Bella Fruita Pty Ltd v Nyrang Holdings Pty Ltd [2000] ACTSC 16 (11 February 2000)

Last Updated: 29 February 2000

BELLA FRUITA PTY LTD v NYRANG HOLDINGS PTY LTD [2000] ACTSC 16 (11 February 2000)

CATCHWORDS

APPEAL FROM DECISION OF TENANCY TRIBUNAL - appeal on a question of law - refusal by the landlord to recognise exercise of option for renewal of a lease - failure to pay rent punctually and other breaches of the lease - whether the landlord's conduct harsh and oppressive - it was not - whether the concept of harsh and oppressive is a question of law or a question of fact.

Tenancy Tribunal Act 1994 (ACT), s 58

Commercial and Retail Leases Code of Practice, r 13

Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd (1954) 76 WN (NSW) 72

Kyrgios v Burns Philp Trustees (TT 4 of 1995 delivered 18 April 1997)

Kintella P/L v Scotte [1999] ACTSC 100 per Crispin J

Painter v Painter (1963) 4 FLR 216

McDonald v McDonald (1965) ALR 166

Sharp Corp (Aust) Pty Ltd v Collector of Customs (1995) 59 FCR 6

Collector of Customs v Agfa-Gevart Ltd [1996] HCA 36; (1996) 71 ALJR 123

On Appeal from the Tenancy Tribunal of the Australian Capital Territory constituted by President Burns.

No. SCA 52 of 1999

Judge: Gallop J

Supreme Court of the ACT

Date: 11 February 2000

IN THE SUPREME COURT OF THE )

) No. SCA 52 of 1999

AUSTRALIAN CAPITAL TERRITORY )

ON APPEAL FROM THE TENANCY TRIBUNAL OF THE AUSTRALIAN CAPITAL TERRITORY CONSTITUTED BY PRESIDENT BURNS

BETWEEN: BELLA FRUITA PTY LTD

Appellant

AND: NYRANG HOLDINGS PTY LTD

Respondent

ORDER

Judge: Gallop J

Date: 11 February 2000

Place: Canberra

THE COURT ORDERS THAT:

1. The appeal be dismissed.

1. This was an appeal by a lessee pursuant to s 58 of the Tenancy Tribunal Act 1994 (ACT) (the Act) against a decision of the Tenancy Tribunal delivered on 25 June 1999 in which the Tribunal declined to make any orders against the respondent landlord in respect of the grant of a further lease pursuant to an option to renew contained within a lease between the parties. The right of appeal conferred by s 58 of the Act is "on a question of law".

2. The matter was heard on 16 November 1999 when I dismissed the appeal and said I would give reasons later. These are those reasons.

3. The appellant was the lessee of premises being shop 5 in subleasing plan number 1908 from the respondent. The premises are within the shopping centre known as the Erindale Shopping Centre. The appellant conducted a business known as the Erindale Fruit Market. The appellant occupied the subject premises pursuant to the terms of a written lease dated 13 February 1995.

4. The original lessee under the lease was one Almir. By deed made 28 November 1995 the lease was, with the consent of the respondent, assigned to persons named Elmir. By agreement for sale of business dated 9 September 1996 the Elmirs sold the business which they conducted on the subject premises to the appellant. By deed dated 17 September 1996 the Elmirs, with the consent of the respondent, assigned their rights and obligations under the lease to the appellant. The lease was expressed to be for a period of four years from 14 December 1994 expiring on 13 December 1998. The lease contained an option for a further term of four years. The appellant, by letter dated 11 August 1998, purported to exercise its option for the further term. The respondent refused to accept the exercise of that option.

The dispute

5. The appellant filed a notice of dispute with the Tenancy Tribunal dated 19 November 1998. The notice contended that the landlord had denied that the exercise of the option was valid and had refused to grant a lease pursuant to the option. The appellant sought orders from the Tribunal that the respondent grant to the appellant the lease of the premises for a period of four years and, as previously stated, the Tribunal refused to make that order. The provisions relating to the option to renew are contained in clause 5 of the lease dated 13 February 1995 and read as follows,

"5.(1) This clause 5 applies where the tenant wishes to take a further lease of the premises after the expiry of this lease in favour of any one or more of those who constitute the tenant (as the tenant directs in writing).

(2) This clause 5 is conditional upon

(a) the tenant punctually paying the rent and observing the covenants throughout the term of this lease; and

(b) the tenant serving on the land lord written notice of the exercise of this option during a period commencing six months and ending three months before the date of expiry of this lease."

6. In its reasons for decision, the Tribunal referred to various cases on the nature of an option to renew and in particular referred to Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd (1954) 76 WN (NSW) 72 where a full court of the Supreme Court of New South Wales said, at 74,

"In the present case the lessor irrevocably offered to grant a lease. Its offer prescribed the time and manner for acceptance. Only by performing the conditions prescribed could it be accepted and result in an agreement for a lease. A purported acceptance without performance of the prescribed conditions would not and could not be an acceptance of the offer. It would in reality be a counter offer by the original offeree requiring acceptance by the original offeror if an agreement were to result. If a conditional offer is made and the offeree without performing the condition purports to accept it, that is to say makes a counter offer and that counter offer is accepted, it is a loose although not uncommon use of language to say that the original offeror has waived performance of the condition which was prescribed by his offer as being the manner of accepting it. In contemplation of law the original offeror has done no such thing. What he has done is to accept a counter-offer and in the result an agreement is made but it is not an agreement consisting of the original offer and an acceptance of that offer."

7. The lease provided for payment of rent in advance by equal monthly instalments due and payable on the first day of each month and, in any event, no later than fourteen days after such due dates (clause 4(5)(a)). The lease further provided that clause 4(5)(a), providing for the payment of rent in instalments no later than fourteen days from the due dates, was an essential condition of the lease (clause 39(2)(b)).

8. The Tribunal found that on the appellant's own evidence, between 23 October 1996 and 1 September 1998, the rent due and payable under the lease was only paid on the due date on one occasion being 1 September 1998 which was after the appellant had purported to exercise its option of renewal of the lease and the respondent had refused to recognise the exercise of the option relying inter alia upon the appellant's failure to pay rent punctually. The Tribunal further found that throughout that period the appellant had on only two occasions paid rent within fourteen days of the date when it became due. Thus, out of twenty-four rent periods from October 1996 to September 1998, the appellant only paid its rent on the due date on one occasion and only two occasions within fourteen days of the due date as required by clause 4(5)(a) of the lease.

9. The Tribunal found that on the appellant's own case it had breached clause 4(5)(a) regularly and that that was sufficient to determine the appellant's contention that it had validly exercised its option under the lease.

10. On the hearing of the appeal to this Court, it was submitted on behalf of the appellant that the word "punctually" in clause 5(2)(a) of the lease should be construed to mean that a payment would be punctual if paid within fourteen days of the first day of the month. Ingenious as this argument may be, there is no basis for rejecting the findings of fact made by the Tribunal nor its conclusion that the appellant was regularly in breach of the terms to pay rent punctually.

11. The Tribunal then went on to consider the contention of the respondent that there had been a breach of the lease by the appellant in using portions of the common area at the Erindale Centre for the display for sale of fruit, vegetables and other produce in bins. The appellant accepted that it had displayed produce for sale in the common area but submitted that it was entitled to do so pursuant to oral permission granted by the respondent, its servants or agents. The Tribunal considered the evidence on the subject and rejected the excuse proffered by the appellant. The Tribunal held that the breaches were persistent and also disqualified the appellant from exercising its option.

12. On the hearing of the appeal to this Court, the appellant accepted that the Tribunal's finding of fact that the appellant regularly placed fruit and vegetable display bins in the common area of the Erindale Centre outside the areas leased to the appellant was a finding of fact and could not be disputed on appeal.

13. There was a third ground upon which the respondent relied for refusing to renew the lease. In that respect, the respondent was not successful before the Tribunal but it is not necessary to deal with that matter further.

14. The main thrust of the appeal to this Court was that the conduct of the respondent was harsh and oppressive and the decision of the Tribunal to the contrary was an error of law. In its reasons for decision, the Tribunal examined the concept of harsh and oppressive conduct and referred to its own decision in Kyrgios v Burns Philp Trustees (TT 4 of 1995 delivered 18 April 1997).

15. Section 36 (1)(g) of the Act provides that the Tribunal may have regard to, inter alia, the requirements of the Code. This is a reference to the Commercial and Retail Leases Code of Practice. Rule 13 of the Code is in the following terms,

"13 Prohibited conduct

A party to a lease shall not engage in conduct, in its dealings with the other party to the lease that is -

(a) unconscionable;

(b) coercive; or

(c) harsh and oppressive."

16. It was submitted on behalf of the respondent that the conduct proscribed by rule 13 is conduct between the parties to the lease in their dealings with respect to the lease. It was submitted that there was no relevant "conduct" by the respondent capable of being harsh and oppressive in respect of the lease. The conduct relied upon by the appellant before the Tribunal was the respondent's refusal to accept the appellant's offer to renew the lease. That conduct was rejected by the Tribunal as giving rise to the concept of being harsh and oppressive but, in any event, so it was submitted on behalf of the respondent, any decision not to grant a new lease was entirely dehors the lease. There was no obligation on behalf of the respondent to grant a new lease. It was entirely free to grant the new lease if it wished to do so. In any event, if contrary to what I have just said, the Code applied then upon the accepted construction of the expression "harsh and oppressive conduct", the Tribunal's decision that the respondent's conduct did not fall within that description was one of fact entirely for the Tribunal and is not reviewable on appeal. The Tribunal's conclusion was entirely justified.

17. The concept of harsh and oppressive conduct is a relative one and requires "consideration of the whole of the circumstances"; the conduct must be "considered in the context in which it occurred": Kintella Pty Ltd v Scotte [1999] ACTSC 100 per Crispin J at para 33. The circumstances included,

1. The appellant's breaches of the lease were not spasmodic, but persistent;

2. The breaches of the lease were not accidental, but were made deliberately and with full knowledge and appreciation of the requirements of the lease. There was no inequality of bargaining (or other) position as between the parties and the appellant obtained professional legal advice in respect of the lease.

3. The appellant as a lessee did not take its responsibilities seriously. It consistently made no effort to pay rent in a timely fashion. It could reasonably have paid on time. Its rental payments were in arrears even at the time of the hearing, as was conceded by witness Mr Gattuso.

4. On the other hand, the respondent was not in breach of the lease and it was, as the Tribunal found, entitled to pursue its own commercial interests.

18. There was evidence before the Tribunal to support all of those circumstances.

19. In my opinion, the respondent's submission that r 13 of the Code is directed to conduct between the parties to their lease in their dealings in respect of the lease is correct. That being so, the conduct of the respondent in refusing to recognise the appellant's purported exercise of the option to renew the lease was not conduct in the parties' dealings with respect to the lease.

20. There is some support for that proposition in Kintella P/L v Scotte (supra) where Crispin J said at para 31,

"... I think that the concept of harsh and oppressive conduct with which the Code is concerned will usually involve acting in a manner which is in accordance with the person's strict legal rights but nonetheless satisfies that description. The example of Shylock insisting on his pound of flesh has been cited: Painter v Painter (1963) 4 FLR 216 at 219. If the act of which the other party complains is "illegal" then the appropriate remedy will be damages for breach of contract or tort depending on the nature of the illegality. Paragraph 13 of the Code of Practice was, I think, intended to provide a further remedy in cases where the conduct was neither in breach of the lease nor tortious but nonetheless unconscionable, coercive or harsh and oppressive. In any event it is clear that the conduct must be both harsh and oppressive to the other party."

I adopt Crispin J's observation.

21. Crispin J went on to cite Herron CJ in McDonald v McDonald (1965) ALR 166 at 175 who was considering the phrase in a somewhat different context,

"Each of the two words in the phrase "harsh and oppressive" must be given its meaning. The test of harshness and oppressiveness is subjective and must relate to the respondent. What is envisaged is not some such concept in the abstract or as applying generally to others, or even to the reasonable man or woman. The phrase connotes some substantial detriment to the party before the court. It is not satisfied by argument based on generalities or on social philosophy or that the petitioner is at fault or by suggested injustice ..."

22. In my opinion, the respondent was entirely justified in refusing to renew the lease. Nevertheless, the question remains whether the concept of "harsh and oppressive" is a question of fact. They are ordinary English words having no specialised or technical meaning and should be construed as ordinary words used in their ordinary sense. Accordingly, their meaning is primarily a question of fact, see Sharp Corp (Aust) Pty Ltd v Collector of Customs (1995) 59 FCR 6 per Davies and Beazley JJ and Collector of Customs v Agfa-Gevart Ltd [1996] HCA 36; (1996) 71 ALJR 123 at 126-128. In this respect, I do not agree with Crispin J. I regard the question of whether conduct falls within the statutory test so postulated is one of fact and not reviewable on appeal pursuant to s 58 of the Act.

23. For these reasons, I dismissed the appeal.

24. I shall hear counsel on the question of costs.

I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice

Associate:

Date: 11 February 2000

Counsel for the appellant: Mr B Meagher

Solicitor for the appellant: Donohue & Co

Counsel for the respondent: Mr M Einfeld QC with Mr D Mossop

Solicitor for the respondent: Bradley Allen

Date of hearing: 16 November 1999

Date of judgment: 16 November 1999