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  4. BEP Zamia Pty Ltd v National Australia Bank Limited - [2022] QSC 73

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BEP Zamia Pty Ltd v National Australia Bank Limited[2022] QSC 73

BEP Zamia Pty Ltd v National Australia Bank Limited[2022] QSC 73

SUPREME COURT OF QUEENSLAND

CITATION:

BEP Zamia Pty Ltd & Anor v National Australia Bank Limited [2022] QSC 73

PARTIES:

BEP ZAMIA PTY LTD

HONSIN PTY LTD

(Applicants)

v

NATIONAL AUSTRALIA BANK LIMITED

(Respondent)

FILE NO/S:

BS No 4141 of 2022

DIVISION:

Trial

PROCEEDING:

Originating Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

3 May 2022

DELIVERED AT:

Brisbane

HEARING DATE:

20 April 2022

JUDGE:

Cooper J

ORDER:

  1. The application is dismissed.
  2. The Court will hear the parties as to costs.

CATCHWORDS:

LANDLORD AND TENANT – RIGHTS AND LIABILITIES – FORM AND CONTENTS OF LEASE – where the premises the subject of the lease were originally owned by the respondent – where the respondent subsequently sold the premises and entered into a lease back – where the applicants subsequently purchased the freehold title to the leased premises – where the lease provides that fixtures installed in the leased premises by the respondent before and during the term of the lease remain the property of the respondent – where the lease between the parties will shortly expire

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS – whether on the proper construction of the lease the respondent is obliged to remove the “Tenant’s Property” from the leased premises at the end of the lease

EQUITY – EQUITABLE REMEDIES – OTHER REMEDIES – DECLARATIONS – APPROPRIATE FORM OF RELIEF – where the applicant landlords and the respondent tenant are engaged in a dispute as to whether the respondent is obliged to remove the “Tenant’s Property” from the leased premises at the end of the lease – where the respondent contends the parties are also in dispute as to what items fall within the definition of “Tenant’s Property” – where the applicants accept that the declaration sought by them would not resolve any question as to what constitutes the “Tenant’s Property” – whether the relief sought by the applicants would quell the controversy between the parties – whether the Court should exercise its discretion to make the declaration sought by the applicants

CASES AND LEGISLATION:

Curtin v Meadlow Holdings Pty Ltd [2001] QCA 45, cited.

Gan v Shop 3, 228-230 Hanvaylee Parade Kensington Pty Ltd [2017] NSWSC 1322, cited.

Graham v Markets Hotel Pty Ltd (1943) 67 CLR 567, cited.

Johnstone & Wilmot Pty Ltd v Kaine (1928) 23 Tas LR 43, cited.

Moorhouse v Angus & Robertson (No 1) Pty Ltd [1981] 1 NSWLR 700, cited.

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, cited.

Wincant Pty Ltd v South Australia (1997) 69 SASR 126, cited.

COUNSEL:

P W Hackett for the applicants

A I O'Brien for the respondent

SOLICITORS:

Pan & Partners Lawyers for the applicants

Corrs Chambers Westgarth for the respondent

Introduction

  1. [1]
    The applicants (Landlords) apply for a declaration that, on the proper construction of a lease between the parties, the respondent (NAB) is required upon termination of the lease to remove all of the “Tenant’s Property” from the leased premises and make good any damage caused by the removal.
  2. [2]
    NAB resists the application on the basis that:
    1. (a)
      the construction advanced by the Landlords should not be accepted as the proper construction of the lease; and
    2. (b)
      in any event, it is not appropriate for the Court to make the declaration sought by the Landlords in circumstances where that declaration would not resolve the issues between the parties.

Background

  1. [3]
    The Landlords are owners as tenants in common in equal shares of a commercial property at 14 Zamia Street in Sunnybank, Queensland (Property).
  2. [4]
    The Property was originally owned by NAB.  It was common ground during the course of argument that NAB constructed the building situated on the Property.  A relevant feature of the building was the construction of a “strong room” on the first floor, reflecting the intended operation of NAB’s banking business from the building. 
  3. [5]
    In April 1997, NAB sold the Property to C.K Chung Pty Ltd and took a lease back of it (Lease).  The Landlords purchased the freehold title to the Property in 2021 and assumed the rights and obligations of the original landlord under the Lease. 
  4. [6]
    The term of the Lease will expire on 25 May 2022.
  5. [7]
    In January 2022, Katherine Castillo, a property agent representing NAB, sent an email to Benjamin Pan, the solicitor for the Landlords, raising the need to discuss make good obligations arising upon the expiration of the Lease.  For this purpose, arrangements were made for the Landlords to inspect the Property.
  6. [8]
    Following that inspection, on 10 February 2022, Mr Pan sent an email to Ms Castillo advising that the Landlords considered the following things needed to be done to make good the Property:

“For ground floor – to remove all partitions and internal walls save for stairs and toilet.

For the first floor – to remove all partitions save for toilet and stairs

For clarity the following are to be removed:

Ceilings

Air conditioning

Carpet, and

External signage / freestanding billboard.

ATM machine once removed the glass window needs to be replace (sic) or a glass door.”

  1. [9]
    On 16 February 2022, Ms Castillo responded to Mr Pan, relevantly as follows:

“In accordance with the Lease and specifically Clause 17.1(b) ‘The Tenant may remove the Tenant’s Property from the Premises’.  It is NABs understanding that there is no obligation to remove any of the Tenant’s property from the premises as part of the exit.”[1]

  1. [10]
    On 22 February 2022, Mr Pan sent an email to Ms Castillo asserting that NAB’s understanding of the Lease was incorrect and setting out the construction which the Landlords now advance on this application.
  2. [11]
    There followed further correspondence between Mr Pan and the solicitors for NAB concerning NAB’s make good obligations and the proper construction of the Lease.
  3. [12]
    The Landlords filed their originating application on 8 April 2022.  The declaration sought in that originating application was expressed as follows:

“In respect of the Lease of the commercial property at 14 Zamia Street Sunnybank a Declaration that within 30 days after the end of the Lease [NAB] must remove all Tenant’s Property and make good any damage caused by the removal.”

  1. [13]
    On 13 April 2022, the solicitors for NAB sent an email to Mr Pan requesting that the Landlords identify the “Tenant’s Property”, which they asserted NAB was required to remove, and the evidence relied upon to assert that each relevant item constitutes “Tenant’s Property”.
  2. [14]
    Mr Pan responded on 14 April 2022, advising that the relief sought in the Landlords’ application would be limited to a declaration as to the proper construction of the Lease and, specifically, whether on that construction NAB was required to remove all of the “Tenant’s Property”.
  3. [15]
    When the matter came on for hearing, Mr Hackett, who appeared for the Landlords, confirmed that the Landlords did not seek a declaration in the precise terms set out in the originating application.  Instead, the Landlords sought a declaration in terms set out in paragraph 1 of Mr Hackett’s written outline of submissions as follows:

“That upon the proper construction of the Lease [NAB] is required upon the termination of the Lease to remove all the ‘Tenant’s Property’ and make good any damage caused by the removal.”

  1. [16]
    Mr Hackett accepted, in the course of his submissions, that the declaration sought in those terms would not resolve any question as to what constitutes the Tenant’s Property.

The Proper Construction of the Lease

  1. [17]
    At common law, upon the expiration of the term, a tenant is entitled, but not bound, to remove “tenant’s fixtures”, those being items which the tenant fixed to the premises for the purpose of trade and which did not become part of the structure itself.[2]  Of course, the parties to a lease might agree upon terms which require the tenant to remove its fixtures at the end of the lease and which address the situation where the tenant does not comply with the requirement.[3]
  2. [18]
    As noted above, the question on this application involves a consideration of the proper construction of the Lease.
  3. [19]
    The principles of contractual interpretation are well known.  The rights and liabilities of the parties to a contract are to be determined objectively, by reference to the text of the contractual provision, its context within the contract as a whole and purpose.  The meaning of the terms of a commercial contract is to be determined by asking what a reasonable businessperson would have understood those terms to mean, having regard to the language of the contract, the circumstances addressed by the contract and the commercial purpose or objects of the contract.  Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of interpretation on the assumption that the parties intended to produce a commercial result.  This means a commercial contract should be construed so as to avoid it making commercial nonsense or working commercial inconvenience.[4]
  4. [20]
    The Lease contains the following relevant provisions:
    1. (a)
      In Schedule 1, the following definitions:

Landlord’s Property means anything in the Premises which is not the Tenant’s Property or property of the Tenant’s Employees and Agents or customers of the Tenant.

Tenant’s Property means anything installed or placed on the Premises or the Building by or for the Tenant.

  1. (b)
    In Item 1 of the Reference Schedule:

Premises was described as the whole of the Land and the Building;

Building was described by the address: 14 Zamia Street, Robertson, Queensland 4109;

Land was described as Lot 15 on RP 140834.

  1. (c)
    Clause 11:

11 Repairs and compliance with laws

11.1 Obligation to maintain and repair

The Tenant must keep and maintain the interior of the Premises in the same repair as they were at the Commencement Date except for fair wear and tear.  The Landlord and the Tenant must agree on a condition report of the Premises as at the Commencement Date.

…

11.3 Exceptions

Despite clauses 11.1 … :

  1. (a)
    the Tenant need not:
  1. (i)
    make structural alterations, structural additions or structural repairs to the Premises; or
  1. (ii)
    install or replace items of a capital nature,

unless they are required because of the Tenant’s negligence or a breach of this lease by the Tenant; …

  1. (d)
    Clause 15:

15 Tenant’s additional rights

15.1 …

15.2 The Tenant’s fixtures include all partitions, fit-out and airconditioning equipment installed in the Premises by or on behalf of the Tenant and whether such installation occurred before or during the Term, which fixtures remain the property of the Tenant.

  1. (e)
    Clause 17:

17 Other Tenant covenants

17.1

  1. (a)
    As soon as practicable after the end of this lease, the Tenant must yield up the Premises and the Landlord’s Property in accordance with the terms of this lease; and
  1. (b)
    The Tenant may remove the Tenant’s Property from the Premises on or within 30 days after the day on which the Tenant yields up the Premises in accordance with clause 17.1(a) and any damage caused to the Premises by the Tenant’s removal of the Tenant’s Property must be made good by the Tenant.
  1. [21]
    The Landlords submit that cl 17.1(a) requires NAB to yield up the Property without the Tenant’s Property.  This is said to follow from the express obligation to “yield up the Premises and the Landlord’s Property” and the definition of the “Landlord’s Property” which expressly excludes “Tenant’s Property”.  The Landlords submit that NAB will not have complied with the obligation to yield up the Premises if it has left any part of the Tenant’s Property behind.
  2. [22]
    On the Landlords’ construction, cl 17.1(b) operates only to define the timeframe set out at the commencement of cl 17.1(a), namely “as soon as reasonably practicable after the end of this lease.” 
  3. [23]
    I am unable to accept the Landlord’s construction as being the proper construction of cl 17.1 of the Lease.
  4. [24]
    There is nothing in the language used by the parties in cl 17.1(a) which indicates an objective intention to impose a requirement that NAB remove the Tenant’s Property in order to comply with its obligation to yield up the Premises. 
  5. [25]
    In my view, a reasonable businessperson would understand the concept of NAB yielding up the Premises to be separate from the question of what is to happen to fixtures and fittings falling within the definition of Tenant’s Property upon the expiration of the Lease.  It is certainly true that the parties’ rights and obligations in respect of those separate matters might interrelate to some degree, but it does not follow from that that the existence of the obligation to yield up in cl 17.1(a) is itself sufficient to create a requirement that NAB remove the Tenant’s Property from the Premises.  That is, subject to the question of the condition the Premises must be in when yielded up (an issue to which I will return), NAB might comply with its obligation to yield up under cl 17.1(a) even though it leaves the Tenant’s Property at the Premises.  One would have expected a requirement that NAB remove the Tenant’s Property at the end of the Lease, if it had been agreed, to be expressed in clear and unambiguous terms.
  6. [26]
    The separate nature of the obligation to yield up and the question concerning removal of the Tenant’s Property is highlighted by the different timeframes imposed under the two limbs of cl 17.1.  In my view, the Landlords’ argument that the period of 30 days provided for in cl 17.1(b) does no more than give content to the expression “as soon as practicable after the end of [the Lease]” in cl 17.1(a) cannot be correct.  That is because, on the Landlords’ construction, NAB must remove the Tenant’s Property in order to comply with its obligation to yield up the Premises in accordance with cl 17.1(a).  That construction is inconsistent with the express words of cl 17.1(b) which permits NAB to remove the Tenant’s Property up to 30 days “after the day on which [NAB] yields up the Premises in accordance with clause 17.1(a)”.  In circumstances where NAB has the right to remove the Tenant’s Property after it has yielded up the Premises in accordance with cl 17.1(a), I cannot see any basis for the argument that removal of the Tenant’s Property is a requirement for compliance with the obligation to yield up.   
  7. [27]
    The Landlords’ reliance upon the express obligation in cl 17.1(a) to yield up the Landlord’s Property, and the express exclusion of the Tenant’s Property from the definition of the Landlord’s Property, is misplaced.  On the view I take as to the proper construction of cl 17.1(b), applying the ordinary and natural meaning of the word “may” and contrasting the use of that word with the subsequent use of “must” in the same provision, NAB might elect to remove the Tenant’s Property from the Premises within the period permitted by that sub-clause.  In those circumstances, it would make no sense for the parties to have included an unqualified obligation in cl 17.1(a) to yield up the Tenant’s Property.  The express reference to the Landlord’s Property in cl 17.1(a) does no more than recognise the fact that NAB has no right to remove that property from the Premises in any circumstances.
  8. [28]
    In the course of argument, Mr Hackett also referred to cl 15.2 which provides that fixtures installed in the Premises by or on behalf of NAB remain the property of NAB, whether that installation occurred before or during the Term of the Lease.
  9. [29]
    In my view, the purpose of that clause is to address issues created by the passing of title upon the sale of the Property by NAB to the original purchaser.  Absent some form of retention of title provision, any fixtures installed on the Property prior to that sale would have become part of the land and ownership of those fixtures would have passed to the purchaser upon completion of the sale.  NAB would not have had the benefit of the common law right to remove, as tenant’s fixtures,[5] any fixtures installed prior to the commencement of the Lease – the ownership of which would have passed upon the conveyance of the land. 
  10. [30]
    Be that as it may, there remains a question as to how, if at all, the Landlords might deal with any fixtures falling within cl 15.2 which are not removed from the Premises within the period permitted by cl 17.1(b). 
  11. [31]
    The position at common law was succinctly summarised by Doyle CJ in Wincant Pty Ltd v South Australia:[6]

“In brief, a fixture is part of the land, even though it is a tenant’s fixture.  The lease is to be construed as giving the tenant a right to remove tenant’s fixtures, unless the right is clearly excluded.  … Unless that right is exercised, and a tenant’s fixture is severed from the land, the fixture remains part of the land and the property of the landlord.”      

  1. [32]
    The position under the Lease is different because the effect of cl 15.2 is that fixtures installed on the Property by NAB, whether before or during the Term of the Lease, are expressly stated to remain the property of NAB and, so, have not ever formed part of the land.  It is on that basis, as I understood the argument, that Mr Hackett raised the question as to how the Landlords might deal with fixtures that are left at the Premises but remain the property of NAB.
  2. [33]
    It seems to me that the answer to this difficulty lies in the application of the doctrine of abandonment.  An election by NAB not to remove the Tenant’s Property within the period permitted by cl 17.1(a) would, in my view, result in it abandoning all of its rights in that property.  That election would provide proof of an intention to abandon ownership of the property.[7]  In circumstances where the parties’ submissions were addressed solely at fixtures installed by NAB,[8] no issue seems to arise as to whether chattels cannot generally be abandoned.[9] 
  3. [34]
    For that reason, I do not consider that the effect of cl 15.2, in providing that fixtures installed by NAB remained the property of NAB, supports the construction advanced by the Landlords.

Whether declaratory relief should be granted

  1. [35]
    It follows from what I have already said that the application for a declaration in the terms sought by the Landlords should be dismissed.  It is therefore unnecessary for me to address, other than briefly, NAB’s argument that it would be inappropriate for the Court to make the declaration.
  2. [36]
    NAB’s submissions were advanced on the basis that the parties were in dispute as to whether particular fixtures, such as the strong room, formed part of the Tenant’s Property.  The result, it was submitted, is that granting the declaration in the form sought by the Landlords would not resolve the parties’ dispute. 
  3. [37]
    I have already referred above to Mr Hackett’s acceptance that the declaration sought by the Landlords would not resolve any question as to what constitutes the Tenant’s Property.  That acceptance was, however, qualified by the submission that there could not, in truth, be any dispute that, for example, the strong room came within the relevant definition.  In correspondence exchanged prior to the application, NAB’s solicitors argued that the strong room might not form part of the Tenant’s Property because it was constructed by NAB before the Property was sold to the original landlord and before the Lease commenced.  In the course of argument, Mr Hackett addressed that suggestion by submitting that it ignored the broad terms of the definition of Tenant’s Property, which he observed are not referrable to the commencement of the Lease so as to exclude fixtures installed during NAB’s earlier occupation of the Property, as well as the express reference in cl 15.2 to fixtures installed “before or during” the term of the Lease.
  4. [38]
    In my view, the position concerning the strong room is not as clear as Mr Hackett submitted.  Having regard to the plans contained in the materials read on the application, it seems to me to be at least arguable that the strong room forms part of the structure of the Building.  If that was accepted, the argument that the strong room formed part of the Tenant’s Property which (on the Landlords’ construction) is required to be removed by NAB at the end of the Lease would need to confront a potential inconsistency with cl 11.3(a)(i) which provides that NAB need not make structural alterations to the Premises.  That issue was not the subject of argument on the application.  In any event, if that sort of issue were to be raised, its proper consideration would be likely to require further evidence to be led.  I do not propose to say anything further about it.  
  5. [39]
    NAB also raised the relationship between cl 17.1(a) and the repair and maintenance obligation in cl 11.1.  NAB submitted that the obligation to yield up the Premises “in accordance with the terms of [the Lease]” required that the condition of the Premises, at the time they are yielded up, conform to the condition required by cl 11.1, namely “in the same repair as they were at the Commencement Date except for fair wear and tear”.  NAB accepted that an obligation to yield up the Premises in that state of repair means that if NAB elects not to remove fixtures, the Landlords may require the removal of such fixtures if their presence means that the Premises are not in the required state of repair.  This does not mean that a covenant to yield up premises in, for example, good and tenantable repair means that a tenant is always obliged to remove tenant’s fixtures.  It means only that the tenant can be obliged to remove fixtures, the presence of which has the result that the premises are not in the required state of repair.[10]  
  6. [40]
    Consideration of any issue whether the presence of fixtures not removed by NAB might mean that the Premises are not in the required state of repair when yielded up would require consideration of the state of repair of the Premises at the Commencement Date of the Lease, and the question of fair wear and tear over the Term of the Lease.  It might also require consideration of the requirements of the tenants likely to take the Premises at the time the Lease was entered into.[11]  No evidence was led on the application about any of those matters.
  7. [41]
    In circumstances where it seems likely that the ultimate resolution of the parties’ dispute is likely to require consideration of further evidence and more detailed submissions, I would not have considered it an appropriate case to make a declaration as to the proper construction of the Lease in the limited form proposed by the Landlords.

Conclusion

  1. [42]
    As I do not accept that the construction advanced by the Landlords is the proper construction of cl 17.1 of the Lease, the application for the declaration must be dismissed.
  2. [43]
    I will hear the parties as to costs.

Footnotes

[1]Underlining in original.

[2]Wincant Pty Ltd v South Australia (1997) 69 SASR 126 at 127 and at 143-144; Curtin v Meadlow Holdings Pty Ltd [2001] QCA 45 at [15].

[3]An example of such terms may be seen in Gan v Shop 3, 228-230 Hanvaylee Parade Kensington Pty Ltd [2017] NSWSC 1322 at [60] to [62].

[4]Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [46], [47] and [51] per French CJ, Nettle and Gordon JJ.

[5]The expression “tenant’s fixtures” being used in the sense described in the authorities referred to in paragraph [17] above.

[6](1997) 69 SASR 126 at 127.

[7]Moorhouse v Angus & Robertson (No 1) Pty Ltd [1981] 1 NSWLR 700 at 702, 706-707, 712-713.

[8]In particular, submissions were made about the “strong room” and airconditioning equipment comprising a plant room and ducting.

[9]Johnstone & Wilmot Pty Ltd v Kaine (1928) 23 Tas LR 43.

[10]Wincant Pty Ltd v South Australia (1997) 69 SASR 126 at 128.

[11]Graham v Markets Hotel Pty Ltd (1943) 67 CLR 567 at 585; referred to in Wincant Pty Ltd v South Australia (1997) 69 SASR 126 at 137.

Close

Editorial Notes

  • Published Case Name:

    BEP Zamia Pty Ltd & Anor v National Australia Bank Limited

  • Shortened Case Name:

    BEP Zamia Pty Ltd v National Australia Bank Limited

  • MNC:

    [2022] QSC 73

  • Court:

    QSC

  • Judge(s):

    Cooper J

  • Date:

    03 May 2022

  • White Star Case:

    Yes

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
Gan v Shop 3, 228-230 Hanvaylee Parade Kensington Pty Ltd [2017] NSWSC 1322
2 citations
Jump To
Cite 1 - [2017] NSWSC 1322
Cite 2 - [2017] NSWSC 1322
Graham v Markets Hotel Pty Ltd (1943) 67 CLR 567
2 citations
Jump To
Cite 1 - (1943) 67 CLR 567
Cite 2 - (1943) 67 CLR 567
Johnstone and Wilmot Pty Ltd v Kaine (1928) 23 Tas LR 43
2 citations
Jump To
Cite 1 - (1928) 23 Tas LR 43
Cite 2 - (1928) 23 Tas LR 43
Moorhouse v Angus and Robertson (No. 1) Pty Ltd (1981) 1 NSWLR 700
2 citations
Jump To
Cite 1 - (1981) 1 NSWLR 700
Cite 2 - (1981) 1 NSWLR 700
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104
2 citations
Jump To
Cite 1 - (2015) 256 CLR 104
Cite 2 - (2015) 256 CLR 104
R v Mathieson [2001] QCA 45
2 citations
Jump To
Cite 1 - [2001] QCA 45
Cite 2 - [2001] QCA 45
Wincant Pty Ltd v South Australia (1997) 69 SASR 126
5 citations
Jump To
Cite 1 - (1997) 69 SASR 126
Cite 2 - (1997) 69 SASR 126
Cite 3 - (1997) 69 SASR 126
Cite 4 - (1997) 69 SASR 126
Cite 5 - (1997) 69 SASR 126

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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