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Loanright Pty Ltd & Anor v Schollick [2017] QDC 178 (23 June 2017)

Last Updated: 23 June 2017

DISTRICT COURT OF QUEENSLAND

CITATION:
Loanright Pty Ltd & Anor v Schollick [2017] QDC 178
PARTIES:
LOANRIGHT PTY LTD (ACN 080 008 920)
and
CAMPBELL JAMES WALKER
(plaintiff/respondent)
v
RICHARD JOHN SCHOLLICK
(defendant/applicant)
FILE NO/S:
D102 of 2016
DIVISION:
Civil
PROCEEDING:
Application
ORIGINATING COURT:
District Court at Maroochydore
DELIVERED ON:
23 June 2017
DELIVERED AT:
District Court at Maroochydore
HEARING DATE:
3 February 2017
JUDGE:
Long SC DCJ
ORDER:
The judgment entered for the plaintiffs/respondents, on 20 September 2016, is amended, so that the words: “the amount of $305,569.69, including $25,417.46 interest to today”, are deleted and replaced by the words: “damages to be assessed by this Court.”
CATCHWORDS:
PROCEDURE – JUDGMENTS AND ORDERS – AMENDING, VARYING AND SETTING ASIDE JUDGMENTS AND ORDERS – r 290 Uniform Civil Procedure Rules – Where the applicant applies to set aside the judgment entered against him, by default of defence, on 20 September 2016 – Whether any prima facie defence on the merits, or triable issue, is identified.
LEGISLATION:
Uniform Civil Procedure Rules rr 290 and 430(2)
CASES:
AHR Constructions Pty Ltd v Maloney [1994] 1 Qd R 460
Apple and Pear Australia Limited v Pink Lady America LCC [2016] VSCA 280
Commonwealth of Australia v Verwayen (1990) 170 CLR 394
Cooke v DA Manufacturing Co Pty Ltd [2004] QCA 52
Deputy Commissioner of Taxation v Ahern (No 2) [1988] 2 Qd R 158
Garland v Butler McDermott Lawyers [2011] QCATA 151
Knott Investments Pty Ltd & Ors v Fulcher & Ors [2013] QCA 67; [2014] 1 Qd R 21
National Mutual Life Association of Australasia Ltd v Oasis Developments Pty Ltd [1983] 2 Qd R 441
Yankee Doodles Pty Ltd v Blemvale Pty Ltd [1999] QSC 134
COUNSEL:
B Hall for the defendant/applicant
A Sinclair for the plaintiffs/respondents
SOLICITORS:
SS Lawyers for the defendant/applicant
Heiner and Doyle for the plaintiffs/respondents

Introduction

[1] By application filed on 7 December 2016, the defendant to a Claim filed on 1 August 2016, seeks an order pursuant to r 290 of the Uniform Civil Procedure Rules 1999 (“UCPR”), that the judgment entered against him, by default of defence, on 20 September 2016, be set aside. That judgment was entered in the following terms:

“THE JUDGEMENT OF THE COURT IS THAT the Defendant pay to thhe Plaintiffs the amount of $305,569.69, including $25,417.46 interest to today and $2,698 costs.”

[2] The dispute between the parties is in relation to an Agreement For Lease of premises in Duporth Avenue Maroochydore, for the purposes of a restaurant. And the default judgment was given in respect of the respondents’ Claim and Statement of Claim, each filed on 1 August 2016, for damages for breach of that Agreement For Lease.

[3] The applicant is a restaurateur and in early 2014 was seeking to expand from an existing restaurant in Duporth Avenue. He engaged in discussion with the respondents agent, Mr McKay, in respect of leasing premises opposite his existing restaurant and at shops 1 and 6, 25 Duporth Avenue and adjacent to an entry to the Big Top Shopping Centre. Consequently:

(a) on 4 February 2014, an offer to lease was exchanged;[1]

(b) in June 2014, a disclosure statement was issued;[2] and

(c) on 4 July 2014, a Deed of Agreement For Lease (“the Deed”) was executed.[3]

[4] The Deed provided the applicant with access to the premises and a licence to complete a fitout.[4] Such work was undertaken in April and May 2015. However and on 17 July 2015, the respondent issued a notice to remedy breach of covenant[5] and retook possession of the premises and sent a letter of termination on 5 August 2015.[6]

The Judgment

[5] On 1 August 2016 the respondents filed the Claim and Statement of Claim and the applicant was served on 17 August 2016. Accordingly, his defence was due on 15 September 2016. On that day, the applicant instructed his solicitors and they wrote to the respondents’ solicitors, requesting an agreement to an extension of time to brief counsel and file a Defence, with a request that they:

“Not take any steps adverse to our client’s interests without providing us with 7 clear days notice.”[7]

[6] However, that request was immediately followed by the further observation:

“In the event that your client seeks to obtain default judgment, we reserve our client’s rights to rely on this correspondence in any application to set aside judgment, and particularly on the question of costs.”

By way of response, Mr McKay provided instructions to the respondents’ solicitors to apply for default judgment because he was:

“Unaware of anything which could amount to a defence of the action and I was aware of past delays and a lack of meaningful response from the defendant to correspondence.”[8]

[7] Such application was made on 16 September 2016 and after an initial refusal and reapplication, was granted on 20 September 2016. Accordingly and when, on 15 October 2016, the applicant’s solicitor sent the applicant’s Defence for filing, with a copy to the respondents’ solicitors, he was consequently advised, by the registry, of the default judgment.[9]

[8] The default judgment was given in the sum of $305,569.69 (including $25,417.46 interest and $2,698.75 costs) and as premised upon the Statement of Claim filed on 1 August 2016, which particularised the loss and damage claimed as a result of the applicant’s alleged breach of the Deed.[10] In that Statement of Claim and after setting out some uncontentious circumstances relating to the Deed and various terms of that Agreement, it was pleaded that:

(i) Pursuant to cl. 7.3 of the Agreement For Lease, the applicant was bound by the Lease obligations from the commencement date, which, having regard to the date on which the defendant took possession of the premises and the fitout period (as defined in the Agreement), was 1 October 2014;[11]

(ii) The applicant was in substantial breach of the Agreement For Lease, in his failures to:

(a) Provide details of all applications made to the Local Government, or in the absence of applications to Local Government, details of any arrangements for private certification; and produce copies of all approvals and consents obtained in respect of the fitting-out of the Premises as required by cl 2.1 of the Agreement;

(b) Provide the Lessee’s Fitout Plan as required by sub-cl. 2.2.1 of the Agreement, and a copy of the quotation for the completion of the Fitout Work as required by sub-cl. 2.2.2 of the Agreement;

(c) Produce evidence of the insurances and Building Services Authority licences as required by sub-cl. 5.2.1 of the Agreement;

(d) Produce evidence of acceptance by one of the Lessee’s contractors of appointment as principle contractor for any of the Lessee’s works as required by cl. 5.3 of the Agreement;

(e) Produce evidence of approvals of the Authorities as required by cl. 5.7 of the Agreement;

(f) Pay to the Lessor the sum of $1,013.28, being the Lessee’s share of the cost of obtaining a survey Plan of the premises as required by sub-cl. 11.1(c) of the Agreement;

(g) Pay to the Lessor the sum of $40,728.17 representing the Bond payable pursuant to sub-cl. 12.1.1 of the Agreement;

(h) Pay to the Lessor the sum of $7,954.09 including GST on account of the outgoings payable by the Lessee pursuant to cl.4.1 of the Lease annexed to the Agreement;

(i) Provide evidence of insurances for public liability, pay class insurance, worker’s compensation, insurance against damage to or loss of the Lessee’s property as required by cl. 10.3 of the lease;

(j) Carry out the Lessee’s Works within the Fitout Period, or at all, and leave the Premises in a stripped-out state; and

(k) Sign the Lease within a reasonable time after it was submitted, or at all;[12]

(iii) The applicant had failed to comply with the notice to remedy Breach of Covenant, given to him under s 124 of the Property Law Act, on 17 July 2015 “within the time referred to in that notice, or at all.”[13]

(iv) The respondents retook possession of the premises on or about 5 August 2015 and incurred some particularised expenses, as a result of the applicant’s breaches;[14] and

(v) That:

“To mitigate its loss, the Plaintiffs sold the land and building by contract dated 11 September 2015 (“the Contract”). By special condition 3 of the Contract, a Guaranteed Sum was paid by the Plaintiffs (as Seller) to the Buyer. The Guaranteed Sum referred to in the Contract, so far as it applied to the Premises, was calculated by reference to the Rent and other money payable under the lease. As at 30 June 2016, the premises remained vacant and accordingly the Buyer has or will pay to itself that portion of the Guaranteed Sum attributable to the premises.”[15]

[9] It is necessary to note that upon this basis, the respondents’ damages were calculated in the Statement of Claim and awarded on the default judgment, substantially upon a calculation for loss of payment of rent pursuant to the Lease, for a period from 1 October 2014 to 30 June 2016 and loss of outgoings for the period 1 October 2014 to 30 June 2015.

The Application

[10] In this application, the applicant relied upon his proposed Defence[16] and the affidavits of his solicitor and himself. [17] For present purposes it may be noted that the applicant contends that there are defences on the merits to the Claim which is the foundation for the default judgment, in three respects and which may be broadly summarised as contentions that:

(a) the respondents purported termination of the Agreement Deed was a wrongful repudiation of that Agreement and as to which the applicant was not in breach, due to oral agreement as to the period of the fitout of the premises and the duration of the rent-free period;

(b) in any event, there is an alternative defence by way of estoppel; and

(c) as was contended on the hearing of the application, there are apparent issues as to the ascertainment of the plaintiff’s damages or loss, including having regard to the curious pleading referred to in paragraph [7(v)], above.

[11] This application proceeded upon general consensus as to the applicable principles. Although it is necessary to have regard to whether or not there is any satisfactory explanation for the failure to defend and/or whether there has been delay in bringing the application, which considerations may particularly give rise to further considerations of prejudice to the respondent and such as might go beyond compensation in terms of costs, the most critical consideration will usually be as to whether any prima facie defence on the merits, or triable issue, is identified.[18]

Discussion

[12] Despite evidence that the Claim and Statement of Claim was served on the applicant personally on 17 August 2016 and as the respondents correctly point out, the further evidence is that it was not until 15 September 2016 that the applicant gave instructions to his solicitor and the letter referred to above,[19] was sent.

[13] As is also correctly pointed out by the respondents, there is effectively nothing provided by way of direct explanation for the applicants delay in giving instructions to his solicitors before 15 September 2016. The implication appears to be in the applicant’s reference to him becoming “quite unwell” in about May 2015[20] and his solicitor’s reference to experiencing difficulty and delays in obtaining instructions from the applicant, due to his understanding that “he had been unwell with cancer”.[21] From 15 September 2016 and until the bringing of this application, the applicant relies on the evidence as to the correspondence from his solicitors and his solicitor’s affidavit as to the steps taken in obtaining the necessary materials and information to prepare the proposed Defence and then to take the further steps to make this application upon the advice from the registry as to the default judgment. Accordingly, the necessary emphasis in the application must be upon the identification of some prima facie defence on the merits or triable issue.

[14] It should first be noted that there is substantial merit in the respondents position in respect of their rights under the written Agreement For Lease. However, the applicant pleads in the proposed Defence and on this application attempts to support the alternative contentions that:

(a) despite a clause in the Agreement requiring any variation or waiver of any provision of it to be executed by the parties in writing, the Agreement had been varied by the conduct of the parties, including by oral agreement; and

(b) that the same conduct had given rise to an estoppel, which prevented the respondent from reliance upon and exercise of their strict legal rights pursuant to the Agreement.

[15] The gravamen of the Statement of Claim and upon which the default judgment was entered, is to be found in the allegations of default in respect of the Deed,[22] and the following allegations:

“14. The defendant abandoned the premises in or about May 2015.

  1. 15. The defendant failed to comply with a Notice To Remedy Breach of Covenant under Property Law Act, s. 124 given to him on behalf of the plaintiffs on 17 July 2015 within the time referred to in that notice, or at all.”

[16] The particularised loss and damage alleged to be the result of the applicant’s breach of the Deed, included that in respect of obligations arising under the Lease[23] and in respect of the payment of rent and outgoings and costs incurred upon default.[24] That was premised upon the contention that pursuant to cl. 7.3 of the Deed, the Lease was “deemed... to have commenced on the commencement date”,[25] which was defined to be “.... the earlier of:

(a) the day the lessee commences trading from the premises; and

(b) the day after expiry of the Fitout Period.”[26]

Accordingly and upon the further premise that the “Fitout Period” expired 60 days after 31 July 2014,[27] the “Commencement date of the Lease” was no later than 1 October 2014.

[17] On this application, the strength of the respondents’ position lies in understanding that by 5 August 2015[28] and when possession was retaken and the Deed terminated:

(a) the Agreement had not otherwise been terminated; and

(b) the applicant had not complied with or even responded to the notice to remedy breach of the deed.

[18] Although that notice was given in reference to the Property Law Act 1974, it is correctly pointed out that it would suffice as a written notice of default given pursuant to cl. 10.2.1 of the deed and entitling, therefore:

(a) and upon failure of remedy within a reasonable time, the termination of the Agreement by the respondents;

(b) recovery of “all losses, damages, costs and other expenses suffered by the Lessor because of the default or repudiation including any costs of terminating this Deed, recovering possession of the Premises, maintaining, renovating, resorting, altering, cleaning, securing and advertising the Premises legal and accounting costs, and real estate commissions, charges and fees of and incidental to any re-letting or abortive re-letting of the premises”; and

(c) the exercise of “any rights that the Lessor may have under the Lease in respect of any default or repudiation by the Lessee under the Lease.”

[19] Notwithstanding that other matters of default are referred to in the notice,[29] on this application the respondent particularly pointed to:

(a) the failure to pay a bond in accordance with cl. 12.1.1 of the Deed, “on or before the Lessee’s Occupancy Date”; and

(b) the failure to produce evidence of the stipulated insurance policies, in accordance with cl. 5.2.1, “prior to the commencement of the Lessee’s Works.”

[20] More importantly, there is force in the respondents’ contentions that:

(a) in relation to the failure to pay the bond, the proposed Defence contains only a pleading that it was not demanded,[30] and which, as the respondents also contend, may well be a deemed admission of the pleaded allegation in [13(g)] of the Statement of Claim;

(b) in relation to the failure to produce evidence of the insurance policies, the proposed Defence merely pleads that the applicant was not in breach because he “held” relevant documents and that the applicant disposes to no more than having “obtained all necessary approvals”;[31]and

(c) in any event, there is no contention that the applicant remedied any default as notified to him shortly after 17 July 2015, within the time allowed in the notice, or at all, and the allowance of a period up to 5 August 2017 to do so, was not other than reasonable in the circumstances.[32]

[21] Although the emphasis on this application was placed elsewhere for the applicant, it was correctly conceded for the respondents, that if properly or sufficiently supported by some admissible evidence, the following proposed pleading, would constitute an allegation of prior repudiation of the Deed and undermine the respondents’ reliance on the notice dated 17 July 2015. That is particularly in terms of allowing for any reasonable period for remedy of any default:[33]

“18. On 17 July 2015:

  1. The plaintiff (by Mr McKay and other agents) attended at the Premises and without the Defendant’s consent removed the following of the Defendant’s equipment:
    1. television and audio equipment and canopy motor and flute to the value of $20,000.
  2. Took away the Defendant’s access to the Premises.
  1. Issued to the Defendant a purported Notice to Remedy Breach of Covenant under the Property Law Act 1974 (Qld) (the “PLA” and the “Notice”).
  1. On 28 July 2015, the Plaintiff placed a Ray White “for lease” advertisement in the window of the Premises.”[34]

In the proposed Defence there is reliance upon these acts, as repudiation of the Agreement.[35] On this application, the only evidence provided in support of these contentions, was as follows:

“24. On 17 July 2015 I was advised by Neil that he had seen Mr McKay and some other people at the Premises and they had taken our television and audio equipment along with our canopy motor and flute. Those items are worth a little over $20,000. We had received no advanced notice of this and immediately afterwards they changed the locks on the Premises and we were not allowed in there anymore. Shortly afterwards, I received a Notice to Remedy Breach of Covenant exhibited hereto and marked “RJS4” is a true copy of this notice.

  1. Shortly afterwards, I observed that a “for lease” sign was placed in the window.”

[22] The response is twofold. First, the respondent relies on the evidence of Mr McKay and a locksmith, to the effect that:

(a) the work on the restaurant fit-out progressively slowed in 2015 so that by May 2015, Mr McKay observed that “there was no activity at the premises whatsoever”;

(b) after the applicant’s previous solicitors withdrew on 9 July 2015, the Notice to Remedy Breach of Covenant was prepared and served on the applicant on 17 July 2015; and

(c) as a consequence of lack of response to that notice, Mr McKay went to the premises on 4 August 2015, to observe that there was no activity nor sign of any change from the condition it had been in late April. And on 5 August, Mr McKay went there with a locksmith and had him change the locks, so as to retake possession for the respondents.[36]

[23] Mr McKay also deposes:

“11. When we retook possession of the restaurant, it was in a partially fitted-out state. There was an amount of goods, equipment, building materials and the like, within the premises, including the television, audio equipment, canopy motor and flue referred to in para. 18 of the draft Defence. All of this loose fit-out material was collected together and stored, in accordance with advice I sought. Also in compliance with Mr Watson’s advice, I made lists of the goods and equipment, and also took numerous photographs.

  1. Exhibit GLM2 is a true copy of a letter which Mr Watson sent to SS Lawyers on 13 August 2015, in accordance with my instructions. The letter invited the defendant to make contact with me to collect items of property. Mr Deakin contacted me in response to that letter. Mr Deakin and his offsider met with me at the premises on the morning of 2 September 2015 and he took away many boxes of personal belongings, chairs, paperwork, cooking equipment, books and the like. I allowed him to take what he wanted from the premises. I then contacted a cleaner to come in and clear the premises, because we wanted to re-lease the premises.
  2. Before I read the draft Defence I had never seen or heard it alleged by the defendant, or anyone else, that I took possession of the premises or removed the items listed in para.18 of the draft Defence before 5 August 2015.”

[24] The second response was to object to part of the evidence in the applicant’s affidavit, as set out in paragraph [21], above. It is correctly pointed out that whilst the first sentence in paragraph 24 of the applicant’s affidavit seeks to rely on hearsay, there is attribution of the source but that the third, and critical, sentence does not make clear the basis for what is asserted. Therefore, it is contended to be not admissible, even if UCPR 430(2) might otherwise have applied to it. It does not identify the source of the information and is not expressly related to the first sentence.

[25] The respondents’ position is supported by the discussion in Deputy Commissioner of Taxation v Ahern (No 2).[37] Whilst it may be discernible from the context provided by other parts of the applicant’s affidavit,[38] that the likely source, apart from the applicant, of the information deposed in the third sentence was Mr Deakin, this is not asserted so as to expressly engage the application of UCPR 430(2). Further, the respondent is correct in the criticism that the evidence put before this Court on this potentially important point, is not just imprecise or vague, but is inexplicably lacking in support from direct evidence, when such evidence, if it existed, would appear to be available to the applicant. That is an important consideration, when the applicant is seeking an exercise of discretion to set aside a validly entered judgment by default. This is because it relates to the issue as to whether or not a prima facie defence on the merits is demonstrated, which is recognised as an often critical consideration in such applications,[39] particularly where, as is the case here, there is no particularly compelling explanation for the failure to defend within time.

[26] The respondents’ objection to the third sentence in paragraph [24] of the applicant’s affidavit must be upheld, with the further consequence of acceptance of the respondents’ further submission, that there is then an absence of support for the contention that there is any prima facie defence of the Claim, in terms of the repudiation asserted at paragraphs [20b] and [21e] of the proposed Defence.

[27] However, matters do not end there. And as has already been noted, on the hearing of this application, emphasis was sought to be placed elsewhere for the applicant. And this was particularly in the proposed alternative pleading of estoppel, as follows:

“40. Further or alternatively to paragraphs 22 to 39 above, the Plaintiff is estopped from enforcing any claim against the Defendant for breach of the Agreement or breach of the Lease because:

  1. in the circumstances described above at paragraphs 4 to 17, the Defendant understood and performed the Lessee’s Works on the Premises on the basis that the Defendant would have the benefit of the Lease once those works were completed;
  2. at all material times, the Plaintiff knew, or a reasonable person in the position of the Plaintiff would have known, that the Defendant was proceeding upon the basis of the assumption described at (a) immediately above;
  1. in performing the Lessee’s Works, the Defendant incurred expenses of $298,500 and, but for its assumption, would not have done so;
  1. the Plaintiff never advised the Defendant that its assumption was incorrect or that the Plaintiff might not honour the Agreement or the Lease;
  2. in issuing the Notice, and subsequently terminating the Agreement or the Lease, the Plaintiff’s offered the Defendant no real opportunity to rectify any breaches of the Agreement or Lease that existed at the time (and the Defendant could have rectified any such breaches if given a reasonable time to do so).”[40]

[28] It may be noted that reference to paragraphs 4 to 17 of the proposed Defence discloses the following, after some history of the dealings between the parties is set out:

“12. Between August 2014 and August 2015, the Lessee’s Works were delayed significantly because:

  1. it was not possible to install two 2,000 litre grease traps as per the Agreement;
  2. the Plaintiffs (by Mr McKay) required amendment to the Lessee’s Plan of Works to move the gas line;
  1. the Premises contained asbestos which required professional removal;
  1. the Plaintiffs’ air-conditioning supplier proved problematic and overly expensive and an alternative supplier needed to be engaged;
  2. from about May to August 2015, the Defendant became significantly unwell with cancer although the Lessee’s Works continued to be conducted during this period.
  1. At all material times between August 2014 and August 2015:
    1. Mr McKay supervised and directed the conduct of the Lessee’s Work;
    2. Mr McKay was kept abreast and involved in the progression of the Lessee’s Works;
    1. it was initially agreed and understood between the Plaintiffs (by Mr McKay) and the Defendant (by Mr Deakin) that the Lessee’s Works would be completed by Easter 2015 such that the Red Sea could open from the Premises for Easter;
    1. it was subsequently, from about March 2015, agreed and understood between the Plaintiffs (by Mr McKay) and the Defendant (by Mr Deakin) that the Lessee’s Works would be completed by August 2015 and that the Red Sea would open from the Premises from about that time.

14. Further:

  1. in or about September 2014, the Plaintiff (by Mr McKay) and the Defendant agreed to amend the Deed to provide for two 1,000 litre grease traps;
  2. in early December 2014, it was orally agreed between the Plaintiff (by Mr McKay) and the Defendant that the delay of the fit-out and Lessee’s Works was agreed by the Plaintiff that the rent-free period to be provided under the Lease once it came into effect would not be provided beyond 12 months from 2 September 2014 (being 12 months from 60 days after the date of the Deed) (the Oral Amendment).
  1. Between approximately August 2014 and August 2015, and in reliance upon the Agreement and the Oral Amendment, the Defendants expended $468,022.00 in conducting the fit-out of the Premises and the Lessee’s Work’s.
  2. On 8 July 2015, the Plaintiff (by Mr McKay) telephoned the Defendant and enquired whether the Defendant, because of his health, ‘wanted to let the Lease go’. In response the Defendant said he did not.”[41]

[29] In this regard, the applicant seeks to engage the principles discussed in Commonwealth of Australia v Verwayen.[42] As the respondent notes, it suffices to note the following observations as to the principles to be applied:

(a) “the result is that it should be accepted that there is but one doctrine of estoppel, which provides that a court of common law or equity may do what is required, but not more, to prevent a person who has relied upon an assumption as to a present, past or future state of affairs (including a legal state of affairs), which assumption the party estopped has induced him to hold, from suffering detriment in reliance upon the assumption as a result of the denial of its correctness. A central element of that doctrine is that there must be a proportionality between the remedy and the detriment which is its purpose to avoid. It would be wholly inequitable and unjust to insist upon a disproportionate making good of the relevant assumption”;[43] and

(b) “the central principle of the doctrine is that the law will not permit an unconscionable – or, more accurately unconscientious – departure by one party from the subject matter of an assumption which has been adopted by the other party as the basis of some relationship, course of conduct, act or omission would operate to that other party’s detriment if the assumption be not adhered to for the purposes of the litigation.”[44]

[30] However, it is also correctly and effectively pointed out that whilst the estoppel pleaded at [40] of the proposed Defence, purports that the plaintiff is estopped from enforcing the Agreement For Lease and the Lease, there is no identification of any assumption in respect of any particular right that the respondent is seeking to enforce. It should also be noted that the evidence provided, on this application and in support of this issue, is particularly as follows:[45]

“20. We had initially intended to have the new restaurant open for Easter 2015 but with all the delays referred to above, which really were unavoidable, Mr McKay and I agreed that we would aim to complete the works and open by about August 2015. We spoke about this at the premises whilst the works were going on many times during the first half of 2015 and it did not seem to trouble Mr McKay at the time. Given what was happening with the works it was obvious there was going to be a delay and there was no dispute or tension about this. We simply agreed that this was the way things were. Mr McKay certainly never said to me that we needed to be open by a particular time or anything like this.

  1. I have checked my records and they indicate that I spent $468,022.00 on the works, although there may have been a small amount of further expenditure that I have not yet identified. I did this because I believed the plaintiffs were agreeable to the works taking longer than anticipated originally and would not have continued to invest money if I had understood anything different.

  1. On 8 July 2015, Mr McKay called me and enquired whether I wanted to ‘let the lease go’. He said he was aware I had been unwell and wanted to know if I wanted to continue with things. I told him I definitely wanted to continue with things and he didn’t say anything to me about there being any problem with this.

  1. As at July 2015, everything from my point of view was in order. We had obtained all the necessary approvals for the works and held the insurance policies required by the Deed. We had not yet completed the fitout under the Deed but things were progressing. We had not received any lease document or advice from the plaintiffs regarding the commencement of the lease or any invoices or anything. As far as I understood things, we were still working towards being completed with the works relatively shortly and once this was done, and the plaintiffs were satisfied with them, we would enter into the lease and open the restaurant. At this time I was unwell but I was speaking to Neil regularly and he advised me, and I believed, that Mr McKay was still in charge of the premises and directing works and overseeing things.

  1. On 17 July 2015 I was advised by Neil that he had seen Mr McKay and some other people at the Premises and they had taken our television and audio equipment along with our canopy motor and flute. Those items are worth a little over $20,000. We had received no advanced notice of this and immediately afterwards they changed the locks on the Premises and we were not allowed in there anymore. Shortly afterwards, I received a Notice to Remedy Breach of Covenant exhibited hereto and marked “RJS4” is a true copy of this notice.

  1. Shortly afterwards, I observed that a “for lease” sign was placed in the window.”

26. At no stage had I ever entered into a lease with the plaintiff. This was all to happen after the works were complete and we never got to that stage. At the time the notice was issued and our access was revoked, I had understood that there was no issue at all with us continuing to complete the works at which stage we would be given the works at which stage we would be given the lease. Because the works were to be completed under Mr McKay’s supervision, and because he had constantly changed his mind about the way things were to be done, and because of the delays indicated above, I was under the impression that there was no dispute between us that the works were taking longer than expected. Earlier in the year (as noted above) we had discussed the works being completed by August 2015. Then, in about April to May 2015, in informal discussions with Mr McKay I had said things to him to the effect that we really needed to be open by the back end of 2015 because we wanted to be established by Christmas to take advantage of the trade during that season. During these discussions, Mr McKay had had no complaint about this and I had certainly not been advised at any stage that there was any issue if we were not completed by July 2015.

27. Mr McKay never said to me that we needed to be completed with the renovations by a particular date otherwise the offer of the lease would be revoked. We were working together collaboratively on the works and we were openly discussing between us that we wanted to be open and have a good run into Christmas, so there was no suggestion that there was an issue if we were not open by a particular date. A large part of the delays were by virtue of Mr McKay’s involvement and direction of the works, so it would have made no sense for him to complain about the delay. If I had understood in the first half of 2015 that we needed to be finished by July 2015 then I would have asked Mr McKay to step back and pushed him to agree an extension or otherwise hurry up the works, but there was no need because none of this was raised with me.

28. We invested almost half a million dollars in that premises on the basis that we would be given the appropriate and required time to finish the works (which were just as much for the benefit of the landlord as us) and on the basis that by spending all this money we would be given our twelve months rent free period.

29. As it stands, we have lost all that money and, in addition to that, we lost the benefit of being able to open a restaurant across the road and take advantage of the overflow customers from the Red Sea. In particular, I have checked my records and we have lost:

  1. The deposit paid originally being approximately $22,253;
  2. The lost value of the works that we did being $298,500;
  1. The lost value of the fit-out that we installed being $169,522;
  1. The lost profits from the time we would have been able to open from the premises if the Plaintiffs had not improperly removed us (which I cannot quantify myself but would have been significant).

30. We never received any lease from the plaintiffs and we were never given possession of the premises, just access under Mr McKay’s control and instruction. We had not got to the stage of the lease given the way things unfolded as described above.”

[31] It must be observed that it is, at least, difficult to understand how the pleaded assumption that “the defendant would have the benefit of the Lease once those works were completed”, provides any basis in estoppel of the exercise of the respondents’ rights under the Agreement For Lease. And particularly, upon the failure of the applicant to respond to the notice given to remedy breaches of that Agreement. Clearly, it was the common anticipation of the parties that the Lease would be effected and each has an obvious commercial interest in that outcome. It is the protection of that interest of the respondent which, in the context of the delays that had occurred, prompted that notice. Neither does there appear to be any reasonable basis for the contention that the applicant was not provided with any real opportunity or reasonable time to rectify the notified breaches.

[32] As has already been noted, it was also contended that there had been an oral agreement to amend the written Agreement For Lease. For the applicant, it was asserted that such a contention was open, notwithstanding the following clause of the written Agreement:

“17.1.1 Any variation of this Agreement or waiver by a party from any provision of it, is not effective unless it is in writing, signed by the parties or (in the case of a waiver) by the party giving it. Any variation or waiver shall be effective only to the extent to or for which it may be made or given.”

[33] That contention is made with specific reference to the observations in Apple and Pear Australia Limited v Pink Lady America LCC[46] and is specified in paragraph [14] of the proposed Defence.[47] However and as was largely conceded for the applicant at the hearing of this application, it is difficult to see how this contention would add any basis for resisting the respondents’ claim over and above any estoppel that might arise from the same facts and which would not require any conclusion as to an actual or concluded agreement between the parties. Moreover, it is also at least difficult to conceive how any such agreement might stand in the way of the exercise of the respondent’s rights to terminate and seek damages upon the applicant’s failure to respond to the notice given on or about 17 July 2015 and to remedy the notified breaches.

Conclusions

[34] Accordingly, it should be concluded that the applicant has not demonstrated any prima facie defence to the respondents’ claim as to breach of the Agreement For Lease, or any sufficient basis for setting aside the judgment as to liability for such breach. However, the position may be different in respect of the damages that have been claimed for such breach and which are now reflected in the judgment. In that regard, what may be noted is that:

(a) the breaches upon which the notice and the respondents pursuit of remedy have proceeded, relates to breaches that had occurred substantially prior to 17 July 2015;

(b) notwithstanding such occurrences, the relationship between the parties and particularly as governed by the Agreement For Lease, had been allowed to continue and there are the contentions raised by the applicant and as to various discussions and positions reached, as to that ongoing relationship in that period;

(c) the respondents’ remedy in damages and which has become the subject of the judgment entered on 20 September 2016, is premised upon the assertion of the legal rights of the respondent under the Agreement For Lease, including reliance upon the commencement date of the Lease, as defined in that Agreement and notwithstanding that it was never actually executed, and therefore the recovery of rent and outgoings on and from 1 October 2014;

(d) the approach of the respondent has made no allowance for the special condition in the Agreement For Lease and as to a “rent-free period” for the first 12 months of the term of the Lease, presumably because cl. 7.10.1 begins with the words:

“Provided there shall be no ongoing breach by the Lessee of the terms of the Agreement for Lease or the Lease...” ; and

(e) no allowance has been made for any value of, or contribution to the value of the premises as the consequence of, the works undertaken by the applicant pursuant to the Agreement For Lease.[48]

[35] It is apparent that the respondents’ rights were not insisted upon before 17 July 2015 and the matter is obviously complicated by what the applicant has deposed to and as to adjustments in the relationship of the parties up to that point in time, including in respect of how the “rent-free period” would be effected or taken into account. In these circumstances and despite the absence of proposed pleadings to this effect, it is plausible that the evidence placed before the Court arguably supports contentions as to the respondents’ damages, whether based in estoppel or otherwise. Further, a conclusion that it is appropriate to allow for an assessment of damages and therefore the provision of an opportunity for the applicant to, appropriately, put the quantum of recoverable damages in contest, is also warranted by what has already been noted as to the approach of the respondents to the quantification of damages and the curiosity of the respondents’ pleading in respect of the requirement of mitigation of damages. Such an obligation is recognised as going to an ability to recover damages[49] and it is expressly recognised in cl. 10.2.2(c) of the Agreement For Lease, in terms that, in the event of termination of the deed, the Lessor “must use reasonable endeavours to mitigate its loss.”

[36] Accordingly and pursuant to UCPR 290, it is appropriate to order that the judgment entered for the respondent, on 20 September 2016, is amended, so that the words: “the amount of $305,569.69, including $25,417.46 interest to today”, are deleted and replaced by the words: “damages to be assessed by this Court.”

[37] It remains appropriate that the applicant bear the costs of the taking out of the default judgment and the parties will be further heard as to the issues as to the costs of this application and directions as to the further conduct of this matter, including as to any claim to be pursued by the applicant, including such as was contended by way of counter-claim in the proposed Defence proffered on this application.


[1] See Exhibit RJS1 to the affidavit of RJ Schollick, filed on 7/12/16.

[2] Ibid at RJS2.

[3] Ibid at RJS3.

[4] See RJS3: Cl: 1.1.22 and 5.4.

[5] See RJS4.

[6] See Exhibit GLM1 to the affidavit of G McKay, filed on 31/1/17.

[7] See ss 1 to the affidavit of S Sciacca, filed on 7/12/16.

[8] Affidavit of G McKay, filed on 31/1/17 at [14].

[9] Affidavit of S Sciacca, filed on 7/12/16 at [12] and ss 2.

[10] Statement of Claim filed on 1/8/16 at [18].

[11] Ibid at [12].

[12] Ibid at [13].

[13] Ibid at [15].

[14] Ibid at [16].

[15] Ibid at [17].

[16] Exhibit SS6 to the affidavit of S Sciacca, filed on 7/12/16.

[17] Both filed on 7 December 2016.

[18] National Mutual Life Association of Australasia Ltd v Oasis Developments Pty Ltd [1983] 2 Qd R 441 at 449 – 450, Cooke v DA Manufacturing Co Pty Ltd [2004] QCA 52 and Yankee Doodles Pty Ltd v Blemvale Pty Ltd [1999] QSC 134 at pp 13-14.

[19] in para. [5].

[20] Affidavit of RJ Schollick, filed on 7/12/16, at [19]

[21] Affidavit of S Sciacca, filed on 7/12/16, at [4].

[22] As set out in para [8(ii)], above and see Statement of Claim at [13].

[23] In the unexecuted terms that were annexed to the deed.

[24] See Statement of Claim filed on 1/8/16, at [6], [16] and [18].

[25] Ibid at [6].

[26] See Exhibit 6 at CL1-1-1.1.13.

[27] Ibid at CLS1.1.15, 1.1.21 and Sch. 1.

[28] The stipulated time in the Notice for Remedy of the notified breaches.

[29] See para 8(ii), above.

[30] See Exhibit 6 at [34].

[31] Affidavit of R Schollick, at [34].

[32] See Statement of Claim at [15] and the proposed Defence (Exhibit SS-6 to the affidavit of S Sciacca, filed on 7/12/16) at [36].

[33] The notice (see Exhibit RJS-4 to the affidavit of the applicant, filed 7/12/16) allowed a period of 14 days from the date of the notice (17/7/16) for remedy.

[34] See proposed Defence (Exhibit SS-6 to the affidavit of S Sciacca, filed on 7/12/16).

[35] Ibid, at [20 b.] and [21 e.].

[36] Affidavit of G McKay and A A Ross, both filed on 31/1/17.

[37] [1988] 2 Qd R 158 at 160-164.

[38] Including paragraphs [7] and [19].

[39] See National Mutual Life Association of Australasia Ltd v Oasis Developments Pty Ltd [1983] 2 Qd R 441 at 449-50 and Garland v Butler McDermott Lawyers [2011] QCATA 151 at [12].

[40] See proposed Defence (exhibit SS-6 to the affidavit of S Sciacca, filed on 7/12/16).

[41] Ibid.

[42] (1990) 170 CLR 394.

[43] Ibid at 413, per Mason CJ.

[44] Ibid at 444, per Deane J.

[45] See the applicant’s affidavit, filed on 7/12/16.

[46] [2016] VSCA 280 at [210].

[47] See paragraph [28], above.

[48] Such as is the subject of a counterclaim included in the applicant’s proposed Defence.

[49] At least in terms of recognition of an onus upon a claimant, in an evidential sense: see Knott Investments Pty Ltd & Ors v Fulcher & Ors [2013] QCA 67; [2014] 1 Qd R 21 at [29] – [36] and AHR Constructions Pty Ltd v Maloney [1994] 1 Qd R 460.


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