is able to obtain comparable lease and businesses”.
[18] Paragraph 15D is denied, partly on the basis that, so it is alleged, the plaintiff did not intend to operate the childcare centres but intended that they be operated by a company, K3 Childcare Centres Pty Ltd. It is further alleged that the plaintiffs intended to attempt to assign them to ABC Learning Centres.
[19] The response in paragraph 8 of the reply is to deny those allegations because:
“It did intend running the childcare centres, until such time as it could assign the lease to K3 Childcare Pty Ltd for a consideration not less than $1.2 million in the event that K3 Childcare Pty Ltd was able to fund the purchase and in the event it was not, then the plaintiff would have run the childcare centres.”
The reply makes no reference to an assignment of the lease at market value (if less than $1.2 million) or to an entity other than K3.
[20] The defendant argues that the pleading effectively abandons the proposition within the statement of claim that “the lease was to be assigned at market value” or to some such other entity.
[21] The argument for the plaintiff asserts that paragraph 8 of the reply should be read as referring to an assignment of the lease to K3 Childcare Centres Pty Ltd or alternatively to someone else. The problem with that is that paragraph 8 presently refers only to an assignment to K3. The plaintiff’s submission reveals the way in which this debate should be resolved. The pleading should accord with what the plaintiff argues is its case. An amendment to paragraph 8 of the reply to refer to a sale to another entity, absent a sale to K3, would put paid to the defendant’s argument. Subject to two matters, there would be no tension between the statement of claim and the reply if that amendment were made. The plaintiff is entitled to advance a case that it lost the market value of the leasehold and the profits from the operation of the centres pending a sale of the leasehold. Of course, a significant period of operation of the childcare centres would have used up some of the term of the lease which might have had an impact upon the market value of the leasehold. But that is a matter for evidence and does not make the pleading of a case about the capital loss and a revenue loss one which is unclear or inappropriate.
[22] The first of these two qualifications is the alternative claim in paragraph 15D of the statement of claim, which is that the plaintiff “will incur a premium to acquire a further lease in other premises of $1,250,000”. I cannot see that this is consistent with the reply. On any view of the reply, it was the plaintiff’s intention to operate childcare centres only for as long as it could not sell these premises at an appropriate price. But there is no application to strike out that alternative plea in paragraph 15D of the statement of claim, at least at present. No doubt those advising the plaintiff will immediately consider whether it should remain. Secondly, there is the point that the statement of claim pleads a loss of profits until the plaintiff is able to obtain alternative premises. But according to the reply and to the plaintiff’s submissions, the real case is that the plaintiff was intending to be in the business of those childcare centres only for as long as it would have taken to have sold them. Again, there is no attack on this part of the statement of claim but it is expected that the plaintiff will immediately reconsider it.
[23] The outcome on the defendant’s application is that the plaintiff should be directed to amend paragraph 8 of the amended reply so as to make it accord with paragraph 30 of the plaintiff’s submissions upon this application, within 14 days. On the plaintiff’s application it will be ordered that paragraph 14(b)(i) of the amended defence be struck out but the application be otherwise dismissed.