CMA Recycling Victoria Pty Ltd v Doubt Free Investments Pty Ltd

• Jurisdiction: Tasmania
• Judge: Blow J,Tennent J,Porter J
• Judgment Date: 24 December 2012
• Date: 24 December 2012
• Court: Full Supreme Court
• Docket Number: FCA 44/2012

[2012] TASFC 7

SUPREME COURT OF TASMANIA (FULL COURT)

Blow, Tennent and Porter JJ

FCA 44/2012

CMA Recycling Victoria Pty Ltd

and

Doubt Free Investments Pty Ltd

REPRESENTATION:

Counsel:

Appellant: D Fagan SC and J C Giles

Respondent: I R Jones SC

World Best Holdings Ltd v Sarker [2010] NSWCA 24 ; Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268, followed

Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14 ; (1985) 157 CLR 17; Apriaden Pty Ltd v Seacrest Pty Ltd [2005] VSCA 139; (2005) 12 VR 319; considered.

Aust Dig Landlord and Tenant [191]

Shiloh Spinners Ltd v Harding [1973] AC 691 ; Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406, considered.

Aust Dig Landlord and Tenant [199]

Conveyancing and Law of Property Act 1884 (Tas), s15(1).

Landlord and Tenant — Termination of the tenancy — Forfeiture — Generally — Re-entry under contract law for breaches of essential terms — Breaches of covenants to keep in repair and promptly repair damage — Provision in lease for termination — Whether contract law applied — Whether compliance with Conveyancing and Law of Property Act 1884 (Tas), s15, required — Whether lease stipulated that termination under contract law was excluded.

Landlord and Tenant — Termination of the tenancy — Forfeiture — Relief against forfeiture — Equitable relief — Whether available — Breaches of essential terms requiring tenant to keep in repair and promptly repair damage — Factors to be considered.

• 1 Orders numbered 1, 2, 3 and 4 made 6 August 2012 are set aside.

• 2 Declaration that lease numbered D1115 continues in force.

• 3 Liberty to apply as to costs and consequential orders.

REASONS FOR JUDGMENT

FULL COURT

Blow J

24 December 2012

1 I agree with Tennent J that grounds 1, 2, 3 and 6 should succeed, substantially for the reasons stated by her. I have reservations as to whether grounds 4 and 5 should fail, but the outcome of this appeal will be the same whether they succeed or fail. I agree with the orders proposed by Tennent J.

Tennent J

2 This is an appeal from a decision of Crawford CJ, delivered on 21 December 2011, in relation to a dispute between a landlord and tenant. The appellant leased part of some land owned by the respondent, and operated a business from the leased area. The respondent purported to terminate the lease by re-entry onto the leased land. The proceedings, the subject of this appeal, relate to the validity of that purported termination and the consequences of it.

3 The land owned by the respondent is situated at 256 George Town Road, Rocherlea. From 2005, which was prior to the respondent becoming the owner of that property, a company by the name of Universal Metals Pty Ltd operated a scrap metal recycling business on part of the land. A Mr Rowe controlled that company. It occupied the premises pursuant to some arrangement with the then owner. At some stage on or before 4 July 2007, the shares in Universal Metals were sold to interests other than Mr Rowe, and the name of the company was changed to CMA Recycling Victoria Pty Ltd (the appellant). The appellant then entered into a formal lease in respect of the area being used for the recycling business, which lease commenced on 4 July 2007.

4 Early in 2008, Mr Rowe was appointed as managing director of the parent company of the appellant. Then in December 2008, the respondent, a company wholly controlled by Mr Rowe, acquired the freehold of the property at 256 George Town Road. In May 2010, however, Mr Rowe was summarily dismissed from his position with the appellant's holding company. Court proceedings followed.

5 Therefore, as at the beginning of 2011, Mr Rowe controlled the company which owned the land, part of which was leased to the appellant. Mr Rowe had no interest in the appellant or its holding company and, it may be inferred, was not particularly well disposed towards either as a consequence of his past dealings. Against this background, the appellant continued to occupy the land it leased from the respondent, and continued to operate its scrap metal recycling business there.

Nature of the appellant's business and its impact on the leased premises

6 The appellant's business involved it in buying quantities of scrap metal. It then crushed and processed that scrap and sold the processed product. At any given time, the appellant had quite large quantities of scrap metal stored at the leased premises.

7 Adjacent to that part of the land from which the business was run was unimproved land which remained the property of the respondent. Much of the boundary fence between the two areas consisted of concrete panels. These were set in concrete footings and were tilted at an angle. They were held in place by flanges on upright steel posts. At one part of this boundary there was a series of bays constructed on the leased premises but adjacent to the tilted concrete panels. They had perpendicular concrete walls, more robust than the tilted panels.

8 Near the bays referred to above, the appellant operated a machine which was used to cut and crush scrap metal. There was no dispute that that crushing process produced fluids which drained through the boundary and onto the respondent's adjoining land. These fluids caused some pollution. The quantities of scrap metal stored by the appellant were stored both in the bays and at the rear of its premises. By the time this dispute arose, the height of the piles of stored scrap metal had become so great that items were falling over the top of the boundary walls onto the respondnet's adjoining land. The weight of the material stored in the bays had also caused damage to the boundary fence, pushing panels out and cracking and damaging others.

9 When the lease commenced, much of the leased area, not covered by buildings, was paved. The appellant's activities had resulted in damage to that paving. Indentations had been made in some areas and, in others, pavers had been torn from the ground. There had been other minor damage to the premises caused by the appellant's activities.

Relevant lease provisions

10 The provisions of the lease which governed the relationship between the parties which were particularly relevant to this matter were cls 9.1, 9.3, 12.1(a), (b) and ( c), 13, 14, 15 and 17. All except cl 17 may be briefly summarised. Clause 9 provided that the leased premises could only be used for ‘the Permitted Use’. That permitted use was ‘metal recycling/waste handling depot and transfer station’. The respondent gave no warranty that the leased area was suitable for any purpose for which the area was to be used. By cl 12.1(a), the appellant accepted the condition of the leased area at the commencement of the lease. By cl 12(b), the respondent gave no warranties as to the ‘condition, description, state, quality, fitness and/or suitability of the Premises for the Permitted Use…’.

11 Clause 12.1(c) required the appellant not to use the leased area in a manner ‘contrary to any laws, regulations, bylaws, policies or directions issued by any Authority having jurisdiction or control over the Premises and/or the Permitted Use, relating to environment protection, the Premises and its surroundings’. Clause 13 required the appellant to comply with all requirements of any authority (this included the Launceston City Council) and all laws in connection with the property and the business the appellant was operating.

12 Clause 14 related to maintenance and repair. The appellant was required to keep the leased premises in good repair and condition. It also had an obligation to promptly repair damage and to notify the respondent of any damage to the premises. Clause 14.7 specifically provided that the plaintiff must not cause damage to the premises. However cl 14 also provided that the appellant need not carry out any work of a structural nature, except as provided in cl 14.3.

13 Clause 15.1(f) required the appellant to immediately deliver to the respondent a copy of every notice received by the appellant in relation to the leased premises.

14 Clause 17 was headed ‘Default’ and relevantly provided as follows:

‘ 17.1Essential Terms

The following obligations of the Tenant are essential terms of this Lease:

(a) all obligations to pay money under this Lease; and

(b) the obligations under clauses 8.1, 9.1, 14.1 and 14.5.

This clause 17.1 does not prevent any other obligation of the Tennant under this Lease being an essential term.

17.2 Events of Default

An Event of Default occurs if:

(a) the Tenant repudiates or commits a fundamental breach of this Lease;

(b) the Rent is at any time unpaid for seven days after becoming due, whether formally demanded or not;

(c) the Tenant does not comply with any of its other obligations under this Lease, whether or not an essential term;

(d) a judgment, order or Security Interest is enforced or becomes enforceable against the Tenant's interest in this Lease or the Tenant's property; or

(e) an Insolvency Event occurs with respect to the Tenant or a Guarantor.

17.3 Landlord's Right to Terminate

If an Event of Default occurs, the Landlord may terminate this Lease by:

(a) re-entering the Premises without notice; or

(b) notice to the Tenant

Except that when section 15(1) of the Conveyancing and Law of Property Act 1884 applies, the Landlord may only terminate this Lease if the Landlord has first given to the Tenant a notice which complies with that section and the Tenant has failed to comply with that notice within fourteen (14) days.’

2011

15 Early in 2011, the respondent complained to the Launceston City Council about aspects of the appellant's activities on the leased premises. As a consequence, the Council's pollution control officer contacted a representative of the appellant. A meeting was held on site the next day. The appellant's representative was told by Council officers that they...