DIY litigant opens up Supreme Court on Sunday for a fence dispute

A neighbour spat over trees and a dividing fence dispute that drafted not one but two Supreme Court duty judges into the the courtroom for an urgent weekend sitting has been listed for a final hearing just over three weeks after the court proceedings were filed.

Rhonda Slattery’s residential lot – in picturesque Davistown near Kincumber on the NSW Central Coast – adjoined that of 30 yr career builder David Dunn and his wife Kim Dunn.

In discussions over the development of their site – for which they had recently gained approval – she learned the Dunns wanted to replace the existing boundary fence which had been in situ for 16 years.

Ms Slattery floated two options for modification of the fence – part of which likely encroached on the Dunns’ land – neither of which were suitable to the Dunns.

Their proposal was to demolish the fence and rebuild a new one at their expense precisely on the common boundary and in the course of which “trim” the trunks of two paperbark trees and a concrete slab which they claimed encroached on to their land.

Slattery was concerned the proposal would imperil her trees and damage the concrete slab.

Her investigations revealed that the development consent from the NSW Central Coast Council did not provide approval for fencing work or demolition of the existing boundary fence.

Her anxiety escalated to alarm when she received a letter from the Dunns on Saturday 7 October notifying her they intended to commence boundary fence demolition works at 7.00am on the coming Monday.

Her response was to prepare paperwork for an urgent court application and drive to Sydney the following morning to open up the Supreme Court registry to file it and to find a judge to make orders to prevent the demolition.

Ms Slattery swore in her affidavit that the application needed to be dealt with urgently because – among other issues – she had two large dogs that need to be confined.

Siting in the Land and Environment Court, Justice Moore indicated he would grant the temporary injunctions to the self-represented – provided she gave the “usual undertaking”, ie to compensate the Dunns for losses suffered if their position prevailed over hers at the final hearing – restraining the Dunns from interfering with either of the paperback trees or demolishing any part of the concrete slab.

The application to restrain the demolition of the dividing fence was though – in his view – outside the jurisdiction of that court.

He therefore transferred the proceedings to the weekend Supreme Court equity judge, Justice Trish Henry, who considered the fence application later that Sunday also on an ex parte basis.

Ms Slattery was – after having been again called on to give the “usual undertaking” and again obliging by giving it – granted her the stop-demolition injunction which she was ordered to serve on the Dunns before 8pm that night.

The matter came before Justice Henry again two days later when she transferred it back to the Land and Environment Court thereby conferring on it the jurisdiction to deal the dividing fence issue which it had initially lacked.

When the matter came before Justice Sarah Prichard in the Land and Environment Court on 12 October, Ms Slattery was represented by counsel. Mr and Mrs Dunn were self-represented but were armed with an arborists report and a survey plan to prove the alleged encroachments and the suitability of the proposed trimming of the paperbark trees’ trunks.

The judge referred the matter for an on-site mediation and listed it for a further directions hearing on 18 October indicating it would be then listed for final hearing if not resolved. The injunctions were extended once again as were Ms Slattery’s undertakings.

The parties participated in the mediation but that proved unsuccessful and when the matter was next dealt with on 18 October, Ms Slattery appeared by telephone from the Central Coast, self-represented.

Justice Pritchard expressed her consternation that the matter hadn’t been resolved and warned them of the consequences of adverse costs orders and in Ms Slattery’s case, the risk of having to pay compensation by reason of her undertaking.

When Ms Slattery informed the judge that she didn’t understand the obligations comprised by the “usual undertaking”, the term was explained to her in some detail prompting the response “Yes, I do” to the judge’s “Do you now understand ?”

The matter was listed for a final hearing on 2 November but there is no record of a court determination on that date.

This may suggest that the parties – when faced with the risk of adverse costs orders and in Ms Slattery’s case the undertaking risks – may have resolved the dispute among themselves with a modicum of common sense.

Slattery v Dunn [2023] NSWLEC 107 Pritchard J, 18 October 2023 Read case

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Lessor floored; make good costs reduced by windfall benefit

Landlords and tenants squabbling over make good costs in commercial leases should consider this dispute relating to an industrial warehouse leased to a heavy machinery hire company.

Kingston Industries took up occupation of the western Sydney premises in August 2010 and after its lease extensions expired in July 2017, it continued occupation on a month-to-month basis until December that year.

Landlord Diana Morabito claimed Kingston was responsible for the make good cost of replacing concrete surfaces in the warehouse and the car park which she claimed had been shattered by the tenant’s steel track earthmoving equipment.

She demanded the former tenant pay $344,000 in make good costs plus lost rent of $295,000 for the 18-month period between when Kingston departed and the date the premises were re-let in June 2019.

The lease – which specified a permitted use of “Plant Hire/Distribution” – contained the usual provisions in relation to the tenant’s maintenance and repair obligations but excluded damage caused by the landlord’s negligence or which occurred “outside its control” from the realm of tenant’s responsibility.

The terms also prohibited the tenant from “allowing the floor to be broken or damaged by overloading”.

The landlord was obliged to “maintain the structure of the premises in good repair” but it gave no warranty or representation that they were suitable for the tenant’s use.

When Kingston refused to pay, the landlord filed proceedings to recover her make good costs in the NSW Supreme Court.

Morabito contended that the permitted use did not extend to moving steel tracked equipment on the concrete surfaces without using protective measures of mapping or steel plates.

Justice Elisabeth Peden had to consider whether machinery with steel tracks was “plant”- and therefore permitted – that would ordinarily be expected to be moved around.

She saw no need to resort to the principle that lease covenants including those in relation to permitted use “are strictly construed against a lessor” because the word “plant” unambiguously included the tenant’s steel tracked equipment – some of over 22 tonnes in weight – of which the landlord had been aware.

Suspecting that the concrete surfaces were defective, Kingston engaged engineers to inspect and test the damaged paving.

Kingston managed to locate Fernando Algorry, the engineer who originally designed the concrete surfaces who swore that – because he was not provided with instructions about the type required – he had adopted a standard specification for concrete suitable for light to medium industry and machinery with pneumatic tyres only.

He also attested that the concrete supplied to the job – by reference to the few cartage delivery documents the landlord produced in discovery – was even inferior to the grade of product he had specified.

And had he known what was actually supplied, he “would not have certified” the low grade concrete that had been supplied.

This allowed Kingston to argue the failure in the concrete fell into one of the exceptions to its maintenance and repair obligations because it was caused by the landlord’s negligence; beyond its control; or it had occurred as a result of “fair wear and tear”.

Justice Peden accepted Kingston’s submission that Ms Morabito’s failure to produce many missing cement truck delivery dockets entitled the court to conclude they would not benefit her case and that it should conclude all batches delivered had been of low grade.

She went on to conclude that the paving damage had not been caused by Kingston’s machinery or overloading but rather by “a matter beyond its control and for which it ought not be liable”.

She went on to consider the validity of landlord’s figures to decide the damages to which she would be entitled should an appeal court decide otherwise regarding the concrete defects.

In the absence of the landlord taking reasonable steps to mitigate her loss by promptly recruiting a replacement tenant, her claim for lost rent was dismissed.

The court also decreed that any damages for the cost to replace the damaged paving should be reduced by “the betterment obtained from the new concrete”. That benefit was – having regard to the projected 50 year “life” of the new concrete paving – an additional 7.5 years.

“A successful plaintiff should not be awarded a windfall amount by reason of obtaining a better outcome, than had the defendant performed its obligations”. Similar reductions apply if a landlord gains “greater efficiency or productivity” from the repairs conducted from make good funds.

Thus Kingston – if it were to be liable at all – would have had to pay the replacement cost for the slabs, reduced in proportion by such “betterment”.

And a $58,000 claim for other make good items was reduced to $3,320 because Mrs Morabito had not demonstrated the damage was caused by Kingston as opposed to “fair wear and tear”.

Morabito v Kingston Industries Pty Ltd [2023] NSWSC 1020 Peden J, 31 August 2023 Read case

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Form 6 fight: seller to pay agents 20% commission on terminated contract

How often do real estate agencies get their hands on a commission from a deal that goes sour and how rarely does that turn out to be a motza?

Consider this real estate deal that crashed in 2020 but nevertheless reaped a $1.5 million commission for the agent concerned.

In January 2018, tourism group Sunshine Group Australia Pty Ltd appointed Cassowary Coast agency Andersons Real Estate for the sale of some 500 acres in Mission Beach.

The Form 6 appointment, provided that it was a “continuing appointment” commencing on for an “open listing” at a list price of $12 million at an agreed of 4.4% of the sale price.

Grahame Anderson was the agency’s sales manager and his wife its sole director.

The property had local authority approval for subdivision, an 18-hole golf course and resort accommodation.

Anderson was approached by Victor Soh who said he had “international buyers” who would be interested in the property.

In May 2019, Soh, Anderson and Sunshine entered into a deed agreeing to a success fee of $500,000 plus GST being payable on the settlement of a sale at $6.5 million plus GST.

Although the deed referred to a form 6 being attached, no form 6 was attached to the signed agreement.

A form 6 was prepared later that month for a “single appointment” for an exclusive agency expiring at the end of July and thereafter continuing as an open listing.

It provided for 4.4% commission for a sale price up to and including $6.3 million plus GST and if the sale price exceeded that sum, the agency was to be paid the entire excess plus GST.

The form 6 appointment included the standard condition that commission was payable even if the sale contract was terminated.

A contract was signed up with the Mayfair 101 group in August 2019 at $7.5 million with settlement 90 days after satisfaction of due diligence.

In May 2020 the buyer’s solicitor requested a rescission so a new contract could be entered into on the same terms with a related entity as buyer.

Although that contract envisaged an immediate settlement, that did not occur and Mayfair’s $750,000 deposit in the agency’s trust account was claimed by the seller.

Anderson Real Estate claimed the full $1.65 million on account of commission worked out as per the May 2019 appointment and when Sunshine refused to pay, filed a lawsuit in the Supreme Court in Brisbane.

Sunshine counterclaimed to recover the deposit in its trust account alleging – among other things – that the commission was not payable because the sale occurred after the term of the exclusive agency had expired.

Chief Justice Helen Bowskill ruled otherwise, concluding the sale had occurred within the period envisaged by the May 2019 form 6 because it was signed up during the open listing that followed after the exclusive agency term.

She also ruled that the failure to state in the appointment that commission would be calculated by reference to the “actual” sale price was immaterial.

The appointment complied – she ruled – with the relevant sections of the Property Occupations Act because it was clear that it would only be payable by reference to the price for which the property was agreed to be sold, not the advertised or listed price.

That conclusion was upheld on appeal.

“There was no error in the primary judge’s conclusion that the omission of the word ‘actual’ before ‘sale price’ rendered the form 6 to be of no legal effect,” held Justice David Boddice with whom Justices Burn and Ryan concurred. “The words ‘sale price’ in the form 6 [refer] to the price for which the property was agreed to be sold, which, for the purposes of the section, is the actual sale price”.

The appeal judges also upheld the chief justice’s finding that the agency had been the effective cause of the sale – rather than Anderson personally because it had been the party appointed under the relevant form 6.

Sunshine also contended the May 2019 form 6 should be read as part of a wider transaction that involved the deed entered into a few weeks earlier that envisaged commission would be payable only in the event a sale proceeded to settlement.

The trial judge and the appeal judges rejected that argument.

In their views, the May 2019 form 6 appointment was to be read alone, thus entitling the agent to commission even if the sale didn’t settle and to the lavish commission that had been agreed.

“The factual circumstances did not support a conclusion that the plain terms of the subsequent Form 6, as to payment of commission on a specified basis and in specified circumstances, including in the event of commission being payable even though the relevant sale did not proceed to settlement, was to be read down,” ruled the appeal judges.

Not only does Andersons get to keep the $750,000 deposit but Sunshine must pay it a further $900,000 plus its legal costs of the trial and appeal!

Sunshine Group Australia Pty Ltd v Trappando Pty Ltd [2023] QCA 214 Boddice JA and Burns and Ryan JJ, 3 November 2023

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Sale of business interest tangled in state ACL twist

The Australian Consumer Law scheduled to the federal Competition and Consumer Act applies to corporations engaged in trade or commerce.

The Australian Consumer Law (Queensland) adopts the federal Act and applies it to non-corporations engaged in trade or commerce by operation of the state’s Fair Trading Act. Similar laws in other states likewise apply the federal Act.

What hasn’t been adopted in Queensland and other states are the various qualifications that apply to the federal ACL that are buried in the Competition and Consumer Act.

The significance of absence of CCA qualifiers was recently demonstrated in a dispute relating to the sale of an interest in a business where it was alleged that individuals had engaged in misleading and deceptive conduct.

Zhiren Li and Baotong Liu signed up in September 2016 for the purchase an interest in Forever Exotic – an online and pop-up retailer of natural skin, health and home products – from Zoe Mikkelsen.

Ms Liu had been attracted to the business because the salt lamps her daughter Scarlett had acquired from it proved successful in treating her hay fever symptoms.

Mikkelsen’s husband Jan proposed the incorporation of a business of the same name with Li and Liu being issued 36 of the 100 shares in the company in exchange for $630,000.

That share issue valued the business at $1.75 mil.

Jan Mikkelsen claimed – according to the buyers – that the business had consistently achieved a net profit margin of approximately 30% and that for FY 2016, profit was approximately $400,000.

A “profit and loss cash statement” said to contain “unadulterated figures from last year” and showing a net profit of $392k on revenue of $1.4 mil was provided by Jan to Scarlett who passed it on to the buyers.

Li and Liu inked the share sale agreement Scarlett translated for them without seeking independent accounting advice.

They also contributed $60,000 by way of working capital to help fund a proposed expansion into Asia.

The business did not perform as the buyers claim they were led to believe it would.

They sued the Mikkelsens for having engaged in conduct that was misleading or deceptive, or was likely to mislead or deceive in trade or commerce and alternatively, for negligent misstatement.

The Mikkelsens defended the claims on the basis that several other financial documents – depicting lower turnover and profit – had been produced to the buyers before they signed up to the deal.

BAS statements for example showed turnover reduced by 50% and profit reduced by about 25%.

Business Valuation Specialist, Victoria Wheeler assessed the actual FY 2016 net profit of the business at just $23,000, 4.61% of turnover and testified that in most prior years it had sustained a loss.

Jan Mikkelsen argued that another $100,000 of cash sales not recorded on their “official books” should be added to those figures.

The trial judge accepted the plaintiff’s account of the profit percent representations they had relied on that had been made by Jan and that the actuals were far lower.

He also ruled that although Mr Mikkelsen was not himself or herself engaged in trade or commerce, the statements in the financial documents he provided were made “in trade or commerce” because they were designed to encourage others to invest in the trading entity.

The trial judge concluded that the buyers would not have proceeded with the investment had the defendants not made the representations and ordered Zoe Mikkelsen pay compensation pursuant to ACL s 236.

The sum they were directed to repay was the $630,000.00 purchase price discounted by 15% by reason of s137B of the CCA to account for their contributory negligence in having failed to engage an expert accountant for due diligence.

The defendants must refund the sum of $535,500.00 (plus interest) to the plaintiffs with costs.

Both parties appealed.

The Victorian Court of Appeal rejected the Mikkelsens’ arguments that the buyer had not relied on the inflated and erroneous profit representations.

It upheld the buyers’ contention that the case should have been decided under the Australian Consumer Law (Vic) because the parties who engaged in the misleading and deceptive conduct – Mr and Mrs Mikkelsen – were natural persons.

It followed that CCA 137B could not apply because there no equivalent in state ACL Acts.

Thus the contributory negligence deduction to the s 236 damages was reversed and the Mikkelsens were ordered to pay the buyers the total $630,00 investment.

Mikkelsen v Li [2023] VSCA 255 Ferguson CJ, Beach and McLeish JJA, 26 October 2023 

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