Liangis Investments Pty Limited v Daplyn Pty Ltd and Jaimey Costin and Harry Victor Costin [1994] ACTSC 2 (17 January 1994)

SUPREME COURT OF THE ACT

LIANGIS INVESTMENTS PTY LIMITED v. DAPLYN PTY LTD AND JAIMEY COSTIN AND HARRY
VICTOR COSTIN
No. SC543 of 1993
Number of Pages - 8
Practice and procedure

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
MASTER A. HOGAN

CATCHWORDS

Practice and procedure - Summary judgment - Affidavit in support - Inadvertent defect - Further affidavit admitted - Claim for damages - Deponent's belief as to absence of defence - "except as to the amount of damages claimed".

Supreme Court Rules O.15 r 1

Les Fils Dreyfus etc v Clarke (1958) 1 All LR 459

Drummer v Brown (1953) 1 QB 710

Supreme Court Practice (Eng) 14/2/8

Landlord and tenant - Breaches of covenant by tenant - No repudiation - Re-entry by landlord - Termination of lease - Rights of landlord - Damages for loss of bargain - Rent for balance of term - Rights of tenant - Covenant for quiet enjoyment - Lease by deed - Estoppel - Variation.

Real Property Act 1925 s.48(4)

Redfern and Cassidy: Australian Tenancy Practice and Precedents, para 17-135

HEARING

CANBERRA
17:1:1994

Counsel for the Plaintiff: G. Lunney

Instructing Solicitors: Macphillamy Donald and Co

Counsel for Defendant: R. Arthur

Instructing Solicitors: Phillips Fox

ORDER

THE COURT ORDERS THAT:

1. Liberty be granted to the plaintiff to enter judgment against each
defendant for $54,550.41.
2. Execution on that judgment be stayed until 4.00 pm on 11 February
1994.
3. Leave be granted to the plaintiff to amend its Statement of Claim
concerning the balance of its claim as it may be advised within 14 days.
4. Leave be granted to the defendants to amend their defence generally
within 14 days after service of any amended statement of claim, or within
28 days if the plaintiff does not amend the Statement of Claim.
5. Costs reserved.

DECISION

MASTER A. HOGAN This is an application for summary judgment pursuant to O.15 r 1.

2. The Writ was issued on 24 August 1993. It was indorsed with a Statement of Claim.

3. After alleging the incorporation of the plaintiff and the firstnamed defendant, the pleading set out the following allegations relevant to this application.
1. By a written agreement for lease dated 18 March 1992 the plaintiff let

to the first defendant certain premises at Kingston. The term was for 5
years from 9 September 1991, and the rent was $186,000, payable in advance

b

monthly payments of $15,500, due on the first day of each month.
2. The lease contained covenants by the first defendant to pay to the
plaintiff, (a) the rental, (b) "the lessor's proportion of expenses as
defined by the lease", (c) the plaintiff's costs and expenses incidental

to

any default by the first defendant or the exercise of any right by the
plaintiff in consequence of any such default, and (d) interest of 20

percent

on any moneys due under the lease.
3. In breach of clauses 2.1(a) and 2.1(b) of the lease the first
defendant failed to make certain payments under the lease. The

particulars
set out an amount owing on account of rent, up to 3 August 1992, of $41,528,

plus "outgoings for 1992/92 and 1992/93" of $14,021.65.
4. On 3 August 1993 the plaintiff determined the lease and recovered
possession of the premises.
5. Pursuant to clause 7 of the lease, the first defendant also

covenante

with the plaintiff, (a) to compensate it for all damage suffered by the
plaintiff by reason of breach by the defendant of its obligations under

the
lease, (b) clauses 2.1(a) and 2.1(b) were essential conditions of the lease,
and (c) the plaintiff might recover damages in respect of the entire term of

the lease in the event of a breach of an essential condition.
6. As a result of the breach of clauses 2.1(a) and 2.1(b) the

plaintiff

suffered damage, for which it claimed:
- rent from 4 August 1993 to 8 September 1996 totalling

$576,344.88;

- interest on outstanding monies $639.03;
- repossession expenses $9,722.50;
- legal costs $7,554.20.
7. The second and third defendants had each covenanted with the

plaintif
to guarantee the performance by the first defendant of its obligations under

the lease, and to indemnify the plaintiff against any loss resulting from
breach by the first defendant of its obligations.
8. The second and third defendants had failed to indemnify the

plaintiff

in respect of the breaches by the first defendant.

4. The claim against each defendant therefore comprised:

Arrears of rent to 3 August 1993 $41,528.76
Arrears of outgoings 14,021.65
Future rent to 8 September 1996 576,344.88
Interest 639.03
Repossession expenses 9,722.50
Legal costs 7,554.20

There was also a claim for interest pursuant to the Supreme Court Act.

5. All three defendants entered an appearance on 25 August 1993.

6. On 7 September 1993 the defendants filed a defence.

7. The defence admitted the existence of the lease, but alleged an agr eement, "made in 1992", that the rent thereafter was payable on the 15th day of the month.

8. It put in issue the existence of the covenants alleged by the plain tiff.

9. It admitted the non payments of rent and share of outgoings, but de nied that the failure was in breach of the lease.

10. It denied that the plaintiff had determined the lease. It alleged an estoppel against the plaintiff's entitlement to determine the lease arising out of an alleged agreement, said to have been made in August 1991, relating to a reduction in the rental in consideration of the first defendant's permitting other tenants in the building to use the toilets in the subject premises.

11. The defence then put in issue the damage alleged by the plaintiff, and the existence of the guarantees by the second and third defendants. It admitted a failure to indemnify, but denied that the failure was a breach of any agreement, or that the first defendant had committed any breach of its obligations.

12. The defence then raised a counter claim by the first defendant, based upon breaches of the covenant by the plaintiff for quiet enjoyment, arising from the use of the toilets by other tenants and the eviction of the first defendant by the plaintiff.

13. It alleged that those breaches constituted a repudiation by the plaintiff of its obligations under the lease, which repudiation the first defendant accepted, resulting in loss and damage to the first defendant. Apart from a claim for $4,000 for the cost of providing fire sprinklers and repairing locks on the premises, the amount of damages claimed by the first defendant was not quantified.

14. Also on 7 September 1993 the plaintiff filed the present Notice of Motion, seeking leave to enter summary judgment. The Notice of Motion was accompanied by an affidavit of a director of the plaintiff, sworn on the same day.

15. The application came on for hearing on 17 September 1993.

16. The affidavit in support verified the lease, and annexed a copy. It was not in fact an agreement for lease, but a memorandum of lease, in registrable form, and in fact registered under the Real Property Act 1925 on 25 March 1992. Although the registrable instrument was dated 18 March 1992, the covenants and conditions set out in the annexure were deemed to be incorporated in it, and its execution was stated to be "as per annexure". The annexure was executed under seal by the plaintiff and the first defendant, and purported to have been signed sealed and delivered by the second and third defendants, and bore the date of execution of 27 September 1991.

17. The question whether the annexure took effect as a deed on its execution on 27 September 1991 was not argued, but there is no doubt that upon its registration on 25 March 1992 the memorandum took effect as a deed pursuant to s.48(4) of the Real Property Act 1925.

18. The affidavit set out that the first defendant entered into possession on about 9 September 1991, and verified the non payment of rent alleged in the Statement of Claim, except for the sum of $1,000, not referred to in the pleading, but which the affidavit showed as having been paid on 2 June 1993..

19. It then alleged that the first defendant remained in possession of the premises until 3 August 1993, when it vacated the premises and that the plaintiff re-entered into possession of the premises on 3 August 1993.

20. It verified service upon the second and third defendants of written demands for the payment of $72,827.11 pursuant to their guarantee and non payment by either of them of any part of the sum demanded. That sum was made up of the outstanding rent and outgoings, together with the expenses and legal costs of repossession.

21. Paragraph 12 of the affidavit read as follows:

"12. Pursuant to Clauses 2.1(b) and 8(c) of the Lease, the defendant's
share of outgoings have been demanded from the defendant for the period 1
July 1991/30 June 1992, and 1 July 1992/30 June 1993 in the total sum of
$14,021.65. The defendant's proportion of outgoings pursuant to Item 9
of the First Schedule to the Lease is 76.66%. The total owing and unpaid
is as follows:
All accounts have been met by the plaintiff. The outgoings were the
costs of insurance premiums and services provided to the premises as
described in Clauses 2.1(b) and 8(c) of the Lease."

It is clear that the claim for outgoings was not verified by that affidavit.

22. The affidavit then purported to verify the expenses and legal expenses incurred in relation to regaining possession of the premises, but giving credit for money received from some other person as contribution to the security costs. It is difficult to reconcile the detail of the amounts set out in the annexures relating to those expenses with the deponent's simple statement that the first defendant vacated the premises and the plaintiff re-entered them on 3 August 1993. The matter was not addressed in argument , but I would not be prepared, on the basis of the evidence in this affidavit, to infer with any confidence that there had been a simple surrender of the balance of the term by operation of law, constituted by the defendant's giving up possession and the plaintiff's acceptance by entry.

23. The final paragraph in the affidavit read, "I believe that there is no defence to this action."

24. So far as the claim for unpaid rent is concerned, that is a liquidated sum, and the affidavit verifies the cause of action and the amount claimed.

25. On an application heard in chambers on 5 November 1993 counsel for the plaintiff sought leave to read and rely also upon an affidavit sworn by the director of the plaintiff on 21 September 1993. It was not contested that it had been prepared in readiness for the hearing on 17 September, but had not then been actually sworn. Counsel for the defendant objected to its reception into evidence. I have decided to admit it. It was obviously designed to overcome a defect caused by inadvertence. See Les Fils Dreyfus etc v Clarke (1958) 1 All ER 459. It deposes simply that the defendant's proportion of outgoings had been calculated in an attachment to a letter from the plaintiff's solicitors to the first defendant dated 14 July 1993, and annexed a copy of the letter. With that supplementation of the evidence there is verification of the fact that the lessor had incurred the expenses referred to in the attachment and particulars in the Statement of Claim.

26. I think it is clear that clause 7(3) of the lease does not have the effect that the plaintiff is entitled to receive as damages "in respect of the entire term", an amount equivalent to the total rent that would have been paid over the term had there been no determination of the lease.

27. But even if it could be read in that sense, it is clear that this part of the plaintiff's claim is for damages.

28. O.15 r 1 does not permit summary judgment to be signed for a final amount claimed as damages, and in respect of any claim for damages the relevant belief of the deponent should be, as set out in the rule, that "there is no defence to the action except as to the amount of damages claimed". Although Drummer v Brown (1953) 1 QB 710 is not directly binding authority on this precise point, it is obvious from a reading of the case, and from the structure of the Rule, that the notes at 14/2/8 of the Supreme Court Practice 1991 (Eng) to this effect are accurate.

29. I would not therefore grant leave to the plaintiff to enter summary judgment in respect of this part of the claim.

30. So far as the claim for the so called "repossession expenses" is concerned, I think it is at least arguable that, as detailed in Annexure "F" to the affidavit of the plaintiff's director, they were not "of and incidental to" "any breach or default by the lessee under" the lease. The affidavit discloses that the first defendant vacated, and the plaintiff re-entered, on 3 August 1993. The greater part of the expenses listed in Annexure "F" were incurred for the hiring of guards on dates after 3 August. Those expenses, and the solicitor's fees and disbursements, as set out in Annexure "G", are related to a "lock out" of the defendant. Whether they will be recoverable or not will depend upon evidence of the circumstances. I do not consider that the affidavit properly verifies that they were due pursuant to a cause of action founded on clause 2.1(t) of the lease, or that the amount claimed was due. I would therefore not grant leave to enter summary judgment in respect of that part of the claim.

31. The defendants relied upon an affidavit of the second defendant, a director of the first defendant.

32. That affidavit deposed to conversations that took place before the execution of the lease. They could not possibly have the effect of varying the written terms of the deed.

33. There are then set out various allegations about use by other tenants of the toilets within the area let to the first defendant, and conversations with the plaintiff's director about a reduction in rental in consequence. It is sufficient to summarise them as inconclusive. Indeed, in paragraph 14 the deponent swore that:

"On each occasion Mrs Liangis either refused to discuss the matter or
said that she would do so at a later time. She has never discussed the
matter."

34. In paragraph 19 the statement is made that "the lease required rent to be paid on the 22nd day of each month". Item 8 of the first schedule of the lease is explicit that payments were to be made on the first day of each month, except for the first and the last.

35. No amount of subsequent conversations, or misunderstandings even mutual, could have the effect of altering that legal obligation. The statement made in paragraph 22 of the affidavit that rent was fully paid up until 30 April 1993, and part paid to the extent of $8,000 for May 1993, is simply not correct, in the absence of any evidence of payment additional to those deposed to by Mrs Liangis.

36. From April 1993 there were discussions between Mr Costin and Mrs Liangis about difficulties that the defendant was having in meeting its rental obligations. There were negotiations about reduction in rent and reduction in floor area.

37. On 27 July 1993 Mr Costin made a formal written request for a meeting to resolve the problems. In it Mr Costin stated that he would not be able to pay any significant monies before 6 August.

38. On 28 or 29 July the doors of the premises were nailed shut, and a note was attached suggesting that information be sought from the landlord.

39. On 30 July a solicitor's letter demanding payment of the outstanding rent and outgoings was served on Mr Costin.

40. On the evening of 31 July 1993 security guards came to the premises and demanded that all persons on the premises leave. In the absence of any formal eviction order and the presence of the police the demand was not persisted in.

41. At about midnight on 2 August security guards, a builder and a locksmith arrived, and the locks were changed, locking Mr Costin and another person inside.

42. On the morning of 3 August Mr Costin packed up such belongings as he could carry and left the premises.

43. Mr Costin also deposed to a contested claim by the defendant for the cost of relocating fire sprinklers and replacing a broken lock.

44. Counsel for the defendant submitted that the evidence disclosed a number of triable defences. I do not think that the evidence goes anywhere near establishing the possibility of raising an estoppel or a variation in the contractual terms about the rent set out in the deed.

45. However, what is central to the plaintiff's claim for any amount over and above the rent and share of outgoings is whether the plaintiff was entitled to take possession of the premises at the time and in the manner that it did.

46. If it was not so entitled then it was in breach of the covenant for quiet enjoyment. Not only was the obligation to pay rent then suspended but the tenant became entitled to damages.

47. The Statement of Claim does not plead a repudiation by the tenant which was accepted by the landlord, and I would doubt that the evidence given on this application would support such allegations.

48. The re-entry by the landlord must then be founded upon a right to re-enter for breach.

49. If asked to guess I would hazard the proposition that the landlord was exercising a right to enter for non payment of rent. But the pleading does not formulate the material facts giving rise to such a right. Neither does the evidence.

50. If the landlord in fact took possession without first determining the lease it was the landlord who was in breach of covenant, and the tenant would be entitled to damages. See, for example Redfern and Cassidy: Australian Tenancy Practice and Precedents, para 17-135.

51. Whether the defendant is entitled to damages, and if so for how much, may well depend upon the way in which the plaintiff puts its case.

52. In this type of case I also think that it is relevant to take into account the existence of the power to relieve against forfeiture.

53. I grant liberty to the plaintiff to sign judgment against the first defendant for the rent shown to be due, namely $40,528.76, plus the first defendant's share of outgoings, namely $14,021.65, a total of $54,550.41.

54. The amount claimed for interest was not verified, so that leave to sign judgment for that element of the claim is not granted. It may of course be pursued as part of the balance of the action, if that is persisted in. The guarantee and indemnity alleged against the second and third defendants is clearly expressed in clause 6.1 of the lease, and the defendants have conducted these proceedings on the basis of a contest about the primary responsibility of the first defendant. There is no evidence of any defence to the claim based on that clause, and leave is therefore granted to sign judgment for the same amount against the second and third defendants.

55. I stay the execution of that judgment until 4.00 pm on 11 February 1994.

56. I grant leave to the plaintiff to amend its Statement of Claim concerning the balance of its claim as it may be advised, within 14 days.

57. I grant leave to the defendants to amend their defence generally within 14 days after service of any amended statement of claim, or within 28 days if the plaintiff does not amend.

58. I reserve the question of costs.

59. I note that for some reason the matter was listed before Gallop J on 19 November 1993 and adjourned to 10 December 1993, on which date Higgins J by consent adjourned it to 11 February 1994, for directions.

60. I grant liberty to either party to apply for directions in the meantime on 2 days notice.