Bowry v Hirst [2012] FJHC 884; HBC348.2011 (24 February 2012)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

ACTION: HBC 348 of 2011

BETWEEN:

VINCENT W BOWRY and
ROSEMARY BOWRY
Plaintiffs

AND:

MARK HIRST
First Defendant

AND:

ROYAL SUVA YACHT CLUB

Second Defendant

Mr A Rayawa for the Plaintiffs.
Mr C N Cameron for the Defendants.

DECISION

Pursuant to an ex parte notice of motion dated 10 November 2011 the Plaintiffs made an application for interlocutory injunctions the effect of which would be to allow the Plaintiffs to continue their restaurant business at the premises belonging to the Second Defendant until the determination of proceedings commenced by writ. The application was made under Order 29 of the High Court Rules and was supported by an affidavit sworn by Rosemary Bowry on 10 November 2011.

On 16 November 2011 I made the following orders ex parte:

"1 The defendants be restrained from preventing the Plaintiffs and their staff from entering the Sails Restaurant located at Suva Yacht Club until further order of the Court.

2 The defendants, their servants and or agents be restrained from interfering with the day to day running of the said business until further order of the Court.

3 The Plaintiffs are to file a supplementary affidavit to provide and fortify an undertaking as to damages within 3 days from today's date.

4 The Plaintiffs are to serve copies of all documents including this Order on the Defendants within 5 days from today's date.

5 The further hearing of the application for interlocutory injunctions is adjourned inter partes to 24 November 2011 at 9.30a.m".

This interim relief was granted on the basis that the material before the Court established urgency. The material established that the Plaintiffs and their staff had been barred from entering the restaurant. There was perishable stock. There was an issue as to outstanding rent and purported termination of an assigned lease.

The Plaintiffs filed a supplementary affidavit sworn by Rosemary Bowry on 18 November 2011. The Plaintiffs gave the necessary undertaking and provided sufficient material to fortify that undertaking.

The parties appeared on 24 November 2011. Directions were given for the filing of further affidavits. The hearing of the application was listed for 19 December 2011 and the interim injunctions previously granted were extended to that date. The hearing of the application for interlocutory relief was conducted on 19 December 2011. Counsel for both parties presented extensive oral submissions and filed helpful written submissions.

The essential background facts which appear not to be in dispute may be stated briefly. By an agreement dated 10 September 2010 between the Second Defendant and Diane Waller trading as "Sails Restaurant" (the tenant), Diane Waller became the operator of the said restaurant.

The agreement commenced on 1 October 2010 for a period of 3 years. The monthly rental was $400.00 payable on the first day of each month. Water rates were included in the rental. Electricity usage by the restaurant was to be metered separately and invoiced monthly to the tenant. Payment was to be made promptly to avoid disruption of electricity supply. Gas supply was the responsibility of the tenant.

The agreement provided that the Second Defendant would supply alcoholic beverages to be consumed by diners in the restaurant. Non-members and/or visitors patronising the restaurant were required to be signed in as a visitor in order to enter the bar/veranda/bure areas of the premises of the Second Defendant. Only members of the Second Defendant could sign in a visitor.

The agreement also provided that either party could terminate the agreement at any time by giving two months notice in writing. Any variation to the agreement could only be effected by agreement in writing with a one month notice period.

By an agreement dated 8 February 2011 Diane Waller trading as "Sails Restaurant" and the Plaintiffs entered into a sale and purchase agreement of the goodwill, clients and business as a going concern for the sum of $40,000.00.

It would appear that the Second Defendant agreed to the transfer of the lease (being a consequence of the sale and purchase agreement) to the Plaintiffs although there was no formal assignment of the lease to the Plaintiffs. The Second Defendant permitted the Plaintiffs to operate the restaurant from the premises without either a formal lease or assignment of the existing lease so long as the Plaintiffs complied with the terms of the lease between it and Diane Waller.

By letter dated 7 September 2011 the Second Defendant wrote to the Plaintiffs concerning outstanding rent. Although no amount was mentioned, the letter claims that three months rent was due which would indicate that $1,200.00 was outstanding.

A statement exhibited to the affidavit of Mark Hirst sworn 25 November 2011 would seem to indicate that the outstanding amount had been paid by 13 September 2011 which then showed a zero balance. However, as at 11 November 2011 rent for October and November was outstanding.

By letter dated 7 November 2011 the First Defendant on behalf of the Second Defendant wrote to the Plaintiffs stating:

"Re : Termination of Contract RSYC Restaurant

The RSYC committee has met to discuss the issues with the performance of the Restaurant currently operated as "Sails Restaurant" at the Royal Suva Yacht Club and have passed the following directive.

As of 8.00a.m. on 8 November 2011 the contract for the operation of the restaurant at RSYC premises has been terminated. This is due to continued problems with unpaid rent, the performance of the restaurant and ongoing issues with the behavior of one of the owners namely Mrs Rosemary Bowry.

The RSYC reserves the right to cancel the agreement and to hold in lieu of rent, the chattels located in the RSYC restaurant area. On the full and complete payment of rent arrears, the RSYC will release said chattels. Failing to pay the arrears within 30 days will result in the said chattels being sold to recover rent arrears and the balance will be forwarded to you."

So far as the right to terminate the agreement is concerned I am satisfied that the termination clause in the agreement between the Second Defendant and Diane Waller applied to the arrangement that subsequently existed between the Second Defendant and the Plaintiffs. As a consequence the agreement could only be terminated prior to its fixed term by two months notice to the other party. The party terminating the agreement does not have to give a reason, but it does have to give two months notice in writing. Clearly in this case there was not two months notice. Termination of the agreement purported to be immediate.

I am satisfied on the material before the Court that as at 7 November 2011 there was an amount of rent owing to he Second Defendant. I am also satisfied that apart from the letter dated 7 November 2011 there was no formal notice demanding payment of the rent for October and November. I am also satisfied that no notice in compliance with the termination clause in the agreement dated 20 September 2010 was served on the Plaintiffs.

The issue before the Court is whether an interlocutory injunction should be granted to the Plaintiffs to enjoin the Defendants from enforcing the letter of termination in respect of non-payment of rent. Putting to one side the issues raised by Counsel for the Defendants, it is at first glance clear that the letter does not give the required notice for termination. I am satisfied that the issue of the bad behavior of one of the Plaintiffs and the poor performance of the restaurant are not grounds for abridging the requirement to give 2 months written notice in order to terminate the agreement. However, does that requirement apply in respect of a breach in the form of the failure to pay rent as and when it falls due. If that requirement to give 2 months notice does not apply, then are the Plaintiffs in this case entitled to interlocutory injunctive relief.

The position of the Second Defendant on his point was clearly stated in paragraph 16 of the affidavit sworn by the First Defendant:

"16 The General Committee terminated any tenancy that the Plaintiffs thought they had for non-payment of rent and in reliance on section 91 (c) of the Property Law Act, without reliance on the lease with Diane or its terms and conditions, as alleged by the Plaintiffs, and regardless of Rosemary Bowry's unlawful behavior or the general poor performance of the Plaintiffs restaurant."

Although the language of the paragraph may be described as extreme, it does indicate that the Second Defendant has relied on the provisions of the Property Law Act Cap 130 to terminate the agreement without giving two months notice.

It should be noted that the only clause in the agreement that deals with the determination of the lease is the clause headed termination. That clause contains an option to determine the lease that is available to both the landlord and the tenant and is subject only to the condition that 2 months notice be given in writing.

Section 91 (c) of the Property Law Act state:

"91. In every lease of land there shall be implied the following powers in the lessor _ _ _:

(a) _ _ _

(b) _ _ _

(c) that whenever the rent or any part thereof, whether legally demanded or not, is in arrears for the space of one month _ _ _ he may re-enter upon the demised premises (or any part thereof in the name of the whole) and thereby determine the estate of the lessee, his _ _ _ transferees or assigns, therein but without releasing him or them from liability in respect of the breach _ _ _".

This implied term leaves it at the option of the Second Defendant to exercise its right to determine the lease on a cause of forfeiture arising. The option under this implied term becomes exercisable by the Second Defendant when the rent is in arrears for the space of one month. There is no requirement for a prior legal demand for payment of the arrears. On the material before me I am satisfied that there was one months rent owning as at 7 November 2011.

Pursuant to the implied term if the Second Defendant elects to determine the lease for the non payment of one months rent it must do so by re-entry. Re-entry is effected by physically entering upon the premises with the intention of determining the tenancy or by the issue and service of proceedings for the recovery of possession of the premises. As noted above the implied term contains a provision that expressly dispenses with any requirement for a formal demand for payment. On the basis of the material in the affidavit of Rosemary Bowry sworn on 10 November 2011 I am satisfied that the Second Defendant had physically entered the restaurant with the intention of determining the tenancy. The doors had been locked and security personnel prevented the Plaintiffs from entering the restaurant.

However that is not necessarily the end of the matter as section 105 of the Property Law Act contains provisions dealing with restrictions on and relief against forfeiture of leases. The starting point is section 105 (9) which states:

"(9) This section shall not, save as otherwise mentioned, affect the law relating to re-entry or forfeiture or relief in case of non-payment of rent."

The only reference in section 105 to re-entry or forfeiture for non-payment of rent is section 105 (4) which has no application in the present proceedings. Section 105 (6) states that the provisions of section 105 will apply even when a right of re-entry or forfeiture has been inserted into the lease pursuant to the directions of any Act. However as the term implied by section 99 (c) deals with the non-payment of rent, section 105 (9) has the effect removing the strict requirements of section 105 as far as re-entry or forfeiture for non-payment of rent is concerned.

Section 105(9) does, however, preserve the law relating to relief in respect of non-payment of rent. In my judgment the effect of section 105 (9) is that the law relating to relief applies when the right of re-entry or forfeiture is exercised pursuant to a term implied by statute in the same way as if the right was being exercised pursuant to an express term of the lease.

The law in respect of relief against forfeiture for non-payment of rent is stated in Halsbury's Laws of England (Fourth Edition) Volume 27 at paragraphs 442:

"The proviso for re-entry on non-payment of rent is regarded in equity as merely a security for the rent, and accordingly, provided the landlord and other persons interested can be put in the same position as before, the tenant is entitled to be relieved against the forfeiture on payment of the rent and any expenses to which the landlord has been put. Save in exceptional circumstances, therefore, relief will be granted on payment of the rent in arrears, and, moreover, save in exceptional circumstances, the Court will grant relief on payment of arrears of rent and costs and will disregard other breaches of covenant."

It is clear that the Second Defendant has re-entered. The Plaintiffs are entitled to apply for relief against forfeiture. Ordinarily, an application for relief from forfeiture is made by summons. (Supreme Court Practice 1991 Volume 1 at paragraph 14/10/1). It may well be that the Plaintiffs will apply for relief against forfeiture. That is a matter for the Plaintiffs to consider and make an application by summons.

There is at present no application before this court for relief from forfeiture. The issue of relief by way of tender of the rental arrears was only raised by the Plaintiffs in the reply affidavit sworn by Rosemary Bowry on 13 December 2011 on paragraph 7. Argument on the issue of relief was not addressed by Counsel before me. Furthermore, I am not able to conclude that assertions of fact have been sufficiently traversed in the affidavits to say that a claim for relief from forfeiture falls to be determined by me. (See Howard –v- Fernshaive [1895] UKLawRpCh 111; [1895] 2 Ch 581 per McMullen J at pages 723 – 724).

The Second Defendant has re-entered as a result of the Plaintiffs being in arrears of rent. The Second Defendant is therefore prima facie entitled to have the interim injunctions discharged. The Plaintiffs may wish to claim for relief from forfeiture. The issue has been raised by the Plaintiffs in the reply affidavit. There is a claim that the arrears were tendered by the Plaintiffs. Generally the Court grants relief from forfeiture for non-payment of rent where all the arrears of rent and costs have been paid or tendered (Gill –v- Lewis [1956] EWCA Civ 2; [1956] 2 QB 1).

In my judgment the appropriate course of action in the present case is to make an order that the interim injunctions granted on 16 November 2011 are to be discharged seven days from the date of this decision. This will give the Plaintiffs time to apply for relief against forfeiture. The costs of this application are to be costs in the cause. Orders are made accordingly.

W D Calanchini
Judge

24 February 2012
At Suva