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In this significant application for leave to appeal from the District Court, the Court of Appeal was faced with two interesting questions. First, whether or not the respondent was entitled to equitable set-off where its cross-claim arose under a different lease from the claim, albeit one with the same parties. Secondly, whether or not two extensions to a registered lease which were not registered created a new unregistered lease for the purposes of determining the time in which an action could be brought under the Limitation of Actions Act 1974.
Sofronoff P and Morrison JA and Henry J
12 February 2021
Gold Tip operated a newsagency in premises in the Mt Ommaney shopping centre which it leased from the respondent. . Originally, Gold Tip leased the premises under a registered lease (the “first lease”), which expired on 10 July 2006, but was extended twice by unregistered instruments, until those extensions expired on 30 June 2008. –. Between 30 June 2008 and 4 February 2010, the first lease was held over as a monthly tenancy on the same terms as the first lease. –.
At around the same time – between 2008 and 2010 – the respondent undertook a major renovation of the centre. . As a result of these renovations, Gold Tip entered into a new lease with the respondent on 4 February 2010 (the “second lease”), under which the business was to be relocated to a different corner of the centre. . In 2012, Gold Tip went into liquidation. . It was ultimately wound up in insolvency, and assigned the right to bring proceedings against the respondent to the applicants. .
Some time later, the applicants commenced proceedings against the respondent in the District Court, seeking compensation under the Retail Shop Leases Act 1994 for various actions taken by the respondent in the course of its renovations of the centre. –. Defending the claim, the respondent submitted that any claim under the first lease was statute barred and that, in any event, it was entitled to an equitable set-off for rent which was due under the second lease. . Ultimately, the primary judge accepted the respondent’s set-off submission and dismissed the application. . The applicants sought leave to appeal to the Court of Appeal under s 118(3) of the District Court of Queensland Act 1967. .
Morrison JA, with whom Sofronoff P and Henry J agreed, first addressed the question of equitable set-off. . His Honour considered the core legal principles to have been set out in Forsyth v Gibbs  1 Qd R 403, 406 , where Keane JA held that to make out a claim for equitable set-off, there must be “such a connection between the claim and the cross-claim that the cross-claim can be said to impeach the claim so as to make it unfair for the claim to be allowed without taking account of the cross-claim”. .
The relevant question, then, was whether there was a sufficiently close connection between the claim and the cross-claim. Morrison JA considered that the fact the claim and cross-claim arose under different leases was neither a qualifying or disqualifying feature for a party seeking to raise equitable set-off. . Rather, equitable set-off might arise “in respect of different legal instruments between the same parties”, so long as it arose from a single relationship of landlord and tenant. . Applying this reasoning to the facts, his Honour distinguished between the form and the substance of the parties’ legal relationship. . In form, there were two separate leases, but in substance, it was a continuing relationship of landlord and tenant, with the second lease only entered into because Gold Tip had to relocate within the centre as a result of the renovations undertaken by the respondent. –. Accordingly, the primary judge was found not to have erred on this point. .
The second issue dealt with by Morrison JA related to whether the primary judge erred in disallowing the applicant’s argument that the dissolution of Gold Tip following the completion of its winding up had extinguished the respondent’s debt. His Honour found there to be no merit in this ground, because it was not pleaded and was only raised in final written submissions by the applicants, they could not show that the primary judge had erred in disallowing it to be raised so late. –.
Thirdly, Morrison JA dealt with a notice of contention filed by the respondent, which argued that the applicants’ claim was time barred. . The respondent’s contention on this point was that, between the expiration of the first lease and the entry into the second lease, the agreement between the parties comprised a “simple contract”. . Accordingly, under s 10(1) of the Limitation of Actions Act 1974, the limitation period for the action under the Retail Shop Leases Act 1994 (the terms of which were deemed to be incorporated into the leases) was six years. .
Conversely, the applicants submitted – and the primary judge accepted – that because the extensions to the first lease included a term providing that the extensions were on the same terms as the first lease, and the first lease was registered, s 176 of the Land Title Act 1994 deemed the first lease to operate as a deed and “since the holding over leases are on the same terms as the first lease, that imports the protection under s 176”. –. As an action under a deed, the applicants contended the claim was an action on a specialty, which attracted a limitation period of 12 years. –.
Morrison JA rejected this submission. . His Honour considered that s 176 of the Land Title Act 1994 only provides that a registered instrument has effect as a deed and an unregistered instrument – such as the extended lease – does not. . His Honour considered there were a number of difficulties with the applicants’ contention. –. Ultimately, his Honour concluded that the claim for disruption under the first lease was time barred. .
Finally, Morrison JA dealt with a number of contentions concerned with the way in which the primary judge assessed the evidence of loss. . However, his Honour considered that none of them raised a ground warranting the grant of leave to appeal. –.
In the event, the application for leave to appeal was refused. .